AuRico Gold (TSX/NYSE:AUQ) received an environmental certificate March 15 for its $684 million Kemess project. The project also has letters of support from three local First Nations.
The company's stock was up 4% to $1.13 per share in mid-day trading March 16.

The Toronto-headquartered company expects it will take another 12 months to get all the permitting in place and begin construction.

But because it will use block cave mining – a relatively uncommon approach for B.C. – it will take about another four years before it is in production.

In traditional underground mining, miners simply bore and blast their way underground in ever-expanding networks of tunnels.

In block cave mining, most of the underground work is done all up front. A large underground cave is created underneath the deposit and miners then begin a process of collapsing the roof so that the ore falls down. It is then crushed underground and sent to the surface and the processing plant by conveyor.

The block cave mining approach – which is also being used at the New Afton mine near Kamloops – has higher up-front capital costs, but lower ongoing operating costs.
“It’s a very low-cost approach, once you’re in operation,” John Minioutis, vice president of corporate development, told Business in Vancouver.

Once in production, the company estimates the mine, which has an estimated life of 12 years, will have a payback period of about three and a half years.

Since the mine was still in production in 2011, most of the existing infrastructure is already in place, including a 50,000-tonne per day processing plant, road, power transmission line, administration building and work camp.

The mine’s estimated production value for the first five years is 238,000 ounces gold equivalent per year, with all-in sustaining cash costs of $682 per ounce.

“There are other greenfield projects out there with higher rates of return, but this is much lower risk, because the processing plant’s in place,” Minioutis said. “We have over $1 billion of infrastructure and we basically already have a tailings solution.”

The tailings will be stored in the old open pit, which eliminates the need for a new tailings storage pond.

The new underground mine would be located six kilometres from the current operations. The mine may have further expansion prospects at a resource called Kemess East.

The Kemess open-pit mine, formerly owned and operated by Northgate Minerals, operated from 1998 to 2011, when it shut down after exhausting the deposit. The mine was acquired in 2015 by AuRico Gold, which later merged with Alamos Gold.