Agnico Eagle Mines Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 26, 2024

There are 12 speakers on the call.

Operator

Good morning. My name is Ludi, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Q1 2024 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 session.

Operator

Thank you. Mr. Amar Aljandi, you may begin your conference.

Speaker 1

Thank you, and good morning, everyone. Thank you for joining us. I have the great pleasure along with my colleagues to report on another strong quarter for Agnico Eagle. But before we get into that, I'd like to acknowledge that the reason we're having another strong quarter is because of all the hard work of all of our employees, our people at the rock face work every day, sometimes in tough conditions, our geologists studies. I want to thank all of you for delivering.

Speaker 1

Again, it makes our job easier here at corporate. We'll have a number of executives talking about a good quarter. But again, it's thanks to all of you. Please keep yourself safe, keep the community safe and the environment safe. Expected good results going forward.

Speaker 1

But again, please take a look at the forward looking notes and statements. And if I could ask, operator, if we could start, I see on Page 6, that's great. We're going to cover a lot this morning, but there's really 3 key takeaways. One, we've had a very good start to the year. 2, we continue to make excellent progress on some of our key value drivers and the catalysts that will really move this company forward over the next 12 to 36 months.

Speaker 1

And 3, we've had some tremendous drill results that we are excited to share with you today. On the strong start to the year, solid operating results, approximately 880,000 ounces of production, good cost control, reiterating guidance, both production guidance and cost guidance. Those strong operating results along with an excellent gold price, has delivered strong financial results. As you would expect, Jamie will review these, but some of the highlights include our 2nd consecutive quarter of record operating margins and our 2nd consecutive quarter of record free cash flow. On the key projects and the value drivers, Detour to 1,000,000 ounces.

Speaker 1

We said a couple of years ago that we thought Detour had the potential to get to 1,000,000 ounces a year. The team has been working very hard on that since systematically, professionally, and we're making good progress. And we remain on target to talk about this midyear. In fact, we expect at this point to have a technical session in June, followed by a site visit, at which point we will talk about the project parameters as we see them at this point, and we will talk about the next step. And we've talked we've hinted about what that next step will be, and it will be likely an exploration ramp that will allow us to get into the ore body, take some bulk samples, confirm continuity, put in an exploration platform and really the first step of we think will be an exciting project.

Speaker 1

And clearly, that exploration ramp will become an important part of a future production ramp. At Upper Beaver, also very good progress, also on target, also confirming that we expect to provide an update towards the middle of the year. With Upper Beaver, it will likely be with our 2nd quarter results, at which point we will be outlining the parameters of the project as we see it and again the next step. And the next step, as we've already discussed in February, is what you would expect the likely next the logical next step, an exploration shaft and an exploration ramp that will allow us to take a couple of bulk samples, again confirm continuity, again put in exploration platforms. At Malartic, we continue to make excellent progress.

Speaker 1

The shaft is continuing well and the underground development, as I think most of you know, is ahead of schedule and the initial stopes are generating positive reconciliation. With Malartic, however, there's also been some excellent drill results. And that leads us to our 3rd key takeaway today. Guy will be discussing some frankly pretty amazing drill results at Malartic, at Detour and at Hope Bay. Big assets in good parts of the world that really just continue to deliver.

Speaker 1

We think that these are potentially big enough to move the needle and causing us to rethink in a positive way some of our growth options going forward. And because of that, we've added a little extra time at the end of today for Guy to talk about it. At $2,300 gold, you should fully have expected us to report strong results, and we are. We continue to be very constructive on the gold price. I came into this business in 1999, gold was $2.90 People have hated the gold price since and it's now 23.50 dollars And we think that we are just starting a long term secular move.

Speaker 1

That said, and important and we want to emphasize this, we do not take this higher gold price for granted. We remain absolutely focused on cost control, We remain focused on per share metrics and we remain focused on capital discipline. We are absolutely determined at Agnico that increases in gold price go to our owners and these increases are not going to be eaten away with higher costs. In fact, when Dominic and Natasha go through their sections and they'll go through it briefly, but the overriding theme you will hear over and over again is a theme of continued focus on business improvement at every mine and every opportunity. Our focus on cost of $2,300 is as strong as ever, And our key projects Detour, Upper Beaver, Malartic, Wausau Mack, Amalgamated, Kirkland, etcetera, those are the same projects at $2,300 as they were at $1800 We're remaining focused.

Speaker 1

So a very good start to the year, but at Agnico Eagle, we believe strongly that it's not only what you do, but how you do it. And with that, our next speaker is Carol Plummer, our EVP Sustainability, People and Culture, who will discuss our 15th Annual Sustainability Report.

Speaker 2

Thank you, Amar, and good morning, everybody. We're certainly happy to release this 15th Annual Sustainability Report, which is titled Global Approach Regional Focus. This report highlights how we are deeply rooted in and committed to the regions in which we operate even as we grow and evolve as an organization. While our vision and goals are global, our strategies are tailored to each region, taking into account their environmental, social and economic context and adapting to their specific needs, priorities and challenges. We're proud of our people who are working every day not only to complete the work of a global miner, but doing it safely and respecting our commitments to the environment and our communities.

Speaker 2

ESG is central to our strategy and it's through the stories of our people, the partnerships they have created, the relationships that they maintain and the challenges that they face that you can see how it is integrated into the very fabric of our company. We prioritize close collaboration with local communities and indigenous people, valuing their perspective as integral components of our operational approach. This is how we make mining work for everyone. Working together, we can reduce our environmental impact, increase social benefits and positively contribute to local economy. You can see on this slide some of the highlights from 2023.

Speaker 2

I'm particularly happy to point out the safety record and a 34% improvement in safety frequency year on year. We continue to work on our decarbonization plans. We invested in our communities and we worked with our employees to make sure that we can maintain our commitment to mine responsibly. The full report can be found on our website or by clicking on the link in the press release. And I will now pass on to Jamie to discuss the Q1 results.

Speaker 3

Thank you, Carol. As Amar mentioned in his opening remarks, we had a great start to the year with stable consistent operating results and excellent cost performance pairing with higher gold prices to drive record cash flows and financial results. 1st quarter gold production totaled 879,000 ounces at total cash cost of $901 per ounce and all in sustaining cost of $11.91 per ounce. With this strong start to the year, we are very well positioned to achieve our full year production and cost guidance. Our all in sustaining costs for the Q1 were actually below the low end of our guidance range at $11.91 per ounce.

Speaker 3

This resulted from the deferral of certain sustaining capital expenditures at Detour Lake to later in the year. As a result, we do expect higher all in sustaining costs in subsequent quarters, but still expect all in sustaining costs per ounce to be within our guidance range of $1200 to $12.50 for the full 2024 year.

Speaker 1

The higher gold price in

Speaker 3

the Q1 combined with our strong operating and cost performance led to significant margin expansion and we had record operating margins in the Q1 at over $1,000,000,000 led by our 2 largest mines Detour Lake and Canadian Malartic. We will maintain our focus on costs and ensure that the benefit of higher gold prices is allocated to strengthening our balance sheet, providing financial flexibility and continuing to return capital to our shareholders. We move on to Slide 9. We'll look at our financial highlights. Our revenues increased 21% over the Q1 of 2023 to over 1,800,000,000 dollars Importantly, our cash provided by operating activities increased by the same percentage and our free cash flow actually increased by over 50% to a record of $396,000,000 for the quarter.

Speaker 3

We are seeing the benefit of higher gold prices with margin expansion helping to strengthen our financial position, adding approximately $190,000,000 of cash to our balance sheet in the quarter. On an adjusted basis, net income per share was $0.76 in the Q1, approximately a 30% increase relative to the prior year period. We continue to pay a strong quarterly dividend of $0.40 per share, which is at a healthy level and represents approximately half of the free cash flow we generated in the quarter. We also repurchased 375,000 common shares for approximately $20,000,000 through our normal course issuer bid in the Q1. While we expect the majority of our capital returns to shareholders will continue to be through the dividend, we do have the financial flexibility to be opportunistic with respect to additional share buybacks.

Speaker 3

At current gold prices, we would expect to generate substantial free cash flow in subsequent quarters. We will remain disciplined with our capital allocation with excess cash being directed to further strengthening our balance sheet, paying down debt, reinvesting and improving our business and continuing to return capital to shareholders. We move on to Slide 10. I'm very proud of the work our team has done this quarter to further strengthen our financial position and flexibility. Strong quarterly operational and financial results added cash to our balance sheet and reduced our net debt position to $1,300,000,000 During the quarter, we upsized our revolving credit facility to $2,000,000,000 dollars This new facility reflects Agnico size, scale and investment grade status and significantly increased our available liquidity.

Speaker 3

We do have approximately $800,000,000 of debt maturities over the next 15 months. We will look to either repay those from cash on hand or refinance at the appropriate time. We were also pleased that Moody's upgraded our credit rating during the quarter to BAA 1 with a stable outlook, which reflects our strong and strengthening credit profile. Overall, the balance sheet is in great shape. We're always looking for opportunities to strengthen it, improve our liquidity and overall financial flexibility.

Speaker 3

I'll now turn the call over to Dominique, who will provide an overview of our Quebec and Nunavut operations.

Speaker 4

Thank you, Jimmy. I'm at Slide 11. Good quarter, all time record at Canadian Malartic Complex. So with the addition of the higher grade from underground at Odyssey, Canadian Malartic is breaking new record after 12 years of operation. We also did a strong quarter on the project development with sorry, the ramp, the shaft sinking and the surface construction.

Speaker 4

And also Guy is going to talk about potential extending of the Eastwoody zone, which is feeding the fill the mill strategy. So we're very excited with that. On the automation side, Agnico is recognized as a worldwide leader in remote operation. And this leadership can be seen at LZ5. As an example, during the quarter the Friday night shift which traditionally was from let's say manual operation now have been transitioned to fully automated operation.

Speaker 4

So this is not just only improving productivity, but it is also improving the life quality of our workers by not having to work anymore on the night Friday night shift. So from now on, the Friday night, Saturday night and the Sunday night shift are fully operated remotely. I'm also happy to highlight that at 40 kilometers of LZ5 in Laronde mine, the Odyssey team executed the first fully automated truckload during the shift change. So I wrap up the Quebec section by saying a big thank you to the teams to keep pushing automation boundaries and leveraging of regional synergy. Moving to Slide 12, Nunavut delivered an outstanding Q1 both on cost control and gold production.

Speaker 4

Both Meliadine and Meadowbank achieved better performances than budgeted especially at the underground operation where moking, hauling and development activities beat the budget. This is the result of a team effort to improve the business. Following last year cost pressure, the Nunavut management team heads down and initiated bold action plan. But why this succeed? Let me explain why.

Speaker 4

I stole 4 important points from Jean Claude Blais presentation. Jean Claude is the General Manager at Meliadine and here's what he said. 1st, focus on what matters. 2nd, empower and staff a dedicated team to succeed. 3rd, be open minded to challenge the stethoscope.

Speaker 4

4th, last but not least, execute like hell. So here's why they succeed and we're very proud of that one. I would like to conclude by congratulating the Geneva team for their leadership and this outstanding quarter. All those improvements are not only building flexibility for 2024 and the coming years, but hope they will be able to build upon those important improvement. On that, I will pass the call to Natasha.

Speaker 5

Thanks, Dom, and good morning, everyone. So I'll start with the operations in Ontario. Here, we had another strong quarter and solid performance. Combined, the sites generated around $300,000,000 in operating margins with, as you can see on this table, with industry leading costs. At both operations, Macassa and at Detour, we're continuing to steadily ramp up production.

Speaker 5

And just coming back to Amar's point earlier on, we remain laser focused on optimizing and continuously improving on our assets. I'll give you a few examples. We'll start with Macassa. First off, we have seen improved productivity throughout the mine and the mill this quarter. The site, they hit records.

Speaker 5

They hit records in underground development. They hit a record in skipped tonnes. They hit a record in milled tonnes. Really incredible work by the team and they keep going. They keep their heads down and they're working on other initiatives such as improvements in energy management and workforce availability or productivities and also fleet availability just to name a few.

Speaker 5

And then in keeping with our regional strategy, we're continuing to integrate the 8 ks deposit into the production profile this year. We're still tracking well to complete a bulk sample extraction of the AK later in Q4. And just as a reminder, this is the ore that would be sent to the LaRonde Mill. Moving to Detour, we set a record, a quarterly record for total tonnage mined, but we also delivered mill throughput that was the highest for our Q1 period. The team already knows this.

Speaker 5

I've mentioned this to them a couple of times, but I'm particularly proud of them and our results this quarter, especially considering we faced some challenges with abnormal breakage of our grinding media. And in terms of continuous improvement efforts at Detour, we have many, but of course, as you know, our main focus is to continue advancing the mill optimization efforts. We still expect to reach the mill throughput of 76,000 tonnes per day, roughly around 28,000,000 tonnes a year in late in the second half of twenty twenty four. Now moving on to Slide 14. I'll touch on our other assets starting in Finland.

Speaker 5

At Kipila, the team had an inaugural celebration for the commissioning of the new shaft in March. And based on the performance in the quarter, they are tracking pretty well to meet guidance. They're also continuing to see positive exploration results demonstrating the expansion potential at the main zone, the Cesar zone and in the Rura area. And then over in Australia, Fosterville, they continue to generate strong cash flows with cost among the lowest in the industry despite decreasing grades. And this is a testament to not just the team's ability, but their continued focus on improving productivity and controlling their costs.

Speaker 5

Finally, in Mexico, at Pinos Altos, we continue to operate with consistent stable production. Here also we focused our efforts over the past year on improving productivity and controlling our costs. All in all, our operations are continuing to exhibit a stable and consistent approach to safely delivering on our objectives. Our site teams are continuing to work hard on improvement initiatives, while also advancing on our pipeline projects. And with that, I will now pass it over to Guy, who will provide us with an update on exploration.

Speaker 4

Thank you, Natasha, and good morning everybody online. This quarter, we continue our exploration efforts to build on last year's record mineral reserves momentum, focusing on opportunity near mine and key value driver project in our portfolio. Our strategy remains the same. 1, extend life of mine 2, maximize available milling capacity at our key operation and 3, advance some specific high potential project by increasing mineral resources and mineral reserves both in quantity and quality. Today I would like to discuss 3 projects in particular where we see strong opportunities.

Speaker 4

First of all, Malartic and Odyssey, we've seen some excellent results in the eastern extension of the East Goldie that could significantly contribute to our fill the mill strategy. 2nd, at Detour, we continue to see broad mirrorized intercept in the upper part of the underground extension of the deposit to the west of the open pit that continue to support our vision of an underground project at Detour. And 3rd, Opie, where we got what I would qualify some very spectacular exploration result in the gap between Soloc and Patch 7 at the Madrid deposit. That could move the needle because of the high grade nature of those intercepts that could significantly improve the scenario for future project development. So starting with Malartic on Slide 15, we saw that the zone is getting thicker again in the Eastern extension with some very solid intercept returning 3 gram over 32 meter and 4.5 gram over 33 meter respectively at 400 and a 1000 meter away from the current mineral reserves.

Speaker 4

And that at a depth between 1.1 and 1.6 kilometer depth. This could lead to the development of another thick mining area along the East Goldie horizon, demonstrating that the zone remains open for additional significant discovery and future potential reserve addition that could help in our long term fill the mill strategy. Moving on to Detour on Slide 16, exploration effort continue to focus on the western extension of the deposit completing 58,000 meter in the Q1 focusing in particular into the shallow portion of the potential underground project where we continue to see broad mineral interval of good grade mineralization with example of 5.4 over 16, 3.9 over 25 and 3.4 gram over 29 meter in a large area located at shallow depth of the width of the potential underground project close to the conceptual exploration ramp that we are envisioning at Detour. These results shows potential for mineralization having both grade and width characteristic that are likely amenable for underground mining supporting our vision to bring the De Torre Lake mine to 1,000,000 ounces of gold a year production from a combined open pit and underground operation in the future. And last but not least, and on slide 17, I'm particularly proud that we complete 30,000 meter of drilling at Oak Bay this quarter, which is almost 50% in last year safely.

Speaker 4

We focused this year winter drilling campaign for ice based drilling at the Madrid deposit and previously on Explorer gap between Solok and Patch 7 to follow-up on some of the exciting results that were communicated in February. The most recent follow-up drilling returned exceptional results 12 gram over 19 meter, 20 gram over 18 meter, 14 gram over 16 meter and those are cap grade and estimated through width. The core length intercept on those were just spectacular solid from wall to wall, demonstrating the potential for a significant new thick mineralized area that could potentially host up to 1,000,000 ounces between 10 20 gram that could have a very positive impact on further project redevelopment scenario considering the high grade nature compared to the rest of the deposit and the apparent simple geometry of this new zone. I would like to thank all of our exploration team and the various jurisdictions that put a lot of good thinking and hard work into these large exploration program to deliver them safely and in the most cost efficient matter. Our focus in exploration remains to focus on opportunity by advancing key value driver project to accelerate their integration into mine development scenarios and with those excellent results we can anticipate that additional exploration budget could be added in the second half of the year.

Speaker 4

And on that, I would like to return the mic to Amar for some closing remarks.

Speaker 1

Well, thank you very much, Guy. We probably should have started with that. Good work. And thank you, Carol, Dom, Natasha and Jamie. Before we jump into questions and next slide, if we could please.

Speaker 1

Thank you. Just really to summarize, we had a strong quarter operationally, strong quarter financially. We're all proud of our team for delivering results, but also for continuing focus on business improvement and our commitment to capturing gold price increases for the benefits of our shareholders. We made good progress on our key value drivers and we have had, as you just heard, some excellent exploration results. We are delivering on 2024, but we're also building the company for the future.

Speaker 1

Our strategy remains the same as it's been for the last 67 years, focus on the best regions based on geologic potential and political stability, try to build the highest quality business that we can for our shareholders, for our communities and for our employees, continue to focus on the bottom line, continue to focus on per share metrics, continue to focus on return on capital. And we think we are uniquely positioned with a competitive advantage in some of the best places in the world to mine for gold. So with that, I want to thank my colleagues for their presentations. Thank all of you for being patient. And operator, if we can now open it up for questions, please.

Operator

Thank you. Your first question comes from the line of Ralph Profiti from 8 Capital. Your line is open.

Speaker 6

Good morning, Amar. Thanks for taking my questions. 2 of them please on Odyssey and maybe for Dom can chime in. Just wondering about matching hoisting capacity and the mining rates at Odyssey in that sort of 2025 to 2027. It seems like we're getting there a little bit earlier.

Speaker 6

And just wondering is there some production perhaps being brought forward because of that temp loader being repositioned higher in the strata. And then when you combine that with some of the development

Speaker 1

ahead of schedule, there's some

Speaker 6

sort of back envelope that you can get an extra sort of maybe 15,000, maybe 20,000 ounces of gold production in 2025. Just wondering if you can comment on that a little bit?

Speaker 4

Yes, Dominik, the teams are working on all the different scenarios to integrate new drill hole, to integrate modification to the shaft by let's say, we just change the loading station and also adjusting with the sinking rate that we're doing. Those plans are going to come up more later during the year with optimization. But as you mentioned, there is place of improvement and the team are working on that.

Speaker 6

Okay. Okay. And is there any mining deeper in the deeper levels of the ore body perhaps Odyssey North that was going to happen ahead of shaft completion, where perhaps if we move up the temporary load, there's perhaps a partly offsetting cost impact moving that up in the strata?

Speaker 4

Yes. Maybe on the loading, the positive impact is going to be a shorter run. So we're going to be able to do more tonnage. So that's going to help to bring out the waste or the ore. But really the focus is on the accessing the East Godi deposit.

Speaker 4

So now we're at the level of the East Godi deposit with the ramp. We're still not touching the ore. That's going to be more coming into 2026. But again, the focus is to be able to really unlock by having the shaft being able to skip that out of the mine in 2027. And this is where the heart of the ore body is.

Speaker 6

Yes. Got you. That's helpful. Thank you.

Operator

Your next question comes from the line of Mike Parkin from National Bank Financial. Your line is open.

Speaker 7

Thanks guys. Thanks for taking my question and congrats on the good quarter. Question is just on Canadian Malartic. The throughput this quarter and actually last quarter, has been like a significant step up from where we were ever since really the start of 2022. Is that more of a blend of like Barnett ore being a bit soft here, allowing you to push the mill a little harder?

Speaker 7

Just trying to understand the roughly 7 ish plus percent improvement in the last couple of quarters versus that last couple of year run rate. What's driving that? Is it sustainable? Any color would be awesome.

Speaker 4

Yes, Mike. This is Drew. The Barnett ore is more softer and we're able to process more than initially planted. But right now, we're still also processing underground ore and also a stockpile which came from the Canadian Malartic pit at the time. We need to time also the process plant with the tailing facilities.

Speaker 4

So this is where the team are also looking to optimize, but we're going to turn into in pit disposition in the second half of the year. So we need to match this, let's say, tailing and also milling capacity. But we have flexibility within the plant.

Speaker 7

Okay. And for in pit tailings, given the underground is not directly underneath it, there isn't really any need to add like a solidifying need

Speaker 4

to like cement to it. Can you just dump it in without any additives? Yes. We don't need to do a specific plug because we're not as you mentioned, we're not on the top of where we're going to mine. And we did external let's say, many studies including external expertise to make sure that everything was fine.

Speaker 4

And there's no issue with going into the Canadian Malartic pit. Okay. Sounds good. Thanks so much guys.

Operator

Your next question comes from the line of Greg Barnes from TD Securities. Your line is open.

Speaker 8

Yes. Thank you. Just returning to Hope Bay and some of the drilling success you've had there in that gap zone. I think you mentioned a couple of times in the presentation, the MD and A is changing your thinking in terms of how you expect the Hoppe development to proceed. Just wondering what that means?

Speaker 4

Well, that Greg, it's me. So that means that if obviously if we have an area in that gap with 1,000,000 ounces at 10 to 20 gram, although obviously if we bring that sooner, but that was not known currently in any kind of previous scenario we've had. So now we're looking potentially we should in the most likely scenario try to go there first, which is just kind of maybe could we add another mining area to big and we just reshuffle the proportion that could come from Nartok, Suluk visit this new area. So obviously, from a return perspective, if we could access that higher grades or earlier, that's going to help. So it means that, yes, we may have to fast track our thinking about establishing a mining area in this higher another mining area to that new zone and reshuffle what proportion could come from the different portion of the deposit.

Speaker 4

So all of that is kind of fresh out of breath from an exploration results standpoint. And we're trying to be live with our study to integrate all of that into design the best project eventually with that.

Speaker 1

And it's just Amar here, I'll jump in. And you know us, we don't want to get too far ahead of things and there's a lot of work and it all goes to capital discipline. But Hope Bay, we don't see Hope Bay as a small thing. We've said from the beginning, if we go ahead with Hope A, it's going to be between 300,000 and 400,000 ounces a year. So these are important drill results.

Speaker 1

Take it with the appropriate amount of caution, but they are they do look pretty good.

Speaker 8

So, Maher, with that second mining front, higher grades, I assume you'd be pushing towards the higher end of that production range now in terms of your thinking on this?

Speaker 4

Yes.

Speaker 8

Okay. Good now. And on Slide 15, the Odyssey Mine, just thinking about the 2nd shaft and looking at the cross section, where do you think that second shaft is going to go and obviously jumping ahead timing?

Speaker 4

Well, it is not clear yet. The team we're going to see more soon some proposition on that. And again, just the new East Goudy, which is getting back wider, that's going to also bring, let's say, new ideas. But the team are looking to different options for the 2nd and maybe eventually a 3rd half, who knows? As you see, we have both good results in the Western Extension and in the Eastern Extension.

Speaker 4

So obviously, it opens up some process of thinking where could be a center of gravity and where should we do things. So there's the deposit being open on both sides of the first half. I know you can pick up the scenario that you prefer.

Speaker 8

That's very helpful. Thanks guys.

Operator

Your next question comes from the line of Anita Soni from CIBC. Your line is open.

Speaker 9

Hi, good morning everyone and congrats on a good quarter and all the exploration success. I had similar questions to Greg.

Speaker 5

Can I just follow-up on sort of the eSchool, what that means? You said it's obviously like you can extend it to the East and to the West, but would that change any of your sort of ideas on how much tons you could push out of that asset?

Speaker 4

There's no, the panel being around open on both sides, both towards the Nori South fleet into the well. So we're just basically adding additional mineral and inventory, adding additional inferred. Obviously, when the zone gets thicker like that with better grade, that kind of is it is becoming sort of an area of interest. Again, it was kind of a gap where we didn't add much drilling so far into an area of a couple of 100 meter. We had some drill holes for the East that were kind of not as good.

Speaker 4

But we were would say I was pleasantly surprised because the belief and our understanding was the deposit was pinching and all of a sudden it is swelling back. So now we want to dedicate additional drilling in second half of the year to better understand at a reasonable drill pattern. We'll be I think we're going to be try to target in this area drill pattern 175, 175, 175 to bigger figure out what's the extent of that new batch at 30 meter. And we'll see how many ounces and what kind of decision it drives. But it's very close from the existing infrastructure.

Speaker 4

We're just talking about between 4,001,000 meters to the east of the current reserves. It's not that far, quite thick, seems to be very close from the it's in the extension of the main thing. So it is kind of tracking our attention.

Speaker 9

Thanks. And then on Detour, the decision to defer the capital, I guess, until later in

Speaker 5

the year, is that related to the results of the study, maybe waiting for that to come out and see if you can better deploy capital? Or was there something else behind it? Hi, Anita. It's Natasha. Thanks for the question.

Speaker 5

No, it has nothing to do with that. It was just it's timing. We're continuing to negotiate better terms with our suppliers. And as part of the process, we just slightly delayed the purchase of equipment and parts associated with it. That's it.

Speaker 9

I have before I turn it over to capital allocation. You talked about returning capital to shareholders. Can you talk about, Jamie, the priorities in order like what will you address first? I know you have your buyback that's expiring in a little bit. Would you renew that?

Speaker 5

Would you consider buying back shares at these levels?

Speaker 3

Yes. Thanks Anita for the question. Yes, we did indicate in the press release that we will be renewing the buyback program. And in my remarks, I indicated that the primary focus of the increased cash flow will be to strengthening our balance sheet. We do have, like I said, dollars 800,000,000 in debt maturities over the course of the next 15 months or so.

Speaker 3

So we want to be well positioned with cash on hand to have the ability to repay that from our balance sheet if that's what we decide to take. So we're still paying very healthy shareholder returns. The dividend 50% of the free cash flow that we generated in the quarter. So that will continue to be the focus of our shareholder capital return program.

Speaker 9

Okay. So first debt repayment and then secondly the potential increase in dividends or just maintaining the dividend?

Speaker 3

I'd say maintaining the dividend for now. We'll look at debt repayment and just further strengthening the balance sheet and providing financial flexibility and we'll be opportunistic with respect to the share buyback. It's there for that reason. In the Q1, we saw the gold price move and our share price didn't. So we stepped in to a small extent, but that's what we'll use that for going forward.

Speaker 9

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

Operator

Thank you. Your next question comes from the line of John Tumazos from John Tumazos Very Independent Research. Your line is open.

Speaker 10

Thank you very much. Congratulations on all of the progress in so many dimensions. I'm trying to imagine how the mine planning might evolve. In the new zone, it's east of East Goldie, over a 1000 meters east and deep, would that likely be another shaft 1,000 meters to the east? Or would that be a ramp from deep since the project plunges in that direction?

Speaker 10

First question. Second question, the grade intercepts in the mid-three hundred meters, it detour is underground targets. Does that suggest that the pit doesn't need to go to 550 meters and it's more economic to mine from underground, which of course solves the problem of waste dumps and where to put the waste stripping because the underground mining is less disruptive. Thank you.

Speaker 4

Thank you, John. Dominic speaking. Yes, for the scenario at East Guli, the team are looking at a different scenario. So now the shaft, we're going to be able to skip from that shaft 12,000 ton per day including the waste. And that's going to be the limit of this one and the ramp.

Speaker 4

There's also a limit going with the ramp. So we need to have another exit to get the ore out. So that could be a second shaft. That could be also a new ramp maybe going through the more the East Malartic zone first. So there's different opportunity into play.

Speaker 4

And the team is also looking how that could what is the most efficient way to do that shaft? Is it by, let's say, doing a ventilation raise that we're going to turn into a shaft? Is it to do it like we're doing right now? I cannot give you what's going to be the scenario for now, but there is people on that and we just added the 6 resources to be able to digest and to look to all those scenarios. And John, it's the right question

Speaker 1

that you're asking. In this case, because the mill is unconstrained, we really want to, as Dominic said, get more tonnes up. If it was if the mill was constrained, then it becomes a question what's more economic to access at a shaft versus a ramp. In this case, and again it will be up to the engineers because the mill is unconstrained as we all know we're going to have 40,000 tonnes a day available To the extent you have this ginormous ore body, you want to bring up tonnes. And just for clarification, Dominic mentioned the roughly 11,000 tonnes a day on the shaft.

Speaker 1

There's roughly the equivalent amount on the ramps coming up. So we're going from 22,000 tonnes a day and we would look at getting higher.

Speaker 4

Yes. In fact, it is 19,000 ton per day from the shaft, but that includes waste. So the rest of the ore is coming from the ramp to end up to 20,000 tonne per day. And for the second part of your question, John, about detour, it's the where exactly what you described. Considering the plunge of the ore body, you see that there is not much in the first 300 meter and it just keeps on plunging.

Speaker 4

And therefore, considering the grade and the fact of that thing that seems to be kind of pretty good for underground and would also, as you described, mean less disturbance, less waste and you can access to that higher grade part. And since a detour with it well, we're going to be maximizing the feed at the mill, but now it's a trigger, can we get a better grade? And obviously, we're going to get a better grade if we go to that area from underground with the ramp more selective into the ore body. So for all of the reason you described, it makes more sense to go to that western part of the deposit and having eventually as we describe a combined open pit and underground scenario in the future.

Speaker 10

Thank you. If I could follow-up on the East of East Goldie, do you have information about the 1,000 meters in between? Oh, yeah. Had you drilled in between or is this just virgin ground in between for the 1,000 meters East?

Speaker 4

No, no, we have information in between and we already had some loose drilling that was showing some economic intercept. And we already have something that do not yet qualify in for because the drilling pattern is to lose. What we were pleasantly surprised although is that we were kind of seeing a pattern to the did that the zone was getting a bit narrower and more in the 10 or 5 to 10 meters, still a decent grade. What we were pleasantly surprised to see is that the zone is getting back to 30, 33 meter between 34.5. So that was a bit unexpected because I was thinking that the tick was within the plunge of the typical ore shoot of the ore body.

Speaker 4

But we were kind of pleasantly surprised to see the system swelling again, still with some good grade between 34. And we have information in between. So eventually, you can and you can see on our the graph that there's already some reserve and then we move to resources and then some mineral inventory and all of that we're going to continue to drill because as you remember, we only have 9,000,000 ounces in the plan for Odyssey. But on total, there is 16,000,000 ounces underground plus in Malartic. So all of that is in lower category and we're going to continue to tight fill the area between the current reserve and this area with a specific attention to this area where it seems to be thicker again.

Speaker 10

So it is undulating, it pinches and swells and you have to drill, you just can't project?

Speaker 4

Well, but it does, but at a large scale, the core of Yezgudi is typically very, very thick up to 50, 55 meter. And it was kind of progressively getting from 50, 60 towards, let's say, more 10 meter. And all of a sudden, it's going back to 30 meter. But it's not pinching and swelling on small scale. It's kind of very kind of large scale progressive pinching that is back swelling.

Speaker 10

Wonderful. Thank you.

Speaker 4

You're welcome.

Operator

Your next question comes from the line of Tanya Jakusconek from Scotiabankar. Your line is open.

Speaker 11

Great. Good morning, everybody, and congrats on a good quarter and good exploration results as well. I'm going to start with Natasha, if I could. Good morning, Natasha, on Detour. A couple of questions there.

Speaker 11

I just want to understand getting that balance what needs to be done. And then I'm trying to understand this grinding media. Have you resolved the issue there with these the grinding media getting caught in the mill?

Speaker 5

Sure. Good morning, Tanya, and thanks for the question. So let's start with the grinding media. So the grinding media is just basically these 5 inches steel balls, they're consumables that are going into the SAG and it's grinding the ore. And so what we have seen, it's very abnormal, is that these balls are pretty much chipping and flaking.

Speaker 5

And so it's accumulating steel in this mill. We're working with our suppliers. This is a supply that we've used for 10 years and they're on it. They're working with us on this. We have new grinding media that was introduced sometime in mid March.

Speaker 5

And so far, it's yielded favorable results, but it's still early days. But we're working with them and we're looking to resolve this issue fairly soon. And

Speaker 11

then is this product media, sorry, was it just a bad batch that maybe you got or I don't know?

Speaker 5

It's still inconclusive. We're doing the investigation with our suppliers and a third party.

Speaker 11

Okay.

Speaker 5

And then this year with respect to the SAG and Ball Mills, we're just optimizing the grinding efficiency and trying to find that load balance between the SAG and the ball mills. And there's a few things that we're doing in here. We're introducing a new instrumentation in the SAG mill, just to stabilize the operating conditions. We're optimizing the screen and great sizing to improve the flow and the distribution of the load. And we're also testing new liners basically just to extend the liner life.

Speaker 5

That's basically what we're doing on the front end.

Speaker 11

Okay. So it's just trying to get that balance between the two to just make it consistent. Is that a fair view of that? Yes.

Speaker 1

Yes.

Speaker 11

Okay. Okay. Thank you for that. And then the second part on Detour is we do have that study coming out in at the end of the Q2. Can from a conceptual basis, should I be thinking that it's going to be based on that 1,600,000 ounce resource of the underground that was released in February plus some additional ore additional resources are inferred that are coming in from part of the pit.

Speaker 4

You're right, Yes, you're right, Tania. So as you know, we are relooking at within the out pit that you described, so the inferred that we produce that here. And also when you look at the larger resource bit that we show in blue on the long section, so what portion of that could we mine quicker by accessing underground? And so it will be a combined kind of what could be within the resource pit, what is outside to the west. You're right.

Speaker 11

So it's not going to be any new additional ounces within your resource envelope

Speaker 1

that I

Speaker 4

should be talking about? No, we're still the study we will be producing will still be based on the number we produce at year end. But we are obviously, we are still working on the next scenario that continues to integrate all of those nitrile holes. We have those, let's say, in additional kind of mineral inventory that could help at enhancing. But what we will be looking in the PEA will be most the number from what we've added in at the year end 2023.

Speaker 4

So as you know, it's a picture shot at certain point in time that we're going to continue to update over time.

Speaker 11

Okay. No, that's great. Thank you. And then my second question maybe for Natasha and Dominic. I just wanted to ask on just and I asked this for Newmont yesterday as well.

Speaker 11

It's just on the costing side, margins there, we're finally seeing margins, strong margins out of the gold companies. And I just want to get an idea on the costs, the inflationary pressures, if any, have they eased? Or are you seeing any relief, any pressures on your cost structure?

Speaker 4

Good morning, Daniel, it's Dominique. I will say on the inflation, it is stabilizing and maybe getting down a bit on the workforce contractor, I would say. So this is a good news. But I think what we need to protect to keep the margin is the cutoff rate. So this is the part where I think we need to be disciplined to keep the margin.

Speaker 4

And I don't see any big inflation coming because of the gold price increase. I see just the danger that we need to be careful that we don't play too much with the cutoff grade or we take stable cutoff grade, it is more our philosophy.

Speaker 5

Yes. And same on my side Tanya, we don't see any rise in costs. It's pretty stable from an inflation point of view. But we're continuing our efforts with renegotiating with our suppliers and finding the best optimal pricing that we can.

Speaker 1

We just had our board meeting yesterday and really, Tanya, the emphasis there was how do we reduce costs. I mean, so we're working hard on making sure that the margin goes to our owners.

Speaker 4

And Tania, maybe it's a smaller drop in the overall cost structure, but in the drilling industry as well, which is an old contractor base, we've seen some easing into the cost. There's a bit less activity and we've seen some reduction in cost in the drilling. So overall, we're quite pleased with that.

Speaker 11

And can I just ask about cyanide and steel? Newmont mentioned yesterday that they saw slight increases there. I'm just trying to see if that's the same for you guys.

Speaker 5

We haven't seen anything material.

Speaker 11

Okay. That's helpful. Thank you so much for that. And if I could just put one last exploration question in from Guy. Guy, that's a lot of interesting results that you're getting and looks like these things are getting bigger.

Speaker 11

For us though, when do you think the market is going to be ready to get some results, some conceptual views of what this could be. I think we talked about Hope Bay maybe having something in 2025. Is that still fair that we would have something

Speaker 6

Yes. It is still fair.

Speaker 4

So we're going to be obviously focusing at bringing that new area to infer and indicate that's really what we are all over at the moment, so that we can put that. So you're right, hopefully, somewhere in 2025, we should be in a position, especially with those better results recently to provide you with an update. Okay. And then especially with those better result recently to provide you with an update.

Speaker 11

And then can I ask about Odyssey? We've got obviously upside to the east, upside to the west. I know it's all drilling dependent, but when do you think you'll be ready? Is it a couple of years that we need to wait to see something conceptual? I'm just trying to put a timeline.

Speaker 4

Yes, it is drilling driven. We're going to have internal scenario coming in the second half of this year. I cannot comment of when we're going to have something more robust on that.

Speaker 1

It'll be drilling driven as Dom said. So your timeline is not far off,

Speaker 11

Tanya. Great. Congratulations and thank you for answering my questions.

Operator

Thank you. And that concludes the Q and A portion of today's call. I would like to turn it back to Mr. Amar Aljandi for closing remarks.

Speaker 1

Thank you, operator, and thank you everyone for participating this morning. As a reminder, we are hosting our Annual General Meeting today at 11 am at the Arcadia Court in Toronto, and we hope to see some of you there. Thank you, everyone, and have a great weekend. Bye bye.

Operator

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

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Earnings Conference Call
Agnico Eagle Mines Q1 2024
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