The Golden Eagle Has Landed

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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:

• Teck Cominco knows about the zinc effect.
• Agnico-Eagle made a strategic investment last month.
• A weaker U.S. dollar is driving the gold bull.