Precious metals have outshined equities so far this year, and when gold soars, the shares of companies that mine the metal tend to significantly outperform the bullion in percentage terms, observes Mike Cintolo, editor of Cabot Top Ten Trader.
Among those that have lately commanded attention is Agnico Eagle Mines (AEM), a senior Canadian gold miner with a pipeline of high-quality exploration and development projects in the U.S., Canada (including the just-closed acquisition of Kirkland Lake), Columbia and Mexico, and whose policy of no-forward gold sales gives it full exposure to current gold prices, which today is a great place to be.
Agnico recently reported several record results for full-year 2021: The company posted solid annual gold production of around 2.09 million ounces with all-in sustaining costs of $1,038 per ounce (well under the current gold price of around $2,000.
On the financial front, Agnico also posted consensus-beating revenue of $949 million in Q4, up 2% from a year ago, as well as per-share earnings of 46 cents. Impressively, Q4 was also Agnico’s fifth consecutive quarter of over half a million ounces in gold production, and the firm achieved records in gold production, operating cashflow and mineral reserves (45 million ounces).
The strong results prompted Agnico to hike its dividend 14% (2.6% annual yield) and announce a $500 million share buyback program. Looking ahead, analysts see the top line growing 41% in Q1, followed by three more quarters of 60-ish percent growth (mostly due to the Kirkland acquisition), but of course the wild card here is gold prices, as upside will fall right to Agnico’s bottom line.
Like most gold mining stocks, AEM hit a peak last May (at $74) and then spent the next eight months in a downward slide. Most of the decline was through with by October (at $49), but shares did probe lower into January (at $45) when the stock’s fortunes began to improve along with that of the yellow metal itself.
AEM established a two-steps-forward, one-step-back pattern in the last six weeks, with a huge-volume push higher last week. We’re OK taking a swing here or on further pullbacks.