Centerra Gold gets some water relief in B.C.

By Peter Kennedy

Centerra Gold Inc. [CG-TSX; CAGDF-OTC] has won earlier than expected approval of certain short-term measures that will allow the company to access the water it needs for its Mount Milligan copper-gold mine in British Columbia. The announcement follows recent discussions between Centerra, B.C. regulators, and First Nations.

Dry conditions are becoming the new normal at Mount Milligan, where milling operations were shut down in December 2017 due to a lack of sufficient water resources.

Centerra has said there is a risk that throughput levels at Mount Milligan may need to be reduced in the fourth quarter of 2018 if it does not receive regulatory approval to access groundwater and surface water. The company is still pumping 2,500 cubic metres per day. Without access to water sources, Mount Milligan will need to reduce to one ball mill for the fourth quarter or 30,000 tonnes per day, Centerra said.

The company recently filed a formal request with the BC Environmental Assessment Office for an amendment to its environmental assessment certificate to provide additional short term water sources through 2020, and to initiate the development of a longer term water supply plan for subsequent years.

The amendment request specifically sought permission for Mount Milligan to access additional water from groundwater wells as well as from surface water sources at Philip Lake, Meadow Creek and Rainbow Creek, in each case, in a manner that is protective of the environment, the company said.

On Friday September 14, the company said it has received approvals which allow it to:

• Pump from groundwater wells within Mount Milligan’s tailings storage facility as well as from a single groundwater well outside the tailings storage facility for the entire life-of-mine;
• Pump up to 15% of the base flow from Philip Lake 1 until November 15, 2018.

An application to further extend the pumping from Philip Lake 1 for the winter period is currently under review as planned.

Discussions with all stakeholders could potentially see access to additional medium-term water sources to be used between now and 2020. Centerra is also working to access long-term water sources for use beyond 2020, which would satisfy Mt. Milligan’s needs throughout its life span.

The Mount Milligan Mine is one of two flagship assets in the Centerra Gold portfolio. The other is the Kumtor Mine is located in the Kyrgyz Republic.

Located about 120 km northwest of Prince George in central B.C., Mount Milligan is a conventional truck-shovel, open pit mine. It features a copper processing plant with a design capacity of 62,500 tonnes per day.

Proven and probable reserves at the end of 2016 stood at 496.2 million tonnes, grading 0.187% copper or roughly 2 billion pounds of contained copper, and 0.36 g/t gold or 5.76 million ounces.

Milling operations were shut down in December 2017 due to a lack of sufficient water.

This was due to a drier than normal spring and summer during 2017, with a limited amount of snow melt. This resulted in lower than expected reclaim water volumes in the tailings storage facility, which is used in the mill processing operation, the company said.

Last year’s water shortage was exacerbated by extremely cold temperatures at Mount Milligan, resulting in a greater than expected loss of water volumes in the tailings storage facility due to ice formation.

On Friday, Centerra was up 1.58% or $0.08 to $5.14. The 52-week range is $9.35 and $4.99.

Centerra noted in a press release that the recently received water sources will provide limited amounts of additional water in the near-term and this will assist with, though not meaningfully reduce, the outstanding water needs of the mine. However, it said there can be no assurances that additional sources will be available to the company on its expected time line, or at all.

In a research report, Scotiabank has provided some background to explain the challenges facing Centerra.

Mount Milligan stores water in its tailings facility, where it is expected to pond on top of silty waste rock (the tailings) from the mill. The operation attempts to recycle 100% of its process water. In addition, the tailings facility collects precipitation and water is also sourced from pumping to increase the total available volume.

Unfortunately, since the permeable floor of the facility is not fully covered by tailings, over a third of the water seeps into sandy gravel at the base of the structure.  The seepage problem is expected to persist through early 2020. Enough of this water is recovered to supply the needs of one ball mill, but not both. Permitting more water sources, is therefore deemed to be the solution.

Mount Milligan uses 21,000 cubic metres a day at full capacity and there is currently 1 million cubic metres in the tailings facility. The company is supplementing its water supply by taking 2,500 cubic metres from Philip Lake. But it needs an amendment to its environmental certificate to extend the pumping beyond the end of October and to use two local creeks.

It may take until the end of this year before the province can approve the amendment as it requires consultations with Indigenous partners and regulatory bodies.