Agnico Eagle - All You Need To Know About The Q4 2016 Results (Graphs Included)

| About: Agnico Eagle (AEM)

Summary

Agnico Eagle released its Fourth-quarter 2016 results on February 15, 2017. Revenues were a little light at $499.21 million or down 18.3% quarter over quarter.

The company expects a production of 2 million ounces of gold in 2020. Dividend are unchanged this quarter at $0.10 per share.

AEM is a long-term investment and should be accumulated on a regular basis.

Agnico Eagle Mines Ltd. (NYSE:AEM)

Source: Meadowbank picture taken from company website.

This article is following of my preceding article on AEM published on October 28, 2016.

To read the conference call transcript click here

Investment Thesis:

Agnico Eagle is one of my main investments in the "gold miner" segment, with Newmont Mining (NYSE:NEM) and more recently Barrick Gold (NYSE:ABX). It is a strong company who owns nine first-class mines producing, with a strong pipeline of projects that allows the company to give a long-term guidance.

M. Sean Boyd, CEO, said it clearly:

As we look at our quarter and our year and our positioning, our operations continue to perform extremely well. They are exceeding targets and they are generating significant cash flow.

Our reserves are growing and that's largely due to a commitment to exploration. Not just at our existing mines were we're seeing those deposits grow, but also in the project pipeline where we're also seeing deposits grow that will form future important parts of our mine plan as we move forward.

Our production profile will see Us producing 2 million ounces in 2020

A Quick Q4'16 - Financial Snapshot trend:

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

Revenues

in $ million

499.21 610.86 537.63 490.53 482.93 508.80 510.11 483.60 503.1

Gold production

in Oz

426,433 416,187 408,932 411,336 422,328 441,124 403,678 404,210 387,538

Realized gold price

in $

1,198

1,332

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

Cash provided by operating activities

in $ million

120.60 282.86 229.46 145.70 140.75 143.69 188.35 143.46 -

Net income

$ million

62.65 49.392 18.99 27.79 (15.54) 1.29 10.08 28.74 (21.3)

EPS - basic

$

0.28 0.22 0.09 0.13 (0.07) 0.01 0.05 0.13 (0.10)

AISC (by-product)

$/Oz

830 821 848 797 813 759 864 804

954

Sustaining CapEx

(Incl. Exploration)

in $ million

-

156.4

80.0

146.8

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

548.4 627.4 473.7 168.0 131.6 208.1 158.3 172.1 215.3

Long-term debt

Net debt

in $ million

1,202.7

666.5

1,203.3

587.9

1,203.1

741.7

-

1,132.6

1,012.3

- - - 1,322.46

Dividend per share

In $/share

0.10 0.10 0.10 0.08 0.08 0.08 0.08 0.08 0.08

Shares outstanding (basic)

in million

224.79 224.31 222.17 219.68 217.84 217.18 215.43 214.6 213.3

From the pr: Not included in the fourth quarter of 2016 adjusted net income above are lower sales volume relative to total ounces produced, net of tax (approximately 30,620 ounces fewer), representing $13.1 million ($0.06 per share), lower realized gold and silver prices compared to average spot prices both 2% lower than the quarterly average, $5.7 million ($0.03 per share) and non-cash stock option expense of $4.2 million ($0.02 per share).

Not included in the fourth quarter of 2016 adjusted net income above are lower sales volume relative to total ounces produced, net of tax (approximately 30,620 ounces fewer), representing $13.1 million ($0.06 per share), lower realized gold and silver prices compared to average spot prices both 2% lower than the quarterly average, $5.7 million ($0.03 per share) and non-cash stock option expense of $4.2 million ($0.02 per share). - See more at: www.agnicoeagle.com/English/investor-rel...

2017-2020 production guidance.

Year Production in Au Oz
2017 1,555,000
2018

1,500,000

2019 1,600,000
2020 2,000,000

Total mineral reserves in 2016 were 19.94 M Oz.

Total CapEx for 2017 is approximately $859 million ($284 million in sustaining capEx and $553 million in development capEx).

Commentary:

Agnico Eagle released its Fourth-quarter 2016 results on February 15, 2017. Revenues were a "little light" at $499.21 million or down 18.3% quarter over quarter. The market was not happy with the results and the stock sold off nearly 5% today.

The revenues were lower than expected because:

  1. First, the company sold 30,620 less ounces than produced or $13.1 million, and gold/silver prices realized were 2% lower than the actual spot price.
  2. Second, the 3Q'16 results were an atypical quarter, due to a high gold price. In fact total production in 4Q'16 was up 2.5% quarter over quarter.

2016 gold reserves increased by 5.0% to 19.9 million ounces (268.4 million tonnes grading 2.31 grams per tonne ("g/t") gold) - Measured and indicated mineral resources increased by 9%, while inferred mineral resources decreased by 4%.

Net debt at the end of 2016 was $666.5 million or 34.2% year over year. CEO Sean Boyd said in the conference call:

Looking at our balance sheet, as we said, we have reduced net debt down in 2016 by a little over $340 million. We have a debt repayment schedules that is very manageable, even in the context of the additional investment that we're putting out to grow our pipeline and build a new emerging platform in Nunavut. We've got cash on hand over $500 million at the yearend and as we said, with a fully undrawn facility at $1.2 billion.

Production per mine in 2016 was very good with MeadowBank and LaRonde doing very well, whereas Lapa and Goldex were not performing well as we can see below.

LaRonde complex is expected to reach over 400k Oz when the Bousquet zone (LaRonde5) will be completed. Also good performance expected in Meliadine/Amaruq as well as Kittila in Finland.

Conclusion:

AEM released a solid quarter, albeit revenues were light as explained above. The sell off today was more technical in nature than related to the balance sheet.

The company is one of the most consistent and most reliable in the industry, and I am pleased with my investment. Good balance sheet and low-level debt that will be reduced to nearly $500's million in 2017.

Technically, AEM shows a descending broadening wedge pattern called also megaphone, which is generally bullish. This type of pattern indicates volatility, which is evident with gold price now. However, depending on the gold price which is of a paramount importance, the stock may retest the $45 support and stay there for the near future.

I recommend to hold AEM, and eventually add a little in the $45 level or take some profit off the table anytime the stock is testing the resistance at $50+.

Important note: Do not forget to follow me on AEM and other gold miners. Thank you for your support.

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.

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