Q1 2021 Agnico Eagle Mines Ltd Earnings Call
Mhm.
Good morning, My name is Corrine and I will be your conference operator today.
At this time I would like to welcome everyone to the Agnico Eagle first quarter results 2021 conference call.
All lines have been placed on mute to prevent any background noise.
The speakers remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question. Please press the balance sheet.
I would now like to turn the call over to Chief Executive Officer, Mr. Sean Boyd you May begin your conference.
Thank you operator, and good morning, everyone and welcome to our first quarter 2021 results conference call.
And we're moving through our slide deck and in that slide deck will be forward looking information. So please.
Review the cautionary language.
And as and our Powerpoint material.
What I'd like to do is just a review a bit of the sort of an overview of the strategy touch.
Touch on the.
On the progress we're making.
And on the ESG and greenhouse gas emissions.
And what our plans are there going forward in terms of additional investment.
Particularly on the north.
View.
The results of the quarter talk about our exploration, which is a real push for us with a huge increase and our budget this year.
So if we look at the quarter again.
And essentially we're able to build off of the momentum and strength that we saw in the second half of 2020 with the second consecutive quarter of record gold production.
We did that.
Strong operational performance with probably the most employees we've ever had and the.
And extremely good safety performance, so not only are producing more gold for doing it.
Very safely.
Our costs were slightly better than forecast and the quarter financial position remained strong.
We've declared a cash dividend again so.
And so that keeps our track record going we've been paying as you know our cash dividends since 1983, and the focus continues to be on growth and execution.
If our brownfield opportunities and project pipeline.
Still looking for 24% growth and production from last year out through 2024, as we said, we'll touch on exploration and it's a big part of the story in terms of gathering information on the brownfields opportunities, we're seeing extremely good results out of Iran.
Hello, and good results at melody, we featured some results here.
Canadian Mill, Arctic and hope they will talk a little bit more about that.
We plan to have a more fulsome exploration update.
Later on.
And the second quarter, what we decided to do is not pile. It all into a quarterly release like we did last time and there was just too much information last February so we'll be able to break it down and.
Provide some forums.
With our exploration team to be able to discuss the progress we're making on exploration and number of areas, having said that <unk>, who runs our exploration group.
And there has been with US for 20 plus years is on the call here and he's available to answer questions on on exploration. So no change and our strategy. It continues to be focused on optimizing the existing assets through taking advantage of the ability to convert more resource to reserve extending the mine lives of our key.
Our mines, that's a low risk high quality strategy.
And given that those are high quality ounces near existing infrastructure and.
So we continue to be focused on ESG, we score very well on ESG and recognized as one of the leaders in the.
Free in terms of ESG by a number of external independent rating agencies and research agencies on ESG.
We put out our sustainability report our annual meeting is today so.
And we make that available around annual meeting time, so that is out today, and we're adopting and net zero emissions target for 2050, and we've begun to disclosure of scope three emissions.
We're fortunate.
And when you look at our business because.
A lot of our production.
And is powered by electricity.
Over 50%.
Of our production and so on a relative basis, we have.
Very very low greenhouse gas emission intensity within the peer group.
And Nunavut.
We're required to use diesel to power those mines. So as we move forward to achieve our targets of reducing and getting to net zero that will require investments and renewable energy and we are as we've talked many times before we continue to work with the governments on alternatives like wind power and also our power.
Line from northern Manitoba up and to none of it.
In fact that whole day the government.
Given the okay for a wind turbine there we still have some work to do on that so we have made some pretty good.
Progress there.
We talked about safety earlier continues to be a priority. We've achieved one of the lowest combined lost time accident, our records and our history and we continue to win a number of safety awards at several of our mines one of the highlights over the last year, it's been challenging for many.
But our teams have really stepped up and the communities they have.
On a real professional job of real classy job of not being asked to help but stepping up and.
And taking the initiative to provide.
Food and certain areas to provide medical assistance and certain areas.
As you know our Nunavut workforce is still at home.
And over a year, we're getting closer as more vaccinations are being put into People's arms, and Nunavut, and they were able to start and the vaccination program. There earlier. So we're getting we're getting closer to the point, where we can welcome our none of US based employees back and we look forward to.
Having them back as.
And as far as the quarter goes on.
On a record production for the second consecutive quarter as we said.
Without hope day it was 505.
<unk> thousand ounces.
Which is a record that sets us up nicely to.
To meet our guidance, but also to produce 2 million ounces for the first time and our history over 2 million ounces.
That's over 300000 ounces more than we produced in 2020, so we continue to make.
Very good progress our Capex estimate and continues at a little over $800 million and we talked about the declaration of a quarterly dividend of <unk> 35, a share.
As we look at the quarter.
Pleased and happy to be delivering strong cash flows are stronger earnings.
Good costs record production.
I think the real value driver of those continues to be exploration. We saw the beginnings of this about a year ago at several projects.
We highlighted and as we said a few of our exploration results and the quarter and this release.
East Goldie.
And <unk> extensive step out there.
Potentially significant because essentially what east Goldie has done is turn.
What was a very marginal underground project into what will become Canada's largest underground gold mines, which we announced last February.
We have always said from the start that.
Given the location of East Goldie.
Totally different rock package than what the main structure is along that main break and that region.
And the potential and we have over 20 kilometers around covering that.
<unk> structure, so to have a step out over 1000 meters to the east.
Is important and we believe it just demonstrates the immense potential of that area to find additional gold and as you recall and our study, which we put out in February we only assumed that we would mine about 7 million ounces.
And overall envelope, which is currently known to be in excess of 14 million ounces and here, we have a step out.
Eaters to the east of the East Goldie mineralized envelope. So that's why we view it as potentially significant it's close to the boundary of the random allergic property, which we acquired a couple of years ago. That's a property where there is a 2% MSR, but we have the ability to buy it all back.
For I think $7 million so.
We just like that area and I think as you recall, we said many times one of the reasons that we got involved and this back in 2014.
Is the fact that we were on that.
In that region for decades, and we felt that there was the potential for <unk>.
Significant underground opportunity and Thats unfolding as we had hoped.
Stay tuned for more results, there and hope Bay stair.
Steady pace of work, we've got a team in place.
From a vehicle that's augmenting the team at Hope Bay, we're making improvements in the operations, they're focused on the doors deposits exploration is largely focused on doors. We think we can extend that part of the operation while we continue to drill.
<unk>.
And the Boston deposits and at Upper Beaver, We had the best reported drill hole intersect ever on that property over 60 grams.
Almost 1% copper a little over 16 meters at a depth of 200 meters. So we continue to drill and work on our analysis of the whole day.
Both the whole pay and the upper Beaver opportunity. The next slide is really just a long section of.
And of Canadian Mill, Arctic Theres, 10 rates going $30 million program split 50 50.
With our partner Yamana as we set the structure wide open and it covers 20 kilometers you can see on the right. The ran allergic property boundary.
That's a property that Hasnt had.
Much exploration on it and.
And that's why we say the structure is totally a wide open and that will be a main focus of our exploration program because it's the thickness in grade of east Goldie, which really drives the entire Odyssey underground mine opportunity. We also see on the next slide a long section of the doors.
Deposits hope they mine just to remind you of the program's $16 million approximately 70000 meters of drilling.
And about 30000 meters of that is delineating Doris and 40000 meters will be exploring targets around doors, Madrid, and Boston from and operational perspective.
And we see improvement and recoveries.
And at whole day to over 90%, so step by step, making it a bit better but the real price. We feel here is the two large geological belts 80 kilometers long that's going to take some time to drill them, we're not in a hurry here.
While we optimize and approval we haven't doors will be refocused on what is the overall size of the mineralized.
Deposits on these two large trends and that will form the basis for our analysis to look at how we can expand the production capacity at this operation at some point and the future as far as our operating results.
And we got really good contribution from several of our big producers will start with <unk>.
The key to the quarter was really excellent productivity and the West mine area and <unk> five at the West mine area, we were able to produce more.
And then our forecasted mining rate.
And as we did also and else at five and else at five.
Record production, averaging over 3100 tonnes a day.
Which was well above the forecast and that was really driven by ongoing.
Improvements and optimizing the usage of automated equipment.
And we're also seeing that at the main Lauren deposits, we continue to.
Make.
Steady progress as we said, Ron and 26% of the market was done from surface.
At the low on deposits and that else at 521%.
And the production.
Marketing this automated calling done from surface. So.
Good solid progress there we continue the exploration program.
And we're developing three exploration drifts to explore areas but.
Low as LS at five from.
One kilometer three kilometers below surface.
Which essentially Eric and lacked prior to that really didnt do much exploration on so that's the same rock package its host solve the deposits on Iran. So it's wide open.
So excellent exploration potential and that type of program is really a key component of our full potential program to understand how we can continue to optimize these large cash flow generators and extend the mine lives and we see potential to do that at several of our mines, including all around.
<unk> steady progress 35000 ounces good cost performance largely driven by.
And the continued outperformance of the rail their system.
It was above target and over 7000 tons, a day on average and the quarter.
So that technology.
<unk> have done an excellent job and not only looking at how they can apply it and gold X, but actually ramping up and improving its productivity continue to explore that deposits, particularly around the south zone, which is higher grade.
So good solid performance coming out of <unk> and Canadian melodic again, good contribution producing almost 90000 ounces or half of that operation, we had record tonnes mined and January.
<unk> performance was above target, averaging over 58000 tons a day on 100% basis a good good performance there.
We talked about the Odyssey drilling.
And that'll be a key part of this project as we look forward.
We saw in February as we said at the time.
And is basically what we would call the first cut.
And this will be optimized continually as we go forward, particularly as we understand how much gold exists in Pontiac sediments, which hosts the east Goldie deposits. So this could have a meaningful impact on the valuation of <unk>.
That opportunity on Canadian margin hit to left set records in March for monthly gold production and tonnage milled. They are also making good progress on autonomous production.
Both and drilling and haulage of trials are underway and Q1 that will be important for that mine.
Looks to expand further.
We are impacted by COVID-19 there in terms of the kits on the shaft and delays there.
The team that was doing the work is as.
At a country.
And so there are travel restrictions going in and out of Finland, which has held us back we've been transitioning into local employees there.
That doesn't really impact our ability to do the ounces because we can simply take them from the ramp system is just a little bit more costly to abuse and the ramp.
And we'll get the shaft and place.
Half of next year about six months behind schedule.
Meadowbank steady improvement produced about 80000 ounces and they set a record in March for long haul trucking performance. So.
<unk> steady.
Solid improvement there.
With good production coming, particularly in March which allowed them to post.
<unk> of about 80000 and.
Ounces at <unk>.
When you add in the tier again Yak ounces <unk> produced more gold and any of our other mines for the first time per.
Producing 96000 ounces. So we have made major.
Advances in terms of productivity.
We processed 4600 tons, a day, which was the target.
Over the last year or so gradually working up to that target, we expect to be at 4800 tons, a day and by the fourth quarter of this year and ultimately continue to expand.
6000 tonnes a day bye.
And by 2025. This is another project, which will be long life.
Hum.
We have continued to explore it.
Starting exploration drilling back about 18 months ago. Once we got into commercial production, we continue to get good intersections that pumped south and west Meg.
Which indicate that the deposits continues to be wide open.
And as steps as we drill it so.
And Mexico steady performance good cash generation there.
Les India.
Little bit of an issue with water and we would expect to be able to ramp up production and the second half of the year there.
And when you add it all up.
Free pulp a 505000 ounces approximately.
Which was a record that generated good earnings good cash flow per share of $1 47.
Which is a strong quarter, our financial position remains strong we paid cash for pulp day, including the buyback or buy down the royalty that was on that.
On a property so as we move forward and we'll continue to rebuild that cash position as we generate strong net free cash flow.
So just a quick summary of as we set second consecutive quarter of record production.
We continue to be focused on delivering the growth of 24% from last year out through 2024, as we focus on brownfield opportunities and.
Our project pipeline as we get more information on these opportunities through our expanded.
And expanded exploration budgets, we can provide updates on that.
Our focus is still on low geopolitical risk regions. We think that's extremely important as we look at the business going forward.
These are places, we're very comfortable being and we've operated in them for a number of years.
Big part of our strategy of synergies.
Being able to transfer technology, but also on knowledge and experience between these operations to help.
Keep our costs down, but also to help us understand new opportunities.
And I'd be fine through exploration and how we built them into the project pipeline.
So I think what I'll do operator results on the line.
Question. So we've got our full team here.
And we'd be happy to take questions.
Thank you Andy.
As a reminder to ask a question. Please press star and then the number line on your telephone keypad again Thats Star one to ask a question. Please standby on while we compile and Nicky and a roster.
Your first question comes from Fahad Kelly from Credit Suisse. Your line is open.
Hi, Good morning, Thanks for taking my two questions maybe first on and then you talked about on the release.
Starting to have discussions with local authorities.
And integrating the local workforce can you remind us what that would mean from a cost perspective, I know theres a number of initiatives that nickel.
Nickel and spent on line.
While those employees were on available, but as they come back from you just remind us from a quarterly basis, what that means from a cost savings perspective.
Yes, Hi, Tariqah tomorrow here.
We will end up saving money when they come back as I think we've expressed before the <unk>.
Additional cost we're still paying goes employees, 75% of their salaries, so that works out to about $1 million a month.
There's a lot of work that's gone into transitioning them back mostly about safety for.
And the communities as well as the employees, but yes.
Yes, there will be a savings of about $1 million.
Uh huh.
On a month as they come back into the workforce.
Okay, Okay and then.
And sorry, just to follow up on cost as well. So I know one of your peers talked about like the stronger Canadian dollar having an impact on obviously, the Canadian exposure, our Canadian exposed costs and operation.
32% of your exposure and patch I think and 2021 and.
Color on.
And if FX rates stay where they are today for the rest of the year, what does that mean for your annual cost guidance and including Capex.
Yes.
Sure.
Did you want to take that or should I take it.
Go ahead Omar.
It's about as you mentioned its about 32% hedged.
And the sensitivity we have been able to offset obviously you saw on the first quarter.
We dealt with that.
The dollar right now as it was averaging about 126 versus our budget of 130, So we were more than able to offset that.
But it is something that we're on top of all the time.
With regards to mitigating it right now we haven't adjusted our guidance.
Even with even with the movement and the currency.
Maybe I would yes, I would just add.
Sorry, Sean what were you going to say no I was just going to turn it over to you maybe just give some color on your thoughts on hedging and and.
And what's in place, yes, and yes.
Yeah, absolutely. Thanks for the question from hard.
It's an interesting time, because with the Canadian dollar lower than $1 23 at the moment and guidance was set at 130 <unk>.
You get into the interesting situation, where are you you probably end up trying to protect things like 128 that you probably wouldn't have considered previously.
And there does seem to be some strength from the Canadian dollar the Canadian government is making some noise about raising interest rates. The U S. Government is not making noise about raising interest rates. So I think that has contributed to the strength of the Canadian dollar and one of the things. We just talked about a couple of days ago.
<unk> was to perhaps use some more exotic instruments too.
Try and benefit the company, but pay a little bit more attention to.
The volatility and really pick our moment here because we with the addition of <unk>.
I would say, we're feeling a little bit under hedged.
We would normally be around 50% hedged for.
For the current for CAD on the year at this point and so it's something that we're looking to add to Opportunistically and I think there is always volatility. So I believe we will get our chance.
Okay, great. Thanks for the color. Thanks.
Your next question comes from Tyler Langton from Jpmorgan. Your line is open.
Yes. Good morning, Thanks for taking my question.
Follow up question on <unk>.
Cost I mean are you seeing.
Outside of the exchange rate pressures are you seeing anything with sort.
And sort of labor labor tightness like other materials, just any concerns there for the for the cost guidance.
I'll start and then I'll turn it over to Dominic Gerard in terms of labor tightness, that's been pretty stable in terms of what.
And what we see as sort of annual increases and our wage cost, particularly in Canada, which is the biggest part of our business, which has been sort of 3% or so a year, we don't see any sort of pressure on that as we look forward.
As far as inputs and I'll turn that over to Dominic Gerard who's on the call on the input price side.
Yes, we start to see some.
Increase.
And let's say in the coming time.
Mainly steel.
Creed.
And also tires, but what we're doing our procurement team is well tune on that and try to take some opportunity on that.
And literally when we give a contract if people start to be is it a bit to give a price because it is really volatile so far and price are still into our range, but again this is as everybody.
And I have to this situation and our own lives.
See pressure coming and maybe on the on the workforce and.
Sean mentioned this is still a well.
And good position, except on the <unk>, where we see a bit more competitive beauty into Canada, and Europe, but ordered and that this is Matt.
This is still okay.
Okay, great. Thanks, and then just on.
And I think the cash costs and the quarter, Rick around 628, an ounce and I think that's you know on a decent amount below the annual guide of around 737, and 40 can you just talk about I guess, what and you talked about good productivity, but was there anything else and the quarter and just kind of how you think about costs for the remainder of the year at the mines.
Well on cost per ounces, we produce more ounces. So that's the main driver we have a better grade into the mines with a good productivity I think and interesting.
Note that the cost if you looked at and I think it's slightly be 17, or 18, and where you see the Nunavut operation cost per ton and Canadian going down so that trending is still continuing with the net.
And it's the optimization that sites more productivity better control on costs I think we're gonna couldn't you just continue to see that.
In the coming quarters.
Okay, great. Thanks, so much.
Your next question comes from Anita Soni from CIBC World markets. Your line is open.
Question on cost and unit costs.
Across the board and unit costs seem to have been better than what you had.
Our guidance.
In February and can you give me a run down some of the assets and.
And some of the main drivers and and try to get us to get me to understand why those costs, but maybe revert to what you were guiding to our and do you expect on unit cost to continue to outperform.
Well, maybe I'll start and as Dominic said a lot of it was a few more ounces in the quarter.
Which certainly helped from a unit cost perspective.
But in terms of the drivers.
We will see some impact on FX.
I think some of the input prices, we can offset just through productivity.
Will we be able to.
Lower that cost guidance I wouldn't think so given.
That the FX continues to be.
Volatile and non unknown to us so that's why we felt.
That it was sort of premature to make any sort of longer term call. Our standard our view on the cost performance going out we do have opportunities at some of the mines to produce a bit more gold.
See how that unfolds as we get through the next quarters as we said and the release Q2 is a bit less we have plant shutdowns that Lauren Gold X.
<unk> had some work being done as well.
Melia Dean so there are several of the operations. They are down for a few days, which puts a little bit.
Lower production.
In Q2, but that comes back strongly and the second half. So if you look at achieving the guidance and we're looking for really strong Q3 Q4 from an ounce perspective, so that will help the unit costs at the backend of the year.
Okay. So maybe on the on the Canadian dollar costs would.
And would be the same but if we're looking at the U S.
And with the stronger dollar the overall per ounce guidance on U S dollars that would be the same and.
And then second question would be with respect to the T Mac acquisition. So I.
And I noticed you had some pretty pretty good grades for T. Mack I had the pleasure of covering that.
For four day, when you back them out so $10 eight gram per tonne materials, and it's pretty good grades and what can we expect does that make similar with similar throughput levels or will it be variable with variable throughput and variable grade.
On top.
Dominic.
Handle that one.
Yes, I think thats one the throughput is let's say between 600 tons per day, and 700 tons per day and the grade is going to vary.
910 grams per tonne, which which bring us to the two.
18% to 20, it doesn't and <unk> per quarter.
And within the first part of the day.
And the first quarter, we were moving the BTB zone, which is more higher grade through the year, we're going to move to the DC and zone.
Which I think it's around seven eight grams per tonne zone, so a bit lower and lower grade, but with a bit more times.
And that's a net.
That's really the plan.
Honestly very.
And there has been great and it's.
Good to see progress at the mills, and reaching 91 per cent regarding the first quarter were a bit higher than that.
Q2 up to date, let's see if we could maintain that but that's interesting and if if the mind Museum Bowl too.
Reduce more with optimization.
Room and do meal. So it's.
Encouraging to see on the.
The continuous improvement there.
And then on just to follow up on that and.
The.
Development work.
And do you expect like the capital levels that you were spending just a quarter that was probably maintained for the course of the year I think I saw on your guidance that as we move forward into next year and the year. After when we have to index.
To really get continue to produce these ounces.
You mean in 2020 one or.
Looking into 2022, 2023, and should we expect this and other capital levels for going and longer term.
I don't have answer to that question yet the team is revising.
A new base plan because now with.
Got it.
The ore body and care and maintenance.
On that desktop and <unk>, Florida, Capex, because we avoid some costs on the short term, we still need to do some thinking to really get the right position for the ramp and the infrastructure.
And from that new baseline and what's going to be ready and <unk>.
And you do we're gonna have a better view.
In Q2, we're going to have a better view, but.
So the spending right now.
And <unk> 10 million per quarter, I believe that we're doing in term of capex it will be.
Okay.
And I answered that question, yes, I need and just on the on the strategy. There the strategy is to sort of be cash neutral.
On that as we drill and get more information.
We think based on what we've seen so far is we think there's more at Doris and so that would extend doris longer.
As we said we've stepped back and Madrid, because we just don't like the location of the ramp.
Particularly at the type of rockets and.
So it's required us to sort of rethink that.
But again as we said we're not in a hurry and we're in a hurry to drill it and to understand it but we're not in a hurry to ramp up Capex. We just see this thing is very very long term were.
And we're going to find more ounces there.
So we're going to take our time in terms of next big steps.
And in the meantime, if we can keep it sort of cash neutral and keep those drills turning.
That's a good objective for us.
Yes, I mean, it looks like the focus would be on finding similar grades and and.
More ounces, there rather than necessarily improving the Merlin and running at 91%. So yes, okay.
Okay. Thank you. Thank you.
Your next question comes from financing from industrial Gal and Alliance. Your line is open.
Thanks, Good morning.
Related to Q2 or is there any higher grade stockpiles that you already have it.
These.
Assets that could potentially lower the impact of maintenance and Q2.
Dominic.
Yeah, and not really we don't.
And usually when we have agreed to acquire we process them, we don't wait for that and let's see.
And the shutdown in Q2 or are there a question of the mill liners are wearing that suits their lifestyle and he has done and there's a note there is.
The shutdown that kicked it off for the other place where we need to do a dentist job because the scaling is built up we need to clean. It is a 10 day shut down there's wanted to their own. It is also a 10 day shutdown, where we do more in deep electrical maintenance, we use that season that part of the year.
Because it's a it's a better season to do with and also its prior to some early day so strategically.
It happens that we ask Marcia on down in Q2.
That's normal operation.
And we're going to see that we're going to see.
Two to the second half of the year better grade at around net that's why rone at Meadowbank and also a good productivity everywhere and that's going to be a better second house, but there's just a question of timing.
Yes.
Okay, great and.
And and at Meadowbank, you did really well this quarter and you're calling for similar production rate next quarter do you think you'll still have some of that softer or helping you next quarter, how should we think about that.
Yes.
And let's see the mines. The mining is better is producing better and planets and Aneel is also able to process more a part of that is related to that.
After or part of that is related to the very good performances on maintenance availability and operational productivity. So.
And we theres an opportunity to do better.
Let's see the bottleneck remains.
And then the hauling and between the two the mine and the meal. We saw record numbers in March at 11000 tonnes per day.
And so there was also four on their trucks coming on the barge. So that's going to give us more flexibility for the second half of the year. If we're able to do more transportation. There is the opportunity to do more tons.
Okay, Great. Those are all my questions. Thank you.
<unk>.
Your next question comes from John Tumazos from John Tumazos, very independent research. Your line is open.
And your next question comes from John from Asia from John duration, and severity of independent Research. Your line is open.
Hello, John.
And this time that question and actually being redrawn. Your next question comes from Greg Barnes.
TD Securities Your line is open.
Thank you Sean this big step.
And the logic East Goldie.
Does that potentially change and elegant approach on the ground and why you would.
Oriented and mining.
And the thing I.
I think it's too early.
And I'll, let D and a minute just.
Give you his color on what we're seeing I think that.
What we do know there is that.
There is tremendous capacity and the plant once we transition into an underground.
So I think we need to drill the Pontiac sediments and see if there is.
Visco these bigger if theres another repeat of something like East Goldie.
It fits on non royalty ground than certainly the economics could be better.
So this could be I don't know that it's early it could be something like the l'oreal and area, where we have multiple shops over 20 years.
So we don't know it's too early.
But I think when you see something.
Like this I think our experience tells US you pay attention and you follow it up and you understand it.
And then you try to factor it in.
For additional development and so I think when we look at Kittila.
And we thought it was a potential to Ron in terms of multiple shops over time, given the size of that deposit and we continue as we move to the northeast continue to see that deposit grow as we go deeper we continue to see that deposit growth.
Lauren was the example of multiple shafts over 30 plus years could the Malarchuk area.
Something like that I think what's interesting to US is here you have and underground mine and area that was mining initially and $19 50.
And was shut down and then the Cisco team.
His astute enough to get the open pit up and running and that gives us an opportunity now to be.
What we see as being Canada.
And just underground mines, how long does adult and I think that's the question and the other question is you. Just said is is there and ability because of multiple sources of ore that we don't know of yet.
Actually have more tonnage coming from underground and I think that's the question we have to answer.
And I D.
And you provide some of your color I know you are probably feeling lonely there lead flow.
And I ask your questions without on exploration, so no I think GAAP.
Yeah, No I pretty good question, but when you look at and it certainly doesn't move the center of gravity of the orebody, yet because the with the core part of it.
These GUL D that as you know on that $6 4 million ounces and and and more with good grade and width. You see also that we've provided results from that.
And that tight field the infill drilling within the main ore body. So that is not changing the center of gravity on something that they already quite sizable with the total 14 million ounces. So I would think that from that perspective.
But as Sean mentioned.
<unk> basically when we were looking at the ore body because the orebody at these goldie is quite predictable. It is simple like we see plywood shape and we've basically.
Looked at that structure and the seawell.
Using the known geometry projecting at that kilometer day east.
We were adding some ongoing drilling of the random on Arctic, we've exited and that they will drill a hole and even the week before we got to the zone and our team and all told US what we should get into does one at $22 50 metered on the whole day getting kudos on that 10 meter off from their predicted target. So they got into the structure right where it was.
And as opposed to be with exactly the same type of war.
And it cut and pace of what we see with and as Goldie and we work quite amazed that we were able to project and predict the location of the ore body at kilometer to the east and get into it right where it was predicted.
But yet we want that person will hold is interesting in terms of.
And the fact that the.
The zone is predictable and where it was supposed to be and are we yet and the best part of the deposit that that these things a lot more drilling will be blind moving forward to better understand.
And that these thing where the center of gravity is and how we as we see indeed no one prior to these Gould EDA will be higher grade the great.
It varies from from two grams, two eight grams with an average of about three and at four so pretty interesting.
So I understand the hole was drilled from Iran and lots of property.
And you are hitting mineralization high rock and the whole on that side of the property downward.
Oh, yeah, Yeah, we usually within the ran monarch dig there are known porphyry intrusions light or 412 debt.
The Odyssey, but with some at one grand to grab over $110 50 meter but.
At the end of the D. We view that drew a hold and we push it we deeper entering to the Pontiac for 600 meter and two.
And to reach out for the Eagle diesel we have multiple <unk>.
<unk> in every single of those drill holes. So we usually start quite hard to day not get into the entire.
Volcanic sequence of the PC, the Cadillac break and then keep going into the sediment to defense.
Okay, great. Thank you.
Your next question comes from Tanya <unk> from Scotia Bank. Your line is open.
Hi, Yes, good morning, everybody and good morning.
Good day.
And I have a couple of questions if I could come back just that came again.
Cost structure I guess on it.
On just a couple of things on inflation and currency.
And maybe just Dave just on the NAV sensitivity for the Canadian dollar and.
Just wanted to check on this.
And number it's still holding that a 10% move from the 130 day Mark.
And having an impact of about $50 per ounce on your cost structure.
Is that still a reasonable assumption.
Yeah, when we put that number out though we didn't have the exposure from.
From T Mack yet so it would be a little bit different on that.
The way I think about it is.
We can still protect that 130, if we're able to do the same amount.
On.
And I'd say 128, so what we think now with the team at <unk> is probably five or $6.
Four.
1% change.
100 basis points pardon me okay.
Okay. That's helpful. Thank you and then just coming on to the inflationary pressures and Andy It's Dominic and I take that fund that and you mentioned GAAP steel and concrete and tires are you seeing.
Anything and freight and inflation now are and cyanide.
I don't have the detailed for cyanide straight.
And we'll see most most probably but the.
Again, we don't you don't see a.
Challenges to meet our guidance, so far and let's see the minds of productivity are offsetting those are those increase.
And it will meet we keep let's say, we keep an eye and.
Keep on though the reader.
Finally on delivery time, and if we see something for example, and tires. That's creep up we could take decision to put more into inventory if needed.
So that type of thing we're doing on close follow up.
On the barge season.
And the material lets see if I took the north as an example, and not the message you all have already been ordered.
Because that needs to be at big non core for a June.
June July when we start to do the shipping so that all of those are those one and I've been predicted but now we are starting to look okay, and what could happen and for 2020, two and maybe to take some position and if needed.
Okay, So you're protected tedeschi access more financing.
Okay, perfect and if I could come back to I know, Dave and feeling lonely and maybe Sean from a bigger picture on the exploration side and I guess.
And I understand just the strategy for you this year and cancer, we observed with placement and then you've got a lot of.
Interesting.
Exploration targets and our success, maybe just review some of the assets for Aflac. You think you are going to be able to replace reserves on the strategy hasn't moved.
Thanks.
Thanks.
Yes, <unk> can.
Can you take that yes, certainly.
Oh Boy Verde may not yet I guess.
Low wronged.
And as you know it says some of those mines, they know where they come in.
And sequence you know.
And until we kind of demonstrate that concept extended production last year was a good year at low one way or we've been adding more reserves that <unk> five with the continued success. This year I do not anticipate let's say for example that low Ron specifically that we go on to replace completely what were going to mine on.
And so theres drilling on going we are positioning ourself, let's say for the wrong. The more important thing. This year is that we're positioning those exploration drift beneath the bousquet, but it's more kind of along long term pay off. So we made this year and next year, maybe net completely see a complete replacement and eventually down the road, we'll get there.
And we'll get some some more on to showing up here and on their own same thing and minority minority quite sizable deposits. As you know we our share are depleting 360000 ounces roughly a year well on until we get the study to brain.
And as Goldie into research.
And we won't see a replacement so right off the bat do you know what we're not.
Replacing market and also from the existing mines those two those specificity that theyre going to come in and the old triggered on the road there will be and should be addition of reserves on the other and you add something like <unk>, where we see a complete replacement and we see kits allow where we see a complete replacement kits.
It's more again.
And now we're having the shaft we're having.
And our case that we can get 500 meter below the shafts and even if we're more looking at the long term because we know that theres still mineralization that kilometer below the bottom of the shaft. So now we're moving more into.
Put some more raw business on the resources and reserves beneath them on a bottom of the shaft. So I think for the near term. We can expect that kittila will replace what they are going to mine for the upcoming two three years after that and he's gonna have to come with a plan to convert the bigger part that depth.
And Mexico, Pinos Altos I think we're in good shape to replace a fair part of what we're going to mine line.
It's more of a reminding the outside until we get a plan to do something with the sulfide.
So we will see a net depletion at <unk>.
And at <unk>.
And through this we'll come triggered on the road I guess, we're getting good result, good sign so eventually it will come out with.
Reserve will it be and two phase, where we could be oxide first and this whole fight for it on the road. So we're working on it and then you enter into the project obviously, we've been drilling a lot tougher beaver and we anticipate that.
Potentially next year at a debt free.
Barry update we will be able to come out with and updated study will will come with some some addition of reserve in line with the good results we've been seeing and we're currently looking at to the obese. So recall research's two made up our mind about what.
What are we going to do with those historical reserve and resources.
Integrating into our business for yearend.
Okay.
So just on my understanding so I should think of them are.
La Ronde and Canadian my logic and maybe.
And as more.
<unk> growth.
And and the other mines, you've given me in terms of reserve replacement would that be a fair way of looking at it.
And that rod and monarch pick yet.
Albeit not share we're still on their review of our accounts by there.
Okay. That's helpful and if I could just assets on mainly a dime, Sean just on on the <unk>.
And what the.
Amy and water pipeline, just maybe a little update there in terms that from where.
And we are with the public hearings and had to be postponed and just getting the permit.
Dominic you are involved and so that one.
Yes, I can take that one and.
Relative to the COVID-19 break breakout and now put the.
The public hearing has been postponed but we.
We don't have a <unk>.
<unk>, because mainly we with our good performances on grouting practice, we see that the inflows are 50% lower than with the planet plus the mining right into the pit is going also better than plan and so we have we have enough room capacity, it's not that it's not day nishu.
And we were going to continue to follow the process for the hearing.
We don't have news yet when it's going to happen again everything is.
Going to depend on how it is going to go with the COVID-19.
But we will stay tuned on that.
Okay.
Okay. Thank you so much.
Tanya before before you go I just want to clarify one thing on the hedge and when we give guidance on the sensitivity to currencies.
And do not consider the impact of hedging and because we have hedged CAD.
For 100, 100 basis points move from budget, So $1 30 to $1 20, CAD would not be the full $50 per ounce on all in sustaining cost because of the existing hedges. It would only be about $30 per ounce I just wanted to make sure you understand that the guidance doesn't include.
Any impact on kind of doing okay. No that's really helpful because on that.
Meaningful. Thank you, yes, it is meaningful.
Your next question comes from Ross <unk> from <unk>.
Capital Your line is open.
Good morning, Thanks for taking my question, Sean I wanted to come back to the East Goldie.
Step out with two quick questions first one it doesn't sound like there's going to be and impact on the plant or target positioning of this initial shaft, but when does that definitive decision has to be made in terms of where it goes and then my second question is.
And how flexible is the permitting process, if we run into a situation, where we have successful drilling to the east over time and sort of the mine plan can become a little bit more dynamic.
Uh-huh as far as the shaft location and we've essentially selected the shaft location there.
So that shaft will continue the question is is there additional ore that's found through exploration, which causes us to add additional underground access. So I think that's the real question here. So we've always looked at this as being.
And large and long life and so I think what we're seeing is that if we were to incorporate much more than 7 million ounces of the 14th this would go well beyond 2039, I think what the drilling has suggested is theres a possibility that its longer life, but is there now a possibility for additional sources of ore.
That's essentially why this is now a successful project because east Goldie gave us that additional thick hire great source of ore that allowed us to pull it all together so I think.
Although it's early I think we need to sort of drilled out and tire.
Length of the Pontiac sediments and do it systematically but initially follow up on this drilling that's been done from random alerting.
To see whats around this latest drill hole and that may start to change our thinking in terms of additional investment going forward.
So we have to certainly do that in conjunction with our partner but.
And what we see so far we like and as you heard from E. It matches up perfectly where you would expect it to be given.
And the orientation of east Goldie and how it plunges.
As far as permitting maybe dominant or geek and talked about.
Sort of permit process, there, it's pretty straightforward because we have on existing operation.
It's not like we need.
We're starting from scratch there so.
The authorities are pretty amenable to that and it helps that its underground, but is there anything else and Dominic on <unk> on the permit side, if we decided that we had to.
Initiate additional underground access at some point too.
Increase the underground mining rates low.
Luke on strain from the exploration standpoint.
Well in nature, as you mentioned Chinese easy to permit and underground, let's say we've hit the first eagle.
The two to three years ago, and now were thinking the shops.
And if we have and other shafts to build that could be the same.
Type of thinking.
So go go get drilled that grew drill depth.
Yes.
Understood Thanks very much.
Your next question comes from John Tumazos from John Tumazos, very independent research your line.
Okay.
Thank you sorry, I had the mute button on before Sean just in case, you're good technical people.
Succeed on many fronts and everything comes up Roses.
Oh Santa <unk>.
Upper Beaver.
And.
Hammond reef and occur.
For the exploration projects among the 17 on the exploration.
Spot on your webpage.
Would you rule out going two 3 million ounces or more.
And should we assume that you're just going to ranked and projects by internal rate of return.
Conservative gold price scenario, it sounds like Theres a lot of progress.
Yes, I think that we've been pretty consistent in saying that.
For a lot of reasons.
Largely due to a risk.
And not wanting to increase the rest of the underlying risk level of the business. Our preferred approach is sort of measured disciplined as far as allocating the build capital.
It's okay to bump up exploration budgets, particularly when youre getting results. So that you can get information, which is kind of consistent with the approach. We took up la Ronde early people would say why the heck are you drilling at 8000 feet. It Ron when we were doing it you are never going to get there and our view was well we want to know what we own and I think this.
And is exactly the approach we're taking is that we want to know as soon as we can what we own two actually.
Help us work through the.
And the options and the ranking.
The relative ranking and I think that's going to be important what we don't want to do is build multiple projects at the same time blow our capex budget.
Free cash flow, that's not a high quality business. So.
I think that.
And we're comfortable with this approach.
As we said on something like pulp day.
And our literally and no rush and when we bought it people were somewhat nervous on my goodness. This is going to blow their capex budget up no it's not.
Because we view and has long term.
Look on how patient we've been with Lauren for 30, plus years 40 years step by step as the drill sort of let us.
To the next step we just.
Gradually invested.
And that opportunity. So this ties into the question about reserve replacement as well.
And we think about it there's a pretty good chance our reserve number in February of next year.
And is the same or higher.
Have they which isn't in our 24 million ounces of reserves.
So and he went through the list and.
And we're getting good exploration results on a number of projects. So that's the basis, but I think the nice thing about it John is we have this combination of brownfield opportunities.
And at places like Iran, and kits on the gold X.
Dean.
And then we have the pipeline and it's how do we put together a mix of both brownfield and pipeline. So that we can get the best Bang for.
And B a predetermined cash.
Capital allocation pie that everybody is competing.
And for internally and we just fine and that that's going to be the most effective approach and a.
Lot of that is really just we just happened to be a gold mining business. That's just good business, but we like the jurisdictions. We're in we like the fact that think about it you know Ron you've been there many times, we're putting out three exploration drifts to the west.
And of the Bousquet property.
We bought 15 years ago for $7 million Canadian.
And Theres ounces there.
And we've got a massive sulphide zone to the east of the main ore body of Iran.
Look at the drill results and Canadian Arctic Theres, a lot of life left here and look at Kittila as.
As we go deeper I think it got lost and the February release, I think the step outs at Kittila was several hundred meters.
And that stepped out from the main deposit there so.
For us this is all about per share value over time, and if we're patient and keep a lid on the share count and work to drill is hard.
Have some pretty smart people throughout the business that know what to do with this stuff when we find it.
And so that's going to be the approach because it's worked for many many years. There is no need to change it but I have to say and I've been here 36 years.
You know the best and most exciting part of this has always been the exploration stuff.
And we never know this whole step out a whole Arctic it may not be anything.
But it may be something pretty important and so that's the excitement that's what keeps us coming to work every day to.
See how the teams are able to continue to grow these deposits and then turn it over and at the project teams and the construction teams and the operating team to see how they can turn it into meaningful cash flow generators, so no change and the strategy.
Thanks Shannon.
Okay and can I ask a question. Please press Star then the number line on your California Keybanc.
There is no further question at this time, Hello, Gal and like to try and nickel number back kind of share point for closing remarks.
Thank you operator and.
Thank you everyone for your attention we have our AGM today at 11, I don't think Youll hear anything new from what you just heard.
Over the last hour or so on the conference call, but Youre certainly welcome.
And to join US it's virtual.
But anyways and enjoy the rest of your day and thanks for your time and and the questions and take care.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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