TREND: Agnico increasing its presence in LatAm mining

By
Monday, June 8, 2015

Agnico Eagle Mines is increasing its presence in Latin America through acquisitions of early stage projects.

Last week, shareholders of Mexico-focused junior Soltoro backed a planned takeover by the Canadian miner.

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Under the Cdn$31.6mn (US$25.4mn) deal, Agnico will gain control of Soltoro's El Rayo, El Tecolote, La Tortuga, San Pedro and Quila exploration projects in Mexico's Jalisco state.

The concessions are located close to Agnico's El Barqueño gold project, acquired in its US$180mn takeover of Cayden Resources, which closed in November.

The company plans to develop El Barqueño as its fourth Mexican gold mine, with a US$15mn exploration program earmarked for 2015. Agnico also has the Pinos Altos, Crestón Mascota and La India mines in the country.

BRAZIL, PANAMA

In addition to its growing Mexico portfolio, Agnico recently increased its stake in two other Latin America-focused juniors.

The company subscribed for 62.5mn common shares in Belo Sun Mining, for Cdn$15mn. Agnico now holds about 17.4% of Belo Sun, which plans to advance its Volta Grande gold project in Brazil's Pará state.

The Canadian miner also acquired an additional 13.2mn shares in Pershimco Resources for Cdn$2.24mn, bringing its total interest to 52.7mn shares or 19.9% of the company. Pershimco hopes to begin production at its Cerro Quema gold project in Panama in 2016.

While the investments give Agnico minority stakes in Belo Sun and Pershimco, they could pave the way for full-blown acquisitions in the future should the projects progress as planned.

OUTLOOK

Agnico CEO Sean Boyd has indicated that he is keen to pursue M&As, with Mexico a favored location due to fast permitting and its lower cost of operations compared to the company's northern business (Canada and Finland).

The company could acquire two or three mines or projects over a few years, he said in June 2014.

In addition to Mexico, other potential jurisdictions for investment are Brazil, Peru and Chile, CFO David Smith said in November.

With majors slimming down their portfolios and juniors struggling to raise finance, mid-tier players with strong balance sheets such as Agnico are well placed to snap up bargains in the current depressed market.

Despite closing its biggest ever deal last year (the US$3.64bn takeover of Osisko Mining and its Canadian Malartic mine, a joint acquisition with Yamana Gold), Agnico has the financial muscle to continue to expand its Latin American interests.

The company held cash and equivalents of US$172mn at the end of Q1, with its mines generating healthy levels of cash flow despite weak metal prices.

BNamericas hosts its 3rd Mexico International Mining Summit in Mexico City on June 17-18.