Agnico Eagle Mines Ltd. (AEM, Financial) reported its financial results for the fourth quarter and full-year 2016 on Feb. 15.Â
For the quarter, Agnico Eagle generated net income of $62.7 million or 28 cents per share.
When one-time charges are excluded, net income for the quarter was $4.5 million or two cents per share. This is approximately 129% higher than the net loss of $15.5 million reported in the comparable quarter of 2015.
Agnico Eagle generated quarterly sales of $499.21 million, a 34% increase on a year-over-year basis. It missed analyst expectations for revenue by $13.83 million. Analysts forecasted average revenue of $513.04 million, ranging between a low estimate of $478 million and a high estimate of $571 million.
During the quarter, the Canadian miner produced a volume of 426,433 ounces of gold, a 0.97% increase, for $598 per ounce produced and a total cash cost of $552 per ounce.
The miner closed the year reporting a robust operating performance with higher gold production, lower cash costs and lower all-in sustaining costs per ounce of gold than originally guided.
Agnico Eagle produced 1,662,888 ounces of gold versus the planned production of 1,600,000 ounces.
For 2016, the miner sustained a total cash cost of $573 per ounce of gold and an AISC of $824 per ounce of gold. The company had guided total cash costs of $600 per ounce and AISCs of $860 per ounce.
Lower operating costs and higher prices realized from the sale of gold and silver enabled the company to substantially improve its bottom line and the cash flow generated from operations.
The company says “the lower AISC is primarily due to lower than forecast total cash costs per ounce in 2016 and higher production than forecast.”
For the year, the company generated $158.8 million of net income, 71 cents per share, a 545.5% increase on a year-over-year basis. It also generater $778.6 million in cash flow from operations, a 26.4% increase from 2015.
The latter led to free cash flow of $243.6 million after $535 million in capital expenditures.
The company distributes part of this cash flow to its shareholders through quarterly dividends. In 2016, Agnico Eagle distributed a total dividend of 36 cents. During the year, the miner increased the quarterly dividend of eight cents by 25% to 10 cents per share. The annual dividend leads to a forward yield of 0.80% according to the current share price.
Part of the cash flow was also used to repay debt. The non-current long-term debt is $1.072 billion, 4% lower than fiscal year 2015.
The debt-equity ratio of 26.89 is below the industry average of 54.66. The interest coverage ratio of 2.63 is above the industry average of 0.65. These ratios indicate the company is not extremely indebted compared to its peers and can pay interest expenses on the outstanding debt.
As of the last quarter of 2016, the gold producer had $548 million in cash on hand and securities and a $1.2 billion line of credit.
The company also communicated that “2016 gold reserves increased by 5% to 19.9 million ounces” and the average gold grade did not change from the prior year.
For 2017, the company expects to produce 1.55 million ounces of gold at total cash costs of $595 to $625 per ounce and an AISC of $850 to $900 per ounce.
Agnico Eagle Mines can rely on its high-quality asset base, which is one of the best in its industry, in terms of mine life and average gold grade. The miner is engaged in several gold projects that, once operating, will add considerably to the total production.
Agnico Eagle Mines is currently trading around $46.61 per share, down 49 cents or 1.04% from the previous trading day.
The recommendation rating is 2.6. Half of the analysts surveyed recommend buying shares, while the other half recommend holding the shares.
The average target price per share is $53.20, which represents a 14% upside from the current share price.
Disclosure: I have no positions in Agnico Eagle Mines Ltd.
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