Shares of Agnico Eagle Mines Ltd. (AEM, Financial) rose 0.33% to $42 in after-hours trading Thursday after the company posted fourth-quarter and full-year 2018 results.
The Canadian gold producer closed the quarter with non-GAAP earnings of 14 cents per share, beating forecasters' expectations by 11 cents. Non-GAAP earnings fell 33.3% from the prior-year quarter.
Revenue declined 4.9% to $537.8 million, beating consensus estimates by $12.16 million. Fourth-quarter revenues were generated from payable gold production of 410,712 ounces, which were 0.6% lower than the prior-year quarter. The precious metal was produced at an all-in sustaining cost of $852 per ounce of metal sold which decreased 5.9% year-over-year.
Sean Boyd, CEO of Agnico Eagle Mines Ltd., said that the year was strong because the company topped forecasts on production and costs for the seventh year in a row. For full-year 2018, Agnico Eagle Mines had guided payable gold production of 1.60 million ounces of gold and all-in sustaining cost of $915 per ounce of metal. However, the payable gold production decreased 5.1% to approximately 1.63 million ounces in full-year 2018 from approximately 1.71 million ounces in full-year 2017. This was a result of diminished throughput levels recorded at the Meadowbank open-pit gold mine in north-east Canada. This year, the asset is proceeding towards its final 12-months of production. Meadowbank is predicted to produce its last 60,000 ounces of payable gold in 2019.
The company produces the precious metal from its assets located in Canada, Mexico and Finland. Agnico Eagle Mines also produces silver and some zinc and copper; however, gold is the main commodity as it covers about 95% of total revenues.
For full-year 2018, the AISC was $877, reflecting a 9.1% increase from full year 2017. The higher cost resulted from lower production at Meadowbank, increased costs and lower by-product revenues recorded at several mines. A stronger U.S. dollar versus local currencies and cheaper sustaining costs were not enough to completely compensate for the negative factors.
In 2018 the company has grown gold reserves to 22 million ounces, reflecting 7% upside from 2017, and improved the average grade by 8% to 2.7 grams of gold per ton of mineral. Further, Agnico Eagle Mines has successfully achieved another stage in the development of the Amaruq and Meliadine assets in Nunavut, the most northerly part of Canada. The company aims to transfer the business there from the Meadowbank deposit.
Meliadine and Amaruq should already underpin Agnico Eagle Mines’ annual production in 2019, which is expected to be 1.75 million ounces. The two assets will also be the principal drivers for the first subsequent 14.3% growth in 2020 to 2 million ounces and the second subsequent 2.5% growth in 2021 to 2.05 million ounces of gold produced.
Commodity permitting, the improved production profile should allow Agnico Eagle Mines Ltd. to increase operating cash flow, which was $605.7 million in 2018, mirroring a 21.1% decline from full year 2017. The decrease was essentially due to the same factors already illustrated. A 0.4% rise in the realized gold price to $1,266 an ounce was not enough to compensate for the negative effects.
Thus, Agnico Eagle Mines should find it much easier to develop its pipeline of mineral projects for future growth of the business. The company will also use cash flow to increase total liquidity, reduce its $1.7 billion total debt and further increase its dividend.
Including cash on hand and securities, undrawn credit lines and uncommitted accordion features, the total liquidity of the miner stood at $1.81 billion as of Dec. 31. Part of the liquidity available in cash on hand was absorbed during 2018 to financially sustain the transition of the business to Meliadine and Amaruq in Nunavut from the retiring Meadowbank.
The Canadian miner has announced that the cash quarterly dividend has increased by 14% to 12.5 cents per ordinary share. The company will pay the quarterly dividend on March 15 to shareholders of record March 1. The ex-dividend date is scheduled for Feb. 28.
The forward dividend yield of the stock is 1.19% versus an industry median of 3.36%. The return of Agnico Eagle Mines Ltd. is based on the cash quarterly dividend of 12.5 cents and on the share price of $41.86 at close Thursday.
The share price is resulting from a 3% decline for the past year through Feb. 14 and is trading above the 200-, 100- and 50-day simple moving average lines. The market capitalization is about $9.82 billion. The stock has a 52-week range of $32.18 to $47.83.
The 14-day Relative Strength Indicator is 52.52 suggesting that the stock is neither oversold nor overbought.
The price-book ratio is 2.16 versus an industry median of 1.74.
Wall Street has issued a buy recommendation rating with an average target price of $49.37 per share of Agnico Eagle Mines Ltd.
Disclosure: I have no positions in any securities mentioned.
