Lacklustre gold prices take shine off Agnico-Eagle

For 1997, Agnico-Eagle Mines (AGE-T) reported a loss of $121.6 million (or $2.83 per share), attributing the red ink to low gold prices. By comparison, the previous year saw the company earn $300,000 (0.01cents per share).

At year-end, Agnico-Eagle’s financial position remained strong. Its cash position, excluding bullion, was $92.5 million, with working capital of $111.8 million. In addition, the company has gold bullion available for immediate sale with a market value of about $23 million. The only debt on the books consisted of convertible notes, which mature in 2004, with a book value of $145.1 million.

>From an operating standpoint, the LaRonde mine in northwestern Quebec continued to perform well in 1997. Cash costs to produce an ounce of gold remained low at US$216 per oz. gold, compared with US$210 in 1996. On a cost-per-ton basis, LaRonde improved its operating efficiency in 1997, averaging US$55 before deducting byproduct credits; this compares with US$62 in the previous year.

Gold production in the year declined by 3% to 154,515 oz. because of lower grades in the Main zone. Output for the current year is pegged at 157,000 oz.

at an average cash cost of US$210 per oz.

For the next three years, prior to the completion of the LaRonde mine expansion, average annual gold production is estimated to be 160,000 oz. at an average cash cost of US$200 per oz. When fully expanded, LaRonde is expected to produce an average of 230,000 oz. gold per year. After the expansion is completed, production of byproduct metals is expected to rise substantially. As a result, the cash operating cost to produce an ounce of gold will be highly leveraged to both silver and zinc prices and is expected to be significantly lower than current levels.

At year-end, reserves at LaRonde stood at 830,000 contained ounces, assuming a long-term gold price of US$350 per oz.