Agnico Eagle Mines Stock Has Upside Potential

It looks like 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"] stock won’t be stopping its rally anytime soon. After a brief pause, Agnico Eagle stock is back to its winning ways thanks to a terrific set of third-quarter results that blew past estimates.

Agnico delivered nearly $683 million in revenue during the quarter, an increase of almost 32% from the year-ago period. The company’s adjusted earnings per share of $0.37 were ahead of the Wall Street estimate by $0.10.

Record Production Is Helping Agnico Stay on Top

Agnico Eagle Mines hit a quarterly record gold production in the third quarter. The company delivered nearly 477,000 ounces of gold during the quarter, a nice jump from the year-ago period’s output of nearly 422,000 ounces. According to the company’s press release:

The higher level of gold production in the third quarter of 2019, when compared to the prior-year period, was primarily due to the contribution of a full quarter of commercial production from the Meliadine mine, partially offset by expected lower throughput levels at Meadowbank as the mine transitioned to the Amaruq satellite deposit.

Agnico Eagle also increased its guidance for the fiscal year. The company anticipates 1.77 million to 1.78 million ounces of gold in 2019 as compared to its prior forecast of 1.75 million. Agnico Eagle also pointed out that its total cash costs per ounce will remain between $620 and $670 an ounce, while all-in sustaining costs are expected between $875 and $925 an ounce.

The good news is that Agnico is on track to achieve its cost guidance as its third-quarter all-in sustaining costs came in at $903 an ounce. More importantly, the company anticipates that the gold pricing scenario can improve further. Agnico Eagle’s revenue increased by nearly 32% year over year last quarter. The bottom line increased over four-fold to clock $76.7 million.

Gold Prices Will Be a Tailwind

Agnico Eagle can sustain this terrific momentum in the future as well, according to CEO Sean Boyd’s latest forecast. He believes that the yellow metal is headed to $2,000 an ounce in the next two to three years. According to a Bloomberg report:

Governments focus on running a deficit budget and spending; that loose money approach is good for gold,” Boyd said Thursday in a telephone interview. “You continue to get good buyer demand from China, India and the biggest buying coming from the central banks since the early 1970s.

Given that gold is currently trading near $1,500 an ounce, Boyd’s forecast means that the price could rise by a third going forward. If that’s indeed the case, then don’t be surprised to see Agnico Eagle stock soar much higher because it is on the right track to increase its production and keep costs under check at the same time.

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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