Agnico Eagle is the world’s most-resilient gold miner – by Danielle Bochove (Bloomberg/Globe and Mail – November 20, 2015)

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Agnico Eagle Mines Ltd. is emerging as the winner in the race to shield profit from slumping gold prices. Since gold began a more than 40-per-cent plunge from a 2011 peak, the miner’s gross margins have narrowed by just 1.9 per cent thanks to expansions and a strengthening U.S. dollar.

For every dollar of gold Agnico Eagle sold last quarter, 49 cents (U.S.) was gross profit, little changed from four years ago when gold touched $1,900. That’s the best performance among 15 major producers tracked by Bloomberg, whose margins compressed by an average 64 percent.

“We’ve generated net free cash flow this year because of those margins, and it’s not at the expense of squeezing our key development projects or our exploration budgets,” Chief Executive Officer Sean Boyd said in an interview in Toronto. “And we still managed to reduce our net debt by almost $200-million.”

It hasn’t always been that way. The Toronto-based company struggled to bring five mines on stream between 2008 and 2010, missing production and cost guidance. In 2011, it suspended mining at Goldex in Quebec because of flooding and rock instability.

But in 2012, the company turned a corner. Since then, operational and exploration success coupled with acquisitions have helped turn things around, according to Josh Wolfson, an analyst with Dundee Capital Markets, who has a buy recommendation on the stock and a share price target of $44 (Canadian). In 2014, it joined with Yamana Gold Inc. to buy Osisko Mining Corp., giving it the Canadian Malartic gold mine in Northern Quebec.

Production Surges

The stock has gained 21 per cent this year in Toronto compared with the BI Global Senior Gold Valuation Peers Index’s 32-per-cent loss. That outperformance has also made it the index’s most expensive member at about 63 times estimated earnings. Agnico Eagle closed up 2.5 per cent to $35.96 on Thursday for a market value of $7.8-billion.

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