Agnico Eagle returns to profitability in Q1; US$108.9 million of net income

TORONTO - Agnico Eagle Mines Ltd. (TSX:AEM) has reported US$108.9 million of net income in the first quarter of 2014, a big improvement over the same quarter a year earlier and the $406-million loss recorded by the gold producer in 2013, mainly because of asset impairments recorded in the final three months of last year.

The net profit for the first three months of 2014 amounted to 63 cents per share, up from 14 cents per share in the first quarter of 2013 and the loss of $2.61 per share in the fourth quarter of 2013.

After excluding certain items, Agnico Eagle's adjusted net income for the three months ended March 31 was US$106.8 million or 61 cents per share. That was up from $53.6 million or 31 cents per share per share in the first quarter of 2013 and $44.2 million or 25 cents per share of adjusted net income in the fourth quarter of last year.

Operating activities provided US$247.7 million of cash, up from US$146.1 million in the first quarter of 2013, despite lower gold prices.

Agnico Eagle says it set a company record for gold production in the quarter with 366,421 ounces at total cash costs of US$537 per ounce — about $200 per ounce below the company's costs in the first quarter of 2013 and $86 below the $623 per ounce recorded in the fourth quarter of 2013.

Agnico-Eagle president and CEO Sean Boyd said a lot of the first-quarter success was due to the company's Meadowbank mine in Nunavut, but added there was also strong performance from mines in the Abitibi region of northwestern Quebec.

"Meadowbank carried on its strong performance from Q4 of 2013. In fact, it had a very strong entire 2013. We carried that momentum into the first quarter (and) we're seeing strong production in April. We have encountered higher grades there, which we explained to the market in February when we put out our guidance (for the full year)."

He added that La Ronde in Quebec is also getting to more high-grade material in lower parts of the mine, which has lowered costs, and the Goldex mine in Quebec, which began commercial production in the fourth quarter, has also performed well.

"It's not production. We're getting very good cost-per-tonne performance at a number of our key mines, which is helping us lower the costs," Boyd said.

The company said on Thursday after markets closed that its 2014 production now is expected to be above its previous high estimate of between 1.175 million ounces to 1.205 million ounces, while costs will come in below its previous forecast range of between US$670 and US$690 per ounce.

After the quarter ended, Agnico Eagle joined a friendly takeover bid for Montreal-based Osisko Mining Corp. (TSX:OSK), which has the Canadian Malartic gold mine in a the same prolific area of Quebec.

Osisko defeated a hostile takeover attempt by Vancouver-based Goldcorp (TSX:G) after it enlisted the support of Yamana Gold Corp. (TSX:YRI), which later combined forces with Agnico to make a friendly deal valued at $3.9 billion — $300 million above Goldcorp's final offer.

Under the stock-and-cash offer, valued at $8.15 per share at time of the April 16 announcement, Osisko shareholders will receive $2.09 in cash, 0.26471 of a Yamana share (TSX:YRI), 0.07264 of an Agnico Eagle share (TSX:AEM) and one new share in the new Osisko with a value of $1.20 per share.

Canadian Malartic began commercial production in May 2011 and has been ramping up its numbers in recent months.

Agnico Eagles has three mines between Val d'Or, Que. and Rouyn-Noranda, Que., with Canadian Malartic in the middle.

But Boyd said it's too soon to say who will operate Canadian Malartic — pointing out that the deal has yet to close and requires approval from Osisko's shareholders.

"I think we bring a lot to the table. We have a technical services team that's based in that region that services all of our mines, so we tend to do a lot of the technical work ourselves . . . and so we hope to bring that skill set to the table," Boyd said in a telephone interview.

Like other gold producers, Agnico-Eagle had a difficult year in 2013. In February it announced that its quarterly dividend would be cut by from 22 cents paid in December to eight cents. On Thursday, it announced the dividend would remain at eight cents per share with the next payment on June 16.

It also announced in February that it had a $453.3 million net loss, or $2.61 per share, for the fourth quarter. It included a non-cash item for asset impairments, which reduced operating earnings by $436.3 million or $2.51 per share), and a number of smaller items that are excluded for adjusted earnings.

Agnico Eagle shares closed Thursday at $32.42 before the financial results were issued, down from $33.45 on April 15, just before the Osisko deal was announced.

— Follow @DavidPaddon on Twitter.

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