Agnico-Eagle Tops, Profit Skids

Agnico-Eagle Mines Limited’s (AEM - Analyst Report) second-quarter 2012 adjusted earnings (excluding one-time items other than stock-based compensation expenses) of 37 cents per share outperformed the Zacks Consensus Estimate of 32 cents.

Profit, as reported, slid 37% year over year to $43.3 million (or 25 cents per share) as higher costs more than offset a modest growth in the top line. The Canada-based mining company posted a profit of $68.8 million (or 40 cents a share) a year ago.

Revenue and Operational Highlights

Consolidated revenues edged up roughly 0.5% year over year to $436.9 million, beating the Zacks Consensus Estimate of $411 million. Payable gold production in the second quarter climbed 11% year over year to 265,350 ounces riding on record gold production from five mine operations except the Quebec-based Goldex mine which was shut down in October 2011.

The company witnessed record production at its gold mines in Meadowbank, northern Canada, and Pinos Altos, northern Mexico, in the quarter. Payable gold production at Meadowbank soared 66% to 98,403 ounces in the quarter. At Pinos Altos, payable production climbed 24% year over year to 63,356 ounces of gold. The company also saw higher production in its Kittila mine in northern Finland which recorded payable gold production of 35,228 ounces, a 14% year over year surge.

Total cash costs in the quarter shot up 17% to $660 per ounce, mainly due to lower byproduct revenues at the LaRonde gold mine in Quebec and absence of production from the Goldex mine. Operations at the Goldex mine was suspended last year due to safety issues. Realized gold prices (per ounce) increased to $1,602 from $1,530 a year ago.

Financial Position

Cash and cash equivalents more than doubled year over year to $289.1 million at the end of the second quarter as the company generated solid cash flows from operations. Long-term debt climbed 38% year over year to $830 million.

Cash provided by operating activities increased 19% year over year to $194.1 million in the quarter. Capital expenditures in the reported quarter were $104.4 million, down 9% year over year.

Outlook

Agnico-Eagle lifted its gold production guidance for 2012. The company now expects production to be 975,000 ounces of gold, up from its earlier view of 875,000 to 950,000 ounces. Total cash costs per ounce have been forecast to be near the bottom end of its earlier released guidance of $690 to $750.

The company also increased its capital expenditure forecast for the full year by $34 million to $452 million. The revision mainly reflects the development of the M and E zones at Goldex and accelerated development of the Vault pit project at Meadowbank.

Agnico-Eagle, which competes with Barrick Gold Corporation (ABX - Analyst Report) and Kinross Gold Corporation (KGC - Analyst Report), currently retains a short-term Zacks #3 Rank (Hold). Currently, we have a long-term (more than 6 months) Neutral recommendation on the stock.