The following article is reprinted with permission from CMJ’s sister publication The Northern Miner.
SONORA, MEXICO — Agnico Eagle Mines (TSX: AEM; NYSE: AEM) gets things done quickly. It’s on the cusp of producing gold from its La India mine in northern Mexico less than two years after acquiring it from Grayd Resource.
Tim Haldane, Agnico’s senior vice-president for Latin America, largely attributes the success of permitting, building, and commissioning the project within 22 months of acquiring it to the company’s skillful Mexican team and Mexico’s efficiency in advancing mining projects.
“Permitting is pretty fast in Mexico. It is equally as rigorous as any other country but it’s not bureaucratic and it is not complicated,” Haldane said in a late September presentation at a beachfront resort in Guaymas, Mexico.
“So there isn’t any jurisdictions pretty much anywhere else in the world where you can get business done this fast. Maybe there are not too many teams like our team that can execute on that kind of timeline,” he says, a day before leading a group of visitors, primarily investors, to the La India site.
Agnico has a local staff of 1,500 at its La India, Pinos Altos and Creston Mascota gold projects in northern Mexico.
The country is rich with mineral potential and hosts a mining friendly government, proficient employees and existing infrastructure, Haldane says.
Agnico now has three operations in adjacent states, Sonora and Chihuahua, and has paid income taxes of US$29 million in Mexico last year.
Its new La India mine in Sonora is 70 km from the Pinos Altos gold mine and the satellite Creston Mascota project, both in Chihuahua. Pinos Altos, a combined open pit and underground operation, is the reason why the global miner first came to Mexico.
The Toronto-based major acquired Pinos Altos in 2006 and brought it into commercial production in November 2009, while underground mining began in early 2010. Creston Mascota started operating as a satellite project to Pinos Altos in late 2010. Most of the ore at Pinos Altos is treated at a 4,000 t/d processing plant, however, the lower grade material is heap leached with the ore from Creston Mascota.
Pinos Altos is now a major gold producer in Mexico and one of the company’s biggest cash generators. Pinos Altos, including Creston Mascota, churned out roughly 234,000 oz Au and more than 2 million oz Ag in 2012. Pinos Altos should deliver 159,000 oz Ag and by-products silver in 2013, with a mine life through 2029.
Creston Mascota, which resumed leaching this March after a temporary suspension in October 2012, should pour 32,000 oz Ag in 2013. It should operate until 2018.
Pinos Altos, including Creston Mascota, has reserves of 2.7 million oz Au gold and 74.4 million oz Ag from 38.1 million tonnes grading 2.2 g/t Au and 60.7 g/t Ag.
Without those assets in Chihuahua, La India would have been too small on its own to consider, Haldane admits. That said, he lists the main reasons to buy La India were the project itself, its exploration potential, and the fact the company could build it on the back of the success it had at Pinos Altos and Creston Mascota.
Agnico received La India as part of its $275 million acquisition of Grayd Resource in November 2011. On the bus ride to the seaside resort, Grayd’s former president and CEO Marc Prefontaine, who put together the land package that eventually became the La India project, said he first heard of the area through a friend who told him of prospectors that had some interesting ground in northern Mexico. Prefontaine decided to check it out and, seeing a potential gold system, secured the area in 2004.
“It took us about two years to really realize we had a discovery and prove it up,” he recalls. But La India was not the only discovery Prefontaine and his team made on the La India property. In May 2010, Grayd’s team unearthed the large Tarachi gold prospect, 10 km north of La India. Later that year, it published a positive preliminary economic assessment (PEA) for the La India project. The PEA results and the Tarachi prospect grabbed the attention of Agnico, which was working nearby at its Mexican operations.
“After Pinos Altos this was a natural because we’d just finished building a satellite leach operation over there called Creston Mascota,” Sean Boyd, Agnico’s CEO, says during the La India tour. “So it was an easy one because we had all the costs down, the live data that it took to build one down the road. So we knew it was a solid project.”
Construction at La India is nearly complete with roughly 95% of the US$157.6 million budget spent by late September. Haldane believes the project will come online below budget and on schedule. “There will be a gold bar coming out of La India pretty soon,” he says during the presentation.
Initial production at La India should kick off later this year, with commercial production anticipated in early 2014. Annual output should average 90,000 oz a year with total cash costs of US$500 per oz. However, La India should churn out 40,000 and 81,000 oz in 2014 and 2015 respectively.
The mine has an eight-year mine life based on reserves of 33.5 million tonnes grading 0.72 g/t Au for 776,000 oz Au.
La India has 582,000 oz Au in measured and indicated from 43 million tonnes grading 0.42 g/t Au, plus 1 million oz in inferred from 81 million tonnes at 0.39 g/t Au.
The La India property covers 576 km2 and 45 mining concessions. It sits in the Sierra Madre Mountains between the towns of Matarachi and Tarachi, some 210 km east of Hermosillo.
The visitors early next morning drove to the Guaymas airport from the resort. Splitting into smaller groups, we hopped onto Cessna airplanes that flew us over the mountainous terrain. An hour later we touched down at the Tarachi airstrip and from there took helicopters to the La India site.
Asked how it felt to be back on the property, Prefontaine, who hadn’t seen La India in nearly two years, said the group was getting a kick out of his reaction in the helicopter. “When I saw that,” he says referring to the site, “I went holy shit and my mouth dropped to the floor.”
Agnico has transformed the exploration stage project into an open pit heap leach operation on the brink of production in a short matter of time. It began working on the La India project right after it closed the Grayd deal. From November 2011 to May 2012, it infill drilled La India’s resource to confirm and expand the resource estimate Grayd had reported in its PEA. This led Agnico to calculate the project’s first reserves in June 2012. In August that year, the international miner tabled a positive feasibility study to build a multi-pit mine and heap leach operation at the La India site. A month later its board approved La India’s construction.
A quick tour of the site reveals Agnico paid close attention to the quality of its operations, facilities and camp. “We think it’s worth it to spend a few more dollars on the camp and offices,” Haldane remarks.
After touring the offices, the company gave an overview of La India’s mine plan and processing methods.
Agnico intends to use 777 haul trucks (90-tonne) and 992 loaders from its Pinos Altos and Creston Mascota operations to mine La India as a 16,000 t/d operation. That works out to 6 million t/y.
The project contains three pits: North zone, La India and Main zone. Agnico started mining the North zone, which is the closest to the heap leach pad, in September. It plans to exploit La India next, followed by Main zone in 2016.
All three pits have similar gold grades, averaging 0.7 g/t. The low grade is partially offset by the mine’s low stripping ratio of 1-to-1. The oxide m
ineralization in the pits starts at surface and goes down to a depth of 120 metres. Below that there’s a layer of sulphide material that could be extracted in the future. The Toronto-based producer is conducting metallurgical work on the sulphides, with results due later this year.
Agnico will use a three-stage crushing system to reduce the ore to minus 19 mm in size for leaching. After which, a conventional carbon adsorption plant consisting of two parallel trains of five 3.5 tonne carbon columns and a Zadra strip with electrowinning will recover gold from the cyanide solution to produce doré bars. La India has a gold recovery of 80% over a 90-day leach cycle.
The miner is constructing the leach pad in two stages, with the first phase virtually complete by late September. The second phase should begin in late 2014 at the cost of US$20 million. Leaching is anticipated to start in October. The leach pad has a capacity of up to 50 million tonnes, giving it room to treat additional material.
The site has an ample supply of water and several water catchment programs. “We have enough water for this year and will collect more next year,” Haldane says.
One of the attractions at the La India property is the Tarachi target, which is larger than the La India project and has a different style of mineralization.
La India contains high sulphidation, epithermal style gold mineralization, similar to other operations in the region, such as Alamos Gold’s (TSX: AGI; NYSE: AGI) Mulatos gold mine 14 km to the east. “All of La India’s reserves are in oxidized material, amenable to heap leaching,” the company explains on its website. “On the other hand, the gold system at Tarachi is best classified as a wall rock gold porphyry deposit … suggesting that it has the potential to grow into a much larger deposit,” it adds.
Tarachi currently has 400,000 oz Au in indicated (34.5 million tonnes at 0.4 g/t Au) and another 900,000 oz in inferred (72 million tonnes at 0.4 g/t Au). Metallurgical work is underway, with results due by year end.
Analysts believe Tarachi has the potential to become either a standalone mine or a satellite project to La India.
Meanwhile Agnico, which is optimizing all of its operations, anticipates producing 1.1 million to 1.14 million oz Au in 2014, as La India reaches commercial production and ounces increase from the company’s flagship LaRonde mine and Goldex mine, both in Quebec’s Abitibi region. Annual production should climb to 1.2 million oz in 2015, driven by further growth from LaRonde and Pinos Altos.
Agnico is developing the San Eligio and Cerro Colorado satellite zones at Pinos Altos, which has a handful of other undeveloped zones. It is also spending roughly US$100 million to sink a shaft at Pinos Altos to help maintain production after open pit mining winds down by 2020. The shaft should be in operation in 2015, Haldane says.
Once in production, La India will become Agnico’s seventh gold mine, joining Pinos Altos, LaRonde, Goldex, Lapa (Quebec), Kittila (Finland) and Meadowbank (Nunavut).
Agnico’s formula for success, Haldane says, includes a good operating platform, cash flow, internal opportunities for expansion, exploration upside and great employees. “And I think we have all those elements in Mexico.”
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