Proficient Auto Logistics Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 28, 2023

There are 11 speakers on the call.

Operator

Good day. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ednego Eagle Mines Limited First Quarter Results 2023 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you.

Operator

Mr. Amar Aljondi, you may begin your conference.

Speaker 1

Thank you and good morning everyone. On this Beautiful spring late April day. It's a pleasure to have the opportunity to talk about our Q1 results. But before I do that, I'm in a room with a lot of my colleagues who will be dealing a lot with this discussion. But in particular, I'd like to talk briefly about 2 colleagues.

Speaker 1

On my right, Sean Boyd, who mentioned to me that at this AGM at 11 o'clock will be his 40th AGM with the company. You don't have many people in any business that committed for that long. We've created as much value as Sean has. So that's quite the milestone, Sean, and we'll make sure we point it out again on the 50th. And on my left, Dave Smith, CFO extraordinaire and a good personal friend who today is his last official day as CFO.

Speaker 1

He has agreed to work with Jamie Porter over the next I just wanted to point that out. So we're going to be summarizing the Q1 results. Really though the story It's 3 parts. 1, strong operational performance, strong production, good costs, good safety, good environmental performance. 2, very good progress on optimizing our assets.

Speaker 1

2022 was a year of consolidation. 2023 is going to be a year of optimization. There's a lot of work, particular focus on the Abitibi Belt, but a huge potential. And then 3 excellent exploration results, importantly excellent across a number of assets and Guy will talk about that. But I want to start with safety.

Speaker 1

Our greatest responsibility at Agnico and I would say at any company It's for the safety of our people and the safety of our communities. In the Q3 Last year, I had the pleasure to announce that it was the safest quarter in the company's 65 year history. The last call at the year end call in February, I then had the pleasure to announce the safest year in the company's 65 year history. And now in the Q1 of 2023, I can once again I have once again the pleasure of saying another record safety quarter in the company's 65 year history. That's pretty fantastic.

Speaker 1

So, before we get started on the details, I would like to mention the forward looking statements. There's a couple Page is there. It's important. A lot of what we talk about is going to be looking forward in our best estimates, but clearly their estimates. I am going to go through this is how the call will go today.

Speaker 1

We'll try to keep The presentation to a half hour, then open it up to questions. I will quickly go over the highlights on the operations, but really I want to focus us on the excellent things we're doing, to create value long term, and I'm going to be asking the people in charge of that to talk directly. 1, growth at Detour and Natasha will be talking about that. 2, growth at Malartic And Dominic will be talking about that. And again Detour and Malartic, some of the biggest mines in the gold mines in the world, some of the longest life gold mines in the world in the best jurisdictions with a lot of growth.

Speaker 1

3, the consolidation work we're doing on the Abitibi Belt, there is a lot of work there. It's still very early, but we're making good progress. And Jean Robitaille, will talk about that. And then 4, as I mentioned exploration and Guy will talk about that. So jumping into the presentation, just hitting the highlights.

Speaker 1

Strong quarterly production and costs, record safety performance, production at 813,000 ounces, cash cost at $8.32 and all in sustaining costs of $11.25 Particular, shout out to the operating team. We've talked about inflation. We've talked about inflation. We've talked about cost pressures. But as we've said before, what really drives costs are efficient operations, and the team delivered that.

Speaker 1

Solid financial results with record quarterly cash flow, adjusted net income of 0.58 dollars operating cash flow of $1.30 a share. There is a big accounting adjustment. I will let Dave talk about that later in the presentation. Gold production, capital and cost guidance maintained for the year. Next page please.

Speaker 1

We've had continued exploration success. That's impressive, but More impressive it's been across the board at Meliadine, at Quetzalah, at La Ronde, at Goldex and of course, continued, success at Detour and Malartic. We closed the Yamana transaction on March 30. We closed the joint venture with Teck on April 6, both of those deals, key strategic deals that position us well in some of the best mining jurisdictions in the world. We released our 2022 sustainability report and a shout out to our ESG team who won the Investor Relations award for best ESG reporting in the industry.

Speaker 1

So congratulations on that. Improvement across a number of indicators, safety, water, indigenous employment, things that are important to our business, and a quarterly dividend of $0.40 a share. Now before I flip, I do want to give a special congratulations to the team in Finland on the ESG side. The mine the Quitula mine is transitioning to 100% clean nuclear power starting effectively now. That reduces our greenhouse gas emissions for the entire operation by about a third.

Speaker 1

And so our target across the company is a 30% reduction by 2,030. Quitula has effectively done that now. And it's also an opportunity to point out again that getting to the targets we need to get to are not just company specific initiatives. They're not just industry specific initiatives, but they have to include broader industry and governments and this is a perfect example of how much progress you can make when you have access to clean electricity, which by the way to repeat, virtually all of our electricity on Ontario and Quebec is clean as well. Looking at our just some highlights of the sustainability report, again, 65 years, Best Safety Performance.

Speaker 1

I can't say that enough. I want to take a second to talk about the Doctor. Leanne Baker scholarship. I think a lot of you remember Leanne Baker, an exceptional individual. She was on our board for a long time, Really an inspiration to young women as a very successful person on the financial world, on the technical world.

Speaker 1

And in that scholarship, we have 14 young ladies at Agnico, with strong technical and financial backgrounds, very capable, and we are mentoring them as future leaders of the company. An increase in indigenous employment, always important to reduction in freshwater usage. And I'm very proud of this. A $1,500,000,000 in local procurement in 2022, that really does make a difference on the ground. Next slide please.

Speaker 1

So the rest of this presentation primarily is going to be focused on the key value drivers that are going to move this company forward for years to come. I'm going to have the individuals talk about them. Again, Natasha will be talking about Detour Lake where we've had record throughput through the mill as Natasha and her excellent team Continue to make progress there and she will also talk about our long term objective to get to 1,000,000 ounces a year. Dominic will talk about the Canadian Malartic Complex, the shaft sinking, the ramp construction and some of the opportunities we see there. And Jean will be talking about some of the initiatives to consolidate and the Abitibi Belt that we've talked about including, amalgamated Kirkland, Upper Beaver and Wassa Mac.

Speaker 1

So with that, I will pass it over to Natasha.

Speaker 2

Thank Thank you, Amar, and good morning, everyone. So as Amar said, I'll provide an update on Detour and our vision to get to 1,000,000 ounces per year. I'm on Slide 9. And I'll start with the mill expansion. So this has been a journey as you can see from the top graph on the slide.

Speaker 2

The team has progressed quite a bit over the last few years and increasing throughput at the mill and have had tremendous success in achieving their objectives. And in my opinion, anyway, since the merger, we've actually seen an acceleration of that, because of the technical bench strength that came with the merger and the ability for us to leverage the best the sharing of best practices between Canadian Malartic and Detour. There was a lot of lessons learned here. And so we continue to advance on multiple initiatives to increase and stabilize the mill throughput to 28,000,000 tons a year by 2025, if not sooner. And as mentioned in February, the last major initiative in our plan to achieve 28,000,000 tonnes a year was fully completed towards the end of 2022 with the installation of the secondary crusher screens.

Speaker 2

And so this quarter, as well as going forward in the year. The focus at the mill will now shift to optimizing the mill processes to analyzing the wear and tear from the higher throughput to optimize maintenance practices. And as I mentioned before, basically improving the overall mill run time so that the higher throughput becomes simply more and more consistent over time. Basically what we're doing is tweaking the system now and aiming to improve the run which is normal at this phase of the expansion process. And some examples of what I mean by tweaking the system is that we're looking at small changes to extend the liner life.

Speaker 2

We're tweaking the repeat system, so that it operates more efficiently in the winter. We're relocating some of the pipelines in the mill, just to maximize efficiency of pipe replacement during shutdowns. Those are just a few examples from a list of things that team is working on very hard. And also while doing this, we're also evaluating a pathway to increase the mill throughput beyond 28,000,000 tonnes a year. The second graph below on the slide shows that.

Speaker 2

It shows our current thinking of how we envision going beyond 28,000,000 tons a year. And I'll just take a minute to explain that. First off, we feel that the infrastructure that we currently have in place has the potential to deliver more once we optimize our mill processes and our maintenance strategy. And with that logic, We think that there is opportunity to gain somewhere in the order of maybe 500,000 to 1,000,000 tonnes per year just from that. The next is implementing an expert system like we have in some of our other mills.

Speaker 2

We think that there's opportunity to gain some tonnage there too. And finally, we're testing the ability of increasing the percentage of pre crush material to feed some more feed through the refeed system. And we're also testing the ore sorting capabilities. So this is just a vision of where we see the potential to achieve higher tonnage beyond 28,000,000 tonnes a year. And importantly, these initiatives that I just talked about come with limited capital expenditures.

Speaker 2

It's still early though, but we do have an experienced team on-site working on this. Now moving on to the second part of study would be to complete an initial underground mineral resource associated with the mineralization that sits just outside of the final pit limits. To that end, we are carrying out an aggressive drilling program and Dee will expand on this shortly. But we do have more drilling to do. And once that underground resource is ready.

Speaker 2

This will be used as the basis for the underground mining scenarios that we'll be working on. Finally, to end, I just wanted to say that the team at Detour has done an incredible job so far. And I just want to take the opportunity to thank them, for their hard work, but also for their passion at continuing to look at ways of maximizing the value of such an incredible asset. But also to echo Amar's words, I just wanted to thank the rest of the sites for performing so well as you did this quarter. It's just truly a testament to the caliber of the people that we have here at Agnico.

Speaker 2

So thank you. And with that, I'll pass the call over to Dominique Drouhard.

Speaker 3

Thank you, Natasha. For Canadian Malartic, maybe before updating on the project and opportunities, Following the acquisition, we had many positive and happy meeting with the Canadian Monarch Complex team and Contractor to celebrate that good news that was very interesting to get back with them. It is another important step to consolidate the strong teams and great assets in one of the best place in the world for mining operations. For the Odyssey project, you could see On the map at slide 10, we've reached the first good milestone was the 1st production blast on March 20, on the Odyssey South ore body at level 31. So far so good.

Speaker 3

We saw a positive reconciliation on tonnes on grade for that first stop. It is currently under mocking and processing at the mill and there is no everything is fine. There is no problem. We are aligned to do the 50,000 tonnes 50,000 ounces in 2023. At the main round, we reached The fifty fourth level, which is the bottom of the Odyssey South ore body as well as the first access where the shaft is going to arrive.

Speaker 3

In the Q1, the team will focus not in the Q1, but in the coming quarter, the team is going to focus on 2 things. To continue the infill drilling of the Odysse South as well as the internal zone to better understand those outside and to push the ramp, the main ramp faster as we can to be in the at the middle station earlier than we think to be able to that's going to be the first place where we're going to have the loading station for the East Goldie deposit. So this is the 2 focus. On the surface, everything is built to support the shaft sinking. The head frame is ready, the waste silo, the Galloway is functional and shafts thinking activities are underway.

Speaker 3

It is still early stage. We need drilling and to do study, but teams are also working on the concept to our 2nd shaft. We're going to need a couple of years to develop that and we are also evaluating other near surface opportunities on the Canadian Malartic property like Camp Flow and LTA. So before transferring the mic to Jean, I would like to thank and congratulate the Canadian Malartic Complex team for their strong health and safety performance in Q1. More specifically, the ODC team, which is, let's say, construction and operation teams.

Speaker 3

We're talking about 250 Agnico employees, 500 contractors. They've reached a triple zero, which is no lost time, no medical treatment, no modified work in a quarter. It's quite a good achievement for a site in development and construction. Congratulations to all. And So thank you for your time.

Speaker 3

We're looking forward to show you our great progress and at the June Investor, you're welcome to join us.

Speaker 4

Thank you. Thank you, Dominique. Next slide please. And good morning, everyone. If you look what we did in the last 2 years with the consolidation of our land position with the merger with Kirkland and the acquisition of Yamana's Canadian asset.

Speaker 4

This provide us with opportunity to leverage our existing asset. You see on the map presently what we own currently between Macassa and Goldex. And Considering our upcoming excess processing capacity at Laurent Complex and Canadian Arctic, we have initiated multiple study to identify the optimal approach. More than 10 studies are ongoing to be in position to integrate the best alternatives into our future production plan. We have identified potential to add up to 500,000 ounces by the end of this decade.

Speaker 4

So currently we are focusing on the near surface and AK. On this specific one, we have identified at this point for the second half of twenty twenty four up to 400 tons per day. Metallurgical test work are completed and the milling options are already defined. They will be integrated in the mine plan of the different operation. We are working on Upper Beaver, Wazamak, satellite deposit and for sure everything around Canadian market.

Speaker 4

We perceive substantial opportunity with the land position we have, with the road, the railway and we will keep you posted as it's a dedicated effort to advance and optimize our assets. On this, I will pass to Guy for the exploration path.

Speaker 5

Thank you, Jean. Good morning, everybody. 2023, again, we have a large exploration program with over than 310,000 meter of drilling that was completed and I would say safely completed in Q1 by the 1,000 employees and contractor that are working into the various exploration sites where we've seen a tremendous improvement into the safety performance. And I would like to congratulate each of the sites for their excellent performance in the Q1. That has been one of our first best quarter ever in the exploration for as long as we can track.

Speaker 5

And we expect those good performance and exploration on the various sites to lead to some positive result in terms of addition to resources and reserves towards DRAM. And to go through a few of them For a start, at Laurent Zone 5, drilling continue to expand the mineralization at depth, now extending the mineralization down to 9 50 meter with iodide resolve up to 3 grams over 30 meters and 3.7 gram over 10 meter, which are above the current reserve and resources grade at LZ5. So quite an encouraging result and we expect those results to lead to an addition of inferred resources below the current limit of 7 70 meter depth towards 9 50 meter step by the end of year end 2023. At Goldex infill result in the South Zone continued to deliver extremely good results, much higher grade than the overall grade at the gold egg deposit, including result of 29.8 grams over 15 meters, 6 grams over 12 meter, which are quite positive on the overall benefit on the grade at the Goldex facility. And also some initial drilling in the W Zone, which is located approximately 200 meters to the west of the main Goldex deposit at shaft number 1, where it was some historical result and recently we We resumed drilling through our level 27 exploration drift where we got an intercept of 1.8 gram over 35 meter.

Speaker 5

In some mineralization, that is similar to the typical Goldex, GZ and Deep Zone. So quite encouraging results for the Goldex future. At Old Bay, we have 9 rigs operating split between Doris and Madrid. Highlights in the Q1 continue to return Good result in the Doris deposit with in the BCO fold Inge 15 grams over 6 meter and also extending the BCO fold Inge to the South, a couple of 100 meter with 17 grams over 4.8 meter. So continue to demonstrate our ability to grow the Doris deposit and also increase of activity at the Madrid deposit where we are shifting towards larger step out along the Menorado's trend of the North Oak, Solo Patch 7 trend and we're starting to see some primary result with 6.8 over 3 points on that.

Speaker 5

But more importantly recently some nice visual intercept with nice mineralization and visible gold along the trend with results that are pending. In more detail at Slide number 13 for Meliadine. I would say Meliadine now quite exciting. We now have access to our exploration ramp in the central portion of the deposit, which have a much better access to test the deep extension of the deposit and during the Q1 in the central part of the Terreganac West MEG. From that new exploration ramp, having access to drill the deep portion, some pretty encouraging intercept at 890 meter, which is the deepest intercept reported to date at the Terregania property demonstrating that the deposit remains open at depth and to the East, so quite positive result for Meliadine.

Speaker 5

Shifting to Quettala, I would The highlight this quarter would be to where in the main zone in the Rimpe area, which is in the north part of the deposit, where we continue to see that the deposit remains open at depth with typical kind of grade and width for that area with 5 gram over 9.2 meter. And the deposit in the RNP and North Ruhr area continue to remain open to the West. So expected to continue to add on. It is outside of the currently known resources area, so very positive. And last but not least, as introduced by Natasha, obviously, lots of drilling happening at Detour, where we currently have 10 rigs operating on the property that completed in excess of 65,000 meter segment in the Q1 with a primary focus at testing in the Saddle and West pit, below the reserve pit And also continue to extend the deposit towards the West.

Speaker 5

So within the West pit and Saddle area, Some quite nice grade over good thicknesses, 2.9 grams over 30 meters, 3 grams over 20 meter 2.6. So this is exactly the kind of intercept we're looking to incorporate it into our vision for the underground scenarios or interpretation of those higher grade intercept within the deposit. And exploration also continue to test the deep western plunge of the deposit that as mentioned in the previous quarter remains open with gold mineralization that extend up to 2.4 kilometer to the west of the current resources pit. So a number of positive results at Detour. And on that, I will hand back over to you, Amar.

Speaker 1

Thank you, Guy. Good job. I'm going to ask Dave to talk about the financials.

Speaker 6

Just looking at the pie graph on the right of the next slide, you can see that Agnico remains very well diversified operationally. And to the left at At the top, we've got the breakdown asset by asset, very strong operating performance as we've discussed. And of course, when you have a good gold price and good operating performance on the cost side. That results in good cash flows. And in fact, this quarter was a record.

Speaker 6

In fact, we expect another record next quarter because we'll have additional production from the other 50% of Malartic as well. So From a production perspective, Q1 should in fact be the lowest gold production quarter for the year. And I also expect a good gold price this year, certainly even higher by the end of the year is my opinion. So So I think we're in a great position from a cash generating ability. On that note, I would just point out that Agnico is currently trading at about 10 times cash flow, which is a fairly low multiple.

Speaker 6

In fact, If you told me that you'd be in a good gold market, gold would be $2,000 an ounce. I would think that Agnico would probably be paying trading at at least 15 times cash flow. So, I've seen us trade north of 20 times cash flow for long periods of time in good gold markets. And I think maybe by the end of the year, We'll have that benefit of a stronger gold price and maybe multiple expansion as well. So pretty excited about that.

Speaker 6

Just flipping to the next page. Just a couple of comments on our liquidity position. In the Q1, we drew $1,000,000,000 on our credit lines to pay the cash component of the Malartic acquisition. And since then, subsequent to quarter end, We've actually entered into a term loan for $600,000,000 with Desjardins and EDC. Very happy with that deal as I know our partners at Desjardins and EDCR as well.

Speaker 6

That's a 2 year agreement. And additionally, We've paid from cash another $200,000,000 down on the line. So of that $1,000,000,000 that was drawn on the deal, There's only $200,000,000 remaining drawn on the lines now. So we're heading into the remainder of the year in a very strong financial position and great outlook, I think.

Speaker 1

Well, thank you, Dave, and thank you, everyone. Next slide, please. So just to summarize, Everybody on the line here knows who we are and what our strategy is, and it's been a consistent strategy. We are not a go everywhere in the world to build a mine. We are very much a regional miner.

Speaker 1

We focus on the best places in the world to mine based on geologic potential and based on political stability. We are absolutely focused on per share metrics. We don't care about the total size of the company. We care about share price. We are an important part of the community.

Speaker 1

If you want to be in a place for 50, 60 years, you can't just be a good miner. You have to be part of the community. That's important to us. It will always be important to us and drives our ESG philosophy. We have a long history of capital returns, almost 40 years of consecutive dividend payments.

Speaker 1

And last year, I think we returned almost $800,000,000 to shareholders. But I will finish On one important thought, which is this regional focus I would suggest that, it is more important now than ever. With what's happening In Ukraine, the east west split is bigger than it's been since I was a little kid, and I'm 58 years old. And to be sure China is flexing its muscles with a focus on minerals. And so that positions, I think, for the next several years and increased focus, not just on what you're mining, but where you're mining.

Speaker 1

And, certainly, the strategy of being in good geologic regions with good political stability and frankly being the strongest miner in those regions is a strategy that will do well for everyone, our communities, our employees and certainly for our shareholders. And with that, Operator, we'll open it up for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Mine. One moment please for your first question. The first question comes from Fahad Tariq of Credit Suisse.

Operator

Please go ahead.

Speaker 7

Hi, good morning. Thanks for taking my question. Maybe for Dave. You talked a little bit about the balance sheet. I just wanted to get a sense of target leverage.

Speaker 7

And I know there's some moving parts with there was the drawdown from the revolver, but then it sounds like there was a repayment subsequent to the quarter. Just trying to get a sense of what is the target net debt to EBITDA that you're comfortable with? And considering there's a few projects potentially in the pipeline that What would be like a high level leverage that you're comfortable with? Thanks.

Speaker 6

Yes. So from a very broad basis, because of course it always depends on market conditions as well and What is going on at the company at any given moment. But the way I've described it to the Board is all else being equal, let's not touch 2 times net debt to EBITDA, and we haven't in a very, very long time. We'd like to operate at less And our current forecasts at spot pricing indicate that we would end this year at about 0.24 times net debt to EBITDA. So very, very conservative balance sheet and we intend for it to stay that way.

Speaker 6

To quote Shawn Boyd, who's been here for apparently 40 AGMs, One of the reasons that we've been around for more than 60 years is because we've never taken on too much financial risk. And we're going to keep that very conservative balance sheet and lots of liquidity to make sure that we can do all those big projects in the future.

Speaker 7

That's very clear. Thank you.

Operator

Thank you. The next question comes from Anita Soni of CIBC. Please go ahead.

Speaker 8

Good morning, everyone. And firstly, Dave, congratulations on your well deserved retirement And congratulations on the quarter, everyone. My question is with respect to the cost guidance as we look at it over the course of the year. So You came in below the low end of your cost guidance for this quarter. Can you talk about some of the moving parts over the course of the rest of the year Q2 and into Q4 that may see you trend upwards.

Speaker 8

And can you also talk about the inflationary pressures that you've seen abating.

Speaker 1

Hi, Anita. It's nice to hear from you. The team did a great job on cost control. And 1st and foremost, it's always the operations. When the operations Do a great job.

Speaker 1

The costs are naturally in line. We are seeing some relief frankly on the inflationary side. We were talking to our procurement team the other day and we are starting to see from the frankly from the merger with Kirkland Lake. We said it would take a while for some of this to come through. Some of that is starting to come through with some of the new procurement contracts.

Speaker 1

The team has been working exceptionally hard on that. We had some currency tailwinds that help us. So I think we're very comfortable With the guidance that we have with costs, it's clearly given the volatility we've had over the last couple of years, It would be probably irresponsible to change it at this point, but it certainly is a good start and Most of the benefit goes to the operating team and the procurement team.

Speaker 8

Okay. I'll leave it there and let the next person ask. Thank you.

Operator

Thank you. The next question comes from Tanya Jakusconek of Scotiabank. Please go ahead.

Speaker 9

Good morning, everyone, and congrats on a good quarter and congrats Dave on retirement. It's good to be back on the call after being restricted Mine. Okay. A couple of questions. Can I just start on the Anita started on the cost side, but I just wanted to get an idea?

Speaker 9

As I look at 2023, can you provide some guidance for the remainder of the quarters in terms of how do you see production, any assets that are back end weighted and where you have maintenance downtime, so I can get That's both correct in my forecast. So let me start with that first.

Speaker 1

Okay. Well, I will start With the big picture on the remainder of the quarters and then maybe Dominic and Natasha, you can hit some of the specifics. And welcome back, Tanya. It's nice to have you back online now that you're not restricted. The Q1 is going to be our lightest quarter with regards to production.

Speaker 1

That is simply because it doesn't include 100% of Malartic, which our numbers will going forward. We don't see any particular problems with any of our production. We remain very confident. I would say that it is Probably normal to have glitches, but that's one of the benefits to have a diversified and multiple mines. And our team are as good as anyone in the business with dealing with these things, but maybe Natasha and Dom if there are any specific items?

Speaker 2

Just to On my side anyway, I see it remains pretty steady over the course of the next three quarters. We might have some changes in Mining sequence here and there, but overall quarter over quarter should be okay. Maintenance downtime is it's planned maintenance downtime. So we would expect to have 1 every quarter or so. In Macassa, I would say that since we commissioned number 4 We should see starting to see higher productivities and development, etcetera.

Speaker 2

And so we should see costs coming slightly down from Good time.

Speaker 9

Okay. So maybe if I think about any downtime at Quetzalaf or autoclave, Should I is there anything specific I should think there?

Speaker 3

Hi, Anita. Yes, Q2 is going to be the lowest quarter because of the shutdown, Our 8 month shutdown.

Speaker 9

Okay. Thanks, Dominic. Just on So as I look at the year, is it safe to assume that all of Q2, Q3, Q4 are generally even production wise?

Speaker 1

Yes, roughly.

Speaker 9

Effective? Yes. Okay. So that's helpful. Thank you.

Speaker 9

And then can I just ask about the inflationary pressures that you saw some easing, maybe some examples of where you are seeing it? I understand productivity has been helping, but can you talk a little bit about where you're seeing when you look at your cost structure and you look at the labor, the consumables, Fuel Other. Can you just talk to us about where you're seeing the easing and sort of a bit more examples as to what you're seeing?

Speaker 1

Well, I'll go first. I mean, we are seeing easing. So for example, in Finland on electricity prices. They're not back to where they were, But they're probably half of what they were at the peak. And the prognosis This looks good going forward.

Speaker 1

Steel prices are down, fuel prices are down, some of the consumable prices are down and we are Getting through the worst of and we've talked a lot about this, the worst of the lack of human capital. People are we're able to operate more effectively. But maybe Natasha and Dawn?

Speaker 2

Sure. I can start. Maybe I'll just give you an example, Tanya. So at for Detore, for example, in the quarter, we saw Diesel remaining flat in the 1st month or 2 and then starting to decline in March and definitely in April as well. For the quarter, Adnigo was down in comparison to what we where we assumed for budgeted levels.

Speaker 2

But in other areas like cyanide and grinding media on

Speaker 3

And maybe the one which we still see pressure is mainly maintenance parts From the supplier, those costs remain high and especially the electrical material. We don't see decrease yet in those one. And as As Amor mentioned, workforce remains on the let's say, didn't decrease, we'll say stabilized but didn't decrease. But maybe more Which is very important too is on the supply and the logistics. In the last year challenge that we had even though you would like to pay, if you don't have the parts, You're done.

Speaker 3

This year this is going away. The supply chain is back on track. So this is very positive and contributing to do a good production, which which has the end of the day helping the cost. And I see more and more contracts now from the procurement team which are Canada or bigger contract where we have the merge together and from that there is of course opportunity by the volume higher volume.

Speaker 9

I was to think back to next year and I think on your call you had mentioned inflationary pressures up to 10%. Would it be safe To assume that from that 10% we've seen a couple of percent of ease or is it just still relatively flat? I'm just trying to get A magnitude of easing.

Speaker 1

Well, I mean, if I give a forecast, The only thing I know is I'm going to be wrong. But it's probably not unreasonable, Tania. Yes, maybe, I I don't know, maybe 8% is better than 10%, but there's so much volatility, take that with a grain of salt.

Speaker 9

I appreciate that. It's just to see if we've started to see it come off or just it stabilized. So it seems as though you're saying It's come off somewhat.

Speaker 3

A little bit, yes, absolutely.

Speaker 9

Okay. And then if I could get one more in for Guy, just on the exploration news and the reserves and resources. I know, Gaye, it's very early days, but as I think of Agnico and I think of Getting to year end 2023, no, that's still far away. Are we still on Is your target to replace reserves at operating mines? Do you think with what you have going, we can get there this year?

Speaker 5

Always an excellent question, Tania. Thanks.

Speaker 9

I was asked.

Speaker 4

You had to.

Speaker 5

No, I think we see positive indication at several of the mines. So we see that some of them are in a good position to completely replace. As you mentioned, it's very early days, although we're planning to deliver All of study on key project like East Goldie eventually, which when some of that may turn to reserve by year end, this is what we're aiming for. So from a mixture of project key value driver project update and the good result at existing mine, We anticipate to be overall exceeding what we're going to be depleting this year from mining.

Speaker 9

That's good to hear. I'll leave it for someone else staff. Thank you very much for taking my questions.

Operator

Thank you. The next question comes from Mike Parkin of National Bank. Please go ahead.

Speaker 10

Hi, guys. Yes, just one kind of question that hasn't been asked is around depreciation. With the accounting change on Canadian Malartic. Do you still see your guidance of about just shy of $1,400,000,000 depreciation? Is that still Solid or kind of up for review?

Speaker 6

Yes, it's exactly that Mike. Let's call it up for review because the purchase price allocation is absolutely preliminary at this point. We'll be working on it until at least the end of the year. So a lot of moving parts. But that being said, I think you are probably Correct.

Speaker 6

That as of right now with no other changes, all else being equal, we probably will have increased DD and A going forward here from the write up, but again subject to change.

Speaker 1

And that's an important point and I'm glad Dave you brought that up. There is going to be balance that $1,500,000,000 It's preliminary, and there may or may not be noise associated with it during the year. Just it's not a big deal, it's accounting, but Just to add Jeff on that.

Speaker 10

And would that impact your expected tax rate for the year?

Speaker 6

Yes. I guess if you have less net income, you have less More taxes, less earnings. But again, it is too early to say where this is going to go, but Let's review it quarter by quarter to see where we are on the PPA and see if we change our guidance because we're very careful quarterly about making sure we update any of the guided numbers. And obviously, DD and A is one of those. So we'll get you next quarter if there's any change.

Speaker 10

All right. Appreciate that. And Dave, congrats on retirement.

Speaker 6

Thanks, Matt.

Operator

Thank you. There are no further questions at this time. Please proceed with closing remarks.

Speaker 1

Well, thank you, everyone. It is a pleasure. And as I've said before, when the operating team does a great job, My job is easy. So we'll end it with that. And thank you very much.

Operator

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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Earnings Conference Call
Proficient Auto Logistics Q1 2023
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