Agnico focuses on internal growth even as mining deals heat up

The merger between Anglo America Plc and Teck Resources Ltd may have set the scene for more major deals, but Agnico Eagle Mines Ltd. is focusing on growing from within.

“We’ve never had a better internal profile. We’re focused on that,” said chief executive officer Ammar Al-Joundi on the sidelines of Mining Forum Americas in Colorado Springs.

While the industry will see more consolidation following the Anglo-Teck deal, according to Al-Joundi, “what we don’t want to see is irresponsible M&A just because the gold price is high. That’s not good for anybody.”

Miners including gold producers have stayed financially disciplined for the past decade after aggressive deal-making at the peak of the China-led commodity super-cycle led to billions of dollars in write-downs and infuriated investors.

Gold mergers and acquisitions could generate a better internal rate of return for miners if the metal holds at $3,000 an ounce, according to Bloomberg Intelligence. BI’s gold mine investment model showed higher scope from buying a mine at average acquisition metrics compared with building an equivalent one from scratch.

Bullion prices have repeatedly hit record highs this year, with the spot price in London reaching a fresh peak of $3,685.64 an ounce on Monday.

“Just with organic growth, we are going to add tremendous value per share,” said Al-Joundi. When the company does decide to do mergers and acquisitions, they are “with a focus on per share value increase rather than just getting bigger,” he added.

(By Yvonne Yue Li)

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