Meadowbank helps put Agnico Eagle back in the black

Agnico Eagle Mines has reported a net income of $108 million in the first quarter of 2014 — a big improvement over its $406 million loss in 2013.

Gold prices are lower than at this time last year. Rather, Agnico Eagle says it set a company record for gold production in the last three months, extracting about 366,421 ounces overall at a cost of $567 US per ounce. That’s $200 less per ounce than in the same three months in 2013.

Agnico Eagle president and CEO Sean Boyd said a lot of the first-quarter success was due to the company's largest gold producer, the 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."

The company is doing exploration around Meadowbank, about 110 kilometres north of Baker Lake, through which it hopes to extend the life of the mine. 

This year, it will spend about $2.2 million in exploration in and around the mine site, including at the IVR project, about 50 kilometres northwest of the mine. 

Boyd said 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 is now expected to be above its previous high estimate of between 1.175 million ounces and 1.205 million ounces, while costs will come in below its previous forecast range of between $670 US and $690 US per ounce.

Agnico Eagle recently joined a friendly takeover bid with Yamana Gold Corp. for Montreal-based Osisko Mining Corp. (TSX:OSK), which owns the Canadian Malartic gold mine in Quebec.

That mine which began commercial production in May of 2011, lies in the middle of Agnico Eagle’s three mines between Val d'Or, Que. and Rouyn-Noranda, Que.

Osisko’s shareholders have yet to approve the deal.

Boyd said it's too soon to say who will operate Canadian Malartic.

"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 from the 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.