Agnico Eagle’s ‘exciting’ Amaruq discovery in Nunavut

VANCOUVER — It’s not a market where producers discuss exploration-stage plays often, but Agnico Eagle Mines (TSX: AEM; NYSE: AEM) can’t contain its excitement over the Amaruq gold prospect, 50 km northwest of its Meadowbank mine in Nunavut. On Sept. 29 the company provided an update on the project, where it expects to invest $9 million in 2014.

According to president and CEO Sean Boyd, Agnico’s team saw the potential across Amaruq’s 408 sq. km concession package four years ago — when the property was called IVR — but it took the intervening period to work out a deal.

Since the company began drilling in July 2013, a total of 30,000 metres have been completed over 142 drills holes, including 26,600 metres in 2014. Agnico’s recent work has unveiled the potential for multiple mineralized zones within a 2 km wide northeast to southwest corridor that can be traced along strike for at least 10 km. The company expects to table a maiden resource at the project by year-end.

“I think the most exciting thing we have on the go from an exploration standpoint is Amaruq,” Boyd said during his presentation at the Denver Gold Forum in September. “This has only happened in the matter of the past few weeks. We identified the project area’s potential, but it took time to secure a deal and drill it. We put a modest program together this year, but it quickly became apparent we should put a lot more holes into this, and as a result significantly increased the budget.”

When Agnico picked up the project it hosted three main targets — the I-, V- and R-mineralized zones — which were the focus of early drill efforts. Highlights include: 3.3 metres true width grading 7.6 grams gold per tonne from 48 metres deep in hole 14-50 at the I-zone; and 12.8 metres true width of 5.63 grams gold from 189 metres deep in hole 14-57 at the R-zone.

The company unearthed a fourth zone at Amaruq when its drills cut the Whale Tail discovery, which was the target of exploration work through August and September. Agnico’s drill program was designed to step out from the zone and drill deeper, as well as chase it along strike.

Agnico reports that Whale Tail has extended “rapidly” southwest to a 1,000-metre strike length, and remains open to the west and at depth. Drilling has intersected the zone on both sides of Whale Lake, and identified what appears to be “four subzones” in the host corridor.

Stepout drilling on the southwest side of Whale Lake yielded the best results to date at Amaruq. Hole 14-103 cut 6.1 grams gold over 55.6 metres at a 278-metre depth, including 13.5 grams gold over 17.6 metres. Meanwhile, 140 metres west hole 14-116 cut 5.2 grams gold over 61.8 metres at an 81-metre depth, including 16.3 grams gold over 11.8 metres. Another 140 metres west of hole 14-116, hole 14-118 intersected 7.3 grams gold over 20 metres at a 31-metre depth.

Agnico expanded Amaruq’s footprint when it followed up on a 600-metre-long boulder field containing large blocks of quartz-vein material and visible gold 3.5 km west of the main IVR area. The showing was discovered earlier this year when a geophysical survey outlined several coincident magnetic and electromagnetic anomalies. Drilling is underway to pinpoint the bedrock source of the mineralized boulders.

In addition, fieldwork in an area 4 km southwest of Whale Tail resulted in a third discovery named Mammoth. Initial drilling at the site has identified mineralization “visually similar” to Whale Tail, with assay results pending. Another area of mineralized outcrop — called the “Whale Fin” target — has been found 1 km south of Whale Tail, and is scheduled for drill-testing before year-end.

“We’re seeing good thickness and good grades. We have a geophysical anomaly that extends 7 km, as well as boulders where we’ve found visible gold,” Boyd noted. “This certainly has the potential, given its proximity to Meadowbank, to extend our mine life in the region. It’s looking like an open pit initially, but we’re also seeing underground potential in the form of depth extension. We could use Meadowbank’s equipment and be a shipper to the mill there. It could have a significant impact on our production profile and prevent a fall-off when Meadowbank’s mine life winds down in 2018.”

Agnico plans to collect environmental baseline data at Amaruq  and evaluate possibilities for an all-weather exploration road linking the project to Meadowbank.

A 25-person exploration camp has been commissioned on-site, with an expansion underway to accommodate 60 workers by early 2015.

BMO Capital Markets analyst David Haughton — who has a “market perform” rating on Agnico’s stock, along with a US$45 price target — says the results are “potentially positive,” and notes that Agnico “is undergoing studies to evaluate the potential incorporation of the project into the Meadowbank operational plan, which may allow it to leverage potential synergies in future.”

Agnico has traded within a 52-week range of $24.66 to $45.92, and closed at $32.70 per share at press time. The company reported US$245 million in cash and equivalents at the end of June, and has 210 million shares outstanding for a $6.9-billion market capitalization.