Jim:        It is always a good idea to keep some gold in your portfolio… as insurance against inflation and economic chaos… the trouble is figuring out how to own it… do you buy the stock of a gold miner?… maybe the ETF, like SPDR Gold ETF (GLD), that tracks the price of gold?… maybe actual gold bouillon… which you pay extra to store in a depository bank… in Getting Back To Even, I tell you that it is usually a good idea to stick with the GLD, the ETF… over the gold miners for straight exposure to gold… why?… Because gold miners can have all sorts of problems that eat into the companies earnings… but have nothing to do with the price of the precious metal… the GLD tracks the price of gold… it is never going to be hit directly with higher cash costs or mine shut downs or delays in construction or production short falls… but a gold miner, can get hit with any of these problems.

And it is just my luck that the gold miner that I have recommended about all others, Agnico-Eagle Mines Ltd. (AEM), was actually hit with all of them in the quarter it reported on Wednesday… this quarter was a text book case of how a gold miner can do badly even when the price of the commodity is sky high… it makes what they went thru in “The Treasure of the Sierra Madre” look like a joy ride… since the last time that I featured Agnico-Eagle on the show on July 29th, when it was at $52... the stock is up about 4.3%… now the GLD is up 14% over the same period… so the numbers say stick with the ETF… although this stock is up so much more than the GLD.

What went wrong here?.. the company lost .02 cents per share… the street was looking for .21 cents earnings… it produced 30,000 fewer ounces than expected… it lowered its production guidance for the year.. its cash costs came in $449 an ounce… almost double what many were expecting… its Lappa Mine, Agnico-Eagle is facing dilution issues… it has to remove more rock relative to the amount of gold that it extracted… and that is causing lower production and higher cash costs… although, since the end of the quarter this problem has declined… at its Kittila Mine, Agnico-Eagle had a massive shut down.. the mine was shut for 22 days as the company had to make repairs at its mill… faced a 7 day shut down at its Larenda Mine, for maintenance upgrades… the company also delayed the start up of its Pinos Altos Mine, which was expected to happen the third quarter… but now looks like it will come near the very end of the year because it is taking Agnico-Eagle longer than expected to set up its filter presses.

And at the companies Gold X Mine, management decided to go thru a lower grade portion of the mine during the quarter… which increased cash costs… the problem is over… they switched back to a higher grade in October… but you see why all of this makes us uneasy… if all of these problems could hit Agnico-Eagle, one of the best run gold miners out there… all during the same darn quarter… how can anyone own a gold miner and still sleep at night?… isn’t it better to stick with the GLD which will never get hit by these issues?… rather than take chances with a company that actually mines gold?… or am I jumping the gun?… maybe things have gotten as difficult as they can for Agnico-Eagle… and it is all good news and ramping production from here on out… that is what I want to ask Sean Boyd, the CEO of Agnico-Eagle Mines Ltd. (AEM)… Mr. Boyd, welcome back to Mad Money.

Jim:      Sean:    Thanks Jim.

Jim:    Mr. Boyd, killed people here. I got this wrong and I want to know whether it can be straightened out. Because this is really one of the worst quarters that I have seen from a company that I have had on my show.

Sean:    When you look at the issues, a lot of them when you went thru them, relate to start up and commissioning. There is no fatal flaws in any of these deposits. Simply dealing with things relating to start up. I think, as you indicated, things happened over a very short period of time. We have made improvements in almost all of the issues that you described to position us for the fourth quarter. Just beginning back to your argument, GLD vs. gold company. There was some recent research put out by UBS which looked at 20, 15, and 5 time horizons for selected gold stocks vs. gold vs. major stock indices and the good quality gold companies did well over all of those time horizons. And beat gold. And beat the major stock indices. So I think that if you get the right gold stock, you will do better than the GLD.

Jim:    I always thought you were better than everyone else. I never thought that this could happen all at once. I put my trust in you as the best gold executive in North America.

Sean:    Well, I think getting back to that 20 year time horizon, 15, 10, 5 year time horizon. We have outperformed all of the senior gold companies. So when you look at this and try to pull it in context, and I appreciate the opportunity to be able to do that, these are start up issues. We have resolved most of them. We are building three mines, or commissioning three mines, in a very short period of time. We are disappointed. But there is no need to change the strategy. There is no need to change and do things differently than what we have been doing in the past. I think the investment case that you have been making over the last couple of years with respect to good quality gold companies holds true. Production in the 4th quarter should be up above 40% over where it was in the 3rd quarter. That looks after all of your cost. Unit cost issues, as we move into 2010, although we lowered our guidance, we did not make any changes to our internal targets. All we have done is put in a cushion there. We are commissioning a big new mine in the Canadian Arctic in January. It is not an issue of mining. We will have significant tonnage stock piled. So we have just decided, based on our rough start ups at a few of these mines, that we should make that cushion. And we will have no changes beyond 2010. So that growth is maintained all the way up thru 2014.

Jim:    Why add still one more mine? To me it just seems that you have so much on your plate trying to ramp up all of these other mines. Why are you risking it? Why are you risking coming on the show and making the promise? And then it could just be bad. I mean, you could hurt people here.

Sean:    Well, what we have done is this mine has been under construction for a couple of years. So we are very close and almost complete with construction here. So what we are saying, and we were saying with our numbers last week, is that we have built in a contingency for that. Even with that contingency, the growth is still dramatic. We have worked thru a lot of these start up issues now. As we have moved thru October and into November.

Jim:    One last question, I liked you guys because you were the lowest cost producer. You are no longer that by a mile. Are you going to be able to get back?

Sean:    Well, it is all a function of the denominator. And as production goes up, your unit cost on a per ounce basis will drop. And we will still be well below the industry average as we move thru 2010.

Jim:    Look, I am sorry, I am disappointed. You know I bank with you. I really hope that next quarter will be a better one.

Sean:    Thank you.

Jim:    Okay, thank you very much. Mr. Boyd of Agnico-Eagle Mines Ltd. (AEM).

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Jim's comments AFTER the interview:     No comments after the interview.