The Motley Fool

Is Agnico-Eagle Mines Ltd. the Best Gold Stock Today?

With gold prices down by roughly a third in the past three years, many miners have been struggling with collapsing revenues, decreased funding, and crippling debt loads. There is one miner, however, that appears to be strengthening its competitive position even through difficult times.

Agnico-Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM) is uniquely positioned to grow its production volumes, reduce its production costs, and comfortably manage its long-term financing.

Growing production volumes

Agnico-Eagle saw its fourth-quarter revenues rise 15% to $503 million on strong gold production across multiple mines. Total gold production was able to grow 20% to 387,538 ounces, offsetting the 10% drop in average realized gold prices. Annual gold production, meanwhile, grew 30% to 1.42 million ounces.

Strong production volumes were a chief contributor to the company posting strong financial results despite the falling market price of gold.

In 2016 the company anticipates reaching production of 1.6 million ounces, with the LaRonde, Kittila, La India, and Canadian Malarctic gold mines driving production growth. Agnico-Eagle also has several projects in the pipeline that should drive long-term production growth beyond 2017.

Lowering its cost of production

Last year Agnico-Eagle’s all-in cost of production was estimated to be roughly $954/oz. With average realized selling prices of $1,261, the company generated a positive operating margin of $307/oz, or 24%.

This level of profitability was higher than competitors such as Kinross Gold Corp., B2Gold Corp., Gold Fields Limited, AuRico Gold Inc., and Iamgold Corp.

Agnico-Eagle forecasts all-in costs to fall below 2015 guidance in 2016 and 2017 on continued cost-cutting initiatives, boosting both profitability and free cash flow.

Manageable debt load

While some gold miners such as Barrick Gold Corp. have intimidating debt repayments in the near future, Agnico-Eagle is more comfortably positioned.

Agnico-Eagle increased its cash position by 29% to $182 million in 2014 with solid free cash flow generation at each gold mine. The company also has a mere $52 million in short-term debt and $1,322 million in long-term debt. A majority of the debt is repayable in fairly even increments over the next nine years.

As a backstop, Agnico-Eagle still has roughly $700 million in available credit to get it through tougher times.

Rest easier with Agnico-Eagle

If you’re bullish on gold prices, it’s important to stick with companies that are positioned to thrive in a upward commodities market. If prices remain depressed, Agnico-Eagle should be able to grow production and lower costs to protect profitability. If conditions improve, the company has the financial flexibility to capitalize even further.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.