Agnico-Eagle has been evaluating properties in northern Mexico for several years. With its rich geology, low operating costs, political stability and mining-friendly regulatory structure, Mexico is a logical choice to help the company achieve geographic diversity. Production is expected to begin mid 2009. Pinos Altos has probable gold reserves of 2.5 million ounces, 73.1 million ounces silver from 24.7 million tonnes at 3.2 g/t gold and 92.2 g/t silver.
 Pinos Altos is located in the Sierra Madre gold belt, 280 km west of Chihuahua, the state capital. The mineral rights total approximately 11,000 hectares, which are directly accessible by paved highway.
We acquired the Pinos Altos property in 2006 upon receiving encouraging results from a drilling campaign we conducted under an option agreement in place at the time. Since initiating exploration, we have significantly increased gold grades and reserves, and expanded gold zones on the property. In August 2007, a favourable feasibility study led to our decision to commence construction of the Pinos Altos mine. Initial production is scheduled for mid-2009, beginning with ore from the open pit. Underground mining will be phased in over four years. The gold will be processed by conventional milling although a heap leach option is also being contemplated. Gold production is estimated to average 190,000 ounces per year over and 11-year mine life, with expected total cash costs averaging $210 per ounce. Preliminary capital cost estimates to bring the project into production are approximately $230 million. In addition to ongoing exploration on deeper targets in the main Santa Nino and Cerro Colorado gold zones, we are drilling at the new Creston/Mascota area, which we believe has the potential to support a future, stand-alone mining operation.
Approximately 60% of the Pinos Altos mineral resource is located in the Santo Niño zone, along a regional fault zone that holds a number of other known deposits in the area. This Santo Niño zone has thicknesses of up to 45 metres over a length of 2 km, and a vertical extent identified to over 750 metres. It remains open to the west and at depth.
Reserves and Resources
Pinos Altos 2007 Mineral Reserves and Resources
|
Gold
(g/tonne) |
Silver
(g/tonne) |
Copper
(%) |
Zinc
(%) |
Tonnes
(000's) |
Gold Ounces
(000's) |
| Probable Reserve |
3.21 |
92.21 |
|
|
24,657 |
2,547 |
| Indicated Resource |
1.36 |
49.88 |
|
|
6,182 |
270 |
| Inferred Resource |
1.44 |
24.08 |
|
|
12,237 |
568 | *Mineral reserves are not a subset of mineral resources.
Agnico-Eagle reports mineral resource and reserve estimates in accordance with the CIM Guidelines for the estimation, classification and reporting of mineral reserves and resources. The assumptions used for these estimates were $583 per ounce gold, $10.77 per ounce silver, $1.19 per pound zinc, $2.65 per pound copper, and a C$/US$ exchange rate of 1.14. Agnico-Eagle advises investors that while the terms Measured Resources, Indicated Resources, and Inferred Resources are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. The Qualified Person responsible for the Pinos Altos mineral resource and reserve estimate is Daniel Doucet, Ing., Principal Engineer Geology for the Company’s Technical Services Group, Abitibi Regional Office. The effective date of the estimate is December 31, 2007. A cut-off that varied between $4.56 and $28.50 per tonne, was used to determine the mineral resource for open pit and underground, respectively. A cut-off that varied between $6.08 and $18.69 per tonne was used to determine heap-leach and milled reserves, respectively while a cut-off of $38 per tonne was used to determine the underground mining reserve. Except for these differences in the resource and reserve cut-offs, the other key assumptions, parameters and methods used to estimate the mineral resources are essentially identical to those reported in the Technical Report disclosed on SEDAR on September 24, 2007. Issues that might materially affect the Pinos Altos mineral resources and reserves are set out in the same Technical Report.
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