Agnico Eagle (AEM) reported a very strong quarter, its first full quarter with Kirkland assets, observes Adrian Day, resource sector specialist and editor of Global Analyst.
Production rose above estimates while operating costs were down (with cash costs at $726/oz and all-in sustaining costs at $1,026), largely due to increased synergies from the merger with Kirkland as well as currency and fuel hedges.
The company had said that their initial estimates on synergies were conservative. Looking ahead for the rest of the year, the company expects continued strong production though also for costs to increase, to the upper end of its previous guidance.
Looking further ahead, initial production from Odyssey (Canada's Malartic underground mine) is now scheduled for the first quarter of next year, while the technical update on the Detour Mine in Ontario looks for a 38% increase in reserves and extending the mine life by 10 years.
Since March, the company has paid down $250 million in debt, leaving $343 million of debt. Importantly, debt repayments scheduled over the next several years are light, around $100 million each year, which will be very manageable from cash flow.
The company now has $2.2 billion of available liquidity. It also initiated its buyback program during the quarter — although on a very small scale so far.
The company has good operations in low-risk regions; continues to execute well; has top, conservative management; a broad management bench; a strong balance sheet; and a deep pipeline. Agnico Eagle is one of our top gold picks. The stock has bounced, but it remains a very strong buy.
