Having kept
“LaRonde is a company builder,” Sean Boyd, president, told The Northern Miner during an interview in the company’s Toronto offices. “It’s a strong asset, even at this gold price.”
Agnico-Eagle intends to use the mine, and the cash flow it will be spinning off for at least the next 20 years, as a springboard for growth. But don’t expect the company to go chasing elephants in exotic locations, Boyd cautioned. “We’re going to stick to North America, and to gold. We’re looking for advanced exploration projects in places like Nevada, where there is still room to get a foothold.”
For the time being, however, Agnico-Eagle is directing its energies toward expanding LaRonde, which is situated midway between the mining towns of Val d’Or and Rouyn-Noranda. The mine turned out 150,443 oz. gold last year at a cash cost of US$212 per oz. (after byproduct credits), down from US$216 per oz. a year earlier.
Over the next three years, Agnico-Eagle plans to spend $147 million to expand the mine to 3,600 tons per day. It has $152.5 million available to fund the expansion program, and Bay Street brokerage firms are backing the company’s efforts to study yet another expansion.
“We’re looking at 5,000 tons per day,” said Ebe Scherkus, chief operating officer. “We’ve already sized up parts of our plant to meet that long-term goal.”
Being an institutional darling is something new for Agnico-Eagle, which, until recently, was viewed as a technically skilled but somewhat parochial industry outsider. Founder Paul Penna, a hands-on manager who was inducted into the Canadian Mining Hall of Fame in 1996 (a year before his death), engendered such loyalty from retail shareholders that Bay Street felt left out of the picture. The
current management team headed by Boyd has changed all that, but without alienating the predominantly American, retail shareholder base.
“We’re the same company, with the same people and operating strategy,” Boyd said. “We have a clean corporate structure and we still don’t like to hedge. But we’ve started a corporate development group and think it’s time to look beyond our traditional areas.”
Traditional, in this case, means LaRonde and environs. While the mine is now the company’s crown jewel, it had a humble beginning and a stop-and-start exploration and development history.
Originally known as Dumagami, the project was first drilled in the early 1960s but remained dormant until 1974, when work resumed in an attempt to outline an open-pittable gold deposit. However, the project was put on the back burner when gold prices fell — until 1980, when 20 holes were drilled and a feasibility study began. Reserves at that time were estimated at 2.7 million tons grading 0.094 oz. gold per ton.
By 1983, the focus had shifted underground. The first shaft was sunk and, by the end of 1985, enough drilling had been completed to outline a deposit. However, the project was once again deemed uneconomic, though more exploration work was recommended, to the west and at depth. It was a good call: the deep drilling hit paydirt when hole 86-3 intersected 59 ft. of 0.23 oz. gold at a vertical depth of 2,800 ft.
Aided by flow-through financing, sufficient exploration work was carried out by 1986 to justify a production decision based on both open-pit and underground reserves. The shaft was deepened to 3,200 ft., and construction began in April 1987. The mine reached commercial production in the fall of 1988 at a rate of 1,500 tons per day, which was later expanded to 2,000 tons. Open-pit reserves were exhausted by 1990, and a second shaft was completed in late 1994.
In 1996, LaRonde reached an important milestone by producing its one-millionth ounce of gold. But along the way, as deeper resources were discovered and outlined, LaRonde had shifted from being strictly a gold mine to a gold-rich polymetallic mine. The first discovery was made in early 1992 and, by 1995, the first polymetallic deposit was reported to host 814,890 tons grading 0.27 oz. gold, 1.14% copper, 2.44% zinc, and 1.07 oz. silver. Mining of the initial stope began in the summer of 1995.
Underground exploration during the 1990s led to the discovery of even more polymetallic zones. To gain access to them, it was necessary to sink a third shaft. Site clearing got under way in the summer of 1994 and sinking began in late 1995.
Today, LaRonde boasts proven and probable reserves and resources (in all three shaft areas) totalling 39.7 million tons grading 0.12 oz. gold, 2 oz. silver, 0.36% copper and 4.5% zinc. The calculations were done using a US$300-per-oz. gold price, U$5 per oz. silver, and US75 cents per lb. copper and US50 cents per lb. zinc. The contained gold in the global estimate now represents 4.5 million oz., of which 1.3 million oz. are in the proven and probable category.
The biggest boost came from the resource at Zone 20 North, which increased to 12.6 million tons grading 0.18 oz. gold, 1.91 oz. silver, 0.69% copper and 1.88% zinc. This represents a 70% increase in tonnage from a year earlier, and the zone is still open for expansion at depth and to the west.
The company says these results “continue to confirm the transition from zinc-silver values and reserves encountered in the upper part of Zone 20 North, to gold-copper at depth.”
The 1998 year-end reserve was based on definition drilling and level development confined to the area above the 11th level, where Zone 20 North contains more zinc-silver mineralization.
In the next two years, definition and exploration drilling will prove up the various zones below the 11th level, including the higher-grade gold resource of Zone 20 North and Zone 7. Late this year, when the third shaft reaches its planned depth of 7,350 ft. (it is now at about 6,000 ft.), an exploration drift will be excavated to allow for more drilling of the higher-grade gold resources.
Plans for 1999 call for at least 40,000 ft. of development to be carried out above the 10th level in an attempt to prepare Zones 20 North and 20 South for initial production in the fall. Ground conditions within the shaft, and along the development levels, are described as “excellent.”
The change in mineralogy has triggered changes to LaRonde’s mill. A copper circuit was commissioned in the fall of 1997, and a new zinc flotation circuit came on-stream last year. As a result, zinc recoveries, along with byproduct credits, have been boosted to 74% from 70%. Work this year will include a new, semi-autogenous grinding unit (capacity of 5,000 tons), a paste-backfill plant, and a cyanide-destruction facility.
Underground, five rigs are carrying out both definition and deep exploration drilling. A total of 107,000 ft. of drilling has been proposed, most of which is targeted at three areas; Zones 20 North, 20 South and 7.
Recent (selected) drill results from this work include:
- 27.9 ft. grading 0.27 oz. gold, 1.51 oz. silver, 0.6% copper and 1.7% zinc;
- 52.5 ft. of 0.11 oz. gold, 4.47 oz. silver, 0.5% copper and 4.4% zinc; and
- 23 ft. of 0.1 oz. gold, 3.47 oz. silver, 0.3% copper and 1.5% zinc.
One of the recent holes hit 14.8 ft. of 0.53 oz. gold, 2.02 oz. silver, 0.7% copper and 2.5% zinc (from Zone 7) and is viewed as having confirmed high-grade mineralization encountered in previous drilling at a depth of 5,700 ft. below surface. This earlier hole had encountered 0.37 oz. gold, 1.97 oz. silver, 0.29% copper and 4.81% zinc over a true thickness of 19 ft. Drilling continues on the 11th level in order to define Zone 7 in this area.
The deepest gold intersection encountered at LaRonde to date returned 9.8 ft. of 0.14 oz. gold, 1.64 oz. silver, 0.43% copper and 1.59% zinc at a depth of 8,800 ft. below surface, or
2,400 ft. below any previous drilling within the Zone 7 horizon. The overall mineralized zone is described as about 40 ft. thick. As might be expected, Agnico-Eagle views the Zone 7 stratigraphic horizon as a priority exploration target.
Boyd says this “intriguing” hole indicates the potential of LaRonde at depth, “and opens up the bottom of the deposit for further exploration.” It remains open it all directions.
Once the expansion to 3,600 tons per day is completed (in the year 2000), Agnico-Eagle’s annual production is expected to climb to 175,000 oz. at a cash cost of US$175 per oz.
Scherkus noted that this could jump to as much as 280,000 oz. gold annually at about US$100 per oz., provided an expansion to 5,000 tons is deemed viable.
On the financial front, Agnico-Eagle posted a 1998 net loss of $11.5 million (or 23 cents per share), compared with a loss of $10.4 million ($121.5 million after writedowns) a year earlier. The fourth-quarter loss was $1.3 million, compared with $7 million a year earlier. The company notes, however, that despite the worst gold price environment in 20 years, the operations are producing positive cash flow.
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