This page presents lengthy summaries of the operations of United Keno Hill Mines Ltd. at Elsa, Yukon, in the years 1978, 1979, and 1980. The information and photos are taken from the company's Annual Reports for those years - the complete Annual Reports can be downloaded at the bottom of this page.
These Annual Reports were given to me in 2016 by Gisele Wasse of London, Ontario. Her husband, Frank Wasse, worked for United Keno Hill Mines, and they lived in Elsa.
According to the Yukon government's Minfile database, between 1913 and 1989 the Keno Hill Silver District produced more than 217 million ounces of silver from over 5.3 million tons of ore with average grades of 1,149 g/t (37 oz/t) of silver, 5.62% lead and 3.14% zinc, making it the second-largest historical silver producer in Canada. In 1989, with falling metal prices and increased environmental standards, the former owners of the Keno Hill Silver District, United Keno Hill Mines Limited, terminated its mining activities in the District. Today (January 2019), the Keno Hill Silver District is owned by Alexco and it continues to boast significant mineral resources at grades far higher than most of the world's primary silver producers.
1978:
Mine Operating Officials
- G. S. Dundas, Mine Manager
- V. E. Smith, General Superintendent
- R. E. Van Tassell, Exploration Manager
- J. Holzapfel, General Foreman - Underground Mines
- R. W. McWhirter, General Foreman - Open Pit Mines
- A. Grundmanis, Mill Superintendent
- W. G. Bennett, Plant Superintendent
- I. Moga, Chief Engineer
- G. H. Partridge, Chief Mine Geologist
- T. Levicki, Mine Exploration Geologist
- W. J. Henry, Office Manager
- K. Berg, Personnel Supervisor
Consultants
- R. E. Van Tassell, Consulting Geologist
- F. G. T. Pickard, Consulting Metallurgist
United Keno Hill Mines Limited, a member of the Falconbridge group of companies, is primarily a producing silver-lead mining operation. The producing properties are located mainly on Galena Hill and Keno Hill in the Mayo district of the Yukon Territory. The Company also maintains an exploration office in Whitehorse, the capital of the Yukon.
The Keno-Galena Hills district has the longest production history of any lode mining area in the Yukon. Silver-bearing galena was first discovered on Galena Creek in 1906 and except for the period between 1942 and 1946, mining operations in the district have been continuous to the present. Since 1946 production from the Company operations has totalled 3,800,000 tons of ore yielding 134,000,000 oz. of silver as well as 457,000,000 lbs. of lead and 330,000,000 lbs. of zinc.
United Keno Hill Mines Limited is a Canadian Company and was incorporated on November 6, 1945 as Keno Hill Mines Limited which in turn had succeeded the Treadwell Yukon Company as the principal operator in the district. The name of the Company was changed to its present form on January 24, 1948. The authorized capital comprises 2,500,000 common shares of no par value of which 2,470,000 shares have been issued. Falconbridge Nickel Mines Limited owns 1,195,989 or 48.42%. The shares are traded on the Toronto Stock Exchange.
Since incorporation, the Company has paid a total of $22,477,000 in dividends. This represents $9.10 per common share.
Seen to the right, miners Joe Weinholzner and Yves Maciagowski.
Revenue & Earnings
Gross revenue from metal shipments in 1978 was $21,623,000. In 1977 it had been $16,860,000. Silver had averaged $6.67 per ounce, up from $5.203 in 1977. Lead had averaged $0.415 per pound, up from $0.349 in 1977. Only a minor amount of zinc concentrate was produced in 1978 as heavy smelter deductions and treatment charges coupled with increased transportation charges made production of this material uneconomical.
Net earnings for 1978 were $3,769,000 - that was the second most profitable year in this history of the company to that point, as high metal prices and high ore grades had more than offset increased operating costs. In 1977 net earnings had been $2,412,000.
Analysis of Operating Costs
Treatment and marketing charges increased by $736,000 to $3,170,000. During 1978 production of concentrate increased by 1,388 tons as lead grade in the ore was almost one per cent higher. As lead content in the concentrate remains fairly constant at about 50% lead, a higher grade ore produces more concentrate. This in turn attracts additional transportation charges and additional smelting and refining charges which are in part based on the number of tons delivered and in part on the metal content.
Mine operating and administrative costs increased $2,178,000 to $12,436,000. The major components of this increase were the mine operating account (+ $941,000) and the maintenance account (+ $768,000). The increase in mine operating charges was due to costs incurred in stripping the Bermingham pit, driving the adit to the Ruby ore body and driving a long cross cut to reach a new ore horizon at the Keno mine. These charges were partially offset by reduced activity in other locations. The increase in maintenance charges was due to increased power and heating charges and open pit equipment repairs which were insignificant in 1977.
Husky Mine head frame and surface plant.
Ore Reserves
Underground ore reserves decreased by 16,255 tons after mining 78,189 tons from underground. These reserves include tonnage from the Elsa, Keno, Husky, No Cash and Ruby Mines. For the first time in the Annual Report, indicated ore is reported. All indicated ore from underground is from the Ruby mine.
Also for the first time, open pit reserves are reported. All "proven" ore is from the Bermingham open pit which is currently in production. This figure includes 56,049 tons grading 21.9 oz. in stockpile. All indicated ore in this category is from the Sime vein which is scheduled for production in 1979.
No further work was done on the Black Cap vein system (mentioned in the 1977 Annual Report) and no reserves are reported. This deposit has an economical mineral inventory; however, this does not fall within the definition of the three reserve categories mentioned.
Marketing
United Keno Hill lead-silver concentrate is shipped from Elsa to Whitehorse by truck, to Skagway, Alaska by train, to Vancouver by ship and to East Helena, Montana by rail.
The company has a sales contract with Asarco Incorporated which operates a lead smelter at East Helena. Under the terms of the smelting contract, payment for metals is made based on the average published price for the second month following date of delivery. With a transportation route that may involve several weeks it can be seen that payment for metals can be four to five months after production, i.e. receipts for 1978 December production would be in April-May, 1979.
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Report on Operations
In late 1977, mineralization was discovered in two trenches on the Bermingham vein on Galena Hill. Subsequent surface stripping showed this mineralization to have considerable strike length and approval was given to purchase the equipment required to conduct a surface mining operation. Metallurgical test work on the Bermingham ore, which is highly altered near surface resulted in the Directors granting approval for the rehabilitation of the cyanide extraction section of the concentrator which had been inactive since 1967. Capital costs for these programs were $747,000 for the cyanide plant and $641,000 for open pit equipment. The cyanide plant started operations in mid September 1978, however, operations were intermittent due to numerous mechanical problems and the plant did not have a significant effect on 1978 earnings.
A total of six underground mines and one open pit were operated in 1978 with one operation, the Dixie mine suspending operations. As in 1977, the two major contributors to silver production were the Keno and Husky operations which supplied 27% and 52% of the silver respectively.
Elsa Mine
The Elsa mine which is located within the Elsa town limits was operated on a fairly low level in 1978 with 7,971 tons mined containing 6% of the total silver produced. Ore reserves at 18,000 tons grading 39.5 oz. are only marginally lower than those reported at the end of 1977. There were no significant new developments at the Elsa.
Husky Mine
This mine pictured elsewhere in this report is located in the valley below the townsite and is the only operation serviced by a shaft from surface. In 1978, the Husky continued to be the major source of ore (36% of total) and silver (52% of total). Ore reserves at the Husky declined from 60,417 tons in 1977 to 45,333 tons after mining 32,439 tons, i.e. 54% of the tons mined in 1978 were replaced. This replacement does not represent any significant discoveries but rather reflects increased stope boundaries within existing mining areas.
Tonnage from the Husky was adversely affected after May 1978 by the exhaustion of one of the major producing stopes, however, some tonnage was replaced by a new stope developed from a decline to fourth level. Third level is the bottom level serviced by the shaft.
There were no significant developments at the Husky and it does not appear that any major additional tonnage will be found above the bottom level and within the boundaries of the existing mine. Consideration is being given to a deep drilling program under the existing workings.
No Cash Mine
This operation contributed 11.6% of the total tonnage and 6.7% of the total silver production. Reserves remaining total 12,381 tons. There were no significant developments during 1978 and the mine will operate at approximately the same level in 1979.
Keno Mine
Production at Keno accounted for 24% of the total tonnage and 27% of total silver. After mining 21,424 tons, ore reserves declined by 10,324 tons to 19,069 tons.
Most of the existing reserves are on the #18 or Shamrock vein above the 400 level. In order to test ore shoots below 400 level, a 1500 foot cross cut was driven on 700 level. At year end the heading had reached the vein and a raise was in progress towards the potential ore zone.
Ruby Mine
On the basis of diamond drill information, development of this mine was started in late 1977. By year end 1978 after a drive of 2500 feet, the vein was reached and a raise started.
Reserves at the Ruby are 2,879 probably grading 25.9 oz. and 12,383 indicated grading 36.9 oz. Some potential exists for increasing this figure.
Bermingham Mine
Surface stripping of the Bermingham started in late 1977. During 1978, 9,114 tons of ore grading 14.4 oz/ton were milled while a further 56,049 tons grading 21.9 oz/ton were stockpiled for treatment through the cyanide plant. Total stripping amounted to 773,000 tons. In 1978, the Bermingham supplied 10% of the total tons milled and 3.8% of the total silver. In 1979 these figures are forecasted to increase to 53% and 40% respectively.
Elsa townsite, concentrator and industrial area from Galena Hill.
Husky mine shaft is in valley below the town.
United Keno Hill Directors and mine staff examine Bermingham vein August 1978.
Employees
United Keno Hill employed 290 at the Elsa operations in 1978. The Whitehorse exploration office had a permanent staff of four augmented by temporary employees during the exploration season. While turnover of hourly employees increased from 132% in 1977 to 149% in 1978 a nucleous of long term employees helped to minimize the effect of this high rate.
Labour relations were generally constructive. A two year contract expiring August 31, 1980 with Local 924 of the U.S.W.A. was negotiated without work stoppage. The agreement provides for wage increases of approximately 10% in the first year and 6% in the second.
Below left: V. Rafuse, Chief Assayer
Below right: Margo Parker, Hoist Operator
Concentrator
Silver metal recovery increased slightly to 90.67% from 89.75% reported a year earlier. This was due to higher lead recovery and improved metallurgical test procedures. As the cyanide plant operated only intermittently, overall recovery was not improved by this operation.
Re-construction of the cyanide plant started in March 1978 and the plant started operations on September 19, 1978. Problems continued with the filters and one of the thickeners for the remainder of the year. In December, the plant was shut down and a more thorough overhaul started on the filters. This plant will be back on line in January 1979.
Exploration
Total exploration expenditures for 1978 amounted to $1,060,000 of which 72% was spent exploring locally for silver in the Elsa area.
Local exploration was by percussion (overburden) drilling (71,035 ft.) diamond drilling (12,134 ft.) and by surface stripping using a D-8 tractor. Significant discoveries were as follows:
- McLEOD VEIN (near Sime vein on Galena Hill) - Detailed follow up was done along a 2,000 ft. strike length and numerous intersections in the 3-30 oz Ag/ton range were obtained. A 1,000 ft. segment of the vein has now been overburden drilled at 50 ft. spacing. Grades are fairly consistent averaging approximately 9 oz/ton.
- SIME VEIN - This structure along with another structure running at right angles to the Sime vein were drilled by the overburden drill on 25 ft. spacing. Reserves are included in this report. Surface stripping will start on the Sime in the spring of 1979.
- CALUMET "C" STRUCTURE - Six trenches were cut on this structure where overburden drilling had indicated anomalous values. Trenching and stripping continued here until December exposing 150 ft. of strike length of good galena mineralization with above average silver content.
United Keno Hill maintains an exploration office in Whitehorse. From this office the Company manages various exploration projects in the Yukon, mainly in a joint venture with Falconbridge Nickel Mines Limited. Programs conducted in 1978 were mainly grass roots prospecting for lead, zinc and silver. Additional work on several of these is required in 1979.
The company also participated in a joint venture along with Giant Yellowknife Mines Limited and Falconbridge Nickel Mines Limited in exploring for metals in Newfoundland. Again, further work is required in 1979.
Summary
In the 1977 Annual Report it was stated that the future profitability of the operation was dependent on continued high silver prices and replacement of the Husky ore with ore from the open pit operations. It was further stated that management was of the opinion that sufficient ore could be developed from this source to meet milling requirements at least through 1980. Although no major additions were made to the underground reserves, tonnage discovered at the Bermingham pit and the Sime prospect have been considerably above expectations. From the reserves reported earlier it is evident that the production will take place at least through 1980 as forecasted. In addition, it is now evident that the use of large equipment for stripping overburden from the vein systems has considerable potential as an exploration tool in the Keno area.
1979:
Mine Operating Officials
Elsa Operations
- V. E. Smith, Mine Manager
- T. A. Dickson, General Superintendent
- J. Holzapfel, Superintendent - Underground Mines
- R. W. McWhirter, Superintendent - Open Pit Mines
- G. D. Byles, Mill Superintendent
- W. G. Bennett, Plant Superintendent
- C. R. Thomas, Mine Engineer
- J. P. Franzen, Chief Geologist
- T. Levicki, Chief Exploration Geologist
- L. W. Carlyle, Chief Mine Geologist
- W. J. Henry, Office Manager
- K. Berg, Personnel Supervisor
Whitehorse Operations
- R. E. Van Tassell, Exploration Manager
- R. J. Joy, Senior Exploration Geologist
Consultants
- R. E. Van Tassell, Consulting Geologist
- F. G. T. Pickard, Consulting Metallurgist
United Keno Hill Mines Limited, a member of the Falconbridge group of companies, is primarily a producing silver-lead mining operation. The producing properties are located mainly on Galena Hill and Keno Hill in the Mayo district of the Yukon Territory. The company also maintains an exploration office in Whitehorse, the capital of the Yukon.
The Keno-Galena Hills district has the longest production history of any lode mining area in the Yukon. Silver-bearing galena was first discovered on Galena Creek in 1906 and except for the period between 1942 and 1946, mining operations in the district have been continuous to the present. Since 1946, production from the company operations has totalled 3,931,000 tons of ore yielding 136,520,000 oz. of silver as well as 462,896,000 lbs. of lead and 329,844,000 lbs. of zinc.
United Keno Hill Mines Limited is a Canadian company and was incorporated on November 6, 1945 as Keno Hill Mines Limited which in turn had succeeded the Treadwell Yukon Company as the principal operator in the district. The name of the company was changed to its present form on January 24, 1948. The capital of the company is comprised of 2,470,000 common shares without par value issued and outstanding. Falconbridge Nickel Mines Limited owns 1,195,989 or 48.42%. The shares are traded on the Toronto Stock Exchange.
Since incorporation, the company has paid a total of $27,417,000 in dividends. This represents $11.10 per common share.
Seen to the right, Chief Mine Geologist Larry Carlyle inspects a high grade face in the Husky Mine.
Revenue & Earnings
The past year was by far the most profitable in the history of the company. Net earnings of $20,726,000 or $8.39 per share far exceeded the previous high set in 1974. When compared with 1978, record earnings were due to significantly higher metal prices, particularly in the last quarter, which more than offset increased operating costs, lower metal production and a higher tax rate.
Gross revenue increased by 146 percent to $53,226,000 as silver and lead prices exceeded 1978 averages by $13.16 per oz. and $0.249 per Ib. respectively.
Analysis of Operating Costs
Treatment and marketing expenses increased by $1,031,000 to $4,201,000. This includes metal not paid for under the terms of the smelter contract. The main component of the large increase is the sharply higher prices for metals used in calculating the value of the losses. Mine operating and administrative costs increased by $2,340,000 to $14,776,000. Unit costs decreased from $138.05 per ton of ore to $118.85 per ton due to the introduction of substantial quantities of lower cost, lower grade ore from the open pit mines.
The major components of the operating cost increase were mining (+$360,000) mainly due to higher development activity, milling (+$997,000) mainly due to full operation of the cyanide plant and the increase in milling operations from 10 shifts to 15 shifts per week, maintenance (+$279,000) and administrative charges (+$704,000). Increases in maintenance were chiefly higher fuel and power costs. The administration cost increase includes an extra $361,000 for environmental control.
Ore Reserves
Total ore in reserve and in stockpile increased by 84,694 tons during 1979 after milling 124,322 tons. Average grade decreased slightly from 30.7 0z/ton to 29.1 oz/ton. Reserve increases were recorded in all underground mines with the largest increases recorded at the Keno and Husky mines.
The ore reserves include 9,229 tons grading approximately 30 oz/ton on claims owned by Comstock-Keno Mines Limited. The company has recently leased these claims from Comstock-Keno and will start rehabilitation of the old workings in the spring of 1980.
Mining areas included in the "Total Ore" calculation are Husky, Elsa, No Cash, Ruby, Keno, Bermingham stockpile, Sime and the Calumet C structure. In addition the underground "Indicated" reserve of 33,314 tons is from a new area designated as South-West Husky. This area is described in more detail in the exploration section.
Marketing
United Keno Hill lead-silver concentrate is shipped from Elsa to Whitehorse by truck, to Skagway, Alaska by train, by ship to Vancouver and to East Helena, Montana by rail.
The company, during 1979 sold all its concentrates under contract to Asarco Incorporated which operates a lead smelter at East Helena, Montana. With a transportation route that may involve several weeks between production and delivery, the time lapse between production and payment can be four to five months, i.e., receipts for December 1979 production would be in April-May 1980.
United Keno Hill records revenue on the basis of production, hence adjustments must be made periodically to balance production estimates with changing market conditions and actual smelter payments. At December 31, 1979 the total inventory of silver in concentrate and in precipitates produced in 1979 and scheduled for payment in 1980 was 826,804 ounces. This compares with 981,521 ounces at December 31, 1978. The 1979 earnings statement reflects the following estimated value of this inventory.
Ounces / $ Can/Oz
January settlements based on December average price - 246,385 $25.35
February settlements based on January average price - 166,857 $40.99
March settlements based on February average price - 141,384 $32.29
May settlements based on April average price - 272,178 $26.81
Note that due to transportation problems in Vancouver, no concentrate is scheduled for settlement in April 1980.
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Seen to the right, Rita Wozniak, Draftsperson; and Ossie Venasse, Chief Surveyor.
Report on Operations
A total of five underground mines and two open pits were operated during 1979 with one pit, the Bermingham suspending operations after exhausting all known ore reserves. Total production for the year was 124,322 tons grading 23.87 oz. silver per ton. Although tonnage increased by approximately 34,000 tons, silver production declined by 256,399 oz. to 2,481 356 oz. For the first time, open pit ore became the major contributor to production with the pits (primarily the Bermingham) supplying 48 percent of the total ore and 36 percent of the total silver produced in the flotation plant. A substantial portion of the cyanide plant production is also attributable to the pits.
Elsa Mine
Production from Elsa was 5,524 tons grading 36 oz. in 1979 compared with 7,971 tons grading 25.8 oz. in 1978. Production was mainly from one stope. Ore reserves at 21,000 tons are marginally higher than 1978. There were no significant developments at this mine which is located within the Elsa town limits.
Husky Mine
Husky production was 23,354 tons grading 35.3 oz. in 1979 compared with 32,439 tons at 52.3 oz. in 1978. The Husky contributed 18.8 percent of the total ore production and 26.1 percent of the total silver. Grade and total silver production were affected by the exhaustion of the 2-1-225 stope, a major producer since 1975.
Ore reserves increased by 10,719 tons to 56,052 tons grading 43.9 oz. Reserve increases were mainly unexpected additions within existing stopes.
The diamond drilling on South-West Husky which is described under the "Exploration" section of this report precipitated a decision to re-examine the south-west extension on the 250 level which is within 700 ft. of the diamond drilling discovery. The old workings were re-opened and subsequent development resulted in 4,500 tons being added to the Husky reserves. At year end the 250 level drift was being driven towards the new discovery.
No Cash Mine
Production at 10,289 tons grading 20.2 oz. was virtually unchanged from 1978. Ore reserves at 14,530 tons grading 26.3 oz. were approximately 2,000 tons higher than 1979. There were no significant developments at No Cash.
Keno Mine
Production at Keno was 15,571 tons grading 18.4 o0z., down from 21 424 tons grading 40.1 oz. in 1978. Tonnage and grade decreased as the high grade sections of the main producing stope on the No. 18 vein were mined out in early 1979.
Keno ore reserves increased by 24,046 tons to 43,115 tons grading 24.2 oz. The large increase is mainly due to development of the 18 vein "North Block" between 700 and 450 levels. Previous mining on this vein had been above 450 level. Two raises, 285 ft. apart were driven in the block in 1979 between the 700 and 450 levels. One raise, the 7-18-019, encountered ore values in two ribs of the vein. The south rib averaged 27.8 oz/ton over 4.8 ft. for a vertical distance of 126 ft. The north rib averaged 20.1 0z/ton over 4.5 ft. for a vertical distance of 98 ft. A subdrift driven from lift 14 of this raise returned 25.3 oz/ton over 6.5 ft. for a strike length of 108.5 ft.
Ruby Mine
Production at Ruby was 9,664 tons grading 27 oz. in 1979 compared with 3,489 tons grading 15 oz. in 1978, the first production year.
This mine was started in late 1977 with the collaring of the adit on Galena Hill. By the end of 1978 the 2,500 ft. drive had been completed and a raise to surface on vein started. This raise was completed in September 1979. During the last quarter of 1979, subdrifting was started to determine the lateral extent of the bottom of the ore body.
Ore reserves at 14,037 tons grading 32.9 oz. were virtually unchanged from 1978 except to move the reserves from the "drill indicated" category to "probable". There is considerable potential for additional ore in this mine.
Bermingham Open Pit (seen to the right)
Mining at the Bermingham Open Pit was terminated in October 1979. A total of 59,005 tons grading 19.9 oz. were delivered to the mill and 33,724 tons grading 20.2 oz. were stockpiled in 1979.
The total Bermingham ore stockpile at December 31, 1979 was 77,669 tons grading 20.4 oz.
Total production for the life of the Bermingham was 146,694 tons of ore grading 21.6 oz.
Waste removed amounted to 1,035,000 tons for a waste/ore stripping ratio of approximately 7:1.
Sime Open Pit
Stripping started at the Sime in July 1979. At year end waste removal amounted to 164,000 tons, 915 tons grading 17.0 oz. had been milled and 1,525 tons grading 22.6 oz. had been stockpiled.
Drill indicated reserves at this pit of 36,259 tons grading 28.6 oz. were unchanged from the figures reported in the reserves in the 1978 report except for the deletion of reserves mined.
The stripping ratio at this pit will be considerably higher than Bermingham, hence it will be necessary to increase waste removal substantially in order to maintain, and if possible increase open
pit reserves during 1980. A program to this effect has been initiated.
Concentrator
Production shortages in the first quarter of 1979 due to freezing of the open pit ore in the crushing system and the fine ore bins led to increased heating of the ore bins and to construction of a thaw shed for the open pit material. Problems to date in the 1979-1980 winter have been greatly reduced. Capital cost of these additions during 1979 amounted to $247,000.
The concentrating process at United Keno Hill employs conventional crushing, grinding and flotation methods to produce a silver rich lead concentrate. The tailings from the flotation plant are treated further in the cyanide plant where cyanide is used to dissolve silver from the tailing. Zinc dust is used to precipitate the silver from the solution. The precipitate is collected and sold separately from the concentrate. The tailing from the cyanide plant is filtered and washed to remove as much cyanide as possible and then treated with chemicals to lower the concentration of deleterious metals before flowing to the tailings pond. Overflow from the tailings pond flows through two settling ponds before discharge to the environment. Effluent from the tailings pond to the first settling pond is treated with lime to remove heavy metals and with chlorine gas to remove cyanide. Further treatment using chlorine gas is used between the first and second settling pond. A photograph of this system is shown below.
During 1979, labour and chemicals to service this system amounted to $437,000. In addition, construction of the dam for the second settling pond during 1979 resulted in a capital cost of $302,000. This expenditure has been made in order to meet a water discharge standard that is one of the most stringent in the world particularly with respect to the maximum allowable concentration for cyanide.
Silver recoveries from the two plants declined from 90.7 percent in 1978 to 85.5 percent in 1979. The reasons for the decline are as follows:
- Lower head grades,
- Higher percentage of non-sulphide ore from the open pits affecting the flotation plant recovery,
- Lower than anticipated silver recovery from the cyanide plant.
Some improvement is anticipated in 1980 particularly with respect to the operation of the cyanide plant.
Tailings dam in the background showing lime and chlorine treatment. Dam between No. 1 and No. 2 settling ponds in foreground showing chlorine treatment in red shack.
Exploration
Total exploration expenditures for the year of $2,006,000 were $946,000 higher than 1978.
Approximately 50 percent of the total amount was spent exploring on the main property at Elsa. A total of 1,081 claims were held by the company in the Elsa area at year end. Exploration included overburden (percussion) drilling (76,400 ft.), diamond drilling (14,084 ft.) and surface stripping and trenching. Significant
results were as follows:
A) Overburden Drilling
- Sime Vein - Before the commencement of open pit mining operations, one hundred
percussion drill holes totalling 11,970 ft. were drilled to test other structures associated with this vein system. Both a hanging wall and a footwall structure were identified. These will be explored further as the open pit develops.
- Calumet 4 and 11 Veins - Extensive follow-up work was done on these structures
where strong mineralization was outlined in 1978 drilling. A 450 ft. strike length of the No. 11 vein and a 200 ft. strike length of the No. 4 vein appears to contain economic mineralization. This system is now considered to be on stand-by for open pit development.
- Calumet No. 1 Vein - This system which has been mined and explored from underground was detail drilled along a 1500 ft. strike length. The vein was found to be well mineralized over the entire length at depths of 20 ft. to 140 ft. from surface. This area is also on stand-by for open pit mining.
B) Diamond Drilling
- Husky No. 1 Vein - Three holes were completed to test for deep ore under the bottom
level of the Husky mine. All holes hit the No. 1 vein; however no economic values were found.
- South-West Husky - Twelve holes were completed on this vein system to test several
anomalous overburden drill results at depth. The zone lies approximately one mile from the
Husky shaft and some 700 ft. south-west of the nearest Husky workings (the 250 level). Silver (Ag) values discovered are associated with pyrite with only minor galena. Tonnage for the zone outlined to date has been calculated at 22,942 tons grading 26.3 oz. Ag above the Husky 250 level and 10,372 tons grading 44.2 oz. Ag below the 250 level. Further drilling is scheduled for the spring of 1980. For the information of shareholders a section along the vein is included with significant assay results from all the diamond drill holes.
In early 1979, the company signed an option agreement with the Tagish Lake Syndicate whereby United Keno Hill undertook to re-examine and develop if feasible the Venus Mine near Carcross, Yukon. This operation, a former gold and silver producer, has been dormant since 1971. During the summer exploration season, the old workings were re-sampled, additional claims for a total of 97 were staked and surface mapping and geo-chemical sampling conducted, all under the supervision of the Whitehorse exploration office staff. Reserves within the old workings were calculated at 77,600 tons grading 0.27 oz. gold per ton, 7.2 oz. silver per ton, 2.1 percent lead and 1.4 percent zinc. In order to examine the vein at depth, two cross-cuts totalling 1,000 ft. were driven into the hanging wall of the bottom working level followed by diamond drilling. A further 42,250 tons were outlined grading 0.13 oz. gold per ton, 5.50 oz. silver per ton, 1.49 percent lead and 1.34 percent zinc. A feasibility study is in progress on this project with completion scheduled for mid-March.
The company continued its participation in a joint venture with Giant Yellowknife Mines Limited and Falconbridge Nickel Mines Limited in Newfoundland. Further work will be done in 1980.
Arctic Precious Metals Inc., an American subsidiary in which United Keno Hill owns 50 percent of the issued shares (Giant Yellowknife Mines Limited owning the other 50 percent) has been formed to permit the company to participate in exploration for gold and silver in Nevada and Utah.
Summary
Steadily rising silver prices throughout 1979 have dramatically altered both the fortunes and the prospects for the company. Previous reports have stressed the importance of the Husky mine to the continued viability of the operations at Elsa. While still an important contributor to production and profits the Husky is no longer the single controlling influence. Record earnings from higher silver prices have permitted the company to invest in additional development work which has resulted in a substantial increase in ore reserves. The company intends to continue and expand this policy during 1980 particularly with respect to developing more open pit reserves. During this period of assessment it is the intention of management to continue operations at approximately 125,000 tons and 2,500,000 ounces of silver per year.
Employees
While turnover of hourly employees decreased by 8.7 percent to 132 percent in 1979. there remained a chronic shortage of qualified mining and trades personnel. Total employees in all operations is approximately 300.
The company, at a cost of $775,000 constructed a new dormitory housing 54 single status employees. Upgrading of quarters for single employees will continue in 1980.
At year end a total of fourteen women were in the hourly work force holding such varied positions as truck driver, mill operator, hoist operator and underground trammer.
Labour relations were generally constructive. The collective agreement terminates August 31, 1980.
Elsa, 1979.
1980:
Operating Officials
Elsa Mining Division
- V. E. Smith, Mine Manager
- T. A. Dickson, General Superintendent
- J. Holzapfel, Superintendent - Underground Mines
- R. W. McWhirter, Superintendent - Open Pit Mines
- D. A. Hanrieder, Mill Superintendent
- W. G. Bennett, Plant Superintendent
- R. K. Lockstein, Mine Engineer
- J. P. Franzen, Chief Geologist
- D. L. Morris, Senior Mine Geologist
- T. Stubens, Senior Exploration Geologist
- W. J. Henry, Office Manager
- K. Berg, Personnel Supervisor
- V. G. Rafuse, Chief Chemist
- R. H. Waddell, Purchasing Agent
- R. Franke, Safety Supervisor
Venus Mining Division
- R. Gagnon, Mill Superintendent
- L. Hurst, Consulting Mechanical Engineer
- G. S. Dundas, Consulting Mining Engineer
Whitehorse Operations
- R. E. Van Tassell, Exploration Manager
- R. J. Joy, Senior Exploration Geologist
Consultants
- R. E. Van Tassell, Consulting Geologist
- S. O. Fekete, Consulting Metallurgist
United Keno Hill Mines Limited, a member of the Falconbridge group of companies, is a producing silver-lead mining operation. The operating properties are located on Keno and Galena Hills in the Mayo district of the Yukon Territory. A second mining and milling complex near Carcross, Yukon is currently under construction. This operation, the Venus Mining Division, is scheduled to come into production in August 1981. The company also maintains an exploration office in Whitehorse, the capital of the Yukon and is participating in joint venture exploration programs in Newfoundland and Nevada.
The Keno-Galena Hills district has the longest production history of any
lode mining area in the Yukon. The first discovery of silver-lead veins was made by H. W. McWhorter about 1906 on Galena Creek, the site of the present Silver King veins. Following the development of the Galena Creek vein, about 1913, interest spread to Keno Hill where a discovery of galena carrying large amounts of silver was made by Louis Beauvette in July 1919. Guided by the distinguished geologist Livingstone Wernecke representing the Treadwell Yukon Company, the area flourished until 1941 when low silver prices and Mr. Wernecke's death forced closure of the mines. The properties remained idle until 1946 when they were sold to Keno Hill Mines Limited. Since 1946, production from the company's operations has totalled 4,019,000 tons of ore yielding 138,184,000 oz. of silver.
United Keno Hill Mines Limited was incorporated on November 6, 1945 as Keno Hill Mines Limited which in turn had succeeded the Treadwell Yukon Company as the principal operator in the district. The name of the company was changed to its present form on January 24, 1948. The capital of the company is comprised of 2,470,000 common shares without par value issued and outstanding. Falconbridge Nickel Mines Limited owns 1,195,989 shares or 48.42%. The shares are traded on the Toronto Stock Exchange.
Since incorporation, the company has paid a total of $32,851,000 in dividends. This represents $13.30 per common share.
On September 10, 1980, Local 924 of the United Steel Workers of America commenced a legal strike against the company. Since the strike continued through the entire fourth quarter, the 1980 results are not directly comparable with those from 1979.
Net earnings for 1980 were $7,679,000 or $3.11 per share compared to a record $20,726,000 or $8.39 per share in 1979. The earnings include a write down of $775,000 in the carrying value of certain marketable securities held by the company.
Gross revenue decreased to $31,742,000 from the record 1979 figure of $53,226,000. Lower revenue was due in part to lower production. There was also an unfavourable revenue adjustment of $2,755,000 reflecting the difference between the estimated value of metals in transit at year end 1979 and the actual amount received.
Analysis of Operating Costs
Treatment and marketing expenses decreased by $416,000 to $3,785,000 as a result of the lower tonnage of concentrate shipped and treated. Mine operating and administrative charges similarly decreased by $729,000 to $14,047,000. Unit operating costs increased sharply from $119.00 per ton in 1979 to $160.00 in 1980. Although the 1980 results are not directly comparable with those of 1979, it is estimated that without the strike, the direct unit operating costs, excluding administration, would have increased from $116.00 per ton of ore to $132.00 per ton of ore in 1980. Major areas of increased costs were in open pit development, labour and overhead charges and fuel (up twenty-three percent).
Ore Reserves
Ore reserves at December 31:
Total ore in reserve and in stockpile increased by 149,758 tons after milling 87,784 tons in 1980. Average grade decreased from 29.1 0z/ton in 1979 to 24.7 oz/ton reflecting a large increase in lower grade open pit ore and the inclusion of low grade ore from South-West Husky in the underground drill indicated category.
Ore reserves at Venus have been diluted to reflect a minimum 5.0 foot mining width. In addition to the above, approximately 51,000 tons of mill tailings from a previous operator are recoverable. These tailings grade 0.09 oz/ton gold and 1.31 oz/ton silver.
Known ore reserves are expected to provide ore for milling through 1984. Management is of the opinion that additional open pit and underground ore reserves can be economically developed. No positive tonnage estimates of these potential reserves are possible at this time. Recovery of the remaining undepreciated cost of plant and equipment and the investment in stores and operating supplies is dependent on the development of sufficient new ore to maintain a profitable level of production.
Marketing
United Keno Hill lead-silver concentrates and silver precipitates are sold under contract to Asarco Incorporated. These products are shipped from Elsa to the Asarco smelter at East Helena, Montana by a circuitous route including truck to Whitehorse, rail to Skagway, ship to Vancouver and rail to Montana.
Under the terms of the smelting contract, payment for silver is based on the Handy & Harman
quotation as published in "Metals Week", averaged for the second calendar month following the date of arrival at the smelter. Payment for lead is calculated at the average of the quotations for common domestic lead for delivery in New York City as published in "Metals Week", averaged for the second calendar month following the date of arrival at the smelter. With a transportation route that may take several weeks, the time lapse between production and payment may be four to five months; that is, receipts for the August 1980 production would be in December 1980 and January 1981.
United Keno Hill records revenue on the basis of the estimated value of production. Adjustments are made periodically to balance these estimates with changing market prices and actual smelter payments. At the end of 1979, there was a total of 826,804 ounces produced in 1979 and scheduled for payment in 1980 at estimated values ranging between $25.35 per ounce and $40.99 per ounce. The actual revenue received for this 1979 production was below estimate by $2,755,000, and this amount has been charged against 1980 revenue. At the end of 1980, payments for 193,070 ounces of silver remained unsettled; however, most of this total will be settled in January 1981 at the December 1980 average price. The low inventory is due to the labour dispute at the company’s Elsa operation which has halted all production.
Report on Operations
Elsa Mining Division
A total of five underground mines and two open pits were operated during 1980. In addition, 29,721 tons of ore were milled from the Bermingham stockpile. The stockpile from this pit, which closed in 1979, stood at 47,948 tons at year end grading 21.1 oz. silver per ton. Total production from all sources for the year was 87,784 tons grading 23.0 oz. silver per ton. All production ceased at 12.01 a.m. September 10, 1980 due toa legal strike by Local 924, United Steelworkers of America. Consequently silver production of 1,665,000 ounces was substantially less than the 2,481,000 ounces produced in 1979.
Elsa Mine
Production from Elsa was 4,595 tons grading 23.0 oz. Ore reserves decreased by a further 8,400 tons to 12,912 tons grading 29.4 oz. at year end. The drop in tonnage is due to projected narrower stoping widths. There were no significant developments at Elsa where one stope continues to support the mine.
Husky Mine
Ore reserves at Husky decreased by 3,959 tons to 52,093 tons at 38.8 oz. after milling 17,820 tons grading 38.4 oz. This mine which has long been the most significant producer in the area supplied 20 percent of the total tonnage milled and 34 percent of the total silver produced.
The 1979 Annual Report included a longitudinal section of an area designated as South-West Husky. This zone lies approximately one mile from the Husky shaft and is accessible from the 250 foot level. In 1980, exploration continued from underground with a total of 1,026 feet of drifting on the vein. The main South-West vein zone has now been determined to be a complex structure 40 to 105 feet wide with an average width of 60 feet. Ore values which range from 1 foot to 21 feet in width, occupy mid-vein to hanging-wall positions within the vein structure. It is generally not possible to differentiate ore from waste by visual inspection, hence selective mining of the high grade zones appears impractical. Ore reserves for this zone have been calculated at 91,277 tons grading 18.5 oz/ton. These figures reflect anticipated mining dilution.
No Cash Mine
Ore reserves at No Cash increased by 4,780 tons to 19,310 tons grading 23.9 oz. after milling 5,870 tons grading 17.7 oz. In-stope additions to ore reserves continue to sustain the mine.
Ruby Mine
Ore reserves at Ruby decreased by 2,092 tons to 11,945 tons grading 29.1 oz. after milling 7,480 tons grading 22.8 oz.
The raise to surface from the adit level was completed in late 1979, and lateral development from the raise resulted in the development of three small stopes.
Seen to the right, H. Gustafson, Surface Foreman, and V. Smith, Mine Manager, with a hand-crank percussion drill from the early days of mining in the district.
Keno Mine
Ore reserves at Keno decreased by 12,617 tons to 30,498 tons grading 23.6 oz. after milling 9,710 tons at 17.0 oz.
A new 420 foot adit was driven to intersect an ore shoot on the No. 4 vein. The ore shoot
which also extends on to ground optioned from Comstock-Keno Mines Limited was partially
developed more than a decade ago. The adit, which is located on United Keno Hill property,
intersected the vein as projected. Lateral development was terminated by the strike.
Sime Open Pit
Ore reserves at the Sime declined by 16,213 tons to 20,046 tons grading 36.7 oz. During 1980, 21,435 tons of ore were mined of which 9,669 tons grading 19.0 oz. were milled. At year end the Sime ore stockpile was 12,681 tons grading 21.8 oz.
Silver King Open Pit
The 1980 overburden drilling program outlined a small ore shoot in the crown pillar of the old Silver King Mine. The bulk of the ore straddles the No. 3 shaft. During the summer approximately one half of the overburden covering the vein was stripped and 2,919 tons grading 13.4 oz. were salvaged from the old shaft area and milled.
Revegetation of Elsa tailings pond.
Concentrator
In the flotation section of the concentrator a total of 5,055 short dry tons of concentrate were produced containing a total of 1,558,000 oz. of silver. The cyanide plant yielded 14.55 tons of precipitate containing 107,000 oz. of silver. Overall silver recovery at 85.92 percent was virtually unchanged from 1979.
Major mechanical problems developed in the cyanide plant with the operation of the No. 1 thickener and all four of the very old tailings dewatering filters. This resulted in the decision to replace the equipment. Installation of the new equipment will be completed following settlement of the strike. Significant improvements in metal recoveries are anticipated.
A decision was made to construct a bullion refinery at Elsa at a cost of $300,000 to refine silver and gold precipitates from Venus and silver precipitates from Elsa. The foundations for this plant have been poured. Completion also awaits settlement of the strike.
In 1979, the Annual Report recorded the time and money spent on treatment of tailings in order to meet environmental regulations. This year, the Directors would like to bring to the shareholders' attention efforts in a related area, namely the revegetation of old tailings areas. During the summer of 1980, a successful revegetation program was conducted on 10 acres of abandoned tailings. A photograph of this
project is included below.
Venus Mining Division
The Venus mine is located approximately 55 miles south of Whitehorse, on the Carcross to Skagway highway two miles north of the Yukon — British Columbia border.
Gold and silver mineralization in veins was first discovered in the early 1900's and in 1908 a 100 ton per day concentrator was constructed on Tagish Lake directly below the present workings. The operation, the remnants of which are still visible, closed in the same year due to low precious metal prices and poor metal recoveries.
The area received only minor exploration and development work until 1966 when Venus Mines Limited was formed. This company, after several years of exploration and development, constructed a 300 ton per day concentrator and commenced production in September 1970. The operation never attained full production and with gold and silver prices at relatively low levels, it was forced to close in June 1971. After lying dormant for several years, the claims were optioned by United Keno Hill on December 31, 1978. Under the terms of the option agreement, the company can obtain a 100 percent interest in the property subject to a royalty of 10 percent of the net proceeds of production payable to the original owners.
In April 1980, after completely sampling all the accessible old workings and after detailed metallurgical test work, the Directors of the company approved the $8,000,000 in capital required to rehabilitate the old workings and to construct a 100 ton per day concentrator. The mine currently is being readied for production and the mill is under construction with initial production scheduled for late summer 1981.
The Venus mine will employ 45 people with the majority being permanent local residents. When in full operation, scheduled production will be approximately 600 ounces of gold and 20,000 ounces of silver per month. In addition, the concentrator has been designed to recover values from the tailings left by previous operators. These tailings which will be treated during the first three years of production are estimated to contain a total of 2,300 ounces of recoverable gold.
Venus Mine, 1980.
Exploration
Total exploration expenditures of $1,704,000 were $302,000 less than in 1979. Lower costs were due to the curtailment of several Elsa programs at the start of the strike. Exploration costs were distributed as follows: Elsa area, $748,000; other Yukon, $664,000; Nevada and Newfoundland, $292,000. The program at Elsa included overburden drilling (36,680 feet), diamond drilling (6,061 feet) and surface stripping. Significant results were as follows:
A) Overburden Drilling
Silver King "2" - The 1980 program followed up several discontinuous overburden drill
intersections along a 1200 foot strike length. Wet, broken ground conditions prevented more than six of twenty-three holes reaching the target. One hole intersected a structure that assayed 43.8 oz/ton over 15 feet at a depth of 110 feet. The down-dip extension of the zone will be diamond drilled in 1981.
Silver King Mine - Eighteen of twenty-two holes intersected vein material. Six holes were stopped in ore by badly broken ground. The drilling outlined approximately 10,000 tons grading 24.7 oz. Further details are included in the operations section.
Lucky Queen - Drilling tested a 1500 foot strike length of the main Lucky Queen vein on Keno Hill. While the main vein was found to be either barren or low grade, a small ore zone was located 60 feet in the footwall. This footwall zone contains an estimated 7,500 tons grading 41.6 oz.
Bellekeno - The 1980 program filled in open areas on two potential open pit ore shoots on the "48" vein on Sourdough Hill. Approximately 16,000 tons of drill indicated open pit ore at 20.7 oz. are considered mineable at Bellekeno.
B) Diamond Drilling
The 1980 program included a budget for 10,000 feet of diamond drilling. The strike interrupted the program after only one of the three targets (South-West Husky) was drilled. Total footage drilled was 6,061 feet. Two of the holes encountered significant mineralization with HK-80-1 intersecting 31.2 oz. across 18.2 feet and HK-80-2 intersecting 38.8 oz. across 19.5 feet. Other developments at South-West Husky are included in the operations section of this report.
C) Surface Stripping Program
A major stripping - sampling program had been planned for 1980 in order to move some of the inconclusive overburden drill results into the ore reserve category. Unfortunately, equipment for this program was not available until two weeks before the commencement of the strike. However, in this two week period the Calumet 1-15 vein was stripped and sampled. Surface sampling outlined a 30 foot width of ore along the footwall of the structure and a 15 foot width of ore along the hanging wall. The structure was found to be highly oxidized and up to 90 feet in width. The Calumet 1-15 was originally mined from underground in the early nineteen sixties. The cut-off mining grade during that period was 48.5 oz. per ton hence only high grade zones were mined leaving pillars and blocks that are by today's standards relatively high grade. This work has resulted in a major addition to the drill indicated reserves (83,958 tons at 21.6 0z.).
Whitehorse Exploration Office
After several years on Main Street in Whitehorse, the company sold its exploration office building to an adjacent hotel in exchange for a new building which is located at 409 Black Street, in Whitehorse. The new building, which will be shared with the Venus Mining Division was occupied in June 1980.
The Whitehorse exploration office maintained a permanent staff of four throughout the year with a further twenty-three employed during the summer field season, mainly in joint venture projects with Falconbridge Nickel Mines Limited. A total of eight projects were undertaken during the year with the following significant results.
Diamond drilling on the STU Claim group north of Carmacks intersected a number of discontinuous, northwesterly trending, copper bearing foliated zones over a 2500 foot strike length. A total of 28 holes were drilled, three holes having significant mineralization.
The drill results of the remainder of the zone vary from trace copper over narrow widths to 0.49 percent copper over 57 feet.
The company has been active in this area for a number of years. Two adjacent medium sized copper deposits are already known to exist under a similar geological environment; namely Williams Creek and the Minto deposit in which United Keno Hill holds an interest. On the strength of the drilling results the claim group was increased in size to 637 claims covering a total area 15 miles long by 4 miles wide. Further work is planned for 1981.
A number of low grade gold-silver bearing quartz veins with coincident geochemical anomalies were located on the Fee claim group at White Moose Mountain in Northern British Columbia. Further exploration is required on this 110 claim group.
A soil sampling program was completed on the Venus property. No new veins were discovered; however, a number of geochemical anomalies require further investigation.
The company continued its participation in a joint venture exploration project with Giant Yellowknife Mines Limited and Falconbridge Nickel Mines Limited in Newfoundland and with the former company in Nevada. This work will continue in 1981.
Summary
Operating results for 1980 have been adversely affected by a strike of the hourly employees which shut down all production from September 10 to year end. At December 31, no signs of an immediate settlement were apparent.
The company has successfully continued its program to maintain and expand the ore reserves at the Elsa operations. Reserves are now sufficient to sustain operations through 1984.
Construction has started at the Venus Mining Division. At current precious metal prices this operation will be a significant contributor to cash flow by 1982.
Employees
For the period January to August 1980, turnover within the hourly workforce at 98 percent was 17 percent less than the comparable 1979 period. Recruitment of personnel ceased at the beginning of September when the probability of a work stoppage became apparent.
Negotiations for a new labour contract commenced June 2, 1980. The respective bargaining committees met intermittently throughout the summer without reaching agreement on a new contract. Subsequent meetings have failed to resolve the dispute. Major areas not resolved by year end include not only monetary items but also several items that the company considers essential to its right to manage the operation.
Seen to the right, the computer room at Elsa.
Town of Elsa, 1980.
