Wednesday, April 29, 2009
(Cont'd from above)...

Jim (cont'd):   


Jim:      Mr. Boyd, welcome back to Mad Money...

Sean:    Great to be back Jim.

Jim:      Okay, Mr. Boyd when I look at what is happening, I know that a couple of quarters ago it looked like you had kind of stuttered… it was not clear whether you had been able to get the costs down. It looks like the costs are really down right now. Have you gotten really to the point where you are rationalizing everything correctly?

Sean:    Well certainly with the mines in Quebec, Laran, and Goldex we are getting very good performance there. As Gold X ramps up, we have had a little bit of a hiccup in Finland. But as you mentioned in the intro, the Lappa mine has started this week, we expect to be pouring gold on Friday. So as we look at the big picture, within a year we will have six mines operating and our production will be close to 1.2m ounces at very attractive cash costs.

Jim:      Lets talk about the cash costs, because one of the things that had made me recommend your stock as the proxy for gold, is that you produce a huge amount of gold at low costs. Only Eldorado was lower on my screen. As these mines come on, are you going to be raising or lowering your cash costs?

Sean:    The cash cost number will be about $300 to $325 an ounce, so we have a very, very healthy margin on significant growing output. So on a per share basis we are going to be able drive cash flow. And that is really what it is all about. You mentioned in the intro about the ETF, the GLD, that is certainly one way to play it. But another way to play this gold market is to have a quality gold equity that is giving you growth, low costs, low political risk that pays a dividend and that has got a good track record over many years. And I think that that is what Agnico brings.

Jim:      Alright, you said good track record over many years… a lot of the gold mine stocks that I used to recommend when I worked at Goldman Sachs in the 80’s and 90’s, they ran out of gold frankly… they ran out of gold that would be cheap enough to have them still be considered commercial. How long do you think you have before you run out of gold?

Sean:    Well, the current suggested mine life over the reserve base is minimum 15 years, and we are in a fortunate position of having deposits that we own 100%. That are really still wide open. We really have not outlined them fully and we think the next phase of growth on the reserve side will come from exploration as we drill huge land packages around the existing deposits.

Jim:      Excellent, now I know that you have talked before about Pinos Altos in Mexico, what is the next step with that? And is it going to be held back at all by swine flue?

Sean:    It is not going to be held back. That one is on track. We should be generating gold output there in July, August. Ramping up the mill later in the third quarter. That mine actually has another expansion phase to it, we have completed the study on it. We have just not given the approval to go ahead. And that is a big part of our story. Is looking at the existing asset base and seeing how we can expand at least 4 of the 6 deposits in terms of annual output.

Jim:      When you expand, if you just start with the Greenfield gold mine so to speak… there is always a chance that your costs are going to spike. If you expand like that, your costs do not spike, do they?

Sean:    They do not spike because you are dealing with the same deposit. And what you are doing is taking really flat overhead and extending it over more ounces. That is really what you are doing.

Jim:      We are huge believers, and you confirmed it when you were on… you see one day when you get this cash flow going, that you could pay a dividend… the reason I was recommending the gold stocks, just so people know is that in the 80’s and 90’s when I was recommending South African Golds which was throwing off a gigantic dividend… and I had been recommending Home Stake Mines, which had a gigantic dividend… is that the model for what you hope? A big, big payout down the road?

Sean:    That is the model. There are two things that we are very proud of in our long history. One, we have never, never sold an ounce of gold forward. And two, we have paid a dividend for 27 years which is a track record that is second to none in the gold business right now.

Jim:      Absolutely, that is why we have picked you as the one… because we like dividends… and because you are not trying to play it financially, you are a true miner… that is what we like here.

Sean:    That is correct.

Jim:      Sean Boyd, CEO of Agnico-Eagle, thank you, and thank you for delivering another great quarter. We really appreciate it.

Sean:    Thanks, Jim. Thank you.

Read Jim's next Segment here  
    

Read Jim's next Segment here