Agnico-Eagle keeps Laronde expansion on track

Agnico-Eagle Mines (AGE-T) is continuing to push ahead with its expansion of the Laronde division, a development that will slash costs and boost gold production once the project hits its stride in the next millennium.

The Laronde mine, situated roughly halfway between Rouyn-Noranda and Val d’Or, exploits several volcanogenic-massive-sulphide lenses containing gold as well as byproduct credits of silver, copper and zinc. In its nearly ten years of production, the Laronde division has yielded over 1.2 million oz.

gold and provided jobs for about 300 people.

Currently, production is derived from shafts 1 and 2, which reach depths of 3,953 ft. and 1,729 ft., respectively. During the first quarter of 1998, some 166,000 tons were mined, producing 35,732 oz. gold, 60,120 oz. silver and 1.42 million lbs. copper at a cash operating cost of US$215 per oz.

gold, net of byproducts credits.

The division is undergoing a dramatic transformation, thanks to the discovery in the early 1990s of several large new zones of mineralization at depth. At that time, the company had driven an exploration drift on the 20th level (2,800 ft. below surface), some 1.1 miles east of shaft 1 in order to carry out a systematic, widely spaced drilling program. From that drift, geologists discovered zones 19, 20N, 20S and the possible extensions at depth of zones 6 and 7.

The discovery enabled Agnico-Eagle to plan a $256-million expansion of its Laronde division, including the sinking of shaft 3 to a depth of 7,350 ft., a program of underground drilling and development as well as a $75-million upgrade of the division’s mill complex.

“With the resources discovered around shaft 3, we can think of producing for another two dozen years and making the Laronde division a durable operation, one that will let us develop other resources here at Laronde and elsewhere in Quebec,” said Laronde’s mine manager, Paul-Henri Girard, during a reception held at the mine to mark the beginning of Mining Week in Quebec.

Shaft 3 is being sunk north of the mineralized zones, in mafic volcanics.

The mineralized zones are hosted by the subvertical felsic pyroclastics of the Blake River Group, which occur within an east-west-trending shear zone north of the Larder Lake-Cadillac fault.

The shaft sinking — being carried out by Sudbury-based contractor MacIsaac Mining and Tunnelling — is progressing at a rate of about 10 ft. per day and had reached a depth of 5,000 ft. (level 152) when The Northern Miner visited the mine. The bottom is scheduled to be reached by November 1999.

The four-compartment shaft is circular in cross-section, 18.2 ft. in diameter and lined with concrete. A mid-shaft bulkhead was installed between levels 134 and 146 to allow upper levels to be developed while shaft sinking continues.

Although work has shown that ground conditions are excellent in shaft 3, a fatality occurred in April when a fan pipe fell from surface into the shaft, crushing one worker.

Last October, Agnico-Eagle began a 3-year, 450,000-ft. underground drilling program designed to establish the size of the mineralized zones that will be accessible from shaft 3. This year’s drilling activity consists of three parts: 42,000 ft. drilled from shaft 3 into zones 20N, 20S and 7; 40,000 ft.

drilled from a ramp between shafts 1 and 3 into zones 20N and 7; and 22,000 ft. of definition drilling from developments on levels 122 and 134.

Already, definition drilling from levels 134 and 146 during the first half of 1998 has shown that the upper portion of zone 20N is longer and often two to three times thicker than originally anticipated.

If the pattern of increased thickness is maintained throughout the entire vertical extent of zone 20N, the mining plan will have to be modified to incorporate the higher-than-expected tonnages from this zone.

Complete results from drilling on level 146 are expected in June and more definition drilling on levels 158 and 170 is planned for the second half of 1998.

Currently, about 5,000 ft. of lateral development is being carried out on levels 122, 134 and 146, with more development to follow on levels 170 and 206. A ramp being driven from the 25th level of shaft 1 to level 122 of shaft 3 has progressed about three-fourths of the way across. Once the ramp is completed this July, trucks will be able to drive from surface to the base of shaft 1 and then across to the mineralized zones of shaft 3; they will eventually be able to ramp between levels 94 and 146.

Unlike the cemented backfill used in shafts 1 and 2, shaft 3 will make use of the relatively new technology of paste backfill. Yet to be completed is a pipeline that will carry paste down to level 20.

The first ore from shaft 3 is scheduled to be hauled from level 146 in November 1999. Plans call for the upper silver-zinc portions of zone 20N and the gold-rich zone 20S to be exploited first, to be followed by production from the gold-copper portion of zone 20S at depth and from zone 7.

Within the 20N zone above level 134, there are probable gold reserves of 918,253 tons grading 0.13 oz. gold per ton, 2.04 oz. silver per ton, 0.68% copper and 0.84% zinc, as well as probable zinc reserves of 4.14 million tons grading 0.03 oz. gold, 2.77 oz. silver, 0.1% copper, and 7.98% zinc.

Within the 20S zone above level 134 are probable gold reserves of 1.02 million tons grading 0.23 oz. gold, 1.68 oz. silver, 0.53% copper and 2.88% zinc.

There are signs that the mineralization in the 20N zone may become thicker and more gold-rich with depth, as suggested by hole 20-131H, which intersected the 20N zone at a depth of 6,900 ft. and graded 0.14 oz. gold, 2.0 oz. silver and 1.1% copper over 61 ft.

So far, the total resource in shaft 3 stands at 29.2 million tons grading 0.13 oz. gold, 2.31 oz. silver, 0.37% copper and 4.92% zinc. The total resource at Laronde is estimated at 32 million tons grading 0.14 oz. gold, 2.2 oz. silver, 0.4% copper and 4.5% zinc. Current proven and probable gold reserves stand at 830,000 contained ounces, with a total resource of 3.4 million oz. gold.

Laronde’s concentrator has a daily capacity of 2,000 tons. The flowsheet consists of crushing and grinding circuits, gravity separation, flotation and cyanidation with carbon-in-pulp recovery. The expansion program will gradually increase the daily milling capacity to 3,600 tons by 2001. A new copper circuit has been in operation since last fall and a new zinc flotation circuit will come on line in July.

In 1999, a new semi-autogenous grinding unit will be added to the existing circuit and both a paste-backfill plant and a cyanide-destruction facility will be built.

Over the next three years, annual gold production from Laronde should remain around 155,000 oz. at a cash cost of about US$215 per oz. However, beyond the year 2000, annual gold production from Laronde will soar to between 220,000 and 250,000 oz. at a projected cash cost of just US$125 per oz., thanks in part to an increase in silver and zinc credits. By that time, it is projected that Laronde will be producing 3 million oz. silver, 10 million lbs. copper and 90 million lbs. zinc annually as byproducts.

Ebe Scherkus, Agnico-Eagle’s executive vice-president, says that the corporate legacy of Agnico-Eagle’s founder Paul Penna (who passed away in 1996) and past-president Wencel Hubacheck (who retired earlier this year, but remains a director) lives on in the company in several ways: its staunch policy of not hedging its gold production; its stay-at-home philosophy; its primary focus on gold; and its dedication to retaining employees and promoting from within.

However, Scherkus points out that today’s management will be more aggressive in acquiring gold projects — even producing ones — anywhere in North America, and that the company will be more receptive to entering joint ventures, though only if Agnico-Eagle retains operator status.

Two obvious potential acquisitions sit right next door to Laronde: to the east lies exploration ground Agnico holds jointly with Battle Mountain Gold (BMC-T); and to the west lies Barrick Gold’s (abx-t) act
ive Bousquet No. 2 gold mine and past-producing Bousquet No. 1 mine.

On the financial front, Agnico-Eagle recently closed an underwriting with a syndicate led by Newcrest Capital and RBC Dominion Securities for the issuance of 9.3 million shares at $10.75 each, for net proceeds of about $95.4 million. The money is earmarked for completion of the Laronde expansion and for general corporate purposes.

During the quarter ended March 31, Agnico-Eagle reported a net loss of $3.3 million (or 7cents per share) on income from production of $15.3 million.

This compares with a net loss of $800,000 (2cents per share) on production income of $18.2 million a year earlier. Agnico-Eagle realized an average gold price during the first quarter of 1998 of US$296 per oz., compared with US$353 per oz. during the first quarter of 1997.

Despite the 7% drop in production during 1998’s first quarter, cash costs rose only US$2, to US$215 per oz.