Current shareholders should continue to hold Agnico-Eagle Mines (AEM) long-term, and interested investors should consider initiating a position on this gold mining stock as soon as possible. Agnico-Eagle Mines reported strong production and earnings in its recent SEC filing and has also been one of the best performing stocks in the gold mining industry throughout 2012. If the price continues to increase as expected, Agnico-Eagle Mines' stock may continue its strong growth through 2013, as well. In the most recent quarter, Agnico-Eagle Mines was able to achieve record production on two assets while decreasing cash costs per ounce of gold on half of its assets.
Barrick Gold (ABX), Goldcorp (GG), Freeport-McMoRan Copper & Gold (FCX), and Newmont Mining (NEM) are the mining firms most comparable to Agnico-Eagle Mines due to mutual diversity and focus on mining gold. Agnico-Eagle Mines' price is around 22.8 times its forward earnings, 5.0 times sales, and 2.9 times its book value. Agnico-Eagle Mines has the highest forward price-to-earnings ratio among these firms; Barrick's 7.7 forward price-to-earnings ratio is the lowest among these firms. Agnico-Eagle Mines' current ratio is around 2.54, and its debt-to-equity ratio is around 0.26; Goldcorp's 0.03 debt-to-equity ratio is the lowest among the firms. Agnico-Eagle Mines' annualized dividend is around $0.80 per share.
Agnico-Eagle Mines' -$3.30 EPS and 267.7% decline in 2012, are the worst among the firms; its 29.2% EPS growth projected for 2013 is only 110 bps higher than Newmont Mining's projection. Agnico-Eagle Mines' 30.23% sales growth through the past five years is the highest among the firms, and it is around 100 bps higher than Freeport's respective growth. Its -15.8% ROE, -40.6% operating margin and -29.4% profit margins are substantially lower than the aforementioned firms. Its float short is around 1.4%, and its short ratio is around 1.3. Its beta is around 0.4 while its 1.8 million average trading volume is the lowest among the firms. This stock has increased 55.4% YTD, 7.4% over the past month, and has increased around 2.7% since its last earnings release.
On its recent earnings release, Agnico-Eagle Mines' third quarter revenue totaled $537.7 million, increasing from $515.4 million YOY; for the first nine months in 2012 revenue totaled $1.44 billion, increasing from $1.36 billion YOY. Third quarter production costs totaled $220.4 million, decreasing from $237.19 million YOY. Third quarter operating margin from Agnico-Eagle Mines' six assets totaled $315.42 million, increasing from $283.34 YOY. Third quarter net income totaled $106.32 million, increasing from a net loss of $81.61 million YOY. Long term debt at the end of September totaled $800 million, declining from $920.09 million at the end of 2011. Agnico-Eagle Mines finished the third quarter with $320.8 million in cash and cash equivalents, increasing from $116 million YOY.
Third quarter gold production totaled 286,971 ounces, increasing from 265,978 ounces of gold YOY; gold production at Meadowbank totaled 110,988 ounces increasing from 78,141 ounces YOY. Third quarter silver production totaled 1.14 million ounces, decreasing from 1.46 million ounces YOY. The average realized price for gold in the third quarter was $1,695, decreasing from $1,717 YOY; the average price for silver was $33.91, decreasing from $37.37 YOY. Agnico-Eagle Mines' third quarter total cash cost for gold averaged around $556 per ounce, decreasing from $563 per ounce YOY
Aside from 110,988 gold ounces being a record quarterly production at Meadowbank, it's also noteworthy that Agnico-Eagle Mines was able to lower cash costs to $734 per ounce of gold from $1,033 per ounce YOY. Operating margin at Meadowbank totaled $104.25 million, increasing from $46.47 million YOY. Agnico-Eagle Mines also realized quarterly record production at its Kittila asset totaling 48,619 ounces of gold, increasing from 37,924 ounces YOY. Third quarter total cash cost at Kittila averaged $478 per ounce, decreasing from $694 YOY. Third quarter operating activities provided $199.5 million in cash, also a quarterly record for Agnico-Eagle Mines.
The more the price of gold rises based on speculations and economic uncertainty, the more miners like Agnico-Eagle Mines are able to leverage their fixed costs as production rates increase. When extraction costs are managed effectively, the gold mining business can be very lucrative for these firms. In comparison to gold prices, owning a stake in gold mining firms is a very attractive and much affordable option for many investors. Finding mining firms like Agnico-Eagle Mines that are able to manage their business costs as well as the mine-level costs is essential; the absolute costs of mining gold can run as high as $1,300 per ounce when costs like fuel, equipment, labor and overhead costs are considered as well. In regions like Africa or South America, many of these firms allocate costs for road, infrastructure, housing, and hospitals as well.
Identifying gold mining firms that are reinvesting in operations opposed to buybacks and dividend payouts is also advisable when looking for a firm with strong long-term projections. The recent resurgence in gold's price through late summer and early fall is based on the Fed's announcement for continual QE3 and the bailout efforts made in Europe. The impending threat of inflation is a strong proponent for higher gold prices in the near to long-term. Under consideration of the economic instability, investors of all types should have gold as a countermeasure, or insurance, as a part of their portfolio. Central banks around the world are heavily focused on gold, they accounted for 16% of the purchases in the most recent quarter, doubling their rate from the prior year.
Central banks and consumers in Asia are also looking to gold more often for investment purposes. An analyst at HSBC Securities projects the price for gold to increase to $1,900 in the current quarter and average $1,850 throughout 2013. Another analyst, at Deutsche Bank, expects gold to reach $2,100 in 2013. It's clear that gold's price is moving upwards as a result of the current economic environment; Agnico-Eagle Mines' stock has increased the most closely in correlation with the recent upticks in gold's price. Agnico-Eagle Mines' increased production and reduced operating costs in the recent quarter suggest this trend may continue.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.