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We bought it because we think there’s a potential to find a lot more gold
Sean Boyd, chief executive of Agnico Eagle
“We didn’t buy it for synergies,” Sean Boyd, chief executive of Agnico Eagle, told the Financial Post. “We bought it because we think there’s a potential to find a lot more gold, in a part of the world we already know, and it’s already got infrastructure up and running.”
The property represents the smallest mine in Agnico’s portfolio of scattered operations, mostly in Canada, but also in Mexico and Finland. Boyd said it would attribute capital to explore the geological potential of the land based on the merits.
The company stock fell 2.3 per cent to $93.95 on Tuesday. Meanwhile, TMAC stock jumped 38 per cent to $2.18 on the Toronto Stock Exchange.
Boyd said the company would move slowly. TMAC has long faced operational issues with its mill that have prevented it from recovering the expected amount of gold from its ore, and is currently operating at 40 per cent of its previous capacity. A report last year suggested the operations need $600 million in investment.
TMAC also had roughly $167 million in debt, and about $71.5 million in cash at the end of the third quarter.
Still, the purchase price represents about one per cent of Agnico’s $23.3 billion market cap, and the Hope Bay mine, even at its reduced operating level, could add 100,000 ounces, or roughly five per cent, to Agnico’s expected 2021 gold production of two million ounces.
“We come into it with our eyes wide open because we know Nunavut is not an easy place to do business,” said Boyd, adding that his senior team plans to travel to Hope Bay on Wednesday to assess the property again.