Agnico Eagle (AEM) to Acquire the Exploration Assets of CMC

Agnico Eagle Mines Limited AEM has agreed to acquire all of the Canadian exploration assets of Canadian Malartic Corp. (“CMC”), including the Hammond Reef Gold and Kirkland Lake projects.

CMC is 50-50 owned and operated by Yamana Gold Inc. and Agnico Eagle. According to Agnico Eagle, the transaction is being structured as an asset deal under which all of Yamana's indirect 50% interest in the Canadian exploration assets of CMC will be acquired by Agnico Eagle. This will enable Agnico Eagle to acquire full ownership of CMC’s interest in the assets.

The effective purchase price post the distribution of the sale proceeds by CMC to its shareholders will be $162.5 million in cash. Notably, the deal will not impact the Canadian Malartic mine and related assets such as East Malartic, Odyssey, East Amphi and Midway, which will continue to be jointly owned and operated Yamana Gold and Agnico Eagle through the Canadian Malartic General Partnership and CMC.

The buyout of CMC asset portfolio enhances Agnico Eagle's long-term development pipeline and provides it with potential production growth post buildout of current mine in Nunavut. The Hammond Reef project provides the company a good option to a potential rise in the gold price while the Kirkland Lake property package enhances its current mineral reserves and offers near-term exploration upside.

Additionally, Agnico Eagle, Yamana Gold and CMC have inked an asset purchase agreement under which the parties have agreed to work expeditiously towards closing the deal, which is expected to occur by Mar 31, 2018, subject to notification under the Competition Act and the receipt of government, First Nations and other third party consents.

Per the deal, if Agnico Eagle sells any of the Hammond Reef and Kirkland Lake properties during the two-year period from the date of the agreement, Yamana will participate in any increase in net proceeds received by Agnico Eagle in the sale.

Shares of Agnico Eagle have declined 1.4% in the last three months, outperforming the industry’s 3.2% dip.

 

Agnico Eagle, during third-quarter earnings call, revised its total cash costs expectations for the full year to $570-$600, down from the previous guidance of $580-$610 per ounce. The company now expects all-in sustaining cost (AISC) in the range of $820-$870 in 2017, narrower than previous guidance of $830-$880 per ounce.

Given the robust operational performance during the first nine months, the company increased production guidance and it now anticipates production to exceed 1.68 million ounces of gold in 2017, compared with the previous guidance of 1.62 million ounces.

Agnico Eagle Mines Limited Price and Consensus

 

Agnico Eagle Mines Limited Price and Consensus | Agnico Eagle Mines Limited Quote

 

Zacks Rank & Key Picks

Agnico Eagle currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Westlake Chemical Corporation WLK, Daqo New Energy Corp. DQ and Kronos Worldwide Inc. KRO, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical has an expected long-term earnings growth rate of 10.6%. Its shares have soared 86.9% year to date.

Daqo New Energy has an expected long-term earnings growth rate of 7%. Its shares have rallied a whopping 179.8% year to date.

Kronos Worldwide has an expected long-term earnings growth rate of 5%. Its shares have surged 117.7% year to date.

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