Agnico Eagle Mines (TSX: AEM; NYSE: AEM) reported Friday Meliadine mine—its largest gold deposit in terms of resources — has achieved commercial production ahead of schedule and below the initial capital budget.
With the gold price reaching a seven-week high, Agnico’s shares were up 4.5% to C$59.20 in mid-morning trading on the TSX.
Total project construction costs after crediting pre-commercial gold sales came in at below the 2017 guidance of $900 million.
The mine, near Rankin Inlet in Nunavut, is expected to produce about 230,000 ounces of gold this year at total cash costs of $612 per oz.
The company forecasts total 2019 production of 1.75 million ounces—with its Amaruq deposit on schedule to reach commercial production in the third quarter of the year.
“The successful delivery of Meliadine into commercial production represents a transition phase for AEM as it begins to exit a period of elevated capital intensity and moves towards a free cash flow inflection in the second half of 2019,” Andrew Kaip of BMO Capital Markets commented in a research note to clients.
“In our view, the announcement marks another positive step for the company as it executes on its strategy… Meliadine represents approximately 30% of our project NPV, 5% for AEM at BMO metal price assumptions.”
Agnico acquired Meliadine in July 2010 and owns 100% of the 111,358-hectare property. The board approved construction of the mine in February 2017.
Over the last year the gold producer’s shares have traded within a range of $42.35 and $62.80 per share. The company has about 235 million common shares outstanding for a C$13.9 billion market cap.