We are downgrading our recommendation on Agnico-Eagle to
Underperform following its lackluster third-quarter 2014 results.
The company swung to a loss in the quarter, hurt by lower gold
pricing and increased costs associated with exploration activities.
Both revenues and adjusted earnings missed Zacks Consensus
Estimates. While Agnico-Eagle maintains a solid exploration budget
and is reinvesting in its assets to expand output, any potential
delay associated with the development projects may jeopardize its
future production. We also take into account the current weak gold
price environment and higher operating costs across a number of
Founded in 1953, Toronto, Canada-based Agnico-Eagle Mines
Limited (AEM) is a gold producer with mining operations in Canada,
Mexico and Finland, and exploration activities in Canada, Europe,
Latin America and the U.S. Agnico-Eagle's LaRonde mine in Quebec is
one of Canada's largest operating gold mines by gold reserves and
has provided the company's foundation for domestic and
international expansion. Throughout its history, Agnico-Eagle's
policy has been not to sell forward its future gold production. In
2013, the company produced 1,099,335 ounces of gold at total cash
costs of $672 per ounce. Its proven and probable gold reserves (net
of 2013 production) totaled 149 million tons at the end of 2013,
containing 16.9 million ounces of gold.
Agnico-Eagle operates through four regional units: the Quebec
Region, the Nunavut Region, the European Region and the Latin
The Quebec Region includes the LaRonde mine (including the
LaRonde mine extension below Level 245, earlier referred to as the
LaRonde II project) and the Goldex and Lapa mine projects situated
in the Abitibi region of Quebec.
The Nunavut Region comprises the Meadowbank mine project, which
is administered by the office in Vancouver, British Columbia.
Agnico-Eagle's operations in the European Region are performed
through its indirect subsidiary, Riddarhyttan Resources AB, which
owns the Kittila mine project in Finland.
In the Latin American Region, operations at the Pinos Altos
project are conducted through the company's subsidiary,
Agnico-Eagle Mexico S.A. de C.V. The company also has the La India
mine in the Mulatos gold belt in Sonora, Mexico.
Agnico-Eagle, in May 2013, wrapped up its takeover of mining
company Urastar Gold Corp. The company acquired all the outstanding
shares of Urastar pursuant to a statutory plan of arrangement under
the Business Corporations Act (British Columbia). Following closure
of the deal, Urastar is now a fully-owned subsidiary of Agnico
Agnico-Eagle penned a definitive agreement with Urastar in March
2013. Urastar is engaged in the exploration of former gold
producing regions in Sonora, Mexico, which is among the richest
gold producing belts globally.
On Apr 16, 2014, Agnico-Eagle and Yamana Gold Inc. (AUY) entered
into an agreement to jointly acquire 100% issued and outstanding
common shares of Osisko Mining Corporation for a total
consideration of roughly C$3.9 billion, or C$8.15 per share ($3.55
billion or $7.43 per share). The offer consists of about C$1
billion ($0.9 billion) in cash, roughly C$2.33 billion ($2.12
billion) in Agnico-Eagle and Yamana shares, and shares of a new
company (Spinco) with an implied value of roughly C$575 million
The acquisition closed in June 214. Under the agreement,
Agnico-Eagle and Yamana acquired 50% of Osisko, and set up a joint
committee to operate the Canadian Malartic Mine in Quebec. Per the
agreement, a number of assets of Osisko have been transferred to
Osisko Gold Royalties Ltd. which, include a 5% net smelter royalty
(NSR) on the Canadian Malartic mine, C$157 million cash, a 2% NSR
on the Kirkland Lake assets, the Hammond Reef project, and certain
other properties, all assets and liabilities of Osisko in its
Guerrero camp, and certain other investments and assets.
On November 28, 2014, Agnico-Eagle completed the acquisition of
100% of the issued and outstanding common shares of Cayden
Resources Inc. Canada-based Cayden is an exploration company
focused on discovery, financing, and monetization of precious metal
assets in two mining jurisdictions in Mexico. Per the Arrangement,
each share of Cayden was exchanged for 0.09 of an Agnico-Eagle
share and C$0.01 in cash. Cayden is now a wholly-owned subsidiary
of Agnico-Eagle. The acquisition is a part of Agnico-Eagle's
strategy to buy promising, early-stage gold projects where it can
add value through exploration and mine building.
Agnico-Eagle Mines Ltd. (AEM): Read the Full
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