How should investors move on Agnico Eagle Mines Ltd. (AEM, Financial)?
The downtrend range within the share price is getting tight. It seems to indicate resistance at $38 to $39 per share, and the most recent support was around $32.60. It looks as if the market price indicating investors should remain neutral on Agnico Eagle Mines.
There appears to be no upside for Agnico Eagle Mines at the valuation Tuesday, which is at a premium to its competitors. Agnico shares traded Tuesday at $35.48.
From the absence of significant changes in the share price, investors will profit from the Canadian gold miner through ad hoc trading strategies, such as using options and going long and short shares.
Agnico Eagle Mines is a senior company in the gold mining industry because it has high-quality mineral assets. But the short-term catalysts, which are posited to support the stock in the near future, are either already factored into the share price or not strong enough to function as they should.
Following the financial results for the third quarter, the company enhanced its 2018 production guidance to approximately 1.6 million ounces from the previous estimate of about 1.58 million ounces. But the market had knowledge of the key drivers for the rise in the production guidance months before the release of the quarterly report.
These operating improvements consist of higher grade of ore being found at its Meadowbank mine and Canadian Malartic mine, in addition to the extension of production at the Lapa underground deposit until the end of 2018.
The company is also benefiting from an increase in the material that trucks are conveying to the mill of the Canadian Malartic mine.
Also, Agnico Eagle Mines has progressively improved its outlook for costs. The cash cost is now predicted around $650 per ounce and the all-in sustain cost around $915 per ounce in 2018. Both figures are the mid-points of the 2018 guidance.
It is mainly thanks to these improvements that Agnico Eagles Mines could close the quarter with 421,718 ounces of commercial gold at an all-in sustain cost of $848, leading to non-GAAP net earnings of 1 cent per share on revenue of $518.7 million. The miner beat earnings consensus by 4 cents and revenue by $7.96 million. Third quarter revenue decreased nearly 11% year-over-year because of lower metal prices and the transitioning of the Meadowbank mine through the last full year of mining at the site.
The balance sheet of Agnico Eagle Mines is strong enough to support the advancement of mineral projects on which the miner is basing its forecast for the production of commercial gold. The company is aiming for more than 1.7 million ounces for full fiscal 2019. But, this forecast for gold production is in the range of the company's current guidance.
Furthermore, the Amaruq project in Canada's Nunavut territory, which should transform the outlook for Agnico Eagle Mines, is still at an exploration stage. The company is still evaluating mining the metal there.
Agnico Eagle Mines has a market capitalization of about $8.2 billion. The miner has three divisions: Northern Business, Southern Business and Exploration. It has an EV-Ebitda ratio of 11.3 compared to an industry median of 9.3. In addition to the production and sale of gold, which is its main income source, the company also explores for silver, zinc and copper.
Disclosure: I have no positions in any security mentioned in this article.
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