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Agnico Eagle sees record gold production
Low Loonie and oil prices help Meadowbank project

Stewart Burnett
Northern News Services
Published Thursday, February 12, 2015

Agnico Eagle saw record gold production in 2014, beating its annual production and cost guidance for the third straight year.

NNSL photo/graphic

Agnico Eagle saw record gold production in 2014, beating its annual production and cost guidance for the third straight year. - NNSL file photo

A company conference call following Q4 2014 results highlighted a number of successes Agnico Eagle achieved in the last year and looked at future plans.

Its record annual gold production in 2014 was at 1,429,288 ounces with total cash costs at $637 per ounce. All-in sustaining costs for 2014 was $954 per ounce on a by-product basis.

Payable production in Q4 was 387,538 ounces of gold at $662 per ounce cash costs.

Sean Boyd, Agnico Eagle president and chief executive officer, said Q4 saw record gold production combined with continued good cost performance.

"That allowed us to exceed our annual production and cost guidance for the third straight year," said Boyd during the call. "Our strong performance in 2014 sets us up nicely to deliver more gold production in 2015. We're looking for 12 per cent more gold production and producing more gold at lower unit costs."

He's looking for 1.6 million ounces of gold in 2015 at cash production costs in the range of $610 to $630 per ounce, and all-in sustaining costs in the range of $880 to $900 per ounce.

Agnico's reserves stand at 20 million ounces, but saw grade increasing at several key mines. The LaRonde mine grade increased to 5.2 g/t, and Kittila went from 4.6 g/t to 4.9g/t.

The company also saw increased reserves, resources and positive permitting progress in Nunavut.

The Amaruq project saw an initial inferred resource of 1.5 million ounces and Meliadine reserves increased by approximately 500,000 ounces to 3.3 million ounces.

"From a resource perspective, we saw a jump in measured and indicated resource up 56 per cent and our inferred resource increased a little over 30 per cent," said Boyd.

In terms of metal mix, Boyd said Agnico continues to see a decline in the importance of base metals.

"In 2014 (base metals) amounted to about one per cent of our total revenue," he said.

Agnico's net debt is $1.2 billion, with $700 million in available credit.

"Our repayment schedule on our long-term debt is very manageable," said Boyd, adding the first principal of $115 million is not due until 2017.

"With increasing production in 2015 projected to come in at lower unit cost than in 2014, we are positioned to continue to grow both our operating cash flow and out net-free cash flow," said Boyd. "As a result of that we maintained our quarterly dividend at eight cents per share."

Agnico's production breakdown is roughly 70 per cent coming from Canada, 20 per cent from Mexico and 10 per cent from Europe.

"I think the importance about the geographical distribution of our production is that we've seen significant weakness and declines in the value of both the Canadian dollar and the Euro against the U.S. dollar, which is a key factor in our U.S. unit dollar cost," said Boyd.

He said there is potential to extend the mine life at Meadowbank because of the weak Canadian dollar and low oil prices.

At Goldex, the company recently drilled in the deep zone and saw results indicating the potential for better grades in its core.

"If we see gold fall to $1,000 an ounce, so down $150 from our calculation at $1,150, we'd see a reduction in reserves of about six per cent," said Boyd, explaining how it's not too sensitive to a decline in gold prices.

"Conversely, if gold was to go up $150, we'd probably see a six per cent increase in the reserve base."

Founded in 1957, Agnico Eagle began gold production at the Meadowbank mine in 2010.

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