Agnico Eagle is a leading Canadian gold mining company with more than six decades of experience. The company has mines in Canada, Finland and Mexico. Agnico’s exploration activities are conducted in these countries as well as in the United States and Sweden.

Agnico Eagle operates mines in Canada (70% of total mineral reserves), Finland (20%) and Mexico (10%). Gold accounts for more than 96% of sales, silver 3% and base metals 1%. Agnico Eagle operates in a single industry, gold exploration and production.

The segments of the company are the north business (with a turnover share of almost 80% from mining), the south business (~ 20%) and exploration. The northern business includes the LaRonde Mine, LaRonde Zone 5 Mine, Lapa Mine, Goldex Mine, Meadowbank Complex, Meliadine Mine, the joint operation Canadian Malartic and the Kittila Mine. The southern business includes the Pinos Altos Mine, the Creston Mascota Mine and the La India Mine.

Agnico Eagle is currently Quebec’s largest gold producer with a 100% interest in the LaRonde Complex and the Goldex mine and a 50% interest in the Malartic mine in Canada.

Agnico is also available as a double-listed stock trade under the same ticker on the NYSE if you’d prefer to receive the dividend in USD.

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Investment data

Sales growth and market presence

As the operator of the high quality gold mining business, Agnico has superior gold reserves and a gold grade more than double that of its North American counterparts. The company focuses on low-cost regions with high potential to drive future growth. Agnico has a solid track record of exceeding its production goals. The company reported its second consecutive quarter of record gold production in the first quarter of 2021.

Over the years, Agnico has built good relationships with its numerous stakeholders and has established itself well in low geopolitical risk countries and for mining. The company has historically expanded its gold reserves and resources through exploration. Agnico’s reserves totaled more than 24 million ounces of gold at the end of 2020. The company aims to maintain its global mineral reserves at 10 times its annual gold production rate.

Agnico saw higher mining operating margins in the most recent quarter (Q1 2021) driven by strong operational performance at the LaRonde and Meadowbank, Meliadine, Canadian Malartic complexes and recently acquired mines in Hope Bay, as well as higher average realized metal prices. The Company is targeting gold production of 2,047,500 ounces and cash costs and AISC per ounce in the range of $ 700-750 and $ 950-1,000, respectively, in 2021.

For the coming quarter, however, weaker production is expected due to the planned maintenance in several plants. Agnico’s bottom line will be driven by its strong project pipeline designed to enhance the company’s growth over the next five years. The high quality gold reserves should also support future growth.

Dividends

Agnico Eagle is a dividend aristocrat who has paid dividends every year since 1983. The company last increased its dividend 47% annually in 2020. It has a dividend yield of 2.2% and a payout ratio of 66%. Agnico achieved a dividend growth rate of 18% CAGR over the past decade. A high quality company with a solid manufacturing base, long lasting assets and a proven business strategy are Agnico’s strengths.

The gold company is in a good position to generate high cash flows from rising gold sales and prices. The average realized gold price rose ~ 27% from $ 1,406 an ounce in 2019 to $ 1,788 an ounce in 2020, and the average market price per ounce of gold was also 27% higher year over year. Agnico expects gold production to grow rapidly over the next few years. The Company’s continued exploration success with an emphasis on pipeline projects and near mine opportunities positions it well for future growth.

Agnico increased its exploration budget by 40% for 2021 and plans to advance its pipeline of growth projects such as Amaruq, Odyssey and Hope Bay. Strong free cash flow is expected to be generated over the course of the year. Projected production growth of around 24% for 2020-2024 is supported by record mineral reserves that increase free cash flow.

The company intends to use its free cash flow to drive major short-term pipeline projects and drive future production growth. Agnico has historically exceeded both its production target and its cost forecast. An investment grade balance sheet with sufficient financial flexibility should allow room for future growth.

Historical yield from Agnico (AEM)
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competition

The company competes with companies such as Newmont Gold Corp., Franco Nevada, Wheaton Precious Metals, and Royal Gold. Franco Nevada is the leading gold-focused licensing and streaming company. Newmont is a leading gold producer headquartered in Colorado while Royal Gold is another precious metals stream and licensing company focused on gold.

Wheaton Precious Metals is the world’s largest streaming-only company, primarily selling silver and gold. Agnico Eagle continues to have one of the highest mineral reserves among its North American counterparts, giving it a competitive advantage.

Bottom line

Agnico Eagle expects significant free cash flow, supported by a strong pipeline of growth projects and an increasing base of mineral reserves. It offers its shareholders full exposure to gold prices and should continue its 38-year dividend payout streak well into the future.

The increasing demand for gold and the higher selling price are a good sign for Agnico Eagle Mines. The company estimates that the gold contained in proven and probable mineral reserves will increase ~ 5.6% at an assumed gold price of $ 1,375 per ounce.

If gold stocks aren’t your thing but you still want to invest in this shiny stone, you can always buy gold ETFs that invest in gold bars or stocks, or both. As with most gold stocks on the TSX, Agnico is double-listed on the NYSE.

AEM versus TSX versus SP500
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Agnico (AEM) historical pe
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