Why Agnico Eagle Mines Stock Can Shoot Higher

Agnico Eagle Mines [stock_market_widget type="inline" template="generic" color="default" assets="AEM.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] delivered a solid set of results when it released its fiscal second-quarter report, and this was not surprising as the gold miner looked well-placed going into the report. The company easily beat Wall Street’s estimates thanks to an improvement in gold prices, and it looks set to do strongly for the remainder of the year as well.

What’s Working for Agnico Eagle?

Agnico Eagle’s adjusted earnings per share of $0.10 were way ahead of the $0.03 analyst expectation. What’s more, the company managed to beat Wall Street’s revenue expectation by a wide margin of $35 million as well.

In all, Agnico Eagle reported an adjusted net income of $22.7 million as compared to a loss of $5 million in the year-ago period. Higher gold prices were the key reason behind this turnaround. Agnico Eagle recorded an average realized gold price of $1,318 an ounce during the quarter, up from $1,293 an ounce during the year-ago period.

At the same time, the company’s production during the quarter came in at 412,315 ounces, an improvement of 1.8% over the prior-year period. The higher production was a result of the pre-commercial production recorded by the company from the Meliadine and the Amaruq mines.

The pre-commercial production at the Meliadine mine came in at just under 30,000 ounces, while Amaruq’s pre-commercial output stood at just over 2,100 ounces.

Agnico Eagle’s production cost per ounce came in at $735 during the quarter, while total cash costs stood at $652 an ounce. All-in sustaining costs stood at $953 an ounce during the second quarter. More importantly, Agnico Eagle’s costs were within the company’s guidance range for 2019. The gold miner has maintained its production guidance of 1.75 million ounces for the full year, while cash costs per ounce of gold are expected in the range of $620 to $670 an ounce.

The Second Half of the Year Should Be Stronger

The fact that a couple of Agnico Eagle’s mines are in the pre-commercial production phase bodes well for the company. This is because there’s now a strong potential for better production in the months to come, which is probably the reason why the company has increased its full-year capital expenditure forecast.

According to the press release:

“Total capital costs for 2019 are now estimated at $750 million (previous guidance was $660 million). The increased capital costs are primarily related to lower pre-commercial gold sales credited against capital at Meliadine, the advancement of the Amaruq underground development program (based on positive exploration results to date) and accelerated spending on the Meliadine saline water treatment system (due to the earlier than expected receipt of the discharge permit).”

So it is not surprising to see why Agnico Eagle’s financial results are expected to pick up the pace next year. Analysts expect Agnico’s top line to jump 11% in 2019, and this is expected to be followed by a 17% jump in 2020. The company’s bottom line is also expected to accelerate rapidly.

As such, it would be a good idea for investors to stick to Agnico Eagle because it is capable of delivering more upside.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.

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