Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Agnico-Eagle Mines (TSE:AEM) has suspended mining and gold production at its Goldex mine in Val d’Or, Quebec, due to unstable ground and water inflow.
“A weak volcanic rock unit in the hanging wall of the Goldex deposit has failed. This rock failure is thought to extend between the top of the deposit and surface. As a result, this structure has allowed ground water to flow into the mine. This water flow has likely contributed to further weakening and movement of the rock mass,” Agnico-Eagle said in a statement.
As a result of the problem, Agnico said it will write off its investment in Goldex, resulting in a $260 million charge in the third quarter results.
The news caused the Toronto-based company’s shares to plummet around 19% near the close of trading on Wednesday.
The mill will continue to process feed from surface stockpiles until the end of October, Agnico-Eagle said, and it will assess the potential for restarting the mining operations next year on the western side of the deposit.
Goldex is one of Agnico’s lowest-cost producers, with proven and probable reserves of 1.6 million ounces, BNN reports. The mine was supposed to account for around 17% of the company’s gold output, or 184,000 ounces, in 2011.
