This is a USD target. GLTA
Top Half; Q3/23 Ops Slightly Weaker Than Expected
Our Conclusion
We reiterate our $72.00 price target and Outperformer rating after AEM
reported Q3/23 adjusted EPS of $0.44 vs. our estimate and consensus of
$0.42. The beat was driven by lower taxes and G&A, while sales were
largely in line with our estimate. However, gold production of 850koz for the
quarter was slightly weaker than our estimate of 863koz.
Notably, AEM is delivering the best operational performance of the seniors
(AEM, GOLD, NEM) in 2023, and for this reason it is our preferred name of
the three. AEM reiterated its gold production, cash cost, AISC and capex
guidance of 3.24Moz-3.44Moz, $840/oz-$890/oz, $1,140/oz-$1,190/oz and
$1.42B, respectively, with production expected above the mid-point of
guidance and in line with our estimate.
After updating our model with the Q3/23 results, we forecast largely
unchanged 2023 production of 3373koz (3374koz prior) at cash costs of
$864/oz ($861/oz prior). Our NAV5% remains largely unchanged, while our
2023E/2024E CFPS decreases slightly from $5.40/$6.13 to $5.14/$6.07.
Key Points
Production For 2023 Expected Above The Mid-point Of Guidance
Despite Detour Mill Downtime; Kittila Could Provide Further Upside:
AEM expects to achieve its current guidance of 190koz-210koz (CIBCe at
188koz) at Kittila regardless of the Supreme Administrative Court’s (SAC)
decision. If the SAC does reinstate the 2Mtpa limit by the end of October,
AEM notes that it expects Kittila to produce up to an additional ~30koz of
gold in Q4/23; otherwise, it will need to partially suspend activities in Q4 at
the asset (we assume ~1.6Mtpa in our model). At Detour, given a
transformer failure in Q3/23 (now resolved), AEM now expects throughput of
25.9Mtpa in 2023 vs. 27.2Mtpa previously and targets the low end of
guidance of 675koz-705koz (CIBCe at 676koz).
Weaker Q3/23 Production Drives Higher Cash Costs: This was driven by
lower throughput at Detour (affected by unscheduled mill downtime), lower
grades at Fosterville and Macassa, and lower throughput and grades at the
LaRonde complex, partially offset by strong production at Amaruq and La
India. As a result of the lower production, cash costs of $898/oz came in
higher than our estimate of $868/oz.
Q3 Affected by Inflation, Partially Offset By Hedges And Currency
Tailwinds: Costs in Q3 were affected by high mine-site costs per tonne
resulting from inflation, which were mitigated by currency tailwinds.
Additionally, the hedges put in place by the company have helped mitigate
some of these pressures. AEM highlighted its Nunavut operations where
72% of its diesel exposure for Q4/23 is hedged at an average price of
$0.70/L vs. a current guidance assumption of $0.93/L