Agnico-Eagle Mines proves there's gold where it's cold

Posted Mar 12th 2008 9:00AM by Joseph Lazzaro
Filed under: Canada, Commodities, Stocks to Buy

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models which have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Agnico-Eagle Mines is worth a look.

Agnico-Eagle Mines (NYSE: AEM) is a Canada-based gold producer with mining operations located in northwestern Quebec, mine construction projects in northwestern Quebec and northern Finland, and exploration and development activities in Canada, Finland, northern Mexico and the western United States.

Analysts like the fact that Agnico produces about 270,000 ounces of gold annually, and has about five million ounces of gold in proved and provable reserves.

Agnico's LaRonde mine, it' main mine, also produces copper, zinc, and silver, with more company possesses more than 12 million ounces in total reserves. AEM also undertakes diamond exploration at properties in Quebec, Ontario, Nunavut, and in the Northwest Territories. The Reuters F2008/F2009 EPS consensus estimates for AEM are $1.21/$1.81.

The risks? A substantial, sustained decline in copper prices or other commodity prices would obviously hurt Agnico's results. Analysts are also keeping an eye on AEM's labor costs and overall operating costs.

Stock Analysis: Agnico-Eagle Mines is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from AEM's shares. If you were to purchase shares in this company, consider a stop loss of $44.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: AEM, Agnico-Eagle Mines, commodities, copper, gold, mining, mining sector, silver, zinc