Agnico-Eagle Mines Limited has announced that it will offer about C$679 million ($580 million) Cumberland Resources Limited in order to gain a foothold in Canada’s Arctic resources patch.

This deal will give Agnico-Eagle 100% ownership of Cumberland’s Meadowbank gold project, in the northern territory of Nunavut. The project is already under construction and has proven and probable reserves of 2.9 million ounces of gold, with production expected to commence in 2010.

Initially Agnicos stock price stumbled a little when the news broke, as is typical when investors worry about the new acquisition and whether or not they have paid too much for a junior miner. In our opinion this is a good move and we hope that it goes through. We say this because as far as we can ascertain Agnico’s stock will experience about an 11% dilution in return for a 30% increase added to the reserve base. So we are relaxed about this acquisition.

Cumberland Resources Limited trades on the Toronto Exchange under the symbol of CGL.
Agnico-Eagle Mines Limited trades on the Toronto Exchange under the symbol of EAM.

15 February 07