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Volatile gold prices is one reason work at the Meliadine gold exploration camp, 24 kilometres north of Rankin Inlet, is being slowed down. Agnico Eagle Mines Ltd. is reducing its spending for next year by $200 million across the company. - NNSL file photo |
Meliadine project budget slashed Contractors for project will be impacted most by Agnico Eagle's cost reductions: company spokesperson
Lyndsay Herman
Northern News Services
Published Wednesday, July 31, 2013
RANKIN INLET
Agnico Eagle Mines Inc. is reducing its $120-million budget for the Meliadine project by about two-thirds.
The company is also cutting expenditures on the project by $10 million this year and $80 million next year, according to a company spokesperson.
As a result, it intends to do less exploration drilling. The drill program that was set to wrap up in August will be completed this month, stated Sonja Galton, web and communications specialist for Agnico Eagle, to Kivalliq News in an email.
"This change will mostly impact the number of contractors without a significant impact on Agnico Eagle employees (Northerners or southerners)," she stated.
Agnico Eagle still plans to invest $45 million at Meliadine in 2014 and construction will go ahead for an underground ramp in order to keep the gold project on its original timeline.
Meliadine is currently home to an active exploration camp as the project works its way through the approval process.
Sean Boyd, Agnico Eagle's president and chief executive officer, said on July 26 that the company is planning to complete a feasibility study next year which will decide if the project is worth developing.
The project will also continue to work through the regulatory process until such time as the company decides it's not economically feasible to develop the project.
"There's been no change in the timing of the decision," Boyd said. "The only change is being the amount of capital we are allocating to the project next year and that is really a function of the current gold price and the volatility of the gold price and the fact that we have to maintain as much financial flexibility as we can."
Mayor Robert Janes said July 26 that although the cutbacks are unfortunate, they aren't really a surprise given the price of gold.
"You can just hope that eventually it goes back up and I'm sure as soon as it does we'll probably see a resumption of more exploration," he said, adding he was happy to hear the company is continuing with plans to build the underground ramp.
"That's a major proponent of the whole thing so it's good ... they're not just going into shutdown mode and maintenance mode. They're actually continuing with some work so that's very positive."
Agnico Eagle is cutting $200 million from its overall budget for next year and $50 million for the remainder of 2013.
The news comes after the company announced a $24.4-million loss for the second quarter of 2013.
It points to lower gold prices and the shutdown at Kittila underground mine in Finland as the reasons for the loss.
"We've had to look at our financial capacity and we needed to have some reductions in how much money we're allocating to projects next year," said Boyd. "As a result of that we have scaled back our investments in a number of properties, including Meliadine."
The Meliadine project is located 24 kilometres north of Rankin Inlet.
A 24-kilometre all-season road is currently under construction to connect the site to Rankin Inlet and is expected to be completed in August, according to a release issued by Agnico Eagle July 24.
Meliadine is the largest of Agnico Eagle's projects and, with the additional costs of building in the remote North, it would take a lot of funds to develop, Boyd said.
Since Meadowbank, Agnico Eagle's operational gold mine in Nunavut, cost $800 million to build, Meliadine would likely cost more than $1 billion, he said.
"It's expensive to build mining operations in that part of the world and so from a project development standpoint it would be by far the biggest in terms of the amount of money that would be required to build it," said Boyd.
"That's what will have to be considered when we decide how to approach it next year when our study is done. Size and cost of the project will be important considerations."
- with files from Miranda Scotland
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