LaRonde may rescue Agnico while other operations falter

A combination of record production and exploration success at the LaRonde gold mine in northwestern Quebec gave shareholders at Agnico-Eagle Mines’ (TSE) recent annual meeting reason for optimism.

In May, the mine produced more than 15,800 oz. gold as the company tapped into higher-grade ore on the lower levels. Cash operating costs dropped to US$267 per oz. from an average of US$288 in the first quarter and more than US$339 at the beginning of 1991. As a result of an aggressive $2.5-million exploration program over the past year, three high-grade gold zones have been found.

“We’re off to a rip-roaring start and well on the way to meeting our objectives in 1992,” mine manager Eberhard Scherkus told shareholders. The 4-year-old mine is expected to produce about 140,000 oz. in 1992 compared with 116,831 oz. in 1991.

Success at LaRonde could prove to be Agnico’s salvation. Shunning the hedging practices that have helped protect its competitors during a weak gold market, the Toronto-based producer has sustained losses for four consecutive years. During roughly the same period, Agnico’s share price has dropped from a high of $45 to just over $5 today. Ground problems at its only other gold operation, near Joutel, Que., have cut production there to 30,000 oz. per year.

Scherkus said this year’s exploration program at LaRonde will focus on zone 6, about one mile east of the producing mine, where Agnico has already outlined a probable reserve of 600,000 tons grading 0.35 oz. gold. At the same time, the company will proceed with a drift out to the eastern boundary of the mine property and continue underground drilling on zone 7. “We have about one year of major work to do both underground and on surface,” said Scherkus. “Then we will be making a major decision on development.” President Paul Penna added that a second, $10-15-million shaft would probably be needed to reach the zone 6 mineralization.

About $2 million will be spent exploring Agnico’s other properties, particularly within trucking distance of the hungry Joutel mill, said exploration manager David Rigg. At the Vezza gold property owned by North American Rare Metals (ME) and Dundee-Palliser Resources (TSE), Agnico recently completed two holes to follow up a gold intersection at 2,000 ft. below surface (T.N.M., May 25/92). Although both holes were barren, the company plans to proceed with wedge cuts in July.

Vezza hosts a preliminary reserve of 2.1 million tons with an average grade of 0.15 oz. gold.