Agnico Eagle Mines: Stock Weakness Offers A Good Opportunity

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A lump of golden connected a chromatic floor


Part I - Introduction

Agnico Eagle Mines Limited (NYSE: AEM) is 1 of nan preferred semipermanent golden miners I person covered quarterly connected Seeking Alpha since 2014. The institution reported its fourth-quarter 2022 and FY22 results connected February 16, 2023.

Note: This article is an update of my article published connected October 27, 2022.

As a reminder, connected February 8, 2022, Agnico Eagle and Kirkland Lake Gold announced nan completion of nan merger of equals transaction.

Also, connected November 14, 2022, Agnico Eagle and Pan American Silver (PAAS) agreed pinch Yamana Gold (AUY) to acquire each AUY assets.

Under nan Binding Offer, each Yamana Share would beryllium exchanged for astir US$1.04 successful cash, 0.1598 Pan American Shares and 0.0376 Agnico Eagle Shares, for an aggregate worth of US$5.02 per Yamana Share. In addition, each outstanding restricted banal units of Yamana will beryllium satisfied successful cash.

The Arrangement would adjacent precocious successful nan first 4th of 2023.

At closing, existing Pan American and Yamana shareholders would ain astir 58% and 42% of Pan American, respectively. Similarly, astatine closing, existing Agnico Eagle and Yamana shareholders would ain astir 93% and 7% of Agnico Eagle, respectively.

Note: On January 31, 2023, Pan American and Yamana shareholders overwhelmingly approved nan Yamana Transaction astatine respective typical meetings of shareholders. The Yamana Transaction is expected to adjacent successful March 2023.

Following closing, nan Company will ain 100% of nan Canadian Malartic mine, 100% of nan Wasamac task located successful nan Abitibi region of Quebec, and respective different exploration properties successful Ontario and Manitoba.

Canadian Malartic produced 86,439 Au Oz successful 4Q22 (50%).


AEM Map Presentation (AEM's astir caller presentation)

1 - 4Q22 and FY22 results snapshot

AEM posted a nett income of $205.01 cardinal successful 4Q22, aliases $0.45 per diluted share, compared pinch $79.64 million, aliases $0.17, successful 3Q22. Adjusted nett income was $0.41 per share, and operating rate travel was $0.84 per share.

The institution generated revenues of $1,384.72 cardinal this quarter, good complete nan $951.53 cardinal (restated) successful 4Q21. Revenues were down 4.5% sequentially.

Production successful nan 4th fourth of 2022 was 799,438 Au ounces supra nan 502,932 Au ounces produced past year. All-in-sustaining costs ("AISC") per ounce was $1,231, a grounds precocious for nan company, arsenic we will spot later. The costs summation is expected to impact 2023, but will alteration successful 2024 and 2025. The institution said:

The expected costs increases successful 2023 are mostly related to inflationary pressures connected labour, electricity, substance and consumables. The institution expects immoderate easing connected input costs to hap later successful 2023 and, mixed pinch accrued golden production, portion costs are expected to beryllium little successful 2024 and 2025,

Total payable golden accumulation successful 2022 was 3,280,731 Au ounces (including Kirkland Lake acquisition) astatine accumulation costs per ounce of $821, full rate costs per ounce of $780, and AISC per ounce of $1,090. Those numbers were successful statement pinch nan mid-point of 2022 accumulation guidance and somewhat supra nan apical extremity of nan costs guidance announced successful February 2022.

Agnico Eagle indicated 2023-2025 Guidance, including nan caller Canadian Malartic information of Yamana Gold, of fantabulous and accordant accumulation for nan adjacent 3 years, going from 3,340K Au ounces successful 2023 to 3,500K Au ounces successful 2025.


AEM 3 years guidance (AEM Press release)

Also, Agnico Eagle Mines Limited reported that its golden mineral reserves accrued by 9% to a grounds level of 48.7 Au Moz, chiefly owed to additions astatine Detour Lake and Micassa mines, arsenic good arsenic nan successful conversion of mineral resources astatine respective different operations. Those reserves will get higher pinch nan Yamana Gold acquisition. In nan property release:

Gold Mineral Reserves Increase 9% to Record 48.7 Moz astatine Year-End 2022 Driven by Drilling Success astatine Detour Lake, Replacement astatine Meliadine and First Declaration of Mineral Reserves astatine nan Odyssey Project

Finally, Agnico Eagle reported that its Board of Directors had declared a quarterly rate dividend of $0.40 per communal stock successful 4Q22, aliases a output of 3.55%.

2 - Stock performance

Agnico Eagle, Newmont (NEM), and Barrick Gold (GOLD) person been my preferred agelong golden miners for years.

As shown below, AEM is down 14% connected a one-year ground and has somewhat outperformed nan group, including nan VanEck Gold miners ETF (GDX).

ChartData by YCharts

Agnico Eagle presently produces golden from 12 mines pinch specifications below:


AEM Quarterly accumulation 3Q22 versus 4Q22 (Fun Trading)

Detour Lake, Macassa, and Fosterville mines are included successful nan floor plan supra and correspond nan 3rd full 4th production.

The task pipeline is vital, particularly pinch Detour Lake, Odyssey, and Hope Bay.

3 - Investment thesis

Agnico Eagle Mines Limited is possibly nan champion golden miner that we tin find. The banal has been falling accelerated recently, not because of an intrinsic hidden weakness but chiefly because of nan FED action.

The CPI number was higher than expected; consequently, nan golden value will struggle until H1 2023 aliases until nan FED signals a pause. Furthermore, nan U.S. dollar spot is present to enactment for rather a while, adding much unit connected gold.

Thus, arsenic I person said successful my preceding articles, I urge accumulating AEM connected immoderate weakness for nan agelong term, arsenic is nan lawsuit now.

I americium not expecting a coagulated uptrend unless golden turns highly bullish and tin transverse $1,900 per ounce again, and it is not apt for nan adjacent fewer months.


AEM 1Year floor plan Au Ag Cu (Fun Trading StockCharts)

Thus, trading short-term LIFO astatine a minimum of 40% of your AEM position is crucial.

Agnico Eagle - Financials and Production history until 4Q22 - The Raw Numbers

Agnico Eagle 4Q21 1Q22 2Q22 3Q22 4Q22
Total Revenues successful $ Million 949.1 1,325.7 1,581.1 1,449.7 1,384.7
Net Income successful $ Million 101.1 109.8 275.9 79.6 205.0
EBITDA $ Million 388.4 458.0 747.7 518.8 568.6*
EPS diluted successful $/share 0.41 0.28 0.60 0.17 0.45
Cash from operations successful $ Million 261.7 507.4 633.3 575.4 380.5
Capital Expenditure successful $ Million 236.9 293.2 408.6 435.7 400.8
Free Cash Flow successful $ Million 24.8 214.3 224.7 139.8 -20.3
Total rate $ Billion (including equity securities) 0.19 1.06 1.02 0.82 0.66
Total indebtedness successful $ Billion 1.57 1.57 1.44 1.34 1.34
Dividends per 4th successful $/ share 0.40 0.40 0.40 0.40 0.40
Shares outstanding diluted successful millions 245.5 385.6 456.8 456.3 456.4

Source: Company filing and Fun trading.

* Estimated by Fun Trading based connected nan property merchandise only. Subject to alteration aft nan institution releases its M&A files.

Part II - Gold Production Details

1 - Gold production

Agnico Eagle had golden accumulation this quarter. Production was 799,438 Au Oz from 816,795 Au ounces nan preceding quarter.


AEM Quarterly golden accumulation history (Fun Trading)

AEM included 3 caller producing mines (Detour, Fosterville, and Macassa). The 4Q22 is nan 3rd afloat 4th of production, combining Agnico Eagle and Kirkland Lake Gold.


AEM 4Q22 accumulation per excavation (Fun Trading)

All-in sustainable costs, aliases AISC, were an mean of $1,231 per ounce successful 4Q22 compared to $1,136 successful nan prior-year period. Inflationary pressures did not help.


AEM Quarterly Gold value history (Fun Trading)

Part III - Balance Sheet Analysis

1 - Revenues of $1,384.72 cardinal successful 4Q22

Revenues were $1,384.72 million, up 31.3% compared to nan aforesaid 4th a twelvemonth agone (before revised) and down 4.5% 4th complete quarter.

The institution posted a $205.01 cardinal nett income, aliases $0.45 per diluted share, successful nan 4th fourth of 2022. Adjusted nett income was $0.41 per stock aliases $185.4 cardinal for nan 4th fourth of 2022.

Note: The 4Q21 has been revised pinch a caller gross of $951.53 million.


AEM Quarterly Revenues history (Fun Trading)

The golden value was $1,726 per ounce during nan 3rd 4th of 2022. The metallic value was $21.51 per ounce, Zinc was $1.35 per pound, and Copper was $3.72 per pound. The full rate from operating activities was $380.50 cardinal successful nan quarter, up from $232.80 past twelvemonth (please spot array above).

AEM Quarterly golden value history (Fun Trading)

2 - Free rate travel was estimated astatine a nonaccomplishment of $20.33 cardinal successful 4Q22

The trailing 12-month free rate travel ("FCF") is estimated astatine $558.40 cardinal ("TTM"), and nan free rate travel for 4Q22 was estimated astatine a nonaccomplishment of $20.33 million.


AEM Quarterly free rate travel history (Fun Trading)

3 - Net indebtedness was $683 cardinal successful 4Q22

Agnico Eagle has coagulated financials pinch a debased nett indebtedness of $683 million, down sequentially from $1,374 cardinal past year.

Agnico Eagle's indebtedness floor plan is what we want to spot for a semipermanent investment.


AEM Quarterly Cash versus indebtedness history (Fun Trading)

Agnico Eagle had full rate of $658.6 cardinal successful 4Q22 compared pinch $191.07 cardinal arsenic of December 31, 2021. Long-term indebtedness was astir $1,342.07 cardinal (including current), compared pinch $1,341.6 cardinal successful 3Q22.

Part IV - Technical Analysis and Commentary


AEM TA Chart short-term (Fun Trading StockCharts)

Note: The floor plan has been adjusted for dividends.

AEM forms a descending transmission shape pinch guidance astatine $49 and support astatine $45.6. The RSI is now 24, an oversold business pinch a bargain signal. Looking astatine RSI history, we tin spot that 26 is rather a debased number for AEM.

Descending transmission patterns are short-term bearish successful that a banal moves little wrong a descending channel, but they often shape wrong longer-term uptrends arsenic continuation patterns. The descending transmission shape is often followed by higher prices, but only aft an upside penetration of nan precocious inclination line. The banal will proceed channeling downward until it is capable to break either nan precocious aliases little inclination line.

The trading strategy I urge is to waste Agnico Eagle Mines Limited astir 40% betwixt $49 and $53.4 pinch a imaginable precocious guidance astatine $57. On nan different side, I urge buying betwixt $47.55 and $45, pinch imaginable little support astatine $40.25.

I still expect nan miners to acquisition predominant chaotic swings for nan adjacent respective months until nan Fed signals a region successful liking complaint hikes, which could hap successful 3Q23 aliases a spot later. Look astatine this play arsenic an fantabulous opportunity to add.

However, it is important to allocate a sizeable information of your finance successful Agnico Eagle Mines Limited to waste and acquisition short-term LIFO and return advantage of nan volatility. About 40% is reasonable.

Warning: The TA floor plan must beryllium updated often to beryllium relevant. It is what I americium doing successful my banal tracker. The floor plan supra has a imaginable validity of astir a week. Remember, nan TA floor plan is simply a instrumentality only to thief you adopt nan correct strategy. It is not a measurement to foresee nan future. No 1 and thing can.

Author's note: If you find worth successful this article and would for illustration to promote specified continued efforts, please click nan "Like" fastener beneath to ballot of support. Thanks.

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