Agnico Eagle Mines - All You Need To Know About The Q2 2016 Results

| About: Agnico Eagle (AEM)

Summary

AEM reported net income of $18.99 million, or $0.10 per share and revenue of $537.628 million, up 9.6% quarter over quarter.

AEM increased its production guidance for 2016, now forecast to be approximately 1.58 to 1.6 million ounces (previously 1.565 million ounces). AEM increased dividend by 25%.

AEM is one of my gold miners choice. I recommend AEM as a long-term investment, however, the entire gold sector seems overbought.

Agnico Eagle Mines Ltd. (NYSE:AEM)

Source: Meadowbank picture taken from company website.

This article is following a preceding article on AEM published on May 2, 2016.

Click here to read the conference call transcript.

A Quick Q2'16 - Financial Snapshot:

Q2'16 Q1'16 Q4'15 Q3'15 Q2'15 Q1'15 Q4'14

Revenues

in $ million

537.628 490.531 482.93 508.80 510.11 483.60 503.1

Gold production

in Oz

408,932 411,336 422,328 441,124 403,678 404,210 387,538

Realized gold price

in $

1,268 1,192 1,094 1,119 1,196 1,202 1,202

Cash provided by operating activities

in $ million

229.46 145.70 140.75 143.70 188.35 143.46 -

Net income

$ million

18.99 27.79 (15.54) 1.29 10.08 28.74 (21.3)

EPS - basic

$

0.09 0.13 (0.07) 0.01 0.05 0.13 (0.10)

AISC (by-product)

$/Oz

848 797 813 759 864 804

954

Sustaining CapEx

(Incl. Exploration)

in $ million

78.7

131.6

66.4

100.5

90.4

-

72.0

-

70.8

203

71.9

150

133.4

-

Cash and cash equivalent (including restricted cash and short-term investment)

in $ million

473.7 167.96 131.6 208.1 158.3 172.1 215.3

Long-term debt

in $ million

1,072.8 1,064.8 1,118.2 1,203.3 1,180.3 1,220.1 1,322.46

Dividend per share

In $/share

0.10 0.08 0.08 0.08 0.08 0.08 0.08

Shares outstanding

in million

222.17 219.68 217.84 217.2 215.43 214.6 213.3
Click to enlarge

2016 production guidance:

Expected gold production for 2016 is now forecast to be approximately 1.58 to 1.6 million ounces (previously 1.565 million ounces) with total cash costs per ounce on a by-product basis of $580 to $620 (previously $590 to $630) and AISC of approximately $840 to $880 per ounce (previously $850 to $890).

TB1 - Payable production per quarter and per metal (10 quarters):

Gold

Oz

Silver

K Oz

Zinc

Tonne

Copper

Tonne

Q2 2016 408,932 1,210 1,318 1,141
Q1 2016 411,236 1,125 614 1,154
Q4 2015 422,328 1,153 949 1,354
Q3 2015 441,124 1,037 650 1,302
Q2 2015 403,678 1,106 733 1,131
Q1 2015 404,210 1,032 936 1,167
Q4 2014 387,538 1,043 2,467 1,399
Q3 2014 349,272 830 2,225 989
Q2 2014 326,058 870 3,788 1,060
Q1 2014 366,420 890 2,060 1,554
Click to enlarge

Click to enlarge

TB2 - Production per segment.

Click to enlarge

Commentary:

Agnico Eagle released its second-quarter 2016 results on July 27, 2016. AEM reported net income of $18.99 million, or $0.10 per share and revenue of $537.628 million, up 9.6% quarter over quarter. Gold production was 408,932 Oz. AISC was $848/Oz this quarter, a little higher quarter over quarter.

Revenue was high because of the price of gold.

Mexican Production Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
Pinos Altos 50106 50647 47725 44496 48117 49458
Creston Mascotta 12448 15606 12716 13933 11551 12398
La India 26523 25803 28604 23432 28231 27438
Click to enlarge

The outstanding balance on the company's $1.2 billion credit facility has been paid off and C$20 million was repaid under the Canadian Malartic Partnership. Net debt is at $742 million as of 6/30/2016.

In short, the company is the perfect example of strong balance sheet, efficiency and predictability. A long-term investment by excellence.

The company has increased the dividend from 0.08 per share to now 0.10 per share, or an increase of 25%. It is important to note that the company has been paying dividend regularly for many quarters.

M. Sean Boyd, CEO, indicated in the conference call that Meliadine is now fully permitted. The company will look at Meliadine in the context of "the overall entire Nunavut strategy, so the focus remains on looking at ways that we can optimize construction capital as well as work some of the large resources into the mine plant. So those efforts continue and we will have an update on that early in 2017."

Conclusion:

AEM closed on Friday at $58.14 and started the year at approximately $27. This is a huge appreciation for a short period of time, and I believe the stock, while not technically overbought yet, seems overpriced now. Taking some profit off the table should be considered as a priority here, because any tiny hiccup regarding production or uncertainty about future gold price will trigger an important selloff, in my opinion.

Click to enlarge

Technically, I estimate that the resistance should be around $60, and the downside from here, could be around $51.50 (first support).

If the first support does not hold, then we will have to look for the low-$40s eventually. Personally, I started to take profit off the table at $56, and will continue on any upside. My goal is to bring down my long-term AEM position by about 40%.

Important note: Do not forget to become one of my followers with AEM and the gold miners. Thank you.

Disclosure: I am/we are long AEM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.