Agnico-Eagle Mines Limited ("Agnico-Eagle" or the "Company") announced today that it is suspending mining operations and gold production at its Goldex mine in Val d'Or, Quebec effective immediately. This decision follows the receipt of an opinion from a second rock mechanics consulting firm which recommended that underground mining operations be halted until the situation is investigated further.
While the Company continues to assess the situation, it appears that a weak volcanic rock unit in the hangingwall of the Goldex deposit has failed. This rock failure is thought to extend between the top of the deposit and surface. As a result, this structure has allowed ground water to flow into the mine. This water flow has likely contributed to further weakening and movement of the rock mass.
"Considering the safety of the Company's employees, and the integrity of the mine's infrastructure and that of the surrounding area, the decision was made to stop production indefinitely" said Sean Boyd, Vice-Chairman and CEO.
It is estimated that the mill will continue to process feed from the remaining surface stockpile until the end of October.
The Company will assess the potential for restarting the 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, there is no guarantee that this will occur. As a result, Agnico-Eagle will write off its investment in Goldex. It is expected that this will total approximately $260 million (or approximately $170 million after tax, or $1.00 per share) and will occur in the third quarter 2011 financial results, scheduled for release on October 26. Additionally, the Company expects 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 ounces of proven and probable gold reserves1 at Goldex (approximately 10 years of mine life), other than the ore stockpiled on surface, will be reclassified as mineral resources.
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1 Approximately 0.9 million ounces of proven reserves in 14.8 million tonnes grading 1.87 grams per tonne and approximately 0.7 million ounces of probable reserves in 13.0 million tonnes grading 1.6 grams per tonne were estimated as of December 31, 2010
Monitoring and Remediation Plan
In the past week, rock subsidence has been confirmed above the north-eastern limit of the deposit. The exact location and extent of this subsidence is unknown and remains to be determined by diamond drilling and other methods. However, as a result of these findings, previously planned grouting and water re-injection efforts have been suspended and work will be reoriented 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
- Considering backfilling and mining options for the deposit
Through the period of investigation and remediation, the Company anticipates that 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 plan will include:
- Re-deployment of employees to the remediation and investigation project team
- Extensive maintenance programs of all mobile equipment not being used during the investigation and remediation phase
- Internal transfers within the Company's Canadian operations
- Employee training and skills upgrading programs to facilitate potential transfers to other Agnico-Eagle operations
During the investigation and remediation period, ongoing assessments of the workforce requirements will be made in collaboration with the employee representatives in order to try to reduce the number of employees that are impacted by this stoppage of operations at the Goldex mine.
As announced on October 11, 2011, it is anticipated that approximately C$25 million will be spent in 2011, and a further C$20 million will be spent in 2012, on monitoring and remediation activities.
Conference Call
The Company's senior management will host a conference call on Wednesday, October 19, 2011 at 9:00 AM (E.D.T.) to discuss the Goldex situation.
Via Webcast:
A live audio webcast of the meeting will be available on the Company's website homepage at www.agnico-eagle.com.
Via Telephone:
For those preferring to listen by telephone, please dial 416-644-3414 or Toll-free 1-800-814-4859. To ensure your participation, please call approximately five minutes prior to the scheduled start of the call.
Replay archive:
Please dial 416-640-1917 or the Toll-free access number 877-289-8525, passcode 44882668#.
The conference call replay will expire on Sunday, November 1, 2011.
The webcast will be archived for 180 days on the website.