Neutral on Agnico-Eagle - Analyst Blog
December 03 2012 - 11:20AM
Zacks
We are retaining our Neutral recommendation on gold miner
Agnico-Eagle Mines Ltd. (AEM). Its revenues and
adjusted earnings for third-quarter 2012 trounced the Zacks
Consensus Estimates. The company turned to a profit riding on
strong gold production and healthy performance across its
mines.
Agnico-Eagle saw record
production at its Meadowbank mine in the quarter. Its payable gold
production rose 8% year over year in the quarter on higher grades
across the LaRonde, Kittila, Meadowbank and Pinos Altos mines. The
company raised its gold production target for 2012.
Agnico-Eagle has rebounded from a
series of underperformances in 2011. The company has sufficient
cash flow, which enables it to maintain a very strong exploration
budget, primarily focused on Kittila, Meliadine and Mexico.
Agnico-Eagle is currently
exploring expansion opportunities in Kittila, its largest
contributor to proven and probable gold reserves, and is conducting
a feasibility study for a potential 25% expansion in throughput. A
new drilling program is also currently underway to boost
exploration in the Rimpi zone at Kittila. In addition, the
development and construction of the La India mine in Mexico is
currently in progress with commercial production is expected to
begin in the back half of 2014.
Agnico-Eagle is also reinvesting
in its assets to expand its output. The company also has
consistently rewarded its shareholders by way of dividend payments.
Moreover, Agnico-Eagle’s revised life of mine plan is expected to
yield significant free cash flows over the next several
years.
However, any potential delay
associated with the development projects may jeopardize the
company’s future production. Moreover, the uncertainties
surrounding the Goldex mine could affect the company’s performance.
Agnico-Eagle suspended operations at the mine in October 2011
considering the safety of its employees. While its Board has
approved two zones in the mine for gold production following a
thorough investigation, production at the core Goldex Extension
Zone (GEZ) remains suspended.
Agnico-Eagle, which competes with
Barrick Gold Corporation (ABX), Kinross
Gold Corporation (KGC) and Newmont Mining
Corp. (NEM), currently retains a short-term Zacks #3 Rank
(Hold).
BARRICK GOLD CP (ABX): Free Stock Analysis Report
AGNICO EAGLE (AEM): Free Stock Analysis Report
KINROSS GOLD (KGC): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
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