The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
AEM: TSX
Vice-chairman and CEO: Sean Boyd, C.A.
President and COO: Eberhard Scherkus, P. Eng.
Senior Vice President, Exploration: Alain Blackburn, P. Eng.
Eighteen months after achieving commercial production at its Meadowbank Mine in Nunavut, international gold producer Agnico-Eagle Mines Ltd. is ironing out kinks in the operation.
Meadowbank, one of the international gold producer's largest mines, has almost 3.5 million ounces of gold in reserves (34 million metric ton at 3.2 grams per metric ton), with tremendous potential for more.
The company is bringing the mine into line even as it continues exploration activities on another major Nunavut gold property, the 80-kilometer- (50 miles) long Meliadine gold project located 290 kilometers (180 miles) to the southeast.
Startup of commercial production in March 2010 at Meadowbank heralded a new era for the mining industry in Nunavut and marked the sixth gold mine that Agnico-Eagle has in production.
But Meadowbank has contended with big challenges including ore crushing difficulties and a major kitchen fire.
In the quarter ended June 30, the company's revenues from mining operations jumped nearly 25 percent to US$433.7 million from US$347.5 million during the same period in 2010.
The increase resulted from higher prices for all metals, especially gold and silver.
But Agnico-Eagle's cash costs also climbed to US$565 per ounce on gold produced in the second quarter, compared with US$482 per ounce produced during the same period a year ago.
The increase was due, in part, to unfavorable cash costs at Meadowbank where production fell to 59,376 ounces of gold in the second quarter from 77,676 ounces in April-June, 2010.
Meadowbank's unit costs have been negatively impacted since startup by a number of production-related problems, including unusually hard ore, less than optimal fragmentation from the pit and a different particle size gradation from the crusher than expected.
To solve these issues, Agnico-Eagle installed a permanent secondary crushing unit in the front end of the circuit, similar to a solution adopted at one of its other gold mines.
In March, Meadowbank's camp kitchen sustained extensive damage but no injuries.
By June 30, a temporary kitchen had been installed at the mine, the mine work force had returned to full strength after temporary layoffs.
But output difficulties were further exacerbated by problems in the pit resulting from fewer onsite mine personnel after the fire.
Meadowbank now anticipates achieving steady state production in the latter half of 2011 following commissioning and installation of a new crusher.
With expected increases in throughput and higher grades, the company is forecasting 50 percent higher gold output at Meadowbank in the second half of 2011 with throughput averaging 8,700 metric tons per day grading 3.8 grams per metric ton and production costs decreasing 15 percent.
In addition, conversion and expansion drilling around the southern end of the Goose South deposit was a priority in the 2011 exploration program as well as results of a study considering an underground exploration ramp to examine this resource.
With a budget of C$65 million, Agnico-Eagle's major exploration focus in Nunavut in 2011 is the Meliadine project where 2011 exploration targeted expansion and definition of six known deposits on the property. The company acquired Meliadine in July 2010 from Comaplex Minerals Ltd. Drilling in 2011 has focused on further resource conversion, extending known zones of mineralization, geotechnical and condemnation drilling to assist in finalizing infrastructure location and on regional exploration. By June 27, 40,000 meters of a planned 90,000 meters had been drilled.
Drilling on the Wesmeg zone, discovered in 2010 and located about 400 meters south of the main high-grade Tiriganiaq Zone, continued to encounter mineralization outside of the currently known resource envelope. The most recent drill results confirmed the continuity of both the North and South trends of the Wesmeg zone and extended them in all directions.
At Dec. 31, Meliadine had probable reserves of 2.6 million ounces of gold (9.47 metric tons grading 8.54 g/t gold), all in the main Tiriganiaq zone. In addition, the project had indicated gold resources of 8.8 million metric tons grading 5.2 g/t (or 1.5 million ounces), and inferred gold resources of 11.8 million metric tons grading 6.9 g/t (or 2.6 million ounces).
Through the end of May, 66 exploration holes (16,092 meters) had been drilled at Wesmeg.
For the remainder of 2011, Agnico-Eagle said it would focus drilling on resource conversion and expanding the resource envelopes at the Tiriganiaq, Wolf, F Zone, Pump, and Wesmeg zones, as well as initiating regional exploration drilling on new target areas.
It is anticipated that the successful exploration results to date on both North and South Trends at Wesmeg will result in a meaningful resource increase at Meliadine, which will be part of a resource update in the third quarter of 2011.
Based on the exploration results to date, the company said planning is underway to dramatically increase the drill program in 2012.
In addition, a study on accelerating the development installation of an underground ramp is nearing completion and a decision to proceed is expected in the third quarter.
This ramp will provide additional drill platforms which will facilitate better access to drill the high-grade Tiriganiaq zone and the continuity of Wesmeg's extension at depth.
Several large-scale production scenarios are being studied with different combinations of open pit and underground ore volumes, with daily tonnage rates varying from 6,500 tpd to greater than 10,000 tpd.
A production decision on Meliadine is expected in 2013.
Cash and short-term deposits: C$139 million (at June 30, 2011)
Working capital: C$434.1 million (at June 30, 2010)
Market capitalization: C$11.4 billion (at Aug. 26, 2011)
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