We don't see inflation as transitory, which is good for gold: Agnico Eagle CEO
The head of Agnico Eagle Mines Ltd. said the time is right for gold miners to keep boosting production without needing to worry about increasing costs.
“We don’t see inflation as transitory,” said Sean Boyd, chief executive officer of Agnico Eagle, in a broadcast interview.
“We see inflation that’s going to stick. Particularly as it rolls into wage expectations. We think this is something we’re going to be dealing with over the next few years and that’s a perfect environment for gold.”
Boyd said costs have bottomed out, and that he expects downstream costs to increase beginning in the second half of this year, but at a sustainable level.
“On the wage front we saw last year about a three per cent boost in Canada. That’s manageable as we moved forward. We would expect that to roll into next year, to see continued price pressure in that three to four per cent range. We can manage that through efficiencies.”
Boyd’s commentary on how inflation will impact the gold mining sector comes amid growing concern that consumer prices are accelerating too quickly amid hotter-than-expected inflation headline numbers. Canadian and U.S. policy makers maintain that the inflation increases are temporary.
Inflation increases not withstanding, Agnico expects to achieve its 2021 cost guidance.
“The company does not anticipate any abnormal impact on labour costs as a result of wage inflation, other than contract exploration drilling and other select contractor groups at this time.” Agnico said in its earnings release Wednesday.
Agnico operates eight sites in Canada, Mexico and Finland, and was able to produce 500,698 ounces of gold in its second quarter, up from 331,064 ounces in the same period last year when output was impacted by COVID-19-related work stoppages.
Boyd said production should continue to increase in the second half of 2021, as activity ramps up at the recently-acquired Hope Bay mine in Nunavut.