Agnico Eagle Misses on Production Snags

TORONTO (TheStreet) -- Investors sold off shares of Agnico-Eagle Mines(AEM Quote) Thursday after the gold extractor fell far short of Wall Street's third-quarter earnings targets because it botched production at several of its new mines.

By mid-afternoon, Agnico's stock had lost 6% of its value during a session that otherwise saw mining share prices rocket higher, boosted by a better-than-expected GDP growth figure and by better-than-expected results from several big gold mining concerns.

Agnico shares were changing hands recently at $57.89, down $3.73. Volume reached 7.7 million shares, more than double the daily average turnover in the name.

After Wednesday's closing bell, Agnico reported a net loss of $17 million, or 11 cents a share, largely based on a big foreign-exchange loss -- some $23 million. Excluding that and another charge to cover stock-options expenses, Agnico said its adjusted net income came to $14 million, or 10 cents a share.

Still, that's half as much as the 20 cents analysts were expecting the company to make on a per-share basis.

Explaining the miss, Agnio-Eagle's chief executive, Sean Boyd, said in a prepared statement, "Our production ramp-up has not been as rapid as we had anticipated which has negatively impacted third quarter earnings."

Agnico slashed its gold-production targets (it had already guided analysts lower back in May) to 500,000 ounces for 2009, down from an earlier range of 550,000 to 575,000, and 1 million to 1.1 million ounces for 2010.

Agnico has faced problems in starting up production at three new mines in Mexico, Finland and Canada. At the Pinos Altos mine in Mexico, the installation of filter presses has taken longer than expected. Meanwhile, Agnico's ramp-up of its Kittila mine in northern Finland suffered setbacks because of mill maintenance issues. And at the Lapa mine in northern Quebec, the mining process resulted in waste material diluting the ore and lowering the average metal content of the rock to a greater extent than is normal.