As part of session moderated by Henry Lazenby, multimedia content producer with CMJ’s sister publication, The Northern Miner, Makuch fielded questions from the audience, including those about why Agnico Eagle did not offer a sizeable premium on the Kirkland Lake share price.
“Kirkland Lake Gold has a track record of growing itself as a company,” he said. “In making a premium deal, you have to see new value that can be created. If we insisted on a premium, it’s the same as me saying to shareholders we haven’t created the value we could have for you.”
The mega-merger was announced on Sept. 28 – a deal that will create a high quality, senior producer with 48 million oz. of gold in reserves. The boards of both companies have approved the arrangement, and current Agnico CEO Sean Boyd will become chair of the board.
The deal carries $2 billion worth of savings through synergy. But where will they come from?
According to Makuch, savings can be found by sharing exploration knowledge, technology, processing opportunities, infrastructure, and the support of local communities and regulators both Agnico Eagle and Kirkland Lake have.
If Kirkland Lake embarks on a project that might take it three or four years, such as creating a smart mine, Makuch said they would look to an Agnico mine where it has already been done, and the implementation timeline would be shortened.
“Unlocking technology will play a big part in reducing costs,” Makuch said. “We rely on exploration technology to drive value in our industry. . . If we can find an ounce of gold for $5 or $10, then upgrade the resources for $150 an ounce, you have created value.”
Likewise, technology and R&D will play a big part in unlocking synergy.
The merger is worth an estimated $13.5 billion as Kirkland Lake shareholders will receive 0.7935 of an Agnico Eagle common share for each of their shares.
Kirkland Lake’s strengths are the Macassa and Detour Lake gold mines in Ontario and the Fosterville gold mine in Victoria, Australia. Agnico Eagle has built its strength on the Meadowbank, Canadian Malartic, Goldex, Hope Bay, LaRonde, and Meadowbank gold mines in Canada. The company also has gold mines in Mexico (Pinos Altos and La India), and Finland (Kittila). Both companies have pipeline projects that create a synergy for the future.
Aggressive exploration to continue
“The new Agnico Eagle is always going to be an aggressive explorer, and we have the capital resources to do that,” he added.
Makuch also sees advantages to electrifying underground beyond savings on ventilation, based on experience implementing battery electric equipment at Kirkland Lake’s operations in Ontario.
“Such trucks are already fitted with computers. (That’s) how we can create a smart or autonomous piece of equipment. Then you can connect them all and create a smart mine,” he said.
The merged Agnico-Kirkland Lake will maintain the goal of net-zero carbon emissions by 2050 or before.
“We can get to net zero if we close all our mines,” Makuch said, “but we want to operate our mines.” That means improving processes, going electric, adopting smart technologies, and always seek sustainability.
“The big challenge is people. Innovations and change need trained people and people with new skills,” he said. He wants the new company to get away from underground diesel engines and the exposure of people to diesel exhaust fumes.
He said that to create a sustainable business, part is technology, and part is how people and the environment are treated, how processes are improved, how business support can be more efficient – at the same time keep costs at the low end of the industry.
“Over the next few years, there are going to be exciting times,” Makuch promised.
A load of ideas for the future
Besides keynote speaker Tony Makuch, the morning keynote at CMJ Reimagine Mining Symposium was given by George Hemingway, managing partner and head of innovation practice at Stratalis. He spoke on how to harness trends to get mining’s message to the public.
There were future-focused panels on the pathway to decarbonization in mining; how to get the public to view mining positively sponsored by SRK; as well one on capturing data beyond line of site sponsored by Emesent. Also looking to the future, speaker Brad Terhune of Costmine offered pointers for estimating project costs, and Don Duval of Norcat outlined how mining companies are speeding up their adoption of technology.
CMJ thanks all its sponsors including Sandvik (global), Eaton (silver), Eaton (silver), BBA (bronze) and KalTire (bronze) and corporate presenter Exyn Technologies.
Links to recordings of the symposium will be available on the CMJ website next week, and coverage of the event will be included in our December issue.
