Agnico Eagle Mines (AEM, Financial) has announced on its website that it has reduced its minority interest stake in Belo Sun Mining Corp (BSX.TO, Financial) to 9.57%. That is a 50% reduction.
Agnico Eagle has sold off 44.5 million ordinary shares. One share of Belo Sun Mining was sold at about 26.5 cents. Agnico Eagle made total proceedings of approximately $11.8 million.
Before the sale transaction, there were 89,102,760 ordinary shares of Belo Sun in the equity investments portfolio of Agnico Eagle Mines.Â
After the deal, Agnico Eagle Mines holds a volume of 44,551,760 shares, which is worth approximately $12.34 million, according to the share price on April 20 at the end of regular hours trading on the Toronto Stock Exchange.
According to the sale agreement, the buyer has the option to purchase the rest of the common shares that Agnico Eagle Mines still holds in Belo Sun Mining within 60 days following April 20, 2018.
Agnico Eagle Mines initiated a position in Belo Sun Mining in spring 2015 when the Canadian gold producer purchased a volume of 62.5 million common shares of the junior exploration and development company. The purchase was executed at about 24 cents per share for a total consideration of approximately $15 million.
The entry in Belo Sun Mining, with an initial interest stake of 17.38%, was part of Agnico Eagle Mines’ strategy of investing in high quality exploration and development companies, which have their interests in favorable mining jurisdictions and are at an early stage of evolution.
Following the initial buy, Agnico Eagle Mines incremented its interest stake with two additional purchases: In spring 2016, Agnico Eagle Mines invested another $6.2 million on 11.68 million shares of Belo Sun and in July of the same year, the Canadian gold producer bought a further volume of 14.92 million shares for total proceedings of approximately $9.7 million. Following those deals, the interest stake was 19.2%.
Agnico Eagle Mines closed at $44.16 per share on April 20. The stock has fallen 5% so far this year, emulating the Van Eck Vectors Gold Miners ETF (GDX) in the loss. The market capitalization is $10.35 billion.
The stock in Agnico Eagle Mines is trading underneath the 200-SMA lines but above the 100 and 50-SMA lines.
The RSI (14-days) is 69.54 of a 30 to 70 range.
The 52-week range is $37.35 to $51.86 per share. The price-book (P/B) ratio is 2.01 versus an industry median of 2.06 times and an EV-to-Ebitda ratio of 11.38 times towards an industry median of 9.9.
Agnico Eagle did not disclose how it will use the funds that, added to the company’s liquidity available at Dec. 30, 2017, will bring its cash on hand and securities to approximately $780 million. The miner has ample financial resources to increase its reserves of gold through exploration and the completion of development projects. It also has $800 million operating cash flow targeted for 2018. The company can also rely on undrawn credit of $1.2 billion.
Gold has been supportive during the first quarter of 2018. Those preconditions are still on the table.
A higher than industry median Ebitda margin of 41.5% sparked an 11% appreciation of the stock of Agnico Eagle Mines in 2017 when the bullion averaged $1,257.12 per troy ounce.
A 9% year-over-year growth in the gold price to $1,329.28 per ounce in the first quarter cannot but be translated in higher Ebitda margin and cash flow at Agnico Eagle Mines, leading therefore to a stock appreciation.
(Disclosure: I have no positions in Agnico Eagle Mines.)
