Oct 27, 2011
Operator
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Agnico-Eagle Mines Ltd.
Third Quarter 2011 Results Webcast Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, Thursday, October 27, 2011, at 11:00 a.m.
Eastern Time. I will now turn the conference over to Mr.
Sean Boyd. Please go ahead, sir.
Sean Boyd
Thank you, Operator, and good morning, everyone, and thank you for joining our Q3 conference call. We got our full team here in Toronto and what I would like to do is take you through a series of slides and then we'd be happy to open it up for questions and talk about Goldex and Meadowbank.
That will be the focus largely of the presentation today as we talk about the impact of Goldex and our decision around writing off Goldex and also talk about Meadowbank and what we need to do there to improve our performance. If we look at the quarter, as a whole, we did have a record cash flow despite some of our challenges at Meadowbank and the decision we made to suspend production at Goldex.
We did see some really good performance at some of our other assets, including Pinos Altos that had record gold production. At Finland, we did a good job reducing our costs.
We'll talk about that as well. We had record throughput.
We maintained our recoveries. At Meadowbank, although we did increase the throughput and our mining rate was up, our cash costs are still too high, and we'll talk about that.
And Goldex, as we've said in our last week's call and we'll talk a little bit about that again today, we did decide to suspend our production indefinitely. And essentially, that results in us taking out one of our better performers.
In Q3, they produced 40,000 ounces at a cash cost of $411 an ounce. So going forward, having to remove one of our lowest cost producers and a steady performer, which is about 15% of our production, is clearly going to impact not only our production but our overall total company wide cash costs.
Look at the financial results. As I indicated, we had record cash flows of about $200 million, about $1.17 per share.
Our production in the quarter was up about 11% from where it was in Q2. So we saw continued improvements in some of our operations at 266,000 ounces.
As we look forward to Q4, we expect our production to be slightly down from the Q3 number and largely the result of the absence of Goldex in the fourth quarter. Our Q3 cash costs were $563 (sic) [$563 per ounce].
If we look out to the fourth quarter, they should be a bit higher than that, given the fact we're removing Goldex's low cost ounces. From an earnings perspective, on a normalized basis, we came in at $0.60.
We have taken a charge for Goldex. The total Goldex charge amounted to, on an after-tax basis, $194 million or $1.14 per share, and I'll talk a little bit about some of those details in a minute.
As far as a breakdown of operating results, we can see the impact of Goldex, again, producing about 40,000 ounces at a cost of $4.11, so that's about 15% of our production. So we lose that going forward.
As we look on out Meadowbank, clearly our biggest producer but also our highest cost producer, so we have work to do there to reduce those costs, being our biggest producer after losing our Goldex low cost ounces. So we'll talk a little bit about what we're going to do there as we go forward in the presentation.
Financial position remains strong, over $100 million in cash. Our long-term debt at $650 million and our available credit facility is over $1 billion available on our credit facility.
Common shares outstanding, about $170 million, fully diluted $187 million, but our warrants and our options are out of the money now. So we'll be looking more at the fully -- or the basic number of $169 million.
Grayd bid, we did amend it, given the impact that Goldex had on our valuation. We essentially just doubled the cash component of the bid.
We would expect that people will take up probably more cash now. What that will do is result in us issuing less shares, likely.
Probably on a fully diluted basis, we have to issue about 1.4% of our float to complete this offer. What this property gives us is something very close to Pinos Altos, where we can use our operating team there to build about 100,000 ounces of annual production at La India with a large land package and discovery on the Tarachi property, which we believe has some good upside and the bid expires on November 18.
As far as the mines go, LaRonde, still a flagship asset, still a strong cash generator. It's in a transition phase now from the upper mine to the lower mine.
That project started about 5 years ago. And essentially, the objective there was to access the higher grade deeper zones below the existing mine area.
And that sets us up for future production growth, where we expect to more than double our output to around 300,000 ounces as we transition -- make a full transition from the upper mine to the lower mine. So that project was on time and on budget and speaks to the technical skills that we have up in that region working on such a complex deep project.
Goldex, as we've looked at it, since we made that decision and talked to experts around the world, it's very rare and unique to have 400 meters of granite in your crown pillar fail. Essentially, we were advised October 12 and 13 in a recommendation and seconded by a second consultant to suspend mining operations at Goldex -- to suspend mucking operation.
We were there this week. We walked along Level 73.
All the draw[ph] points are full. That mine produced right up until Tuesday of last week, at over budgeted or available capacity of over 8,000 tonnes a day.
So it's unfortunate to lose such a strong performer. But when you have 2 rock mechanics consultants recommending that we stop mucking because we still don't understand exactly what happened in the rock mass of the crown pillar, and so their suggestion was that we should stop mucking and investigate and monitor to see exactly what happened, and that's essentially what we did.
We made the decision to recommend to the board to suspend operations. And a day later, the board took that decision.
And the following morning, we had a press release out. So it was within less than a week from getting the recommendations of the consultant that we made the decision, the tough decision and a difficult decision, to suspend mining operations there.
As far as the charge, we took an after-tax charge of write-down of mining assets of $161 million. We took an additional after-tax charge of $33 million for remediation, so a gross amount of $45 million to do additional grouting, monitoring and work in the area for remediation.
As far as the specifics on the action plan, the recommendation, as we indicated, was to stop drawing ore for an indefinite period. And that was really to allow us time to determine what was happening within the rock mass and why it happened.
We've also reoriented the grouting program essentially to protect the surface infrastructure. We're doing that right now.
We're continuing with the geotechnical investigation to really understand what's happening within the rock mass. We're doing monitoring of not just the soil but also the rock.
And we're still evaluating also -- although there's no guarantee that we can go back, we're certainly using our expertise in the region to understand if there is a possibility after we do this investigation phase to sell the Ginnie value at Goldex. So we certainly haven't given up here.
So we're still looking at ways that we can salvage more value there. As far as Lapa goes, a steady-state mine.
The cost per tonne was very steady in the quarter with another quarter below budget. We've had some success on the exploration front.
And we should be in a position to extend the mine life through, at least at this point, to the end of 2015. Kittila in Finland, we averaged 32,000 tonnes a day.
The cost per tonne declined about 16% in the quarter, so our cost control efforts have benefited us. We've been able to reduce our cost per tonne on a euro basis to about $66 a euro down from the high 70s in the last quarter.
Our recovery's 83.5%. We continue to do exploration here.
That's a project where we've had -- continued to have good drill results out on that. And we would look to update the market over the next couple of months on our exploration at Kittila.
At Pinos Altos, a record quarterly gold production, about 53,000 ounces, cash cost below $300 an ounce. Record tonnage, which is up about 28% in a year.
Cost per tonne down 36%. Still exploration potential there.
And again, this team will begin to focus -- assuming a successful transaction with Grayd on the La India project very close to the Pinos Altos mine site. At Meadowbank, although as planned, we got our tonnage up.
Record tonnage at 9,400 tonnes. Cost per tonne remained high at CAD $93 per tonne.
If we looked at a breakdown of those costs, we saw essentially our mining costs to move rock, our site services, our drilling they were on forecast, where we were over our forecast was in maintenance and in the mill. Those costs are just too high.
So it's still going to take us some time to get those costs down on a per ounce basis. Part of that comes from mine sequencing and getting access to higher grade ore.
We're behind in our waste development. We need to catch up.
We're looking at ways that we can catch up on a mine development and waste development, and that will allow to access as we go forward higher grade materials. So that should certainly help us on the unit cost basis.
We're also looking at ways where we can get our maintenance cost down and do better work in the mill and get our costs down in the mill. Meliadine, we continue to drill it.
In fact, we've now completed our 2011 drill program. We've completed our 2011 bulk sample program.
We are awaiting results. The deposit has grown.
As we continue to say this will ultimately be our largest gold producer and likely our largest gold deposit as we continue to make new discoveries along that trend. We're going to continue to aggressively drill it as we move forward.
And we're looking to make a decision on what sort of production we're expecting from this in 2013. And we'll have a bit more color on that likely in February, as we complete our ore reserves and resource calculation and have a better sense of the likely mix of underground and open pit ore as we start that mine at some point in 2016.
So that's our presentation. What we'd like to do, Operator, if we can is open it up for questions.
Operator
[Operator Instructions] Your first question comes from Anita Soni from Credit Suisse.
Anita Soni
My first question is with regard to the LaRonde, I guess the higher costs that you're experiencing there. You quoted the -- or you cited there were high stress extremities at the mine.
Can you talk about where these extremities are?
Sean Boyd
Sure. We're just having a little trouble hearing you, Anita.
But from what I understand, you're talking about mining underground at LaRonde on the extremities of the ore body in the upper mine.
Anita Soni
Yes.
Sean Boyd
Ebe was having trouble hearing that.
Eberhard W. Scherkus
No, the LaRonde mine is in transition. So, as we have said in the past, we are -- we'll be reducing our byproduct to production.
We'll be reducing and to be replaced by higher grade gold ore. So we are mining on the Eastern and Western flanks above Level 152.
And as we get to those specific areas, the ore zone pinches out so we are mining longitudinally. And so they are in areas of higher stress and higher dilution.
And as a result, we also have less flexibility.
Anita Soni
Okay. So it's not as a result of depth that you're having these high stress?
Eberhard W. Scherkus
No, no. This is in the upper part of the mine.
Anita Soni
So it's the lateral extension [ph]...
Eberhard W. Scherkus
Dilution figures are actually at the deepest part of the mine.
Anita Soni
Okay. And then with respect to Meadowbank, you were talking about the equipment availability and the need to winterize the fleet.
Is that something that you're going to have to do every year? I thought you have winterized it last year?
Eberhard W. Scherkus
No. Winterizing are essentially modifications to the equipment of things that we learned last year, and they include things like the cooling systems on the drills, the right radiators on the trucks.
So these are like a one-time items. And they're not like changing the pipes of oils or doing something like you would to winterize a car.
These are actually modifications. And that is also part of the reasons why when we look at our cost per tonne, the maintenance cost is so high.
They include these modifications.
Anita Soni
Okay. So that, that you don't expect to be an ongoing annual issue then?
Eberhard W. Scherkus
No.
Operator
Your next question comes from Haytham Hodaly from RBC Capital Markets.
Haytham Hodaly
Just a couple of quick questions. With regards to some of the expansion and growth opportunities at some of your existing operations, can you just go through just some highlights of where you can see things happening in the next 2 to 3 years?
Sean Boyd
Well, I think we've been talking about a couple of opportunities and one is clearly Kittila. And the question we have there is rates of return versus new drill information, where we're getting higher grade drill results below Rimpi closer to surface.
And so the decision there will be, one, whether we embark on an expansion to roughly 4,500 tonnes a day or do we reinvest those dollars in underground access to find out how big the deposit is before we decide on the ultimate throughput rate. Eventually, we think it goes over 5,000 tonnes a day, but that needs a separate access.
So those are the parts of the puzzle that we're working on right now to try to determine which way we should go. In Mexico, we're looking at a separate underground access at Pinos Altos to expand the capacity of the underground mine.
That's certainly one we're looking at. We haven't given up, although we've suspended Goldex, we clearly haven't given up on that.
And there may be a way to mine the D Zone at some point. And we're going to spend some of our -- the time of some of our current technical service team and the existing Goldex team to think about that.
But this whole question about capital allocation is one we're going through right now. And it involves a number of pieces, and one is the dividend.
And we look at this now with a backdrop of having lost a mine that generated cash flow of roughly $40 million a quarter. So we're mindful that -- we've been on record as saying that we'd like to improve our dividend.
We still feel we can do that. We still need to put emphasis on Meliadine and the exploration and realizing the potential of that.
We certainly need to understand how big Kittila can be in terms of the overall size of the deposit and then ultimately what's the proper throughput rate there. In Mexico, that mine has performed extremely well.
That's one of the reasons why we are looking at the great opportunity because it's a nice tuck-in. But there's still opportunities at Creston Mascota for potential expansion and adding ounces.
So that's one area of focus for us. So all we're really trying to do over the next 2 to 3 months is get the right balance between return to our shareholders and a nice focused tight capital investment program on the assets.
Haytham Hodaly
Okay. That's good.
And with regards to Meadowbank, just briefly, what do we see happening in terms of grades here? I know we're expecting higher grades in the latter part of the fourth quarter.
Is that still the plan here going forward?
Eberhard W. Scherkus
We'll be expecting grades very similar to Q3 to be able to get higher grades. As Sean mentioned, we're behind on our waste stripping.
And as a result, that higher grade ore will not be available to us. It will be available to us perhaps in the second half of next year.
Haytham Hodaly
Okay. And last question, Sean, you touched on the dividend.
When will you guys be reviewing your dividend distribution policy again?
Sean Boyd
Well, right now through the budgeting process, we usually conclude that sometime in December. And traditionally over the last several years, we were able to update the market sometime mid-December.
So we'll certainly be doing that. And part of this review that you touched on, Haytham, on Meadowbank and the sequencing is how can we accelerate waste development to get back on track for the mine sequencing to improve the grade, 'cause that's going to have an positive impact on the cost side.
So that's a big focus of the budgeting process right now as we go through and see what we can do at Meadowbank. Because we were expecting a run rate on some years at over 400,000 ounces, that's been pushed out now.
So we're not going to get there for a while now.
Operator
Your next question comes from David Haughton from BMO Capital Markets.
David Haughton
You've mentioned in this discussion and also your quarterly that you had some lower grade than expected. We heard a little bit about the expectation going forward on Meadowbank.
What about at Lapa? It's around the 6,000 area.
Can you see it going up to the 7,000?
Eberhard W. Scherkus
Lapa will be consistent with its life of mine. We don't foresee any significant uptick in the grade, but that is being made up by higher tonnage throughputs through the mill.
In September, we averaged in excess of 1,850 tonnes per day.
David Haughton
And is 1,850 a sustainable level in your opinion, Ebe, at Lapa?
Eberhard W. Scherkus
Well, I would say that is a record month and it's hard to maintain record month after month. But typically, Lapa has averaged in excess of 1,700 to 1,750, which is sustainable.
David Haughton
All right. And on the topic of throughput, I have noticed that at Meadowbank, it was higher than what I would've anticipated that probably offset that lower grade.
Where do you see that settling out for the next few quarters? Clearly, more than 8,500 tonnes a day?
Eberhard W. Scherkus
Well, in a budget process, we feel that we can maintain an average throughput of 9,500 tonnes for the year. We've done this very consistently.
We've hit peaks or record days of 11,100 tonnes per day. And now we're getting stability on the availability in the 94%, 95% range.
And we still haven't really finished. We still have ideas with respect to optimization.
So the number we are using is 9,500.
David Haughton
Okay. That's quite an improvement over -- what I would expect in -- is helping that offset the low-grade.
The CapEx there was a touch higher for the quarter than I would have anticipated. What sort of expenditure have you got there and what should we think about as a normal go-forward rate?
Eberhard W. Scherkus
Well, I think that is a figure that is currently with what happened to Goldex in transition, and we're reviewing, so I don't think I want to hand out any numbers now because they will be inaccurate and in all honesty, too high. So we are working on that right now.
David Haughton
But I actually meant specifically Meadowbank.
Eberhard W. Scherkus
Meadowbank, there are items right now that are one-time items like the kitchen is in there -- rebuilding the kitchen, that is in there. Extra waste stripping, that is in there.
So we expect to get rid of these one-time items into -- the kitchen will continue in Q4. And we expect to have additional waste stripping, et cetera, during the next year as well as the dyke construction.
And then we expect it to fall off in subsequent years. But next year we'll be heavy with respect to the next phase of the dyke construction and overburden stripping from the Goose Bay area (sic) [Bay-Goose Dyke].
David Haughton
Okay. And by heavy, are we looking at $50 million to $100 million sort of range?
Eberhard W. Scherkus
We're looking at around $50 million to $67 million, in there.
David Haughton
All right. And last operational question is now going back to LaRonde.
CAD $88.00 per tonne in the current quarter? Higher than what we've seen as a normal run rate, notwithstanding the fact that the discussion you had with Anita.
What should we be thinking about it going forward?
Eberhard W. Scherkus
Well, I think going forward, we will be in the $88 to $90 cost per tonne. We're budgeting about a 3.5% increase.
But also in our life of mine plan, LaRonde extension itself, we see a drop down to 6,000 tonnes per day from 7,000 tonnes a day, that's the figure we're working on. So you'll see another increase probably within 2 years as the LaRonde extension ramps up.
David Haughton
All right. Just as a function of fixed versus variable costs?
Eberhard W. Scherkus
Yes.
David Haughton
Now some -- 2 accounting questions. I had seen in the cash flow statement $83 million thereabout for acquisition.
And are there -- what does that relate to?
Sean Boyd
I'm sorry, David, that's mostly Rubicon.
David Haughton
I see, okay, got you. And there's the closure cost which had been identified as a one-off abnormal item.
Whereabouts can I find that in the P&L?
Sean Boyd
That's part of the write down. You'd see that as part of the write down...
David Haughton
Okay. So that's $298 -- it includes partly that write-down -- partly that closure cost?
Sean Boyd
That's right. The $298 includes $45 million of closure provision, which is $33 million after tax.
Operator
Your next question comes from Don MacLean from Paradigm Capital.
Don MacLean
Just on the Meadowbank, a bit more color on the dilution situation. What was the percentage of dilution in the quarter relative -- well, what was it?
And what were you, I guess, targeting? Or maybe you can tell us what the grade you achieved as opposed to what you targeted was?
Eberhard W. Scherkus
Well, all I can tell you, Don, is that over the last quarter, our forecasted grade was a lot closer to the realized grade than ever before. So we really closed the gap on that.
We have made significant improvements in the dilution. And one of the main reasons for that has been blasting.
And we've seen AB videos and the difference is quite remarkable, where we have been able to reduce it from anywhere from 10 meters now down to about 3.5, 4 meters. But in terms of the actual hard dilution numbers, we are still somewhere in the 15 or closer to the 20 range.
Our objective is to get it down to about 10 to 12. So we still got a ways to go, but that is still a significant improvement from the previous 50.
Don MacLean
For sure. And could you touched on, Ebe, maybe some of the thought of solutions you have at this point or how you're going to tackle that to get it down the other 5%, 10%?
Eberhard W. Scherkus
Well, I think part of that is still -- we've had some great improvement with respect to blasting. We're not there yet.
We believe we can still do better. The progress has been amazing.
So we can still be doing that. The other question is also on how do we tackle flat-lying iron formation zones that are at an angle of about 45 degrees in the pit.
We may want to take it in 2 slices rather than take it in 1 slice and end up mucking more waste. And so these are things that we believe we can do.
Don MacLean
And if we go back to the reserve estimates, what dilution is -- assumed in those, Ebe?
Eberhard W. Scherkus
The reserve model contained about -- and depending on the thickness of the vein, anywhere between a 10% to 15%.
Don MacLean
So at this point, they were off by 5% to 10%?
Eberhard W. Scherkus
Yes. And that is sort of the fact that we are incorporating into the 2012 mine plan.
Don MacLean
Is there -- what's the grade deferral? Is there any relationship between that and the excess dilution you're achieving?
Eberhard W. Scherkus
I would say we had 2 issues. One was grade deferral and the other one was dilution.
And grade deferral, that was due to all of the operational errors -- I mean, not errors but equipment issues and winter and fire that we had over the past 12 months. So we just did not move the waste.
So right now, our mining sequence from the original mining plan is out of kilter. And so the 2012 mining plan will then work towards addressing and reestablishing the balance between Portage -- Portage South and then also provide access to the Goose Bay zone.
Operator
Your next question comes from Anita Soni from Credit Suisse.
Anita Soni
Ebe, can you just refresh my memory on how that mine plan deviated from the original, like what happened in the last, I guess, year?
Eberhard W. Scherkus
Well, the mine plan, this mine plan that we -- our bench plan that we worked on, dated back to about, I would say, 2.5 years. And then of course, when we started off and we started having issues with respect to the mill and with respect to getting the ore out originally, well, then we would focus on the higher grade zone.
So if you look at the grades last year compared to this year, so we focused on Portage South and not enough on Portage North. So as a result, all that -- we are a couple of benches deeper on Portage South rather than Portage North.
And that's what we hoped to correct to get the proper blend and combination of South and North.
Anita Soni
Portage North is lower grade or higher grade?
Eberhard W. Scherkus
Sorry?
Anita Soni
Is Portage North lower grade or higher grade than Portage South?
Eberhard W. Scherkus
North is lower grade and it also tends to be more inclined, or not vertical, whereas Portage South, the iron formation is more vertical. So dilution is less of an issue.
Operator
[Operator Instructions] Your next question comes from Steve Butler from Canaccord Genuity.
Steven Butler
Ebe, I know it's only been a week since the discussion last week -- of the unfortunate discussion last week of Goldex. But can you take any -- is there any positives you can say that have had happened at Goldex in last week in terms of stability of rock mass or otherwise, measurements of rock mass movement or otherwise?
Anything you can take as a positive in the last week or so, or have things stabilized?
Eberhard W. Scherkus
Well, there's 2 things that have changed. One, we had a long -- throughout this whole process, we had 2 opposing schools of thought and with respect to water management.
The soil mechanics people, a subsidence people said that we had to inject water into the overburden. And the rock mechanics people said you should not add water because it may cause structural issues or cause other issues.
So we stopped injecting water. And we've clearly seen in the past week that our pumping -- or inflow into the mine has gone from 1,250 gallons -- from U.S.
gallons per minute to just over 800 gallons per minute. So that is a definite positive as far as inflow of water into the mine.
The second thing that we have done, we started drilling on surface. And we've drilled very close to the area of suspected rock failure.
And so far, we have not encountered any failure. And so that is another question mark.
And that's why this decision was so hard. So physical drilling, so far, has not encountered any surface rock failure.
And that is fresh as of 2 days ago.
Steven Butler
Okay. Surface rock failure, i.e even the failure of rock in the units -- above the -- ore body, you're saying?
Eberhard W. Scherkus
Well, all it means is there may not be a chimney up the surface yet. It doesn't mean that the failing mechanism isn't there.
But it may mean that the damage isn't as bad as suspected. But it's early days still.
Operator
Your next question comes from John Tumazos from John Tumazos Very Independent Research.
John Tumazos
Ebe, continuing on the same vein, could you just illustrate where you've encountered contradictory readings from instrumentations in mine at surface, contradictory data sets, conflicting data advice per experts? I kind of sense that you reached a point where the data was either indeterminate or bad and you just called a timeout -- figure out what's going on without exposing anyone to risk wasting resources, et cetera?
Eberhard W. Scherkus
Well, I think the biggest sort of question mark that we've had, John, was the thought that the failure had broken through the surface. And every time that we withdrew from the ore body would result in an equivalent amount of mud or silt or whatever's on surface to flow into the mine, and that would create a hazard.
And also by failing -- the failure would increase and the risk was that the hole might increase. So our -- and in the meantime, we felt there were surface subsidence.
We have injected over 8,000 tonnes of concrete into the various openings. And where we have divergence of opinion, we have not seen any concrete in the underground workings.
We have measured the pH of the water. There has been no change in the pH of the water, including -- despite 8,000 tonnes of concrete being added.
We have seen no silt or whatever or foreign material or detritus in the ore zone. We have flat drill holes over the ore body that have not detected any movement per se.
So a lot of this was based on surface drilling close to top like injection drilling. And that was new information that we acquired from June on -- and we provided to -- I passed it to model.
Plus we have water inflow data, which they incorporated in the model. So we have these really opposite points of view and evidence that weren't really corroborated.
So it was a tough call.
John Tumazos
How lengthy -- or exhaustive a data set along which parameters do you need to accumulate to define how to proceed next...
Sean Boyd
Well, I think the main data that really sort of changed pictures was the results of the rock quality of the surface diamond drilling. And some of that surface drilling indicated rock quality in the form of RQDs in the low teens -- low 20s and that was new data.
And it did not conclude that there was movement. We did not know whether this was originally like that because we were drilling in different locations.
And so that was incorporated. And then also add water to that equation.
Itasca -- originally did not incorporate inflow of water. And clearly, 1,200 gallons plus over a significant period of time has had an impact, according to them.
Operator
Ms. Soni, please go ahead.
Anita Soni
Okay. Just a couple more questions, Ebe.
And so I guess, my question becomes -- were the soil guys talking to the rock guys? I mean, if one is -- the hydrogeologist are telling you to reinject water and the rock guys -- at what point did they tell you not to be reinjecting water?
Is there a remediation issue -- sorry, a remediation measure for the initial thought of that there's been some subtle surface subsidence over the spring?
Eberhard W. Scherkus
This -- of course, there was a communication between the soil guys and the rock mechanics. So this just further corroborates that.
We thought it was surface subsidence issue and that -- and the way to control surface subsidence was to restore the water table and inject it -- the rock subsidence never really entered into the picture because we had received stability reports earlier in the year up to May that indicated everything was stable. So we have -- and we had our own internal people.
So, yes, it's a tough call.
Anita Soni
But I mean -- if you had 2 reports ongoing and you had a hydrogeologist then make a recommendation saying, okay let's reinject water into the surface. And then you're saying Itasca -- never actually modeled additional water.
Why didn't they model additional water, if they were talking to the soil guys who are recommending that you inject water?
Eberhard W. Scherkus
This is an ongoing process, Anita, that started last spring, when we had even more drill hole data. And it was part of a routine inspection.
We do this every year. So we asked them to update their model, their stability model, not expecting to come back with a recommendation of this magnitude.
And in the meantime, all we were trying to do was stabilize the roads, stabilize the buildings. And it was thought to be surface subsidence.
That's what our consultants told us, and we had to inject water.
Anita Soni
And then how did the rock people actually know that the rock masses failed or they just -- it's the RQD and the fact that, at surface, and the fact that you really can't account for 7 meters of surface subsidence with soil alone?
Eberhard W. Scherkus
Well, you can make a case for saying that there are shear zones and the voids we now have are -- have been created by washing out the insight[ph] to material and you can also base it on those voids are created by failure. And it follows the block caving criteria.
So also, there were situations where we could not get a drill hole through this summer and we lost water. So the only way you can't get a drill hole through if there is some [indiscernible].
Operator
Your next question comes from Don MacLean from Paradigm Capital.
Don MacLean
I'm just wondering if Mark could give us a quick update on the Meliadine exploration?
Guy Gosselin
It's Guy, I'm going to correct data[ph] a little bit. We just shut down our drilling program as of early this week.
We add up to 10 raid running this summer over there. We managed to drill a little bit more than the 104,000 meters of draw hole, which is a bit more than what was originally budgeted because over the year, we decided based on good results to extend a little bit the drill program.
We did significant improvement on the camp facility over there. And while currently we're shutting down, trying to winterize -- completing the sampling of the hole, the drill hole.
And we are almost done with the underground bulk sampling program. As you know, we went back underground into the historical drifting that was done over there to expand and drill a bit more of bulk sampling.
All that is almost completed and another week or so to complete the underground development and the main load of the deposit. After that, we have to finish up the sampling and ship all that to all the subsamples that we'll be picking out of the development, will be shipped to the lab.
And we expect that maybe by somewhere in the middle of the first quarter or at the end of the first quarter next year, we'll be able to complete our study on the bulk sampling program.
Don MacLean
And will we hear the results then, end of Q1?
Guy Gosselin
That now, we expect to -- for the bulk sample, we're going to maybe having our internal report during Q1. But regarding exploration results, we're going to be releasing before -- well, during November, we're going to be releasing exploration result while new fresh running[ph] drilling result out of the different deposit we've been drilling on this summer.
Don MacLean
Okay. And maybe just some color, then Guy, about how it turned out relative to what you were expecting in terms of resource expansion?
Guy Gosselin
We're still getting exciting results out of the newly discovered Wesmeg deposit. I think this is very positive.
We know we came from finding more along strike -- along that structure and we are lately discovering some structure in between that Wesmeg deposit and Tiriganiaq. So, the more we drill, the more we find gold all over the place.
Operator
Mr. Boyd, there are no further questions at this time.
Please continue.
Sean Boyd
Thank you, Operator. I'd just like to sum up -- and clearly we're disappointed to have to make a decision like we did at Goldex.
We're disappointed for our employees and our shareholders. As you know, Goldex has been in the Agnico group since 1971, so clearly not an easy decision to make.
But reflecting sort of over the last few days and putting in the context of Agnico's long history, we've been around for 54 years. We started with nothing.
We've had some tough times. We've been able to manage through those difficult times.
And although, again, it is a bit of a blow with Goldex, we sit back and look at something like Meliadine, which will likely be 10-plus million ounces. We've got an asset in Kittila, which could be the same size and has the potential at some point to expand.
We've got a world-class operation in Mexico; that's still growing. LaRonde is still a flagship asset; that's going to produce 300,000 ounces.
So there's really -- a really strong foundation to build on. We've got some challenges at Meadowbank to deal with, but we've been able to overcome a lot of mining challenges in our long 54-year history.
So we expect to do just that here and build on top of that. So on that, I'd like to thank everybody for their participation.
And again, if there's any follow-up questions that you may have on any of these issues, please feel free to give us a call. Thank you.
Operator
Ladies and gentlemen, that does conclude our conference call for today. Thank you for participating.
Please disconnect your lines.