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Agnico Eagle reports solid Q2 results, hikes guidance

Agnico Eagle Mines (NYSE, TSX: AEM) reported on Wednesday 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 $105.3 million or $0.43 per share, compared to $27.8 million or $0.12 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 $16.0 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 $44.3 million or $0.18 per share — beating analyst estimates of $0.15 per share and representing a 50% improvement from a year earlier.

The company has also raised its 2020 production guidance to between 1.68 million to 1.73 million ounces

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,” CEO Sean Boyd commented 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 ounces (versus previous guidance of 1.63 million to 1.73 million ounces), while guidance for total cash costs and AISC remains unchanged at $740 to $790 per ounce and $1,025 to $1,075 per ounce, 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 ounces, respectively.

Agnico expects gold production to ramp up in the second half of 2020 and average approximately 480,000 to 500,000 ounces 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.