Agnico Eagle Mines Ltd (AEM)

[investora2z]

Agnico is considering selling a minority stake in its Meliadine gold project in Canada's Nunavut Territory, to reduce the capital spending burden. Management had recently announced curtailment of expenditure on the high cost project. The transaction may take several months, but it indicates the intent of the management to keep the risks under control. The debt has been increasing during the recent quarters, and stands at $950 million as on Sep 30. The cash has also declined significantly. This is a bit of a concern. So it is imperative for the company to keep its cost reduction efforts going. Meanwhile, the stock has done well after the earnings release, and the volumes have also been high. The guidance for 2013 production was increased to 1,060,000 ounces of gold, and the all-in sustaining costs in 2013 are also expected to be lower ($1025 per ounce) than what was previously guided by the management. The cash costs are also expected to be lower ($690) than anticipated. The recovery in gold prices has improved the sentiments slightly, but it is not sure that the correction is over. The entire sector has been extremely volatile on the back of the ups and downs in the prices of the precious metals. However, the rebound has improved things a bit, and there are signs from other companies which indicate increasing confidence of managements. Pershing Gold (PGLC), a development stage company, recently announced that it had taken steps to start production as per schedule. For Agnico, the dividend yield is around 2.9%, and the expected reduction in production costs is likely to improve the bottom-line. The company reported a net income of $46.8 million in the first nine months of 2013 compared to $228.1 million in 2012. Though the net income has fallen, the company remains in profit even on ttm basis.