A flawed processing plant and some “poor decision making” at TMAC’s Doris North gold site led to struggles meeting production expectations during the mine’s first two years of operation.

Production metrics have improved at TMAC’s Doris North gold mine over the past several months. Among the next goals at the site, located 125 kilometres southwest of Cambridge Bay, are expanding the amount of gold through exploration and becoming profitable, according to president and CEO Jason Neal. photo courtesy of TMAC Resources

That’s a candid admission from Jason Neal, who became the company’s president and CEO in January 2018. Since taking over, Neal has overseen the retrofitting of the mine and the fine tuning of ore throughput and gold recoveries, getting both measures much closer to reaching stated objectives.

The improvements contributed to record gold production of 34,080 ounces at the Hope Bay property in the fourth quarter of 2018 and unparalleled revenues of $51.4 million.

“We’ve made the big investments in the plant,” Neal said. “We’re happy with the progress we’ve made for sure, but we’re not satisfied that we’re done yet.”

In recapping TMAC’s accomplishments to date, Neal listed the establishment of infrastructure and a 300-person camp, assembling a team to achieve operational status and “great relationships” with the Kitikmeot communities and regulators.

“I really would have loved for us to be profitable as well, but we have a foundation that’s been formed,” he said. “The mistakes are sunk and now it’s a matter of moving forward in a profitable way.”

Jason Neal, TMAC’s president and CEO, says TMAC has identified enough gold to mine at Hope Bay for 20 years but the objective is to increase that to more than 50 years. TMAC is investing $5 million of its $20-million exploration budget this year on regional drill targets. photo courtesy of TMAC Resources

In total, TMAC has spent close to $500 million at Hope Bay, Neal noted. That created a mountain of debt and Neal, who has a background as a mining investment banker, admitted he was concerned by the amount of money owed when he arrived. As of Dec. 31, 2018, TMAC had $166.7 million (Canadian) outstanding on its debt facility, down from $202.2 million in the third quarter.

The junior miner managed to raise $90 million through the markets in October, putting $57 million toward debt reduction and allotting some to exploration.

“It helped get us into a stronger position,” Neal said. “I would say we’re very prudent about paying down debt. We made another significant debt payment at the end of January that was scheduled, a bit more than $10 million Canadian was spent. If the operations perform as we’re expecting them to this year then we’ll slowly work down the debt during the year. Ultimately, we want to get the balance sheet healthy because that’s what allows us to attract more capital for our next steps.”

Revenues and royalties

Optimizing operations and profits will benefit not only shareholders but the Kitikmeot Inuit Association (KitIA), Neal said.

“The revenue comes in royalties so they (the KIA) would like to see us producing for as long as possible and producing in any one year as much as we can, responsibly, because that will drive the revenues,” he said.

Paul Emingak, the KitIA’s executive director, said the organization is seeing TMAC’s progress in ramping up production and working toward profitability.

Neal also spoke of the support Inuit organizations, including the KIA, have shown in helping the company obtain regulatory permits.

“I think they’ve seen us to be good citizens in getting the mine going in the first place,” he said.

TMAC’s other major objective this year is exploration to expand upon the 4.8 million ounces of measured and indicated gold at its Doris, Boston and Madrid deposits.

TMAC is allocating $20 million for exploration in 2019, including $5 million for regional targets in hopes of expanding the known 20 years worth of gold toward the 50-year-plus goal. Total drilling will amount to 60,000 metres.

The junior miner has regulatory permits in hand for its Boston and Madrid North and South deposits.

There’s more underground zones at Doris North to be mined and Madrid North ore will be trucked seven kilometres on an already built road to Doris North for processing this year. TMAC also has permits for a 55-km road from Madrid to Boston, but that’s probably still a few years from construction, said Neal.

The Boston deposit has a resource of close to 1.5 million ounces, which is within about 350 metres of surface but there are drill holes going down close to a kilometre “hitting great grades,” Neal said of the potential to add substantial quantities of gold.

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