Agnico Eagle forecasts record production in 2019

Agnico Eagle Mines (TSX: AEM; NYSE: AEM) forecasts record production this year, with the start of two gold mines at Meliadine and Amaruq in Canada’s Arctic.

With the output from the new mines, the company forecasts total gold production of 1.75 million ounces in 2019. That number could rise to 2 million oz. in 2020 and 2.05 million oz. in 2021, the company says.

Agnico’s growing production platform should result in greater cash flow, allowing the company to fund its project pipeline with internally generated funds, reduce debt and increase dividends, Sean Boyd, the company’s president and CEO, told analysts and investors on a conference call in February.

“What we continue to prove over and over is that our build-our-own mines approach works very well for us, so we’re going to continue to focus on that,” the mining executive said.

Meliadine, the company’s second major project in the Low Arctic, is ahead of schedule and under budget, and is expected to start commercial production early in the second quarter of this year. At Amaruq, open-pit mining has started at the Whale Tail pit, and production start-up is on track for the third quarter of the year.

The company says Meliadine will produce 230,000 oz. gold in 2019 (including pre-commercial production of 60,000 oz.) at total cash costs of US$612 per oz., while Amaruq will produce 165,000 oz. gold (including pre-commercial production of 40,000 oz.) at total cash costs of US$812 per ounce.

Meadowbank, Agnico’s first mine in the Low Arctic, will reach the end of its mine life this year, after producing 3 million oz. gold in 2018.

The open-pit mine — 300 km west of Hudson Bay and 100 km north of Baker Lake — churned out 248,997 oz. gold at total cash costs of US$814 per oz. last year, and is expected to deliver 65,000 oz. at total cash costs of US$990 per oz. in its final year.

Meadowbank’s mill will soon transition to processing ore from Amaruq, 50 km northwest.

Trucks at Agnico Eagle Mines’ Meadowbank gold mine in Nunavut. Photo by The Northern Miner.

On the conference call, Boyd noted that while 2018 was a transition year from Meadowbank to other production platforms in Nunavut, Agnico’s total production only declined 5% from 2017 to 2018, for a “nice, smooth transition.”

“Several years ago, when we were looking at this transition, there was potential for a sizeable gap in production, but our team has done an exceptional job,” he said. “Really what you had was basically a dozen drill holes [at Amaruq] in 2013, with the first drilling done in August of 2013, and, literally, six years later, you’ve got a mine starting up.”

Meliadine, 290 km south of Meadowbank, is the company’s largest gold deposit in terms of resources.

The deposit contains proven and probable reserves of 16.7 million tonnes grading 6.97 grams gold for 3.8 million oz. gold. Measured and indicated resources stand at 25.96 million tonnes grading 3.81 grams gold for 3.18 million oz., and inferred resources of 13.48 million tonnes grading 6 grams gold for 2.6 million ounces.

Agnico approved construction of Meliadine, near the western shore of Hudson Bay in Nunavut’s Kivalliq district, in February 2017.

The mine could produce 5.7 million oz. gold over its 14-year mine life.

The reserves are found in the Tiriganiaq and Wesmeg deposits, while the resources are in Tiriganiaq and Wesmeg, plus five nearby deposits. The 1,114 sq. km property includes an 80 km long greenstone belt.

The company plans to spend $5.2 million on a 10,000-metre drill program at the Tiriganiaq deposit, on top of 12,500 metres of conversion drilling. It has also budgeted a $1.4-million, 5,000-metre regional exploration program.

“We continue to drill it, and we see intersections that suggest that the deposit at Tiriganiaq will continue to grow,” Boyd said.

Amaruq hosts the Whale Tail deposit, as well as the I, R, V and Mammoth zones.

The deposits support a seven-year mine life, and sit on a 945 sq. km property on Inuit-owned and federal crown land, north of Baker Lake.

The updated life-of-mine plan calls for 2.5 million oz. gold production between 2019 and 2025. In 2020, production would be 268,000 and 277,000 ounces.

As of Dec. 31, 2018, Amaruq has an open-pit reserve of 24.9 million tonnes grading 3.59 grams gold per tonne for 2.9 million contained oz. gold. Open-pit and underground resources stand at 8.9 million indicated tonnes grading 3.97 grams gold for 1.1 million contained oz. gold, and open-pit and underground inferred resources of 12.6 million tonnes grading 5.12 grams gold for 2.1 million contained oz. gold.

An aerial photograph of the V zone at Agnico Eagle’s Amaruq project. Credit: Agnico Eagle Mines.

Agnico’s land package at Amaruq, which means “large wolf” in Inuktitut, covers 40 km of the Woodburn Lake Group of Archean supracrustal rocks — the same sequence as at its Meadowbank mine.

The company discovered Amaruq’s I, V and R zones in 2013, followed by Whale Tail in the first half of 2014. Agnico gave the green light to build a mine in February 2017, and development work began in July 2018, after all the final permits were granted.

Whale Tail is the largest discovery at Amaruq so far. It has been defined over a strike length of at least 2.3 km, and extends from surface to a depth of 915 metres. It remains open at depth and along strike.

The V Zone, north of Whale Tail, is the second source of open-pit ore at Amaruq.

The deposits at Amaruq show underground potential below their designed pits, the company says. The pit at Whale Tail, for instance, is expected to bottom at 285 metres, but its resources stretch to 800 metres’ depth. The IVR pit has an expected bottom of 120 metres, with resources extending to 700 metres’ depth.

Work is being undertaken to evaluate the potential for an underground operation, which could run alongside the open-pit mine. Mining the bottom of the Whale Tail open pit from underground could provide quicker access to higher grades and lower stripping costs.

Agnico started work on an underground exploration ramp in January 2018 — completing 1,214 metres — and the company plans to develop the ramp another 1,440 metres in 2019.

“We’re evaluating the potential to open up an underground opportunity there, but also to optimize the pit, because if we’re going to go underground … that allows us to do less stripping in the pit, and become much more efficient in the allocation of capital and the return on the pit,” he says. “So we’ll have more details on that as we move through 2019.”

This year the company also plans to complete an $8.1-million, 32,800-metre exploration drill program, and another $4.4-million, 20,300-metre conversion drill program.

Processing facilities at Agnico Eagle MInes’ Meliadine gold mine. Credit: Agnico Eagle Mines.

Exploration focuses on Whale Tail’s deep extensions toward the west and the east, V Zone deep extensions, and extending the resources of the Whale Tail North structure toward the east to fill the gap with the V Zone, and at depth.

“Exploration remains a key driver for us,” Boyd says. “We’re actively drilling on a big part of our project pipeline. We continue to see good results at places like Meliadine, where we have encountered good grades outside of the known mineral reserve and resource outline. And our experience largely has been that we tend to create more value, from an exploration standpoint, once we get the production base established, and we would certainly expect that to happen at Meliadine, given the size of the land package there that’s largely under-explored — and at Amaruq, drilling continues to give us confidence in the underground opportunity there.”

Elsewhere in the north, Agnico is making progress on shaft and mill-expansion work at its Kittila mine in northern Finland, 900 km north of Helsinki and 150 km north of the Arctic Circle. The company approved a €160-million (US$181-million) project that includes building a 1,044-metre-deep shaft, and increasing throughput at the processing plant 25%, to 2 million tonnes per year.

Kittila is the largest gold producer in Europe, and has a mine life estimate through 2035. It also hosts the company’s largest proven and probable reserves, with 4.4 million contained oz. gold within 31 million tonnes averaging 4.5 grams gold.

Kittila could produce 175,000 oz. gold this year at total cash costs of US$822 per ounce. In 2018, it produced 188,979 oz. at total cash costs of US$853 per ounce. In 2020, Agnico is guiding for 215,000 oz. gold.

The Kittila property covers 237 square kilometres. The mine area includes a group of six gold deposits along a 4.5 km segment of the 25 km Suurikuusikko trend, a major gold-bearing shear zone. Most of the reserves and resources are found in three deposits — Suuri, Roura and Rimpi. The others are called Etela, Ketola and Sisar.

The region around the mine is underlain by mafic volcanic and sedimentary rocks of the Kittila greenstone belt, which is similar to those hosting Canadian deposits in Quebec’s Abitibi and Nunavut.

The company plans to spend $8.2 million this year on 34,400 metres of exploration drilling to explore the Kittila mineral reserve and resource potential, and to evaluate the potential to develop the Sisar zone as a new mining horizon. There is a budget for $1.1 million for 8,000 metres of conversion drilling. Agnico plans to spend $2.5 million on exploration outside its mining-licence area along the Suurikuusikko, Kapsa and Hanhimaa trends.