Agnico Eagle Hits It Out Of The Park With Their Free Cash Flow Machines Of Gold Mines
Featured in this report are Agnico Eagle, McEwen Mining, Silvercrest Metals and new special situations pick Equinox Gold.
Yesterday, I put out a report about my long term outlook for gold titled “Gold Is On Its Way to $20k” which caused a ton of feedback. I’m glad so many enjoyed it, I usually try to only look out a year or so in my forecasting. But, after running the numbers on the gold to debt ratio of the US and other countries, it gave me confidence gold is heading dramatically higher.
This afternoon, Agnico Eagle had a stunning news release reporting their latest quarterly numbers. The quote below from their news release puts things into great context.
"Building on a very strong close to 2023, we are reporting our second consecutive quarter of record operating margins and record free cash flow, on the back of solid operational and cost performance. With this strong start to the year, we are well positioned to achieve our production and cost guidance for 2024," said Ammar Al-Joundi, Agnico Eagle's President and Chief Executive Officer. "During the quarter, we continued to advance our key value drivers and project pipeline, and our exploration program yielded significant results at Hope Bay, Canadian Malartic and Detour Lake. We strengthened our balance sheet in the quarter and our focus remains on capital discipline and cost control, while investing in our projects pipeline and providing returns to shareholders," added Mr. Al-Joundi.
What stood out to me is the headline that mentioned record quarterly free cash flow. They also reported all-in sustaining costs of $1190 per ounce. They are well under the average all-in costs for the industry, and with gold spending the first quarter above $2000 per ounce their mines are free cash flow machines.
Over the past couple months, I had featured Agnico Eagle because I saw they were significantly outperforming their major mining company peers. They made an important bottom in the middle of February, and have rallied significantly to be up nearly 50% since that low. They are making new 52-week highs while several of their peers have improved but are still trading under their 52-week highs.
We are seeing new blood coming into the gold stocks, this report and their recent strength is the kind of stuff that will surprise a lot of generalist investors starting to look at gold stocks.
Another gold stock that is firing on all cylinders is McEwen Mining. They are much smaller than Agnico Eagle, but are significantly outperforming them. Just prior to the PDAC in early March, they also made an important bottom. Since then their stock is up around 100% from the bottom. They are trading well above their 52-week high from prior to their recent run.
McEwen Mining has a great combination of gold mining and one of the top 10 undeveloped copper mines that is also in the lowest cost quartile for undeveloped copper mines. Many major gold mining companies are eager to add copper to their asset base as they see the bullish supply and demand fundamentals. McEwen Mining is ahead of this curve.
Silvercrest Metals has been a special situations pick in the reports because their Las Chispas gold and silver mine is performing exceptionally well. A few quarters ago they went into full commercial production.
At that time they had $100 million in debt, since then they have paid off all the debt and built up a hoard of cash, gold and silver worth over $100 million. The reason for that remarkable change is their mine is a low cost producer of high-grade gold and silver.
They made an important bottom in early October, 2023 and are up nearly 100% from that low. They are also significantly outperforming much larger mining companies and trading well above their 52-week high prior to the big move gold has been on lately.
I’m ready to make Equinox Gold a new special situations pick. Over the past couple years they have been building the Greenstone Gold Mine in Ontario under a 60-40 joint venture with Orion Mine Finance Management. A couple days ago they announced that they are buying out Orion for $995 million.
There is a great quote in their news release announcing the deal. Ross Beaty, Chairman of Equinox Gold, stated: “When we acquired our 60% interest in Greenstone in 2021, our goal was to ultimately own the whole mine. Consolidating 100% of Greenstone into Equinox Gold delivers our shareholders full exposure to a mine of outstanding scale and quality, in one of the best mining jurisdictions in the world, while meaningfully growing our expected production, cash flow and reserves.”
Their timing is impeccable as the Greenstone Gold Mine is about to go into production and it will become one of the largest Canadian gold mines. It also doesn’t hurt that this is all happening while gold is performing so well.
All the best,
Allan Barry Laboucan
Disclosure
Rocks And Stocks News does not make buying or selling recommendations. The reports are for information purposes only. Sponsors pay a fee to Rocks And Stocks News for content creation. The business model of Rocks And Stocks News is to fund research and reporting on the sector, picks and sponsors through corporate sponsorship. We are thankful to sponsors for enabling commentary free of charge to readers and viewers of the reports. When reporting on sponsors it is on behalf of the sponsors discussed in the portion of the report mentioning the sponsor. Before making any investment decision it is important for you to speak with your financial advisors to consider your risk profile. It is also important to do your homework. To help in that process, Rocks And Stocks News means to be a gateway by doing reports and interviews of management of sponsors and picks. The reports and interviews should not be considered investment advice. Allan Barry Laboucan is the founder and owner of Rocks And Stocks News, he has worked in the mining sector since 1993 and has been reporting on the sector since 2005. He has worked with and been mentored by very talented geoscientists in geology, geochemistry and geophysics. He uses the skills he has picked up during his career to assess sponsors and picks in the reports. Whether a company is a pick or a sponsor they go through the same filter and are reported on when important news is made that Allan Barry Laboucan wants to discuss on the Rocks And Stocks News platform. He may own shares in sponsors and picks for investment purposes.