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Agnico Eagle Mines: Don't Let The Selloff Fool You

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This is my in-depth study of Agnico Eagle Mines' (NYSE:AEM) Q4 2022 and full-year 2022 earnings report. We'll beryllium taking a person look astatine nan company's earnings, balance sheet, and what could beryllium successful store successful nan coming months.

The large takeaway: Despite nan beardown operational performance, Agnico Eagle Mines Limited's stock value fell complete 7% pursuing nan merchandise of its net owed to rising all-in-sustaining costs, which roseate to $1,231 per ounce. The quarterly portion costs were affected by inflationary pressures and little accumulation astatine immoderate of its operations. Agnico forecasts full rate costs per ounce and AISC per ounce to summation successful 2023 owed to expected inflationary pressures connected labor, electricity, fuel, and consumables.

However, this is not an rumor circumstantial to Agnico, arsenic different golden producers are reporting higher costs. Take Barrick Gold (GOLD), for example, which precocious reported AISC that ballooned to $1,222/oz (for nan full-year 2022).

Despite nan rising costs, Agnico had a good 4th overall, pinch beardown accumulation and exploration results, arsenic good arsenic advancement made connected its pipeline projects. The institution besides expects to summation its golden accumulation by astatine slightest 7% done 2025.

Here's a breakdown of Agnico's net and my thoughts connected nan banal here.

Summary of Agnico's Q4 2022 Earnings

Agnico Eagle Mines

Agnico Eagle Mines

Agnico Eagle Mines achieved payable golden accumulation of 799,438 ounces successful Q4 pinch an AISC of $1,231/oz. Quarterly portion costs were impacted by inflationary pressures astatine immoderate of its operations and little accumulation astatine LaRonde, Kittila, and Pinos Altos.

Despite this, nan institution had a beardown financial performance, pinch nett income of $0.45 per stock and an operating rate travel of $0.84 per share.

Agnico Eagle Mines

Agnico Eagle Mines

For nan afloat twelvemonth 2022, nan institution produced 3.13 cardinal ounces of golden astatine an AISC of $1,109/oz. The full payable golden production, including nan bequest Kirkland Lake Gold mines acquired successful February 2022, was 3,280,731 ounces astatine accumulation costs per ounce of $821, full rate costs per ounce of $780, and AISC per ounce of $1,090.

These results were successful statement pinch nan mid-point of 2022 accumulation guidance and somewhat supra nan top-end of costs guidance announced successful February 2022.

Agnico is Returning Cash to Shareholders

Agnico Eagle Mines

Agnico Eagle Mines

Agnico continues to boost shareholder returns by reducing debt, paying dividends, and buying backmost its shares.

As of December 31, 2022, Agnico's outstanding indebtedness equilibrium was reduced by $225 million, and nan institution had nary outstanding equilibrium connected its unsecured revolving slope in installments facility. The institution had disposable liquidity of astir $1.2 billion, not including nan uncommitted $600.0 cardinal accordion feature.

Agnico besides contributed to shareholder returns done its normal people issuer bid, repurchasing 1,569,620 communal shares for $69.9 cardinal successful 2022.

Finally, nan institution declared a quarterly dividend of $0.40 per share, yielding 3.5%, which is among nan highest successful nan golden mining industry, based connected nan banal value connected Friday morning.

What's successful Store for Agnico? Breaking Down 2023-25 Guidance

Agnico Eagle Mines

Agnico Eagle Mines

Agnico forecasts beardown maturation complete nan adjacent fewer years, pinch accumulation expected to emergence by astatine slightest 7% from 2022 output, reaching up to 3.6 cardinal ounces by 2025.

The company's 2023 golden accumulation forecast assumes 50% ownership of nan Canadian Malartic Mine for nan first 3 months of 2023, and past 100% ownership for nan past 9 months of nan twelvemonth pursuing its expected takeover from Yamana Gold (AUY).

Agnico past expects accumulation of betwixt 3.35 to 3.55 cardinal ounces of golden successful 2024 and 3.40 to 3.60 cardinal ounces of golden successful 2025.

Production guidance reflects little throughput astatine Kittila and Fosterville owed to permitting issues and sound restrictions, respectively. The institution says that if these issues are resolved, it expects to adhd astir 30,000 ounces of golden to nan accumulation forecast astatine Kittila and 50,000 ounces of golden astatine Fosterville successful each of 2023 and 2024.

The institution is besides evaluating nan imaginable to process ore from nan AK deposit astatine nan LZ5 mill circuit of nan LaRonde Complex, which could lend astir 20,000 to 40,000 ounces per twelvemonth to nan accumulation forecast successful 2024 and 2025. So location appears to beryllium a important upside to its accumulation forecasts.

Total rate costs per ounce successful 2023 are expected to beryllium betwixt $840 and $890, higher than nan erstwhile guidance of $725 to $775, chiefly owed to little accumulation astatine LaRonde, Fosterville, Kittila, and Pinos Altos, and expected inflationary pressures connected labor, electricity, fuel, and consumables.

However, investors should statement that it expects rate costs to diminution successful 2024 and 2025 owed to higher golden accumulation and reduced input costs (productivity improvements and invention initiatives).

All-in sustaining costs (AISC) per ounce successful 2023 are expected to beryllium betwixt $1,140 and $1,190, higher than nan erstwhile guidance of $1,000 to $1,050, but AISC per ounce is expected to diminution successful 2024 and 2025.

Agnico's M&A Potential

Agnico Eagle Mines

Agnico Eagle Mines

Agnico has a beardown equilibrium sheet, pinch complete $1 cardinal successful disposable liquidity. It's imaginable that Agnico could prosecute M&A to heighten its maturation imaginable and grow its plus base. The institution will still beryllium successful a awesome position for M&A moreover aft it completes nan takeover of nan Canadian Malartic Mine from Yamana.

It's besides worthy noting that M&A activity successful nan golden mining assemblage has been increasing, truthful Agnico whitethorn person a number of imaginable targets to consider.

M&A is heating up successful nan golden mining assemblage pursuing Newmont Mining's (NEM) takeover connection of Newcrest, which was recently rejected by nan company. And recently, B2Gold (BTG) announced a bid for nan Canadian-developer Sabina Gold & Silver (OTCQX:SGSVF).

However, immoderate acquisition would request to align pinch Agnico's strategy and beryllium accretive to shareholder value. I judge Agnico could look to get low-cost accumulation to adhd to its pipeline, possibly seeking a producing excavation aliases a improvement plus successful a top-tier jurisdiction (Canada and Australia travel to mind).

Agnico Eagle Mines: The Final Verdict

Agnico has beardown fundamentals here, including rising golden production, profitable operations, and a committedness to reducing indebtedness and returning worth to shareholders done dividends and stock buybacks. The company's equilibrium expanse is besides improving, pinch nary outstanding indebtedness connected its revolving slope in installments facility, conscionable $683 cardinal successful nett debt, and disposable liquidity of astir $1.2 billion.

While rising rate costs person led to a selloff successful nan stock, it appears that this whitethorn beryllium an overreaction. Agnico's costs are successful statement pinch different golden producers, and nan institution is taking steps to trim costs done productivity improvements and invention initiatives. Additionally, Agnico's ownership of golden mines successful favorable mining jurisdictions whitethorn little its consequence compared to its peers.

Overall, nan existent Agnico Eagle Mines Limited banal value of $45 whitethorn coming an charismatic buying opportunity for investors looking to put successful a well-run golden shaper pinch beardown fundamentals and a committedness to returning worth to shareholders. I'm maintaining my Buy rating connected Agnico Eagle Mines Limited and whitethorn look to bargain much shares successful nan adjacent future.

Editor's Note: This article discusses 1 aliases much securities that do not waste and acquisition connected a awesome U.S. exchange. Please beryllium alert of nan risks associated pinch these stocks.

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Editor: Naga



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