Home
 
Choose Your City
Change City

Agnico-Eagle shares fall, analysts downgrade ratings after disappointing Q3

TORONTO - Agnico-Eagle Mines Ltd. (TSX:AEM) produced 30,000 fewer ounces of gold than it expected to in the third quarter due to difficulties at several of its new mines, but CEO Sean Boyd expressed optimism, saying many of the problems have already been rectified.

TORONTO - Agnico-Eagle Mines Ltd. (TSX:AEM) produced 30,000 fewer ounces of gold than it expected to in the third quarter due to difficulties at several of its new mines, but CEO Sean Boyd expressed optimism, saying many of the problems have already been rectified.

Shares in the Toronto-based gold miner fell more than seven per cent in Thursday trading on the TSX after the gold miner reported a loss in its latest quarter, weighed down by lower-than-expected production and a non-cash foreign exchange charge.

In addition, at least two equity research firms downgraded their rating of the company Thursday due to its production issues.

Anita Soni of Credit Suisse said she was downgrading her rating to neutral from outperform with a revised target price of $68, down from $80, due to "continued start-up issues at each of AEM's newer mines."

And Richard Gray at Blackmont Capital downgraded his rating to sector perform from outperform with a revised target price of $75, down from $84.

Boyd described the quarter as a "disappointing" one for Agnico-Eagle.

"Our earnings and cash flow were below our expectations simply because we produced about 30,000 ounces less than we had expected to produce, and that lower output really came from slower tonnage ramp-up at Kittila," Boyd said in a conference call with analysts.

The Kittila mine in Finland, which began production last January, averaged production of about 2,000 tonnes per day with the amount of metal recovered from the ore averaging a less-than-optimal 64 per cent in the quarter.

Problems at several other mines contributed to the disappointing third-quarter results.

Boyd said the Lapa mine in the Abitibi region of northwestern Quebec, which began production in May, averaged production of 1,200 tonnes a day versus capacity of 1,500 tonnes a day.

In addition, production problems at the newly operating Pinos Altos mine in Mexico slowed Agnico-Eagle's ability to refine its ore, and the company produced a lower grade of ore than expected at its Goldex mine, also in Quebec.

The gold miner cut its 2009 production guidance to about 500,000 ounces and lowered its 2010 production guidance from 1.2 million ounces to between one million and 1.1 million ounces.

That is because the bulk of next year's production is expected to come from the new Meadowbank mine in Nunavut, Boyd said.

"Why we decided to take a contingency on our public guidance is we're starting a large plant up in the middle of the Canadian Arctic in January" and wanted to be prepared for any potential startup problems, he said.

"If we have an uneventful startup at Meadowbank, then we should certainly exceed the upper end of the new guidance."

The gold miner, which keeps its books in U.S. dollars, said late Wednesday that it lost US$17 million or 11 cents per share for the quarter ended Sept. 30 compared with a profit of $14 million or 10 cents per share a year ago.

The results included a non-cash foreign currency translation loss of $22.9 million and a stock option expense of $5.1 million, offset in part by a $5.9-million gain on the sale of marketable securities.

Revenue totalled $158.9 million, up from $83.4 million.

Boyd said he expects things to improve at all of Agnico-Eagle's struggling mines in the fourth quarter.

He said recoveries at Kittila have been steadily improving to near the 80 per cent range with production of 3,000 tonnes per day in the last week and a half. At Lapa, there has been a 10 per cent improvement after changes were made to mining methods and blasting techniques, and grades will improve at Goldex as the miner moves to a different area of the mine.

"All of these issues that we encountered in the third quarter, none of these issues are fatal and they will be resolved," said president and chief operating officer Eberhard Scherkus.

Agnico-Eagle stock dropped $4.91 to $61.19, a decline of 7.44 per cent, in trading of 3.7 million shares.

 
 
You Might Also Like