Agnico Eagle Mines Limited (TSX and NYSE: AEM) (“Agnico Eagle”) and
Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK)
(“Teck”) announced today that Agnico Eagle has agreed to subscribe
for a 50% interest in Minas de San Nicolás, S.A.P.I. de C.V.
(“MSN”), a wholly-owned Teck subsidiary which owns the San Nicolás
copper-zinc development project located in Zacatecas, Mexico (the
“Transaction”). As a result of the Transaction, Teck and Agnico
Eagle will become 50/50 joint venture partners at San Nicolás.
“San Nicolás is a high-quality project, located
in a leading mining jurisdiction, with high grades, extremely
competitive capital intensity, and first quartile costs,” said Don
Lindsay, President and CEO of Teck. “The opportunity to add the
operating and development experience of Agnico Eagle should
generate substantial benefits for the project including for all
stakeholders throughout the project life cycle.”
“This is a unique opportunity to create a
long-term partnership between two high quality mining companies
working together to de-risk and optimize a world class VMS deposit
in a premier mining jurisdiction,” added Ammar Al-Joundi, President
and CEO of Agnico Eagle. “Agnico Eagle’s project development,
permitting and construction experience in Mexico, combined with
Teck’s base metals expertise, operating excellence and marketing
leadership, are complementary skillsets and will contribute to the
timely and successful development and operation of San
Nicolás.”
Transaction Highlights
- Agnico Eagle will subscribe for
US$580 million of MSN shares, giving Agnico Eagle a 50% interest in
MSN. The subscription proceeds received from Agnico Eagle
will be used by MSN to fund the first US$580 million of
post-closing costs with subsequent funding to be contributed
according to each partner’s ownership percentage. Agnico Eagle’s
contributions will be made as study and development costs are
incurred – there is no up-front payment from Agnico Eagle
- The US$580 million share
subscription implies a notional US$290 million acquisition cost to
Agnico Eagle for 50% of the San Nicolás project plus the
contribution by Agnico Eagle of 50% of the first US$580 million of
project costs for its own account
- Agnico Eagle’s funding in the first
two years is expected to be approximately US$50 million
- Establishes a 50/50 joint venture
between two Canadian-based global mining leaders each with
demonstrated track record of successful joint operations
- Governance arrangements with equal
representation from Teck and Agnico Eagle, to leverage and
implement each shareholder’s skillsets
- Agnico Eagle to be deemed to be a
50% shareholder in MSN for governance purposes upon closing of the
Transaction, which is expected in the first half of 2023
San Nicolás Project
Highlights
- Located in Zacatecas, a major
mining state in Mexico, with significant geological potential and
numerous poly-metallic and precious metals opportunities. In
addition, Zacatecas has excellent access to infrastructure and a
skilled workforce
- San Nicolás is the largest
undeveloped volcanic-hosted massive sulfide deposit (“VHMS”)
deposit in Mexico and is one of the largest undeveloped VHMS
deposits globally. As at December 31, 2021, Teck estimated San
Nicolás to contain 105.2 million tonnes of proven and probable
mineral reserves at average grades of 1.12% copper, 1.48% zinc, 0.4
g/t gold and 22 g/t silver, or more than 2.0% on a copper
equivalent basis
- Prefeasibility study completed by
Teck in March 2021 describes attractive economics and project
parameters:
- The project contemplates a modern
truck-and-shovel open pit, processing, and flotation operation
- First production expected in 2026,
with an estimated mine life of 15 years and meaningful potential
for mine life extension and regional exploration upside
- Expected to produce 63 thousand
tonnes per annum (ktpa) of copper and 147 ktpa of zinc in
concentrate over its first five years of production
- Average life of mine head grades of
1.13% copper and 1.49% zinc
- Average C1 operating costs of
US$(0.16)/lb copper and US$0.44/lb copper over the first five years
of production and life of mine, respectively, net of
by-products
- US$842 million development capital
cost estimate
- 2.6 year payback and 33% after-tax
Internal Rate of Return (IRR) based on US$3.50/lb copper and
US$1.15/lb zinc
- Teck and Agnico Eagle anticipate
that development capital costs could be in the range of US$1,000
million to US$1,100 million, based on current cost environment and
estimate accuracy. With development capital costs in this range,
and assuming spot prices of approximately US$3.57/lb copper and
US$1.46/lb zinc, the estimated payback period would be 2.5 to 2.8
years with an estimated after-tax IRR of 33% to 30%.
San Nicolás Study StatusA
detailed plan to complete a feasibility study, permitting, and
community engagement has been developed, with initial work underway
since January 2022. Further, an environmental and social baseline
survey, including in-depth archaeological surveys and clearances,
was carried out by Teck from 2018 to 2021. Well-developed community
engagement and investment programs have resulted in strong support
for development from stakeholders near the project and more broadly
in Zacatecas.
The feasibility study is expected to be
completed early in 2024 with project sanction thereafter subject to
receipt of permits.
About the TransactionAgnico
Eagle will subscribe for US$580 million in MSN shares, through a
wholly-owned Mexican subsidiary of Agnico Eagle, giving Agnico
Eagle a 50% interest in MSN. The subscription proceeds received
from Agnico Eagle will be used by MSN to fund the first US$580
million of post-closing costs with subsequent funding to be
contributed according to each partner’s ownership percentage.
Agnico Eagle’s contributions will be made as study and development
costs are incurred – there is no up-front payment from Agnico
Eagle. The US$580 million share subscription implies a notional
US$290 million acquisition cost to Agnico Eagle for 50% of the San
Nicolás project plus the contribution by Agnico Eagle of 50% of the
first US$580 million of project costs for its own account.
Funding requirements beyond this initial
subscription amount will be funded by Teck and Agnico Eagle in
proportion to their shareholdings in MSN. The shareholders’
agreement will include provisions typical in a transaction of this
nature, as well as remedies for material breach that include
accelerated dilution and forced sale of a defaulting shareholder’s
ownership interest. For governance purposes, Agnico Eagle will be
deemed a 50% shareholder of MSN from closing, regardless of the
number of shares that have been issued to Agnico Eagle.
Closing of the Transaction is subject to
customary conditions precedent, including receipt of necessary
regulatory approvals, and is expected to occur in the
first half of 2023.
Additional Information on the San
Nicolás ProjectFor further details on the San Nicolás
project, please refer to the Supplemental Information slides in the
Investors section of Teck’s website
(https://www.teck.com/investors/events-&-presentations/presentations-webcasts/supplemental-information-for-investors).
About TeckAs one of Canada’s
leading mining companies, Teck is committed to responsible mining
and mineral development with major business units focused on
copper, zinc, and steelmaking coal, as well as investments in
energy assets. Copper, zinc, and high-quality steelmaking coal are
required for the transition to a low-carbon world. Headquartered in
Vancouver, Canada, Teck’s shares are listed on the Toronto Stock
Exchange under the symbols TECK.A and TECK.B and the New York Stock
Exchange under the symbol TECK. Learn more about Teck
at www.teck.com or follow @TeckResources.
About Agnico EagleAgnico Eagle
is a senior Canadian gold mining company, producing precious metals
from operations in Canada, Australia, Finland, and Mexico. It has a
pipeline of high-quality exploration and development projects in
these countries as well as in the United States and Colombia.
Agnico Eagle is a partner of choice within the mining industry,
recognized globally for its leading environmental, social and
governance practices. The Company was founded in 1957 and has
consistently created value for its shareholders, declaring a cash
dividend every year since 1983.
Teck Media ContactChris
StannellPublic Relations
Manager604.699.4368chris.stannell@teck.com
Teck Investor Contact:Fraser
PhillipsSenior Vice President, Investor Relations & Strategic
Analysis604.699.4621fraser.phillips@teck.com
Agnico Eagle Investor
Contact:Jean-Marie ClouetCorporate Director, Investor
Relations416.457.9464jeanmarie.clouet@agnicoeagle.com
Forward Looking StatementsThis
news release contains certain forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995 and forward-looking information as defined in the
Securities Act (Ontario). Forward-looking statements and
information can be identified by statements that certain actions,
events or results “could”, “may”, “might”, “should”, “will” or
“would” be taken, occur or achieved. Forward-looking statements in
this news release include statements regarding the expectation that
the Transaction will close and the timing of closing; the
expectation that the San Nicolás project will be developed into
production; the expected timing of first production; the estimated
mine life; the expectation that there is meaningful mine life
extension and regional exploration potential; the expected
ownership interests of Teck and Agnico Eagle in the joint venture
at any time; the expected production over the first five years of
operation; all San Nicolás project economics included in this news
release, including head grades, average C1 operating costs,
development capital cost estimate, payback period and IRR; the
expectations as to results of the feasibility study, including
development capital cost estimate, payback period and IRR; the
statement that the project has been de-risked; and timing of
project sanction decision.
Forward-looking statements involve known and
unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of Teck, Agnico Eagle
or the joint venture to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements. Factors that may cause actual results
to vary include, but are not limited to, changes in general
economic conditions or commodity prices, unanticipated permitting,
development or construction issues including delays in receiving
permits or other regulatory approvals, or withdrawal or suspension
of permits, unanticipated geotechnical conditions or other factors
affecting construction plans and budgets including supplier,
transportation, logistics or labour issues, adverse weather or
natural disaster, community unrest, access issues, failure of plant
and equipment, disruption of financial markets, the accuracy of our
mineral estimates (including with respect to size, grade and
recoverability) and the geological, operations and price
assumptions on which these are based, other circumstances
interfering with the closing of the Transaction, including an
inability to satisfy the conditions to closing, including receipt
of any regulatory approvals and failure by Teck or Agnico Eagle to
fund as required by the agreements. Economic projections for the
San Nicolás project are presented on a 100% basis and, except as
otherwise noted, assume US$3.50/lb copper,
US$1.15/lb zinc, US$1,550/oz gold, and US$20/oz silver.
Teck and Agnico Eagle caution you that the
foregoing list of important factors and assumptions is not
exhaustive. Other events or circumstances could cause actual
results to differ materially from those estimated or implied by
these forward-looking statements. Certain of these risks are
described in more detail in the Annual Information Form of Teck
and/or Agnico Eagle and in their respective subsequent quarterly
report filings with Canadian securities administrators and the US
Securities and Exchange Commission. Neither Teck nor Agnico Eagle
assumes the obligation to revise or update these forward-looking
statements after the date of this news release or to revise them to
reflect the occurrence of future unanticipated events, except as
maybe required under applicable securities laws.
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