Another 2,000-ton mill for Dumagami Another feather for the Eagle

Agnico-Eagle Mines has come up with another winner.

For close on the heels of bringing its Telbel Mines’ property at Joutel, Que., into highly profitable production, Agnico is ordering a 2,000-ton mill for its controlled Dumagami Mines in Bousquet and Cadillac twps., 60 miles to the south. Initial output is targeted for mid-1988.

Whereas the Dumagami had long been regarded as a very marginal grade gold-silver-copper situation, recent developments in its new west zone have dramatically changed the ore picture at this mine, which Agnico has been nursing along for years.

Thanks to West zone findings, over-all tonnages have already been increased 100% and grade by 80%, with ore in all categories now nudging 7.0 million tons grading 0.134 oz gold. And it seems to be improving with depth.

Capital cost for this final phase is estimated at $3l.5 million, including deepening the present shaft by 1,000 ft to 3,200 ft, as well as $4 million for working capital. (Not many gold mines in this country put down a shaft to 3,200 ft before going into production.)

Dumagami will come into production debt-free, President Paul Penna emphasizes, and should prove a real money-maker from day one.

Operating costs are expected to run around $40 per ton, slightly lower than at the Telbel.

The company currently has some $10 million cash on hand from a previous flow-through underwriting by the brokerage firms of Levesque, Beaubien Inc. and Dominion Securities Ames which netted $19,053,470. That, incidentally, was the first large flow-through share offering in Quebec, winning Mr Penna the IDA’s 1984 Public Financing Award of Excellence.

Funds for the shaft deepening and a heavy underground drill program are being provided by parent Agnico via new flow-through financing of up to $4 million, affording the latter company certain tax advantages. The remaining $17 million will be provided by a group of senior investment firms which has already been formed.

When all financing is completed, it is expected that Dumagami will have about 9.5 million shares issued. Of this, Agnico-Eagle will hold a direct 28% interest and a direct and indirect interest of 35% reflecting its holdings in closely associated Mentor Exploration & Development Co., which in turn will hold a direct 13% interest. (Early this year, it will be recalled, Agnico bought out Noranda’s entire Dumagami holding for cash.)

This same new West zone, which has so completely turned the tables for Dumagami, is also proving highly important to adjoining Lac Minerals, inasmuch as this same ore extends across the common boundary into Lac’s Bousquet mine property. (See story at right). Indeed Lac currently has no less than eight surface drills at work on what Lac President Peter Allen describes as an important new discovery, 1.2 km east of its Bousquet shaft. (Managements of the Dumagami and Bousquet mines enjoy a mutually good working relationship.)

With two deep surface drill holes on the Dumagami side just 300 ft or so from the boundary returning excellent intersections — 34.5 ft of 0.244 oz and 59 ft of 0.227 oz — it’s little wonder that the company is most anxious to get the shaft down further for a deeper and detailed underground look, as drilling has indicated good ore extending to at least 3,400 ft. Goldex plans ship ore

Dumagami’s decision to build a 2,000-ton mill at this time comes as good news for Goldex Mines, another company that is controlled and managed by Agnico. A full production-sized shaft has just been completed on this property, which is located in the very heart of the bustling Val d’Or area, 40 miles to the west and from which ore shipments are planned.

Over 180,000 ft of diamond drilling has been carried out on the Goldex ground, outlining 856,000 tons of ore to a depth of 500 ft with a cut grade of 0.209 oz. Drives are now going out on the 1,100 and 1,250-ft levels from which extensive underground drilling will soon be carried out.

Goldex, which is also amply financed for its present program, plans to start shipping 500 tons daily to the Dumagami mill just as soon as that plant is ready. This means that the Goldex should be able to get into production quickly, and at very little additional capital cost. But eventually, if ore developments warrant, this company would likely build a mill of its own on site. The detailed underground work now planned will establish whether the ore should be mined as a small selective good grade operation or as a much larger medium grade one.

Would you have recommended a 2,000-ton mill for Dumagami if there were no ore shipments expected from Goldex, we asked W. A. Hubacheck, Agnico’s long- time consultant and who has played a key role in that company’s success? “Definitely” was his quick reply, pointing out that any extra capacity can be readily utilized to mine lower grade ore and take immediate advantage of any upswings in the price of gold. Penna’s patience pays

Paul Penna, whom we named our Mining Man of the Year for 1985 for his success in bringing the Telbel mine into production, is a remarkably patient individual and a master at timing. This was demonstrated right from the start when he put the lid on Agnico’s original Eagle gold mine at Joutel back in 1970 when markets turned sour and financing by junior companies was almost impossible. It may interest our readers to know that when he closed that operation, Agnico’s shares slumped to a low of 73 cents . It has since been split 1 times which represents about $43 per share for that same stock at its current price.

Both the Dumagami and Goldex had also been put on ice in the past when metal prices turned weak and financing difficult.

Another example of patience was his decision to stockpile silver bullion from Agnico’s Cobalt operation when the price of that metal slumped. Right now it has something like 1,200,000 oz on hand, the value of which has risen significantly in recent weeks. “We are in no rush to sell. It doesn’t eat and there are no costly storage problems,” he says.