CANADIAN MINING PERSPECTIVE: Good news gold, bad news base metals

Let's start with the really good news. Agnico-Eagle Mines of Toronto has declared its 27th consecutive annual cash ...

Let's start with the really good news. Agnico-Eagle Mines of Toronto has declared its 27th consecutive annual cash dividend. The payment of US$0.18 per common share will be made on March 27, 2009, to shareholders of record as of March 13, 2009.


Hearing from an optimistic miner in these times is very good news, indeed.


"Agnico-Eagle enters 2009 with a strengthened balance sheet and the expectation that over the next 15 months we will complete the construction of three more gold mines. We also anticipate further increases in gold reserves and resources in 2009 as we continue with an extensive exploration program on our large gold deposits", said Sean Boyd, vice-chairman and CEO. "We also look forward to providing the results of our ongoing studies on four internal production growth opportunities that give the potential to enhance our superior growth beyond 2010," he added.


Agnico is in the enviable position of doubling its gold output next year and doubling it again to 1.2 million oz in 2010. Cash costs are expected to be less than US$300/oz in 2010, and only US$320/oz from 2010 to 2018.


Base metals producers, on the other hand, are being hit hard by falling metals prices. There are no plans among them to double production. Quite the opposite.


Vancouver's Teck Cominco has announced a temporary shutdown of the Pend Oreille zinc mine near Metaline Falls, Washington. The closure is to begin in mid-February 2009, and will reduce refined zinc production at Teck's Trail Metallurgical Complex in British Columbia.


Acadian Mining of Halifax, N.S., is also scaling back the zinc-lead operations of its Scotia mine. Another 38 operations jobs will be cut, brining number of mine employees to 70 people. The company embarked on a cost-cutting program in October 2008. A revised mine plan is being implemented to recover currently developed run of mine ore and lower grade material at surface with zero strip ratio. Acadia says it needs a "significant rebound" in metals prices to operate beyond the end of Q1 2009.


In Sudbury, FNX Mining has suspended all ore production from its Levack and the adjoining McCreedy West nickel mines. Late in October, the company announced partial suspension of mining at the Levack mine. This recent decision leaves the company with no ore production. The shutdowns will continue indefinitely, pending recovery in the nickel, copper and precious metals markets. The suspension affects 39 staff and 248 hourly employees. FNX plans, however, to continue development of the advanced, high-grade Levack Footwall deposit for production in 2010.


At the Endako molybdenum mine in British Columbia, 75%-owner Thompson Creek Metals of Toronto, has reduced its capital expenditures plans, necessitating a delay of the expansion project. Capital spending in 2009 is budgeted at $69 million, $33 million of which is the company's share of the Endako expansion. Previously, Thompson Creek was planning capital expenditures of $600 million over the period 2008 to 2010 that would have included $280 million toward the Endako expansion and $109 million for development of the Davidson moly project.


Vancouver's Roca Mines, owner of the MAX molybdenum mine near Revelstoke, B.C., has extended the planned holiday shutdown of the concentrator. It began on Dec. 12 and will continue until Jan. 19, 2009, rather than restart on Dec. 29, 2008. The extension is the result of a rockfall that occurred underground in the stope development area of level 875 on Dec. 4. Meanwhile, the moly price has dipped to between US$11 and $20 per lb, as low as it has been in four years, although some analysts are predicting the price could jump to over US$40/lb in 2009.


I wish more mines were in a position like that of Agnico-Eagle to pay dividends and double production. Meanwhile, the suspensions represent each company's desire to conserve cash so that they can get back in the game when metals prices go up again.


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