National Bank analyst Mike Parkin thinks Agnico Eagle Mines Ltd.’s plan to add an underground mine to its flagship Detour Mine in Northern Ontario is “a good move by management, as it should prove relatively low-risk to execute on and brings access to higher valued tonnes sooner in the mine life, and thus boost medium-term cash flows.”
Updating his estimates to account for the latest life-of-mine plan for Detour, Mr. Parkin said he’s “upside to come.”
“The additional capital requirement of the u/g is also spread out over multiple years, allowing the company to finance the development through cash flow from operations,” said the analyst. “Ongoing exploration work continues to support the potential for significant resource growth in the u/g to the west. The LOM update did prove modestly negative to our prior NAV estimate due to the higher capital intensity for the open pit, offset somewhat by the quality u/g project now factored in. Overall, we view the LOM update for the Detour Lake asset as a good first step in identifying the potential of the u/g, and we believe future updates could prove positive with respect to building back up the NAV/sh of the company.
“Our analysis shows that additional tonnes discovered for the u/g should prove more economic vs additional open pit tonnes (assuming similar grades for each on a go forward basis). As management noted, there exists a considerable mineralized envelope to the west of the current u/g resource shell that should significantly boost the overall underground resource as infill drilling work is completed.”
Mr. Parkin reiterated an “outperform” rating and $104 target for Agnico shares. The average is currently $106.19.
Elsewhere, Eight Capital’s Ralph Profiti kept a “buy” rating and $105 target.
“[The preliminary economic assessment (PEA2024)] demonstrates the potential to increase Detour Lake gold production to an average of 1Moz per year over a 14yr period starting in 2030,” he said. “The underground project provides earlier access to a high-grade core of mineralization at depth below the reserve pit through underground development and displaces lower-grade open-pit production at the end of mine life. PEA2024 also sets the stage for future underground expansion along the western plunge of the mineralization. PEA2024 assumes an underground mining rate of approx. 11.2Ktpd (4Mtpa), mill expansion to 79.45Ktpd (29Mtpa) starting in 2028, and a mine life extension to 2054, with an expected annual gold production increase of 300koz per year from 2030-2043 to reach a 1Moz annual gold production (up 43 per cent vs. 2024-2029 production).”