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Gold possesses the rare distinction of being both next to useless and highly valuable.Getty Images/iStockphoto

It's been a great year for gold investors. The price of the precious metal has shot up from a low of $1,046 (U.S.) last December to close out the first half at $1,322.15, a gain of over 26 per cent.

It wasn't expected to be this way. In January, some economists were calling for gold to drop below $1,000 within a few months in the face of rising U.S. interest rates. But those increases never materialized, and the uncertainty raised by the Brexit vote may keep the Fed on hold until late in the year or into 2017.

Meanwhile, the gold price is being driven higher by investors seeking a safe refuge from weak economic growth, battered stock markets, and the uncertain post-Brexit future. The gold miners are the big beneficiaries. Their stocks are outpacing the metal itself with the S&P/TSX Global Gold Index up an astonishing 95 per cent in the first half of the year.

One of the stocks that helped to push the index higher is Agnico Eagle Mines Ltd. (AEM-T, AEM-N), whose shares shot up further last week as gold surged after the Brexit vote. Here's what you should know about the company.

Background: Agnico Eagle is a Toronto-based international gold mining firm with operations in Quebec, Nunavut, Finland, Sweden, and Mexico. The company produced almost 1.7 million ounces of gold and 4.3 million ounces of silver in 2015. At the end of 2015, the company had gold reserves of 19.1 million ounces and 55 million ounces of silver.

Stock performance: The stock price has been extremely volatile in recent years, dropping below the $30 level since 2013 on several occasions. The shares hit a 12-month low of $27.63 in Toronto last summer but have been on a steady upward trend since as the gold price has rebounded. They closed at $69.14 on Friday, just below their four-year high of $69.80. The stock is up 90 per cent since the start of the year.

Why I like it: The company's properties are in investment-friendly countries, so political risk is minimal. Profitably is improved by Agnico Eagle's relatively low production costs, which averaged $573 per ounce on a cash basis in the first quarter compared to $588 per ounce for the first quarter of 2015. The all-in sustaining costs (ASIC) per ounce was $797, down from $804 last year. The stock pays a quarterly dividend of $0.08 per share.

Recent developments: The company announced that first quarter production came in at 411,336 ounces of gold, driven by a strong performance from its Mexican operation. On that basis, management projects that production for the full year is expected to meet the high end of the guidance range of approximately 1.525 to 1.565 million ounces of gold. Cash costs are expected to come in between $590 to $630 per ounce and AISC of will be approximately $850 to $890 per ounce.

Revenue for the quarter was $490.5 million, a modest increase of 1.4 per cent from the year before. Net income was $27.8 million ($0.13 per share, fully diluted), down slightly from $28.7 million (also $0.13 per share) the year prior.

"At current margins, Agnico Eagle is generating sufficient cash flow to support its expanded exploration and development activities and potentially pay down additional debt," said CEO Sean Boyd.

Outlook: The higher gold price suggests a big improvement in second-quarter numbers, which will be released on July 27. If the gold price continues to rise, as appears likely at least in the short term, this stock could test the $80 level this year.

However, history has shown this stock can be highly volatile. If the price of gold pulls back, the downside will not be as extreme as with some other gold producers because of Agnico Eagle's relatively low production costs, but it will be significant. Only investors who can tolerate risk should buy at this stage.

Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to

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