Agnico-Eagle reports third quarter 2011 results
(All amounts expressed in U.S. dollars unless otherwise noted)
Stock Symbol: AEM (NYSE and TSX)
TORONTO, Oct. 26, 2011 /PRNewswire/ - Agnico-Eagle Mines Limited ("Agnico-Eagle" or the "Company") today reported a quarterly net loss of $81.6 million (or a loss of $0.48 per share) for the third quarter of 2011. This result includes the $161.1 million ($0.95 per share) after-tax write off of the Company's Goldex operation (as announced on October 19, 2011), a $32.7 million closure provision ($0.19 per share), stock option expense of $7.7 million ($0.05 per share), and the writedown of available for sale securities of $3.4 million ($0.02 per share), partly offset by a non-cash foreign currency translation gain of $21.4 million, or $0.13 per share. Excluding these items would result in adjusted net income of $101.9 million, or $0.60 per share. In the third quarter of 2010, the Company reported net income of $121.5 million, or $0.73 per share. The lower net income in 2011 was largely due to the suspension and write off of the Company's Goldex operation.
Third quarter 2011 cash provided by operating activities was a record $197.6 million ($213.5 million before changes in non-cash components of working capital), up from cash provided by operating activities of $156.8 million in the third quarter of 2010 ($170.9 million before changes in non-cash components of working capital).
The higher cash provided by operating activities in 2011 was primarily due to a 39% higher realized gold price and significantly higher byproduct metal revenue when compared to that realized in the third quarter of 2010.
"While the suspension of production at Goldex, one of our lowest cost mines, is extremely disappointing to the Agnico-Eagle team, our strategy remains unchanged and we will continue to focus on improving our business," said Sean Boyd, Vice-Chairman and Chief Executive Officer. "Although we had continued operating improvements in the quarter at Kittila and Meadowbank, there is still more work to do, particularly at Meadowbank where realized gold grades are still below plan," added Mr. Boyd.
Third quarter 2011 highlights include:
Record Cash Generation - quarterly cash provided by operating activities of $198 million, or $1.17 per share
Record Nine Month Gold Production - produced 757,668 ounces
Record gold production at Low Cost at Pinos Altos - 52,739 ounces at $295 total cash costs per ounce1
Goldex Operations Suspended Indefinitely
Payable gold production2 in the third quarter of 2011 was 265,978 ounces compared to 285,178 ounces in the third quarter of 2010. A description of the production and cost performance for each mine is set out further below.
The lower level of production in the 2011 period was largely due to the processing of lower grades at Meadowbank, LaRonde and Goldex.
Total cash costs for the third quarter of 2011 were $563 per ounce. This compares with $423 per ounce in the third quarter of 2010. The higher cost in 2011 was largely attributable to the 7% lower gold production and also higher total cash costs per ounce at Meadowbank, Kittila, Lapa and Goldex. Each of these mines processed lower grades than in the prior year's period.
For the first nine months of 2011, the Company produced a record 757,668 ounces of gold at total cash costs per ounce of $553. This compares with the first nine months of 2010 when gold production was 731,138 ounces at total cash costs of $445 per ounce. The higher gold production in 2011 is mainly due to a much stronger performance at Pinos Altos (much higher mill throughput following the installation of two more tailings filters, and the start up of the Creston Mascota mine), combined with better mill performance from Kittila and Meadowbank. The higher total cash costs are largely a result of high costs at Meadowbank, Kittila, Lapa and Goldex, as mentioned above.
Mainly due to the suspension of operations at Goldex, Agnico-Eagle now expects production of approximately 1.01 million ounces of gold for the full year 2011 at total cash costs per ounce of approximately $575. This compares with previous guidance of approximately 1.08 million ounces at total cash costs per ounce of $495. The higher total cash cost reflects the loss of the relatively lower cost Goldex mine combined with high costs which continue to be realized at Meadowbank.
Take-Over Bid for Grayd Resource Corporation
On October 19, 2011, Agnico-Eagle and Grayd Resource Corporation ("Grayd") amended the acquisition agreement dated September 19, 2011 and Agnico-Eagle amended the offer (the "Offer") dated October 13, 2011 made by Agnico-Eagle for all of the outstanding shares of Grayd to increase the maximum amount of cash available under the Offer to approximately C$183 million (from approximately C$92 million). The maximum number of common shares of Agnico-Eagle available for issuance under the Offer is unchanged at approximately 2.7 million (based on the number of Grayd shares outstanding on a fully-diluted basis as at September 19, 2011). A notice of change and variation of the Offer was mailed to shareholders of Grayd on October 21, 2011. The expiry time of the Offer remains unchanged at 5:00 p.m. (Toronto time) on November 18, 2011, unless the Offer is extended or withdrawn.
Third Quarter 2011 Results Conference Call and Webcast Tomorrow
The Company's senior management will host a conference call on Thursday, October 27, 2011 at 11:00 AM (E.D.T.) to discuss financial results and provide an update of the Company's exploration and development activities.
Via Webcast:
A live audio webcast of the meeting will be available on the Company's website homepage at www.agnico-eagle.com.
Via Telephone:
For those preferring to listen by telephone, please dial 416-644-3415 or Toll-free 800-814-4861. To ensure your participation, please call approximately five minutes prior to the scheduled start of the call.
Replay archive:
Please dial 416-640-1917 or Toll-free 877-289-8525, access code 4403803#.
The conference call replay will expire on November 27, 2011.
The webcast along with presentation slides will be archived for 180 days on the website.
Cash Position Remains Strong
Cash and cash equivalents decreased to $116.7 million at September 30, 2011 from the June 30, 2011 balance of $139.0 million as capital expenditures and investing activities exceeded the cash provided by operating activities during the quarter.
Capital expenditures in the third quarter of 2011 were $164.0 million, including $45.0 million at Meliadine, $43.6 million at Meadowbank, $23.3 million at LaRonde, $22.9 million at Kittila, $16.0 million on Goldex, $6.7 million at Pinos Altos and $4.3 million at Lapa.
With its current cash balances, anticipated cash flows and available bank lines, management believes that Agnico-Eagle remains fully funded for the development and exploration of its current pipeline of gold projects in Canada, Finland, Mexico and the USA.
Available bank lines as of September 30, 2011 were approximately $1.12 billion.
LaRonde Mine - Strong Cash Flow Generation Continues
The LaRonde mill processed an average of 6,517 tonnes per day in the third quarter of 2011, compared with an average of 6,872 tpd in the corresponding period of 2010. The lower throughput was largely due to some scheduled maintenance downtime, an unplanned 56 hour shutdown of the concentrate filter press and also due to low ore availability. The low ore availability resulted mainly from the mining of smaller stopes near the higher stress extremities of the orebody.
Minesite costs per tonne3 were approximately C$88 in the third quarter of 2011. These costs are higher than the C$74 per tonne experienced in the third quarter of 2010. The increase is largely due to the lower throughput in 2011, as discussed above.
On a per ounce basis, net of byproduct credits, LaRonde's total cash costs per ounce were minus $270 in the third quarter of 2011 on payable production of 29,069 ounces of gold. This compares with the third quarter of 2010 when total cash costs per ounce were minus $298 on production of 37,832 ounces of gold. The higher costs and lower gold production in the 2011 period are largely related to the planned mining of lower grade areas for much of the year but also due to higher than expected dilution near the extremities of the orebody (18% lower grade in the 2011 period) and due to the lower third quarter 2011 throughput, as discussed above. Higher grades are scheduled for late in the fourth quarter of 2011 with the first production from the higher grade LaRonde Extension.
Payable production was 93,487 ounces of gold at total cash costs of minus $21 per ounce in the first nine months of 2011. This compares with 124,401 ounces at $69 per ounce in the first nine months of 2010. The lower production is mainly due to the processing of lower grades and throughput in 2011 as discussed above. The lower total cash costs in 2011 are largely the result of the mine focusing on byproduct production and the associated revenues during the year, which reduces the overall total cash cost per ounce for the Company as a whole.
Goldex Mine - Production Suspended Indefinitely on October 19
As discussed in the Company's press release of October 19, 2011, the Goldex mine has been suspended indefinitely due to suspected rock subsidence in the hangingwall above the GEZ orebody. Monitoring, investigation and remediation work will continue with the hope of one day re-opening the mine. However, there is no assurance that this will occur. The Goldex reserves will be reclassified into mineral resources.
The focus of future investigation and remediation work will be in securing the infrastructure in the area, detailed investigation into the mechanisms of the failure and installing further instrumentation for monitoring of the situation.
The Goldex mill processed an average of 8,223 tpd in the third quarter of 2011. During the third quarter of 2010, the plant processed an average of approximately 7,893 tpd.
Minesite costs per tonne at Goldex were approximately C$22 in the third quarter of 2011, essentially unchanged from the C$21 incurred in the third quarter of 2010 as higher throughput helped offset general inflation in the industry.
Payable gold production in the third quarter of 2011 was 40,224 ounces at total cash costs per ounce of $411. This compares to third quarter 2010 gold production of 50,672 ounces at total cash costs per ounce of $288. The decrease in gold production was due to the mining of lower grade material during the 2011 period which also negatively impacted the total cash costs per ounce.
Payable production was 120,722 ounces of gold in the first nine months of 2011 at total cash costs of $408 per ounce. This compares with 141,275 at total cash costs of $325 per ounce in the first nine months of 2010. The lower production and higher costs are mainly due to the processing of lower grades in 2011 as discussed above.
Kittila Mine - Cost Reduction Progressing
The Kittila mill processed an average of 3,196 tpd in the third quarter of 2011. In the third quarter of 2010, the Kittila mill processed 3,067 tpd. The mill is consistently achieving its steady-state design operating rate of 3,000 tpd.
Gold recoveries in the third quarter of 2011 were 83.5%, essentially at the design rate of 83%. This compares with the third quarter of 2010 when the recoveries were approximately 81.1%. This improvement in mill recovery was largely due to improvements in the understanding of the metallurgy and in the operation of the autoclave.
Minesite costs per tonne at Kittila were approximately €66 in the third quarter of 2011, compared to €58 in the third quarter of 2010. The increase in minesite costs was largely due to cost pressure on items such as fuel and electricity costs, material costs underground and high contractor costs. However, the 2011 level is significantly lower than the €79 realized in the second quarter of 2011. Further efforts to reduce the minesite cost per tonne are ongoing.
Third quarter 2011 gold production at Kittila was 37,924 ounces with a total cash cost per ounce of $694. In the third quarter of 2010 the mine produced 40,344 ounces at total cash costs per ounce of $519. The lower gold production was due to the mining of lower grades. The higher costs were largely the result of the cost issues mentioned above. Total cash costs per ounce were also unfavorably impacted by a weaker US dollar (US dollar per Euro of 1.29 in Q3 2010 versus 1.41 in Q3 2011).
The third quarter 2011 total cash cost per ounce of $694 was a significant improvement over the second quarter 2011 level of $850. Further efforts to reduce the total cash cost per ounce are underway.
For the first nine months of 2011, payable gold production was 109,052 at total cash costs per ounce of $736. This compares with 96,484 ounces at total cash costs of $603 in the corresponding period in 2010. The higher gold production in 2011 was not able to fully offset the cost pressure at the mine, resulting in the higher total cash costs. Additionally, the relative strength of the Euro negatively impacted the total cash costs in the first nine months of 2011, as discussed above.
Lapa - Record Quarterly Throughput
The Lapa circuit at the LaRonde mill processed an average of 1,858 tpd, a quarterly record, in the third quarter of 2011. This compares with an average of 1,573 tonnes per day in the third quarter of 2010 as Lapa continues to exceed its design throughput of 1,500 tpd.
Minesite costs per tonne were C$107 in the third quarter of 2011, compared to C$105 in the third quarter of 2010. The lower cost is largely due to the increased throughput.
Payable production in the third quarter of 2011 was 27,881 ounces of gold at total cash costs per ounce of $657. This compares with the third quarter of 2010, when production was 27,688 ounces of gold at total cash costs per ounce of $509. The increase in costs is largely due to a decrease in grade due to higher than planned dilution (difficult ground in the western side of the deposit) which largely offset the positive impact of the higher throughput. Additionally, higher than expected concentrations of antimony and arsenic in the ore reduced mill recoveries below plan.
For the first nine months of 2011, payable gold production was 83,347 at total cash costs per ounce of $629. This compares with 88,168 ounces at total cash costs of $517 in the corresponding period in 2010. The lower gold production in 2011 and the higher total cash costs were largely the result of processing lower grades, as discussed above.
Pinos Altos - Record Gold Production
The Pinos Altos mill processed a record average of 4,959 tpd in the third quarter of 2011. This compares with 3,863 tonnes per day in the third quarter of 2010. The mill is now routinely performing at process rates above the initial design capacity of 4,000 tpd following the installation of two additional tailings filters in the third and fourth quarters of 2010.
Minesite costs per tonne were $27 in the third quarter of 2011, compared to $42 in the third quarter of 2010. These lower costs were largely the result of the higher tonnage mined and milled combined with the higher proportions of heap leach ore being processed due to the onset of operations at Creston Mascota.
Payable production in the third quarter of 2011 was a record 52,739 ounces of gold at total cash costs per ounce of $295, including the satellite Creston Mascota operation. This compares with production of 35,248 ounces at a total cash cost of $558 in the third quarter of 2010. The higher gold production and lower costs are largely due to the ramp up of Creston Mascota and the increased mill throughput.
The first gold production from Creston Mascota occurred during the fourth quarter of 2010. In the third quarter of 2011, payable gold production from this heap leach operation was 11,741 ounces (included in the Pinos Altos total above). Commercial production at Creston Mascota was achieved on March 1, 2011.
For the first nine months of 2011, payable gold production was a record 151,806 at total cash costs per ounce of $302. This compares with 91,141 ounces at total cash costs of $451 for the corresponding period in 2010. The higher gold production and lower costs are largely a result of the increased mill throughput and contributions from Creston Mascota.
The underground mine at Pinos Altos operated at approximately 3,300 tonnes per day during the third quarter of 2011, the first such period with underground mine production in excess of its initial design capacity of approximately 3,000 tpd. Due to this performance, the improved mill capacity and the increased underground ore reserve tonnage at Pinos Altos, the Company is evaluating alternatives with respect to increasing the underground mine capacity either through an additional production ramp or via a production shaft. The study is expected to be completed near the end of 2011.
Meadowbank - Record Mill Throughput, But Dilution and Cost Issues Remain
The Meadowbank mill processed a record average of 9,414 tpd in the third quarter of 2011. This compares with the third quarter of 2010 when the mine processed approximately 6,918 tpd. The increase in throughput was largely due to the commissioning of the permanent secondary crusher in June 2011.
Minesite costs per tonne were C$93 in the third quarter of 2011 as compared to the third quarter of 2010 when minesite costs per tonne were C$102. The lower costs in the 2011 period are largely due to the increase in the mill throughput and increased productivity in the pit. However, the minesite costs remain above budget. Initiatives to reduce these unit costs include improvements in equipment maintenance. Equipment availabilities have improved to approximately 60% towards the target of 80%. The mine is incurring additional costs to catch up on maintenance and winterizing the fleet to minimize the issues experienced last winter.
Payable production in the third quarter of 2011 was 78,141 ounces of gold at total cash costs per ounce of gold of $1033. This compares with payable production of 93,395 ounces at total cash costs of $671 per ounce in the third quarter of 2010. The decrease in gold ounces and increase in cost was largely due to the higher than expected minesite costs per tonne and the mining of 38% lower grades in the 2011 period. The main reason for lower grades was ongoing dilution issues first identified during the second quarter of 2011. However, delays in waste removal also postponed access to higher grade ore.
For the first nine months of 2011, payable gold production was a record 199,254 at total cash costs per ounce of $969. This compares with 189,669 ounces at total cash costs of $664 in the corresponding period in 2010. The higher gold production in 2011 was mainly due to higher mill throughput, but partly offset by the mining of 32% lower grades in 2011. The higher total cash costs were partly due to the low grades, but also due to the high minesite costs, as discussed above.
Dividend Record and Payment Dates for the Remainder of 2011
Record Date Payment Date
December 1 December 15
