The Bracemac-McLeod Project is a high grade volcanogenic massive sulphide (VMS) deposit located in the historical and prolific mining district of Matagami, Quebec. Xstrata Canada Corp. has been operating in the Matagami district for almost fifty years with ten previously operating mines and one current working mine called Perseverance. As Perseverance winds down, Xstrata plans to shift operations to Bracemac-McLeod while utilizing the existing Matagami Mill to produce concentrates of zinc and copper. The Matagami mill has been in operation since 1963 and underwent a recent upgrade that was completed in 2007. Historically, it has processed similar types of ore from other VMS deposits and is operating at a high availability.
Bracemac-McLeod will be an underground mine, accessed via a ramp, and is expected to begin ore production in early 2013. Current reserves would take the mine life to four years, but the high grade inferred resources on the McLeod Deep orebody have the potential to extend the life materially. Production is expected to be 2,500 tonnes per day.
Bracemac-McLeod Gold Stream
Sandstorm has a gold stream agreement with Donner Metals Ltd. (TSXV:DON) (via a back-to-back agreement with Sandstorm Metals & Energy Ltd.), to purchase amount equal to 17.5% of the gold and gold equivalent produced from the Xstrata operated Bracemac-McLeod mine. Pursuant to the agreement, Sandstorm Gold will make an upfront cash payment to Donner of US$5 million on June 30, 2012 plus ongoing per ounce payments equal to the lesser of US$350 and the then prevailing market price of gold. Donner Metals are the owners of a 35% joint venture interest in Bracemac-McLeod.
Until December 31, 2013, Donner has the option to repurchase up to 50% of the agreement by making a US$3.5 million payment to Sandstorm Gold upon receipt of which the percentage of gold and gold equivalent that Sandstorm is entitled to purchase shall be decreased from 17.5% to 8.75%.