ABX Barrick Gold Corp. (BC) (delisted)

Agnico-Eagle Mines Limited (AEM) reported quarterly net income of $45.3 million or 27 cents per share for the first quarter of 2011.  Net income 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.   

Adjusted net income for the reported quarter was $76.5 million, or $0.45 per share compared with $22.3 million or $0.14 per share in the prior-year quarter. Results were below the Zacks Consensus Estimate of 53 cents per share.

Revenue

In first-quarter 2011, revenues were $418.1 million versus $238.8 million in the prior- year quarter. Results were below the Zacks Consensus Estimate of $483 million.

Payable gold production in the first quarter of 2011 was 252,362 ounces compared with 188,232 ounces in the prior-year quarter.

The higher level of production in the 2011 period was largely attributable to the production at the Meadowbank mine, which achieved commercial production in March 2010 and therefore contributed one month to the first quarter total last year.  Despite the fire, which destroyed the Meadowbank kitchen complex, and unusually severe winter conditions, the year 2011 witnessed an increase in gold production. However, these factors negatively affected the company’s production and costs.

Total cash costs for the first quarter of 2011 were $531 per ounce compared 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.

Financial Position

Cash provided by operating activities was $171.0 million versus $74.5 million in the first quarter of 2010, primarily attributable to 34% higher gold production and significantly higher metal prices.

Cash and cash equivalents increased to $114.8 million as of March 31, 2011, up slightly from the December 31, 2010 balance of $104.6 million, as higher cash flows in 2011 allowed full repayment of the Company's bank facilities.

Capital expenditures in the first quarter of 2011 were $96.8 million, including $22.9 million at Kittila, $20.3 million at Meadowbank, $19.7 million at LaRonde, $15.9 million at Pinos Altos, $11.9 million on Goldex and $5.0 million at Lapa.

With its current cash balances, anticipated cash flows and available bank lines, management believes that Agnico-Eagle remains fully funded for the development and exploration of its current pipeline of gold projects in Canada, Finland, Mexico and the USA.

Available bank lines as of March 31, 2011 were approximately $1.2 billion.

Outlook

For the second half of 2011, management expects gold production to be approximately 20% higher than the first half of 2011. Management expects 2011 amortization to amount in the range of $200 to $250 per reserve ounce. 

For fiscal 2011, it is expected that Agnico-Eagle’s overall mineral reserves will continue to grow as the company converts its resources to reserves and explores its properties outside the currently known resource.

Agnico-Eaglefaces stiff competition from Barrick Gold Corporation (ABX), Kinross Gold Corporation (KGC) and Newmont Mining Corp. (NEM).

Currently, we maintain a Neutral recommendation on the stock and a Zacks #3 Rank (Hold).

 
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