Investing.com -- Moody's Ratings has revised its outlook for Agnico Eagle (NYSE: AEM ) Mines Limited from stable to positive, while affirming the long-term issuer rating at Baa1. The change in outlook comes in light of Agnico's strengthened credit profile, which has been bolstered by record annual gold production in 2024 and concerted efforts to improve its financial position.
Agnico's record gold production in 2024 was achieved at a cash cost of $903 per ounce of gold. The company also made significant strides in debt reduction, repaying $700 million over the course of the year. These developments reflect positively on Agnico's credit profile and have played a key role in Moody's decision to revise the company's outlook.
Agnico's credit profile is further supported by its good scale of production, low leverage, mine diversity, and conservative financial policies. The company anticipates gold production to be between 3.3 to 3.5 million ounces over the next three years, positioning it as the third largest global gold producer. Its adjusted debt/EBITDA is below 1x, and over 85% of its production is derived from ten operating mines located in favorable mining jurisdictions in Canada.
However, the volatility of gold prices and limited product diversity, with over 95% of revenues stemming from gold, pose challenges to the company.
The company's merger with Kirkland Lake Gold (NYSE: KL ) Ltd. in 2022 and its acquisition of the remaining interests in Canadian Malartic and Wasamac in 2023 have also bolstered its credit profile. In 2024, Agnico produced 3.49 million gold ounces, a significant increase from 2.1 million ounces in 2021. This increased production, coupled with low operating costs, has resulted in gross margins above 60%.
Agnico's liquidity position is robust, with around $3.7 billion of total sources and about $90 million of uses projected through to December 2025. Its sources include approximately $926 million of cash at the end of 2024, an expected free cash flow of about $800 million in 2025, and almost full availability on its $2 billion revolving credit facility, which expires in February 2029.
Moody's positive outlook is based on the expectation that Agnico will sustain its operating cash costs in the range of $915 to $965 per ounce and maintain production over 3 million ounces per year. The company's conservative financial policies, with leverage remaining below 1x, also contribute to the positive outlook.
The ratings could be upgraded if Agnico maintains a consistent operating performance, its cost profile, and keeps adjusted debt/EBITDA below 1x. However, the ratings could be downgraded if the company's operating profile deteriorates significantly from a production and cost basis, or if adjusted debt/EBITDA rises above 2.0x.
Agnico, headquartered in Toronto, Ontario, Canada, operates ten mines in Canada, Australia, Finland, and Mexico, and has a pipeline of exploration and development projects.
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