In accordance to its dividend reinvestment and share purchase plan, Agnico Eagle Mines Ltd. (AEM, Financial) is giving shareholders the opportunity to purchase additional common shares, as announced by the miner.
The proposal was filed with the Securities and Exchange Commission yesterday. The plan gives investors the opportunity to buy more common shares with cash they will get in the form of a dividend directly from the company.
The proposal concerns 2,496,458 ordinary shares. Investors who are interested in increasing their positions can purchase additional shares using the aforementioned dividends or paying cash.
The company says that “common shares purchased with cash dividends will be acquired at 95% of the weighted average of the trading prices for a board lot (100 shares) on the Toronto Stock Exchange for a period of 20 trading days on which a board lot was traded immediately preceding each dividend payment date.”
Of course, Agnico Eagle cannot foresee how successful their plan will be. However, if successful, the miner could gain more than $100 million and add it to the $730.78 million in cash on hand and securities reported in the most recent quarter.
In addition to its line of credit, Agnico Eagle has a significant amount of total liquidity it can use to further enhance the quality of its asset base, which is one of the best in the industry, through mergers, acquisitions and exploration activities.
The miner can rely on its respectable asset base to drive production growth. In a recent presentation, the miner discussed its mineral reserve grade and five-year difference between production and mineral reserve grade.
The mineral reserve grade is 2.37 versus an industry average of 1.08. The grade measures how much metal is contained in the ore. The mineral reserve grade is a very important measure because it “directly affects costs associated with mining as well as its subsequent beneficiation and extraction of precious components,” according to Mining.com. The lower the grade is, the higher the cost to extract one ounce from the ground.
Furthermore, the difference between production and mineral reserve grade is -22%, meaning Agnico Eagle still has plenty of ore that can be processed without affecting the quality of the asset base and has great potential to be expressed in terms of annual gold production.
At the moment, Agnico Eagle Mines is trading at $35.51 per share, down 6.15% from the previous trading day. The sharp decline in the share price is explained by the Federal Reserve's interest rate increase and the announcement of three additional interest rate hikes in 2017.
The gold stock has gained 35.5% year to date and is trading at 1.79 times its book value and 10.34 times its Ebitda.
During the third quarter, Mario Gabelli (Trades, Portfolio) increased his position in Agnico Eagle Mines by 3.13%. Arnold Van Den Berg, First Eagle Investment and Ron Baron (Trades, Portfolio) reduced their positions by 13.23%, 9.88% and 28.57%.
Disclosure: I have no position in Agnico Eagle Mines Limited.
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