We are retaining our Neutral recommendation on gold miner
Agnico-Eagle Mines Ltd.
(
AEM
). Its revenues and adjusted earnings for third-quarter 2012
trounced the Zacks Consensus Estimates. The company turned to a
profit riding on strong gold production and healthy performance
across its mines.
Agnico-Eagle saw record production at its Meadowbank mine in
the quarter. Its payable gold production rose 8% year over year
in the quarter on higher grades across the LaRonde, Kittila,
Meadowbank and Pinos Altos mines. The company raised its gold
production target for 2012.
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, 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. A new drilling program is also
currently underway to boost exploration in the Rimpi zone at
Kittila. In addition, the development and construction of
the La India mine in Mexico is currently in progress 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.
Moreover, the uncertainties surrounding the Goldex mine could
affect the company'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
(
ABX
),
Kinross Gold Corporation
(
KGC
) and
Newmont Mining Corp.
(
NEM
), currently retains a short-term Zacks #3 Rank (Hold).
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