Our Little Eaglet Is All Grown Up

Like watching your firstborn navigate those awkward teenage years to careen headfirst toward adulthood, sometimes your favorite growth stock can catch you off-guard with how quickly it grows up.

Just a couple of short years ago, my favorite growth story in the gold patch was a one-mine wonder with headstrong aspirations to take on the gold mining world with five simultaneous development projects. Today, Agnico-Eagle Mines (NYSE: AEM  ) has achieved the improbable. Despite a few growing pains that are a fact of life for miners, the company remains on track to surpass the 1-million-ounce production threshold for 2010, on its way to sustaining 1.4 million ounces thereafter.

For those keeping score, that looming volume implies a sixfold increase over 2007's pre-growth-spurt production. Yet shares have been persistently constrained, like a grounded adolescent, to a range beneath their all-time high above $83 (struck before the epic gold correction of 2008). Agnico is hardly alone in enduring this stern treatment by the market, and I have consistently pointed to the resulting deep value in several growing mid-tier gold miners such as Yamana Gold (NYSE: AUY  ) and IAMGOLD (NYSE: IAG  ) . Nowhere was the market's failure to reasonably value future gold production more obvious than in the case of Taseko Mines (AMEX: TGB  ) , and that stock's recent surge tells a portion of that story.

To consider whether Agnico-Eagle deserves to be freed from detention, let's take a look at its report card. The miner reported fourth-quarter profit of $47.9 million, a 119% improvement over the prior-year result. For the full year 2009, Agnico unearthed 78% more gold than in 2008, producing 493,000 ounces at a cost of $347 per ounce.

Just as with energy giants like ConocoPhillips (NYSE: COP  ) , sustainable success in mining is all about replacing production with fresh reserves, and Agnico did just that while doubling resources at the important Meadowbank project. A first gold pour is expected at Meadowbank imminently, with commercial production set for April, which will add some 350,000 ounces of annual production for the remainder of this decade.

Fools pondering this eagle's mineral wealth of 18.4 million ounces of gold are encouraged to consider both the potential for further expansion (targeting more than 20 million ounces by year's end) and the monster silver reserves at Pinos Altos that supply most of Agnico's 130 million ounces of silver in reserve. For context, that silver hoard alone is equivalent to that of primary silver producer Hecla Mining (NYSE: HL  ) .

With normal growing pains taken in stride, Agnico-Eagle Mines remains this Fool's favorite growth story in the gold patch. Sporting high-grade ore bodies with considerable potential for further expansion, a proven development team that delivered five new mines in short order, and a well-timed production growth spurt coinciding with gold's historic climb, I believe this is one budding miner that will make its shareholders proud.

Gold is a hot topic on the blogs at Motley Fool CAPS. Join the free service today and see just how many Fools are taking the long view when it comes to investing in gold. The "Gold" tag at CAPS lists 48 potential investments; you'll find Christopher's comments on many of them.

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 Agnico-Eagle Mines, Hecla Mining, IAMGOLD, Taseko Mines, and Yamana Gold. The Motley Fool has a gilded disclosure policy.


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