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The gold mine only old-timer miners could save

Every old mining hand has seen a dozen abandoned adits just like this one: portal 830, the overgrown head of a mine drift disappearing into the side of a mountain high in the Selkirk range just north of Revelstoke, B.C. Here, a hundred metres past the end of a bad road, the opening evokes a sense of adventure and promise. Even the rusty gate, which is probably there only because the lawyers want to avoid liability, suggests that someone is trying to protect something of value—that thar's gold in that thar hill. As well there is. There's gold all over these hills. The irritating, elusive and expensive question is: How much? And: Where, exactly? The difference between the whiff of something pretty and the proof of a lode worth chasing has ruined many an optimist. It's busted more than a few on this very site.

This is the life of a mountain, of a junior mining company—of a large slice of Canada, in other words, complete with the very 21st-century twist of Canadian natural resources slipping away to China.

The mine is called J&L, and it's been breaking hearts since 1896, when prospectors Jim Kelly and Lee George (hence the name J&L) first staked a claim at the confluence of the Carnes and McKinnon Creeks. In 1912, an E. McBean drove the first shafts into the mountainside. He flailed about for a dozen years or more before being stumped by the ore's high arsenic content. In 1934, the property passed into the hands of a T.E. Arnold, a mining engineer, investor and promoter from Pennsylvania whose extended family would profit from the "mine" for more than 70 years without ever busting a knuckle. Between 1934 and 2007, they sold options to a parade of 10 companies, each of which tried to prove up the value of the deposit and each of which broke its own budget—or just lost interest—and then let the options lapse. These firms were not always triflers. Over the years, Noranda, Pan American and Equinox poured money into the ever-expanding series of exploratory tunnels. Of these, the 830 level adit was among the most promising, running horizontally along the "main zone," the richest part of a deposit that many believed carried economic concentrations of gold, silver, lead and zinc.

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The problem is that all these early excavations are, by modern standards, tiny. These eight-foot by eight-foot track adits are like the narrow train tunnels that you might expect to see on a Disney ride or in an Indiana Jones movie. Modern mine drifts are generally cut five metres by five metres, to accommodate the big, rubber-tired machines that now do the drilling and heavy lifting. If you're driving one of those monsters, you can't get there from here.

Of course, in the long term, the tight quarters are no big deal: Once someone decides to turn J&L into a working mine, they'll just blow open the tunnels or drive new ones from different angles and gather up the goods. But no one wants to spend that kind of money before they're sure of finding something worthwhile—and the only way to be sure is to look deeper and more closely into the bowels of the mountain. And the only way to get there is on the back of a senior citizen.

Seriously. If you want to extend an old-fashioned track tunnel, you need to recruit crew from among the generation of hard men who clambered at the rock face in the days before miners got used to pushing hydraulic levers on a drilling jumbo. You need people who are old enough to know what to do with a jackleg drill, and still fit enough to pick one up. You need people like Jack Retzlaff.

Retzlaff, 71, is a hard, wiry man with a surprisingly gentle handshake—and someone who everyone seems to agree is about the best track miner they ever met.

But can an old man really still be up to the task? Consider it: You trudge deep into a mountain and spend the first half of your shift drilling holes into the mine face with a restive, compressor-driven weapon—the jackleg. Then you pack the holes with ANFO powder (ammonium nitrate and fuel oil), wire up the caps and blast down a "round" of rock, eight feet by eight feet by six feet deep. You perhaps have a smoke or eat a little lunch while the fumes clear and then you muck it out, shovelling all that rock into 16 narrow-gauge train cars. Finally, you lay six more feet of 30-pound rail to set up for the next crew—the cross shift—and you call it a day.

And that probably makes it sound easier than it is. First, the jackleg weighs about 115 pounds and works like a gun that keeps firing the same projectile, over and over, wherever you aim it. It sprays water constantly, to keep the dust down, and it spurts enough oil that the air would look blue if the light were better. And the noise! Mine mechanic Ken Sperling says that track-mine crews work with two miners at the face—partners who have to be able to rely upon one another in every way. Yet crews will sometimes pass the whole shift without speaking. Who would hear? And when they come back into the shop at the end of the day, they are so perfectly coated with mud and dust that, Sperling says, "If they stand still, they look like a rock statue."

For all that, Retzlaff instantly dispelled any notion that he was not still up to the task: On his first day, he breezily set a pace that left his 20-something helpers crying for a break.

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There remains some debate among the veterans who congregated for the J&L job as to how hazardous the work is. John Nesbitt, at 65 another senior who thought he was retired before being coaxed back to work by J&L mine manager Lee Heichert, passed more than three safe and happy decades underground. Nesbitt says he moved into the dark after seven years of high-scaling: bringing rock down from the cliffs overhanging B.C. highways. After that experience, he found underground mining to be "not dangerous." In the mines, he says, "you control your own destiny. You make it safe."

Retzlaff might argue the same on the basis of personal experience: He worked in the industry for 52 years without a single day lost to injury. But, he says, he's also helped carry dead men from mines seven times. When things go wrong, there's not much margin for error.

Asked why he'd come back to all this, Retzlaff shrugs. He doesn't need the money. While not a stock-trading "insider," in the conventional sense, he's taken sufficient advantage of his mining knowledge to do well on his investment portfolio. "I even made money on Bre-X," he says—he sold before the famously corrupt company collapsed. He has a nice house on a golf course in Lethbridge, but, he says, he's a terrible golfer. He sold his Harley years ago, and while he used to quit every job after three months—"to go on a drunk"—he's no longer any kind of a party animal. Worst of all, his wife died the year before mine manager Heichert called offering him the J&L job. And called, and called.

The backers behind J&L were trying to rustle up enough miners for three shifts, so they could operate around the clock, minimizing the time and expense of keeping the camp operating. But there were few candidates and even fewer takers. Retzlaff resisted for the first couple of calls, before finally agreeing to accept a sweetened offer of $1,100 a day. "Money is the only thing that motivates a miner," Retzlaff says.

Hearing that some time later, Heichert smiles. The money had nothing to do with Retzlaff's taking the job, Heichert says: "He likes it." And when Retzlaff walks into the dining hall and every other worker in the place clears the way, you can tell that it's true.

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As of today, there is no actual "mining" occurring at J&L. In the words of Paul Cowley, vice-president of exploration for the site's current owner, Huakan International Mining, the purpose of the drilling program for which Retzlaff et al. were hired was the long-standing mission to "grow the deposit."

This is the challenge that all junior mining firms face when trying to prove that they have "discovered" a property that is worthy of development: They have to accurately define the scope of a deposit, hoping to demonstrate that it's big enough to justify a mine—and they have to do so before they run out of cash. As Cowley says of J&L, "Others have broken their picks on this property."

Noranda notwithstanding, most of those who have worked J&L have been juniors. A "junior," in mining parlance, is a small company, most often listed on the TSX Venture Exchange, that exists primarily to explore—to find new mining properties, to prove their worth and, in the best cases, to sell them to the major companies that will actually build and operate the resulting mine.

Each player that optioned the site from the Arnolds added value—that is, each one demonstrated that the deposit was bigger and richer than others had thought—but no one reached the magic point where one of the big-league players was prepared to buy them out to build a mine. So, one investor after another ran out of money and was forced to hand the rights back to the Arnolds when the option expired. Cowley says, "I don't want to fall into that trap."

That was why he and his former partner, Fred Sveinson, took over a shell public company for the purpose of buying J&L from the Arnolds outright in 2007. Under the name Merit Mining Corp., they immediately launched a $10-million drive that included construction of a 40-person camp and the digging of a new drift. It was all looking great until 2008, when metal prices collapsed, leaving Cowley, Sveinson and other Merit stockholders with something that looked very much like a broken pick.

Enter Tianjin Huakan Group Co., Ltd., one of the largest mining interests in China. It is also one of the most internationally adventurous Chinese players, with 5,000 employees working 200 mining projects in 20 countries—and with two good reasons to pick up the Merit property. First, according to company executive Penghzi Guo, Tianjin Huakan was eager "to take advantage of the opportunity that arose from the international financial crisis." Second, "Canada and the province of B.C. have been chosen by Tianjin Huakan to be a strategic base for its overseas operation to develop a diversified, stable and reliable offshore resource organization."

So Guo and company came to Merit's "rescue" with a $15.5-million private placement. That was too small to get on the radar of those worried about a creeping takeover of Canadian resources by China. But the process, according to Cowley, was "brutal for original shareholders." Merit stock had been consolidated 50 to 1. Sveinson resigned and the company was renamed Huakan International Mining. Guo is now CEO.

Of course, in this market, it could have been worse. Cowley says that 60% of the juniors on the TSX have "less than $200,000 in their kitty," adding, "It's a real meltdown."

So Huakan International is something of an anomaly. Having a deep-pocketed parent like Tianjin Huakan makes the TSX listing almost irrelevant. On one hand, Huakan doesn't need to be going to the market for money. On the other hand, the payoff is going to be harder to realize. With Huakan's Chinese parent already holding or controlling more than 75% of the stock, minority shareholders in this play don't have much hope of a future bidding war.

Guo recognizes the problem, which he says has contributed to Huakan International's being "undervalued by the market." He says, "Tianjin Huakan should keep its shareholdings in a healthy range rather than pursuing absolute control of the company. In fact, the lower the holding ratio, the better. Too high a stake will seriously lower the stock's trading volume and take away investors' interest." For that reason, management plans to obtain more North American financing "to dilute Tianjin Huakan's shareholdings." It is, Guo says, all part of a long-term plan to "gradually master the processes in operating a Canadian public company."

In the meantime, Cowley is delighted to fossick through the rock. What's in the ground is pure candy to a geologist: a silver-lead-zinc deposit in a 70 million-year-old thrust fault. The superheated water that once poured along the fault line carried a host of other metals—happily including gold, which precipitated out into an overlapping deposit. It is, Cowley says, "a freak of nature," resulting in the kind of concentration that he estimates could support a mine employing between 150 and 200 people, operating for 15 years or more.

Which is, perhaps, getting ahead of the story—ahead of consultations with First Nations, ahead of environmental permitting, ahead of deal-making with smelters and refiners. And it's getting ahead of the drilling process enabled by J&L's geriatric mining team. Modern diamond drilling techniques allow geologists to assemble an image of a deposit. The task at J&L was getting the diamond drillers deep enough into the mountain to pull core samples from the edges of the deposit—both to establish with greater certainty what was in the sample and to clarify where the good stuff stopped.

Touring those old and new tunnels is a certain kind of thrill ride. It's true that the rail car is jiggling along the two-foot track at a speed that you could often better on foot. But the safety briefing alone is enough to get your heart racing faster than on Space Mountain. Instead of being told to keep your arms and legs inside the car at all times, John Nesbitt hands over a respirator that looks vaguely like a Second World War gas mask and says, "If I give you the signal, put that in your mouth and don't take it out—even if your lips start to blister." Great. Then he guides you to your "seat": an overturned pail. The Disney folks may whisk you more quickly through the tunnels, but you know that no Mouseketeer has ever been thrown from one of those cars. The pail, by contrast, has no seat belt. And Disney doesn't know the first thing about setting a scene. In J&L mountain, the dripping water, the dull lights, the whine of the diamond drill—and the certainty that, if you fall off your bucket, you will get hurt—is much more compelling.

At the end of each line is a gallery, a cavern big enough to accommodate a diamond drill, with enough space left over for two operators, well-practised in the miner's dance, moving back and forth checking gauges, adding drill rods and retrieving samples—sorting and marking everything to ensure the geologists can recreate the ore profile precisely once the cores make their way to the surface.

All of which has now happened. Huakan wrapped up its last round of drilling in the summer of 2012 and released the analysis this January. And Paul Cowley is happy to report that they did grow the deposit, from an earlier estimate of 7.3 million tonnes of ore to 10 million tonnes. Now they wait. They wait for prices to improve, for demand to increase. And they work through "pre-feasibility," defining the techniques that will work best for rendering a still-arsenic-laden ore, safely, into an economic payoff for everyone from the coffee shop owners in Revelstoke to the hungry manufacturers of China.

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There is a temptation here to see this as another instance of Canada failing to keep its labour supply relevant, an issue that flared up in the coalfields of Northeastern British Columbia when another Chinese player, the Vancouver-based HD Mining International, received approval to bring in 201 workers from China. But this is not a story about Canadian workers not keeping up. It's a tale of transition.

Cowley says Huakan never considered looking to China for miners, even though it was only ever able to find enough men to run two crews, when three would have been much more cost-efficient. "We recognized it as the cost of doing business." Indeed, the only Chinese worker on the J&L site has been a junior geologist, Tao Song—a University of British Columbia grad who says he came to Canada because there isn't much respect in China for smart students "who like rocks." He was delighted, coming out of school, to find a job in Canada and then to get permanent residency.

Cowley says Huakan also recognizes that the rules of play are different in Canada—in environmental management as well as in labour relations. So, in the end, getting the job done was about the value of work to the people who do the work, about the pride that people take in their skills. It's about the easy grace of a senior citizen picking up a hernia-inducing tool (the jackleg) like it was an empty lunch pail on a stick and making it dance against a rock face for fully half of an eight-hour shift. And given the generation in question, it's about men being men.

Not that there aren't women in modern mining camps. Well, there was one woman, a cook named Alex Teare (who, by way of full disclosure, is the writer's stepsister). Teare is an accomplished chef who had recently wound down a catering company in favour of the simplicity of making peoplehappy—which, in a mining camp, is both harder and easier than it seems. Practising as she was for Red Seal culinary accreditation, Teare was serving high-end dishes that were attracting little interest from men who wanted meat, in large amounts, and potatoes, preferably mashed. Which accounted for one of her best successes. The day she worked up the deep-fried pommes dauphine ("crisp potato puffs encased in a savory choux pastry"), the boys all came back for seconds, saying, "Hey, you got any more of those Tater Tots?"

Even in the absence of gourmands, Teare says she couldn't believe her luck at meeting and feeding this particular crew. Her best day, she says, was when the 64-year-old electrician, Brian Hutchison, arrived for the first time in the dining room. Hutchison was greeted by Walter Kellner, a 70-something mine mechanic he hadn't seen since the mid-1990s. Kellner, Hutchison says, "picked me up and swung me around like a child."

Teare says: "It was the cutest thing."

For his part, Hutchison says he took the job at J&L for the same reason as everyone else. He's retired and happily so, living in the Okanagan with what Teare describes as the most elaborate and fabulous stereo system ever devised. But when the phone rang, Hutchison didn't hesitate.

In these circumstances--—or any circumstances--— he says, "Who wouldn't want to work with a bunch of old friends?"

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