Agnico-Eagle reports record quarterly production and earnings

Vancouver – Agnico-Eagle Mines (AEM-T, AEM-N) reached record gold production, revenue and net income in the third quarter, the result of several years of work commissioning no less than five mines.

Net income was US$121.5 million, compared with a net loss of US$17 million for the same period a year ago. Total revenue for the quarter was US$473 million, compared to US$159 million for the same quarter in 2009, thanks in part to both increased production and significantly higher metal prices.

Gold production was up 140% to 285,179 oz.., while the company expects to produce between 1 and 1.1 million oz. gold this year.

Sean Boyd, vice-chairman and CEO of Agnico-Eagle, said in a phone interview that the company is benefitting from years of expansion, often at a challenging rate.

“The sheer pace of trying to build five mines at the same time from scratch, that wasn’t easy,” said Boyd. “We do our own feasibility studies, we’re our own general contractor, so we take on a fair bit when we build these things. It’s pretty hard to build two or three; when you’re building five it gets a bit wild and willy. But it was the right thing to do because we built a lot of value.”

Production was boosted from last year thanks to recoveries of 81% at the Kittila mine in Finland compared with 64% in the same quarter last year, as well as by achieving commercial production at the Pinos Altos mine in Mexico last November and the sizable Meadowbank mine in Nunavut earlier this year. Agnico-Eagle also continued to reap strong outputs from its three mines in the Abitibi region of Quebec.

Total cash costs per oz. were US$441, compared with US$436 for the same quarter a year earlier. Cash costs at Pinos Altos were US$690 per oz., compared to US$415 per oz. for the second quarter of 2010, due largely to the transition to underground workings, an employee bonus, and the write-down of a low-grade stockpile. In contrast, cash costs at the LaRonde mine were negative US$298 per oz. thanks to significant by-product revenues.

Cash costs for the 93,395 oz. produced at Meadowbank were US$677 per ounce. Boyd said the challenging location and early stage meant they were still optimizing the operation.

“We would have liked it to be a bit lower cost” said Boyd, “but to be fair to them, they’ve only been in commercial production for six months.”

Agnico-Eagle’s share price rose $4.39 or 6% to close at $77.23 on the day, a new 52-week high. The company was trading as low as $53.16 in February.

Boyd attributes the company’s progress over the past few years to a strong focus on set goals.

“We didn’t grow just to say we were bigger, we were actually very focused on what an acquisition would do to our per-share exposure to production and reserves, and ultimately, cash flow,” said Boyd.

Going forward, Boyd said the company will continue to look for smaller, earlier-stage opportunities where it can get involved and help along, though he noted that was becoming more difficult for everyone in the industry.

“The challenge for gold companies is to find quality opportunities to continue to grow,” said Boyd. “The industry is really challenged to actually significantly increase output, even with gold prices at these high levels.”

The company still has significant internal expansion opportunities though, such as the Meliadine project acquired earlier this year that sits 290km southwest of Meadowbank. Agnico-Eagle is advancing an aggressive exploration budget there with the aim of completing a feasibility study in 2013.