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Two Gold Stocks With Something to Prove

NEW YORK ( TheStreet ) -- Gold miners Rangold Resources (GOLD - Get Report) and Agnico-Eagle (AEM - Get Report) are in the hot seat to deliver the glittery goods when they report first quarter earnings.

Both had glaring misses in the fourth-quarter of 2010 and these mid-sized gold miners must show growth, profits and crisis management when they report. Agnico will report Thursday April 28th and Randgold will follow a week later.

Here's what you have to look for, beginning with Agnico:


Agnico missed 2010 gold production guidance by 1.2%, delivering only 987,609 ounces of gold.

The company had lower-than-expected grade at two of its mines, Lapa and LaRonde. According to CEO Sean Boyd, the low grade was a sequencing issue and eventually both mines will deliver better gold and more of it. LaRonde is estimated to produce 157,000 ounces in 2011 and Lapa should produce 125,000 ounces. Agnico is hoping to produce 1.2 million ounces in 2011, 19% more than 2010.

Cash Costs

Agnico also reported higher cash costs in 2010 of $451 an ounce, which disappointed the Street. This was mainly due to operational issues at two if its fledgling mines, Kittila and Meadowbank, and the first quarter might be rough.

Kittila had to contend with a planned maintenance shutdown that was longer than expected and the mine took longer to rev up after the fact. According to Boyd, "since December that mine has run above design capacity" and is "running well." Agnico hopes Kittila will produce 150,000 ounces in 2011 for $548 an ounce.

The biggest thorn in Agnico's side was capacity constraints at Meadowbank. This was due to the company using portable crushing facilities that didn't do their job. Investors will have to wait until the third quarter for a permanent fix, at which time, supposedly, production will ramp up big time.

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Estimated 2011 gold production for Meadowbank is 362,000 ounces at $548 cash costs, but Boyd says after the third quarter the mine could deliver between 375,000 and 400,000 ounces at $550 cash costs. However, due to a fire in the kitchen and nearby facilities at the mine, daily throughput in the first quarter should be 6,900 tons lower than previously expected and at lower grades. Expect lower production and higher cash costs.

According to Boyd, Kittila will see dramatic cash cost improvements quickly and that the rest of Agnico's six operating mines will slowly improve their cash costs in the second half of 2011.
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