How has the underground mine development at Young-Davidson impacted production levels?

We had been working for a number of years on the build out and commissioning of the deep levels of the Young-Davidson mine. This included taking the shaft from 750 meters (m) down to 1,500 m, and building new infrastructure at depth to be able to take the mine from 6,000 tonnes per day (mt/d) throughput capacity, to 8,000 mt/d. Once the infrastructure is in place, it takes some time to ramp up because of the necessary stope sequencing: you need enough stope faces open to supply the ore.

To complete the lower mine expansion, we had planned temporary downtime of our main production shaft starting in late February 2020. Due to COVID-19, this shutdown extended slightly longer than planned into July. During the downtime, we were trucking some ore up the ramp from the upper levels to feed approximately 3,000 mt/d to the mill, and continued to mine ore in the lower levels, but stored it underground. This created an inventory of broken ore, therefore we had a lot of material ready to go once the shaft had been commissioned, and were able to push it through at 8,000 t/d for six weeks straight.

By Q3 2021, we will be able to put 8,000 mt/d through the mill consistently, which will continue for 13+ years. Costs at the mine have come down as we now benefit from economies of scale and a more automated system, which requires minimal handling.

Can you explain how the Island Gold mine has evolved through exploration?

Richmont Mines had already made the discovery at Island Gold, mining a deposit that went back more than a decade, but had not performed impressively, with shallow reserves and mediocre grades. Before we acquired the mine, Richmont had made a series of improvements, including testing at depth to look for higher-grade gold and increased production through the mill from 500 mt/d to 900 mt/d, increased the grade from 4.5 g/mt to 9 g/mt, and raised annual production from 40,000 oz/y to 90,000 oz/y. This was achieved through mining to a depth of 650 m, which is still very low for the Canadian Shield, and this triggered our interest.

Generally, when reserve estimates are modeled by a company the size of Richmont, they take an optimistic view. However, when we looked at Richmont’s model, they were taking a conservative view. Island Gold is now one of Canada’s highest-grade, lowest-cost mines. At the 1,100 m level we are now looking at 19 g/mt average Inferred resource grades below the Eastern extension, up from the 10.5 g/mt average grade from 650 m depth, and 4.5 g/mt at 400 m. The mineral endowment has gone from 1.8 million ounces to 3.7 million oz, as of December 2019. We have not been drilling at the same rate in 2020 because of COVID, but the work that we are doing clearly indicates that the ore body will continue to grow. Our engineers believe reserves and resources could potentially grow to upwards of 5 million oz in the coming years.

What are the latest developments from AGI’s Mexican assets, including the Mulatos mine and the La Yaqui Grande development project?

The Cerro Pelon satellite deposit at Mulatos was brought into production in 2019 and has been performing well with grades consistently higher than what was modeled, which helped contribute to free cash flow (FCF) of US$31 million in Q3. Cerro Pelon also represents the first real greenfield opportunity we have had near Mulatos, as previous owners Placer Dome had not drilled it. Areas like El Carricito and El Halcon hold enormous potential in terms of geologically similar high sulfidation gold deposits.

La Yaqui Grande will be a huge step forward for Mulatos, with 123,000 oz/y average production over five years and an AISC of US$578/oz with initial production expected in Q3 2022. This will keep Mulatos going for another seven years. For context, when we started Mulatos in 2005 it had a six year mine life, so we should have run out of ore by 2011. Here we are in 2020, still mining at 150,000 oz/y run rate, with at least seven years left to run and the possibility to extend through exploration – replicating the success we have had with El Victor, San Carlos and Cerro Pelon.