Agnico Eagle Mines — Showing its metal in Q3

Agnico Eagle Mines (NYSE: AEM)

Last close As at 12/10/2024

USD79.42

1.25 (1.60%)

Market capitalisation

USD39,775m

More on this equity

Research: Metals & Mining

Agnico Eagle Mines — Showing its metal in Q3

Relative to the prior quarter (Q220), Agnico Eagle Mines’ (AEM) production in Q3 increased by 48.8% to 492.7oz and its adjusted net income by 111.4%. While this may seem impressive enough, adjusted net income actually increased by 327.0%, to 78.1c/share, as the company leveraged a 76.0% quarterly increase in revenues against a 47.2% increase in production costs to result in an 8.2pp uplift in gross margins. AEM also benefited from a relatively low effective tax rate of 33.1% in Q3. As a consequence of both its performance in Q3 and the expectation of a similar one in Q4, the company increased its quarterly dividend by 75%, from 20c/share to 35c/share.

Lord Ashbourne

Written by

Lord Ashbourne

Director of Content, Mining

Metals & Mining

Agnico Eagle Mines

Showing its metal in Q3

Metals & mining

QuickView

30 October 2020

Price

US$76.13

Market cap

US$18.4bn

C$1.3314/US$

Share price graph

Share details

Code

AEM

Listing

TSX

Shares in issue

242.3m

Business description

Agnico Eagle Mines operates eight mines located in Canada, Finland and Mexico and is among the top 15 largest gold mining companies in the world. It seeks to build a high-quality business that generates superior long-term returns for shareholders and contributes to the communities in which it operates.

Bull

Low-risk mining jurisdictions in Finland, Nunavut, Abitibi and Mexico.

Management focused on costs, returns and profits rather than output growth.

Relative weakness of the Canadian dollar vs the US dollar compared to prior periods of elevated precious metals prices.

Bear

Exposure to Canadian weather, which is not always clement.

AEM has no gold hedges; however, it does hedge portions of its Canadian dollar, Mexican peso, euro and diesel exposure.

Ongoing risk of future COVID-19 related disruptions.

Analyst

Charles Gibson

+44 (0)20 3077 57 24

Relative to the prior quarter (Q220), Agnico Eagle Mines’ (AEM) production in Q3 increased by 48.8% to 492.7oz and its adjusted net income by 111.4%. While this may seem impressive enough, adjusted net income actually increased by 327.0%, to 78.1c/share, as the company leveraged a 76.0% quarterly increase in revenues against a 47.2% increase in production costs to result in an 8.2pp uplift in gross margins. AEM also benefited from a relatively low effective tax rate of 33.1% in Q3. As a consequence of both its performance in Q3 and the expectation of a similar one in Q4, the company increased its quarterly dividend by 75%, from 20c/share to 35c/share.

Operational records set; costs flat to lower

After seven of its eight mines were variously suspended in Q220 in response to COVID-19, operations rebounded strongly in Q3, with new performance records being set at Canadian Malartic, Goldex, Meliadine and LaRonde Zone 5. Unit costs were flat to lower, with the group recording an average cost of production of US$865/oz in Q3 (cf US$854/oz in Q220), an average total cash cost of US$764/oz (cf US$825/oz) and an average all-in sustaining cost (AISC) of US$1,016/oz (cf US$1,142/oz). At the same time, ongoing exploration success at East Gouldie at Canadian Malartic is expected to lead to a significant increase in its mineral resource estimate by the year end, which, in turn, should add to its mine life.

Cost and production outlook unchanged

AEM has left its production and cost guidance unchanged for FY20, at 1.68–1.73Moz at total cash costs and AISC of US$740–790/oz and US$1,025–1,075/oz, respectively. Gold production guidance for FY21 and FY22 also remains unchanged at 2.05Moz and 2.10Moz, respectively. Only AEM’s estimate of capex in FY20 has increased, by c 5.8%, from US$690m to US$720–740m, owing to accelerated development plans at Kittila and Amaruq and advanced procurement at Meliadine.

Valuation: Consensus estimates within a wide range

Consensus forecast EPS for both FY20 and FY21 continue to exist within wide ranges of US$1.66–2.09/share and US$1.44–6.56/share, respectively (presumably reflecting gold price forecast variations). Having recorded adjusted EPS of 120c/share to date in FY20 and 78c/share in Q3 alone, a result close to the consensus average in FY20 appears likely. In the meantime, AEM’s forecast yield remains almost 0.2 percentage points above the average of six of its closest peers.

Consensus estimates

Year
end

Revenue
(US$m)

PBT
(US$m)

EPS
(US$)

DPS
(US$)

P/E
(x)

Yield
(%)

12/18

2,191

153

0.37

0.44

205.8

0.6

12/19

2,495

393

1.01

0.63

75.4

0.8

12/20e

3,131

767

1.89

0.82

40.3

1.1

12/21e

4,135

1,752

3.96

0.83

19.2

1.1

Source: Company sources, Refinitiv. Note: PBT and EPS are normalised, excluding exceptional items.

Agnico Eagle Mines is a client of Edison Investment Research Limited

General disclaimer and copyright

This report has been commissioned by Agnico Eagle Mines and prepared and issued by Edison, in consideration of a fee payable by Agnico Eagle Mines. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Agnico Eagle Mines and prepared and issued by Edison, in consideration of a fee payable by Agnico Eagle Mines. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Agnico Eagle Mines

View All
mining02

Metals & Mining

Agnico Eagle Mines — Record-breaking production

Metals & Mining

Agnico Eagle Mines — A year of optimisation ahead

mining02

Metals & Mining

Agnico Eagle Mines — A record-breaking year

Latest from the Metals & Mining sector

View All Metals & Mining content

Research: Healthcare

Cantargia — Buoyant on CANFOUR and CANOPY interims

Cantargia has provided updated interim data from its Phase IIa CANFOUR trial, reporting new efficacy data from the combination arms of the study investigating CAN04 (anti-IL1RAP) in first-line NSCLC and PDAC. These new Phase IIa data, combined with initial interim data reported in December 2019, continue to support the hypothesis that CAN04 has a synergistic benefit with chemotherapy, in our view. Another tailwind is increasing positive sentiment on Novartis’s canakinumab (anti-IL1beta) progressing in its Phase III trials in NSCLC. We have revised our rNPV model, increasing success probability for CAN04 and revising deal terms, upgrading our valuation to SEK65.1/share (vs SEK38.2/share previously).

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free