Q2 2021 Agnico Eagle Mines Ltd Earnings Call
Good morning, My name is Chris and I'll be your conference operator today at this time I would like to welcome everyone to the Agnico Eagle second quarter results 2021 conference call all lines have been placed.
On mute to prevent any background noise. After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press Star then the number 1 on your telephone keypad. If you if you would like to withdraw your question. Please press Star then the number 2 thank you Mr. Sean Boyd you May begin your conference. Thank.
Thank you operator.
Good morning, everyone and thank you for joining our second quarter conference call, we will be going through a series of slides and Oh. Please take note that in the presentation. There will be forward looking statements and there's.
Some material outlining them.
Note to investors in the slide.
Well.
As we look at the quarter as it ties into our strategy.
Solid quarter, a solid start to the year, we look at first half production was at record levels over a million ounces, but.
But what was really gratifying is as we're producing more gold but doing it.
Definitely more safely than we've ever done in our history. So we had the best safety performance in over 64 years in terms of fewest lost time accident. So congratulations.
To all of our employees for that focus on safety.
Also had good cost performance will talk about that in a minute, which generated really strong.
Flows, which strengthened our cash position.
It's still a company that's growing we're still investing in the future. We have the ability to continue to grow up and will take you through that.
On 24% production growth from last year out through 2024, and the strategy is also based on.
On taking advantage of geological opportunities, we'll talk about some of that we're spending more on exploration. This year as part of that strategic push to understand them.
The opportunities we have particularly at the existing mines. These are brownfield opportunities that's important information for capital allocation.
On the.
On cash is really as we grow to grow in a way that improves the quality of the business..1 of the key measures. There is our ability to drive cash flow per share. So that's a focus as we think about our business as well.
Risk is also important here and we like where we are in terms of operating them.
Platform.
Forms those are areas as you know, we're really comfortable being in them and we see them as <unk>.
<unk> for the.
The future success of our business not only that we bring expertise to the table, but we have an ability to do business.
In those regions and we'll talk about ESG as well a lot going on in the quarter and.
Our focus highlights from an ESG perspective in terms of operations.
And production in the quarter, we produced a little over 500000 ounces without I'm not including Hope day, the cash cost were under 700.
$40 an ounce so.
Good solid performance in terms of managing our unit cost.
It puts us on track to achieve our production and cost guidance that.
That we put out earlier this year in February our Capex is around.
$800 million, excluding funds that are being spent on whole day.
A lot of heat declared our quarterly dividend of 35 cents per share.
I made reference earlier to ESG.
And we see that as sort of an investment in opportunities to improve.
The business and to manage risks, we had a lot of good things happening.
We were.
We're able to begin the reintegration of the Nunavut workforce.
It's underway at both Melia Dean and Meadowbank.
I I I think what was for.
For me gratifying to see is that as the none of them at work force returned to work we have.
And we celebrations there to welcome them back and I think the reaction of the workers. We had workers that were actually in tears because they were so happy to be back at work. So that shows you it's more than just a paycheck here.
It's about opportunity, it's about opportunity to provide for their family to build a career.
And those are a big part of the benefits that we're focused on being able to deliver there. So.
Welcome all of our none of them at workers back and thank you for your patience.
Over the last sort of year and a half and as we said we're glad to have you back.
Other important initiative and none of it.
It was an Mou that was signed with the consortium of in you had on businesses to move.
Move forward on our renewable energy plan for the whole Bay project, which essentially a wind turbine wind turbines and I think that's an important we see that as an important first step as a way to invest.
Vast and resource development, but also do it in a much more environmentally friendly way and this is going to not just be on agnico Eagle on other companies. That's also going to beyond governments to continue to invest in this infrastructure and we see this as an important first step in not only the whole Bay region, but also to expand.
Options for renewable energy.
And the Rankin Inlet <unk> region around Meadowbank and <unk>.
Staying in Nunavut.
Today, we have the pleasure at noon right. After this conference call what we do here at Agnico as we have something.
The old good move of the week. So every operation every business unit will report.
Over that week, where they've made.
<unk>, whether it's an environmental initiative, whether it's a safety initiative, whether it's a community initiative, whether it's a productivity initiative on exploration initiative.
And we review those every week and we get an update of the mall, but then on an annual basis, we select 1.
And we recognize and honor the groups that when the annual award and that's today at noon.
And the winner of the good move of the year was the none of it.
Shared services and none of it teams for their on site Covid testing. So you've heard us talk about it many times and I think what that demonstrates is leadership and clear thinking.
In the face of a lot of uncertainty that we're all dealing with last March and as we've said before we had testing up and running.
To protect our sites last April.
So that was being recognized today internally is a good move and we also have received.
Outside external acknowledgment in Mexico for the second year in a row.
By the mining Association of Canada. They won the total sustainable mining award for their work.
In the local community around Creston <unk> heap Leach.
Winding down so we asked the workers.
As.
We are winding down that operation look is there anything we can be doing like is there anything you need in the workers said, while our community need something.
Work, they need safe drinking water they need sustainable drinking water and it's not just for homes. It was for clinics it was for businesses.
So our teams put together a community development project to supply 300 families with clean and sustainable drinking water using solar panels to power of the system. So.
Another good example of how we're able to.
Share some of the benefits on our good fortune for the strength of our business in in our communities, where we have employees, but also people that partner with US. We also made referenced at the start moving on to exploration, we did put out on exploration release.
<unk>.
But in early this month, which highlighted a number of initiatives that are moving forward.
Just touch on a couple of them Odyssey.
The underground component of Canadian Mill Arctic at this east Goldie It was certainly the the driver.
Of the underground mines in terms of being able to pull together multiple sources of or 2 actually.
Have a business that's a long life are productive with an attractive rate of return, but in that rock package that host east Goldie, we've continued to drill and certainly our team has been focused on.
<unk> understanding what else is in that sedimentary package of rocks and I know talking to <unk> as he's been up at the site and are working with the drillers.
You know the collective thinking was well, let's see if we can extend these holes to the limits of the drill.
Let's go beyond the horizon, where the east Goldie deposit.
That exists and test for extensions of that deposit to the east, but also as we said look beyond.
And we've had a significant step out hole, which we've talked to over 1000 meters to the east and following up there.
They pushed the drill to the limits and we picked up another structure 400 meters to the south.
On the projection.
On the east Goldie deposit so lots of potential there and if you recall on the study we're talking about a study that incorporates about 7 million ounces of what is already a 14 million ounce total envelope and here, we are identifying additional mineralization well with that well outside of the known mineralized.
Pause outlined so.
We're starting to see this as an extremely long life opportunity and what we like about it it's in our backyard essentially where we've demonstrated decades of experience in knowing how to build these underground mines and so we're looking forward to continued exploration results, we're going to do more drilling we're adding.
Channel resources there. So we're excited about that upper Beaver project, we continue to drill and were continue to get high grade gold intersections with very attractive copper grades.
So that drilling will continue.
That will drive clarity of the study so we'll be moving that study into 2022 based on on the drill results.
Our desire to increase the drill program are there as we move forward at Hope Bay, we're seeing extensions.
That suggests that we can mine the Doris project longer.
Which would be good.
We got more.
Getting more drills this summer on the barge so that'll allow.
2 more drilling on the regional targets such as Madrid.
So this was the plan get more drills and drill these large geological belts focus on Doris we know we can do better there and while we've done that we've also been improving.
On the mill performance improving recovery.
How us cities.
They've had a solid quarter at Kittila, that's 1 when we first got involved.
That he'd been Alain and even Mark was involved at the time and suggested it looks like the Abitibi you know, it's a structure that wasn't drill that deep at the time when we first got involved down to 250 meters.
We've.
We've drilled it down to almost 2000 meters now shaft is going down I think what we're seeing as we move to the north west.
We're seeing really good thicknesses really good grades.
We're already thinking about another expansion now that we've achieved 2 million tons a year.
Just based on the size of that deposit.
So.
Cover at some exciting.
Drill.
Drilling and exploration opportunity ultimately all of these results that these deposits plus in Mexico at Santa Gertrude US we've had some good results there.
We've had some good results at <unk>. This is important information as we look at our long term cash.
Capital allocation decisions and that's why we decided strategically to.
<unk>.
Push on warm investment towards our exploration what ill do now is I will just use slide 8 which lists all the mines and just work my way down and talk a little bit about some of the highlights in the quarter at the operations Lauren.
So.
They just continue to deliver quarter after quarter after quarter operating margin in the quarter of $130 million, producing almost 100000 ounces of gold at $500 cash cost. So what we like there is in.
In addition to the solid performance.
Is the fab.
That they continue steady improvement in terms of the percentage of tonnes being mined using automated equipment.
So they've made good advances there that's clearly important as.
As we move deeper in that mine.
As we know on the West mine area, which had another out another strong quarter.
Almost 500 tonnes a day.
Automated equipment is really important as we think about how we're going to continue to open up that line.
Sales at 5 over 3100 tonnes a day in the quarter.
So that 1 started very modestly couple of years back.
We said, we were going to get it over to over 3000 tons.
On a where they are now so that's positive exploration. It's funny. After 30 years of this thing producing high quality gold, we're still making discoveries and as you know we're pushing.
Multiple exploration drift at the site are.
3 of them are moving to the west on the old Bousquet ground.
That's an area, where it's essentially the same rock packages as Laurent and it wasn't really drilled by Barrick when it was there and it's wide open and so the best access for US is to drill from underground and we have tunnels.
In place and so we're pushing additional.
Exploration drifts in there.
Tonnes a day to.
To get access to better drill platforms to drill that horizon.
Because that could give us low risk high quality ounces.
At the low or on site. We're also pushing to the east because we had as you know some.
Some drill holes on a massive sulfide lens.
So thats.
We've seen that before it Lauren.
That's high valued rock.
We need to understand the potential extent of that so that will also be.
Our focus at <unk> steady performance there at gold X.
Another solid quarter in terms of cash cost and production.
Good performance.
<unk> and the rail there.
Good performance in the underground mine.
So a good result at gold X at Canadian Mill Arctic.
<unk> quarterly.
Quarterly record for tonnes mined.
Gold production, so that's a big mines generating big cash flow and big production.
We had record quarterly tonnage of over $18 million.
On tons in the quarter Prost.
Processing 62000 tonnes a day. So that's excellent performance remember in June of 2014, when Agnico and Yamana took ownership of that project of the throughput rate was 47500 tonnes a day.
And we said we could get it to 55000 tonnes a day here. It is at 62000 tons a day and now we have the underground opportunity and as we talked about earlier, we're getting extremely good drill results. Good performance in terms of getting things set up.
In the ramp and and also and getting things set.
4.
4 shafts sinking.
We continue the progress on the shaft collar.
Good day.
At Kittila.
We also had.
New mill tonnage records in April and May.
So a solid quarter in terms of production at.
At Kittila.
And again, we talked about the exploration potential there.
In terms of the shaft and we're looking at commissioning in the second half of next year, but in terms of project cost were in that sort of 190.
The 200 million Euro range at Meadowbank, good solid performance in terms of ounces.
A little over 85000 ounces, there's still improvements that we need to make there, but we're making steady improvements quarter on quarter, we had a record month in terms of tonnage hauled on <unk>.
380000.
Tons per day, so gradual ramp up it's going to produce more gold as we move forward.
It will be a stronger contributor as we move forward.
We continue to focus now on developing the underground because we have higher grades there and that will augment the open pit production <unk> had a really strong quarter. So you can see <unk> starting to hit its stride.
As far as production goes it produced almost 97000 ounces had almost $100 million.
<unk>.
Mine operating profit.
In the quarter. So strong performance, we saw monthly records set in May for mill throughput.
Foot and in gold production.
So that will be a long life contributor were seeing good exploration results. There as we start to ramp up exploration. We've made some progress on the permit side.
And on the saline water discharge line, which people are really focused on.
We may.
Good progress and we expect to get the permit.
In the third quarter of this year.
So we have been working very closely with the community and with the regulatory authorities. We made some changes to the plan.
That had been accepted so we've been moving forward on that.
As we said we would expect to get.
The permits.
Very soon in Mexico.
Good performance.
You look at that operation.
On producing over 40000 ounces had some good cost so good cash flow generation there as we said the focus is on the satellite.
Deposits.
Eloping those satellite deposits like India was slow start this year due to lack of rain. We've had a lot of range recently, so that sets us up for a better performance.
In the second half of this year, so good solid performance across the board.
Which helped to set that record output.
In the second half of over 1 million ounces that drove good solid earnings in the quarter, but also really good cash flow per share dollars 67 for the first half of the year over $3 per share in operating cash flow.
That drives an increase in our cash position over 280 million.
<unk>.
So on a good strong results. So I'll just summarize now and then we'd be happy to take questions. We have.
Nice thing is we have more people here in person and we have the contingent on line that can help answer questions. So again over 1 million ounces first half positioned for a stronger second.
Half and further growth in production as we look beyond 2021.
As far as.
Strategy and risk again strategy is to stay in very low geopolitical risk pro mining jurisdictions, that's our comfort zone, we've had a lot of success with that business.
No need to change that on ESG as we said record safety performance in the quarter.
We've done a lot of work in the communities, particularly over the last year and a half helping out during these challenging times that will continue going forward, where footwear already low intensity in terms of greenhouse gas.
Emissions in freshwater usage.
We've got plans to do even better as we go forward so that'll be a prime focus of us.
On dividend again 35 cents per quarter. So we're clearly focused on return of capital and we feel as we continue to grow output and build cash position theres room to pay a higher dividend so that will be a focus.
Going forward, we talked about the exploration success.
Particularly focused on the pipeline projects and the opportunities near the mines. We went through that as we said that's a big part and has been a big part of our ability to to provide above average per share value creation over our.
Of our history.
And because it works so well on because we have that expertise and have that success.
We're investing more in that area to add additional value and there is no.
The reason too.
<unk> the strategy it works well as focus on things like per share cash flow growth and generation.
Along continue as we move forward so operator.
That's it for the formal presentation, we'd be happy to open up the line and take questions. Thank you ladies and gentlemen, we will now begin the question and answer session did you have a question. Please press star followed by 1 on your Touchtone phone.
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Your first question comes from Tyler Langton Jpmorgan Tyler. Please go ahead.
Good morning, and thanks for taking my questions.
So we'll be cash because they just to start moving in the release you kind of talked about inflationary pressures are you starting to see them, but it's on track to hit your guidance do.
Due to some initiatives you've been taking I guess could you just.
Give it a little bit more detail on you know.
What type of pressures, you're seeing you know I'm on what cost and kind of what these initiatives are and then just I.
Yes.
Is 2021 benefiting from any sort of I guess, you know fuel hedges or supply contracts, where if they kind of roll off or expire.
And sort of inflationary pressures would be the same could we see sort of I guess added pressure next year.
Hi, Tyler Tomorrow here, there is inflationary pressure.
The board, but as you can imagine cost control is a focus of agnico on every mining company. Our team has done a great job as you mentioned and managing that we're maintaining our cost guidance.
Not only with the inflation pressure, but also with the volatility in currency our treasury team as.
It always.
As on top of this we've got about 50% of our position hedged.
Into through the rest of this year and a portion into next year. So there is inflationary pressure.
Our team has done a good job managing that and at the end of the day when the operations are firing on all.
<unk> that helps your cost as well so across the board they've done a good job.
Okay.
And then maybe just switching to hope Bay.
And I guess this quarter sort of production was above sort of the quarterly actually takes patients you have in unit cost.
All similar can you just give some thoughts on what you expect for the second half.
Yeah the <unk>.
Speaking this quarter have been.
Maybe a bit higher than expected.
Pushing also a timing there because we're running on enough. So we're still expecting to.
To be net <unk> 20000 ounces per quarter.
Costs were low Ah at Hobe.
The Neal.
Is exceeding the day recovery.
So very very happy about how it's going at the mill.
And the underground is still progressing we are going to move to the D. C. N. A zone, that's going to give more flexibility on more productivity for this thing.
On the half of the year.
Alright, great. Thanks, so much.
Thank you. Your next question comes from Puneet Sing I E capital markets Puneet. Please go ahead.
Hi, Good morning, I see on Meadowbank had another strong quarter and.
Production originally guided would step up in the back half.
Quarter on Yesterdays release, you mentioned you were reviewing the plan there to give you some flexibility in the years to come on you're still maintaining our overall production guidance. So could you provide some more color on what kind of effect, we could see this year at meadowbank.
Yes, Nick speaking.
<unk>.
<unk> continued to improve.
For the year aspect very proud of the team over the success and achievement at the mine moving to times as well as the long haul truck.
We still are improving and optimizing the mining sequence between the IV are weighted Dale a phase 1 phase 2 phase III. This is work in progress. So we still expect to have a.
Have a good year at Meadowbank.
You see in the press release about us somewhat.
Challenges in the northeast of where they'll pit that's normal as we are mining we're discovering the pit and the team are as usual are adjusting to sequence related to debt Oh, we have.
On on on monitoring tool, a reader to winterize that and Theres no big issue related to it.
Okay, great. Thanks, and then.
Final question is last year in the third quarter, you took a look at the dividend.
On a bit on Sean you were mentioning at the top with strong cash flow and Youre looking to add increasing.
Goodman again are you following the same time line this year and reviewing your debt.
Dividend policy should we expect an update in Q3 while.
While we do it every quarter.
And last year, we bumped it twice in the year.
So we review it and look at it every quarter. So it's certainly something that will be reviewed.
In Q.
<unk> and given that we expect stronger output in the second half.
And build on the success of the first half.
On our ability to pay is certainly we will continue to go up and if you look at our track record, we kind of like to pay a dividend. So that's certainly a focus at the board level on a quarterly basis.
Okay.
Good to hear thank you very much.
Thank you. Your next question comes from Anita Soni CIBC World markets. Anita. Please go ahead.
Hi, Thanks for taking my call.
I just want to focus in on the exploration results that you had.
Put out a couple of weeks ago.
And I think you noted there.
3 debt.
We're looking to grow your reserves and resources and I was just trying to understand whether or not that that trains of growth growing them also apply to reserve. This year and maybe you could just give us I know there were a lot of.
Like pretty good help from some.
Additions, but if you could just give us an idea.
How we can squeeze reserves playing out this year and then also what we can do some resource additions this year.
Maybe I can take this 1 on Utah good morning.
So yeah, obviously as you as you noted.
We're ramping up activity there will be a combination of.
All drilling to track from existing operations, but also from the pipeline project. So.
As a as you see we are currently.
The weighing on our own assessment of the historical reserve that they'll be we're working on taking the grading more drilling at.
And as Sean mentioned, we're thinking about the beating the study further in 2022. We are also working to bring some of the the.
He's going to be eventually where in filling ethylene is still not sure yet what will be the.
The drill spacing needed so there's a lot of moving.
Part obviously, we are a for example, a non Arctic with the Pip on.
Till we get the underground ready to move from resources to reserves are there won't be anything to replace what is currently being mined from the pit. So you can clearly.
C over their debt replacement it will happen is that in a bigger.
Chunk once we got to get the underground project to ready to be couldn't move to reserve at around where it puts the training ourselves more on a long term strategy, putting dose a dose dose a dose exploration drift at 1.2 and 3 kilometer so.
First we're still working on on both aspects.
<unk> book.
On the short term a reserve or a new world from operations, but more positioning ourselves for a much longer term vision and get their life is a good example of that.
Therefore, it eventually put the story together to to think about the deposit below the current resource estimate that at 1.5, we know.
We still we're still in the deposit 2 kilometer. So there's a lot of moving parts, we are expecting that altogether.
Well it will be able to to to grow the reserve by year end, but it will be a mix from existing operations from pipeline project update.
Okay and then my second question.
We can tell on the shaft.
Expansion are on there you guys have got pushed out into the first half 2022.
And again, that's more cost relate.
Put them mitigate cost right.
That was the main sort of synergy that we would see from that.
That's a that shopped.
Yeah, the shelf is going to reduce the mining cost wanting operation, we're going to have less tons to be moved with the trucks.
So this is a part of their strategy to improve the cost and Anita.
As we fine.
As we find some really good.
Drill results continuing good drill results at Kittila.
<unk> got a very long mine life, but it's going to go down below on kilometers.
So the shafts does make good sense.
Yeah sure I'm just trying to.
Figure out what the pushout in my model. Thank you that's it from my questions.
Thank you your next question.
From Mike Parkin National Bank, Mike. Please go ahead.
Hi, guys. Thanks for taking my questions I've, just got a few for Canadian Mill Arctic can you give us an idea of what percentage of the ore feed was from Barnett noted a nice tick up there on throughput.
<unk> comes on.
Okay 60 per cent of the ore is coming from a Canadian mill Arctic. So the remaining is gonna be a mix between Barnett been partially stockpile has the mill is processing more I think it's like 30% I could go back on.
Okay.
That's okay.
It's going to be fairly steady or is that kind of becoming a bigger proportion as we move into the back half.
Ah theres going to be steady for the remaining of the year Brooklyn at least 60 coming 60 per cent stemming from Canadian about Arctic, but that's going to increase more in 2022 and the further.
Okay.
On that Mike that's good.
Second 1 can you just.
Give us a bit more color in terms of what.
You saw happen there it goes back either as a node on the thickness of the event.
Just kind of severity of it what youre doing to kind of.
Address it in terms of the additional rock sport.
Yeah deep mining are involved.
But it is normal as we're mining deeper this is not new for <unk>.
But the thing is as we go and adjusting our protocols and adjusting our mining methods are why do we go it happens in the deep 1.
At level around 1.1 let's say 1.1 kilometer below surfaces.
No major issue with that and again the mining methods protocol is all in to get integrated into our mine plan and there's no impact.
Impact or significant impact on debt.
1 is that.
Anything that you're benefiting from all your years of experience that moron.
In terms of just best practices and rock support yeah.
That's an excellent point, we there is synergy between the 2 divisions not only like 50 kilometer and close to 2 you can go back and the team.
Very strong team there working together as well on using also expertise external expertise, which are the same people.
Helping and supporting the teams to be the best best practice.
Alright.
And then just last thing I've read a couple of articles about issues with.
We have the why of shipping containers and I know your barge season is either.
Underway or.
Uh huh.
Have you experienced any challenges there or the barge season up into the Nunavut region.
Going as planned.
I'm happy to say that we are on target. The team have worked let's say.
We are hard on that we had some challenges.
On the logistic part with the channel that was blocked and.
Covid close a port in China, but overall, we've been able to put a wet plant on the barge we sell so that's on there.
The containers and we're kind of.
Put to find but we were in advance on that and well plan. So this is a this is not a problem and maybe to add on inflation the.
The fact that.
None of it is running with let's.
Let's say material maturity debt have been bought into we need to any this is positive for us as well as we did.
All the procurement for this for this year barge going up to mid 'twenty..2 we need to have been done in Q4 last year Q1. This year. So debt. This is an advantage for a 4 day none of it operations.
Great. That's a great point, thanks, guys. That's it from me.
Thank you. Your next question comes from John.
Difficult dose of John Tumazos, very independent research John Please go ahead.
Thank you very much.
Could you give us a little update on the strategy for hope.
At the onset of the acquisition. It was described more as a long.
Term exploration and development projects, where you want to find more ore.
Have a bigger mines.
Better amortize the fixed cost of <unk>.
Site up north.
So here we are.
On June quarter, it had a lower cost than Meadowbank on Mexico.
Are the.
The June results sort of not sustainable.
Are you going to use up some of the better stopes.
Or are you doing.
Just better cost performance than you expected.
Modeling a $1200 gold.
Long term for your decision, making and ignoring the current results.
Yeah.
Yeah, maybe I will start with coal being ask <unk> to complement to continuing on debt, but the strategy who would be a non we're mining the <unk> deposit.
On an average as I said 18.20000 ounces per.
Quarter on the integration is going well with.
The team and we see progress he ran there and do you really the what we're looking nowadays in parallel why we're mining the Doris which is paying for the fixed cost of the sites and partially the fixed cost related also to exploration. We continue to look what is the what is a more bigger picture.
We're doing trade off with the meal.
As we see good improvement and we see potential maybe to use a meal that we look at what could be done with a low capex are to have good recovery and higher throughput through that Neil. This is 1 of the trade off another 1 is to look to build a bigger meal.
To process more forthcoming from Madrid.
So this is underway we are going to still need some time to the end of this year 2 to analyze and to do those trade offs and the good news I could say on that then I'm going to give it to <unk> is doris.
There's it is limited.
Drilling debt have been done and now we're mining and we when we arrived we continued to drill it's always extending so we're able to replace everything we're mining right now we're able to replace it into the direct deposit, but I will give it to <unk>, which could talk maybe a bit also about Madrid, and Boston, which are Madrid is a very interesting.
Yep. Thank you Dominik I drunk, so we're looking at to add on.
It doesn't change.
From our plan and we still continue to assess I know Doris and.
On the recent results have demonstrated that we can continue to extend the zone that work that are currently being <unk>.
Close from the existing facilities. So we're going to continue to work on that which is more short term plan are the midterm plan is also ongoing which is a better understand what's what is what is Madrid. What is Boston. We're currently ramping up drilling at Madrid.
Now for a couple of things are reducing their drill spacing, increasing our understanding of the deposit distinct for some parallel structure and are there to do.
Some medium term thinking about what what's best to be billed for med rib and on the same time as well we are ramping up our our activity.
T at property scale to to to look at the the more of a longer term plan. So currently when we came in there wasn't anything on the 2 to 3 rigs that we're operating we're now 7 rigs.
All 4 of them being in the in the in the doors 3 of them being on the Madrid, and we're bringing additional drill.
So why I'm, having in mind that next year, we're going to have 10 rigs or plus NOI property scale adjusted by the time, we bring the supply and we're bringing the equipment needed to ramp up our activity. We did what we could with what the little bolt on on site. When we came in and now were spreading our wings.
D scale, so, but I'd say, we're going to continue to look at those 3 things you know if we can continue to get good grade extend a zone and we've seen some low hanging fruit in the West Valley area on the Bdd extension. So we're quite positive on on all aspect from from that standpoint, and in terms of exploration upside.
Thank you.
Thank you. Your next question comes from Tanya Joseph Skolnik Scotiabank Tanya. Please go ahead.
Good morning, everyone and congrats on a good quarter and thank you for taking my question.
Can I start with <unk> just to circle back on line.
Just a question on the exploration results that came out because there were a lot that came out in the press release, a few weeks ago and from what I understood from your comments on we're looking at some of the mines to add to add to their reserve base. In addition to upper Beaver and whole day, adding to reserves.
And then we've got some I think soccer to dust East Goldie La Ronde on the resource side.
Am I correct in those assets and where am I missing in terms of reserve additions at the mine sites.
Oh, no I think were pretty that you pretty much covered them. All you were also looking but it's all going to.
When all the because a lot on drilling will come out when will they be supported by study when will those be made available. So this is why we mentioned at upper Beaver will but they should become into 2020..2 so we won't be on bidding reserve until we get that you study a on some under Keith It sounds like a.
We're still working on that they know can we do something with the with the oxide can we bring some portion of it to reserve well so working at the line via with the sulfide.
So all of that on it.
I know from existing operations and existing working area, we will partly replace what are we going on.
And the rest of the reserve replacement or growth will come from the number of pipeline projects studies that will be there to finalize the the global equation about reserve, a new world and in growth.
Okay, and maybe if I could ask a about amarillo.
Mines, there wasn't any information on I remember it.
Duration on me.
Our and that's press release, just wondering what work is planned natural reserve replacement.
We're working on a couple of opportunity. That's good you bring debt that point because I know it was that we we've been.
Updating.
The market on a couple of project, but as you noted we haven't updated on all of them at on my Roku or getting some interesting number towards the west of whale tail and even we are back looking at Mahmood for some underground area.
But where we were having a lot of resolve up we're still pending so we feel.
See opportunity over there and then as a whole at Meadowbank I'm, Eric where we're looking at all of the opportunities. There. So we're conducting some growth from regional grassroots exploration, which is may be I'm not going to pan out short term has a 2 turn out into resources, but flow so close to the mine and the western extension at.
Dale and memory, I think where we've been quite pleased recently visually with some of the draw holding some preliminary results. We've got we're looking back on or what can we do with some of the we know for a fact that long term debt.
Some from zone that were left behind around the fault for example, either to the east on the ground. So we are on.
Wilting all of those Estelle recalled a residual mineral inventory. In addition to can book a lot of grassroots exploration properties scale. So we will be in a better position to update maybe on the back end of the year and the AR and the Knicks exploration update.
Okay Yeah.
I look forward to getting more on that.
And just maybe with them or if I can circle back on the inflation I wanted to review closer on the inflation and the cost structure on and then the capital and so I just wanted to zoom in on and I. Appreciate you have currency hedging and I think you mentioned that you're not.
Not seeing inflationary pressures in 2020, 1 that as we look into 2022, maybe from from what you are seeing out there any areas that you are operating and can you comment on what you are seeing in terms of labor inflation.
In your jurisdictions, maybe some of the input and freight cost.
Cost finite steel et cetera, et cetera that could have an impact on you in 2022.
Yeah, Hi, Tanya it's.
A big question is is this temporary or transit.
Transitory or permanent.
And we will find out the answer to that is as we go through.
The months ahead on the labor side, which is about 40% of our cost and probably representative of other mining companies, we don't expect anything abnormal.
We're expecting that it's hard to say, we haven't had the negotiations, but we're expecting in line with historic numbers, which are sort of.
4%.
And we always try as you know tenure, we always try to anticipate that and have offsets to control that.
As we go through our mine plan.
With regard to I'm afraid cyanide consumables.
Those costs are.
We've done well so far.
2 of the areas. We operate we have we're the biggest customers we have the longest term relationships we benefit from that.
But eventually it will go through to us like everyone else is.
Too early right now to say about.
<unk> 22, and 'twenty 3 again because.
The jury.
<unk> is still out as to if this is a transitory inflation pressure or permanent.
Okay, and maybe if you can just give us some insights on you're seeing any tightness.
Any portion of your supply chain and or <unk>.
Labor or specialization IV exploration and or other.
Yes I'll.
I'll start with the latter yes, we're seeing tightness in exploration labor in particular.
We're all we're all dealing with that again, we're benefiting.
You know when you're in the same district for decades in your their best customer you get better treatment, so we benefit relative to others, but absolutely, particularly with exploration.
I'll start on we're seeing tight.
Tightness in labor with regards to supply chain.
Our team has done a fantastic job.
They're always on it they became more focused with Covid and.
As Dominic referred to earlier I think they put US ahead, a little bit so we haven't really.
The ratio of issues on the tightness with supply with regards to consumables and that type of thing.
That's good great. Thank you for the insights.
Thank you. Your next question comes from Kerry Macquarie Canaccord Genuity Kerry. Please go ahead.
Thanks, just a question.
Had any upper Beaver.
<unk> been getting good results. There you mentioned an upcoming study just wondering how youre thinking about that project now I think about a year or so ago. Sean I think you mentioned that maybe that was on a project that.
Maybe the project is better suited for somebody else I think Nicole So just wondering how youre thinking about that project and is there any sort of potential timeline to.
Question on shouldn't or is it still too early.
Well I think the exploration results that we've seen lately or higher gold grade, but particularly higher copper grade we're seeing another structure potentially at depth, which is changing the complexion as we look at it.
And so it's.
Production line, we know that and it's just how do we fit it into our overall pipeline and capital allocation process. So I think the view is.
It's not a rush.
So if we take an extra quarter or 2 to do some more drilling and finish the analysis thats. Okay. Because we think sort of long term on this.
This.
On the sort of timeline.
We will be more driven by permitting youll.
You've probably got 3.4 years of permitting in this particular instance.
Just based on its involving federal authorities as well.
So that means as let's.
Let's say, we greenlight something at some point next year Youre, probably looking at 2027 or so.
Roughly based on a permitting timeline, we don't know the exact timeframe, but that was sort of roughly.
What we're thinking so it's an important asset, particularly because it is going to grow.
It's in a historic.
On high grade camp.
And it's not only upper Beaver, it's what do we do with upper Canada, and we haven't said much about that so we look at it is this large set of land package well suited as we talked about on our conference call about <unk>.
<unk> political risk and scenario.
Well.
And it's essentially we see it as an extension of our business in Quebec is just over the border in Ontario, there's lots of similarities.
So that's how we're thinking about it now is to complete the exploration work.
<unk> the study.
And sort of work that into the other studies, we are working on as well.
Pretty much to how it fits.
Great. Thanks for that essentially update thanks, Sean Okay.
Thank you there are no further questions at this time I will now turn the call back to Mr. Boyd for closing remarks.
Thank you operator again, thank you everyone. Thanks for the interest and the good questions and if theres any other information.
Please reach out to us.
Have a good.
Afternoon, and for those that are going to have a long weekend. This weekend have a great long weekend take care.
Thank you ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
<unk>.
Yeah.