Under the Spotlight: Agnico Eagle Mines (AEM) (Clone) (Clone)

Agnico Eagle Mines ($AEM) would have been a keen observer of Northern Star Resources’ ($NST) $5b takeover offer for De Grey Mining ($DEG) last week. 

A Toronto-based miner listed on the NYSE since the 90s, Agnico Eagle has been touted as being interested in De Grey and its Hemi gold project – which would be one of Australia’s top five gold mines when built. Whether it makes a rival bid is yet to be seen, but the company is proof that M&A can pay off handsomely: AEM shares are up 77% since its US$10.7b merger with Kirkland Gold was completed in February 2022. 

Founded in 1957 with a focus on silver, nickel and cobalt, Agnico Eagle has acquired companies and assets, and invested in its own projects, to become the world’s third largest gold producer. From one mine and production of 240,000 ounces in 2005, it now has 11 mines and is targeting 2024 gold production of 3.35m-3.55m ounces. A market cap of US$42.7b places it within striking distance of challenging Newmont ($NEM) as the world’s largest listed gold stock. 

All that glitters

Agnico Eagle shares have tracked the record-breaking run in the price of gold. A combination of central bank purchases, elevated inflation, growing government debts and geopolitical uncertainty lifted the precious metal to a record high of US$2,790.17 per ounce on 31 October. It’s up 30% this year. The Philadelphia Gold and Silver Index, which tracks U.S. gold stocks, is up 25%. Agnico Eagle shares have actually rallied 55% in 2024. 

The miner may enjoy another bumper year of gold prices if the bullishness of some professional forecasters is on the mark. While gold has pulled back to US$2,630 an ounce, Goldman Sachs ($GS) expects gold to finish 2025 around US$3,000 an ounce. JPMorgan ($JPM) also sees US$3,000 an ounce. However, HSBC sees the possibility of a volatile year, with gold possibly lower by the end of 2025 if the U.S. dollar remains strong and high prices hurt purchases of physical gold. 

A major driver of the gold price is central bank buying. Central banks bought 60 tonnes in October, according to the World Gold Council. That’s the highest amount this year. Gold miners like Agnico Eagle would welcome the news that the People’s Bank of China started buying in November after a six-month break. Its gold holdings grew from 72.8m ounces in October to 72.96m ounces in November, now worth US$193b. 

Increasing gold supply is another issue Agnico Eagle needs to navigate. Q3 total gold supply increased 5% year-on-year (YoY) to a record 1,313 tonnes, according to the World Gold Council. Mine production rose 6% to a quarterly record, while year-to-date production surpassed the previous high in 2018. 

Agnico Eagle’s supply stands out as its mines are in safe jurisdictions including Canada, Finland and Australia. Compare them to Mali, where the aggressive pursuit for additional gold revenue has elevated sovereign risk concerns among investors. Resolute Mining ($RSG) shares slumped after Mali’s junta government forced it to pay an additional US$160m, while it has issued an arrest warrant for Barrick Gold ($GOLD) CEO Mark Bristow.