Q1 2020 Earnings Call

[music].

Good morning, My name is sharing and I'll be your conference operator today at this time I would like welcome everyone to the Agnico Eagle first quarter results 2020 conference calls all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question. During this time simply press Star then the number.

On your telephone keypad. It seems like withdraw your question. Please press the pound <unk>. Thank you Mr. Shawn Boyd you may begin your conference.

Thank you operator, and good morning, everyone and welcome and thank you for joining our first quarter 2020.

The conference call.

This presentation does include forward looking statement, so just want everybody to be for warrant.

Hopefully wherever you are we're doing this remotely as well so hopefully wherever you are.

You're saying you're doing well in your family is doing well because we're doing this remotely during the Q in L. direct the question. So hopefully that goes smoothly it because we've got.

Our senior staff working from home.

Patch in online.

But as they go through the presentation I want to spend some time just on.

Our thinking and mindset around the challenges around to covert 19, and how we've managed it really how we're thinking about the business and position the business as we sort of move through the issues around Covance 19, I think as you know.

We've been challenge more than most companies.

In the quarter, having seven over eight operating mines are reduced to minimum activities will get into that how we managed it how we manage that with our people what it meant per our assets will talk a little bit about that as we went through it.

Clearly the focus was the health and safety of our employees the wellbeing of our employees that comfort level of the families.

So we've been able to manage through that very successfully and while we were doing that.

And even on minimum activities, we were still able.

To position the assets and look after so.

Issues that we had been managing through Q1, so that we could have a strong second half.

In terms of our actual response to the pandemic.

As you said that as we've said many times before and so long term business you have to think long term.

Although.

A pandemic is devastating theres a lot a loss associated with it.

Things will improve.

So the question is is manage through.

The pandemic and look beyond it.

Our view is things will likely never get back to where they work a lot of the protocols and measures that we put in place will likely have to continue.

For many months into the future and we'll talk a little bit about that but we think as an industry. The gold industry is better positioned than post in terms of managing and in terms of.

Getting back.

To a situation closer to normal where we can take advantage.

Have.

A price deck for our product that is strong as it's been in seven or eight years. So that provide certain advantages and also dictates the strategy. So as we said we've been very focused around.

Hygiene.

Around screening.

Around physical distancing.

And.

Terms of positioning as I've said the industry is in a much better positioned than most because.

Our physical discussing challenges are relatively short duration.

In things like pages, where or in close quarters for a few minutes at a time, it's not like we have as an industry extended period of time is where we're right on top of each other so we can actually manage the business.

A lot better than most industries will talk a little bit about that as we get into the mines and how we dealt with this on some of them binds.

We've also we've all also employ testing.

Which is another layer of protection, we've tested all of our none of it employees, we've tested all of our employees and Lynn.

We hope to expand that testing we are involved in a a pilot project in none of it that's how we got access to the quick testing method that testing that that has now been approved by provincial and federal governments.

We're in a good position there as we said, we're looking to expand that hopefully bring that to Val d'or.

The other thing that stood out for US here is really on the SG side.

As we've said before we found ourselves.

In a position where in the and a lot of the areas. We operate we're in a much better positioned than even the governments and the communities to provide critical services and to provide critical health to the communities.

For example, in Mexico, we actually have more health care capacity at our minds than many of the communities too.

We have as many doctors as the communities do we have more sophisticated medical equipment like ventilators.

We have more ambulances. So we're in a position to help those communities. We did set up a separate facility.

For the government the government's request, we opened up an old finding camp.

Provide if needed in the community in isolation center. So on the social side of things, we've been doing things like that but also and none of it we're providing food hampers on a regular basis told a 450 families in multiple communities.

We're able to transport.

He supplies to those communities on our flights from the folks.

We've been investing in food banks so.

All of this is something we would do normally anyways as part of the way we think but it's also I think focused governments and communities on the benefits of mining.

As the government communities are looking for leadership looking for assistance.

And that actually builds the case for mining and I think many of you know we started a we make mining work social media advocacy campaign last year and this really hammers home.

That message, but I also think it's important as we move forward.

Because all of US have no idea how this is going to play out.

One of the things we saw was that different governments approach mining.

From a different perspective, some called essential some called it non essential.

We are in regions, where initially it was determined non essential but I think the government's realize particularly in Quebec that it was although initially determined non essential it was a high priority industry that not only was able to benefit the communities, but also it was able to provide well paying jobs.

Pay significant tax.

Dollars towards the government and I think one of our jobs here as we go forward is to ensure that we continue to make the case from mining because we don't know if theres a second wave coming we don't know how long this is going to go.

And Thats why weve been very careful with the restarts is take leadership demonstrate this works demonstrate that we can protect our employees demonstrate that we can make our employees families comfortable so that.

If there is a second wave or this thing continues for awhile.

We can continue to do what we do well in the communities and continue to operate our businesses. So we're very focused on.

Those initiatives.

And we'll talk a little bit about that as we get into some of the specifics on the sites as far as the first quarter.

But the big impact was really.

Nine days of shutdowns at our Quebec operations.

Two of our Qubec mines, where our best cash flow generators historically so.

For 90 days in the quarter of a back ended the quarter two of our best cash generating bind.

We're down as was Goldex.

It also impacted our operations and benefit because one of the things we didn't do it none of it is to protect the communities and none of it because that's a high risk those communities or high risk.

They have a history of lung issues and poor health.

They live in quote close quarters. So we made a decision earlier on early on to isolate our operations from the communities and have our.

None of it workforce go home and that continues to this day, we're still working on plans to bring them back we're still working on plans to fill in.

While they're still at home.

Allowing us to continue to ramp up so that was a key also.

Strategy, but it also did impact our operations I'll talk a little bit about that but we have restarted.

In Quebec, we'll talk about that and we're also ramping up in none of it which is all about really position the business for the second half, where we expect to return to production levels and that cost levels to those that we saw.

As we closed 2019 very strong in the fourth quarter of last year. We're also focused on free cash flow generation. Our overall capex numbers will come down from roughly 746 90, so that will certainly help in terms of generating free cash flow and we still have a lot of confidence in our business and we maintained.

Dividends or quarterly dividend 20 cents us per share.

As far as an operational update.

The focus was number one priority deal with cobot 19, and the impact look after our employees try to manage a business, where we were shutting down basically the minimum activity seven or eight mine. So we're dealing with thousands of employees and multiple communities that was an easy as we've said in my 35 years.

As the busiest sort of seven or eight weeks I've ever had I think just based on the complexity of all the things that are involved in managing through this but we didn't lose sight of what we needed to do at the assets. The teams did an amazing job.

At sort of managing.

Things they needed to do at the asset level.

Everybody knows that we had plans to upgrade infrastructure.

At the West mine at Laronde, whatever we had planned to do we got done.

In the first quarter impact we are actually before we had to suspend operations, we actually were in the West mine area developing.

We've actually just taking the first production blast in the West mine area within the last 24 hours. So.

So far so good as we continue to ramp up.

Around and we're also looking at ways that we can increase the mining rate at the neighboring property. The Ron will talk a little bit about that in Milan section Meliadine. The job one of the mean jobs was too.

The feeding system to the crushing plant.

That was repaired.

In March we had actually been running the plant at over 4000 tonnes a day prior to having to reduce activities there.

We had good indications before we were impacted by Covance.

That things would.

Well with the repairs ultimately, we're getting a new unit in.

The.

With the repairs have gone well.

Your mills actually operating at 85% capacity from underground ore stockpile as we continue to ramp up in the mine area, we'll talk a little bit.

Meadowbank the focus was just getting caught up and catching up on equipment maintenance backlog.

Getting the lake material out of the open pit, creating more mining surfaces. We.

We've been running at 50% in our mining rate due to reduced activity is there.

As we move into the second half, what we expect to be back to normal levels.

Instead of at both of the site.

We're really excited about exploration.

In the quarter I think what we're seeing there is so we've mentioned this before is there seems to be a lot of life left in these old mining can a lot more potential we've been saying that in the past with respect to east Goldie and we've been saying that with respect to what we're seeing on the old escape property at El said five but we're now seeing it again.

Interesting enough.

At Laronde and Laronde is blessed with the sickest package of favorable rock in that whole sector. When you go from going on the old can be or I am goal to boost gate, which was barrick Tula Ron to the east which is ours.

We were blessed with the tickets package of rock. So we always had multiple lenses in that with various types of mineralization.

And what we were seeing in the West zone, which we've talked about in the past.

As a repeat of what we saw 25 years ago in terms of.

Small nor so fractures that were filled with a lot of visible gold that we're situated parallel to our drilling so we never really pick them up and that's why we're seeing that upgrading in the west mine area, but we've actually seen something else that we saw many many years ago, we're actually seeing what looks.

Like the re appearance of the 20, nor the zinc so flat.

Which is massive sulfide.

We're seeing decent thicknesses waiting assays, what we're seeing massive sulfide.

Over sort of Trutech, Mississippi 10 meters.

I would suggest lots of zinc lots of silver.

Still need to do the assays, but situated in an area, which makes sense. It's on the eastern side of the deposit is still wide open.

So we've got a program to continue the drilling off to the east and.

It wouldn't surprise us as we have the reappearance of that lands below three kilometers, which could make an interesting those lenses tend to have a lot of tons in them.

So it's early remains to be seen but it shows you that there's a lot of life left in this camp.

At Canadian Malartic.

We continue to drill east Colby I think east gold is important because just with Odyssey and east melodic it was never going to work. It was too low grade on its own it just didnt make sense east Goldie given the tonnage given the uptick in great. The better grades gives us a chance now it's still early.

We continue to get good results were getting decent thicknesses and a higher grade core, but we've only drilled it on spacings of about 150 meters.

Right.

Plan and strategy now over the next 18 months.

This to tighten up that drill spacing.

To about 75 meters and hopefully we continue to confirm the continuity and that geometry of the deposit.

So that we can upgrade the resource classification, and so that we can understand what's possible and what ultimately yamana and agnico can put together.

For that opportunity at Canadian Malartic, and Santer Gertrude us we put out some pretty good holes. We've got some recent drill holes.

Which continue to look good.

So thats going to be a focus of our Mexican business to try to understand how that fits in.

As we move forward.

Just briefly on the operating results.

Again, these were impacted by temporary shutdowns and reduced activities.

I'll just highlight two here.

Goldex, even without nine days at the end of March was still above its budget very good productivity, there and kittila.

Has remained open we had a.

Temporary shutdown of the underground mine will talk about that but even with that they were above their budget as well. So good performance from those mines.

The financial highlights Ecevit noisy that's really driven by.

The weakening of our local currencies against the U.S. dollar, particularly the Canadian dollar, which on January one was 1.3.

End of March 1.4, too.

So that had the impact of.

Impacting our deferred tax liability. So we had to add back 18% to our headline earnings and also we had mark to market on our foreign exchange and diesel hedges.

About nine cents, so normalized earnings of 23 cents per share so not bad given that we were impacted in the back half of March due to cold and on the financial position.

But the started this week it really understand their know how this foot unfold.

Just wanted to the ultra careful no magic to the number we decided to draw down $1 billion on our credit line of 1.2 billion. We've paid back half a million we expect to pay the balances we continue to ramp up our production over the next few months.

Gets.

Pay down our maturity on April seven $360 million.

We didn't term 200 million of that out.

Which given the volatility in the markets and the way that treasuries were moving around our team did a very good job because that was not easy.

In fact, the week that we did that debt deal. There is only I think about six debt deals done that beat in all of the U.S. market and normally theres dozens and dozens of these things done.

So we got it done average of 11 years at 2.83%.

If we had a weighted a week.

Deals that were done a week later they were much better credits nervous they were paying for the same term about <unk> percent more interest so our team did a good job.

Getting that done so our debt and overall debt came down.

In terms of net debt, because we did pay down 160 million of that.

Over to bulk to term out to reduce that.

We did get a credit upgrade Crs and we did have.

Fitch.

Issue, there and our credit rating on us with a rating of.

I will be with a stable outlook, so all of that again.

It is positive as we look forward. So I'll go through this fairly quickly and we'll open it up for questions I think laronde as we mentioned the emphasis was really just doing the ground support. So we can get back into the West mine as you know that's a higher grade area.

We have.

This has seen last year when we're in a significant upgrade of 3% to 50% contained gold due to the north south fractures and a lot of visible gold in that system. So it's important to get back in there.

That drives production dries production growth as we go forward. So I think that was important to get back there at the key there as we deal with cold bid.

As we looked at our back operations and began to call people back as the Quebec government on April 15th allowed the reopening of mining.

Just a process each of the employees were called individual by their supervisors, we sent them a video.

Which outlined in visual form what they were going to see when they came back to the sites in terms of screening in terms of hygiene in terms of physical dispensing and I think one of the key things which is.

From a mining perspective really jumps out at you is the the way we're managing the cage.

Each of the employees entered the cage were operating at 50% capacity each the employees into the cage one by one.

There are separated by occurred they can't face each other they can't look at each other.

I can't talk to each other.

So there in that cage for five.

Plus minutes.

So.

Thats been well accepted we had 90% take up on the returned to work its all voluntary, forcing anybody to come back to work not only did employees have to be comfortable the.

Families have to be comfortable so what we found when people return they were excited about the back to work excited to see their fellow employees.

So things are going well.

As we go forward I guess the big question is well Okay. These types of things may extend.

For a much longer and many months, how do we offset the lack of the drop in productivity from some of these.

New measures.

We believe that.

What we already started a program to understand sort of the optimal size, our workforce and the fact that we've had to scale back at seven or eight mines gives us a better feel as we reintroduced people slowly.

The optimal size should be and most of the people that havent.

Back in yet contract workforce. So we're hoping we can be more efficient with that contract workforce.

That could introduce some savings to possibly offset some of this.

Productivity loss through these new measures.

But it's still early we're still learning.

But for we're confident that.

We're going to get a really good feel of how this is going to work going forward.

Largely because we but weve been forced to scale back and we're actually doing more productivity with less workers in places like none of it than we were doing before so we really have to let this play out.

As we go forward, so jumping to Canadian Malartic.

We did start that will shortly after things were allowed to reopen we restarted on April 17.

Running about 60000.

Today running off a stockpile as we ramp up the mining activity. So that restart has gone well we mentioned gold ex the productivity is is really driven by really good performance in the rail there. So that was a great AD and a great use of old technology, just adapting it in a new format.

And tailoring it to that particular operation on were also benefiting from higher grades and more tons in the south zone in the South side, I think is going to be driving.

Good solid performance at Goldex for several quarters as we move forward.

Meadowbank focus was just.

Managing the communities as it was meliadine, having the workforce cohort isolate the operations.

The from the.

Communities going to at 28 day rotation from 14 again that was all voluntary we're not forcing people to go up for 28 days, we had more volunteers than we had spaces. So thats a good sign that rotations working well ultimately we have to come back to something less than 28 days, that's a long period of time.

To be up there.

With that help helps the productivity because we're having fewer changeovers.

So I think thats, a plus and thats positive as we work through the issues around Kogut focus there was just catch up on maintenance remove the lake that material open up more faces.

In the open pit, we went down to 50% of our mining rate.

We stopped the mill.

Building a sufficient stockpile, we've just resumed long haul trucking.

Bringing your to Meadowbank.

We have done a lot of improvements on getting parts from Meadowbank to the Amaruq site, there's still work to do at this one so of the three Laronde Meliadine and Amaruq. We always said this was sort of Q1 Q2, the others are more Q1.

So there's still a bit of work to do and a bit of catch up to do because of cobot, but they've made a lot of good progress there and it's set up for a much stronger second half as we resumed production and get up to over 9000.

Tons a day in the second half at Meliadine as we said eight for an issue feeders will resolve.

They function they worked well.

Even in February I got to give the team credit even with no eight from feeder.

The work around we were able to do 3300 tonnes a day in February even with the work around.

So getting the apron feeder repaired.

So with manufactured parts, we have the spare plates in from the manufacturer we should get the other unit in July August when the barges come in.

So so far so good there.

Are running that plant now at about.

3500 tonnes a day.

Q3 about 4000 tonnes a day Q4 about 4600 tonnes a day, we've started to pump out the.

Additional mining horizon.

So we're in a position to continue to move that part of the mine forward as we pumped out and get to developing that area. So that's what's going to drive the additional tons in Q4, but also thats one of the higher grade areas of the underground mine. That's why we're comfortable on the Meliadine.

Production.

Profile so.

As we look at.

Meliadine and we look at.

Meadowbank one of the things that we have to do is reintegrate, the none of us workforce.

At this point theyre not ready to come back.

I think theres still anxiety. They have had one case of Colgate 19, and none of it. It appeared this week, it's important for northern tip of Baffin Island, so not near any of our operations, but theres still something unease and anxiety there so.

We can actually ramp up we can use.

Contract workers, we can use employees that we had planned to have come in in the summer to do some of the duties that we had our workforce there's still a key part of our operations, we want them back, but we only want them back when it safe for them to come back and Theyre comfortable coming back.

At Kittila.

Again, we said, it's a above budget.

They have and the only mine that's really maintained the processing through the entire quarter. They did have an employee test positive they isolated employee right away when he was a feeling not well.

They did contract tracing they tested immediately the people that he had contact in.

Prior to him not feeling well all of those tests coming back negative employees better now and we have actually tested all of our employees in Finland.

No other issues there and I think finished team did a really good job reacting responding following protocol, taking isolation steps contacting public health authorities working with them to do the contact tracing and ensure that spread.

Not.

More widespread and just impacting one employed a good work on behalf of kept a lot.

In the southern business, Mexico has taken a position that in April.

All non essential businesses were to go to minimum activities were still doing some.

Getting goal that little Leach pads.

At those operations, particularly in the India. The government has subsequently extended that now to the end of May.

They have made.

Hey.

They do have.

Opportunity that if you're operating a business in a region where.

The cope with 19 is not age or issue, where there's very few cases that they will consider allowing those industries and those businesses to start back up that eight which could be may 18. So we're certainly in an area right now where.

There's not an awful lot of cases there.

So there may be an opportunity that we can get back to work.

Before the end of May early June so we're going to continue to monitor that our team is working very closely with the secretary of the economy Thats responsible for the mines.

To highlight what we're able to do in the community and the fact that we can still protect our employees.

And run our business. So we'll keep you posted on that.

Operator, if you can open the lines for questions, we'll try to see how this works remotely.

I'll try to direct questions to those of.

Members of the team that our online that can respond to the questions. Thank you very Mike.

I'd like to ask a question at this time. Please press Star then the number one on your telephone keypad. If you like Charlie Your question press the pound he will foster just a moment to compile the Q any roster.

First question comes from for Hot Sorry, with credit Suisse.

Hi, good morning, Thanks for taking my question.

Just the first one is a clarification the 480 to 500000 ounces per quarter and the second half.

Incorporate any.

Any productivity losses is that right.

Yes, that's correct.

Okay and then my other question.

Second half the year is obviously looking very good from a free cash flow perspective, you don't have any debt maturity the revolver will get repaid.

Just high level, what are some of the free cash flow capital allocation priorities.

Well I think the focus on that side really doesn't change.

For us it was still always define that balance between.

We do see debt.

Essentially improving financial flexibility.

Reinvesting in our highest quality projects not the entire pipeline. The emphasis is still trying to stage that out and that's why we're continuing fairly actively drilling some of the key projects to get a better feel for the relative ranking and prominence of the projects within the pipeline and then.

Clearly we are looking to the.

The dividend up and.

We no one really knows how this will all unfold, but I think as we said.

Alluded to at the start.

You know this has been devastating.

For many people, but also for industries and a lot industries are going to take a long time to come back.

The mining industry, particularly the gold mining industry is one that can come back fairly quickly into a much better pricing environment for the product and given the stimulus that's been thrown.

Economies.

The prospects for Boulder pretty good.

We're not sure how it again, there's no guarantees on this but.

I think.

It's kind of reminds me a bit of now I'm dating myself, but it kind of reminds me a bit of 70 980.

Where the gold price move fairly quickly.

To a level that to.

Companies to really anticipate.

In the amount of cash that was generated by the industry in a very short period of time was huge and I saw that when I first walk into a eco in 1983.

As an auditor.

And they had.

As much almost as much cash as their market cap.

And thats the year that day instituted the first cash dividend because of that and so I.

I would expect goal to hit a new high in US dollars, it's hit a new high and almost in every other major currency and.

So the industry is going to do really well at 1700, it's going to do tremendously well at 2000.

Question then becomes.

Your question becomes even more important at that point.

Because what we need as an industry is the disciplined to make sure that the bulk of that gets returned to shareholders.

And.

You can see that Paul Pan I made the right way back when.

Because he had way more cash than in could actually put to good use and he decided when it wasn't the norm back then.

To start the dividends and even in 1980, we actually paid a special dividends at one point. So that's going to continue to be our focus if we're fortunate enough.

To continue at 1700, plus and maybe 2000 plus at some point.

Thank you.

Next question comes from Ralph Profiti with eight capital.

Hi, good morning, everyone. Thanks for taking my questions.

Sounds good to see the sort of turnaround and things going well into west area of Laronde. If I can maybe ask a question as you sort of put some focus on this expansion at Lz five we've seen the grades come down to about two grams a ton in the last few quarters I was wondering if that's sort of.

A good go forward assumption on some of the grades that we can associate with this potential expansion.

I think thats, roughly where we.

Looking at I don't see we're we're not sort of forecasting a big bump in grade that's generally what we get there I think the strategy. There is that the reason that we actually went there.

In the first place was not just to get 100000, or 200000 ounces and make a little bit of money.

Ultimately there are several hundred thousand ounces over there that were left at a much lower gold price by the previous owners.

There was almost similar to the thinking and strategy around Goldex spend 90 million to reopen it after the issues we had 2011.

Take a view that we only had three years.

Of mine life for that 90 million and we'll probably end up getting 10 to 12 years.

So we're not looking for great bump, but we're looking for more tons.

Which is good return.

Good cash flow, particularly at east gold prices and the extra benefit we've had from there is the ability to test our automated equipment tested an environment, which isn't as complex as laronde, because I guess one of the things that this issue and pandemic has highlighted the more you can use automated equipment.

Better off your employees are safer you can respect physical distancing. So all of those were real bonus on else at five.

You've on I don't know if you have anything to add in terms of.

Mining and moving forward on just ramping up some tons and what we're seeing over there.

Yeah, I think to you.

Moving up and Tom interest when the biggest focus particularly.

Rearrange the engineering team to focus on Morone at depth and.

Basically understanding the potential in that area. So the group has been focused on some satellites on higher grade satellite phones that they were left behind in the bear Dave. So these are.

As you go further is that they're also integrating some of these ideas and future. Most among we'll update as we get more information on them.

Okay, Great separate question on on Kittila and.

The the prudence of delaying the shaft expansion I've seen in a couple of quarters toward late 2019, you sort of hit that 500000 tons on a quarterly basis I was wondering exclusive of the shaft expansion. Do you think you can you can push operations there to get to that 2 million ton and.

Realized rate without the expansion.

I'll just start and then I'll I'll get evolved to fill in some of the detailed.

The shaft.

Project.

Was impacted by cold it really wasn't that decision.

Okay.

Two.

Sort of suspended outside of coal that.

The shaft sinking contractor that the workers were Canadian so we need to make sure those Canadians got home.

As this thing started to ramp up so the focus was on making sure. They got home our team in Finland has been in touch with the Canadian Ambassador to Finland too.

To start working on.

Program to get the Canadian workers back so that we can get that project back on track, but he vonn, maybe can fill in some of the details.

Yeah, specifically to your question Mr. good point.

The both the mill in the mine presently and probably till the end of 2021 will be in a position to get a doctor that 500000 tons per quarter.

So that's that's a good thing.

As we go further.

Assuming the better the shacks is completed the cost structure underground changes drastically. So there's lot of all I'm focused on trying to complete this project as soon as we can.

Because of the.

The magnitude of the cost reduction.

As we are starting to mine below like Fivesix hundred boggles. The 10 kilometer factors on the holding is getting a little bit.

More challenging.

I see.

That's good clarity thank you.

Next question comes from Greg Burns with TD Securities.

Yes. Thank you Sean I'll give on can you talk a little bit more about the same water issues.

Let me down on the pay specs, so what you've done to address what issues that you talked about in.

Q4 results.

Yeah, I think on the paste backfill.

And reduced activities there we kept mining so it was important to continue to mine.

Continue to process and why we're mining at reduced rates and processing a little bit less I think we're processing around 3000 tonnes a day versus the plant at four we're able to catch up on some voids in backfill. We've also use consolidator brachfeld.

So we've done a really good job just catching up on that which is important as far as sailing water, it's more about really permits.

We continue to engage the and the authorities I think everybody acknowledges that.

The best solution is a pipeline rather than have us a truck.

Water and dumped that water during the summer season, because those trucks.

Kick off an awful lot of does so.

We've been engaged that the the local level.

With our into at partners, if any would associations with and none of it government at the federal levels and salsa involved in that permitting.

To make that case, so we still expect to get those permits later this year, we still expect to have a pipeline in place.

Next year.

Got storage capacity for two years.

The cost is capital from an operating cost perspective, it will be cheaper.

So it's really the answer to make.

The right environmental solutions, and it's really the answer to be more productive in terms of water management water management kind of the biggest issue now versus where it where things were at 10 years ago from a mining perspective. So this would certainly help so we don't we haven't had any pushback on that people understand thats. The best way to go it's just a matter.

Through the permit process.

Thanks.

Yes.

Next question comes from carry Macquarie with Canaccord Genuity.

Hi, good morning, guys not so much on morning.

A question.

Hi, Kerry you may have to speak up a bit we're having trouble hearing you.

Okay, just better that's a lot better. Thank you. Okay. Yeah, maybe longer term question. You mentioned, you know being potentially unhealthy gold price environment here just wondering how you think about your.

Project pipeline beyond the phase two at Amaruq and Meliadine and.

Other projects there that you think and move forward or do you think you need to supplement with supplement that with M&A at some point.

Well I think if you look at how we built the business until five we've done a lot of smaller deals. So we're certainly focused in terms of our evaluation work.

Still monitoring sort of single asset projects, but theres nothing out there, we feel compelled to own a moment.

You know people say hey, maybe this is an opportunity to be proactive and may be aggressive during.

This period, we don't see that at all we haven't really sped up our project evaluation work, it's just sort of.

Disciplined and measure just trying to understand things.

But what we're really trying to do.

Ahead of that is just to understand like why do we have at Kirkland Lake you know theres likely available mind narrowed upper beaver, but how does it fit.

We continue to watch with interest what our neighbor is doing in terms of drill results on their structures. So I think that camp has a lot of potential.

Where is that where should that asset land.

That's a question that has to be resolved at some point.

We like our exploration team has always like that they have liked it for 10 years, even when Charlie H. added at Queen's them.

Certainly the gold price helps but is it has to stand on its own and so we would have to stack that up again.

Things like the underground Arctic and how that one fits in.

Two years ago that was not going to make it.

With East Goldie, It's certainly got a lot more potential but again as we said it's still early.

That has the potential to extend the life of a large.

For quite awhile.

And with East Goldie you have the potential.

When you add in Odyssey any small Arctic you have the potential for a fairly sizable underground mine at some point in order to determine what that is exactly we need the drilling.

So I think what we've told our team is that the drill priorities at your drill priorities should be focused on a pipeline and we need to understand that pipeline.

And so the focus on the drill priorities as Laronde are these are there new zones emerging at depth wouldn't surprise us given the history given the favorable rock package given the thickness of that.

The fact is we're drilling into an area, we really had drilled in the past does this mean it goes much further east name so.

These are the types of things, we're trying to fit in but I don't I don't sense that.

We're not.

We don't have the the appetite for a massive building phase.

I don't think it's necessary.

We'd rather think.

The strategy worked so are there other things out there we could add at a decent price and work and work into the pipeline, but in order to determine whether those are any good need to understand our pipeline better.

So it'll be more measured continued to be measured.

Great. Thank you and maybe just on Malartic.

Any just any advance from the discussions around the royalties there. They can comment on no. We just put that on old I don't think.

Well I think they position that both humana technique or taking is that we need to think about it.

As.

How does it look under the existing conditions.

Making no assumptions that those conditions could change.

And the good thing about that.

When you actually owned it 100% other partner you.

You direct every drill hole.

You will apply every budget.

Every dollar that you want to spend on it and say you determine the pace.

You've got it in the hands up some pretty good underground mining companies that have experience. So we're going to work out of that work on it at a pace that make sense, but we're going to drill it and we need tighter spacing as we said.

But although early.

Our guys Lincoln.

Great. Thank you.

Once again, if you'd like to ask a question. Please press star one on your telephone keypad. We have a question from annual checkup with Scotiabank. Please go ahead.

Hi, good morning, everybody.

Morning, I, just wanted to come back and none of that if I could pass this on our on Yvonne maybe just talk a little bit about I know you if you've got a reduced workforce right. Now can you just talk a little bit about how you're looking.

The requirement that you need to ramp up tick capacity and today after the second half just on each of the site and.

How you're going to get there with manpower and how you're thinking back on some of the job.

Well you look at four I'll start four to 500 employees.

With various skill levels.

So.

You know that as a small much smaller subset when you look at which of those employees are actually involved in critical mining.

Tasks and responsibilities.

So these are jobs that.

Can be filled in by contractors some of them can be filled in by.

Our rotation in the summer, we usually do a fair amount of hiring.

During the summer we had a lot of take up in the summer.

Lot of these jobs wouldn't take a lot in terms of training.

As we said ultimately we want our none of it workforce back, but there's a way that we can manage sort of ahead of that and the strategy is really around contracts. So we've already started that process.

To to assume that this may take through the summer before the annual workforce is comfortable coming back.

We don't know for sure.

We're engaged in and and talking to them on a regular basis, but maybe you have on you can.

Sort of fill in some of the details there.

Yeah, well I think like you have to look out is from each operation standpoint at Meliadine.

There's not too much concern going forward and ramping up because they were rodeo roughly about 75%.

Of normal workforce at site.

And adding personnel on from mostly.

We're in a position that will will find too.

Contractors, some resource in that area, so not too concerned at movie the challenges will be more because you proportions of vendor with on the operation side of things is more predominant at a at Meadowbank and so far like will more looked at 55%.

Workforce up there, but the construction industry can supply a lot of.

Contractors to for heavy equipment an operation.

What we're seeing a you don't expect the in which to return probably for a few months at least in.

As we ramp up in tonnage, we're going to be basically.

Getting.

Employees from that.

From that group gross contractors out there to supplies.

And just so that I understand I asked in the press release, you mentioned that use them stopped on the underground project.

Are you stopping and redirecting.

The employees that to underground at.

Now you die.

Is that how it's working.

No actually well, yes, and no some some of the.

Manpower's spin either returned home the maintenance guys had been returns have been.

Reintroduced into the site to focus on a backlog.

So it's a variety of things with the we will Oh, we will adopt probably will probably restart some minor development work towards the end.

End of Q2 Q3 in Q4.

Okay, and then maybe Sean for you and I I've been trying to get a handle on nothing you touched a metal bet on that which has been you now with that then you how can safety measures special destined, saying I'm I'm trying to understand the long 10 impacts.

To the cost structure on product candidate 10, plus the mining industry and I've been asking all of the company's next question.

No and I know you're doing work on it can maybe qualitatively give us some.

Indications as well.

Found to be a latest challenge.

On this basis any of that topic Kennedy, maybe what I think Mike.

Yeah, I think the greatest challenge you know a lot of these plants are fairly sizable. So you can operate these plants and still respect all the physical distancing measures of the pressure points in the mines are generally at the front gate.

'cause, there's limited access and limited entrances.

So it's that screening process. So the way that we manage the screening process as you've got to stagger. The ships insight you don't have as many people showing up at the same time as you normally do to waive Hello to the security guard as they pass through.

Now there is for example at melodic Theres a series of trailers, where you have to actually go through.

Physical screening and also a series of questions. So you have to stagger to go through that she can manage that without a lot of impact on costs. The employees have to adjust to a different shift schedule.

But it's really in the underground mines on the cage, DAC and indicate and so the question going forward again, you stagger the entry.

You don't have 150 people showing up let's say for example at Laronde.

Eight in the morning or 730 in the morning, all lining up to jump into the next cage.

Staggering the shifts, but the capacity and those are half of what they normally would be the question. We have going forward is that.

Thats worked people are comfortable with it.

Can we get more productive and use that cage better by using face protection, whether its mass whether its plastic shields.

Because we're really focused on that short term contact it's not like they're standing hi, each other for hours as we said it's several minutes.

So we're looking at ways that we can.

Maybe.

Utilize those Kate systems.

That are going forward, but again, it's going to take some time, so it's hard to quantify but I think the real opportunity now.

Is what we were trying to do here over the last year as we went through that building phase and we started to ramp everything up is we said now it's time to look at the workforce and as you're building stuff. You know people you know you're adding people things don't really settled down to give you a chance to really take out.

Close hard look at things. So I think what this is Don is actually allowed us to strip everything back down again, and then reintroduce things very carefully and we're hopeful at the end of this that we can do the same things we're doing before.

With a smaller on track workforce.

And that could be the opportunity. So it's hard to quantify it now but from our perspective. This is all manageable and I think our people really did a good job not just signing things specifically for our mines, but working together with their colleagues and peers and other companies to make the case, particularly to the Quebec government.

This is an industry that can actually do things well and demonstrate leadership around things like hygiene and screening in physical distancing and testing.

Which we think a lot of these things we should probably just keep them going anyway.

Because it makes the employees comfortable so well have a better feel for this.

You know probably June.

So we can certainly circle back and provide more color on them at that time yeah.

And I would assume that any additional costs on the Navy on [laughter] you know something for you to answer is that you'll be getting benefits. Some from your FX and fuel hedges Thames, that's helping to offset some of these additional costs that would come to the cost structure would that be a fast they Matt Yeah, I think that's one thing.

Thanks, Tom.

When we've looked at it Treasury department is that so.

It's not just the Canadian dollar, but it's all its the peso and that's the Euro which has moved in a positive direction end the diesel price relative to what we had budgeted an expected and so what we've tried to do is just.

Protect levels better than the budget numbers.

And on the FX side do it with zero cost collar. So we still have that participation.

And that can make a difference of 40 to $50 on out so.

That can have a meaningful impact.

On the unit costs as we go forward.

Okay and look for more information on that Sean, but I'd I agree with you I think of all industries and mining industry and that's all it how can safety measures already in place before calls at 19 as you know is as one that is very adaptable to what we have to Dan.

Kim.

Yes, thanks, and but I think as an industry we've got to.

Demonstrate to you're not just our owners, but demonstrate to our employees and our communities and the government.

That we can take leadership on this but.

It because that if we can remain essential.

That puts the industry in a really strong position because we know other industries are going to struggle.

And the gold industry.

As in this position.

Where it's getting a.

Good prices, which could be a better price.

It's able to run at pretty close to normalized levels fairly quickly.

Which means on a relative basis.

That returns that the mining gold mining industry are going to generate I'm.

Should be viewed a lot better.

On a relative basis and.

As general Us start to revisit as resource fund to start to get a bit of inflow.

As many of you know.

He shares are still not widely held particularly.

With the vast pools of money in the U.S. I think that is the opportunity the opportunity is to run responsible businesses.

That stay disciplined as the gold price moves up.

Generate higher returns.

Uhhuh dividends up.

That's the formula for success no guarantee.

But that's the thing that certainly.

In our mind as we think about strategy.

And tactics.

Yes.

That's not second half a margin expansion stuff looking forward.

Thank you we'll leave it at that we have our ATM today.

Which is virtual so we've got a few things to do before that.

Thank you for your attention what we've tried to do it.

Because we've been working at home.

We have the opportunity to.

Get our teams together fairly quickly to respond to inquiry. So as we move forward if you'd like a one hour one on one to talk about some of these things in more detail more than happy to do it so.

Again, it wherever you are hopefully you're safe and your family's doing well and we look forward to.

Gauging in person at sometime down the road. Thank you.

Today's conference call you may now disconnect.

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