Analysts Feel Agnico-Eagle Is on Track

Monday's corporate update from Agnico-Eagle Mines Ltd. (AEM) is getting a positive response from analysts, despite some concern about rising costs.

"Unlike some recent project updates [e.g. Galore Creek], there appears to be little potential for a significant capital cost blow-out at [Agnico's] major projects," TD Securities analyst Greg Barnes wrote in a note to clients.

Agnico forecast capital expenditures of C$898-million over the next three years, which is 6% higher than Mr. Barnes' forecast of C$847-million. But he pointed out that development projects remain largely on or ahead of schedule, and life-of-mine operating costs are 5% to 25% better than his conservative estimates, with the exception of the Lapa Project.

Over at UBS, analyst Tony Lesiak wrote that Agnico is doing a good job of controlling costs. Gold production is forecast to be 10% lower than his estimate for 2008, but about 8% higher than his forecast from 2009 to 2011. He is maintaining a "buy" rating and a target of $65.00 a share.

But Blackmont Capital analyst Richard Gray cut his target on the stock slightly to C$58.50 a share (from C$60.00) due to lower production, and higher cost estimates for the LaRonde mine next year. He is still maintaining a "buy" rating, and thinks the company is in good financial shape.

"The 50% increase in the annual dividend to 18¢ per share demonstrates the balance sheet strength to fund the company's growth," he wrote.