Opinions
Stockchase Insights
Agnico-Eagle Mines
AEM-T
DON'T BUY
Feb 17, 2023
Stock price when the opinion was issued
You might be interested:
Premium contentAEM is reiterated as a TOP PICK as its strong cash flows under higher commodity pricing is allowing the company to aggressively retire debt and buy back shares. It recently announced a growth in ownership of a Canadian based mining company involved in the country's only copper and zinc mine under development. It trades at 16x earnings and 2.4x book. We will continue to recommend a stop at $136, looking to achiever $186 -- upside potential of 24%. Yield 1.5%
(Analysts’ price target is $185.78)He continues to be bullish on gold. Still owns, but took partial profits just before it reported. Nothing against AEM, but wanted to spread the risk via another gold producer with more torque. Major thrust behind the move has been the gold price moving higher.
Believes we're in very early stages of a gold bull market. Best operator. 5 of their major projects have exploration growth opportunities. Great dividend growth. Last year's acquisition of O3 Mining is a positive.
Multiple will go up once people realize how much cash the company will generate. If gold just stays where it is at $3400, generates a ton of cash. He guesses that gold prices will go higher, which means the whole group will be revalued. Yield is 1.36%.
Single finest precious metals mining operating company in the world. So it's the most valuable, even though its production is not as high as ABX or NGT. Exemplary corporate and safety cultures, and people like to work there. Grounded in Canada, skilled Mexican miner vis-a-vis politics and sociology. This name, along with WPM and FNV, needs to be in every single precious metals portfolio.
(Disclaimer: AEM is sponsoring his symposium next week.)
Premium contentWe reiterate this globally acclaimed precious metal producer as a TOP PICK. Recently reported earnings showed a 134% increase in income and rising free cash flow that allows for debt to be retired and shares bought back. It trades at 26x earnings and under 3x book. We recommend trailing up the stop (from $136) to $143, looking to achieve $192 -- upside potential of 21%. Yield 1.0%
(Analysts’ price target is $191.60)Great way for most people to get exposure to precious metals, which has a multi-year bull market in front of it. Generates a ton of cash. This year will see ~30% growth in cashflow generation over last year, even assuming lower gold prices from where they are now.
Paying down debt; once it gets to a certain level, they'll look at increasing dividends. Consistent share buybacks. In safe jurisdictions. Proven best operators in the business. Relatively long reserve life, lots of opportunity to increase reserves at existing mines. Yield is 1.35%.
Biggest single equity holding he has in client portfolios. He did trim, as it got to be way too big a position. Like the gold price, has stagnated over the last few months. Sees it as portfolio protection, insulates from inflation and geopolitical concerns. Tariff issues are still to be resolved, and there's still the impact of tariffs to look at (earnings, inflation, interest rates, the dollar).
Best gold-mining company in the world. Yield is 1.35%.
EPS was 41c, matching estimates; revenue was $1.385B, 3% short of estimates.
EBITDA of $496M was 20% short.
Guidance was weak: AEM noted it expected production to be lower and costs to be higher for the next three years.
The stock dropped the most in two years.
Guidance is about 6% below prior forecasts due to 'permit issues, noise restrictions and revised mining operations'.
Cost guidance rose 15% from the company's prior expectations. 4Q gold production was 799,438 ounces, vs 812,537 estimated.
The Yamana deal is expected to close in March. We can deal with short term issues, but we do not like a three year outlook of lower production as well as higher costs.
The price drop is justified here.
Unlock Premium - Try 5i Free