Agnico Eagle: Shares break free
Agnico Eagle is among the big winners of the US midterms. As the gold price rose, the shares gained sharply the very next day. Since then, the stock has gained around 15%. However, there is still plenty of room to reach the all-time high from the winter. From a technical chart perspective, the past few days represent a breakout for the shares. The first major target is now likely to be the interim high from late August.
Agnico Eagle itself delivered strong third-quarter figures at the end of October. The Canadians produced 814,012 ounces between July and the end of September. The company’s AISC came in at USD 1,648 per ounce. That puts it roughly in the lower middle of the industry. The Detour Lake, Fosterville and Kittila mines in particular delivered, according to the press release.
With solid production performance and a realised selling price of USD 4,264 per ounce, Agnico generated a net profit of USD 1,353 million and earnings per share of USD 2.67. Free cash flow reached USD 852 million. Agnico continues to accumulate cash and now has a net cash position of USD 3.4 billion. In addition, there are credit facilities worth billions. For the full year, Agnico continues to expect production of 3.3 million to 3.5 million ounces of gold, targeting the lower end. Management aims to bring costs per ounce below the Q3 figure.
So far, the company has primarily used its plentiful cash to reward shareholders through dividends and share buybacks. In principle, half of free cash flow is to be passed on to shareholders through these two channels. We do not expect Agnico to be planning any major acquisitions. Management appears willing to pursue operational growth.
Globex Mining: Drill results just around the corner
Globex Mining Enterprises has built a portfolio of 274 mining projects in North America alone. The company takes a low-risk approach that conserves cash. For one thing, it has a broadly diversified portfolio of royalties and shares. Globex itself buys resource projects cheaply. It then carries out the so-called groundwork. If a property proves promising, the next step is to pass it on to exploration companies. These companies then take on the exploration work with expensive drilling. In return, Globex receives royalties and often additional shareholdings from its partners. It therefore bears no exploration risk itself. If the partner company is successful, it shares in its progress. Gold and silver projects form the core of the portfolio. Alongside these, however, are numerous other metals, such as platinum, copper, zinc, antimony and rare earths. In addition to small companies, it also has agreements with mining giants such as Agnico Eagle, IAMGOLD and Eldorado Gold, which speaks to the quality of its portfolio.
Over the years, the company has accumulated 105 royalties in this way. If these projects eventually go into production, it receives a share of gross revenues – just like a traditional royalty company. In this way, Globex Mining remains debt-free and can use royalty cash flow to operate as an explorer itself. These exploration activities then turbocharge the shares if drilling proves successful. Most recently, for example, it carried out a 4,484 m drill programme on its own Central Cadillac/Wood property. The results are not yet available but are expected to be published in the coming weeks.
A positive factor is that the management team led by CEO Jack Stoch has “skin in the game”. Managers and insiders hold around one-seventh of the company’s shares. Globex has a market capitalisation of around CAD 120 million. The stock has been in a long-term uptrend since the end of 2022. It is currently around 10% below the interim high from August.
Pan American Silver: An opportunity for diversification
The past six months have been very challenging for Pan American Silver shareholders. Since its spring high, the stock has now lost 40% of its value. This was partly due to the sharp correction in silver and gold prices, but also due to minor operational setbacks. Nevertheless, it is surprising that this established producer has been hit so hard.
The third-quarter financial figures certainly do not justify declines of this magnitude. Pan American Silver reported robust free cash flow of USD 377 million. Of this, USD 300 million was returned to shareholders in Q3 alone. Since the start of the year, the company has now distributed USD 701 million through dividends and share buybacks. These massive share buybacks increase EPS in purely mathematical terms, as profits are spread across fewer shares.
At the same time, management is investing in the company’s future. The company expects the measures at the La Colorada, Jacobina and Timmins projects to increase production. They are also expected to improve the cost profile. For the full year 2026, the executive board expects silver production to come in at the lower end of the guidance of 25 to 27 million ounces. The reasons for this are unplanned downtime at Huaron and shifts in the ratio of gold to silver production. Silver costs, in turn, are expected to be at the lower end of the guidance range, according to the company. Gold mining costs, by contrast, are expected to rise.
The shares did not jump quite as sharply last week as those of other gold and silver producers. Investors looking to diversify their portfolios in precious metals and who expect prices to rise again over the medium to long term are unlikely to go wrong with this stock.
Conclusion
With shares in Agnico Eagle, Globex Mining and Pan American Silver, investors can diversify their precious metals portfolios in two ways: across gold and silver stocks, and by investing in one of the largest gold producers, a broadly diversified gold and silver miner, or a promising explorer that also has a royalty portfolio.
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