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spk14: Good morning. My name is Anas, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle First Quarter Results 2022 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 answer your question, please press star, followed by two. Thank you. Mr. Amar Al-Jundi, you may begin your conference.
spk07: Thank you, and good morning, everyone. Well it's been 65 days since we last spoke and we've been very busy we've been working hard and I think what we'll demonstrate today is some very good progress there's a lot to cover this morning we're excited about where we are we're excited about where we're going and for all of you who know us at Agnico we can go on and on talking about the company so we'll try to be quick and leave some time for questions. Before I jump in, really, there are four things to take away from this call. One, on the operations side, we had a good quarter, a good start to the year. We are reiterating our production guidance. We are, importantly, in this inflationary environment, reiterating our cost guidance. And I would say, as we go through the numbers, the numbers are strong, but I would say... particularly pleased given the challenges. On the production side, and again we'll get into it, a little bit ahead of our internal budget in the first quarter, which is quite exceptional given the initial challenges with Omicron and the situation in January. And on the cost side, we're a little below our internal budget on costs, which again is exceptional given the inflationary environment. Again, reaffirming our uh combined company full year uh production guidance of 3.2 to 3.4 million ounces and our combined company full year cash costs of 725 to 775. the second item to take away is in the is the integration of the merged entity uh we would say it's gone exceptionally well the senior management team is well in place everyone knows what they're doing We took the opportunity to quickly, as promised, streamline the organization. And as you see from our results and our press release, that streamlining has resulted in roughly double the synergy savings that we had estimated. We had estimated approximately $15 million a year in streamlined organizational costs, and we're already closer to $30 million. on that. Most importantly, however, the team, the new team is energized, we're excited, and we're focused on the value drivers, which is our third item to take away in this call are the value drivers. Strong pipeline, as always, but strong pipeline, again, in the Agnico way, largely off existing assets in existing jurisdictions. We'll go through this in detail, but it's interesting that as we talk about the great potential at Detour, and we talk about the great potential at Mallardic, among others, those are the two biggest gold mines in Canada. They are two of the top ten largest gold mines in the world, and the fact that they have decades of future ahead of them from existing infrastructure in safe jurisdictions Again, that's always the best return on capital and the best risk-adjusted return on capital. But we'll go through that in more detail. And then finally, the fourth item to take away, while this was a strong quarter, remember two things. One, this was a stub quarter. So we'll really see the, you know, there's a lot of complexity in this first quarter, the merger, the stub period. But the second, third, and fourth quarter and going forward are going to be full quarters. And again, we are reiterating that our expectation is the first quarter is going to be our weakest quarter. So we are expecting stronger quarters going forward. So just before we jump into the presentation, pages two to five on the presentation, understand that we will be talking about some non-GAAP numbers, and we are also going to be discussing some forward-looking statements and we always need to appreciate that in a volatile industry. So maybe just jumping on to page six, some of the highlights. Again, solid quarterly production on a combined entity post-merger, incorporating the Kirkland Assets post-merger, 661,000 ounces of production at a cash cost at 811. But for the full company, full quarter, Those equivalent numbers are 806,000 ounces at cash costs of $755. So well within our guidance and a very strong start to the year as we discussed. Some exceptional results out of key cornerstone assets, and we'll talk about it, but Laurent knocked it out of the park. Fosterville knocked it out of the park as did Detour and then solid results from most of the other operations as well. Talking briefly about COVID-19 you know it seems over the past 12 months it's gone then it comes back it's gone it comes back Omicron was difficult in December in the beginning of January we feel that's largely behind us we were back at full production pretty much by the end of January and have continued to progress going forward. The inflationary environment, that is the big discussion, something we're focused on, something investors are focused on. The challenges are out there. We acknowledge it, but kudos to the team. They did a great job managing costs. and so far continue to do a great job managing costs you know that said it is out there and we're all aware of it and focused on it as we know the merger completed on february 8th the synergy the integration has gone exceedingly well the synergies are ahead of schedule and most important we are now focused really on the key value drivers that we're going to be discussing uh We repaid $125 million of debt with cash as it came due and a quarterly dividend of 40 cents once again. Hitting on some of these key value drivers, and I give credit to Brian Christie and his team. They did a great job in the press release, and I would encourage you to review that in detail. But hitting some of the highlights, the Odyssey project remains on schedule, on budget, and You know, we get asked a lot about, can you find people? And what we're finding is while the labour market is tight, one of the advantages of being the biggest employer and being there for decades is Agnico Eagle and our partners, Humana, in this project. But this project is the project of choice in the region, and we're able to get high-quality people. That is a competitive advantage. We're going to talk a little bit about it But it's not just that the project's on time and on budget, but it's really the potential of the project. As some of you know, as we transition from Canada's largest open pit mine to Canada's largest underground mine, we are going to have excess mill capacity in the neighbourhood of 35,000 or 40,000 tonnes a day in the most prospective gold region in Canada and one of the most prospective in the world. And we have made some good progress in looking at opportunities to fill that mill. And we expect, you know, maybe this time next year to give a little bit more guidance on that, but good progress on that front. Detour Lake, an exceptional mine. As Natasha Vaz said yesterday, you know, we're just now scratching the surface of the life of mine on that project. The mill optimization projects are going well. We're going to be giving a technical report middle of the year that talks about incorporating some of the additional ounces, the additional 10,000 resource, 10 million resource ounces from last year into the mine plant. So a considerable amount of that will be incorporated. We'll be discussing moving from 24 to 28 million tons a year But again, this is a mine that has decades of run room, and we are already looking at the potential to move to the permitted 32.4 million tons a year. And at a very high level, when you think about it, and this is just at a high level conceptually, but at roughly one gram a ton at 32.4, million tons a year that's about a million ounces a year of production potential on that we are and maybe Eric can talk about this later continuing to find some excellent exceptional frankly drill results as we continue and we're now even getting excited now this is down the road but we're getting excited about an underground potential there as well the Kirkland Lake update we'll talk about that but the real potential there isn't sort of 20 million here 40 million there it's really about consolidating that land package and bringing all of the different opportunities and holdings we have there together we're working on that that's a big project we'll probably have a better guidance on that in about a year or so But there's a lot of potential there. We mentioned Hope Bay. You know, we acquired Hope Bay a year ago. We got our feet wet. We understood what we've got. We made the decision, as you know, at the end of last year to focus 100% on exploration. That was always the plan. And we've had some exceptional drill results that Guy can talk about. We mentioned them, you know, a couple of them here, 23 grams over 5 metres. 9.5 grams over 15 meters. The potential there, as we've always said, is to develop a project that's 300,000 to 400,000 ounces a year, and we're working on it. Again, we'll leave that for a question period maybe with Guy. It's not on the page, but we have to highlight Meliodine growing to 6,000 tons a day. La Ronde, a mine that's been in place for 34 years, had some of the best results ever. with three exploration drifts, Makassar and Kitala, the shafts coming in. So a lot of key value drivers were focused on. Importantly, another good quarter of demonstrating our ESG credentials. I'd like to congratulate Detour Lake, who was awarded the Leading Practice Award, by the International Network for Acid Prevention for some of the work and frankly some of the research that they're doing. So congratulations to the team there. We'll be publishing our 2021 sustainability report in the second quarter and congratulations to our team there as Agnico Eagle was nominated by IR Magazine for having nominated for best ESG disclosure among large-cap Canadian companies. It's important to do the right thing, and it's also important to make sure you're able to talk about it and demonstrate it. You see the numbers here on the page. We continue to have one of the lowest greenhouse gas intensities of gold miners anywhere in the world, and we are getting better. We've made a commitment to zero carbon emissions, net carbon emissions by 2050, And I think we're going to get there before that. But the most important thing is, if you look at our strategy, which is to go to places in the world where we can operate multiple mines for multiple decades and be there for multiple decades, that in itself, frankly, is the cornerstone of why you have to be good at ESG. And that's part of who we are. If we take a look at some of the operations again a strong quarter but I just want to point out some of the some of the mines that again were exceptional in La Ronde 105,000 ounces that cash costs of $560. We talked about Detour Lake this shows post merger 100,000 ounces at $600 for the full quarter that's 182,000 ounces again a stellar quarter. Fosterville post-merger 81,000 ounces at a remarkable cash cost of $309 an ounce. For the full quarter, that's 127,000 ounces. And just to be consistent and finish, Macassar shows 24,000 ounces, but for the full quarter, it was 44,000 ounces. So, you know, pretty decent quarter. Operating margin post-merger, incorporating Kirkland Assets post-merger, $663 million for the entire company for the quarter. That number was closer to $900 million, which shows you the potential of this company. I might ask our excellent CFO, Dave Smith, to talk a little bit about the strong financial position.
spk00: Thanks, Amar. As mentioned, the strong operations allowed Agnico, as well as good pricing, of course, allowed Agnico to add cash to the balance sheet during the quarter. We had free cash flow of about $200 million. We have liquidity of approximately $2.3 billion, in fact, not including an uncommitted accordion of $600 million. As Amara mentioned, subsequent to quarter end, we repaid $125 million of notes that matured. We paid that off with cash. Of course, continued our 40 cent per share dividend. And pleased to announce a new tool. Our normal course issuer bid should be in place next week. And that will provide us with a very flexible way to continue to increase shareholder returns. I'd like to add as well that financially our hedge book helped offset some of the inflationary pressures that certainly the entire industry is seeing. And I think Agnico is in a great position to continue with a strong year. Every quarter is going to be better than this quarter, we hope. I'm knocking on wood right now. And we're very excited to continue delivering very strong financial results to you quarter after quarter.
spk07: Thank you, Dave. Talking about synergies, we made a commitment to all of you on our last call that we would get into details. We've been doing a lot of work on this. This is important. This is something that our investors want us to work hard on. So I'll take a minute to go through this. And again, you know, congratulations to our team on the press release. There's a lot of details in there, as promised. But hitting some of the highlights on the corporate synergies, as we discussed, we have not only exceeded our expectations. We are at a point now where we are upping our guidance on what we think the what we know the synergies are going to be. We had guided $15 to $25 million in the corporate synergies category for this year. We've already achieved $45 million, $35 million of which is annual. And we are now anticipating a run rate of between $40 to $50 million a year, up from $35 million a year. And we are guiding to $200 million annually. pre-tax in the first five years up from 145 and we're guiding to 400 million over the next 10 years up from 320 so a very good start to that again most important it's it's not just the dollars it's that the team is in place and working well and focused I'm going to I'm going to jump first to strategic optimization before operational on the strategic optimization we are not changing our guidance we're keeping our guidance but I have to say again we are well ahead of where we thought we would be we have talked about at a very high level the opportunity to bring amalgamated Kirkland in to the Macassar mine that seems to be going very well we will probably make a decision on that before before the end of this year And we think there's the potential to bring in potentially another 40,000 ounces a year in production, roughly has the potential to generate an additional $40 million a year into that project with resources in around the 600,000 to 700,000 ounces and the drilling going pretty well. So you can see that one project alone has the potential to generate well more than half of the total synergies that we anticipated strategically over the next 10 years. And there are other things going on. A very simple example, potentially $20 million in savings on equipment, one time associated with the Upper Beaver shaft, just from equipment that's available from the Macasa shaft sinking. So again, good progress on the strategic optimization and then on the operational synergies again a good write-up in the in the press release but I'll hit some of them procurement we're still targeting 50 million dollars a year by 2024 and we're making good progress there some ideas on optimizing availability of the mill at detour something as simple as that potentially five million dollars a year uh some good work on uh uh the potential to steepen the the the pit wall slopes at detour that has the potential that one item alone has the potential given the size and tenor of that mine of potentially a hundred million dollars over the life of the mine and then a basket of other things we talked about in the press release centralized control systems energy management core scanning uh renegotiating refining contracts those together potentially $75 million a year. If there are questions afterwards, we can get into it, but suffice to say, very good progress and we really have just started. So again, Agnico Eagle, we want to maintain a simple, consistent, disciplined, and importantly, proven approach to value creation, which has three key components. Low cost, strong margins, strong cash flows, robust production profile with a strong growth pipeline in the safest and best jurisdictions in the world with proven leadership and a track record of building value per share. Importantly, value per share. And it's interesting. I was talking with Dave Smith yesterday about, look, what's the key message we want to give today? And Dave said it's the same one always. We focus on value per share. All the time doing this with ESG leadership, it is simply the right thing to do and it is a core part of our strategy. Growth potential from existing mines and growth potential from a pipeline of high quality exploration and development assets. And again, some excellent exploration results in the first quarter that we're excited about and going to build on. And then building on a long history, a long history of capital return to shareholders, 38 years of consecutive dividend payments. And we haven't mentioned it, but we think the normal course issuer bid will be approved probably next week or the week after. So that's good. I've been going on for a while. I'm just going to take a couple more minutes to flip through some of the operational highlights. I'll be very quick because we want to leave time for questions. You know, La Ronde, an exceptional quarter. You've seen the numbers, but there are some details that I think are also exciting. 31% of our production mucking was done autonomously at La Ronde. That's impressive. We're almost at a third being done autonomously. And at La Ronde Zone 5, 21% of mucking done in automated mode. So this is a mine that has been operating for 34 years. that we're continuing to invest in. We're investing in three exploration drifts, and we're investing in modernizing it, an exceptional cornerstone asset for Agnico Eagle. Canadian Malartic, we talked about the project on surface, and Shaft is on budget, on schedule. And then, you know, again, interestingly, we make the point here, and this gets to the full potential of this asset which is not just the underground but the available milk capacity um in the the final point on this page uh we uh uh we added the cam flow property to the partnership's land holding and this is an asset that has potential to provide some of that feed into the mill goldex continuing to get good exploration results continuing to get good production the rail veyer set a a a record Average for the quarter above the design capacity and a record single day performance of 10.7 tons. Again exceptional progress. Detour Lake full quarter 182,000 ounces. I just had to repeat that that's quite remarkable. very good cost control in the first quarter considering, you know, fuel and electricity costs and all of those associated things. And again, to repeat, we will be giving a technical report in the middle of the year, but that's really just the next step in what we think is going to be a long path of value added in the detour potential. Mikasa, I'll go quickly, Mikasa and Ketela both having their shafts on schedule coming in at either the end of this year or early next year. Meliodine going up to 6,000 tons a day. And Fosterville, again, an exceptional quarter and hard work and good effort by our team in Mexico as always. And with that, I think we will stop and open it up for questions.
spk14: Thank you, sir. Ladies and gentlemen, we will now conduct the question and answer session. If you would like to ask a question, press star, then the number one on your telephone keypad. If you would like to answer your question, press star, too. If you're using a speakerphone, please leave the hands up before pressing any keys. One moment, please, for your first question. Your first question comes from Tanya with Scotiabank. Please go ahead.
spk09: Oh, great. Thank you. Good morning, everyone, and congrats on your first quarter as the new co. A couple of questions, if I could. First off, just a quick one. Maybe Dave can help me on this one. Just to reconcile the numbers that you provide on an annual basis for guidance for production and cost, you mentioned Q1 would have had production of 806 at 755 total cash costs. Do you have the all-in sustaining costs so that I can reconcile that too, please?
spk07: We can give you that, Tanya. I don't have that available with me right now, but we'll get you that.
spk09: Okay, that's perfect. And then maybe just keeping on just on the quarters, you mentioned that, you know, we're going to see much stronger quarters going forward. In the press release, you did give guidance on your mines and what we're seeing quarterly at La Ron, Fosterville, Meadowbank, and Kittila. Can you just give us maybe from a bigger picture, are we looking at, like, 55% second half or 53% second half? I know it's quarter over quarter improvement, but just a bit more that we can help us with some of the other mines.
spk07: Well, I think what we said the last time was roughly the first quarter would be 20,000 ounces less than the next three. I think that's not a bad number for the second quarter, but And again, we're working on this, but actually we think that we're going to get stronger throughout the year. So, you know, the 55-45 is probably not a bad number at a high level, Tanya.
spk09: Just maybe on the pressures, just Dave, again, just to come back on, you know, you've used 90 cents per litre Canadian for diesel. I think the sensitivity for a 10% move was $6 an ounce. Is that still correct?
spk02: Yes.
spk09: And you do have about 40% of your oil? That's correct. Can you just remind me when you would be purchasing all of your fuel for none of it and what you're seeing out there for purchase price?
spk00: Yeah, beginning in July and the forward rate for the remainder of the year on diesel is about $1.13 a litre. That number was about a week old.
spk09: And when do you expect to have all of this done, having to put it all in and complete?
spk00: I think the shipping season ends kind of September, October.
spk09: I just wanted to ask about other inflationary pressures. You say that your labor, you're not seeing it. Are you seeing it in any other consumable?
spk07: We are seeing it. And interestingly, Tanya, probably where we're getting the most pressure is in Finland. And that's because it's closest to where the supply chain disruptions are most acute. So we are seeing it, but the team has done a good job And it's a combination of they got out ahead. We got out ahead of some of this. We're trying to manage it contemporaneously. And also some of it, frankly, is they've done a good job on efficiency of operations, which has offset some of that. But we are seeing inflation in consumables. We're seeing it in reagents. We're seeing it in steel. You know, it's out there.
spk09: Can I ask what sort of levels are you seeing the inflationary pressures up in those items?
spk07: You mean percentages?
spk09: Just a round number.
spk07: Well, you know, in general, we gave sort of 5% to 7%. I would say the numbers are higher than that, but we've been able to offset some of that. So, again, frankly, you know, there are some items that are 30% and some items that haven't moved. It moves across the board. Probably the most sensitive ones, you know, again, there is a geographic split, but probably the most sensitive ones have been around in Finland, and it's mostly to deal with steel and items that are derivatives of natural gas, which, you know, again, is logical.
spk09: And I'll leave it to someone else. Thank you.
spk14: Thank you. Your next question comes from Fahad Tariq with Credit Suisse. Please go ahead.
spk13: Hi, good morning. Thanks for taking my questions. Maybe first for Dave Smith, just an accounting question. So I can see that the Kirkland operations, the sales exceeded production by about 56,000 ounces. I just want to clarify, after all the adjustments and everything, those 56,000 ounces are included in revenue, but the costs are not included in the quarter, is that correct?
spk00: Yeah, the inventory cost went through the production costs and you're talking about the revalue, right?
spk12: Correct.
spk00: Because they had to be revalued to market. Yeah, that's correct.
spk07: So the costs did go through, they would go through our costs because you value them at basically at spot.
spk00: Increment goes through the production cost.
spk13: Okay, I understand. And then just switching gears to the operational synergies that you highlighted for 2022, you mentioned in the press release that it could be about $10 an ounce this year. Is there a particular order or timing when that comes in, or is it kind of gradually through the year?
spk07: It's gradually through the year.
spk13: Okay, and then just the last one from me on MACASA. Any update on the battery electric fleet? And you mentioned in previous conversations that you might be looking to use conventional diesel or something to get the productivity back up. Any update on that? Natasha?
spk04: Yeah, sure. Thanks, Amar. Hi, Fahad. Yeah, so we are continuing to work with the OEMs on that. In terms of our performance, we are continuing to troubleshoot with Sandvik in terms of our battery issues We're seeing a supply chain concern. I think there's like a chip shortage that's plaguing the automotive industry, but seeing a slight increase in availability, we're fixing some of the issues, but still a lot of work to do on that end.
spk07: And Natasha, maybe just talk a little about the ventilation progress and the flexibility that will give you.
spk04: Right. So at the end of this year, we plan on completing the ventilation upgrades. So we're going from 300,000 CFM to about 750,000 CFM with the shaft and the two raised boards that we're doing. We've completed the excavation of the raised boards. We're putting the fans on later this year and changing out the entire vent system. So we should have additional flexibility in our options.
spk13: Okay. And just to follow up on that, so, Natasha, it sounds like it's not – the focus is not really trying to go back to conventional diesel just yet. It's still trying to figure out the battery electric fleet.
spk04: Absolutely. We're committed – yeah, absolutely. We're committed to pursuing this, but it's nice to have that optionality.
spk13: That's it for me. Thank you very much.
spk14: Thank you. Your next question comes from Lawson Winder with Bank of America. Please go ahead.
spk02: Good morning, Ammar and Dave. Very nice to hear from you both, and thank you for today's update. Ammar, I wanted to address my first question to you. In the Aussie press in late March, you made some comments that Agnico wants to own more Aussie assets. I just would be curious what form that expansion might take and Would that be acquisitions of existing operations, development stage or exploration stage? And, you know, would you consider partnering as well?
spk07: Hi, Lawson, and that's nice to hear your voice. Well, I tell you, you know, we had a fantastic trip to Australia, and the team there is really a great team, nice people, very capable, and they're doing a lot of really – leading-edge technical things there. Australia absolutely meets the criteria of geologic potential for multiple mines over multiple decades and meets the criteria of you can actually operate there for multiple decades. So it has great potential. it would be tough for us to go there uh from nothing because the australians are good miners but what we've got now with the merger is an exceptional team an exceptional asset and a strong foothold and also as we discovered some really good relationships with the local communities and government officials so it is now in the uh uh category of uh good regions in which we operate To the extent we expand in Australia, Lawson, we do it the same way you would. Any opportunities there have to compete with opportunities everywhere else in the world. And we typically think we make a lot more money for our shareholders through the drill bit. And so we probably would do what we've done successfully for over 60 years, which is sort of take a small position early based on knowledge and then try to... create value from there. So good region, good potential, and the opportunity to expand will be a function of what we see, and it'll have to compete with everything else.
spk02: Okay, and in that same sort of vein, are there any assets in the portfolio that might be worth considering divesting?
spk07: There are some positions that we have, you know, that we look at. You know, those are non-operating assets, and we're always looking at optimizing the portfolio that we have. But all of the operating assets we have right now, we're pleased with.
spk02: Okay, great. And if I could ask on the diesel costs again, you guys made a comment in the release that – The hedges you have in place, you expect to provide some degree of protection against inflation for the 2022 CLEF diesel cost. Maybe just a little color on that, particularly like in terms of sort of the strikes on the hedges. I mean, is there a large sort of strike that happens in July when you guys are going to be paying for those diesel costs? And yeah, just sort of the kind of moving parts around that would be helpful.
spk00: Yeah, it might be helpful. Our hedge rate is 57 cents a litre. The guidance rate was 90 cents a litre. And as I mentioned, the forward rate was $1.13 a litre. So mark to market, our hedge book right now is about $20 million in the money, which certainly will help us.
spk02: Okay, got it. Thanks very much, guys. Thank you.
spk14: Thank you. Your next question comes from Jackie with BMO Capital Markets. Please go ahead.
spk05: Thanks very much. I want to congratulate you guys on this interview so far. It's really terrific to see that it's ahead of schedule. And maybe if I could ask a question just to get some more color on that. Are the synergies that you've achieved year to date so far and that you're expecting to achieve this year, are those new synergies that you had not previously identified? Or are you bringing forward things that you weren't really expecting so far? Maybe if you could just give us a little bit more info on that, I'd appreciate it. Thanks.
spk07: Yeah, thanks, Jackie. It's a bit of both. You know, as you look at this, we did a lot of due diligence on this deal, including on the synergy potential. And, you know, for every 10 units of synergies you identify, you know, four of them don't pan out, and then you find four that you never thought of. So it is a bit of a combination. But the biggest thing is I think Dave and his team did a great job on cutting some of the financial costs very quickly, like within weeks. You know, this is you don't need two bank facilities. You don't need two insurance policies. So some of that had been identified, but they did it. They did it in weeks rather than months. So that's good. A big difference is, frankly, on the streamlining. You know, it's hard to know exactly what you're going to have when you get together. And then when you put pencil to paper and make the decisions, we wanted to move quickly. And the reason we wanted to move quickly on the streamlining, it's not just about cost. It's about human beings. The worst thing you can do is leave people out there and they don't know if they have a job or not or what their future is. So we made a commitment that within 30 days we would have that all worked out and we did it within 20 days. And so part of it was clearly we achieved them faster than we thought but it really to be honest it was mostly about treating our people fairly.
spk05: That's great. Thank you. Maybe I could ask about the NCIB that you announced in February and now that you've approved. Can you talk a little bit about, and I know it's always hard to know exactly, but can you talk a little bit about what the strategy will be in terms of how quickly that gets executed? Is this something you expect to do fairly quickly or sort of like 500 million over a year or something like that?
spk00: Well, I think it's a very flexible tool that we have, and we'll try and be opportunistic in the buying, and I anticipate it'll probably be spread out over most of the year. But again, that could change if there's a moment that we feel we should be opportunistic. And that's what I like about this tool in terms of return of capital. We've always represented that this would be our variable, very flexible tool that we have for return of capital.
spk05: Thanks, Dave. Maybe if I could just ask one last question. Amar, you mentioned this earlier, and you sort of promised us that we could ask about this on the Q&A, so I'll bite. Can we hear a little bit more color from Guy about the changes to Hope Bay and the exploration that's going on so far and what the current thinking is for once it restarts production? Thanks.
spk01: Hi Jackie, it's Guy. So we've been ramping back up our capacity to drill and the first thing we really want to wrap our head around was the potential at depth in Doris. As you know, there's currently, there was all of the mining infrastructure and we came out of our due diligence with some good idea about potential to connect some of those deep patch at Doris, basically below the dike. And we've been positioning some drills specifically on surface in the first quarter. And we got, as you can see in the press release, you know, some pretty nice, you know, 10-gram plus, even 25-gram over 5-meter in an area that was left untested before we took over. So we're quite pleased to see that within those fold limb at depth because it's a tight fold at Doris that we're dealing with that not only we're getting good results in the fold inch like they were used to mine in the past, But now we're developing and confirming that within the full limb, there is some pretty decent high-grade vein system, and it's wide open at depth and laterally. So we're going to continue to ramp up drilling in this area.
spk07: And again, you know, it's not just at doors. The key there, Jackie, is, and maybe Dominic can talk a little bit more about this, is You know, we operate – we know what it takes to operate in the north, and our vision is, again, sort of 300,000, 400,000, maybe more for that project. And Madrid has had a lot of drilling, and we know there's gold there, and we know we can bring it in. But Doris is important in and of itself. But as part of the bigger strategy, it is additional high-grade tons – that are right there right beside the mill that would supplement uh the madrid and we haven't even talked about boston yet but it's a it's again it's not just uh doris but it's how doris fits into the overall strategy i don't know dominic if you wanted to make a few points on that yeah we're looking to have the let's say a first project 300 000 answers 10 years kind of project to kick kick out uh and to start the foundation
spk08: looking to work probably with the current mill, improve the throughput to 4,000 tons per day. So this is our first, let's say, initial project, and as exploration goes, eventually increase that to, I don't know, could be 500,000 ounces at some point. It's still early. I'm very happy that we see a good hit, and we're Right now, really the focus is full blast on drilling and exploration.
spk01: If I may add, Jackie, we're all excited as well to go back to Boston as soon as possible. And one of the things we've, but we had to bring supply on the barge last summer, and we did the winter road hauling to bring all of the new equipment to refurbish that camp that dates from the 80s when BHP put that camp together. So there was We had to give a little bit of love to that camp to be in a position to resume drilling. And because we know that the deposit remains open down there with some very high-grade setting at depth, a kilometer below surface, the zone was still open with 56 grams over 10 meters at the kilometer depth. So we know there's a lot more to find over there as well. It's all that we can ramp up activity from the small scale it was on their TMAC, bring more rig and increase our drilling capacity over there.
spk05: That's a super helpful update. Thank you. Sounds like there's a lot of opportunity there. Thanks very much.
spk14: Thank you. Your next question comes from Greg Barnes with TD Securities. Please go ahead.
spk10: Thank you, Amar. I just want to talk about detour in the upcoming mine plan. Do you see that more as an incremental step? And then 18 to 24 months or 12 to 18 months from that point, you'll have another mine plan with the expanded mill the underground and would the underground be the source of all the feed to fill a mill from the 28 to 32 million tons?
spk07: Well, Greg, thank you for asking the question because that's exactly right. And we want to make that point. We see this update mid-year as just an increment to a much longer path. Again, as I said it, and I like Natasha's quote yesterday, this is just scratching the surface of the life of mine potential. So yes, Greg, I think that's the right way to think about it the update in mid this year will be the work that's been done to incorporate some of the drilling from last year and to incorporate some of the steps to go from 24 to 28 million probably you know and Jean and Natasha are working on this closely together the next step is to look at the potential to grow from 28 to 32 million tons a year and importantly that to get to 32 million tons a year it's not just the underground because the pit continues to expand and maybe Eric after this Eric Calio is on the line he can jump in on the exploration but we think the pit can can support a lot of throughput through the mill but the underground when we get to the underground You know, that would be at, say, three grams, two and a half, three grams versus one gram. So it would be an opportunity, Greg, to add higher grade through the mill, which could potentially, you know, get your annual production even above, again, hypothetically, if you do the math, above a million ounces a year. But that's the idea. Expand the mill, or at least that's the potential. Expand the mill, expand the pit, expand the potential, and go underground to get some higher grade feed.
spk10: And the mail is licensed to 32 million tons, is what I understand. It wouldn't require significant capex to achieve those levels.
spk07: It is permitted at 32.4. You're exactly right. And, you know, we are going through the process of getting there. And, you know, we were talking to John about this yesterday. It's, you know, John's our local mad scientist. He's got 10 different things he's thinking about. But... know this is something that's probably going to take us uh you know a year a year and a half uh to really come back with uh something more focused but what i would ask maybe eric i know you're on the line eric maybe you can just hit a couple of the the just briefly some of the highlights on the exploration uh progress for sure yeah good morning everyone uh as mark said uh
spk11: We feel very positive about the exploration potential at Detour. We had the press release in February and actually from that you could see we had a lot of new drilling happening on the west side of the pit where previously there was very little drilling done and some very good results both on the north side and deep and on the west limits. We do expect that we can grow the pit when we do the mid-year update. already just from the results we have. And, uh, and then, uh, with the press release that we just had, uh, yesterday, we, uh, announced new holes that were up to 500 meters, uh, to the west and, uh, showing some, uh, even, uh, continuing to show broad intersections, but even some very good grades up to 38 grams, uh, over three, 3.3, three and a half over 48, 3.1 over 10. So, you know, these are, uh, These continue to make us very positive about growing. So anyways, I think, yeah, it just continues to look very good. And we know the structure from our regional geophysics and things looks like it tracks for at least another kilometer or two to the west. Beyond that, we don't know. But, you know, we continue to see a lot of room for growth.
spk07: Thank you, Eric. And again, thanks, Greg, for asking because that's an important point.
spk12: Thanks, Mark.
spk14: Thank you. Your next question comes from Anita Soni with CIBC. Please go ahead.
spk06: Hi. Good morning, guys. Thanks for taking my call. I just have questions about the nitty-gritty, as I usually do. On Macasa, the grades were a little lighter, I guess, than you had just forecast a few weeks ago. How do we expect the grades to evolve over the year? Like, will it rebound? I mean, I think you were forecasting 24 and it came in at 16. So, could you give us a little bit of color on that and how we would expect those to rebound over the course of the year?
spk04: Hi, Anita. It's Natasha. So, yes. So, the grade was slightly down in comparison to what we had predicted for Macassar in the quarter, but in general, As you know, Macassar is a pretty high-grade ore body. It's a small tonnage operation, so we expect to see some grade variability in a localized scale. That, coupled with some changes in the mining sequence, has contributed to the grade variance. So we expect that to stabilize over the next couple of quarters to hit our guidance.
spk06: Okay, similar question. I guess this one goes to Dominique for Meliodine and Amaru as well in terms of the grades.
spk08: Yeah, good morning, Anita. At Meliodine and Middle Bank, both were affected with, say, COVID issues early in the year. Now it's behind us, mainly because now it's much easier to do with contact and contact tracing. So Nunavut are back and all the crew is back. We had to process a bit more low-grade, not low, but let's say open-pit stockpiles while we had decreased mining activity. So that affected the answers and the cost. But now we're back on track and grades are going to increase. At Middle Bank, we started January stopped. We restarted. The grades are going to improve through the year. We did the first quarter at 2.26 tram per tonne. And we're forecasting the year at 3.5, 3.6. So more deep we go into the pit, the grade is increasing. We're going to see it this year and the coming years. But also the underground is coming in. So we're going to have the first test stop where we're doing all the commissioning in May. And underground is going to be in full production, let's say in the Q2, Q3, Q4. which is going to be a very good help. And this is a good part of the increased ounces coming in the second half of the year.
spk06: Okay. So was the underground not operational yet from Q? I thought I had seen that there was a few stopes in Q4 and Q3. So did it contribute at all yet this quarter or no?
spk08: Well, we had a bit of development ore, but it was very, very minimal. It's going to really start more in May and June. And I'm very happy also with an important key KPI, the broken inventory. We are today at 2.5 million tons broken, so in good position for the remainder of the year.
spk06: Okay. And then flipping to Laurent, which is the opposite, some pretty good grades. I guess you said you were, and I'm not going to remember which zone it is, but it was the higher gold, lower zinc zone. Is that going to persist? into the next quarter or are you guys immediately out of that?
spk08: Yeah, the upgrade mainly came from the east mine in Q1. I need to say that this month is still good. Let's see how it's going to go through the year. But part of the upside was coming from STOPE also that we're planning Q4 that have been moving Q1. So we're not getting those results. But they are still looking to be on forecast for the end of the year.
spk06: Okay, and then last two questions on costs. So, and I think these relate a little bit more to, so firstly on the CASA, costs there were a little bit better than planned. Could we talk about, I think it was like 523 versus 692 guide, and that's more in line with what was happening last quarter and the prior quarters under the KL fold. So, Maybe there was a little bit too much conservatism, or are the MACASA costs going to trend up over the year?
spk04: We expect to be within guidance, Anita. There were some delays with respect to some of the sustaining capital in terms of the number four shaft and such, so we plan on being within guidance. I was talking about unit cost, sir. Cash cost per ounce?
spk06: Yes.
spk04: Yes. Same, same.
spk06: Okay, maybe I'll take that one offline. And then lastly, Kitala, right? So you were guiding that they've got a little bit higher, they're seeing more inflation impacts because they're closer to the supply chain issue. So maybe that's one that might be a little bit higher than guide for the course of the year. Is that correct?
spk08: Yeah, we see more pressure in Ketela, energy, and as Ammar mentioned, some supply stuff. Also, what affected the first quarter is also because we had less answers. Now, it was not the question I needed, but I could answer that one. We had some challenges on the sequence where secondary stove, ground condition pushed us to mine more. Smaller stope at the end of the panel with a bit more dilution. So the higher grade stope plan in Q1 are postponed into the year. So now the team is back on track and we are currently now in those higher grade stope. So having more ounces is going to just help to have a better cost.
spk06: And then last one on the cost was Fosterville. That one was a little high too. Is that because of the restrictions that are happening in Australia in terms of the labour market? or have you not been impacted by that with something else?
spk04: No, there's no labor impact. COVID did impact all of our sites, but we were able to mitigate that. In terms of our cost profile, we've been pretty good in comparison to our budget.
spk07: Anita, so yeah, there's the cash cost per ounce and then there's the unit cost per ton. They do vary a little bit. You know, overall, though, it went pretty well. That's just kind of normal variance, yeah.
spk06: Yeah, no, I was just kind of one of your competitors reported last week, and they were talking about a lot of labour issues in Australia. And then I guess the last, similar to that, I wanted to follow up with, another thing they mentioned was that they were a bit behind in terms of sequencing on some of their operations. Is there anything that we should be aware of, like, you know, as we come out of, hopefully, fingers crossed, COVID? you know, the last two years where maybe there's some stuff that you might be trying to work to catch up on in the next two years?
spk07: No, not really. You know, the first quarter of January was tough, and so the guys had to do a lot of work. And as, you know, Dominic said, a simple example of that is, you know, Meliodine had to use more of the stockpiles. So, you know, we'll be refreshing those stockpiles. Again, it's the normal kind of variance.
spk06: All right. Thank you very much. That's it for my questions.
spk07: Thank you.
spk14: Thank you. Your next question comes from Mike Parkin with National Bank. Please go ahead.
spk12: Hi, guys. Thanks for taking the question. Can you just give us an update where and what permits are remaining outstanding at Detour Lake? Or if you're kind of going after West Detour in the Saddle Zone, I recall all those permits quite aren't in hand yet.
spk07: Well, either Mohammed, why don't you take that one?
spk03: Sure. Thanks, Mike. With respect to the permits remaining for detour, there's two principal permits that we have submitted to the authorities and we're waiting for their technical review and approval. They would be the closure plan associated to the West Detour layout and includes closure and closure costs, as well as what we call the overall benefits permit for the caribou. Once those are in place, that would be the two principal permits. Then there's just your construction, various other permits.
spk12: Great.
spk03: And do you have agreements with all your First Nations as well? Correct, we do. And if I may say noteworthy that we have all our agreements in place and updated agreements that include West Detour.
spk07: Including what? including a trip next week to sit down with one of the First Nations and celebrate some of those agreements. So very good progress by the team on that. Just to close up, I'm sorry, Mike, I'm not cutting you off. Mike, did you have any other questions? No, that's it for me. Thanks so much.
spk00: Okay. Well, before we end, I think, Dave, you wanted to make a comment? Yeah, I just wanted to go back to Fahad's question for clarity. I think Fahad was asking... about whether or not the fair value inventory adjustment was included in our non-GAAP KPIs like cash cost. The answer is it's included in the GAAP measures so it's on the income statement as I mentioned in production cost but it is not as a non-operating non-cash non-recurring item it is not reflected in the KPIs the non-GAAP KPI so I just wanted to make that clear.
spk07: Thank you, Dave. And so in conclusion, I'd like to thank everyone on the call. Again, you know, 65 days ago, we ended the call by saying we're going to work hard for our investors and our communities. And I think we have been. We've made good progress. And I'd also like to thank all of our employees who really have been working hard. So thank you, everyone. Have a great day.
spk14: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.
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