After a fling with pretty golf courses and ski resorts, Kamloops moves back to its mining roots

BY WI STAFF/CAM FORTEMS

When the 1,000-acre, high-end Tobiano golf and resort development was forced into receivership this year, it cooled local excitement of what was once seen as the future of Kamloops. This summer, when fancy hotel condos at the Sun Peaks golf resort began selling for 10 per cent of what they went for a few years ago, the signal become unmistakable: it may be time the blue-colllar town put its workboots back on.

"It's finding a balance," said Dan Sultz, manager of Venture Kamloops, which works hard at luring business and residents to B.C.'s fourth-largest city, "Mining and development are positive for business, but at what cost?"

Sultz, an Ironman athlete who likes to run and bike in the rolling hills that surround the city, was referring to a debate that has split the town and may define Kamloops for years to come.

Kamloops is a historic mining town, first settled in the wake of the Cariboo Gold Rush in the 1860s and incorporated as a city in 1893. In the last century, discoveries of gold and copper allowed Kamloops to prosper. Today the Highland Copper Mine, close by at Logan Lake, is still producing and the underground New Afton mine - being developed on the site of Teck Corp.'s old Afton Mine site - will be in production next year, with 350 workers and 650 contractors on site. According to the Mining Association of BC, Kamloops is a near-ideal mining centre because of its central location to all major centres in the province. Kamloops is at the intersection of B.C.'s four major highways, the Coquihalla (Highway 5), Trans-Canada (Highway 1), Yellowhead (Highway 5) and Highway 97. Over 25 trucking and transport companies are located in the city. Both Canadian National Railway and Canadian Pacific Railway intersect in Kamloops.

In the last decade, however, as prices for minerals fell and mining activity waned, Kamloops began to define itself as a recreational destination. The Sun Peaks ski resort and golf course, the Tobiano golf course and the Sun Rivers golf resort - all with residences - put Kamloops on the vacation map, attracting buyers from as far away as Alberta, the U.S. and the United Kingdom.

Mining seemed, well, so yesterday.

Ajax mine

The current debate now focuses on the proposed Ajax Mine, a controversial mining project on the city limits. In the latest in a series of public and civic meetings on the mine, officials from Abacus Mining and Exploration, which is owned by Polish company KGHM, recently gave council and residents a presentation on the proposed Ajax mining project.

The mine, which would be located a couple of kilometres south of the city limits in Aberdeen, stretches west to the Coquihalla Highway and is part of the old Afton Mine site. The mine is not that large: it could produce an estimated 1.5 million pounds of copper and 1.3 million ounces of gold over a projected 25-year lifespan. This compares with the New Afton Mine, already under development about 10 kilometres from central Kamloops, which will produce 75 million pounds of copper.

Ajax would also generate an estimated 1,000 jobs during construction and up to 400 high-paying mining jobs.

"There is a big difference [to the economy] between miners making six-figure incomes and $15-per-hour tourism jobs," Sultz said.

Still, there are many in town, including the Kamloops Area Preservation Association (KAPA) - which has mounted a "stopajax" web page - who oppose the mine. "We are concerned that about 90,000 people will be exposed to the toxic dust which will inevitably blow over the city," the KAPA web page thunders. Other residents expressed concern about damage to local Jacko Lake and potential mine runoff into Kamloops Lake.

Mark Whittaker, project manager for Ajax, said the mine would work around Jacko Lake and respect the area.

"It was very clear to us that Jacko Lake was the centrepiece of the area," he told council. The company said it has no plans to change the access to the popular fish-bearing lake to the public.

A spokesman for KGHM Ajax said, "There is nothing going on at the site now, we just have one geologist up there," adding that at least three more public hearings are on the docket.

What the mine and the town are waiting for is the result of provincial and federal environmental studies, which could ultimately decide if the mine goes ahead. KGHM does not expect a final environmental ruling until the end of next year.

Spin-offs

Mayor Peter Milobar noted approval of the mine ultimately rests with the senior governments.

For some Kamloops businesses, the mine approval is necessary and welcomed. An example is longtime mine supplier Moly-Cop, which is celebrating 25 years in business. Founder Maurice Hindle, an engineer who came to Kamloops from Stelco in Edmonton to help start the operation, said the global commodity boom is running Moly-Cop up against its limited capacity. Moly-Cop manufactures forged steel heat-treated grinding balls, ranging in diameter from one inch to 5.5 inches, used in milling ore.

"We've been at or near capacity for the past couple years. We almost expanded back in 2008, but held up, fortunately," Hindle said.

Two years after the world plunged into the recession, metals prices have rebounded and remained strong. That's kept operations, including Highland Valley Copper - and Moly-Cop - running and profitable.

Now owned by Australian firm OneSteel Ltd., Moly-Cop is again talking about its plans for expansion.

In the late 1980s, Hindle decided Kamloops was a natural location for the plant due to the number of neighbouring mines, including the Afton and Brenda mines. "Twenty-five years ago Kamloops was a centre of mining."

Hindle said Moly-Cop has been maximizing its output to about 100,000 metric tonnes a year. It is now working on engineering and layout plans to increase that tonnage to between 162,000 and 200,000 tonnes a year. To do so it will have to lease or purchase adjoining land.

While Kamloops shed its boom-and-bust reputation beginning in the 1990s, mining is unlikely to ever escape the cycle. Despite that, Hindle noted Moly-Cop has never laid off staff. "We've kept people employed from Day 1. It's given us an experienced workforce," he said.

Still, the Axton and New Afton mines, like all others, are subject to commodity prices, and there are signs copper demand and prices may falter. As of press time, the London Metal Exchange reported that contracts for three-month delivery of copper had fallen 5.7 per cent in August, the first drop in three months.

Resorts

Kamloops remains a popular recreation area, but overreaching by developers - who apparently never counted on the loss of Alberta and U.S. buyers - has shaken the resort industry. The highest-profile casualty is the giant Tobiano golf resort.

This June, Bowra Group Inc. was appointed receiver manager of the assets, undertakings and properties of Kamlands Holdings Ltd., the Tobiano developer. Tobiano consists of a partially completed 1,000-acre resort development including an operational golf course.

Bowra "is actively looking for a buyer to purchase, in whole or in part, the Tobiano development." The Bank of Montreal holds the $27 million debt. Among those named as owing are: Michael Grenier, Pagebrook Investments, Tobiana Golf Club and the Business Development Bank of Canada.

Creditors in control of Tobiano are in no panic to sell the entire operation because it is not bleeding red ink, the receiver in charge said. Bowra's Doug Chivers said the golf course is profitable and "the utilities break even, essentially."

The resort continues to market individual lot sales while it is in receivership. Land prices have dropped below those offered late in 2008, when the resort offered recession-level pricing. Current discounts on lots amount to between 30 per cent and 50 per cent.

Chivers said some developers have looked at the books but no offers have been made to purchase its assets, including the golf course and undeveloped land. The new developer is not bound to build a marina or equestrian centre, both part of Tobiano's original plan. Developer Mike Grenier, who owes millions himself and has lost ownership and control, blamed continuing effects of the 2008 recession as well as the inability to get government or private financing for the proposed marina.

Meanwhile, at the Sun Peaks Ski Resort, the third-largest in B.C., hotel condos that sold four years for around $200,000 are offered at deep discounts. One recently sold for $18,000: evidence that recreational investments can be as volatile as mining.

from Western Investor October 2011