OSC may probe Agnico-Eagle (March 18, 2004)

After the closing bell on March 18, gold miner Angico-Eagle Mines (AGE-T) revealed that the Ontario Securities Commission is "contemplating commencing proceedings" against the company and some members of management.

The matter relates to the "timing and content" of the company’s disclosure concerning a rock fall that occurred in early 2003 at Agnico’s flagship LaRonde mine in Quebec.

Agnico issued a press release announcing the rockfall on March 31, 2003, after the market closed. When trading resumed the next day, Agnico shares tumbled 15.1% to C$16.22 in Toronto and 15.9% to US$11.03 in New York.

The 30,000-ton rockfall occurred in two production stopes above the mine’s Level 215 (at 2,150 metres below surface) during development of a pyramid-shaped stoping sequence designed to distribute and relieve rock stress. Workers then extracted the fallen ore and backfilled the void with cemented rock fill. No one was injured, no equipment was damaged, and underground and mill operations were not interrupted.

Agnico’s preliminary assessment was that the rockfall could reduce by up to 20% its 2003 forecast of 375,000 oz. produced, owing to the necessity of replacing higher-grade mining blocks with lower-grade ones.

In fact, the outcome was even worse: Agnico gold sales for 2003 only totalled 236,653 oz., or only 63% of the pre-rockfall goal.

For now, Agnico says it intends to co-operate fully with the OSC and will soon respond in more detail.