The Eagle That Found Its Wings: Agnico- Eagle
Despite a medicre quarter, Agnico- Eagle is about to expirience a huge growth spurt, propelling it to the top of the Mid-Tier Producers, along with Yamana Gold. Before getting into the production numbers, it is imporant to recognize a few other key metrics.
Production Per Share: In 2008, Agnico sported a miniscule 1.9oz per share. Don't be Sad! This will increase over 350% by 2010 to 7.15oz/share! Now were talking..Oh wait I forgot declining cash costs hit bottom in 2010, under $300/oz! This even makes Yamana look bad with a measly 2/oz share(mostly due to the shares outstanding Yamana has and the fact 2011-2012 will be the high growth years) , but nonetheless, sometime between 2011-2013, Agnico will sport the highest Porduction per share as it reachese 2m/oz + per annum.
Cash Flow Per Share- Agnicos growth is so rampant, cash flow per share will grow 300% relative to 2009, and among the highest in the industry. This is not as telling as it seems as Agnico is trading at a premium, but attractive nonetheless.
Strong history of increasing reserves (14 times to be exact, while equity holders leverage to gold is up nealry 5 fold over the last decade). I expect this continue due to the quality of Agnico's mines i.e (La Ronde, Goldex, lapa, Kittila, Pinos Altos, Meadowbank and several others with great potential). In my opinion Agnico will have 5 mines all with 5m oz of proven reserves, showing the diversication of its portfolio.
Capital Exenditures- will gradually decrease over the next several years, thus increasing free cash flow (the real profit). (900 million was spent in 2008 and will decline year over year as follows: 2009- 550 million , 160 million, 90 million, 75 million) barring any aquisitions
WHERE IS THE GROWTH COMING FROM? The Lapa mine is producing and increasing production by an additional 25% in the first half of 2010. Kittila Mine - Commercial Production expected later this fall Meadowbank - Prodcution set for Q1 2010, producing 350k of gold per annum for 9 years. Pinos Altos- like Kittila is expected to commence production later this fall, producing 175k of gold and over 2.5oz of silver for 12-14 years. But the Flagship(in my opinion) is LaRonde in Quebec located in the gold belt. This mine will have very high quality ore and far more reserves than has been declared thus far. It will produce 325k per annum, but wait it gets better. the LaRonde extension extends the life of the mine to 2024-2025 which has an even higher grade ore. This is expected to commence in 2011.
Geopolitical Risk - Among the best in the industry - (Laronde, Lapa, Goldex, & Meadowbank located in mining friendly Canada), Kittila (Finland) , Pinos Altos (Mexico). Growth Profile- in GEO (55:1 G:S) - 2008 = 290k , 2009 = 540-575k , 2010 = 1.25-1.35m/oz, 2011 = 1.57 - 1.66m/oz, 2012 = 1.91- 1.98m/oz.
Valuation : http://spreadsheets.google.com/ccc?key=rob7DJ_CziVGF623h_na5ZQ Published & Open For Editing Via Google Docs