Agnico-Eagle Mines Limited (AEM) reported excellent fourth-quarter 2010 results. Quarterly net income was $88.0 million, or 53 cents per share compared with $47.9 million, or 31 cents per share in the year-ago quarter. Adjusted earnings were 51 cents per share versus 30 cents per share in the prior-year quarter. However, the results were below the Zacks Consensus Estimate of 61 cents per share.

Net income includes a non-cash foreign currency translation loss of $10.4 million, or $0.06 per share, stock option expense of $7.2 million, or $0.04 per share, and a gain on sale of investments of $11.3 million, or $0.06 per share.

For full-year 2010, the company recorded net income of $332.1 million, or $2.05 per share versus $86.5 million, or 55 cents per share in the prior year, positively affected by a greater than 100% increase in gold production as a result of a full year of production at Kittila, Pinos Altos and Lapa, the startup of production at the Meadowbank mine in March, combined with higher realized prices for gold, silver, copper and zinc. Adjusted earnings were $2.00 per share versus 55 cents per share in the prior year.

Revenue

In fourth-quarter 2010, revenues were $451.5 million versus $232.0 million in the prior- year quarter. In fiscal 2010, total revenue was $1.5 billion versus $640.1 million in the prior year.

Payable gold production in the fourth quarter of 2010 was 256,469 ounces compared with 163,276 ounces in the prior-year quarter.

Total cash costs for the fourth quarter of 2010 were $485 per ounce versus $297 per ounce in the fourth quarter of 2009.

The company’s payable gold production in fiscal 2010 was a record of 987,609 ounces at total cash costs per ounce of $451. The full-year production is 1.2%, which is significantly below the bottom end of the guidance range, provided in December 2009, largely due to the slower than anticipated ramp-up at the new Meadowbank mine. Additionally, the shortfall partially resulted from lower than expected grades at LaRonde and Lapa in the fourth quarter of 2010.

Financial Position

Cash provided by operating activities was $90.6 million versus $53.7 million in the fourth quarter of 2009, primarily attributable to 57% higher gold production and significantly higher metal prices.

In fiscal 2010, cash provided by operating activities was $483.5 million versus $115.1 million in fiscal 2009, primarily due to the previously mentioned increase in 2010 gold production, as well as significant increases in realized prices for all produced metals in 2010.

Cash and cash equivalents decreased to $104.6 million as of December 31, 2010 from $148.1 million as of September 30, 2010, as the company repaid $65 million of its long-term debt during the quarter.

Capital expenditures in the fourth quarter were $115.0 million, including $28.2 million at Pinos Altos, $26.1 million at Meadowbank, $23.7 million at LaRonde, $18.7 million at Kittila, $8.8 million at Goldex and $7.3 million at Lapa. For full-year 2010, capital expenditures totaled $511.6 million.

In fiscal 2010, the company’s proven and probable gold reserves totaled 21.3 million ounces, net of depletion, up 2.9 million ounces over 2009 levels. During the year, the number of shares outstanding increased by approximately 8%, while the gold reserves surged by approximately 16%.

Outlook

For fiscal 2011, it is expected that Agnico-Eagle’s overall mineral reserves will continue to grow as the company continues to convert its resources to reserves and continues the exploration of its properties outside the currently known resource. Agnico-Eagle’s goal is to increase gold reserves from its existing portfolio of mines and projects to more than 22 million ounces by year-end 2011.During 2011, the company expects to invest approximately $145 million in exploration.

Currently, we maintain a Neutral recommendation on the stock. Currently, it holds a Zacks #3 Rank (Hold) on the stock.

 
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