VANCOUVER (miningweekly.com) – Canadian gold major Agnico Eagle Mines has reported buoyant first-quarter earnings on Thursday, nearly tripling profit on the back of increased output and higher precious metal prices.
Excluding special items for the three months ended March 31, Toronto-based Agnico reported adjusted profit of $64.1-million, or $0.28 a share, comfortably beating average Wall Street analyst forecasts calling for earnings of $0.11 share.
The improved performance sent the miner’s NYSE-listed stock up 1% in after-market trading to $43.90 apiece.
Net profit came in at $76-million, or $0.33 a share, compared with $27.8-million, or $0.13 a share in the comparable period of 2016.
"Operationally, 2017 has started strongly with solid performance on both the production and cost fronts. Higher gold production at lower costs has resulted in stronger cash flow generation and has allowed us to increase our production guidance for the year,” CEO Sean Boyd told Mining Weekly Online in an interview.
“We really saw a continuation of the fourth quarter last year, which was viewed by the market as mixed, only because we had a late shipment before the end of the year. In the first quarter, there was not really any one particular mine that shot the lights out, it was just a good consistent performance across the board.”
Revenues rose nearly 12% year-on-year to $547.5-million, underpinned by payable gold output of 418 216 oz, compared with 411 336 oz in the first quarter of 2016. The flagship LaRonde mine, in Quebec, and Meadowbank, in Nunavut, drove higher output in the period owing to higher grades.
The two mines’ performance helped drive costs lower, falling to $578/oz in the quarter, compared with $593/oz in the comparable 2016 period.
All-in sustaining costs (Aisc) for the first quarter were 7% lower at $741/oz, compared with $797/oz a year earlier, and is a function of lower total cash costs an ounce and lower sustaining capital expenditures when compared with the first quarter of 2016, Boyd explained.
Agnico reaffirmed its 2017 Aisc guidance of between $850/oz and $900/oz, but it will be reviewed later in the year, as certain components outside of Agnico’s control crystallise.
Agnico maintains an extremely strong balance sheet, with zero debt and $804.3-million available in cash and cash equivalents, boosted in part by a stock issue in March, but also by strong output across its portfolio of mines. This is bolstered by about $1.2-billion available in credit lines, not including the uncommitted $300-million accordion feature.
MASTER OF EXPLORATION
The company on Thursday lifted its full-year production guidance to more than 1.57-million ounces, up from 1.55-million ounces forecast previously.
Boyd pointed out Agnico’s track record of more than five years of exceeding guidance, and this trend is expected to continue this year. This is owing to production from the Lapa mine, in north-western Quebec, being extended into the current quarter, and higher grades expected later this year at the 50%-owned joint venture (JV) with Yamana Gold at Canadian Malartic, also in Quebec.
During the quarter, Agnico approved mining of additional target zones at Lapa at depth, from the Zone Deep East and Zone 7 Deep areas. Under the current mine plan, Lapa is expected to operate until the end of the second quarter, doubling expected 2017 output to 30 000 oz.
Boyd noted the positive drilling results at the Amaruq project, in Nunavut, which is a satellite deposit of the Meadowbank mine. Drilling has shown that the west end of the Whale tail pit can likely be extended, and infill drilling at the V-Zone near surface encountered more mineralisation.
The nearby Meliadine project was also reported to be on schedule and on budget, with underground development 5% above plan and engineering 67% complete at the end of March. Construction activities are progressing well with the concrete batch plant being commissioned and pile installation restarted in March. Full camp facilities are expected to be completed in May ahead of the barge season.
The Agnico board had in January approved investment of about $1.2-billion to build Meliadine and develop the Amaruq satellite deposit. Both projects are slated to start production in the third quarter of 2019.
Meadowbank encountered some higher-than-expected grades in the first quarter, thanks to a grade of 3.11 g/t outperforming the reserve grade of 2.69 g/t.
Meanwhile, the Goldex Deep 1 project, also located in Quebec’s Abitibi region, is ahead of schedule by about three months and will start ramping up in the third quarter.
The Canadian Malartic JV last week received approval to relocate Highway 117 to access the Barnat zone, which has the added benefit of operating flexibility and access to softer ore, which poses the potential for the mill to be able to exceed nameplate capacity of 55 000 t/d once this zone is opened.
In Finland, Boyd noted that exploration at the Kitila mine was expanding the deposit in parallel to the Main Zone.
Boyd stated that Agnico would continue to invest in junior explorers as a form of 'exploration by proxy', noting that the company pioneered the approach that was now readily being adopted by other senior gold producers. This strategy has resulted in some blockbuster discoveries, including LaRonde and Goldex.
“We’re masters at going from early stage to production,” Boyd stated, adding that the 60-year-old company did not only rely on partners for its grassroots exploration, but was indeed spending big bucks on its own exploration programmes during the recent commodity downturn, when other majors slashed their exploration budgets.
Boyd noted “dark clouds on the horizon” regarding global geopolitical tension this year, potentially supporting higher gold prices. He also eagerly anticipates the release of the latest US gross domestic product numbers Friday, which will give clues as to whether the US economy is indeed slowing, which will diminish the rate at which interest rates rise, and support gold in the long term.
He expects the gold price could end the year in a range between $1 400/oz and $1 500/oz.