The three Quebec gold mines of Agnico Eagle Mines Ltd. will probably escape the $250 million in spending cuts the company plans this year and next to offset sagging bullion and base metals income.
Agnico Eagle, which started producing gold north of Val d’Or in 1988 with the launch of its rich LaRonde mine, has since become an international company with operations in northwestern Canada, Finland and Mexico. It targets overall annual output of 1.2 million ounces within three years.
It had planned to invest $600 million U.S. a year on mine development, but with gold down to about $1,350 an ounce from a peak of almost $2,000 and co-products silver and zinc depressed, Agnico Eagle has cut that number to $400 million.
Most of the savings will come from delays in exploration and mine construction activity outside Quebec, CEO Sean Boyd told analysts Thursday. Year-end completion of a new cooling and ventilation system will boost output from LaRonde’s deep higher-grade reserves next year and the mine will produce 300,000 ounces a year for a long time yet.
The smaller Goldex mine nearby, shut down by rock and water problems in 2011, continues to yield high values in “satellite” areas and drilling continues successfully. It will return to full production next year. Also Lapa, near LaRonde, is showing good drilling results — its mine life is being extended beyond three years.
The global mining industry has been reacting to lower gold and base metals prices in the same way. Goldcorp Inc. is keeping up the pace at its $500 million U.S. Eléonore gold-copper project near Rouyn-Noranda despite major cutbacks in “non-critical” spending in its massive international network. Eleanore’s production shaft has reached 383 metres.
Both companies took big non-cash writedowns in the second quarter, adversely affecting earnings, but they are confident about global economic recovery and rising medium-term demand for gold and base metals. They have ample cash reserves to survive the price volatility.
“Agnico’s $400 million spending estimate is a run-rate based on the existing mines,” Boyd said. “It gives us financial flexibility in a transition period that is focused on returns.”
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