Agnico grows Amaruq discovery under Whale Lake

Agnico Eagle Mines (TSX: AEM; NYSE: AEM) is off to a strong start in this year’s exploration program at its promising Amaruq gold discovery, located 50 km northwest of its Meadowbank gold mine in western Nunavut, 300 km west of Hudson Bay.

The 1,147 sq. km, wholly owned Amaruq property hosts three small gold zones named I, V and R that had Agnico’s interest until July 2013, when its exploration team discovered the Whale Tail zone, 350 metres south of the three small zones, on either side of Whale Lake.

Agnico realized the discovery’s importance, and the $1.5 million budgeted for exploration at Amaruq in 2014 ballooned to $9 million. In September — only two months on from the Whale Tail discovery — Agnico’s vice-chairman and CEO Sean Boyd was already describing Amaruq as “the most exciting thing we have on the go from an exploration standpoint.”

By the time the 2014 drilling campaign ended in October, Agnico had drilled 144 infill and stepout holes totalling 31,600 metres, mostly into the Whale Tail zone.

After this, Agnico released a maiden resource in February of 1.5 million oz. gold in 6.6 million tonnes grading 7.07 grams gold per tonne, with 1.4 million oz. in the Whale Tail deposit and the rest in the I, V and R zones.

Drilling resumed at Amaruq in late March as part of an initial 50,000-metre program for 2015. There are five rigs running on the site and a sixth on the way, with four targeting Whale Tail and two for stepping out west to Mammoth Lake. Up to 10 rigs could run at Amaruq as the year continues.

The latest drilling has confirmed with 10 new holes that the Whale Tail mineralization discovered last year on either side of Whale Lake is indeed continuous underneath a 300-metre wide stretch of Whale Lake’s northern end (which, yes, is shaped like a whale’s tail).

For example, hole 15-168, drilled in the middle of the lake, returned 8.2 metres (from 106 metres) grading 5.1 grams gold; 18.9 metres (from 121 metres) at 21.8 grams gold; 10.4 metres (from 146 metres) at 7 grams gold; and 7.4 metres (from 163 metres) at 4.6 grams gold. (All grades are uncapped.)

“We’ve already confirmed the continuity of mineralization under the lake, and now with that latest press release, the grades and thicknesses are looking the same,” Alain Blackburn, Agnico Eagle’s senior vice-president of exploration, tells The Northern Miner in a telephone interview. “We get two parallel structures to the east, going under the lake as four lenses, and continuing to the west as four to five parallel lenses. Everything is vertical to subvertical dipping to the south, and drilling to the west will be easier from the shore.”

So far, the Whale Tail deposit is continuous over at least 1.2 km strike and it extends from surface to more than 350 metres deep. It remains open at depth and to the southwest.

“Don’t forget, we built that 1.5 million oz. only in two months,” Blackburn notes. “It is impressive — let’s see another project build 1.5 million oz. in two months!

“This one is going so fast because the continuity between the holes is so good,” Blackburn continues. “We have the luxury to have two to five lenses, and that’s why we build the 1.5 million ounces.”

He also describes the resource grade at Whale Tail as “impressive,” at 7 to 7.2 grams gold. “Boy, around the world the average grade for an open pit is 1 gram. And for sure in Nunavut we need high-grade material. And compared with Meadowbank — which is around 3 grams — this one may be around 6–6.5 grams, with dilution. So we will have maybe double the grade we have at Meadowbank.”

Agnico has drilled 11,000 metres this year at Amaruq and expects to have 50,000 metres completed by the end of June, with the focus on upgrading the resource from the inferred category to indicated to a 200-metre depth amenable to open-pit mining.

An updated resource estimate will be calculated before the end of September.

The current program includes a 15-hole, 5,000-metre reconnaissance program to test targets around Mammoth Lake west of Whale Lake.

In terms of logistics, Amaruq is connected to the Meadowbank mothership via a 90 km winter road, and Agnico has applied to build an exploration road across the relatively flat, rocky landscape to facilitate exploration activities such as fuel, equipment and personnel transportation.

There is already a 60-person camp at Amaruq that is being expanded to a 100-person capacity. The Meadowbank mine is serviced by daily flights from Montreal via Val-d’Or, Que.

Initial studies are underway to evaluate developing the Amaruq deposit as a satellite operation to Meadowbank, which is Agnico’s largest producer, and slated to produce 400,000 oz. gold this year.

But Meadowbank could run out of ore by 2018. Developing the small Vault deposit north of Meadowbank could extend the mine life by months, with Vault looking promising in light of lower fuel costs, the fallen loonie and the value of gold in Canadian dollars.

To develop Amaruq, Agnico wouldn’t need to build a mill or tailings facility, but it would need a road and a dam across Whale Lake, which is 1 to 4 metres deep.

“The big deal is transportation,” Blackburn says. “We have to transport our material over 60 km, and we have to think about that. Can we bring the technology, can we bring a truck that decreases the cost per tonne? We’re not there yet, but it’s something we’re going to have to think about.”

He says another big question is whether Amaruq can feed the Meadowbank mill, which is 12,000 tonnes per day. “We could have 6,000 tonnes or 8,000 tonnes (coming from Amaruq), I don’t know, depending on the size of Whale Tail. And if we find something under Mammoth Lake, the sky is the limit. But we don’t have all these answers for now.

“We are pushing hard and are on the fast track, for sure,” Blackburn says. “Because the clock is running on Meadowbank, and with the Amaruq discovery it puts pressure on us, and maybe we can have ten rigs on the Amaruq site. But we have a history of experience with Meadowbank and exploration at Meliadine, and now Amaruq. Our guys know what to do.”

Blackburn adds that the Nunavut government has supported its efforts at Amaruq. “For the Nunavut economy, it’s important to have the Meadowbank mine running and have no gaps in production. The people [in the Nunavut government] familiar with the project are supportive, because they know the impact. How many employers are in Nunavut? Not a lot.”