New shaft will extend EU's largest gold mine to 2035

The biggest gold mine in the European Union is getting a new lease on life, thanks to a shaft sinking project that will increase throughput.

Reporting its fourth-quarter and full-year results last Thursday, Agnico Eagle Mines (TSX,NYSE:AEM) said it will invest 160 million euros on expanding its Kittilä gold mine in Lapland, northern Finland, including the construction of a kilometre-deep mine shaft.

"The expansion project is expected to increase the efficiency of the mine and decrease or maintain current operating costs while providing access to the deeper mining horizons": Agnico Eagle Mines 

Lower gold grades in the mining area for 2018 and 19 has meant lower expected production from the mine in the next two years – 10,000 ounces less this year and 20,000 next year. As a result the Toronto-based company approved a plan in 2017 to increase throughput 25% from 1.6 million tonnes per annum to 2mtpa by 2021. Higher rates will be achieved through a new 1.4 kilometre shaft and a modification to the 4,500 tonnes per day mill, as well as other infrastructure and service upgrades.

Agnico Eagle adds the increased throughput rate is further supported by additional drilling that has yielded favourable results in the Rimpi and Sisar zones.

"The expansion project is expected to increase the efficiency of the mine and decrease or maintain current operating costs while providing access to the deeper mining horizons.  In addition, the shaft is expected to provide access to the mineral resource areas below 1,150 metres, where recent exploration programs have shown promising results," the company stated.

The new shaft will have hoisting capacity of 2.7 mtpa (2.0 mtpa of ore and 0.7 mtpa of waste), while the mill expansion involves installation of a secondary crushing circuit, new thickener and reactor capacity, and minor modifications to the existing grinding circuit and autoclave.

The improvements will boost average annual gold production by 50,000 to 70,000 ounces per year starting in 2021.

In 2016 Kittilä, located about 150 kilometres north of the Arctic Circle, produced 202,508 ounces. It contains proven and probable reserves of 4.5 million ounces as of the end of December. Gold deposits were discovered in 1986 by Finnish geologists and underground mining has taken place there since 2010, states a project page.

Agnico Eagle beat its 2017 guidance of 1.68 million ounces by producing a record annual gold output of 1.71 million ounces. All in sustaining costs for the year were $804 per ounce, lower than the most recent guidance of $845 per ounce. The company grew its mineral reserves last year (net of production) by 3.1% to 20.6 million ounces, with grades increasing by about 7.7%, due to the conversion of resources to reserves at Amaruq, in Nunavut, Canada. Gold production is expected to increase in 2018 and 2019 as the Meliadne mine in Nunavut starts up and production at Meadowbank, also in Nunavut, extends into 2019. Production is expected to reach about 2 million ounces in 2020.