Engineering & Mining Journal

JAN 2014

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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REGIONAL NEWS - U.S. & CANADA Klondex Buys Newmont's Midas Mine/Mill for $55M Cash Plus Stock Drilling activity continues at Klondex Mines' Fire Creek gold project in Nevada. Klondex purchased Newmont Mining's Midas mine and mill to process Fire Creek ore once development is completed. Klondex Mines and Newmont Mining announced an agreement on December 4, whereby Klondex will acquire Newmont's Midas mine and related ore milling facility in north-central Nevada for approximately $83 million. Klondex's flagship Fire Creek gold development project is located 112 miles south of Midas, and Klondex plans to process Fire Creek ore at the Midas mill. The purchase price includes approximately $55 million in cash and the replacement of Newmont surety arrangements with Nevada and federal regulatory authorities in the amount of approximately $28 million. The companies expect the transaction to close in early 2014. In addition, Klondex will issue to Newmont 5 million common share purchase warrants with a 15-year term, subject to acceleration in certain circumstances and an exercise price to be specified on the closing date of the acquisition. Midas is an underground mine, with limited reserves. The mill has a design capacity of 1,200 metric tons per day (mt/d), but Klondex is targeting throughput during 2014 in the range of 500 to 800 8 E&MJ; • JANUARY 2014 mt/d. The mill is based on a traditional Merrill Crowe processing circuit with high gold and silver recoveries. Klondex expects to commit $3 million to $5 million to exploration of the Midas land package in 2014 in an effort to provide future feed to the mill. Klondex's Fire Creek project has current measured and indicated resources totaling 295,900 oz of gold at a grade of 44.7 g/mt and inferred resources of 421,400 oz at a grade of 19.2 g/mt, at cut-off grades of 7 g/mt. Mining Investors Wary of Quebec's Changing Restrictions and Regulations Uncertainty about protected areas, tax changes, environmental restrictions, and regulatory duplication and inconsistency have combined to diminish Quebec's status as a destination for mining investment over the past three years, concludes a new study from the Fraser Institute. Until recently rated the most attractive jurisdiction in the world for mining investment, the province has seen this advantage plummet due to changing governmental attitudes toward mining regulation. The study, Quebec's Mining Policy Performance: Greater Uncertainty and Lost Advantage, cites policy change and uncertainty involving protected areas such as wilderness zones, parks and archeological sites as the primary deterrent to mining investment in Quebec. These changes include commitments to protect 12% of Quebec's northern territory (nearly 1.2 million km2) and intentions to exclude up to half of the territory from industrial use. "Uncertainty over protected areas effectively disqualifies land for exploration and mining, and douses any potential economic benefits such as job-creation. Uncertainty may also discourage exploration investment in and around potentially protected areas where the risk of increased protection looms," said Alana Wilson, study author and senior economist with the Fraser Institute's Center for Natural Resources. The study recommended that Quebec's government reconsider giving municipalities the ability to exclude areas from mining and seek to restore a single, stable and transparent policy framework. Also, a fair, transparent, and market-based compensation mechanism should be identified for mineral claims affected retroactively by increased restrictions. The province should also assess and publish the potential economic and social impacts of lost mineral exploration and development prior to removing land from mining and exploration. The study also noted that until recently Quebec provided a generous system of incentives and a competitive tax regime that was attractive to mineral exploration investment. However, since 2010, Quebec has introduced two major changes in taxation, increasing mining duty rates to 16% from 12% of annual profits and basing profits on individual mines rather than across operations held by a single owner. Now, losses incurred at one mine cannot be used to reduce annual profits at another. The study recommended that Quebec move toward a single, lower rate for corporate taxes and reconsider restrictions that limit credit for exploration work. Uncertainty concerning Quebec's environmental regulations, which have inwww.e-mj.com

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