Company Reports

No-moat Agnico Eagle’s first-quarter 2024 result was another good one and in line with our expectations. The purchase of the remaining 50% of the Canadian Malartic mine from Yamana Gold in March 2023 drove a 12% increase in gold sales volumes to about 880,000 ounces. We expect a similar run rate over the rest of the year and continue to forecast 2024 sales of roughly 3.45 million ounces, the midpoint of unchanged guidance. Higher gold prices were another tailwind, helping more than offset an 8% rise in unit cash costs due to inflation, with adjusted EBITDA rising 26% to about USD 930 million. We forecast 2024 EBITDA of roughly USD 3.9 billion, up 20% on 2023 due to higher gold sales volumes and prices more than offsetting increased unit cash costs. Free cash flow of roughly USD 400 million—about USD 0.79 per share—was also strong, up by about half on the same period last year.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its four cornerstone assets each produce roughly 350,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank and Meliadine. All four are in Canada. These mines accounted for around 60% of the company’s production of 3.4 million ounces of gold in 2023, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2023.

Commodity prices diverged in the quarter. Despite solid China steel production, iron ore and metallurgical coal prices are down, while copper rose on supply issues and hopes of faster global growth. However, prices are elevated compared with history and cost-curve support.

Iron ore prices are lower on concerns over China steel demand due to its struggling property market and weak infrastructure spending. However, gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 51. It remains the cheapest miner we cover, trading 27% below fair value.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its four cornerstone assets each produce roughly 350,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank and Meliadine. All four are in Canada. These mines accounted for around 60% of the company’s production of 3.4 million ounces of gold in 2023, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2023.

Demand growth from China has been the main driver of rising commodity prices in the past two decades. More recently, though, most commodity prices have fallen from highs set with Russia’s invasion of Ukraine, the subsequent sanctions on Russia, and the rerouting of supply chains. Prices, nevertheless, are generally elevated versus the 20-year average, as well as relative to cost support.

Our fair value estimate for no-moat Agnico Eagle is unchanged at USD 54 per share after its 2023 result was broadly in line with our expectations. Adjusted EBITDA of roughly USD 3.2 billion was modestly higher than our forecast and 20% up on 2022, driven by increased gold sales volumes and price, partially offset by higher unit cash costs. Adjusted net profit after tax of about USD 1.1 billion rose 9% on 2022, affected by additional depreciation and amortization from purchasing the remaining 50% of the Canadian Malartic mine from Yamana Gold in March 2023. Accounting rules mean Agnico revalued its initial 50% stake in Canadian Malartic, contributing to higher depreciation and amortization. Along with the increased share count from this acquisition, EPS was modestly lower than in 2022, at USD 2.24 per share. However, we think accounting earnings don't reflect the company’s underlying performance. Free cash flow per share rose by roughly half, to USD 1.94 per share, a solid result in our view. While Agnico paid a total price for the remainder of Canadian Malartic, we think there are opportunities to expand production while potentially also developing the Wasamac deposit that came with the acquisition.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its four cornerstone assets each produce roughly 350,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank and Meliadine. All four are in Canada. These mines accounted for around 60% of the company’s production of 3.4 million ounces of gold in 2023, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2023.

Near-term iron ore prices are higher on strong China steel production. Gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 54. It is the cheapest we cover, trading 30% below fair value.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its five cornerstone assets each produce roughly 300,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank, Meliadine, and Fosterville. Four of the five are in Canada. These mines accounted for around two thirds of the company’s production of 3.1 million ounces of gold in 2022, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2022.

Commodity prices diverged in the quarter with strong China steel production driving iron ore and metallurgical coal prices up, while base metals prices dropped on worries of a Western recession. Even so, prices are elevated versus history and cost-curve support.

No-moat Agnico Eagle’s 2023 third-quarter result met our expectations. Adjusted EBITDA of USD 760 million increased 13% on the same quarter of 2022, driven by higher gold sales volumes and price, partially offset by increased unit cash costs. Adjusted net profit after tax of roughly USD 220 million was similar to last year due to higher depreciation and amortization from the purchase of the remaining 50% of the Malartic mine from Yamana Gold in March 2023. However, the increased share count from this acquisition meant EPS was 10% lower, at USD 0.44 per share. Similar to last year, and consistent with its quarterly dividend payout policy, Agnico will pay a USD 0.40 (roughly CAD 0.56) per share dividend in December. Free cash flow was roughly USD 80 million, down from USD 140 million last year due to increased working capital, likely mostly temporary. The balance sheet is sound. Net debt was USD 1.6 billion at end September 2023, around 0.5 times trailing 12 months EBITDA.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its five cornerstone assets each produce roughly 300,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank, Meliadine, and Fosterville. Four of the five are in Canada. These mines accounted for around two thirds of the company’s production of 3.1 million ounces of gold in 2022, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2022.

Strong China steel production is supporting prices for steel inputs despite recession concerns. Otherwise, changes to our commodity price assumptions are mixed, led by higher near-term iron ore prices and lower near-term thermal coal prices. We think thermal coal miner Whitehaven Coal and minerals sands miner Iluka are the cheapest we cover. Both trade at 29% discounts to our AUD 9.50 and AUD 10.50 per share fair value estimates, respectively, with Whitehaven’s down 3% on lower near-term thermal coal prices, partially offset by a weaker Australian dollar. Peer New Hope is also down 3% to AUD 6.10 per share. Iluka’s estimate is unchanged, with a weaker Australian dollar offsetting lower synthetic rutile prices.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its five cornerstone assets each produce roughly 300,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank, Meliadine, and Fosterville. Four of the five are in Canada. These mines accounted for around two thirds of the company’s production of 3.1 million ounces of gold in 2022, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2022.

Commodity prices have generally stabilized after falling on concerns that China’s reopening would underwhelm, along with worries over a recession in the West. Even so, they remain elevated versus history and cost-curve support. The Russian invasion of Ukraine and subsequent sanctions on Russia support energy prices and reinforce the importance of energy security.

No-moat Agnico Eagle’s 2023 second quarter result was solid. EBITDA of USD 975 million was 6% higher than the previous corresponding period, or PCP, driven by higher gold sales volumes and a higher realized gold price, partially offset by increased unit cash costs. However, EBITDA per share of roughly USD 2 was similar to the second quarter of 2022 due to Agnico’s increased share count driven by its purchase of the remaining 50% of its Canadian Malartic mine from Yamana Gold in March 2023. This acquisition also drove higher depreciation and amortization, with adjusted net income falling 10% to roughly USD 320 million, or USD 0.65 per share. On balance, we think the roughly unchanged EBITDA per share compared with the PCP is a more accurate reflection of Agnico’s second-quarter performance.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its five cornerstone assets each produce roughly 300,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank, Meliadine, and Fosterville. Four of the five are in Canada. These mines accounted for around two thirds of the company’s production of 3.1 million ounces of gold in 2022, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2022.

No-moat Agnico Eagle’s 2023 first-quarter earnings were solid. Adjusted net income of USD 270 million, or around USD 0.57 per share, was up around 10% versus the same quarter of 2022. Adjusted EBITDA of about USD 730 million was roughly 25% higher than the first quarter of 2022, driven by 14% higher gold sales to nearly 800,000 ounces, partially offset by higher unit cash costs. Greater volumes reflect increased production from Agnico’s Meadowbank mine and a full quarter of sales from the Detour Lake, Macassa, and Fosterville mines compared with about two months in the first quarter of 2022. Agnico bought these three mines via its merger of equals with Kirkland Lake Gold in February 2022. The company’s average realised gold price of about USD 1,890 was similar to last year. However, unit cash costs of around USD 830 per ounce were 3% higher on the same quarter of 2022 given continued inflation, partially offset by foreign exchange.

We recommence coverage of senior gold miners Newmont, Barrick Gold, Agnico Eagle Mines, and Kinross Gold with fair value estimates of USD 54, USD 21, USD 53, and USD 5.20 per share, respectively. We do not allocate a moat to any of these companies. Newmont, Barrick Gold, and Agnico Eagle have Medium fair value Uncertainty Ratings, while Kinross has a High Uncertainty Rating partly reflecting its greater financial leverage.