Gold mining in Red Lake, Ontario was once one of the most lucrative and booming opportunities of its time! In 1936, it was so popular that Howey Bay became the busiest airport in the world! And now, Australia’s Evolution Mining Ltd wants to repeat that history and take advantage of the inflated gold prices. But will they be able to?
While Red Lake has had a number of successes, the last decade has been anything but that. Prospectors first descended upon Red Lake in the 1880s, and mining operations began in 1930s. Many of the mines were huge successes, some even producing millions of ounces of gold over decades. But by the 1980s, gold mines began running dry and many investors left for other opportunities.
However, in 1995, Robert McEwen’s was able to discover a new gold deposit, one that was far more profitable than before. His company, Goldcorp, was able to extract high-grade gold at production costs of $65 USD an ounce. The industry views $800 USD as low costs of production today. The mine and its extremely profitable gold were key in helping to make Goldcorp the most valuable gold company in the world. But eventually, the gold ran out.
Goldcorp didn't modernize or further invest in the mine's resources beyond what was necessary. And as such, production costs rose higher and higher until it was too much. In early 2019, Goldcorp bought out by Newmont Corp at a heavy discount. Instead of investing and risk throwing more money down the drain, Newmont sold the properties to Evolution for $475 million USD.
When it was purchased, the operation was on its last legs. They found broken tools, outdated equipment, and demoralized employees. Evolution quickly got to work, upgrading equipment, consolidating 142 models into a single database, and more. They've also had to make some tough decisions. Evolution closed two of the five mines and laid off 350 out of its 1050 employees.
While Mr. Klein understands the blow to the small community of Red Lake, he also says that it was necessary. “If the mine continued operating like it was, it was going to close down,” he said. While it may not be their fault that they're in this position, it's now up to them to turn it around. And with the recent world events, gold prices have skyrocketed to record highs.
There's a lot of risks here. Not just financially to the company, but also to the workers who live in Red Lake and potentially to other sites in Ontario. If it's a success and more gold deposits are found, this can help revive a dying industry in Red Lake and bring in more investors. But, if no gold is found, it's unlikely that any other company will pour resources into Red Lake's mining operations. Evolution has taken a gamble, and all eyes are on them to see if there's a future for gold mining in Red Lake, or if it's simply too late.