Goldcorp fine-tunes Éléonore mine

As the Éléonore gold mine ramps up towards full production in 2018, its owner Goldcorp (TSX: G; NYSE: GG) appears well on its way to solve problems that popped up in its first year of commercial production.

The underground mine in the James Bay region of Quebec achieved commercial production in April 2015. However, after unexpected dilution at the mine and recovery issues in the mill, production fell shy of expectations. Last year, Éléonore churned out 249,800 oz. gold — about 40,000 oz. short of its production target of 290,000 to 330,000 ounces.

For 2016, the mine has a more modest production forecast of 250,000 to 280,000 oz. gold.

One of the main issues at Éléonore last year was higher-than-expected dilution that reduced head grades after finding unexpected folding and faulting in the mine’s initial production stopes.

In response, the company has reworked the stope designs, CEO David Garofalo said on the company’s second-quarter conference call.

“As we continue to improve on the stope design to account for the folding and faulting, we are experiencing lower dilution and increasing grades,” he said.

Another issue was not in the mine, but in the processing plant: reactive sulphide ores in some production stopes led to lower-than-expected gold recoveries. Recoveries have increased with lab and plant work conducted on the reactive ore. The operation achieved a 90% recovery rate in the first two quarters of 2016, compared with as low as 85% in the last two quarters of 2015. Preproduction test work at Éléonore had achieved 92.5% recoveries.

Workers underground at Goldcorp’s Éléonore gold mine in Quebec. Credit: Goldcorp.

In addition to addressing the dilution and recovery issues at the mine, finishing the production shaft by year-end will drive efficiencies, eliminating the need to truck ore or hoist it up the production shaft, and lower operating costs.

“It will also allow us to ramp up to full production of 7,000 tonnes per day in the first half of 2018, following the expansion from four to six mining horizons that is expected in 2017,” Garafalo noted on the conference call.

Reserves of 28.3 million tonnes grading 5.87 grams gold per tonne for 5.35 million oz. are contained in six horizons at the deposit. Throughput is expected to average 4,900 tonnes per day in 2016.

Executive vice-president and chief operating officer George Burns confirmed that the company expects “steady improvement” at Éléonore.

“We’re working on infrastructure in that lower half of the mine, so we’ll have the production shaft complete at the end of the year,” he said. “We’ll work on then connecting the shaft with ore waste passes that will be much more efficient than our current method of moving material, and we’ll shut down the exploration shaft, so there are lots of advantages coming.”

The exploration shaft will be converted to ventilation once the production shaft is complete.

“Early next year into the middle of 2018, as we get the development done in the lower half of the mine and get that infrastructure in place, we’ll see a steady ramp-up of production and throughput at Éléonore.”

In the second quarter, production at the mine totalled 74,000 oz. gold at an all-in sustaining cost (AISC) of US$919 per ounce (with a total by-product cash cost of US$857 per ounce). In 2015, the mine produced 249,800 oz. gold at a US$1,007 per oz. AISC.

Across all of its mines, Goldcorp expects to produce 2.8 to 3.1 million oz. gold in 2016 at a US$850 to US$925 per oz. AISC.

The company has undergone a restructuring, whereby it reduced staff, introduced zero-based budgeting and strengthened its management team. Goldcorp expects the changes will increase its annual sustained cash flow by US$250 million starting in 2018.

Goldcorp shares recently traded at $21.94 in a 52-week range of $13.55 to $26.56. The company has 853.4 million shares outstanding.