Agnico Eagle Mines Ltd. (AEM, Financial) added a new presentation on its website that I will summarize below.
From 2005 to 2015, Agnico Eagle has been able to successfully build up high quality assets through acquisitions and exploration activities. The miner’s asset base is characterized by long-life mines like Kittila and Pinos Altos.
Kittila is the largest primary gold producer in Europe and Agnico’s longest-life mine located in northern Finland with the life of the mine estimated through 2035. An approximate 4.4 million ounces of gold is contained in its proven and probable reserves. The operating capacity of 4,000 tons per day will lead the miner to produce approximately 200,000 ounces of gold in 2016 and to an average of 195,000 ounces of gold annually from 2017 through 2018.
The mine reached the current operating capacity thanks to expansions completed in the fourth quarter of 2014. The miner aims to improve unit costs through ongoing efforts and studies to assess the optimal throughput rate and to optimize underground mining rates.
Pinos Altos is located in northern Mexico, 136.7 miles west of Chihuahua, and has a life of mine expectancy through 2024. Approximatley 1.5 million ounces of gold and 37.5 million ounces of silver are contained in its proven and probable reserves. In 2016, the miner expects to produce 175,000 ounces of gold as well as by-product silver and an average of 178,000 ounces of gold per year from 2017 to 2018.
Exploration activities and drilling programs are undertaken by Agnico to develop the Amaruq deposit as a satellite operation to Meadowbank, and expand known mineralized zones at Meadowbank and mineral reserves at La India.
The high quality of the miner’s gold reserves is reflected by an average gold grade, which is more than double than that of one of its North American peers (2.37 g/t versus average 1.08 g/t).
Source: AEM’s presentation
The current assets give Agnico Eagle the potential to produce from 30% to 40% more gold by 2020 that can assure a continued strong operational performance, as it was in the second quarter of 2016 when the miner reported a 5.4% increase year-over-year in revenue ($537.6 million) and a 246.5% increase year-over-year in the quarterly adjusted net income ($35.0 million or 16 cents per share).
CFO also increased: +157% from the previous quarter and +99% year-over-year.
The miner’s balance sheet is strong with $473.7 million in cash and short-term investments on June 30, and long-term debt manageable repayment schedule: 60% of total long-term debt ($1,210.30 million) matures after 2020.
Source: Agnico Eagle’s presentation
With a Net Debt/EBITDA of 0.89 (versus an industry average of 1.23), Agnico is well positioned compared to the peer group.
A strong balance sheet plus enhanced financial flexibility gives Agnico Eagle’s shareholders the opportunity to benefit from a 25% dividend increase in third quarter 2016. The company has a long history of dividend payments to its shareholders.
Agnico Eagle is delivering superior share performance since 1998, consistently outperforming gold and gold equities.
Source: Agnico Eagle’s presentation
Valuation
The gold stock gained 74% year to date, but it looks overvalued by the stock market considering both Enterprise Value/EBITDA (13.77) and the Price/Book (mrq) (2.33.
Ten analysts out of 19 recommend holding this gold stock. The recommendation rating is 2.6. The rating ranges between 1.0 (Strong Buy) and 5.0 (Sell).
The average analyst price target is $58 versus a current share price of $45.71.
Disclosure: I have no positions in Agnico Eagle Mines Ltd.
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