Q1 2021 Agnico Eagle Mines Ltd Earnings Call

Barry safely.

<unk> costs were slightly better than forecast and the quarter financial position remained strong.

And we've declared a cash dividend again.

So that keeps our track record going we've been paying as you know our cash dividends since 1983 with the focus continues to be on growth and execution.

Of our brownfield opportunities and project pipeline.

We're 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.

And good results at Melody, we featured some results here at 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 it.

In the second quarter, what we decided to do is not pile. It all into our 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> <unk>, who runs our exploration.

And that's 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 and 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 minds, 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. We are recognized as one of the leaders and.

And the industry in terms of ESG by a number of external independent rating agencies and research agencies on ESG.

And we put out our sustainability report our annual meeting is today. So we make that available around annual meeting time. So that is out today and we're adopting a net zero emissions target for 2050, and we've begun to disclosure of scope three emissions.

We're fortunate.

And when we 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 none of which we are required to use diesel to power those mines. So as we move forward to achieve our targets of reducing and getting to net zero and that will require investments and renewable energy and where as we've talked many times before we continue to work with the governments on alternatives like wind.

Power and also a power line from northern Manitoba up into none of it.

And in fact that whole day the government.

And 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 on priority. We've achieved one of the lowest combined lost time accident.

And our history and we continue to win and number of safety awards at several of our mind 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've done a real professional job of real classy job of not being asked to help but stepping up and and.

And taking the initiative to provide food.

Food and certain areas to provide medical assistance and certain areas.

As you know our Nunavut workforce is still at home.

It's been 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 and none of US based employees back and we look forward to.

And having them back.

As far as the quarter goes.

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 meet our guidance, but also to produce 2 million ounces for the first time and our history and 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 that.

<unk> of our quarterly dividend of <unk> 35, a share.

As we look at the quarter.

Pleased and happy to be delivering strong cash flows are strong earnings growth.

Costs record production.

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.

The extensive step out there.

Is potentially significant because essentially what east Goldie has done.

And is turn.

What was a very marginal underground project into what will become Canada's largest underground gold mine, which we announced last February.

And we've 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 of ground cover right net.

Nature structure, so to have a step out over 1000 meters to the east.

And is important and we believe it just demonstrates the immense potential of that.

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 mind about 7 million ounces of on overall envelope, which is currently known to be in excess of 14 million ounces and here, we have a step out 1000 and heaters 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 Rand 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 that's unfolding as we had hoped.

Stay tuned for more results, there and hope they stay.

Steady pace of work, we've got a team in place.

From an eco that's augmenting the team at Hope Bay, we're making improvements in the operations, they're focused on the doors deposit exploration is largely focused on Doris and we think we can extend that part of the operation while we continue to drill.

Drink.

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 or both the whole pay and the upper Beaver opportunity. The next slide is really just a long section.

Canadian Mill, Arctic Theres, 10 rigs going $30 million program split 50 50.

With our partner Yamana as we said the structured wide open and covers 20 kilometers you can see on the right. The ran a large property boundary.

That's a property that hasnt had much exploration on it 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, but we also.

See on the next slide on long section of the Doris.

Deposit hope my mind, just a reminder, 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 Doris and Madrid, and Boston from on operational perspective.

And we see improvement and recoveries.

Hope 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 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 at <unk> five and <unk> 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 deposit.

<unk>.

Mike.

Steady progress as we set up around 26% of the market was done from surface.

At the lower on deposit and debt else at 521%.

The production.

<unk> 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 below and Els at five.

One kilometer three kilometers below surface.

Essentially Eric and lacked prior to that really didnt do much exploration on that's the same rock package its host solve the deposits on Lauren So it's wide open.

Excellent exploration potential and.

And that type of program and 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 <unk>.

Ron Gold and sustaining progress 35000 ounces a good cost performance.

Largely driven by.

And the continued outperformance of the rail their system.

And was above target and over 7000 tons, a day on average and the quarter.

So that technology. The teams 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 deposit, particularly around the south zone, which is higher grade.

And so good solid performance coming out of <unk> at Canadian melodic again, good contribution producing almost 90000 ounces or half of that operation, we had record tonnes mined and January mil.

Mill performance was above target, averaging over 58000 tons a day on a 100% basis. So good good performance there.

And we talked about the Odyssey.

Drilling.

And that'll be a key part of this project as we look forward what we saw in February as we said at the time.

It was basically what we would call the first cut.

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 deposit. So this could have a meaningful impact on the valuation of that opportunity and Canadian margin kissed a lot set records in March for monthly gold production and tonnage.

Milt.

They are also making good progress on autonomous production.

Both and drilling and haulage trials are underway and Q1 that will be important for that mine.

And it.

Looks to expand further.

We are impacted by COVID-19 there in terms of that gets on the shaft and delays there.

The team that was doing the work is out of 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, it's just a little bit more costly to abuse and the ramp but.

We'll get the shaft and place.

And second half of next year about six months behind schedule.

Meadowbank steady improvement produced about 80000 ounces and they sell.

A record in March for long haul trucking.

Performance so good.

Good steady.

Solid improvement there.

And with good production coming, particularly in March which allowed them to post.

Quarter 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've made nature.

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 by the fourth quarter of this year and ultimately continue to expand.

To 6000 tonnes a day bye.

And by 2025. This is another project, which will be long life.

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 make which.

Which indicate that the deposit continues to be wide open.

And that's because we're drilling 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 whole day 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 of the royalty that was on that.

On a property.

So as we move forward, we'll continue to rebuild that cash position as we generate strong net free cash flow.

So just a quick summary of as we said 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 <unk>.

Expanded exploration budgets, we can provide updates on that.

Okay.

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 is synergy.

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 we find through exploration and how we build 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.

And as a reminder to ask a question. Please press star and then the number one and on your telephone keypad.

Yeah, and Thats Star one to ask a question. Please standby on while we compile the Q&A roster.

Your first question comes from Fahad Tariq from Credit Suisse. Your line is open.

Hi, Good morning, Thanks for taking my two questions maybe first on the you talked about and the release.

And starting to have discussions with local authorities reintegrating. The local workforce can you remind us what that would mean from and cost perspective, I know theres a number of initiatives.

Alright, and equal and spent on.

While while those employees were on available, but as they come back could you just remind us from a quarterly basis, what that means from a cost savings perspective.

Yes, hi.

Tomorrow here.

We will end up saving money when they come back as I think we've expressed before.

Additional cost we're still paying those employee <unk> 75 per cent 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 yeah.

Yes, there will be a savings of about $1 million.

Uh huh.

On a month as they come back into the workforce.

And.

Oh, Okay, Okay and then.

And sorry, just to follow up on on costs as well and so I know one of your peers talked about like the stronger Canadian dollar having an impact on obviously the Canadian exposure on our Canadian exposed cost and operation.

32% of your exposure and Patrick and in 2021 and.

And color on if it's.

If FX rates stay where they are today for the rest of the year, what does that mean for your annual comp guidance and including Capex.

Yes. It is.

So.

Sure.

Steve did you want to take that or should I take it.

I'll go ahead and Maher.

It's about 30 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 the even with the movement and the currency.

Maybe I would just add.

Sorry, Sean what were you going to say no I was just going to turn it over to you and maybe just give some color on your thoughts on hedging and and.

And what's in place yes.

Yeah, absolutely. Thanks for the question for hard on it.

It's an interesting time, because with the Canadian dollar lower than 123 at the moment and guidance was set at 130 <unk>.

And 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.

But there does seem to be some strength and the Canadian dollar debt.

Media and 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 other things. We just talked about a couple of days ago was to perhaps use some more.

Zadok instruments to 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 T. Mack.

I would say, we're feeling a little bit under hedged.

And 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 there's always volatility so I believe we'll get our chance.

Okay, great. Thanks for the color. Thanks.

Yeah.

Your next question comes from Tyler Langton from Jpmorgan. Your line is open.

Hey, good morning, Thanks for taking my question.

Follow up question on cost and are you seeing and outside of the exchange rate pressures are you seeing anything with sort.

And sort of labor and labor tightness like other materials, just just any concerns there for the year 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 we see as sort of annual increases and our wage costs, 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 see we start to see some.

Increase.

And let's say in the coming time.

Mainly steel.

Creek.

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 gave our contract.

We'll start to be is it a bit to give a price because it is really volatile so far and price are still and into our range, but again. This is as everybody Oh half.

<unk> the situation and our own life that's debt.

See pressure coming and maybe on the on the work force.

And Sean mentioned this is still a well we're in good position to accept on the <unk>, where we see a bit more competitivity into Canada, and Europe, but ordered and that this is a.

This is still okay.

Okay, great. Thanks, and then just on that.

And I think the cash costs.

The quarter, Rick around 628, an ounce and I think that's you know a decent amount below the annual guide of around 737, and 40 can you just talk about I guess, what and you talked a 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 mine.

Well on on cost per ounces, we produce more ounces. So that's the main driver we haven't been better grade into the mines with good productivity I think on the interesting.

Note that the cost if you looked at and I think its like <unk> 17, or 18, and where you see the new network operation cost per ton and Canadian going down so that trending are you still considering with the net.

And it's the optimization at sites and 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.

A question on cost on the unit cost.

Ross the board at the unit cost and seem to find and better than what you had.

Our guidance.

In February and can you give me a run down some of the assets and and.

And 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 or 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 unknown to us so that's why we felt.

And that it was sort of premature to make any sort of longer term call. Our standard our view on the cost performance going out and 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's, a bit less we have plant shutdowns that Lauren Gold X.

<unk> had some work being done as well.

Elliot 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 back end of the year.

Okay. So maybe on the on the Canadian dollar cost would.

And would be the same but if we're looking at the U S.

With that and make the stronger dollar and the overall per ounce guidance on U S dollars and they'd be the same and.

And then second question would be with respect to the T. Mac acquisition. So the whole bank and interest you had some pretty pretty good grain score team and I had the pleasure of covering that.

And before they put you back on that so $10 eight gram per tonne material lines and it's pretty good grades and what can we expect does that make similar with some of our throughput levels or will it be variable with variable throughput and variable grade.

On.

Dominic and me.

Yeah, Yeah, I think that's one and the throughput, let's say between 600 tonnes per day to 700 tons per day and the grade is going to vary and I don't know.

<unk> 10 grams per tonne, which which bring us to the.

18% to 20 doesn't and <unk> per quarter.

In the first part of the day in the first quarter, we were moving to BT D zone, which is more higher grade through the year, we're going to move to the <unk> zone, which I think it's around seven eight grams per tonne zone, so a bit lower lower grade, but with a bit more times. So.

And that's really the plan.

And honestly very.

Interest and great and it's good to see progress and.

The mills, reaching 91% recovery and the first quarter were a bit higher and that the.

Q2 up to date, let's see if we could maintain debt, but that's interesting and if if the mine is able to produce more with optimization and we have room on vimeo. So.

And it's encouraging to see on the.

Continuous improvement there.

And then and just to follow up on that.

And the.

Development work and when do you expect like the capital levels that you were spending just a quarter that was probably maintained for the question and the year I think I saw on your guidance that had been moved forward into next year and the year. After when we have to index them to really get it continue to produce these ounces.

You mean in 2021 and more.

And looking into 2020 to 2023 and should we expect this and other capital levels and <unk>.

And longer term.

I don't have answered to debt question yet the teams are revising our new base plan because now we've got.

Got.

And maybe at the ore body and care and maintenance.

Postponed that desktop and <unk>.

For the 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 we need we need to we're going to have a better view.

And Q2, we're going to have a better view, but.

So the the spending right now.

And I keep $10 million per quarter I believe that's what we're doing in term of capex it totally.

Okay, Thanks and.

And I answered my question.

And I need and just on the on the strategy there and the strategy is to sort of be cash neutral.

On that as we drill and get more information.

And what 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 at Madrid, and because we just don't like the location of the ramp and.

Particularly at the type of rockets and.

So it's required us to sort of rethink that.

But again as we've 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.

We're going to find more ounces there.

So we're going to take our time in terms of next big steps.

But 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 you know.

More and since there rather than necessarily improving the mill is running at 91%. So yeah. Okay.

Okay. Thank you. Thank you.

Your next question comes from financing from industrial going on Alliance. Your line is open.

Thanks, and good morning.

Related to Q2 are there any higher grade stockpiles that you already have at some of 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 the.

Down in Q2 or are there a question of the mill liners.

<unk> debt, it's a their lifetime he's done and theirs.

Theres a shut down that kicked it off for the other place where we need to do a dentist job because the scaling and built up.

Need to clean it is a 10 day shut down there's one at the narrow and it is also a 10 day shutdown, where we do more and E deep electrical maintenance, we use debt season, that's part of the year because it's a.

It's a better season to do it and also it is prior to some early day so strategically.

It happens that we ask more shut down in Q2, but.

Debt that's normal operation.

And we're going to see that we're going to see a.

Two to the second half of the year better great at and around net that's right.

Net middle Bank and also a good productivity everywhere and that's going to be a better second house, but he is just a question of timing.

Okay, great and and.

And at Meadowbank, and 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.

Yeah and then.

See the mine and the mine you better is producing better and planted and the Neal is also able to process more a part of that is related to debt. So soft or part of that is related to the very good performances on maintenance availability and operational productivity. So.

We there was 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.

<unk> tons per day.

So there was also four on their trucks coming on a 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.

Yeah.

Your next question comes from John Tumazos from John Tumazos, very independent research. Your line is open.

Thank you and your next question comes from John from Hs from John duration, and severity in Japan and switching rich your line is open.

Hello, John.

Yeah.

And just on that question has been withdrawn. Your next question comes from Greg Barnes.

TD Securities Your line is open.

Thank you, Sean just big stair step out.

Arctic East Goldie.

Does that potentially change your development approach on the ground and why you would.

Orient and mining yeah.

It's too early.

I'll, let D and a minute just to 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, it's early it could be something like the l'oreal and area, where we have multiple shafts 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, we always thought it was a potential to Ron in terms of multiple shafts 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.

Mara and was the example of multiple shafts over 30 plus years.

Could the Malarchuk area would be 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.

Bill.

We see as being Canada.

<unk> underground mine, how long does adult and I think that's the question and the other question is you. Just said is is there on 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.

Keith can you provide some of your color I know you are probably feeling lonely there lead flow.

And your questions without on exploration.

And so no I think GAAP.

Yeah, No I, it's a pretty good question, but when you look at and it certainly doesn't move the center of gravity of the ore body, yet because the with the core part of East GUL D that is now on that $6 4 million ounces, and and and and more with good grade.

And with you see also that we've provided results from the debt.

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 would be total 14 million ounces. So I would think that from the debt perspective.

But as Shawn mentioned.

And our team basically when we were looking at the ore body because the orebody at East Goldie is quite predictable it is.

And like we see plywood shape and we've basically.

Looked at that structure and the seawell.

You know Purdue using debt and no one geometry projecting at that kilometer C D E and <unk>.

We're 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, our team and all told US what we should get and kudos on at 22 50 meter on the whole day cutting kudos on that 10 meter off from their predicted target. So they got into the structure right where it was.

Supposed to be with exactly the same type of war.

Cut and piece of what we see with and as Goldie and we weren't 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 yes, we won't that kurzweil hold it interesting in terms of of.

The fact that debt the the zone, it's predictable and where it was supposed to be and are we yet and the best part of the deposit that debt. These things a lot more drilling will be blind moving forward to better understand and.

And that these thing where the center of gravity is and how we as we see indeed no one prior to be school day, there will be higher grade the great.

It varies from from two grams, two eight grams with an average of about <unk> four so pretty interesting.

So I understand the hole was drilled from around and lots of property.

And you are hitting mineralization higher up on the whole on that side of the property downward.

Oh, yeah, Yeah, we usually within the Rand monarch gig there are known porphyry intrusions light or free 12 debt owes the odyssey, but with some at one grand two gram over $110 50 meter but.

At the end of the day, we'd use that drew a hold and we push it we deeper entering to the Pontiac for 600 meter and two to reach out for the Eagle diesel we have multiple.

Target 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 this effort.

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.

Yeah.

And I have a couple of questions if I could come back just to again be the car.

<unk> share I just want to check.

Back on just a couple of things on inflation and then and.

Hi.

Maybe just Dave just on the sensitivity and the Canadian dollar and I just wanted to check on this number it's still holding that at 10% and move from the 130 Mark.

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 and that the way I think about it is.

We can still protect about 130, if we're able to do the same amount.

I'd say 128.

No.

What we think now with the T Mack is probably five or $6.

Four.

One per cent change or.

100 basis points pardon me.

Okay.

Okay. That's helpful. Thank you and then just coming back on.

On to the inflationary pressures and maybe its dominant that's gonna take debt fund that and you.

You mentioned and as steel concrete and tires are you seeing any.

Anything and freight and inflation now are and cyanide.

Oh I don't have the detailed for cyanide straight.

C and most most probably but.

Again, we don't you don't see our challenges.

Challenges to meet our guidance, so far and let's see the minds of productivity are offsetting those are those increase but it will need we keep let's say, we keep an eye and.

Keep on though the reader.

Finally on data every 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.

And so that's the type of thing we're doing on close follow up the.

The barge season, nothing nothing material lets see if I took the north as an example, and that's the message you will have already been ordered because.

And because that needs to be a bit on core for June.

June July when we start to do the shipping so that all of those are those one I've been protected but now we're 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 said that cash is smartphone.

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 understand just the strategy for you. This year in terms of reserve replacement and then you've got a lot of inter.

Interesting.

Exploration targets and our success, maybe just revenue some of the assets for Aflac, you think you're going to be able to replace reserves on the strategy hasn't moved.

Yes.

And that.

Okay.

Yes, Gail can you Yep yep.

Certainly Oh Boy Verde may net debt I guess.

And the wronged.

And as you know it says some of those mine and they know where they come in and.

And sequence you know.

Until we kind of demonstrate that capex down their production last year was a good year at the one where we've been adding more reserves that lv five with the continued success. This year I do not anticipate and let's say for example that la Ronde, specifically that we go on to replace completely what we got on mind, although theirs.

Drilling on going we are positioning ourselves, let's say for lower on the more important thing. This year is that we're positioning dose exploration drift beneath the bousquet, but it's more kind of a long long term pay off. So we we we made this year and next year, maybe not completely see a complete replacement and eventually down the road, we'll get there.

We'll get some some more on to showing up here and on their own same thing and minority on Arctic quite sizable deposit as you know we our share are depleting 360000 ounces roughly a year well until we get the study to brain.

Goolsbee into research.

We won't see and replacement so right up to that do you know if we're not.

Replacing market and also from the existing mine those two I have no specificity that theyre going to come in and old triggered on their whole day will be it should be addition of reserves on the water and you have 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.

A key that we can get 500 meter below the shafts and and if we're more looking at the long term because we know that there is still mineralization that kilometer below the bottom of the shaft. So now we're moving morning too.

Put some more raw business on the resources and reserves they need to buy on a bottom up their shop. So I think for the near term. We can expect that kittila will replace what theyre going to mine for the upcoming two three years after that and who's going to have to come with a plan to convert a bigger part debt debt and Mexico Pinos.

Those I think we're in good shape to replace a fair part of what we're going to mine life and be Oh, 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 the <unk>.

Sounds like that's where this will come triggered on the road I guess, we're getting good results. Good sign. So eventually it will come out with the 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 that doctor Beaver and we anticipate that.

And next year at.

The February update we'll be able to come out with an update on 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 Oh, Beth So recall researches to made up our mind about.

What are we going to do with those historical reserve and resources.

Integrating it into our business for yearend.

Okay. So that.

So just from my understanding so I should think of them are on.

La Ronde and Canadian Malarchuk and maybe.

And as more rigs.

<unk> growth.

A year and and the other mind, you've given me in terms of reserve replacement would that be a fairly and looking at it.

And that Rod and monarch, Nick yes.

I'm not sure we're still on their review of our channel by there.

Okay. That's helpful and if I could just ask us on Melia dine and Sean just on the.

And what the saline water pipeline and 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 with that one.

Yeah, I can take that one yet.

Relative to the COVID-19 break breakout and now put the.

And the public hearings have been postponed, but we don't have a issue because mainly we with our good through from inches on grouting practices, we see that the inflows are 50% lower than with the planet.

Plus the mining right into the pit is going and also better than plan and so we have a we have enough room capacity, it's not that it's not an issue.

And we were going to continue to follow the process for them and their hearing.

We don't have news yet when it's going to happen again everything is going to depend on how it's going to go with the COVID-19.

But we will stay tuned on debt.

Okay.

Okay. Thank you so much.

Danielle before before you go I just want to clear.

Clarify one thing on the hedge and when we give guidance on the sensitivity to currencies we.

We do not consider the impact of hedging and because we have hedged CAD.

For 100, 100 basis points moved from budget. So $1 30, CAD 120, 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.

<unk> any impact on kind of doing okay. No that's really helpful because that meaning.

Thank you, yes, it is meaningful yep. Thanks.

Your next question comes from Ross <unk> from a capital your line is open.

Good morning, Thanks for taking my question, Sean I wanted to come back to the East Goldie.

And 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 how.

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.

Mhm 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.

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 14. 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 sick higher 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.

And to see what's 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.

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.

The orientation of east Goldie and how it plunges as.

As far as permitting maybe dominant gorgie can talk about.

The permit process there, it's pretty straightforward because we have on existing operations.

It's not like we need.

And 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 Dominic on <unk> on the permit side, if we decided that we had to.

Initiate additional underground access at some point to <unk>.

<unk> increased the underground mining rates.

Look on strained 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.

And the two three years ago and now we're sinking the shaft.

Yes, and if we have and another shot to build that could be the same.

Type of thinking yeah. So go go get drilled debt grew drill depth.

Okay.

Understood Thanks very much.

Your next question comes from John Tumazos friend, John Tumazos, very independent research and <unk>.

Yes.

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.

Yeah.

Oh Santa <unk>.

Upper Beaver.

Okay.

Pam and reef and.

Couple of 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 rank the 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. Ron when we were doing it youre never going to get there and our view was well we want to know what we own and I think this.

<unk> is exactly the approach we're taking is that we want to know and.

As soon as we can what we own to actually.

To help us work through the.

The options and the ranking.

And the relative ranking and I think that's gonna be important what we don't want to do is build multiple projects at the same time blow our capex budget out.

Free cash flow, that's not a high quality business. So.

I think that.

We're comfortable with this approach.

As we said on something like Hope day.

And our literally and no rush 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 at how patient we've been with Lauren for 30, plus years 40 years and 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.

Is the same or higher.

Have hope day, which isn't in our 24 million ounces of reserves.

So and he went through the list and.

We're getting good exploration results at 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.

Ladies and.

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 what will be a predetermined.

Our 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.

The fact that think about it you know <unk> had been there many times, we're putting out three exploration drifts to the west.

And of the Bousquet property, something we bought 15 years ago for $7 million Canadian and.

And Theres ounces there.

We've got a massive sulphide zone to the east of the main ore body of Iran.

And I look at the drill results at Canadian Arctic Theres, a lot of life left here and look at Kittila.

As we go deeper I think it got lost and the February release, I think the step out 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 working 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 on <unk> 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 to the project teams and the construction teams and the operating team to see how they can turn it into meaningful cash flow generator, So no change and the strategy.

Thank you and it.

Okay and can I ask a question. Please press Star then the number one on your California Keybanc.

Yes.

Okay.

And there is no further question at this time, and Kelly and I would like to try and get going over back to Mr. Flynn for closing remarks.

Thank you operator and.

And thank you everyone for your attention we have our AGM today at 11, and 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.

To join US it's virtual.

But anyways and enjoy the rest of their day of your day and thanks for your time and and the questions take care.

Yeah.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

And.

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