In a May 29 research report, analyst Andrew Kaip indicated that BMO Capital Markets upgraded Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) to Outperform from Market Perform and raised its target price on the miner to US$55 from US$47 per share. This compares to US$44.97, the price at which the company's shares are currently trading.
Kaip outlined the following five reasons for the upward revisions on Agnico Eagle, a company BMO considers "Best in Class."
1. Production to Increase: BMO expects Agnico Eagle to grow production by about 30% between 2018 and 2020 from its core assets, including Meliadine where a mine is under construction. The miner should consistently produce about 2 million ounces per year between 2020 and 2025.
2. Pipeline is Robust: Agnico Eagle "has identified a number of potential opportunities at existing operations to enhance its production profile in 2019 to 2022 and early-stage opportunities for production growth beyond 2022," reported Kaip.
3. Management Team Delivers: Agnico Eagle consistently meets its targets and has actually exceeded its production and cash cost estimates for the past six years. This trend of surpassing the targets is what differentiates Agnico from the other best-in-class companies that routinely meet their guidance.
4. Jurisdictions are Favorable: The countries and regions in which Agnico Eagle operates are generally "stable" and "subject to lower political risk," noted Kaip. "Approximately 80% of our project net present value for the company resides within Canada."
5. Balance Sheet to Strengthen: Following the near-term period of high capital outlay and project execution, Agnico Eagle's cash flow should "increase materially," said Kaip. In fact, the company is expected to pursue ways to boost its dividend and lower its debt.
Kaip concluded the report by noting that Agnico's forecasted increase in production and free cash flow should "translate into an improving balance sheet, the potential for increased dividends and the company setting the stage for its next leg of growth."
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Disclosures from BMO Capital Markets, Agnico Eagle Mines, May 29, 2018
Analyst's Certification: I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures:
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Agnico Eagle Mines within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Agnico Eagle Mines within the past 12 months.
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Agnico Eagle Mines.
Disclosure
6A: Agnico Eagle Mines is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services Disclosure
6C: Agnico Eagle Mines is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of Agnico Eagle Mines.
Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of Agnico Eagle Mines.
Disclosure 9: BMO Capital Markets makes a market in Agnico Eagle Mines.
Disclosure 16: A research analyst has extensively viewed the material operations of Agnico Eagle Mines. Disclosure 17: Agnico Eagle Mines has paid or reimbursed some or all of the research analyst's travel expenses.
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