Agnico Eagle making a splash at Whale Tail

Excitement is building for Agnico Eagle Mines (TSX: AEM; NYSE: AEM) at its Amaruq gold project, 300 km west of Hudson Bay, as exploration geologists unveil a robust mineralized system that can be traced for 2.3 km and counting, adding momentum to one of Canada’s fastest growing greenfield discoveries.

A new resource upgrade at the project’s Whale Tail and IVR deposits tallies 3.3 million oz. gold in 16.9 million inferred tonnes grading 6.05 grams gold per tonne — up 67% from an estimate in December 2015, and a 120% increase since its first resource figure in 2014.

For Guy Gosselin, Agnico’s vice-president of exploration, the upgrade is likely only a glimpse of what’s to come, considering the potential he sees around the greenstone-hosted deposit.

“The beauty of this system is that we can easily track the sulphidized parts of it in geophysics,” he says in an interview, noting strong, continuous magnetic and electromagnetic signatures across the deposits. “We can trace these signatures from Whale Tail to beneath Mammoth Lake, where it extends at least another 4 km, so we’re quite optimistic and excited.”

Faced with depleting reserves at its nearby Meadowbank gold mine, Agnico ramped up its desktop study of the region in 2013, and found hints of anomalous gold and arsenic within till samples 50 km northwest.

A modest drill program on the newly branded Amaruq property in 2013 zeroed in on the I, V and R mineralization lenses, returning intercepts of 3.3 metres of 7.60 grams gold and 12.8 metres of 5.63 grams gold.

But the lenses appeared discontinuous and structurally complex, so Agnico zig-zagged the drill rig south until it stumbled upon substantial intercepts of 21.6 metres of 8.13 grams gold and 23.7 metres of 5.99 grams gold beneath a lake shaped like a whale’s tail.

Exploration budgets in 2014 ballooned to $9 million once Agnico realized it may have found the next feed for Meadowbank’s mill. The budget rose to $37.7 million in 2015.

“It’s been amazing to make a discovery like that and watch it grow,” Gosselin says, noting that open-ended mineralization at Whale Tail has stretched to 2.3 km along strike and 600 metres deep.

“It’s a brand-new camp, so we can’t refer to any studies done in that area. We’ve been involving the Geological Survey of Canada and are initiating a bunch of masters and PhD studies to understand the new belt.”

He explains that mineralization is found within a moderately dipping package of carbon-rich, volcano-sedimentary rocks sandwiched between two rigid komatiite layers — an ideal rheological and chemical trap for cross-cutting, gold-rich structures commonly found across the Archean-aged greenstone belt.

The company is also outlining high-grade, plunging ore shoots within the west-trending ore zone, which focus along the bends, or kinks, within the stratigraphy.

“The geology looks a lot like a mirror image of Meliadine,” he says, referencing Agnico’s other asset 270 km southwest, which hosts 3.4 million oz. gold in proven and probable reserves within 14.5 million tonnes grading 7.51 grams gold, and another 3.55 million oz. gold sitting in 14.7 million inferred tonnes grading 7.51 grams gold.

The company said in a full-year update that Meliadine remains on track for first production in 2020, and it has budgeted $96 million there this year to extend underground development and complete optimization studies.

“With the market the way it is, we have to be measured about what we plan, and how much synergy we can create between all three of the projects,” Gosselin says.

He adds that 80% of the 75,000-metre, first-phase drill program at Whale Tail in 2016 will expand the inferred resource of the deposit along the higher-grade ore shoots, and to the west beneath Mammoth Lake.

“At this point we thought it wasn’t really relevant to try to classify a part of the inferred into indicated,” he says. “We prefer to keep our options open, there’s still a lot more thinking to be done. It depends on how deep the deposit can go and what part of it should be mined underground or open-pit, so at this point in time, it’s more important for us to grow the overall size of the deposit.”

The remaining drilling would outline the potential open-pittable  part of the deposit, he says, and if “the stars align” on permitting and studies, Whale Tail could be production-ready in 2019.

In light of this timeline, the company has decided to extend the Vault pit at Meadowbank, bringing its end-of-life to the third quarter of 2018 in a bid to help bridge the production gap with what will likely become a new satellite operation at Amaruq.

“Doing the pushback made a lot of sense, it’s all part of a much bigger plan. If we can move on our side to fast-track the permitting process and get Amaruq ready sooner, it’ll help fill the gap between the two,” he says. “We’re going to be around for multiple decades in Nunavut, it’s now just a matter of making our plans wisely.”

Agnico shares have traded in a 52-week range of $27.63 to $51.04, and closed at $49.37 at press time. The company has 217.9 million shares outstanding for a $10.8-billion market capitalization.