“…North American Gold Producer earnings season kicks off on Oct. 29. Gold price average 3% lower than Q2/08, but up 28% over Q3/07 Gold equities poised to disappoint in an unforgiving market environment: We expect earnings, production or cost misses will be viewed unforgivingly in the current environment of extreme aversion to operational risk. While the smaller producers are more susceptible to such operating fluctuations, we do expect Alamos to benefit given operating guidance of 40kozs at quarter-end, compared to 32kozs guidance issued just weeks earlier. We also expect that Agnico-Eagle is most likely to miss on EPS given the negative pricing adjustments resulting primarily from the 16% drop in zinc price. Additionally, Yamana stated during its analyst day on October 15th that production in Q3/08 was similar to Q2/08 and costs have hit the "high water mark' in Q3/08.”
Comments made by Scotia Capital analyst Anita Soni on October 29, 2008
To add to Ms. Soni’s analysis, I would say that while Q3/08 earnings might be positively affected by lower capital costs in the form of fuel and weaker local currencies, if operations are based outside the United States, those operations that are heavily reliant on base metal credits are probably going to report higher average cash costs.
Note: On October 29, 2008, Agnico-Eagle reported quarterly net income of $14.0 million, or $0.10 per share for the Q3/08. In comparison, in Q3/07, the company reported net income of $11.5 million, or $0.08 per share. The company said that “The increase in net income, when compared to the third quarter of 2007, was due to higher gold production and prices and the foreign currency translation gain, partly offset by the net loss on investments and substantially lower by-product zinc and copper prices.”
Cash flow from operating activities for Q3/08 was was $17.9 million, compared with $54.9 million in the third quarter of 2007, as “higher gold production and prices were more than offset by lower by-product zinc and copper prices.” Payable gold production in Q3/08 was 68,753 ounces at weighted average total cash costs per ounce of $240. This compares with payable gold production of 55,830 ounces, at total cash costs per ounce of minus $307, in Q3/07 when only LaRonde was operating, and zinc prices were much higher. For the full year, Agnico-Eagle forecasted gold production from LaRonde, Goldex and Kittila to be approximately 300,000 ounces.
Agnico-Eagle will host its quarterly conference call on Thursday, October 30, 2008 at 11:00 a.m. (E.D.T.). A live audio webcast of the meeting will be available on the Company's website homepage at http://www.agnico-eagle.com/
For those preferring to listen by telephone, dial 416-644-3414 or Toll-free 800-733-7571.
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