No Reason to Panic as Agnico-Eagle Dumps Rubicon Shares
Bobby is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Agnico-Eagle Mines (NYSE: AEM) has reduced its shares in Rubicon Minerals (NYSE: RBY). The mining company recently informed Rubicon that it had “disposed of a significant portion of its shareholdings of Rubicon in the public markets” and that it would soon make the details of the disposal known in regulatory filings.
More specifically, Agnico-Eagle is reducing its interest in Ontario’s Red Lake gold camp. This almost seems like a reversal of Agnico-Eagle’s strategy. Last year, Agnico-Eagle made the decision to invest $70 million in this area, and this move made perfect sense when considering its long-standing interests in Red Lake. It has now sold off a substantial portion of that investment only one year later. A cursory analysis of Rubicon’s activities in this area seems to indicate that the company’s endeavors have been mostly successful and profitable. Once again, this begs the question of why Agnico-Eagle would give up its interests in the company.
Agnico-Eagle has not made it clear why it has decided to do this. Investors and the general public have no knowledge regarding how many shares were sold, at what price they were sold, and, most importantly, why it sold them. The internal difficulties that the mining company has been experiencing may have played a role in this rather sudden and unexpected decision, but again, this is mere speculation. That being said, the company is not in a bad position in financial terms, so a sudden sale of shares seems unnecessary.
In comparison, Goldcorp (NYSE: GG) appears to be in a much better position. It recently announced its sixth monthly dividend payment for 2012 of $0.045 per share. In addition, “Canadian [residents] who receive dividends from Goldcorp after 2005 are entitled to an enhanced gross-up and tax credit on such dividends.” The company has given monthly dividends to its stockholders for nine years. The mining stock also remains one of the fastest growing entities in the industry, making it a safe bet for any stockholder looking to expand their portfolio. As a result of maintaining such a good reputation, I expect that Goldcorp stock will be going up.
Bad news for AngloGold Ashanti (NYSE: AU) comes in the form of a fatal shooting at its gold mine in Geita. AngloGold Ashanti is doing the only thing it really can do by cooperating fully with the investigation. The company says that the circumstances surrounding the death of the 18-year-old remain unclear. Although this is clearly not a reflection on the mining company’s abilities to continue functioning, it does look bad. People are affected by surface appearance more than they will admit, and a shooting at the company’s mine is bad press that could pull down the stock.
Vale (NYSE: VALE) must also deal with deaths that took place at one of its mines. Two miners died at its mine nearly a year ago, and charges have now officially been laid against Vale for breaking the Occupational Health and Safety Act. Criminal charges are still possible as well, and, in my opinion, it is likely that the criminal charges will indeed come up. The union that serves the miners in that area claims that the deaths are a result of negligence. Court proceedings will begin in the middle of August this year. Even now, however, the bad press will begin to harm Vale stock. As the court date approaches, this may get even worse.
Likewise, Freeport McMoRan (NYSE: FCX) is experiencing further problems at its Grasberg mine in Indonesia. Violence and strikes led to a major decline in the company’s profits last year. Miners are now threatening another protest in June of this year due to the dismissal of three employees and security problems. Freeport needs to get its act together. This is one of the biggest mines it has, but it is not going to do the company any good if it has to keep shutting down for strikes. Freeport needs to resolve the problems there once and for all. If it cannot do so, maybe it should consider cutting its losses and getting out of Indonesia. For now, the upcoming strike will certainly have a negative effect on the stock.
Comparatively, Agnico-Eagle is not in such a bad position. It may even be able to resolve its current issues by merely informing the public of the reason behind its recent sale of Rubicon shares. I expect Agnico-Eagle stock to drop for a little bit, but as long as the company explains the situation soon, this should not have a major impact on it. This is certainly a better investment than some its competitors, and I do not think stockholders should be overly concerned by the events at the moment.
BobbyFisher has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
