Mexico’s proposed higher mining royalties could block nearly $7bn in investments
The Mexican government proposed raising mining royalties under the argument that metal prices have risen in recent years.
Agnico-Eagle Mines Limited (“Agnico-Eagle” or the “Company”) today reported quarterly net income of $68.8 million, or $0.41 per share for the second quarter of 2011. This result includes a non-cash foreign currency translation loss of $2.7 million, or $0.02 per share and stock option expense of $8.3 million, or $0.05 per share. Excluding these items would result in adjusted net income of $79.4 million, or $0.47 per share. In the second quarter of 2010, the Company reported net income of $100.4 million, or $0.64 per share.
The lower net income in 2011 was largely due to a return to normal levels of tax expense and a foreign currency translation loss versus a large tax recovery and a large foreign currency translation gain in the second quarter of 2010.
Second quarter 2011 cash provided by operating activities was $162.8 million ($161.7 million before changes in non-cash components of working capital), up from cash provided by operating activities of $161.6 million in the second quarter of 2010 ($138.9 million before changes in non-cash components of working capital).
The higher cash provided by operating activities in 2011 was primarily due to a 25% higher realized gold price and significantly higher byproduct metal prices when compared to those realized in the second quarter of 2010.
“With the installation of the permanent secondary crusher at Meadowbank, we have seen a significant improvement in our production rates. Steady state throughput is now allowing us to focus on cost cutting through optimization. The Company expects to deliver a strong second half operationally, with gold production anticipated to increase approximately 20% over the first half of 2011”, said Sean Boyd, Vice-Chairman and Chief Executive Officer. “Overall, our corporate strategy, which created significant value over the past five years, remains unchanged. Over the next several quarters, we expect to be able to lay out a new plan which will keep Agnico-Eagle at the forefront of growth in the gold industry. To that end, we have made a C$70 million strategic investment in Rubicon Minerals today, and also plan to enter into a technical services agreement to help advance their high grade Phoenix deposit in Red Lake, Ontario”, added Mr. Boyd.
Second quarter 2011 highlights include:
Strong Cash Generation – quarterly cash provided by operating activities of $163 million, or $0.96 per share
Record gold production at Pinos Altos – 51, 066 ounces at $299 total cash costs per ounce
Secondary Crusher Operating at Meadowbank – installation complete in June. Mill operating at approximately 9,250 tonnes per day in July
One of the Best Drillholes from Kittila’s Rimpi Zone – Hole RIE-11-008 returned 7.1 grams per tonne gold over 21.0 metres true width at 850 metres below surface, approximately 200 metres below the current resource envelope
Gold Mineralization Extended at Goldex’s D Zone – Intersection of 3.0 grams per tonne gold over 117.0 metres core length at 1,100 metres depth confirms similarity of D Zone to current Goldex orebody
Payable gold production1 in the second quarter of 2011 was 239,328 ounces compared to 257,728 ounces in the second quarter of 2010. A description of the production and cost performance for each mine is set out further below.
The lower level of production in the 2011 period was largely due to issues in April relating to the March 2011 fire at the Meadowbank mine and also due to higher than expected levels of dilution in its pit during the second quarter of 2011.
Total cash costs for the second quarter of 2011 were $565 per ounce2. This compares with $482 per ounce in the second quarter of 2010. The higher cost in 2011 was largely attributable to the issues at Meadowbank that more than offset the positive impact of higher byproduct metals prices. Additionally, higher than expected costs have persisted at Kittila as two shutdowns for maintenance on the autoclave (one unplanned), higher fuel and electricity prices and high levels of labour expense (as the mine transitions from contractor to self mining), offset increased gold production.
For the first six months of 2011, the Company produced 491,690 ounces of gold at total cash costs per ounce of $548. This compares with the first half of 2010 when gold production was 445,960 ounces at total cash costs of $464 per ounce. The higher gold production in 2011 is mainly due to stronger performances from Kittila (much higher mill recoveries following a process breakthrough) and Pinos Altos (much higher mill throughput following the installation of two more tailings filters). The higher total cash costs are largely a result of high costs at Meadowbank and Kittila, as previously discussed.
As announced in the June 27, 2011 news release, Agnico-Eagle expects production of approximately 1.08 million ounces of gold for the full year 2011 at total cash costs per ounce of approximately $495.
