Agnico-Eagle’s costs rise as output falls (January 14, 2004)

Higher by-product credits for copper, zinc and silver helped Agnico-Eagle Mines (AGE-T) report higher but lower-than-anticipated costs in the fourth quarter at its sole producing asset, the LaRonde gold mine in northwestern Quebec.

The news comes as the mid-tier gold miner struggles to ramp up LaRonde to full capacity, having suffered a major undeground rockfall in March which cut off access to higher grade ore zones.

For the fourth quarter, Agnico produced 70,299 oz. gold, down from 75,235 oz. a year earlier. By-product output comprised: 1.2 million oz. silver (1.1 million oz. a year earlier); 24.7 million lbs. zinc (26.6 million lbs.); and 5.7 million lbs. copper (4.0 million lbs.)

Total fourth-quarter cash costs rang in at US$210-220 per oz., up from US$198 per oz. last year but better than the anticipated figure around US$250 per oz. (Total cash costs include the US$40-per-oz. El Coco royalty payable to Barrick Gold (ABX-T), while declined from US$70 per oz. a year ago.)

On the plus side, Agnico’s realized prices in the fourth quarter were way up across the board: US$395 per oz. for gold (US$318 per oz. a year ago); US$5.27 per oz. silver (US$4.51); US43 per lb. zinc (US34); and US94 per lb. copper (US71).

Another big plus in the fourth quarter were improvements of several percentage points in the recoveries of silver, zinc and copper.

Miners continue to make progress underground at LaRonde, with increases in total ore hoisted and in the proportion of ore extracted from the higher-grade lower levels of the mine.

Agnico hoisted over 635,000 tons from underground in the fourth quarter, up 13% from the third quarter, and milled 627,000 tons for an average daily throughput rate of 6,815 tons, up 10% from the third quarter.

By December, milling rates approached an impressive 7,400 tons of ore per day, allowing minesite operating costs to hold steady at C$49 per ton.

Agnico will report its full quarterly and year-end financial results on Feb. 25.

For 2004, LaRonde is confident it can match its goal of producing 300,000 oz. gold, 4.7 million oz. silver, 120 million lbs. zinc and 24 million lbs. copper, all at a total cash operating cost of US$155-165 per oz., based on base-metal credits well below current spot prices.

On the exploration front, Agnico released more enticing high-grade gold intercepts encountered during ongoing exploration at its nearby Lapa property. One hole, no. 118-03-35D, cut a true thickness of 37.1 ft. grading 0.41 oz. gold per ton (14 grams gold per tonne) at a very deep 3,942 ft. down-hole.

The company described this mineralization at depth as characterized by:

* greater thicknesses in excess of 15 ft., reaching 25-37 ft. at depth and to the west — which might allow for cheaper bulk-mining methods;

* decreasing total sulfides (arsenopyrite, stibnite, pyrrhotite) from 5% in the upper block to 0-1% at depth — which improves metallurgical recoveries;

* increasing silicification at depth, overprinting biotitic alteration seen in the upper block — which translates into even better rock quality at depth, and so, easier mining.

* increasing frequency of coarse visible gold at depth — which also improves recoveries.