Agnico’s strong Q3 results

High prices for its byproducts kept Agnico-Eagle‘s (AEM-T) gold production costs falling, fuelling record third quarter earnings for the Toronto-based company.

On Oct. 26, Agnico’s shares were up nearly 2% to $39.45 on roughly 1.2 million shares.

The jewel in the Agnico crown continues to be the enormously profitable LaRonde mine in the Abitibi region of Quebec. The mine generated US$221 million profit in the first nine months of this year, compared with US$76 million for the same period last year.

But Agnico’s story is rapidly becoming about a lot more than just LaRonde. The company continues to push forward on the construction of four new mines: Goldex, Lapa, La Ronde II all of which are in Quebec, and the Kittila mine in Finland.

A fifth project Pinos Altos in Mexico is slated to have a bankable feasibility study done by the second quarter of the 2007.

Speaking on a conference call, Agnico’s chief executive Sean Boyd emphasized that the rapid growth was all fully financed and that Agnico was in, “the strongest financial position we’ve ever been in.”

Backing that statement up were record third quarter earnings coming in at US$45.2 million compared to net earnings of $2.1 million for the same period last year.

Agnico says such robust earnings were inflated by a non-recurring after-tax gain of US$11 million on the sale of Contact Diamond Corporation shares an advantage the company won’t be able to enjoy in the fourth quarter.

The company said non-cash foreign exchange translation resulted in the loss of US$1 million and another $1 million was lost on zinc forward sales.

Agnico’s cash position remains enviable at US$431 million — up from US$415.5 million at the end of the second quarter.

Cash flow for the quarter also set a record with roughly US$74 million from operations. That figure easily covered capital expenditures of US$41 million and US$20 million in investments.

But what continues to set Agnico apart are its incredibly low cash costs at LaRonde. Payable gold production in the third quarter of 2006 was roughly 60,000 oz. and with high prices for La Ronde’s byproducts of silver, copper and zinc, cash costs per oz. went down to an extraordinary minus US$709.

However, mine site costs per tonne were up slightly to $63 per tonne from $57 per tonne for the same period last year. The company blamed the increase on accelerated development work and general cost increases for the industry as a whole. Boyd says that costs should drop to $61 per tonne for the fourth quarter.

For 2006, the company says it is on target to put out roughly 5 million oz. of silver, 77,000 tonnes of zinc, and 7,500 tonnes of copper.

The company also stood by its gold production guidance for the year, saying it will produce roughly 250,000 oz. of the yellow metal in 2006.