Agnico Eagle Mines Limited’s (AEM) adjusted earnings (barring one-time items other than stock-option expenses) of 25 cents per share for second-quarter 2014 missed the Zacks Consensus Estimate of 29 cents per share.
The company logged a net income of $37.7 million (or 20 cents per share) on a reported basis in the second quarter, which compares favorably with a loss of $24.4 million (or 14 cents a share) recorded in the year-ago quarter. The bottom-line improvement was aided by significantly higher gold production that offset a decline in realized metal prices.
Agnico Eagle’s shares fell around 9% to close at $37.19 yesterday, reflecting the earnings miss.
Revenues and Operational Highlights
Agnico Eagle registered revenues of $437.8 million in the quarter, up 30.1% from $336.4 million in the year-ago quarter. The results however missed the Zacks Consensus Estimate of $458 million.
Payable gold production in the quarter increased 45.5% year over year to 326,059 ounces.
Total cash costs per ounce of gold produced on a by-product basis for the reported quarter were $626 compared with $785 per ounce on a by-product basis in the second quarter of 2013 (excluding the Kittila operations). The lower cash cost per ounce in 2014 was mainly due to higher grades at Meadowbank and contributions from commercial production at Goldex and La India.
Gold production at LaRonde mine in northwestern Quebec, Canada, was 48,494 ounces in the reported quarter compared with 46,119 ounces in the year-ago quarter. Production increased in the second quarter due to slightly higher grades and higher tonnage processed. Total cash costs per ounce were $691 on a by-product basis, down 25.5% year over year.
Production at the Canadian Malartic mine (on a 100% basis) in the reported quarter was 133,181 ounces of gold at a total cash cost per ounce of $645 on a by-product basis. Production from Jun 16 to Jun 30, 2014 (on a 100% basis) was 23,756 ounces at a total cash cost per ounce of $614 on a by-product basis.
Payable production in the second quarter at the 100% owned Lapa mine in northwestern Quebec was 18,821 ounces of gold, down 18.8% year over year. Total cash costs per ounce were $847 on a by-product basis compared with $720 in the year-ago quarter.
The Goldex mine in northwestern Quebec produced 23,929 ounces of gold in the quarter compared with 43,359 ounces in the prior-year quarter. Total cash cost per ounce was $654 on a by-product basis, down 3.7% year over year.
Payable production of 118,161 ounces of gold at the 100% owned Meadowbank mine in Nunavut, Canada was up 28.6% year over year. Total cash costs per ounce were $577 on a by-product basis in the quarter, down 36.7% year over year. The increase in year over year production and lower total cash costs was attributable to higher grades, increased throughput, higher recoveries, and lower mine site costs per ton.
Gold production at Kittila in the reported quarter was 31,830 ounces with a total cash cost per ounce of $862 on a by-product basis. In the second quarter of 2013, the Kittila mill was idle for most of the quarter due to the relining of the autoclave, and hence there were no comparable figures.
Payable production at Pinos Altos mine in northern Mexico in the quarter was 43,978 ounces of gold, down 7.2% year over year. Total cash cost per ounce was $481 on a by-product basis which was down 3% from $496 in the year-ago quarter. Production and total cash costs were lower year over year due to lower grades processed in the mill and fewer heap leach tons placed.
Payable gold production at Creston Mascota was 11,159 ounces, up about 10% year over year. Total cash cost per ounce was $616 on a by-product basis, up 23.7% year over year. The higher production was due to more tons stacked, while the increased costs were incurred due to higher mine site costs per ton in the quarter.
The La India mine in Mexico started commercial production in Feb 2014. Payable gold production in the second quarter was 17,809 ounces at a total cash cost per ounce of $457 on a by-product basis.
Agnico Eagle’s cash and cash equivalents totaled $240.8 million as of Jun 30, 2014, compared with $136.4 million as of Jun 30, 2013, up 76.5%. The increase owed largely to higher production as well as lower production costs. Long-term debt increased to $1.3 billion as of Jun 30, 2014, from $0.9 billion as of Jun 30, 2013.
Cash provided by operating activities in the second quarter was $197.7 million compared with $75.3 million in the prior-year quarter. Capital expenditures in the second quarter were $101.5 million compared with $171.8 million in the year-ago quarter. On a 100% basis, capital expenditures at the Canadian Malartic Mine in the second quarter were C$42.1 million.
In the second quarter, Agnico Eagle and Yamana Gold Inc. (AUY) each acquired 50% of Osisko Mining Corporation and formed a joint committee to operate the Canadian Malartic mine.
The 100% owned Meliadine mine near Rankin Inlet, Nunavut, continued with its underground development, exploration, technical studies and permitting in the second quarter. An updated technical study is expected in late 2014.
Agnico Eagle also believes that by the beginning of 2015, there is good potential to refine and improve the Canadian Malartic mining operation.
Agnico Eagle expects payable gold production to be in the range of 1,225,000 to 1,245,000 million ounces (excluding the ounces from Canadian Malartic). Total cash costs on a by-product basis are anticipated to be $650 to $675 per ounce.
Including Canadian Malartic, 2014 production is expected to be 1,350,000 to 1,370,000 million ounces, while total cash costs on a by-product basis are expected to remain in the range of $650 to $675 per ounce.
The guidance for all-in sustaining costs on a by-product basis remained unchanged at $990 per ounce.
The company's overall tax rate for 2014 is expected to be within 35% to 40% down from the earlier guidance of 40% to 45%. The decrease is primarily due to the high proportion of the profit being generated by the Meadowbank mine, which continues to be sheltered by tax pools.
Agnico Eagle also stated that due to optimization efforts, particularly at Meadowbank, Kittila and in its Southern Business, it expects to increase the gold production guidance for 2015, beyond the addition of the Canadian Malartic mine.
Agnico Eagle currently carries a Zacks Rank #3 (Hold).
Other companies in the gold mining industry worth considering are Sibanye Gold Limited (SBGL), and Pretium Resources Inc. (PVG). While Sibanye Gold carries a Zacks Rank #1 (Strong Buy), Pretium Resources holds a Zacks Rank #2 (Buy).