Big Player in the Abitibi

Cast your mind back a few years, before the mergers and acquisitions left me permanently confused. In those days, there were a few reliable, well-run intermediate-size Canadian gold miners. One that I took special interest in was Agnico-Eagle Mines Ltd. Since its Ontario silver mines closed in the 1980s, it has been a one-mine company, but that one mine (the LaRonde gold mine) is a very good money-maker, with ever-expanding reserves. Through mainly exploring its own properties plus some acquisitions, Agnico has grown into a substantial company with considerable in-house expertise. At year-end 2005, the company had reserves containing 10.4 million oz of gold, of which 5.3 million oz are in the LaRonde mine or its deep extension. It anticipates producing 250,000 oz of gold in 2006 at total cash costs for gold of less than nil (due to byproduct credits).

Agnico still has only one mine, but not for long. The second quarter of this year was a turning point, as the board approved construction of three new mines–LaRonde II on May 12, and the Lapa and Kittila mines on June 5–in addition to its ongoing work at Goldex. Goldex, Lapa (both in the Abitibi) and Kittila (in Finland) are scheduled to become producers in 2008, with LaRonde II starting up in 2011. By 2009, Agnico intends to triple gold production to 750,000 oz/year, with 15 million oz of gold in reserves.

The company will spend about US$170 million in 2006 and US$250 million in 2007 on its four developments. All this building takes money. On June 7 Agnico floated a share offering that closed just six days later, putting US$237 million in the company coffers. This brought cash and cash equivalents up to US$415 million at the end of June.

CMJ visited Agnico-Eagle’s Abitibi operations in July, and interviewed many employees including Paul-Henri Gerard (Abitibi general manager), Daniel Racine (Toronto-based vice-president operations), and Louise Grondin (regional environmental manager). At LaRonde we interviewed Michel Leclerc (LaRonde mine manager), Sylvain Boily (LaRonde environmental superintendent), Jean Cayouette (assistant mill superintendent) and Richard Grenier (maintenance superintendent). We also spoke with Rosaire mond (Goldex mine manager) and Harold Boulanger (Lapa project engineer).

LaRonde (the original)

The LaRonde gold and base metal mine mid-way between Rouyn-Noranda and Val d’Or remains the company’s main asset, and is owned 100%. With over 600 employees, it is the largest mining operation in the area. By early July, the site had achieved 540 days without a lost-time accident.

LaRonde started out in 1988 as the 1,800-tonne/day Dumagami mine, first open pit and then underground. The underground mine has progressed eastward and downward, with production now from the 2,250-m-deep Penna shaft (see “Good news is golden”, CMJ August 2003). The mine has increased its reserves each year. As of the end of 2005, proven and probable reserves at LaRonde totaled 17.5 million tonnes grading 2.8 g/t Au. Today the mine averages 7,400 tonnes/day of ore production, and 1 km/month of development. There are 30-40 open faces, with 12 active stopes.

LaRonde has developed many successful innovations to deal with the mine’s increasing depths while keeping costs down:

* Ventilation, backfill, underground crushing, hoisting, a 25-kV underground electrical substation and the shotcrete and fuel systems are all automated, handled from a surface control room staffed around the clock by former mine shift bosses. Sixty per cent of the ore is now mucked by remote control.

* Pastefill and backfill from the mill sometimes travel as far as 5 km along the line, relying on sensors. Adjusting the recipe (now public) has allowed LaRonde to drop shotcrete as deep as 2 km underground without it sticking in the pipes.

* Ninety-four underground sensors record seismic events.

* LaRonde was the first Canadian mine to use water cooling towers for the refrigeration of fresh air for underground; the system operates in the summertime to cool the air for the deep part of the mine. Secondary fans only operate on the levels where people are working. A $125,000 project to automate all the fans paid for itself in energy savings in only three months.

* Underground water that had settled in the No.2 shaft and the Bousquet complex (formerly owned by Barrick Gold) is joined and pumped back to the Penna shaft for use in dust-control, from a sprinker system on the backs of travelways.

* A series of ramps allow all equipment to be driven to the bottom of the mine, so there is no need to dismantle and sling it.

* With a 5.5-m diameter, the Penna shaft is small for the tonnage it handles, up to 9,000 tonnes/day. For the last four years, the hoist has been using an implement factor of four (as in South Africa) to increase the payload of each skip. In fact, it could hoist as much as 10,000 tonnes per day. The cables in the cage and production hoist include monitors to indicate any problems.

The Dumagami/LaRonde mill has been expanded three times to the current average production of 7,400 tonnes/day capacity. It now handles about 8,000 tonnes/day of ore. An $11-million copper and zinc recovery project currently underway will increase the recovery of each metal about 2%, paying off the expenditure in less than a year.

Over time, the ore has changed content, which presents challenges. For example, the mill includes a water treatment system developed in-house to deal with a toxicity problem (thiocyanate) in the tailings discharge. Flotation needs to remove as much copper as possible, which requires minimizing the cyanide to dissolve the gold, but this leads to thiocyanate. A pilot plant began testing bacterial films in 2003, to remove the thiocyanate. The exact process is secret, but generally involves two separate bacterial cultures that, in the presence of oxygen, change thiocyanate to ammonium, then nitric oxide and eventually nitrates (which are benign). The bacteria lie on a high-surface-area film enclosed in tanks kept at a steady temperature. The result is clean water. A full-scale plant has operated successfully since 2005.

LaRonde is expected to produce 250,000 oz of gold this year, with byproduct credits of 5.0 million oz of silver, 77,000 tonnes of zinc and 7,500 tonnes of copper. Total cash costs for the gold will be less than nil, due to the byproduct credits.

LaRonde II (the sequel)

Exploration of the LaRonde orebody below 2,450-m depth led to the definition of the company’s largest current reserve in the 20 North gold-copper and the 20 North zinc-silver zones (called LaRonde II). The probable gold reserve–3.6 million oz of gold–will extend the life of LaRonde by a decade to 2020, at a capital cost of US$210 million. Work continues to convert more resources to reserves, and the orebody remains open below 3,300 m.

The 6,000-tonne/day underground mine is expected to produce an average of 320,000 oz/year of gold at total cash costs of US$230/oz and minesite costs of Cdn$67/tonne. Byproduct production will average 670,000 oz of silver, 4,000 tonnes of copper and 8,600 tonnes of zinc.

Construction began in the second quarter of 2006. By mid-year, significant amounts of equipment had been purchased, detailed engineering was underway, and underground development was advancing. A winze will provide access from the Penna shaft to 2,900-m depth, with a series of ramps enabling mining to about 3,100-m depth. Two drifts will be driven from the shaft to the ore, one for the equipment and the other for conveyor transportation of ore to the shaft. LaRonde is in the process of renewing its fleet of Atlas Copco hydraulic jumbos, and the rest of its 15-20-year-old underground equipment (mainly Tamrock) with more efficient equipment with lower emissi
ons. It is buying three 50-tonne trucks and 10 load-haul-dumpers with a capacity of 6 m3 (replacing the 4.5-m3 ones).

The old equipment will be sent to shallower mines.

The mill is undergoing expansion, so it can handle gold ore from Goldex beginning in 2008. At that time the mill will process close to 8,800 tonnes/day.

Goldex development

The 100%-owned Goldex mine and mill project is on the western edge of the city of Val d’Or, 56 km east of the LaRonde mine. It is currently the company’s most advanced development project, and is expected to begin gold production in the second half of 2008.

The property has been explored for 35 years, but the go-ahead was given only in mid-2005 as the success in mining high tonnages at LaRonde enabled a re-engineering of Goldex as a high-tonnage operation as well. Probable reserves containing 1.6 million oz of gold are expected to support a nine-year mine life with gold production averaging 170,000 oz/year at total cash costs of US$225/oz. The capital cost is expected to be US$135 million.

Construction began in July 2005. Talbon built the 70-m tall concrete headframe. It took 13 days to pour the continuous concrete walls, which rose by 23 cm/hour guided by numerous lasers. Beroma in Val d’Or built the galloway for shaft-sinking. The shaft collar and headframe are now complete. Construction of the surface facilities is advanced, while underground development is well underway. During the second quarter, 980 m of lateral development and 260 m of raising were completed. Approximately 26,000 tonnes of ore were extracted and stockpiled in the quarter.

Shaft-sinking to a depth of 860 m will begin in the third quarter. The project remains on time and on budget.

With the comparatively low grade of Goldex ore, the emphasis is on keeping total costs low, at about Cdn$17/tonne. Most of the fixed and mobile equipment was acquired from the Louvicourt and Bousquet 2 mines, including the 120-kV electrical substation, four 85-m3/min air compressors, the auxiliary hoist, the electrical generator and three 4.5-m3 load-haul-dumpers and scissor lifts. This was partly to cut costs, and partly to avoid long lead times in ordering new equipment.

To minimize mining costs, Goldex will use a mixture of different methods to mine with open stopes with no backfill, and muck as block-caving, similar to the method used at the former Ansil mine in Rouyn-Noranda. Rounded tops will give stability to the stopes, measuring 244 m high x 300 m long x 60-140 m thick. The 15-cm-diam longhole drilling will make holes 60-90 m long. Blasting will move upward from the bottom. The muck remaining in the bottom of the stopes will give them stability, until the last muck is removed. Ore will be recovered from 45-50 draw points.

The ore is metallurgically simple, so the 7,000-tonne/day processing plant will be simple as well. More than 65% of the gold will be recovered by gravity on Knelson tables following grinding. The rest will be recovered as a rich sulphide concentrate by flotation; the concentrate will be trucked to the LaRonde mill for gold recovery.

The location of the mill between a creek and neighbouring houses has affected its design. The plant is very small on a compact site. Surrounding berms will reduce noise. The ore stockpile is covered by a dome to keep dust down. The gold recovery from the sulphide concentrate will be done at the LaRonde mill, so there will be no need for cyanide at the Goldex site. The tailings, which will be deposited in a nearby shallow valley, are just “grey sand” with neutralizing capacity, so there’s no acid-generation.

Lapa project

The Lapa project 11 km east of LaRonde was bought (100% interest) from Breakwater Resources in 2003 for $8.9 million. Agnico is preparing Lapa for startup in the last quarter of 2008. Capital costs will be about $90 million, with a seven-year lifespan expected. Probable gold reserves of 1.1 million oz will support annual production of approximately 125,000 oz of gold at total cash costs of approximately US$210/oz. A very rich, small deposit beside the main deposit could extend the mine life.

Lapa underwent a first phase of underground development last year. Dumas began sinking a 1,370-m exploration shaft in March 2005. By the end of June 2006 the shaft had reached 783 m depth (77 level), advancing about 3 m per day. Significant station work and lateral development have also been completed. There are about 50 contract miners on the site doing the shaft sinking plus surface work.

Meanwhile, Lapa was approved on June 5 to go ahead to production, so the “exploration” shaft is now a production shaft, being built to allow for up to 1,500 tonnes/day of ore production. It is expected to be complete in summer 2007. Once the shaft is done, there will be about 15 months of development work before production can reach the designed 1,500 t/day. At that time it should employ 170 people.

The upper parts of the orebody contain some arsenic, so the ore from the top, middle and bottom portions of the mine will have to be blended to reduce the arsenic content.

Costs have been kept low at Lapa by using equipment from within Agnico-Eagle or from the Louvicourt mine that closed last year.

The final mill feasibility study is still underway. The current plan is to treat the ore at the LaRonde mill to maximize synergies, but it is possible that a separate mill will be built on the Lapa site to save ore transport costs.

Click here to view the Summary of Agnico-Eagle’s Development Projects.

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