TORONTO (Reuters) - Agnico-Eagle Mines‘AEM.TO longer-term gold production outlook has not been affected by start-up problems at two of its mines, the company’s chief executive said on Thursday, adding he sees gold prices rising as high as $1,500 an ounce over the next year.
However, the gold miner’s stock fell nearly 8 percent as the market digested its weaker than expected second-quarter profit, a lower 2008 production outlook and its warning of a 40 percent jump in project costs over the next two years.
In an interview, Agnico Chief Executive Sean Boyd said the miner should produce 600,000 ounces of gold next year, rising to 1.3 million ounces in 2010 and 1.4 million in 2011 as it continues to open new mines.
Gold prices should rise to between $1,200 and $1,500 an ounce over the next 12 months, he said.
Boyd also said the company’s expansion plans would focus on further exploration near existing projects, with the hopes of expanding their reserves, although he did not rule out taking stakes in early-stage projects.
The company reported its results late on Wednesday, blaming the profit miss on weak zinc prices. Its core earnings per share were 9 cents, falling short of analyst expectations of 17 cents a share.
Agnico also cut its 2008 gold output forecast to between 300,000 and 320,000 ounces from 360,000, due to the slow ramp-up of its Goldex and Kittila mines. It also said higher input costs and currency fluctuations could force it to raise its capital spending estimate for the 2008-2010 period by 40 percent above its previous estimate of $880 million.
Just after midday on Thursday, the stock was down C$4.90, or 7.6 percent, at C$59.90 on the Toronto Stock Exchange.
In a research note, analyst Barry Allan of Research Capital Corp. cut his 12-month target on the stock to C$68 from C$71, calling the results a miss.
Boyd said the mine start-up problems were due to delays in installing a hoist at Goldex and in dealing with the complex metallurgy at Kittila.
“I’d say that’s part of the normal course of commissioning and constructing a mine,” he said.
He said the company’s profit miss was completely due to falling zinc prices and lower than expected zinc output, which the company uses to offset the costs of its gold production.
Despite the weaker earnings, UBS analyst Brian MacArthur upgraded the company’s shares to “buy” from “neutral” and raised his 12-month price target to C$82 a share from C$77, citing Agnico’s expected rapid production growth.
Reporting by Cameron French; editing by Rob Wilson