Agnico scales back some operations amid COVID-19 crisis
Mexico’s decision not to exempt mining from a nationwide virus shutdown is paralyzing operations run by some of the biggest companies in the industry.
One is example is Newmont Corp., which is moving to ramp down its Peñasquito mine. CEO Tom Palmer said the company is working with the Mexican government to clarity which activities may continue at the site.
The mine is important for Newmont: National Bank of Canada says it was set to supply about 15 per cent of the company’s production this year, representing 18 per cent of its asset value.
The move by Mexico is the latest COVID-19 setback for Agnico Eagle Mines Ltd., which is set to shutter its Pinos Altos, Creston Mascota and La India operations. National Bank says Mexico accounts for around 15 per cent of 2020 gold production for Agnico but only around six per cent of its asset value, excluding exploration projects.
Agnico has been hit hard by the virus elsewhere. Its Quebec mines have been shuttered and the company has cut back operations in Nunavut, leaving its Kittila mine in Finland as its only mine operating normally.
Meanwhile, Scotiabank downgraded Vancouver-based Fortuna Silver Mines Inc. to sector perform Thursday, warning a prolonged shutdown of the company’s San Jose Mine in Mexico “could cause Fortuna’s liquidity position to erode at the worst possible time.”
Scotia was expecting San Jose to provide just over half of Fortuna’s cash flow this year.
Wheaton Precious Metals Corp., the investor in precious metals “streams” from other companies’ mines, is cancelling its production guidance for this year as virus disruption spreads.
The closing of Peñasquito is a blow to the Vancouver company, with Scotia estimating that the mine would have contributed 14 per cent of Wheaton’s 2020 cash flow from operations. It says the shutdowns of two mines in Peru, Glencore’s Yauliyacu mine and the Constancia copper project, run by Hudbay Minerals Inc., affect operations providing about 21 per cent of Wheaton’s cash flow.
But a freeze on mining in Brazil would be a bigger problem, according to Scotia analyst Trevor Turnbull. He said in a report that Wheaton’s “largest asset Vale's Salobo in Brazil is the one to watch” because it’s set to supply 36 per cent of cash flow.
Equinox Gold Corp. is also suspending mining activities at its Los Filos mine in Mexico, and at its Pilar mine in Brazil to comply with state government restrictions. TD had estimated second-quarter production at Los Filos at 37,000 ounces, or 32 per cent of total second-quarter output. It said the company's other mines (one in California and three in Brazil), representing 62 per cent of Q2 output, are operating.
Meanwhile, Pan American Silver Corp. is suspending normal operations at its La Colorada and Dolores operations on Mexico on top of shutdowns in Peru, Argentina, and Bolivia amid quarantine measures. TD says Pan American is "well capitalized" for shutdowns. At year end, it had $238 million in cash or short-term investments and $275 million drawn on a $500 million credit facility.
And Endeavour Silver Corp. is shuttering all three of its operating mines in Mexico and withdrawing its financial forecast.