Agnico Eagle CEO Sean Boyd sounded relaxed on the company’s Thursday conference call announcing Q4 results. But if the mining boss was jumping for joy on the inside, it would be hard to blame him.
The stars seem to be aligning for Agnico Eagle (AEM-T), which produces two-thirds of its gold from mines in northern Canada. The gold producer logged another year of record gold production, 1.67 million ounces, at all-in sustaining costs of $810, compared to guidance of $850. Agnico also reduced net debt and managed to eke out a net income of $24.6 million or 11 cents a share.
And gold has been an appreciated tailwind of late, surging US$50/oz surge to one-year highs of US$1,247 an ounce Thursday - after briefly spiking past US$1,260. Agnico shares have been on a tear of their own, closing at $49.04 today - near three-year highs - on the back of gold’s advance.
That “US” in front of the dollar sign is a critical detail. With the Canadian dollar stuck below 72 cents US, currency movements offer powerful leverage for Canadian gold miners.
Boyd also focused on plans for the next three years, and Nunavut operations were front and centre. He said Agnico’s Quebec base of operations - it owns Goldex and 50% of Canadian Malartic - is a significant platform from which to build out Nunavut operations.
“It’s a huge cost advantage in an area where we see tremendous potential,” Boyd said of Nunavut.
Agnico Eagle’s Meadowbank open-pit gold mine in Nunavut is the company’s largest producer but is slated to close in 2018. The Amaruq development project, 50 km northwest of Meadowbank, is set to begin producing the following year, and Agnico also has the Meliadine deposit further north. The start-up for Meliadine is now projected at 2020, a one-year delay from prior plans.
If there’s a northern discount for operating in Nunavut, Boyd appears happy to be the guy paying it.
“We have always felt, particularly with the recent success at Amaruq, that Nunavut is a place that we can see ourselves for multi-decades,” he said. “We know we can do business there, it’s open for business.”
Planned infrastructure improvements will make Nunavut an even better jurisdiction for mining companies, he said.
“We know there’ll be additional investments in infrastructure up there, we’ve talked to the government about how that area opens up.”
Boyd said he could see Nunavut operations ramping up to 800,000 ounces of annual production eventually.
“We could see ourselves, five years from now, producing in Canada what we’re producing in our entire company (now).”
Boyd’s bullish comments on Nunavut bode well for other companies operating in the northern territory, including Sabina Gold & Silver (SBB-T).
Sabina is in the environmental permitting stage after submitting their Final Environmental Impact Statement to the Nunavut Impact Review Board in December. Last year Sabina published two Feasibility Studies last year, including an “initial-project” mine option with reduced capex that would focus on mining the high-grade open pits. That mining scenario has a 3,000 tpd mill producing 250,000 ounces annually in years 1-8 of an 11.8-year mine life.
Sabina’s Back River gold district hosts an estimated 5.3 million ounces Measured and Indicated and a further 1.8 million Inferred ounces, at grades above 6 g/t Au.
Sabina ended 2015 with $18.4 million in cash.
Disclosure: Sabina Gold & Silver is a CEO.CA client and the author owns shares. This is presented for information purposes and should not be considered investment advice. We seek safe harbour.