Agnico Eagle Mines Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 27, 2023

There are 11 speakers on the call.

Operator

Morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Second 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 And now I will turn the call over to Mr.

Operator

Amar Aljundi. You may begin.

Speaker 1

Thank you very much and good morning everyone. Before we jump in, I would like to point out that we will be talking about some forward looking concepts and statements. And there's some documents at the beginning of the package that you might want to go through. We have our team with us today. We're going to be in a very good position to talk about the quarter and a very good position to answer questions afterwards.

Speaker 1

But really, today, there are only 3 key takeaways that we'll go through. 1, we had a very strong operating quarter, Consistent performance by the team across all the sites and I'm proud to say now for several quarters in a row. To excellent progress on our Abitibi optimization programs. As many of you know, we have a very ambitious program to consolidate and optimize our Abitibi platform. We believe we have the potential to add several 100 1,000 ounces of additional production, potentially, and we've made some good progress on that, And we'll talk about that and where we are.

Speaker 1

And the third point is we've had some excellent exploration results. Guy will talk about that, But excellent results across many of the operations. And I would say that all of these results are in places we already operate. We have infrastructure, we have teams and we have the capacity to utilize and leverage off existing infrastructure. These are not Exploration results.

Speaker 1

It's a top of a mountain range in the middle of nowhere. These are in our backyard, and they will make A big difference. Guy will talk about it. In fact, we're so confident that we've increased his exploration budget, putting us over $300,000,000 this year, demonstrating again the confidence we have in the business. When we talk about strong operations, just hitting some highlights.

Speaker 1

Record quarterly production, Costs $8.40 cash costs at the bottom of our guidance range, all with another quarter of exceptional safety performance. I'm proud to say that we have now had the safest The first half of the year ever in the 66 year history of the company. There is nothing more important And the safety of our people and our communities. And I've said it before, I'll say it again, you cannot have that kind of safety performance without excellent operating capabilities and you can't have the kind of operating results we've had without that type of safety performance. That's all led to impressively record quarterly cash flow and Jamie Porter will be talking about our financials later on.

Speaker 1

So hitting some highlights, payable gold production of 873,000 ounces, good cost control, All in sustaining costs of $11.50 an ounce, cash costs of $8.40 an ounce at the bottom end of our guidance, generating almost $1,000,000,000 of operating cash flow this quarter. Just getting into a few more, just Frankly, I'm quite proud of this. I'm going to hit a few points. Malartic produced its 7,000,000 ounce since we had it in 2011. We've updated the Odyssey project.

Speaker 1

Dominic is going to talk about that, but just some highlights, An additional 1,700,000 ounces, additional 3 years out to 2,040 2. And most importantly, still open at depth, Still getting some very good exploration results and geologic upside. I mentioned on a call this morning, Malartic was discovered by the Goldie Brothers in 1923. So that mine has been around for 100 years. It's produced with us and previously over 12,000,000 ounces.

Speaker 1

It's got a mine life out another 20 years. It's still open. It is just a great example of putting yourself in the best places in the world based on geologic potential and political stability, 100 years and plus. Detour, Natasha is going to talk about some of the great progress the team has made there to build that mine. But from an operating perspective, Proudly record quarterly mill throughput at Detour.

Speaker 1

At Goldex, record quarterly mill throughput since the restart. At Macassa, record quarterly mill throughput, record skipped tons, record underground development. The team there has really, Frankly delivered on that mine, great ore body, a great operating team. Meliadine, record monthly mill throughput in May And Meadowbank record production for the 1st 6 months of the year, again with one of the safest quarters in the company's history. I'll address the question now because we'll get it later, I'm sure.

Speaker 1

With the very strong start of the year, we are already being asked are we going to update and improved guidance. What I would say is it's very early. We've only had the 1st two quarters. But I will say we are clearly off to a very strong start. We are clearly tracking production That would be above the midpoint of our guidance and we are clearly tracking costs very well relative to our guidance.

Speaker 1

So An excellent start of the year. We're very confident and we're confident going forward. Next slide, actually keep it on this slide here. So if we do the update on the key drivers again, Natasha and Dominic are going to talk about it. I'll just hit a few points.

Speaker 1

As I mentioned, Canadian Malartic, we updated The internal study in June, we talked about the additional ounces, the additional years, the potential there, but really what's exciting More than anything is the significant geologic upside that we continue to see there. That is a fantastic asset. At Detour Lake, Natasha is going to talk about it, The great progress we've made, but also Guy is going to talk about some of the exploration results To bring in potentially underground ore. Remember, our objective at Detour, Our vision is to try to get that to 1,000,000 ounces a year. This is a mine that's already up to 2,052 That is still going to be increasing and to get it to 1,000,000 ounces a year, it's going to be a combination of increasing the mill throughput and bringing in higher grade ore from the underground, and we're working on that and we'll be looking to give some updates in the first half of next year.

Speaker 1

On optimizing some of the other assets, good progress, looking at the potential at Macassa, the upper zones in Amalgamated Kirkland. We're doing our work on Upper Beaver. We're doing our work at Wassa Mac. As I remind everyone, the opportunities there are not just the base case standalone for those projects. But really what we're excited about and what we're working hard on is can we develop to those assets without having to build additional mill capacity and utilize existing infrastructure, mill infrastructure and tailings infrastructure at either Malartic or at LaRonde.

Speaker 1

As a reminder, the Upper Beaver and Wossamak each have a potential for between 150,000 to 200,000 ounces a year, amalgamated Kirkland and the upper zones at Macassa, 20,000 to 40000 ounces a year and that's progressing well. So just between those projects, We have the potential for an additional 350,000 to 450,000 ounces a year using existing infrastructure, Which reduces our permitting risk, which reduces our environmental footprint and materially increases to our return on capital. That's something we're very focused on. And that doesn't include other projects, for example, at Canflo, for example, Potentially a second shaft at some point at Malartic. Now before I turn it over, We're also getting questions on how are these studies going.

Speaker 1

Frankly, they're going well. There are no delays whatsoever. We expect to start to come out with some guidance in the 1st or second quarter of next year, But understand something as simple as the underground at Malartic, it just takes a lot of drilling. These things just take a little bit of time and frankly, I'm very impressed with the way the team is working and the progress made. And again, we expect to be able to start giving some guidance in the 1st or second quarter next year.

Speaker 1

Not everything is probably going to work, but things are looking pretty well so far. So with that introduction, I will turn it over to Dominic to talk first about Odyssey.

Speaker 2

Thank you, Amar. Odyssey project, If we put it in perspective, the first hole where we discovered the East Goldizone in 2018, in 2021, we released our first study And we just updated that one last June, very good improvement where we production trial increased by 3 years. So we have now in front of us a 20 years life of mine with 8,500,000 ounces on the production plan. And this is just the beginning. As Amor said, this is there is still full of potential to just increase those zones and eventually maybe also on the regional aspect Maybe one important point about that updated study and where we are today is we derisked the project With now in 2020, we had 5% of the ounces which were under indicated resources.

Speaker 2

Now we're up to 53, Which is a good news and the grade is still there. There's no discrepancy. The team are happy about that. And also we have now 60% of the surface Construction completed in the last 2 years and a half, which was not the easiest year to do that. But I need to say the Fact that we were in EBITDA, the fact that also we had good guys, good leaders with experience to deliver that.

Speaker 2

This has been done Very well done in those years. And I have in the room here Serge Blais and Daniel Paris, which are Two leaders, key guys which have worked on that. We are now going to reduce the pace of the construction. The workers that size is going to decrease from 400 to 450. So it's going to be easier pace.

Speaker 2

And now we're getting into the next phase, which is sinking the shaft. But overall, at the current gold price, the value of the project is $2,500,000,000 with a 33% return on investment. An update on the ramp, how it's going. Odyssey South ramp up is going on track. So The team did over 1 kilometer drilling last month, no in May.

Speaker 2

It was a record. So we are now at 600 meter below the surfaces And we start the production from the Odyssey South Zone, which is the first one we're going to mine there for the next 3, 4, 5 years at approximately 80,000 ounces per year. We are on track with that. Maybe a good news on the reconciliation So far, we talked to you about the internal zone, which was something difficult to see from the surfaces or to understand from the surfaces. Now we're touching it and we see that there is upside through those zones.

Speaker 2

And that could potentially add more ounces from 2024 to 2027, but it is still early. We're defining the infill drilling program right now to better understand those zones. The first stope was supposed to be 30 times at 2.6. It ends up to be 45 times at 2.9. So this is a great bonus That we had.

Speaker 2

The next important phase also is all the shaft sinking. So to access the East Goldie zone, which you could see on the Bottom left of the figure, there's 2 things. We need to bring the ramp and to build all the infrastructure and to start to develop the first pyramids. We also need to sink the shaft. So it's a 1.8 kilometer shaft.

Speaker 2

Today, we're at the 76 meter done and We are also in the step that is now back to the or we're just initiating the full cycle to sustain the shaft. So we took the 1st 4 meter bench last week and the next one is coming in the coming weeks And we start to installing the sales. So that's a good news. That was an important step and all the construction done behind in the past year was to achieve that. So everything is on track on that side.

Speaker 2

There is we had up to 16 drills on the property in the second quarter. So as you could see, we're still drilling intensively. In the past year, we've put emphasis on 2 doing conversion, again to derisk that study. But now we're turning back to do more exploration and potentially add resources. And on top of that, we need to recall that the mill Have a 40,000 ton per day capacity still available in one of the best place in the world.

Speaker 2

So we have homework to do to bring some answers through that mill. So on that, I would pass the microphone to Natascha.

Speaker 3

Thank you, Dom, and good morning, everyone. I'm on Slide 9. The slide highlights the evolution of Detour and the journey that it has been on to make operational improvements on all fronts From the mine to the mill and on the maintenance front as well. The culture of Detour has always been one that's focused on safety and on minimizing our footprint, but also one that focuses on cost control and value generation. By just going back to basics on how we operate by assessing innovative approaches by constantly pursuing efficiencies and most importantly of all, by empowering our people.

Speaker 3

As you see here, there are some initiatives that the sites has successfully achieved. And what we've shown here just scratches the surface. The bottom line is that you can see that we have a track record of delivering improvements. And these improvement initiatives is an ongoing process. And so we continue the transformation of Detour into one of the world's largest and most profitable gold mines by assessing the potential, like Amar said, to achieve the 1,000,000 ounces annually.

Speaker 3

As you know, this comes in the form of 2 main projects, increasing the mill capacity and assessing the underground potential. As Amor mentioned, both are currently ongoing. But from a mill tonnage perspective, as shown on the graph, we have steadily been delivering year over year and growing mill capacity by 5% on an annual basis. This past year, we have completed the installation of the screens on the secondary crusher, and we believe that we can add an additional 1,400,000 tonnes to the throughput from 2022 to get us to an annual throughput of about 27,000,000 tonnes. And as mentioned before, we're also advancing several projects to improve the run time and sustain throughput of 28,000,000 tons by 2025 or even sooner.

Speaker 3

And as a result of our ongoing efforts, this quarter the Tons per operating hour improved significantly and combined with the high mill availability, the mill recorded its best quarterly mill throughput and close to what we need to achieve the 28,000,000 tonnes a year. Now we are looking at sustaining it. And so we're looking at small, to small modifications in different areas. We're looking to improve the efficiencies of the SAG discharge screens. We're looking at small changes to extend liner life.

Speaker 3

We're tweaking the refeed system to so that it operates better and more efficiently in the winter. We're relocating some of the pipelines in the mill to maximize efficiency of pipe replacement during our shutdown. And in parallel, we're also assessing a few projects to potentially exceed the mill throughput beyond 28,000,000 tons a year. And we're going to be trialing the ore sorting and we're going to be working on an expert system like we had at some of our other mills. And then in terms of the underground study, we're continuing to advance this based on a revised mineral resource that factors in additional drilling that was completed earlier this year.

Speaker 3

And as Amar mentioned, we expect the report and the results of the study to be shared with you sometime in the first half of twenty twenty four. But in parallel, the exploration team is continuing to carry out an aggressive drilling program at Detour and Guy will be expanding on this and some other exploration to programs next. But before I end, I just want to commend the sites on an incredible quarter and a year so far. So on behalf of Dom and myself, thank you for all your hard work, your passion to continually look at ways of improving and optimizing our business, not just at Detour, but at all of our sites and for making our jobs a little bit easier. So with that, I'll turn the call over to Guy.

Speaker 4

Thank you, Natasha, and good morning, everybody. So to continue our detour on Page 10 of the slide deck. We continue to See excellent result below the West pit and the extension. So now the focus is really To get to an underground resources model, reduce the drill spacing over that large area. We look at the scale where We continue to get good results up to 2 kilometer away from the pit.

Speaker 4

So based on those good results we've been getting year to date and I'm not going to Through the long list we've seen in the press release, but those are the kind of grade and width that mix it at first sight For an underground scenario, so the focus is really to continue to advance. We're currently ahead of schedule with the drilling. We We see unit costs that are better than expected with good productivity on our drill over there on our drilling program. So we're planning to add as part of what Tamara mentioned an overall addition of $32,000,000 a portion of that $5,000,000 is to carry on drilling at the same pace with those 10 drill rig. And in order to be in a better position by year end to provide sort of a first overview of what could be underground resources for the tour around which we're going to be building our business case for the underground project.

Speaker 1

At a larger scale, I would say

Speaker 4

if we go to next slide 12 on the overall the rest of the portfolio, We've seen overall very good results on several assets. For example, at Meliadine during Q1 and Q2, We've seen result in Toriganiac at depth at some of the deepest drill hole ever drilled at Meliadine that support that What we believe that the deposit remains open has significant upside. It's one of those that we see a very good potential for reserve replacement. So we want to be a bit more aggressive. So with that again that stage gate approach, we want to add to the budget that was approved adding another 25 I'm going to turn the call over to the east so that we have a better understanding of how much we can continue to grow Meliadine.

Speaker 4

Moving to Quettala, we've seen again some very good results close to the Rimpi Rura infrastructure. Those are very near term opportunity where we can quickly Bring additional resources, bring them to reserve, very close some existing infrastructure. And in parallel, while conducting some geological Technical drilling closer to surface. We've encountered some of that parallel CECL zone in an area that were previously maybe Not understood properly. We started to understand the Cesar zone about 6 or 7 years ago at Certain depth and now we realize that some of those were a hole closer to surface were potentially stopped a bit short.

Speaker 4

So we are assessing when I have we left any of those potential parallel structure in the upper part of the mine, which could be very appealing because we already have all of those structure over there, which could provide additional flexibility for the team over there at Kittila. Moving to Macassa, Continue to get good result in the extension both of the main break and the sulfine complex. But more importantly, Now that we have an old shaft number 4 in place and a much better capacity Both with the ventilation access and everything. So now we are starting to put some long term thinking and Establishing long term exploration platform like we did back in the days at Laurent. So establishing long term exploration drift to the east to the west of shaft 4 because we know that the deposit remains open at depth and all of those.

Speaker 4

And so it opened up our shaft number 4 infrastructure A very good playground to think long term at Macassa. And maybe to wrap up On a little bit on Monarch that Dominic cover in the beginning of the presentation. Again another site where we want to continue To add additional drilling in the second half based on the good results that have been delivered, we see again Meliadine the opportunity to Continue to grow. We just took about 9,000,000 ounces out of the total 16,000,000 ounces. So we see the opportunity to continue to convert the remaining resources that are currently not in the plan and bring them into a future update of the project, while we continue to grow the footprint of the deposit that continue to be open laterally.

Speaker 4

Moving to next page quickly, Okay. This is another one where we took sort of a state gate approach. We were basically starting with But based on the very good result, we've seen both at the res and more recently at Madrid. And I think this is why we see Maybe the change in the dynamic. We always knew that Madrid was open at depth and laterally.

Speaker 4

Now we are seeing excellent grade with good thicknesses at depth that shows that the structure seems to be maybe Better defined higher grade with visible gold and with large step out that we've conducted like that Drorho 105, which is 500 meters step out below. So we see excellent potential to significantly grow. So it's going to continue to take time to bring it to resources. But now we see what we believe when we did the acquisition that we can significantly grow the deposit and identify higher grade source of ore. So those things are unraveling as and we're pleased with the results so far, which convinced us to add another of $14,500,000 for the second half of the year.

Speaker 4

And on that, I will be handing over to Jamie, I think. Great.

Speaker 2

Thank you, Guy. Yes, just some

Speaker 5

brief comments on the financial results for the quarter. Overall, as Damaris summarized up front. Just a phenomenal performance from an operating and a safety perspective, leading to phenomenal financial results, resulted in a number of new records. From a gold production perspective, we hit a new record of 873,000 ounces and that reflected 100 Canadian Malartic for the Q2. In terms of operating margin, again, close to $1,000,000,000 of operating margin with very strong contributions from our 2 biggest mines, which happened to be the 2 biggest mines in Canada, Detour and Canadian Malartic and also a strong contribution from Bosterville.

Speaker 5

From a cash cost and all in sustaining cost performance, we're in great shape relative to guidance. We came in at $8.40 Per ounce total cash cost, which is $25 below the midpoint of our guidance and $11.50 in terms of all in sustaining costs, dollars 15 below the midpoint of our guidance. So Our cost did benefit from Canadian dollar weakness in the quarter relative to what we'd guided, but also the strong operating Performance really helped to ensure that we had a strong cost performance. You can see in the table at the bottom right that we've been in managing our costs, keeping a lid on our costs over the past three quarters where they've actually been fairly stable or in decline. We move over to the next slide, just some financial highlights here on Slide 14.

Speaker 5

We'll walk through Our overall, the records that I mentioned, we had record revenues for the quarter. We sold 859,000 ounces. We're benefiting from The strong gold price environment at a realized price of $19.75 per ounce. So again, record revenues, Very strong earnings. Our adjusted earnings per share were $0.65 in the quarter, again reflecting the strong operating performance.

Speaker 5

If we look at our capital spending for the Q2, we came in if we include capitalized exploration at 416,000,000 which is in line with our guidance. So great results overall Q2. My last slide just talks It summarizes our balance sheet position, current strength and financial flexibility that we have. We We're active in terms of debt repayment in the quarter. You'll recall that at the end of the Q1, we drew a $1,000,000,000 on our credit facility as part of the acquisition of the other 50% of to Canadian Malartic.

Speaker 5

We repaid $900,000,000 of that in the second quarter, dollars 600,000,000 via the term credit facility And $300,000,000 from cash on hand. So we ended the quarter with $433,000,000 in cash, Down about $300,000,000 from where we were at the end of the Q1. But overall, very Strong financial position to be in. We actually improved our net debt position to $1,500,000,000 in the quarter and increased our overall liquidity to 2,100,000,000 So we're in great financial shape. And with that, I'll turn it back to Amar.

Speaker 1

Thank you, Jamie. And I would like to, on this first call for Jamie, formally welcome him to the company. We have a great leadership team and we're also very protective of our culture. And I think with Jamie, we got a super smart guy with a lot of experience, but also a nice guy who fits in very well. So welcome Jamie And congratulations for already delivering the highest cash flow record ever for the company.

Speaker 1

We know that was mostly you. So just finishing off before we jump into questions. Look, this is the same strategy we've had for 66 years, which is we want to provide we want to build a high quality, reliable, consistent Gold Company with superior leverage to gold, but not only superior leverage to gold, but importantly superior leverage to gold on a per share basis and on a risk adjusted basis. And we're going to do that by building profitable, high quality, low risk business based on 2 key factors. Well, several a few key factors.

Speaker 1

1, a leading position in what we we believe are the best mining jurisdictions in the world based on 2 criteria. 1, obviously, the geologic potential, But it has to have the geologic potential for multiple mines over multiple decades and 2, associated with that the political stability to actually operate multiple mines in multiple decades. When you look at Malartic around since 1923, when you look at Detour, Originally, it's an underground mine going to Canada's largest open pit mine going back potentially to an underground mine. When you look at all of the things that Guy talked about, all of those exploration results, they're tremendous, but they're in established camps where we've been for a long time. This strategy works.

Speaker 1

It's worked for years and we think it's even more important given the geopolitical issues going on in the world today. We have built this business largely on demonstrated Technical skills, all of these projects we're working on are tough, But we're going to make them happen or we're confident we're going to make them happen. We've had Jean Robitaille and his team talk about some of the things they're working on. We have an excellent technical team. We delivered these results let me step back.

Speaker 1

The team delivered these results, not in an easy quarter. We had Fires in Ontario and Quebec. We had the earliest and longest caribou migration season that we've experienced in Nunavut. That's a good It shows the health of the herds up there, but the team delivered record results With those challenges, we're going to continue our emphasis on per share metrics. We're going to continue to And that if you want to be in a region for 50 years or 60 years or 100 years, you can't just be good at ESG, you can't just be Accepted in the community, you have to be part of the community.

Speaker 1

And that's what we've always done and we're going to continue to do. We're going to continue to focus on creating value through the drill bit. We are going to continue disciplined capital Investments based on knowledge and diligence, and we're going to continue to return capital to shareholders building on our 39 years of consecutive dividends. We sometimes people at meetings mention that Agnico Eagle is the sleep well at night gold stock. And I would say that I hope that even with the challenges, what we've been able to deliver in this quarter demonstrates that we are in fact the sleep well at night gold stock.

Speaker 1

And so with that, operator, I'd like to turn it over to questions.

Operator

Thank you. Ladies and gentlemen, we'll now conduct a question and answer session. One moment while we stand by for questions. First question in the queue comes from to Ralph Profetti with 8 Capital. Your line is open.

Operator

Please proceed.

Speaker 6

Great. Thanks, operator. Good morning, everyone. Amar, two questions from me. Firstly, There was some discussion about the challenges in defining some of the internal zones at Odyssey.

Speaker 6

And when we think about potentially adding production 2020 4 to 2027. Is that dependent on sort of a successful surface exploration drilling program or where we need to move more towards an underground drilling strategy to better define those resources?

Speaker 4

I'm going to take that one. The internal zone were Originally recognized from surface drilling, but they are a bit different in nature than the Odyssey South and Odyssey North that sits at the contact of the porphyry. Now as we are getting closer, we're having a lot more access, a lot more drilling as we are infilling and bringing the Odyssey into production. And now we get to better understand the shape of those. So we took a conservative approach so far, not putting Any of that into the mine plan and now they are showing up as incremental done and we see more of that that will show up as Production will take place and we're going to get a better understanding because they are not as well defined in the south zone.

Speaker 4

So it takes more drilling, takes more development And you're going to see them showing up progressively along with in the life of mine. And one thing

Speaker 1

and maybe Dominic you can mention on this. The team And it's a good question. And the team has already changed the ramp positioning so that when we're down there, We're much better able to exploit the additional ounces to the extent that they're there. Dominic, I don't know if you want to I Yes, I've explained it well enough. No, that's fine.

Speaker 6

Okay. Great, great. Yes, that's quite helpful.

Speaker 4

Maybe a

Speaker 6

question for Detour and Natasha. On first onset, does the nature of the mineralization show favorability to ore sorting? And is this Simply sort of a low density unmineralized versus high density and would ore sorting sort of be more amenable in the underground scenario versus the

Speaker 3

Hi, Ralph. I'll start and then I'll let Jean Add to this. So with respect to the ore sorting, we haven't started the Phase II trial, but we are looking at about 1 point 1,000,000 tons of material that we plan on trialing this year, majority of which is all of it is actually at the pit. Jean, do you want to add?

Speaker 4

Yes. I will step in. Listen, the proposes to use marginal ore on stockpile mainly And just do an upgrade with the ore sorting. So it's ongoing 1,500,000 tons. We anticipate complete the study in the next, let's 12 months and we'll see from there.

Speaker 6

Okay. Thanks very much.

Speaker 1

Thank you.

Operator

Your next question in the queue comes from Anita Soni with CIBC. Please proceed.

Speaker 7

Hi, good morning everyone and congratulations on a strong result. My question is with respect to the drill results at Hope Bay. Could you just give us some context in what That means to the mine plan and when you expect to restart Hope Bay and the timeframe on that project?

Speaker 4

Hi, Anita. I'm going to put some color maybe on that. We were obviously in order for Obey to work, We see the need for the mine to be much larger like we are doing at Medellin and Medellin, something that will be between 300,000 ounces to 400,000 ounces of gold per year. Therefore, we were needing either to find additional mining area to be able to ramp up the tonnage or find better grade. And I think what we are demonstrating and with that new drilling at Madrid is that we have potentially identified another mining area with Good grade, better grade.

Speaker 4

So it shows that we can not only potentially grow the critical mass Of resources, but get better grade and that will eventually be incorporated as we're going to get more drilling into updated study. So it just means that we know we were right that there are a lot more gold over there. Locally it seems that it's even better grade and we're going to continue to need more time for drilling. But We now recognize that it's not just a wishful thinking, it's there and those drill holes are demonstrating that it Worth to carry on drilling on it.

Speaker 7

Thank you. And secondly on Fosterville. So you received your permits To resume mining at your and processing at your prior rate. And I think you didn't upgrade the guidance because you're catching up on development work. But would that have an impact to 2024?

Speaker 7

I think my understanding was it was about 30 in the order of 40,000 ounces give or take 10,000 for next year that could have a potential positive impact.

Speaker 3

Hi, Anita. So right now, we're currently working on updating the mining sequence based on the mid year models and getting ready for the budget season and looking at the production profile for the remainder of 2023 and going into 2024 onwards. So I would say for now, we've decided to focus in on the capital development in an effort to get ahead of the critical areas of the mine. And we'll have an update on the rest of The life of mine towards the end of this year.

Speaker 7

Okay. Thank you. I'll leave it there.

Operator

Thank you. The next question in the queue comes from Mike Parkin with National Bank. Please proceed.

Speaker 8

Hey, guys. Congrats on the good quarter and Jamie Welcome aboard officially. A couple just kind of housekeeping items. With Canadian Malartic, The depreciation per ounce reported for Q2, is that fair to kind of assume a similar rate going forward? Or is the book value still not quite set in stone and therefore depreciation grounds could Be

Speaker 1

a little bit volatile of that asset.

Speaker 5

Yes. Thanks, Mike. It's the latter. The way the accounting works for that is you have Really 12 months from the time of acquisition to do the purchase price allocation. But I'd say we recorded in the second quarter is a good is The best estimate for Q3 and Q4 and if there's an update it would be towards the early end of the year.

Speaker 8

Okay. Sorry about that.

Speaker 2

2nd,

Speaker 8

Where are you in terms of being cash taxable in Detour Lake? Are you paying taxes? Are you still consuming

Speaker 1

tax pools.

Speaker 5

Yes. So I think our forecasts have us actually paying cash taxes. I mean, obviously, we're paying Ontario mining taxes, A cash taxes starting next year, but that's all dependent of course on the plans with respect to underground development, which would defer the payment of cash taxes in subsequent years. Right. Okay.

Speaker 5

Good point.

Speaker 8

And then also on Detour, I remember in the past, from past owners, they've negotiated discounted power costs. Is that something that's Behind you now and you're paying kind of average grid prices or do you still have those rolling contracts with discounted rates applied?

Speaker 3

Hi, Mike. We still have the contract in place until the end of this year and we're working on a new program starting next year.

Speaker 8

And is the discount, I remember it was pretty significant. Is it still kind of that similar scale where it's meaningful savings for you guys?

Speaker 3

Right until the end of this year, yes.

Speaker 8

Okay. Okay, that's it for me. Thanks very much.

Operator

Thank you. And the next question in the queue comes from Tanya Jakusconek. Your line is open. Please proceed.

Speaker 9

Great. Good morning, everyone. Congrats on a good quarter and thank you so much for taking my questions. I think I'm going to start with Guy first just on the exploration results. Guy, I know I asked this question on the Q1 call as well and You've had more drilling done to date.

Speaker 9

And I know we talked about reserve replacement. With what you're seeing today, Is that still on track to replace your reserves this year?

Speaker 4

Overall, yes, with the what we We foresee with the addition of East Goldie on the top of the ongoing replacement at each of the site. We expect the overall reserve to be at least replaced if not growing by year end.

Speaker 9

One asset that you didn't talk about And on these exploration results or maybe and I apologize, the press release was long and maybe I missed it, but you didn't talk about Fosterville. Your has anything changed there with respect to what do you think you see on the exploration side or the exploration upside?

Speaker 4

No, we continue to drill in specifically two area. We continue to infill in the Robbinsdale area where we are getting kind of a mixed But I think it is kind of in line with the known part of Robinsville above the decline so far. And at the bottom of the Phoenix, You know in what we call the cardinal splay, we continue to see some interesting results sometime wide average grade within it with some Smaller scale vein with VG, obviously nothing like this one is only yet, but we see again good potential in the down plunge extension of the Phoenix.

Speaker 9

Okay. Okay. Thank you for that. My second question is just a little bit to talk about the inflationary pressures and maybe that's over to Amar. You mentioned in the press release that you are seeing some relief.

Speaker 9

I know I ask in what areas are you seeing the relief. I'm just trying to understand because different companies with different assets are seeing different things. So I'm just Interested in where you're seeing relief versus your guidance that included the 2022 pricing?

Speaker 1

Thanks, Tanya. So one, we had some tailwinds with the currency, which helped, which continues to, but certainly we have seen Relief on some of the consumables. Energy is a big one. As I think you can see On the press release, we've been able to hedge a good portion of our diesel. I think it's at 0 point $0.65 if I recall versus $0.93 in our budget.

Speaker 1

So the team did a pretty Spectacular job in my view of waiting out the peak and coming in when the markets We're more advantageous. We're seeing relief on steel grinding material, a number of consumables. We're also starting to see and often exploration is a leading indicator. We're starting to see Better drillers available, higher quality, more numbers, better performance. The biggest challenge probably remains with respect The cost pressure is people.

Speaker 1

We are still working very hard to make sure we get the people and the highest Quality people. Now, I'll repeat what I've said before. As difficult as it is for us, when you are the number one employer and you've been there for 60 years and you have the best projects, you always get the best teams available. So, while it's difficult, I would say That leaves us in a competitive advantage even in that area.

Speaker 9

And just on the same thing with explosives and cyanide, you're seeing some relief there as well?

Speaker 4

Yes.

Speaker 9

Okay, that's good. And I know that most of and maybe just for myself, like you would have very low inventories on-site given your location, except your isolated mines, but Your other mines would have very low inventory on-site, so you'd be pretty much buying on spot markets now. Would that be a fair statement?

Speaker 1

That's right. I mean, as you correctly stated, it's a different story up in Nunavut because you have the barge season. But yes, where we operate in the Abitibi in particular, It's a very substantial mining district and we can operate with lower inventory. So, yes, much more spot pricing.

Speaker 9

And if I could ask just one final question and Amar, I know you talked about the guidance and So you're not changing the guidance, but we're above the midpoint on production. Maybe you can just guide us to because the whole Sector, I would say majority of the sector is second half weighted with a strong Q4. Can we just Review with you how your second half looks like, is it evenly distributed and are any mines taking a Lower production profile in the second half that we should be aware of.

Speaker 1

I think what I would suggest is the 3rd quarter, At least by my forecasts and I caveat with I've been in this business for 25 years and you never know what's going to happen. But The Q3 should be very similar to the Q2. It should be. The Q4, the variability, Tanya, As you know, it's going to be at Quitula whether we get the SAC approval or not. But what I would say is our guidance Is assuming we don't get it, and if we do get the approval To continue to operate at 2,000,000 tons a year, then I would that's 30,000 roughly extra ounces.

Speaker 1

So without changing the guidance, I would expect the 3rd quarter to be similar to the second and the fourth quarter To be less, if we don't get the SAC, but that's in our guidance. And if we do, then it would be similar again to the 2nd quarter.

Speaker 9

Okay. That's perfect. And then just a clarification, I think Anita asked on the Fosterville. From memory, I had about 30,000 ounces, maybe Natasha can confirm that if we were to go back to the additional throughput of what the permit allows you, it would be an additional 30,000. Is that fair?

Speaker 1

I think, I mean, we're still working on our budget for next year. What I would say is it allows us to operate Those 6 hours at night that we weren't able to operate. So that's going to have an impact on ounces. We are catching up a little bit on development. The guys Frankly, did a stellar job in the first half of the year dealing with that restriction.

Speaker 1

But also and this is important, very important. In the scheme of things, it's not a huge number, but it So makes the work environment a lot better for our employees. It was a tough work environment. It was hot. We don't like to do that to anybody.

Speaker 1

And so, I just want to make sure we emphasize that it's not just the ounces, it's also importantly, the work environment for our employees.

Speaker 9

No, no, yes, for sure. Okay, thank you. I'll let someone else ask questions.

Operator

And your next question in the queue comes from John Tumazos from John Tumazos Very Independent Research.

Speaker 10

Thank you. With the $28,000,000 drop in first half exploration expense from a year ago, Could you explain how much of that is more being capitalized due to success Versus any stream linings versus more or less meters being drilled.

Speaker 4

Hi, John. So it's mostly, I would say, a reprioritization of the asset. So we are doing less On other project, let's say in Mexico, for example, Santa Garcia Frudes, we've basically Stop drilling over there, reassessing the potential. We've also reduced activity, for example, in Colombia. But I would say the budget on key value driver or the number of meter hasn't changed.

Speaker 4

So it was me say we in a lower gold price environment Like we were facing during the budget period, we thought that less money should be allocated to Grassroots project and we should focus on operating asset and key value driver.

Speaker 10

When you drill in the Abitibi sort of in your backyard, Are the costs lower than when you're operating in Sonora or Colombia or other grassroots places?

Speaker 4

It's very variable depending on the location, to be honest, John. If you have no water, if you have to if it's more labor intensive. But I think all in all, we are drilling at similar costs in Mexico when you have it also depends on the size of the project. So when we have a similar scope of work, similar kind of drill program, we can achieve good cost. The cost are just not dispatched the same way you have to transport water or a fee or in the EBITDA where you can find water a little bit 4th quarter or a figure in the EBITDA where you can find water a little bit everywhere.

Speaker 8

Thank you.

Operator

Thank you. And the next question in the queue comes from Anita Soni from CIBC. Please proceed.

Speaker 9

Hello. So it was just

Speaker 7

a follow-up to Tanya's question about the cadence of Q3 and Q4. So The downtrend, if all else being equal and Kittila not getting its permit is because you would have to throttle back Quisel in the Q4. And I think the second half of the year, LaRonde will be have will have sort of Periodic shutdowns to deal with that, I guess, tie in of the new system there. Is that correct?

Speaker 1

Yes, broadly correct, Anita.

Speaker 7

Okay. All right. Thank you very much.

Speaker 4

Thank you.

Operator

There are no further questions at this time. Speakers, do you have any closing remarks?

Speaker 1

Well, we just want to thank everyone. We know it's a busy day. And then finally, I hope all of you get a little bit of time off in the next couple of weeks with your families. Summers in Canada are short. So thank you everyone for joining us and have a good day.

Operator

Thank you, ladies and gentlemen. This will conclude your conference. Please disconnect your line.

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Earnings Conference Call
Agnico Eagle Mines Q2 2023
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