Meadowbank improvements lift Agnico’s profits

Agnico Eagle Mines (TSX: AEM; NYSE: AEM) wrapped up a strong first quarter, with profits of US$109 million, ahead of the US$24 million earned in the same period last year. 

Removing one-time items — including an US$8.3-million non-cash foreign currency gain and a US$9.5-million non-cash stock option expense, and other gains of US$3.3 million — adjusted earnings doubled from a year ago to US$107 million, or US61¢ per share, on the back of higher-than-expected gold production, particularly from the Meadowbank gold mine in Nunavut. 

The Toronto-based miner churned out 366,421 oz. gold, or 55% more ounces than in the year-earlier period. 

The Meadowbank mine was the top performer due to higher gold grades, delivering 156,000 oz. at total cash costs of US$434 per oz. This compares to 82,000 oz. at costs of US$1,069 per oz. a year ago. 

The cost reduction resulted from higher output, lower costs for consumables and other savings. 

Also helping production were higher grades at the LaRonde gold mine and the first full quarter of production from the Goldex gold mine’s M and E zones. Both operations are in  northwestern Quebec’s Abitibi region — where Agnico has mined for more than 50 years and operates the Lapa underground gold mine. 

To expand its home base in Quebec, the company launched a joint $3.9-billion takeover bid with Yamana Gold (TSX: YRI; NYSE; AUY) for Osisko Mining (TSX: OSK; US-OTC: OSKFF) and its large Canadian Malartic gold mine in the Abitibi. Osisko shareholders are set to vote on the offer on May 30. The deal should close in June. 

The La India mine, Agnico’s newest gold mine, contributed 10,000 oz. commercial production during the quarter at low costs. The Mexican mine reached commercial production this February. 

Company wide total cast costs were US$537 per oz., down 27% from the year-earlier period, despite lower metal prices. Average realized gold prices were US$1,308 per oz., down from US$1,611 per oz. a year ago. 

But the miner saw a US$492-million revenue increase, largely due to higher gold sales of 358,000 oz. Last year Agnico sold 233,000 oz. gold in the same quarter.

The 53% sales boost led to US$247.7 million in cash provided by operating activities. 

Given the solid quarterly performance, Agnico expects to surpass its 2014 guidance of 1,175,000 to 1,205,000 oz., while total cash costs should come below the lower end of its US$670 to US$690 per oz. target. 

Agnico ended the quarter with US$206.8 million in cash and equivalents, up nearly US$37 million from the end of 2013. The cash boost came from lower costs, strong gold production and higher realized metal prices, compared to the last three months of 2013. 

Agnico has US$120 million outstanding on its otherwise undrawn US$1.2-billion credit facility. It intends to use the facility to fund its half of the total $1 billion cash consideration for Osisko.  

The $3.9-billion offer includes $1 billion in cash, $2.3 billion Agnico and Yamana shares and $575 million shares of a new company. 

Agnico closed May 2 — the day after the results were released — up nearly 10% at $35.53 per share.