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spk12: At this time, I would like to welcome everyone to the Agnico Eagle Second Quarter Results 2022 conference call. All lines of being placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star and then the two key. Thank you. Mr. Amara Aljindi, You may begin your conference.
spk03: Thank you, and good morning, everyone, and welcome to the Agnico Eagle Mines second quarter conference call. I'd like to start this call by thanking all of our employees for a strong quarter. When we have a strong quarter, and this is a strong quarter, persons like myself and my colleagues, the executives here, we have the pleasure to get to speak about it, but we are well aware that that there's a lot of hard work that goes into this by the thousands of employees at the mines, at the communities, at the support positions, at the rock face, who are really working hard day in, day out as a team to deliver these results. So we wanted to acknowledge that and thank everyone. On page five, first I'll say there are some forward-looking statements that we should acknowledge and everyone should acknowledge. With that said, as I move to page five, we talk about the key takeaways this quarter. And the obvious headline key takeaway is the very strong operating results. Record quarterly production, excellent cost control, especially important in this inflationary environment, which naturally will lead to strong earnings and, in this case, record cash flows. And we'll talk about the operating results and what the team has been able to do and importantly do it perhaps most importantly in a safe manner and an environmentally friendly and responsible manner. But I think the real message of today, the real story of the past quarter and I think the real story for Agnico Eagle over the next several years is the exciting and significant progress on our development projects and our exploration results. And I say that because while we are performing on all cylinders on the operations, our development projects and exploration results really reflect the future of the company, the next five years, the next 10 years. And I might say in the case of Detour, out past the next 30 years, which is quite impressive. Detour Lake, we provided a technical update. We'll get into that. That'll be a key part of today's discussion. But at 38% in mineral reserves, and extending the mine life by 10 years. Odyssey Underground, the two largest gold mines in Canada, Detour Lake and Odyssey, both continuing good development, good exploration. At Odyssey, production and development on schedule, on budget, and some initial production as early as the first quarter of 2023. The Kirkland Lake region, progress made there. Shaft number four expected to be completed towards the end of the year. Very good progress on the amalgamated Kirkland evaluation. We are about two-thirds of the way through the exploration drift, which will become part of the development. But it's not just those projects. And we'll talk about the shaft at Keetala coming close to completion. Amarok Underground starting this quarter to bring in production. Goldex, we've just approved the Akasaba satellite project, which will support both Goldex and Laurent, and continued success and development across a number of our assets. On the exploration side, and again, we'll get into more detail, but excellent results and importantly, really exciting results at both, well, At Detour, with a two-kilometer step-out hole suggesting continuity two kilometers west of where the existing or the current mine plan pit shell is. At Odyssey Underground, extension about 225 meters to the west, possible extension hole out at 1.7 kilometers to the east, again showing you the potential of these massive ore bodies for continued development with existing infrastructure, existing teams in good jurisdictions. But also some really good news on some of our other sites. At Hope Bay, some exciting exploration results. At Meliuddin, exciting exploration results. At Kitala, exciting exploration results. We will be giving a more detailed exploration release in August, and I would encourage everyone to look forward to that. And then finally a little bit on the mergers. We want to talk about the merger synergies on this call because we promised that we would but also synergies while always important are extremely important and even more important in this current inflationary environment and we are hoping and expecting that some of these operational synergies will act as a partial buffer to the cost pressures that we're seeing. Next page please. So on the operating highlights uh 858,000 ounces of production at cash costs of $726 and all in sustaining of $1,026 again uh over 850,000 ounces at $726 cash costs excellent results and and we will get questions and we have had questions about um how it is we've been able to to manage our costs in this environment We've taken a lot of proactive steps towards that. We talked about it at the previous call, and we talked about it at the call before that. We did have a view that inflation was going to be an issue in 2022. I remember Sean Boyd saying early on, this is not going to be transitory, and we looked at it that way. So we took some actions in advance. But at the end of the day, the best way to control costs is to have efficient operations, and that's what the team did. has done. In particular, we're proud across the board, but Ontario and Nunavut had superb results which really drove the rest of the company. Gold production was better than expected, grades better than expected, and throughput better than expected, with some notable call-outs to Amarok, Detour Lake, and Macassar. And again, we'll get into those through this discussion. It does remain, we do continue to see inflationary pressure We've managed it well in the in the first half of the year. We're working hard to manage it well in the second half of the year and into the future years. That said we're not immune to it and so we are maintaining production guidance we're maintaining cost guidance but we expect based on what we see that the costs are going to trend towards the upper end of the range. Some strong balance sheet. Dave Smith will talk a little bit about what we've done. But we're pleased to say that we paid down $125 million of debt as it came due in the quarter. And we've paid another $100 million since in line with what we promised. The right combination of capital to our shareholders, capital in the business, while at the same time being able to strengthen our balance sheet. And of course, continuing with the $0.40 dividend through the quarter. Next slide, please. I'll hit a few highlights on detour, and then I'll ask Natasha and Eric to talk a little bit about some of the progress on the mill expansion and on the exploration results. But hitting the highlights, I think most of you have seen them, but frankly, we're so pleased with them, I'm going to say them again. 38% increase in gold reserves. At detour, that's 5.6 million ounces. So we're at 20.4 million ounces, and I will say going to continue to grow. We've increased the mine life by 10 years. Recovered gold increased the same 38% as reserves. Importantly, a little over 400,000 ounces added in the 2028-2031 period and the reason I say importantly is because that's where we have a little bit of a dip in production. We've identified at the last call that we're working hard to offset some of that dip and roughly 100,000 ounces a year for those years is it moves a good direction in that in what we're trying to achieve. 1.8 million ounces added between 2032 to 2042 and then 3 million ounces added at the end of the mine life. And I want to talk about that a little bit later. Importantly and impressively, higher grade and lower costs for the next 20 years. That's pretty good considering this technical update incorporates some of the inflationary pressures we've seen recently versus the previous mine life. So to be able to increase grade and lower costs for 20 years on one of the best gold mines in the world I think frankly is fantastic. Our vision, and we've said this before, our vision for detour is to get to a million ounces a year. That would be through a combination of increasing mill throughput and potentially underground mining. It's our vision. We're working to get there and we expect to be able to give some clarity on that towards the end of next year. It's a lot of work, but the potential is absolutely there. to increase production, but also to increase mine life. And the final point here, again, very exciting, and Eric will talk about this, some excellent exploration results, including a step-out hole two kilometers west of the pit outline. And with that, maybe, Natasha, I'll turn it over to you.
spk15: Perfect. Thank you, Amara, and good morning, everyone. So slide eight provides an update of the status of a few critical projects required to increase the mill throughput to 28 million tons per year. The graph on this slide shows the six main projects and the contribution in tonnage of each. So the first four projects, the ones that are in blue, are completed. So this includes the introduction of drill and blast optimization, targeting mill throughput maximization, in addition to choke feeding our primary crusher. The second bar is the replacement of the 75,000 ton per day limit with the annual permit for 32.8 million tons a year. So back in 2020, when the 75,000 ton per day limit was in effect, there were at least 70 days where we achieved that daily limit and had to pull back the mill. So having that 75,000 ton a day limit removed has had a significant impact on the throughput. We also converted our pulp lifters to a curved configuration from a radial configuration, and this switch has helped us increase our tons per operating hour, but also our overall throughput. The 610 conveyor refeed initiative has successfully been completed this year, Q1 actually, to gain an additional 750,000 tons a year. So basically every time maintenance is performed on the crushing circuit, our throughput is impacted. The goal of this refeed system is simply to top up the feed going into the sag mills during the crusher downtime events. This has proven to be successful. We commissioned it in Q1. We're operating it in Q2, and the system is operating as per design. A main contributor to the 28 million tons per year increase is the installation of the screens on the secondary crusher. This specific project will add about 2.25 million tons per year. Basically, the secondary cone crusher is most efficient when the fines smaller than the desired crushing product, are removed from the feed. So by installing the screen, we're able to filter out the fines, and it will make the crusher much more efficient. So we have begun the installation of the first set of screens in Q3, and we expect to have both commissioned by Q4 this year, so stay tuned. Finally, next year, we expect to add another 750,000 tons per year due to planned runtime improvements. The plan here is to improve how we analyze our downtime drivers, how we complete root cause analysis on breakdown events, and make adjustments to resourcing, planning, and scheduling. So to summarize, all is going well, and we are on track to achieving our 28 million tons per year in 2025. And with that, I'll pass the call over to Eric Calio, our EVP of Exploration Strategy and Growth.
spk04: Okay, thanks, Natasha, and good morning, everyone. As planned, exploration and detour continued at a very fast pace with the project, and as mentioned by Amar already, includes some very good results and overall progress of the project. Details for the program itself are shown on the current slide, which is the plan and long section of the project, and as indicated, shows about 62,000 meters of drilling, with most of this directed to 2-kilometer strike length west of the pit and along the Sunday Lake deformation zone, which is highlighted here on the slide in blue. Assuming... A shallow westerly plunge, most of the holes target about 300 to 600 meters below surface along this plunge line that's shown in pink on the lower part of the drawing. In terms of results, everything we've seen is looking very good, with some of the best being directly west of the pit where we already announced several high-grade holes in Q1. As shown on the image, we now have added quite a few more holes with pretty much all interesting results in them. generally broad zones of mineralization, sometimes up to 150 metres wide, and similar types of things as in the west pit and saddle, often containing a mix of wide bulk and narrow high-grade values. Although some of the holes are a little deeper and possibly a little bit more suitable for underground, we unexpectedly also saw several others at quite shallow depths, which we think could also add to the overall pit potential. Additionally, we also received some very good results from some of our first step-out holes to the west, which not only confirmed the overall trend of the structures, but intersected high grades up to 32 grams, 32.3 grams over 4.8 meters, 2.2 kilometers west of the pit. Importantly, this and several other holes seem to have a little more quartz and visible gold than normally seen in the pit area, which would be very good for the underground scenario. Considering all this, we're very encouraged for the future and continue with 12 drills on-site targeting 230 thousand meters by year-end and then possibly a new resource update and when we do this we think that we can have a very good chance of adding significantly more ounces to either the open pit or the underground so based on the current plan though we see that most of these new ounces would probably be added directly west of the pit and below which would then still leave a lot of area to the even further west for even and to depth for future additions. So overall, summary, everything coming along very well and excited for the future. With that, I'll pass it over to, I think it's Samar. Thanks, Eric.
spk03: Well, look, just one big picture about detour. So as you know, we've added a lot of ounces over the next 20 years. We've reduced costs. We've increased grade. But we've extended the mine life 10 years. at about 3 million ounces from 2042 to 2052. To be sure, right now, those are the processing of the low-grade stockpiles, and that's how all mines are optimized. But what we expect, and you just heard Eric talk about this, based on the continuing good drill results, we expect to find more gold and to extend the mine life longer. I'll say that again. We expect to find more gold, and we expect that there's a real possibility of extending the mine life further. And what that would do is for the 2042 to 2052, it would replace what is currently expected to be the low-grade stockpile processing with fresher, higher-grade ore. So this is, and again, we've said this before, we'll repeat, the detour plan, as good as it is, is just the next step to a longer plan that we're working on. This project continues to have tremendous potential. And as I move to page nine, I would say it's not just detour. The two biggest gold mines in Canada are Detour and Odyssey. And at Odyssey, we have fantastic continuing results, 20 drills operating, four underground, 12 at surface, four regional. And again, we mentioned not only is the project progressing on budget by the project, I mean the underground project progressing on schedule, and on budget, but some excellent holes, both confirming what we've got and stepping out, again, 225 kilometres to the west, and at this point up to 1.7 kilometres to the east. At Kirkland Lake, we mentioned shaft number four by the end of this year, the amalgamated Kirkland deposit. We still are guiding that we think we can bring in some of that gold as early as 2024. A perfect example of operational synergies where we're taking a historic Agnico asset that had no infrastructure associated with it and processing it through the Macassar Mill. But it's also worth talking about Hope Bay and some of the very good drill results that we've had there. I wish I had more time to focus on this because it is exciting. but our vision for Hope Bay is 300,000 to 350,000 ounces a year. We're working on that. The first step is drilling, and I can say that so far the drilling has either met or exceeded our expectations. And then finally, before we turn the page, remember all of this are assets that – already exist with existing infrastructure and, importantly, with teams already in place, which has always been important but probably never more important than what we're seeing today in today's environment. Just moving on to page 10, some highlights on our sustainability report. The first thing I would say is it's an excellent report. We've had a lot of good feedback on the report we issued on June 20th. I couldn't do it justice to try to summarize here, and I would encourage everybody to take a look at it, and we're more than happy to set up meetings to discuss this. But what I would say is two things. First, broadly speaking, ESG has always been a foundational part of who we are as a company, a foundational part of our culture. When you want to operate in a region for 30, 40, 50 years, you have to be a good neighbor and you have to be welcome in the community and that hasn't changed what we have what has changed or at least what we've emphasized more in I would say the last 24 months is a focus on climate change and we continue to put a lot of efforts into that over the past 12 months we have reviewed all of our at all of our sites effectively all of the opportunities from simple to complex to be able to reduce greenhouse gas emissions, and we've put in processes to look at that in more detail. I will say something briefly, but I think it's important. A lot of this will be moving from fossil fuels to electricity, and we are, I would say, as far ahead as anyone in looking at that, But at the end of the day, if the electricity is not clean, then you're not making much progress. So I would say that our move towards greenhouse gas reductions can't be just a mining industry thing, can't be just an industry thing, but it also has to be an electrical grid issue. And that is a big issue. We're aware of that. and we think that industry and government have to work together if we're serious, and we are serious. Next page, please. Just briefly on some of the operating financial results on page 11, the big number I want to point to is the $923 million of operating margin in this quarter. That is a strong business, and all of the mines have delivered well. Rather than going through the individuals because they're in the appendix, I'll go through the region. The Quebec region producing roughly 213,000 ounces at about an average cost of a little over $700 cash cost. Excellent, excellent results. Ontario, about 250,000 ounces at about $625 cash costs. Nunavut, roughly 200,000 ounces at a little over $900 cash costs. Fosterville, 85,000 ounces at an outstanding $350 cash costs. Quitala, roughly 65,000 ounces at $828. And Mexico at 43,000 ounces at a little over $1,000 cash costs. We acknowledge this was a tough quarter at Pino Saltos. The team there is an excellent team. You know, you have 12 minds sometimes. you know, some mines have more difficulty than others.
spk01: Just moving on to the next stage, Dave. Thank you, Amar. Of course, the tremendous operating results have resulted in a fantastic financial result as well. The company has a tremendous balance sheet, $2.2 billion of available liquidity. I would add, Amar already mentioned that we had 225 million of debt repayment this year, leaving us with net debt at the end of June of $434 million. We have a light maturity schedule coming up for the next several years with $100 or so million due each year. And that gives us the opportunity to continue to pay a stable and growing dividend. And for the first time, we initiated our NCIB, our share buyback program, only did $22 million worth but it is certainly something that has always been intended to be the variable component of the buyback. So we will analyze that in the second half of the year and see what we'll do there. We're also very proud that Fitch has upgraded our credit rating to BBB high, BBB plus, and with a stable trend. So we are acknowledged as having a great balance sheet, certainly by third parties, and I think we're in a fantastic financial position. Of course, inflation is a topic these days. Everybody's talking about it, and you've seen in our results that we've been able to mitigate the inflation through optimization at the assets as much as possible, realizing the synergies, but also from some success in our hedge book as well has helped insulate us And all of that resulted in us leaving the cost guidance unchanged for the year. And that wasn't easy to do, but we're very proud of all the teams, including the finance group, for chipping in to help out with this result.
spk03: Thank you, Dave. Just moving on to page 13. And again, congratulations, Dave, and the finance team for all the work you've done, not just on the synergies, but also on the hedging and cost control efforts. Speaking of synergies, we promised in February that we would report how we're doing each quarter, and we're doing that. We have a summary here. I won't spend a lot of time on it, but I will say the team did a very good job in our press release laying out item by item where we are, where we expect to be. And to summarize, in general, we're ahead of schedule and more synergies than we had anticipated. I would go so far as to say that With regards to corporate synergies, we have achieved our objective. We've achieved more than our objective, and we have once again increased our guidance for corporate synergies by quite a bit, actually. On the operating and strategic synergies, we are maintaining guidance. Internally, we're a little bit ahead of our expectation, but at this point, we're maintaining guidance. That's important and good on its own. But again, I will emphasize that none of our guidance incorporates these synergy numbers. So we are hoping and expecting, frankly, that some of these synergy numbers will continue to play a role to help offset some of the inflation that we're seeing out in the business. And so then finishing on page 14, before we jump into questions, Look, our strategy is the same that it's always been. It's a simple, consistent, disciplined strategy based on a few key things. First, good operations in good regions with low costs with a focus on high margins and per share metrics. Secondly, leveraging off the existing assets we have where we can in the best jurisdictions as measured by geologic potential and the ability to be able to operate multiple mines for multiple decades. Odyssey and Detour both, we talked about it, not only are they world-class mines, but I'll emphasize again world-class mines and world-class jurisdictions. And when you're talking about production in the 2050s, it's good to know you're in a stable environment. And then finally, proven leadership with a strong track record with a focus on per share value. And what I would say on the proven leadership side is, He's sitting right here beside me. You know, Sean continues to be involved heavily on the strategic side of things. We talk on a very regular basis, not just Sean and I, but the whole team. And it's been exceptionally helpful. On the ESG side, that's always been who we are. We're focused on that. And, you know, when you're a company with a bunch of engineers, We're all really excited to look at the opportunities to focus more and more on reduction of greenhouse gas emissions. And we are excited to talk about that. And we will be giving more detail on our strategy on that later in the year. And then finally, a long history of returning capital to shareholders and of capital discipline. And I want to end by saying that while the story here has been, I hope, not just about production, but on the development and exploration projects, we are going to develop this pipeline in a responsible manner, in a manner that still allows us to grow production per share while returning capital to shareholders and strengthening the balance sheet. And with that, operator, we will now turn it over to questions.
spk12: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the 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 the star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Fahad Tariq of Credit Suisse. Please go ahead.
spk09: Hi, good morning. Thanks for taking my questions. On Detour Lake, you mentioned in the presentation that there's potential to maybe increase the throughput beyond 28 million tons per year. I know it's early, but any sense of whether that would be a capital light type of expansion opportunity? Well, Natasha, did you want to?
spk15: Sure. Hi, Fahad. So yes, we are looking at expanding or looking at the option of expanding the mill. We're looking at three options, actually, three separate alternatives, the low-grade screening and ore sorting, pebble low-grade sorting, and also potentially an HPGR. We are just starting the studies, and so there is a lot of work that is yet to be done. So in terms of CAPEX, we We don't really have an estimate yet.
spk03: We don't have an estimate, but absolutely, Fahad, relative to other alternatives, it's always the lightest capital when you are expanding on existing infrastructure. So the three things that, and I apologize, there's some feedback noise, but the three things that Natasha talked about are frankly relatively minor. We don't have the numbers yet, but in the scheme of a project of that size, the amount of capital that you put in is relatively small to what you get out. But also importantly, it's risk-adjusted capital. It's not just the quantum of capital, it's how much risk is associated with that, and you will never get a better risk-adjusted capital than you do by expanding existing infrastructure.
spk09: Understood.
spk03: Okay.
spk09: And then just switching gears to MACASA, so you mentioned potential to maybe incorporate the amalgamated Kirkland deposit. at the Macassar mill. How should we think about that in 2024? Is that displacing Macassar ounces or is it maybe filling excess capacity at the plant because maybe Macassar doesn't ramp up the way you expect that year despite the productivity improvements?
spk03: This would be incremental using excess capacity in the mill.
spk09: Okay. And then given the productivity gains that you've seen this quarter and maybe You know, in the past you've mentioned potentially going back to diesel equipment and getting the productivity up over the next few years. Is it possible that, you know, there is no excess capacity in 2024?
spk15: Hi, Fahad. So, yeah, we're looking at this. Macassar has had a good quarter. We've been, you know, there's a lot of progress made in the last six months to a year on continuous improvement efforts on the operations side. Year to date, we're observing higher availability on our electric trucks. There's still a long way to go, but we're seeing an uptick in availability. We're also seeing a higher availability and utilization on our equipment fleet. And of course, we're seeing higher or improved ventilation as well. So it is stabilizing. We plan on improving throughput, but we'll have to wait until we update our life of mine and provide an annual guidance to understand how AK factors into the plan.
spk03: Yeah, I mean, Fahad, you're 100% right. Our objective is to have no excess capacity in the mill. Our objective is to get the mining rate up and then we will look at, and we know there are already opportunities to increase throughput at the mill. So your questions are valid. In an ideal world, and this is what we're working to, the mining rate will fill the mill completely, both at Macassar and at Amalgamated Kirkland, but then we have opportunities to expand the mill as well. Got it. That's helpful, Culler.
spk13: Thank you.
spk12: Thank you. The next question comes from Josh Wolfson of RBC Capital Markets. Please go ahead.
spk10: Thanks. I was looking to sort of drill down a bit more on the comments about positive grade reconciliation for Detour and Amaruk. Is there any detail you can provide on what the perhaps percentage impact of that was, maybe what the factors are and the ability to see that continue? Thanks.
spk11: Andre, would you like to take that question? Sure. In relation to detour, we continue to observe a positive reconciliation that is ranging on an annual base between 4% to 6% between grade and tons. So that is being a combination of Some efforts that we're putting at the tour continues to improve our grade control and historical trends that we observe with this model that we issued in 2020 that has reconciled with that range within the past three or four years.
spk20: And on Amarok, we were anticipating, and that's always been our understanding. The shallower part of the deposit was a bit lower grade, and as we were going deeper in both IVR and whale tail, the grade was to get better. We were pleasantly surprised. It came a bit ahead of the plan, so there's been a bit some upside from that standpoint, accessing some higher grade material a couple of months sooner than expected this year. and we see that trend continuing, and we were, in fact, planning to have a much stronger second half, and we see that trend and robustness in the grade to keep going moving forward.
spk10: Got it. Thank you. And one more question. The topic of the Catilla permit that's outstanding – I'm just wondering if there's any more information on what the issues are, and then in the event that throughput remains 2 million tons, what would be the expected production impact for the next two years for the existing guidance?
spk18: Yeah, we are currently evaluating the decision of the administrative court. Currently, we intend to continue the same throughput while discussing with them. We're going to know more in the Q3 about that.
spk10: Okay, thank you. And then, sorry, just for the existing guidance, what was the throughput assumption for the next two years? Two million tons per year. So no change versus the existing permit? Yeah, no change for now. Okay, great. Thank you very much.
spk12: Thank you. The next question comes from Jackie Pizvalowski of BMO Capital Markets. Please go ahead.
spk16: Thanks. I just want to follow up maybe on Fahad's questions about detour. I know you've put the life of mine plan out, which is super helpful, but it looks like it includes stockpiled assets. or is basically the main force of war at the later years. Can you talk a little bit about this exploration that is still to come and maybe the evidence you're seeing of continuity between the different, between the main pit and the saddle zone and how, if that is successful, how that might affect the overall mine plan? Like not necessarily to do with the expansion, but more to do with the grade through the life of mine things.
spk04: Well, exploration at this point is really focused mostly on the west extension, I would say, and then chasing things to depth. We have actually already drilled most of the area in the saddle in the west pit to the similar spacing as what you see in the main pit, and so should be able to evaluate for open pit. We would be looking at closer space drilling probably going forward, which might help the underground because we do see a lot of the higher grade is in smaller lenses. So I think it's not so much exploration in the pit area, but it would be whether we need higher definition.
spk03: And Jackie, maybe I didn't totally understand your question, but certainly to the extent. So if you look at those low-grade stockpiles, and I don't know the number off the top of my head, I'm thinking it's about 0.35 grams or something like that. You know, to the extent that you are putting through some of the additional exploration that even if we go through what we've currently got at closer to say 0.97, that obviously, you know, roughly triples the production in those years, which would put you closer to it, especially if you have a little bit of underground. And we've given some very high level numbers and these are very high level at this point. but to the extent you're able to supplement some of the throughput through an underground at, say, 5,000 tons a day at, let's say, between two and three grams, you can see that that really gets you much closer to the million-ounce target that we're talking about. Again, these are very high-level, but the concept clearly is you would be, as you find more gold, that is similar to the type of gold that you've got in the mine plan, you're able to defer effectively, you know, by adding to the mine life, you're able to defer the throughput, the milling of the low grade and replace it with higher grade.
spk16: Thanks. You did understand my question, but I just wanted to make sure I understand the answer fully. So in terms of open pit operation, open pit mineable ore, the main pit, the saddle zone, are pretty well defined already. So maybe could you, like if I understood what the comment was, where would the opportunity be for adding new open pitable ore at this point? Is that to the west?
spk04: Well, to the west is one of the main targets for sure. And this could be for either open pit or underground, depending on how close it is to surface and, of course, the width and grades that you get. But We're not finished exploring to depth below the west pit or saddle either, so there's still more drilling to be done there. And, you know, we have some inferred within the pits. Those could be still converted. But really we have... The other thing is we are looking at holes that could be under north wall, the north pit area as well. So there's a various number of areas, I guess, looking at.
spk03: And it's important to understand, too, that they're not necessarily sequential, the open pit and underground. In fact, we would target, and again, Jackie, we're working on this, but to the extent you can make the underground contemporaneous with the open pit, that would be part of the plan as well. Does that help?
spk16: Yeah, absolutely. No, that's super helpful. And then if I could maybe ask for a little bit more color on your hedge book. You've obviously been really successful this year in managing your operating costs. Can you give us a bit of color on what your strategy is for hedging inputs or effects or whatever it is for next year and if you've kind of gotten started at this point? Thanks.
spk01: Yeah, sure. So the most important input we have after gold is the Canadian dollar. And we're about 30% hedged in 2023 already on the Canadian dollar at much better than budget rates. The budget rate is 125 and this would round out to about 129 so far. We actually believe that we'll have the opportunity in the short term to continue to add to that position. You know, it is effectively an insurance policy. We don't know for sure. what the Canadian dollar, U.S. dollar, et cetera, are going to do in the future. But it does give us some comfort on our cost guidance when we have hedges at better than budget rates. So I think one of those opportunities is kind of right now, and we'll continue looking at that going forward. People are always asking about diesel. It's a much smaller impact. It's only about 300 million litres per year. The current spot rate is about 120-ish litres. canadian per liter and we are 26 hedged for 2023 at actually worse than budget rates but much better than spot rates so not a bad position there too but a much much smaller input than uh than the canadian dollar that is for sure that's that's super helpful thanks dave uh that's it for me thanks
spk12: Thank you. The next question comes from Lawson Winder of Bank of America Securities. Please go ahead.
spk06: Hi, Amar and Dave. Thank you very much for the update. And, you know, I'd like to just commend you all given Agnico's standout on managing costs in the current inflationary environment. I think it's very impressive. I just... wanted to sort of start with cost and ask about both Finland and Australia. So last quarter, you highlighted Finland as the region that was most impacted by cost inflation. So I wanted to ask if that was still the case. And then if I look at your numbers for Q2 on a cost per ton basis, I mean, my site costs are up 6% over year, which actually doesn't seem that bad. Are you finding ways to offset the cost inflation in Finland?
spk03: Well, I'll go first, and then maybe Dominic. Finland is still the most challenging from an overall inflation perspective, and it's natural given the environment there. They have had a very good quarter, relatively speaking, efficiency-wise, and I think that's the biggest thing that they've been able to do. Again, it's a combination of things we can do to control costs, but at the end of the day, efficiency drives a lot of that. Dominic?
spk18: Yeah, you're right, Ammar. They did good improvement on drill and blast and all the underground mining, which is a good cost. There's also a positive impact on the exchange rate with the euro, which is also giving a positive input on that.
spk06: That makes a lot of sense. So similar question on Australia. Just I mean, regarding that region, I mean, your peers are highlighting pretty significant issues with labor inflation and availability. But again, I mean, based on your cost per ton, it looks like you're managing very effectively. I mean, maybe you could speak to Agnico's experience with respect to labor inflation and availability in Australia. Well, go ahead.
spk15: Sure. Hi, Lawson. Yeah, in terms of our employees in Australia and Bendigo specifically, the majority of our employees reside in Bendigo, and the turnover has been low, so we haven't seen too big of an impact from a labor perspective. And, yeah, in terms of our cost per ton, we are seeing a slight rise, but that's just a function of where we are with our mine sequencing. Grade has offset it. We have higher grades, so our cash costs are in line. if not better.
spk06: Okay, that's great. Quite remarkable. On Detour Lake, among many of the opportunities that you highlighted to enhance the operations there, some seem to me like they make sense to go ahead with in fairly short order. For example, like Trolley Exists or maybe increasing automation with the haulage truck. But then there's this study, which these are all part of, that's coming out in 18 months, So, I mean, could some of these enhancements perhaps be implemented before that initial assessment is ready?
spk03: Well, we're looking at a lot of things, and the answer is some may come in sooner than later. We always tend to look at things in a bigger holistic perspective, Lawson, but absolutely some of them could come in earlier. And as I think as Natasha showed with regards to detour, We gave the details on the current mine plan at 28 million tons, but she and her team have been working on that for a long time, and we are well-progressed on it.
spk06: Okay. And then if I could just ask one more question just on Odyssey. So now that Odyssey Underground Development is certainly well-progressed, could you maybe provide some comments on how you're finding the ground conditions versus expectations? And also, to what depth have you now been developing? Thanks very much.
spk18: Hi, Lawson. Dominique speaking. In terms of ground condition, they are excellent. Very good comments from the team. We're reaching our meters. We're on schedule and on budget. We're still heading to have the first answers coming in Q1 next year. Everything is going as planned there. Could you just repeat your last question?
spk06: Oh, yeah. I was just asking to what depth you've now developed at Odyssey.
spk18: I need to double check. I'm not sure. We're going to come back on that.
spk06: Okay, great. That's it for me. Thanks a lot, guys, and great work.
spk02: Thank you.
spk12: Thank you. The next question comes from Anita Soni. Please go ahead.
spk17: Good morning, everyone. Thanks for taking my questions, and congratulations on good cost control in this environment. Most of the questions have been answered, but I do have a couple of ones on Akasaba. So, GoldX satellite deposit, and I'm just looking at the ore feed. I think you said it was 1,500 K ton that Akasaba is going to add. Is that over and above the current mill feed, or is that... Is that within the current mill feed? I just noticed the Goldex grades are 1.6. I was wondering why you would feed, substitute the 0.84 versus the 1.6.
spk18: Yeah, the current license we have at Goldex is 9,500 tons per day. We're currently with the Goldex at 8,000 tons per day. So we already have space into the mill. Not clear. Let's say probably we need some modifications, small modifications to do at over 9,000 tons per day, but we think we're going to end up in between 8,500 to 9,000. The other aspect is we're going deeper at Goldex, below 1.2 kilometers with Deep 2. So that's going to give us flexibility. If throughput or throughput will probably decrease gradually with time, we're going to be able to top up the meal with the Akazaba. And just maybe at the high level, the value of the tons from Akazaba are quite the same of the Goldex ore. Akazaba also has copper, so it's 0.5% copper. So at the end of the day, we're going to top up the mill with Goldex and ore Akazaba just to have the good cash flow out of that.
spk17: And that $50 million Canadian that you're going to spend, that will help... figure out how to process that copper? I was just wondering. I was going to ask about that.
spk18: The $50 million, it is mainly mining costs, so it's minimal infrastructure as we're going to process it at Goldex, and the concentrate is going to be sent at La Ronde. So it's really mainly a stripping cost through the next two years. First production is going to be in 2024.
spk17: Okay. I think that's it for my questions. Oh, actually, no, La Ronde. I think you talked about resequencing of the mine in the second half of the year. Will that reverse back to what the original plan was with the guidance that you had put out in February? Should we still be modeling what we had expected in 2023, or should we modify our assumptions to account for this resequencing and dealing with, I guess, a higher ground condition protocol?
spk18: We are still in between the guidance range that we gave. It's going to be going a bit lower than the middle point, I guess, because we have more protocol in place, again, mainly in the east mine. But that's going to be compensated from AZ-5. So currently we're mining 3,200 tons per day. They're looking to go at the 3,400 tons per day at AZ-5 to compensate. And maybe also another interesting aspect with Akazaba coming into play, we're going to provide a higher copper grade to La Ronde Mill, which is going to provide them more flexibility to introduce eventually more satellite deposits. The exploration drift is progressing well. We don't have yet results from the drilling, but we started to drill at a level... 2.15 and level 9 recently, and eventually, I don't know, next year, we should see coming interesting results and potentially bring other satellite deposits at La Ronde. We're in the same situation than Goldex, where we have a mill that could take more, so teams are looking to add the satellite zones to the mill.
spk17: Okay, thank you. That's it for my questions.
spk12: Thank you. The next question comes from Greg Barnes of TD Securities. Please go ahead.
spk08: I just wanted to ask Natasha about the mill capacity growth of DETURN. Taking it to 28 million tons a year with the steps you're taking now, I'm likely to get more than that through that time. Are you building in some contingency and say you get 10, 15% more? And if you do, that would get you up to close to 32 million tons without doing anything additional.
spk15: Good question, Greg. So right now we are targeting 28 million tons. We commissioned the 610 refeed, and it is operating as per design. The high-intensity blasting and the choke feeding has shown some improvements, but we need a little bit more time to quantify it. So for now we're targeting the 28 million tons.
spk08: What would then be the likelihood of increasing the permit level above 32? I think it's 32.8 million tons.
spk15: Right. So, yeah. So it is a strong likelihood, I would say, because we went from the 75,000 ton per day limit up to 32.8 million tons a year. So there was a step up on an annual throughput. So I don't anticipate any issues, but maybe I'll pass it over to Mohamed to provide any more clarity on that.
spk05: Sure. Thank you, Greg. In terms of the likelihood from a permitting and regulatory perspective, we don't see any challenges to get to that number. As Natasha earlier mentioned, we were able to increase that throughput earlier, and we would be going through that same process.
spk08: And just a final question again for Natasha. You talk about the ultra-high grades coming in queue for Fosterville. What are we talking about in terms of grade cadence over the years?
spk15: In terms of Q4, we expect higher. We plan on sequencing. Just based on sequencing, we have a few high-grade stopes coming in. I would say probably I don't have that information handy, but I would say probably in the 20-gram range, if not slightly higher.
spk13: Thank you.
spk12: Thank you. The next question comes from John Tomasso of John Tomasso's Very Independent Research. Please go ahead.
spk14: Thank you for the great results. I have two questions related to the west of Detour and west of Mallardic deep drilling successes, one, two miles west of the known reserves or resources. From a share buyback compliance legal standpoint, are you able to buy back shares given that you're drilling, you're getting great results? The return on assays is a little bit unpredictable. Transportation and labs are problematic. So the first question is, Does it change the windows for buybacks or make them very short? One could also take the point of view that you have so many reserves already at Detour and the Malartic underground resources that you're adding things for the 2050s at Detour or 60s or 2040s at Malartic and maybe it isn't material. Then the second question after the legal issues on buyback windows, is for your own planning, are these results good enough to change the mining sequence and mine these new zones first? Or if they're 20 to 40 years out in the production plan, they're kind of lesser NPV ounces?
spk03: Chris why don't you answer the first one and then I can I can address the second.
spk19: Thank you John. Yeah sure thanks John. So you're correct if we're in possession of material non-public information we're not able to execute under the discretionary buyback plan but we do have an obligation obviously to promptly disclose any material information so if those results were in fact material we would have to put them out via press release promptly but as you sort of note in general you know any given drill result for a company of our size is unlikely to be material beyond that as part of our ncib we also do have the automatic plan in place if we choose to use it and so if we do that we can give instructions to the broker after which our discretion is removed and the broker executes those instructions and we can only change those instructions if we're not in uh in possession of material information and john with with regards to our ability to
spk03: to mine the drill results sooner than anticipated. The mining sequence is going to be a function of the drill results and where the ore is. The good news is some of these step-outs show the vastness of these ore bodies. The bad news, I guess, is that they're quite a distance away from existing infrastructure. What I would say though is if, for example, we have some exceptional results at detour at a decent depth, we could, and I'll emphasize again, we could start the underground development to access those much more quickly. It doesn't have to be sequential with the open pit. But it'll just be determined by the drill results, and then we would optimize the mine plan based on that.
spk14: If I could ask a different follow-up question, thank you for the clear responses. In Amarook, how much did the second quarter outproduce the geologic model, 10%, 20%? Presumably there were top cuts in area of influence, conservatisms, and do the second quarter results create a scenario for potentially underground mining if there's zones that are so good that you can spoon feed some brown sugar to the Meliodine Mill if the Meadowbank Mill's too big?
spk20: To answer the question about the grade, first, let's say, John, it's Guy. So there was no pocket of super high-grade merization known at Amarok. The pleasant surprise we had is that, you know, they came a bit earlier into copper bench higher than expected, maybe due to some folding feature. So we know for a fact that we were writing into that. And as the mine plan was also there was higher, higher, bigger than most of the ounces were coming in the second half of the year. We saw some of that came earlier in the second quarter. So that's basically the add-on. But now moving forward, we consider that those zone high grades are well factored in the plan. We can still see some pleasant surprises on reconciliation, about top cut and everything, as you discussed. But so far, it's just a nice add-on, additional high grade that came earlier in the second quarter.
spk14: So maybe we shouldn't add extra years to our models, but we could add 5% or 10% above your projections for the next few years if we think that these sweet spots are going to recur.
spk20: I'm not sure I well understood your question, but certainly if we can continue and we're still exploring at depth, you know, with the intention of, you know, can we extend the life of mine? Can we build on? Now, what I mentioned is that, yeah, there was a bit more done of that high-grade material that came earlier in the plan. But for the upcoming couple of years, you know, we're back on track. And we may, again, we're not there. We haven't yet mined too much of those. And maybe we are a bit conservative on our estimation of the grade in that high-grade material. Still, it needs to be proven in the pudding, so we'll see in the upcoming couple quarters what's the performance when we mine those high-grade parts of the deposit.
spk14: I'm sorry if I was implying second-guessing of the projections, but we know you're conservative, and we might want to hope for a little bit better. We dream. Thank you.
spk02: Thank you, John.
spk12: Thank you. The next question comes from Tanya Jakunasnik, Scotiabank. Please go ahead.
spk00: Good morning. I think that's me. Thank you for taking my questions. Amar and team, can I just go back to detour, just the mine plan? Thank you for giving us some of the assumptions that went into that mine plan. Just missing the oil price assumption that you used. Just over a long period of time, so just trying to understand what oil price you used.
spk15: Hi, Tanya. So for the short-term model, we used $1.10 per liter. The long-term, I can't remember exactly the cost per liter, but it was based on our forward-looking curve, and I believe it was increased by $0.10 a liter compared to the previous plans.
spk00: I'll take it offline and maybe just get a sensitivity from someone to just so that, you know, it's a long period of time, and if, you know, fuel changes, you know, that gives you some relief. So just trying to get a sensitivity there. Natasha, now that I have you on, maybe just to talk about this mine plan, which, you know, in 2042 we do drop down with these stockpiles. Based on what you're seeing today, which you are seeing exploration success to the west, you see potential for an underground, where could you see the underground coming in? Like towards the end of this decade or would you see it coming in in the early 30s? I'm just trying to see when could you see an underground come in at the same time you have the open pit and potentially before the stockpiles come in.
spk15: Right, right, Tanya, good question. So we're working on doing the exploration drilling. We're working on studies into the future. So We anticipate definitely the viability of the underground plan will bring it into sometime sooner than the 2040 mark. So we're looking at mining the underground as we mine the open pit.
spk00: Okay. So before the stockpiles come on board, so before 2042, so sometime in the 30s, would that be reasonable?
spk15: Sounds good. Yeah, that's right. Okay.
spk00: Okay. And then just from a bigger picture, like I think I heard that there's going to be a potential to increase the resource at this asset at year-end. Maybe someone can just share with me, is this going to be in the inferred category, and from what areas are we seeing this increase in resource?
spk04: I think we have potential to increase add resources both open pit and underground probably most likely near the west end of the west pit and also in areas that are that may be on the north wall or below the west pit we have almost 80,000 assays now even since the last time we closed the database in February 5th and by year end you know we're going to have closer to maybe 150,000 so a lot of them are going to be in that area and Hard to say what category this will all go in, but I think a lot of it could still be inferred, but there will be at least some indicated.
spk03: And Tanya, that gets to the question, you know, why are we giving, we're sort of anticipating being able to give a fulsome update at the end of next year. And a natural question is, well, why does it take you that long on the mill? It's not just the mill. It's also taking into account all of this exploration. So There's a lot of work to be done. It is quite remarkable the amount of drilling we've done. There's a lot of potential, but there's a lot of work to bring it all together.
spk00: Amara, thank you. I appreciate it. I know we focused on the mill a lot. I was just trying to conceptually see a bigger picture for this asset to try and see, okay, if we can get the mill there, which looks like it can be done, I shouldn't say quite easily. These things aren't easy, but It can be done. It's just then looking at the mine plan and trying to see how you sequence all of these areas in to get to that million ounces and sort of when can we see this, you know, these stockpiles can be pushed out and can we supplement, you know, 2042 from just the open pit and underground, you know, for another decade or so before we hit the stockpiles again. I'm just trying to understand that. That's all.
spk03: Yeah, Tanya, those are exactly the right questions, 100%.
spk00: Thank you. I'll look forward to getting more information on that mine plan. If I could ask just another question, and it's going to come back to just the inflationary environment again. I wanted to circle back to we've seen a lot of high turnover and issues at isolated mines, so fly-in, fly-out mines around the world. and obviously you have that situation up in Nunavut. Can you talk to me about what you're seeing with your labor in Nunavut in terms of turnover and or inflationary pressures? We've just seen a lot in various other mines, so I'm just trying to understand how this is impacting you.
spk18: Hi, Tanya, Dominique speaking. Yeah, we see also that the pressure, especially with Quebec, Abitibi, Nunavut, Quebec, where a lot of our workforce also is coming from. But so far, we're able to mitigate it. Again, we have a good relationship with our employees. They like to work with us, and let's say usually they stay with us. But I would say also in Nunavut, last quarter, we've added 50 Nunavut to our workforce, which is also... We continue to hire as much as we can locally. After COVID, we had to back to home, but now we are just getting back to where we were before. So this is compensating or helping also to mitigate that aspect.
spk03: But, you know, Tanya, it's a good opportunity to re-emphasize. So, for example, at Odyssey, We're able to get employees because, you know, we've been there for 60 years. We're able to get employees who are our employees, our engineers, our mechanics. It's a lot tougher if you're building a brand new mine in a brand new region. So, again, you know, we are benefiting from that.
spk00: Yeah, and what type of labor inflation would you be seeing in Nunavut compared to some of your other operations? It's just like I've heard as high as 8%, 10% in some areas that are isolated. So I'm just trying to understand where you are on that in Nunavut.
spk03: Yeah, I mean, yeah, you know, I think we negotiate with our employees, and I think it's November of every year. So, you know, the last negotiation, if I recall, was 3.5% to 4%. You know, we're working with the team and with our employees to try to figure out what the number is, but we'll probably have a better idea on that, Tanya, later in the year. But for now, you know, we're largely covered by what we negotiated earlier. Okay, perfect.
spk00: And then maybe if we could just still ask about inflation. I mean, another area we've seen, you know, stresses on, strains on, have been in shaft sinking, and you're going to be starting the, you know, Odyssey shaft sinking in October, you know, very shortly. I'm just trying to understand from you, or what can you share with us that, you know, helps us understand that, you know, some of the issues that we've seen in other companies, you know, you're able to, how comfortable are you with your budget for that shaft sinking project? portion of the shaft in your Canadian Malartic, I think it was 1.2 billion capex.
spk18: Yeah, we have the opportunity at Canadian Malartic to be in, let's say, a good area close to 117 in Abitibi where, let's say, it's easy, it's a good place to mine and to work. We also have, we're finishing the shaft sinking in Kitila and also at Makassar. So there's part of the workforce that also is going to transition to Odyssey. We're currently staffing those teams, and we still expect to start to do shaft sinking in Q4 this year.
spk00: Okay. So are you saying that it's some of your own employees that you're bringing back, or is it contractors that you're bringing back to help and located in the Canadian Malartic, so close to home, to work on the shaft sinking industry? i.e. not being isolated in a camp?
spk18: Yeah, we have that advantage at Odyssey. It's a sexy place to work right now.
spk03: I'm not sure about sexy.
spk18: Well, it's a good place to work, and all the shaft-sinking employees are going to work through the contractor, but this is a small work, and from one contractor to the other one, This is usual that the shop thinkers, employees are getting to the best place and they're going to be hired through the contractor. Okay.
spk00: And if I could just read Dave, just on the inflation estimates or inflation pressures you're seeing, can you just review with us again, and I ask this on every call, I understand we've seen a bit of relief in fuel, so we're all seeing that, and some other oil-based products, but can you just let us know where you're seeing the most inflationary pressures coming through? We talked about your labor at Ketela, but maybe anything else that you want to share with us where you're seeing more pressure, or maybe you've seen relief in some areas. Any insights would be appreciated. Okay.
spk01: Yeah, first I'll get back to you on the detour study assumptions on oil. The first three years are Canadian dollar, $1.10 per litre, and then after that it falls back to $0.90. I'm probably not the best person to talk about the inflation that we're seeing in the business, because of course I'm watching most carefully the financial, and thankfully everything's working as it should, and The Canadian dollar is relatively weak at the moment, really helping us out. But maybe Natasha or Dom might be best to talk about where the biggest components are.
spk18: Yeah, Tanya, we see inflation on reagents and steel products, stuff like that. But overall, as Amor mentioned, we're working to optimize the cost on productivity with different aspects on automation, fleet management, ventilation on demand, which is offsetting that inflation. This is what we control and what we work, and we could see it in our results right now. And we expect, again, to stay into the guidance through the end of the year. I don't know, Natasha, if you'd like to add something.
spk15: Yeah, no, it's similar, Dom. So, Tanya, we are seeing a slight increase in our mill reagents, seeing it in grinding media. We're seeing it in, of course, diesel. But like Dom mentioned, we are looking at optimization efforts. So I can give you a perfect example is at Detour, right? Diesel, we are definitely exposed on that end. But we're looking at payload optimization and seeing how we can optimize our payloads on our 795 trucks to see how often we can park them and better utilize.
spk00: Overall, would you say your inflation within what you're seeing in your own cost structure, everyone has a different number, but would you be in the 7% to 8% range?
spk02: I think that's as good a guess as anything. Yeah, Tanya? Yeah.
spk00: Thank you so much. I'll leave it to someone else to ask.
spk12: Thank you. We have time for one more question, and that question will come from Mike Parkin of National Bank. Please go ahead.
spk07: Thanks, guys, and congrats on the good quarter. Can you just give us an update in terms of where you stand with Detour with respect to... IBAs with the First Nations as well as are you fully permitted now for what you're pitching with this life and mine plan update or is there any revisions to permits or completely new permits that you would require to move ahead with that?
spk05: Mohamed? Thank you for the question, Mike. It's Mohammed here. With regarding your questions on the two-folds with the agreements and the indigenous communities and then the permits, as you stated, it is in that order at the moment. We have all the necessary agreements to proceed with the expansion. And then with the expansion itself, our consultation process is just beginning and then we'll be going through the permitting process, which is going to be very similar to the permitting process we went through for the West Detour expansion. So there shouldn't be any surprises that we're worried about, and they'll be following the same process. Does that help answer your question, Mike? No, that's perfect. Thanks very much, Dave. Thank you.
spk03: Well, with that, I think I'd just like – I know we ran over time, so thank you, everyone, for being on the call and for your help. And, again, the key takeaway – Great quarter operationally, but really the story, I think, is the development projects and the exploration that are going to set this company forward for years to come. So everyone have a nice long weekend, and thank you for your time.
spk12: Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
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