Special Situations for SMART INVESTORS
AGNICO-EAGLE MINES LTD (NYSE:AEM/TORONTO:AGE): FOLLOW-UP NO 12
Home page: http://www.agnico-eagle.com/
Charts: http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ca
A SOLID REPUTATION AS EXPERIENCED MINE BUILDERS AND LOW-COST PRODUCERS
Business Summary
For almost three decades, Agnico-Eagle has been mining gold in one of the world's most productive regions -- the mineral-rich Cadillac Belt on the Canadian Shield -- and establishing a solid reputation as experienced mine builders and low-cost producers who delivers what it promises. The future looks even brighter.
As of the beginning of the fourth quarter of 2002, the daily throughput rate increased from 5,000 tons per day to 7,000 tons per day. This newly expanded rate will result in a substantial increase in gold production and a further decline in the unit costs to produce an ounce of gold. The company expects by 2004 gold production to approach 400,000 ounces per year and the cash costs to produce an ounce of gold are expected to decline to below US$100.
Recent Developments: Agnico-Eagle reports third quarter results and announces successful commissioning of LaRonde at 7,000 TPD rate
Agnico-Eagle Mines Limited has reported a third quarter net loss of $0.6 million, or $0.01 per share compared to a net loss of $5.6 million, or $0.08 per share in the same period in 2001.
Operating cash flow improved to $2.3 million, or $0.03 per share from $0.9 million, or $0.01 per share in the third quarter of 2001.
For the year to date, net earnings were $3.2 million, or $0.05 per share compared to a net loss of $4.7 million, or $0.07 per share in 2001 while operating cash flow increased to $14.9 million, or $0.22 per share from $10.9 million, or $0.16 per share in 2001.
Highlights for the third quarter include:
- LaRonde underground mine and mill now operating at 7,000 tons per day with successful commissioning of mill in early October, already reaching peak daily rates of 7,900 tons.
- Although lower than anticipated, both earnings and cash flow improved over prior year levels.
- Deep drilling encountered economic mineralization on western limits of Zone 20 North suggesting greater than anticipated strike length and potential new parallel gold zone.
- High grade gold results from Lapa Property drilling, east of LaRonde, has led to follow up drill program in the fourth quarter.
"Although third quarter gold production was lower than anticipated the LaRonde Mine is now operating at the planned expanded rate of 7,000 tons per day. As a result, gold production in the fourth quarter is expected to achieve record levels", said Sean Boyd, President and Chief Executive Officer.
Fundamental Considerations
The Company's LaRonde Mine is a world-class gold asset. It is a very large deposit with a gold reserve and resource totalling over eight million ounces and still growing. This mine will produce low-cost gold for many years to come. Gold production for 2001 totalled 234,860 ounces at a cash cost of US$155.
By 2002, Agnico expects to reduce production costs per ounce of gold to approximately $100. La Ronde-Mine will be one of the lowest-cost gold producers in North America.
No hedging: Agnico does not give away price upside, so as to avoid the risk of limiting the potential value of their extraordinary gold asset.
Technical Considerations
The share price of AGE has remained in a solid up-trend since the end of the year 2000 when the new gold bull-market trend started. It is pushing against the high reached in 1996. Once overcome, we expect a further push towards the all-time high around CAD 45.
The gold price is relentlessly pushing against the resistance level around $330 which will give way sooner or later - a matter of time.
Our recommendation: Buy!
Peter Zihlmann
www.pzim.com
November 1, 2002
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