Q2 FIRST LOOK: STRONG RESULTS, BUYING BACK STOCK, ADVANCING PIPELINE
THE TD COWEN INSIGHT
Agnico continues to deliver strong results with a beat on production, costs, and earnings. Furthermore, they continue to advance their strong organic growth pipeline (mostly in Canada).
Impact: POSITIVE
AEM reported Q2/24 adjusted EPS of $1.07, ahead of TD at $0.92 and consensus at $0.91.
Adjusted EBITDA was ~$1,176mm, slightly above TD at $1,153mm, and above consensus at $1,115mm. FCF was ~$582mm, before w/c changes (TD $469mm). The EPS beat vs. our forecast was driven by higher production and lower costs.
Q2 gold production was 896kozs (TD: 863kozs), cash costs were $870/oz (TD: $897/
oz), and AISC of $1,169/oz (TD $1,285/oz). Gold production in Q2 was led by strong production at Canadian Malartic, LaRonde, and the Nunavut operations. H1 gold production is equivalent to ~51.5% of the mid-point of 2024 production guidance.
In Q2, Agnico repurchased 763k shares for a total cost of $50mm ($65.53/sh). This is approximately double Q1, when the company repurchased 375k shares for a total of $30mm. The company renewed its NCIB on May 4, 2024, allowing it to repurchase up to $500mm of shares in the following 12-months.
AEM announced a development scenario for Upper Beaver which contemplates a 13-year mine life with average production of 210koz gold and 3.6kt copper (LOM: 2.8mmoz gold and 46.3kt copper). The plan estimates $0.9bn of initial capex which includes a 5,000 tpd conventional mill, a ramp and shaft, and a dry stack tailings storage facility. At $1,900/oz the project has an NPV of $625mm and IRR of 14%. At $2,300/oz the project has an NPV of $1.01bn and IRR of 18%. We currently value Upper Beaver at $481mm based on a resource credit.
Exploration drilling at Hope Bay during Q2 totaled 35,400 metres and continued to return promising results in the Patch 7 zone, and in the Gap area between the Patch 7 and Suluk zones of the Madrid deposit. Based on the success of the drill program this year, Angico has approved an additional $23mm of exploration budget for H2. This is intended to accelerate mineral resource growth before the project decision in 2025/2026.
2024 guidance unchanged. Expected gold production remains unchanged at ~3.35-3.55 million ounces in 2024, with total cash costs and AISC in 2024 unchanged at $875-$925/oz and $1,200-$1,250/oz, respectively. AEM increased the company-wide exploration budget by $50mm given promising early results.