Agnico Eagle Mines Limited (TSX: AEM) is a Canadian gold mining company which produces precious metals since 1957. The group’s operating mines are situated in Canada, Finland and Mexico, while its exploration and development activities are located in each of these countries as well as in the United States, Sweden and Colombia.

Key Updates:

• Higher cash from operations: The company posted a higher cash flow of FY21 of USD 1,315.9 million, as compared to USD 1,192.0 million in FY20, driven by higher net income. This is expected to support the overall liquidity of the firm.
  

• Increase in dividend payment: In FY21, the company reported higher dividend distribution of USD 275.1 million, as compared to USD 190.2 million in FY20, backed by strong cash flow growth. This is impressive as most of the companies are lowering their dividend payment in order to retain liquidity.

• Impressive FY22 Guidance: For FY22, the company expects Payable gold production in between 3.2 to 3.4 million ounces, which is higher than 2.1 million ounce (including Hope Bay, Meliadine and Amaruq mine ) in FY21. For FY22, the company expects its total cash costs of USD 725 to USD 775 ounce, while its all-in sustaining costs is expected  in between USD 1,000 to USD 1,050 per ounce.

  FY21 Financial highlights:

   FY21 Income Statement Highlights (Source: Company Report)

• AEM announced its full-year result, wherein the company posted its Revenues from mining operations of USD 3,823.8 million, higher than USD 3,138.1 million in FY20. The increase was driven by improved performance from the LaRonde mine and Canadian Malartic mines.
• The quarter was marked by a higher production cost, surge in exploration and corporate development, coupled with an increase in General and administrative expense, partially offset by lower finance costs. Income before income and mining taxes stood at USD 903.4 million, higher than USD 767.5 million in FY20. This was supported by elevated top-line, partially offset by higher input costs.
• Net income for the period stood at USD 543.0 million, grew from USD 511.6 million in FY20, due to increase in income before income and mining taxes while offset by higher income tax expenses.

Valuation Methodology (Illustrative): Price to CF based

Analysis by Kalkine Group

Stock Recommendation:

In FY21, the company posted highest annual production from Meliadine, Kittila and Canadian Malartic, while the LaRonde Complex had its best year ever in terms of tonnage milled. This is a key positive considering the ongoing mine restrictions imposed across several mines. We have valued the stock using the P/CF-based relative valuation method and have arrived at a single-digit (in percentage terms) upside. For the said purposes, we have considered peers like Teck Resources Ltd, Alamos Gold Inc etc. Considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock of AEM at the last traded price of CAD 76.26 on March 15, 2022.

One-Year Technical Price Chart (as on March 15, 2022). Analysis by Kalkine Group

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