Agnico Eagle Mines' (TSX: AEM; NYSE: AEM) Meliadine mine - it's largest gold deposit in terms of resources - achieved commercial production ahead of schedule and below the initial capital budget, the company reports.
Total construction costs after crediting pre-commercial gold sales came in below the 2017 guidance of US$900 million.
The mine, near Rankin Inlet in Nunavut, is expected to produce about 230,000 oz. gold this year at total cash costs of US$612 per ounce.
The company forecasts total 2019 production of 1.75 million oz. - 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 comments 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 NPV5% for AEM at BMO metal price assumptions."
Agnico acquired Meliadine in July 2010, and wholly owns the 1114-sq.-km property. The board approved construction of the mine in February 2017.
News of Meliadine reaching commercial production sent Agnico's shares up $2.54, or 4.5%, to $59.20.
The gold producer's shares have traded within a 52-week range of $42.35 to $62.80, and the company has a $13.9-billion market capitalization.