Agnico-Eagle is up 56% since recommended in March

Back in March of this year I made a bullish case for owning the Canadian gold producer, Agnico-Eagle Mines. Back then, thanks to a couple of big write downs that contributed to a loss of $601.4 million in the fourth quarter of 2011, the company was trading at $33.61. Today however, it’s selling for $52.69 a share, a rise of 56% in a little over 6 months. However, despite this rise I remain bullish on the stock.

In the 26 March article I stated that “Agnico is a well run company in a sector with tremendous prospects” and that “this spate of bad luck allows investors to buy it at a significant discount.” I went on to say, “I believe the downside for Agnico is limited, and over the next 18 to 24 months the company will likely be an excellent recovery play.”

A 3 Year Chart Of Agnico-Eagle Mines

Chart courtesy of Stockcharts.com

Speaking at the Denver Gold Forum last month, the company’s CEO, Sean Boyd, outline some of the reasons I like Agnico. These include the fact that the company:

  • Is generating around $200 million a quarter in operating cash flow
  • Has $1.2 billion in cash in the bank
  • Only 171 million shares outstanding after 55 years of operating history
  • Has an investment grade credit rating

In the second quarter of 2012 Agnico reported record gold production from its five operating mines. It produced 265,350 ounces of gold at a cash cost per ounce of production of $660, and net income for the quarter of $122 million.

As of 31 December 2011 the company had 18.75 million ounces of gold and 115.9 million ounces of silver on a Proven and Probable basis, as well as significant reserves of copper, lead and zinc.

As the chart above shows, Agnico has risen quite sharply since making a bottom at $30.95 in February 2012. However, despite this rise Agnico continues to offer decent upside potential for investors, and I remain bullish on the stock.

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