Agnico Eagle Mines Limited

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.

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.

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.