Costs tracking well to guidance despite higher royalty costs. YTD total cash costs of $897/oz are near the midpoint of the $875-$925/oz guidance range. The company estimates higher gold prices have had a +20/oz impact to total cash costs, which makes their cost performance impressive, in our view. Agnico remains the lowest cost large cap producer, reaching gross margins of 63% in Q3.
AEM's preliminary view on 2025 operating cost is as expected. Preliminary estimates have labor costs climbing 3% y/y (vs 4.5% in 2024), which makes up 45% of operating costs. The remaining consumables and other costs are expected to be up less than 5%. The company has been working to reduce the impact of inflation through improved productivity and efficiencies, which they appear to have been relatively successful in doing in 2024. Several mines are hitting record throughput levels on flat unit costs. We forecast total cash costs climbing ~3% to $931/oz in 2025.
Potential production dip in 2027 likely to be a focus. We expect Agnico will release its 2027 guidance with its usual 3-year guidance update in February. Our current production forecast has an 8% decline to 3.2mmoz in 2027 (vs ~3.5mmoz in 2024-2026) as Detour and Malartic have lighter years, and Meadowbank ramps down, before production ramps up again with growth at Malartic and Detour undergrounds. We believe Agnico could improve 2027 modestly, with potential upside at Detour and Meadowbank. They also have Upper Beaver and Hope Bay in the pipeline, however, those assets are likely farther from initial production in our view.
Maintaining BUY recommendation and $105.00 target price. Our 2025 estimates have declined slightly as we incorporated some additional cost inflation, while our NAVPS is largely flat.