Agnico-Eagle Suspends Operations at Goldex

Following ground failure and water ingress at Agnico-Eagle's Goldex mine in Québec, the company suspended
mining and said it would study the possibility of restarting underground production on the western side of the
deposit. Agnico-Eagle plans to write off its entire investment in Goldex, totaling roughly $260 million.
Agnico-Eagle announced October 19 it had suspended mining operations at its Goldex mine in Val d'Or, Québec. The decision followed apparent failure of weak volcanic rock in the hanging wall of the Goldex deposit, followed by groundwater flow into the mine. The rock failure was thought to extend from the top of the deposit to the surface. The company estimated that the mill would continue to process feed from the remaining surface stockpile until the end of October.

Agnico-Eagle will assess the potential for restarting Goldex mining operations next year on the western side of the deposit, where the ore zone is narrower and still considered to be relatively stable; however, the company said there is no guarantee that this will occur. As a result, the company said it would writeoff its investment in Goldex to a total of about $260 million (approximately $170 million after tax) in its third-quarter 2011 financial results. Additionally, the company expected to make an accounting provision for a portion of the anticipated costs of remediation in the third quarter of 2011. All of the remaining 1.6 million oz of proven and probable gold reserves at Goldex (approximately 10 years of mine life), other than the ore stockpiled on surface, will be reclassified as mineral resources.

During the week prior to October 19, rock subsidence was confirmed above the north-eastern limit of the Goldex deposit. The exact location and extent of subsidence was unknown and remained to be determined by diamond drilling and other methods. However, as a result of these findings, previously planned grouting and water re-injection efforts were suspended, and work was re-oriented to preserve the surface infrastructure in the area.

Ongoing investigative and remediation efforts include drilling from underground into the volcanic rock unit to determine whether additional fracturing has occurred and the extent of movement in the rock mass; installing additional instrumentation to monitor for further soil and rock movements; backfilling the surface depression to reduce the potential for further soil migration; and considering backfilling and mining options for the deposit.

Through the period of investigation and remediation, the company anticipates underground exploration drilling of the deeper D Zone will continue.

The company is also implementing a plan to minimize the impact on the current workforce of 233 permanent employees during the investigation and remediation phase. The company anticipated it would spend approximately C$25 million in 2011 and a further C$20 million in 2012 on Goldex monitoring and remediation activities.

The Goldex mine and plant reached commercial production in August 2008. During the first half of 2011, plant throughput averaged 8,200 mt/d, and gold production totaled 80,498 oz.

As featured in Womp 2011 Vol 09 -