Q2 2021 Agnico Eagle Mines Ltd Earnings Call

[music].

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.

Pat.

If you would like to withdraw your question. Please press Star then the number 2.

Mr. Sean Boyd you May begin your conference.

Thank you operator, and good morning, everyone and thank you for joining our second quarter conference call, we will be going through a series of slides and.

Please take note that.

In the presentation, there will be forward looking statements and there is.

Some material outlining the.

Notes to investors in the slide deck as well.

As we look at the quarter.

As it ties into our strategy.

Solid quarter of solid start to the year, we look at first half.

Production was at record levels over a million ounces.

But what was really gratifying is as we're producing more gold but doing it.

More safely than we've ever done in our history. So we had the best safety performance in over 64 years in terms of <unk> lost time accidents. So congratulations too.

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 cash flows.

Of 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.

<unk>.

24% production growth from last year out through 2024.

On the strategy is also based 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.

The opportunities.

<unk>, we have particularly at the existing mines. These are brownfield opportunities thats important information for capital allocation.

The focus 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 the focus as we think about our business as well.

True that risk is also important here and we like where we are in terms of operating.

On the platforms those are areas as you know, we're really comfortable of being in and.

And we see them as.

And the important for the.

The future success of our business not only that we have.

For <unk> 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 a lot of highlights from an ESG perspective in terms of.

Operations.

And production in the quarter, we produced a little over 500000.

Bring exercise without.

Not including Hope day, the cash costs were under $740 an ounce. So good solid performance in terms of managing.

Unit costs.

That puts us on track to achieve our production and cost guidance.

We put out earlier this.

In February of our Capex is around.

$800 million, excluding funds that are being spent on <unk> and we declared our quarterly dividend of <unk> 35 cents per share.

I made reference earlier to ESG.

We see that as sort of an investment.

Mint and opportunities to improve the.

The business and to manage risks, we had a lot of good things happening.

We're able to begin the reintegration of the Nunavut workforce, that's underway at both <unk> and Meadowbank.

I think.

Sure So was.

For me gratifying to see is that as the none of them. The at workforce returned to work we had the 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.

What do it's more than just the paycheck here.

It's about opportunity, it's about opportunity to provide for their family to build the 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 it workers back and thank you for your patience.

It shows on <unk>.

Over the last sort of year and a half and as we said we're glad to have you back.

Another important initiative and none of it was an Mou that was signed with the consortium of in you at all the businesses to move.

Move forward on our renewable energy plan for the whole Bay project, which essentially of wind.

Wind turbines and I think that's an important and we see that as an important first step as a way to invest in 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. It's also going to be.

Beyond government.

But we 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 the options for renewable energy.

In the Rankin Inlet <unk> region around the Meadowbank and <unk>.

Staying in Nunavut.

Day, we have the pleasure at noon right. After this conference call.

What we do here at Agnico as we have something called 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 environment.

<unk> initiative, whether its the safety initiative, whether it's the community initiative, whether it's the productivity initiative on exploration initiatives.

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.

Debt when the annual.

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 the teams for their on site Covid testing. So you.

<unk> 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 of external acknowledged.

Knowledge of and 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 crest in the Skoda, So creston <unk> heap Leach.

Winding down so.

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.

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 and so our teams put together.

On 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.

And early this month, which highlighted a number of initiatives that are moving forward I will just touch on a couple of them Odyssey the.

Underground component.

Ponant of Canadian Mill Arctic.

On this east Goldie it with <unk>.

Certainly the.

The driver of the underground mine in terms of being able to pull together multiple sources of or 2 actually.

Have a business that's a long life of productive with an.

Attractive rate of return, but in that rock package. The host East Goldie, we've continued to drill and certainly our team has been focused on understanding what else is in that sedimentary package of rocks.

Talking to <unk> as he has been up at the site and working with the drillers.

On.

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 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.

Are they pushed the drilling of the limits and we picked up another structure 400 meters to the south.

Of the projection of the east Goldie deposit so lots of potential there and if you recall on the study we're talking about the study that incorporates about 7 million ounces of what is already a 14.

The balance total envelope and here, we are identifying additional mineralization well with that well outside of the known mineralized.

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 additional resources. There. So we're excited about that upper Beaver project, we continue to drill.

To get high grade gold intersections with very attractive copper grades.

So that drilling.

Millions of new.

That will drive clarity of the study and so we'll be moving that study into 2022 based on on the drill results.

Our desire to increase the drill program there as we move forward at Hope Bay, we're seeing extensions.

That suggests that we can mine the Doris.

<unk>.

Which would be good.

It's kind of we've got more of where we're getting more drills. This summer on the barge so that'll allow us to do more drilling on the regional targets such as Madrid.

So this was the plan get more drills and drill these large geological belts focus.

<unk> on Doris.

No we can do better there and while we've done that we've also been improving.

The mill performance improving recoveries.

<unk> had a solid quarter at Kittila.

Thats 1 when we first got involved that ive been Alain and even Mark was involved at the time.

<unk> adjusted it looks like the <unk>, it's a structure that wasn't drilled that deep at the time when we first got involved down to 250 meters.

Drilled it down to almost 2000 meters now shaft is going down I think what we're seeing as we move to the north.

We're seeing really good thicknesses.

The good grades.

Since you already thinking about another expansion now that we've achieved 2 million tons of year.

Just based on the size of that deposit.

So that's an exciting drill.

Drill.

The 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 capital allocation decisions and that's why we decided strategically to.

To.

Pushing warm investment towards our exploration what ill do now is I will just use <unk>.

Slide 8 which lists all of the 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.

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 addition to the solid performance is the fact that they continued steady improvement in terms of the percentage of tonnes being mined using automated equipment.

They've made good advances there that's clearly.

The important.

As we move deeper in that mine.

As we know on the West mine area, which had another of 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.

Dallas at 5 over 3100 tonnes.

The 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 tonnes a day, where they are now so that's positive exploration. Its funding. After 30 years of this thing producing high quality gold.

We're still making discoveries and as you know were push.

The.

Multiple exploration drift at the site 3.

3 of them were moving to the west on the old boost day ground.

That's an area, where essentially the same rock packages as Laura on and it wasn't really drilled by Barrick when it was there and it's wide open and so the best access.

<unk> is to drill from underground and we have tunnels.

In place so we're pushing additional.

Exploration drifts in there.

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.

For us pushing.

Pushing to the east because we had as you know.

Some drill holes on a massive sulfide lens.

So thats.

We've seen that before at <unk>.

It's high valued rock.

We need to understand the potential extent of that so that will also be a focus at gold ex.

Also of the performance there at gold ex.

Another solid quarter in terms of cash costs and production.

Good performance in the rail there good performance in the underground mine.

So a good result at gold ex at Canadian Mill Arctic record quarterly.

Stay record for tonnes mined.

Gold production, so that's a big mine generating big cash flow and big production as we said record quarterly tonnage of over $18 million.

The tons in the quarter.

Processing 62000 tonnes a day, so thats excellent performance remember in June of 2000.

14, when agnico and Yamana took ownership of that project of the.

The throughput rate was 47500 tonnes a day and we said we could get it to 55000 tonnes a day here. It is at 62.

Tons, a day and now we have the underground opportunity and as we talked about earlier.

We're getting extreme.

The good drill results good performance in terms of getting things set up.

And the ramp and and also and getting things set up.

For shaft sinking.

As we continue the progress on the shaft collar.

Good day.

At Kittila.

We also.

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 of potential there in.

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 of 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>.

3.

380000.

Tons per day, so gradual ramp up it's going to produce more gold as we move forward.

It'll be a stronger contributor as we move forward.

And we continue to focus now on <unk>.

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 of.

Mine operating profit.

<unk>.

In the quarter. So strong performance, we saw monthly records set in May for mill throughput and gold production.

So that will be of long life contributor were seeing good exploration results there as we start to ramp up exploration.

Made some progress on the permit side.

Right.

And on the saline water discharge line, which people are really focused on.

We made some 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 and as we said we would expect to get the.

The permits.

<unk> soon in Mexico.

Good performance.

You look at that operation.

On producing.

Over 40000 ounces had some good cost of good cash flow generation there as we said the focus is on the satellite deposits.

Eloping those satellite deposits lay 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.

Half of this year so.

Good solid performance across the board.

<unk> 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.

Sure.

Operating cash flow.

That drives an increase in our cash position over $280 million.

So 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.

<unk> online 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.

The strategy and risk again, the strategy is to stay in.

The very low geopolitical risk pro mining jurisdictions, that's our comfort zone, we've had a lot of success with that business model 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.

<unk> times that will continue going forward, our footwear already low intensity in terms of greenhouse gas emissions and 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 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 of focus of us 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 the.

Part of it has been a big part of our ability to to provide above average per share value creation over our long 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.

The change.

Change the strategy it works well as focus on things like per share cash flow growth and generation and that will 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.

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Your first question comes from.

Did you have the Langton Jpmorgan Tyler. Please go ahead.

Morning, Thanks for taking my questions.

Yes, because they just the start sort of in the in the release you kind of talk about inflationary pressures are you starting to see them, but it's on track to hit your guidance due just due to some initiatives you've been taking I guess could you just.

Give it a little bit more detail.

From talents.

What type of pressures, you're seeing you know I'm on what cost and kind of what these initiatives are and then just.

Is 2021 benefiting from any sort of legacy of fuel hedges of supply contracts, where if the kind of roll off of expire and sort of inflationary pressures and the same could we see sort of it I guess added.

Pressure next year.

Hi, Tyler Tomorrow here.

There is inflationary pressure across 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.

<unk> not only with the inflation pressure, but also with the volatility in currency our treasury team as always.

As on top of this we've got about 50% of our position hedged.

Into through the rest of this year on a portion of 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.

When the operations are firing on all cylinders that helps your cost as well so across the board they've done a good job.

Okay.

Okay.

And then maybe just switching to hope day.

I guess this quarter sort of production was above sort of the quarterly <unk> expectations. You have in costs were lower can you just give some thoughts on what you expect for the second half.

Yes, the <unk>.

Speaking of this quarter of being mbd.

And maybe a bit higher than expected pushing also of timing there because.

Moving on enough so we're still expecting.

The 2 being at 18 of 20000 ounces per quarter at the Hobey the.

Neil.

Exceeding the the 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 DCM zone, that's going to create the give more of flexibility on more productivity for the second half of the year.

Alright, great. Thanks, so much.

Thank you. Your next question comes from Puneet, saying IAA capital markets Puneet. Please go ahead.

Hi.

We're running ICM Meadowbank had another strong quarter and.

Production originally guided the step up in the back half of the year in yesterday's 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, the mic speaking we need.

<unk> continued to improve on all aspect very proud of the team over the success and the achievement at the mine moving the times as well as the long haul truck.

We're still improving and optimizing the mining sequence between the IV arm of whale tail of phase 1.

<unk> phase II phase III.

This is work in progress we still expect to have a good year at Meadowbank.

You see in the press release about some wall.

The challenges, let's say at the northeast of the aware tail pit that's normal as we are mining we're discovering the pit entity.

And the team.

As usual, our adjusting the sequence related to debt.

Good morning monitoring tool, a reader to modularize that and Theres no big issue of related to it.

Okay, great. Thanks, and then.

The final question is the last year in the third quarter you took a look.

At the dividend in the high fit quite a bit on Shawn you were mentioning at the top of the strong cash flow and Youre looking to add increasing and again are you. Following the same time line. This year and reviewing your 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.

To it and look at it every quarter. So it's certainly something that will be reviewed.

In Q3, 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.

Dividend. So that's certainly a focus at the board level on a quarterly basis.

Yes.

Okay.

Good day here, Thank you very much.

Thank you. Your next question comes from Anita Soni CIBC World markets. The Nida. Please go ahead.

Hi, Thanks for taking my call.

Focusing.

On the operation of results you had set out a couple of weeks ago.

You noted there.

That you were looking to grow your reserves and resources that I was just trying to understand whether or not that that range of growth growing them also apply to the reserve this year.

And maybe you could just give us I know there were a.

A lot of.

I'd like pretty good hits in some of them additions, but if you could just give us an idea of.

How we can squeeze reserves playing out this year and then also what but where we can see some resource additions this year.

Maybe I can think of this 1 on Utah and good morning.

So yes, obviously.

U S.

So did we.

We're ramping up activity there will be a combination of of drilling to track from existing operation, but also from the pipeline project. So as as the as you see you know we were currently all the wing and our own assessment of.

As you May recall reserve at the will be we're working on taking the grading more drilling at the upper Beaver and as Sean mentioned, we are thinking about the beating the dead. The study further in 2022. We are also working to bring some of the day.

The Eagle will be eventually we're in filling.

The still not sure yet what will be the the drill spacing needed. So there's a lot of moving part obviously we are for example.

Non of Arctic with the Pip you know until we get the underground ready to move from registration as the 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 the bigger chunk. Once we got to get the underground project to the ready to be a kind of move to reserve at the round, where it puts the training ourselves more on the long term strategy, putting dose the dose dose the dose exploration drift at 1.2 and.

3 kilometer so worst we're still working on on both aspects of optimizing both the short term reserve of new world from operation, but more of positioning ourself for a much longer term vision and kept the light is a good example of that in order for 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 the 2 kilometer. So there's a lot of moving parts, we are expecting that altogether.

Well it will be able to to grow the reserve by year end, but it will be of mix from existing.

And from pipeline project update.

Okay, and then my second question with Kittila and the on the shaft.

Expansion are from there you guys have the push that out into the first half of 2022 I'll remind me again, that's more costs really like that was supposed to.

The mitigate costs right as the that was the main sort of synergy that we would see from that that are that shopped.

Yeah, the shafts of going to reduce the mining gross wanting the operation we're going to have less tons to be moved with the trucks.

This is a part of the strategy to improve the cost.

And Anita.

As we fine.

As we find some really good drill results continuing good drill results at Kittila.

It's got a very long mine life, but it's going to go down below of kilometers. So the shafts does make good sense.

Yes for sure I'm just trying to.

Figure out what the push out in my model. Thank you that's it for my questions.

Thank you. Your next question comes 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 and throughput.

Okay, 60% of the ore is coming from Canadian mill Arctic. So the remaining is going to be a mix between Barnett.

Barnett been partially stockpile as the millions of processing more.

I think it's like 30% I could go back on that Mike.

That's okay.

Going to be fairly steady or is that kind of becoming a bigger proportion as we move into the back half.

There's going to be steady for the remaining of the year are approximately.

60, coming 60% coming from Canadian Arctic, but theyre going to increase more in 2022 and the further.

Okay.

That's good.

The second 1 can you just give us a bit more color in terms of of what.

You saw from there it goes back to if there is a note on the seismicity events.

On.

It's kind of severity of it what youre doing to kind of.

Address it in terms of the additional rock support.

The deep mining involve the assessment of <unk> it.

It is normal as we're mining deeper.

This is net new for <unk>.

But the thing is as.

As we go.

Paying our protocols adjusting our mining methods why do we go it happens in the deep 1.

At level around 1.1 let's say 1.1 kilometer of below surfaces no major.

The issue with that and again the mining methods critical.

Is all interest get integrated into our mine plan and there's no.

The impact significant impact on debt.

Okay.

Is that anything that you're benefiting from all your years of experience that Laura on in terms of just best practices and rock support.

Yeah, that's the nature of endpoint we there.

Adjusted between the 2 divisions are only like a 50 kilometer.

Close to 2 <unk> and the team were very strong team there working together as well as using also expertise of external expertise, which are the same people.

Helping and supporting the teams to be the best best practice.

Synergy.

And then just last thing I've read a couple of articles the boat.

Issues with the supply of shipping containers and I know your barge season is either.

Just underway or about to kick off of.

Have you experienced in the challenges there or the barge season up into the Nunavut region.

Going.

Going as planned.

I'm happy to say that we are on target the.

The team at work.

Let's say worked hard on that we had some challenges.

On the logistic part with the the channel that was blocked in the Covid.

Covid.

Close of Port in China, but overall we've been.

Just to put a <unk> plan on the barge we.

We see also that on their containers and we're kind of difficult to find but we were in advance on that and well plan. So this is a this is not the problem and maybe to add on the inflation.

The fact that.

None of it is running with the.

Let's say method of majority debt have been brought into I need to any this is positive for us as well as we did all of the procurement for this for this year barge going up to mid 2008, we need to have been done in Q4 last year Q1. This year so that.

This is an advantage for a 4 day none of it operations.

Abel that's great. Thanks, guys. That's it for me.

Thank you. Your next question comes from John Tumazos of John Tumazos, very independent research John. Please go ahead.

Thank you very much.

Okay.

Could you give us a little update on the strategy for hope.

At the onset of the acquisition. It was described more as the long term exploration and development project for you to find more ore.

I have a bigger mine.

Better amortize the fixed cost of the <unk>.

Site up north.

The here we are in the.

On June.

The in quarter, it had a lower cost than Meadowbank on Mexico.

Are the June where we saw sort of not sustainable.

Are you going to use up some of the better stopes.

Or are you getting just better cost performance on your expected for your modeling of $1200 gold.

Long term for your decision, making and ignoring the current resolved to 1800.

Yeah, maybe I will start with total being are asking you to to complement to the continuing on debt, but the the strategy of <unk> be a non we're mining the Darius the deposit.

The.

On average as I said 18.20000.

Ounces per.

For quarter, the integration is going well with the team and we see progress. He ran there and the really the idea of what were looking nowadays in parallel while we're mining the the Doris which is paying for the fixed costs of the sites and partially the fixed cost related also to exploration.

We continue to look what is the what is the more bigger picture.

We're doing trade off with the meal.

As we see good improvement and we see potential maybe to use the meal.

Look at what could be done with the low capex are to have good recovery and the higher throughput through.

True that Neil this is 1 of the trade off another 1 is to look to build the bigger mill to process more for coming from the Madrid.

So this is on the way we've done it still need some time to.

Through the end of this year 2 to analyze and to do those trade offs and the the good news I could say on that then I'm going to give it to.

2 of <unk> as Darius.

There's it is limited drilling debt have been done and now we're mining and we when we arrived we continue 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>, we could talk maybe.

It'd be a bit also of both Madrid, and Boston, which are Madrid is a very interesting 1.

Thank you Dominik I, John So we're looking at to add assets.

It doesn't change from.

From our plan and we still continue to assess the no.

Doris and.

On the recent result of demonstrated.

<unk> continued to extend the zone that work that are currently being mindful of clothes from the existing facility. So we're going to continue to work on that which is more the short term plan.

The midterm plan is also ongoing which is a better understand what's.

What is what is the Madrid.

What is Boston for we're currently ramping up drilling at Madrid.

For a couple of things are reducing the drill spacing, increasing our understanding of the deposit distinct for some parallel structure in order to to put some medium term thinking about what what's best to be billed for med rib.

Debt, we could and at the same time as well we are ramping up our hour of activity at corporate the scale to to look at the the.

More of the longer term plan so correctly when we came in there was only 2 to 3 rigs that we're operating we're now having 7 rigs.

For all of them being in the.

And the door is 3 of them being on the Madrid, and aware of bringing additional drill rigs. So why I'm, having in mind that next year, we're going to have 10 rigs are plus NOI property scale adjusted by the time, we bring the supply and we're bringing the equipment needed to ramp up of our activity. We did what we could with what the available on site.

And we came in and how we're spreading our wings.

Property scale, so, but I think we're going to continue to look at those 3 things. If we can continue to get good grade extend the zone and we've seen some low hanging fruit in the West Valley area on the BCD extension. So we're quite positive on the on all aspects.

From from that standpoint, and in terms of exploration upside.

Thank you.

Thank you. Your next question comes from Tanya <unk> Scotiabank Tanya. Please go ahead.

Good morning, everyone and congrats on the good quarter and thank you for.

Taking my questions here.

Can I start with <unk> just to circle back on any of his question on the exploration results that came out because they were a lot of that came out in the press release of few weeks ago and from what I understood from your comments on we're looking at some of the line to add to that.

<unk> adds to the reserve base. In addition to upper Beaver and Hope day, adding to reserves and then we've got some I think soccer to the east Goldie of La Ronde on the resource side.

Correct, and those assets and where am I missing in terms of reserve additions at the mine sites.

No I think we're proud of you pretty much covered them. All you were also looking but it's all going to win all of the because of a lot of drilling will come out when will they be supported by study when will those that he be made available for this is why we mentioned at the upper Beaver will potentially come into 2022.

We won't be updating reserve until we get that new study on some of your case of some type of our critics were still working on it then or can we do something with the with the oxide can we bring some portion of it the reserve well so working at the line there with the sulfide.

So all of that.

Oh from existing.

So we shouldn't and existing working area.

We will partly replace what are we gonna mine and the rest of the the reserve replacement or growth will come from the number of pipeline projects studies that will be there to finalize the the the global the equation about reserve of new World and.

Operator.

Okay.

Maybe if I could ask about Amarillo, there wasn't any information on the risk exploration.

The exploration of <unk>, and our and that's press release I'm, just wondering what work as planned there for reserve replacement.

We're working on the couple of opportunity that's good you bring the.

And growth point, because I know it was the we we've been.

Updating the market on a couple of project, but as you noted we have an update at all on all of them at the America, we're getting some interesting number towards the west of whale tail and even we are back looking at Mahmood for some underground areas.

Area, Ah, but where where we were having a lot of the resolve of course still pending so we see opportunity over there and then as a whole at Meadowbank I'm, Eric where we're looking at the all of the opportunities. There. So we're kind of thing some grants from regional grassroots exploration, which is maybe not gonna of Pan out short term as.

Of the 2 turned out into resources, but flow so close to the mine and the western extension of at whale tail and Mammoth I think where we've been quite pleased recently visually with some of the draw of holding some preliminary result, we've got we're looking at back end of what can we do with some of the we know for the fact that long term there was some some zone that's.

Behind around the 12th for example, either to the east on the ground. So we are on the thing all of those the Estelle recalled a residual made around the inventory. In addition to conduct a lot of the grassroots exploration of the property scale. So we will be in a better position to update maybe.

At the back end of the year and the AR and the Knicks exploration update.

Okay, Yeah look for to get him off on that and just maybe with the EMR. 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.

The zoom in on and I. Appreciate you have currency hedging and I think you mentioned that you're not seeing inflationary pressures in 2021, but as we look into 2022, maybe from from what you are seeing out there in the areas that you are operating and can you comment on what you are seeing in terms of labor inflation.

<unk> in your jurisdictions and maybe some of the inputs for.

Rate costs on finite steel et cetera, et cetera that could have an impact on you in 2022.

Yes, Tanya it's.

So the Big question is is this temporary or transit the transitory or.

Permanent.

And we will find out the answer to that is as we go through the.

The months ahead of.

On the labor side, which is about 40% of our costs 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 the historic numbers, which are sort of 2% to 4% and.

And we always try as you know Daniel we always try to anticipate that and have offsets the control of that.

As we go through our mine plan.

With regard to free.

Right.

Line I consumables.

Those costs.

We've done well so far the areas. We operate we have we're the biggest customers we of the longest term relationships we benefit from that.

But eventually it will go through to us like everyone else is.

Too early right now.

About <unk>.

22, and 'twenty 3 again because.

The jury is still out as to if this is the transitory inflation pressure or permanent.

Okay, and maybe if you can just give us some insights on you're seeing any tightness in any portion of your supply chain and ore.

To share or specialization IV exploration and or other.

Yeah, I'll start I'll start with the latter yes, we're seeing tightness in the exploration labor in particular.

We're all we're all dealing with that again, we're benefiting.

When you are in the same district for decades of near their best customer you get.

Better treatments, so we benefit relative to others, but absolutely, particularly with exploration we're seeing tightness.

Tightness in labor with regards to supply chain.

Our team has done a fantastic job the.

There are always on it they became more focused with Covid and.

Ladies as Dominic referred to earlier I think they put US ahead of little bit. So we haven't really had any issues on.

Tightness with the supply with regards to consumables and that type of thing.

That's good great. Thank you for the on site.

Thank you. Your next question comes from carry of Macquarie Canaccord.

On the accord Genuity Kerry. Please go ahead.

Thanks, just a question on upper Beaver.

Good results. There you mentioned in the upcoming study just wondering how youre thinking about that project now I think about a year or so ago share.

Sean I think you mentioned that maybe that wasn't the project debt or.

Maybe the project is better suited for some.

I think Nick on so just wondering how youre thinking about that project and is there any sort of potential timeline for production or is it still too early.

Well I think the exploration results.

We've seen lately.

On our higher gold grade, but particularly higher copper grade.

Seeing another structure potentially at depth.

Somebody else on which is changing the complexion as we look at it.

And so it's definitely in 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.

Thats not a rush.

If we take an extra quarter or 2.

Do some of our drilling and finish the analysis thats, okay, because we think sort of long term on this.

The the sort of timeline.

We will be more driven by permitting.

<unk> got 3.4 years of permitting.

This particular instance.

Just based on its.

Involving federal authorities as well.

So that means is let's say, we greenlight something at some point next year.

Looking at 2027 or so.

Roughly based on a permitting timeline, we don't know the exact sort of 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 been a historic.

On high grade camp.

And it's not only upper Beaver, it's what do we do without for Canada, and we haven't said much about that so we look at it is this large set of land package well soon.

As we talked about on our conference call about.

Geopolitical risk its an area, we know pretty well.

It's the essentially we see it as an extension of our business in Quebec, It's 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.

Complete the.

On.

And sort of work that into the other studies, we are working on as well as to how it fits.

Great. Thanks for that thanks for the update things from 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 you need the 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.

Yeah.

Yeah.