This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk06: Good morning. My name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Agnigo Eagle fourth quarter results 2020 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remark, there will be a question and answer session. If you'd like to ask a question during this time, simply press star and the number one on your telephone keypad. If you'd like to withdraw your question, please press the pound key. Thank you. Mr. Sean Boyd may begin your conference.
spk14: Thank you, operator, and good morning, everyone, and welcome to our fourth quarter and 2020 full-year results conference call. Before we get started with the slides, just want to remind everybody that this presentation does include forward-looking statements, and we have that material in the slide deck. Just to start off, in terms of how we've closed the year and how we're positioned for moving forward over the next several years, we had a record quarter in terms of production, which drove record cash flow. But more importantly, we posted our best ever safety performance. So although we're pushing more volume than ever and we have more employees than ever, we're operating more safely than we've ever done in history. So a big thank you to our employees. It's a testament to their focus and the fact that they show up to work every day looking to make a contribution and caring about their work environment and the people they work closely with. As a result of that performance on the operating side, the business in the full year 2020 generated operating cash flow of $1.2 billion. So that continues to improve our financial position, good liquidity, declared our quarterly dividend of 35 cents per share, also got an additional credit rating agency to rate us as investment grade. We bought Moody's to do that recently. So it just shows you the strong financial position, which continues to strengthen as we grow our production over the next several years. We expect to grow output off of the 2020 amount by 24% as we move through 2024, and that's supported by our record reserve position. So lots of records as we close 2020. The reserve growth is supported by exploration results. So this is really not just a story about production growth, but also being able to improve the quality of our asset base, growing deposits at our existing mines As we move forward as a result of that, we've increased our exploration budget by over 40% to $160 million. So very much still a focus on exploration, and we'll talk about how that fits into the strategy in a minute. It's a key part of the story. The strategy is going to remain the same. It's consistent. It's really to grow production per share by focusing on the geological potential of our asset base by optimizing our existing mines, as we said, through exploration, and then building out our project pipeline. We can see visibility at La Ronde, at Goldex, in terms of additional conversion of resource into reserves, which will extend those lives of those assets, as well as bringing new projects into the production base of the company with the announcement of Amaruk Underground and Canadian Malarctic Underground. A big part of the strategy is to keep the business low risk, to manage political risk, stay in those jurisdictions that we know well, but also to continue our leadership and excellence in ESG, which we continue to do. We're double A rating at MSCI. Corporate Knights just ranked us number 73 in the world, not just in mining, but of all companies in ESG. So we continue to be recognized for our leadership in ESG. Just going to the highlights for the quarter, as we said, first time in our 60-plus year history, we produced over 500,000 ounces in the quarter. That put us over the top end of the guidance range in 2020 at 1.736 million ounces. As we said, our reserves grew to a record level at 24.1 billion ounces. We'll break that down in a minute. that's backed up by an increase in exploration budgets, as we said. And that exploration is really focused on places like Canadian Malartic, where the combined budget with the partnership is about $30 million. We'll talk about that in a minute. Big budgets at La Ronde, where we're extending drifts in four different areas to open up that whole felsic rock package as we move to the west and also the east. So a big year for exploration. And as we said, our board yesterday approved the go-ahead for Odyssey and Amaruk underground projects. We'll talk about that in a minute. So steadily growing production in 2021. Costs will be lower than in 2020 as we grow our output. So as we said, we're expecting production growth over the next four years up 24%. In 2021, we should be up over 300,000 ounces from 2020, with our unit cost down about 6%. And as we move forward, we're looking for slightly higher costs we've outlined in our press release. That's largely driven, almost primarily driven, by higher costs at our Amaruk deposits. We continue to get very good cost performance at a number of our mines, particularly in the Abitibi, and we'll talk about that. So it's really the high cost at MRU that have tended to skew the overall average a bit higher. Capital expenditures, we're forecasting about $800 million in 2021 as we approved two new projects. We're still going to generate significant net free cash flow with that number. And as we look forward on the project pipeline, we're not in a hurry. We're going to stage them, we're going to spread them out, and we're going to keep our CAPEX in line with where it's been over the last couple of years as we move forward. We talked about our gold reserves and mineral resources. With the exception of Hammond Reef, all of those reserves were done at 1250. Hammond Reef was done at 1350. As we said, it increased 12%. We had over a million ounces added at several of our current producing assets with the balance coming from Hammond Reef. What that number and what these reserves and resources do not include is the reserves and resources that are hosted at the recently acquired Hope Bay project. I'll talk about that in a minute. So we also had maintain a strong resource base indicated, measured, indicated 15 million ounces inferred, 23 million ounces So a strong reserve and resource base that supports our ability to continue to grow output. In terms of the near-term opportunities, we have several. Kittila has had a good year. They produced record amounts of gold. They continue to ramp up their annual throughput. Last year, I think it averaged 1.85 million tons a year. going to 2 million tons per year. The mill expansion was completed slightly ahead of schedule in Q4, so they continue to move that opportunity forward. They're also studying, based on exploration success, as they drill the deposit as it plunges to the north, they're looking to potentially increase annual throughput from the 2 million tons per year amount up 20 to 25% from that amount. So that study will take place over the next two to three years just to optimize, to continue to optimize the growing size of that ore body. Meliodine phase two remains on track. In January, we're about 4,600 tons a day, so we'll be gradually increasing that over the next few years to 6,000 tons a day. We talked about The Aberrug underground project being approved for construction. The objective is essentially just to mine higher grade underground portions of that deposit in conjunction with the open pits. First gold production we're expecting in 2022 as we begin to access ore from the underground ramp system. The average mining rate over the five year period in the underground components about 2000 tons a day. Overall, we expect to be mining about three million tons at an average rate of about five and a half grams per ton. That adds just from the underground about 100,000 ounces a year to the Amaru production. There are years where when we combine the underground, the open pit, Amaru will become Eco Eagle's largest single producer of gold. So it's a high quality asset that'll generate significant cash flow as we go forward. We'll produce those amounts because When we add the open pit ore with the underground ore, we'll have a capacity in our plant to handle about 12,000 tons a day. So the capital costs of that underground, about 140 million construction, almost 40 million in sustaining. At 1550, it's got an actual tax rate of return of 28%. Odyssey, I'll talk about that now. We've continued to have drilling success and exploration success there as we've expected to have because we've had a very active drill program going there for the last two to three years. At East Goldie, we saw over 130% increase in the resource to 6.4 million ounces. There's 11 drills currently targeting the East Goldie zone. to continue to expand that deposit and also to tighten up the drill spacing, particularly in the high-grade core of the East Goldie zone. Property-wide, in 2001, Agnico and Yamana will spend about $30 million on drilling. That's a significant budget, $24 million of that largely on East Goldie, $6 million will be to drill regional targets because it's interesting with the discovery of East Goldie, it's essentially opened up an entirely new mining horizon with tremendous potential given what we're seeing at East Goldie. So that's also a focus of our drill program in 2021. The underground ramp is in progress. That's important because as that continues down, it makes it easier to drill. It just gives us a better drill setup to drill those underground targets, particularly in Odyssey, East Mallardic, and also at East Goldie. As far as the project, the project, Odyssey, Canadian Mallardic, the underground project, it's really a very large, low risk, high quality opportunity. We anticipated it becoming the largest underground gold mine in Canada based on annual production. When it reaches full production, we expect it to be producing about 550,000 ounces per year that's based on daily throughput of about 19,000 tons. We're able to run it at that high rate because there's essentially four underground sources of ore. So that was the real, the game changer, let's say, on this whole project was really the discovery of East Gold because that just opened up a much bigger, higher grade additional source of ore which when you combine it with Odyssey North and South and the old East Malartic area, you get volume. And it's the volume that's really made this work in terms of the size underground. Cash costs at full production expected to be around $650 per ounce. So very long mine life out to about 2040, and that's only based on a plan that currently incorporates about 7 million ounces in, the analysis. We know when we add up everything, I guess we're not supposed to add up everything, but when we add up everything, reserve and resource, it's more than double what we currently have in the economic plan and the mine plan going forward. And these deposits are still wide open, as we know them, and the entire horizon is wide open. So we believe this is going to be a big part of both Humana and Agnico's businesses for many, many years. At 1550, it's got an after tax rate of return of 17 to 18%. There's still room, we feel, to optimize the study, optimize the plan, and we're going to continue to work hard on doing that. CapEx, 100% CapEx is $1.3 billion. But from the period from 2021 to 2028, which is really the construction phase during this period, we would expect to produce over 900,000 ounces at a cash cost of about $800. So it's almost self funding in a way when you think about it. That 1.3 billion includes an 1800 meter deep production shaft with a capacity of approximately 20,000 tons per day. As we said, we'll phase in production over several years beginning in 2023, late in 2023 from the ramp with the shaft, we expect to commission the shaft in 2027. And as we said, full production we expect at around 19,000 tons a day as we ramp up the underground mine, including East Goldie, which is the deepest of the four sources of ore by 2031. As we've said over the last little while, We're comfortable making this production decision now based on a resource because from a cost perspective, the numbers are solid. Many of the design criteria and the parameters that are being used in this study are very similar to EcoEagle's existing operations in the region. And when you combine that confidence in the fact that we're dealing with live cost data and experience, at Canadian Malartic, we've got good confidence in the production plan and in the cost estimates. As far as the project pipeline, we continue to optimize the project pipeline. As we said at the start, we're in no hurry to build these. We're just focused on continuing to add value to these assets through exploration and through updating studies, employing innovation. as we think about innovation on certain projects like Hammond Reef, we're looking at ore sorting. So there's still work to do before we decide to spend capital here, but we have made significant progress in the last year on these projects. At Upper Beaver, the deposit continues to grow. We expect it to be at some point down the road a low-cost producer given the significant copper credit. It's in a good part of the world, a pro-mining district. It's very near our operations in Quebec, so we couldn't put it in a better spot. And we continue, as we said, to add value through drilling, and we'll continue to drill that and update the study for roughly the end of the year this year. I'll talk about Hammond Reef, and I'll talk about Hope Bay. At Hammond Reef, we've incorporated 3.3 million in reserves. The overall mineralized envelope is over 5 million ounces. So we're looking to optimize that plan and bring additional gold resources into the mine plan. This is sort of the first cut at it. We started to revisit it about a year ago. We always liked it because the location's good, permitting's straightforward, community support is there. The challenge was it's on the low-grade side, but we feel there's ways that we can use things like ore sorting to improve the economics. So we'll continue to move it forward and add value. But again, no commitment to spend significant dollars there. At Holt Bay, the transaction closed on February the 2nd. The project hosts reserves of 3.5 million ounces and resources of 3.8 million ounces. As we said, none of those numbers are in our current reserve and resource statement. The property position, as many of you know, is very extensive. It's an 80-kilometer greenstone belt that hosts three known deposits, Doris, Madrid, and Boston. As we've said, the focus this year will be on exploration with a planned budget of approximately $16 million. $5 million of that will be delineation drilling, and $11 million will be testing targets around the three known deposits and other targets along the 80-kilometer greenstone belt. The mine currently produces about 18,000 to 20,000 ounces a quarter. Cash costs around $9.50 to $9.75. The mill is operated three weeks on, three weeks off. We're forecasting hope day to be cash flow neutral in 2021, and those production costs or CapEx numbers are not in any of our overall total agico cost guidance. While we focus on expanding the reserve and the resource in the property, we'll also focus on optimizing the existing Doris mine and then evaluate expansion scenarios. We believe the project could ultimately produce 250,000 to 300,000 ounces, but we still have to do the studies, still have to do the work. We're confident that there is a solid plan to move forward as we put our Nunavut expertise to work there. And we do not anticipate spending any significant capital, expansion capital there over the next two years. In terms of the specific assets and operating results, I'll start with La Ronde. It still remains after 30 plus years. Our largest cash flow generator produced over 105,000 ounces at the cash costs for 34. continued strong performance in Q4. It actually, for the full year, achieved its original budget, despite the fact that the mine was stopped in Q2 due to the impacts of COVID. And it's also interesting in Q4 that 28% of Laurent's tonnage was mucked with automated scoops, and 16% of the tonnage at LZ5 was mined with automated scoops. So that's the way forward at Laurent as we mine deeper. Our exploration suggests that there's more mine life at depth, so automation will be important, not just from an efficiency and cost perspective, but also from a safety perspective. In Q4, that performance was really driven by more tons being mined in the West Mine area at higher grades than we anticipated. So the deposit continues to grow. As we said, we're adding reserves. We're still adding quality ounces. We're still adding significant tons to the mine plan. We'll talk about the exploration shortly. At Gold X, record quarterly production, about 40,000 ounces at cash cost below $600 per ounce. We averaged in excess of 8,000 tons a day. That's record daily tonnage since we restarted the mine back in 2013, so the teams have done an excellent job there. And what's really helped him to achieve over 8,000 tons a day is some tremendous performance coming out of the underground rail system, which was something that our team looked at a few years ago, invested the capital to put in, and that's just been a really important addition to the efficiency of that mine. When you think about it, we're mining around 1.5 grams per ton, and it's still an extremely profitable mine. Canadian Malartic, best ever full year safety performance in Q4. We continue to sort of tweak up the throughput in the plant, setting another quarterly record at over 62,000 tons per day. When you add up the Abitibi, those three assets in Q4 produced over 230,000 ounces at a cash cost of approximately $540 an ounce. So those three mines are still very much an important part of our business, but more importantly, important cash flow generators, particularly as we look at opportunities to extend La Ronde mine life with our exploration success at depth and also extend the Goldex mine life because we're also getting good drill results in the Goldex as we look at the Deep Two Zone. And then with the addition of the Canadian Malartic Underground, That's going to be an important part of our business for a number of years. At Kitzela, as we said, record ore production in the year leads to record gold output in 2020. So we're finally, after many years, getting into a rhythm, let's say, where we're able to better match the large size of the ore body with the production rate going to 2 million tons per year. but there's more work to do because that deposit continues to grow. So we could see it with additional ore sources that are being suggested by the recent drilling, that we can take that up another 20% to 25%. Again, not in a hurry to do that. It's going to take us two to three years to do the work on that, think about that. But it still has upside, and the deposit continues to grow. At Meadowbank Amru, steady improvements. We've seen quarter after quarter there. Record open pit production. in the quarter at 3.8 million tons mined per month. So they've done a good job with the maintenance and availability of equipment and steadily improving that operation over time. And with the addition of the higher grade underground ore, that will become a much more significant producer of ours. We still need work on the cost. The costs are higher based on strip ratios as we move into the next couple of years. We'll come down as we get to 12,000 tons a day with more high-grade as we move into 2024. But we still need to do some more work on the cost side. At Meliodene, record quarterly safety performance, another strong quarter, another strong operating and production quarter, 90,000 ounces at approximately $650 an ounce cash cost, but a very good operating margin quarter and cash-generating quarter at $108 million. So that's our second biggest contributor next to Iran, even more than Canadian Malarctic. So again, we're going to continue to expand that. So also an important part of our business going forward. And Mexico, steady operations and good cash generation continuing from our Mexican operations. Just quickly touching on the financial highlights. I think what struck me being here for 36 years as record cash provided by operating activities of over $1.2 billion. 20 years ago, late 90s, our revenue was only $50 million. So it's a testament to our strategy of adding small pieces and turning them into meaningful parts of our business and doing it while keeping our share count down so we can generate per share returns to our shareholders. That strong cash generation improves our financial flexibility, strengthens our investment grade credit rating where we added booties to our list of credit rating agencies. Our cash position grew 400 million at the end of December. Again, low share count after 60 plus years in the business and a debt maturity schedule that's extremely manageable as we look forward. Dividends are still an important part. of our story. We've paid them for 38 years. Given our production growth, given how we see the ability to extend some of our major mines, given the recent projects that we've just announced approval on, which when you look at Amarok Underground, very long life, we expect to be in a position to continue to increase our dividends as we move forward and grow the output in this business. So I'll just quickly summarize and then We'll open it up for questions. So essentially a strong close to 2020, which we anticipated. We expected, you know, based on coming through the challenges of Q2, we did do a lot of important work in that quarter to position the assets for the strong second half that we did deliver. So that was not only important for the cash generation, but also important to set us up for continued growth going forward over the next four years, as well as positioning projects beyond 2024 to continue to grow and continue to add value. No change in our appetite for geopolitical risk, comfortable sort of where we are. We continue to be focused on not just to do the right thing on ESG, but to be a leader in ESG. We haven't really talked much about how much contribution we made to our communities during COVID, but that's certainly being recognized by federal governments in the countries we operate in. I'll just sort of close off on exploration because it has, our success there has really forced us to a rethink sort of the 10 to 15 year production profile versus where we were about three years ago on that. And a lot of that has to do with our strategy all the time is, you know, we want to know what we own. We want to know what we own as early as we can. And that's why we have a history of drilling deep holes to understand, you know, whether those deposits do continue. That's how we're here talking about Canadian Malartic Underground. there was a deep target that wasn't in the budget that we put in the budget after a mine visit to say, look, our history at La Ronde tells us that it's important to understand when you have a geological structure that's wide open, how deep it goes. And so we're seeing that at Kittila now. We're seeing that continuing at La Ronde. After 30 plus years, we're producing more gold than we ever have. and generate more cash than we ever have, and we're still finding more gold. And as a result of that, we're going to invest in four exploration drifts to move to the west to go into the old Barrett ground, because that same felsic package of rocks that host all the La Ronne world-class ore bodies also exists on that land package to the west. So we're going to open it wide open to see what's there. But we're also going to drill to the east where we've got some high value net smelter return drill holes on a zinc zone, the reappearance of the 20 north zinc zone. So a lot happening at La Ronne, which bodes well for the future of our largest cash flow generator. Kirkland Lake, Upper Beaver continues to grow. So we're confident that's a mine at some point, but again, We'll update our study later this year. We'll decide how we can fit it in. Pinos Altos in Mexico continue to get good drill holes at the satellite deposits and at Santa Gertruda. So we'll work those in to our production plan going forward. So essentially, from a strategic standpoint, we're just going to continue to focus on what's worked very well for us for many years. We're going to optimize and realize the full potential of our existing mines with a distinct exploration focus because it's adding really good value for the dollars we're investing in exploration. We're going to work the project pipeline. We're fortunate we have a solid project pipeline. We added whole day. We like it long term. We think it's going to go well beyond the current reserve and resource. We're going to work that pipeline in a steady, consistent manner. And where appropriate, we're going to add high potential projects that have excellent geological potential in parts of the world where we have good skills. We've done that since 2005 when we started buying assets like Kitsila, like Pino Salto. So it's worked well for us in terms of creating per share value, and we're going to continue to do that. So operator, I'd be happy to open up the line. We've got our full team virtually here and happy to answer questions. the questions we get from the callers on the line.
spk06: Certainly. Ladies and gentlemen, to ask a question, please press star and the number one on your telephone keypad. We'll pause for just a moment for the public community roster. Your first question comes from Tyler Langton with J.P. Morgan. Your line is open.
spk11: Good morning. Thanks for taking my question. I just had a question on Amarook. I guess in 23, you're kind of guiding to total production at Meadowbank of like around 415,000 ounces with around 100 from the underground and then a little, you know, 300 or so from the open pit. And I guess, you know, post-2023, I think you're getting to the underground being a little around 120,000. Just what does the open pit, I guess, look like, you know, in 24 and beyond? Does it kind of stay around 300,000 ounces or should it ease a little bit?
spk14: Dominic, do you want to help us with this? the split between underground and open pit at Meadowbank as we go beyond 2023?
spk04: Yeah, the Amarok underground is going to bring 100,000, 140,000 ounces to the game. That's going to bring overall Meadowbank, they're going to reach over 500,000 ounces, which is going to be our biggest operation in those years, 2024, 2025.
spk11: Great. That's helpful. And then just, I guess, final question. You know, I think free cash flow is really strong in 2020. When you look to 2021, you know, outside of, I guess, sort of earnings and CapEx, are there other items like, you know, I guess, taxes or something like that that could sort of have an impact on the free cash flow profile this year?
spk14: Well, cash taxes will be slightly higher than 2020 because of the 300,000 ounces of additional production, which is going to be more profitable or add to the total profit. So cash taxes will be up a bit, but not significantly higher.
spk11: Great. Thanks so much.
spk06: Your next question comes from Fahad Tariq with Credit Suisse. Your line is open.
spk15: Hey, good morning. Thanks for taking my two questions. First, on Hope Bay, I know you mentioned over the next two years you don't expect to spend significant capex. Beyond that timeline, as you think about Hope Bay versus some of the other projects, can you just provide some color on how you're thinking about what it's competing against? Is it competing against Upper Beaver and Hammond Reef, or is there already a priority among those projects that's already set out even before you've done more work on Hope Bay?
spk14: No, it's competing with the two you mentioned. So those would be the ones that we're still studying. I would say Upper Beaver has the upper hand, let's say, given our familiarity, given its location. Hope Bay is a work in progress. I think what we liked about it was the 80-kilometer greenstone belt. We've had big success with geological belts when we can control them 100%. in adding ounces, so we believe this will get bigger. But basically, we have to step back on this one because everybody understands we need a new processing facility. So the question will be, what and where? And the where will depend on the exploration results as we move forward. So there's still work to do. That's why we're not in a rush here. We've already had our top crews up there recently. They spent a week there. our project development team, some of our senior team at Nunavut. So we've begun the process of putting people from our technical service group to look at various expansion scenarios. And again, the whole concept with our strategy is to stage and spread these projects out over time. So it's just going to require us applying some of our key project development teams, working with our technical service group, and the operating teams in those jurisdictions to optimize the project studies and compete for the capital.
spk15: Okay, great. That's really clear. My only other question on Kittila, I'm just trying to understand the shaft sinking contract issues. Do I understand this right that now all of that will be done in-house or is it still being contracted with some additional vocal personnel? I'm just trying to get a sense of what's going on there.
spk14: Dominic.
spk04: Yeah, we're going to continue to contract it. Of course, we're looking to mitigation now to introduce more local worker training, local people, but still the shaft that is sinking construction phase is contracted. The challenges are really with the traveling issue we have with our challenges we have with the COVID. So people need to get isolated and tested. So that's bringing some challenges on having a Canadian contractor going there. But the team are looking for mitigations to minimize that with better conditions for the guys as well as training more local people.
spk15: Okay, got it. So that's different than terminating the underground development contract. That's different, right?
spk04: Yeah, that's different. Let's say the overall project is completed at 80%, 90% if we're talking about the rock line and all the work done to be ready to operate the shaft. The only critical path, which is the shaft sinking, this is the area where we struggle, and there are some delays. At the end of the day, that will not impact the production because we're able to mine it through the ramp. more costs each month that we do it through the ramp compared to the shaft, but that will not affect the production rate at Kistela.
spk15: Okay, great. That's it for me. Thank you.
spk06: Your next question comes from Ralph Perlini with Eight Capital. Your line is open.
spk13: Hi there. Good morning, everyone. Sean, I have a question on Canadian Malartic exploration, but specifically for open pit ore sources in the context of filling up that mill capacity, right, especially post-2026. Is now the time that this becomes more of a strategic priority?
spk14: I would say that the focus before that is really on... now this is the first cut of the study is just optimizing that study um you know rather than looking at outside additional sources of ore so it's really an optimization effort if we can sort of reduce the dip in production in those years during the initial transition from the open pit to the underground but what we won't do is rush the build out here you know this is a 17 plus year life It doesn't need to be rushed. If there's a dip in production, there's a dip in production. That's not the end of the world. So we'll just try to manage and build the most effective project. But Guy, from an exploration standpoint, or Dominic, from a production sourcing standpoint in the pit, is there any color you can add on that?
spk12: Yeah, so it's Guy here. So we also control a large property over there, and over that hour 20 kilometer of ground we control, we continue to investigate and reassess the potential of other near-surface ore body either towards the west of the Canadian Monarchic Pit with the western porphyry, forax, east amphi, former operation, And at the same time, to the east of the Odyssey project, while we still control another 10 kilometers towards the east that we are continuing to assess. So that's one of our plans to continue to test for both shallow and extension of the East Goldie and see if we can integrate them eventually in the mine plan.
spk13: Okay, thanks for that. Yeah, that's good color. Sean, the economies are starting to show some light on Hammond Reef, right? And we have some good first cut numbers. But it doesn't seem like it maybe meets the NICO investment criteria right here with this study in terms of IRR. First of all, do you think it could get there? And particularly with respect to the CapEx number of a billion dollars, is this something you'd be open up to partnering up on?
spk14: Yeah, or selling it. Yeah, we're open-minded on that one. What we like about it is it was a throw-in in the Cisco deal in 2014, and we bought the other half for $12.5 million. So we've had a lot more value than what we paid for it. And so the only question now is how do we realize on that value? So we're open-minded with respect to Hammond Reef.
spk13: Got it. Well said. Thanks very much.
spk06: Your next question comes from Josh Wolfson with RBC Capital Markets. Your line is open.
spk02: Thanks. A couple of questions first on the capital. I know the number that's been outlined is really just indicative of that 750 to 800. You know, we have some details in the release on Marouk Underground and Mallardic, but, you know, the indicative guidance, I guess, implies roughly $400 million on the project side. Sorry, I have a greyhound crying next to me. And then I guess I just want to fill the gap in terms of where the rest of that could come from, as the release has said, there was no hope in there either.
spk14: Well, we've just put sort of a hold on things because we expect at some point we'll advance Upper Beaver. All that is is sort of a bookmark to allow us to move those projects forward that are in the pipeline in a very steady and staged manner.
spk05: Okay. So, okay.
spk02: I'll follow up maybe directly. My other question is for Laurent. the guidance for the year looks somewhat lighter versus what the operation has already been doing the last couple of quarters. Is that just conservatism that's been incorporated, or is there a change in sequencing?
spk14: Not really a change. I think it's just being generally conservative there. We did have an upgrade in the West Mine area in Q4, so we don't have that all factored in.
spk05: Okay. Thank you very much.
spk06: Your next question comes from Jackie with BMO Capital Markets. Your line is open.
spk08: Thanks very much. Good morning, everyone. I guess a couple questions. I'll start with Hope Bay. You know, it looks like you're planning to run it through this year and work on the longer-term expansion option. Is the plan still to to sort of take a step back, close the operation down for an extended period of time? Like, should we expect that sort of announcement for 2022? And I guess maybe if you could give us just a little bit of a guideline as to how long you think that exploration studies, all that stuff might take and when we might see it come back into your production profile.
spk14: Yeah, it's still too early to sort of make a decision on you know do we put it on care and maintenance as we said it's not leading money I think which is important so we can continue to run it optimize it drill it and complete the studies we'll have a much better idea this time next year after doing all the study work through 2021 while we continue with the drill program as to what it looks beyond 2022 that's still to be determined based on the results of the drill program and the study.
spk08: Okay, got it. So we'll wait and see, and hopefully next February we'll have a bit of a clearer picture. That sounds great. A similar question maybe on the Malartic Underground. We've been waiting for this study, and I think the detail you give us was really helpful and looks quite positive. Where's the next... next information flow or where's the next data point that we should be watching for from here? It kind of feels like we're going to be in a period of drilling, ramp development, that kind of thing. Is there more news flow that you're expecting to release to the market in 2021?
spk14: Well, I would expect, as you said, Jackie, it's more exploration detail. As we said, we have the combined partnership budget. There's $30 million in with 24 of that on East Goldie, which is wide open. So we would expect the news flow to be on those exploration results on East Goldie and as we drill the structure along the trend. And we'll continue to always optimize and revisit the study and look for ways to improve and look for ways that maybe we can minimize the production dip during that transition from the open pit to the underground. but there's no timeline for information flow on that. But there will be on exploration because of the size of the budget and the fact that there's 11 drills going on the site.
spk08: Got it. Thanks very much. One final question. I know 2020 was a challenging year for your operations for COVID. Certainly we're not out of the woods yet. It sounds like there's still some lingering effects in terms of travel restrictions and things. I guess mostly related to your more remote operations in Nunavut, how are you coping at the moment with COVID? Are you starting to think about bringing the local workforce back? Is there an increased risk of COVID up there at this point, or are things getting better? Can you maybe just give us a broad update in terms of the operations?
spk14: Yeah, the vaccine's there now in Nunavut, I think, which is important. So that bodes well, and that will be sort of a key part of the decision on bringing the workforce back. So we've been very patient on that because of the because of the risks to the community, as we said from the start, that we wanted to make sure that, you know, Eagle Eagle wasn't causing or bringing virus up to Nunavut. So but I should say in Canada, we've got five testing labs going now. So We started testing early. We've continued to expand our testing capabilities, and we're using that to help us manage sort of COVID now.
spk08: Okay, that's perfect. I'll leave it there. Thank you very much, Sean.
spk16: Okay.
spk06: Your next question comes from Greg Barnes with TD Securities. Your line is open.
spk16: Yeah, thanks, Sean. I just want to get a clear picture of Amarook and Medibank Complex. Costs will remain high for the next couple of years. They'll come down as the underground comes on. The underground, I think, mines out in 2026. What happens near-term, medium-term, and longer-term at Amory, both production and cost?
spk14: I think from a production standpoint, it's still a relatively short-life mine compared to our other mines, and that's why the focus is on exploration in and around Meadowbank and amaru looking for preferably additional open fit material because that would extend the the underground with our ability to mix but maybe dominic on the cost side you can give us some sense of sort of strip ratios and the impact of that on costs over the remaining mine life yeah we we're going to see some fluctuation on the cost and it's a lot driven by the uh
spk04: stripping ratio and the grade through the sequence. 2021 strip ratio is going to be more around 7-ish, better than 2020, where we were more around 11. So that's going to be helpful. What the impact is when strip ratio is lower, you're building stockpile. That's helped. And when stripping ratio is higher, then you need to consume stockpile. So that's impacting the cost. But overall, the Amarok Underground is bringing a positive impact. It is higher-grade material, and all the fixed costs are already paid. So that's going to improve the costs at the site. And also, we've launched a new optimization. Let's call it the strategic optimization at the site, where they've beefed up the team to look at two different ways to improve it. uh mainly on the contractor side rental side on the logistic uh inventory um they've been through uh the nunavut let both divisions have been through an expansion phase now in last year they did now they're doing their units so that's the first step now as this is more stable we're really transferring to an optimization site and i think there is a There is room to improve there. We're going to see. We just need to let the team some room to optimize their operation.
spk16: So we have a big bump in production in 24, 25, and then 26. After that, is Amaru finished after 2026 at this point?
spk04: Yeah, at this point, we go up to 2026. As Sean mentioned, we still have... good resources underground under the permafrost because we keep the mining in the permafrost for the Amarok phase one, Amarok underground phase one. Exploration and maybe Guy could give a flavor on that, but exploration are still ongoing. The best dream will be to find another pit that we could, we have all the infrastructure to manage that and to continue to mine with the higher grade coming from underground. But up to now, this is where we have the resources reserved at Amarok. Okay. Okay.
spk16: And just secondarily on Upper Beaver, Sean, it does sound like that's leaked up the queue. Effectively, it looks like it's going to be the next operation after the Malarctic Underground. Timing on studies or any kind of decision on that one?
spk14: Oh, well, it'll be later this year when we get the study, so...
spk16: um decision would be sort of maybe this time next year depending on the results of the study okay thank you your next question comes from carrie macquarie with canaccord genuity your line is open hi good morning everyone um sean as you mentioned you said the pa resources about half of the total resource outline there is that more of a function of drill spacing or the economics on some other detail or potentially?
spk14: You're referring to Canadian Malartic Underground?
spk16: Yes.
spk14: Yeah. Well, the bulk of it's East Goldie. And so the balance of it would be East Malartic and Odyssey North and South, which are lower grade. So we fully expect that as we optimize the plan, that we'll be able to add some additional ounces to it. and also we would expect East Goldie to continue to grow. So as we said, this is the results of the first study, let's say, which remains to be optimized as we look at adding additional resources to the mine plan.
spk16: And then maybe just again on extending the open pit, I know your reserves are at $1,250, like three years down the road if we're in a $2,000 price environment. Is there a bigger pit shell potentially at the open pit or is it sort of not that sensitive to the gold price?
spk14: At Mallardic? Yes. I don't think there's much room to expand the open pit. The future there will be the underground. And so certainly a higher gold price bodes well for some of the lower grade material in the old East Mallardic area. So we'll certainly be looking at that as we continue to drill it and as we continue through the construction phase. The underground infrastructure I think will be important. That's what was really something that turned La Ronne from a small mine into a large mine is the underground ramp and shaft gave us access to drill the deposit. So I think we'll probably see in this instance getting better access to drill gives us the potential to you know, add more resources and do more effective conversion of the resource to reserve. Some of that resource is only drilled at 150-meter spacing. So, as you said in your question, part of why it's not in the plan is we still need to do some more drilling and tighten up the spacing.
spk16: And then maybe just one more for me. What do the processing costs look like when you're running at 19,000 tons a day versus today at 55,000 or 57,000 tons and G&A per ton? Can you give some color on the unit costs?
spk14: Dominic, do we have a breakdown? I don't have the breakdown in front of me on processing costs per ton when we're at full production at 19,000 tons a day.
spk04: No, we've given the cash costs, but I don't have the details. We could come back on that.
spk14: We'll get that. Yeah, we'll get that for you.
spk04: Okay, great.
spk14: Thanks.
spk06: Your next question comes from John Tremuzzles with Very Independent Research. Your line is open.
spk01: Thank you very much for taking my question. Concerning Hope Bay, is the original gecko mill up to Agnico standards? I know they weren't as well financed as your team. And how much of the issue with the plant is the 80-kilometer trend and figuring out where the center of gravity is?
spk14: Yeah, no, the mill is not up to our standards, not even close. But we knew that sort of going in. So it does need a new plant. And the question is largely location now based on the size of the geological belt and the distance between the deposits. And that's what we're really trying to nail down over the next year or so as we continue to sort of look at it and assess it.
spk01: If I could ask a second one, and I'm sorry to ask a big company question. The southern business in Mexico, as the other businesses north grow, is getting close to 10% of the prospective mix. Is it worth keeping... Because of the value of the heap leach, low capital cost, simpler mining, and the exposure to the Sonora, Sierra Madre, Southern Belts, as well as Latin America, and heap leaching in the southwestern U.S., is it getting to be too long of a plane flight? Would the company have less admin and be tighter if it was just a northern business?
spk14: Well, that's a good question. We ask ourselves those questions all the time. Our best asset there is our people and their ability to do business in that country. So we think it's worth keeping based on that skill set and based on its proximity, as you said, to those geological belts. And so We'd like to have something else for them to build. We still believe Santa Gertrudis is a buildable project. Again, when, we don't know. So right now, we're just mining satellite deposits and developing satellite deposits to generate cash, and we've got decent exploration budgets going. But we still like Mexico as a place to do business. It's still a pro-mining country. But despite what you may see or read in the news, we haven't had any issues that sort of change our view on wanting to invest in Mexico. It's competitive. There's no doubt about it. But we think we have a competitive advantage just based on the skill set there. So it's still important for us, but it clearly needs a pipeline that it doesn't have. that the northern business does have. And from a management perspective, it's not difficult to manage because it's almost self-managing. The leadership team there has done an exceptional job, and it's not something that eats up a lot of senior management time.
spk01: Thank you. Congratulations. Paul Penn is up in heaven doing a backflip, Sean.
spk14: Okay.
spk01: Great job.
spk14: Thank you. Thank you, John.
spk06: Your next question comes from Anita Soni with CIBC World Markets. Your line is open.
spk07: Hey, guys. Good morning. So just a few questions. So firstly, just as I understand it, if we're going to model the 750 to 800 CapEx for the next three years, we should probably also be modeling potentially Upper Beaver. Like that includes the capital for that or some of the capital, obviously.
spk14: Yes, but we don't have that defined. All we're really saying is that this is also for internal discussion for our teams is look, this is the envelope we're prepared to spend. You do the analysis on the projects and we'll decide whether it meets the investment criteria, whether it meets the risk profile to invest in it. So all we're saying is we've left room in the event that we have a positive production decision for something like Upper Beaver.
spk07: Yeah, and then also just a sort of financial question, just to confirm, that does include your capitalized stripping number, right, as well? Sorry, capitalized exploration. I keep doing that. Yes. Capitalized exploration.
spk16: Yes. Yes.
spk07: All right. And then the second question, Laurent grade. So I noticed, you know, when I did my sort of reserve analysis and depletion that you actually added even higher grades again, and overall the mineral inventory went up at higher grades. So can you talk about exactly where you found that exploration success? Yeah.
spk14: Guy, can you help us with that?
spk12: Yep. So basically, as we discussed over the last couple of quarters, you know, with the high grading effect, we were seeing of the wrong minds. We've been investigating on our reconciliation and basically found out that we were a bit too conservative where applying, you know, to... low capping limit to the high-grade assays we were getting in the deposit. So we've basically loosened a bit our capping, and even still, I think we've been running a couple of assumptions, and even with that higher assays capping approach, we still cannot reconcile. We're getting more gold than what our predictive model. So we've taken a little bit of that, plus with the success we're having at LZ5, We've been extending the resources beneath the previous limit that was around 400 meters. We've extended the limit now to close to 700 meters below surface at LZ5 due to success. So it came from those two modifications at Laurent that we've more than replaced what we've mined this year and that you've seen an increase of the grade for the Laurent portion.
spk07: Okay, and then that leads me to a little bit on the byproducts. have you, you know, used the same kind of parameters on the byproducts? I mean, I noticed you guys always tend to do a little bit better than what you say at the beginning of the year for your byproducts, and I'm wondering if it's suffering the same kind of capping.
spk12: No, no change to the byproduct estimation, neither any of them. The only change was on the gold.
spk07: Okay, so, all right. So, and then just in terms of the Canadian malarxic royalty, so... understanding that your partner reports their total or their unit cost a little differently. So that 5.5% royalty, that should be on just the, you know, Canadian Malarctic or the Odyssey Project underground material, right? And then if we were to, you know, just look at the Barnett and Canadian Malarctic pit, we would kind of take the cost that you guided to on a unit cost basis for that material, but not have to include a royalty. Is that correct?
spk14: Yeah, I'm not sure I follow that. The royalty is in the cash costs on all the current production and will be on the underground production as well.
spk07: I guess what I'm asking is, I thought my understanding was that, you know, the way you guys report your unit costs, you already include the royalty within the unit costs for the open pit. But here in the underground, you split out the royalty because Humana doesn't actually do it the same way as you guys do.
spk14: Brian, I don't know if Brian can help us with that.
spk07: It's okay. We can take it offline.
spk14: Yeah. Okay.
spk07: All right. That's it for my question. Thank you very much.
spk14: Okay. Thanks.
spk06: Your next question comes from Matthew Murphy with Barclays. Your line is open.
spk03: Hi. I had a question on costs. And, I mean, your AISC, you're going to be in the high 900s. I guess, you know, last year, this time, it sounded like they were going to come down near term. Now it's sounding like they'll be flattish. So I guess two parts to the question. Number one, what has changed that's keeping that elevated? And number two, you know, if we look beyond 2024, all else equal, do you have kind of a range you want to get to on AISC?
spk14: Yeah, it's really largely Amaruk. Amaruk has two high cost years, 22 and 23, and then it goes lower. So that's what sort of drove the all in because the cash costs go up there, drives the all in sustaining costs up as well, and they come down after that.
spk03: And do you have a level that you can talk about for 2025, 2026? No, we're not guiding that far out. Okay, and I guess maybe as a related question, has the experience at Amaruk changed the way you think about satellite opportunities in Nineveh?
spk14: No, I think that's a function of sort of longevity of that asset. It doesn't have the longevity that Meliodene has. So we are fortunate with the exploration success at Amaruk to provide higher-grade underground ore. So it's really volumes that work well there and volumes in terms of tonnage that work well. Trucking does add costs, and that's certainly our trucking costs are a bit higher based on sort of availability and reliability of equipment. But it's really grade that's driven the unit cost.
spk05: The grade's been a bit lower than what we expected it to be. Okay. Thanks, Ron.
spk06: Your last question comes from Tanya. Your line is open.
spk10: Great. Good morning, everybody. I just wanted to circle back to Amaroq. I know, Dominic, we talked about the mine going until 2026, and there is underground potential further there, but my understanding is that you just can't run the underground without having open pit. So maybe, Guy, number one, is that correct? Like 2,000 tons a day from the underground is not going to support that complex.
spk14: Yeah, that's correct.
spk10: Yeah. Maybe, Guy, can you talk about the exploration focus for open pit material on this property?
spk12: Yep. That's something we are pursuing year over year, investigating, especially along the infrastructure, either the road that connects Baker Lake to Meadowbank or from Meadowbank to Amarok. And we basically continue target identification and target testing. And year after year, we're generating good targets. Unfortunately, we're not making discovery of something like Amarok every year, but it's not a lack of effort. And the emphasis remains there at generating new targets, testing them, and we'll provide an update as soon as we hit something.
spk10: And what's the budget, sorry, for this year?
spk12: Generally speaking, we are allocating 20,000 to 30,000 meters for regional exploration, both for Milyuddin and Ameruc. And then in terms of allocation, you know, it depends how things will unravel. But you can assume that something like 20,000 meters regional is detailed in the news release. 20,000 meters are generating new targets around Middle Bank and Marouk.
spk10: Maybe for Sean or Dominic, maybe just a bigger picture. What if we don't end up finding anything here? Can some of your infrastructure, some of your equipment, people be used at Hope Bay?
spk14: Potentially, yes. Potentially.
spk10: OK, so so the mill could maybe could be movable and trucks and etc.
spk14: You know, we'd have to look at the specifics of that, but certainly when you look at Hope Bay at reserves of three and a half million ounces, resources of over three and a half million ounces still wide open. So you know it's likely going to be 7 to 10 million ounces or so. We bought it because of its location and its geological upside and our skill sets to operate in that area. So if we could leverage off of existing infrastructure because the mine life doesn't exist, then Amaruk will certainly be looking to do that.
spk10: Yeah. Okay, good. I'll hopefully find more at Amaruk. Thanks a lot, guys.
spk14: Thank you.
spk06: Now let's just call back over to Sean Boyd for closing remarks.
spk14: Thank you, operator, and thank you, everyone, for the questions. And if there's any other follow-up information you require, please get in touch. We'll be happy to help. Thank you.
spk06: This concludes today's conference call.
Disclaimer