Agnico-Eagle Mines (NYSE:AEM) reported record annual earnings and cash flow despite a big increase in its cash cost per ounce of gold produced.
The mid-tier gold producer benefited from a combination of higher gold production and higher gold prices, which more than offset the increase in costs and a few one-off charges, including a $10.4 million hit on currency translations and $7.2 million in stock option expenses. The company also booked a one-off $11.3 million gain on the sale of investments.
The company reported both fourth quarter and full year results.
Quarterly net income surged from $47.9 million or 31 cents per share in Q4 2009 to $88 million, or 53 cents per share in Q4 2010. According to Bloomberg, the EPS result was short of consensus analyst expectations. Other fourth quarter highlights included record production of 245,469 ounces and record gold reserves of 21.3 million ounces, net of production, up 16% from Q42009.
Full year production came in enticingly close to the magic 1 million ounces per annum level, hitting a record 987,609 ounces of gold. Full year net income benefited from the strong production growth profile of Agnico-Eagle combined with a higher gold price. Net income hit $332.1 million, or $2.05 per share, way up from $86.5 million or 55 cents per share in 2009. The company also reported record cash from operating activities of $483.5 million.
However, the one area which is likely to attract further scrutiny for Agnico-Eagle was a significant hike in its total cash cost per ounce of gold, which rose from $295 per ounce in 2009 to $485 per ounce in 2010. This increase was blamed on higher costs at the Kittila Gold Mine in the fourth quarter, combined with high costs at Meadowbank which is ramping up to full production. Despite the increase in cash cost per ounce, Agnico-Eagle still boasts a low cost production profile, and is benefiting immensely from record gold prices.
Full year production also came in 1.2% below the bottom end of guidance given by the company in December 2009, which was attributed to a longer-than-expected timescale to ramp up Meadowbank to full production.
"As Agnico-Eagle begins the next five-year growth phase from our expanded production platform, our strategy remains unchanged. The focus continues to be to increase our gold reserves, gold production, earnings and cash flows, each on a per-share basis", stated Sean Boyd, CEO of Agnico-Eagle.