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Citi Looking At Gold Stocks, Says Sell Agnico Eagle Mines

Citi Looking At Gold Stocks, Says Sell Agnico Eagle Mines - Agnico-Eagle Mines Limited NYSE:AEM

Citi initiated coverage on Agnico Eagle Mines Ltd (USA) AEM with a Sell rating and $44 price target, which implies a 26.13 percent downside to the current stock price of $59.57.

The analysts described Agnico as the best performing stock in the sector for the past decade, based on superior operating performance and NAV generation. The company has grown from one to eight mines in nearly seven years and avoided major mistakes common to peers in the industry.

However, the analysts' primary concern on the company is valuation, as the company has struggled to meet valuation metrics. "The Lapa and Meadowbank mines are close to end of mine-life which could cause production to decline post 2018. The company's returns are relatively low (4 percent ROIC at $1,250/oz gold)," wrote Citi.

The analysts mentioned the following risks to their investment thesis, stating that the shares could outperform their target in case the impact from these risks turns out to be greater/less than estimated:

  • Metals pricing volatility.
  • Mining operations, which are subject to variability in ore quality and structural issues which could potentially decrease production volumes and increase unit costs.
  • The company has projects in the pipeline that have execution risks.

At time of writing, Agnico was up 0.98 percent on the day, trading at $59.47.

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