Analysts Weigh in on Agnico-Eagle's Lowered Production Guidance

Dec.16.08 | About: Agnico Eagle (AEM)

The Street continues to weigh in on Agnico-Eagle Mines Ltd.'s (NYSE:AEM) 2009 guidance and for the most part, analysts remain upbeat about the company's future prospects.

On Thursday, Agnico announced lower production guidance of 13% on average and cash costs on average of 26% from levels previously forecast last year.

Catherine Gignac said Agnico's new production forecast is conservative and achievable given the company's solid management team. She added that her new net asset value for Agnico decreased by only 2% to C$27.20 per share and she left her "buy" rating and C$55 price target unchanged.

She said:

We continue to believe that Agnico’s valuation remains somewhat stretched at current levels relative to the peer group, and that the company has a relatively high degree of execution risk in the near term, particularly as many industry projects are being shelved. However, given Agnico’s industry leading growth profile, solid management team and relatively low political risk profile, we continue to expect the market to apply a premium valuation multiple to the company’s shares.

RBC Capital analyst Michael Curran, meanwhile, lowered his price target from C$41 to C$40 and maintained his "sector perform" rating.

He said in a research note about Agnico's higher cash cost guidance:

We had thought that there was some scope for this figure to come in lower due to declines in energy and other input costs, as well as favourable moves in some of the local currencies (versus the US$) where Agnico is building new mines.

But the company looks to have chosen a more conservative approach by not significantly changing the exchange rate assumptions (which remain above current spot exchange rates), and due to the fact that more than half of the C$1.4B of capital has already been spent.

Other analysts fine tuning their recommendations on Agnico's new guidance include Scotia Capital analyst David Christie, who lowered his price target from C$55 to C$47, while maintaining his "sector perform" rating.