Agnico drills prospects across Canada, Sweden and Mexico

VANCOUVER — Agnico Eagle Mines (TSX: AEM; NYSE: AEM) has reported another strong quarter to start 2016, and it is giving the market a more detailed look into its exploration portfolio that hints at an equally bright future.

Agnico tabled first-quarter production of 411,336 oz. gold at by-product, all-in sustaining costs (AISC) of US$797 per oz. gold. The company is on track to hit the upper end of its annual guidance of 1.53 million oz. to 1.57 million oz. gold at AISCs of between US$850 and US$890 per oz. gold.

Quarterly net income totalled US$28.7 million, or 13¢ per share, with cash from operations pegged at US$146 million. The result marks the sixth straight quarter that Agnico has lowered its debt, which fell by US$89 million to US$923 million.

“We continue to make progress on several fronts: production, cost, exploration and development, and financial flexibility,” president and CEO Sean Boyd said during a conference call. “The solid performance helped us improve financial flexibility, and we declared a quarterly dividend for the 34th consecutive year.”

Agnico enjoyed a particularly strong quarter from its Pinos Altos and La India operations in Mexico, which produced nearly 88,000 oz. gold and 752,000 oz. silver. Total by-product cash costs were only US$364 per oz. gold.

Agnico has benefitted from a diversified production base and a portfolio of high-grade gold operations, but it has also showed a propensity for timely acquisitions and brownfield discoveries.

Moving material at the Meadowbank gold operation in Nunavut. Credit: Agnico Eagle Mines.

Agnico’s  highest-profile exploration success over the past few years is the Amaruq gold deposit, which could extend the life of the Meadowbank mine in Nunavut, which faced closure in 2018.

The Amaruq property covers nearly 190 sq. km, 50 km northwest of the mine site. The Whale Tail zone is the largest of six mineralized zones discovered to date, and a 75,000-metre drill campaign has indicated “gold-bearing zones that are all open along strike and at depth.”

A 2016 drill program at Amaruq is focused on locating a second open-pit source of ore. Credit: Agnico Eagle Mines.

“We’ve got a heavy program at Amaruq, and we continue to receive good results,” Boyd said. “At Whale Tail we’ve encountered better thicknesses, which is important for the mining rate there. We have the large mill at Meadowbank, so the thicker the deposit, the higher the mining rate to take advantage of the available capacity at the plant. And we’ve moved some of our rigs from other parts of the property to locations where we see higher-grade, visible gold in shallow drilling.”

Recent drill highlights from Amaruq include: 12.1 metres of 22.7 grams gold per tonne from 66 metres deep in hole 16-654; 16.1 metres of 42.9 grams gold from 91 metres deep in hole 16-643; and 20 metres of 10.8 grams gold from 300 metres deep in hole 16-601.

Amaruq hosts nearly 17 million tonnes grading 6.05 grams gold per tonne for 3.3 million contained oz. gold.

Agnico’s Barsele project in Sweden is another up-and-comer. The company acquired a 55% interest in the asset in mid-2015, and can earn another 15% by completing a prefeasibility study.

Location of the Meadowbank operation in Nunavut. Credit: Agnico Eagle Mines.

Barsele features intrusive-hosted gold zones in the Central, Avan and Skirasen areas, and Agnico sees broad similarities to its Goldex mine in Val-d’Or, Que.

The company released inaugural assays from a 13,300-metre program at the property highlighted by: 84 metres averaging 2.07 grams gold from 339 metres deep in hole 15-016; 79 metres of 1.25 grams gold from 400 metres deep in hole 16-005; and 27 metres of 3.06 grams gold from 276 metres deep in hole 16-001.

“We had been looking for an opportunity in the region for a while, but it wasn’t until last year that we found something to really get excited about at Barsele,” Boyd said. “It has similarities to Goldex in terms of grades and thicknesses, and the large nature of the structure. We believe we’ve connected the central zone and another zone there, with good thicknesses and grades. We’re off to a good start.”

Agnico will also complete a 60,000-metre drill program at the Odyssey property — which is part of the fifty-fifty Canadian Malartic mine joint venture with Yamana Gold (TSX: YRI; NYSE: AUY) — and 25,000 metres at its El Barqueno project in Mexico.

Visiting the central zone at the Barsele gold-base metal project in Sweden, 600 km north of Stockholm. Photo by Ben Whiting.

“We certainly had a sense when we became involved with the Canadian Malartic opportunity that Odyssey could be important,” Boyd said. “At El Barqueno we discovered two mineralization areas, but we have some surface rights to tidy up in those areas before we can really talk about it.”

Resources at El Barqueno include 19.7 million tonnes at 0.96 gram gold, 5.78 grams silver and 0.2% copper. In-situ metals total 3.7 million oz. silver and 608,000 oz. gold.

Targets at the El Barqueno project in the Guachinango Mining District in the State of Jalisco, Mexico. Credit: Agnico Eagle Mines.

Agnico has traded within a 52-week window of $27.63 to $59.85, and closed at $58.12 per share at press time. The company has 221 million shares outstanding for a $12.7-billion market capitalization.

Scotiabank analyst Tanya Jakusconek noted that Agnico had a “stonger quarter than expected,” and management says the Amaruq deposit could support a 9,000-tonne-per-day mining rate. Scotiabank has a “sector outperform” rating on Agnico, along with a US$36.50-per-share price target.