LEADERSHIP ‘VACUUM’ IN THE MINING SECTOR
Agnico chief ramping up advocacy on benefits of resource development
TORONTO Two days after a federal election left Canada fractured along regional lines, and divided on many issues including whether to build energy pipelines, Agnico Eagle Mines Ltd. chief executive Sean Boyd said he plans to begin advocating more forcefully for resource development.
The comments came in an interview with the Financial Post on Thursday, when Agnico reported record quarterly gold production of 477,000 ounces, which has helped propel the company’s stock up by 40 per cent this year.
As the company grows into its role as one of Canada’s largest mining companies, Boyd said he plans to be particularly vocal about the need for federal government investment in Canada’s Arctic. His company has spent the past decade building two mines in Nunavut, which still largely lacks roads, energy grids, higher education resources and other infrastructure, and said it plans to use the experience to propound the benefits of mining.
“You’re going to hear a lot more from Agnico going forward,” said Boyd. “We’re going to make a stronger case on the benefits of resource development, whether it’s in speeches, whether it’s media we do or advertising campaigns we do.”
“It’s time Canadian companies stand up and say, ‘Look mining and energy is not all bad,’ ” he added.
Boyd said the difference of opinions about whether to build an extension of the Trans Mountain pipeline — to carry oil out of Alberta — which played a central role in the elections, shows the country needs a better conversation about how its resources can be tapped to create value for everyone.
But he framed his comments, which he has made before, not as a direct response to the election.
Rather, Boyd said there’s “a vacuum” of leadership in Canada’s mining industry now that Barrick Gold Corp. has scaled back its head office in Toronto, and Goldcorp was acquired by Newmont Corp. Meanwhile, other large base metal miners, such as Inco, Noranda and Falconbridge were long ago purchased by foreign companies, which has reduced their influence in Canada.
“It’s almost like we have a responsibility to step up and fill the vacuum because we have 6,000 employees in Canada,” he said.
Boyd, 61, is a certified public accountant who joined Agnico in 1985 after serving as the company’s outside auditor while working at Clarkson Gordon, which is now part of Ernst & Young.
He rose through the company in the ensuing decades, serving as comptroller and chief financial officer before becoming chief executive in 1998.
He said he plans to give a speech at the Canadian Club in November on the need for an Arctic strategy, and in February, to travel to Ottawa to make a similar speech. Boyd also suggested the company will launch a social media campaign but said there won’t be any significant expenditures on lobbying.
The Mount Polley dam failure in northern British Columbia in 2014 — one of the worst environmental failures in Canadian history, which released millions of cubic litres of waste from a copper and gold mine into a lake — as well as a similar disaster in Brazil earlier this year have stained the sector’s reputation, he acknowledged.
But Boyd emphasized that Agnico wants to make a case that Canada can responsibly extract its vast resource endowment, citing its experience in Nunavut where it has built two mining complexes.
“We built this company over six decades going where people wanted us,” he said. “You don’t want us there, we don’t want to go, because mining is hard enough.”
This May, the company opened Meliadine, an underground and open pit gold mine on the western shores of Hudson Bay, near Rankin Inlet, in Nunavut, which it characterizes as its largest gold deposit.
It’s time Canadian companies stand up and say, ‘Look mining and energy is not all bad.’
Agnico expects to contribute 25 per cent of the territory’s gross domestic product next year, and Boyd emphasized that the company is keen to replicate its success in other parts of Canada.
Meanwhile, analysts and investors are enamoured with its performance: Its annual capital expenditures are expected to decline from an average of US$1.05 billion in 2017 and 2018 to around US$790 million this year.
Even as it adjusted its guidance, on Thursday, revising its capital expenditures up from a predicted
US$750 million to US$790 million, analysts such as Citi’s Alexander Hacking target the price to rise an additional 18 per cent and believe it should trade at 2.5 times its net asset value.
“This is a significant premium to peers but justified due to (Agnico’s) quality mines in less risky jurisdictions and strong growth potential,” Hacking wrote.
In the third quarter, the company posted US$311 million in cash flow, ahead of estimates of US$299 million.
Its gold production is also growing from around 1.6 million ounces in 2018, to an expected 1.77 million ounces this year, and a projected 1.95 million ounces in 2020.
Meanwhile, on Thursday, Agnico announced a 40-per-cent increase to its quarterly dividend to 17.5 cents. It marked the sixth-straight year it has increased its dividends, and seventh-straight year it increased its gold production.
In the past year, its stock has risen more than 60 per cent.
It ended the day 6.58 per cent higher at $75.27 in Toronto.