Agnico-Eagle's Bottom Line Slammed by Zinc

Analysts are not panicking over the third-quarter earnings miss from gold miner Agnico-Eagle Mines Ltd. (AEM). The company had operating earnings per share of 6¢ compared to the average analyst estimate of 9¢, with the difference largely due to production sales delays.

The general consensus is that Agnico ran its Quebec-based LaRonde mine effectively. However, cash costs rose sharply because the plunging price of zinc dragged down byproduct revenues. The Goldex mine also started up in the quarter with relatively high costs, but those will come down over time.

RBC Capital Markets analyst Michael Curran wrote that funding for the company's $1.4-billion of capital expenditures over the next couple of years appears to be secure. New projects could allow Agnico to boost its gold production five-fold by 2010, but he wrote that there will be more execution risk.

Mr. Curran and Tony Lesiak of Genuity Capital Markets both cut their targets on Agnico, citing lower price forecasts. Mr. Curran now has a target of C$41 a share (down from C$59), while Mr. Lesiak's target dropped C$10 a share to C$62. They both maintained their ratings ("sector perform" from Mr. Curran and "buy" from Mr. Lesiak).

Meanwhile, Blackmont Capital analyst Richard Gray upgraded the stock to "buy" from "hold," even though he noted that the Q3 results missed his estimates "by virtually every metric."

"We believe Agnico-Eagle offers one of the sector's best growth profiles in terms of both production and cash flow, and for the first time in a long time, also now offers attractive value," he wrote.

Mr. Gray's price target is C$55 a share. He expects Agnico to have enough cash to complete all of its construction projects as long as gold remains above US$475 an ounce for the next two years.

Comments

[ibiza:]

AEM best buy out there!

2008 Oct 31 09:06 AM

[NOWHEREMAN:]

Welcome to Alpha.

2008 Nov 01 01:57 PM

[OctoberFaith:]

hey paul taut.
you should read the nations debt service article.

2008 Nov 02 12:05 AM

[OctoberFaith:]

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2008 Nov 02 02:55 AM