Agnico Eagle Mines Limited

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagles Second Quarter Results 2021 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 1 on your telephone keypad. If you would like to withdraw your question, please press star, then the number 2. Thank you. Mr. Sean Boyd, you may begin your conference.

Thank You operator and good morning everyone and thank you for joining our second quarter conference call we'll be going through a series of slides and please take note that in the presentation there'll be forward-looking statements and there's some material outlining the notes to investors in the slide deck as well as we look at the quarter as it ties into our strategy a solid quarter a solid start to the year we look at first half production was at record levels over a million ounces but what was really gratifying is is we're producing more gold but doing it uh more safely than we've ever done in our history so we had the best safety performance in over 64 years in terms of fewest lost time accidents so congratulations um to all of our employees for that focus on safety Also had good cost performance. We'll talk about that in a minute, which generated really strong cash flows, which strengthened our cash position. It's still a company that's growing. We're still investing in the future. We have the ability to continue to grow output, and we'll take you through that. 24% production growth from last year out through 2024. The strategy is also based on taking advantage of geological opportunities. We'll talk about some of that. We're spending more on exploration this year as part of that strategic push to understand the opportunities we have, particularly at the existing mines. These are brownfield opportunities. That's important information for capital allocation. The focus is really, as we grow, to grow in a way that improves the quality of the business. One of the key measures there is our ability to drive cash flow per share. That's a focus as we think about our business as well. Risk. is also important here and we like where we are in terms of operating platforms. Those are areas, as you know, we're really comfortable being in and we see them as important for the future success of our business. Not only that we bring expertise to the table, but we have an ability to do business in those regions and we'll talk about ESG as well. A lot going on in the quarter and a lot of highlights from an ESG perspective. In terms of operations and production, in the quarter we produced a little over 500,000 ounces without not including Hope Bay. The cash costs were under $740 an ounce, so good solid performance in terms of managing unit costs. That puts us on track to achieve our production and cost guidance. that we put out earlier this year in February. Our CapEx is around $800 million, excluding funds that are being spent on Hope Bay, and we declared our quarterly dividend of $0.35 per share. I made reference earlier to ESG, and we see that as sort of an investment in opportunities to improve the business and to manage risks. We had a lot of good things happening. We were able to begin the reintegration of the Nunavut workforce. That's underway at both Meliadeen and Meadowbank. I think what was for me gratifying to see is that as the Nunavut workforce returned to work, we had celebrations there to welcome them back. And I think the reaction of the workers, we had workers that were actually in tears because they were so happy to be back at work. So that shows you it's more than just a paycheck here. It's about opportunity. It's about opportunity to provide for their family, to build a career. And those are a big part of the benefits that we're focused on being able to deliver there. So welcome all of our Nunavut workers back and thank you for your patience. over the last sort of year and a half. And as we said, we're glad to have you back. Another important initiative in Nunavut was an MOU that was signed with the consortium of Inuit-owned businesses to move forward on a renewable energy plan for the Hope Bay project, which is essentially a wind turbine, wind turbines. And I think that's an important, we see that as an important first step as a way to invest in resource development, but also do it in a much more environmentally friendly way. And this is going to not just be on Agnico Eagle and other companies, it's also going to be on governments to continue to invest in this infrastructure. And we see this as an important first step in not only the Hope Bay region, but also to expand the options for renewable energy in the Rankin Inlet, Kivalik region around Meadowbank, and Meliadeen. Staying in Nunavut, today we have the pleasure at noon, right after this conference call, what we do here at IGNICO is we have something called Good Move of the Week. So every operation, every business unit will report over that week where they've made improvements, whether it's an environmental initiative, whether it's a safety initiative, whether it's a community initiative, whether it's a productivity initiative or an exploration initiative. And we review those every week and we get an update of them all. But then on an annual basis, we select one. And we recognize and honor the groups that win the annual award. And that's today at noon. And the winner of the good move of the year was the Nunavut shared services and Nunavut teams for their onsite COVID testing. So you've heard us talk about it many times. And I think what that demonstrates is leadership and clear thinking in the face of a lot of uncertainty that we were all dealing with last March. And as we've said before, we had testing up and running to protect our sites last April. So that was being recognized today internally. as a good move. And we also have received outside external acknowledgment in Mexico for the second year in a row by the Mining Association of Canada. They won the Total Sustainable Mining Award for their work in the local community around Crest and Mascota. So Crest and Mascota, heap leach winding down. So we asked the workers as we were winding down that operation look is there anything we can be doing like is there anything you need and the workers said well our community needs something they need safe drinking water they need sustainable drinking water and it's not just for homes it was for clinics it was for businesses and so our teams put together a community development project to supply 300 families with clean and sustainable drinking water using solar panels to power the system so Another good example of how we're able to share some of the benefits and our good fortune for the strength of our business in our communities where we have employees but also people that partner with us. We also made reference at the start moving on to exploration. We did put out an exploration release in early this month which highlighted a number of initiatives that are moving forward I'll just touch on a couple of them. Odyssey, the underground component of Canadian malarctic. This East Goldie, it was certainly the driver of the underground mine in terms of being able to pull together multiple sources of ore to actually have a business that's long life productive with an attractive rate of return. But in that rock package that hosts East Goldie, we've continued to drill. And certainly our team has been focused on understanding what else is in that sedimentary package of rocks. And I know talking to Guy as he's been up at the site and working with the drillers, you know, the collective thinking was, well, let's see if we can extend these holes to the limits of the drill. let's go beyond the horizon where the East Goldie deposit exists and test for extensions of that deposit to the east, but also, as we said, look beyond. And we've had a significant step-out hole, which we've talked to over 1,000 metres to the east. In following up, they pushed the drill to the limits, and we've picked up another structure 400 metres to the south of the projection of the East Goldie deposit. So lots of potential there. And if you recall on the study, we're talking... about a study that incorporates about 7 million ounces of what is already a 14 million ounce total envelope. And here we are identifying additional mineralization well outside of the known mineralized outline. So we're starting to see this as an extremely long life opportunity. And what we like about it, it's in our backyard, essentially, where we've demonstrated decades of experience in knowing how to build these underground mines. And so we're looking forward to continued exploration results. We're going to do more drilling. We're adding additional resources there. So we're excited about that. Upper Beaver project, we continue to drill. We continue to get high-grade gold intersections with very attractive copper grades. So that drilling will continue. That will drive clearly the study. So we'll be moving that study into 2022 based on the drill results and our desire to increase the drill program there as we move forward. At Hope Bay, we're seeing extensions that suggest that we can mine the Doris project longer, which would be good. We're getting more drills this summer on the barge, so that will allow us to do more drilling on the regional targets such as Madrid. So this was the plan, get more drills in, drill these large geological belts, focus on Doris. We know we can do better there. And while we've done that, we've also been improving the mill performance, improving recoveries. They've had a solid quarter. At Kitzela, that's one when we first got involved that Ebe and Elaine and even Mark was involved at the time and suggested it looks like the Abitibi. You know, it's a structure that wasn't drilled that deep at the time when we first got involved down to 250 metres. We've drilled it down to almost 2,000 meters now. Shaft is going down. I think what we're seeing as we move to the north, we're seeing really good thicknesses, really good grades. We're already thinking about another expansion now that we've achieved 2 million tons a year just based on the size of that deposit. So that's an exciting drilling and exploration opportunity. Ultimately, all of these results at these deposits, plus in Mexico at Santa Gertrudis, we've had some good results there. We've had some good results at Meliodine. This is important information as we look at our long-term capital allocation decisions, and that's why we decided strategically to push more investment towards our exploration. What I'll do now is I'll just use slide 8, which lists all the the mines and just work my way down and talk a little bit about some of the highlights in the quarter at the operations. La Ronde, they just continue to deliver quarter after quarter after quarter. Operating margin in the quarter, $130 million, producing almost 100,000 ounces of gold at $500 cash cost. So what we like there is, you know, in addition to the solid performance, is the fact that they continue steady improvement in terms of the percentage of tons being mined using automated equipment. So they've made good advances there. That's clearly important as we move deeper in that mine. As we know in the West Mine area, which had another strong quarter, almost 1,500 tons a day, automated equipment is really important as we think about how we're going to continue to open up that mine. LZ5 over 3,100 tons a day in the quarter. So that one started very modestly a couple of years back. We said we were going to get it over to over 3,000 tons a day. We're there now, so that's positive. Exploration, it's funny. After 30 years of this thing producing high-quality gold, we're still making discoveries. And as you know, we're pushing multiple exploration drifts at the site. Three of them were moving to the west on the old Bousquet ground. That's an area where it's essentially the same rock package as La Ronde, and it wasn't really drilled by Barrick when it was there, and it's wide open. And so the best access for us is to drill it from underground, and we have tunnels in place. So we're pushing additional exploration drifts in there to get access to better drill platforms to drill that horizon. because that could give us low-risk, high-quality ounces at the La Ronde site. We're also pushing to the east because we've had, as you know, some drill holes and a massive sulfide lens. And so we've seen that before at La Ronde. That's high-valued rock. We need to understand the potential extent of that, so that will also be a focus. At Gold X, steady performance there at Gold X. Another solid quarter in terms of cash costs and production. Good performance in the rail there. Good performance in the underground mine. So a good result at Goldex. Canadian Malartic, record quarterly record for tons mined. Gold production. So that's a big mine generating big cash flow and big production. As we said, record quarterly tonnage of over 18 million tons in the quarter, processing 62,000 tons a day. So that's excellent performance. Remember in June of 2014 when Agnico and Yamana took ownership of that project, the throughput rate was 47,500 tons a day. And we said we could get it to 55,000 tons a day. Here it is at 62,000 tons a day. And now we have the underground opportunity, and as we talked about earlier, we're getting extremely good drill results. Good performance in terms of getting things set up in the ramp and also in getting things set up for shaft sinking as we continue the progress on the shaft collar. At Kitzla, we also had new mill tonnage records in April and May, so a solid quarter in terms of production. At Kittila, and again, we talked about the exploration potential there. In terms of the shaft, we're looking at commissioning in the second half of next year. But in terms of project costs, we're in that sort of 190 to 200 million euro range. At Meadowbank, good solid performance in terms of ounces, a little over 85,000 ounces. There's still improvements that we need to make there, but we're making steady improvements quarter on quarter. We had a record month in terms of tonnage hauled at over 380,000 tons per day. So gradual ramp up. It's going to produce more gold as we move forward. It'll be a stronger contributor as we move forward. And we continue to focus now on developing the underground because we have higher grades there. and that will augment the open pit production. Meliodine had a really strong quarter. So you can see Meliodine starting to hit its stride as far as production goes. It produced almost 97,000 ounces, had almost $100 million of mine operating profit in the quarter. So strong performance. We saw monthly records set in May for mill throughput and goal production. So that will be a long life contributor. We're seeing good exploration results there as we start to ramp up exploration. We've made some progress on the permit side and on the saline water discharge line, which people are really focused on. We made some good progress and we expect to get the permit in the third quarter of this year. So we have been working very closely with the community and with the regulatory authorities. We made some changes to the plan that have been accepted. So we've been moving forward on that. And as we said, we would expect to get the permits very soon. In Mexico, good performance. If you look at that operation, producing over 40,000 ounces had some good costs, so good cash flow generation there. As we said, the focus is on the satellite deposits, developing those satellite deposits. India was a slow start this year due to lack of rain. We've had a lot of rain recently, so that sets us up for a better performance in the second half of this year. Good solid performance across the board, which helped to set that record output in the second half of over a million ounces. That drove good solid earnings in the quarter, but also really good cash flow per share, $1.67 for the first half of the year, over $3 per share in operating cash flow. That drives an increase in our cash position, over $280 million. So a good strong result. So I'll just summarize now and then we'd be happy to take questions. The nice thing is we have more people here in person and we have the contingent online that can help answer questions. So again, over a million ounces first half, positioned for a stronger second half and further growth in production as we look beyond 2021. As far as strategy and risk again strategy is to stay in very low geopolitical risk pro mining jurisdictions that's our comfort zone we've had a lot of success with that business model no need to change that on esg as we said record safety performance in the quarter we've done a lot of work in the communities particularly over the last year and a half helping out during these challenging times that will continue going forward We're already low intensity in terms of greenhouse gas emissions and freshwater usage. We've got plans to do even better as we go forward, so that'll be a prime focus of us. Dividend, again, $0.35 a quarter, so we're clearly focused on return of capital, and we feel as we continue to grow output and build cash position, there's room to pay a higher dividend, so that will be a focus of us going forward. We talked about the exploration success. particularly focused on the pipeline projects and the opportunities near the mines. We went through that. As we said, that's a big part and has been a big part of our ability to provide above average per share value creation over our long history. And because it works so well and because we have that expertise and have that success, we're investing more in that area to add additional value. And there's no reason to change the strategy. It works well. It's focused on things like per share cash flow growth and generation, and that will continue as we move forward. So, operator, that's it for the formal presentation. We'd be happy to open up the lines and take questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Tyler Langton, J.P. Morgan. Tyler, please go ahead.