What Agnico Eagle Mines Ltd.’s Latest Acquisition Move Means for Investors

Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM) makes bid for Cayden Resources and its flagship Mexican gold projects.

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Yesterday, Agnico Eagle Mines Ltd. (TSX: AEM)(NYSE: AEM) announced that it entered into an agreement to acquire Cayden Resources Inc. Since early 2012, Agnico Eagle has been following Cayden, which has mining activities in Mexico. Here’s the upside for investors’ concerning this potential acquisition.

El Barqueño Property

Agnico Eagle Mines will gain the El Barqueño Project (west of Guadalajara, Mexico, in the Guachinango gold district) with the Cayden acquisition. This project consists of three exploration stage concessions with a total of 41,126 hectares. The project area has first-rate infrastructure. On April 17, 2012, Cayden Resources acquired the option to earn 100% interest in El Barqueño I. It acquired the option to earn a 100% interest in El Barqueño II and staked the El Barqueño III concessions on July 2, 2013. El Barqueño is one of Cayden’s flagship projects.

El Barqueño has recently yielded decent results. Drilling highlights completed by Cayden Resources recently include 4.26 grams per tonne (g/t) gold and 0.06-percent copper over 20 meters. Results additionally include 2.34 g/t gold and 0.15-percent copper over 44 meters.

Cayden Resources is currently drilling at the property. It is pursuing a multimillion-ounce open-pit gold district. Multiple high-grade trenches have been identified in four targets so far and a number of advanced gold targets have been identified by surface exploration. What has attracted Agnico Eagle here is impressive grades, widths, and apparent strike length with the potential for many deposits.

Morelos Sur Property

Cayden Resources’ other flagship property in Mexico, which Agnico will get upon closing of the acquisition, is the Morelos Sur Property. Situated in the Guerrero gold belt, Morelos Sur consists of three concessions.The Las Calles concession has yielded drill intersections of up to 3.21 g/t gold and 84 g/t silver over 28.5 metres. Las Calles is between two operating pits. These pits make up one of the largest producing gold mines in Mexico.

Two other concessions (La Magnetita and Tenantla) together host a 25 km2 gold soil anomaly with values of 0.1 to 1.0 g/t gold. La Magnetita neighbours the largest producing gold mine in the belt. The Morelos Sur Property is 13K hectares.

Significant for Agnico Eagle is that Cayden Resources believes the Morelos Sur concession has the capacity to produce substantial additional internal cash flow. This project has considerable infrastructure in place as well.

Important for investors to note is that Agnico Eagle Mines is working to increase operating and free cash flows. Its aim is to increase net free cash flow via higher production, controlling operating costs, and controlled capital spending.

Regarding the Cayden Resources acquisition, Agnico Eagle Mines President and Chief Executive Officer, Sean Boyd, said, “This acquisition is consistent with our long-term strategy of acquiring promising, early stage gold projects where we can add value through focused exploration and mine building.”

The expectation is that this acquisition will close before the end of 2014. Of course, it is subject to approval from Cayden security holders, Mexican anti-trust and other regulatory approvals and court approval.

Agnico Eagle Mines current dividend yield is 0.944 and its five-year average dividend yield is 1.30%. The company pays dividends quarterly and its dividend rate is $0.32. It has declared a cash dividend every year since 1983. It recently approved the next quarterly dividend of $0.08 per share to be paid on September 16, 2014.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Michael Ugulini has no position in any stocks mentioned.

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