Dumagami merger a boost Agnico earnings on the rise

Anyone pondering a takeover of Agnico-Eagle Mines, as recent trading in its shares might suggest, could find the going rough. The past week alone saw more than three million shares change hands on the Toronto, Montreal and NASDAQ exchanges, with a further $1 advance to $12.50. Unaware of any such takeover development, Paul Penna, the company’s president and managing director, tells The Northern Miner that any unfriendly tactics would prove “very costly,” for it would trigger an intricate shareholders’ rights plan (poison pill) approved at last year’s annual meeting.

Penna also points out that Agnico’s 18,000 shareholders, most of whom reside in the U.S., constitute a unique and exceptionally loyal group who have been with him since 1963 when he took over control in a bitter battle. At that time the stock was trading at 63 cents , reaching an all-time peak of $45 in 1987.

However, there are other favorable corporate developments in the broadening Agnico picture that could account for this market activity, especially in its outside exploration activities on which eight diamond drills are working.

Also, earnings could be up sharply this year, reflecting the recent 100% acquisition of the Donald J. LaRonde gold mine through Agnico’s marriage to Dumagami Mines. With production at the latter’s spanking new 2,000-ton mill rising smartly, it’s beginning to look like the tail wagging the dog, for with a 10-year productive life already in sight, this is shaping as a real cash-cow for Agnico-Eagle.

And there was more good news for shareholders this week, with some positive exploration results revealed in an initial report issued by Lucky Eagle Mines on two gold projects — one in Canada and one in the U.S. This is the recently formed exploration company which, jointly owned and managed by Agnico and Hecla Mining (NYSE), promises to be quite active in both countries.

On what is known as the Meadbank project, managed by Agnico and covering an extensive spread of ground 60 miles northwest of Baker Lake in the Northwest Territories, a follow-up reverse circulation drill program late last year on a gold discovery certainly looks promising.

Described as a Lupin-type deposit in iron formation, 12 of the 13 holes put down over a length of 1,300 ft. tested the mineralized trend to a depth of 300 ft. All returned gold values indicating the zone to be open both on strike and to depth. Two of the better intercepts were in holes 10 and 13, at each end of the trend. No. 10 at the north end intersected 45 ft. averaging 0.46 oz. per ton, while No. 13 at the south end cut 15.7 ft. averaging 0.60 oz. Visible gold was picked up in all holes except 12.

Hole No. 11 was drilled on an island 1,000 ft. southwest of the discovery to test a gold-bearing frost-heave flanked by a strong EM conductor under the lake. This intersected 6.6 ft. assaying 0.42 oz.

Prospecting and geophysical surveys located another showing a mile to the north from which grab samples ran up to 1.4 oz., as well as other geophysical targets along strike both north and south.

Lucky Eagle, Hecla and Agnico are participating equally in this project under an option agreement to earn a 55% interest from the vendor joint venture partners — Asamera Minerals (TSE) and Comaplex Resources International (TSE). A budget of US$975,000 has been allocated for the 1990 summer drill program.

In the U.S., Lucky Eagle has its teeth into another gold situation with real mine-making possibilities. Known as the Trout Creek project, it is three miles south of the Marigold mine in Nevada where a recently completed drill program has confirmed and extended an area of gold mineralization discovered in 1988. Forty-three reverse-circulation drill holes were put down here in January, bringing to 152 the total number of holes on this project to date.

Results indicate a disseminated gold deposit about 1,500 ft. long and 500 ft. wide at depths of 200-400 ft. But additional work will be required to determine if there is continuity of mineralization between drill holes and whether a commercially minable deposit exists, Hecla reports.

The Lucky Eagle company has now earned a 60% interest in this project from Nevada North Resources (VSE) and Welcome North Mines (VSE) through its expenditure of US$1 million on exploration. A further US$360,000 has been alloted.

Quite separate from its Lucky Eagle participation, Agnico operates a new exploration division out of Val d’Or, Que. It presently has eight drill rigs working in the field under David Rigg, its exploration manager.

Three of these are on the gold project of Goldex Mines (TSE) and Ormico Exploration (ME) at Val d’Or, Que., where an underground drive is being pushed into the optioned Ormico ground. Goldex is an affiliated company, in which Agnico holds a direct and indirect interest of 26%.

Another three drills are at work in an on-going investigation of Agnico’s extensive holdings in the general Joutel area surrounding its main Telbel operation, as well as on a large group of claims extending west to the Casa Berardi area held jointly by Agnico with a 45% interest and Cominco (TSE) with 55%.

And two drills are busy in Vezza Twp. on ground Agnico holds under option from North American Rare Metals (ME) and Dundee-Palliser Resources(TSE), confirming a deposit estimated to contain over two million tons grading 0.16 oz. gold. Agnico expects to make an early decision on an underground program here, the ore from which would be trucked to Agnico’s Joutel mill. With the mill currently operating at around 1,250 tons daily, management is anxious to get this up to its 1,800- to 2,000-ton rated capacity to trim operating costs.