Agnico-Eagle stoic as gold price tumbles

This year’s first quarter brought challenges beyond a falling gold price for Agnico-Eagle Mines (AEM-T, AEM-N), but it’s nothing that a company with a 55-year history can’t weather.

Agnico reported quarterly net income of US$23.9 million, or US14¢ per share — but excluding non-cash items, adjusted net income rings in at US$53.6 million, or US31¢ per share. That compares to net income of US$78.5 million, or US46¢ per share, for the same period last year.

Cash from operating activities was US$146.1 million, compared to US$196.5 million in the first quarter of 2012. As expected, the lower totals were tied to the lower gold prices and higher cash costs that are affecting the entire industry. The company was also hit by lower production.

Despite the challenges, Agnico’s CEO Sean Boyd, speaking on a conference call, stressed that operations performed in-line with expectations and that the company is still on track to meet its production guidance for the year.

He stressed that Agnico will move up to having seven producing mines quicker than anyone thought thanks to start-ups at Goldex in Quebec and La India in Mexico being months ahead of schedule.

Goldex is slated to restart production in the fourth quarter of this year and should contribute 15,000 oz. gold for the year, while La India is three months ahead of schedule, with commissioning expected by year-end and commercial production likely beginning in the first quarter of 2014.

As for its other operations, good news comes from Pinos Altos in Mexico, where the Creston Mascota phase-two leach pad is back online. Leaching resumed at Creston in March, one month ahead of schedule, and the company expects the project back to pre-shutdown rates by year-end.

There was also good news from the Far North, as the company’s Meadowbank mine in Nunavut reached record quarterly throughput, which amounted to a daily average of 11,320 tonnes.

On the downside, scheduled maintenance at its Kittila mine in Finland is taking a month longer than expected. That means that it will lose between 10,000 and 15,000 oz. gold production for the year. But the company stresses that those lost ounces should be made up for at Goldex, leaving its production guidance of 990,000 oz. gold for the year unchanged.

The extra time needed at the mine is connected to the company relining its autoclaves, and work should be finished in late June. Autoclaves need to be relined every five to seven years.

More worrisome for investors is higher-cost guidance, which was revised upward due to commodity prices and exchange rates. The company now says total cash costs for the year will come in between US$735 and US$785 per oz.

For the quarter, total cash costs were higher than for the same period last year, coming in at US$740 per oz. compared to US$594 per oz. in the first quarter of 2012. The higher costs are connected to lower by-product revenues at its LaRonde mine in Quebec, lower grades at Meadowbank and a lack of production from the lower-cost Creston Mascota mine.

Payable gold production also fell to 236,975 oz., compared to 254,955 oz. last year. The shortfall is mainly due to Pinos Altos’ Creston Mascota heap leach being suspended during most of the quarter.

Going into the second half of the year, production should climb higher as Kittila comes back on stream and Creston Mascota ramps back up. LaRonde is expected to contribute more ounces, and there should be higher grades at Meadowbank when production increases.

At the end of the quarter, Agnico was sitting with cash and equivalents of US$264 million, down from the US$332 million it had at the end of last year. The decline is attributed to lower metal prices and repayment of a $30-million credit line.