Sell Agnico-Eagles Mines

Robert Hsu, May 23, 2008

Agnico-Eagle Mines (NYSE: AEM) is a well-established Canadian gold producer with operations in Quebec and exploration and development activities in North America and Finland. I recommended Agnico-Eagle back in January because international gold demand had surged 30% in the third quarter of 2007 as many investors flocked to the natural resource for its hedging characteristics. And I expected gold to hit $1,000 per ounce this year -- I was correct in these expectations, too, as gold jumped over $1,000 per ounce in mid-March.

With gold demand high at the start of the year and my expectations of elevated prices, I wanted to take advantage of gold's popularity by buying Agnico-Eagle since it has access to new sources of gold. Its LaRonde Mine is Canada's largest gold deposit in terms of reserves. And new developments at LaRonde will extend the mine's life to 2020. The company also has four other mines under construction: Kittila in Finland, and Meadowbank, Lapa and Goldex in Canada.

Recently, though, gold prices pulled back sharply to $860 after its brief stint above $1,000 an ounce. I find the weakness in gold prices unsettling in light of the strength in crude oil, which just made a new record high this week. Now, I am not bearish on gold, but the negative momentum makes me want to take some profits in AEM.

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