Agnico-Eagle Mines Limited (AEM) posted net income of $47.3 million or 27 cents per share in third-quarter 2013, down from net income of $106.3 million or 62 cents per share a year ago. The results were impacted by lower realized metal prices and extended maintenance outage at the Kittila mine in Finland during the quarter.
Barring one-time items other than stock-option expenses, the Canada-based mining company’s earnings were 32 cents per share, comprehensively beating the Zacks Consensus Estimate of 9 cents per share.
Revenues and Operational Highlights
Revenues declined roughly 17% year over year to $444.3 million in the reported quarter, but surpassed the Zacks Consensus Estimate of $374 million. Payable gold production in the quarter increased roughly 10% year over year to 315,828 ounces. Higher production level was mainly due to record throughput, better-than-expected gold grades and higher mill recoveries at the Meadowbank mine.
Total cash costs per ounce for the third quarter rose 6.3% year over year to $591 per ounce due to lower net byproduct revenues at LaRonde and Pinos Altos mines. Realized gold price fell 21.4% to $1,333 an ounce from $1,695 a year ago.
Gold production at Kittila in the reported quarter was a record 56,177 ounces at total cash costs per ounce of $518 compared with 48,619 ounces produced at total cash costs per ounce of $478 in the year-ago quarter. The mine’s production was higher on account of increased throughput, higher grades from mining the pit pillar, and better gold recoveries.
Payable production at the Pinos Altos mine in northern Mexico decreased 5.2% year over year to 43,736 ounces of gold. Cash cost per ounce increased 113.7% year over year to $404 due to decline in realized silver price.
The Creston Mascota heap leach operates as a satellite operation to the Pinos Altos mine. Payable gold production at Creston Mascota was 11,307 ounces, a decline of 28.6% year over year due to decreased tons being stacked at lower grades and the suspension of operations during the first quarter of 2013. Cash cost per ounce increased 86.2% year over year to $523 due to lower production divisor.
Payable gold production at Meadowbank rose 20.3% year over year to 133,489 ounces in the quarter. The year-over-year increase in production was due to better tonnage and grade, high crusher throughput levels, and slightly better mill recoveries.
Financial Condition
Agnico-Eagle’s cash and cash equivalents stood at $141.7 million as of Sep 30, 2013, compared with $320.8 million as of Sep 30, 2012, down 56%. Long-term debt was $950 million as of Sep 30, 2013, compared with $800 million as of Sep 30, 2012, up 19%.
Cash provided by operating activities in the second quarter was $81 million compared with $199.5 million in the prior-year quarter. Capital expenditures in the quarter were $142.3 million compared with $113.3 million in the year-ago quarter.
Dividend
Agnico-Eagle’s Board declared a quarterly cash dividend of 22 cents per share, which is payable on Dec 16, 2013, to stockholders of record as of Dec 2, 2013.
Outlook
Agnico-Eagle increased its production guidance and expects payable gold production to be roughly 1,060,000 ounces for 2013, up from the previous guidance of 970,000 ounces to 1,010,000 ounces. The company expects to achieve the projected gold production at a total cash costs per ounce of roughly $690, down from the earlier estimate of $735 to $785.
The increase in the 2013 production forecast with a related reduction in the total cash cost estimate was attributable to the strong operational performance from the Meadowbank mine, and positive contributions from other mines in the third quarter. The company also lowered all-in sustaining costs’ expectation to roughly $1,025 per ounce from its previous guidance of $1,100 per ounce.
Agnico-Eagle further expects production growth in 2014 from LaRonde, Goldrex and La India. The growth in Goldrex is based on a planned full year of operations and La India on expected start of commercial production in 2014. Anticipated improvement in grades is expected to drive the growth in LaRonde. The company also expects similar higher-than-expected grades at the Meadowbank mine to reoccur in 2014.
The company has incorporated cost reduction initiatives in 2014 budget process, which are expected to have an impact on the year-end financial results and three-year forecast, scheduled to be released in Feb 2014.
Agnico-Eagle also announced capital and other cost reductions of roughly $50 million and exploration spending of roughly $20 million for 2013. The company also anticipates 2014 capital expenditures at existing mines and projects to be roughly $400 million, which is lower than its previous estimate of about $600 million.
Agnico-Eagle currently retains a Zacks Rank #3 (Hold).
Other companies in the gold mining industry worth considering are Pretium Resources Inc. (PVG), Franco-Nevada Corporation (FNV) and Allied Nevada Gold Corp. (ANV). While both Pretium Resources and Franco-Nevada carry a Zacks Rank #1(Strong Buy), Allied Nevada holds a Zacks Rank #2 (Buy).
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