High hopes for Nunavut's next mine

Nunavut Territory's next mine appears to be a winner.

On track to begin initial gold production in early 2010, the Meadowbank Project promises to deliver the best of what those who pressed for the creation of the territory had in mind - a mining venture capable of doing the heavy lifting needed to improve the local standard of living by providing steady, good-paying jobs along with significant public revenue.

The Meadowbank property is located in the Kivalliq region of Nunavut and lies in the Third Portage Lake area, about 70 kilometers, or 43 miles, north of the community of Baker Lake, near the western shore of Hudson Bay.

Agnico-Eagle Mines Ltd. holds a 100 percent interest in Meadowbank, which has probable gold reserves of at least 3.6 million ounces; 32.8 million metric tons at 3.5 grams per metric ton. Meadowbank's deposits are open on strike and at depth.

Already a major source of employment in the region, the C$620 million project is viewed as an important sign that the young territory is moving in the right direction, toward a self-reliant and sustainable economy.

"Agnico-Eagle is a tremendous asset to the territory and a real vote of confidence for mining in Nunavut," said Gordon MacKay, director of the Government of Nunavut's Minerals & Petroleum Resources Division. "When the mining industry sees the tremendous profits that Agnico-Eagle will make at Meadowbank, it will make a difference."

Part of Nunavut's exciting geology

Four gold deposits have been discovered along the Meadowbank gold trend, a 25-kilometer-long trend encompassing 35,000 hectares, or about 84,000 acres, of land in a series of Archean-aged rocks forming the Western Churchill supergroup in northern Canada.

Currently, three of the four deposits are planned to be mined. The Goose Island and Portage deposits are hosted by highly deformed magnetite-rich iron formation rocks, while an intermediate volcanic rock assemblage hosts the majority of the mineralization at the more northerly Vault deposit. In all the deposits, gold mineralization is commonly associated with intense quartz flooding, and the presence of iron sulphite minerals (pyrite and/or pyrrhotite).

Like the similar-sized Fort Knox gold mine in Interior Alaska, Meadowbank is being developed as an open-pit mine because the known gold resources are situated within 225 meters of surface. A zone of high-grade, near-surface gold mineralization, the Cannu zone, was discovered and evaluated in exploration in 2005.

Meadowbank is expected to produce an average of 350,000 ounces of gold per year over a 10-year mine life. But unlike Kinross Corp.'s Alaska mine, total cash costs of production at Meadowbank are expected to dip well below the industry average to C$300 per ounce. That compares favorably with an average of US$390 per ounce for Fort Knox production over the next nine years.

Following up on an early lead

When Agnico-Eagle pours its first gold at Meadowbank, it will culminate nearly 30 years of exploration and development in the Baker Lake area. Regional grassroots exploration programs outlined gold-bearing Archean greenstone belts in the area in the early 1980s.

The Third Portage deposit was discovered in 1987 during exploration by a joint venture between Cumberland Resources Ltd. and Comaplex, which also outlined the Goose Island deposit, and the North Portage deposit. In 1997, Cumberland purchased Comaplex's 40 percent interest making it the 100 percent owner of the project. In additional exploration programs, Cumberland discovered three other area gold deposits: the Vault deposit (October 2000), the PDF deposit (October 2002) and the Cannu zone (September 2005).

By 2003, Cumberland had identified several large, high-grade shallow and closely spaced gold deposits at Meadowbank, thus establishing a major Canadian gold project. Currently, Meadowbank consists of 10 Crown mining leases (7,395 hectares) and three Nunavut Tunngavik Inc exploration concessions (23,126 hectares) covering a total of 30,521 hectares. A 2005 feasibility study recommended development of a conventional open pit gold mine with an eight-year mine life from probable mineral reserves of 2,890,000 ounces situated within closely-spaced, near-surface deposits.

In August 2006, Cumberland received a positive recommendation from the Nunavut Impact Review Board for development of Meadowbank, and a month later reported that the Cannu zone contained about 85,000 ounces of inferred mineral resources.

In July 2007, Agnico-Eagle and Cumberland executed an all-share exchange for all of Cumberland's outstanding and fully diluted stock.

Though Agnico-Eagle appeared to be new to Meadowbank, the company actually had been eyeing the property for a while.

"We actually drilled this property ourselves in a joint venture with Hecla Mining Co. in the early 1990s. The times were different and we walked away," said David Smith, Agnico-Eagle's vice president of investor relations. "But we kept our eye on it and watched what Cumberland was doing. When the time was right, we made our move."

C$11 million for 2009 exploration

Exploration at Meadowbank is ongoing. In the 2008 exploration campaign, Agnico-Eagle completed 85 drill holes totaling 24,028 meters. Most of the drilling took place near the current resource envelopes at Portage, Goose Island and Goose South and on other targets on the large Meadowbank property, outside of the area of the mining license.

A scoping study is underway to consider an increase in the production rate at Meadowbank from the design rate of 8,500 metric tons per day to a target rate of 10,000 tpd. The study is considering a higher production rate from the open pits, as well as a scenario where the pit material is supplemented by underground ore from the Goose South deposit. Results of the scoping study are expected in the third quarter of 2009, according to Agnico-Eagle.

For 2009, the company has budgeted C$11 million for exploration in Meadowbank region, including an estimated 47,800 meters of diamond drilling for resource-to-reserve conversion and discovery of new gold zones.

Six months ahead of schedule

In a March 2009 update, Agnico-Eagle said mine construction is well underway at Meadowbank with commissioning and first gold production expected before the end of the first quarter of 2010.

A 110-kilometer, or 66-mile, all-season road to the site has been completed and startup has been accelerated by six months.

"We had such a good shipping season last summer that we were able to advance the schedule," Smith explained. "We exceeded our expectations."

Smith referred to the sealift last summer that the company conducted to transport the bulk of equipment and supplies needed for its exploration and development efforts at Meadowbank. He said goods are brought every summer on oceangoing barges from Montreal through the Atlantic Ocean around Newfoundland and into the Arctic.

Agnico-Eagle credits hard work by its employees and contractors as the main reason for the speedy timetable, he added.

At the project, pre-stripping in the Portage pit got underway during the fourth quarter of 2008 with about 800,000 metric tons of waste rock hauled.

The mill, power house and service buildings also were fully enclosed in the fourth quarter. Work continued on the SAG mill foundations and internal foundations during the winter season.

Most of the earthwork related to the construction of the East Dike was completed by the end of the third quarter of 2008. During the fourth quarter, the emphasis was placed on the grouting of the foundation of the dike. Casing installation is virtually complete. Bedrock drilling had progressed to 33 percent completion earlier this year.

Construction of the Bay and Goose dykes are scheduled for 2009 and 2010. Completion of the East Dyke will permit the start of initial production from the Portage open pit, while completion of the two additional dykes will allow extension of the Portage open pit as well as access to the higher-grade ore of the Goose Island open pit by 2011. Work also has started on dewatering the Portage open pit area.

Agnico-Eagle also said preparations are underway for the 2009 sea lift season. The outstanding mill and mining equipment as well as consumables for the ensuing year are scheduled to be delivered this summer. The company expects to start commissioning the plant near the beginning of 2010.

Arctic challenges on horizon

The mine and mill planned for Meadowbank are simple in design, so processing ore should not be difficult. But operating in the Canadian Arctic could present a considerable logistical and infrastructure challenge for the producer, Smith said.

"On occasion, the area has pretty severe winter weather so we've budgeted for some days when we can't operate at Meadowbank due to whiteout conditions," he said.

Another big challenge that the miner is already tackling is training members of the local labor force to work at the mine and retaining that work force once it is in place.

Agnico-Eagle plans to draw personnel from its Quebec base to complement and assist the work force in Nunavut.

Part of an ambitious strategy

Agnico-Eagle's operating history includes more than 30 years of continuous gold production primarily from underground operations. Since Agnico Mines Limited, a silver producer in Ontario, and Eagle Gold Mines Ltd., a gold exploration company, merged in 1972, the company has produced more than 4.0 million ounces of gold.

In addition to being one of the lowest total cash-cost producers in North American gold mining, the company prides itself on having paid its shareholders a cash dividend for 27 consecutive years.

Agnico-Eagle has an ambitious strategy to increase its annual gold production to 1.4 million ounces by 2011. To accomplish this goal, the company is building a multimine platform starting with its operations in the Abitibi region of Quebec. Having created a dominant land position around its LaRonde mine in Quebec, the gold producer brought numerous properties running along Quebec's gold-rich Cadillac-Bousquet belt into the pipeline at different stages of development. This foundation offers long-life gold reserves and generates good earnings and cash flows, enabling Agnico-Eagle to broaden its base within Canada and internationally.

Toward that end, the company has developed five gold mines, including Meadowbank, virtually simultaneously. Gold production began in April 2008 at its Goldex mine near LaRonde. In Finland, the Kittila gold mine began initial production in September 2008. Shaft sinking is complete and level development is underway at the nearby Lapa deposit, with gold production expected there in midyear 2009. And initial gold and silver production at the Pinos Altos Project in Mexico is on tap for the third quarter of 2009.

When Agnico-Eagle CEO Sean Boyd was asked what he learned from building five mines at the same time, Smith said the top executive replied, "I learned not to build five mines at the same time."

He said the company's top managers are now "looking forward to stepping back" and thinking about how to improve operations at its six producing gold mines.