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The board of directors of gold miner Agnico Eagle Mines Limited (AEM - Analyst Report) has approved the development and construction of La India gold mine in the Mulatos Gold Belt in Sonora, Mexico. Located about 70 kilometers from Agnico's Pinos Altos gold and silver mine, a part of the Mulatos Gold Belt in Chihuahua State, La India will be developed as an open pit, heap leach operation.

Commercial production at the La India mine is expected to commence in the second half of 2014. The cost of constructing the project is estimated at $158 million and will be funded through Agnico Eagle’s operating cash flows. Capital costs are expected to total about $25 million over the eight-year life of the mine.

The company believes that the development of La India project will provide low risk and high quality gold and will generate ample cash. The project is also estimated to provide an internal rate of return of approximately 31%, assuming a gold price of $1,379 per ounce.

Initial probable reserves at La India are anticipated to contain 930,000 gold ounces, while gold production is expected to average 90,000 ounces annually. Indicated gold ounces are forecast to be 436,000 ounces.

In addition to La India, the company is also developing an early-stage exploration project named Tarachi, which is 10 kilometers to the north of the La India deposit. Through the end of July 2012, Agnico has spent more than $8 million on exploration at the both La India and Tarachi deposits.

In July 2012, Agnico released its second quarter 2012 results. The company’s adjusted earnings (excluding one-time items other than stock-based compensation expenses) of 37 cents per share in the quarter 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.

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.

Agnico-Eagle, which competes with Barrick Gold Corporation (ABX - Analyst Report) and Kinross Gold Corporation (KGC - Analyst Report), currently retains a Zacks #3 Rank (Hold) for the short-term (1 to 3 months). We have a Neutral recommendation on the stock for the long-term (more than 6 months).

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