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Agnico Eagle CEO explains company’s sudden interest in Hope Bay

When TMAC Resources announced in January 2020 that it was prepared to sell its assets to a larger company, only China’s Shandong Gold Mining stepped forward with a bid.

After the federal government rejected that deal in December, Toronto-headquartered Agnico Eagle announced it was making an offer 20 per cent higher than Shandong did – $286.6 million compared to $230 million.

Agnico Eagle CEO Sean Boyd says the company would like to see “significantly higher” Inuit employment at Hope Bay as mine production expands.
photo courtesy of Agnico Eagle

Agnico Eagle’s appetite to acquire the oft-troubled Hope Bay project at a premium are multifold, according to CEO Sean Boyd.

TMAC made a number of operational improvements at the Doris gold mine over the past year, boosting efficiencies and generating cash, said Boyd. That drove up the value of the property and, consequently, Agnico Eagle’s bid, he explained.

Another factor was that, when TMAC went up for sale a year ago, Agnico Eagle was focused on resolving start-up challenges on the ground at its Meliadine gold mine and Amaruq gold deposit in the Kivalliq.

“It wasn’t the right time for us to take on something else in Nunavut,” said Boyd, adding that Covid emerged a short while later.

Something else that changed was the federal government’s mindset regarding mining in Canada’s North, according to Boyd. Following the offer from Shandong and the subsequent national security review, Ottawa “realizes there’s significant opportunity in Canada’s North,” he said.

Some initial ideas have been exchanged on the need for federal investment in infrastructure in the North, he said, citing renewable energy such as wind farms, high-speed internet and training programs for employees as examples.

“One of the things Agnico has learned is that we like to do a lot but we can’t do everything. We need partners to work with us to improve the investment climate and improve the conditions there,” said Boyd.

Existing mines and advanced exploration projects in Nunavut.
image courtesy of Agnico Eagle MInes

“I can tell you that it’s totally different (with the federal government) than it was a few years ago where it was a struggle to get them to pay attention to what we were doing up in Nunavut,” he said. “They are actively engaged and have been over the last year or so.”

The rate of Inuit employment at Hope Bay has ranged between 11-15 per cent. Boyd said Agnico Eagle will require more workers as it expands production at the site and he wants the Inuit workforce to “increase significantly.”

The return date for Nunavummiut miners, who were sent home with pay in March due to Covid, is still undetermined, and Agnico Eagle is awaiting signals from the chief public health officer.

“Our objective is to get everybody back as quickly as possible,” Boyd said, adding that sorting out employee compensation long-term at Hope Bay remains to be negotiated.

Higher costs at Hope Bay

Boyd acknowledged that Hope Bay comes with some obstacles, namely escalated expenditures. The break-even point for selling gold from the Doris mine is higher than US$1,000 per ounce whereas it’s only about US$700 per ounce at Meliadine, an “order of magnitude difference,” Boyd said.

Gold was trading at more than US$1,900 per ounce on Wednesday.

“In the event the gold price goes down – we don’t think it will but it can; it’s a commodity – this mine would struggle, so we’ve got to really look at the cost structure,” he said.

Part of Agnico Eagle’s objectives on that front will be to identify synergies with its two Kivalliq mines, tying in transportation, logistics and planning as it integrates Hope Bay.

Tom Hoefer, executive director of the NWT & Nunavut Chamber of Mines, also pointed to those “economies of scale,” and said Agnico Eagle can leverage the same environmental, social and governance programs they have already established in the Kivalliq region.

“It is good news!” Hoefer said of the pending transaction between the mining companies. “Agnico Eagle has both the mining and specific Nunavut technical expertise and the financial resources necessary to continue the development of the Hope Bay project… with their proven Arctic experience and gold mining expertise, we believe they will maximize the opportunities and benefits from Hope Bay for Nunavummiut, the Kitikmeot region, Nunavut and for Canada.”

With all of the exploration potential at Hope Bay, there’s a possibility that mining could continue for 50 years, added Jason Neal, TMAC’s CEO.

Hoefer underscored that point.

“The Hope Bay greenstone belt is rich in gold and offers long-term mining potential that TMAC had begun tapping into,” he said.

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