Agnico-Eagle inaugurates Penna shaft

Rouyn-Noranda, Que. — Mine openings and expansions are increasingly rare events in this historic camp, so a few showers did not dampen the enthusiasm of more than 800 guests who gathered here to help Agnico-Eagle Mines (AGE-T) celebrate the inauguration of its Penna shaft at the newly expanded LaRonde mine.

The new shaft — the third built at LaRonde — was excavated to a total length of 7,380 ft. (2,250 metres), making it the deepest single-lift shaft in North America. It was named in honour of Paul Penna (1922-1996), the driving force behind LaRonde and Agnico-Eagle. Guests were told that Penna was a firm believer in the miner’s axioms that the best place to look for ore is near ore, and that mines are not found but made.

In keeping with the mines-are-made theme, President Sean Boyd praised the determination of employees who helped transform LaRonde from a modest-sized mine into a world-class operation. “At the start, skeptics doubted our plans to expand to 5,000 tons per day,” he said. “They doubted our ability to deliver, saying the mine was too deep, too metallurgically complex, and too big for a company our size. But we have delivered, and the mining and investment communities are starting to take notice.”

Indeed they are. In its early years, Agnico-Eagle was viewed as a struggling, small producer with a mining maverick at its helm. No more. Paul Penna was inducted into the Canadian Mining Hall of Fame in 1996 in recognition of his many accomplishments, notably bringing Agnico-Eagle from small beginnings to senior status. And over the years, the company has raised about $500 million for various projects, including development of its crown jewel, LaRonde.

LaRonde has produced more than 1.7 million oz. gold since the original flotation/carbon-in-pulp mill was commissioned in 1988. While some production came from small open pits, most of the ore was extracted from underground deposits. Years of exploration have expanded reserves at depth, resulting in changing expansion targets, first to more than 3,000 tons and then to the current rate of 5,000 tons.

Sinking a new shaft was necessary because new reserves were found more than half a mile from the existing shafts and up to 1.8 miles below surface. Mine expansion then began in earnest, at a capital cost of about $320 million, financed by bank loans and equity. Of this total, $105 million was spent to expand the concentrator, which features the latest in sophisticated monitoring systems and numerous changes and improvements to its flow sheet. A new semi-autogenous grinding mill was added, the copper flotation circuit was expanded, a new zinc recovery circuit was built, and the carbon-in-pulp circuit was replaced by counter-current decantation and Merrill-Crowe recovery. About 60% of the tailings end up as paste backfill in mined-out stopes, with the remainder going to a tailings impoundment area.

The expanded production rate also dictated an increase in the hoisting capacity. Impressed by the latest in South African rope technology and monitoring methods, Agnico-Eagle successfully lobbied the Quebec government to reduce the required safety factor of the hoist rope. As a result, about $19 million was shaved off capital-cost estimates.

“We couldn’t have brought in this state-of-the art technology without the help of the Quebec government,” said Chief Operating Officer Ebe Scherkus. “It takes ages to get an exploration permit in Nevada, but it only took fourteen months to change the mining law in Quebec. That’s one of the pluses of working in a centre of mining excellence, and another reason why I’d rather be mining in the Abitibi at 7,000 ft. than in Chile at 1,200 ft.”

Scherkus told reporters that industry downsizing has provided an unintended bonus of a strong and dedicated workforce at LaRonde, which remains non-union, despite the repeated efforts of labour organizers. “Our employees are the key strength of this company,” he said.

Ore-handling at depth is fully automated, and even ground control methods are mechanized. Dilution is running at about 11% on average.

Having completed the expansion to 5,000 tons per day, Agnico-Eagle plans a further expansion to 7,000 tons. Once completed, gold production would increase from an estimated 229,000 oz. this year to 341,000 oz. in 2002, 373,000 oz. in 2003, and 396,000 in 2004. This expansion would cost about $60 million, mostly to expand surface facilities and develop reserves, as the new shaft already has a daily capacity of up to 7,000 tons. Cash costs would fall to below US$100 per oz., compared with US$134 per oz. as achieved in the latest quarter ended June 30.

At the end of 2000, LaRonde’s proven and probable reserves stood at 33.6 million tons grading 0.1 oz. gold and 2.34 oz. silver per ton, 0.32% copper and 4.4% zinc. When combined with additional resources of 25.3 million tons, LaRonde’s global reserves and resources total 59 million tons of 0.13 oz. gold, 1.70 oz. silver, 0.5% copper and 2.68% zinc. Known mineralization extends to almost 10,000 ft. below surface and remains open in all directions. The bulk of existing reserves are in zone 20 North.

In its latest quarter, LaRonde produced 65,937 oz. gold, a 100% increase over the previous year. Cash costs fell 54% to US$134 per oz. over the same period. On the financial front, the company was able to trim its second-quarter loss to $1.1 million from $3.4 million a year earlier. The company does not hedge its production, and has no plans to do so in the future.

“We believe we’re going to see higher gold prices,” Boyd says, “plus we’re now seeing interest from market generalists because of our non-hedging policy. So why sell our upside?”

This year, Agnico-Eagle aims to produce 230,000 oz. gold at a cash cost of below US$150 per oz. Exploration is ongoing, with five rigs at work on the property at the end of the second quarter. In addition to the deep exploration program focused on expanding reserves, Agnico-Eagle is extending the 20th-level exploration drift on the nearby El Coco property. Drilling is also taking place along the Level 235 horizon at the bottom of the LaRonde reserve outline. The latter two programs are still in their early stages.

Agnico-Eagle expects to be mining at LaRonde for decades to come, though management also is examining opportunities elsewhere, namely in Central and South America. “We will look at [foreign] projects if the price is right,” Boyd said, “but our backbone will remain here.”