Agnico-Eagle Mines stock forecast (NYSE:AEM)

A year ago, Agnico shares were north of $70. Prices crumpled to as low as $33, though, on news that the company was forced to close its Goldex mine in Quebec due to safety concerns. It looks like a recovery is well underway.

This post is part of series where we’re checking in on the Top 500 gold and silver mining stocks profiled in our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock.

Performance: First, let’s compare Agnico-Eagle’s performance against the AMEX Gold Bugs Index (HUI) – a basket of industry-leading gold stocks.

Time Span AGONF Performance HUI Performance
1 Month +9.5% +13%
3 Month +18.8% +3%
YTD +33% -12%

Agnico-Eagle Mines is one of the top-performing stocks in the HUI this year. The stock also happens to be the smallest component of the HUI with a 3.11 percent weighting. As the smallest component of the HUI, Agnico’s market cap still stands at a massive $8.28 billion. Since it’s smaller than some of its peers, though, share prices could be a bit more volatile.

Why we like Agnico: 1.66% dividend; More than 21 million ounces of gold reserves. By market cap, Agnico is Canada’s fifth-largest gold producer. In Q3 2011 alone, the company increased its production by 11 percent to 265,978 ounces of gold. According to their most recent numbers, they’ve got total proven and probable gold reserves nearing 21.3 million ounces. http://www.agnico-eagle.com/

Recent News: RBC Dominion Securities raised their price target on Agnico-Eagle to $53 a share last week. A year ago, shares were north of $70. Prices crumpled to as low as $33, though, on news that the company was forced to close its Goldex mine in Quebec due to safety concerns. On top of that, Agnico wrote off part of its investment in its Meadowbank mine in Nunavut.

RBC analyst Stephen Walker says things are finally looking up. “The company has shown its ability to ‘under-promise and over-deliver’ on its operating results and drive strong performance at its five operating mines,” he wrote in a note (per the Financial Post). “However, we believe investors expect to see the company deliver results that are sustainable and demonstrate future growth over the next 2-3 years.”

Agnico’s looking to the future with new exploration partnerships in Colombia and Alaska (with Miranda Gold) among other places.

Agnico paid out a dividend of $0.20 cents on Aug. 30. That’s up 25 percent over the company’s $0.16 dividend a year ago. Thanks to growing enthusiasm for gold and silver mining shares, I think RBC’s price target is low, and I wouldn’t be surprised to see shares north of $60 a year from now.

Check out our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock (pictured above) to uncover more undiscovered gold and silver mining stocks.

Related

Gold mining stocks haven’t looked this attractive in four years

A simple chart shows that gold mining stocks potentially present a better buying opportunity now than they have at any time over the past four years.

Frank Holmes has a fascinating post over at WallStreetPit called Where’s the Beef for Gold Equities? In it, he urges investors to “think contrarian: Eat up all you can while the pasture is wide open, because … when gold equities reverse, it happens quickly.”

We all know that gold mining stocks have grossly underperformed the spot price of gold recently. What you might not know is that gold mining stocks (via the NYSE Arca Gold Miners Index) haven’t underperformed spot gold this badly since the very height of credit crisis in 2008. Reference Frank’s chart for proof:

It’s evidence that gold mining stocks potentially present a better buying opportunity now than they have at any time over the past four years.

“The cold shoulder from investors has also given way to a promising trend in the gold space—growing dividend payouts,” Holmes writes. Newmont Mining Corporation (NYSE:NEM), for instance, has started paying dividends with a yield that’s based on the current price of gold. When gold goes up, so does NEM’s dividend payout. The stock’s currently yielding 2.88 percent.

Our new book, The Top 500 Gold and Silver Mining Companies, is filled with lists that compare gold and silver mining companies by things like dividends, amount of gold and silver in the ground, and recent stock price performance. You can find it on Amazon.

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Up 180%? 10 best gold and silver stocks returns year-to-date

From Wilcat Silver Corp. to Midway Gold Corp., here’s a look at the Top 10 best gold and silver stocks with the biggest returns this year.

Picking winning gold and silver stocks is notoriously difficult. Not only are mining stocks influenced by volatile precious metals prices, they’re also subject to natural disasters, political risk, worker strikes, misinformation and poor assay results. If you can find the right companies with the right management (see my post How to pick gold stocks that outperform the market), the gains can be extraordinary.

Here’s a list I put together of the top 10 biggest gainers in the gold and silver market year to date. I pulled only from the 100 largest gold and silver stocks by market cap:

Stock YTD Gain
NEWSTRIKE CAPITAL INC. (PINK:NWSKF) 181.24%
Midway Gold Corp. (AMEX:MDW) 177.48%
NGEX RESOURCES INC. (PINK:NGQRF) 144.63%
Richmont Mines Inc. (AMEX:RIC) 129.55%
WILDCAT SILVER CORP (PINK:WLDVF) 114.23%
SCORPIO MINING CORP (PINK:SMNPF) 97.62%
PRETIUM RESOURCES INC ORD (PINK:PXZRF) 63.02%
Samex Mining Corp. (OTC:SMXMF) 51.39%
Vista Gold Corp. (AMEX:VGZ) 48.54%
Minefinders Corp. Ltd. (AMEX:MFN) 44.75%

The year-to-date gains listed above are particularly impressive considering the steep losses gold and silver stocks suffered yesterday. Several of the stocks on the list lost nearly 20 percent in a brutal day of trading. Here are my guesses as to why these stocks have out-performed their peers this year:

NEWSTRIKE CAPITAL INC. (PINK:NWSKF): Newstrike’s Ana Paula project in Mexico continues to show impressive drill results. Most recently, the company announced 119.60-meter interval grading 3.76 g/t gold. That’s after results of 230.95-meter interval grading 7.5 g/t gold in April. The Ana Paula project has good pedigree. It was purchased from Goldcorp Inc. (NYSE:GG) last year. Goldcorp still has a robust mine there in Los Filos, and Torex Gold Resources Inc.’s (TSX:TXG) Morelos project is nearby. All three are part of the Guerrero Gold Belt.

Midway Gold Corp. (AMEX:MDW): Company insiders have been big buyers over the past six months snagging 100,000 net shares (per DailyFinance). Analysts have a price target of $3.71 on the stock as drill results from Nevada roll in. Midway’s gained a lot of investor interest thanks to a joint venture with Barrick Gold Corporation (NYSE:ABX).

NGEX RESOURCES INC. (PINK:NGQRF): The company’s Josemaria copper-gold deposit in Argentina has 460 million tonnes of gold (0.30 g/t gold) in the ground. NGEx’s also drilling for potash in Eritrea with results expected next month.

Richmont Mines Inc. (AMEX:RIC): Richmont’s Wasamac gold deposit just seems to keep mushrooming. Most recently, the company intercepted 7.28 g/t gold over 31.40m. The company has interests in 14 projects in Ontario and Quebec.

WILDCAT SILVER CORP (PINK:WLDVF): One of a handful of precious metals stocks that’s focused exclusively on silver, Wildcat Silver Corp. has an 80 percent interest in the Hermosa silver project in Santa Cruz, Arizona. The project has an indicated resource of 36 million ounces of silver and an inferred resource of 85 million ounces. Recent drilling results showed an impressive 230.9 g/t silver.

SCORPIO MINING CORP (PINK:SMNPF): Headquartered in Canada, Scorpio’s mines in Mexico are already in production. Fifty-five percent of the company’s revenue comes from silver – with the rest a mix of zinc, copper and lead. In addition to their operational Nuestra Señora mine, Scorpio has its eyes on more than 40 other exploration targets.

PRETIUM RESOURCES INC ORD (PINK:PXZRF): Much of the excitement around Pretium surrounds the company’s Snowfield deposit. Pretium could join up with mining major Seabridge Gold, Inc. (AMEX:SA) to further explore the project. On top of Snowfield, there’s the “Bonanza-grade” results the company recently announced at its Brucejack Project (5,740 g/t gold and 2,750 g/t silver).

Samex Mining Corp. (OTC:SMXMF): Samex is an early-stage exploration company that’s drilling in the Los Zorros District in Chile. Four out of 46 holes drilled at the Milagro project yielded 4.26 to 5.56 g/t gold.

Vista Gold Corp. (AMEX:VGZ): Impressive results from the company’s Mt.Todd Gold project pushed shares up nearly 20 percent in a day last week. Measured mineral resources were bumped up 23 percent to 353,000 ounces of gold. Indicated resources climbed 14 percent to 506,000 ounces of gold.

Minefinders Corp. Ltd. (AMEX:MFN): Minefinders’ massive Dolores gold and silver mine in northern Mexico is in production and has proven reserves of 1.2+ million ounces of gold and 68+ million ounces of silver. The company’s also evaluating the viability of a mine at its La Bolsa property.

Related

3 reasons the rally in gold and silver prices is far from over

Precious metals investors may be jittery, but the decade-long bull market in gold and silver far from over. Here are three reasons why investors should keep allocating cash to gold and silver.

Silver investors got a rude awakening at the start of trading yesterday. Spot prices for the metal tumbled more than 12 percent in early-morning Asian trading on Monday. We’ve heard a lot of excuses for the manic plunge, the most prominent of which is an unexpected surge in silver margin requirements on the Comex that went into effect at the close of trading on Friday.

Regardless of the reason, precious metals investors are jittery. But I’m far from convinced the decade-long bull market in gold and silver is drawing to a close. Here are three reasons why investors should consider staying the course:

1) The fundamentals haven’t changed. Everyone knows gold and silver coins and bars don’t actually do anything. They’re pretty to look at, but they don’t pay dividends and you can’t use them to pay for gas at the local Speedway (not yet anyway). The fact that they don’t do anything, though, is what makes them valuable. Precious metals are finite. The government can’t make more.

The government can, however, print more dollars. As the total number of dollars in circulation increases, the laws of supply and demand kick in. Suddenly, those greenbacks buy less gold and silver. In dollar terms, the “value” of your gold and silver goes up.

Beginning investors understand as much, but they still argue that it’d be better to hold something else, oil perhaps, or real estate. Unfortunately, there are problems inherent in oil and real estate – particularly during periods of rapid inflation.

Think back to 2008 when oil screamed up to record highs around $140 a barrel. Prices for just about everything else started rising, too, and that ultimately ground the global economic engine to a halt. Before long, oil was trading at $40.

How about real estate? If you’ve got enough cash to buy a sprawling apartment complex, I’d recommend doing so. You could get a low-interest loan, steady returns and a fair degree of insulation from inflation (so long as you have the ability to raise your rental rates every year). If you don’t have that kind of cash, though, the costs of entry in the housing market are too high and the market too illiquid to be practical for most investors.

That leaves gold and silver. The market is small, volatile and often stomach-churning, but the barriers to entry are low, and the metals are good at what they do: acting as a store of value during periods of high inflation.

Make no mistake that inflation has arrived, either. Official numbers might peg it shy of 2 percent, but if you calculate inflation the way our government did just 20 years ago, we’re already living with double-digit inflation. That means those dollars you’ve got sitting in your bank account are shrinking … and that’s not good for anyone.

2) 10 percent inflation is just the beginning. The Federal Reserve has made it clear that they’re going to see QE2 through to the bitter end. The massive bond-buying program is slated to end in June, but that’s two more months of massive capital injections. On average, the Fed is pumping $2.5 billion into the economy every day.

$2.5 billion is a vague number that’s hard to digest, but think about the fact that the Federal government nearly shutdown three weeks ago when Congress couldn’t come to an agreement on trimming a mere $39 billion from the 2011 fiscal year budget. QE2 is pumping that much cash into the economy every two weeks!

On top of that, Fed Chairman Ben Bernanke reiterated his promise to keep interest rates near zero for the “foreseeable future.” It’s all fuel for an inflationary fire that’s already smoldering. And the danger is, the Fed won’t be able to put that fire out without rapidly raising interest rates – something that would threaten to topple the U.S. into yet another recession.

3) Corrections are normal. Markets never move in a straight line. Rapid price run-ups are tempered by corrections and consolidation periods. Of course, it’s hard to remember that when you’re watching the net value of your portfolio crumple in a short-term sell-off. Rest assured, though, there are lots of long-term gold and silver bulls out there – even at the world’s biggest investment banks.

“Gold has hit our target of $1500-1600 and the long term target for next few years is $2000-3000,” Merrill Lynch analysts wrote last week (per Barron’s). “Silver should consolidate near-term as it challenges its all-time high – support is in the low $30’s. Longer-term, silver should re-challenge $50 and then target a move toward $80 (an ounce).”

What happens in the near-term is anyone’s guess. Just don’t buy the hype and get out of precious metals altogether. Gold and silver’s brightest days appear to lie ahead.

No love for gold and silver mining stocks

The next boom in gold and silver space might not be in the physical metals themselves but rather in the shares of mining companies. Silver mining stocks are up just 5 to 10 percent on average this year (per Forbes). By comparison, silver bullion’s rallied more than 43 percent since the start of the year and 171 percent over the past 12 months. Gold has trailed silver’s performance, but it’s still clocked gains of 30 percent over the past year.

Once mining companies start turning those price gains into robust earnings, sentiment toward the stocks just might change – even with all the noise and volatility in the spot market. It’s profits, after all, that do the talking. And we’d do well to listen.

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