Investing in gold has always been a favourite among many conservative investors, but what about gold mining stocks? How have they been performing in the market lately? Is it safe to invest in gold mining stocks in the current market scenario?
Well, in 2023, the price of gold has been trading above US$1,800 and reached as high as US$1,959.40 in January.
Gold is known to be a considerably safer investment option due to its low volatility. Also, now that investing in banking stocks is not a favourable option for many, most investors are exploring other value options in the safety bucket.
In today’s article, I’m going to look at one of the top gold mining stocks and my all-time favourite: Agnico Eagle Mines (TSX:AEM).
Let’s dive in and find out if it would be the right choice in the current wobbly market.
Reconsidering Agnico’s valuation
Agnico Eagle Mines’s market cap currently stands at approximately $24 billion at the time of writing. Investors have been eagerly waiting for the company’s first-quarter earnings report.
Notably, the mining company provides a rather juicy dividend yield of 3.2% as well as a strong dividend payout ratio. Analysts predict the company’s earnings per share to come in around $2.23 for the financial year 2023 and $2.25 for the financial year 2025.
Experts predict 7.10% growth in earnings this fiscal year, which is considerably higher than the previous year. Additionally, analysts at The Wall Street Journal expect the yearly revenue of this company to grow to $6.6 billion, which represents a 14.90% hike from last year’s financial report.
Latest update on plans for Malartic mine
Agnico Eagle has recently updated its plans for the Canadian Malartic mine. The update has come in accordance with its transition from open pit to underground mining, named Odyssey, by 2028.
The underground mining plan has been stretched to 2042 with an increase of about 23% in gold production.
However, there are predictions of a few down years lasting up to 2027, resulting in lower production and higher costs. But, from 2028 onwards, their annual production is predicted to be above 500,000 ounces every year.
Although there will be a considerable increase in production, there will still be an excess of mill capacity. Agnico plans to utilize this excess capacity with ore from other nearby deposits and deposits in general districts.
Bottom line
Agnico Eagle has recently declared a quarterly dividend payment of $0.40 per common share. The company has been declaring dividends since 1983, which builds the base for its reputation among investors.
AEM currently trades at the $66 level, and investors with long-term solid investment objectives can consider investing in this stock. Also, some recent interest of shareholders, such as LGT Group Foundation raising its stake in the stock, speaks volumes.
