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Agnico Eagle Provides Reserves Update for Canadian Malartic

Zacks Equity Research

Agnico Eagle Mines Limited (AEM) has announced updated mineral reserves and resources for its Canadian Malartic mine. Agnico Eagle and Yamana Gold Inc. (AUY) each own a 50% interest in the mine as part of the joint acquisition of Osisko Mining Corporation that was closed on Jun 16, 2014.

Proven and probable in-pit mineral reserves from the mine were 8.9 million ounces of gold as of Jun 15, 2014. The total indicated and measured resources including reserves as of the same date totaled 10.8 million ounces. Inferred resources amounted to 1.14 million ounces.

The addition of the 5% royalty payable to Osisko Gold Royalties Ltd. raised the highest cut-off grade to around 0.35 grams per ton (g/t) gold from 0.33 g/t gold, representing a decrease of roughly 60,000 ounces to the reserve base from previous estimates published by Osisko.

Moreover, a $100 per ounce fall in the gold price would reduce the reserves by around 3.3% or 310,000 ounces.

While calculating the mineral reserves and resources estimates at the Canadian Malartic mine, the assumptions were $1,300 per ounce gold , a cut-off grade between 0.28 g/t and 0.35 g/t gold (depending on the deposit) and a C$/US$ exchange rate of 1.10.

Recently, Agnico Eagle released its results for second-quarter 2014. The company’s adjusted earnings (barring one-time items other than stock-option expenses) of 25 cents per share for the quarter 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 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.

Agnico Eagle currently carries a Zacks Rank #3 (Hold).

Other companies in the gold mining industry worth considering are NovaGold Resources Inc. (NG) and Harmony Gold Mining Company Limited (HMY). Both hold a Zacks Rank #2 (Buy).

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