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A GREAT NEW MINE

Agnico Eagle's cold gold is a hot story

Agnico-Eagle impresses with its new Kittila mine in Finland, reinforcing the status of Tier II gold miners as one of the “best performing” within the bombed out global resources arena. Tables included.

Author: Barry Sergeant
Posted: Thursday , 20 Nov 2008

JOHANNESBURG -

Centurion, South Africa, 19 November, 2008

Agnico-Eagle yesterday hosted a visit to its new Kittila gold mine in northern Finland; the chartered Boeing 737 was well populated, with more than 60 buy side customers and sell side analysts. The general impression from attendees after the visit was positive, reinforcing Agnico-Eagles relative premium rating for high quality growth assets, technical capability and an enviable first world political risk profile.

Agnico-Eagle is placed within the loosely-defined global Tier II gold miner classification, one that is outperforming practically all other resources subsectors. Where a selection of more than 100 gold stocks listed across the world have now bounced by 24% from (very recent) lows, stock prices remain 70% off highs, measured on a value-weighed basis. The Tier II gold division, which includes 19 names has, however, bounced 38% off lows. The Philadelphia gold & silver index, of which Agnico-Eagle is a member, is up 19% from its lows.

Some of the more impressive performances among the Tier II grouping have come from Eldorado, Randgold Resources and Red Back; some of the less impressive from High River (on liquidity worries) and Centerra (mainly on worries over Centerra's agreements and licenses at the Kumtor mine in Kyrgyzstan).

Kittila is a good news story, coming at a time when miners everywhere are desperate for even neutral news. The story is particularly positive for Agnico-Eagle. As the numbers stand, the group is the most heavily market capitalised of Tier II names, at USD 4.5bn, having by now left its erstwhile key rival, Yamana, a good way behind.

Given its rate of growth, and quality in that growth, Agnico-Eagle would be moving into the elite Tier I grouping in the foreseeable future. Its current market capitalisation already exceeds that of a number of names in the top group, including Polyus, Harmony, Lihir, Gold Fields, and Buenaventura

At Kittila, the 3m ounce gold reserve, with an enviable grade of 5.1 grams/ton, is being ramped up to annual gold production of around 150,000 ounces. Operating and capital expenditure have crept higher, in line with global industry developments; cash costs have shifted from USD 300/oz in the original forecast towards USD 380/oz. Capital expenditure has increased sharply from USD 210m towards circa USD 300m.

Kittila's autoclave, considered the most significant technical risk, had been running for 18 hours as visitors arrived on site. Recoveries are budgeted at 92%; the general impression was that the plant could push out 10 to 20% more production than the budgeted 150,000 ounces a year.

Mining dilution had been budgeted at 17%, but Agnico-Eagle has indicated that it may improve this by implementing some innovative blasting techniques. According to one sales-trader focused on Kittila, the biggest issue occupying the minds of analysts after the visit is - guess what - parent company balance sheet strength.

Agnico-Eagle recently increased its debt capacity by USD 300m, and holds USD 100m in cash, for funding fund growth. It is thought that an equity top up of around USD 200m would be possible, but not necessary for Agnico-Eagle, so long as gold and zinc prices don't weaken materially from current levels.

Flexibility, growth curves and room to maneuver may be some of the features attracting investors to the global Tier II gold subsector. From Agnico-Eagle, forthcoming events include ongoing extension of resources at its flagship LaRonde mine in Canada, the country's biggest gold deposit; continuing build up success at Goldex in Canada, and after Kittila, new projects at Lapa, Canada, Pinos Altos, Mexico, LaRonde extension, and at Meadowbank, Canada.

*Global tier I gold stocks*
	Stock	From	From	Value
	price	high*	low*	USD bn
Goldcorp	USD 19.71	-62.6%	42.4%	14.365
Polyus	USD 15.50	-80.6%	10.7%	2.955
Harmony	USD 6.21	-57.3%	13.5%	2.505
Lihir	AUD 1.69	-61.5%	11.2%	2.387
AngloGold Ashanti	USD 15.54	-68.4%	11.6%	5.450
Zijin	CNY 3.96	-82.0%	5.3%	5.966
Barrick	USD 21.05	-61.5%	21.9%	18.361
Newcrest	AUD 18.95	-53.2%	14.5%	5.539
Gold Fields	USD 6.15	-66.0%	32.5%	4.017
Kinross	USD 12.03	-56.1%	75.6%	7.927
Newmont	USD 23.65	-58.9%	10.5%	10.440
Buenaventura	USD 11.95	-72.1%	32.8%	3.285
Freeport-McMoRan	USD 21.68	-83.0%	3.2%	8.188
SPDR Gold Trust ETF	USD 72.51	-27.8%	9.9%	17.736
Tier I averages/total		-63.6%	21.1%	109.121
Weighted averages		-65.4%	19.8%

*TIER II*	Stock	From	From	Value
	price	high*	low*	USD bn
Zhongjin	CNY 29.61	-79.8%	29.9%	1.522
Iamgold	USD 3.06	-69.6%	37.8%	0.905
Simmer & Jack	ZAR 1.87	-70.4%	27.2%	0.192
Yamana	USD 3.99	-80.0%	20.5%	2.792
High River	CAD 0.09	-97.4%	125.0%	0.022
Eldorado	USD 4.53	-51.5%	90.3%	1.659
Agnico-Eagle	USD 31.15	-62.7%	49.3%	4.505
Centerra	CAD 1.30	-91.9%	44.4%	0.227
Randgold Resources	USD 27.70	-50.8%	24.3%	2.117
Shandong	CNY 38.91	-67.4%	47.4%	1.980
Peter Hambro	GBP 2.06	-86.6%	32.1%	0.250
Hecla Mining	USD 1.25	-90.5%	26.3%	0.212
Golden Star	USD 0.49	-88.7%	1.0%	0.093
Franco-Nevada	CAD 15.44	-38.1%	32.9%	1.251
Fresnillo	GBP 0.97	-83.1%	2.3%	1.043
JSC Polymetal	USD 2.67	-72.9%	167.0%	0.841
Red Back	CAD 3.96	-57.2%	38.5%	0.603
New Gold	CAD 1.00	-89.7%	0.0%	0.172
Northgate	CAD 0.73	-79.1%	7.4%	0.151
Tier II averages/total		-74.1%	42.3%	20.535
Weighted averages		-72.5%	38.1%

*TIER III*	Stock	From	From	Value
	price	high*	low*	USD bn
Western Goldfields	CAD 1.22	-70.5%	144.0%	0.135
Great Basin	CAD 1.13	-70.5%	24.2%	0.196
Sino Gold	AUD 2.90	-61.9%	22.4%	0.546
Alamos	CAD 4.61	-45.1%	31.7%	0.357
Highland	GBP 0.47	-81.5%	121.4%	0.226
PanAust	AUD 0.17	-86.4%	6.3%	0.158
Kingsgate	AUD 2.43	-61.4%	10.5%	0.146
Int'l Minerals	CAD 2.00	-69.9%	3.1%	0.155
Allied Gold	AUD 0.24	-74.7%	29.7%	0.064
First Uranium	CAD 1.95	-82.6%	91.2%	0.206
Novagold	CAD 2.58	-87.1%	2.8%	0.219
Gold Wheaton	CAD 0.19	-89.7%	5.6%	0.177
Oxus Gold	GBP 0.07	-84.8%	0.4%	0.042
Pan African	GBP 0.02	-72.7%	0.0%	0.037
Citigold	AUD 0.20	-58.5%	30.0%	0.093
Jaguar	CAD 2.50	-82.7%	3.3%	0.129
Pamodzi Gold	ZAR 1.35	-91.1%	92.9%	0.012
Oceanagold	AUD 0.30	-90.6%	39.5%	0.031
DRDGold	ZAR 3.45	-66.3%	2.4%	0.126
Central African	GBP 0.01	-97.0%	28.6%	0.003
Resolute	AUD 0.48	-81.2%	4.3%	0.087
Integra Mining	AUD 0.12	-83.8%	21.1%	0.029
Royal Gold	USD 30.33	-25.9%	33.3%	1.029
Chenzhou	CNY 7.85	-81.9%	31.9%	0.614
Aurizon	CAD 1.76	-67.6%	45.5%	0.210
Kazakh Gold	USD 2.51	-91.6%	-0.4%	0.107
Gammon Gold	CAD 3.74	-66.6%	6.6%	0.362
Crew Gold	CAD 0.06	-97.0%	0.0%	0.025
Lingbao	HKD 1.19	-81.6%	48.8%	0.046
Zhaojin	HKD 2.91	-86.4%	56.5%	0.164
Rusoro Mining	CAD 0.31	-86.1%	19.6%	0.097
Minefinders	CAD 4.40	-68.7%	8.6%	0.177
Andina Minerals	CAD 0.59	-88.9%	7.3%	0.038
Crystallex	CAD 0.24	-91.7%	0.0%	0.057
Tier III averages/total		-77.2%	28.6%	6.101
Weighted averages		-77.1%	25.4%

*DEVELOPERS*	Stock	From	From	Value
	price	high*	low*	USD bn
Anatolia	CAD 0.85	-85.5%	7.6%	0.057
Andean	CAD 0.57	-74.8%	32.9%	0.147
Norton Gold	AUD 0.08	-88.1%	23.1%	0.022
European Gold	CAD 1.65	-77.1%	50.0%	0.239
Banro	CAD 1.04	-91.7%	30.0%	0.044
Greystar	CAD 0.83	-88.9%	10.7%	0.031
Medusa	AUD 0.56	-62.4%	1.8%	0.053
Osisko	CAD 1.60	-75.6%	14.3%	0.214
Central Rand	ZAR 4.00	-77.8%	0.0%	0.096
Westgold	AUD 0.20	-61.2%	11.1%	0.018
Gabriel	CAD 1.47	-52.9%	37.4%	0.303
Nuna Minerals	DKK 208.50	-64.1%	29.9%	0.038
Moto Goldmines	CAD 0.85	-86.0%	25.0%	0.060
Detour Gold	CAD 3.71	-85.4%	29.7%	0.134
Centamin Egypt	CAD 0.49	-69.7%	12.8%	0.344
Seabridge	CAD 10.73	-67.6%	43.1%	0.324
Gold Reserve	CAD 0.60	-90.0%	53.8%	0.028
Goldplat	CAD 0.12	-27.9%	50.8%	0.021
Avoca Resources	AUD 1.27	-56.4%	45.1%	0.229
St Barbara	AUD 0.24	-74.5%	30.6%	0.197
Jinshan	CAD 0.45	-85.6%	15.4%	0.060
Metals Exploration	GBP 0.09	-72.0%	42.3%	0.016
Mercator Gold	GBP 0.03	-96.5%	0.0%	0.004
Archipelago	GBP 0.06	-83.7%	0.0%	0.017
China Goldmines	GBP 0.28	-80.6%	0.0%	0.020
Cluff Gold	GBP 0.23	-79.6%	124.4%	0.033
Apex Minerals	AUD 0.26	-81.5%	30.0%	0.066
Semafo	CAD 0.90	-47.7%	23.3%	0.155
B2GOLD	CAD 0.36	-86.1%	18.3%	0.047
Beadell	AUD 0.08	-84.2%	27.9%	0.005
Kimber Resources	CAD 0.73	-63.1%	37.7%	0.037
Aflease Gold	ZAR 1.10	-64.5%	34.1%	0.056
Wits Gold	ZAR 40.00	-76.0%	4605.9%	0.108
Uruguay Minerals	CAD 0.55	-85.1%	57.1%	0.022
Minera IRL	GBP 0.50	-34.2%	104.1%	0.046
Mineral Deposits	AUD 0.37	-75.3%	4.3%	0.114
Allied Nevada	CAD 2.95	-62.0%	43.2%	0.137
Bralorne Gold	CAD 0.52	-63.9%	48.6%	0.007
Buffalo Gold	CAD 0.04	-94.3%	16.7%	0.003
Cassidy Gold	CAD 0.05	-89.1%	0.0%	0.003
Colombia Goldfields	CAD 0.02	-98.9%	50.0%	0.001
Coral Gold	CAD 0.18	-88.3%	75.0%	0.004
Entrée Gold	CAD 0.80	-73.8%	60.0%	0.061
Exeter Resources	CAD 1.33	-77.5%	26.7%	0.054
Gitennes	CAD 0.03	-92.7%	0.0%	0.001
Golden Goose	CAD 0.11	-88.9%	0.0%	0.004
Grandview Gold	CAD 0.05	-92.9%	42.9%	0.001
Kirkland Lake	CAD 3.30	-77.2%	31.0%	0.148
Aldridge	CAD 2.31	-37.9%	28.3%	0.039
Molycor Gold	CAD 0.02	-92.0%	0.0%	0.001
Moneta Porcupine	CAD 0.04	-87.5%	40.0%	0.003
Nautilus Minerals	CAD 1.03	-75.8%	41.1%	0.122
Navasota Resources	CAD 0.22	-74.4%	37.5%	0.010
PC Gold	CAD 0.16	-87.2%	45.5%	0.003
Queensland Minerals	CAD 0.05	-93.1%	12.5%	0.002
Rainy River	CAD 0.68	-88.6%	4.6%	0.032
Reunion Gold	CAD 0.03	-97.9%	0.0%	0.001
Searchgold Resources	CAD 0.03	-85.7%	20.0%	0.003
Skyline Gold	CAD 0.04	-80.5%	14.3%	0.002
Staccato Gold	CAD 0.06	-82.0%	22.2%	0.004
Sunridge Gold	CAD 0.10	-94.6%	25.0%	0.005
UC Resources	CAD 0.07	-87.0%	85.7%	0.006
Yukon-Nevada	CAD 0.04	-98.1%	40.0%	0.005
Tanami Gold	AUD 0.01	-90.1%	60.0%	0.018
Tasman Goldfields	AUD 0.06	-80.0%	12.0%	0.002
Focus Minerals	AUD 0.02	-84.3%	5.9%	0.014
Goldminex	AUD 0.90	-50.0%	12.5%	0.039
Leyshon Resources	AUD 0.08	-88.0%	68.0%	0.012
Regis Resources	AUD 0.08	-91.2%	31.7%	0.013
Goldstar Resources	AUD 0.04	-91.5%	23.3%	0.004
Gryphon Minerals	AUD 0.08	-90.6%	15.4%	0.006
Barra Resources	AUD 0.06	-88.8%	12.2%	0.008
Conquest Mining	AUD 0.16	-78.7%	6.7%	0.028
Hill End Gold	AUD 0.10	-80.8%	0.0%	0.020
Dioro Exploration	AUD 0.34	-83.4%	13.3%	0.015
Shield Mining	AUD 0.09	-75.7%	70.0%	0.003
Dragon Mining	AUD 0.02	-87.3%	0.0%	0.009
Zedex Minerals	AUD 0.03	-90.6%	60.0%	0.006
Red 5	AUD 0.03	-76.6%	41.7%	0.014
Adamus Resources	AUD 0.11	-86.8%	0.0%	0.010
Medusa Mining	AUD 0.56	-62.4%	1.8%	0.053
Hampton Hill	AUD 0.13	-77.6%	0.0%	0.011
Navigator Resources	AUD 0.15	-84.8%	15.4%	0.013
Keegan Resources	CAD 0.60	-89.7%	22.4%	0.014
Oromin	CAD 0.78	-81.2%	20.0%	0.041
Bear Creek Mining	CAD 0.84	-91.0%	44.8%	0.038
Austral Gold	AUD 0.19	-44.1%	137.5%	0.021
Atlantic Gold	AUD 0.11	-49.8%	57.1%	0.015
Lake Shore Gold	CAD 0.65	-68.9%	8.3%	0.092
Linear Gold	CAD 0.80	-74.2%	23.1%	0.018
Metallic Venture	CAD 0.27	-89.9%	25.6%	0.011
Mundoro	CAD 0.20	-82.9%	30.0%	0.006
Stratagold	CAD 0.02	-95.2%	100.0%	0.003
Tyhee	CAD 0.09	-87.1%	12.5%	0.012
Queenstown	CAD 1.10	-71.3%	44.7%	0.047
Miranda	CAD 0.21	-82.6%	20.6%	0.007
Mariana	GBP 0.04	-68.5%	0.0%	0.003
Tribune Resources	AUD 1.15	-46.5%	35.3%	0.037
Atna Resources	CAD 0.32	-82.1%	5.0%	0.021
Condor Resources	CAD 0.09	-94.9%	80.0%	0.002
Australian Solomons	CAD 0.04	-95.7%	14.3%	0.002
Brazauro	CAD 0.15	-83.3%	15.4%	0.010
NWM Mining	CAD 0.03	-87.8%	0.0%	0.002
Geoinformatics	CAD 0.02	-95.2%	100.0%	0.012
Hawthorne Gold	CAD 0.18	-92.5%	2.9%	0.004
Inter-Citic	CAD 0.19	-91.6%	0.0%	0.012
Int'l Tower Hill	CAD 1.48	-38.3%	34.5%	0.052
Midway Gold	CAD 0.27	-94.2%	50.0%	0.011
PMI Gold	CAD 0.03	-92.4%	0.0%	0.002
Verena	CAD 0.05	-87.8%	25.0%	0.004
Vior	CAD 0.03	-87.5%	25.0%	0.002
Developer averages/total		-78.6%	70.2%	4.864
Weighted averages		-77.4%	30.5%

Overall averages/total		-75.7%	54.8%	122.885
Overall weighted averages		-70.3%	24.9%
* 12-month
Source: market data; tables compiled by Barry Sergeant

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