Penna fends off criticism at Agnico annual meeting

His methods may have prompted some criticism at Agnico-Eagle Mines’ (TSE) recent annual meeting in Toronto, but President Paul Penna demonstrated he has the backing of the vast majority of the company’s shareholders. He was re-elected by 90% of the votes cast at a 3-hour meeting during which his responses to questions from minority shareholder Jacques Forget were repeatedly applauded by members of the audience.

Forget, who holds approximately 3% of Agnico-Eagle through his Montreal investment firm Invesfor, criticized Penna for, among other things, not hedging against falling gold prices by selling forward some of its gold output.

Other shareholders, including Ross Lamonaco, expressed surprise that Penna received $1 million in cash compensation (including a $550,000 special bonus) during a year when Agnico-Eagle reported a net loss of $10.1 million or 66 cents per share.

But Forget, Penna’s most vocal critic, said after the meeting that he is happy with the way the company’s operations are performing.

Production targets are being met at the Donald J. LaRonde mine near Bousquet, Que., according to mine manager Ebe Scherkus who says the operation could churn out 50,000 oz. by the first half of 1990 at a cost of $340 per oz. “We hope to break the magic 100,000-oz. mark in 1991,” said Scherkus.

The key to increased production lies with development work on the 21st level where work crews are driving crosscuts into a new zone. As values reported in this area include 0.3 oz. gold per ton and 1% copper, Scherkus said the area has turned out to be a jewel box.

Reserves at Donald J. LaRonde now stand at 7.2 million tons grading 0.15 oz. gold.

Meanwhile, at Agnico’s Joutel, Que., division, manager Denis Lachance is expecting the Telbel and Eagle mine operations to produce 75,000 oz. this year. By the end of May, 31,350 oz. had been produced at a cost of $339 per oz.

Reserves at Telbel stand at 1.7 million tons grading 0.2 oz. but Agnico-Eagle is planning to spend $2 million this year to expand the tonnage. Exploration efforts are targeted toward the east side of Telbel and down-plunge.

After cancelling a public offering designed to raise $40 million for exploration programs on its properties, Agnico is now considering alternative financing methods. However, Penna declined to mention any of those being considered. “We will know in a month or two,” he said.

Cancelled due to a drop in Agnico’s share price from $12.88 in January to $7.88, the offering would have allowed Agnico to spend $20 million on development work at Dumagami and Joutel. An additional $12 million was earmarked for other properties including a Vezza Twp. property in Quebec where Agnico has agreed to spend $7.4 million in return for 51% of a gold property held by Dundee-Palliser Resources (TSE) and North American Rare Metals (ME).

Agnico-Eagle Secretary-Treasurer Sean Boyd said the company has already met its 1990 work commitments at Vezza Twp. and is, therefore, not under any pressure to spend more money there.

However, with drilling scheduled to continue at Vezza, the joint venture expects to be able to make an underground decision by year-end. “It’s not `if’ but `how’ — ramp or shaft,” Penna said.

With 1.8 million tons of grade 0.16 oz. already indicated, this is looked upon as future feed for the 1,800-ton-per-day Joutel mill, a short truck haul away.

Also unaffected by the cancelled offering is Agnico’s Baker Lake gold project where the company is continuing to explore a “Lupin style” iron formation. With 600,000 acres under its control, work crews are planning some definition drilling this summer to extend the strike length of a 1,300-ft.-long mineralized zone.

Values reported so far include 0.60 oz. gold per ton over 15.7 ft. Geological consultant William Hubacheck said he believes the potential is good for the whole 75-mile-long Greenstone belt on which Agnico claims lie.

As the price of gold reached a 4-year low of US$345.50 per oz. recently, Penna indicated that he will not be tempted to stray from his no-hedging policy.

“Our philosophy is that we don’t believe in guessing the market,” said the Agnico president who declined to predict what his company’s earnings will be this year.

Asked if he had any plans to retire, Penna, who is now 67, replied: “My friends want me to carry on.”

Forget said he has retained Toronto law firm Tory, Tory Deslauriers & Binnington to examine the salary and compensation received by Penna during the previous two years.

Even though Agnico-Eagle has installed a shareholders’ rights plan designed to prohibit an unwanted takeover attempt, Forget said he will also try to find a company willing to bid for Agnico.