The Golden Eagle Has Landed

Maybe it's waiting for a field mouse to emerge from its den, or perhaps just enjoying the shade of a big oak tree, but Canada's golden eagle has definitely touched ground for the time being. Thankfully, we actually know the causes for the raptor's respite, so let's jump in to assess the damage.

Gold miner Agnico-Eagle (NYSE: AEM  ) reported a 78% drop in second-quarter earnings, to $8.3 million. Zinc was the primary culprit, with a 56% decrease in the realized price. Pouring salt on investors' wounds, Agnico-Eagle also announced delays to the projected commissioning of two upcoming gold mines, revising development cost estimates substantially upward.

Due to delays in equipment deliveries and mechanical installations, commencement of operations at the Kittila mine in Finland has been revised from September to sometime in the fourth quarter. The new Goldex mine is operational, but its ramp-up to commercial production has also been delayed. Backlogs for mining equipment from major suppliers like Terex (NYSE: TEX  ) and Bucyrus (NYSE: BUCY  ) are challenging mine-development schedules throughout the industry.

Alongside these delays, cost increases both for development and operation of mines are heralding a new reality for miners worldwide. Agnico-Eagle revealed that costs could trump projections by 40% through 2010. Recent revelations from competitors like Gold Fields (NYSE: GFI  ) and Newmont Mining (NYSE: NEM  ) establish that Agnico-Eagle is not alone in this struggle. Fellow Canadian miner Barrick Gold (NYSE: ABX  ) has even announced the purchase of an oil company to rein in costs.

Like my Foolish colleague David Smith's take on Freeport McMoRan's (NYSE: FCX  ) earnings miss -- and despite the near-term bumps -- I continue to view Agnico-Eagle as a first-rate gold producer with excellent long-term earnings growth potential.

Further Foolishness:

The "Gold" tag within the Foolish universe of Motley Fool CAPS lists 85 companies. Join the CAPS community to separate Foolish picks from fool's gold. It's free and fun!

The Fool owns shares of Terex. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Agnico-Eagle, Freeport McMoRan, and Gold Fields. The Motley Fool has a 24-karat disclosure policy.


Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 693207, ~/Articles/ArticleHandler.aspx, 11/25/2014 4:24:56 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement