Nunavut projects boost Agnico gold outlook

Agnico Eagle Mines Ltd. Oct. 25 said it expects to produce more gold than previously predicted both this year and next.

Based on strong operational performance, the company has raised its gold production guidance for 2018 to 1.6 million, slightly higher than the 1.58 million ounces of gold predicted at mid-year. Given the positive development progress at its Meliadine and Amaruq projects in Nunavut, Agnico Eagle now also expects its 2019 gold production to exceed 1.7 million oz, the mid-point of its guidance range for next year.

"Our Nunavut development projects are progressing well. Drilling continues to generate positive exploration results from the Amaruq underground deposits and we see potential for a slightly earlier startup at Meliadine," said Agnico Eagle Mines CEO Sean Boyd. "As a result, we now expect our 2019 gold production to exceed 1.7 million oz, which was the mid-point of the previous 2019 guidance."

Amaruq slated for Q3 2019 start

Agnico Eagle said development of the Whale Tail deposit on its Amaruq gold mine project in Nunavut remains on schedule and development is expected in the third quarter of next year.

Ore mined from the Whale Tail pit will be shipped to Agnico's Meadowbank mine site about 50 kilometers (31 miles) south and processed through the 11,000-metric-ton-per-day mill there.

Currently Agnico's only producing mine in Nunavut, Meadowbank began production in 2010 and has enough ore in reserves to last until the first ore arrives from Amaruq.

Meadowbank produced 189,333 oz of gold during the first nine months of this year, including 68,259 oz during the third quarter. While this is down from 2017, it is better than expected as the last of the Meadowbank ore has higher grades than expected.

As crews mop up the last of the ore at Meadowbank, the company has begun stripping and other activities at the Whale Tail Pit.

The first open-pit ore is expected to be mined from Whale Tail early in the second quarter of 2019 and the Meadowbank mill is slated to begin processing ore from this deposit during third quarter.

Amaruq is expected to produce 2.1 million oz of gold during the first five years of operation.

This start-up plan only considers mining roughly 40 percent of the 20.1 million metric tons of probable reserves averaging 3.67 grams per metric ton (2.4 million oz) gold; and 8.8 million metric tons of indicated resources averaging 3.62 g/t (1 million oz) gold outlined so far at Amaruq.

Other work carried out in preparation of beginning production at this satellite deposit included modifications to the processing plant at Meadowbank; expansion of the haul road between Amaruq and Meadowbank; and construction of a permanent camp facility and new mobile maintenance shop.

This year's program also includes development of an underground exploration ramp at Whale Tail.

Crews began work on the underground exploration ramp in January and by the end of June had advanced 478 meters of underground development. With another 392 meters completed during the third quarter, the ramp had been advanced to 870 meters by the end of September and is on-pace to reach 1,210 meters by the end of the year.

Agnico Eagle is evaluating potential underground mining scenarios at Amaruq and an update will be provided with the company's year-end results to be published in February of next year.

Learning more about Whale Tail

Agnico said exploration continues at depth in both the Whale Tail and V zones, as well as conversion drilling of underground mineral resources closer to the planned bottom of the Whale Tail pit.

During the third quarter, the company completed 29,702 meters of drilling at Amaruq in 90 holes, part of the first phase of a 67,000-meter exploration drill program slated for this year.

So far, drilling has defined the Whale Tail deposit for at least 2,300 meters along strike and to a depth of 915 meters.

Conversion drilling carried out during the third quarter targeted areas beneath the central and western side of the Whale Tail pit, aiming to convert mineral resources to mineral reserves. Agnico said the results continue to demonstrate the extension of high-grade mineralization below the proposed pit outline.

Agnico is particularly interested in the western part of the Whale Tail ore shoot. Two new holes drilled in this area, one from the south and the other from the north, have led to an update of the structural interpretation. One of these holes, AMQ18-1849, cut four mineralized intercepts, including 10.2 meters of 9.8 g/t gold from a depth of 257 meters depth, followed by 8.1 meters of 5.2 g/t gold at 327 meters. Agnico geologists interpret these two intervals as parts of the same mineralized lens folded into an S-shape. This is expected to lead to a mineral resource with a more continuous outline and, locally, a steeper geometry, approximately 75 to 150 meters beneath the proposed Whale Tail pit. Hole AMQ18-1829, which cut 7.8 meters of 8.8 g/t gold at 257 meters in the same area, seems to confirm this interpretation of the folding of the zone.

Roughly 110 meters east of AMQ18-1849, hole AMQ18-1848 cut 12 meters of 10.4 g/t gold, some of which is outside the proposed pit limit. These results support the interpretation of a thicker folded shape within Whale Tail's main zone in this area.

Agnico says the level of confidence in the Whale Tail geological model continues to improve and recent drill results could potentially increase the mineral reserve and mineral resources estimate.

The Whale Tail deposit remains open to the west at depth, and to the east along a shallow plunge corresponding to the main ore shoot.

Tracing V Zone deeper

The V Zone, another deposit at Amaruq, consists of a series of parallel stacked mineralized structures striking northeast from near surface to 656 meters below surface.

Agnico said deep exploration drilling during the third quarter continued to return positive results, particularly along the interpreted V Zone ore shoot.

Hole AMQ18-1845 intersected two intervals within the inferred resource area at V Zone – three meters of 18.6 g/t gold from a depth of 436 meters and 2.9 meters of 8 g/t gold at 451 meters. In addition, AMQ18-1845A cut 9.4 meters of 7.2 g/t gold at 491 meters.

Hole AMQ18-1856, located between previous drill intercepts, returned two distinct intervals – 6.1 meters of 5.1 g/t gold at 643 meters depth and 5.6 meters of 19.6 g/t gold at 656 meters. This is the deepest intercept released in the V Zone.

The V Zone ore shoot remains open at depth and laterally down-plunge along the favorable folded contact between volcanic and sedimentary rocks.

Agnico said additional drilling could result in extension of the high-grade ore shoot to the east and west, as well as better definition of the geometry of these structures by the end of 2018.

Meliadine nears production

Development of Agnico's Meliadine project continues to run ahead of schedule. With construction 89 percent complete at the end of September, the company expects to begin commercial production at the underground gold mine during the second quarter of next year.

Located near Rankin Inlet, the 111,757-hectare (276,157 acres) Meliadine project hosts Agnico Eagle's largest gold deposit in terms of mineral resources.

Going into 2018, Meliadine hosted 16 million metric tons of proven and probable mineral reserves averaging 7.12 g/t (3.7 million oz) gold; 25.3 million metric tons of indicated resources averaging 3.77 g/t (3.1 million oz) gold; and 13.8 million metric tons of inferred resources averaging 6.04 g/t (2.7 million oz) gold.

A new fleet of equipment that arrived during the third quarter is maximizing underground productivity at Meliadine. During the quarter, roughly 1,860 meters of underground development was completed, increasing the 2018 total to 6,121 meters.

Production drilling for the first stope began on Sept. 19, approximately two weeks ahead of schedule. Four stopes are expected to be completed by year-end 2018.

Mechanical completion of the process plant remains on-pace for December and commissioning is expected to begin in the first quarter of 2019.

By the second quarter, the plant is expected to reach commercial production using a 150,000 to 200,000-metric-ton stockpile of development ore averaging 8.5 g/t gold.

Meliadine is currently expected to produce roughly 170,000 oz of gold in 2019 and about 385,000 oz in 2020.

Combined, Agnico's two new mines in Nunavut will be significant contributors to the company's gold production in the coming years.