Q2 2022 Agnico Eagle Mines Ltd Earnings Call

Okay.

Good day my name is Michelle.

And I will be your conference operator today at this time I would like to welcome everyone to the Agnico Eagle second quarter results 2022 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 would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

I would like to withdraw your question. Please press Star and then the two key.

Mr. Martin L. Sandy you may begin your conference.

Thank you and good morning, everyone and welcome to the Agnico Eagle mines second quarter Conference call.

I'd like to start this call by thanking all of our employees for a strong quarter. One we have a strong quarter and this is a strong quarter persons like myself and my colleagues. The executives here we have the pleasure.

To get to speak about it but we are well aware that there's a lot of hard work that goes into this by the thousands of employees.

At the mines at the communities to support positions at the rock face.

Who are really working hard day in day out as a team to deliver these results. So we wanted to acknowledge that and thank everyone.

On on.

On page five I'll first I'll say there are some forward looking statements that we should acknowledge and everyone should acknowledge.

With that said as I move to page five.

We talk about the key takeaways this quarter and the obvious headline key takeaway is the very strong operating results.

Our record quarterly production.

Excellent cost control, especially important in this inflationary environment.

Which naturally will lead to strong earnings and in this case record cash flows and we will talk about the operating results.

What the team has been able to do.

And importantly, do it perhaps most importantly in a safe manner, and an environmentally friendly and responsible manner, but I think the real message of today, the real story of the past quarter and I think the real story for Agnico Eagle over the next several years is the exciting.

And significant progress on our development projects and our exploration results and I say that because while we are performing on all cylinders on the operations our development projects and exploration results really reflect the future of the company. The next five years. The next 10 years.

And I might say in the case of detour out past. The next 30 years, which is quite impressive detour Lake.

We provided a technical update.

We will get into that that'll be a key part of today's discussion, but a 38% in mineral reserves and extending the mine life by 10 years.

Odyssey underground the two largest gold mines in Canada, Detour Lake and Odyssey both.

Continuing good development good exploration.

At Odyssey production and development on schedule on budget and.

Some initial production as early as the first quarter of 2023.

Kirkland Lake region progress made there shop number four expected to be completed towards the end of the year very good progress on the amalgamated Kirkland.

Evaluation, we are about two thirds of the way through the exploration drift, which will become part of the development, but it's not just those projects and we will talk about the.

<unk> shaft at Kittila coming close to completion <unk> underground starting this quarter.

Bring in production Gold X, we've just approved the ACA Saba.

<unk> project, which will support both <unk> and <unk> and continued success in development across a number of our assets on.

On the exploration side, and again, we'll get into more detail, but excellent results and importantly.

Really exciting results at both.

At detour with a two kilometer step out hole, suggesting continuity two kilometers west of where the existing or the current mine plan pit shell is at.

Odyssey underground extension about 225 meters to the west.

The possible extension hole out at one seven kilometers to the east again, showing you the potential of these massive ore bodies for continued development.

With existing infrastructure existing teams in good jurisdictions, but also some really good news on some of our other sites at Hope Bay. Some exciting exploration results at Meli Dean exciting exploration results at <unk> exciting exploration results, we will be giving a more detailed.

<unk> release in August and I would encourage everyone.

Look forward to that and then finally, a little bit on the mergers we want to talk about the merger synergies.

On this call because we promised that we would but also synergies while always important are extremely important and even more important in this current inflationary environment and we are.

Hoping and expecting that some of these operational synergies will act as a partial buffer to the cost pressures that we're seeing next page. Please.

So on the operating highlights.

858000 ounces of production at cash costs of $726 and all in sustaining of 1026 again over 850000 ounces at $726 cash costs excellent results and we will get questions and we have had questions about.

Uh huh.

How it is we've been able to manage our costs in this environment. We've taken a lot of proactive steps towards that we talked about it at the previous call and we talked about in the call before that we we did have a view that inflation was going to be an issue in 2022.

Sean Boyd, saying early on this is not going to be transitory and we looked at it that way so.

So we took some actions in advance but at the end of the day.

The best way to control costs is to have efficient operations and that's what the team has done in particular, we're proud of across the board, but Ontario, and none of it Ed.

Superb results with truly drove the rest of the company.

Gold production was better than expected grades better than expected and throughput better than expected with some notable callouts to <unk> Detour Lake and Macassar and again, we'll get into those through this discussion.

It does remain we do continue to see inflationary pressure, we've managed it well in the in the first half of the year, we're working hard to manage it well in the second half of the year and into the future years.

That said, we're not immune to it and so we are maintaining production guidance were maintaining cost guidance, but we expect based on what we see that the costs are going to trend towards the upper end of the range.

Some strong balance sheet, Dave Smith will talk a little bit about what we've done but.

We're pleased to say that we paid down $125 million of debt as it came due in the quarter and we paid another $100 million since in line with what we promised the right combination.

Of capital to our shareholders capital in the business, while at the same time being able to strengthen our balance sheet and of course, continuing with a <unk> 40 dividend.

Through the quarter next slide please.

I'll hit a few highlights on detour and then I'll ask Natasha and Eric to talk a little bit about some of the progress on the mill expansion and on the exploration results, but but hitting the highlights I think most of you have seen them but.

Frankly, we're so pleased with them I'm going to say them again.

38% increase in gold reserves.

At Detour Thats $5 6 million ounces. So we're at 24 million ounces.

And I will say going to continue to grow we've increase the mine life by.

By 10 years.

Recovered gold.

Increase the same 38% as reserves.

Importantly, a little over 400000 ounces added in the 2028 2031 period and the reason I say importantly, because thats, where we have a little bit of a dip in production. We've identified at the last call that we're working hard to offset some of that dip.

And roughly 100000 ounces a year for those years.

Is it moves a good direction in that.

And what we're trying to achieve.

One 8 million ounces added between 2032 to 2042, and then 3 million ounces added at the end of the mine life and I want to talk about that a little bit later importantly, and impressively.

Higher grade and lower costs for the next 20 years.

That's pretty good considering this technical update incorporate some of the inflationary pressures we've seen recently versus the previous mine life, so to be able to increase grade and lower costs for 20 years and one of the best gold mines in the World I think.

Frankly is fantastic our vision and we've said this before our vision for detour is to get to.

1 million ounces, a year that would be through a combination of increasing mill throughput and potentially underground mining. It's our vision, we're working to get there and we expect to be able to give some clarity on that towards the end of next year. It's a lot of work, but the potential is absolutely there.

To increase production, but also to increase mine life.

And.

The final point here again, very exciting and Eric will talk about this some excellent exploration results, including a step out hole two kilometers west of the pit outline.

And what that may be Natasha I'll turn it over to you perfect. Thank you Omar and good morning, everyone. So slide eight provides an update of.

The status of a few critical projects required to increase the mill throughput to 28 million tons per year. The graph on this slide shows the six main projects and the contribution in tonnage.

So first of all our projects the ones that are in blue.

So this includes the introduction of drill and blast optimization targeting mill throughput maximization and addition to choke feeding our primary question.

The second bar is the replacement of the 75000 ton per day limit with the annual permit for $32 8 million tons a year. So back in 2020, when the 75000 ton per day limit wasn't there were at least 70 days, where we achieved that daily limit and had to pull back the mill. So.

Having that 75000 ton a day limit removed has had a significant impact on the throughput.

We also converted our pulp lifters two a curved configuration from a radio configuration and switched had helped us.

Increase our tons per operating hour, but also.

Our overall throughput.

The 610 conveyor Lee feed.

<unk> has successfully been completed this year Q1 actually to gain an additional 750000 tons a year. So basically every time maintenance is performed on the crushing circuit our throughput is impacted.

The goal of this we feed system is simply to top up the feed going into the Sag mills during the crusher downtime events.

This has proven to be successful we commissioned in Q1, we were operating at in Q2 and the system is operating as per design.

Our main contribute contributor to the 28 million tons per year increases the installation of the screens on the secondary crusher.

This specific project will add about two 5 million tons per year basically the secondary crusher is is most efficient when the fines.

Smaller than desired crushing product.

From the fee so by installing the screen, we're able to filter out defines and it will make the crusher much more efficient.

So we have begun the installation of the first set of screens in Q3, and we expect to have both commission by Q4, this year and so stay tuned.

Next year, we expect to add another 750000 tons per year due to planned one time improvement.

Here is to improve how we analyze our downtime drivers how we complete root cause analysis on breakdown events.

And make adjustments to Resourcing planning and scheduling.

So to summarize all is going well and we are on track to achieving our 28 million tons per year in 2025, and with that I'll pass the call over to Eric Kallio, our EVP of exploration strategy and growth.

Okay. Thanks, Natasha and good morning, everyone as planned exploration at Detour continued at a very fast pace of the project.

And as mentioned by Omar already includes some very good results and overall progress of the project.

Details for the program itself are shown on the current slide which is the plan and long section of the project and as indicated shows about 62000 meters of drilling with most of this directed to two kilometer strike length west of the pit and along the Sandy Lake deformation zone, which is highlighted here on the slide in Blue.

Assuming the shallow westerly plans most of the whole targeted about $3 to 600 meters below surface. Along this pledge line is shown in pink.

On the lower part of the Dawn.

In terms of results everything we've seen is looking very good with some of the best being directly west of the pit, where we already announced several high grade holds in Q1 as shown on the image. We now have added quite a few more holes pretty much.

All interesting results in them.

Generally broad zones of mineralization, sometimes up to 150 meters wide and similar types of things is in the west pit and subtle.

Often containing a mix of wide bulk and narrow high grade values.

Although some of the holes are a little deeper and possibly a little bit more suitable underground. We unexpectedly also saw several others are quite shallow depth, which we think could also add to the overall pit potential.

Additionally, we also are seeing severe received some very good results from some of our first step out holes to the west which not only confirmed the overall trend of the structures, but intersected high grade up to up to 32 grams.

32, three grams over four eight meters to two kilometers west of the pit.

Fortunately this and several other <unk> seem to have a little more quartz and visible gold than normally seen the pit area, which would be very good for the underground scenario.

Considering all of this we're very encouraged for the future and continuing with 12 drills onsite targeting 230.

<unk> meters by year end, and then possibly a new resource update.

And when we do this.

We think that we can have a very good chance of adding significantly more ounces to either open pit or the underground.

So based on the current plan, though we see that most of these new ounces are probably be added directly with west of the pit and below which we then still leave a lot of area to even further west for Eden and.

And to depth for future additions.

So overall summary, everything coming along very well and excited for the future with that I'll pass it over to Mark.

Eric.

Well look just just one big picture about.

About detour, so as as you know.

We've added.

A lot of ounces over the next 20 years, we've reduced cost we've increased grade, but we've extended the mine life 10 years at about 3 million ounces from 2042 to 2052 to be sure right now.

Those are the processing of the low grade stockpiles and Thats and Thats, how all mines are optimized, but what we expect and you just heard Eric talk about this based on the continuing good drill results, we expect to find more gold and to extend the mine life longer I'll say that again, we expect to find more gold.

And we expect that there is a real possibility of extending the mine life further and what that would do is for the 2042 to 2052. It would replace what is currently expected to be the low grade stockpile processing with fresher higher grade or so.

This is and again, we've said this before we will repeat the detour plan as good as it is is just the next step to a longer plan that we're working on this project continues to have tremendous potential and as I move to page nine.

I would say it's not just it's not just <unk> are the two biggest gold mines in Canada, our detour on Odyssey and at Odyssey, We have fantastic continuing results 20 drills operating for underground 12 at surface for regional and again, we mentioned not only is the project.

Progressing on budget by the project I mean, the underground project progressing on schedule and on budget, but some excellent.

<unk> holds both confirming what we've got and stepping out again 225 kilometers to the west and.

At this point up to one seven kilometers to the east at Kirkland Lake, We mentioned shaft number four by the end of this year. The amalgamated Kirkland deposit we still are guiding that we think we can bring in some of that gold as early as 2020 for a perfect example of.

Operational synergies, where we're taking a historic agnico asset.

It had no infrastructure associated with it and processing it through the Makassar mill, but it's also worth talking about hope Bay.

And some of the very good drill results that we've had there.

I wish I had more time to focus on this.

Because it is exciting but we are our vision for <unk> is 300 to 350000 ounces a year.

We're working on that the first step is drilling.

And I can say that so far the drilling has either met or exceeded our expectations and then finally before we turn the page remember all of this.

Our assets.

Assets that already exist with existing infrastructure and importantly, with teams already in place, which has always been important but probably never more important.

Then what we're seeing today in today's environment.

Just moving on to page 10.

Some highlights on our sustainability report for the first thing I would say is its an excellent report we've had a lot of good feedback on the report we issued on June 20th I Couldnt do it justice to try to summarize here and I would encourage everybody to take a look at it and we're more than happy to set up meetings to discuss this but what I.

I would say is.

Two things first broadly speaking.

ESG has always been.

Foundational part of who we are as a company a foundational part of our culture.

When you want to operate in a region for 30 40 50 years.

You have to be a good neighbor and you have to be welcome in the community and that Hasnt changed what we have what has changed or at least what we've emphasized more and I would say the last 24 months.

<unk> is a focus on.

Climate change and.

We continue to put a lot of efforts into that over the past 12 months we.

We have reviewed all of our at all of our sites effectively all of the opportunities.

From simple to complex to be able to reduce greenhouse gas emissions and we've put in processes to look at that in.

In more detail.

I will say something brief.

Briefly, but I think it's important.

A lot of this will be moving from fossil fuels to electricity.

And we are I would say as far ahead as anyone in looking at that but at the end of the day if.

If the electricity is not clean.

And youre not making much progress so I would say that our move towards.

Greenhouse gas reductions can't be just a mining industry think can't be just an industry thing, but it also has to be an electrical grid issue and that is a big issue. We're aware of that and we think that that industry and government have to work together, if we're serious and we.

We are serious next page please.

Just briefly on some of the operating financial results on page 11, the big number I want to point to is the $923 million of operating margin.

In this quarter that is a strong business and all of the mines have delivered well rather than going through the individuals because they are in the appendix I'll go through the region.

The Quebec region producing.

Roughly 213000 ounces at about an average cost of a little over $700 cash cost excellent excellent results, Ontario about 250000 ounces at about $625 cash costs, none of it roughly 200000 ounces at a little over $900 cash costs fall.

<unk> 85000 ounces at an outstanding $350 cash cost Quito 60, roughly 65000 ounces at 828 and Mexico at 43.

And ounces.

A little over $1000 cash cost.

We acknowledge this was a tough quarter at Pinos Altos the team.

There is an excellent team.

You have 12 mines sometimes.

Yes.

Some lines up more difficulty than other fast moving on to the next stage gate.

Thank you Omar.

Of course, the tremendous operating results have resulted in a fantastic financial.

<unk> as well.

The company has a tremendous balance sheet $2 $2 billion.

Available liquidity I would add.

I already mentioned that we had $225 million of debt repayment this year, leaving us with net debt at the end of June .

$434 million, we have a light maturity schedule coming up for the next several years with 100 or so million dollars due each year and that gives us the opportunity to continue to pay a stable and growing dividend and for the first time, we initiated our <unk> our share buyback program.

Only did $22 million worth.

But it is certainly something that has always been intended to be the variable component of the buybacks. So we will analyze that in the second half of the year and see what we'll do there.

We're also very proud that Fitch has upgraded our credit rating to triple B high Triple B, plus and with a stable trend.

We are acknowledged.

Is having a great balance sheet, certainly by third parties and I think we're in a fantastic financial position.

Of course inflation is a topic. These days everybody is talking about it and you've seen in our results that we've been able to mitigate the inflation through optimization at the assets as much as possible.

Realizing the synergies, but also from some success in our hedge book as well has helped insulate us and all of that resulted in us, leaving the cost guidance unchanged for the year.

That wasn't easy to do but we're very proud of all the teams, including the finance group for Chipping in to help out with this result.

Thank you, Dave just moving on to page 13, and again, congratulations Dave and the finance team for all the work you've done not just on the on the synergies, but also on the hedging and cost control efforts.

Speaking of synergies.

We promised in February that we would.

Report, how we're doing each quarter and were doing that we have a summary here I won't spend a lot of time on it but I will say the team did a very good job in our press release laying out item by item, where we are where we expect to be and to summarize on the corp. In general we're ahead of schedule.

And more synergies than we had anticipated I would go so far as to say that with regards to corporate synergies.

We have achieved.

Our objective we've achieved more than our objective.

And we have once again increased our.

Our guidance for corporate synergies by quite a bit actually on the operating and strategic synergies. We are maintaining guidance internally were a little bit ahead of our expectation, but at this point, we're maintaining guidance.

Thats important and good on its own but again I will emphasize.

That none of our guidance incorporates these synergy numbers. So we are hoping and expecting frankly.

Some of these synergy numbers will continue to play a role to help offset some of the inflation that we're seeing out in the out in the business.

And so then finishing on page 14, before we jump into questions.

Look our strategy is the same that it's always been it's a simple consistent disciplined strategy based on a few key things first.

Good operations in good regions with low costs with a focus on high margins and per share metrics.

Secondly.

Leveraging off the existing assets, we have where we can in the best jurisdictions as measured by geologic potential and the ability to be able to operate multiple mines for multiple decades.

Odyssey and detour, both we talked about it not.

Not only are they world class mines, but I'll emphasize again world class mines and World class jurisdictions, and when when you're talking about production in.

In the 2015.

Good to know you're in a stable environment and then and then finally proven leadership with a strong track record with a focus on per share value and what I would say on the on the proven leadership side.

He's sitting right here beside me Sean continues to be involved heavily on the strategic side of things we talk on a very regular basis, not just sean and I, but but the whole team.

And it's been exceptionally helpful. On the ESG side, that's always been who we are we're focused on that and.

When you're a company with a bunch of engineers.

We're all really excited.

Look at the opportunities to focus more and more on reduction of greenhouse gas emissions and we are excited to talk about that and we will be giving more detail on our strategy on that later in the year and then finally, a long history of returning capital to shareholders and have capital discipline.

And I want to end by saying that while.

The story here has been I hope not just about production, but on the development and exploration projects. We are going to develop this pipeline in a responsible manner.

In a.

Manner that still allows us to grow production per share, while returning capital to shareholders and strengthening the balance sheet and with that operator, we.

We will now turn it over to questions.

Thank you ladies and gentlemen, we will now begin the question and answer session.

Thank you have a question. Please press star followed by the one on your Touchtone phone you.

You will hear three tome prompt acknowledging your request and your questions will be pulled in the order of the RBC.

Should you wish to decline from the polling process.

Star followed by the team.

If you are using a speaker phone please lift the handset before pressing any.

One moment. Please for your first question.

Your first question comes from.

<unk> <unk> of credit Suisse. Please go ahead.

Hi, Good morning, Thanks for taking my questions on Detour Lake you mentioned in the presentation.

That there is potential to maybe increase the throughput beyond 28 million tons per year.

I know, it's early but any sense of whether that would be a capital light type of expansion opportunity.

Hello, Natasha did you want to sure Hi, Hi, Fahad.

Yes, we are looking at expanding.

Looking at the option of expanding the mill, we're looking at three options actually three separate alternatives at a low grade screening and reporting pebble low grade sorting and also potentially an HP Jr.

We.

Just starting the studies and so there is a lot of work that is yet to be done so in terms of capex.

We don't really have an estimate yet we don't have an estimate, but but absolutely fahad relative to other alternatives, it's always the lightest capital when.

When you are expanding on existing infrastructure. So the three things that and I apologize there is some feedback noise.

Three things that Natasha talked about.

Frankly relatively minor we don't have the numbers yet, but in the scheme of a project of that size.

The amount of capital that you put in is relatively small to what you get out and then but also importantly, it's risk adjusted capital.

It's not just the quantum of capital that's how much risk is associated with that and you will never get a better risk adjusted capital than you do by expanding existing infrastructure.

Understood. Okay, and then just switching gears to macassar. So you mentioned potential to maybe incorporate the amalgamated Kirkland deposit.

At the Makassar mill is that.

Or how should we think about that in 2024 is that displacing macassar ounces or is it.

Is it may be spilling excess capacity at the plant because maybe makassar doesn't ramp up the way you expect that year.

Despite the productivity improvements.

This would be incremental using excess capacity in the mill.

Okay, and then given the productivity gains that you've seen this quarter and maybe.

In the past you've mentioned.

Potentially going back to diesel equipment and getting the prototype productivity up over the next few years is it possible that.

There is no excess capacity in 2024.

Hi, <unk>.

We will be looking at that Mckesson has had a good quarter. We've been theres a lot of progress made in the last six months to a year on continuous improvement efforts on the operations.

Year to date with observing higher availability on our electric trucks, there's still a long way to go but we're still we're seeing an uptick in availability. We're also seeing a higher availability and utilization on our equipment fleet.

And of course, we're seeing higher improved ventilation as well.

So so it is stabilizing we plan on an improving coupons, but we'll have to wait until we update our life of mine and provide.

Ed.

And annual guidance to understand how achy factors into that.

Yes.

Youre, 100% right. Our objective is to have no excess capacity in the mill. Our objective is to get the mining rate up.

And then we will look at and we know there are already opportunities to increase throughput.

Throughput at the mill so your questions are valid.

In an ideal world and this is what we're working to the mining rate will fill the mill completely both at Mckesson at amalgamated Kirkland.

But then we have opportunities.

To expand the mill as well.

Got it that's helpful color. Thank you.

Thank you.

Next question comes from Josh Wolfson of.

RBC capital markets. Please go ahead.

Thanks, I was looking to sort of drill down a bit more on the comments about positive grade reconciliation for detour and Amarin is there any detail you can provide on what the perhaps percentage.

The impact of that was maybe what the factors are and the ability to see that continue.

Thanks.

Got it.

Andre would you like to take that question sure relationship Detour, we continue to observe.

Positive reconciliation that is ranging on the annual beans between 4% to 6% between grade and tonnes. So that has been.

Combination of.

Some airports so we're putting a <unk> continues to improve our grade control and historical trends that we observed from with this model to be shooting in 2020 that passed.

Record sign with not that range within the past three or four years.

And on on MRO, we were anticipating and that's always been our understanding the shallower part of the deposit was a bit lower grade as we werent going deeper and bolt.

<unk> and we'll deal with the grade was to get better.

We were pleasantly surprised that came a bit ahead of the plan. So there has been a bit some some upside from that same point accessing some higher grade material.

A couple of months sooner than I expected this year and we see that trend continuing and we were in fact planning to have a much stronger second half and we see that.

That trend and robustness in the grade to keep going moving forward.

Okay.

Got it thank you and one more question.

The topic of the <unk>.

Permit that's outstanding.

I was just wondering if theres any more.

Information on what the issues are and then in the event that throughput remains 2 million times, what would be the expected production impact for the next two years, but for the existing guidance.

Yes, we are currently evaluating the decision of the administrative court.

Currently we intend to continue the same throughput while discussing with them, we're going to know more in the in Q3.

About that.

Okay. Thank you and then sorry just on the.

For the existing guidance.

What was the throughput assumption for the next few years.

2 million tons per year.

So no change versus the existing permit.

No change for now.

Okay, great. Thank you very much.

Thank you. The next question comes from Jackie <unk> of BMO capital markets. Please go ahead.

Thanks.

I just wanted to follow up maybe on <unk> questions about detour.

I know you've put the life of mine plan, which is super helpful. But it does it looks like it includes stockpiled.

Or is basically the main first of or the later years can you talk a little bit about this exploration that is still to come in maybe the evidence youre seeing a continuity between the different.

Between the main pit and the Battle zone and how.

That.

Is successful how that might affect the overall mine plan like not not necessarily to do with the expansion, but more to do with the grade through the life of mine.

Exploration at this point is really focused mostly on the west extension I would say and then chasing things to depth.

I've actually already drilled most of the area in the saddle.

The west pit too.

To the St. Louis spacing as what you've seen the main pit and so be able to that it should be able to evaluate for open pit, we would be looking at closer spaced drilling.

Probably going forward.

Which might help the underground because we do see a lot of the higher grade is in smaller lenses.

So I.

I think it's not so much exploration in the pit area, but it would.

With the weather, we need how youre definition.

And Jackie.

Maybe I didn't totally understand your question, but certainly to the extent. So if you look at those those low grade stockpiles and I don't know the number off the top of my head I'm thinking it's about three five grams or something like that.

To the extent that you are putting through some of the additional exploration that even if we go through what we've currently got it closer to say <unk> 97.

That obviously.

Roughly triples the production.

Those years, which would put you closer to us, especially if you are a little bit of underground and we've given some very high level numbers and these are very high level at this point, but to the extent you are able to supplement some of the throughput through an underground at say 5000 tonnes a day.

Save between two and three grams, you can see that that really.

Get to much closer to the sort of million ounce target that we're talking about again. These are very high level, but the concept clearly as you would be you would be as you find more gold that is similar to the type of goal that you've got in the mine plan.

Well too.

Differ effectively by adding to the mine life Youre able to defer the throughput the milling of the low grade and replace it with higher grade.

You.

You did understand my question, but I just wanted to make sure I understand.

The answer.

So the.

In terms of open pit or <unk>.

Pip mineable ore the main pit the battle zone.

Are pretty well defined already so maybe could you all I guess, if I understood what what the comment was the.

Or would the opportunity be for adding new.

<unk> already started that.

Yes.

To the west is.

One of the main targets for sure.

Sure.

This could be for either open pit or underground.

Depending on how closer to surface and of course, the widths in grades that you get but we're not finished exploring to depth below the west pit towards satellite. There. So there is still more drilling to be done there and we have some inferred within the pit those could be still converted.

And but that really we have.

The other thing is we are looking at holes that could be.

Under North wall, the north pit area as well so theres some theres a various number of areas I guess okay.

And it's important to understand too that they're not necessarily sequential the open pit and underground in fact, we would target and again Jackie. This is we're working on this but to the extent you can make the underground.

Contemporaneous with the open pit.

That's part of that would be part of the plan as well does that does that help yes, yes, absolutely.

Super Helpful. And then if I could maybe ask a little bit more color on your hedge book.

We've been really successful this year in managing your operating costs.

Can you can you give us a bit of color.

Right.

Right.

Our hedging inputs or.

Thanks, or whatever it is for next year.

<unk> gotten started on that at this point yes.

Yes, sure so the most important.

Input we have after gold as the Canadian dollar and we're about 30% hedged in 2023 already on the Canadian dollar.

Much better than budget rates the budget rate is $1 25.

This would round out to about 129, so far we actually believe that we will have the opportunity in the short term to continue to add to that position.

It is effectively an insurance policy, we don't know for sure what the Canadian dollar U S. Dollar et cetera are going to do in the future, but it does give us some comfort on our cost guidance. When we have hedges at better than budget rates. So I think one of those opportunities is kind of right now and.

We will continue looking at that going forward people are always asking about diesel.

It's a much smaller impact it's only about 300 million liters per year.

The current spot rate is about 100, Twentyish Canadian per leader and we are 26% hedged for 2023.

Actually worse than budget rates, but much better than spot rate, so not a bad position there too, but much much smaller input than when the Canadian dollar that is for sure.

That's super helpful. Thanks, Steve that's it for me thanks.

Okay.

Thank you. The next question comes from Lawson Winder of Bank of America Securities. Please go ahead.

Hi, Omar and Dave. Thank you very much for the update and.

I'd like to just commend you all given eco standout.

Managing costs in the current inflationary environment I think it's very impressive.

<unk>.

Wanted to sort of.

Start with cost and ask about both Finland in Australia, So last quarter you.

You highlighted Finland as the region that was most impacted by contemplate. So I wanted to ask if that was still the case and then as you get your numbers for Q2 on a cost per ton basis, I mean might say contura.

Year over year.

Which actually doesn't seem that bad.

Are you finding ways to offset the cost inflation in Finland.

Well I'll go first and then maybe Dominic Finland is still.

Most challenging from an overall inflation perspective, and it's natural given the environment. There. They have had a very good quarter relatively speaking efficiency wise and I think thats. The biggest thing that they've been able to do again, it's a combination of things.

Things, we can do to control costs, but at the end of the day efficiency drives a lot of that Dominic.

Yes, you are right.

On the let's say you did good improvement on drilling blast and Aldi underground mining, which is a good cost. There is also a positive impact on the.

The exchange rate with the Euro, which is also giving us a positive impact of input on that.

That makes a lot of sense. So similar question on Australia.

Just regarding.

Regarding that.

That region I mean, your peers are highlighting pretty significant issues with labor inflation and availability, but again I mean based on your cost per ton.

It looks like you are managing very effectively what I mean, maybe you could speak to nikos experience with respect to labor inflation and availability in Australia.

Well go ahead sure how often.

Yes.

Terms of employees and Australian Bendigo, specifically majority of our employees reside in Bengal and the turnover has been low so we haven't seen too big of an impact from a labor perspective.

Yeah and in terms of our cost per tonne, we are seeing a slight rise, but that's just.

A function of where we are with our with our mine sequencing grade has offset it and we have higher grades. So our cash costs are in line.

If not better.

Okay, that's great quite remarkable.

On Detour Lake.

Among many of the opportunities that you highlighted to enhance the operations there.

Some seem to me like it makes sense to go ahead with its fairly short order for example, like trolley exists.

Or maybe increasing automation with the haulage trucks.

But then there is this study which these are all part of that is coming out in 18 months.

I mean, some of these enhancements perhaps be implemented before that initial assessment is ready.

We're looking at a lot of things in the.

The answer is some may come in.

Sooner than later, we always tend to look at things.

And a bigger holistic perspective, Lawson, but absolutely some of them could come in earlier and as I think as Natasha showed with regards to detour.

The details on the on the current mine plan at 28 million tons, but she and her team have been working on that for a long time, and we are well progressed on it.

Okay.

And then if I could just ask one more question just on Odyssey. So now that Odyssey underground developments fairly well progressed could.

Could you maybe provide some comments on how you are finding the ground conditions versus expectations.

Also note typically think towards density you know been developing thanks very much.

Hi loss under Nick speaking in term of ground condition. They are excellent very good comments from the team.

Reaching our meters where.

On schedule and on budget.

We're still waiting to have the first answer is coming in Q1 next year everything is going as planned there could you just repeat your last question.

Yeah, I was just asking to what depth you've now developed at Odyssey.

I need to double check I am not sure we are going to come back on that.

Okay, Great. That's it for me. Thank you thanks, a lot Adam.

Great quarter.

Thank you.

Thank you.

Next question comes from Anita Soni. Please go ahead.

Good morning, everyone and thanks for taking my questions and congratulations on a good cost control in this environment.

Most of my questions have been answered, but I do have a couple of one day.

Gustavo.

So go.

<unk> satellite deposit and then just looking at.

Ore feed I think you said it was 15.

<unk> hundred <unk>.

Thomas can add is that over and above the current mill feed or is that.

Is that within the current mill feed I just noticed that the gold grades are one six I was just wondering why you would see.

Substitute the eight four versus that one.

Yes, the current.

License, we have had <unk> 9500 tonnes per day.

Frankly with <unk> at the 8000 tonne per day, so we already have space into the meal.

Nick here.

Let's see what do we need some modification smallwood litigation to do it over 9000 ton per day, but we think we're going to end up in between 8500 to 9000 theater aspect is we are going deeper at <unk> below one two kilometer with deep too so that's going to give us flexibility.

Throughput or throughput will probably decrease gradually with time, we're going to be able to top up the mill with the <unk> Zibo and just had maybe at the high level the value of the tons from <unk> block are quite the same of the <unk>.

Because I've always will also have copper so it's a 0.5% buffer so at.

At the end of the day, we are going to top up the mill with <unk> <unk> or <unk>.

Just to have the good cash flow out of that.

And that $50 million Canadian that youre going to spend that will help.

Hey, Greg had a purpose that copper I'm, just wondering I was cut off.

Okay.

The 50 million it is mainly mining costs, so which means minimum on infrastructure as we are going to process. It at <unk> in the country center is going to be centered around.

So it's really mainly as stripping class to the next two years first production's going to be in 'twenty 'twenty four.

Okay.

That's it for my questions.

Lauren.

So thank.

Thank you talked about re sequencing of the mine in the second half of the year.

And will that reverse back to the original plan was.

With the guidance or the <unk>.

You put out in February and should we still be modeling, what we had expected in 2023 or should we sort of modify our assumptions to account for account for this re sequencing in dealing with I guess.

Higher ground condition protocol.

We are still in between the guidance range that we gave we it is going to be going a bit lower than the middle point I guess.

Because we need to we have more protocol in place again in the mainland the east mine, but theres going to be compensated from <unk> five so cranky, where mining 302200 tonnes per day, they're looking to go with the 2400 tons per day at his advice to compensate and maybe also another.

An interesting aspect with guys that are coming into play we're going to provide higher copper grade tool around meal, which is going to provide them more flexibility to introduce eventually more satellite deposit.

The exploration drift are progressing well.

We don't have yet.

<unk> from the drilling, but we started to build at a level to 15 and nickel nine recently and eventually I don't know next year, which we should see coming interesting result in potentially bring other satellite deposit.

Tyrone.

The same situation in <unk>, where we have a meal that could take more so teams are looking to add to that.

Alight zoned to.

To the meal.

Okay. Thank you that's it for my questions.

Okay.

Thank you. The next question comes from Greg Barnes of TD Securities. Please go ahead.

Thank you I just wanted to ask on the cash about.

Capacity growth victory.

Taking into 28 million tons, a year with the steps, we're taking now and likely to get more than that through that plant you're building in some.

C&C.

10, 15% warrants you do that would get you up to closer to 32 million tonnes without doing anything additional.

Good question, Greg So right now we are targeting 28 million tons.

We commissioned the <unk> feed and it is.

Bleeding as per design.

High intensity blasting in the tube feeding has shown some improvements, but we need a little bit more time to quantify it. So for now we're targeting the 28 million tons.

Then there is a likelihood of increasing the permit level above 30 to $32 8 million right. So yeah.

Yeah.

Is.

With strong likelihood I would say because we went from 75000 ton per day limit up to $32 8 million tons a year. So there was a step up.

On an annual throughput so I don't anticipate any issues, but maybe I'll pass it over time Mohammad can.

Can you provide any more clarity on that.

Thank you Greg.

In terms of the likelihood from a permitting and regulatory perspective, we don't see any challenges to get to that number.

Natasha earlier mentioned.

We were able to increase that throughput earlier, and we will be going through that same process.

And just a final question again can you talk about the ultra high grades coming in Q4 possible.

What are we talking about there is great.

So for the year.

Okay.

In terms of Q4, we expect higher.

We plan on sequencing just based on sequencing we have.

Few high grade stopes coming in I would say, probably I don't have that information handy, but I would say probably in the 20 Gram range, if not slightly higher.

Okay. Thank you.

Thank you. The next question comes from John Tumazos.

John Tumazos very independent research. Please go ahead.

Thank you for the great results.

I have two questions related to the west of detour and west of minority deep drilling successes, one two miles west.

Known reserves and resources.

From a share buyback compliance legal standpoint.

Are you able to buy back shares give.

Given that.

You're drilling you're getting great results.

Return on assets is a little bit unpredictable.

Depreciation and labs are problematic.

So the first question is.

Does it change the windows for buybacks.

Some very short.

One could also take the point of view.

So many reserves already at detour.

Florida underground resources.

Youre, adding things for the 2015 detour sixties.

<unk> and <unk>.

Maybe it isn't material then the second question after the legal issues on buyback windows.

It is.

For your own planning.

Are these results.

Good enough to change the mining sequence in mind these new zones first.

Or is there.

20% to 40 years out and the production plan, they're kind of.

Lesser NPV ounces.

Well, Chris why don't you answer the first one and then I can I can address the second John Yes sure. Thanks, John So you are correct. If we're in possession of material nonpublic information.

We're not able to execute under the discretionary buyback plan.

We do have an obligation obviously to promptly disclose any material information. So if those results were in fact material we would have to put them out via press release promptly.

But as you sort of note in general any given drill result for a company of our size is unlikely to be material.

And that is part of our and CIB. We also do have the automatic plan in place if we choose to use it and so if we do that we can give instructions to the broker after which our discretion is removed and the broker execute those instructions and we can only change those instructions if we're not in.

In possession of material information.

And John with regards to our ability to.

The drill results sooner than anticipated so.

The mining sequence is going to be a function of the drill results and where the ore is.

The good news is.

Some of the step outs or show the vastness of this of these ore bodies. The bad news I guess is that.

There are quite a distance away from existing infrastructure and so what I would say, though is if for example, we have some exceptional results at <unk>.

<unk>.

At a decent depth.

We could we could and I'll emphasize again, we could.

Start the underground.

Development to access those.

Much more quickly we don't we don't it doesn't have to be sequential with the open pit.

But it'll just be determined by by the drill results and then we would optimize the mine plan based on that.

If I can ask a different follow up question. Thank you for the responses.

<unk>.

How much did the second quarter.

Produce that geologic model, 10%, 20%, presumably there were top cuts in areas.

Services.

And do the second quarter results.

Create a scenario for potentially.

Underground mining is theirs Zhong sooner so good.

You could spoon feeds from brown sugar into the <unk> mill.

Meadowbank mills too big.

Yes.

To answer the question about the grade the first I'd say John this week.

So there was there was none.

<unk> of Super High grade mineralization known that tomorrow. The Pleasant surprise, we had is that they know they came a bit earlier and so copper bench higher than expected.

Maybe due to some folding feature so we know for a fact that we were writing into that and as the mine plan, while though so there was.

Higher higher bigger than most of the ounces were coming in the second half of the year. We saw some of that came earlier in the second quarter. So thats basically the add on but now moving forward, we consider that dose zone of high grade are well factor in the plan they've made we can still see some plans on.

Surprises filmed reconciliation top cut down everything as you discussed but so.

So far as just announced a nice add on additional high grade that came out a year in the second quarter.

So maybe we should add extra years to our models.

Could add five or 10% above year projections.

For the next few years, if we think the.

Sweet spots are going to recur.

I'm not sure I understood. Your question, but certainly if we can continue and we're still exploring at depth. We know with the intention of can we extend the life of mine can we build on now what that what I mentioned is that yes, there was a bit more of a ton of that high grade material that came out a year in our plan, but for the upcoming.

<unk> got about a year, we're back on track and we May again, we're not we haven't yet mine too much of those and maybe we are a bit conservative on our estimation of the great in that high grade material with scale.

Needs to be proven in <unk> that we'll see in the upcoming couple of quarter, you know whats the performance when we mine those high grade part of the deposit.

Im sorry, if I was.

Buying a second guessing of their projections.

No you are conservative and we might want to hope for a little bit better we train.

Thank you.

Thank you John .

Thank you.

The next question comes from Tanya Jack can ask Nick Nick.

Scotiabank. Please go ahead.

Good morning, I think Thats me.

Thank you for taking my questions.

And can I just go back.

The mine plan and thank you for giving us some of the assumptions that we.

One into that mine plan, just missing the oil price assumption that you used.

Over a long period of time to just kind of trying to understand what oil price you used.

Hi, Tanya.

So for the short term our model we used.

<unk> 10 per liter.

The long term I can't remember exactly the cost per liter, but it was based on a forward looking curve and I believe it was increased by 10 cents a litre.

Compared to the previous plan.

Okay, I'll take it offline and maybe just get a sensitivity from someone to take it so that it's a long period of time.

Fuel changes that gives you some relief.

And they get a sensitivity that.

In the past and now that I have you on maybe just to talk about that mine plan.

<unk> <unk> 42, we do dropdown will destock path based on what Youre seeing today, which you are seeing exploration success to the left you'll see a potential fine under ground.

Where could you see the underground coming in.

But at the end of this decade or would you see it coming in in the <unk> I'm just trying to see when could you see a nimble bound come in at the same time you have the open pattern essentially decided to stockpiles.

Tonya good question so.

We are working on.

On getting the exploration drilling were working on studies into the future. So we anticipate definitely.

The viability of the underground plan will we'll bring it into some time sooner than the 2014, Mark. So we will looking at mining the underground as we mine the open pit.

Okay.

For the the stockpiles com.

Before 2040, <unk>, sometimes in the <unk> with that be reasonable it sounds good yeah, that's right.

Okay.

And then just from a bigger picture I think I heard that it's going to be potential.

Potential to increase the resource.

At this asset at year end.

Maybe someone can just bear with me.

Is this going to be in the inferred category and from what areas are we seeing that increase in resources.

I think we have we have.

Potential too.

Add resources, both open pit and underground probably most likely near the west end of the west pit.

And.

Also in areas that are.

That may be on the north wall or below the west pit, we have almost 80000.

I'll say, it's now even since the last time, we close the database in February 5th and by year end, we're going to have closer to maybe 150000. So a lot of them are going to be in that area.

<unk>.

Yes.

Hard to say what category. This will all go in but I think.

A lot of it could still be an inferred, but there will be.

At least some indicators.

Linda.

<unk> of that gets to the question why are we giving.

We're sort of anticipating being able to give a fulsome update at the end of next year and a natural question is well why does it take you that long on the mill. It's not just the mill. It's also taking into account all of this exploration. So theres a lot of work to be done.

It is quite remarkable.

Amount of drilling we've done, but there's a lot of potential but there's a lot of work to bring it all together.

Thank you I appreciate it annually, we focused on the mill a lot I'm just trying to conceptually bigger picture for this asset.

<unk>, Okay. If we can get to know that which looks like it can be done I shouldn't say quite easily these things aren't easy, but it can be done. It's just been looking at that mine plan in China.

How you sequence all of these areas.

To that 1 million ounces and silicon when can we see that.

Feedstock cost can be pushed out and can we supplement 2042 from just the open pit and underground for another decade, or so before we hit the stockpiles again I'm just trying to understand that that's all yes.

Any of those are exactly the right questions 100%.

Well. Thank you so I'll look forward to getting more information on that to mine plan.

If I could ask just another question and it is going to come back to just the inflationary environment again.

And I wanted to circle back to we've seen a bottom.

Hi turnover issues isolated mine so fly in fly out lines around the world and obviously you have that situation.

None of that can you talk to me about what Youre seeing with your labor and none of that in terms of turnover and our inflationary pressures.

We've just seen a lot of various other lines I'm just trying to understand how this is impacting you.

Hi, Daniel Nick speaking.

Yes, we see also that the pressure, especially we'll see Quebec <unk> none of it.

Where a lot of our workforce also is coming from but so far we able to mitigate it.

Again.

We have a good relationship with our employees.

They like to work with those and let's say.

Usually they stay with us, but I will say also in Nunavut, we've last.

Last quarter, we have added the 50 Nunavut to our workforce, which is also.

We continue to hire as much as we can locally.

After COVID-19 we.

We had yes, we had to.

Yeah.

Nunavut back to home, but now we are just getting back to where we were before so this is compensating are helping also to mitigate that aspect, but <unk>. It's a good opportunity to reemphasize. So for example at Odyssey.

We were able to get employees because we've been there for 60 years were able to get employees, who are our employees our engineers our hour.

Our mechanics.

It's a lot tougher.

If you are building a brand new mine.

Brand New region.

So again, we are benefiting from that.

What type of <unk>.

And inflation would you be seeing and none of it compared to some of your other operations.

Alright as high as 10% in some areas that are isolated so I'm just trying to understand where you are on that.

And none of that yes.

Yes, I think we negotiate with our employees and I think it's November of every year. So the last negotiation if I recall was three 5% to 4%.

We're working with the team and with our employees.

To try to figure out what the number is but we will probably have a better idea on that.

Daniel later in the year, but for now.

We're largely covered by what we negotiated earlier.

Okay, perfect and then maybe.

I'll ask about inflation.

Another area, we are seeing in our strategy.

James on have been in shaft thinking it's going to be starting the Odyssey shafts sinking in October .

No.

Thanks, Shortly I'm just trying to understand from Neal can you share with us that you know.

Helps us understand that some of the issues that we've seen in other companies.

Youre able tent how comfortable are you with that.

SaaS thinking portion of the shafts and euro Canadian and the Canadian market I think it was $1 2 billion Capex.

Yes.

We have the opportunity at Canadian about Arctic to read to be in a good area close to 117 <unk>. It's easy it's a good place to mine and to work and we also have.

Finishing the shaft sinking in Kittila and also at Macassar. So there's part of the workforce that also is going to be.

It's going to transition to a D C. We're going.

Currency staffing those teams and we still expect to start to do shafts sinking in Q4 this year.

Okay. So are you, saying that if some of your own employees that you're bringing back was it contractors that you are bringing back to health.

And located in the Canadian market, so close to home to work on the shaft sinking I E not being isolated.

In our camp.

Yes, we have that.

The advantage at <unk>.

We see it.

Let's say, it's a 60 place to work right now.

I'm not sure about.

Well, it's a good place to work and.

All of the shaft sinking employees are going to work through the contractor, but this is a small word and from one contractor to the other one.

This is usual that.

The shaft Sinkers.

Employees or getting to the best plays in.

They're going to be higher through the contractor.

Okay.

And if I could just for Dave.

Just on the inflation.

Estimate that.

And I appreciate Youre seeing can you just review with us again.

And I asked this on every call.

Yeah.

I understand we've seen a bit of releasing feel so we're all seeing that.

And some.

Other.

Oil based products, but can you just let us know where youre seeing the most inflationary pressures coming through we talked about your labor at Kittila.

That may be anything else that you want to share with us why you're seeing more pressure or maybe you've seen relief in some areas any insights would be appreciated.

Alright, Yes, first I'll get back to you on the <unk>.

<unk> study assumptions on oil the first three years are Canadian dollar $1 10 per liter and then after that it falls back to 90.

I'm, probably not the best person to talk about the inflation that we're seeing in the business.

Because of course, I'm watching most carefully the financial and thankfully everything's working as it should in the Canadian dollar is relatively weak at the moment really helping us out.

But maybe natasha or Dom might be best to talk about.

The biggest components are.

Yes, Danielle we see inflation on.

Regions, and the steel products and stuff like that.

But overall wheels more mentioned, we're working to optimize the cost and productivity with different aspect on automation fleet management ventilation on demand which is offsetting.

That inflation this is what we control.

And what we work and we could see it in our results right now and we expect again to be due to stay into the guidance through the end of the year.

No I don't know if you'd like to add something similar docile. So Tanya we are seeing a slight increase in <unk>.

Ill reagents.

Seeing it and grinding media, we are seeing it and of course diesel.

But like Dan mentioned, we are looking at optimization efforts I can give you.

Perfect example is that Detroit diesel we are definitely exposed on that end, but we're looking at payload optimization and seeing how we can optimize.

Payload on our 795 trucks to see how often we can put them in better utilized for me here.

Overall would you say your inflation.

What youre seeing in your own cost structure and everyone has a different number but would you be in a 7% to 8% range.

I think thats as good a guess as.

Is anything yet Tanya.

Okay. Thank you so much I'll leave it to someone else to ask.

Yes.

Thank you we have time for one more question and that question will come from Mike Parkin of National Bank. Please go ahead.

Thanks, guys and congrats on the good quarter.

Can you just give us an update in terms of where you stand with detour.

With respect to them.

As with the first nations as well.

Are you fully permitted now for what you're you're pitching with this life of mine plan update or is there any.

Revisions to permits or completely new permits that you would require to move ahead with that.

Mohamad.

Thank you for the question, Mike Mohammad here with regarding your questions on the two folds with the agreements and the business communities and then the permits.

As you say it is in that order at the moment, we have all the necessary agreements to proceed with the expansion.

And then with the expansion itself.

Our consultation process is just beginning and then we'll be going through the permitting process, which is going to be very similar to the permanent process. We went through for the west detour expansion. So there shouldnt be any other.

Any surprises that we're worried about and it will be following the same process does that help answer your question Mike.

Perfect. Thanks, very much guys. Thank you.

Well with that I think I'd, just like I know, we ran over time. So thank you everyone for.

Being on the call and for.

Your health and again, the key takeaway great quarter operationally, but really the story I think is the development projects and the exploration that are going to set this company forward for years to come so everyone have a nice long weekend and thank you for your time.

Ladies and gentlemen, this does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.

Okay.

Yes.

Okay.

Yes.

Okay.

Okay.

Okay.

Okay.

Yes.

Yes.

Yes.

No.

Yeah.