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Higher Gold Prices Help Agnico Eagle Mines Beat Q2 Estimates

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Agnico Eagle Mines’ Q2 2019 results

Agnico Eagle Mines (AEM) released its Q2 2019 results on July 24 after the markets closed. Its adjusted EPS were $0.10, higher than analysts’ expectation of $0.03. AEM’s top line also beat the analysts’ estimate by $35 million coming in at $526.6 million. Agnico Eagle Mines had beat the estimates in its Q1 2019 results as well. AEM’s adjusted profit for Q2 2019 reached $27.8 million, about 4.5 times the profit in Q2 2018. This increase is mainly due to higher realized gold prices.

AEM’s production

The company’s gold production improved by 1.8% YoY to 412,315 ounces. This total includes pre-commercial production of 29,699 ounces from Meliadine and 2,147 ounces at Amaruq. Its Meliadine project declared commercial production on May 14. The project was completed at $830 million, below the original budget of $900 million. The company maintained its expected production from the project at 230,000 ounces of gold. AEM’s Amaruq project remains on schedule for commercial production expected to start late in the third quarter of 2019.

AEM’s costs

AEM’s all-in sustaining costs (or AISC) increased by 3.5% year-over-year to $953 per ounce in Q2. Higher sustaining capital costs as well as lower gold production (excluding pre-commercial production) were mainly responsible for higher AISC during the second quarter. The company maintained its full-year guidance of 1.75 million ounces for gold production and AISC of $875 to $925.

AEM is expecting higher earnings and cash flows in the second half of the year due to the completion of its projects. Analysts are estimating an increase of 10.0% and 17.3% year-over-year in AEM’s revenues for 2019 and 2020, respectively.

Stock’s outperformance

Agnico Eagle Mines stock has outperformed its peers year-to-date. Up to July 24, AEM’s stock has risen 32.8% compared to a 10.8% and a 32.0% rise in the SPDR Gold Shares and the VanEck Vectors Gold Miners ETF, respectively.

Analysts’ favorite

Analysts are also very bullish on AEM. We had highlighted in Which Gold Stocks Do Analysts Love and Hate? that analysts are most bullish on AEM in the senior and intermediate gold miner space with 82% “buy” ratings. This is followed by 65% and 54% “buy” ratings for Newmont Goldcorp and Yamana Gold, respectively.

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