Expert Adrian Day reviews recent quarterlies and other developments at some more of his favorite gold and silver companies.
Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) reported a very strong quarter, its first full quarter with Kirkland assets. Production rose above estimates while operating costs were down (with cash costs at $726/oz and all-in sustaining costs at $1,026), largely due to increased synergies from the merger with Kirkland as well as currency and fuel hedges.
The company had said that its initial estimates on synergies were conservative. Looking ahead to the rest of the year, the company expects continued strong production though also for costs to increase, to the upper end of its previous guidance.
Long-term Growth Ahead
Looking further ahead, initial production from Odyssey (Malartic underground) is now scheduled for the first quarter of next year, while the technical update on the Detour Mine looks for a 38% increase in reserves and extending the mine life by 10 years.
Since March, the company has paid down $250 million in debt, leaving $343 million of debt. Importantly, debt repayments scheduled over the next several years are light, around $100 million each year, which will be very manageable from cash flow. The company now has $2.2 billion of available liquidity. It also initiated its buyback program during the quarter. Although on a very small scale so far.
Agnico is one of our top gold picks. The company has good operations in low-risk regions; continues to execute well; has top, conservative management; a broad management bench; a strong balance sheet; and a deep pipeline.
The stock has bounced in the last week from $38.44, but it remains a very Strong Buy.
Few Details on Any Deal for Vista, but Strong Financial Position
Vista Gold Corp. (VGZ:NYSE.MKT; VGZ:TSX) reported progress on its objective to seek a partner for its Mt Todd gold project in Australia, and understandably it was all rather vague without any specifics.
CEO Fred Earnest says that the company and its advisor, CIBC, are both “working diligently” towards the goal of a transaction, and “pleased with our progress.”
The company is “evaluating a range of strategic opportunities.”
Clearly, a transaction on Mt Todd is the most important issue for the company, and for its stock price. The company has not announced any timing, including specifically the deadline for companies to submit bids, so shareholders are in the dark on progress. The longer the process continues without any specific news from the company, then the longer the stock price will drift.
With over $11 million cash, the company is well-positioned for current needs. Costs during the last quarter were $1 million, half of the prior-year quarter, because of lower exploration and holding costs.
Expenditures going forward are expected at around $1.5 million per quarter. The stock has moved from a mid-month low of $0.54, but can be bought at this price, particularly for investors who do not own any.
Fortuna Wraps up an Exploration Story With a Royalty
Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) has sold its 51% interest in a project in Serbia, on which it had earn-in options, to Medgold, the owner of the rest of the property, for a 1% royalty on any production. We don’t ascribe much value to this, but it concludes a long saga for Fortuna.
Fortuna is a good buy at the current level.
TOP BUYS THIS WEEK in addition to those above include Osisko Royalties (OR.NY, 10.45); Wheaton Precious Metals (WPM.NY, 34.30); Midland Exploration (MD, To., 0.36); Franco-Nevada (FNV.NY, 127.98); Royal Gold (RGLD, Nasdaq, 104.77); Ares Capital (ARCC, Nasdaq, 19.39); Barrick Gold (GOLD.NY 15.74); and Pan American Silver (PAAS, Nasdaq, 20.33).
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