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Agnico Eagle Downgraded to Strong Sell

Zacks Equity Research

On Jun 26, Zacks Investment Research downgraded Agnico Eagle Mines Limited (AEM) to Zacks Rank #5 (Strong Sell).

Why Downgraded?

Agnico-Eagle’s earnings estimates and share prices witnessed a downward trend after reporting disappointing first quarter 2013 results on Apr 25. Earnings estimates for this Canada-based gold mining company have been on the downside due to its high operating costs across a number of mines and a weak gold price environment.

The company’s adjusted earnings (excluding one-time items other than stock-based compensation expenses) of 24 cents per share lagged the Zacks Consensus Estimate by 10 cents. Profit for the first quarter slid roughly 70% on lower gold prices and production as well as higher cash costs.

The company delivered negative earnings surprises in the last two quarters with an average of 6.13% for the last four quarters. The company’s long-term estimated EPS growth rate is 2.3%. Shares of Agnico Eagle also attained a 52-week low on Jun 26 of $25.00.

Payable gold production declined in the quarter, mainly due to the suspension of the Creston Mascota heap leach facility. While Agnico-Eagle achieved record quarterly throughput at its Meadowbank mine in northern Canada, its Kittila mine in northern Finland saw a decline in payable gold production in the quarter. The company backed its production guidance for the full year

Moreover, one of Agnico-Eagle’s main issues has been persistently high operating costs across a number of mines. Total cash cost jumped around 25% year over year in the first quarter, mainly due to lower by-product revenue at LaRonde and lower grades at Meadowbank.

Agnico-Eagle raised its cash cost guidance for 2013 to a range of $735-$785 per ounce from earlier expectation of $700-$750 to reflect weak metals prices and production changes at Goldex and Kittila mines. The company is exposed to a weak gold price environment, which may continue to affect its bottom line.

The Zacks Consensus Estimate for 2013 has gone down 45% to 95 cents per share as most estimates were revised lower over the last 60 days. Similarly, the Zacks Consensus Estimate for 2014 has also decreased 21% to $1.63 per share.

Other Stocks to Consider

Not all stocks in the industry are performing as poorly as Agnico Eagle. Brigus Gold Corp. (BRD) with a Zacks Rank #1 (Strong Buy) and Claude Resources, Inc. (CGR) and Lake Shore Gold Corp. (LSG) carrying a Zacks Rank #2 (Buy) are some stocks worth considering.

Read the Full Research Report on AEM

Read the Full Research Report on LSG

Read the Full Research Report on CGR

Read the Full Research Report on BRD

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