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Precious Metals Miners Face Challenges and Opportunities
Contributed Opinion

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Adrian Day Precious metals mining companies like Agnico Eagle Mines and Franco-Nevada face production issues, but well-capitalized miners are still finding attractive assets.

The precious metals mining industry has faced several recent challenges but also new opportunities.

Companies like Agnico Eagle Mines, Franco-Nevada Corporation, and Osisko Gold Royalties have dealt with mine disruptions but continue to make strategic moves.

Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) reported a 4% production increase in Q3 2022 over the previous year.

However, output fell slightly below expectations due to transformer issues at Detour Lake mine that limited mill output for 25 days. Costs also rose, with all-in-sustaining costs up 15% year-over-year due to inflationary pressures.

On the positive side, Agnico Eagle received ratification from the Supreme Court of Finland for a permit allowing increased production at its Kittila mine. Although Kittila only represents around 5% of the company's net asset value, the elimination of this legal overhang is seen as a positive for Agnico Eagle.

With the Detour mine now operating on schedule and higher output approved for Kittila, Agnico Eagle expects to reach the upper end of its 2022 production guidance.

Agnico Eagle is a Buy.

Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) also faces challenges at its Cobre Panama mine, which represents nearly 20% of the company's revenue. Violent protests recently erupted after Panama enacted a new law affirming the mine contract.

Although the contract was grandfathered under Panama's new ban on mining concessions, the unstable political climate raises concerns. 

Franco-Nevada is a Buy.

Osisko Gold Royalties Ltd.'s (OR:TSX; OR:NYSE) Renard diamond mine in Quebec has temporarily suspended operations due to low diamond prices. Osisko owns a 9.6% stream on the mine, which was forecast to contribute around 10% of the company's future revenue. The short remaining mine life and marginal economics suggest questions about further investment.

We are holding Osisko.

Despite headwinds, companies like Ares Capital Corp. (ARCC:NASDAQ) show how strong middle-market companies can prosper even amidst rising interest rates. Ares reported increased earnings, net asset value, and portfolio credit quality in Q3 2022. With significant available capital and a robust deal pipeline, Ares appears poised to acquire quality assets at attractive prices.

We are holding Ares.

Precious metals companies clearly face risks ranging from production disruptions to political instability. However, well-capitalized miners continue to find opportunities to add assets and expand production.

For investors, volatility can yield chances to buy quality mining stocks at discounted prices. Careful analysis of individual company fundamentals remains key.

TOP BUYS this week, in addition to above, include Nestle SA (NESN:VX; NSRGY:OTC), Hutchison Port Holdings Trust (HPHT:Singapore)Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX)Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE)Altius Minerals Corp. (ALS:TSX.V), Midland Exploration Inc. (MD:TSX.V), and Lara Exploration Ltd. (LRA:TSX.V).

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Important Disclosures:

  1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Agnico Eagle Mines Ltd., Franco-Nevada Corp., Osisko Gold Royalties Ltd., Fortuna Silver Mines Inc., Altius Minerals Corp., Midland Exploration Inc., and Lara Exploration Ltd.
  2. Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: All. I determined which companies would be included in this article based on my research and understanding of the sector.
  3. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
  4.  This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

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Adrian Day Disclosures

Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2023. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.


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