Agnico Eagle Mines (TSX: AEM) is a senior Canadian gold mining company operating mines in Canada, Mexico, and Finland. It also owns 50% of the Canadian Malartic mine. Agnico Eagle is focused on increasing gold production in lower-risk jurisdictions.

Key highlights 

• Production and CAPEX Guidance for 2021: The Company is creating the highest senior gold production and is expected stable gold production in 2021 to 2.04 million ounces (approx.). The total cash costs per ounce and AISC per ounce continue to be forecast in the range of USD 700 to USD 750 and USD 950 to USD 1,000, respectively. Total capital expenditures guidance for 2021 remains unchanged at USD 803.0 million (approx).
  

• Merger update with Kirkland Lake Gold: The proposed merger with Kirkland Lake Gold will change the size, scale, and assets of AEM. This Synergy will boost the cashflows, Revenue, EBITDA, AISC and increase per share value of the company. The Merger is expected to close in the first quarter of 2022. Additional details on management structure, guidance and capital allocation expected to be announced during Q4 2021 results in February 2022.

Source: Company PPT 

• Development and exploration activities: The company’s underground activities are focused on extending the main ramp and developing the first production levels and an exploration drift at Odyssey South. All surface construction activities and the purchase of long lead items remain on target. Underground exploration began at the Odyssey South and Internal Zones in July and a second drill will be added in the fourth quarter of 2021.
  

• Positive Drilling Results: The Company's exploration focus remains on pipeline projects and near mines opportunities. Company is developing three exploration drifts to explore below LZ5 and west of the 20N Zone. Initial drilling from track drift 9.0 has started in Q3 2021. Also, the company is targeting significant growth in mineral reserves through extensive drilling.
  

Risks associated with investment

The Company's business is subject to several risk factors, including the risk of workforce cost, projects cost to improve productivity, climate related risks, governance structure and COVID 19 risk which directly impacts employee health and productivity. 

Financial overview of Q3 2021 in thousands of USD, excepts per share amounts

Source: Company’s Filings 

• In Q3 2021, The Gold production has increased to 541,663 ounces as compared to 492,693 ounces in Q3 2020, primarily due to the contribution of gold production from the Hope Bay mine and increased gold production at the Meadowbank and LaRonde Complexes and the Canadian Malartic and Kittila mines.
  

• The Company’s Production costs is USD 452.1 million in Q3 2021, a 9.5% increase as compared to USD 412.8 million in the Q3 2020. It is due to higher mining and milling costs at the Meadowbank Complex and the addition of production costs from the Hope Bay mine that was acquired in the TMAC transaction.
  

• Revenues from mining operations decreased to USD 974.1 million Q3 2021 as compared to USD 980.6 million in Q3 2020 Due to lower average realized price of gold and silver of around 6.5% and 7.2% respectively.
  

Valuation Methodology (Illustrative): EV to EBITDA based Valuation Metrics

Analysis by Kalkine Group 

Stock recommendation

The company, despite pandemic restrictions, the company’s gold production in Q3 2021 was higher than previous corresponding period. Furthermore, the merger compliances with Kirkland expected to complete in first quarter of 2022, post-merger the company is expecting the sound revenue growth and estimating a USD 2.0 billion of revenue over 10 years. Therefore, based on the above rationale and valuation, we recommend a “Buy" rating on the stock at the closing price of CAD 65.17 on January 11, 2022.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Summary Analysis

One-Year Technical Price Chart (as on January 11, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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