Agnico Eagle Mines Ltd.'s (AEM, Financial) board of directors declared a cash dividend for the third quarter of fiscal 2017 during its earnings report on July 26.
The Canadian gold producer will pay 10 cents per ordinary share on Sept. 15 to shareholders of record as of Sept. 1. The miner goes ex-dividend today.
Agnico Eagle is one of the few gold mining stocks with a long history of dividend payments. The miner has distributed a Ă‚ cash dividend every year since 1983.
This is possible because Agnico Eagle Mines – although it has fewer reserves and resources compared to Barrick Gold Corp. (ABX, Financial) and Newmont Mining Corp. (NEM, Financial) – runs its operations efficiently and mines gold at a price of $1,150 per ounce, which is one of the best in the entire industry. As of Dec. 31, 2016, the miner had 19.943 million ounces in proven and probable gold reserves.
Agnico Eagle also produces silver, copper and zinc. Mineral reserves for these metals have also been defined at one of the lowest prices per unit in the industry. However, the production of copper and zinc is still negligible.
As of Dec. 31, 2016, Agnico Eagle had 53,579 million ounces in proven and probable silver reserves determined at a price of $16.50 per ounce.
Approximately 95% of the company’s total revenue comes from the production and sale of gold. Silver accounts for only 4% of total revenue, while copper and zinc combined account for a slim 1%.
Other factors that put Agnico Eagle among the best mining stocks are its average gold grade of 2.31 grams per ton of mineral mined and the difference between its production and the grade of its mineral reserves, which equates to an average of -22% over the last five years.
While the first factor influences the miner’s economics more directly, the lower the cost associated with the extraction of the metal from the mineral is also worth consideration. This metric indicates gold can still be mined from the reserves without affecting the quality measured by the average concentration of the precious metal in one ton of mineral. These figures are the some of the best in the gold mining industry currently, making Agnico Eagle Mines a leader in the space.
In the first quarter, Agnico Eagle beat expectations on earnings, generating a positive surprise of 154.50% and outperforming the biggest mining stocks. In comparison, Barrick Gold produced a negative surprise of 30% and Newmont Mining and Goldcorp Inc. (GG, Financial) generated positive surprises of 13.60% and 12.50%.
The average price of bullion was $1,219.36 per troy ounce in the first quarter of 2017. With gold averaging $1,257.88 per troy ounce since the beginning of the third quarter, the dividend should be backed by another solid quarter.
Agnico Eagle is trading around $51.02, up $1.42 or 2.86% from the previous trading day. The stock is trading with a price-earnings (P/E) ratio of 43.95 and a price-sales (P/S) ratio of 4.95. The forward P/E ratio is 58.48. For full fiscal 2017, analysts forecast EPS of 78 cents. For full fiscal 2018, EPS of 89 cents is expected. This projection suggests bullion will uptrend for the remainder of 2017 and throughout 2018. The current macroeconomic and political factors are positive to gold.
For the reasons mentioned, the company currently represents one of the best investment opportunities in the industry.
Disclosure: I have no positions in Agnico Eagle Mines Ltd.
