Agnico stakes claim in Red Lake

These are robust days for Agnico-Eagle Mines (AEM-T, AEM-N).

On the heels of opening its second major mine, Goldex in the Abitibi region of Quebec, the company announced a significant investment in a hugely prospective deposit in northwestern Ontario.

Agnico is putting roughly $50 million into Gold Eagle Mines‘ (GEA-T) coffers for a stake in its Bruce Channel Discovery along the western part of the Red Lake trend — an area that has turned out more than 20 million ounces of gold thus far.

The deposit sits beneath the waters of the Bruce Channel and recent drill results released on June 18 returned highlight intersects of 30.2 metres grading 7.58 grams gold 3.9 17.33per tonne, 10.9 metres grading 5.86 grams gold per tonne, and 3.9 metres grading 17.33 grams per tonne.

The deal is non-brokered private placement for roughly 5.5 million units of Gold Eagle at $9.05. Each unit is made up of one common share and a half share warrant. One whole warrant gives Agnico the right to buy one common share for $10.15 within the 36 months.

Fully diluted the investment could bring Agnico’s stake in Gold Eagle to 7.16%. Without the exercise of the warrants it holds 5.18% of the company.

The move continues Agnico’s strategy of investing in robust deposits in political stable parts of the world. Its portfolio includes projects in Canada, Finland and Mexico.

Sean Boyd, Agnico’s vice chairman and chief executive pointed to technical expertise the company has developed in connection with the deal.

“We look forward to using our exploration and mine development skills to assist Gold Eagle in increasing the size of the deposit and advancing the project towards feasibility,” Boyd said in a prepared statement.

Gold Eagle’s president and chief executive Simon Lawrence underlined the point describing Agnico as a company “which has proven expertise in the development of underground mines.”

He went on to say in the statement that proceeds from the private placement will go towards shaft sinking and an underground development program.

The move by Agnico and the appointment of its president and chief operating officer, Eberhard Scherkus, to Gold Eagle’s board of directors represents a home coming of sorts for Scherkus.

The Agnico stalwart he has been with the company for 23 years cut his teeth as a manager and chief geologist for the Cochenour-Willans mine which lay in the Red Lake district. He also served as mine superintendant at the Dickenson Mine now known as the Red Lake Mine.

The investment brings Gold Eagle’s cash position tor roughly $148 million an ample sum to fund its two year surface step-out drilling program from the Bruce Channel deposit towards what is known as the Finn Zone and to get through much of its advanced underground development program.

Midday in Toronto on June 26, Gold Eagle’s shares were up 15% or $1.22 to $9.10 on just over 1 million shares traded. Agnico shares were up roughly 7% or $4.89 to $7.63 on roughly 895,000 shares traded.