Currency in USD
Last close As at 03/02/2023
USD57.20
▲ 1.22 (2.18%)
Market capitalisation
USD26,080m
Research: Metals & Mining
Agnico Eagle Mines (AEM) reported a strong set of Q3 results, delivering gold production of 816,795oz at competitive cash and all-in sustaining costs (AISC) of US$779/oz and US$1,106/oz, respectively, notwithstanding cost pressures, constraints regarding workforce availability and the lingering aftermath of COVID-19. Material mark-to-market losses on foreign exchange and oil hedges of US$134.5m distorted headline earnings. However, excluding these non-cash, exceptional items, adjusted net income was US$235.4m or US$0.52/share, compared to US$119.0m or US$0.49/share in Q321. The quarterly dividend was held at US$0.40/share.
Agnico Eagle Mines |
Moving forward during difficult times
Metals & mining |
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1 November 2022 |
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Agnico Eagle Mines is a research client of Edison Investment Research Limited |
Agnico Eagle Mines (AEM) reported a strong set of Q3 results, delivering gold production of 816,795oz at competitive cash and all-in sustaining costs (AISC) of US$779/oz and US$1,106/oz, respectively, notwithstanding cost pressures, constraints regarding workforce availability and the lingering aftermath of COVID-19. Material mark-to-market losses on foreign exchange and oil hedges of US$134.5m distorted headline earnings. However, excluding these non-cash, exceptional items, adjusted net income was US$235.4m or US$0.52/share, compared to US$119.0m or US$0.49/share in Q321. The quarterly dividend was held at US$0.40/share.
A strong Q3 battled looming inflationary costs
AEM reiterated its FY22 production and cost guidance of 3.2–3.4Moz of payable gold, US$725–775/oz total cash cost and US$1,000–1,050/oz AISC. Unsurprisingly however, AEM now foresees costs coming in towards the top end of the range because of global inflationary pressure on items such as energy, cyanide and steel, where price increases so far this year have exceeded AEM’s FY22 5–7% general inflation expectations and seem likely to persist into FY23.
Projects progressing
AEM’s scope of operations continues to impress, with developments across three projects and several positive exploration results. The Amaruq underground project was completed on schedule and on budget with commercial production achieved on 1 August. Construction at the Odyssey project remains on schedule with shaft sinking expected to commence in early 2023. At the same time, the Detour Lake project continues to progress and is set to increase mill throughput to 28Mtpa.
Strength in numbers
AEM is well structured to weather the storm, leveraging synergies following the merger with Kirkland Lake Gold and with continued strong operational performances. Consensus earnings forecasts for FY22 appear consistent with both year-to-date results and the current gold price.
Valuation: Dividend yield beating the pack
Consensus estimates
Source: company data, Refinitiv. Note: PBT and EPS are normalised. |
AEM has traditionally commanded a premium valuation relative to the sector, consistent with both its size and the low-risk jurisdictions of its operations. On most measures, it continues to command this premium rating. Also notable is its dividend yield, which is comfortably above the sector average and also the S&P 500.
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Research: Metals & Mining
Allkem is uniquely positioned to be one of the main beneficiaries of the favourable lithium market conditions as it boasts a healthy pipeline of advanced development projects, aiming to triple its production capacity and to expand into the higher value battery-grade products. Despite near-term economic weakness, lithium demand continues to be driven by the secular trend towards decarbonisation and growing global electric vehicle (EV) adoption. Supported by supply shortages, cost inflation and project delays, lithium prices should remain at elevated levels to incentivise new supply. Despite adding c 45% year to date, Allkem shares trade at a FY23e consensus EV/EBITDA multiple of only 5.6x versus the downstream peers’ average of 9.6x.
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