Gold production is Queenston’s future, one way or the other
By Kevin Michael Grace
After a $35-million investment by Agnico-Eagle Mines Ltd, Queenston Mining Inc is holding $70 million in cash. So now Queenston faces a dilemma. As President and CEO Charles Page puts it, “Queenston could become a significant producer on its own, or Agnico-Eagle could say, ‘We’re going to take you out at a premium and make all your shareholders happy.’” It’s a nice dilemma to have.
Queenston has a rich history, going back to the 1920s, when it was called Upper Canada Resources. It owned the historic Upper Canada Mine, in Kirkland Lake, Ontario, which produced 3.4 million ounces of gold. But by the time geologist Page became involved with the company, it was little more than a name. He says, “The first property I picked up was in 1979. Long story short, we went from one claim to about 1,500 claims.” Queenston now has a market cap of $395 million.
Agnico-Eagle, on the other hand, is one of the largest mining companies in the world, with a market cap of $13.5 billion. Like Queenston, it has a long history, going back to 1953, when it was called the Cobalt Consolidated Mining Company. Page explains that Agnico may be difficult to pronounce, “Americans call it Ag-Nick-Oh, but Canadians call it Ag-Knee-Co”; but its meaning is simple. “It’s an acronym. In the periodic table, Ag is silver; Ni is nickel; and Co is cobalt. One of their founding properties was in the old Cobalt Mining Camp, which was largely a silver district, and the silver mines always had some cobalt in them and a bit of nickel.”
Agnico-Eagle started with silver, but its focus now is gold, and that’s how it came to be involved with Queenston. “We’ve been talking to Queenston for over a year,” Page says. “They had initially expressed some interest in our Pandora property in Quebec, which adjoins one of their mines in the Cadillac Gold Camp, called the Lapa. They wanted a joint venture with us, but we didn’t want to do that deal. We said, ‘Let’s be creative and think about doing something bigger.’”
Which take us back to Kirkland Lake and the Upper Canada Mine, where it all started for Queenston. The Kirkland Lake Camp is an increasingly familiar story in 21st-century gold mining: a fabulous deposit that was thought tapped out by the 1990s. In 1912, Sir Harry Oakes made Kirkland Lake famous when he found the Lake Shore Mine, which became the second-most productive in the world, yielding 8.5 million ounces. It made Oakes the richest Canadian, and, later, the most notorious, after he was brutally murdered in the Bahamas in 1943—a crime that remains unsolved.
Here we are at $1,300 an ounce, and that’s a huge profit margin—Charles Page
Queenston has the largest holdings in the district, about 200 square kilometres, with a 43-101 resource estimate on all properties of 2.1 million ounces. But as Page explains, “This project wouldn’t make any sense at $400 an ounce gold. Typically, production costs in this area are going to be on the order of $500 an ounce. But here we are at $1,300 an ounce, and that’s a huge profit margin.”
Page believes that “We have the potential to grow this to over eight million ounces over the next couple of years. And that’s something that attracted Agnico-Eagle.” What attracted Queenston to Agnico was this: “We always knew we had the potential to evolve Kirkland Lake to more than a development story, but to move that along we would need some mining expertise. And what better way than a strategic investment from one of the country’s best underground mining companies.”
But even $70 million won’t be nearly enough to bring Kirkland Lake to Page’s goal: a central milling facility capable of producing 250,000 ounces a year. So will Queenston borrow the money and become and independent producer, or will they cash out with Agnico? Page says, “It’s going to take us two years to get to the point of making that decision.” Again, it’s a nice dilemma to have”