Mixed bag for Agnico's Nunavut gold mines

Agnico Eagle Mines Ltd. July 24 reported that the ramp up of production at two new gold mines in Nunavut – Meliadine and Amaruq – is setting the Toronto-based miner up for a strong second half of 2019 and beyond.

"With Meliadine ramping up to full production over the balance of the year and Amaruq on schedule to achieve commercial production in the third quarter of 2019, the company is well positioned for a strong second half from both a financial and operational perspective," said Agnico Eagle Mines CEO Sean Boyd.

While the Meliadine gold mine reached commercial production ahead of schedule and under budget, a rapid spring thaw and unusually wet summer has put Amaruq slightly behind schedule.

"It's a bit of a slower ramp-up from a mining perspective than we expected, due to a quicker thaw and more rain than we anticipated," Boyd explained.

Despite the extra water slowing progress, Agnico Eagle said it remains on pace to recover 460,000 oz of gold from its Nunavut mines during 2019, which is within the range the company forecast at the beginning of the year.

"We expect record production in 2019, again with much stronger operating and financial performance anticipated in the second half. And, as we go forward into 2020, we would anticipate further growth in production, as we ramp up our two new operations in Nunavut," the Agnico CEO added.

Meliadine Mine online

Agnico Eagle reached commercial production at Meliadine on May 14 and this new mine located near Rankin Inlet produced 47,281 oz of pre-commercial production, which is lower than the 60,000 oz predicted.

During the second quarter Meliadine produced 61,112 oz of gold, which includes 29,699 oz of pre-commercial gold during the first 47 days and 31,413 oz of commercial production from the final 47 days.

Agnico Eagle said underground operations at Meliadine continued to ramp up during the second quarter and three mining horizons are now well established. A fourth horizon is slated to be operational in September.

Additional mining equipment being shipped on the 2019 sealift to Meliadine is expected to arrive at the site within the next month. The company said this added equipment should further increase underground productivity and flexibility.

The mill processed an average of 2,872 metric tons of ore per day during the second quarter and continues to ramp up to the plants 3,750 t/d nameplate capacity. Agnico said the plant hit a high of 3,900 t/d during the second quarter, showing the potential for a strong third quarter.

Gold recoveries during the quarter averaged 92.1 percent, which was slightly below guidance. This is partially to do with the processing of high-grade ore rich in pyrrhotite. Work is underway to increase recoveries through adjustments to address the pyrrhotite-rich ore.

Despite lower than expected pre-commercial production and recoveries during the second quarter, Agnico Eagle still anticipates Meliadine will churn out roughly 230,000 oz of gold this year. This means, the company anticipates producing roughly 151,000 oz of gold during the second half of 2019.

While ramping up production, Agnico is carrying out 10,000 meters of exploration drilling and 12,500 meters of resource conversion drilling at Meliadine this year. This includes 2,785 meters (six holes) of exploration drilling and 2,442 meters (two holes) during the second quarter.

Going into 2019, Meliadine hosted 16.7 million metric tons of proven and probable mineral reserves averaging 6.97 grams per metric ton (3.75 million oz) gold; 26 million metric tons of measured and indicated resources averaging 3.81 g/t (3.18 million oz) gold; and 13.5 million metric tons of inferred resource averaging six g/t (2.6 million oz) gold.

The Meliadine project includes seven gold deposits, six of which are part of the current mine plan. Tiriganiaq, which extends for 3,000 meters along strike and to a depth of at least 750 meters, is the largest of these deposits and hosts the bulk of the mineral reserves.

Agnico said recent drill results has expanded Tiriganiaq, which remains open at depth and to the west.

"At Meliadine, our drilling there has discovered two new lodes ... north of the Tiriganiaq mineralization," said Boyd.

The best recent intercept was in hole M19-2524-W2B, which cut 4.6 meters averaging 9.2 g/t gold starting at a depth of 812 meters, the deepest reported intercept so far at Meliadine. Two other intercepts demonstrate the potential for a new parallel zone as exploration continues at depth. Roughly 200 meters to the west, M19-2518-W2A cut 2.8 meters of 6.5 g/t gold at a depth of 675 meters; and about 225 meters to the east, M19-2520 cut 2.8 meters of 5.3 g/t gold at a depth of 705 meters.

Agnico Eagle said additional drilling will be performed to define the lateral and vertical extent of this discovery and this area is expected to increase inferred mineral resources at the end of the year.

Water, caribou slow Amaruq

As Meliadine hits its stride, Agnico Eagle is ramping up production at Amaruq, which is about 50 kilometers (31 miles) northwest of the Meadowbank, the Toronto-based miner's first operation in Nunavut.

Since reaching commercial production in 2010, the Meadowbank Mine has churned out more than 4 million ounces of gold. With crews mopping up the last of the reserves at this operation, Agnico will use the 11,000-metric-ton-per-day mill there to process ore trucked down from Amaruq.

Going into 2019, Amaruq had 24.9 million metric tons of proven and probable reserves averaging 3.59 g/t (2.88 million oz) gold.

In addition, the Amaruq open-pit hosts 4.2 million metric tons of measured and indicated resources averaging 3.34 g/t (455,000 oz) gold; and 899,000 metric tons of inferred resource averaging 4.2 g/t (121,00 oz) gold.

Much of the focus at Amaruq during the second quarter was on dewatering the Whale Tail pit, which is the source of the first ore from this new mine.

Pit dewatering, however, has been slower than expected due to increased water inflows related to faster than anticipated snow melt related to the spring thaw; heavy rainfall; and slower than planned ramp up of the water treatment plant, which is required to treat water being pumped from the lakes.

Due to this slow dewatering, Agnico was forced to shift its mining focus during the quarter primarily to waste stripping to open additional mining areas.

During the quarter, roughly 354,000 metric tons of overburden was removed, and 1.85 million metric tons of waste and 146,978 metric tons of ore were mined. By the end of June, crews had stockpiled approximately 293,000 metric tons of Amaruq ore grading 3.5 g/t gold.

Mining activities were also impacted by a slightly longer caribou migration period, which reduced the ability to move materials on the road between Amaruq and Meadowbank.

Wildlife management is an important priority and Agnico said it is working with Nunavut stakeholders to find the best solutions to safeguard wildlife and minimize production disruptions.

The mining rate is expected to incrementally ramp up in the second half of 2019 and reach the design rate of 9,000 to 10,000 t/d by the end of the year. Tonnage hauled to the mill is also expected to increase through the balance of this year.

Although the ramp-up of mining activities at Amaruq has been slower than expected, 2019 production guidance for the Meadowbank mill remains unchanged at 230,000 oz of gold. A larger percentage of these ounces, however, will be recovered from Meadowbank ore.

Boyd informed shareholders and analysts that roughly 30,000 additional oz of gold is expected from additional material being mined from the Portage pit at Meadowbank, which is offsetting the shortfall from Amaruq.

Production guidance from Meadowbank is now forecast to be between 95,000 to 105,000 oz of gold, compared to the previous forecast of 65,000 oz. Given the change in the production mix, operating costs for the Meadowbank mill are expected to be higher in the third quarter and gradually decline through the end of the year.

In late June, roughly 39,200 metric tons of low-grade ore (1.83 g/t gold) from the Whale Tail deposit was processed at the Meadowbank mill to test the characteristics of the Amaruq ore. The sample yielded an average gold recovery of 93 percent, which was in-line with expectations. The 2,147 oz of gold produced in this test marks the pre-commercial production gold from Amaruq.

Expanding Amaruq gold

As Amaruq production ramps up, exploration drilling continues at depth in the project's Whale Tail deposit and V Zone, and conversion drilling of underground mineral resources close to the planned Whale Tail pit bottom and in the V Zone at depth is ongoing.

In the second quarter of 2019, exploration drilling consisted of 32 holes (9,148 meters) and conversion drilling consisted of 14 holes (6,595 meters).

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

The conversion drilling program continues to demonstrate the extension of high-grade mineralization below the proposed pit outline.

At the western end of Whale Tail, hole AMQ19-2052 cut three meters of 13.6 g/t gold starting at a depth of 205 meters. AMQ19-1999, drilled 290 meters to the east, cut 3.9 meters of 7.5 g/t gold starting at 297 meters and 2.9 meters of 8.4 g/t gold at 313 meters. Agnico said these resource conversion holes confirm the fold geometry in an area where local inferred mineral resources were first identified in 2018.

The central-eastern sector of Whale Tail continues to yield high grades over potential mining thickness. Hole AMQ19-2030 cut 4.6 meters of 12.3 g/t gold starting at 351 meters. AMQ19-2027A, drilled 165 meters to the west, cut 6.3 g/t gold over 3.1 meters starting at 258 meters and 9.3 meters of 6.6 g/t from 292 meters.

Agnico said the eastern part of the Whale Tail ore shoot also continues to yield positive results. Hole AMQ18-1909C cut 5.1 meters of 7.9 g/t gold starting at 475 meters depth, confirming the thickness and grade of the inflection in the ore shoot.

Exploration in the central Whale Tail deposit encountered the Whale Tail North Zone, where hole AMQ19-2039 cut 3.3 meters of 11.7 g/t gold starting at 284 meters. The company said this intercept should help to increase the inferred mineral resources at year-end.

For the balance of the year, Whale Tail drilling will focus on expanding and upgrading resources in the deposit and parallel the Whale Tail North structure.

Drilling also targeted V Zone, which is about 400 meters northeast of Whale Tail.

V Zone consists of a series of parallel stacked mineralized structures striking northeast from near surface to as deep as 707 meters.

Agnico said conversion drilling during the second quarter continued to return positive results along the interpreted V Zone ore shoot. Hole AMQ19-2033A cut 2.8 meters of 9.5 g/t gold starting at 400 meters and 4.7 meters of 7.1 g/t gold at 444 meters depth. AMQ18-1925 cut 3.7 meters of 7.2 g/t gold at 442 meters. The company said these intercepts will likely help to convert this area into indicated mineral resources at year-end.

Additional drilling is expected to extend the high-grade V Zone ore shoot to the east and west.

Two other holes explored the gap between Whale Tail and the V Zone. One such hole, AMQ19-2043 cut 3.3 meters of 9 g/t gold starting at 328 meters and another, AMQ19-2040, cut three meters of 7.1 g/t gold at 445 meters.

Agnico said these holes demonstrate a potential to develop new mineral resources in an area that would link the potential underground operations of Whale Tail and V Zone.

The company plans to complete 32,800 meters of exploration drilling this year at Amaruq focused on developing new mineral resources around the deposits to a depth of 600 meters, as well as testing regional targets. In addition, the company has 20,300 meters of drilling slated to upgrade the already established resources at its newest mine project in Nunavut.

Based on the encouraging results from this work, Agnico has decided to increase it underground development and exploration budget at Amaruq by US$21 million.

"That's due to continued good results there particularly in the area between Whale Tail and the V Zones," Boyd said, referring to the additional spending. "We started drilling from the ramp in June. So, that will accelerate our ability to convert our resources and reserves in the lower part of the mine."

This accelerated development program could mean that underground ore could be being trucked to the Meadowbank mill in 2022.

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Shane Lasley, Publisher

Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.

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