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Agnico Eagle Mines (AEM) is the largest listed Canadian gold producer. It produced 2.33 million oz. of gold in the nine months to Sept. 30, 2022 following the takeover of Kirkland Lake Gold in February 2022, observes Gavin Graham, contributing editor to Internet Wealth Builder.

Agnico’s portfolio of eleven mines are located in mining friendly jurisdictions, with eight in Canada, including 50% of the giant Canadian Malarctic mine, La Ronde, and Macassa mines in Quebec, along with Amaruq and Meliadine in Nunavut, and one each in Finland, Mexico, and Australia.

The takeover of Kirkland brought the company control of the Fosterville mine in Australia and the Detour Lake and Macassa mines in Canada.

The company reported net income of $465.2 million ($1.08 per share) for the first nine months of 2022. It also reported $1,716.1 million of cash generated, and forecast cash costs per oz. and all in sustaining costs per oz. near the top end of the range of $725-775 and $1,000-1,050, respectively, for the whole year.

In May 2022, South Africa based miner Gold Fields (GFI) made an offer to buy Yamana Gold (AUY), which owned the other 50% of the Canadian Malarctic mine as well as mines in Argentina, Chile, and Brazil.

In November, Agnico and Pan American Silver (PAAS) combined to make a better offer for Yamana, with Agnico paying $1 billion in cash and issuing just over 36 million shares for Yamana’s Canadian mines, while Pan American Silver acquired Yamana’s South American mines.

Production at the Odyssey project at Canadian Malarctic is expected to begin soon and ramp up through 2023 and 2024, which is estimated to have 1.5 million oz. in the indicated capacity and 6 million oz. in the inferred category in the East Gouldie deposit. Meanwhile, Wasamac is expected to have a ten-year lifespan with average 169,000 oz. p.a. production, though Yamana has estimated that the mine life could extend to fifteen years.

Agnico has grown from one operating mine fifteen years ago to becoming one of the three largest gold miners in North America by market capitalization and production. The stock is down 20% from its all-time high reached earlier this year in April and only up 25% over the last five years despite more than doubling its gold production.

Agnico is attractively valued and also yields more than 3%, making it a "Buy" in my books. It is also a great way to play the increasing production and likely rise in the gold price, given the persistence of higher inflation.

About the Author

With over 40 years of domestic and international financial experience, Gavin Graham is a highly sought-after market pundit and prognosticator. His wealth of global experience has been garnered through roles in London, Hong Kong, San Francisco, and Toronto, including those of senior fund manager, Thornton Management; chief investment officer, Citigroup Investment Management (Asia); and chief investment officer, Guardian Group of Funds.

Mr. Graham is a contributing editor of The Income Investor, host of the Gavin Graham Show podcast, and regular commentator in the financial media. Originally hailing from the UK, he is a graduate of Magdalen College at the University of Oxford and a Trustee of the Investment Committee of the Royal Medical Foundation (UK).

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