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Analysis of Agnico Eagle Mines Limited Company

Analysis of Agnico Eagle Mines Limited Company

18 May 2022

Agnico Eagle Mines Limited is engaged in exploration and mining in Canada, Mexico and Finland. The company is mainly engaged in the gold mining and sale, as well as the exploration of silver, zinc and copper deposits.
The main property is the Larond Mine, located in the Abitibi region in northwestern Quebec, Canada. As of December 31, 2021, the proven mineral reserves at the mine amounted to approximately 3.0 million ounces of gold. Agnico is also involved in exploration activities in Europe, Latin America and the United States.
The company was incorporated in 1953 and is headquartered in Toronto, Canada.
Agnico bought Kirkland Lake Gold last quarter. The shares of the latter ceased trading on stock market in February. Agnico is a large-cap company – $27 billion. In the past 4 years, the net loss was in 2018, the negative FCF in 2018-2019. Revenue increased by 75% over a four-year period.

P/E 26.5 forward P/E 21.2 (average current for competitors 32)
P/B 1.4 (industry average 3.4)
P/S 3.3 (industry average 5.8)
Debt of $1.7 billion with current operating cash flow of $1.4 billion
Dividends 3.1%
Share Price: $51
The cash flow discounting model shows a fair price of $38.
Simply Wall Street values the company at $47.
12 analysts give an average estimate of $71 per share.
Compared to the industry, Agnico pays good dividends per annum. However, analysts predict their decline in the coming years, as the company pays more than FCF and net profit are.
Agnico is the fourth company in the world by capitalization and the only one of them that increased reserves last year by 110%, to 45 million ounces. Most of the gold is mined in Canada and Australia.

Stocks are trading slightly below the 20, 50 and 200-day moving averages, which indicates an undervaluation of the stock.
The price of gold is now at highs, as well as the Newmont stock price, but the Agnico rate is going down. In recent months, Agnico has been poorly correlated with the exchange rate of an ounce, which can give an upside in price.

The share price of any gold mining company depends primarily on the gold exchange rate. Therefore, the only thing we can do is to choose the most effective and undervalued companies. According to all the main indicators, Agnico is now rated below average values, while it is possible to say that the company is managed properly. In 2022, the price of gold rose, and the Agnico exchange rate fell. An upside from current prices is possible. Purchases become interesting from $46 per share and below. From $40, you can increase the stock. Keep it for 2-3 years, receive dividends. In case of an increase in gold prices, you will receive your profit.

18 May 2022
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