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Sean Boyd, the chief executive officer of Agnico Eagle Mines Ltd. , says there is room for more consolidation in the “fragmented” global gold sector, but operators have to be careful not to repeat the sins of the past.

Even as gold prices have hit a record high over the past year, mergers and acquisitions activity has been relatively quiet, especially compared with the previous rush of big deals from a decade ago. The industry also saw an aggressive round of consolidation about three years ago, with heavyweights Barrick Gold Corp., Newmont Corp. and Kirkland Lake Gold Ltd. pulling the trigger on multibillion-dollar deals.

But over the past 18 months, deal making has slowed, with medium-sized or smaller acquisitions becoming the norm. During that time, Britain’s Endeavour Mining Corp. made two purchases in West Africa, Vancouver-based Fortuna Silver Mines Inc. bought Roxgold Inc., another West African gold specialist, and Australia’s Evolution Mining Ltd. acquired Toronto-based Battle North Gold Corp.

Part of the reason for the slowdown in the size and pace of big deals is the COVID-19 pandemic, which has made travelling difficult for on-site due diligence. But miners are also under pressure to remain disciplined, after vastly overpaying for acquisitions in the late 2000s, and taking multibillion-dollar write downs as a result.

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Gold companies have navigated the past decade more judiciously, with tighter controls over not only M&A, but also over capital allocation and financings. Still, because of an overabundance of companies chasing a limited pool of capital, there is potential for another round of deals, said Mr. Boyd.

“You could make an argument there should be more M&A, but it has to be smart, with meaningful synergies,” he said. “It’s not getting easier. It’s tough to grow and to do it in a way that you’re not substantially increasing your risk.”

Agnico’s last big deal was its 2014 purchase of 50 per cent of Malartic, Canada’s biggest gold mine, for $1.9-billion. Earlier this year, the company paid $289-million to acquire TMAC Resources Inc., which previously ran the Doris gold mine in Nunavut. After Agnico bought TMAC, it indicated that it could take years before a new mine plan would be in place, as the previous operator had long struggled with an underperforming mill.

Agnico said on Thursday that it will continue to drill the site, exploring other areas of the property for new gold deposits, before figuring out where a new mill should be built.

Part of the plan for Doris will also likely see the company transition in part to renewable energy. Doris, like Agnico’s other gold mines in Nunavut, are wholly dependent on diesel generators, because of the absence of an electric grid. A few weeks ago, the company signed an agreement with Tugliq Energy Co. and Hiqiniq Energy Corp. that will see the Inuit organization build a wind turbine on site that will provide electricity for the company at Doris. Like all miners, Agnico is under pressure to cut its carbon emissions, and a move toward renewables would certainly help.

“Wind power will form some part of the energy supply,” Mr. Boyd said.

Agnico on Wednesday reported a net profit of US$189.6-million for the quarter ending on June 30, up 80 per cent compared with the same period last year, thanks in part to higher-than-expected production. On an adjusted basis, Agnico reported earnings per share of US$0.69 a share, 10 cents better than analysts expected.

Shares in Agnico rose by 4.2 per cent on Thursday on the Toronto Stock Exchange to close at $80.60, its best performance since early May. Gold stocks were also aided by the price of bullion on Thursday, which rose by about 1.6 per cent to US$1,835 an ounce.

Agnico also flagged that it is facing some inflationary cost pressures amid the current boom in commodity prices, particularly when it comes to paying for labour for exploration. But the company said it still expects to be able to hit its cost targets for the year.

The company has started to bring back its Inuit work force in Nunavut, which will result in savings of about $4-million a quarter. In March of last year, Agnico sent its Inuit employees home with 75-per-cent pay to reduce the chance of the virus spreading to the Indigenous community. The entire work force of 400 is expected to be back by the end of September.

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