This Golden Eagle Is Set to Soar

It seems the very pace of life continues to quicken, with vehicles of instant gratification like texts and tweets seeming to mold a culture less appreciative of the adage: "Good things come to those who wait."

And then there are Fools, whose trend-bucking commitment to a long-term investment perspective yields a culture all its own. During the deep precious-metals correction that assailed gold stocks during 2008, when much of the fast-money crowd was likely ditching gold in search of the next momentum play, I asked Fools to remain patient with Agnico-Eagle Mines (NYSE: AEM  ) .

Likewise, after the company struck a series of speed bumps in its monumental growth spurt during 2009, I encouraged Fools not to lose faith in the long-term outlook for this leading midtier producer. Although timing gave my selection of Agnico as my top stock for 2009 an underwhelming result -- the stock essentially traded sideways for the year -- focused Fools who held through that extended pause may have enjoyed a portion of the 160% appreciation in Agnico's shares since my October 2008 appeal for patience.

To know where you are going, you have to know where you have been, and I believe that Agnico-Eagle's share appreciation to date remains merely a foreshadow of the strong performance to come. The miner promptly doubled its gold production during 2010, approaching the 1-million-ounce mark at a still-reasonable cash cost of $451 per ounce. Refreshingly attuned to the interests of shareholders, the company aims to expand per-share gold production by another 50% over the next four years, as illustrated by the following chart:

For the fourth quarter of 2010, Agnico batted in an 84% increase in profit to $88 million. Despite a production cost that crept up to $485 as the company worked through normal ramp-up hiccups at the newer Kittila and Meadowbank mines, Agnico managed an inspiring 65% operating margin on the strength of realized gold prices that averaged $1,387 for the quarter. That places Agnico's margin close to the range that I anticipate for low-cost producers Gammon Gold (NYSE: GRS  ) and Eldorado Gold (NYSE: EGO  ) . For the full year 2010, earnings surged 284% to $332 million, and cash flow from operations climbed a husky 320% to $483 million.

Perhaps more importantly from the perspective of long-term investors, Agnico delivered an impressive 16% expansion in gold reserves -- net of production -- to build its golden basket up to a 21.3-million-ounce trove. Alongside the uncommonly promising exploration potential of Goldcorp (NYSE: GG  ) and Yamana Gold (NYSE: AUY  ) , I consider Agnico-Eagles' prospects for sustained organic reserve growth among the very best in the industry.

With exciting new projects like the Meliadine property filling out its development pipeline, a stated commitment to additional increases in its dividend yield, and sufficient cash flow to pursue beneficial asset purchases going forward, I believe that Agnico-Eagle Mines remains near the pinnacle of a crowded field of quality gold miners. If gold prices proceed toward $2,000 per ounce over the coming years -- as Agnico CEO Sean Boyd and I both expect them to -- then Agnico's targeted 50% production growth to 1.5 million annual ounces by 2014 could finally produce the sort of precious timing that led this Fool to tout the miner's incredible potential nearly three years ago.

Good things come to those who wait!

Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of every company mentioned in this article: Agnico-Eagle Mines, Eldorado Gold, Gammon Gold, Goldcorp, and Yamana Gold. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a gilded disclosure policy.


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