Agnico-Eagle Mines Ltd. (AEM), a gold miner with operations in Mexico, Canada and Finland, said it’s “realistic” to expect prices of the precious metal will rise to as much as $1,800 an ounce within the next 12 months.
Gold prices have probably bottomed and will increase because the fundamentals in the market haven’t changed, Sean Boyd, chief executive officer of the Toronto-based company, said in a telephone interview yesterday. Central-bank purchases and continued economic stimulus programs by governments will support gold, Boyd said.
Gold futures in New York have declined 12 percent this year after 12 consecutive annual increases in which the metal rose more than sixfold. Prices slipped into a bear market last week after falling more than 20 percent from a record closing price of $1,891.90 an ounce in August 2011. Gold reached a two-year intraday low of $1,321.50 on April 16.
The drop was an “overreaction,” Boyd said in the interview.
“We see this as a speculative move where traders quite smartly and astutely took advantage of an opportunity and used the paper market to make a great trade,” he said. “Within the next 12 months we could see ourselves back in that $1,700 to $1,800 range, I think that’s very realistic.”
Boyd said the company is considering further investments in exploration and development companies and would look at a bigger deal if it found something attractive. Lower metals prices and weak equity valuations have left so-called junior companies starved of capital, he said.
Agnico-Eagle said this month it agreed to buy 10 percent in both Vancouver-based Kootenay Silver Inc. (KTN) and Toronto-based Sulliden Gold Corp., as well as warrants that entitle it to increase its holdings. Agnico-Eagle is looking at similar transactions now, Boyd said.
“It’s an opportune time, it’s a receptive group, they are more open to ideas,” he said. “We see this as a time of opportunity, we’re not going to sit on our hands.”
Agnico-Eagle yesterday reported first-quarter net income fell to $23.9 million, or 14 cents a share, from $78.6 million, or 46 cents, a year earlier. Earnings excluding a stock-option expense and other one-time items were 31 cents a share, matching the average of 18 analysts’ estimates compiled by Bloomberg.
The company said it still forecasts production of 970,000 to 1.01 million ounces of gold this year. The forecast for so- called cash costs was increased to $735 to $785 an ounce, from a Feb. 13 range of $700 to $750.
Agnico-Eagle fell 2.4 percent to C$32.83 at 10:40 a.m. in Toronto. The shares have declined 37 percent this year.
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