Agnico Eagle Mines Ltd. April 26 said its Amaruq and Meliadine gold mine development projects in Nunavut remain on schedule and are expected to boost the company's annual gold production to 2 million ounces by 2020.

"During the first quarter, we continued to make very good progress at our Nunavut growth projects, with Amaruq permitting activities advancing as expected and development of the underground exploration ramp proceeding as planned," said Agnico Eagle CEO Sean Boyd. "Construction activities and underground development remain on schedule and on budget at Meliadine."

Meadowbank, currently the company's only operating mine in Nunavut, began production in 2010 and is now nearing the end of its gold reserves.

This operation produced 61,447 oz of gold during the first quarter of 2018, roughly a 28 percent decrease from the 85,370 oz produced during the first three months of 2017.

Agnico said this drop is primarily due to harder ore and reduced access to the pits due to adverse winter weather conditions at the aging gold mine.

"At Meadowbank ... our throughput in the quarter was down about 10 percent and grade was down –that was expected. This is the sort of final full year of mining there," said Boyd. "As a result, our production was down 24,000 oz, which again was expected."

The company said Meadowbank remains on track to produce around 220,000 oz of gold this year as the operation begins the transition of receiving ore from Amaruq, a satellite deposit about 50 kilometers (31 miles) to the northwest.

Advancing Amaruq

Amaruq permitting is on track for approval in the second quarter of 2018 and it is expected that the first ore from this deposit will be trucked to Meadowbank in 2019, where it will be processed through the 11,000-metric-ton-per-day mill there.

Agnico forecasts that Amaruq will produce around 162,050 oz of gold in 2019 and around 265,000 oz in 2020.

Overall, this mine is expected to produce 2.1 million oz of gold during the first five years of operation.

This start-up mine plan only considers mining roughly 40 percent of the current mineral reserve and resource base outlined at the project.

At the end of 2017, Amaruq hosted 20.1 million metric tons of probable reserves averaging 3.67 grams per metric ton (2.4 million oz) gold; and 8.8 million metric tons of indicated resources averaging 3.62 g/t (1 million oz) gold.

In preparation for mining and resource expansion, the company began developing an underground exploration ramp at the Whale Tail deposit in early January and by the end of March this ramp had advanced by 128 meters. The company anticipates that about 1,200 meters of underground development will be completed by the end of the year.

The main purpose of building the ramp is to carry out additional exploration drilling and evaluate the potential for underground mining activities at both the Whale Tail and V zones.

Exploration continues well below the planned pit depths at both the Whale Tail deposit and V Zone. In the first quarter, the company completed 5,002 meters of drilling in 15 drill holes at Amaruq, part of an initial 67,000-meter drill program for the project in 2018.

The Whale Tail deposit has been defined over at least 2,300 meters of strike length and extends from surface to a depth of 915 meters.

One hole, AMQ18-1677, cut narrow, very high-grade gold between 540 and 627 meters depth. These intercepts include 2.8 meters averaging 23.1 grams per metric ton gold starting from a depth of 540 meters; 2.9 meters of 18.6 g/t gold starting at 580 meters; and 3.3 meters of 16.6 g/t gold starting at 598 meters. A lower intercept from the same hole cut 7.2 meters of 6.4 g/t gold at a depth of 627 meters.

A branch from the same hole, AMQ18-1677A, cut 8.5 meters of 13.8 g/t gold starting at 641 meters. Agnico said this intercept confirms the width of the model but the gold grade was higher than anticipated.

Two new intercepts have encountered mineralization west of the current underground mineral resources, which is one of the goals of the 2018 exploration drill program. Hole AMQ18-1669A cut 2.8 meters averaging 6.5 g/t gold starting at 582 meters depth; and AMQ17-1607C cut 3.3 meters of 8.5 g/t gold at 673 meters.

For the remainder of 2018, the drill program will continue to focus on expanding and upgrading the resources at Whale Tail, as well as explore a parallel structure to the north at depth. Drilling has also resumed in the V Zone to test its depth and lateral extent.

Meliadine ahead of schedule

Agnico's Meliadine project remains ahead of schedule and the company anticipates the underground gold mine to go into operation by mid-2019.

Located near Rankin Inlet, the 111,757-hectare (276,157 acres) Meliadine project hosts Agnico Eagle's largest gold deposit in terms of mineral resources.

At the end of 2017, the Meliadine property was estimated to host 16 million metric tons of proven and probable mineral reserves averaging 7.12 g/t (3.7 million oz) gold; 25.3 million metric tons of indicated resources averaging 3.77 g/t (3.1 million oz) gold; and 13.8 million metric tons of inferred resources averaging 6.04 g/t (2.7 million oz) gold.

When Agnico's board of directors approved the construction of Meliadine early in 2017, the mine was forecast to begin operations in the second half of 2019. However, given the progress of construction and development activities in 2017 and through the first quarter of 2018, the company announced it now expects to begin operations in the second quarter of 2019.

"Fortunately, the team did an excellent job in the second half of last year getting prepared for the winter," Boyd said, referring to the crews at Meliadine. "It was an unusually cold winter and difficult and harsh winter there, but the teams were able to work entirely inside in the process plant and the power plant and in the main service building, so they made excellent progress."

As a result, the company reported that site construction is more than 60 percent complete.

Gold production for 2019 is estimated to be approximately 170,000 oz in 2019 and roughly 385,000 oz in 2020.

Agnico is evaluating potential opportunities to increase production in 2019.

Combined, Agnico's two new gold mines in Nunavut will be significant contributors to the company's gold production in the coming years.

"The focus continues to be on transitioning in 2018 into a larger production platform in Nunavut as we continue as well to optimize our existing assets. That will take us to 2 million ounces in 2020 with an ability to grow beyond that," said Boyd.

Agnico Eagle Mines Ltd.

Agnico Eagle's Meliadine gold mine project in Nunavut is on pace to begin production in the first half of 2019.

–SHANE LASLEY