Agnico Eagle: Q1 2021 Detailed Analysis
Summary
- Agnico Eagle reported its 1Q'21 results on April 29, 2021. Revenues were $934.39 million, up 39.1% compared to the same quarter a year ago and up 0.6% quarter over quarter.
- Agnico Eagle had a strong gold production this quarter. Production was 516,804 Au Oz, up 3.1% sequentially.
- AEM is one of my long-term gold miners. I recommend accumulating below $60.5.
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Investment Thesis
Agnico Eagle (NYSE:AEM) is one of my favorite long-term gold miners that I have been regularly following on Seeking Alpha for many years.
On April 29, 2021, the gold miner reported a net income of $136.15 million, or $0.56 per diluted share, during first-quarter 2021, up from a loss of $21.57 million, or $0.09 per diluted share, recorded in the same quarter last year. The adjusted earnings per share came in at $0.67. The miner beat expectations this quarter.
Agnico Eagle 1Q 2021 revenues were $934.4 million, up 39.1% compared to the same quarter of 2019.
Total Production for 1Q came at 516,804 ounces in the first quarter (including Hope Bay mine and Meliadine/Tiriganiaq), up 25.6% compared to 1Q 2020.
Agnico Eagle, Newmont (NEM), Barrick Gold (GOLD), and Kirkland Lake Gold (KL) are my core long gold miners.
We can see that the group and the VanEck Vectors Gold Miners ETF (GDX) have not performed well on a one-year basis despite reporting record revenues.
A quick look at Agnico Eagle's production from 4Q 2020 to 1Q 2021 shows another excellent quarter, with Canadian Malartic, Meliadine, and Kittilä producing at a record high. Agnico Eagle presently produces from ten mines.
The investment thesis continues to be the same, quarter after quarter. Agnico Eagle presents a solid financial profile that fits the requirements of a savvy investor's balanced portfolio. The company is generating free cash flow and pays a safe dividend.
Thus, as I have said in my preceding articles, I recommend accumulating this gold miner on any weakness for the long term.
However, it's crucial to trade short-term a minimum of >30% of your AEM position to benefit from the current gold volatility.
I call it "trading your long-term position." It allows investors to narrow the risks of sharp corrections that always happen along the way. A simple look at the chart above gives you a good idea.
Sean Boyd, the CEO, said in the conference call:
So no change in the strategy. It continues to be focused on optimizing the existing assets through taking advantage of the ability to convert more resource to reserve, extending the mine lives of our key mines. That’s a low risk, high quality strategy given that those are high quality ounces near existing infrastructure.
AEM - Financials and Production in 1Q 2021 - The Raw Numbers
| Agnico Eagle | 1Q'20 | 2Q'20 | 3Q'20 | 4Q'20 | 1Q'21 |
| Total Revenues in $ Million | 671.9 | 557.2 | 980.6 | 928.5 | 934.4 |
| Net Income in $ Million | -21.6 | 105.3 | 222.7 | 205.2 | 136.1 |
| EBITDA $ Million | 204.6 | 272.0 | 527.3 | 489.9 | 432.9 |
| EPS diluted in $/share | -0.09 | 0.43 | 0.91 | 0.84 | 0.56 |
| Cash from operations in $ Million | 163.4 | 162.6 | 462.5 | 403.5 | 356.4 |
| Capital Expenditure in $ Million | 168.8 | 170.5 | 195.3 | 224.7 | 181.9 |
| Free Cash Flow in $ Million | -5.5 | -7.8 | 267.2 | 178.8 | 174.5 |
| Total Cash $ Billion (including equity securities) | 1.34 | 0.51 | 0.32 | 0.41 | 0.13 |
| Total Debt in $ Billion | 2.71 | 1.81 | 1.56 | 1.57 | 1.57 |
| Dividends per quarter in $/ share | 0.20 | 0.20 | 0.35 | 0.35 | 0.35 |
| Shares outstanding diluted in million | 240.2 | 242.8 | 243.9 | 244.1 | 244.2 |
Source: Company filing and Fun trading.
1 - Gold Production Details
Agnico Eagle had a strong gold production this quarter. Production was 516,804 Au Oz, up 3.1% sequentially.
The gold production includes 12,259 ounces of payable gold production at Hope Bay and including 8,123 ounces of pre-commercial production of gold at the Tiriganiaq open pit at Meliadine.
LaRonde, Meliadine, Meadowbank, Canadian Malartic, and Kittila are the five primary producing mines. Hope Bay mine is a new mine for the company.
Source: Presentation
All-in sustainable costs, or AISC, are now down sequentially, with an average of $1,007 per ounce in 1Q'21. AISC is up sequentially from $985 per ounce the preceding quarter.
Sean Boyd, the CEO, said in the conference call:
As far as the quarter goes, record production for the second consecutive quarter as we said. Without Hope Bay, it was 505,000 ounces, which is a record. That sets us up nicely to beat our guidance but also to produce two million ounces for the first time in our history over two million ounces. That’s over 300,000 ounces more than we produced in 2020.
Guidance for 2021 unchanged
The company expects gold production guidance for 2021 at a mid-point of 2.0475 million ounces.
The company anticipates that total cash costs per ounce and AISC per ounce for 2021 will range from $700 to $750 and $950 and $1,000, respectively.
Capex is expected to be between $750 million and $800 million through 2024. Capex for 2021 will be $803 million.
2 - Balance Sheet Analysis
1 - Revenues of $934.39 million in 1Q'21
Agnico Eagle reported its 1Q'21 results on April 29, 2021. Revenues were $934.39 million, up 39.1% compared to the same quarter a year ago and up 0.6% quarter over quarter.
The company posted a $136.15 million net income, or $0.56 per diluted share, in the first quarter of 2021.
The total cash costs per ounce for gold production were $734 per ounce.
Source: Presentation
The gold price realized was $1,780/Oz during the first quarter of 2021. The total cash from operating activities was $356.4 million in the quarter, more than double year over year (please see table).
Despite a weakening gold price, the company managed to get nearly $1 billion in revenue. Furthermore, the silver price is also a component for Agnico Eagle and has been climbing as well. The silver price realized is now over $26.13 per ounce.
2 - Free cash flow analysis
Trailing free cash flow was $597.8 million ("TTM"), and the free cash flow for 1Q'21 was $174.5 million.
Free cash flow generation is expected to be strong in the next few quarters, and the company decided to keep the quarterly dividend at $0.35 per share.
3 - Net debt was $1.44 billion in 1Q'21
Agnico Eagle has solid financials with a low net debt of $1.44 billion, up sequentially from $1.16 billion.
The debt profile is what we want to see to justify a long-term investment.
The net debt increase is due to the acquisition of TMAC Resources on February 2, 2021, representing a cost of C$286,611,708.
Agnico Eagle had total cash of $131.95 million in 1Q compared with $1,339.64 million as of March 31, 2020. Long-term debt was around $1,565.89 million, compared with $2,712 million in 1Q'20.
Financial position from Presentation:
Source: Presentation
4 - Agnico Eagle 2020 Reserves
The 2020 Reserves (Proven and Probable) is growing.
- 24.082 Au Moz
- 27.767 Ag Moz
- 84,987 Cu M Metric Tonnes
- 115.454 Zc M Metric Tonnes
Technical Analysis
Agnico Eagle forms a symmetrical wedge pattern line resistance (97%) at approximately $66.8, and line support is approximately $60.4
Warning: The TA analysis is only a picture-in-time and must be updated frequently to help in your short-term trading strategy. It is what I am regularly doing for my subscribers.
The short-term strategy that I recommend is indicated in the chart above. Selling at $67 to $71 (200MA), about 30% of your position gradually accumulates between $61 and $60. The RSI is now descending at 48, which confirms the accumulation range.
However, AEM is highly correlated to the price of gold. The company is relying on the gold price almost exclusively (97%).
Source: Presentation
If the gold price turns bullish and can cross $1,800 per ounce, we could see the $80s again. Conversely, if the gold price crosses $1,700 again, AEM may eventually trade below $56.
Watch gold like a hawk.
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This article was written by
I am a former test & measurement doctor engineer (geodetic metrology). I was interested in quantum metrology for a while.
I live mostly in Sweden with my loving wife.
I have also managed an old and broad private family Portfolio successfully -- now officially retired but still active -- and trade personally a medium-size portfolio for over 40 years.
“Logic will get you from A to B. Imagination will take you everywhere.” Einstein.
Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.
Analyst’s 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.
I trade short-term AEM as well.
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