The board of directors of gold miner
Agnico Eagle Mines Limited
) has approved the development and construction of La India gold
mine in the Mulatos Gold Belt in Sonora, Mexico. Located about 70
kilometers from Agnico's Pinos Altos gold and silver mine, a part
of the Mulatos Gold Belt in Chihuahua State, La India will be
developed as an open pit, heap leach operation.
Commercial production at the La India mine is expected to commence
in the second half of 2014. The cost of constructing the project is
estimated at $158 million and will be funded through Agnico Eagle's
operating cash flows. Capital costs are expected to total about $25
million over the eight-year life of the mine.
The company believes that the development of La India project will
provide low risk and high quality gold and will generate ample
cash. The project is also estimated to provide an internal rate of
return of approximately 31%, assuming a gold price of $1,379 per
Initial probable reserves at La India are anticipated to contain
930,000 gold ounces, while gold production is expected to average
90,000 ounces annually. Indicated gold ounces are forecast to be
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In addition to La India, the company is also developing an
early-stage exploration project named Tarachi, which is 10
kilometers to the north of the La India deposit. Through the end of
July 2012, Agnico has spent more than $8 million on exploration at
the both La India and Tarachi deposits.
In July 2012, Agnico released its second quarter 2012 results. The
company's adjusted earnings (excluding one-time items other than
stock-based compensation expenses) of 37 cents per share in the
quarter outperformed the Zacks Consensus Estimate of 32 cents.
Profit, as reported, slid 37% year over year to $43.3 million or 25
cents per share as higher costs more than offset a modest growth in
the top line. The Canada-based mining company posted a profit of
$68.8 million or 40 cents a share a year ago.
Consolidated revenues edged up roughly 0.5% year over year to
$436.9 million, beating the Zacks Consensus Estimate of $411
million. Payable gold production in the second quarter climbed 11%
year over year to 265,350 ounces riding on record gold production
from five mine operations except the Quebec-based Goldex mine,
which was shut down in October 2011.
Agnico-Eagle, which competes with
Barrick Gold Corporation
Kinross Gold Corporation
), currently retains a Zacks #3 Rank (Hold) for the short-term (1
to 3 months). We have a Neutral recommendation on the stock for the
long-term (more than 6 months).