With nearly 4,000 stock calls, the TrackJimCramer page at Motley Fool CAPS indicates that Cramer has been on the money with less than half of his picks. By recommending my top pick for 2009, however, Cramer found the donkey's tail with this one.
Agnico-Eagle Mines (NYSE:AEM) delivered fourth-quarter earnings this week that were, as expected, significantly affected by the dramatic decline in prices for base metals such as zinc and copper during the period ... not to mention that fleeting weakness in gold and silver. The company earned $21.9 million, which comes to $0.15 per share after adjusting for currency gains, tax recoveries, and writedowns.
Because of the abrupt nature of the crash on zinc and copper prices, Agnico-Eagle suffered losses on the difference in base metal prices between the time of shipment and the time of settlement. Decreased by-product revenue sent cash costs of gold production spiking to $463 per ounce, but it would have been less than $300 per ounce without those settlement losses. With gold roughly at $1,000 an ounce Friday, robust long-term margins remain baked in the cake for this growing miner, now that the base metal collapse has stabilized.
More importantly, Agnico-Eagle announced the addition of 1.4 million ounces of gold reserves net of production, for total reserves of 18.1 million ounces. While fellow intermediate miner Kinross Gold (NYSE:KGC) revealed a $1 billion writedown of assets acquired through the acquisition of Bema Gold in 2007, Agnico-Eagle highlights the advantage of organic growth over acquisitive growth, with a full year of production added to the flagship LaRonde Mine and 1 million ounces added at Pinos Altos. Like miners Minefinders (AMEX:MFN), with the Dolores mine, and Coeur d'Alene Mines (NYSE:CDE), with Palmarejo, Agnico-Eagle is poised to capitalize on higher precious-metal prices, with new mines coming online in 2009 that will quickly double gold production at a most auspicious point in history.
Agnico-Eagle kicked off the gold-mining earnings season with a completely acceptable result under the circumstances, and it continues to top this Fool's list of vehicles for gold exposure. Notwithstanding the potential for significant gold-price volatility in either direction, the long and winding road for miners such as Yamana Gold (NYSE:AUY), Goldcorp (NYSE:GG), and Agnico-Eagle is paved with yellow bullion bricks.
Further Foolishness:
- Goldcorp remains a gold mine.
- The fourth way to invest in gold.
- Gold will be fine in 2009.
