We are retaining our Neutral recommendation on
Agnico-Eagle Mines Ltd.
). Its revenues and adjusted earnings for second-quarter 2012
outstripped the Zacks Consensus Estimates. However, profit slid 37%
year over year as higher cost more than offset a modest growth in
BARRICK GOLD CP (ABX): Free Stock Analysis
AGNICO EAGLE (AEM): Free Stock Analysis Report
KINROSS GOLD (KGC): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis
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Payable gold production climbed 11% year over year in the quarter
on the back of record gold production from five mine operations.
The company raised its gold production target for 2012 based on the
first half production trend.
Agnico-Eagle has rebounded from a series of underperformances in
2011. The company has sufficient cash flow, which enables it to
maintain a very strong exploration budget for 2012, primarily
focused on Kittila, Meliadine and Mexico.
Agnico-Eagle is currently exploring expansion opportunities in
Kittila, its largest contributor to proven and probable gold
reserves, and is conducting a feasibility study for a potential 25%
expansion in throughput. The company recently announced that its
board has approved the development and construction of the La India
mine in Mexico with commercial production is expected to begin in
the back half of 2014.
Agnico-Eagle is also reinvesting in its assets to expand its
output. The company also has consistently rewarded its shareholders
by way of dividend payments. Moreover, Agnico-Eagle's revised life
of mine plan is expected to yield significant free cash flows over
the next several years.
However, any potential delay associated with the development
projects may jeopardize the company's future production. The
company also contends with persistently high operating costs.
In addition, uncertainties surrounding the Goldex mine could affect
the stock's performance. Agnico-Eagle suspended operations at the
mine in October 2011 considering the safety of its employees. While
its Board has approved two zones in the mine for gold production
following a thorough investigation, production at the core Goldex
Extension Zone (GEZ) remains suspended.
Agnico-Eagle, which competes with
Barrick Gold Corporation
Kinross Gold Corporation
Newmont Mining Corp.
), currently retains a short-term Zacks #3 Rank (Hold).