Denver (Kitco News) -Although Agnico Eagle Mines Ltd.’s (TSX, NYSE: AEM) La India and Goldex projects took starkly different routes towards production, they are both starting first gold pours before the year closes out.
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Sean Boyd, CEO Agnico Eagle
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La India, located in Sonora, Mexico, was quick and generally problem free, while Goldex, located in northwestern Quebec, has essentially been transformed into a new mine since its suspension in 2011.
“La India is a good model for our business, the team is well matched to doing those types of things,” Agnico Eagle President and Chief Executive Officer Sean Boyd told Kitco News on the sidelines of the Denver Gold Forum. "And I think the key message there is to get a mine up and running within two years of acquisitions.
“Goldex is a totally different story,” Boyd continued. “It’s one of perseverance and just sticking to it. We’re not going back to the old mining area, we’ve changed the mining method, we’refocused on satellite deposits.”
La India is slated to have its first gold pour by year-end, a mine that will bring roughly an average of 90,000 ounces of gold annually at average total cash costs around $500 per ounce.
Goldex is expected to have its first pour in early October and the company expects it will produce 15,000 ounces of gold before year-end. Annually, gold ounces produced are expected to average 85,000 ounces of gold per year at an annual average total cash cost of $900 per ounce.
Along with the positive project news, Boyd said Agnico Eagle is always looking for good deals in terms of acquisitions.
“We’re open, that’s how we built this company, through six acquisitions.” Boyd said. “There’s a bit of a template we use - don’t bet the company – so, they tend to be earlier stage where we can get in and use our exploration experience, use our mine building experience and add a significant component to our business.
“Ultimately it comes down to fit. If you can’t manage it once they all fit together, then what good is that?” Boyd said. “We continue to look, we have not stopped looking, in fact that one area where we haven’t reduced resources, is in our project evaluation.”
The company has taken further cost-cutting measures after the initial cuts announced during their second quarter conference call.
“Now we’re going through the line-by-line budget review and we think there’s probably another $30-40 an ounce that we’ll be able to get out of our total cost per ounce,” Boyd said. “And that’s not looking at serious reductions in head count because we don’t have a lot of layers, we don’t have a lot of fat.
“It’s strictly looking at the entire component of our labor costs including benefits and seeing where we can restructure some of those plans,” he said.
Moving on to gold prices, Boyd believes there’s too much focus on the wrong things driving gold.
“Gold prices are going to be fine,” Boyd said. “The North American centric view is that it’s all about Wall Street, it’s all about Bernanke, it’s all about quantitative easing and once QE is over, the gold story is over.”
Boyd looks more towards the Far East as what has been and what will continue to dictate gold prices.
“When we had some outflows on the ETF, move through London, end up in Switzerland, and bars are reconfigured and moved into the Asian market,” he said. “So I think that’s the gold story, it’s not Bernanke, the story is the physical flow of gold is moving. We really don’t feel that the Indian market is at risk of seeing a sharp decline in demand, or the Chinese market is going to see a sharp decline in demand.
“Why would Deutschebank be building the largest vaulting facility in Singapore - 200 tons - this tells you that something profound is happening, regardless of the paper market,” Boyd continued. “And that creates volatility, but we’re in a stage where there’s measured growth in the industry, supply is constrained, central banks are buying, Asian demand is strong and will likely continue to be strong with some volatility.”