Leading International Investment Research, Edison Investment Research

Edison Investment Research

Leading International Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

Equity Bottom-Up

On 28 September, Agnico Eagle Mines (AEM) announced that it is to combine with Kirkland Lake Gold (KL) in a merger of equals. Under the terms of the agreement, KL shareholders will receive 0.7935 AEM shares per KL share, which represents a c 1% price premium to KL’s 10-day volume weighted average price on the TSX. Upon closing, existing AEM and KL shareholders will own c 54% and 46%, respectively, of a combined company (called Agnico Eagle Mines Ltd) with a market capitalisation of c C$29.0bn (US$22.9bn). The merger has been unanimously approved by both boards of directors.

On 28 September, Agnico Eagle Mines (AEM) announced that it is to combine with Kirkland Lake Gold (KL) in a merger of equals. Under the terms of the agreement, KL shareholders will receive 0.7935 AEM shares per KL share, which represents a c 1% price premium to KL’s 10-day volume weighted average price on the TSX. Upon closing, existing AEM and KL shareholders will own c 54% and 46%, respectively, of a combined company (called Agnico Eagle Mines Ltd) with a market capitalisation of c C$29.0bn (US$22.9bn). The merger has been unanimously approved by both boards of directors.

Agnico Eagle Mines - Creating a Canadian champion

Agnico’s (AEM’s) Q221 adjusted EPS of US$0.69/share was ahead of both the consensus average (US$0.59/share) and range of expectations (US$0.54–0.63/share). Relative to the prior-year period (which was adversely affected by the onset of the COVID-19 pandemic), the increase in adjusted EPS was a very material 275.1%. Relative to Q121, the increase was a more modest 2.7%, driven by a 3.4% increase in revenue, a 3.6% increase in costs (such that gross margins were steady at 55.8% vs 55.9%) and a 7.9pp decline in the effective tax rate (from 40.7% to 32.8%). After the acquisition of TMAC in Q121, free cash flow reverted to a US$209.3m inflow, such that net debt declined by US$121.1m to US$1,406.6m (24.0% gearing; 19.3% leverage). Headline EPS of US$0.78/share advanced 39.0% quarter-on-quarter, augmented by financial gains and the quarterly dividend was maintained at US$0.35/share.

Agnico’s (AEM’s) Q221 adjusted EPS of US$0.69/share was ahead of both the consensus average (US$0.59/share) and range of expectations (US$0.54–0.63/share). Relative to the prior-year period (which was adversely affected by the onset of the COVID-19 pandemic), the increase in adjusted EPS was a very material 275.1%. Relative to Q121, the increase was a more modest 2.7%, driven by a 3.4% increase in revenue, a 3.6% increase in costs (such that gross margins were steady at 55.8% vs 55.9%) and a 7.9pp decline in the effective tax rate (from 40.7% to 32.8%). After the acquisition of TMAC in Q121, free cash flow reverted to a US$209.3m inflow, such that net debt declined by US$121.1m to US$1,406.6m (24.0% gearing; 19.3% leverage). Headline EPS of US$0.78/share advanced 39.0% quarter-on-quarter, augmented by financial gains and the quarterly dividend was maintained at US$0.35/share.

Relative to the prior quarter (Q220), Agnico Eagle Mines’ (AEM) production in Q3 increased by 48.8% to 492.7oz and its adjusted net income by 111.4%. While this may seem impressive enough, adjusted net income actually increased by 327.0%, to 78.1c/share, as the company leveraged a 76.0% quarterly increase in revenues against a 47.2% increase in production costs to result in an 8.2pp uplift in gross margins. AEM also benefited from a relatively low effective tax rate of 33.1% in Q3. As a consequence of both its performance in Q3 and the expectation of a similar one in Q4, the company increased its quarterly dividend by 75%, from 20c/share to 35c/share.

Relative to the prior quarter (Q220), Agnico Eagle Mines’ (AEM) production in Q3 increased by 48.8% to 492.7oz and its adjusted net income by 111.4%. While this may seem impressive enough, adjusted net income actually increased by 327.0%, to 78.1c/share, as the company leveraged a 76.0% quarterly increase in revenues against a 47.2% increase in production costs to result in an 8.2pp uplift in gross margins. AEM also benefited from a relatively low effective tax rate of 33.1% in Q3. As a consequence of both its performance in Q3 and the expectation of a similar one in Q4, the company increased its quarterly dividend by 75%, from 20c/share to 35c/share.

Agnico Eagle Mines - Showing its metal in Q3

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Our outlook remains bullish and we continue to believe that the path of least resistance remains higher for global equities (MSCI ACWI). As long as the MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), EM (EEM-US), and EAFE (EFA-US) are above their respective intermediate-term support levels we believe a positive outlook is warranted. Support levels to watch include $75 on ACWI-US, $44 on ACWX-US, $41 on EEM-US, and $60 on EFA-US. We recap significant technical levels across major markets and highlight specific opportunities within the Technology and Materials Sectors.

Our outlook remains bullish and we continue to believe that the path of least resistance remains higher for global equities (MSCI ACWI). As long as the MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), EM (EEM-US), and EAFE (EFA-US) are above their respective intermediate-term support levels we believe a positive outlook is warranted. Support levels to watch include $75 on ACWI-US, $44 on ACWX-US, $41 on EEM-US, and $60 on EFA-US. We recap significant technical levels across major markets and highlight specific opportunities within the Technology and Materials Sectors.

Global Equity Strategy: Bullish Outlook Intact

We continue to have a bullish outlook and we believe the path of least resistance remains higher. Perhaps the most important thing which supports our bullish outlook is the continued lack of breakdowns on all S&amp;P 500 Sectors and all the major averages. In today’s report we highlight attractive Groups and stocks within Materials: Copper, Gold, Silver, Platinum, and Uranium Mining.

We continue to have a bullish outlook and we believe the path of least resistance remains higher. Perhaps the most important thing which supports our bullish outlook is the continued lack of breakdowns on all S&amp;P 500 Sectors and all the major averages. In today’s report we highlight attractive Groups and stocks within Materials: Copper, Gold, Silver, Platinum, and Uranium Mining.

U.S. Equity Strategy: Upgrading Materials To Overweight

Canada

Agnico Eagle Mines Limited is a gold producer with operations primarily in northwestern Quebec, northern Mexico, northern Finland and Nunavut.  The Company also has exploration activities in Canada, Europe, Latin America, and the United States.  Agnico Eagle Mines focuses on the exploration, development, and expansion of its gold properities primarily from underground operations.

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Agnico Eagle Mines (AEM CN)

Agnico Eagle Mines - Creating a Canadian champion

On 28 September, Agnico Eagle Mines (AEM) announced that it is to combine with Kirkland Lake Gold (KL) in a merger of equals. Under the terms of...

Edison Investment Research

Agnico Eagle Mines - Continuing strong

Agnico’s (AEM’s) Q221 adjusted EPS of US$0.69/share was ahead of both the consensus average (US$0.59/share) and range of expectations...

Edison Investment Research

Agnico Eagle Mines - Showing its metal in Q3

Relative to the prior quarter (Q220), Agnico Eagle Mines’ (AEM) production in Q3 increased by 48.8% to 492.7oz and its adjusted net income by...

Edison Investment Research

Global Equity Strategy: Bullish Outlook Intact

Our outlook remains bullish and we continue to believe that the path of least resistance remains higher for global equities (MSCI ACWI). As long as...

Vermilion Research

U.S. Equity Strategy: Upgrading Materials To Overweight

We continue to have a bullish outlook and we believe the path of least resistance remains higher. Perhaps the most important thing which supports...

Vermilion Research

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