Agnico Eagle Mines (TSX: AEM; NYSE: AEM) reported Friday Meliadine mine-its largest gold deposit in terms of resources - has achieved commercial production ahead of schedule and below the initial capital budget.
With the gold price reaching a seven-week high, Agnico's shares were up 4.5% to C$59.20 in mid-morning trading on the TSX.
Total project construction costs after crediting pre-commercial gold sales came in at below the 2017 guidance of $900 million. Total project construction costs after crediting pre-commercial gold sales came in at below the 2017 guidance of $900 million
The mine, near Rankin Inlet in Nunavut, is expected to produce about 230,000 ounces of gold this year at total cash costs of $612 per oz.
The company forecasts total 2019 production of 1.75 million ounces-with its Amaruq deposit on schedule to reach commercial production in the third quarter of the year.
"The successful delivery of Meliadine into commercial production represents a transition phase for AEM as it begins to exit a period of elevated capital intensity and moves towards a free cash flow inflection in the second half of 2019," Andrew Kaip of BMO Capital Markets commented in a research note to clients.
"In our view, the announcement marks another positive step for the company as it executes on its strategy... Meliadine represents approximately 30% of our project NPV, 5% for AEM at BMO metal price assumptions."
Agnico acquired Meliadine in July 2010 and owns 100% of the 111,358-hectare property. The board approved construction of the mine in February 2017.
Over the last year the gold producer's shares have traded within a range of $42.35 and $62.80 per share. The company has about 235 million common shares outstanding for a C$13.9 billion market cap.
(This article first appeared in The Northern Miner)