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Agnico-Eagle Misses, Turns to Black

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Agnico-Eagle Mines Limited’s (AEM - Free Report) fourth-quarter 2012 adjusted earnings (excluding one-time items other than stock-based compensation expenses) of 39 cents per share missed the Zacks Consensus Estimate of 45 cents.

On a reported basis, the Canada-based mining company turned to a profit of $82.8 million or 48 cents per share in the quarter compared with a loss of $601.4 million or $3.53 per share a year ago. The bottom line in the year-ago quarter was hit by $907.7 million of impairment charge at the Meadowbank mine in northern Canada.

For full-year 2012, the company posted a profit of $310.9 million $1.81 per share versus a loss of $568.9 million or $3.36 per share in 2011. The hefty impairment loss coupled with production suspension at the Goldex mine crimped the bottom line in 2012. Adjusted earnings of $1.87 per share fell behind the Zacks Consensus Estimate of $2.12.

Revenues and Operational Highlights

Consolidated revenues rose roughly 4% year over year to $466.8 million in the reported quarter, yet missed the Zacks Consensus Estimate of $486 million. Payable gold production in quarter increased 4% year over year to 236,535 ounces.

The company witnessed healthy production across its Meadowbank and Kittila gold mines during the quarter. Payable gold production at Meadowbank climbed 8% year over year to 77,238 ounces in the quarter. The Kittila mine in northern Finland recorded a 31% surge in payable gold production to 45,273 ounces.

The LaRonde mine in northwestern Quebec logged payable gold production of 36,911 ounces, up 20% year over year. At the Pinos Altos mine in northern Mexico, payable production was 52,492 ounces of gold, flat year over year.

Total cash cost jumped 15% year over year to $769 per ounce, mainly due to higher costs at LaRonde and Meadowbank. In addition, temporary halt of operations at the Creston Mascota mine in Mexico added to the cost.

For the full year, sales rose 5% year over year to $1,915.6 million, beating the Zacks Consensus Estimate of $1,898 million. Payable gold production increased roughly 6% year over year to a record 1,043,811 ounces, driven by strong results across the board, especially at Meadowbank. Proven and probable gold reserves were flat year over year at 18.7 million ounces.

Financial Condition

Agnico-Eagle exited 2012 with cash and cash equivalents of $332 million, up 50% year over year. Long-term debt stood at $830 million at the end of the year, down roughly 10% year over year. Cash provided by operating activities for 2012 rose 4% year over year to a record $696 million. Operating cash flow fell 20% year over year in the reported quarter to $106 million.

The company’s Board raised its quarterly dividend by 10% to 22 cents per share from 20 cents. The revised dividend will be paid on Mar 15, 2013, to shareholders of record as of Mar 1, 2013.

Agnico-Eagle expects payable gold production in the band of 970,000 ounces to 1,010,000 ounces for 2013 with second half of the year contributing significantly to the overall production. Resumption of full production at Creston Mascota, installation of additional cooling capacity at LaRonde and higher gold grades at Meadowbank will be the contributing factors.

Total cash costs per ounce for 2013 are projected to be between $700 and $750. Capital expenditure is expected to be approximately $596 million in 2013, roughly 94% of which is expected to be incurred on sustaining capital at the mines and new projects.

For 2014, Agnico-Eagle envisions meaningful production growth across LaRonde, Goldex and La India mines. It expects payable gold production of between 1,100,000 ounces and 1,140,000 ounces for the year. Constructions at Goldex and La India are progressing as planned and both are expected to contribute meaningfully to growth in 2014.

For both 2014 and 2015, cash costs per ounce have been predicted to be near the bottom of the forecast range for 2013 (or roughly $700 per ounce).

Agnico-Eagle retains a short-term (1 to 3 months) Zacks Rank #3 (Hold).

Other companies in the gold mining industry with favorable Zacks Rank are AngloGold Ashanti Ltd. (AU - Free Report) , Primero Mining Corp. and Sandstorm Gold Ltd. (SAND - Free Report) . All of them hold a Zacks Rank #2 (Buy).

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