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« Looking for Hui | Main | Twenty ozs of Endeavour Silver has been Won »
Tuesday
Mar292011

Agnico-Eagle Mines Limited: Poor Performance

aem chart 28 march 11.JPG


Agnico-Eagle Mines Limited (AEM) heads south as Gold prices head north. Also note the possibility of a crossover by the 50dma down through the 200dma, which is sometimes known as the cross of death as its a rather negative sign for the stock. The trend is down at the moment so Agnico-Eagle needs to pull out of this nose dive soon before investors start looking elsewhere.

Looking at the news stream this news release regarding a set back at Meadowbank due to a fire does not help matters with the knock on effect of lower production and a higher cash cost. Although not a severe blow it does add to the general downward pressure on this gold producer at a time when they should be going gang busters on the back of rising gold prices.







The news release is as follows:


Agnico-Eagle Mines Limited reported on March 10, 2011 that the kitchen and associated facilities at its Meadowbank mine were destroyed in a fire. The following is an update on current operations at the mine with estimates of the impact of Meadowbank on full year gold production for the Company.
Since the fire, the mine has been operating with a substantially reduced workforce at a reduced production rate.  Over most of this period, the plant has been processing lower grade ore from stockpiles due to the reduction in workforce.  The Company expects to return Meadowbank to normal staffing levels of approximately 450 people by the end of April. Temporary kitchen facilities have been delivered to site and are currently being prepared for use.  The Company expects a permanent replacement kitchen to be installed during the fourth quarter of 2011.
As a result of the fire, and due to unusually difficult winter weather conditions encountered earlier this year, daily throughput at Meadowbank during the first quarter of 2011 is expected to average approximately 6,900 tonnes per day at lower than reserve grade.  Accordingly, the Company now expects total cash costs per ounce1 at Meadowbank to be significantly higher in the first quarter of 2011 than the previously forecast average of $600 for the full year.  First quarter financial and operating results are expected to be released on April 28, 2011.
The mining and processing rates are anticipated to begin to improve during the second quarter as staffing levels increase. Grades are also expected to improve in the second quarter as full mining operations in the pit resume and less low grade stockpile material is processed.
During the third quarter of 2011, a permanent secondary crushing unit is expected to be commissioned which is projected to allow the mill to reach its design throughput of approximately 8,500 tonnes per day for the second half of 2011.
Agnico-Eagle now expects full year gold production at Meadowbank to be approximately 310,000 ounces, at total cash costs of approximately $700 per ounce with approximately 60% of this production coming in the second half of the year.  This compares to Agnico-Eagle's previously announced full-year guidance for Meadowbank of approximately 360,000 ounces at cash costs of approximately $600 per ounce.
Incorporating the recent events at Meadowbank, Agnico-Eagle now expects Company-wide gold production in the first quarter to be approximately 245,000 ounces.  Full year 2011 gold production is now expected to be between 1.08-1.15 million ounces, split approximately 45% and 55% between the first and second halves of the year, respectively.  This compares to Agnico-Eagle's previously announced (December 15, 2010) full year production guidance of between 1.13-1.23 million ounces.
Full year, Company-wide, total cash costs are expected to be negatively impacted by approximately $25 per ounce, resulting in a new range of $445-$495 per ounce2. This compares to Agnico-Eagle's previously announced guidance of$420-$470 per ounce.

We are wrestling with this one at the moment as the stock price has been battered and we could be looking at a buying opportunity here. There are also a number of eminent gold bugs predicting gold prices to go much higher, which we concur with, so Agnico-Eagle could be one of those heavyweights to lead the charge. However, before we buy we will need to see some positive signs that it has turned the corner and is not on the verge of taking a financial bath.

Agnico-Eagle Mines Limited trades on the NYSE under the ticker symbol of AEM and on the Toronto Stock Exchange under the symbol of AEM.TO.

Agnico-Eagle has a market capitalization of $11.18 billion, a 52 week trading range of $54.12 - $88.20, a rather high P/E ratio of 32.35 on volume of 1.3 to 2.7 million shares traded per day and closed yesterday at $66.20.





PS: Over at www.skoptionstrading.com we have just closed another winning trade in the options market, banking a profit of 38.66% on this trade in just 13 days.

Our model portfolio is up 140.79% since inception, Average return of 41.23% per trade, 68 closed trades, 66 closed at a profit, or a 97% success rate. Average trade open for 42.76 days.

A gentle reminder for those of you who are still thinking about it, prices will double as of 2nd April 2011, but will remain as is for existing subscribers, join us now while this bargain lasts.


SK Chart with profits re-nvested 29 March 2011.JPG


The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

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