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« Despite recent events gold prices remain a dollar play | Main | Are You A Smart Money Investor? »

Agnico-Eagle Mines Ltd: Net income $0.27 per share Qtr One

AEM Chart 29 April 2011.JPG

Agnico-Eagle Mines Limited (AEM) has had a few difficulties this year which has hampered the stock price in our view. Now that they appear to have been solved we are looking forward to a better second half performance from this quality gold producer. Highlights of today's results are followed by an update on their 'expanded mineralization' and finally an interview with Sean Boyd, the CEO.

Agnico-Eagle Mines Limited today reported quarterly net income of $45.3 million, or $0.27 per share for the first quarter of 2011.  This result includes a non-cash foreign currency translation loss of $14.1 million, or $0.08 per share, stock option expense of $18.5 million, or $0.11 per share, an expense of $3.1 million, or $0.02 per share related to the March 10, 2011 Meadowbank fire, and a gain on sale of investments of $4.4 million, or $0.03 per share.  Excluding these items would result in adjusted net income of $76.5 million, or $0.45 per share.  In the first quarter of 2010, the Company reported net income of $22.3 million, or $0.14per share.

First quarter 2011 cash provided by operating activities was $171.0 million ($146.9 million before changes in non-cash components of working capital), up from cash provided by operating activities of $74.5 million in the first quarter of 2010 ($92.5 million before changes in non-cash components of working capital).

The higher net income and cash provided by operating activities in 2011 was primarily due to 34% higher gold production and significantly higher metal prices when compared to the first quarter of 2010.

"Thanks to a quick response by the team at Meadowbank, the damage caused by the recent fire was limited and we are already back running at full capacity at the mine," said Sean Boyd, Vice-Chairman and Chief Executive Officer.  "On the back of record production quarters at our Pinos Altos and Kittila mines, and with the expected commissioning of the permanent secondary crusher at Meadowbank in the third quarter, we expect to have all six of our mines operating at a steady state as we head into the second half of the year.  It is expected that gold production in the second half of this year should be approximately 20 percent higher than in the first half of 2011," added Mr. Boyd.

First quarter highlights include:

Record Quarterly Gold Output at Kittila - record quarterly recovery of 86.4%, and gold production of 40,317 ounces

Record Operating Quarter at Pinos Altos - record quarterly gold production of 48,001 ounces at total cash costs of $312 per ounce1.  Commercial production declared at Creston Mascota at March 1, 2011

Strong Cash Generation - record quarterly cash provided by operating activities of $171 million, or $1.01 per share

Gold Mineralization Extended at Kittila, Goldex, Lapa and Meliadine - details in today's separate exploration news release

Payable gold production2 in the first quarter of 2011 was 252,362 ounces compared to 188,232 ounces in the first quarter of 2010.  A description of the production and cost performance for each mine is set out further below.

The higher level of production in the 2011 period was largely due to production at the Meadowbank mine, which achieved commercial production in March 2010 and therefore only contributed one month to the first quarter total last year.  The increase in gold production in 2011 was in spite of the fire which destroyed the Meadowbank kitchen complex and also in spite of unusually severe winter conditions.  These factors negatively impacted production and costs, as disclosed in the Company's news releases of March 10 and March 28, 2011.

Total cash costs for the first quarter of 2011 were $531 per ounce.  This compares with $441 per ounce in the first quarter of 2010.  The higher cost in 2011 was largely attributable to the issues at Meadowbank which more than offset the positive impact of higher byproduct metals prices.


Agnico-Eagle Mines Limited is pleased to provide an update on its 2011 exploration program to date, as well as the plans for its exploration activities for the rest of 2011.

The Company's largest-ever exploration program of $145 million will include approximately 400 kilometres of drilling employing approximately 40 rigs.  This dollar amount includes a major exploration-related infrastructure program of $27 million at Meliadine.

During the first quarter of 2011, significant extensions of gold mineralization at Kittila, Goldex and Meliadine were discovered.  At Kittila, mineralization has been extended at depth and north of the Roura zone.  At Goldex, the latest deep drill holes indicate that D Zone mineralization extends well beyond the current resource envelope over large thicknesses, with grades similar to the current reserve grade. At Meliadine, drilling has continued to infill the Wesmeg zone and extended it westward.

This year's exploration program is on track to achieve the 2011 goal of more than 22 million ounces of gold reserves, representing organic growth of at least 8%, net of production.
Highlights of the 2011 exploration program include:

Deepest High-grade Mineralization Found to Date at Kittila - Hole ROU-10-037 returned 9.5 grams per tonne ("g/t") gold over 6.0 metres true width at 1,200 metres below surface approximately 150 metres below current reserve envelope Goldex's D Zone Growing Significantly - Hole 76-014 intersected 192 metres (core length) grading 2.2 g/t gold approximately 150 metres below the current D Zone resources. 

New exploration ramp for D Zone will accelerate delineation of this growing deposit Mineralized Envelope Grows at Meliadine's Wesmeg Zone - North and South Trends of Wesmeg indicate satellite open pit potential.  Hole M-11-1014 yielded 8.2 g/t gold over 5.4 metres High-grade Intercepts at Depth and to the East of the Lapa Orebody - goal is to extend mine life

"These latest exploration results show that several of our gold deposits extend beyond the currently known mineral resource and demonstrate the potential of our newly built mines to continue to grow" said Sean Boyd, Vice-Chairman and CEO. "These results also support the next phase of our program to build value at our mines through the acceleration of underground infrastructure so we can delineate of our growing gold deposits more quickly" added Mr. Boyd.

April 28 (Bloomberg) -- Sean Boyd, chief executive officer of Agnico-Eagle Mines Ltd., talks about the company's first-quarter earnings, forecast and the outlook for gold production. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." click here to hear the discussion.

Still one of our favourite stocks but as with this sector in general, stocks remain under valued in our view. Some of our peers are looking for a serious 'pop' in stock prices, however, we remain a tad skeptical at the moment as their are other vehicles enticing investors away from the miners, ETFs, physical metal, coins, options, futures trading, et al.

We are tempted at these price levels but perturbed that they have not responded better to the move in gold prices.

We will observe for now.


(4 more profitable trades have now been closed, so far, this week.)

Over in the Options pit, our model portfolio has managed an average return of 40.19% per trade, 74 closed trades, 72 closed at a profit, or a 97.29% success rate. Average trade open for 44.89 days.

sk chart 28 April 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.

Stay on your toes and have a good one.

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