Steel is dependent on economic growth. Nickel, copper, and uranium—all are
subject to the changing times. But gold, gold has always been in fashion.
Almost since the beginning of time, gold has adorned women and men alike,
added beauty to furniture, pottery, and clothing, and been used as legal tender. Gold is still
popular and the strong supply and demand of today’s market, especially for jewelry in China
and India, have helped bolster the price of gold. Reports have also shown that certain central
banks are considering buying gold to add to their reserves. These factors have resulted in a
renewed interest in gold as an investment.
Canada is a land rich in gold deposits, and many Canadian gold mining companies made
their start right here before expanding globally. Last year was a record year for the mining
industry, gold included, and 2006 looks to be well on its way to matching and surpassing
the gold rush of 2005. The price of gold reached a 25-year high of $572 per ounce in
February, and many think that this unprecedented price will hold and possibly go even
higher in the coming year. This article will focus on a few key players in the Canadian gold
game. Barrick, Agnico-Eagle, Goldcorp, Kinross, Cambior, and Teck Cominco have all had a
bustling year selling their gold as quickly as they can dig it up out of the ground, and have
profited well from high prices. So what’s next for these companies?
For years Agnico-Eagle has focused their attention on their
flagship LaRonde mine in northwestern Quebec. After 18
years of production, LaRonde is still going strong. Since its
beginning, LaRonde has produced almost 3 million ounces
of gold and still has 5.3 million in reserves left. In the last few
years, the mine and mill have been expanded to meet the
mine’s full potential. In 2003, there were two mining horizons,
but now there are operations on four main mining levels and
150 mining blocks per year. Processing began at 1,500
tonnes per day and has now reached almost 8,000 tonnes
per day. In 2006, LaRonde is expected to produce approximately
250,000 ounces of gold at a total cash cost of $50
per ounce. The low cash cost is thanks to LaRonde’s rich silver
and zinc deposits. Sean Boyd, CEO, [pictured left] summed up the situation:
“We produce more silver than some silver mines.”
The profit from the silver produced covers the overall mining
costs. But that’s not the only reason for LaRonde’s successes.
Boyd said the experienced workforce, with high performance
standards, is the number one reason that cost per tonne went up
only eight per cent from the first quarter of 2004 to the fourth
quarter of 2005—despite the increased price of steel and energy.
With construction completed and everything running
smoothly at LaRonde, Agnico-Eagle has a firm foundation to
build upon and now has its sight set on exploration.
LaRonde II is the deep extension of the
current LaRonde operation. Statistics from
2004 show probable reserves of 3.2 million
ounces, indicated resources of
158,000 ounces, and inferred resources of
just over 2 million ounces, along with significant
amounts of silver, copper, and zinc.
Drilling and mine planning is underway
and higher grade gold and base metal values
continue to be encountered. It is anticipated
that the LaRonde II resource will
continue to be converted to reserves, with
an update on the results expected soon.
Although right next door, LaRonde II will
not be accessible by the original Penna
shaft. The new project will, however, benefit
from significant operating synergies and
technical expertise which will result in
decreased start-up costs. Agnico-Eagle aims to produce
300,000 ounces annually from this project, extending the
mine life of LaRonde through to 2020 at least.
The Lapa property, located 11 kilometres east of LaRonde,
and the Goldex property (formerly owned by Placer Dome),
60 kilometres east of LaRonde, are two gold projects currently
being developed. At Lapa, a $30 million shaft sinking
project is in progress. Phase 1 includes an underground
drilling program to validate the continuity and grade of the
present reserve estimate. A bulk sample and metallurgical
test are scheduled for late 2006. Positive results could bring
the Lapa project into production in 2008. Probable reserves
are estimated at over 1 million ounces, indicated resources at
133,000 ounces, and inferred resources at 414,000 ounces.
Underground development and construction has begun at
Goldex and plant construction is underway. Gold production
is expected in 2008, averaging 170,000 ounces per year at a
total cash cost of $200 per ounce. The Goldex mine life is
expected to be ten years although the mineralization remains
open to the east and at depth.
In November 2005, Agnico-Eagle acquired the outstanding
shares of Riddarhyttan, thus becoming full owner of the
Suurikuusikko gold deposit, 1,000 kilometres north of
Helsinki, Finland. Even though it is across the ocean, the
geology is similar to that of northwestern Quebec and
poses few new challenges for Agnico-Eagle. Drills are operating
on the property with the objectives of testing the
deposit at depth and transferring resources to reserves.
Probable reserves have been calculated at 2.33 million
ounces of gold.
Always on the lookout for areas with rich geology, low
operating costs, political stability, and a miningfriendly
regulatory structure, Agnico-Eagle signed an
option agreement in March 2005 with Industrias
Peñoles S.A de C.V. to purchase the Piños Altos property
in northern Mexico. Indicated resource for gold is
1.6 million ounces. Other bonuses of this property
include over 40 million ounces of silver (indicated
resource), highway access, and it is situated within 10
kilometres of an extension of the state power grid.
Boyd said the key to Agnico-Eagle’s expansion projects
is to “have the strongest reserve position. Adding to our
reserve of 10.4 million ounces of gold, an additional
resource of over 5 million ounces puts Agnico-Eagle
comfortably at the top of the mid-tier gold companies.”