February 18, 2009 / 9:20 PM / in 9 years

UPDATE 2-Agnico-Eagle hit by higher costs, lower prices

(Adds details, background; in U.S. dollars, unless noted)

By Cameron French

TORONTO, Feb 18 (Reuters) -Agnico-Eagle Mines (AEM.TO) said on Wednesday its fourth-quarter profit fell by two-thirds, as higher mining costs and plunging base metal prices offset the impact of higher gold production.

The Canadian gold producer earned $21.9 million, or 15 cents a share, in the quarter ended Dec. 31. That was down from $65.2 million, or 46 cents as hare, in the year-before period.

Stripping out non-cash currency translation gain, a tax recovery, and a non-cash writedown of investments, the company earned nil per share.

That just missed expectations of a profit of 1 cent a share from analysts polled by Thomson Reuters.

Gold production rose 49 percent to 89,630 ounces, while cash costs soared to $463 an ounce from $184, due in part to the impact of plunging copper and zinc prices, which Agnico produces as a byproduct and uses to offset gold mining costs.

Taking out the impact of the lower base metal prices, including downward revisions to sales recorded in the third quarter, but finalized in the fourth quarter at lower prices, cash costs would have been below $300 an ounce.

Also hurting results was a retreat in realized gold prices to $789 an ounce from $895.

Factoring in the price revisions, realized copper prices were actually negative during the quarter, while zinc prices fell 71 percent.

Gold XAU= has rallied into the first quarter, and was around $985 an ounce on Wednesday.

Toronto-based Agnico, which operates mines in Quebec and Finland, said its gold reserves rose 8 percent during the quarter, and it set a target of 20 million to 21 million ounces by year-end 2010.

Yearly production is expected rise to 1.2 million ounces by 2010.

Asked about the company's growth plans past 2010, Chief Executive Sean Boyd said the company expected to wring more reserves out of its current properties.

"We don't have to make a major acquisition to grow the company," Boyd said in a conference call.

Capital costs are expected to total $450 million this year.

Agnico shares have more than doubled since the end of October, and closed at C$67.30 on Wednesday, down C$1.30 or 1.9 percent on the Toronto Stock Exchange. The news was released after markets closed.

$1=$1.26 Canadian Reporting by Cameron French; editing by Rob Wilson

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