BUSINESS

Gold miner Agnico-Eagle expects production to increase despite spending cuts

07/24/2013 05:38 EDT | Updated 09/23/2013 05:12 EDT
TORONTO - Agnico-Eagle Mines Ltd. (TSX:AEM) is cutting spending after reporting a loss in its latest quarter, but the gold miner says it's confident it will still meet its production goals.

"Despite our decision to reduce some of our capital investments, we can still achieve the production growth that we laid out to the market earlier this year," said president and chief executive Sean Boyd in an interview.

"We were able to reduce in areas that weren't going to impact our ability to continue to grow our production."

The gold miner announced plans to cut capital expenditures and other costs by about $50 million during the remainder of 2013.

It will also shave another $200 million from its capital expenditures at existing mines and projects next year, from a previously planned $600 million.

Among the cuts, Boyd said the company will scale back on exploration drilling at its Meliadine project in Nunavut, shifting its focus to developing a ramp that will give it access to the deposit.

However, Agnico-Eagle expects a 15 per cent boost in production during the second half of the year now that the Kittila autoclave, which was shut down for an extended maintenance period during the quarter, is up and running again.

Production will also be helped by the Goldex mine in Quebec, which will restart operations after being halted in 2011 due to unstable ground conditions and water infiltration.

The gold miner, which keeps its books in U.S. dollars, said Wednesday it lost $24.4 million or 14 cents per share for the second quarter, largely due to a maintenance shutdown at Kittila that was 30 days longer than planned.

The results compare with a profit of $43.3 million or 25 cents during the same quarter last year.

Revenue totalled $336.4 million, down from $459.6 million.

Excluding one-time items, Agnico-Eagle said it lost $4.6 million or three cents per share in the quarter.

In addition to the lower production from Kittila, the company said it was hit by negative settlement adjustments for byproduct metals at its LaRonde and Pinos Altos mines due to lower silver prices.

Boyd said the spending cuts announced Wednesday don't include any job losses, but the recent drop in gold prices prompted the company to review all aspects of its business.

"We are continuing to go through our budget process and looking at all of our operations, but with these cuts they're more related to our projects and the timing of expenditures on those projects," Boyd said.

Mining companies have been battered lately by lower gold prices and higher operating expenses. But despite the turbulence, Agnico, which recently bought Yukon miner ATAC Resources Ltd. (TSXV:ATC), is still eyeing new acquisitions.

Boyd said the company is primarily focused on opportunities near its existing deposits in Canada, Mexico and Europe.

"We have the ability and the experience to work through this period of volatility," said Boyd.

"I've seen a lot of these ups and downs, and you can't stop running your business. So you're always looking for opportunities."

Payable gold production for the quarter totalled 224,089 ounces, including 5,389 ounces from Kittila, compared with 265,350 ounces in the second quarter of 2012.

Excluding the impact of the shutdown at Kittila, total cash costs per ounce for the second quarter of 2013 were $785 per ounce, up from $660 a year ago due to lower byproduct revenue at LaRonde and Pinos Altos.

Agnico-Eagle has operations in Quebec, Mexico, Finland and Nunavut, along with exploration activities in North America, Latin America and Europe.