Agnico-Eagle Mines (AEM.TO)

Not unique in stock price diverging from price of gold. It owns the 2 largest gold mines in Canada. Bit of indigestion with acquisitions. Lots of moving parts. One of the best teams and its execution. One of the premier companies globally.

This whole trade has legs. He's looking for an entry point. Prefers to go with torquier and debt-free names. See his Top Picks.

The gold sector is doing well. Central banks are shunning U.S. dollars and U.S. Treasuries because of high levels of debt. It took over Kirkland Lake which has a lot of good properties for development. It has a strong balance sheet to carry out this development. It has become hard to find gold.
Buy 19   Hold 1   Sell 0

You want to be long gold and silver at the right time, once every 15-20 years, and it's hard to find those times. Free cashflow is harder to come by when costs have been rising. And you have to be right about your bond yields, which have to keep coming down for gold to work. That's probably the way they're going to go. He likes ABX and AEM and owns them, but is not piling in.

You could buy only if you want exposure to gold. In that case buy a gold ETF, a royalty company like Franco-Nevada or the bullion itself to avoid mining risks. He doesn't like gold as a safe haven - there are better ones.

Recently took profits. With all the acquisitions, growth may be more limited. Valuation is still relatively high. Likes gold, but prefers the mid-size and juniors for more upside, better valuations, more opportunities. 

Is approaching $78 resistance, and shares are popping 5% today. The underlying trend is good, though. Be patient. This current move is parabolic. Look at this space in May-June, not now.

Gold companies are slaves to the price of the commodity they produce. Gold is enigmatic. Inflation is waning, bond yields have peaked, and that's good for gold. Likes the diversification and scale. Great dividend grower. A laggard that will catch up.

One of the very best of the golds. Merger with Kirkland created a powerhouse. A must-hold if you're in gold. Don't sell.

The company’s guidance pegs gold production at 3.2 to 3.4 million ounces of gold annually in 2023 and 2023, about the same as 2022, but if three projects are approved those would add up to 100,000 ounces in 2024. Costs per ounce are expected to remain “relatively stable” in this period. The price of gold itself will increase whenever the U.S. dollar rises. Gold is expected to be stable, hovering around $1,900 an ounce. Investors will be paid 3.41% to wait. AEM’s beta is a stable 0.78. Read: PDAC special: minerals for our full analysis.

They've been buying a lot, such as Kirkland Lake Gold a year ago, and Yamana Gold (and a mine in Quebec). Up 28% over 5 years. Pays a 3.5% dividend. Huge runway for growth even if the price of gold doesn't move. Gold hasn't appreciated and has been flat, but it isn't correlated to bond yields. Owns great properties and two big deals to digest.

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.
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Well run. If you're looking for gold exposure, a reasonable company to consider. You could also consider FNV or ABX. ABX results did not impress, and the stock's down. AEM will trade down on similar news. Watch and wait, as the sector's been strong. Interest rate cuts would be negative catalysts for gold names. Enter on a pullback.

With inflation, mining costs went up. So he moved into royalties, where he remains.