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Agnico Eagle to Issue and Sell Common Shares Worth $220M

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Agnico Eagle Mines Ltd (AEM - Free Report) announced that it has agreed to issue and sell 5,003,412 common shares to an institutional investor in the U.S. at $43.97 per common share, for total consideration of roughly $220 million.

The net proceeds of the offering which is expected to close on or by Mar 31, subject to stock exchange approval and customary closing conditions, will be used for general corporate purposes.

Agnico Eagle has underperformed the Zacks categorized Mining-Gold industry in the past three months. The company's shares have gained 2.9% over this period compared with the industry's gain of 6.4%.

Agnico Eagle's adjusted earnings and sales for the fourth quarter of 2016 missed the respective Zacks Consensus Estimate. The company witnessed a modest increase in gold production and higher unit costs in the quarter.

The company is exposed to a volatile gold pricing environment. Although gold prices recovered in 2016 after three dull years they remain volatile. Fed rate hike along with a stronger U.S. dollar put pressure on gold prices towards the end of 2016.

The Fed, earlier this month, raised interest rates for the second time in three months, citing an improving labor market and greater consumer confidence. Prospects of more rate hikes in 2017 are still weighing on gold.

Moreover, lower expected production and higher anticipated costs may affect Agnico Eagle’s performance in 2017. Agnico Eagle expects its payable gold production to decline to 1.55 million ounces in 2017 from 1.66 million ounces in 2016. Moreover, it expects all-in sustaining costs (AISC) to rise to $850-$900 per ounce in 2017 from $824 per ounce in 2016.

However, the company maintains a solid exploration budget and is reinvesting in its assets to expand output. Agnico-Eagle’s sufficient cash flow is enabling it to maintain a strong exploration budget, primarily focused on Kittila.

Agnico Eagle Mines Limited Price and Consensus


Agnico Eagle currently carries a Zacks Rank #5 (Strong Sell).

Stocks to Consider

Better-ranked companies in the basic material space include Arkema S.A. (ARKAY - Free Report) , BHP Billiton Limited (BHP - Free Report) and Kronos Worldwide Inc. (KRO - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arkema has an expected long-term growth of 12.4%.

BHP Billiton has an expected long-term growth of 5.6%.

Kronos has an expected long-term growth of 5%.

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