February 2009

Agnico-Eagle strikes Goldex

Favourable gold prices make the project viable despite low yields

By P. Diekmeyer

Goldex site

For many years, Agnico-Eagle’s Goldex deposit, located in Quebec’s gold-rich Cadillac-Bousquet belt, was not considered an economical ore body to mine. Although the property had been on the minerals industry’s radar screens for some time, its low-grade status and weak gold prices meant that the business case for investing there was weak. As a result, the project remained on a backburner.

In 2004, Agnico-Eagle, which already operated the nearby LaRonde mine, decided to move ahead with a feasibility study of the Goldex project, and an ongoing production decision followed in 2005. The move proved to be prescient. “The timing was excellent,” said Yvon Sylvestre, Goldex mine manager. “Production began at a time when gold prices were holding up well, especially relative to those of many other commodities.”

Agnico-Eagle’s long-term policy is to not hedge its production. This positions it well to profit when prices move up.

A long-term presence

Agnico-Eagle Mines was formed in 1972, following the amalgamation of Agnico Mines Limited and Eagle Gold Mines. However, until recently the operation’s revenues came from a single major stream: the LaRonde mine, located a short driving distance from the Goldex operation.

At Goldex, construction work to the tune of about $183 million was completed in 2008 and production began in August of that year. This past January, the mine hit its full capacity at 7,000 tonnes per day. So far, according to company reports, the milled grade has been running at about 2.1 grams per tonne, which is closely in line with the initial block model estimates.

The Goldex mine’s proximity to its LaRonde operation turned out to be a major boost, making the synergies of combined infrastructure possible. As a result, total cash production costs per ounce are currently running at $315, which compares favourably with initial forecasts. As production efficiencies increase, those costs are expected to fall further, bottoming out later in the mine life at a projected $270 per ounce. In fact, Agnico-Eagle regards itself as one of the lowest total cash costs per ounce producers in the North American underground mining industry. If current plans come to fruition, Goldex is expected to yield an average of 165,000 ounces of gold annually for the next ten years.

Minimizing costs

The Goldex deposit is both large and impressive. Estimates are that it includes about 23.1 million tonnes of probable mineral reserves at an average grade of 2.2 grams per tonne, which would imply an eventual yield of 1.6 million ounces. The deposit itself extends from about 510 metres to 770 metres below the surface.

To access and process those reserves, Agnico-Eagle built new mining and milling facilities, which incorporated many innovative technologies and processes. “The fact that ore yields are so low there compared to other bodies in the region meant that the only way that we could justify the mine development was to find ways to minimize extraction and processing costs,” said Sylvestre.

To speed up the extraction process, a 5.5-metre diameter shaft was dug to a depth of 865 metres and bordered with a 50.8 centimetre concrete lining, using a steel sheet piling method for the 24.4-metre collar in overburden. The shaft needed to be so large to accommodate both the hoisting equipment installed within, and to provide space for proper ventilation. The hoisting system, which includes a refurbished unit, now handles both production and service duties. An auxiliary friction hoist single-drum unit was also installed to accommodate personnel, service and emergencies.

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