Agnico halts Quebec mine operations; stock tumbles

Wed Oct 19, 2011 6:54pm EDT
 
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By Euan Rocha

TORONTO (Reuters) - Agnico-Eagle is suspending operations at its Goldex mine at Val d'Or, Quebec, indefinitely because of water inflow and ground instability, the Canadian gold miner said Wednesday, sending its shares sharply lower.

Toronto-based Agnico will write-off its investment in Goldex, resulting in a pretax third-quarter charge of about $260 million. On an after-tax basis, the charge will be about $170 million, or $1 a share, the company said.

The write-off prompted analysts at Credit Suisse and Macquarie to downgrade the stock, while analysts at a number of other brokerage firms lowered their price targets on Agnico-Eagle shares.

Dahlman Rose analyst Adam Graf, in a note to clients, said Goldex accounts for roughly 13 percent of Agnico's net asset value and about 14 percent of next year's gold production.

"This would appear to be a major blow to Agnico-Eagle," Graf said. "While Goldex is only a minority of annual production and value, it is nonetheless quite significant."

Both Agnico's Canadian and U.S.-listed shares plummeted on the announcement. Its Toronto-listed shares fell 19.1 percent to C$46.89 in afternoon trading, while its New York-listed shares were down 19.3 percent at $46.09.

SAFETY HAZARD

Agnico Chief Executive Sean Boyd, on a conference call, stressed that the move to halt operations was the right decision in light of the safety hazard the ground instability posed to its employees.   Continued...

 
<p>An aerial view of Agnico-Eagle's Goldex mine in Val d'Or, Quebec. REUTERS/Handout</p>