AGNICO-EAGLE (AEM)…
A Follow-up
Peter Degraaf
Back in July, I wrote an article about this Blue Chip Miner. The stock quickly rose to 46.00, (from 34.00), and more recently it dropped back to 34.00 again, due to the credit market problems, which have impacted stocks in virtually every sector.
In view of the fact that Agnico-Eagle is worth even more now, then it was when I wrote the July article, I decided to revisit the company's fundamentals and technical picture.
(To read the original article, visit Gold-Digest on this website, click on the banner with my name, then scroll down to the article).
First by way of review, Agnico-Eagle has a number of producing and prospective properties in the USA, Canada, Mexico and Finland, all located in 'safe' area's of the world.
The flagship property is the LaRonde Mine, in Quebec, Canada, host to Canada's largest gold deposit in terms of reserves.
A few weeks ago the company announced Second Quarter results, and these indicate that Agnico-Eagle remains on track to achieve its goal of owning gold reserves totaling 18 to 20 million ounces, within the next 18 months!
In addition Agnico-Eagle is on schedule to increase gold production five fold from current production to 2010 production, just three years hence!
Q2/07 earnings were reported at $37.8 million (US), or 0.28/share. Cash and cash equivalents increased by 67.7 million dollars during the quarter, and now total $495 million (US).
The flagship property, the LaRonde mine in Quebec, has processed an average of 7300 tonnes of ore per day for the past three years, indicating that this is a very reliable source of ore. As the price of gold rises, LaRonde could begin to process lower grade ores, thus extending the mine life beyond the current 14 years of mine life expectancy.
The cost of gold production at LaRonde during Q2/07 was a remarkable minus $699/oz, thanks to profits realized from the sale of silver, copper and zinc. That is an amazing accomplishment!
A few weeks ago the board decided to go ahead with construction of a production facility at Pinos Altos in Mexico. Reserves there were recently increased to 2.2 million ounces of gold and 65.7 million ounces of silver. Production target is Q2/09 and the proposed mine will have a life expectancy of 11 years. The company is still working on increasing the reserves even more, with 4 drill rigs working the site.
Two additional mines are expected to begin production in 2008, Goldex in Quebec, is nearing completion. Reserves are 1.7 million ounces, and mine life is expected to be 10 years. Kittila in Finland has 2.6 million ounces of gold reserves, and mine life at Kittila is anticipated to last 13 years. At both of these mines, exploration will likely add to reserves and mine life.
At the newly acquired Meadowbank project in Nunavut (Northern Canada), 3 drilling rigs are currently active, to increase the reserves from the current 2.9 million ounces.
Agnico-Eagle is on track to spend $40 million dollars on exploration at its various properties this year.
The company recently announced a joint venture agreement with American Bonanza, involving the Noyon project, owned by Bonanza, which is adjacent to the Vezza property owned by Agnico. The goal is to join the two properties into one profitable project. The properties are located in the Casa Berardi gold belt.
(Chart courtesy www.stockcharts.com)
The chart formation is quite bullish. Breakouts from CWH formations (green arrow), are usually reliable signals. The RSI and MACD are in bullish uptrend (purple arrows). The C&H measuring rule projects a minimum price objective of $57/share.
Anyone who missed out after the July article, might consider buying this stock on pull-backs in price.
Agnico-Eagle's long-term growth strategy is to:
- Add shareholder value through exploration.
- Execute accretive acquisitions.
- Develop and operate gold mines in areas of low political risk.
- Focus on regions with long-term mining camp potential.
September 6, 2007
DISCLOSURE:
I have not been paid (nor expect to be paid) to write this report.
I own shares in the company.
DISCLAIMER:
Please do your own diligence, I am not responsible for your trading decisions.
* Peter Degraaf is an on-line stock trader with over 50 years of investing experience. He sends out a weekly Email alert to his subscribers. For a 60 day free trial contact his at ITISWELL@COGECO.CA
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