Q3 2020 Agnico Eagle Mines Ltd Earnings Call
Assess as we get into the slide presentation, you'll see we're still in the process of ranking our projects on a relative basis. So that we can effectively allocate the capital to.
Are those projects.
The important thing for us is to continue to steadily grow.
And do it in a way, where we're generating net free cash flow. So thats why its critical for us to rank them in stage.
And invest in them over time, and not increase the risk level by piling projects on top of projects and eating up all the net free cash flow. So thats an important part of our story and will connect some of those dots in the presentation.
The other aspect here is the dividend and so we've seen a 75% increase in the dividend. It's now 35 cents a quarter dollar 40 on an annual basis Thats approximately in total dollars about 300.
$40 million.
Dollars per year that.
The dividend increase is not solely based on higher gold prices, but also we factored in our ability to continue to grow the output from the current levels. If you look at sort.
Sort of assume an average production over the next several years.
Between 2.1, and 2.2 million ounces that works out to $160 an ounce.
In terms of dividend payment on an annual production basis. So that's very manageable for us as we've invested heavily in the business and now we're in that harvesting stage one more thing on the.
On sort of the dividends and the philosophy, there and I think the industrys positioning itself well, it's certainly been.
Good to see companies that eliminated dividends six or seven years ago reinstating them now it's certainly good to see from an industry perspective companies growing dividends I think we as an industry heard our owners.
Saying, we want to return of capital.
We certainly isn't there for many years.
As you know we started to pay a dividend back in 1983, and we paid one every year since then but it wasn't just the fact.
That.
We were able to pay that dividend over that 37 year period by paying that dividend.
We didnt pay a dividend and as a result of paying that dividend and maintaining that track record it.
It didn't take money away.
From our ability to invest in our business over time and so if we reflect on why we have been successful we've been successful because.
We've identified a high quality projects early.
We put money to work early.
Early.
Drilled those projects.
And we realized on that geological potential so effectively what we've done is we've taken geological risk and we've kept the other risks in our business low and what Weve also done this share count both so the idea was to ensure that over time, when we had the ability to.
To pay a dividend and return cash to our shareholders we did it.
We made it a priority, but while we're doing that that wasn't just good enough. What we were also more.
More focused on is ensuring the business was strong in a way, where we were adding ounces cheaply.
Using our in House mine building skills to turn those growing deposits into meaningful parts of our business.
And while we kept our share count low.
We're able to put.
Put up.
Above average share price returns to our shareholders. So.
Really what we're trying to say is that's been a very effective strategy for us because it's been well matched to our skills.
As we said it's proven that it works and it's worked over several decades. So the message here is we will continue to follow that plan as we move forward.
Because of how it works and how effective it's been and the one other point before I get into the details as to just to note that we've had some real.
Really.
Steve just acknowledgement on the safety side here. So our teams are.
We've done an excellent job and have been recognized.
For that work so lets move into the presentation and we'll get into some of the details.
We talked a little bit about the summary.
We always expected that the second half would be much stronger or we can see that in Q3. So we expect.
A solid second half in terms of our ability to produce gold, where we expected to produce it but also to generate the free cash flow.
These gold price levels. So we've maintained our production and cost guidance we've maintained.
Our longer term guidance that's unchanged.
As we said.
We're producing roughly at a run rate of close to 2 million ounces and we expect given our pipeline and what we're seeing or assets to be able to go above that we still have to decide how we're going to build those projects in terms of scheduling and relative ranking.
As we said, we're working on that but a big piece to how we're going to make those assessments is really on the exploration side as we said at the start.
There's still more work to do we've seen some really good results, which are suggesting that we can extend mine life now add ounces in the mine plan.
Which is important.
And we'll get into some of those.
Ideas in this presentation on the back of a higher exploration budget as we move into next year as we said.
On the gold production side, we produced over 490000 ounces.
Cash costs of $764 per ounce, there's still more work to do on the cost side.
We believe we can do better next year. So we're expecting to see some improvements on that side. As we said there is no change to our 2020 guidance. So our longer term production guidance that remains the same we did decide to spend a bit more in the closing months here in 2020 to position that.
Business going forward, adding a boat.
$40 million, if you take the midpoint of that range and that's being spent.
At Kittila to accelerate that expansion program at Amaruq, We had stopped the underground program were restarting the underground program, we stopped it in the first half largely around cope it and the fact that we had to go to minimum activities there.
And we're actually.
Purchasing pipe.
The waterline that we expect to have permitted.
Next year at Meliadine. So we thought that was smart to do in terms of being able to position the business forward.
Knocked about dividend co that clearly important our teams responded as you know we've talked about this before risk.
Responded well in.
In Q2.
Sensibly and getting testing up and running early on effective testing system.
In addition to the other protocols.
So that certainly helped us position the business and make the case to the authorities that we could operate safely and as a result, as you know we were able to get our minds up and running in Quebec, and Mexico earlier that had been suggested by the government shutdown.
And I think the real question is.
How is the business and how is the industry position now where we're seeing rising case counts rising case counts and some of the areas where we're operating.
What we're doing is we're expanding testing.
We have two laps going now we're adding another lab another lab in Quebec in the Val Dor area. So testing has been effective we're looking at changing when we test to test.
For a period before people workers show up.
For their transportation to site I think that's important.
Because sometimes theyre asymptomatic may not test positive may test positive of a day later when they are at the site, which has happened, but we've been successfully able to isolate employees in those instances and avoid spread within the workforce, which is important.
I think the other thing that's important for a second wave is the way that the.
Businesses position not just the eco, but the industry and I think the industry has made a strong case to the authorities that not only can we operate safely.
We're clearly economic engines in those regions, where we operate and you can just see based on the profitability on the third quarter results from our peers and ourselves that these.
These companies bring a lot of benefits to the region and given the profitability.
In most instances, we'll be paying lots of taxes, which the governments are looking for so there is a strong case to be made in one other point here is that.
Everybody knows that none of the communities are particularly susceptible to the virus and.
Back in March we were one of the approaches we took was to ensure that we separated our business from the community. So that there would be no transmission as we were bringing people out from the south to the north even though we were testing we wanted to be extra careful on.
Unfortunately, the intuit workforce is still at home.
They are very important to us.
We're focused on getting everybody back, but only when we can ensure the safety of the communities and right now.
We can't do that will continue and we are continuing dialogue.
With the government none of it with the public health authorities and none of it.
I understand.
Best way to bring them all back to work.
That will happen, we're just not sure when we're bearing the cost of that.
For the quarter was $3.7 billion.
We'll be patient because it's the right thing to do.
Also on coal bed, which is in our cost per ounce is about $6, an ounce largely due to additional testing and the additional protocols.
So I just want to mention one more point on the none of it workforce what we've done.
To keep them engaged and to assist the communities who are in need of help.
Is we've actually brought.
Many employees back to work not at the mine.
They are actually working in the communities for community agencies they.
They're doing things like cleaning up waste fill sites there.
They're working in daycares, they're working community centers and when they do that we pay them, 100% right workers is at home.
75% of their pay.
If we can find a way that we can get them engaged in the community will pay them, 100% to keep them active and engaged but also the give back to the communities that we partner with and operate in.
As far as gold production.
Looking forward, we're forecasting about a 24% increase through 2022.
Our focus is.
Not only on executing that but understanding what comes in and beyond that and as we said, we're still doing the relative ranking on which projects. We're focused on we'll talk a little bit about them. We know about the kettle expansion, we've made major pro.
Progress there.
It's going to cost us a little bit more because we got delayed there.
With Covance, we had to send all the shaft sinkers back home to Canada. So it costs us a four months or so there.
Which is increasing somewhat the cost smelling phase two is underway amber underground, we talked about the restart of that and Odyssey Smile article talk about that in a minute, but there's an opportunity there in the early stages as we began the ramp to bring up some development or Oh and the ramp.
We're also focused in this context as we look at the production profile.
In the out years 2027 to 2032 and part of that is this.
Increased drill program to help us convert resource at existing mines into reserve. So we can put those ounces in the mine plan, which is really focused around how we can.
Not only going to be up above 2 million ounces, but sustained in it for a longer period of time, and so thats, where our team is focused on just talking a little bit more in detail about exploration.
I talked about kitzmiller from an expansion point of view.
Well.
We've got the permits to be at 2 million tons a year.
Moving to 2 million tons, a year, we commissioned the plant.
Things are gone a well there, but what we've also seen recently is an extension of the seas ourselves. So the seas Arizona's elements parallel to our main zone, we continue to intersect that zone outside of the known outline and that could be important as we move forward because it's an additional source of ore for us and.
It's growing in size. So we're focused on what is the next level of up 2 million tons per year is a 2.4 as a 2.5 a lot of this drilling on the seas, Arizona Bowl tell us whether we have.
Additional sources of ore to increase the mining rate. So that's how we are focused on adding value.
Kitzmiller mine in Finland.
I'll skip over Canadian Malartic on the slide for a minute and talk about Iran.
Laronde.
The focus there we can see adapt as we mine the west some are getting an upgrading.
And that West zone. So the Laronde mine has been in production for over 30 years were seeing some of the best grades in terms of volume we've seen in that 30 year history and we also have a lot of EPS had a lot of exploration success, we see the reappearance of zinc zone.
Recent drilling has been deeper on that zinc zone. The gold grades have gone better. The NSR values are very high here, what we're trying to do is figure out how big it is.
But it's close to infrastructure.
That'll be part of the increase in exploration budgets to understand the size. It was certainly open up a lot of flexibility in the lower mine and extend the mine life and also at Laronde. We're focused on the old boost gate property now known as sales at five and there is a whole package of health of rocks that.
The previous owners Barrick and lack never drilled.
Mike was shut down due to gold prices ahead of that and that opens up entirely new exploration front for us and for the wrong. So we need to understand what that opportunity is.
At Kirkman Lake I think we we know and have concluded its a buildable projects. The question is when when does it fit in.
Theres still more work to do you continue to get good drill results. It's got low cash cost because it's got a copper credit. They are so unique deposit for that part of of Ontario, but it's well situated we like it because it's a 45 minute drive from Rwanda, which is where we have a good part of our workforce live.
So there is a natural fit there.
And we're working on the study and hope to have it completed.
By the end of 2021 Canadian Malartic, it's getting a lot of attention as it should.
It's really moved up the depth chart.
In terms of potential over the last two years largely on the back of East Goldie, because what east Goldie does is it gives us.
Another fairly.
Fairly large source of ore, which is thicker and much better grade than what we see in other parts of the underground and the Odyssey.
East Mill Arctic areas. So it's changed the complexity of that opportunity largely because we can now look at it as a much larger underground mining scenario.
And what it has the potential to do is significantly extend the mine life.
And so there's work to do it's still early.
It's not a slam dunk by any means but I think our confidence level is high there because of our experience of almost 50 years in that region.
50 years of successfully building and operating underground mine. So we know what these things looked like we know what they feel like we know what to do with them when we see them back.
Back in 2014, when we sort of stepped into the the hostile takeover.
Part of our thesis was that there was a pretty good chance that there was underground opportunity here and it looks like the risk and so we put our best people.
To help and work with the Canadian Malartic team and with our partners in Yamana to sort it all out the news flow will be an updated resource in February as well as the preliminary economic assessment, which will outline our thinking on a shaft at need to shaft.
I think you can.
Take from our decision to advance the ramp we're confident that we have an underground scenario here.
We just need to continue to drill it we need to improve the confidence level around the resource we need to understand.
How big it is but we also now.
Given where east Goldie is located in a package of rocks, which previously didnt really it wasn't really known to have a lot of potential.
We've got over 20 kilometers of coverage now of that favorable rock package. So clearly it's a regional play now as well as.
Play around the immediate vicinity mine. So when you add all those things up these are telling us that these traditional caps have a lot more life left in them and that I think what it means to US is as we look at external opportunities. We continue look because we're always focused on the pipeline as we look on the on five years, that's how we feel.
This business that's were kept select came from that's where pino's altos came from that's where meadowbank and leading came from.
That's really India came from with that type of Siri, we talked about the strategy at the top that's what we're going to continue to look for those.
We also need to be able to understand what we already own at existing mines to make those relative comparison. So that's an important part.
I'm not going to go through each individual mine slide they're all there in the deck I won't get that part as we want to open it up for questions I know nuance.
Coming up.
At the top of the hour, but I'll just use the slide on the operating results to touch on.
On some of the mine.
Then I'll talk about some of the financial results and then we'll open it up for questions.
I'll start with Laronde laronde, although it's been in production for 30 years at June.
Keeps going it's one of these things that.
And it's not an easy money. So I think we have to give our team credit for I listen to our presentation. A couple of weeks ago from Ron team and when you add in everything they are dealing with there. It's a really complex business onto itself and its more complex because they're dealing at depth, but they are also dealing with exploration opportunities and how that fits in.
Sites located community.
So there's lots of things to worry about here. They are continuing to open up the lower part of the mine for getting an upgrade in the West mine.
We're getting tonnage from the other parts of the deposit.
We have opportunities elds at five.
We're using more automation, which is going to be extremely important as we go forward.
And the end result of all that is a quarter, where they produced about 100000 ounces.
Cash costs of $476 an ounce so still after all these years is an important contributor.
To our operation part of that success is the vision that the team had several years ago to take the old boost gate property, which we paid Barrick 7 billion Canadian in cash for almost 15 years ago.
And use it as a test case for automation, but also use it as a way that we can extract some of the resources that were left there and part of the strategy going forward. There's a lot more ounces. There there are several hundreds of thousands of ounces more.
They're not in our mine plan and Theres exploration opportunities in that fell sick package of rocks that we need to understand so that will continue to be a focus going forward.
So exploration is key all of the mine continues to generate extremely strong cash flows and not only that we have opportunities to the west as we look at the old Aber in ground, we now own but also.
To the east of our deposit when we see the potential in the base metals.
A gold actually talked about safety awards Goldex was awarded the FGF O'connell Trophy by the Qubec Mining Association for excellence and health and safety. So congratulations.
To the Goldex team also in September they had the highest throughput since the mine restarted back in 2013.
So they continue to get good drill results a depth in the south so.
So it's still an important contributor.
Two the company at Canadian Malartic.
Also awarded an upscale Connell board and the open pit category by.
By the Qubec Mining Association for excellence in health and safety. So that's a big bite.
Thats, a big mine that requires a re.
Regular overhauls up a plan, where you have 812000 contractors running around in a week.
And so a lot of people in a confined space and there clearly doing it safely so.
I think that's a good example of how effective that there.
There is they had record monthly tonnage milled in August.
So.
Coming back from the shutdown in Q2 with Covance they've done an extremely good job.
Barnett reach commercial production at the end of September.
So slightly ahead of schedule with our mining activities. There. The project we mentioned the underground we started the ramp so I think that's a really good sign that we talked about.
The expanded drilling and the potential for each school at Kittila.
Well as we said.
We are commissioning the expanded sales that's ongoing now.
We completed the tie end from September late September two third we connect tobar. So that's a good thing.
As we said the shaft.
The project was delayed because we had the sense of the contract workers back home to Canada, So there'll be a delay in the construction not a delay on the other side of the expansion in the plant because we kept working on that.
Because we used our our employees in Finland, and look more local contractors that could actually.
Operate and move in the country.
So still producing over 50000 ounces.
But with the ability to expand and go higher with exploration potential as we continue to look at depth at Meadowbank.
I don't bank was important from the perspective of that.
We achieved our plan target of over 100000 tons, a day of ore and waste.
So that was critical we struggled to get there as you know and we struggled to get there because of.
Backlog and eight and switching back to the equipment availability.
So were able to achieve that tonnage in Q3.
We're also focused on the long haul trucking we've added more vehicles, we received on the barge three in the third quarter.
So that'll give us some flexibility.
In that aspect of the business, which is important for us.
The IDR pit development.
Has been accelerated we mentioned we've restarted the underground ramp for the underground program I think which is also important for the future of that positive and as we go forward over the next several quarters, we should see an improvement in the strip ratio there.
The deposit because the early part of the production there was near surface lowered rate higher strip ratio. So the mining conditions should improve as we go forward there.
Meliadine, we had record production there.
96000 ounces.
Good cost performance. So they've had also a successful ramp up.
From Q2 and being reduced.
Down to minimum activities. So the focus there going forward is to continue to steadily ramp up.
Our our throughput and production rate over the next several quarters.
As we move into 2021 and take advantage.
The better grades that were seeing as we open up the new mining horizon.
That started in Q3 of 2020 and Weve begun overburden stripping at tier again, he acts as a lot of that expansion work in adding.
Additional reserves into the mine plan is ongoing we continue conversion drilling at the discovery satellite deposit.
Which should add to the reserve position there at the end of the year in Mexico.
We continue to move and develop the centre deposit to help out at Pinos Altos. We also see some good drill results at the Kabir all deposit, which we think is going to be important for Pino salt sales in terms of accessing good grade material in the vicinity of the existing infrastructure. So it's important for them. There then.
The next slide is crest in the Skoda really a thank you, Chris and the Skoda or an.
An open pit that added some really good quality production for our.
Business in Mexico.
Very close to the Pinos Altos mine, it's now winding down its just in the Leach pad.
Position now, where we're just getting their residues off the heap leaches going into next year. So.
Just a thank you to the team there for doing an exceptional job over a number of years and adding value to our business in Mexico at the India.
Another safety award.
India for the third year in a row was recognized by the Mexican chamber of Commerce.
For their health and safety awards. So they won silver helmet on board and what we're looking at at the India We're drilling.
Infill drilling and extending the chip riona deposit that will allow us we feel to extend the mine life.
The India. So the focus really in Mexico continues to be on taking advantage of here the synergy deposits to the infrastructure and also working on sand to recruit us and some other.
Opportunities that we see in Mexico.
So moving off the sites quickly to the financial highlights we can see that our earnings.
Were strong, but we're focused really on the operating cash flow for share, which was $1.90, so and see the impact that.
Increasing production being able to maintain cost and delivering into this high gold price environment has on our ability to generate cash not only cash from operations, but also free cash flow as we look forward to keep a lid on our capital spend by staging out projects and and building them out over time and not being in a hurry.
It is a real focus moving.
Moving to financial position.
As we entered the quarter.
We had about 250 million a.
Drawn on your credit line, that's been now paid as we expected it would eat so nothing drawn on the credit line and we ended the quarter with 322 million in cash so strong cash position comes.
Coming out of the quarter and I'll just end with a dividend slide I think what we see there is the progression since 2014, we were confident in our business, even when gold was 1200 that.
We didn't eliminate the dividend some others, where we're we're having to based on their positioning we were in a better position. So we did but we.
We are confident that we could increase it every year.
After that reduction and that was largely in a period, where gold wasn't doing much. It was sort of between 10 50 and Paul 50.
And we were spending a lot in 2017, and 18 and none of it and we were still increasing the dividend and as we said it's been a big part of our history and were comfortable increasing it again.
To the level of 35 cents a quarter.
And so one of the things for us, it's really about balance and so weve highlighted the dividends, but I think more importantly, we've highlighted the fact that we can pay that dividend and still invest.
And continue to invest in our quality projects to improve.
Oh.
The value in the business, while we keep the share count down so on that operator, I'd like to open it up open the lineup for questions.
Certainly at this time I would like to remind everyone that in order to ask a question. Please press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the culinary roster.
Your first question comes from the line of so hard to read from Credit Suisse. Your line is open.
Hey, good morning, Thanks for taking my question.
First as you think about the upcoming reserve update.
Is it fair to say that this will be your.
Please send reserve replacement reserve growth.
Sounds like next year is really when you're going to see higher exploration spend and maybe.
The more reserve growth. So I'm, just trying to get a sense of what this year is shaping up to be.
Yeah, we haven't finalized that number we do sort of a internal mid year run there.
Theres still some projects were updating studies on Theres still some drilling that were doing I think we're hopeful we can maintain a where we were.
Maybe a little bit of growth, but we still haven't done the numbers.
We're still working on that.
Okay no problem.
And the only other question I had was I was looking at the co. Good case data and it looks like you know the vast majority of the cases I think 75% are in Mexico are there any specific health and safety protocols that you have in place there to try to mitigate that and.
From a financial perspective is there a higher cost that we should expect there. Thanks.
I'll I'll just give you a sort of a general response and then mark.
The goal is here and he can provide some color.
Unfortunately, the situation in northern Mexico, where we operate are there there are a lot of cases in the big population centers and we're drawing on our.
Our workforce in some of those big population centers and so.
So we've had to adjust the protocol because although we do testing.
Sometimes the testing isn't 100% accurate so sometimes we're finding that we.
We do have someone that appears on site, but doesn't have it and a day or two later may.
Port symptoms and then show a positive test so what we've been able to do is is isolate very effectively when that does happen. So the limit the spread and we havent seen extensive spread but.
But we've had to change some things.
The big population centers, what we're finding is that.
Some of the employees to get to the pickup point, we're taking public transit.
And so now we pick them up.
And so it seems simple we probably should have been doing that before there's.
Theres lots to manage here, but so that's one of the things we're doing we're looking at getting a better testing system there as well.
We don't have the testing to the level, we have it in Canada.
Unfortunately, we'd certainly like to bring what we have in Canada down there, but it's a different country. So it's not as easy as you'd hope that would be.
But we are trying to mobilize testing resources in Mexico that can improve the accuracy of the testing.
So those are the BBB additional protocols it doesn't add a lot to the cost structure I think whats important is to ensure that the.
The mine isn't contributing to spread.
And the other side of that equation is the mine is actually in those regions in the best position to provide logistics and support to the communities because of our own medical facilities and medical personnel that are there that aren't there from the community. So our team has done a lot of work there providing.
That and the government is really appreciative of those efforts so.
That's what you've been doing there mark signaling that I've covered it pretty well so that.
That.
That's why I listen to those calls I actually pick some of that stuff up.
Thank you.
Thank you.
Your next question comes from the line of Josh Wolfson from RBC capital markets. Your line is open.
Thank you very much.
Regardless of the Odyssey P.A. I guess the phrasing in the release does make it focused on that asset and the comment about synergies from the other deposits.
Yeah, I'm just trying to understand what is going to be the focus of this study will include.
What that would be I guess full expectations are for each school. The will include some of the open pit extension I'm.
Just kind of what are the high level sort of I guess for this yeah I'll just dominic's got some detail on that but I think.
We know.
That we're going to have to make a call on this project.
On resource.
And we're not going to have it all but down on a reserve and that's why we're tightening up the drill spacing to improve the confidence level of the resource.
So we know that's a given.
So as we move forward I think the focus now is to understand.
The next stage outside of the ramp which is the shop, so that will be the big part of that and then how does that tie into the existing processing facility, but dominic's is going to provide.
A bit more color and detail on the expectations for what's in that study yet this study's going into it and integrate different ore body, including Easter Marty could you see and the new one is gouldie.
Assuming those ones into wide, but now with the addition of is good you know, it's a game changer with the project and that's going to be all owning so we did as well as wet.
What else really is remaining into to fit the team is looking for example at burn up or how do we extend a bit it there so that might add to reserves at the end of the year, but this is also important to part of the equation.
We have the meal, we have to fit and now we have been you a new project, how would we sold or feel more to gap between both of them.
Yes, I think that's important Josh.
Because it's still not clear to us how without potential production gap gets filled in.
We've experienced that before and none of it and we didnt sort of panic and rush Meliadine, we actually slowed it down here.
So we've got a really put all of our collective experience together with.
With the Florida team both humanity eco on you know what can be done at the Malartic pit.
Side and also what can we do in terms of the project side, but.
But we what we don't want to do is we don't want to sort of cut corners in Russia. Because this is probably 15 to 20 years of high quality production. That's sitting there. We're just trying to sort it out now so the worst thing. We can do is try to jam. It just to fill in six to 12 months whatever could be.
The focus will be on the quality of the project.
Got it so just just so I understand it doesn't sound like the production would go to zero I think because they ramp production would come earlier is that correct.
Yes, that's correct.
But it depends on you know the the question will be what is the quantities of what we can access from the ramp and the challenge with the ramp is it's only going to give us access to the lower grade part of that whole underground scenario, but the gravy, but the the the really good stuff, let's say.
Stuff that much better grade stuff is deeper and east Goldie.
Got it and then second question in terms of the dividend level going forward as you know we saw a major increase this quarter.
Where do you see that that dividends.
You know going being going forward.
You know given obviously uncertainty with the gold prices and what capital needs are for the business.
Well, we'll just have to consider that as we move forward as we gather more information on the problem project pipeline.
And.
That will give us.
Direction.
How do we split the pie and the pie is really projects dividends and financial flexibility.
On the balance sheet, they don't want to sit with a lot of cash. So then it principally comes down to.
Return to shareholders and project pipeline on the project pipeline, we don't want to pile up capital to.
To drive Capex up $2 billion again, the focus is to keep it at 700 to 800.
While we still build the project out so there's still you know gold price will depend on that how we move our production to 2.2 million ounces, maybe better will also dictate some of those.
Decisions around the dividends as well.
Great. Thank you very much thank you.
Your next question comes from the line of Binnie signal from Industrial Alliance. Your line is open.
Great. Thanks.
I spoke something or none of an asset so at Meliadine, you've got them a higher grades this quarter I just want to know ive throughput desktop and carrying janiak grows what should we expect in terms of average grade going forward at the mine and my other question would be on Meadowbank I, you're seeing a strip ratio is going to drop in the next year or so.
What sort of impact without having to have on your cost per ton there. Thanks.
Yeah, Okay. It doesnt make speaking.
At Meliadine.
We are going to increase throughput at 40 600000 to 4600 tonnes per day as you mentioned come in with more are coming from the pit, but the let's see the site is going to produce.
Between 90 and 100000 ounces.
Water. So greet then it'd be I think if you do the math you can I read between I mean their own 6.5 gram per tonne overall.
Andy for do you need to bank assets, they're really the driver is one of them is the the stripping ratio. So since the beginning of the year were mining at around 11.
Fourth quarter is going to be at 10, and next year, we're going to be between seven and eight so that's going to be a very helpful for the cost as well as the answer is we.
We are going to see the.
And then the next quarter is going to be in the same area 70, 75000 ounces, but group water, but we're going to go first fruits housing 85000.
I wasn't ounces per quarter and up to do a 100000 ounces per quarter.
Same area, the median and can't in monarch taken lateral and that's going to be also a very helpful sort of caught up rooms as a by increasing those units and this is going to do is going to come from with higher grade more we go deep into the whale tail and IDR bit a degraded going improve so next year, it's going to be start.
During the year, a three week four and we're going to finish the year at home for a into a into modeling.
Great. That's very helpful. Thank you.
Your next question comes from the line of.
Jackie proves balinski from BMO capital markets. Your line is open.
[noise] so much I just wanted to circle back quick on not on Josh is questioning about them Malartic underground project I, you mentioned in the Mdna that you're using and geotechnical drilling.
Added potential shaft location [laughter] can you give us some color on is that it does sound like that that's final stats have you more or less settled on the shaft location or is there still multiple sites that you're investigating how much more work to do you think there has to be done in terms of determining the overall.
Layout.
Well the shaft the studies, we will again.
In fact, I think were like at the over 90% I'd been dumping suit to to have more information with the geotechnical to understand where was that we did we going to ride with the P.A., which is going to be pea level on the resources, but we are going to be more and more advance into infrastructure.
The team he's looking out with we do with.
Yes, as we can as we mentioned to minimize.
The gap to bring on says faster.
We don't have we don't have the full picture yet we don't have the fruits of vision on the economy to end of December.
Okay sounds good.
And if I could just I mean, maybe make a jump over to the Laronde don't Fives mine I use you've noted that you found that you've had some real automations expenses and that might open up some new opportunities whether its deepening the mine ore or otherwise finding new efficiencies can you give us a little more color on.
On how you're able to roll out those those successes that you've achieved and is there opportunity to kind of move that into other mines as well or is this something that it's more.
Isolated they get sent to the sales at five area.
Oh, no that's really be do what we're looking for when we list. These cards more aggressive on a commission and the team said they look it do it does at five whats going to be kind of the I wouldn't mind in school to do more information a indoor able to do their part.
Part of the Sun age around 15.
15% to 20% of the contingent put you at the meeting so from the the loading of the holding up to the surface. We don't we don't see any driver assistance.
We're not there yet at a lot wrong because of the infrastructure and also the equipment that we have looked but what we're focusing right now is to really.
Where we have the I use a reduced and remember we used to be moved to a.
Remote loading or sorry, if we move marking a this is done well.
We did over 50% of the mucking done in the West mine I mean last quarter I mean, I know domestically within six months from now we're going to have an hour and you design, where we're gonna have you able also to load the truck automatically because we need to design to.
The area probably to do with safe no right now with was not necessarily the case mining that was not the according to that but more and more we go we go in that direction and division maybe do we need we need three to be able then to do more as not wrong I being out because you need to have it do you think.
[noise] indicated ramp to do how many but this is what we're looking at right now.
On the automation part with the 15 would did did see the commissioning at at is it five or <unk> I mean do at meeting.
People working with the suppliers. So the sales people are there and we're going to start a we're starting the implementation. So yes. The idea is to do with two to replicate that everywhere.
Okay, that's great and be exciting to see if I can just ask one final question.
Can you provide us maybe with some thoughts on the equity investments that you've made recently I specifically against me Paul Gold mines in Rupert like how are you thinking about those assets I do you see those moving into a cell phone like neagle ownership at some point, where maybe where they stack up in your.
In your pipeline is it possible to talk about and I guess, just finally on that point Oh are you looking to add other equity investments are or where else would you be looking at other equity investments until that your portfolio. Thanks, Yeah in terms of the general question on equity investments Weve as.
As you know we've used that successfully since the seventies, that's where gold acceleron came from so it's an important part of the strategy and.
Doesn't Nestle said I mean, if we buy something that it ends up a wholly owned by Nico Some do some don't we trade that portfolio I don't see the overall size of that portfolio going up much because of the way we're managing that now if the team comes with something they really like we tend to.
Take the lowest ranked.
Situation within the portfolio and try to move it out in a graceful way where we're not.
Putting pressure on the stock of that junior. So we're we're we're sort of managing it that way as for specifics, we tend not to sort of get into specifics of more recent ones. So we can just talk about the rationale for getting involved with them.
The one in the most recent was Naples or that kind of makes sense for us because of the large land package the favorable geology.
The fact that we were able to event in our old you tell property, which you know wasn't explored that deep and given what we know about some of our mines, which have shown that they've got tremendous life as we drill deeper kind of makes sense to have a revisit of that one.
And it kind of made sense to tie up a lot of ground in that region because we've seen.
Some of the success that other companies have had.
In those regions. So you know the phenol and project et cetera. So there's a lot of old projects that tend to.
Are showing well these days as they get more focused exploration done on them to do a project. We've we've known about it for years, we knew about it one way or operating EPS you tell.
So the way we've approached it is that.
We look at it by stepping back and say, we're really acquiring or getting involved with a large land package.
That is very prospective and has a lot of potential how do we use our skills Uh huh.
The skills of the company that owns the do a project to put forward a sort of a high quality exploration program and we'll see how things unfold, there's no plans to start building anything there.
In the case of Rupert, it's 50 kilometers from Tesla.
So one of the things that we always told ourselves or thought back in 2005, when we made a bid for red are hitting witches kept them up as we thought that.
As we don't cancel out any sort of junior exploration success in Scandinavia would have to come and talk to us because we would be a pretty important player given the size of the capital deposit and the infrastructure, we were going to have to build and the team that we were going to have to put in place or not much materialize for a number of years.
For the most recent two or three years and there's a number of things there that are going on.
And our team came to us several months back and said the one we like the best out of all the things that are going on and Finland and Sweden.
As Rupert.
So given the proximity to our operation given our successful experience in building a high quality business in Finland.
What goes with that which is relationships and a track record of doing things properly.
And then exploration budget a team there as well he taught us a good sense to engage the Rupert team provides some capital to work with them on thoughts on how.
The project can grow so we never can say, where these things ultimately end up.
Well on that one we've done well on Orlando.
Which we had for quite a while as it was harder for show.
Way back when when it was just the Panama. So the portfolio is doing well, but we're not here to sort of turn a quick buck.
Over here to see if there's anything that could fit in our pipeline looking out five to 10 years. So that's how we view these things.
That's super helpful. Thanks, very much and thank you.
Your next question comes from the line of Greg Burns from TD Securities. Your line is open.
Thank you Sean it sounds like walking down your production or your project pipeline.
Pretty important just terms of deciding where you go from here.
It sounds like that's 12 to 18 months away still is that right in terms of how you rank.
Logic underground.
Either on go to Ralph whatever else is in the pipeline.
We're we've got a good feel.
So what we're doing I would describe this is dotting the i's and crossing the Ts I would say now.
And that.
Looking at how we're going to deploy the capital we we know that we've got projects to build.
The question now is which ones will have the biggest impact.
Relative to risk and then fit them in and the.
We could.
Build them quicker, but that doesn't really make sense to us in this market because our focus is to just keep.
Keep risks down and provide quality and I think we all know that in order for these shares to go up we need to do investors and those investors tend to be.
HM.
Generally due to the space and they looking for different things and as we've said before we spend a lot of our time when we talk to these new potential investors talking about risk.
So our pipeline and how we manage it is really about risk and one of the reasons that we've always tended to want to own 100% of a project was so we can take the pace.
So when we spent.
Not just on what we spend and how we spend when we spend it and given.
Given that we have control of them all except for our partner on Canadian Malartic, the Humana and we're both aligned there we've got the ability to stage them properly. So that will be the focus I think it's more.
So that plus it's also in some of the recent exploration it looks like it's going to impact 2027 to 2032, certainly east Goldie would do that.
Certainly the Roland at depth would do that as well.
Kitzmiller has the potential to maybe boost production, but you know we already have a long life mine. There. So we need to just understand how that would fit as it give us a multiple another source of ore to go to two and a half million tons. So each of them has a specific thing we're trying to figure out, but given our experience where we're quite a long ways away I wouldn't.
18 months, I'd say six to 12 points.
It's probably more like it.
So by this time next year, we'll have a progression laid out of how these things will will fold into the pipeline, yeah, and I think we'll have better visibility on 27 to 32 like we can say now we're pretty comfortable that you know 2 million ounces is good for 10 years, but you know is that number 2.2, we don't know.
No. We're trying to say that's what we're trying to also to sort out as we look to add high quality resources at existing mines because in some cases. It extends the mine life and then if you look at melodic the pit it's ending in 26, maybe 27, we're still trying to sort that out.
That's the way everybody perceive that project.
We were starting to get results that was kind of changing are you 18 months ago.
But really early and so luckily we have people that have been through that phase and how things unfold there, but now it's pretty clear that you know you could see something that goes from 27 to 2014, there or maybe beyond again. Its early we don't know, but those are the types of things, where we're trying to get more clarity on.
Right now.
Thanks, Sean.
Your next question comes from the line of John Tumazos from.
John Tumazos very independent research your line is open.
Congratulations on all the success.
Thank you John.
Could you explain to me I'm sorry.
37860 ounces prepay.
Pre production.
Underground there's no Arctic.
Year to date, mostly in the third quarter I'd say because.
The biggest preproduction I can recall.
Was it something like a five meter stringer that was small time all tie ounce.
No that was not Barnett, yeah, I think that would be the Barnett pre production ounces.
Well more like 200 meters were 100000 tons grades four tenths of an ounce or.
Talk about the configuration of the development Mark.
Yeah, I'm just checking dominant do I think that's from Barnett. So I don't think it was Malartic underground John you said, we're not there yet murder I might have the names wrong actually excuse me yeah yeah.
Yeah. So that was the development of the open pits.
At Barnett and so we were producing develop.
Development ahead of hitting.
Hitting commercial production, which we achieved at the end of September so it was waste stripping.
Yes.
Yes.
[noise] issue go underground are you hitting any surprises where there's.
Mineral where you don't expect it.
Well I think it's too early now, but I think the expectation and this is really around east gold. We know the development ramp. It's just started we know well that will be having development money from.
The zones in the upper part of that opportunity.
That's lower grade material, that's in that two gram range.
Whereas odyssey has areas and <unk>, which are four or five and six grams.
So our expectation is when we get into that zone.
We'll see that much higher grades, but what we're still trying to figure out and that's going to one of the previous questions is there will be underground development coming out of the development ramp that's going underground at large.
We're just trying to quantify all that as part of the studies.
So that could have an impact a much before 2027. So there is a.
Potential bump that up we'll see there and has for grades were just not there yet we have drilled holes, but we don't have development from there yet.
Thank you.
Your next question comes from the line of Anita Soni from.
RBC capital markets. Your line is open.
Hi, just snuck in under the wire there so.
Most questions have been answered I. Just was curious can you talk about exploration budget. So I think you talked about on them increasing next years, you know idea broadly of the the.
The magnitude of what you're looking at or around yeah. Yeah. We've as we go through the budgeting process and we haven't landed anywhere.
But what we said to Gewgaws land.
As we said as we go through the budgeting process based on the return results that were coming in during Q3.
Why don't you look in the neighborhood of 50% bump, which would be roughly $50 million and allocate that to some of these projects, where we've got wide open intersections that could have an equal impact on the value of the deposit and you need to tell US one other thing you need to tell us if we invest.
Acts of that 50 million what is your expectation in terms of what we'll see at the end of the year in terms of additional resource ounces and where will they be so that's the way we're going to make the decision. So.
So I'd say Max is 50% it may come out to be less than that because we're not just going to spend at the spend that we need to spend to make sure that it's going to have the ounces.
Okay. Thank you very much that's all I. Thank you.
Your next question comes from the line of Kerry Mercury from Canaccord Genuity. Your line is open.
Hi, Good afternoon, I'm, Sean you mentioned that you know the Malartic underground isn't a slam dunk and other than making a call on resources and as you mentioned is there anything that stands out from a risk perspective.
Well I say that because it's a big project in its early so we've been around long enough to know that we're dealing with nature at the end of the day and although we're confident because of the skills that we have living and working in that region and we've done it before and we've seen it before from that aspect we know the sky.
Sales are all there and we know that the Canadian Malartic team you know.
Has exceptional skills and demand an eco we'll build it to bring additional skills to the table, but right now were working off of 150 meter drill spacing.
Although the project in the deposit, particularly he Scoli you know.
Looks good in terms of continuity, but we still have to do the infill drilling.
So we just we're just cautious I'm in that regard and where are you. If you see results coming out from us we're using cap rates or you know the grades are higher if you don't cap.
Which I think is important but it's just the way we got sort of approach it and think about things Oh, I I don't want to maybe I used the word slam dunk wrong.
It wasn't.
That we view the project is being a very challenging project filled with a lot of risk Oh, we just view it as there's a lot of work still to do we've done a lot of that work before on other mines. We know we can do the work, but we still have to do the work and that's why we don't want to get too far ahead of ourselves.
But I think we are excited.
So in terms of just general timing post the P.T. any like when would the shafts even be breaking ground and or is it going to be a PFS the Apollo.
Yeah, I've, just dominic's going to jump in here, but I think that that really drives the timing so.
So if you have to talk about a production gap or how you could manage that.
Part of managing that will be decisions around shaft, sinking and timing of making that decision. So we'll be mindful of that I'm, hoping for sort of considering that but it all has to sort of fit.
And it all has to be done in a way that.
We're not cutting corners. So dominant has got some thoughts on the shaft.
What we said we agreed with the team is to push as much as you can on the engineering to be ready when we were going to have the economy and to take a decision that engineering is willing advent.
We are in good position for that so when we're going to see a in the fit the economy and everything we work that Super crewman works and stuff like that but starting on the Q.
Great. Thank you guys.
Your next question comes from the line of Tony a jacuzzi connect from Scotiabank. Your line is open beta good morning, everybody.
Oh, good morning, maybe just Dominic and I have you on if you can just continue on Canadian My life [laughter] topic. Kennedy starting you know as a you know a mining sometime to decline for a few years and in that lower grade ore out there.
Actually the two and a half ramp time, and then moving out here and he's called me, let trends in <unk> three grams per tonne you know Nancy following years out after that.
Yes, that's.
What will happen in this is that what the team is looking for.
<unk> as early as we can to start to have some development or on that some points I'm stooping from the ramp.
During that time also to extend the pit a burden it gets could we do bigger, but we do a push back.
We have a low grade stockpile also with the current price those combined might make sense. So we're going to put everything together to extend a bit start to.
Beef up with the ramp.
Or material and that's when we're going to have to shop. More later I don't know 2027 is a that could be the shovel ready and then we went back to the same pills, maybe the same production we're doing right now.
Okay, and I know that we talked about Tom on your Jack <unk> that you're talking I talked to of scenario [laughter] ramping up to 20000 tons per day from the underground [laughter] contract is that something that you see is when you snap off overtime.
I don't have the detail do you think about that so we're not we're not there yet Kenya and that's why we're sort of not we don't want to get too far ahead of ourselves here, there's still some work to do but I think well, maybe that's driven off of their excitement for east Goldie when you see thickness and you'll see.
Great and you see multiple sources war I know about 18 months ago Youve on so best his office was next to mine and he came in and he said this has the potential to be a sizable underground mine with multiple sources more. So you know you can pick a number or were not going to put a number out well wait for the study.
Okay. So I guess, what Dominic mentioned is that we can get in 2027. When we you know happy East Goldie, there something tennis am I right that we actually day producing.
Yeah, again that needs to be to be looking detailed with oh, when we're going to add albeit it was it together, but yeah. That's that's the objective to two who who reach back to you to keep that that.
I see it as a as as it is right now yeah. I think 10 years you know those are important questions and we don't have the answers to those questions. I think the important question is is there a gap.
How long is the potential gap what do what can we do to maybe minimize the gap what does the production fall to during the potential gap I think is important also whats important is.
You know this this idea that we could have a mine that's producing the same as its producing today, we haven't made that call.
You know because you're going to have a mine that significantly lower tonnage, but better grade what is that tonnage what is that grade. It it's still a few years away. So.
So that's why we don't want to get too far ahead here, but we like it yeah. Yeah I appreciate that maybe just far apart part of the reason I was asking about that were expecting when here I know everybody be safe to assume I don't think that that's mainly coming from the east called me and we shouldn't expect so much from coming back to this topic.
Yes.
Well I will ask me the question to give them that.
Yeah, you're right. The 10, yeah. The growth will come from he is going to be mostly.
And if I can one more question intent to some I'm just I just I you know you have a lot going on and then northern now [laughter] I, just wonder about bad things happen business strategy. You know it looks like we have a few little things at the mine site is there something more beyond that in terms of opportunity at a popular.
Private thing you can probably not [laughter] pickup yeah. There's a few things that the team is working on an order of magnitude in terms of financial dollars, it's small but.
But they like the geology, there relatively new in terms of our engagement with them. So.
You know, it's unfortunate in Mexico, we've got a fabulous team.
That have done an exceptional job it's almost like the business. Currently is relegated to working satellite deposits are waiting for that next opportunity. So there's a few things were working on.
As I said not significant anywhere near significant relative to our overall size or that the team down there likes.
So we'll see how that unfolds, so order of magnitude or tens of millions of dollars and hundreds.
Hundreds of millions of dollars.
Okay, Okay, good and when we got to see some opportunities down there.
Very good thank you.
There are no further questions I'd turn the call back to you for closing comments. Thank you operator, thanks, everyone. I'm, sorry, we went a little bit long and cut into lunch, but theres any follow up questions give us a call. Thanks again.
That concludes today's conference call you may now disconnect.
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