Agnico Eagle Mines Ltd. plans to invest more than $1.2 billion in Canada’s subarctic in the next three years as it builds one new mine and expands another.
North America’s fourth-largest gold miner by market value is moving ahead with plans to develop its Meliadine project and a deposit near its Meadowbank mine in Nunavut, the company said Wednesday in its fourth-quarter earnings statement. The decision will boost Agnico’s gold production to 2 million ounces a year by 2020, about 20 percent more than last year’s output of 1.66 million ounces. “This is very much low-risk, high-quality growth because it’s an extension of what we’ve been doing for the last many, many years,” Chief Executive Officer Sean Boyd said in an interview at the company’s Toronto offices.
Agnico will spend $900 million through 2019 to build a new mine at its Meliadine deposit, located on the western shore of Hudson Bay, about 290 kilometers (180 miles) southeast of its Meadowbank mine, Boyd said. Over the same period it will spend another $330 million to develop Amaruq, a satellite deposit northwest of Meadowbank that will extend that mine’s life by at least six years.
The expenditures will be funded with existing cash, free cash flow and, if needed, funds drawn from an untapped $1.2 billion revolving credit facility, Boyd said.
Previously, the company had said that it had the potential to grow production to 2 million ounces a year by developing assets it already owns. The biggest risk for Agnico in moving forward on any new projects is the cost, Josh Wolfson, an analyst with Dundee Capital Partners, said last week in a phone interview from Toronto. “In addition to that there is execution risk. The more projects you take on, the more risk you take on in terms of execution.”
The company has previously stumbled over its ambitions. Between 2008 and 2010, Agnico struggled to bring five mines on stream, missing production and cost guidance. Mining at its Goldex mine in Quebec was suspended in 2011 because of flooding and rock instability.
“We overestimated our ability to manage logistics and planning and support and that set us back,” Boyd acknowledged. However, the company’s growth strategy during that period included building new mines in new parts of the world and can’t be compared to the Nunavut expansion, he said. “This is totally different than where we were.”