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The first gold pour at PureGold mine, Red Lake, in Dec. 2020.Pure GoldMining

When Australia’s Evolution Mining Ltd. took over the Red Lake gold mine in Northwestern Ontario in early 2020, it found busted equipment, manually operated mine shafts and demoralized employees. Formerly owned by Vancouver-based Goldcorp Inc. , the operation was in a shambles.

“This mine was lost within the Goldcorp portfolio,” Evolution chief executive officer Jake Klein said. “It was a tough place to work. It never met its budget or forecast. It never got allocated capital. Exploration development was starved. It was kind of a spiral of negativity.”

Now the Melbourne-based company is trying to turn the mine around, investing hundreds of millions to mechanize, improve and tweak the operation – and protect hundreds of jobs in the process.

The revival is welcome news for an Ontario community that had fallen on hard times. Once one of the world’s most prolific mining districts, Red Lake had petered out over the past decade and fallen victim to more than its fair share of mining catastrophes. But amid a dearth of new gold discoveries worldwide, investor wariness of risky mining jurisdictions such as West Africa – not to mention a surge in the price of gold – mining entrepreneurs are doubling down on some of the most promising prospects in Canada. At Red Lake, Evolution, Pure Gold Mining Inc. , Battle North Gold Corp. and Great Bear Resources Ltd. are investing big and putting people back to work.

Battle North Gold Bateman gold project, Red Lake.Battle North Gold/Battle North Gold

While the rewards are clear, the risks are high. With its erratically dispersed gold deposits, Red Lake has historically been tricky to mine. Investors have been burned in the past and are far more wary now. Red Lake operators know they need to do better.

“The boards and management want to do it right this time around so they don’t screw it all up,” said Doug Groh, precious metals portfolio manager with Sprott Asset Management.

Prospectors descended on Red Lake as early as the 1880s. The first mines started operations in the 1930s. During a multidecade gold rush, the town attracted so many people that at one point its airport was the busiest in the world. Some of the mines turned out to be gigantic producers. Campbell, which opened in 1949, produced more than 11 million ounces of gold over more than 50 years.

By the early 1980s, though, many mines in Red Lake were starting to run dry. When entrepreneur Robert McEwen bought the Dickenson property in 1985, conventional wisdom had it that the mine was on its last legs.

But in 1995, Mr. McEwen’s team discovered a spectacular new high-grade gold deposit. His Goldcorp would go on to extract some of the richest ore ever found in the world – at laughably low production costs. In 2002, the mine produced more than half a million ounces for just US$65 an ounce. (Today, less than US$800 an ounce is considered a low production cost.) The Red Lake mine eventually helped make Goldcorp the most valuable gold company in the world, but it didn’t last.

As the richest ore ran out, Goldcorp didn’t modernize the facility, and costs crept higher. “The mine got addicted to the high-grade ore,” Mr. Klein said. “Its cost structure and its approach to mining started to become dependent on it.”

In early 2019, Goldcorp was sold to U.S. competitor Newmont Corp. at a deep discount. Newmont didn’t have the bandwidth to fix Red Lake and, later that year, sold the properties to Evolution for US$475-million.

Evolution has already done a lot to bring order to the chaos. It is mechanizing manual equipment, shut down two of the five mining shafts and consolidated 142 disparate geological models into one database. The Australian miner is aiming to eventually produce as much as 500,000 ounces of gold a year at Red Lake, up from 160,000 in 2019, and bring costs down to less than US$1,000 an ounce.

A big part of the reduction in costs has invariably involved layoffs. Evolution has cut the work force to 700 from 1,050. Mr. Klein recognizes the blow to the community, but the alternative could have been a lot worse. “If the mine continued operating like it was, it was going to close down,” he said.

While Evolution is trying to turn around a mine at death’s door, others are attempting outright resurrections. The revival in gold prices over the past five years has seen some prospectors take a second look at shuttered mines to see if any ore still in the ground can now be mined at a profit. The most spectacular success story of the past decade is the Canadian Malartic mine in Quebec. After being shuttered in the 1960s, a team led by Sean Roosen put the property back into production in 2011. Malartic is now Canada’s biggest gold mine.

In 2014, Darin Labrenz and Mark O’Dea acquired Red Lake’s Madsen property. It shut down in the 1970s after producing 2.5 million ounces over 40 years. Their company, Vancouver-based Pure Gold Mining, eventually found another million ounces of gold reserves. Since much of the basic infrastructure was already in place, the capital investment to put the mine back into production was a relative bargain – just $100-million. Shortly after Christmas, Pure Gold poured its first gold at the site. Over the course of the next year, the company is planning to ramp up to full production with about 350 employees, almost all of them from the local community.

“It’s one of the real benefits of being in Red Lake,” said Mr. Labrenz, Pure Gold’s CEO. “You have a very vibrant community with around 5,000 people who have a long, long history with underground mining.”

The first gold bar poured at the PureGold Mine, Red Lake, on Dec. 29, 2020. The bar is stamped PGM 0001. PureGold Mining/ PureGold Mining

Pure Gold is keen to avoid the mistakes made by the last junior to start a gold mine in Red Lake. About five years ago, Rubicon Minerals Corp. rushed its Phoenix project into production with only an early stage engineering study in hand. Rubicon had not done nearly enough drilling, and when it went to mine the deposit, the gold wasn’t there. About a billion dollars of shareholder money went up in smoke. Among those who got stung were the Canada Pension Plan Investment Board, which had invested US$50-million, and streaming and royalty company Royal Gold Inc., which had sunk US$75-million into the project.

“Building a mining project is no different than building a house,” said George Ogilvie, CEO of Battle North Gold – the renamed Rubicon. “If you don’t put in the proper foundation stones and build the house in the correct order and manner, eventually there’s going to be an external event which is going to come blowing in, and the walls and roof are going to come crashing in around your head. That is a fair analogy with what happened with Rubicon 1.0.”

After a painful restructuring, the miner is attempting a comeback. A new management team is in place, led by Mr. Ogilvie, who is credited with turning around Kirkland Lake Gold Ltd. earlier in his career. A novel mine plan will see a smaller amount of gold extracted at a lower grade. Naturally, some investors are still nervous, given Rubicon’s legacy, but Mr. Ogilvie accepts this. “It is still very much a ‘show me’ story,” he said.

Of all the new ventures in Red Lake, perhaps none has generated as much excitement as Great Bear Resources. The Vancouver-based exploration company is already worth more than $800-million, based on drilling results. That’s roughly the same valuation as Pure Gold, which already has a mine in operation.

Not that long ago, Great Bear could barely raise a dime. CEO Chris Taylor and his chief geologist had to turn to family and friends to raise enough money to buy the Dixie property in Red Lake.

In Red Lake ore, gold is almost always found in quartz veins; the rest of the rock is usually barren. At Dixie, early explorers concluded the rock contained little or no gold-bearing veins. In fact, the most recent prospectors only scanned for veins and didn’t bother to assay the rest of the rock, so confident were they that it would contain nothing of value.

But after poring over all the historical data, the Great Bear team had a hunch that something had been missed. After assaying all the leftover drill samples, they stumbled upon something remarkable: The quartz veins were empty, but the surrounding rock was teeming with gold.

“There was high-grade gold that was just sitting there, already drilled, waiting for us,” Mr. Taylor said.

Great Bear Resources, Red LakeHandout

The company started drilling in an area called the LP fault that nobody had looked at before. Great Bear has since drilled more than 230 holes in the zone – and every single one has hit gold.

“It was obvious to us that we had a major gold find that other guys had just totally missed because it’s in a different suite of rocks [than what] everybody else mines in Red Lake,” Mr. Taylor said.

Unlike typical Red Lake deposits, which are narrow and randomly dispersed, the LP fault appears to be uniform and large. The geology suggests the ore can be extracted in a bulk underground operation, which is much cheaper than traditional, stope underground mining. Some analysts have speculated Dixie could contain as much as 20 million ounces of gold, which would make it one of the biggest discoveries anywhere in the world in decades.

“Geologically it’s very interesting,” said Rob Cohen, portfolio manager with Dynamic Funds, one of Great Bear’s biggest shareholders. “We’re only in the first inning. There’s just so much stuff to look at.”

If Dixie ends up being a major mine, it may change the way people look at geology in Red Lake and possibly even elsewhere. While that has excited many people in the Canadian gold industry, it makes others a little wary.

“What they’re describing not only is unlike Red Lake, but is unlike Canada,” said John Tumazos, an analyst with Very Independent Research LLC.

Red Lake operations at Great Bear Resources.Great Bear Resources/Great Bear Resources

The rubber will hit the road when Great Bear delivers a maiden resource estimate, which will give investors the first real insight into how big an eventual mine could be.

A decade ago, senior gold companies routinely bought early stage companies with promising prospects. But after many of those acquisitions failed, large gold companies are being far more judicious before pouncing on juniors. A new culture of conservatism in the industry means operators will have to prove themselves. For Great Bear, Pure Gold, Battle North and Evolution, the next 18 months or so will be critical.

“Let’s face it: Red Lake has torched a lot of money in the past,” Evolution’s Mr. Klein said.

“We’ve got to demonstrate our capacity to deliver before we earn the trust of investors.”

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