The last few months have been painful for shareholders of Agnico-Eagle Mines Ltd. . The stock is down more than 30 per cent since the company announced the closure of its Goldex mine in Quebec in late October, one of its lowest cost mines, because of water inflow and ground stability concerns that made it unsafe for workers.
As Dundee Securities Ltd. analyst Paul Burchell puts it, Goldex “was the catalyst that released a lot of angst and concern built up over the past couple of years from slower-than-expected ramp ups and an underperforming Meadowbank operation.”
Meadowbank, an open pit mine in Canada’s far north, has had its own challenges, with issues such as equipment availability and ore dilution holding production back and increasing costs. Mr. Burchell believes the operation is likely to face another year of costs near the $1,000-an-ounce mark, “a level unlikely to mollify too many investors.”
Even though the market probably isn’t expecting too much when Agnico-Eagle reports fourth-quarter results in a couple of weeks, Mr. Burchell warns that production and costs may still disappoint.
“While one could make the point that Agnico-Eagle is trading at a deep discount to its net asset value and is inexpensive at this time, we believe the stock could remain range bound at current levels until it demonstrates several quarters of improved production,” Mr. Burchell said.
Downside: Mr. Burchell downgraded Agnico-Eagle to “neutral” from “buy,” and slashed his price target to $44 from $56.
News of the imminent resignation of the CEO of Calgary-based directional drilling company Enseco Energy Services Corp. and a subsequent round of share sales is “slightly negative” for the company’s outlook, according to Desjardins Securities Inc. analyst Jamie Murray.
Enseco announced last week that Lane Roberts plans to retire from his CEO position once a replacement can be found, though he will continue to serve on the board of directors. He will also sell 650,000 shares at $1.15/share (Canadian) to fund the purchase of a first secured mortgage held by Enseco on certain properties located in British Columbia.
The company also announced a non-brokered private placement of 2.05 million units at a price of $1.15/unit, worth $2.4-million (Canadian). Each unit consists of a share and one-half common share purchase warrant with a strike price of $1.65 and an expiration date of Sept. 30, 2012. Insiders are expected to acquire 45 per cent of the units issued.
“We view the press release as slightly negative, mainly due to (1) dilution from the issue of shares at below market price, and (2) potential short-term share price pressure as a result of liquidity factors, although we recognize that the company’s balance sheet will be strengthened,” says Mr. Murray. “The additional $2.4-million from the private placement lowers overall financial risk for the company and immediately improves its balance sheet. While the open CEO position will be an uncertainty, we note that all key operations personnel with the company remain in their existing positions.”
Upside: Despite Mr. Murray’s mild pessimism on the stock, he reiterated his “buy-speculative” rating and $2.20 price target.
Strong price appreciation in recent weeks prompted Raymond James Ltd. analyst Steve Hansen to downgrade CanWel Building Materials Group Ltd. shares to “outperform” from “strong buy.”
CanWel shares have surged 54.2 per cent since mid October, versus 3.4 per cent for the TSX, mainly due to a string of positive data relating to the Canadian and U.S. housing sector.
Overall, CanWel’s outlook remains favourable, explains Mr. Hansen. “We continue to admire CWX’s market leading position, proven management team, consistent track record of healthy free cash flow, and exposure to the seasonal lumber trade advocated by our forestry team. Taken together with its attractive 10.2 per cent dividend yield that we consider secure, we continue to believe CWX provides income-oriented investors with low-risk exposure to a U.S. housing recovery and our associated lumber super-cycle thesis.”
Upside: Despite the rating downgrade, Mr. Hansen maintained his $3 (Canadian) price target.
Newell Rubbermaid Inc.’s fourth-quarter results, which saw an improvement in core sales growth, “shows that CEO Mike Polk’s strategy is on track, momentum is building and management is gaining credibility,” commented RBC Dominion Securities Inc. analyst Jason Gere.
“NWL remains one of our favourite names, and following two consecutive quarters of outperformance, investors are starting to believe that a return to double-digit EPS growth down the road can be achieved.”
Upside: Mr. Gere raised his price target by $2 to $21 and maintained an “outperform-above average risk” rating.
Arc Resources Ltd. , which last week reported its 2011 year-end reserves, “continues to deliver solid operating results and is well positioned in the current environment with a strong balance sheet,” said Raymond James Ltd. analyst Kristopher Zack. But given depressed natural gas prices, and Mr. Zack’s bearish view of the commodity going forward, he believes the stock is fairly valued at current levels.
Upside: Mr. Zack raised his price target by $1 to $25 and maintained a “market perform” rating.