Can Agnico Eagle Mines Deliver More Upside?


Agnico Eagle Mines (TSX: [stock_market_widget type=”inline” template=”generic” color=”default” assets=”AEM.TO” markup=”{symbol} {currency_symbol}{price} ({change_pct})” api=”yf”]) stock has been on a tear on the stock market over the past six months, gaining more than 20% thanks to rising gold prices and its recently reported fourth-quarter results. The Toronto-based gold mining company is expected to step on the gas in 2019 because of a stronger production profile and a potential improvement in the price of gold. Let’s take a closer look at the reasons why Agnico Eagle’s impressive momentum is all set to continue.

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Higher Gold Production Expected

Agnico Eagle produced 1.63 million ounces of gold in 2018 at all-in sustaining costs of $877 an ounce. The company’s all-in sustaining cost was well below its original guidance of $915 an ounce, while production exceeded the company’s most recent guidance of 1.6 million ounces.

Our mining guide will show you how Agnico’s gold production costs stack up again competitors.

Looking ahead, the company expects to produce 1.75 million ounces of gold in 2019 as compared to the previous guidance that called for 1.70 million ounces. More importantly, Agnico Eagle sees its gold output rising for the years 2020 and 2021 as well, expecting 2 million ounces and 2.05 million ounces for those periods, respectively.

But that’s not the only reason why investors are positive about the company’s performance going forward. Agnico Eagle is forecasting a progressive decline in its costs as well. The company is looking at all-in sustaining costs of $900 an ounce this year at the mid-point of its guidance. Now, that’s higher than last year’s all-in sustaining costs, but investors are upbeat about the fact that Agnico is looking at an AISC of $865 an ounce next year. The company expects further decline in its AISC in 2021, which should pave the way for further margin growth.

Agnico Eagle attributes the potential improvement in its production and costs to higher grades. The company’s 2018 gold mineral reserves were up by 7% to 22 million ounces along with an 8% increase in the grades. So, it isn’t surprising to see why Agnico Eagle is looking at a better operational profile going forward.

Gold Prices Could Be a Catalyst for More Growth

Analysts expect the company to deliver nearly 7% revenue growth this year, with further acceleration in the cards for 2020.

Another factor that could positively impact Agnico Eagle going forward is a potential hike in gold prices. The company’s average realized price of gold stood at $1,266 an ounce in 2018, and the good news is that the price of gold has averaged close to $1,300 an ounce in 2019. In fact, it is expected that the current spot price of gold of around $1,330 an ounce could be sustained for the remainder of the year.

In that case, Agnico Eagle could deliver a solid turnaround in 2019 by arresting the slide in its top line. As it turns out, analysts expect the company to deliver nearly 7% revenue growth this year, with further acceleration in the cards for 2020. So, it won’t be surprising to see Agnico Eagle deliver more upside going forward on account of operational improvements and financial growth.

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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