Agnico-Eagle Worth Its Wait

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I'd venture to guess that "I didn't do it" has to be among the most commonly told fibs on the planet.

If gold miner Agnico-Eagle (NYSE: AEM) were to say that, though, after careful review of the evidence I would have to agree. Agnico missed analyst expectations for non-GAAP numbers for the third quarter by $0.02. The company reported pretty dismal earnings of $0.10 per share in GAAP earnings, which even included some one-time gains. More disappointing still was the year-over-year reduction in cash from operations despite higher gold prices and increased gold production. Given the dreary numbers, Fools may be surprised to learn that I hope Agnico-Eagle doesn't change a thing. Keep up the good work, people!

With gold spending a surprising amount of time below $800, I fully expected this third quarter to be a challenging one. Megaminer Barrick Gold (NYSE: ABX) also missed expectations, and Newmont Mining's (NYSE: NEM) production costs rose to $480 per ounce.

Higher costs have been a common theme as the prices for base metals like zinc and lead -- which typically lessen the costs of gold production through byproduct accounting -- have fallen precipitously. This zinc effect put a major strain on Agnico's second-quarter results, too, and has affected diversified miners like Teck Cominco (NYSE: TCK). Yamana Gold (NYSE: AUY), for its part, has its fate linked somewhat with that of copper. As with gold prices, Agnico has no control over price volatility in byproduct metals, but Fools would love for zinc to mount a recovery in time for far greater gold production in the company's medium-term pipeline.

Agnico-Eagle raised gold production by 23% over the year-ago quarter as the new Goldex mine began commercial production and the Kittila mine in Finland is deep into its commissioning. Agnico paired this increased production with an impressive cash cost of $240 per ounce -- half that just reported by Newmont. As Kittila begins to hit its stride, Agnico expects record gold production in the fourth quarter.

To be sure, Agnico lost some money on investments during the quarter. Meanwhile, the company ended up with a $40 million gain and 760,000 shares of Goldcorp (NYSE: GG) when that company purchased a small exploration company in which Agnico held a sizable stake.

While we wait for gold and zinc prices to go back up, my only message to Agnico-Eagle is, again: Keep up the good work.

Further Foolishness:

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• Yawanna have Yamana?
• 700 billion reasons to own gold