(Kitco News) - The precious metals mining sector continues to defy expectations as Canada’s largest gold producer reports better-than-expected earnings Wednesday, with higher gold prices helping to offset rising production costs and lower output.
Wednesday, after North American equity markets closed, Agnico Eagle Mines (NYSE: AEM, TSX: AEM) reported adjusted net income of $1.324 billion, or $2.62 per share, for the third quarter of 2026, beating analysts’ consensus estimate of $2.56 per share. Earnings increased 21.3% from $2.16 per share reported a year earlier.
The company reported net income of $1.353 billion, or $2.67 per share, compared with $1.055 billion, or $2.10 per share, in the third quarter of 2025.
Although historically elevated gold prices continue to support the mining sector, Agnico Eagle’s latest earnings highlight growing cost pressures as higher energy prices, labour expenses and royalties threaten to erode operating margins.
The company reported an average realized gold price of $4,264 an ounce during the quarter, up 22.7% from $3,476 an ounce a year earlier.
However, higher prices were partially offset by weaker production. Agnico Eagle produced 814,012 ounces of gold, down 6.1% from 866,936 ounces a year earlier.
Meanwhile, all-in sustaining costs (AISC) rose nearly 24% to $1,648 an ounce, compared with $1,331 last year. Total cash costs increased to $1,133 an ounce from $952.
Despite these headwinds, the company generated $1.755 billion in operating cash flow and $852 million in free cash flow during the quarter.
In a statement, Ammar Al-Joundi, President and Chief Executive Officer of Agnico Eagle, said the company remains positioned to achieve its full-year targets.
"Solid operational performance contributed to strong free cash flow generation and we remain on track to achieve our full-year guidance, with production expected near the lower end of the range and costs within the range despite inflationary cost pressures," he said.
Looking ahead, Agnico Eagle maintained its 2026 production guidance of 3.3 million to 3.5 million ounces, with output expected near the lower end of the range.
The company also expects total cash costs and AISC to finish near the upper ends of their respective guidance ranges of $1,020 to $1,120 and $1,400 to $1,550 an ounce.
The weaker production outlook reflects disruptions at Canadian Malartic in Quebec, where a rock mass movement at the Barnat open pit in July forced adjustments to mining operations.
Meanwhile, inflation remains a significant challenge. The company said diesel purchases for its Nunavut operations were approximately 45% above budgeted levels, even after hedging. Diesel now represents approximately 11% of operating costs.
Consumables and supplies, accounting for approximately 30% of operating expenses, are also facing inflationary pressures of about 6%.
Nevertheless, the company continues to advance its long-term growth pipeline, including expansion projects at Canadian Malartic, Detour Lake, Upper Beaver and Hope Bay.
Agnico Eagle expects these projects to support a 20% to 30% increase in annual gold production over the next decade, potentially exceeding four million ounces in the early 2030s.
The company ended the quarter with $3.613 billion in cash and a net cash position of $3.416 billion.
Agnico Eagle also returned $478 million to shareholders through dividends and share repurchases during the quarter. At current gold prices, the company expects to return more than 50% of its free cash flow to shareholders in 2026, subject to operational requirements.
