February 27, 2012 / 11:24 PM / 5 years ago

Agnico sees new production goals as more realistic

TORONTO, Feb 27 (Reuters) - Agnico-Eagle, which has seen its share price tumble following setbacks at key mines, has now set more realistic targets in a move to rebuild investor confidence in the Canadian gold miner, Chief Executive Sean Boyd said on Monday.

"What we have put together is solid achievable results, based on the risk and understanding of our deposits," said Boyd, while addressing a gathering of investors at the BMO Global Metals and Mining Conference in Hollywood, Florida.

Earlier this month, Toronto-based Agnico forecast 2012 gold output in the range of 875,000 to 950,000 ounces. Total cash costs per ounce are expected to be in the range of $690 to $750. Output in 2013 is seen rising to about 990,000 ounces, while 2014 output is expected to be about 1.06 million.

"In the past, the focus was on getting input from the mine managers. Senior operating personnel would then essentially set a stretch target and drive those managers to produce up to that target," said Boyd.

"We had instances, when working on that basis, we fell 5 or 10 percent short on that target. We still beat the original expectations for the site, but we weren't meeting the market expectations. We've totally turned that around," he said, adding that production so far this year has remained in line with Agnico's expectations.

Boyd's comments came, shortly after both RBC Capital Markets and GMP Securities trimmed their price targets on the company's shares.

"It is clear to us that the company seeks to re-build investor confidence by under-promising and over-delivering on upcoming operating results," RBC analyst Stephen Walker wrote in a note to clients.

Last October, Agnico was forced to write off its investment in the Goldex project in Quebec, after the mine was shut down due to water inflow and ground stability issues that made operating there unsafe. Earlier this month it booked a partial writedown on the value of its Meadowbank mine in the Canadian Arctic after being forced to alter its mine plan due to lower than expected ore grades.

Agnico's share price has fallen almost 50 percent over the last 12 months, largely due to the setbacks at both mines.

Boyd though remains confident that production growth from its Kittila mine in Finland and its long-running LaRonde mine in Quebec will drive results going forward.

"Looking beyond the challenges we had at Goldex and looking beyond the challenges we had at Meadowbank, as we move forward into 2012, we actually set the basis in 2011 to see a better operating performance at four of our five mines," said Boyd.

"We no doubt had a difficult year," he said. "But the strategy does not change, the tactics may change, but the strategy stays the same."

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