Despite 1988 loss, Agnico announces big exploration plan

What didn’t appear in the 1988 operating results was the sale of the company’s real estate investment which yielded a before-tax profit of $11 million in just 2 1/2 years, the meeting was told.

But Agnico’s real jewel is the 43% interest it holds in Dumagami Mines (TSE), a company it has managed and financed over the years and with which it will soon merge. Exceeding all expectations, it is already in the throes of a $12.6-million expansion to raise underground production from 1,500 to 2,000 tons daily, as well as an ambitious exploration program of its own.

Despite loud pre-meeting cries from a Montreal group over the terms of this planned amalgamation, not a word of criticism was heard from the floor when Penna announced that the marriage is proceeding on the basis of 1.7 shares of Agnico for each Dumagami share. Already approved by both the Toronto and Montreal stock exchanges, it will have to be registered with Washington’s Securities and Exchange Commission because of the many U.S. shareholders of Agnico. This is a time consuming process, so it will likely be early fall before it can be completed. The merged company could be producing up to 200,000 oz gold annually by 1991, the meeting was told.

“Bad ground is nothing new to us,” Anton Adamcik, general manager of the gold division said in reference to the problems encountered at the Telbel operation. Changes have already been made that are raising grade. But these have also raised operating costs, he added, which are now being vigorously attacked. Importantly, ore reserves here are being maintained, standing at 2.2 million tons grading 0.193 oz.

With the exception of the Langis project, mining operations at the company’s silver division are pretty well on hold awaiting an upturn in the price of that metal, or the discovery of a more cost-effective orebody. However, hopes are high for the development taking place from a 2,000-ft drive on the 4th level from the new $9-million Penna shaft. “We are getting some real encouragement. We are going to find a mine here,” said John Young, mine manager of this division.

Agnico has two other sizeable exploration plays that will bear watching. Working out of Val d’Or under Exploration Manager David Rigg, this new division will focus on the company’s very extensive holdings in the general area of its Joutel operation where it will be spending some $3 million annually for the next 10 years.

Two surface diamond drills are currently working in an unexplored area 2,000 ft east of the Telbel mine where two holes — 0.152 oz over 25.8 ft and 0.148 oz over 19.7 ft — hold the potential of a repeat of the Agnico-Eagle ore deposit. A lot of work is also to be carried out in Vezza Twp. where drilling last winter around the Allard River gave some highly interesting results on strike and adjoining a large group of claims recently taken under option from North American Rare Metals (ME) and Dundee Palliser Resources (TSE). (N.M., July 10/89) “This is a new area with a lot of potential. There’s smoke here,” Rigg told the meeting.

The other on-going play is its association with Hecla Mining Company and Lucky Eagle Mines, the recently formed joint venture company that gives Agnico an entry into the booming U.S. market. Initially, Hecla is putting 15 properties into the new company and seven by Agnico. Soon to go public, it will be spending $3 million this year. Agnico has a 15-man crew on sight in the Northwest Territories where it expects to start drilling within three weeks on a high grade Lupin-type gold show, Riggs reported. And within six weeks drilling is expected to start on a 100,000-acre permit now being flown in Saskatchewan. This is a grassroots project targeted for sulphide type deposits, Rigg said.

Shareholders approved the adoption of a “poison pill” rights plan which would make it almost impossible for any hostile attempt to take over the Agnico or Dumagami. “I am not interested in being awarded any golden parachute before being kicked out and made a dead duck by some takeover artist,” Penna said.

Lewis Gilbert, an American shareholder’s rights activist and perennial attender of Agnico’s annual meetings asked about the status of the legal proceeding launched by Noranda over the sale of 1,455,163 Dumagami shares to Agnico in 1986. In response, Agnico solicitor Irwin W. Fefergrad expressed disappointment that this case did not proceed in June as slated, when Agnico appeared with a massive 47 volumes of material. It now looks like the latter part of October. “A lion never growls over a plate of straw, but if it’s a plate of meat * * .,” quipped Penna.

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