Agnico OKs two new Nunavut gold mines

Agnico Eagle Mines Ltd. Feb. 15 said its board of directors has approved the development of Amaruq and Meliadine, two new gold mines in Nunavut.

Amaruq is to be developed as a satellite to Agnico's Meadowbank Mine, which lies about 50 kilometers (31 miles) to the southeast.

Going into 2017, Amaruq hosted 16.9 million metric tons of open pit indicated mineral resource averaging 3.88 grams per metric ton (2.1 million ounces) gold; and 4.9 million metric tons of open pit inferred mineral resource averaging 4.81 g/t (763,000 oz) gold.

Additionally, the property hosts 6.8 million metric tons of underground inferred mineral resource averaging 6.22 g/t (1.4 million oz) gold.

In 2016, Agnico completed an internal technical study that demonstrated favorable economics for developing Amaruq as a satellite deposit to Meadowbank and expected potential for project expansion, prompting the board to greenlight the project.

The company anticipates that it will have the permits for Amaruq by mid-2018 and production is currently forecast to begin in the second half of 2019. The initial plan calls for the production of roughly 2 million oz of gold between 2019 and 2024, with pre-mining activities starting in 2018 at the Whale Tail deposit.

Amaruq is expected to average 396,000 oz of gold annually in years two through six.

The Amaruq ore will be hauled to the Meadowbank mill, which is expected to operate at 9,000 metric tons per day.

A road connecting Amaruq to Meadowbank is currently under construction and is expected to be completed by the end of this year.

Minimal infrastructure will be built at the Amaruq site - truck shop, warehouse, fuel storage and a small camp facility - but the satellite operation will require a new fleet of trucks.

Initial capital costs are estimated to be approximately US$330 million, while total sustaining capital costs are estimated to be approximately US$25 million per year.

Roughly US$73 million of the initial capital costs will be spent in 2017.

A planned 75,000-metre drill program at Amaruq, which is expected to cost around US$22 million, began earlier this month.

Meliadine, which lies about 25 kilometers (15 miles) from the town of Rankin Inlet, is also slated to begin production in the second half of 2019. This operation is expected to produce 5.3 million oz of gold over the first 14 years of operation, or roughly 379,000 oz per year.

Initial capital costs are estimated to be around US$900 million - roughly US$550 million for surface construction and US$350 million for underground construction and development, owner costs and drilling.

Sustaining capital costs are forecast to total approximately US$48 million per year over the life of mine.

Agnico invested US$131 million at Meliadine in 2016 and expects to invest another US$740 million over the coming two years.

At the end of 2016, the Meliadine property was estimated to host 14.5 million metric tons of proven and probable reserves averaging 7.32 g/t (3.4 million oz) gold; 20.8 million metric tons of indicated mineral resources averaging 4.5 g/t (3.3 million oz) gold; and 14.7 million metric tons of inferred mineral resources averaging 7.51 g/t (3.6 million oz) gold.

Agnico produced 1.66 million oz of gold in 2016 at an all-in sustaining cost of US$824/oz and expects to average about 1.55 million oz of gold annually over the next three years at stable or lower costs.

If Amaruq and Meliadine come online as expected, the company's production is expected to begin increasing in 2019 and be at 2 million oz in 2020.

"Our primary focus will be on developing and expanding our business in Nunavut as we complete the construction of a new mine at Meliadine and develop the Amaruq satellite deposit at Meadowbank. These new operations, along with optimizations at existing mines, are expected to result in production growth from current levels to approximately 2 million ounces in 2020, along with a decline in unit costs," explained Agnico Eagle CEO Sean Boyd.

-SHANE LASLEY