Agnico-Eagle poised for record exploration spending

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Agnico-Eagle Mines Ltd. (AEM-TSX, AEM-NYSE) has released an update on its 2021 exploration program, saying it plans to spent $163 million on exploration this year, marking the highest amount in the company’s history.

At its operating mines, Agnico expects to replace about 50% of its 2021 reserve depletion (implying about 1.1 million ounces of gross reserve additions), while increasing total resources. These additions will come mainly from underground operations.

Agnico and Kirkland Lake Gold Ltd. [KL-TSX, NYSE, KLA-ASX] recently agreed to combine their operations in a merged company that will continue under the Agnico-Eagle name.

The companies said the deal is valued at $13.5 billion and will create the gold industry’s highest-quality senior producer with annual production of 3.4 million ounces in 2021. The combined company is expected to have the lowest-all-in-sustaining costs per ounce of the senior gold producers.

The merger is expected to leave Agnico with $2.3 billion of available liquidity, a mineral reserve base of 48 million ounces.

A precious metals producer since 1957, Agnico’s operating mines are located in Canada, Finland and Mexico. The company also has exploration and development activities in each of those countries as well as in the U.S. and Colombia.

Kirkland Lake Gold is a senior gold miner with operations in Canada and Australia. It has set a production goal of 1.3 million and 1.4 million ounces of gold this year, output that is anchored by three key operations, including the Macassa and Detour Lake mines in northern Ontario and the Fosterville Mine in Victoria State, Australia.

Meanwhile, Agnico has budgeted $11.9 million for underground drilling at the Canadian Malartic mine in Quebec. The 2021 program is mainly focused on the East Gouldie deposit, including infill drilling of the core of the deposit, expanding the resource envelope, as well as testing the extension of the deposit.

The company has also budgeted $16.2 million for 70,000 metres of drilling at the Hope Bay project in Nunavut where the focus will be on increasing resources at the Doris and Madrid deposits. Meanwhile, a review of historical estimates for mineral reserves and mineral resources at Hope Bay is ongoing, the company said.

The Hope Bay property covers a greenstone belt, which is 80 kilometres long and 20 kilometres wide and includes three camps with significant infrastructure, including 2,000 tonne-per-day processing plant, and underground developments at the Doris and Boston mines.

Agnico has budgeted $14.3 million to complete 74,500 metres of drilling at the Kittila mine in Finland, where the focus this year is to demonstrate the economic potential of the Sisar zone as a new mining horizon below the current mineral resources limit a 1,540 metres depth.

The company has announced a new target area below the shaft, which is currently under construction. Exploration in that area returned 12.8 g/t gold over 3.1 metres at a depth of 1,209 metres and 3.3 g/t gold over 3.5 meters at a depth of 1,390 metres.

On Wednesday, Agnico-Eagle shares advanced on the news, rising 0.46% or $0.30 to $65.07. The shares are currently trading in a 52-week range of $109.99 and $62.28.


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