US markets drop, June 24-28: Agnico Eagle, Rio Tinto

The Dow Jones Industrial Average fell 0.45% to 26,599.96 and the S&P 500 Index dropped 0.30% to 2,941.76. Spot gold rose 0.71% or US$9.90 per oz. to US$1,408.90 per oz.

Agnico Eagle Mines’ shares jumped US$0.94 to US$51.24 per share. The gold miner reiterated its offer of June 13 to acquire Alexandria Minerals in a deal valued at about C$26 million. The acquisition would enable Agnico to consolidate an additional 14,819 hectares of mining claims that cover about 35 km of strike length along the Cadillac-Larder Lake break in the prospective Val d’Or gold camp. Three of Alexandria’s properties—Orenada, Akasaba and Sleepy—collectively contain historical inferred resources of 4.6 million tonnes grading 3.5 grams gold per tonne for 526,702 ounces of contained gold and indicated resources of 7.4 million tonnes at 1.88 grams gold per tonne for 448,654 ounces of gold based on Alexandria’s estimates. Alain Blackburn, Agnico’s senior vice president of exploration, said the company has “a long history of involvement with Alexandria, both as an equity investor and through the purchase of the Akasaba West property in 2014,” adding that the company believes that Alexandria’s key properties “are highly prospective and underexplored and could potentially provide future sources of ore at our nearby Goldex mine.” Under Agnico’s proposal, each shareholder of Alexandria would have the option to receive C$0.05 in cash; 0.000819355 common shares of Agnico plus C$0.000001; or 0.000819355 Agnico shares. Agnico’s offer represents a 25% premium to the implied value of C$0.04 per Alexandria share offered by Chantrell Ventures for Alexandria in May. Agnico currently owns 28.8 million Alexandria shares or about 5.6% of the junior’s issued and outstanding shares.

Rio Tinto climbed US$2.07 to US$62.34 on no corporate news. The company updated its iron ore guidance on June 19, stating that its iron ore division was experiencing “operational challenges” at some of its mines, particularly in the Pilbara’s Greater Brockman hub. The difficulties have resulted in a higher proportion of certain lower grade products, Rio Tinto said, “partly to protect the quality of our flagship Pilbara Blend.” Given the challenges, Rio Tinto has reviewed its mine plans and revised its 2019 guidance of Pilbara shipments on a 100% basis to between 320 million and 330 million tonnes, down from its previous guidance of between 333 million and 343 million tonnes. Unit costs will be updated in mid-July.