Three gold miners reported 3rd quarter production numbers ahead of earnings releases in a few weeks. All three reported strong numbers which should bode well for the gold mining sector.
1. Iamgold (IAG) – Gold production for the quarter totaled 222,000 ounces, up 18% from the second quarter with Niobium production of 1.2 million kilograms. The Essakane expansion feasibility study is expected to be complete during the fourth quarter of 2011 with construction expected to begin during the first quarter of 2012.
Monetization of the Niobec mine continues to move forward with interested parties doing due diligence. Management continues on the acquisition trail searching for a 150,000 ounce producer with 2 million in reserves.
2. Eldorado Gold (EGO) – Gold production for the 3rd quarter totaled 179,195 ounces at $397 per ounce along with Iron Ore sales of 170,781 tonnes at $122 per tonne. The first quarter of gold production at Efemcukuru produced 14,000 ounces of gold with the mine on track to declare commercial production during the fourth quarter of 2011.
Construction at Eastern Dragon on the processing facility is 70% complete with Eldorado waiting for the Project Permit Approval (PPA) with gold production slated to begin in the 3rd quarter of 2012. Exploration programs continue to yield success with a new zone of mineralization being discovered at Efemcukuru while two new drill holes at White Mountain confirmed and expanded a deep mineralized zone.
Based on strong results at the Agua Branca project in Brazil, Eldorado has made the final payment to Talon Metals acquiring 100% of the project. Eldorado has entered into a share purchase agreement with Kopy Goldfields AB. Kopy hold seven exploration licenses covering 225 square kilometers in the Lena Goldfields region in the Irkutsk region of Russia.
1.7 million shares have been acquired at 10 SEK and pending shareholder approval Eldorado will acquire an additional 1 million shares at 12 SEK.
3. Agnico-Eagle Mining (AEM) – Agnico-Eagle has had a tough year to say the least. Production numbers were up 11% from the second quarter to almost 266 thousand ounces of gold due to improved performance at Kittila and Meadowbrook. For the first nine months of 2011 gold production rose to 757,668 ounces from 731,138 a year ago.
Meadowbrook recorded record throughput and Kittila operated above design rate in the third quarter of 2011.
Now onto Goldex. The good news is that nobody lost their life and the damage was caught early enough to allow for mitigation efforts. In the meantime, the book value of the deposit has been written down and the company has taken steps to account for remediation with the remaining reserves reclassified to resources. Agnico has taken the worst case scenario and accounted for it.
This means there is little additional downside risk and if remediation efforts are successful there is a chance the remaining ore can be accessed at a later date.
Additional drilling continues in the D zone with the hopes that the ore may be accessed at some point in the future.
All three gold companies reported strong third quarter production numbers in the last week, the Goldex problems notwithstanding. But here is a key takeaway with respect to Agnco-Eagle and the collapse in the share price. The problems at Goldex are limited to Goldex. They do not reflect in any way on the other operations worldwide.
In fact, at the exploration and development level I was stunned to see how many juniors at the Toronto Resource Investment Conference Agnico had stakes.
At these levels, I believe Agnico is a buy for long-term investors. They took the right steps and the problems earlier this year have been rectified.
Eldorado and Iamgold both look like solid values with little downside risk for investors. Eldorado has opened the Efemcukuru mine which will immediately contribute to the bottom line while Iamgold continues to streamline the portfolio and extract value from the Niobec mine.
Gold stocks have sold off heavily over the last week and look set to retest the lows made a few months ago. When coupled with a gold price that is up 15% on a yoy basis and strong production numbers gold stocks are tremendous bargains at these levels.
Sources: Agnico-Eagle, Eldorado Gold, and Iamgold websites