AEM:CC - Agnico Eagle Mines Q2 Results Top Draw Performance

2023-07-28 11:30:57 ET

Summary

• The financial results for Q2 are excellent and guidance for the future is positive making Agnico Eagle a Strong Buy.
• The AISC/oz for future guidance throughout 2023 is expected to remain between $1,140/oz and $1,190/oz.
• Agnico Eagle is ranked highly in the industry and compares favorably to its competitors in the gold mining space.
• The performance of the underlying commodity, gold, will of course determine Agnico’s fortunes in the coming months and years.
• If I could only hold one gold miner then Agnico Eagle would be it.

Introduction

My association with Agnico Eagle Mines Limited ( AEM ) stretches back to the early 1980s so I have traded it many times. I suspect that most investors in this sector would recognize this company as a class act as it has weathered the bad times, usually paid a dividend, and grown through both organic means and also through the mergers and acquisitions route.

Despite being a fan of Agnico Eagle I have often found it to be fairly valued and my low bids were met with rejection sadly for me. However, having invested in Detour Gold Corp. (DRGDF) which was swallowed up by Kirkland Lake Gold Limited (KL) on the February 12, 2020, and rightly or wrongly I decided to hold onto this stock. Not for long though as along came the news that Agnico Eagle and Kirkland Lake had merged on the February 08, 2022. As you can see, this is an acquisition via the long road, but I have to add that I am happy to be invested in Agnico Eagle at this time as I believe the outlook for this company and its underlying commodity gold has a bright future.

Agnico Eagle Mines: Brief Description

Agnico Eagle Mines is a $25B Canadian gold mining company active in Canada, Mexico, Australia, and Finland. The Company was formed 65 years ago and has managed to pay a cash dividend every year since 1983. The dividend has been fairly small, especially throughout the tough times, which is a considerable achievement as many in this tiny sector of the market were unable to do so. Of interest today are the quarterly financial results which I will briefly cover below .

Second Quarter 2023 Highlights

These results read very well and investors will be pleased to see that Agnico Eagle has declared a quarterly dividend of $0.40 per share.

The chart below shows us that gold production on a YTD basis has increased from 1,519,000 ounces for Q2, 2022 to 1,686,000 ounces for Q2 2023. We can also see that the total cash cost for the same period has risen from $763 to $836 on a YTD basis. The AISC/oz for this quarter is $1,150/oz and for future guidance throughout 2023 it is expected to remain between $1,140/oz and $1,190/oz.

This suggests that the outlook for the cost of production is fairly stable. So if we take the higher figure of $1,190/oz and gold at say $1950/oz then we have a profit of approximately $760/oz. Now, should gold rally to $2300/oz by the end of the year then the profit would be $1110/oz or an increase of 46% over the Q2 position. As a gold bug a new all-time is a realistic possibility for me and I expect the second half of this year to be a huge one for the precious metals sector. The reasons why gold will form a new all-time will be covered in another article shortly as it is too large a subject to be included here.

Other standouts worthy of note are Record Quarterly Gold Production, various milestones achieved such as Detour Lake, Goldex and Macassa all hitting record quarterly mill throughput rates, and a solid safety performance.

The table below highlights the company's performance in terms of its strong cash flow.

Financials

Agnico has a market capitalization of $25.01B, a 52-week trading range of $36.69-$61.15, a P/E Ratio ((TTM)) of 9.96 and an EPS ((TTM)) of 5.08. The liquidity is good with an average volume of 2,408,418 shares traded per day enabling speculators to enter and exit this stock comfortably.

Taking a quick look at Seeking Alpha's Quant Ranking Agnico is ranked in Industry at 3 out of 45 which I think is fair, but as I am a long-time fan of Agnico I would place it at number 1 on the basis that if I could only hold one gold miner then Agnico would be it.

This company is quoted on both the NYSE under the ticker symbol of AEM and on the Toronto Stock Exchange under the symbol of AEM.TO.

Agnico Eagle One Year Chart

Volatility in this tiny sector of the market is par for the course as the chart below depicts. The stock price of Agnico has oscillated from a low of around $37.00 to a high $61.00.

The crossover on the MACD shows the black line heading south and may well cross the red line, which is a negative indication and a tad worrisome in the short term.

However, fundamentals trump technical analysis and a belting set of financial results suggests that this Eagle is about to fly.

You may have noticed yesterday's fall as Agnico lost 3.10% as the Gold Bugs Index (HUI) tumbled 4.06%. One possible reason could be the sudden bounce in the US Dollar which has an inverse relationship with gold, so as the US Dollar rose the price of gold comes under pressure. There are a myriad of factors that determine the price of gold and the performance of the US Dollar plays a major role, so do keep an eye on it along with inflation, and the actions of the Federal Reserve etc., as it is your hard-earned cash that it on the line.

Stock Comparison Chart

If we take a quick look at some of the company's competitors in the gold mining space, we can see that Agnico compares favorably against Newmont Corporation ( NEM ), Barrick Gold ( GOLD ) over the last year, although the capital gains for all three companies are negative.

Conclusion

The financial results for Q2 are excellent and guidance for the future is positive making Agnico a Strong Buy

The performance of the underlying commodity, gold, will of course determine Agnico's fortunes in the coming months and years

Interest rate hikes and the strength of the US Dollar represent a major threat to gold's progress and in turn may cap Agnico's progress.

For the record, I have been long physical gold and silver for a number of years and also own a portfolio of stocks in the precious metals sector including Sandstorm Gold Ltd ( SAND ), Wheaton Precious Metals Corp . ( WPM ), Agnico Eagle Mines Limited ((AEM)) and SSR Mining Inc. ( SSRM ).

Your comments are very much appreciated whether you agree with us or not, so please fire them in, and I will do my best to address each and every one of them.

Go gently.

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