Agnico-Eagle Mines Ltd. (AEM) recently announced that it has concluded the maintenance shutdown at its Kittila mine, located in Finland, and the mine is now operating at full capacity. The company initially expected the shutdown to last up to 40 days in second-quarter 2012, but the operations at the facility eventually restarted after just 18 days.
The Toronto, Canada-based gold producer further noted that it has postponed additional maintenance work at the mine to late 2012 given better-than-expected conditions inside the autoclave. But it has reaffirmed the overall scheduled maintenance downtime for the year which remains at 44 days.
Agnico-Eagle has mining operations in Canada, Mexico and Finland. It competes with Barrick Gold Corporation (ABX), Kinross Gold Corporation (KGC) and Newmont Mining Corp. (NEM).
With an increase in gold reserves in 2011, Kittila is the company’s largest contributor to proven and probable gold reserves. Agnico-Eagle is currently exploring expansion opportunities in Kittila and is conducting a feasibility study for a potential 25% expansion in throughput.
Agnico-Eagle achieved record gold production from two of its mines in Kittila and also from its operations in Mexico in first-quarter 2012. The Kittila mine produced 47,000 ounces of gold (up 16% year-over-year) in the quarter and is expected to produce 155,000 ounces in 2012.
Agnico-Eagle expects sustained production growth through the remainder of 2012. It has sufficient cash flow which enables it to maintain a very strong exploration budget for this year, primarily focused on Kittila, Meliadine and Mexico.
However, any potential delay associated with the development projects may jeopardize the company’s future production. Moreover, uncertainties surrounding the Goldex mine (operations suspended in October 2011) could affect the stock’s performance.
We currently have a long-term Neutral recommendation on Agnico-Eagle, which is in tandem with a short-term Zacks #3 Rank (Hold).
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