Agnico-Eagle Mines Ltd. (AEM): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

By
A A A

Summary:
We are upgrading our recommendation on Agnico-Eagle to Outperform following its forecast-topping first quarter results. Profit for the quarter surged as lower costs and higher gold production offset a decline in metal pricing. Both revenues and adjusted earnings topped Zacks Consensus Estimates. The company expects gold production for 2014 to exceed the higher end of its guidance range. Agnico-Eagle maintains a solid exploration budget and is reinvesting in its assets to expand output. Moreover, the company's revised life of mine plan is expected to yield significant free cash flows over the next several years. We are also encouraged by its recent move to jointly acquire Osisko, which will boost its production profile and improve cost structure.

Overview:

Founded in 1953, Toronto, Canada-based Agnico-Eagle Mines Limited 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 American Region.

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 Eagle.

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 with an implied value of roughly C$575 million ($523.8 million).

Per the agreement, Agnico-Eagle and Yamana will each own 50% of Osisko, and set up a joint committee to operate the Canadian Malartic Mine in Quebec. Once the transaction is complete, Osisko shareholders will own roughly 16.7% of Agnico-Eagle and around 14.4% of Yamana. As part of the agreement, certain assets of Osisko will be transferred to Spinco (a new company), the shares of which will be distributed to Osisko shareholders. The acquisition is expected to close in early June 214.


Agnico-Eagle Mines Ltd. (AEM): Read the Full Research Report
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AGNICO EAGLE (AEM): Free Stock Analysis Report

To read this article on Zacks.com click here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: AUY , AEM

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

48,099,947
  • $16.09 ▲ 0.50%
40,277,806
  • $102.50 ▲ 0.24%
40,236,499
  • $19.57 ▲ 2.35%
31,092,510
  • $49.75 ▲ 0.65%
30,795,218
  • $34.92 ▲ 0.78%
29,910,855
  • $3.63 ▲ 0.83%
24,019,154
  • $13.06 ▼ 0.38%
23,753,906
  • $74.82 ▲ 1.31%
As of 8/29/2014, 04:04 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com