On Nov 20, we reiterated our Neutral recommendation on gold
). While its strategic investment in several exploration projects
should bring in meaningful growth opportunities, we maintain a
cautious stance taking into account high operating costs across a
number of mines and a weak gold price environment.
Agnico-Eagle's revenues and profit slipped year over year in
the third quarter of 2013, reported on Oct 23, due to lower metal
pricing and maintenance outage at the Kittila mine. However, both
revenues and adjusted earnings beat Zacks Consensus Estimates.
The company raised its production guidance for the full year.
Agnico-Eagle, a Zacks Rank #3 (Hold) stock, is reinvesting in
its assets to expand its output. Moreover, its revised life of
mine plan is expected to yield significant free cash flows over
the next several years.
Agnico-Eagle's sufficient cash flow is enabling it to maintain
a strong exploration budget, primarily focused on Kittila. The
company is currently exploring expansion opportunities in
Kittila, its largest contributor to proven and probable gold
reserves. An expansion of throughput capacity is currently
underway which is expected to cut total cash costs per ounce over
the next several years.
Moreover, the development and construction of the La India
mine in Mexico is currently in progress with commercial
production is expected to begin in first-quarter 2014.
Agnico-Eagle expects production to expand 20% through the end of
2015 factoring in contributions from La India.
However, one of Agnico-Eagle's main issues has been
persistently high operating costs across a number of mines. Total
cash cost rose around 6% year over year in the third quarter,
mainly due to lower by-product revenues at LaRonde and Pinos
Agnico-Eagle is seeing higher costs in LaRonde due to lower
byproduct metal production and prices. Moreover, lower realized
silver prices are contributing to higher costs at the Pinos Altos
Agnico-Eagle is also exposed to a weak gold price environment,
which may continue to hurt its bottom line. Moreover, any
potential delay associated with the development projects may
jeopardize its future production.
Other Stocks to Consider
Other companies in the gold mining industry with favorable
Zacks Rank are
Lake Shore Gold Corp.
Pretium Resources Inc.
Golden Star Resources, Ltd.
). All of them retain a Zacks Rank #2 (Buy).
AGNICO EAGLE (AEM): Free Stock Analysis
GOLDEN STAR RES (GSS): Free Stock Analysis
LAKE SHORE GOLD (LSG): Free Stock Analysis
PRETIUM RES INC (PVG): Free Stock Analysis
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