Q4 2020 Agnico Eagle Mines Ltd Earnings Call
Yeah.
Yeah.
Good morning, My name is Denise and I'll be your conference operator today at the time I'd like to welcome everyone to the.
Eagle fourth quarter results 2020 conference call all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask the question. During this time simply press Star then the number one on your telephone keypad, if you'd like to withdraw your question. Please press the pound key.
Thank you Mr. Sean Boyd you May begin your conference.
Thank you operator, and good morning, everyone and welcome to our fourth quarter and the 2020 full year. Our results conference call before we get started with the slide just want to remind everybody that this presentation.
Does include forward looking statements and we have that material.
In the slide deck.
Just to start off.
In terms of how we close the year on how we're positioned.
For moving forward over the next several years, we had a.
The record quarter in terms of production of which drove a record cash flow.
More importantly, we posted our best ever safety performance, so although we're pushing.
More volume than ever.
And we have more employees than ever.
We're operating more safely than we've ever done on our history. So a big thank you to our employees. It's a testament to their focus and the fact that the shop to work every day looking to make a contribution on caring about their work environment and the people they work closely with.
As a result of that.
Performance on the operating side the business in the full year 2020 generated operating cash flow of $1 2 billion. So that continues to improve our financial position good liquidity day.
Cleared our quarterly dividend of <unk> 35.
Per share also got on additional credit rating agency to rate us as investment grade by Moody's.
To do that recently so it just shows you the strong financial position, which you know.
<unk> continues to strengthen as we grow our production over the next several years, we expect to grow out but.
Off of the 2020 amount by 24% as we move through 2024, and that's supported by a record reserve position so lots.
Lots of records as we close 2020.
On the reserve growth is supported by exploration results. So.
This is really not just the story of bulk production growth, but also being able to improve.
Improve the quality of our asset base growing deposits at our existing mines as we move for us of results of that.
We've increased our exploration budget by over 40% to $160 million. So very much still a focus on exploration and we will talk about how that fits into the strategy.
In the minutes of key part of the story.
The strategy is going.
Going to remain the same it's consistent it's really to grow production per share by focusing on the geological potential of our asset base by optimizing our existing mines as we said through exploration and then building out our project pipeline.
We can see visibility at the.
Iran that gold acts in terms of additional conversion of resource into reserves, which will extend those lives of those assets as well as bringing new projects.
Into the production base of the company with the announcement of <unk> underground and Canadian Mill Arctic underground.
A big part of the strategy is to keep the business low risk to manage political risk stay in those jurisdictions that we know well, but also to continue our leadership and excellence in ESG, which we continue to do where.
Double a rating at MSCI corporate Knights, just ranked US number 73 in the world not just in mining but of all companies in ESG. So we continue to be recognized for our leadership in ESG just going to the highlights for the quarter as we said the first time in our 60 plus year history, we produced over 500000 ounce.
In the quarter that put us over the top end of the guidance range in 2020 at $1 736.
The only in ounces.
As we said.
Our reserves group of record level of $24 1 billion ounces will break that down in the.
Minute.
That's backed up by an increase in exploration budgets as we said in that exploration is really focused on.
Places like Canadian market.
Where the combined budget with the partnership is about $30 million, we'll talk about that in a minute a big budgets at the wrong, where we're extending drifts in four different areas to open up therefore fell rock package as we move to the West and also the east.
All of the big year for exploration and as we said our board yesterday approved the go ahead for Odyssey and <unk> underground projects, we'll talk about that.
In a minute so steadily growing production.
In 2021.
Costs will be lower than in 2000.
<unk> 'twenty as we grow our output so as we said we're expecting the production growth over the next four years up 24%.
In 2021, we should be up over 300000 ounces from 2020 with our unit costs down about 6%.
And.
And as we move forward, we're looking for slightly higher costs, we've outlined on our press release, that's largely driven almost primarily driven.
And by higher costs at our <unk> deposits we.
We continue to get very good cost performance at a number of our mines, particularly in the Abitibi and we'll talk about that so it's really the high cost of ameren that of tended to skew the overall average.
Higher.
Capital expenditures of our forecasting about $800 million.
In 2021, as we approved two new projects.
We're still going to generate significant net free cash flow with that number and as we look forward on the project pipeline.
We're not in a hurry, we're going to we're going to a stage of them, we're going to spread them out and we're going to keep our capex in line with where it's been over the last couple of years as we move forward, we talked about our gold of reserves and mineral resources.
With the exception of Hammond reef all of those reserves were done at 12 50 Hammond Reef was done at $13 50, as we said it increased 12% we had over 1 million ounces added at several of our.
Current producing assets with the balance coming from Hammond reef.
What that number on what these reserves and resources do not include is.
The reserves and resources that are hosted at the recently acquired hope the project I'll talk about that.
And of minutes. So we also had a.
Maintaining a strong resource base.
Indicated measured indicated 15 million ounces inferred.
23 million ounces.
So a strong reserve and resource base that supports our ability to continue to grow.
Output.
In terms of the near term opportunities we have several.
Kittila.
Had a.
A good year, they produced record amounts of gold they continue to ramp up.
Their annual throughput of last year, I think on average $1 eight 5 million tonnes, a year going to two 2 million tons per year the.
The mill expansion was completed slightly ahead of schedule in Q4.
So they continue to move that opportunity forward and there are also studying.
Based on exploration success as they drill.
On the deposit as it plunges to.
To the north the Theyre looking to.
Potentially increase annual throughput from the 2 million tons per year amount up 20 of 25% from that amount. So that study will take place over the next two to three years, just the optimized to continue to optimize the growing size of that ore body <unk> phase II remains.
It's on track in January were about 4600 tonnes per day, so we'll be gradually increasing that over the next few years to 6000 tonnes a day.
We talked about the.
The <unk> underground project being approved.
For construction of the objective is essentially just to mine.
Higher grade underground portions of that deposit in conjunction with the open pits first gold production, we're expecting in 2022 as well.
That will be begin to access ore from the underground ramp system. The average mining rate over the five year period in the underground components about 2000 tons. A day overall, we expect to be mining about 3 million tons that are on average rate of about five and a half.
Grams per tonne that adds just from the underground about 100000 ounces a year to the Amor production there are years, where when we combined the underground the open pit amyris will be kind of make eco eagle's largest single producer of gold.
So it's of high quality assets that will generate significant cash flow as we go forward.
We will produce those amounts because of.
When we add the open pit ore with the underground the war.
On the capacity in our plant to handle about 12000 tons a day, so the capital costs of that underground about $140 million construction.
Almost $40 million of sustaining at $15 50, as Scott on the tax rate of return of.
28%.
Odyssey I'll talk about that now.
We've continued to have drilling success in exploration success, there as we've expected to have.
We've had a very active drill program going there for the last of two to three.
Years at East Goldie, we saw over 130% increase in the resource of six 4 million ounces there is <unk>.
11 drills currently of targeting of the East Goldie zone.
To continue to expand.
Deposits.
And also to tighten up the drill spacing, particularly on the high grade core of the East Goldie zone property wide in 2001 of <unk>.
On your manner, we'll spend about $30 million on drilling that's of significant budget $24 million of that's largely on east Goldie 6 million will be to drill a regional targets because it's interesting with the discovery of the skull, it's essentially opened up an entirely new mining horizon.
Tremendous potential given what we're seeing at east Colby. So that's also a focus of our drill program in 2021. The underground ramp is in process and progress that's important because as that continues down it.
It makes it easier to drill it just gives us a better drill setup to drill most of underground targets, particularly.
In Odyssey East melodic and also at East goes as far as the project.
The project on.
The Canadian melodic the underground project, it's really out of very large low risk high quality opportunity.
We anticipate it becoming the largest underground gold mine in Canada based on annual production.
When it reaches full production, we expect it to be producing about 550000 ounces per year, that's based on.
Daily throughput of about 19000 tons.
We're able to run it at that high rate because theres essentially four underground sources of ore so that was the real.
The the game changer of let's say on this whole project was really the discovery of east <unk>, because that just opened up a much bigger higher grade additional sources of source of ore, which when you combine it with Odyssey, north and south in the old East melodic area, you get volume and it's the <unk>.
Volume that's really made this work in terms of the size of underground cash costs at full production.
But to be around 650.
Dollars per ounce, so very long mine life out to about 2040 and Thats. The only based on a plan that currently incorporates about 7 million ounces and.
The analysis, we know when we add up everything I guess, we're not supposed to add up everything, but we add up everything reserve and resource it's more than double what we currently have.
In the economic plan in the mine plan going forward and these deposits are still wide open as we know them and the entire horizon is wide open. So we believe this is going to be a big part of.
Both humana and the <unk> business for for many many years at $15 50, It's got an after tax rate of return.
17%, 18%.
Theres still.
We feel to optimize the study optimize the plan.
And we're going to continue to work hard on doing the Capex of 100% Capex is one three.
Billions of dollars.
But from the period from 2021 to 2028, which is really the construction phase.
This period.
We would expect to produce over 900000 ounces out of cash cost of about $800. So.
It's almost self funding in a way when you think about it.
That $1 3 billion includes an 1800 meter deep production shaft with the capacity of approximately 20000 tons per day as.
As we said it will phase in the production over several years beginning in 2023 late in 2023 from the ramp.
With the shaft, we expect the commission of the shaft in 2002.
<unk> 2007, and as we said full production, we expect that around 19000 tons of day as we ramp up the <unk>.
Underground mining floating east Goldie, which is the deepest of the four sources of ore by 2031.
As we said over the last little while we're comfortable making this production decision now based on.
On a resource because from a cost perspective.
The numbers are solve many of the design criteria.
And the parameters that are being used in the study are very similar to the eco eagle's existing operations in the region and when you combine that confidence in the fact that we're dealing with live cost data and experience at Canadian <unk>, We've got good confidence.
And the production plan and end of the cost estimate.
As far as the project pipeline.
We continue to optimize the project pipeline as we said at the start we're in no hurry to.
To build these were just focused on continuing to add value to these assets through exploration and through updating studies.
Employing innovation.
As we think about innovation on certain projects like Hammond reef, we're looking at ore sorting.
So theres still work to do before we decide to spend capital here.
But we have made significant progress in the last year on these projects at upper Beaver. The deposits continues to grow we expect it to be.
At some point.
On the road of low cost producer given the significant copper credit it's in a good part of the World Pro mining district, it's very near our operations in Quebec.
Put it in a better spot.
We continue as we said to add value through drilling and we will continue to drill that and update the study for roughly the end of the year this year.
I'll talk about Hammond reef and I'll talk about whole day.
The Hammond reef, we've incorporated the <unk>.
$3 3 million in reserves the overall.
The mineralized envelope is over 5 million ounces.
So we're looking to optimize that plan and bring additional goal of resources.
The mine plant.
This is sort of the first cut at it.
We started to revisit it about a year ago, we always liked it because the location is good.
Permitting straightforward community support is there.
The challenge was.
On the low grade side.
But we feel there's ways that we can use.
Things like ore sorting to improve the economics. So we will continue to move forward NAV value, but again no commitment to spend significant dollars there.
At Holt day, the transaction closed on February of the second of the project host reserves of $3 5 million ounces.
And resources of $3 8 million.
Million ounces as we said on those numbers are in our current reserve and resource statement.
The property position as many of you know is very extensive it's on 80 kilometer of greenstone belt. It hosts three known deposits Doris Madrid and Boston.
As we've said the focus this year will be on exploration with a planned budget of approximately $16 million 5 million of that will be delineation drilling in the 11 million on we'll be testing targets around.
The three loans deposits and other targets along the 80 kilometer of greenstone belt. The mine currently produces about 18 to 20000 ounces of quarter cash costs around $9 50 to 975.
The mills operated three weeks on three weeks off.
We're forecasting hope day to be cash flow neutral in 2021 at the end of those production cost or Capex numbers are not in any of our overall total like eagle cost guidance. So what we focus on expanding from the reserve and the resource from the property.
We will also focus on optimizing.
The existing doors mine and then evaluate expansion scenarios.
We believe the project could ultimately produce 250 300000 ounces.
But we still have to do the study is still have to do the work.
We're confident that.
There is a solid plan to move forward as we put our none of it expertise to work there.
And we do not anticipate spending any significant cash.
Capital expansion capital there over the next two years.
In terms of the specific assets and operating results I'll start with Loren.
Still remains after 30 plus years, our largest cash flow generator produced over 105000 ounces at cash costs.
434, So continued strong performance in Q4, it actually for the full year achieved its original budget. Despite the fact that the mine stopped in Q2 due to the impacts of Covid.
And it's also interesting in Q4 of the 28% of La Ronde tonnage was marked with automated scoops and 16% of the tonnage at <unk> five.
His mind with automated skewed so that's the way forward on <unk> as we mine deeper our exploration suggest that.
There is more.
On mine life at depth, so automation will be important not just from an efficiency and cost perspective, but also.
From a safety perspective.
In Q4 of that.
Performance was really driven by more tons.
Being mined in the West mine area at higher grades than we anticipated some of the.
The deposit continues to grow as we said, we're adding reserves, we're still adding quality ounces, we're still adding.
Tons of the mine plan.
We will talk about the exploration of shortly at gold ex record quarterly production.
About 40000 ounces at cash cost below $600 per ounce, we averaged in excess of 8000.
Once a day that's record daily tonnage since we restarted the mine back in 2013, so the teams have done on.
On excellent job, there and what's really helped them to achieve over 8000 tonnes a day is.
Some tremendous performance coming out of the underground rail the air system, which was something that our team looked at a few years ago invested the capital to put in and that's just been really important addition to the efficiency of that line. When you think about it for mining around one five grams per tonne and it's still an extremely <unk>.
<unk> line.
The Canadian Malarchuk.
Best ever full year safety performance.
In Q4, we continue to sort of tweak up the <unk>.
Throughput in the plant setting.
Setting another quarterly record at over 62000 tons per day, when you add up the Abitibi of those three assets in Q4 produced over 230000 ounces at a cash cost of approximately $540 an ounce. So those three mines are still very much an important part of our bid.
But more importantly important cash flow generators, particularly as we look at opportunities to extend Lauren.
Mine life with our exploration success at depth and also extend the gold ex mine life, because we're also getting good drill results and in.
And the gold acts as we look at the deep two zone.
And then with the addition of the Canadian Mill Arctic underground.
It's going to be an important part of our business for a number of years at Kittila.
As we said record oil production.
In the in the year lead to record gold output in 2020. So we're finally after many years getting.
Into a rhythm, let's say where we're.
We're able to better match.
The sort of large size of the ore body with the production rate going to 2 million tonnes per year, but there's more work to do because that the deposit continues to grow so we could see it with additional ore sources that are being suggested by the recent drilling that we can take that up another $20 to 25%.
Again, not in a hurry to do that kind of take us two to three years to do the work on that and think about that.
But it still has upside and the deposits continues to grow at Meadowbank Amber of steady improvements we've seen quarter after quarter there.
The open pit production in the quarter of $3 8 million.
Tons mined per.
Per month, so they've done a good job with the maintenance on availability of equipment and steadily improving of that operation over time and with the addition of the higher grade underground ore that will become a much more significant producer of ours, we still need to work on the cost of the costs are higher based on strip ratios.
As we move into the next couple of years will come down as we get to 12000 tonnes a day with more high grade.
As we move into 2024.
Still need to do some more work on the cost side of <unk> record quarterly safety performance another strong quarter.
Another strong operating and production quarter.
90000 ounces at approximately $650, an ounce cash costs, but a good very good operating margin quarter and cash generating quarter at $108 million.
<unk> dollars in the quarter. So that's our second biggest contributor.
Next till the wrong.
Even more than Canadian <unk>, so again.
We're going to continue to expand that so also on important part of our business going forward.
Mexico, the steady operations and good cash generation continuing from our Mexican operations.
Just quickly touching on the on the financial highlights.
What struck me being here for 36 years.
As record cash provided by operating activities of over $1 $2 billion.
20 years ago late 90 of our revenue was only $50 million.
So it's a testament to our strategy of adding small pieces and turning them into meaningful parts of our business and doing it while keeping our share count down. So we can generate per share returns.
To our shareholders that strong cash generation improves our financial flexibility.
Since our investment grade credit rating, where we added duties to our list of credit rating agencies, our cash position grew $400 million at the end of December again, Oh share count after 60 plus years.
On the business and the debt maturity schedule, that's extremely manageable as we look forward.
Dividends are still an important part.
Of our story, we paid them for 38 years, given our production growth given how we see the ability to extend some of our major mine given the recent projects that we've just announced approval on which when you look at Ambry of underground very long life.
We expect to be in a position to continue to increase our dividends as we move forward and grow the output in this business.
So I'll just quickly summarize and then.
We will open it up for questions.
Essentially a strong close to 2020, which we anticipated we expected.
Based on coming through of the challenges of Q2, we did do a lot of important work in that quarter to position the assets for the strong second half of that we did deliver.
So that was not all the important for the cash generation, but also important to set us up for continued growth going forward over the next four years as well as positioning projects.
<unk> 2024th to continue to grow and continue to add value.
No change on our appetite for geopolitical risk comfortable sort of where we are.
We continue to be focused on.
Not just the do the right thing on ESG, but to be a leader in ESG, we haven't really talked much about how the how much contribution we made to our communities.
During the Covid, but thats certainly being recognized by federal government.
In the countries we operate in.
I'll, just sort of close off on on exploration because it has.
Our success there is really.
The.
Forced us to rethink sort of the 10 to 15 year production profile versus where we were about three years ago on that.
A lot of that has to do with.
Our strategy all the time is.
We want to note what we all we want to know what we owned as early as we can and that's why we have a history of drilling deep holes to understand.
Whether those deposits do continue.
We're here talking about Canadian <unk> underground there was a deep target that wasn't in the budget that we put in the budget.
After of mine visit to say look our history on the Ron tells us that it's important to understand when you have the geological structure of it's wide open how deep it goes and so.
We're seeing that it gets the let al.
Seeing that continuing on la Ronde.
We're after 30 plus years.
<unk> more growth than we ever have.
And generate more cash than we ever have and we're still finding more gold.
And as a result of that we're going to invest in for exploration drifts.
To move to the west to go into the old Barrett Brown.
Does that same felsic package of rocks that host all of the Leroy on World class of ore bodies also exists on the land package to the west So we're going to open it wide open.
The C. What's there.
But we're also going to drill to the east where we've got.
Some high value.
Net smelter return drill holes on zinc.
Zinc zone, the reappearance of the 20 <unk> zinc zone.
So a lot happening at Maran, which bodes well for the future of our largest cash flow generator Kirk of late.
<unk> continues to grow.
We're confident that as the mine at some point, but again.
Update our study later this year, we will decide how we can fit it in.
Pinos Altos, and Mexico continued to get good drill holes at the satellite deposits and at the center protruded. So we'll work those in to our production plan going forward, so essentially from a strategic standpoint.
We're just going to continue to focus on what's worked very well for us for many years and optimize and realize the full potential of our existing mines.
With a distinct exploration focus because it's adding really good value for the dollars we're investing in exploration.
Going to work the project pipeline.
We're fortunate we have of solid project pipeline, we added whole day, we like it long term, we think it's going to go well beyond.
Beyond the current reserve and resource, we're going to work that pipeline and a steady consistent manner, and where appropriate we're going to add high potential projects that have excellent geological potential in parts of the world, but we have good scale.
We've done that since 2005, when we started buying assets like hits a lot like Pinos Altos. So it's worked well for us in terms of creating per share value.
We're going to continue to do that so operator.
I'd be happy to open up the line, we've got our full team virtually here.
And happy to answer.
The questions, we get from the callers on the line.
Certainly the ladies and gentlemen to ask a question. Please press Star then the number of wind on the telephone keypad.
For this amendment from province, many roster.
Your first question comes from Tyler Langton with Jpmorgan. Your line is open.
Good morning, guys. Thanks for taking my question I had a question on.
On on <unk>, I guess for 23 year kind of guiding to total production at Meadowbank of the ground 415000 ounces.
Around 100 from the underground and then a little you know 300 or so from the open pit and I guess post 2023.
You're guiding to the underground being a little around 120000.
What does the open pit I guess look like and.
In 'twenty, four and beyond as the kind of stay around 300000 ounces or should it should ease a little bit.
Dominic Joe on a help us with the.
The split between underground.
Open pit at Meadowbank as we go beyond 2023.
Yeah.
Sure.
On the.
I am on Roke undergone there is going to bring on 100 and 140.
<unk> thousand answers to the to.
The game, that's going to bring overall middle bank.
Getting old.
The gun to reach over 500000 ounces, which is going to be our biggest operation.
Those years of 'twenty 'twenty four 'twenty five.
Great No that's helpful and then just.
I guess final question on the free cash flow is really strong.
In 2020 when.
When you look to 2021, you know outside of Vegas, the sort of earnings and Capex are there other than the.
Items like taxes, or something like that that could sort of have a.
Impact on the free cash flow profile. This.
This year.
Cash taxes will be slightly higher than 2020 because.
Of the 300000 ounces of additional production, which is going to be more profitable or add to add to the total profit so cash taxes will be up a bit.
But not significantly higher.
Great. Thanks, so much.
Your next question comes from Fahad Tariq with Credit Suisse. Your line is open.
Hey, good morning, Thanks for taking my two questions.
First on hoping I know you mentioned over the next two years you don't expect to spend significant capex beyond that time line as you think about co pay versus some of the other projects can you just provide some color on how youre thinking about what its competing against is it competing against upper Beaver and Hammond reef or is there already a priority among those projects the authorities.
Even before you've done more work on hope they know it's competing with the two you mentioned.
So those would be the ones that.
We're still studying I would say upper Beaver has the upper hand, let's say given our familiarity given its location.
Hope day is is at work in progress I think what we liked about it was.
The 80 kilometer greenstone belt.
Had big success with geological belts, when we can control on the 100%.
In adding ounces. So we believe this will get bigger.
Basically we have to step back on this one because everybody understands we need on new processing facility. So the question will be what and where.
And the way it will depends on the exploration results as we move forward. So there's still work to do that's why we're not in a rush here.
We've already had.
Our top crews up there recently they spent a week there our project development team some of our senior team it none of US. So we've begun the process of putting people from our technical service group.
To look at various expansion scenarios and again.
On the whole concept with our strategy is the stage and spread these projects over time.
So it's just going to require.
The supplying.
Some of our key project development team is working with our technical service group and the operating teams in those jurisdictions to optimize the project studies and compete for the capital.
Okay, Great that's really clear on my only other question on Kittila I'm, just trying to understand the the shaft thinking contract issues.
Is it right to did I understand this right that.
Now all of that will be done in house or is it still being contracted.
With some additional.
Bulk of personnel I'm, just trying to get a sense of what's going on there.
Dominic.
Yes, we are going to continue to contract. It of course, we're looking to mitigation now to introduce more local worker training the local people, but still of the shaft sinking.
Thinking construction phase.
Contracted the challenges are really with the traveling.
<unk>, we have with our challenges we have with the Covid. So people need to get these out of you did in <unk>. So that's bringing some.
The challenge on that having a Canadian contractor going there but.
The team are looking for mitigation to minimize that with the.
Bidder.
Missions for the guys as well as the training more local people.
Okay got it so that's different than the terminating the underground development contract the different rate.
Yes that is different let's say the overall project is completed at.
The 18, 90% of if we're talking about the the.
The rock line in all of the work done.
To be ready to operate the the shaft the on the critical path, which is the shaft sinking.
This is the area of where we struggle and there were some delays at the end of the day that wasn't that the impact the production because we're able to mine it.
Two of the ramp.
Just more costs.
Each month that we do with two of the ramp compared to the shaft, but that wasn't the epic the.
Products on rates at the casino.
Okay, Great. That's it from me thank you.
Your next question comes from Ralph <unk> with.
<unk> capital your line is open.
Hi, there good morning, everyone.
Sean I have a question on Canadian melodic exploration, but specifically for.
Open pit ore sources in the context of filling up that mill capacity right, especially post 2026 is now the time that this becomes more of a strategic priority.
I would say that the focus.
Before that is really on.
Now this is the first cut of the study is just optimizing that study.
Rather than looking at outside of additional sources of ore.
So it's really on optimize Asian effort, if we can sort of reduce the dip into production in the.
Those years during the initial transition from the open pit.
The underground, but what we won't do is rush.
On the build out here. This is the 17 plus here of life.
It doesn't need to be rushed if theres a dip in production there's a dip in production that's not the end of the world. So we will just try to manage and build the.
The most effective of project, but.
From an exploration standpoint, our dominant from a production.
<unk>.
The sourcing standpoint in the pit is there any color you can add on that.
Yes.
So is the key here.
I don't we also control a large.
Property over there and the over our 20 kilometer of ground that we control we continue to investigate and reassess the potential of of other near sort of face or body either towards the west of the Canadian monarch.
The western pour free four ex <unk>.
The empty former operation so and at the same time to the east of the of the Odyssey project, while we still control. The another 10 kilometer towards the ease that we are continuing to assets.
No.
That's one of our plan to continue to task for both shallow and an extension of the east Goldie and see if we can into.
Integrate them eventually in the mine plan.
Okay. Thanks for that yes, that's good color.
On the.
The economies are starting to share.
Show some light on Hammond Reef right then we have some good first cut numbers.
But it doesn't seem like it's maybe meets the technical investment criteria right here with this study in terms of IRR.
First of all of do you think it could get there and particularly with respect to the Capex number of of $1 billion is this something you'd be open open it up to partnering up on.
Yeah or selling it we're open minded on that one.
What we like about it is.
It was of throw in and the.
Cisco deal in 2014, and we bought the other half of $12 $5 million.
So we've had a lot more value than what we pay for it.
So the only question now is how do we realize on that value. So we're open minded with respect to Hammond reef.
Got it well said thanks very much.
Your next question comes from Josh Wolfson with RBC capital markets. Your line is open.
Thanks.
Couple of questions first on the capital I know the.
The number that's been outlined is really just indicative of that 750 to 800.
We have some details in the release on the underground and melodic but.
The indicative guidance I guess implies roughly $400 million on the project side.
And sorry, I have a greyhound calling next week and.
And then.
Yes, I was just trying to fill the gap in terms of what.
Where the rest of that could come from.
As the release of said.
There was no hope in there either.
Well.
Just put a set.
Set of of hold on things because we expect at some point will advance upper Beaver so on.
All of that is the sort of a bookmark to allow us to move those projects forward that are in the pipeline in the very steady and stage manner.
Okay. So.
Okay.
I'll follow up maybe.
<unk>.
Directly.
My other question is sort of low ROI on.
The guidance for the year looks somewhat lighter versus what the the operation has already been doing the last couple of quarters is that just conservatism, that's been incorporated or sort of change in sequencing.
Not really of change I think it's just being generally conservative there.
We did have an upgrade in the west mine area in Q4.
So we don't have that all factored in.
Yes.
Okay. Thank you very much.
Your next question comes from Jackie.
The <unk> with BMO capital markets. Your line is open.
Thanks, very much good morning, everyone.
I guess, a couple of questions I'll start with <unk>.
It looks like you're planning to run it through this year and work on the on the longer term expansion option is the plan still too.
Just take a step back close the operation down for an extended period of time like should we expect that sort of the announcement for 2022.
And I guess, maybe if you could give us just a little bit of.
Guideline as to how long you think that exploration of studies all of that stuff might take and when we might see it come back into your production profile yes.
Yes, it's still too early to.
Sort of make the decision on.
Do we put it on care and maintenance as we said, it's not leading money I think which is important. So we can continue to run it optimize it drill it and.
And complete the studies will have a much better idea.
This time next year after.
Doing all of the study work through 2021, while we continue with the drill program.
As to what it looks beyond.
2022.
That's still to be determined based on the results of the drill program in the study.
Okay got it so we'll wait and see and hopefully next next February we'll have a bit.
Out of a clear picture of that sounds great and similar question, maybe on the mill Arctic underground.
We've been waiting for this study and I think the.
The detail you gave us is really helpful and end it looks it looks quite positive.
Where's the next.
Next information flow of Where's the next year of data point that we should be watching for from here is it kind of feels like we're going to be in a period of drilling ramp development that kind of thing is is there more news flow that you are expecting to release to the market in 2021.
Well I would expect as you said Jackie it's more exploration detail as we said we have the combined partnership budget there is $30 million.
With 24 of that on East Goldie, which is wide open. So we would expect the news flow to the.
On those exploration results on east Goldie and as we drill the structure.
Along the trend and we will continue to always optimize.
The visit the study and look for ways to improve and look for ways that maybe we can.
The production during that transition from the open pit to the underground.
But there is no timeline for information flow on that so.
But there will be on exploration because of the size of the budget and the fact that Theres 11 drills.
The color on the site.
Got it thanks very much one final question I know on 2021 side of it wasn't challenging year for for your operations for Covid.
Certainly we're not out of the woods, yet it sounds like there's still some lingering effects in terms of travel restrictions on things.
How I guess, mostly related to your more remote operations and none of it how are you coping at the moment with Covid are you starting to think about bringing the the local workforce back.
Is there any.
The increased risk of <unk>.
The content up there at this point or are things getting better can you maybe just give us the broad update in terms of the operations yeah of the vaccines, there now and none of it I think which is important so that's a that bodes well on that will be sort of a key part of the decision on bringing the workforce back. So we've been very patient on that because.
Of the.
Because of the risks to the community as we said from the start.
That we wanted to make sure of that.
Equally eagle wasn't causing.
Bringing virus.
None of it so.
Yeah.
But I should say in Canada, we've got five testing labs going now.
So we started testing early we've continued to expand our testing.
Capabilities and we're using that.
To help us manage.
Sort of Covid.
Okay, that's perfect I'll leave it there. Thank you very much on.
Okay.
Your next question comes from Greg Barnes with TD Securities. Your line is open.
Yeah, Thanks, Sean I, just want to get a clearer picture of the Cameroon.
Meadowbank complex.
Cost of remain high for the next couple of years will come down as we on the ground comes on.
The underground I think the mines out in 2026, just what happens.
The medium term and longer term and I'm on.
On both production on cost.
Yes, I think from a production standpoint.
It's still a relatively short life of mine compared to our other mines and Thats why the focus is on extra.
Exploration in and around Meadowbank and <unk> of looking for preferably additional open pit material because that would extend.
The the underground with our ability to on mix, but maybe Dominic on the cost side, you could give us some sense of sort of strip ratios and the impact of that on costs over the remaining mine life.
Yes, we were going to see some fluctuation on the class and it's driven.
Driven by the.
Stripping ratio and the grade of 2% of sequence.
'twenty, one strip ratio is going to be more around seven ish.
Better than we need to of need where we were more around 11, so that's going to it's going to be ample.
The impact is the wind strip ratio was lower Youre building the stockpile.
And when the stripping ratio is higher than you need to consume stockpile.
So that's impacting the cost but overall the on a real condo guns gun of brain is bringing a positive impact. It is the higher grade material and it's the all of the fixed costs are already paid so that's going to improve.
Are the costs at the site and also we've we've launched a new optimization related with the content the strategic optimization at the at the site.
The beef beefed up the team to look at two different the way to improve it.
On mainly on the contractor side rental side on the logistic inventory.
He's been through the new NAV.
Both divisions Ive been to an expansion phase now and last year.
Now they're doing their units.
That's the first step now as the.
This is more stable, where really the transferring to end up the musicians sites and I think there is up.
There is room to improve there are we going to see we just need to let the the team some room to optimize or their operation.
So we have a big bump in production in 'twenty four 'twenty five and then 26 after that.
And the route finished off the 2026 at this point.
Yeah at this point, we go up to we need 26.
As Sean mentioned, we still have a good resources underground on the PMI for us because we keep the mining in the Premier Cross border.
The phase one of American underground phase one.
The exploration in the <unk> gave a flavor on that but the exploration are still ongoing the.
The best Dream will be to find another pit.
We have all the infrastructure to manage that.
And the two continue to mine with the higher grade on coming from underground, but up to now. The this is this is where we have the resources the reserve at the Amazon.
<unk>.
Okay.
Okay.
And just secondarily on the B.
The show and it does sound like that sleep on.
The Q.
On the effectively it looks like it's going to be the next operation of the logic underground the timing.
Timing on studies or any kind of decision on that one.
Oh, well it'll be later this year when we get the study so.
Decision would be sort of maybe this time next year, depending on the results of the study.
Okay.
Thank you.
Your next question comes from Carey <unk> with Canaccord Genuity. Your line is open.
Good morning, everyone.
Sean as you mentioned you said the PAA resources of about half of the total resource at line. There is that more of a function of the.
Youll spacing or the economics on from other people who are potentially.
You're referring to Canadian <unk> underground.
Yes, yes.
Well.
The the bulk of its east Goldie and so the the balance of it would be small Arctic and Odyssey, North and south which are lower grade. So we fully expect that as we optimize the plan that we will be able to add some additional ounces to it.
And also we would expect east Goldie to continue to grow so.
As we said this is the results of the.
Yeah.
So the first study, let's say and the which remains to be optimize as we look at adding additional resources.
Two of the mine plan.
And then maybe just again on extending the open pit I know your reserves of about $12 50.
Three years down the road of Corona $2000 price environment.
Is there a bigger picture of potentially at the open pit or is it sort of not that.
On the gold price.
Melodic.
Yes, yes.
Yes, I don't think theres much room to expand the open pit the future of there will be.
The underground and so certainly a higher gold price bodes well for some of the lower grade material.
In the old East Mill Artic area.
So we'll certainly be looking at that as we continue to drill it and as we continue through the construction phase of the underground infrastructure I think will be important.
That's what was really.
Something that.
Current Laura on from a small line into the large mine is the underground.
Ramp in shock gave us access to drill the deposits. So I think we'll probably see in this instance, getting better access to drill.
It gives us the potential to.
Add more resources and do more effective conversion.
Of the resource to reserve some of the resource is only drilled out of 150 meter spacings.
So as you said in your question part of why it's not in the plan as we still need to do some more drilling and tighten up the spacing.
And then maybe just one offering which of the processing costs look like.
When youre running at 19000 tons of day versus today at 55, either with the 7000 tons and G&A per tonne can you give some color on the unit costs.
Dominic do we have.
The breakdown I don't have the breakdown in front of me on processing cost per ton when we're at full production at 19000 tonnes a day.
No.
We give there the cash costs, but I don't have no I don't have the detail.
We could come back on to get that we'll get that for you.
Okay, great. Thanks.
Your next question comes from John Tumazos, very independent research your line is open.
Thank you very much for taking my question.
Concerning hope.
As the original gecko mill up to Agnico standards, I know, they're not as they werent as well financed as your team.
And how much of the issue with the plant is the 80 kilometer.
And on trend and figuring out where the center of gravity is.
No. The mill is not up to our standards.
Not even close.
We knew that sort of going in.
So it does need of new plant and the question is largely location now based on.
The size of the geological belt and the.
Distance between the deposits.
And that's what we're really trying to do.
Nail down over the next year or so as we continue to sort of look at it and.
And assess it.
Hi can I ask the second one and I'm sorry to ask a big company question.
The southern business in Mexico, as the other businesses Norris grow.
It's getting close to 10% of the prospect of mix.
Is it worth keeping.
Because of the value of the heap Leach low capital cost.
Simple or mining and the exposure to the.
Sundar, Sierra Madre southern belts as well as Latin America.
He bleaching in the southwestern U S or is it getting to be too long of a plane flight.
Would the company be better to have less admin and be tighter if it was just the northern business.
Well that's the that's a good question, we ask ourselves those questions all the time.
The our best assets, there is our people and their ability to do business.
In that country.
So we think it's worth keeping based on that skill set and based on its proximity as you said to those geological belts.
And so.
We'd like to have something else for them to build.
We still believe center of Retrude us as of Buildable project again, when we don't know.
So right now were.
We're just.
Mining satellite deposits from developing satellite deposits too.
General cash and we've got the.
Exploration budgets going.
But we still like Mexico as a place to do business, it's still a pro mining country of despite what you may see or read.
In the news.
We haven't had any issues.
That sort of change our view on wanting to invest in Mexico.
The competitive.
There's no doubt about it but we think we have a competitive advantage just based on the skill set there. So it's still important for us, but it clearly needs of pipeline that.
The.
It doesn't have that the northern business does have in from a management perspective, it's not difficult to manage because it's almost self managing the leadership team there.
<unk> has done an exceptional job and it's not something that eats up a lot of senior management time.
Thank you congratulations Paul kind of goes up and have been doing of backflip Shaw, okay. Great job. Thank you.
Thank you John.
Your next question comes from any of the earning with CIBC World markets. Your line is open.
Hey, guys.
Morning.
So just a few questions.
So firstly just as I understand it look we're going to model the 750 the 800.
Capex for the next three years, they should probably also be modeling.
Essentially upper Beaver like that includes the capital from that.
With some of the capital obviously.
Yes, but we don't have that define our really saying is is that.
This is also for internal discussion for our teams is look this is the envelope we're prepared to spend.
You do the analysis on the projects and we will decide whether it meets the investment criteria.
Whether it meets the risk profile to invest in it. So all we're saying is we've left room in the event that we have a positive production decision for something like upper Beaver.
And then also just the sort of financial question just to confirm that does conclude your capitalized stripping number right as well.
Sorry of capitalized exploration of keeping on capitalized the questions yes, yes.
Alright, and then.
The second question Laura on grades so I noticed when I did my sort of reserve analysis and depletion that you actually added.
Even higher grades and overall of the mineral inventory went up the higher growth, but can you talk about exactly where he found that exploration success.
Come on.
Yes.
How do you help us with that.
As we discussed over the last.
A couple of quarters, you know with the <unk>. The effect, we were we were seeing on the law.
The overall mine so we've been investigating on our reconciliation.
And basically found out that we were a bit too conservative where are applying it to low capping.
Linear to the high grade as we're getting into deposits. So we basically loosened a bit the hour hour capping any and even still I think we've been running a couple of assumption and even with that the higher out of phase.
Phase capping approach.
We still cannot reconcile the no we're getting more gold than what the our predictive models. So we've taken a little bit of that plus with the success, we're having at the L. D. Five.
We've been extending the resources beneath the previous the the previous limit that was around 400 meter we've extended the limit now do close to 700 on meter of below sort of phase <unk> due to the success. So at kings from it the.
The dose dose two modification of the round that we've more than replace what we've mined this year and <unk> seen an increase of the grade for the <unk> portion.
And then that leads me to a little bit on the byproduct.
Have you.
The same kind of parameters on the on the byproduct of me I noticed you guys are always tend to do a little bit better than what you saw at the beginning of the year from a byproduct of one whenever you put the suffering the same kind of capital.
No change to the Youbet byproduct estimation, neither are any of them Joe the only change was on the go.
Okay.
Alright, and then just in terms of the.
Canadian <unk> royalty so.
Understanding that your partner reports their total iron ore unit cost a little differently.
So that part of the slide five 5% royalty that should be on just the.
The team of Arctic under current the Odyssey project underground material right and then if we were to just look at the.
Barnett.
That came electric pet you would kind of take the costs that you guided to on the unit cost basis per that material, but not have to include the royalty is that correct.
Yes, Im not sure I am not sure I.
Follow that the royalties and the cash costs on all.
The current production and well beyond the underground production as well I.
I guess, what I'm asking is I thought my of my understanding was that you know the way you guys report your unit costs. You already include the royalty within the unit costs, yes.
The open pit, but here in the underground you can split out the royalty because it doesn't actually give it the same way of the idea.
Brian I don't know of Brian can help us the bankruptcy.
It's okay, we can take it offline.
Okay, Alright, that's it from my questions. Thank you very much okay. Thanks.
Your next question comes from Matthew Murphy with Barclays. Your line is open.
Hi.
A question on costs and.
I mean your ASC.
Youre going to be in the high nine hundreds I guess.
Last year. This time it sounded like they were going to come down near term now it sounding like Dolby.
Flattish so I guess two parts of the question number one on what has changed that that's keeping that elevated and number two if we can.
Look beyond 2024 all of.
The equal do you have kind of a range of you want to get too on the IFC.
Yes.
That's really a largely <unk> has two high cost years, 'twenty, two and 'twenty three.
And then it goes lower so that's the sort of drove of the all of it because of the cash cost go up there drives the all in sustaining costs up.
As well and they come down after that.
And do you have a level that you can talk about for 2025 2000.
Now, we're not guiding that far out.
Okay, and I guess, maybe as a related question.
Has the experience at <unk>.
<unk> the way you think about satellite opportunities and none of it.
No I think that's a function of.
So the longevity of that asset it doesn't have the longevity of the Melia Dean has.
So we are fortunate with the exploration success at at Amarin could provide higher grade underground ore.
So it's really volumes that work well, there and volumes in terms of tonnage that.
It worked well.
The trucking does add costs.
And that certainly of our trucking costs are a bit higher based on sort of of availability and reliability of equipment.
But it's really great that's driven the unit cost of grades and a bit lower.
Then what we expected it to be.
Okay. Thanks, Ron.
Your last question comes from Kenya, Jackie the next with Deutsche Bank. Your line is open.
Thanks, Dan Good morning, everybody.
Just wanted to circle back.
I know Dominic we talked about the mine going till 2026 and is underground.
The potential further there, but my understanding is that you just can't run the underground without having open pit. So maybe the number one is that correct like 2000 tonnes a day from the on demand is not going to support the complex.
Yes, that's correct.
Maybe can you talk about the exploration focus for open pit material on the property.
The.
That's something we are pursuing the year over year on investigating especially along the infrastructure either the.
So the connex Baker of late to Meadowbank ore from Meadowbank to MRO, and we BCP continue I know target that the the vacation and target testing.
And when all of a year after year, we're generating good target on the fortunate the way are not making discovery of something like Embraer will give you a year, but it's not the lack of the FERC than the.
The emphasis remains there at the.
Generally the thing new target the thing them and we will provide an update as soon as we hit something.
And what's the budget for next year.
Generally speaking.
Allocating 20% to 30000 meter of four regional exploration.
Both for <unk> and <unk> and then in terms of allocation depends on how things will unravel.
So what you can assume that that something like a 20000 meter regional it's detailing the in the news release, but.
The 20000 meter of generating new you would.
The target.
On the Meadowbank on the road.
Maybe maybe for Sean or Dominic maybe just the bigger picture.
One of if we don't end up finding anything here Ken.
Infrastructure some of the.
The on infrastructure some of your equipment people be used at home.
Potentially yes.
Potentially.
Okay. So the.
Maybe it could be moving the ball.
From etcetera.
We have to look at the specifics of that but certainly when you look at hoped at the.
Reserves of $3 5 million ounces resources of over $3 5 million ounces still wide open so it's likely going to be seven to 10 million ounces or so.
Sure.
We bought it because of its location and the geological upside on our skill sets to operate in that area.
So if we can leverage off of the existing infrastructure because.
The mine life doesn't exist that the <unk> will certainly the looking to do that.
Yeah, Okay. Good hopefully find more of that alright. Thanks, a lot of that thank you.
I would now like to turn the call back over to Sean <unk> for closing remarks.
Thank you operator, and thank you everyone for the questions and if theres any other.
Follow up information you require.
Please get in touch we'll be happy to help thank you.
This concludes today's conference call you may now disconnect.
Okay.
Okay.
Yes.
Okay.
Yes.
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And from the moment.
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