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Agnico Braves the Cold for Gold

By Christopher Barker - Updated Apr 6, 2017 at 1:36PM

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The search for gold spreads north to the vast tundra.

Seventeenth-century explorer Henry Hudson appeared to have been undeterred by frigid climes during his quest for a northwest passage to Asia. After wintering ashore in 1611, Hudson's crew refused to venture on, and set their captain adrift upon the bay that bears his name.

We find, 400 years later, another type of explorer venturing to the banks of Hudson Bay in Canada's Nunavut territory ... this time in search of gold. Like Hudson, Agnico-Eagle Mines (NYSE: AEM) is pumped up about further exploration in Nunavut after an encouraging success. Agnico's Meadowbank mine achieved commercial production during March, and from here forward is expected to yield some 350,000 ounces of gold per year through 2019.

Agnico recently made landfall with an all-stock transaction to acquire the 88% of the shares it does not already own in Canadian explorer Comaplex Minerals. The miner envisions Comaplex's Meliadine properties near the Hudson Bay coast developing into its launching pad into the next phase of an impressive growth trajectory. With 3.29 million ounces of high-grade indicated resources already in the bag, and a strong stated potential for building reserves through aggressive exploration over the next couple of years, Agnico is clearly positioning itself for another Meadowbank-like gold mine to be built some 300 kilometers from Meadowbank. The company foresees the initiation of a feasibility study before the end of 2011, and will target annual gold production of 300,000 ounces or more beginning around 2015.

Meanwhile, Agnico expects an operating cost at Meadowbank of just $460 per ounce for 2010; which is exceptional for a gold mine's inaugural year. Following a rocky start-up of its Kittila mine in Finland last year, Agnico's on-time delivery of Meadowbank production caps an organic growth spurt that this Fool has considered unrivaled in the gold mining industry (despite a couple of hiccups along the way).

Aside from this incredible breaking saga, one of the more significant stories unfolding in the gold sector for 2010 is an increasing push into northerly climes for gold. Down below the tree line, NovaGold Resources (AMEX: NG) has seen a tremendous thawing of the market's prior cold shoulder, and Kinross Gold (NYSE: KGC) has staked a chilly claim in the Yukon territory. Before long, I believe that speculation will grow regarding the fate of large-scale projects like Seabridge Gold's (AMEX: SA) KSM complex and Silver Standard Resources' (Nasdaq: SSRI) Snowfield and Brucejack properties. Still further south, Taseko Mines (AMEX: TGB) is due to begin construction at Prosperity in British Columbia shortly.

Thus far, Agnico-Eagle stands alone in mining for gold above the tree line. Newmont Mining (NYSE: NEM) is taking a breather on its Hope Bay project to train crews to operate safely at sub-zero temperatures. Already in production at Meadowbank, Agnico is honing a unique and valuable skill set that I believe will give the miner a lasting advantage as these remote deposits beneath the vast tundra witness improving metrics for economic viability.

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Stocks Mentioned

Agnico Eagle Mines Limited Stock Quote
Agnico Eagle Mines Limited
AEM
$50.07 (1.73%) $0.85
Newmont Mining Corporation Stock Quote
Newmont Mining Corporation
NEM
$63.83 (-0.55%) $0.35
Kinross Gold Corporation Stock Quote
Kinross Gold Corporation
KGC
$4.10 (2.50%) $0.10
Taseko Mines Limited Stock Quote
Taseko Mines Limited
TGB
$1.21 (2.54%) $0.03
Seabridge Gold Inc. Stock Quote
Seabridge Gold Inc.
SA
$13.67 (1.71%) $0.23
NovaGold Resources Inc. Stock Quote
NovaGold Resources Inc.
NG
$5.64 (-2.76%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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