Agnico Eagle Mines Limited

Good morning. My name is Karina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle First Quarter Results 2019 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Thank you. Mr. Shawn Boyd, you may begin your conference.

Thank you, operator, and good morning, everyone, and welcome to our first quarter 2019 conference call. We're going to be going through some forward-looking statements today, so please be forewarned. Just to sort of step back and look at 2019, as we've said, we expect record production at 1.75 million ounces. at cash costs in the midpoint of the range of $645 and all in sustaining costs at the midpoint of the range of $900. After the first quarter, we're tracking extremely well towards that target and we'll be revisiting those numbers in our second quarter update in late July as we move through the commissioning of both Meliadean and Amaruq. The other thing that I think we've been focused on this year is just simply the execution of those two projects, because what that does in the second half of the year, it drives a significant bump in production, in earnings per share, and also in cash flow per share. From the quarterly perspective, we produced almost 400,000 ounces, of which about 18,000 ounces came from Meliodine in the pre-commercial stage. We poured our first bar at Meliodine. in the third week of February. Our cash costs in the quarter were very good. We'll talk about some of the components of that at 6.23, all in sustaining costs at 8.36. At Meliadean, as we mentioned, we're very close to commercial production. We'll expect commercial production in May. At Amarook, we would expect commercial production in the third quarter of this year. So everything's tracking Well, both projects are ahead of the original schedule, and we would expect both projects to come in slightly below the total budget for both projects, which was U.S. $1.23 billion. We also had some exploration results in our press release. We continue to get good results at Amaroop in the underground. We've got some interesting new results at Santa Gertrudis new what looks like a higher grade structure in an area of past mining, a small pit, and at Kirkland Lake at Upper Beaver, we're extending the mineralization there. So these are three projects that we've talked about providing an update as we move through the balance of this year, and the update will continue to obviously be exploration, but also will give you a project update on potential development scenarios for those projects as we move through the balance of this year. Looking at the specific properties and the contribution to production of almost 400,000 ounces, if we look at the Abitibi and look at Leron, Goldex, and Canadian Malartic, we produced a combined a little over 200,000 ounces. The weighted average cash cost of those mines for the quarter was $544 an ounce, so we're getting good performance and good cash generation coming out of our operations in the Abitibi. Also had good production at Quetzala, almost 50,000 ounces. We continue to produce good quantities of gold at Meadowbank as we continue to mine in Portage, so that's extended a little bit longer than we had expected, and we talked about the 18,000 ounces roughly coming out of Eliadeen in pre-commercial production. In Mexico, our combined cash costs for those operations below $600. So those mines continue to generate good cash flow. So if you think about roughly 400,000 ounces of production in the quarter, that's roughly what we've been averaging per quarter for the last several years, plus or minus. But as we move into the second half of this year and into 2020, when we expect to produce 2 million ounces and then go beyond 2 million ounces, Post-2020, we'll have quarters of 500,000 ounces plus, which is really the inflection point that we've been talking about in terms of both earnings per share and cash flow per share. Just going to the earnings and cash flow for the quarter, normalized is 14 cents, so a good quarter from an earnings perspective. Operating cash flow is 63 cents, but as we said, as we go into the second half, we would expect to see improvements in both of those financial metrics. The balance sheet, we closed the quarter with about $200 million in cash, a good position as we move forward given the financial flexibility that we'll have moving into the second half as we ramp up production. We'll talk a little bit about the assets, talking about La Ronne produced 77,000 ounces in the first quarter. We would expect to see higher grades in the second half of this year. That's just simply due to mining sequence in the mine. We'll have about a 10-day maintenance shutdown in May of this year. We'll be offsetting some of that with material from the LZ5 zone next store to that. LZ5 continues to generate good cash, but I think the importance of that particular operation is the testing of the automated equipment. Good cash flow, good return on investment there, but also allowing us to test our automated mining equipment and communication system. Canadian malarctic, over 80,000 ounces. Work on the Barnat extension is going according to plan. We would expect to begin production in late 2019 on Barnat, so no change to that schedule. We have a very active exploration program. ongoing at Canadian Malartic, focused largely on underground opportunities and zones there, but it's still early there. There's still a lot more work to do. Nothing's been approved in terms of additional capital to move forward there, but all we can really say at this point is there's active exploration going on there. We continue to add to our land package there. We continue to fill in the blanks and open spaces on that belt and the partnership just picked up the Rand Malartic property, which is immediately to the east of the Canadian Malartic ground, and there is potential for the zones to continue onto that ground. At Goldacks, a record production since the restart in 2013, seeing some high-grade coming out of the south zone, which is not unexpected. That is a higher-grade area, although small. We'll see continued tonnage coming out of the south zone for the balance of this year. The Akasaba project is still on hold. It's a quality project, but in terms of capital allocation, it's one that we've just put on hold for the moment, and we would expect at some point to give it the go-ahead, given that it meets our investment hurdle rate. And we can leverage off of the existing skills that we have at GoldEx. At Meadowbank, 44,000 ounces. So as we said, we're winding down at the deposits in and around the Meadowbank processing facilities. But I think it's important just to stop and reflect on how effective the transition's been in Nunavut from the Meadowbank deposits to the Amaru satellite deposit. If we roll it back two or three years ago, there was an expectation that we would possibly be faced with a 12 to 18 month gap in production. At the time, all we could say was just allow our people to work through the issues and the opportunities and come up with a plan that narrowed that production gap and also allowed for a seamless transition from the metal bank deposits to the new amor deposits and they've done an exceptional job because that's had a very positive impact on the workforce because there was no negative impact of having people without a job for a period of time so very good work from that team and we're now we've been transitioning both people and equipment to the AMAROOP facility and we've also completed all the mill upgrade work at Meadowbank for the AMAROOP material. So AMAROOP is well advanced in terms of dewatering and mining and truck fleet. We're still working on permits for the whale tail and the v-zone expansion. We would expect to get those in late 2020. There's nothing special about those permits compared to the permits we've already been issued to start whale tail, so we don't see any issue with that. And I think we're still very much focused on the underground opportunity at Amarook and how we can potentially bring that into production at the same time as we're mining the pits, because that could have a significant impact on the production profile for two or three years where they're potentially operating at the same time. So we'll have an update as we move through the balance of this year on our thoughts around the AMRU underground opportunity. At Maliadian, we've talked about it. It's going well in terms of commissioning. We poured our first bar, as we said, in the third quarter of February. We're getting good recoveries. We're ramping up the mining rate. There's no showstoppers there. We're confident on our guidance this year. We continue to get good exploration results there. demonstrating that the deposit continues at depth with good grades and decent thicknesses. So I think also looking at that decision back in early 2017 to invest $900 million, that was the right decision. Timing was right. We had slowed the project down in 2016. We got better prepared and as a result, that project is ahead of schedule, as we said, and below budget. So good decision and I think that decision How positive that is is really reflected in the fact that although the economic study was done on 14 years of mine life, we have an extensive resource, and we see with the latest drilling that the deposit is likely going to continue to grow. At Ketala, we talked about a solid production quarter at 49,000 ounces. We will have a scheduled shutdown to reline the autoclave in this quarter. So that's done every four to five years. So that was in our plan. So it doesn't impact our guidance at all and we continue to push forward on the mill expansion and the shaft projects. In the southern business, as we said at the start, very good performance from a cost per ounce standpoint and from a cash generating standpoint. So they continue to operate effectively, generate good solid cash flow while they work on satellite deposits such as Sinter and Kibero and Reina da Plata, effectively just leveraging off of infrastructure and skills in the region to maximize our investment there. Preston, Muscoda also, good cost performance and good production in the quarters. And India, we continue to a focus on expanding the heap leach and the ore stacking, which is going well. We're drilling the El Rio Lido satellite zone, which we would expect to extend the mine life at La India. From an exploration standpoint, before I open it up for questions, I just wanted to highlight Santa Gertrudis. We bought that in December of 2017. And we've got some nice high-grade intersections on an area that had some past small open pit mining on it. Interesting opportunity because we feel if we extend the drill holes, some of the earlier drill holes did not extend enough to capture what we see as a potential new zone. So already almost a million ounces. So we would expect that to continue to grow. And that's the type of tailor-made project for our skill set. in Mexico, right region, Sonora. We know what operates there. We operate there with India. So, as we said earlier, we'll be providing an update on that project as we move through this year. So, operator, I'd like to open the line for questions.

Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star, then the number 1 on your telephone keypad. Your first question comes from the line of Fahad Tariq with Credit Suisse. Please go ahead.