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TABLE OF CONTENTS Jul 30 - Aug 5, 2012 Volume 98 Number 24 - 0 comments

Goldcorp remains on target at Éléonore

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By: Matthew Keevil
VANCOUVER 2012-07-30

Goldcorp’s (G-T, GG-N) new Éléonore gold mine under construction in northern Quebec’s James Bay region is a cornerstone of the company’s four-year expansion of operations worldwide.

Éléonore is the first major mine  development undertaken in tandem with the provincial government’s Plan Nord initiative, and according to recent comments by Goldcorp’s senior management, the project is on track to pour its first gold in 2014.

Situated on the northeast corner of the Opinaca Reservoir, the Éléonore property hosts the prized Roberto deposit — composed of the Roberto, East Roberto and Zone du Lac zones— which is a clastic sediment-hosted, stockwork-disseminated gold deposit in an orogenic setting, with mineralization having been intersected to vertical depths of 1,400 metres.

Goldcorp has completed 315,000 metres of delineation drilling since acquiring the project by buying  André  Gaumond’s Virginia Gold Mines in 2006.

As a result, Éléonore today boasts probable reserves of 12.5 million tonnes grading 7.6 grams gold per tonne for 3 million contained oz. gold. There are another  12.3 million inferred tonnes grading 10.6 grams gold for 4.2 million contained oz. gold.

Goldcorp’s US$1.4-billion underground development will come in two stages, with the first being the sinking of the Gaumond exploration shaft and the excavation of a separate surface ramp. The initial shaft is planned to hit a 715-metre depth and provide an exploration drilling platform for expanding orebody access, as well as eventually forming the backbone of a 3,500-tonne-per-day operation that could produce 285,000 oz. gold per year.

“We’re pleased with the advancement of construction,” Goldcorp’s president and CEO Chuck Jeannes comments.

He says the company is building two shafts to concurrently mine the upper and lower parts of the deposit, and it’s just about completed sinking the first shaft. The company expects to start delineation drilling of the deeper parts of the deposit during the third quarter. It’s also started surface work for the second shaft, and worked on the plant.

“So everything looks good at Éléonore for first gold, as scheduled, in early 2014,” Jeannes says.

The new on-site mill is expected to initially operate at a 1.3 million-tonne-per-year capacity, which would support a daily 3,500-tonne throughput.
The second production shaft plus a planned mill expansion would allow for a ramp-up to a 7,000-tonne-per-day mining rate, which could boost yearly gold output to 600,000 oz.

The mill’s comminution circuit will include three crushing stages, followed by a stage-ball mill grinder. Typical flotation will be used to separate sulphides, with concentrates recovered using carbon-in-pulp circuits. Éléonore’s ore is classified as moderately hard and abrasive, and metallurgical test work demonstrated a weighted-average recovery of 93.5%.

“We’ve worked extremely hard to get to this point,” executive vice-president and chief financial officer Lindsay Hall explains. “I would be disappointed if Éléonore did not go well, and it is going extremely well. Our team has been together up there for a long time, and everything is on track. We’ve got the two shafts — one of which is an exploration shaft — but the end game is that both will be production-ready. The exploration shaft has gone very well — on time and on budget. Exciting news, as the production shaft is being collared. We’ve since started drilling, and that’s sinking well.”

Goldcorp will satisfy Éléonore’s energy needs using a 120-kilovolt overhead electrical power line supplied and installed by Hydro-Québec. The company needs to build 62 km of roadway to access transportation networks. Quebec Premier Jean Charest confirmed in early January that the province has communicated with Goldcorp about financing the US$40-million road project under Plan Nord.

“We are in discussions, but in order to secure a financial contribution from the Quebec government, there are conditions to be met,” Charest told The Canadian Press in January. “And that includes another project or a cost-sharing formula. Because the other dimension is that, where there are multiple projects, we want to see a sharing of infrastructure.”

Charest and representatives from the Quebec government visited the project earlier this year, and admitted that the scope of Éléonore — expected to employ between 400 and 600 people at peak capacity — could lead to a permanent town as the economy grows. Charest likened developments like Éléonore to previous mining booms in the Val-d’Or and Rouyn-Noranda regions, which led to the creation of townships.

“The thing about northern Quebec, and Éléonore specifically, that makes mining operations run well and meet capital costs are three key elements,” Hall explains. “First is government support, and we’re the first mining company in Quebec’s Plan Nord. Second are relations with First Nations, and we have an agreement with the Cree Nation we worked on for three years. We have momentum with local communities. Third, we’ve had the orebody in our hands, and we’ve been working with it for a few years.”

Éléonore will fits nicely into Goldcorp’s portfolio of producing assets, with cash costs expected to fall below US$400 per oz. gold, and capital costs in-line with feasibility estimates. Éléonore is one of three new mines Goldcorp hopes will boost its annual gold production to 4.2 million oz. by 2016 — along with Cerro Negro in Argentina, and Pueblo Viejo in the Dominican Republic.

“The key issue in our business is discipline,” Jeannes says. “Looking at growth opportunities and making sure we are investing in new projects that take into account what we’ve seen over most of the last ten years: capital cost appreciation, operating cost appreciation, various levels of political risk and resource nationalization and a shortage of qualified personnel. All of those things go into our decision-making when looking at a new project — making sure we have robust rates of return, and taking into account what we know is coming.”

Goldcorp remains  highly liquid  with US$1.4 billion in cash and equivalents at the end of the first quarter, and a forecasted average-annual cash flow of US$3.7 billion over the next five years.

But share prices have dropped due to uncertainty surrounding gold prices, and recent underperformance at its Red Lake and Penasquito gold mines in  Ontario and Mexico. Goldcorp has dropped 26%, or $11.50 per share since April. The company has 810 million shares outstanding and a $27-billion presstime market cap.

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Sinking the Gaumond exploration shaft at Goldcorp's Éléonore gold project. Photo by Goldcorp
Sinking the Gaumond exploration shaft at Goldcorp's Élé...
Mine construction at Goldcorp's Éléonore gold project in Quebec's James Bay region. Photo by Goldcorp
Mine construction at Goldcorp's Éléonore gold project i...

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