This miner may fly thousands of ounces of gold to Canada to avoid tariffs

Revealed

11:49 am EDT, Thursday, June 6, 2019

Gold bars in Vienna on Jan. 16, 2015.

Gold bars in Vienna on Jan. 16, 2015.

Photograph: Bloomberg Photograph By Lisi Niesner.

Photograph: Bloomberg Photograph By Lisi Niesner.

Gold bars in Vienna on Jan. 16, 2015.

Gold bars in Vienna on Jan. 16, 2015.

Photograph: Bloomberg Photograph By Lisi Niesner.

This miner might fly 1000’s of ounces of gold to Canada to keep away from tariffs

If push involves shove, one of many world’s largest gold miners is ready to do an finish run across the U.S. ought to President Donald Trump’s threatened tariffs on Mexican items chunk.

Agnico Eagle Mines Ltd. at the moment produces about 300,000 ounces of gold in Mexico that it refines within the U.S., all of which might possible be topic to the proposed tariffs, Chief Government Officer Sean Boyd stated Wednesday. However he already is aware of how he’d reply to potential levies.

“It isn’t costly to fly a bar of gold,” Boyd stated in an interview at Bloomberg’s Toronto bureau. “We’d simply refine it some other place. We might simply deliver it to Canada.”

In the meantime, the Toronto-based firm, Canada’s second-largest gold miner, is reaping some advantages from U.S. isolationism. International commerce jitters have strengthened the U.S. greenback on the expense of the Mexican and Canadian currencies, considerably decreasing Agnico’s prices, he stated.

Within the hour-long interview, Boyd mentioned a variety of points, from consolidation within the gold trade to the succession plan for an organization he has helmed for greater than 20 years.

Regardless of two mega-mergers within the gold area prior to now yr, Boyd has little interest in massive M&A and believes most consolidation will occur between firms with market values of $1 billion to $three billion. He isn’t fearful about any of the world’s giants making a run at Agnico and says he would not waste time trying over his shoulder. As an alternative, he plans to concentrate on operating his current portfolio whereas searching for small acquisitions in protected jurisdictions.

Gold equities, which have underperformed spot gold costs prior to now yr, are on the verge of a breakout, Boyd says. That is one level he is been making whereas actively wooing high-wealth European generalist buyers lately, assembly over lunch someday in Vienna and dinner in Monaco. The present rally in gold costs is not about tariffs, he says, however fairly the build-up of numerous components, together with a “drained” inventory market, “wobbly” financial progress, and rising sovereign debt ranges all over the world.

Resistance has been robust at $1,360-$1,370 an oz. of gold; Boyd believes it is going to take a reduce in U.S. rates of interest to propel the market above that stage. “Gold got here out of the chute in early 2016 and buyers confirmed up once more and the equities took off,” he stated. “We might be at that time now.”

With money circulate set to ramp up, Agnico will have the ability to proceed its 36-year streak of dividends, however the firm can even check out its steadiness sheet, Boyd stated. “We now have debt maturing so we’ll pay that as we come due.”

The subsequent main tranche — about $360 million — at roughly 6.6% curiosity is due in April 2020, he stated. “It could be good to cut back that as a result of we might go to the market right now and get four.5%, for 10- to 15-year cash.”

In a high-risk sector characterised by ups and downs, Boyd stands out for his longevity. The 60-year-old has helmed Agnico for greater than 20 years and labored for the miner for 34.

“In some unspecified time in the future I will change into chairman,” he stated, noting that an inner succession plan has been in place for 4 years. There isn’t any date for that transition, he stated, but it surely will not be quickly.

The alternatives in Canada’s North are monumental, however the nation’s leaders must have a dialog about how dedicated they’re to fund initiatives. “There is definitely not a transparent sign from the federal authorities on useful resource improvement,” Boyd stated.

As international warming makes the area extra accessible, Canada would do nicely to safe its sovereignty claims by its pure sources, he stated.

“If we wish to have a say on how the North develops, and the way the North is used and utilized, we would higher have a presence there,” Boyd stated. “And one of the best presence could be companies.”

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