Finance

Gold to Hit $2,500 in Next Two Years, Agnico Eagle CEO Says

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let’s start with the operating environment and what you just went through in that three-month stretch how would you describe what that was like well it was challenging it was challenging because it was a complex from the perspective of conditions were changing very quickly in terms of the government’s response to the pandemic in areas where we were mining and as a result of that we were faced with seven of our eight minds having to either suspend totally their operations or reduce the activities to minimum activities so that was challenging during the quarter but i think what we learned is that we were able to adapt quickly our team did an exceptional job laying out a plan to protect our employees and the communities and part of that plan including included adopting testing of our employees very early on we were testing employees in the first part of april which allowed us to provide that extra layer of comfort to the employees that were still working and to those communities so an effective plan we got those operations restarted earlier than we had expected and that allowed us to ramp them up nicely into the end of the quarter and we’ve had a strong july so from that perspective the team did a really good job managing it but it was extremely challenging no doubt about it you know when you talk about that april period when certainly a lot of people weren’t going to work can you just clarify for our audience because we’ve heard over these last few months essential industries or essential workers like who qualified and who didn’t qualify for that can you just clarify how your business fit into that well in quebec the quebec government determined that mining was not essential so that impacted our three quebec based operations but we also operate our nunavut base connected to the quebec base in terms of bringing up technical and highly skilled workers into that region so that also spilled over into none of it and then mexico as well made a decision essentially to shut down most industries for two months and mining was deemed non-essential but i think what was important there is we continue to dialogue with both governments to explain that mining lends itself to natural physical distancing and we had strong protocols in place for hygiene and screening we were employing testing so as a result of that both of those quebec and mexico allowed mining to start earlier than the original plan and that’s what we referred to so that was important and we think that’s important going forward because nobody really knows how the virus will play out will there be a second wave but i think what the mining industry has been able to demonstrate is that we can operate safely and we can operate through what could be a second wave and we can provide significant economic benefits given the high-paying jobs and the fact that the business is extremely profitable at the present time let’s dig into that part of it and you mentioned ramping up production i mean profitability helped by this surge in the price of gold and as we teased your segment we were alluding to the fact that you told our colleagues at bloomberg that you think that this gold rally is sustainable not just that that we could see a further push towards call it twenty five hundred dollars an ounce can you can you as an as a long time industry player can you um explain to us the thesis behind continued gains for gold well this has been building for a while so it may have surprised a lot of people but it certainly hasn’t surprised us we’ve been saying for a while what we were seeing two to three years ago we were seeing a renewed interest among big generalist investors at least to reintroduce themselves to the space and try to understand what was happening in the gold market what was happening in the gold mining market so the gold price was set to do well prior to the pandemic because what we were having prior to the pandemic as we were having rising debt levels we were having economies that simply were not growing that dramatically debt was rising faster than economic growth as a result interest rates were low and were likely to stay low and since the pandemic we all know what’s happened we’ve had massive amounts of monetary and fiscal stimulus which has dramatically increased debt levels economies are contracting interest rates are likely to stay low so we think we’re still in the early stages of this we had been saying for a couple of years that in this cycle gold would would hit it a new high in u.s dollars because it was hitting a new high in every other major currency it’s done that now it’s done it earlier than we had expected and largely because of what’s happened around the pandemic but i think investors are paying attention now and investors really drive the gold price higher we’ve had really solid supply yep go ahead oh sorry about that sean um i just was uh i just wanted to clarify so that that uh that potential for moving higher like let’s say twenty five hundred dollars an ounce your time frame for that is what within the next two years within the next two years because i think what we really had is we still really have good solid supply demand fundamentals we still have central banks wanting to own more of it to diversify their reserves away from the us dollar mine supply we know how tough this business is is not going to have the ability to to respond quickly to higher gold prices so i think that set what really drives it higher as we were saying is the investor and the investors looking at the prospect of much higher debt strained economic growth lower interest rates for longer the fed as we say going to do whatever it takes um to ensure that the economy keeps moving and that generally at some point drives inflation and it’s not that we need inflation to drive the gold price higher it’s the perception of the expectation that we could get inflation that attracts investors to things like gold so um there’s still room to go in our view and we would not be surprised to see it at 2 500 in the next two years in the next two years okay and then just finally in our last minute here we obviously saw a lot of consolidation in the sector before we got into this year and started talking about the the rally and the price of gold for your business do you see yourself doing any deals in these next few months given what’s happened with the price of gold does that change the conversations around m a and are you thinking about doing any deals it doesn’t really change the conversation we’ve still got the ability to grow for us it’s really about how do we stay a high quality business in what is still a challenging business but i think we’re going to see some of the highest historical returns in the sector over the next little while the strongest relative returns but if you look at history and if you look at history in the commodity space anytime you have a significant move in the underlying commodity history shows you have consolidation so i would say that two years from now the industry in terms of the players will look a lot different than it does today

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