Agnico’s Boyd balances opportunity with discipline

Mining is entering a new stage. After years of restraint, dealmaking is accelerating. Gold producers are consolidating, chasing scale and locking in long-life assets as prices hover near record highs. But this isn’t like the last cycle. This time, the focus is different. Discipline, jurisdiction and durability are driving decisions, not just growth.

And that’s where Agnico Eagle Mines (TSX, NYSE: AEM) stands out. While others are expanding, the company is making a calculated push, consolidating a major gold district in Finland in a move that could reshape its long-term production profile.

So for investors, the question is no longer just about gold prices — it’s about how capital is being deployed at this point in the cycle.

Devan Murugan: Well, it’s a pleasure to welcome Agnico Eagle Chair Sean Boyd.  Sean, thanks very much indeed for coming in.

Sean Boyd: Great to be here, Devan.

DM: Well, look, these are certainly very interesting times in the mining industry. We’ve seen a lot of dealmaking happening, consolidation, and companies focusing on scale and securing long-life assets.

How do you see this moment in the cycle? What does it look like to you, and where does Agnico fit into it?

SB: Well, it’s funny. We’ve seen multiple cycles over the years. And being in the business for four decades, I’ve seen gold as low as $250 an oz. and as high as $5,600 an ounce.

And so, you still have to run your business. And I think, as you mentioned, you run it in a disciplined way. You run it by following a strategy that’s well matched to your skills and something you’re comfortable with in terms of how you’re building value.

That really doesn’t change.

You’ve got to stay at it. One of our advantages that we’ve had — and that’s just based on strategy — is we were very busy during COVID while others, I think, put their pencils down and weren’t pushing.

We were actually doing deals and working on deals in 2020, social distancing in a way when we were in discussions, and we were adding some important pieces to our business.

We’re really taking advantage of that now with production of around 3.4 million ounces. We can see record earnings in the past quarter.

But again, how do we redeploy it? We redeploy it in a disciplined way.

We could be anywhere in the world. We’re big enough, but we only choose to be in certain geographic regions. And we define it with two simple criteria: What’s the geological potential like? And can we see ourselves building a multi-decade successful business?

And in those regions where we are, we’re doing that. And as you mentioned, in Finland, we like that as a place to do business. The geology is great.

We’ve got a good business in Kittilä, and that consolidation — doing those three deals simultaneously — gives us a large land package, some reserve and resource 50 km away from our operation.

So, that makes good business sense regardless of the gold price.

DM: There’s a lot in there I want to come back to, but let’s touch on those results.

Some very impressive numbers came through. You had roughly $1.7 billion in net income, if I’m not mistaken. But at the same time, Sean, you reiterated guidance. You didn’t raise it.

What’s the thinking behind that?

SB: Well, you can’t go up and down.

We’ve just been consistent over time. I think that’s one of the things that we’ve done well for the last 15 years or so — set targets that were achievable and then just execute and hit those targets.

And I think that makes good sense. You’re trying to eliminate volatility.

Mining’s hard enough. You start complicating things and changing things all the time, you’re just going to create uncertainty.

And we’ve been fortunate that we have a group of assets. Our teams understand them. They know what they’re capable of doing. And they work those assets.

Key for us is exploration investment. We’re spending almost $500 million a year. We’re adding to reserves. We’re converting resources to reserves. We’re growing those deposits. We’ll continue to do that.

So not only record financial results, we’re seeing our deposits grow.

We’ve also got a growth pipeline — an internal growth pipeline — that should take our production over 4 million ounces over the next few years beyond 2030.

So that’s good. Even though we’re a big company, we can still grow.

And that’s because we put those deals together a while ago when gold prices were lower, we got them for a good price, and now we can take advantage of those assets.

DM: It’s interesting you’re talking about growth because production has been softer year-on-year. And that’s not exclusive to Agnico. We’ve seen this production trend across the sector lately. Given those results, people are naturally asking: is this more of a margin story than a growth story?

How would you respond to that?

SB: I think it’s just a high-quality business story that happens to mine for gold.

And that’s what we started decades ago as we said, look, we just happen to be in the gold business. Let’s create the best business we can create that can compete with other businesses in terms of the quality of the investment proposition to investors.

That’s what we have at Agnico.

But we have that added benefit where we’re not too big that exploration doesn’t still move the needle. It does move the needle.

And we can see that with something like Hope Bay.

That’s something we picked up for roughly $250 million four years ago when the federal government said no, the Chinese entity can’t own it.

We did that deal over Christmas and New Year’s in two weeks.

We said our investment thesis was to drill it. We spent a few hundred million dollars doing it.

It’ll come out to be much bigger than it was when we put it on care and maintenance.

So those are the types of things that you do through all cycles.

And we’re in a position to not only provide those quality financial results, keep our costs under control, but still provide a good exploration story and provide the growth with projects that we know well in regions where we have a successful track record of building good businesses.

DM: Well, the fact that you mentioned Hope Bay — let’s stay there for a moment.

It’s a very interesting region right now, the Arctic North, for a variety of reasons. How do you view the way this region has evolved, particularly from a government and infrastructure perspective? What’s happening there at the moment?

SB: There’s a few things. From a country perspective, from a sovereignty perspective in the North, it’s clearly now important. It’s a focus, obviously.

But it goes beyond that because if we’re smart and we’re effective and we’re efficient with our investment dollars, particularly from a government level, then we can set this up for decades of value creation for 40 million Canadians.

So, not only will the communities benefit, not only will our Indigenous partners benefit, but we’ll basically be putting in infrastructure that will allow us to do responsible, sustainable development for decades up there.

And it’s really opening up a vast new area of the country. So that’s important.

You can still get things done. It’s not an easy place to do business because it lacks infrastructure at the moment.

But think about it. We’ve built a business over 20 years. We’ve invested over $10 billion. That business is now roughly a quarter of Nunavut’s GDP.

And so when we look at Agnico and step back, that’s an important part of Agnico’s Canadian business. But we’ve been able to build one of the largest public companies in Canada with roughly 80% of our production coming from Canada, and a big part of that comes from the North.

So it can be done.

DM: Looking back, why do you think momentum was so slow there? And can Canada avoid some of the mistakes of the past?

SB: Yeah, governments have all sorts of priorities.

Governments tend not to think long term. It’s interesting though that our Indigenous partners by nature think long term. Mining companies by nature think long term.

So there’s a good match between our Indigenous partners and the mining industry, which is good.

Governments are pushed toward short-term priorities, and that’s just politics.

But now the bigger picture is for Canada: Let’s focus on what we do well. Let’s take advantage of the opportunities that exist for us as a country. And mining is a big part of that because it basically was one of the key industries that built a successful country.

So let’s get back to doing what we do well and let’s focus on an area that’s largely underexplored, that needs infrastructure, that screams opportunity — not just from a resource development perspective, but from a community perspective and from a people perspective in the North.

Watch the full interview below: