Agnico-Eagle Mines is a gold mining company with mining operations in Canada, Mexico and Finland, as well as exploration activities in Canada, Europe, Latin America and the United States. Chart 11 shows the price history of Agnico-Eagle. You can see at the bottom of 2008, around the time when gold hit a low of $712.50 per ounce, the price of Agnico-Eagle dropped to a low of $21.70 per share. However, in December 2013, Agnico-Eagle traded as low as $25.13 per share while gold traded at roughly $1,200 per ounce. In other words, even though gold is roughly 68% higher in December 2013 than it was at the bottom of 2008, Agnico-Eagle’s share price is just 19.5% higher at the end of January 2014, which leads us to believe the stock is significantly undervalued relative to gold.
Chart 12 highlights that when gold traded at $712.50 per ounce in 2008, Agnico-Eagle’s stock price traded at 1.4 times book value. Now, at the end of January 2014, with gold trading at $1,251 per ounce, Agnico-Eagle’s price-to-book is actually lower at 1.2 times. Again, we believe this illustrates an undervalued share price relative to gold.
Chart 13 shows that while gold closed at $1,251 per ounce at the end of January 2014, Agnico-Eagle’s share price sold at 2.3 times sales. This is lower than when gold traded at $712.50 per ounce. Again, we believe this ratio highlights that its share price is undervalued relative to gold.
From Century Management's Newsletter - Inflation, Gold, and Gold Mining Companies
