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Oil & Minerals
A winter drill

New ruby-mine owner ready to begin drilling

Norway’s LNS says it expects the first rubies from Greenland’s Aappaluttoq mine to be on the market by January
Oil & Minerals
The ruby in the rough (Photo: True North Gems)

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If you’re a miner and have nothing against working in Greenland during the winter, LNS may have a job for you.

After purchasing the rights to the bankrupt Aappaluttoq ruby mine last month, the Norway-based firm is in the process of hiring staff ahead of a planned start up later this year.

“We’re bringing together a crew and then we just have to to install and test the last of the mining equipment,” says Finn K Mortensen, the head of LNS’s Greenland subsidiary.

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Until last month, LNS was a junior partner in the project, responsible primarily for building the mine for True North Gems, a Canada-based mining firm that obtained the rights to the site in 2004.

LNS saw its opportunity to take over completion of Aappaluttoq after True North Gems failed to raise the final $15 million needed to pay employees and market the mines it was hoping to extract. After two other investors walked away at almost the same time, the board voted to ask the court in Nuuk to declare the operation bankrupt in order to avoid being made liable for eventual losses.

LNS, however, continued to see potential in the mine, and with construction almost finished, and with an ownership structure it was dissatisfied with out of the way, it put in a bid for an undisclosed amount of money to overtake the licences vacated by True North Gems.

“We had put work on hold once True North Gems stopped paying us. We figured something was wrong and we stopped until we could get things sorted,” Mr Mortensen says.

SEE RELATED: Greenland ruby mine could turn sod by end of year

Solicitors responsible for handling the bankruptcy accepted the bid in principle almost immediately. After the formalities fell into place earlier this month – including the establishment of a Greenlandic subsidiary, a requirement for foreign firms operating in Greenland – LNS now officialy holds the rights to prospect and mine at the site, some 250km from Nuuk.

Mr Mortensen expects the final preparations, including removing a layer of topsoil before it freezes, to be completed within a month.

“If we don’t remove the soil, it will freeze. If we don’t dig it away now, we’d have to blast it off later.”

Actual mining will begin within “two or three months”, according to Mr Mortensen. By that time, he expects the processing equipment to be up and running. After separating the rubies from as much of the rock as possible on site, LNS will then send the rubies to its facility in Nuuk, where they will be processed further.

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Originally, True North Gems had planned to stop operations during the winter. LNS, however, has decided to keep mining year round.

“We know that these types of machines break if they are stopped during the winter. Machines don’t take well to standing idle unless they need maintenance or repairs, so our plan now is to run 12 months a year,” Mr Mortensen says.

LNS already operates mines year round in Norway, and the experience, Mr Mortensen believes, can be transferred to Greenland.

“It’s colder there than it is in Aappaluttoq, so it shouldn’t be a problem. Besides, it’s not the weather, it’s how you dress that matters. True North’s plan to stop during the winter must have been related to a lack of production experience. Or maybe it was related to their marketing strategy. I can’t really see why that should have caused a problem. You don’t need to sell all the rubies you mine all at once. You can hold some of them back if you think there are too many on the market and the price is suffering.”

SEE RELATED: Well and truly funded

Production of Aappaluttoq’s rubies will likely begin in January. By not polishing them, LNS hopes it can sell the first of them the same month.

“To begin with, we are going to sell them raw,” Mr Mortensen says. “They can be polished later. Polishing them raises their price, but there are also higher costs when you do that. It’s worthwhile to polish individual stones, since prices rise exponentially with size – so a stone that is twice as big is four times as expensive and a stone that is three times as big is nine times more expensive. Since most stones are small we’ll decide which ones are worth polishing on a case-by-case basis.”

Under the previous construction, LNS owned 27% of the Aappaluttoq project. Greenland Venture, a nationally controlled investment fund, owned another 7%. Those investments have been lost as a result of the bankruptcy. Greenland Venture, however, has chosen to go into the LNS-led operation as a 10% partner.

True North Gems, despite losing its entire investment, is not out of the picture entirely. During the 10 years it spent trying to establish a mine, it worked out agreements with potential buyers and may end up serving as a go-between for LNS. Gunnar Moe, an executive with LNS, confirmed this week to High North News, a Norwegian news outlet, that the two firms remained on good footing.

Another matter that must be cleared up is the return of several hundred kilograms of unprocessed corundum, a mineral often refined into gemstones, including rubies, as well as 1,500kg of soil samples taken to Canada for studying. Greenlandic authorities have requested the material be handed over.

This article originally appeared in AG, a Greenlandic newspaper published by the parent company of The Arctic Journal.