Gold production up by 30% at Agnico’s mid-year mark

With one record year under its belt, Agnico-Eagle Mines appears well on its way to achieving another.

For the six months ended June 30, the company’s gold division produced at an all-time peak in tons of ore milled and troy ounces of gold. Indeed the mill treated 228,188 tons at an average grade of 0.198 oz gold per ton, producing 40,046 oz gold. That’s up smartly from the 208,536 tons of ore treated at an average grade of 0.163 oz gold per ton to produce 30,714 oz gold in the comparable period of 1985.

Given these figures, President Paul Penna reports the targeted record production for the current year should be achieved. Last year 75,000 oz gold were produced from the gold division, with at least 90,000 oz expected to be produced this year and 100,000 oz in 1987.

For the latest 6-month period, the bullion revenue of the gold division increased by 44% to $19.1 million from the 1985 comparable figure of $13.2 million. Cash operating profit of the gold division was also higher by 63% at $8.3 million from the 1985 comparable figure of $5.1 million.

A look at consolidated financial results for the six months ended June 30 shows net income of $1.5 million, or 11 cents per share, a decline from the net of $1.9 million or 14 cents a share posted in the comparable period of 1985.

This decrease reflects a number of negative factors, primarily the results from the silver division, says Mr Penna. Due to a fire that destroyed the Penn mill early this year and the consequent absence of silver production, this division proved a negative contribution.

Moreover, he says, the decline in the silver price has resulted in a writedown of the 1985 silver bullion remaining in inventory of $1.2 million. This writedown appears as a charge against income in this year’s first quarter and brings the carrying value of the 1.2 -illion-oz silver bullion inventory to about $7.20(C) per oz.

Should the value of the silver inventory be upgraded by an improvement in silver prices in lockset with uptrending gold prices, the effect of the $1.2-million writedown could be considerably alleviated, he says.

Also affecting the bottom line for this 6-month period is the increased non-cash charges for depreciaton and amortization as a result of additions to fixed assets: the Telbe mine shaft and related infrastructure additions and mill expansion.

The non-cash charges for depreciation and amortization amounted to $3.5 million in the latest 6-month period, an approximately 93% increase from the $1.8 million charged against the same period in 1985.

The company’s net cash position at the end of the latest 6-month period was $10.06 million, higher by 52% from the year ago level of $6.6 million.