Shares of Agnico Eagle Mines Limited (AEM) rose around 2.3% during the trading session following the release of its fourth-quarter 2013 results. The company’s adjusted earnings (barring one-time items other than stock-option expenses) were 23 cents per share in the quarter, beating the Zacks Consensus Estimate of 21 cents per share. The company’s shares eventually closed at $33.47, gaining around 1.8%.
The company logged a net loss of $453.3 million (or $2.61 per share) on a reported basis in the fourth quarter compared with a net income of $82.8 million (or 48 cents a share) recorded in the year-ago quarter.
The loss in the reported quarter mainly resulted from $436.3 million of after-tax non-cash impairment loss, $47.2 million of non-cash deferred tax charge related to a new Mexican mining tax law and $10.2 million of non-cash impairment loss on securities available for sale.
For full-year 2013, the company posted net loss of $406.5 million (or $2.35 per share) compared with a net income of $310.9 million (or $1.81 per share) recorded in 2012. The results were impacted by lower-realized metal prices, non-cash impairment loss, non-cash deferred tax charges elated to the new Mexican mining tax law and non-cash impairment losses on available for sale securities during 2013.
Revenues and Operational Highlights
Revenues declined roughly 3% year over year to $437.2 million in the reported quarter but surpassed the Zacks Consensus Estimate of $399 million. For full-year 2013, revenues decreased 14.5% to $1,638.4 million from $1,917.7 million in 2012.
Payable gold production in the quarter increased roughly 3.6% year over year to a record 322,443 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 fourth quarter decreased 19% year over year to $623 per ounce due to higher production and continued cost control at several of the operations, particularly in the Meadowbank mine, which more than offset lower byproduct metals revenue.
Realized gold price fell 26% to $1,244 an ounce from $1,684 a year ago. Gold prices declined due to a challenging gold market.
Gold production at Kittila in the reported quarter decreased around 8% to 41,710 ounces at total cash costs per ounce of $687 from 45,273 ounces produced at total cash costs per ounce of $569 in the year-ago quarter. The mine’s production was lower in the reported quarter as all the ore was sourced from the relatively higher cost underground.
Payable production at the Pinos Altos mine in northern Mexico decreased 5% year over year to 46,490 ounces of gold. Cash cost per ounce increased around 50% year over year to $442 due to decline in realized silver price. The mine’s production lowered mainly due to slightly lower grades processed.
The Creston Mascota heap leach operates as a satellite operation to the Pinos Altos mine. Payable gold production at Creston Mascota was 10,666 ounces, a roughly three-fold year over year rise from 3,560 ounces produced in the prior-year quarter. The year ago lower production was due to suspension of operations for leach pad modifications which resulted in fewer ounces from drain-down of older leach panels.
Payable gold production at Meadowbank rose 60% year over year to 123,433 ounces in the quarter. Cash cost per ounce decreased around $547 year over year to $637. The year-over-year increase in production and decrease in costs were due to better grade processed and ongoing cost control programs.
Financial Condition
Agnico-Eagle’s cash and cash equivalents were at $170 million as of Dec 31, 2013, compared with $332 million as of Dec 31, 2012, down 48.7%. Long-term debt was $1,000 million as of Dec 31, 2013, compared with $830 million as of Dec 31, 2012, up 20.5%.
Cash provided by operating activities in the fourth quarter was $135.9 million compared with $106 million in the prior-year quarter. Capital expenditures in the quarter decreased 12.3% to $133.1 million from $151.8 million in the year-ago quarter. The decrease in capital spending is a reflection of capital and cost reduction initiatives that have been incorporated in the second half of 2013.
Dividend
Agnico-Eagle’s Board declared a quarterly cash dividend of 8 cents per share, a reduction of around 64%, payable on Mar 17, 2014, to stockholders of record as of Mar 3, 2014. The reduction in quarterly dividend payment is based on the challenging environment prevailing in the current gold market and management's decision to conserve cash for longer-term development and growth of its asset base.
Developments
The 100% owned Goldex mine in northwestern Quebec, achieved its commercial production in the fourth quarter, with the mill processing an average of 5,343 tons per day in the quarter. The La India mine’s commissioning commenced ahead of schedule in the third quarter of 2013 and commercial production from this mine is expected in the first quarter of 2014.
Outlook
Agnico-Eagle expects payable gold production to be in the range of 1,175,000 ounces to 1,205,000 ounces for 2014. The company expects to achieve the projected gold production at a total cash cost per ounce of $670 to $690.
The guidance assumes strong operational performance from the Meadowbank mine and positive contributions from other mines. The company also expects all-in sustaining costs to be roughly $990 per ounce for 2014.
Agnico-Eagle further expects production growth in 2014 from LaRonde, Goldrex and La India. Anticipated improvement in grades is expected to drive growth in LaRonde. The company also expects similar higher-than-expected grades at the Meadowbank mine to reoccur in 2014.
Agnico-Eagle currently retains a Zacks Rank #3 (Hold).
Other companies in the gold mining industry worth considering are Franco-Nevada Corporation Inc. (FNV), Gold Fields Ltd. (GFI) and Golden Star Resources, Ltd. (GSS). While Franco-Nevada carries a Zacks Rank #1 (Strong Buy), both Gold Fields and Golden Star hold a Zacks Rank #2 (Buy).
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