Agnico-Eagle in $162.5 million deal to buy Ontario, Quebec assets from Yamana

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The Canadian Malartic Mine near Val d’Or, Quebec will remain a 50/50 joint venture between Agnico-Eagle Mines and Yamana Gold. Source: Agnico-Eagle Mines Ltd.

Agnico Eagle Mines Ltd. [AEM-TSX, NYSE] has agreed to acquire all of the Canadian exploration assets of Canadian Malartic Corp., a company owned equally by Agnico-Eagle and Yamana Gold Inc. [YRI-TSE, AUY-NYSE]. The assets being acquired include the Kirkland Lake and Hammond Reef Gold projects as well as additional mining assets in Ontario and Quebec. The Kirkland Lake project covers 27,291 hectares in northeastern Ontario where key deposits include Upper Beaver, Anoki and McBean, Amalgamated Kirkland and Upper Canada. Hammond Reef is an advanced stage gold project covering approximately 31,145 hectares in northwestern Ontario. It contains a well-defined mineral resource.

The assets being sold are non-cash generating, prompting Yamana to conclude that it could create more value by monetization rather than by exploration and development, Yamana said in a press release. Agnico-Eagle will pay US $162.5 million in cash for the assets, which will not affect the Canadian Malartic Mine and related assets, including Odyssey, East Malartic, Midway and East Amphi. They will continue to be owned and operated jointly by Agnico and Yamana through Canadian Malartic Corp. and the Canadian Malartic General Partnership. The Canadian Malartic Mine is one of Canada’s largest gold mines. It is expected to produce 600,000 ounces annually for the next 14 years.

“The purchase of the CMC asset portfolio enhances are longer-term development pipeline, and provides us with potential production growth post our current mine buildout in Nuvavut,” said Agnico-Eagle CEO Sean Boyd. “The Kirkland lake property package enhances our current mineral reserves and offers near-term exploration upside, while the Hammond Reef project provides good optionality to a potential rise in the price of gold,” he said.

Agnico said both parties have agreed to work together to complete the transaction by March 31, 2018. Under the agreement, if Agnico-Eagle sells any of the Kirkland Lake and Hammond Reef properties during a 24 period from the date of the agreement, Yamana will participate in any increase in net proceeds received by Agnico-Eagle in the sale.

Agnico-Eagle has said it expects to sustainably grow its production to 2 million ounces annually from 1.6 million ounces based on its currently approved pipeline. Production is being generated by new gold mines in the Kivalliq region of Nunavut, about 300 kilometres west of Hudson Bay. They include Meadowbank, which produced 312,214 ounces of gold and 221,000 ounces of silver in 2016; and Meliadine which is scheduled for startup in the third quarter of 2019.

The Medliadine Project has 3.4 million ounces of proven and probable gold reserves. Those reserves are located in the Tiriganiaq and Wesmeg deposits. There are another five deposits located on the property. The initial capital cost is estimated at $900 million. Metallurgical recoveries are estimated at 96%, resulting in average annual production of 400,000 ounces in years two through 14.

The Toronto-based gold mining giant is also bringing on line the Amaruq satellite deposit near the Meadowbank mine. Production Amaruq is set to begin in 2019.

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