Agnico-Eagle: Positioned to Fill the Mid-Tier Gold Mining Gap

Agnico-Eagles Mines (AEM) is a mid-tier, unhedged producer with one operating mine in Quebec and 5 mines which will be starting production by 2010. All mines are in mining friendly jurisdictions (Canada, Finland, and Mexico.) Gold production will increase by 6x over the next four years.

3^rd Quarter stats

• EPS of $0.08/share.
• Foreign currency translation loss of $0.19/share.
• Cash of $427.6 million on the balance sheet as of September 30, 2007
• 15.8 million ounces of gold reserves with a target of 18-20 million by the end of 2008.

Operating mines

LaRonde, Quebec

• Cash cost net of by-product credits was a negative $307/oz.
• Proven & Probable (P&P) reserves of 5.2 million oz. and a mine life of 13 years.
• Continuing exploration to expand the mine.

New Mines

Goldex – Northern Quebec

• P&P reserves of 1.7 million oz. of gold
• 10 year mine life averaging 170,000 oz. per year.
• Production is expected to start in the 2^nd Quarter of 2008.

Kittila - Finland

• Construction is ongoing with production expected to commence in the 3^rd quarter of 2008.
• P&P reserves of 2.6 million oz. with production of 150,000 oz. per year and a mine life of 13 years.
• Production is expected to commence during the 3^rd quarter of 2008.

Lapa – Northwest Quebec

• Probable reserves of 1.2 million oz. with production of 125,000 oz. per year.
• Production expected in the 2^nd quarter of 2009.

Pinos Altos – Mexico

• Probable gold reserves of 2.2 million oz. and 20 million oz. of silver.
• Average annual production of 150,000 oz. of gold and 2 million oz. of silver with an 11 year mine life.

Meadowbrook – Nunavut

• P&P gold reserves of 2.9 million oz. of gold.
• Open for expansion.
• Production expected by 2010.
• Average annual production of 350,000 oz. of gold over the life of the mine.

AEM is a strong mid-tier producer who will be ramping up production significantly over the next few years. Current projects are in mining friendly areas where the risk of seizure and problems are low. Recent mergers have left a gap in the mid-tier gold mining sector and Agnico-Eagle is well positioned to fill that gap. Longer term, a takeover by a much larger mining company is not out of the question.

Total gold cash costs are extremely low due to higher by-product sales prices for silver, zinc, and copper mined from LaRonde.

Going forward I will have to keep a close eye on the mine construction efforts but even a small slip can be easily forgiven if one looks at the longer term picture. Because of the collapsing US Dollar and the companies' headquarters in Canada, EPS numbers may look a bit strange due to currency conversions. Investors need to take that into account when forming an opinion.

Source: Agnico-Eagle website

Disclosure: The author owns share and options in Agnico-Eagle.

Comments

[taurus:]

I have to buy some of this stock for my old age, a very good stock for my portfolio,

2007 Nov 08 06:48 PM