Agnico Eagle profits soar in the second quarter

A gold refiner preparing the first pour at Agnico Eagle's Meliadine project. Credit: Agnico Eagle Mines.

Agnico Eagle Mines (NYSE, TSX: AEM) reported on July 29 a near four-fold increase in quarterly profit, owing to a surge in gold prices and a reduction in exploration costs during the second quarter of 2020.

For the three-month period ended June 30, the Canadian gold miner posted a net income of US$105.3 million, or 43¢ per share, compared to US$27.8 million, or 12¢ per share, a year earlier.

According to Agnico, the latest quarterly result includes non-cash mark-to-market gains on warrants of $33.7 million, derivative gains on financial instruments of $16 million, foreign currency translation gains on deferred tax liabilities of $15.2 million, and various other adjustments losses of $3.9 million.

Excluding these items would result in an adjusted net income of US$44.3 million, or 18¢ per share — beating analyst estimates of 15¢ per share and representing a 50% improvement from a year earlier.

Cash provided by operating activities came to $162.6 million, as compared with the second quarter of 2019, when cash provided by operating activities was $126.3 million.

The increase in net income and cash was mainly due to higher average realized gold prices as well as lower exploration and general and administrative expenses, partially offset by lower gold sales volume and temporary suspension costs, the company said.

“The second quarter was challenging given the global Covid-19 pandemic and its impact on our operations. While our business returned to normal production levels ahead of schedule in June, we did have seven of our eight mines on care and maintenance at one point during the quarter,” chief executive officer Sean Boyd said in a press release.

“With the ramp-up of operations now complete, and with July production expected to exceed 160,000 ounces of gold, the company is well positioned to have a strong second half, with gold production expected to average 480,000 to 500,000 ounces per quarter with declining unit costs,” Boyd added.

The company has also raised its 2020 production guidance to between 1.68 million to 1.73 million oz. (versus previous guidance of 1.63 million to 1.73 million oz.), while guidance for total cash costs and all-in sustaining costs (AISCs) remains unchanged at $740-$790 per oz. and $1,025-$1,075 per oz., respectively. Capital expenditures are expected to reach approximately $690 million this year.

Previous gold production guidance for 2021 and 2022 remains intact with a midpoint of 2.05 million and 2.10 million oz., respectively.

Agnico expects gold production to ramp up in the second half of 2020 and average approximately 480,000 to 500,000 oz. per quarter, with total cash costs per ounce expected to be in the range of $690 to $740, primarily as a result of the expected increase in gold production.

All operations that had experienced Covid-19 shutdowns during the second quarter were subsequently restarted, with production progressively ramping up to more “steady state” levels in June at all operations.

— This article first appeared in our sister publication,


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