Zacks_Analysts' Blog : Agnico-Eagle Lowers Forecast - Analyst Blog

Agnico-Eagle Mines Ltd. (AEM) expects to produce less gold this year than previously predicted after a fire at its Meadowbank mine destroyed the kitchen and crippled the mine's staffing levels.

For the first-quarter 2011, Agnico expects total gold production to be about 245,000 ounces.

For full-year 2011, total gold production is now anticipated to be 1.08–1.15 million ounces, down from the earlier estimate of 1.13–1.23 million ounces, a decrease of 5.5%. For the year, company-wide, total cash costs are expected to be negatively impacted by ~$25 per ounce, resulting in a new guidance range of $445–$495 per ounce, compared with the prior guidance of $420–$470 per ounce.

For fiscal 2011, gold production at the Meadowbank mine is anticipated to be about 310,000 ounces at total cash costs of ~$700 per ounce with ~60% of this production coming in the second half of the year, down 14% from its previous estimate.

The Meadowbank plant has been processing lower grade ore from its stockpile as a result of lower staffing since early this month and expects to return to normal staffing levels of 450 employees by the end of April.

It expects grades and processing rates to improve from the second quarter. A permanent secondary crushing unit is to be commissioned in the third quarter.

Earlier in February, Agnico reported excellent fourth-quarter 2010 results. Quarterly net income was $88.0 million or 53 cents per share compared with $47.9 million or 31 cents per share in the year-ago quarter. Adjusted earnings were 51 cents per share versus 30 cents per share in the prior-year quarter. However, the results were below the Zacks Consensus Estimate of 61 cents per share.

The result was positively affected by a greater than 100% increase in gold production resulting from a full year of production at Kittila, Pinos Altos and Lapa, the start of production at the Meadowbank mine in March, combined with higher realized prices for gold, silver, copper and zinc.

Agnico is incurring heavy exploration and development costs, which might strain the company’s liquidity.

AEM faces stiff competition from Barrick Gold Corporation (ABX), Kinross Gold Corporation (KGC) and Newmont Mining Corp. (NEM).

Currently, we maintain a Neutral recommendation on the stock. Currently, it holds a Zacks #4 Rank (Sell).