Agnico-Eagle's Quebec gold mine gets the go-ahead
Project, one of five the miner is focusing on, will cost $210-million (U.S.) to build



TORONTO -- Agnico-Eagle Mines Ltd. said yesterday it will go ahead with its LaRonde 2 gold project in Northern Quebec -- but that's just one of five projects the miner is focusing on this year.

The mine will cost $210-million (U.S.) to build and is an extension of Agnico-Eagle's original LaRonde mine, Canada's largest gold deposit.

Chief executive officer Sean Boyd told investors yesterday that the development will be easier to execute because the company can use the same infrastructure, machines and crew that have worked on LaRonde.

"It's that same team that has taken LaRonde from seven million ounces to 10 million ounces, that has a good handle on our cash costs and our operating costs at LaRonde, that will be building LaRonde 2," he said during the company's annual meeting.

"We have the people to make things happen."

The mine will average gold reserves of 3.6 million ounces, in addition to 13 million ounces of silver, 62,000 tonnes of copper and 155,000 tonnes of zinc, the firm said.

Annual gold production is expected to average 320,000 ounces annually with initial ramp-up of gold production occurring in 2011, extending the life of the LaRonde complex to at least 2020.

Annual "byproduct" production is expected to average 670,000 ounces of silver, 4,000 tonnes of copper and 8,600 tonnes of zinc.

Mr. Boyd said the expansion is intended to strengthen the company's gold production base in Quebec, where it is also developing the Goldex project. It will be funded from existing cash and cash flows.

"We're using conservative metal prices to calculate the rate of return there, so we're not going ahead with it just because metal prices are higher. It works at much lower metal prices," he said after the meeting.

On the Toronto Stock Exchange yesterday Agnico-Eagle shares closed down $1.48 (Canadian) or 3.4 per cent at $41.77.

Chantal Gosselin, an analyst at Haywood Securities Inc., said most of the stocks were "correcting," adding that costs at LaRonde 2, for both mining and capital expenditure, were a bit higher than she was expecting.

Agnico-Eagle is also focusing on mines in Finland and Mexico, Mr. Boyd said, as the company "will be moving them all forward at the same time."

He said the combination of the two new Quebec mines, along with completion of feasibility studies for Suurikuusikko in Finland and Pinos Altos in Mexico -- expected in June -- should triple Agnico-Eagle's gold production by 2009.

That means the company isn't feeling pressured by the bigger players, because it has "a full pipeline and we're moving forward on that pipeline," Mr. Boyd said.

The company would consider opportunities to develop a mining camp in Europe or Mexico.

Late Thursday, Agnico-Eagle reported its first-quarter profit more than tripled to $37.2-million (U.S.) from $10.4-million in the same period last year, mainly on a $15.4- million after-tax gain from the sale of securities.

The miner, which reports in U.S. dollars, said earnings for the three months ended March 31 amounted to 34 cents a diluted share, up from 12 cents.

Revenue jumped to $113.6-million from $63-million.

"We had an extremely good first quarter and that was based on realized metal prices that are a lot lower than what we're seeing today, so we're looking forward . . . to increasing earnings and increasing cash flow," Mr. Boyd said yesterday.

For the year, Agnico-Eagle is forecasting production of 250,000 ounces of gold and byproduct production of 5.7 million ounces of silver, about 73,000 tonnes of zinc and over 9,000 tonnes of copper.