Agnico forecasts falling output, rising costs at Mexican mines
Agnico Eagle Mines said its Mexican production will decline over the coming three years, with costs rising in 2017.
The company produced 355,230oz gold at its Pinos Altos, Creston Mascota and La India operations in the country in 2016, beating guidance of 320,000oz.
But Mexican output is forecast to decline to 310,000oz this year, 315,000oz the following year and 290,000oz in 2019.
Guidance for 2017-18 is down from previous guidance of 320,000oz and 335,000oz, respectively, due to mining sequence changes at Pinos Altos and La India and reduced mining activities at Creston Mascota in 2018.
RISING COSTS
The Toronto-based company expects a sharp increase in costs at its Mexican assets this year. The three mines are among the country's lowest-cost producers.
Cash costs are forecast at US$553/oz in the country in 2017, up from US$390/oz last year. Cash costs at Pinos Altos will rise to US$474/oz from US$356/oz, the company said. At Creston Mascota they will rise to US$812/oz from US$516/oz and at La India they will swell to US$583/oz from US$395/oz.
Agnico produced 1.66Moz gold in 2016, down from 1.67Moz the previous year, at cash costs of US$573/oz, down from US$567/oz.
Companywide output is expected at 1.55Moz this year, 1.50Moz in 2018 and 1.60Moz in 2019, rising to about 2.00Moz in 2020 driven by new mines in Canada.
EXPLORATION UPSIDE
Agnico plans to expand Creston Mascota following exploration success at the nearby Bravo and Madrono properties, which could see operations extended beyond the current mine plan, CEO Sean Boyd told the earnings call.
Reserves and resources are growing at La India, with exploration being extended beyond the current mine area, Boyd added.
In addition, the company has 14 rigs drilling at the El Barqueño project. Agnico expects to mine at least two pits at the Jalisco state project, the CEO said, potentially providing additional output from 2021.
Agnico plans to spend US$26.8mn on exploration in Mexico this year, including US$9.70mn at El Barqueño plus, US$1.30mn on capitalized drilling.
Reserves at Agnico's Mexican properties increased to 2.55Moz gold at end-2016, up from 2.50Moz the previous year.
EARNINGS
Agnico reported net income of US$62.7mn for Q4, compared to a net loss of US$15.5mn in the same period of 2015. Excluding non-cash items, adjusted net income for the quarter was US$4.50mn.
Full-year net income was US$159mn, up from US$24.6mn, mainly due to higher gold and silver prices.
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