June/July 2006

Canada – The land of golden opportunity

By H. Weldon

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.”

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