Currency in USD
Last close As at 26/05/2023
USD52.02
▲ −1.40 (−2.62%)
Market capitalisation
USD25,152m
Research: Metals & Mining
On an underlying basis, Agnico Eagle Mines’ (AEM’s) Q122 revenue of US$1,325.7m, EBITDA of US$583.8m, pre-tax profits of US$300.4m and adjusted net EPS of US$0.612/share were either at or above the top end of analysts’ expectations. Production (with Kirkland Lake included from 8 February) was 660,604oz at a total cash cost of US$811/oz (on a by-product basis) and an all-in sustaining cost (AISC) of US$1,079/oz. Including a full quarter’s contribution from Kirkland Lake’s mines, pro forma payable production in Q122 was 806,329oz. AEM maintained the quarterly dividend at US$0.40/share, while net debt (excluding leases) declined to US$503.7m, equivalent to leverage (net debt/[net debt + equity]) of just 3.0%.
Agnico Eagle Mines |
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3 May 2022 |
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Agnico Eagle Mines is a client of Edison Investment Research Limited |
On an underlying basis, Agnico Eagle Mines’ (AEM’s) Q122 revenue of US$1,325.7m, EBITDA of US$583.8m, pre-tax profits of US$300.4m and adjusted net EPS of US$0.612/share were either at or above the top end of analysts’ expectations. Production (with Kirkland Lake included from 8 February) was 660,604oz at a total cash cost of US$811/oz (on a by-product basis) and an all-in sustaining cost (AISC) of US$1,079/oz. Including a full quarter’s contribution from Kirkland Lake’s mines, pro forma payable production in Q122 was 806,329oz. AEM maintained the quarterly dividend at US$0.40/share, while net debt (excluding leases) declined to US$503.7m, equivalent to leverage (net debt/[net debt + equity]) of just 3.0%.
Guidance unchanged
Cost pressures at AEM were reported to be modest in Q1 owing to cost savings, long-term agreements with suppliers, existing fuel hedges and a predominantly local labour force. In the meantime, the effects of the COVID-19 pandemic are also reported to be waning. On a pro forma basis, expected gold production in FY22 remains unchanged at 3.2–3.4Moz at total cash costs of US$725–775/oz and AISC of US$1,000–1,050/oz. Similarly, the estimate for potential operational synergies remains unchanged at c US$130m pa (US$440m over five years and US$1.1bn over 10 years) as does the estimate of strategic opportunities at up to US$240m over five years and US$590m over 10 years. However, corporate G&A synergies are now expected to be up to US$200m in the first five years (cf US$145m previously) and US$400m over the next 10 years (cf US$320m previously). Estimates for total capex for FY22 remain unchanged at US$1.4bn.
ESG targets remain in focus
Following the merger with Kirkland Lake, AEM continues to have one of the lowest greenhouse gas intensities among gold miners globally and will provide an update on its climate strategy as well as publishing its 2021 sustainability report later in Q222. In the longer term, it has committed to both a net zero target for 2050 and the pathways to achieve it.
Valuation: Q1 likely the weakest of FY22’s quarters
Given that Kirkland Lake’s mines will contribute to AEM fully in Q2-Q422, FY22 consensus revenue, EPS and DPS estimates in particular appear conservative pro rata with Q122. In the meantime, it retains its premium rating in the sector, albeit to a lesser extent than previously, but offers a higher dividend yield than the average of its peers, while still being able to fund its growth plans internally.
Consensus estimates
Source: Company sources, Refinitiv. Note: PBT and EPS are normalised, excluding exceptional items. |
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Research: Investment Companies
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