{"id":10548,"date":"2023-05-18T15:37:08","date_gmt":"2023-05-18T19:37:08","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/agnico-eagle-growing-bigger-but-do-investors-benefit-rating-downgrade-nyseaem\/"},"modified":"2023-05-18T15:37:10","modified_gmt":"2023-05-18T19:37:10","slug":"agnico-eagle-growing-bigger-but-do-investors-benefit-rating-downgrade-nyseaem","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=10548","title":{"rendered":"Agnico Eagle: Growing Bigger, But Do Investors Benefit (Rating Downgrade) (NYSE:AEM)"},"content":{"rendered":"
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Part I – Introduction<\/h2>\n

Agnico Eagle Mines Limited<\/strong> (NYSE:AEM<\/span>) is part of the preferred long-term gold miners I have covered quarterly on Seeking Alpha since 2014. The company reported its first quarter 2023 results on April 27, 2023.<\/p>\n

Note: This article <\/span>updates my February 17, 2023 article.<\/span><\/p>\n

Noticeable most recent acquisitions:<\/p>\n

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  1. On February 8, 2022, Agnico Eagle and Kirkland Lake Gold announced the completion of the merger of equals transaction.<\/li>\n
  2. On March 31, 2023, Agnico Eagle and Pan American Silver (PAAS) completed the Yamana Gold acquisition of all AUY assets. The Company owns 100% of the Canadian Malartic mine<\/strong>, 100% of the Wasamac project located in the Abitibi region of Quebec, and several other exploration properties in Ontario and Manitoba.<\/li>\n
  3. On April 6, 2023, AEM announced a 50\/50 joint venture agreement with Teck Resources Limited (“Teck”) for the San Nicol\u00e1s copper-zinc development project in Zacatecas, Mexico.<\/span> <\/li>\n<\/ol>\n

    AEM is now the third-largest gold producer, with a P&P mineral reserve of 49 Au Moz.<\/p>\n

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    \"Map\"<\/span>
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    AEM Map Presentation May (AEM Presentation)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

    As we see above, Agnico Eagle Mines Limited is growing much bigger through acquisitions, but I wonder if this artificial expansion has benefited AEM shareholders. I am unconvinced, and I believe it may have slowed down the return for long-term shareholders, albeit it could be debated eternally. What do you think?<\/p>\n

    Ammar Al-Joundi – President and Chief Executive Officer, said in the conference call:<\/p>\n

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    One, strong operational performance, strong production, good costs, good safety, good environmental performance. Two, very good progress on optimizing our assets. 2022 was a year of consolidation, 2023 is going to be a year of optimization. There’s a lot of work, particular focus on the Abitibi belt, but the huge potential. And then three excellent exploration results. Importantly, excellent across a number of assets and Guy will talk about that.<\/p>\n<\/blockquote>\n

    1 – 1Q23 Results Snapshot<\/h4>\n

    AEM posted a net income of $1,816.89 million in 1Q23, or $3.86 per diluted share, compared with $119.08 million, or $0.31, in 1Q22. Adjusted net income was $271.3 million or $0.58 per share. In the press release (emphasis added):<\/p>\n

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    This result includes the following items (net of tax): a remeasurement gain<\/strong> arising from the acquisition of the remaining 50% of the Canadian Malartic complex of $1,543.4 million ($3.29 per share), transaction costs relating to the acquisition of the Canadian assets of Yamana of $12.5 million ($0.03 per share), foreign currency translation gains on deferred tax liabilities of $10.6 million ($0.02 per share), and mark-to-market gains on the Company’s investment portfolio of $4.1 million ($0.01 per share). Excluding the above items results in adjusted net income of $271.3 million or $0.58 per share for the first quarter of 2023.<\/p>\n<\/blockquote>\n

    The company generated revenues of $1,509.66 million this quarter, well over the $1,325.69 million in 1Q22. Revenues were up 9% sequentially.<\/p>\n

    Production in the first quarter of 2023 was 812,813 Au ounces above the 660,604 Au ounces produced last year. All-in-sustaining costs (“AISC”) per ounce was $1,125.<\/p>\n

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    \"Table\"<\/span>
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    AEM 1Q23 Highlights (AEM Presentation)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

    Agnico Eagle indicated 2023-2025 Guidance, including the recent Canadian Malartic portion of Yamana Gold, of excellent and consistent production for the next three years, going from 3,340K Au ounces in 2023 to 3,500K Au ounces in 2025.<\/p>\n

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    \"Table\"
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    AEM guidance (AEM Press Release)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

    2 – Stock Performance<\/h4>\n

    Agnico Eagle, Newmont Corporation (NEM), and Barrick Gold Corporation (GOLD) have been my preferred long gold miners for years.<\/p>\n

    As shown below, AEM is up 7% on a one-year basis and has slightly outperformed the group, including the VanEck Gold Miners ETF (GDX).<\/p>\n

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    \"Chart\"
    Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

    Agnico Eagle presently produces gold from 11 mines with details below:<\/p>\n

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    \"Chart\"<\/span>
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    AEM Quarterly Gold production per Mine 4Q22 versus 1Q23 (Fun Trading)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

    Detour Lake, Macassa, and Fosterville mines are included in the chart above and represent the fourth total quarter production. The Canadian Malartic is still reported at 50% in 1Q23.<\/p>\n

    3 – Investment Thesis<\/h4>\n

    Agnico Eagle Mines Limited is as excellent a gold miner as we can find. We can’t imagine talking about gold mining and omitting AEM as one of the leading players. Thus, the long-term investment thesis is quite simple here.<\/p>\n

    As I have said in my preceding articles, I recommend accumulating AEM on any weakness for the long term.<\/p>\n

    AEM is highly correlated to the gold price. Gold has turned bullish and recently reached nearly $2,050 per ounce due to the FED action.<\/p>\n

    Initially, the market expected the FED to consider lowering interest rates at the end of 2023, which boosted the gold price. However, the market is now reconsidering this first assumption weakening the gold price slightly.<\/p>\n

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    \"Chart\"<\/span>
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    AEM 1-Year Chart Gold, Silver, Copper (Fun Trading StockCharts)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

    Thus, trading short-term LIFO at a minimum of 40% of your AEM position is crucial.<\/p>\n

    Agnico Eagle – Financials and Production History Until 1Q23 – The Raw Numbers<\/h2>\n

    <\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n\n\n\n
    Agnico Eagle<\/strong><\/td>\n1Q22<\/strong><\/td>\n2Q22<\/strong><\/td>\n3Q22<\/strong><\/td>\n4Q22<\/strong><\/td>\n1Q23<\/strong><\/td>\n<\/tr>\n
    Total Revenues in $ Million<\/td>\n1,325.7<\/td>\n1,581.1<\/td>\n1,449.7<\/td>\n1,384.7<\/td>\n1,509.7<\/td>\n<\/tr>\n
    Net Income in $ Million<\/sub><\/td>\n109.8<\/td>\n275.9<\/td>\n79.6<\/td>\n205.0<\/td>\n1,816.9<\/td>\n<\/tr>\n
    EBITDA $ Million<\/sub><\/td>\n458.0<\/td>\n747.7<\/td>\n518.8<\/td>\n547.1<\/td>\n2,272.9<\/td>\n<\/tr>\n
    EPS diluted in $\/share<\/sub><\/td>\n0.28<\/td>\n0.60<\/td>\n0.17<\/td>\n0.45<\/td>\n3.86<\/td>\n<\/tr>\n
    Cash from operations in $ Million<\/sub><\/td>\n507.4<\/td>\n633.3<\/td>\n575.4<\/td>\n380.5<\/td>\n649.6<\/td>\n<\/tr>\n
    Capital Expenditure in $ Million<\/sub><\/td>\n293.2<\/td>\n408.6<\/td>\n435.7<\/td>\n400.8<\/td>\n384.9<\/td>\n<\/tr>\n
    Free Cash Flow in $ Million<\/sub><\/td>\n214.3<\/td>\n224.7<\/td>\n139.8<\/td>\n-20.3<\/td>\n264.7<\/td>\n<\/tr>\n
    Total cash $ Billion (including equity securities)<\/sub><\/td>\n1.064<\/td>\n1.016<\/td>\n0.822<\/td>\n0.669<\/td>\n0.754<\/td>\n<\/tr>\n
    Total debt in $ Billion<\/sub><\/td>\n1.57<\/td>\n1.44<\/td>\n1.34<\/td>\n1.34<\/td>\n2.34<\/td>\n<\/tr>\n
    Dividends per quarter in $\/ share<\/sub><\/td>\n0.40<\/td>\n0.40<\/td>\n0.40<\/td>\n0.40<\/td>\n0.40<\/td>\n<\/tr>\n
    Shares outstanding diluted in millions<\/sub><\/td>\n385.6<\/td>\n456.8<\/td>\n456.3<\/td>\n456.4<\/td>\n470.5<\/td>\n<\/tr>\n<\/table>\n

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