Agnico sells out of Orla for $405M

[Redator]

Agnico Eagle Mines (TSX: AEM; NYSE: AEM), Canada’s largest gold miner by output and market value, has sold its 11% stake in Orla Mining (TSX: OLA; NYSE: ORLA) for nearly C$561 million ($405 million).

The major sold 38 million shares in the mid-tier gold producer at $14.75 each via the TSX, the companies said on Tuesday. The transaction puts an end to Agnico’s interest in Orla, which it had seeded in 2017. Orla – which has two producing assets, the Camino Rojo oxide mine in central Mexico and the Musselwhite mine in Ontario – forecast consolidated gold output this year to hit 265,000-285,000 ounces.

National Bank of Canada said the sale adds to Agnico’s cash on hand, likely to hit $2.3 billion by year’s end, which with spiking gold prices allows the company to increase share buy-backs beyond a budgeted $100 million per quarter.

“This incremental cash flow can be used to increase the pace of stock buyback and dividends in the coming quarters,” mining analyst Shane Nagle said in a note on Tuesday. “Our Outperform rating is based on Agnico Eagle’s low-risk operating jurisdictions combined with its continued strong/consistent operational performance and near-term production outlook.”

‘Right time’

“With Orla’s success in evolving into an established intermediate producer and in the context of the current gold market, we believe it is the right time to monetize our investment,” Agnico CEO Ammar Al-Joundi said in a release. “This demonstrates our commitment to disciplined capital allocation and allows us to redeploy capital to our strategic priorities.”

The sale underscores Agnico Eagle’s focus on advancing its internal growth pipeline, including the Odyssey underground expansion at Canadian Malartic in Quebec, the Hope Bay project in Nunavut, and work at the Fosterville mine in Australia. Divesting the half-billion-dollar Orla stake allows the company to redeploy capital toward these priority assets while maintaining flexibility for other strategic opportunities.

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‘Mutally beneficial’

Orla president and chief operating officer Jason Simpson described the exit as “mutually beneficial,” enabling broader investor access and greater liquidity for shareholders of the company. He gave “thanks in no small part, to Agnico Eagle’s technical expertise and financial backing.”

Shares of Orla slid 5.1% to C$15.17 apiece in Toronto, cutting their gain since the start of the year to 78% and the company’s market capitalization to C$4.92 billion. Orla suffered a wall slide at Camino Rojo in July that knocked its total gold production forecast by 5% and its share price to less than C$13 for a time.

Agnico Eagle slid 1.2% by mid-Tuesday in New York to $152.26 each. The company, like many gold producers, has gained more than 80% this year as bullion hits record prices. The spot gold price gained about $10 an oz. from a record on Monday to another all-time high around $3,674 per oz. before easing to near $3,646 an oz. by mid-Tuesday.