Goldcorp’s Chuck Jeannes ‘not worried about lonore’

Goldcorp (TSX: G; NYSE: GG) is highlighting the potential at Éléonore in northern Quebec, despite recently lowering the gold mine’s 2015 production forecast, partly due to higher-than-expected mining dilution.

“Looking forward, I’m not worried about Éléonore — it’s a great plant, it’s a great orebody,” Charles Jeannes, the company’s president and CEO, said in a Sept. 22 presentation at the Denver Gold Forum.

The underground mine reached commercial production on April 1, 2015, after Goldcorp poured first gold last October. The slower-than-anticipated start-up came from commissioning issues in the first half of 2015 relating to the tailings filter press and primary crusher feeder. Jeannes said the issues have been resolved.

In August, the Éléonore mill achieved nameplate capacity of 7,000 tonnes per day, with 2,000 tonnes of the feed coming from low-grade stockpiles.

While the stockpiles should diminish by year-end, Goldcorp is confident mining rates will reach 7,000 tonnes per day by the first half of 2018, despite the recent hiccup, when it uncovered unexpected dilution in the initial stopes at the Horizon 4 level. Goldcorp reduced Éléonore’s annual production guidance by 15% on Sept. 8. 

The horizon is in the “deepest part of the mine, and when we got there and opened it up, there was folding and faulting that wasn’t expected, based on what we saw higher in the mine,” Jeannes said, adding that this condition affects 10% of the orebody.

The estimated mining dilution has increased from 10% to 25%, leading to lower head grades and lower production.

Éléonore is set to churn out 250,000 to 270,000 oz. gold in 2015, down from 290,000 to 330,000 oz. previously. (The guidance includes 32,500 oz. of pre-commercial production.)

Goldcorp, however, is keeping its company-wide output guidance and expects to reach up to 3.6 million oz.

After a September site visit, BMO analyst Andrew Kaip wrote that “Éléonore is typical of a mine that is in the initial stages of commercial production and ramping up towards full production rates … it is apparent that the mine is built for the long-term.”

Raymond James analyst Phil Russo added the dilution issue may have taken away from the mine’s progress, but said it is “heading towards free cash flow status nonetheless.”

Goldcorp has sunk a production shaft at Éléonore and will commission it by next September, which should lower mining costs and improve efficiency. The miner is also on track to finish a prefeasibility study on the viability of mining the crown pillar at Éléonore by year-end. It is confident it can extract near-surface ounces near the end of the mine life. 

Éléonore has reserves in six geological horizons, of which four have seen extraction. At the end of last year, the 10-year  mine had gold reserves of 4.97 million oz. from 24.6 million tonnes grading 6.30 grams gold per tonne.

“We added 1 million oz. of reserves last year, and still haven’t seen the bottom of the deposit. We think there is strong reserve growth potential here,” Jeannes said.