October 27, 2011 / 7:45 PM / 7 years ago

Agnico warns on Meadowbank output, shares slide

* Exec says higher grade ore not available until H2 2012

* Q3 output at Meadowbank down 16.3 pct on lower grade

* Shares down 5.7 pct to C$42.49

Oct 27 (Reuters) - Agnico Eagle Mines (AEM.TO) warned on Thursday that efforts to access higher grade ore at its Meadowbank mine in the Canadian Arctic would be delayed until at least the second half of 2012, sending its shares down 5.7 percent.

The company had hoped to boost output at the mine in the second-half of 2011. Operations at the site had already been hurt earlier this year by a kitchen fire that crippled staffing in the second quarter.

But the mine underperformed in the third quarter as site costs rose above budget and lower ore grades hurt production. In a conference call on Thursday, a company executive said work to strip waste in the mine was behind schedule.

“As a result, that higher grade ore will not be available to us (in the fourth quarter),” he said. “It will be available to us perhaps in the second half of next year.”

Agnico shares fell C$2.56 to C$42.49 on Thursday afternoon on the Toronto Stock Exchange.

Gold output from Meadowbank fell 16.3 percent to 78,141 ounces in the third quarter, while cash costs rose 54 percent to $1,033 per ounce.

On Wednesday, Agnico reported a third-quarter net loss, as its results were hurt by a large charge related to the writeoff of its investment in the Goldex mine in Quebec. [ID:nN1E79P1F2]

The company cut its gold production forecast for the year and raised its average operating cost outlook, due to the loss of the relatively low-cost Goldex mine.

However, Agnico said preliminary drilling at the Goldex site so far indicates that ground instability at the operation may be less serious than previously thought.

It now expects total 2011 gold production of 1.01 million ounces, down from a prior forecast of 1.08 million ounces. Average cash costs per ounce in 2011 are now expected to be $575, well above the prior view of $495.

$1=$0.99 Canadian Reporting by Julie Gordon; editing by Rob Wilson

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