March 9, 2018
Agnico Eagle Mines Limited (AEM on TSX and NYSE), March 9/18: C$50.04, 52-week range: 68.76-48.04, market cap: C$11.7 billion, div: C$0.57, Yield: 1.14%
Agnico Eagle is a senior Canadian gold mining company that has produced metals since 1957. Its eight mines are located in Canada, Finland and Mexico. It has declared cash dividends every year since 1983.
Agnico Eagle reported results for the 2017 year on February 14. Cash provided by operating activities before changes in working capital for 2017 was $839 million compared to $714 million in 2016, an increase of 17.5%. Net income was $244 million, or $1.06/sh compared with $159 million, or 71 cents/sh in 2016, an increase of 53.4%. The increase was due toto higher gold sales (up 5%) and a higher realized gold price (up 7%).
In 2017 the company produced 1.71 million ounces of gold compared with 1.66 million ounces in 2016. 2018 and 2019 will be years of transition during which time lower production will take place at the Meadowbank mine that produced 2.7 million ounces of gold over 8 years and now awaits to mill ore from its satellite Amaruk deposits. As well, production from the new Meliadine project, located 290 km to the southeast, will be commencing production in 2019. All three mines are located in the Canadian territory of Nunavut. Agnico Eagle forecasts annula gold production of 1.53 million ounces in 2018, 1.7 million in 2019 and 2.0 million in 2020. A further increase in gold production is expected in 2021 as a result of a 25% expansion at the Kittila mine in Finland.
The stock market reacted poorly to these recent forecasts, perhaps not sensing that gold production would be affected as much on an annual basis, albeit over a short two-year period as well as a fear that the company would be obliged to raise funds, possibly on an equity basis, to finance capital expenditures. Agnico Eagle has made a point of keeping the number of shares issued at a somewhat reasonable level. Nevertheless, over the last six weeks since the company was mentioned in this newsletter on January 26 AEM stock is down from the $60 level to $50, a drop of $2.4 billion in market cap. This may be a good entry point for long term investors keen on buying into a well-managed company while at the same time viewing a participation in gold as a hedge against inflation.
Savaria Corporation. (SIS on TSX), March 9/18: C$18.37, 52-week range: $19.24-11.10, market cap:C$758million, div:C$0.36, yield: 2.29%
Savaria Corporation was last mentioned in this newsletter on October 27, 2017 when then trading at $15.70. The company reported results for 2017 on March 8. Revenues of $180.5 million were 50.8 % higher than the $119.7 achieved in 2016. Adjusted EBITDA was $31.1 million an increase of 49.4% over $20.8 million in 2016%. Acquisitions during the year may have accounted for approximately one-half of the $61 million increase in revenues. The most important acquisition, that of Span-America Medical Systems, represented a significant portion of the increase and yet reported for only about a half year. This bodes well for 2018. Savaria is predicting an increase of 48% in revenues to $268 million for the year and an adjusted EBITDA to a range of $42.5 million to $44.5 million. While providing signs of being a growth company Savaria is also keen to reward shareholders through increased dividends and paying these out on a monthly basis.
Sleep Country Canada Holdings Inc. (ZZZ on TSX), March 9/18: C$36.70, 52-week range: $42.36-30.82, market cap: C$1.36 billion, div: C$0.66, yield: 1.80%.
Sleep Country was last mentioned in this newsletter on January 26. The company reported earnings for 2017 on March 1 and both sales as well as profits were better than expected. 4Q revenues increased 13.4% to $153.6 million, same store sales growth was 9.3% and adjusted net income increased 35.8% to $15.8 million, that being 42 cents/sh an increase of 35.5% over last year’s Q4 31 cents/sh. For the year, revenues of $588.0 million were 12.3% higher than last year’s $523.8 million. Adjusted earnings per share increased 21.3% to $1.65 from $1.36. These results were on top of similar growth results of a year ago, helping to define Sleep Country as an above average growth company. The company plans to continue opening 8 to 12 stores a year. In 2018 it expects to renovate 25 to 30 of its 249 stores. Some analysts predict the company will earn $1.80/sh in 2018. That being the case, Sleep Country stock could very well attain its previously high trading price level.
Student Transportation Inc. (STB on TSX), March 9/18: C$9.59, 52-week range : $9.74-6.98, div :C$0.57, Yield: 5.93%
Student Transportation was last mentioned in this newsletter on August 4, 2017 at which time the shares were trading at C$7.35. It was announced on February 27 that the company had entered into an agreement with the Province of Quebec pension fund manager Caisse de Depot et Placement du Quebec and the Washington, DC.-based Ullico Inc. to be bought out in a cash agreement at US$7.50/sh. At the current rate of exchange this works out to C$9.59 compared favorably to the $7.35 level mentioned on August 4, 2017. As was the case with Napec Inc stock mentioned on October 27/17 and on January 3/18 this newsletter will no longer follow the company unless the takeover does not materialize
Teranga Gold Corporation (TGZ on TSX), March 9/18: C$3.93, 52-week range: 4.75-2.36, market cap: C$422 million.
This newsletter last reported on Teranga on January 3, 2018 when its stock was trading at $2.94. Over the course of the last two months the shares have climbed to its current level of $3.93 on the TSX, an increase of 34%. During this period the company announced that its Sabodala mine in Senegal produced 233,000 ounces of gold in 2017, exceeding the high end of its annual production guidance range of 205,000 to 225,000 ounces. Reserves increased by 400,00 during the year and now attain a level of 2.7 million ounces at Sabodala. Teranga is forecasting production of between 210,000 and 225,000 from this mining complex in 2018. To date since 2010 Sabodalo has produced 1.2 million ounces and expectations are that production will continue at this annual rate of 200,000 ounces through at least 2022, generating at least $230 million in free cash flows during this period. Production at a lesser rate is expected to continue for a further 9 years. For 2017 operating cash flow excluding changes in working capital came to $82.6 million from revenues of $292 million up from $49.1 million on revenues of $269 million in 2016.
Teranga has announced the receipt of a commitment letter from Sydney, Australia based Taurus Funds Management setting forth a secured development finance facility pertaining to the company’s two developments in Burkina Faso. The facility includes $165 million to be used towards funding the development of the Wahgnion (formerly Banfora) Gold project, $25 million to be used toward the future advancement of a feasibility study for the Golden Hill Project and $10 million equipment lease facility. Mill construction at Wahgnion is scheduled to commence in the 2nd quarter of 2018. This additional mine will increase Teranga’s gold production by about 50% to between 300,000 and 350,000 ounces of gold annually following first pour by the end of 2019. The company is expected to produce a revised reserve calculation during 2018, providing an increase from the present 1.2 million ounces. At Golden Hill an initial resource estimate is expected relating to the 5 centrally located advanced exploration prospects along the Hounde greenstone belt.