Agnico-Eagle takes off

Agnico-Eagle Mines Ltd. has never been far out of our sights, since field editor Marilyn Scales and I started at Canadian Mining Journal (in 1977 and 1986, respectively). For one thing, Paul Penna, who put together Agnico-Eagle in 1972, was an engaging character. The company itself was interesting: a cost-conscious operator that moved from a dwindling silver camp at Cobalt, Ont., and the then-closed Eagle gold mine in northwest Quebec, to the modest and challenging Dumagami gold mine (later renamed LaRonde) near Cadillac in 1992. The operator took a huge leap of faith by driving an 850-m-long exploratory drift two years later and almost miraculously hitting more ore. The fledgling mine grew and prospered, becoming a real money-maker (revenue of US$432 million in 2007), which has allowed the company to gain control of a 40-km stretch of the Cadillac Trend.

Webegan to notice a change three years ago. The company spread its wings beyond the Abitibi, and started making go-ahead decisions at its other properties. In mid-2005 Agnico-Eagle announced that it would turn its long-held GOLDEX PROPERTY in Val d’Or into a bulk mining operation. In May 2006 it announced the go-ahead of the deep LARONDE EXTENSION, and a month later added that was going to build mines at the nearby LAPA PROJECT as well as the KITTILA PROJECT in Finland. In March the same year it acquired

Drill core from Agnico-Eagle’s mines and projects decorate the company’s head office in Toronto.

the PINOS ALTOS PROJECT in northern Mexico, and the following year decided to build a mine there. In April 2007 Agnico-Eagle acquired the MEADOWBANK PROJECT in Nunavut when it took over Cumberland Resources. It is still awaiting the final permit, but has begun preparations to build a mine there.

At this moment Agnico-Eagle is in full expansion mode. The company that produced 231,000 oz of gold in 2007 from one mine at total cash costs of -US$365/oz is planning to produce SIX TIMES that amount–1.4 million oz of gold–in 2011 from LaRonde and five other mines. No wonder The Northern Miner chose CEO Sean Boyd and president Ebe Scherkus as its Mining Men of the Year earlier this year. As well, the LaRonde mine received the Marc Curriel for mine excellence in Quebec this year, and the company received certification as a “socially responsible company” for its work at Pinos Altos.

This spring, CMJ interviewed four Agnico- Eagle executives at the company’s newly-expanded Toronto head office about how the company has grown and where it’s going. They are Sean Boyd (SB), Ebe Scherkus (ES), Louise Grindon (LG) and Marc Legault (ML). Excerpts from those interviews follow.

CMJ: What is Agnico-Eagle’s way of doing business?

SB: The philosophy of our founder Paul Penna was to keep things simple, but always take the lead from your technical people.

ES: There’s not a lot of hierarchy. Decisions get made quickly in the field with the team.

SB:We take a 10-to 20-year view so we can wait for opportunities, be patient and stay within our skill set. We stay focused. We are not trying to be the biggest. We have been aggressive but financially conservative. That gives us a strong foundation, and the assets to build mines in places with an exploration upside. We’ve never hedged. We’ve paid a dividend for 26 years, a good track record, and increased it last December by 50%. One of our biggest shareholders is Fidelity Trust, and they have been with us since the late 1970s. Shareholders stay with you if they are comfortable with your strategy and you get results.

ES: Our people are our strength. 2001 to 2003 were some of the darkest years we had at Agnico because of rockfalls and depth-related issues at LaRonde. But we had support from the top down. Although we were having operations problems we were looking ahead, doing our homework at Kittila and reconnaissance in Mexico. None of our people were afraid to make decisions; that’s a key to our success.

CMJ: Categorize the company’s mines. Where do they all fit in?

ES: LaRonde and LaRonde Extension will continue to be our flagship operation for many years. LaRonde has produced 4 million oz of gold and has another 5 million oz in reserves. This will be followed by Meadowbank, which has the potential to become a 400,000-oz per year site, and will open up other opportunities in Nunavut. After that comes either Pinos Altos or Kittila; both have great exploration potential. Those three each have the potential to become a 5-million-oz gold producer, and that’s rare. Goldex was a test in patience; it’s unbelievable that we started work on it in 1972 and we had the first gold pour this week. It proves Paul Penna’s motto: “The gold will be there when we’re ready for it.”

SB: When we had gained experience with LaRonde running at 7,000+ tonnes per day, we saw Goldex differently; we saw that it could work as bulk tonnage rather than selective mining. Goldex has been a great story for us and for the town of Val d’Or. It also helped us work with the government to find a solution to an old environmental problem at the abandoned Manitou tailings pond on the other side of the town. [see sidebar on p. 26].

ES: And Lapa is the smallest of them. Each location has its own issues. At Pinos Altos, it’s the terrain, and training the workforce. Kittila is blessed with a highly skilled workforce but the challenge is metallurgical. At Meadowbank, it’s the regulatory system, building a workforce and the location. CMJ: How does Agnico-Eagle keep its personnel and attract an expanding workforce?

SB: It’s a great company, and people tend not to leave. There is a trust factor. It’s a people- driven company; they work well together. We have developed a very unique skill set that doesn’t exist in any other mid-tier company; that’s our strength. Also our exploration team led by Alain Blackburn–he has been here over 20 years and has a nose for gold. Ebe Scherkus is a geologist but a mine builder and operator. They make a good team that can decide if a deposit can be a mine.

ES: We still have the same core group team [who formerly worked under Scherkus when he was the general manager of the LaRonde mine] and we are still operating in the same way, but we’re trying to take it to a new level. LG: Lots of the operating people came from Quebec, especially the Abitibi, and moved up through the ranks. For the new projects, we bought the orebodies and are building the teams by hiring locally.

SB: This company has kept its people and been able to bring in new people because we let people do their job; we expect them to get results.

ES: We keep people by giving them tools: by having growth, they see excellent career potential. As a result we have a very strong team. We’re very fortunate.

CMJ:Were you nervous, when the company began to expand outside of Ontario and Quebec?

SB: No, I wasn’t.We already had the people. We thought we would create more value by using the team that we had put together at LaRonde to build more mines. It’s highly unlikely that we’ll find anything as complex as LaRonde. We picked parts of the world where there is no major cultural clash, political risk or where people don’t want mines. Then we did our homework. We started looking in Finland five years before we made the deal. We took shares in the company, then got on the board. In Mexico we optioned the property, got on the ground for a year, doubled the resource and then exercised the option. We got involved early in Cumberland [former owner of Meadowbank] through Hecla Mining. LG: Our executives go out from head office every month to make sure the operations are using the ‘Agnico way’. Daniel Racine [vice-presi
dent operations] conducts weekly conference calls with the managers from all the operations so they can exchange information and help to solve problems. It’s a team-building exercise.

We will second people as needed. We sent a mill construction expert from the Abitibi to Kittila. People will be sent from the LaRonde mill for startup there. Also we will second mining people and a metallurgist in Mexico. The construction manager there is from the Abitibi.

CMJ: How does Agnico-Eagle handle environmental and sustainability issues?

LG: The environment policy was first signed in 2003 and updated in 2007. It initially came from LaRonde, but is now being reviewed and applied everywhere. We are especially good in water treatment systems. LaRonde has every kind of treatment that you can think of: lime, SO2-air, peroxide, biological treatment and phosphorus removal. Its ore is a big chemical soup, so we’ve gained lots of knowledge, which is a real plus for us.

SB: In the last five years, we’ve been more open-minded about transporting our culture. Our team was largely centred in northwest Quebec, but we can’t expect other places to do things in exactly the same way.

LG: We do not have a very rigid hierarchy, which makes it easier for us to go and work elsewhere. Our motto is “competence and respect”, allowing people to contribute in their own way. We need a social licence to operate anywhere. When we go to a new place, we have to fit in and be part of it as much as we can. Our policy is to strive to have a positive impact, providing jobs, training and contributing to social causes.

CMJ: How is the company preparing for its future?

ML:We have purposely chosen each new mining project in areas that have mining-camp-size potential. We have a $65-million exploration

Marc Legault, vice-president of project development, is a geological engineer. He has been with Agnico-Eagle since 1988, and has held his current position since July 2006. Prior to that, Legault served as manager of project evaluation, mine geologist and later chief geologist at the LaRonde Division, and project geologist at the Val d’Or exploration office.

budget in 2008 with at least 25 drills on projects. Almost $40 million of it is at the projects, focusing on resource to reserve conversion and additional potential.

SB:We are making assessments at our existing projects and looking for opportunities to grow them more. We are also looking at smaller-type acquisitions in a steady, disciplined fashion, but we don’t see anything yet that we need.

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