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Comments (24)

Taylor, what’s going on with AEM currently? Up 9% over the past 30-days! A lot of folks must be following you . . . stealthily, of course.

I always thought that NEM was the bellwether.
nice article Taylor and as always appreciate your work. AEM just a class act, and as you point out....you are paying up to own versus the other 2-3 class acts that are currently undervalued in the market. Love to buy the name the few times it has come under strong pressure.....and will wait for those opportunities to add in the future.
Taylor Dart profile picture
@tman1 Thanks, flattered to hear. Agree, will be a time and place for AEM, but think need a sub $56.00 price to bake in the right margin of safety, whether it dips there or not is another story.
@Taylor Dart, after today’s run to almost $ 65, $ 56 may be in the rear
view mirror. AEM led the others by a country mile - up 2.1% while the others digested the week’s gains.

BTG very strong this week. Any article coming out this week?
Taylor Dart profile picture
@Miners to the Moon Hi MTTM,

Not suggesting AEM has to hit $56 this year or even next year for that matter, but in long-term accounts where I hold 3-5 years, I don't chase, I just wait for my prices. KL & NEM hit my buy zones and AEM didn't so I'd rather miss than chase, chasing just creates bad habits of over-paying.

I will have a BTG article coming out this week, I'm not that bullish on it from these levels.
Thx Taylor once again! Holding my small aem position, adding to the larger KL position and largest nem. Looking for a pm breakout at resistance this week looking to start new otm or itm call positions if that happens?
Taylor Dart profile picture
@RWilliam Happy to hear it was of value, thanks for reading! I don't really use options that often, if I want leverage I just use margin on common stock, so can't really comment.
Thanks Taylor, I quite like Agnico but won’t buy as I have exposure via the Abitibi Royalty shares that are owned by Golden Valley. I also prefer KL as a major or K92 (adding hugely to their resources), tony
Taylor Dart profile picture
@tonyconnolly No prob! Happy it was of value. Abitibi and Golden Valley are decent names, I've never traded either or followed them closely as I can't trade them due to liquidity issues.
On Dec. 1, you said Agnico Eagle: Potential For A Monster Breakout have you changed your mind?
krauch023 profile picture
Another concise and insightful analysis - I like your style of writing.

One thing to keep in mind is that ore reserves will vary with the market price of the metals being mined. For example, as the price of gold goes down, marginal ore blocks fail to justify mining and will be transferred to the resources category. Conversely, when gold prices go up, lower grade resource blocks can become part of the minable reserve.

This type of adjustment occurs regularly in most mines (not just gold), often on a daily basis. It's called grade control and is performed by an army of mine geologists (like me before I retired). Formal reserves are reported annually and reflect these adjustments.

It also means that a mine can sit idle with no production, but it's reserves can change from year to year with the price of gold.
Taylor Dart profile picture
Hi Krauch,

Thank you & thanks for reading. Good points. So far I like that the major miners are keeping their reserve assumptions at $1,300/oz or lower as it suggests a good amount of upside if gold goes higher, but not a major issue if gold does retrace since most majors aren't moving any marginal projects or ore into reserves, nor are they sacrificing on quality and acquiring more marginal projects like in the last cycle.
Another solid piece, Taylor. Several writers see doubles on g/s miners within the next 1-3 years. Do you agree? If this happens, NEM, AEM,
PAAS and even little HL will easily smash their all-time highs.
Taylor Dart profile picture
@Miners to the Moon Thank you.

I have no idea, so much depends on commodity and material prices (not just gold, but oil, steel) and I think it's extremely irresponsible to throw out $2,700/oz gold prices or $50/oz to $100/oz silver prices and make assumptions for price targets based on these prices. There are many less experienced investors that don't know better that haven't traded through a cycle or two in this sector, and many pile up significant losses with expectations that stocks are 'easy' doubles.

There are no easy doubles in my opinion, and certainly not when a company relies on where several different commodities trade at a given time for its margins and earnings. I just buy companies that are cheap and use a discount to spot gold prices to make my assumptions of 'cheap', so I don't rely on the commodity for my thesis work. I try to avoid price targets or long-term targets because no one knows where commodities are going or where the general market is going. Instead, I try to find 'fair value' and buy at a large discount to that fair value.
@Taylor Dart, one more question: do you see AEM increasing its
2.3% dividend again soon? Maybe now we’re all spoiled by NEM’s leading 3.6% payout.
Taylor Dart profile picture
I think it's unlikely this year unless it's a very small raise. They've got a lot of projects and capex over the next 3-4 years between a new development project (UB or HR or both), Hope Bay studies/expansion, Odyssey, and potential M&A.

I like the raise by NEM because they're the world's biggest producer and really can't grow from here, just maintain or grow incrementally, it makes sense to return FCF. I don't like raises from sub 2.5 million-ounce miners that are already paying 2% or more - focus on growth, that's where the real returns will be.
Aureus Denarii profile picture
Taylor, appreciate the valuation on AEM. Long KL, AGI and WPM. Currently looking for quality miners and streamers to own and back off on the paper gold for my allocation.

Thank you
Taylor Dart profile picture
@DRE Retired Happy it was of value, thanks for reading!
When do you think gold will be reevaluated?
Very good article but you didn’t explain what better opportunities there are in the sector or why they are better than AEM.
Taylor Dart profile picture
Hi Jeff,

Thanks. I only share my top ideas in my private newsletter at www.tfsignals.com, but I did note in the article the discrepancy between KL & AEM's valuation, which inferred that I see that as better value, and I've written extensively on KL on this site.

"However, while Agnico clearly wins for reserve grade and jurisdictional profile in the sector, the stock is not cheap, trading at nearly ~$660.00 per reserve ounce on an enterprise value basis. Meanwhile, Kirkland Lake Gold (which beats Agnico on jurisdictions) trades closer to $400.00/oz, with its lower grade reserve base being offset by much higher-margin production.

This is based on Kirkland Lake's all-in sustaining cost guidance of ~$800/oz in FY2021, compared to Agnico's cost guidance of $975/oz. Agnico should get some points added for its significant organic growth potential, which Kirkland Lake lacks unless additional high-grade reserves are added at Fosterville, or Kirkland Lake makes another bolt-on acquisition. Still, this large discrepancy (~$660/oz vs. ~$400/oz) suggests that Kirkland Lake offers better value than Agnico, in my opinion."
BlueTower5000 profile picture
Nice write up. I like AEM at $60 but also believe there are better buys currently like NEM, KL, and GOLD. I own all 4 though because I like the teams managing all 4 and believe gold has a lot of upside in the not too distant future.
Taylor Dart profile picture
Hi BT,

Thank you & thanks for reading.
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