Agnico-Eagle suffers growing pains

Paced by the first full year of production from the expanded LaRonde mine in Rouyn-Noranda, Que., Agnico-Eagle Mines (AGE-T) was cheered by significantly improved operating results in 2001.

During the year, the company’s operating cash flow increased more than 150% to US$12.4 million, thanks mostly to increased gold production. Despite the improvement the company ended 2001 with a net loss of US$7.7 million (or 12 per share), just more than twice the US$3.4-million loss suffered in 2000. The bigger loss comes as a result of increased non-cash expenses plus a non-cash, third-quarter writedown of US$1.6 million on an exploration property. Revenue between the two years climbed to US$93.7 million from US$67 million.

The last three months of 2001 were no better. The company’s net loss piled up to US$1.5 million (or 2 per share), compared with year-ago net earnings of US$3.1 million (6 per share). Revenues slipped to US$25.1 million from US$28.4 million. Operating cash flow dropped by US$7.7 million to US$1.4 million.

Fourth-quarter production from LaRonde fell to 66,372 oz. from 71,008 oz. the previous year. With significantly lower byproduct prices and increased gold production from Zone 20 South-El Coco, resulting in higher royalty payments, total cash costs climbed to US$181 per oz. from US$95 per oz. in the 2000 fourth quarter.

For all of 2001, gold production soared to a record 234,860 oz. at a total cash cost of US$155 per oz., compared with the 173,852 oz. produced at US$188 each in 2000. The company realized US$273 for each gold oz. produced in 2001, off US$5 per oz. from 2000. The prices for its byproduct metals were lower across the board.

Agnico’s president and CEO Sean Boyd said in a prepared statement, “We are extremely pleased with the steady progress we have made in the past year increasing production and expanding our already large gold deposit. The LaRonde mine performed very well in its first full year at 5,000 tons of ore per day, setting the stage for the expansion to 7,000 tons per day by the fourth quarter of 2002.”

During the quarter, LaRonde ran through a total of 1.8 million tons of ore with onsite cash costs ringing in at C$52 per ton. Both the mine and mill performed according to plan. The Penna Shaft hoisted a total of 2.5 million tons of ore and waste and the mill met or exceeded design criteria for metal recoveries and availability.

With the expansion to 5,000 tons per day under its belt, Agnico-Eagle says that both the underground development program and the mill expansion to 7,000 tons per day are on schedule for completion by the end of the third quarter. Construction contracts have been awarded for the mill expansion and additions to the grinding bay have begun. Ramping of production up to 7,000 tons per day is planned for the fourth quarter.

With the expansion, Agnico expects 2002 production to hit 340,000 oz. at a cash cost of about US$130 per oz. By the second half of 2003, when the lower gold-copper-rich portions of the orebody are developed, the company figures production should reach about 400,000 oz. annually. Cash costs are projected below US$100 per oz.

Looking ahead, operating cash flows are expected to continue to increase significantly in 2002 and in future years thanks to the LaRonde expansion. The company plans on spending US$44.8 million in 2002 to complete the expansion and most of the underground development in the lower portion of the Penna Shaft.

On the exploration front, Agnico plans to have seven drill rigs sink a total of 265,000 ft. of diamond drilling in 2002, the most aggressive program so far. Of that, 61,000 ft. are aimed at stope delineation; 82,000 ft. will test the western margins of zones 20 North and South with an eye toward converting resources above the bottom of the Penna Shaft into reserves; 70,000 ft. will aim to add resources below the Penna Shaft from the Level 215 exploration drift. Another 52,000 ft. of drilling is planned for the El Coco property.

At the end of 2001, the company had cash and equivalents of US$21.2 million, up from $13.9 million at the end of 2000. LaRonde’s total mineral reserve and resource stood at a record 70 million tonnes running 0.12 oz. gold, 1.52 oz. silver per ton, plus 0.44% copper, and 2.31% zinc. Mineralization remains open in all directions.