Company Reports

Commodity prices generally fell in the September-ending quarter, except for gold. Concerns about weak China end-user steel demand affected iron ore and other steelmaking commodities, while base metals prices fell on worries over slower economic growth in China and elsewhere.

No-moat Agnico Eagle’s 2024 second-quarter result was better than we expected. While sales volumes of about 870,000 ounces were a modest 2% higher than a year ago and similar to the prior quarter, elevated gold prices and cost control were highlights. The 1.75 million ounces sold in the first half means it is on track to meet our unchanged forecast for sales volumes of about 3.45 million ounces in 2024, the midpoint of production guidance, which Agnico reiterates. Its average realized gold price rose by 19%. This is a headwind for unit costs, as higher prices increase royalties payable on each ounce of gold sold. However, Agnico’s all-in sustaining costs (including byproduct credits) of about USD 1,170 per ounce for the quarter were a modest 2% higher than last year, helped by a weaker Canadian dollar.

Shares of most of our global mining coverage fell during the quarter, and the average price/fair value estimate has fallen modestly to 1.05 at July 8, 2024 from 1.07 last quarter. While our coverage is close to fairly valued on average, there is a wide dispersion, with no-moat mineral sands miner Iluka the cheapest, trading 30% below fair value at that date. Mineral sands prices are lower, on reduced demand from China’s property sector. Rising interest rates and slowing housing markets in the West are also a near-term headwind. However, longer-term, maturing mines and a lack of large, high-grade, undeveloped resources are likely to support mineral sands prices. Its proposed rare earths refinery in Eneabba is an option, on elevated rare earths prices and potential Western tariffs on Chinese production.

Base metals prices surged earlier in the June quarter of 2024 before partially reversing due to concerns over China’s economy. Iron ore prices are broadly stable despite China's struggling property market and weak infrastructure spending, leading to questions over China's steel demand. After updating our commodity price assumptions, no-moat Iluka is the cheapest miner we cover, trading 31% below its unchanged fair value estimate of AUD 9.50.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its four cornerstone assets each produce roughly 350,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank and Meliadine. All four are in Canada. These mines accounted for around 60% of the company’s production of 3.4 million ounces of gold in 2023, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2023.

No-moat Agnico Eagle’s first-quarter 2024 result was another good one and in line with our expectations. The purchase of the remaining 50% of the Canadian Malartic mine from Yamana Gold in March 2023 drove a 12% increase in gold sales volumes to about 880,000 ounces. We expect a similar run rate over the rest of the year and continue to forecast 2024 sales of roughly 3.45 million ounces, the midpoint of unchanged guidance. Higher gold prices were another tailwind, helping more than offset an 8% rise in unit cash costs due to inflation, with adjusted EBITDA rising 26% to about USD 930 million. We forecast 2024 EBITDA of roughly USD 3.9 billion, up 20% on 2023 due to higher gold sales volumes and prices more than offsetting increased unit cash costs. Free cash flow of roughly USD 400 million—about USD 0.79 per share—was also strong, up by about half on the same period last year.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its four cornerstone assets each produce roughly 350,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank and Meliadine. All four are in Canada. These mines accounted for around 60% of the company’s production of 3.4 million ounces of gold in 2023, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2023.

Commodity prices diverged in the quarter. Despite solid China steel production, iron ore and metallurgical coal prices are down, while copper rose on supply issues and hopes of faster global growth. However, prices are elevated compared with history and cost-curve support.

Iron ore prices are lower on concerns over China steel demand due to its struggling property market and weak infrastructure spending. However, gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 51. It remains the cheapest miner we cover, trading 27% below fair value.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its four cornerstone assets each produce roughly 350,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank and Meliadine. All four are in Canada. These mines accounted for around 60% of the company’s production of 3.4 million ounces of gold in 2023, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2023.

Demand growth from China has been the main driver of rising commodity prices in the past two decades. More recently, though, most commodity prices have fallen from highs set with Russia’s invasion of Ukraine, the subsequent sanctions on Russia, and the rerouting of supply chains. Prices, nevertheless, are generally elevated versus the 20-year average, as well as relative to cost support.

Our fair value estimate for no-moat Agnico Eagle is unchanged at USD 54 per share after its 2023 result was broadly in line with our expectations. Adjusted EBITDA of roughly USD 3.2 billion was modestly higher than our forecast and 20% up on 2022, driven by increased gold sales volumes and price, partially offset by higher unit cash costs. Adjusted net profit after tax of about USD 1.1 billion rose 9% on 2022, affected by additional depreciation and amortization from purchasing the remaining 50% of the Canadian Malartic mine from Yamana Gold in March 2023. Accounting rules mean Agnico revalued its initial 50% stake in Canadian Malartic, contributing to higher depreciation and amortization. Along with the increased share count from this acquisition, EPS was modestly lower than in 2022, at USD 2.24 per share. However, we think accounting earnings don't reflect the company’s underlying performance. Free cash flow per share rose by roughly half, to USD 1.94 per share, a solid result in our view. While Agnico paid a total price for the remainder of Canadian Malartic, we think there are opportunities to expand production while potentially also developing the Wasamac deposit that came with the acquisition.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its four cornerstone assets each produce roughly 350,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank and Meliadine. All four are in Canada. These mines accounted for around 60% of the company’s production of 3.4 million ounces of gold in 2023, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2023.

Near-term iron ore prices are higher on strong China steel production. Gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 54. It is the cheapest we cover, trading 30% below fair value.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its five cornerstone assets each produce roughly 300,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank, Meliadine, and Fosterville. Four of the five are in Canada. These mines accounted for around two thirds of the company’s production of 3.1 million ounces of gold in 2022, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2022.

Commodity prices diverged in the quarter with strong China steel production driving iron ore and metallurgical coal prices up, while base metals prices dropped on worries of a Western recession. Even so, prices are elevated versus history and cost-curve support.

No-moat Agnico Eagle’s 2023 third-quarter result met our expectations. Adjusted EBITDA of USD 760 million increased 13% on the same quarter of 2022, driven by higher gold sales volumes and price, partially offset by increased unit cash costs. Adjusted net profit after tax of roughly USD 220 million was similar to last year due to higher depreciation and amortization from the purchase of the remaining 50% of the Malartic mine from Yamana Gold in March 2023. However, the increased share count from this acquisition meant EPS was 10% lower, at USD 0.44 per share. Similar to last year, and consistent with its quarterly dividend payout policy, Agnico will pay a USD 0.40 (roughly CAD 0.56) per share dividend in December. Free cash flow was roughly USD 80 million, down from USD 140 million last year due to increased working capital, likely mostly temporary. The balance sheet is sound. Net debt was USD 1.6 billion at end September 2023, around 0.5 times trailing 12 months EBITDA.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its five cornerstone assets each produce roughly 300,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank, Meliadine, and Fosterville. Four of the five are in Canada. These mines accounted for around two thirds of the company’s production of 3.1 million ounces of gold in 2022, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2022.

Strong China steel production is supporting prices for steel inputs despite recession concerns. Otherwise, changes to our commodity price assumptions are mixed, led by higher near-term iron ore prices and lower near-term thermal coal prices. We think thermal coal miner Whitehaven Coal and minerals sands miner Iluka are the cheapest we cover. Both trade at 29% discounts to our AUD 9.50 and AUD 10.50 per share fair value estimates, respectively, with Whitehaven’s down 3% on lower near-term thermal coal prices, partially offset by a weaker Australian dollar. Peer New Hope is also down 3% to AUD 6.10 per share. Iluka’s estimate is unchanged, with a weaker Australian dollar offsetting lower synthetic rutile prices.

Agnico Eagle is the world’s third-largest gold miner by production, operating mines in Canada, Mexico, Finland, and Australia, reflecting the company’s focus on lower-risk jurisdictions. Its five cornerstone assets each produce roughly 300,000-700,000 ounces of gold annually, consisting of Detour Lake, Canadian Malartic, Meadowbank, Meliadine, and Fosterville. Four of the five are in Canada. These mines accounted for around two thirds of the company’s production of 3.1 million ounces of gold in 2022, with the company also producing minor amounts of copper, zinc, and silver. Agnico Eagle had about 15 years of gold reserves at end 2022.