Sean Boyd, chief executive of Agnico-Eagle Mine Ltd., speaking at the AGM in Toronto.DEBORAH BAIC/The Globe and Mail
Sean Boyd, the chief executive of Agnico Eagle Mines Ltd., says that COVID-19 may change the way the big gold miner operates permanently, as it ramps up production after the novel coronavirus wreaked havoc on its business.
Of the world’s senior gold miners, Toronto-based Agnico was the hardest hit by mandated production restrictions related to the coronavirus. At one point last month, seven out of its eight gold mines were largely idled.
“Things will likely never get back to where they were,” Mr. Boyd said in a conference call with analysts on Friday after the release of the company’s first-quarter results.
“A lot of the protocols and measures that we put in place will likely have to continue for many months into the future.”
Unlike Ontario and British Columbia, which declared mining an essential business, Quebec initially deemed mining was non-essential and ordered the industry to minimize operations. Agnico shut down production at its three mines in the province, including Canadian Malartic, the country’s biggest gold mine. Agnico co-owns Malartic with Yamana Gold Inc.
Agnico also powered down two gold mines in Nunavut, and sent its entire local work force home on a precautionary basis to reduce the chance of the virus spreading to the Indigenous community.
The company was also forced to ground its Mexican operations after its government mandated all non-essential businesses to close.
But over the past few weeks, Agnico’s fortunes have improved considerably. In Mexico, the company is talking to the government about restarting as early as May 18. In mid-April, Quebec permitted miners to resume operations, albeit under stringent physical distancing guidelines. Agnico is also ramping up its Nunavut mines again, in large part because it has brought in contractors on a temporary basis. The company’s Inuit work force in Nunavut is remaining at home for now, as the health risks are still perceived as elevated. Just this week, the territory reported its first case of COVID-19.
“At this point they’re not ready to come back," Mr. Boyd said of Agnico’s Inuit work force.
"There’s still anxiety.”
As it ramps back up, Agnico has brought in a number of measures aimed at keeping workers safe, including staggering shift start times to reduce congestion at the entry gates to mines. It also reduced capacity in cages that lower workers underground by half, and inside those gates installed curtains between people to further reduce the risk of virus spread.
The protocols are slowing things down, reducing productivity and increasing costs. Agnico expects to have specifics on the financial impact of the measures by the end of the second quarter.
Mr. Boyd said one offsetting factor is that the company is discovering new cost efficiencies as it ramps up its mines, which it may be able to permanently work into its business.
At at time when COVID-19 has devastated large parts of the global economy, the gold mining industry has so far come through relatively unscathed, certainly in comparison with other resource industries, such as oil producers, or even other companies within mining, such as copper companies whose prospects largely depend on the health of the global economy.
In fact, because gold bullion has barrelled dramatically higher over the past few months, in large part because of the economic devastation and uncertainty caused by the spread of the coronavirus, the gold industry, in some ways, is in better shape than it was pre-COVID-19.
The irony is not lost on Mr. Boyd, and it’s something he’d change if he could.
“We’d rather see a lower gold price and a vaccine," he said in an interview.
Gold traded up about 1 per cent on Friday to US$1,710 an ounce, only about 10-per-cent below its zenith in late 2011, just shy of US$1,900.
Agnico’s shares fell sharply after the mandated slowdowns to its operations in March, but have rebounded strongly to trade near an all-time high. Shares in Agnico rose by 6 per cent to close at $86.18 apiece Friday on the Toronto Stock Exchange.
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