CIBC Raise TargetEQUITY RESEARCH
April 28, 2023 Earnings Update
AGNICO EAGLE MINES LIMITED
Q1/23 Wrap Note: Outperformer Reiterated, PT To $71.00
Our Conclusion
We are increasing our price target from $69.00 to $71.00 after updating our
model for the strong Q1/23 financial and operating results reported after
market on April 27 (link to first read). Our model also reflects commentary
provided by the company on the conference call, specifically related to costs.
Overall, our production estimate remains largely unchanged for the year at
3,424koz (3,419koz prior), at the top end of the current guidance of 3,240k-
3,440koz, while our cash costs decrease from $848/oz to $842/oz, at the
bottom end of the guidance of $840-$890/oz. AEM also discussed the
positive exploration results on the call and noted that it expects to replace
mining depletion on an overall basis this year.
AEM ended its conference call by reiterating its strategy of being a regionally
focused miner in stable jurisdictions, which it views as more important than
ever in light of current geopolitical uncertainty. The focus remains on the best
places with geologic potential and political stability.
As a result of our changes, our 2023E CFPS increases from $5.03 to $5.27,
which is partially offset by a NAV5% decrease from $39.84/sh to $38.12/sh
(on increased net debt). We continue to rate AEM as the top pick in our
coverage universe given its cost leadership, exploration success, ore
optimization opportunities given its scale in Canada, and focus on stable
jurisdictions.
Key Points
Some Early Relief On The Costs Front: AEM provided additional colour on
inflation and costs. The company is seeing relief on the procurement front
following the merger with Kirkland Lake, which provides better purchasing
power. Additionally, better-than-budgeted electricity and fuel prices at some
of its operations and less difficulty procuring labour have provided tailwinds
to costs. However, AEM noted that, while the supply and logistic challenges
have eased, it is still seeing some cost pressure on maintenance parts from
suppliers. Overall, given the volatility of costs over the past two years, AEM
noted it is too early to revise the 2023 cost guidance to the positive.
Exploration Results Point To Potential Replacement Of Mining
Depletion In 2023: Given the positive exploration results, AEM noted on the
call that it expects to more than replace depletion this year, aided by the
feasibility at East Gouldie later this year, and other key projects.
Financial Position As At Q1/23: AEM ended the quarter with cash and cash
equivalents of $745M and net debt of $1,598M. AEM also noted that
subsequent to the quarter it entered into a term credit facility for $600M at
SOFR +0%-2% due on April 21, 2025 that it expects to use, in addition to
$200M from its balance sheet, to repay part of the $1B drawn from the
revolver in Q1/23.