Agnico Eagle Mines Ltd. (AEM) released updated resource estimates and an updated mine plan for Detour Lake in Northern Ontario, incorporating its proposed underground mining which will provide early access to a high-grade core at depth. With top management, a solid balance sheet, a clear strategic focus, and low political risk, Agnico is our favorite of the large miners, highlights Adrian Day, editor of Global Analyst.
The Preliminary Economic Assessment (PEA) demonstrates the potential to increase annual production to 1 million ounces when the underground starts in 2030 for the next 13 years.
Agnico Eagle Mines Ltd. (AEM)
The plan is to mine underground concurrently with the open pit, while increasing the mine life another two years to 2054. Agnico has talked about the possibility of 1-million-ounce production from Detour and the PEA provides a clear path to achieving it.
It will spend $100 million over the next three years and $730 million in all. Project economics are solid, increasing production by 27%, with underground costs of $690 per ounce, and, at today’s gold price, an IRR of 25%.
The PEA is further evidence of Agnico’s long-term plans to maximize returns from the assets it acquired with Kirkland, and to remain the dominant miner in Canada. Detour will be one of the top five gold mines in the world.
After a run in AEM’s stock price, we are holding. But particularly for new investors, we would buy on any meaningful pullback.
Recommended Action: Buy AEM on a pullback.
