Gold Production
Outside-the-box thinking, strengthening, and growth trajectories
With a production value close to US$14 billion, gold is Canada’s most valuable commodity. Québec accounted for 25% of the country’s production in 2021, with close to 1,696,000 oz/Au. New developments and extended mine lives at existing operations in Québec and Ontario are the main factors driving the expected expansion of Canadian gold mining production at a CAGR of 18.7% up until 2026, according to GlobalData. Despite high inflation, decreasing reserves globally, and market interest in battery metals, 2023 was a strong year for Québec’s producers. A high commodity price (with gold teasing the US$2,000/oz mark), central banks buying large amounts of gold, coupled with the new developments, announce the promise of a vibrant production scene in the coming year.
Operational updates
Leading the gold production charge in Québec is Agnico Eagle. The firm produced over 827,000 oz/Au from its three main assets in 2023; the Canadian Malartic complex, the LaRonde complex, and the Goldex complex. With innovation and discoveries bringing all three assets’ mine lives beyond 2030, the future looks bright for the firm, which is particularly intent on leveraging its new underground plan at Odyssey. Having completed the preliminary mining of the Canadian Malartic pit this year, the firm processed the first ore from development and started production in March at Odyssey. The asset has the potential to be the biggest underground mine in Canada.
For gold producers, Québec’s hydroelectric competitive advantage is best illustrated at Newmont’s Éléonore mine. Located north of Montréal, in the territory of the Cree Nation of Wemindji, the underground operation is fully powered by hydroelectricity. Compared to 2022, Éléonore achieved 43% higher gold production in the first quarter of 2023. While the ore is currently processed onsite, Newmont began the development of a fifth mining horizon and a production shaft, both of which will bring Éléonore closer to its full production capacity.
Near Val d’Or city, Eldorado Gold is focusing on the completion of in-fill at Lamaque’s Ormaque deposit, to deliver a maiden reserve in 2024. By the end of 2023, Lamaque is expected to mine and process around 870,000 t of ore. The increase from US$670/oz to US$770/oz in operating cost per reflects the struggles majors have been facing in the past 24 months: cost inflation, a competitive labor recruitment market, and optimizing zones. Hecla Mining, the larger silver producer in the US, generates about 35% of its revenue from La Belle Province. Operating the Casa Berardi mine, the firm’s sole gold asset shut down for several weeks due to wildfires in the province. The operation is still on track to produce at least 110,000 oz/Au by the end of 2023.
Strengthening the gold scene
Agnico Eagle chose both acquisitions and organic growth routes to strengthen its leading gold-producing position in the Abitibi gold belt. In 2022, the firm merged with Kirkland Lake Gold, and in 2023 it acquired the Canadian assets of Yamana Gold, making Agnico Eagle the largest gold producer in Canada, and the third gold producer in the world. Speaking about the firm’s consolidation strategy in the Abitibi, Daniel Paré, VP Québec, explained: “We also have a JV with Maple Gold Mines there, located next to our former Joutel mine. We are always keeping an eye on the radar for potential opportunities.”
In the months to come, majors will be eyeing developers' and juniors’ positions, with extra milling capacity to be filled. For logistical reasons, many neighbors in Val d’Or or the Abitibi are keen on processing ore through the region’s existing mills, which boast industry-high recovery rates. Indeed, with global reserves shrinking, high capex operations, and growing opex costs, feeding producers’ mills will be one of the main stories to follow in 2024 and beyond. As explained by Daniel Paré: “Once we completely transition to underground mining at Odyssey, it will be processing 19,000 t per day, which will unlock 40,000 t per day in excess milling capacity.”
This stance was seconded by Sylvain Lehoux, VP Canada at Eldorado Gold, whose Sigma mill reached an attractive 97% recovery rate in 2023: “We are seeing significant interest from junior miners in using our Sigma mill to process their ore, as the Lamaque operation is surrounded by many neighbors who have made some good discoveries.”
An example of a successful marriage would be that of Gold Fields and Osisko Mining. The former, the top South-African producer, announced its arrival in Québec in style through a JV with a firm part of the province’s finest mining entrepreneurial story, Osisko Mining. In May 2023, Osisko Mining and Gold Fields put pen to paper, and Gold Fields acquired a 50% interest in the Partnership at Windfall in exchange for payments of C$600 million in cash plus C$75 million for the exploration properties. Boasting intercepts of 65 g/t over 6 meters, Windfall is currently scheduled to produce gold towards 2026. Martin Preece, interim CEO of Gold Fields, who will overall spend over C$1 billion in Québec and announced a long-term commitment to the province, explained the marriage terms: “We have been collaborating with the Osisko team for the better part of the year, providing technical input, particularly on the processing side. The partnership is a great marriage where Gold Fields and Osisko’s skill sets greatly complement each other.”
Newmont acquired Goldcorp and Newcrest in the space of four years (with the latter being a US$19 billion transaction) and, like Barrick for instance, sees diversification as a key reason for acquisitions. Bernard Wessels, Newmont’s regional SVP, North America, highlighted the strategy: “Newmont recently entered into a definitive agreement to acquire Newcrest, providing a strong example of the factors that make a good target for Newmont. Adding the gold and copper operations from the acquisition of Newcrest to our portfolio will increase our exposure to copper.”
On Hecla’s side, geology is the first factor making a potential acquisition a good target. CEO Phil Baker shared: “As part of Hecla’s growth strategy, we are looking at M&A and deal-making opportunities, especially projects that are close to Casa Berardi. Hecla first looks at geology as, at the end of the day, it fundamentally starts with the reserves, resources, and exploration opportunities.”
With a pool of great mining stories, shrinking reserves, and input cost inflation, consolidation will most likely remain the best strategy for gold producers in Val d’Or, Chibougamau, and the Abitibi. As put by David Garofalo, CEO of Gold Royalty Corp, which has over 220 royalties in its portfolio and notably a 3% net-smelter royalty (NSM) at the Odyssey mine: “Producers will continue to consolidate with each other to replace their depleting reserves and maintain scale and relevance in the capital markets.”
Innovation for sustainability: investing ahead of the game
In an industry that has often been considered as conservative, Québec’s producers are showing that investment in new technologies is an effective strategy to optimize their processes while decreasing their carbon footprint – this, despite the capital risks associated with early-stage technology investment. Leveraging its culture of thinking outside of the box, Agnico Eagle was the first company to implement an LTE 4G network underground at the LaRonde complex and is currently testing battery electric vehicles (BEVSs) at the Odyssey mine. Touching upon electrification initiatives, Daniel Paré explained the strategy: “We need to invest now, despite the technology not being fully ready, if we want to remain ahead of the curve.”
The use of electric battery vehicles underground will only get more popular in the future as an obvious means to decarbonize mining operations. For the last six years, Hecla Mining has been using automated trucks at the Casa Berardi mine for haulage of approximately 1.7 km. Eldorado’s capital expenditure of up to US$42 million highlights producers’ push in that direction: “We look forward to incorporating more BEVs into our fleets as part of our efforts to continuously improve sustainable mining practices at our operations and project,” said Sylvain Lehoux, VP Canada at Eldorado Gold.
At Éléonore, Newmont already made big strides in the battery space, with sustainability driving operating expenditures. The firm’s Full Potential Program includes the implementation of Sandvik DD422i jumbo bolters at Éléonore and for David Gaudreau, GM of the mine: “Replacing diesel trucks (which currently represent more than two-thirds of the GHG emissions at Éléonore) with battery electric vehicles represents the greatest opportunity for emissions reductions on site.”
Despite the frenzy around mining the metals of the future, gold will most likely remain the lifeline of Québec’s mining economy in the coming years. Over the past century, gold mining’s instrumental role in the socioeconomic development of the province has been unparalleled. Every year, Agnico Eagle injects around US$375 million into the regional economy through employee wages and benefits and paid over US$700 million in mining duties to the Government of Québec in the past decade. Over the same period, Éléonore invested more than US$1 billion to support Cree businesses.
Image courtesy of Eldorado Gold