Toronto based Agnico-Eagle Mines (AEM) announced that gold production at its Meadowbank operation in Canada’s Nunavut territory will be around 50% higher in the second half of 2011 compared with the first six months of the year.
As per the company, total group production is also expected to be higher, and costs are anticipated to improve in the second half of 2011.
A few months back, a fire broke out at Meadowbank and destroyed the kitchen and dining room facilities forcing the company to operate the mine at lower staffing and production levels. According to the company, operations at the mine in the Canadian territory of Nunavut have been fully recovered and a permanent replacement for the destroyed kitchen would be in place by the end of 2011. The company has also started a new permanent secondary crusher at the mine, and is in the final stages of commissioning.
Gold production at the mine in the second quarter is expected to be 60,000 ounces, bringing the first half output at the mine up to around 120,000 ounces. The company expects total first half production across its six mines to be approximately 490 000 oz, with total cash costs in the range of $540/oz –$570/oz. Both production and costs are expected to show a significant improvement during the second half of the year.
Agnico expects gold output to be around 20% higher and costs to decline by a similar percentage. The company feels that despite a difficult start in 2011, its Meadowbank mine has made good progress in ramping up operations and adding additional processing capacity.
In April 2011, Agnico reported quarterly net income of $45.3 million or 27 cents per share for the first quarter of 2011. Net income includes a non-cash foreign currency translation loss of $14.1 million, or $0.08 per share, stock option expense of $18.5 million, or $0.11 per share, an expense of $3.1 million, or $0.02 per share related to the March 10, 2011 Meadowbank fire, and a gain on sale of investments of $4.4 million, or $0.03 per share.
In first-quarter 2011, revenues were $418.1 million versus $238.8 million in the prior- year quarter. Results were below the Zacks Consensus Estimate of $483 million.
Agnico-Eagle faces stiff competition from Barrick Gold Corporation (ABX), Kinross Gold Corporation (KGC) and Newmont Mining Corp. (NEM).
Currently, we maintain a Neutral recommendation on the stock and a Zacks #3 Rank (Hold).
