Q3 2022 Agnico Eagle Mines Ltd Earnings Call
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 <unk>.
Oh Eagle third quarter results 2022 conference call.
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Mr Marr I'll John D.
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Well, thank you very much and good morning, everyone. Thank you for taking the time out of your busy day.
To join Us on our call this morning.
Last quarter, we started the call by thanking our operating teams for delivering some exceptional operating results.
And this quarter, we would also like to thank our operating teams not just for delivering solid operating results.
But notably and importantly, we'd like to thank our operating team for delivering the best quarterly safety performance and the company's 65 year history.
Nothing is more important.
Then the safety of our people and our communities.
A safe mine is a well run mine and a well run mine is a safe mine. So thank you very much to all of our employees and our operating teams.
For delivering that.
With the strong results in the third quarter, we've now got nine months under our belt and we are pleased to be able to say that we are reiterating guidance for 2022 production guidance capital expenditure guidance and importantly cost guidance in that that hasn't been easy.
And the highest inflation environment, and probably 40 or 50 years.
The team has done a very good job and again congratulations on that we are maintaining our guidance on all of those albeit at the higher end of the cost guidance.
This strong quarterly production.
It allows us to have strong earnings per share.
Cash flow per share and create value per share and maintained our strong financial position on.
On both liquidity.
And cash flow generation.
The real story that I think youll see during this call is the continued progress on our expansion projects and some excellent and exciting drill results. These are the items that are going to drive value creation going forward and I think that what really separates us and differentiates us.
Versus our peers.
Finally, as an introduction we are proud to say that we are announcing.
An interim target of a 30% reduction in greenhouse gas emissions by 2030 on our way to a target of zero greenhouse gas emissions by 2050. This is not a challenge we take lightly it is not a challenge we think is going to be easy, but it's a challenge we are prepared to undertake and are confident.
We'll achieve next slide please thank you.
Some of the third quarter highlights.
Solid quarterly production and costs 817000 ounces of production at cash cost of $779 and all in sustaining cost of about $1100 quarter.
Quarterly net income of 17, but adjusted to 52 and Dave will talk about that later.
Operating cash flow at a solid dollars 26 per share.
Some of the highlights of the operating results include record gold production at <unk> that is a 123000 ounces. This quarter I think that is a world class mine by any standards and some material improvements at Makassar, a great ore body that is coming into its stride and I'm going to.
Asking Dominic Gerard and Natasha Vaz.
Moment to talk a little bit about our progress on those two projects.
Pressures related to cost inflation workforce availability and COVID-19.
Remained we were able to manage them during the third quarter. We see continued pressure on inflation, we are starting starting to see.
Some potential relief I think it's too early to say.
That we are completely past. This situation. We are in fact expecting and planning for continued cost pressures going forward, but the team is focused on that and focused not just on mitigating cost pressures, where we can but optimizing mine efficiency mine throughput gold.
<unk>, which also helps.
To offset some of the cost pressures and the team has done a good job with that.
Financial position remains very strong we have paid down another $100 million of debt as it came due we told all of you. We are planning to pay our debt as it comes due through cash flow and that's what we're doing.
Some additional share buybacks of about 43.
<unk>.
About 1 million shares this past quarter, and our quarterly dividend of <unk> 40.
Continually paying a dividend since 1983, and maybe Dominic if I can ask you to talk a little bit about American then Natasha a little bit about mckesson.
Thank you <unk>.
Did the strong quarter and a record quarter also for the division.
We have been updating with very a good result, with operation maintenance mill throughput and also a good grade coming from the pits as we mentioned in the past more we go deep in whale tail more did the grade is going higher and also we are also interesting great at the IV, our pit plus the underground ore.
Which is coming in right now and undergone did also an important milestone.
We mentioned in February 2021 that's going to be 180 million to build it and we did it at the cost and on schedule to which is a good achievement. Despite.
Covid situation in inflationary situation, where we are and I would like to thank all of the employees or contractors suppliers and also the local community support.
We develop that project. We've said they also celebrated in Q3, four 4 million ounces bore at Meadowbank. So quite a good success this quarter.
Thank you Natasha Thank you Tamara and good morning, everyone. So with respect to Macarthur the site had a very solid quarter and more importantly, the mine is starting to become more reliable.
As a press release mentions a big factor that led to our strong performance in the quarter was the added ventilation through the mine for the connection of shaft for two of our existing workings resulted in improved ventilation in the areas we were mining.
And that also contributed to lower temperatures and improved working conditions. So.
So this includes ventilation helped with our productivity.
Gains in the quarter relative to our budget.
Besides the ventilation improvements, we're also seeing better adherence to plan quarter over quarter. So theres been a lot of focus by the site on the short term plans to deliver a weekly and monthly targets. So kudos to the team on that and then on the equipment side, we're starting to see slightly better availability on about <unk>.
But with the added ventilation, we also have the flexibility of utilizing our conventional trucks, if and when needed.
And then if we look out further I'm sure everyone wants to know about the future of Mckesson and we continue to work on that and we continue to work on the new mine strategy.
We're planning on running a few scenarios when we get the year end model to better understand the optimum production levels at Mckesson and the possible benefits associated with the 18th but.
But all in all a very good quarter.
Mine is starting to stabilize and we're very very proud of the entire team and.
Kessler for their hard work and dedication to get us to this point.
That I will pass it back to Omar Thanks <unk>.
Look the real the real excitement continues to be on the key value drivers and I'll just hit a few highlights quickly Dominic mentioned Amrok underground completed on schedule on budget, that's never easy, it's particularly tough and none of it and it's particularly difficult in an inflationary environment, where not only.
Our cost is going up but access to people access to equipment. So congratulations on that the Odyssey project remains on schedule. The shaft sinking activities are expected to to resume early in January again excellent performance by the team there I'm going to go so far as to say that I think.
It would be difficult for any company in this environment to keep a project as ambitious as that on schedule. Our team has done it and I think the way we're able to do it is because we've got access to the best people the best contractors.
And the best suppliers in the regions, where we have been operating for 60 plus years. The Detour Lake mine, we were up there just a couple of days ago, what an exceptional property.
We've installed the.
Screened.
Between in front of the second crusher.
Team did a great job doing that in the quarter.
On schedule on budget. They use the 610 re feed which worked flawlessly and importantly in September we reached the equivalent of 28 million tonnes per annum throughput at lower energy usage. So we are very confident with what the team has done we are looking forward to IND.
Stalling the second screen into the first circuit in the fourth quarter and with that and it's early but we are confident that not only will we be able to reach the 28 million ton per annum target, but one.
Absolutely reach it ahead of schedule and to possibly exceed that number.
Kirkland Lake the commissioning of the number four shaft is expected to be done at the end of this year the underground ramp from <unk> to the amalgamated Kirkland deposit has been completed.
When we did the merger we identified this as an opportunity to create some synergies.
Done now eight months.
After the merger and I think and I hope that's a demonstration of our commitment.
To hit the ground running and to deliver some of the synergies that we promised that we would and.
Some exceptional by the way drill results in that area that that the team will talk about in a moment. The <unk> shrinking is completed and commissioning expected to start in the fourth quarter. The <unk> expansion to 6000 tonnes per day progressing as expected I just want to make two points.
One is and we've mentioned this before everything we just talked about.
Is exciting and all of it is that existing assets leveraging existing infrastructure leveraging competitive advantages. That's how you always get in our business. The best return on capital and the best risk adjusted return on capital and secondly every single one of these expansions are not just expansions in throughput.
But open up.
The potential at all of these mines, which still have exceptional exploration upside and we will talk about that next next slide. Please thank you.
I'll just talk very briefly about this and then I'll ask <unk> Erik to comment.
Being the experts they are in there, but what I would say to you is that at Odyssey and detour to world class multi decade mines.
Very good infill continued results.
But what's really exciting to me and to all of US is the step out drilling both of these multi decade assets.
Good step out results, 1% to two kilometers beyond the existing perimeter of the ore body. It's early to say what that means but it is exceptionally promising.
For these mines World class mines.
At Makassar as I mentioned.
The amalgamate the ramp to the amalgamated Kirkland dips.
Deposit is now complete we're drilling and I just want to point out the one the one hole we talk about here.
31, effectively 31 grams over three five meters.
That's pretty impressive 64 meters underground at Fosterville, Eric will talk a little bit about it and maybe what I'll do is I'll, just ask D and Eric to briefly talk about some of the things they're most excited about.
Thank you Omar so overall 2022 will be on.
Obviously, the most important year in terms of exploration spending in the company from the original budget of 325 that we've announced this early in the year. We've added an additional $30 million that was announced in the August press release. Following good result, so year to date, we have successfully completed in excess of a 100.
Million meter.
One 1 million meters of core on schedule to complete our total of one 2 million meter of drilling which is a lot.
Thanks to all of our drill contractor and service provider on each of the project.
We had all of that we're certainly positioning ourselves favorably for the.
The year end reserve and resources update we've seen it.
And mid year. The addition of detour with $5 4 million ounces and good success at several of the line, which will more than offset the production depletion of two 2% to three four we're anticipating this year. We've seen solid result at near mine et cetera, all of operation like get to allow the wrong <unk>, but.
More importantly on the key value driver of project, we've seen some solid results good step out as mentioned by EMR starting by Odyssey in monarch, we have not we continue to have 14 drill rigs operating we're on our way to complete our target program for this year for with 160 kilometers of drilling.
We have been getting solid result, and filling the Odyssey and Odyssey will be.
Potentially move to where the reserve at year end 2022, and we are anticipating to start production at the end of Q1 2023.
With some very positive results in the core portion of the deposit up to $5 seven Gram over 2021 meter at 367 meter bottles or face.
And at East Goldie at depth, the infill is continuing.
Some of the notable intercept for six Gram over 50 meter in a core portion of the deposit.
And we continue to get pleasantly surprised by the Western extension of the East Goldie moving towards <unk> zone with some intercept located 670 meter west of their current resources, returning $4 two gram over 12 meter.
So quite interesting to see all of the east Goldie continue to shape up to do that.
Towards the west.
Moving and none of it at all.
We're conducting a very aggressive drill program over there focusing on exploration only.
<unk> to the end of the third quarter to 76000 meter we're getting good results at depth and Doris.
And we're pleasantly surprised that recently, we are ramping up activity in Madrid, we have mobilized a second drill contractor that as two rig over there and we're starting to drill deeper drill hole in a matter of deposit and we've seen good visual intercept reporting interesting with with CT Zane and visible gold, which we will continue to see.
The outcome of those and we anticipate to continue ramp up of activity in Madrid and Doris.
And to have a better clear picture of the full potential of the asset by later on in 2023.
Closer in the Abitibi ITK as mentioned by EMR, we've been aggressively drilling since the merger both from surface and underground. The team has been closely working together over there we have an excess of 135 drill holes that were completed year to date, we are going to be updating resources over there at year end and that could add it in.
Near term ambac, adding potentially adding to production and <unk> as early as 2024 and on that I will pass to Eric to talk about detour and Fosterville.
Hey, thanks.
Thanks Keith.
In terms of detour, we had again some very good progress in the quarter.
Both in terms of the productivity of the drilling.
And the results.
We drilled about 74000 meters in total and the main focus remaining on the left side of the pit and to DFS and the extension of that up to about 225 kilometers to the last.
And.
<unk>.
Some additional really good results.
The intercepts closer to the pit so in broad zones of mineralization similar to what we see in the pit and including some more high grade intercepts as a previous announced.
Further to the west again, showing some more higher grade holes with courts in physical gold so having come together very well there and we believe we are on track to.
Again add more to the open pit and underground project doesn't go ahead the cassa.
The project continues to focus on both the deep mine and on the AK project. The deep mine the main targets, where really the main break and the South mine complex to the east main break.
We're looking at the high grade corridor, which is actually just eastern number four shaft to set new targets, we haven't been able to drill much until we get the recent drilling in there and there was a very high grade hole that we have announced and they're 25 grams over about two five meters leaf and to the SMC east.
Additional extension of the zone. There Fosterville was also very exciting this quarter. We finally got a lot more of that.
Selling and progress there remember we were having to delay a lot of that to the second half of the year and.
So we are now starting to receive quite a few results and showing.
A number of holes with high grade and the continuation of the zone.
<unk> about 200 meters down plunge.
Also identified a new structure, which we called the <unk> zone that has additional high grade results similar to the the Swan zone.
Still a lot to evaluate with cardinal but.
In total showing.
The continuation of the Swan zone to depth with more high grade lenses and <unk>.
Yeah.
So we're very pleased with that.
We think that it's both.
It's very well for the future at Fosterville.
Thank you very much.
I mean, those are excellent results and what I want to emphasize again is none of these are results at.
At the top of a mountain in a country. We've never been in these are at operations, where we have the people we have the infrastructure we have the competitive advantage.
And we will immediately create value for our shareholders. So thank you guys just moving onto the next slide.
As important Sean Boyd has always said as important as what we do is how we do it.
And we are continuing to demonstrate the culture of the company. We talking this slide about and I've mentioned the record.
Quarterly safety performance again that is <unk>.
Fantastic and I referenced representation of the culture of the company, but also how we operate the interim target of 30%.
We discussed but.
But what I want to talk a little bit about very briefly our the bottom points.
We are well rated by all the external agencies.
If you take a look at greenhouse gas emission in water usage relative to our peers.
Are doing.
Doing very very well, but take a look at some of these points at the bottom and I'm going to I'm going to focus maybe a little bit on <unk>.
Mexico.
Nico Eagle was awarded the 17th best place to work anywhere in Mexico and this is not just mining companies. This is against any company in Mexico as measured.
By this.
Best place to work.
Award that is that is pretty impressive and chose who we are and then look at the one below ly, Indiana, La India isn't a huge mine.
But the team there.
A distinction of social responsible company.
Not by the mining industry.
By the Mexican center for Philanthropy, and the foundation for sustainability and equity.
Sometimes it's the small things on the ground at the communities that really make a difference and it's these types of things that show the culture of the company. So we are while these are small potentially awards. They are very important and they show who we are.
Moving on to some of the financial results David would you mind covering this.
Don't mind at all Omar.
I will just focus on a few numbers here just looking on the extreme right of the slide of page 10, the operating margin. It's two $4 billion U S year to date, that's a big number and I think the size the scale and the liquidity of companies are more important in this market than ever.
And certainly agnico is delivering on these these important metrics. If you look at the pie graph just below that for Q3 operating margin in line with what we've done year to date about $800 million, but importantly, it's well balanced between our regions and I think that diversification.
And balanced throughout the portfolio is very important and very comforting to our investors as well over the last number I would focus on on this slide is the.
Quarterly.
Year to date cash.
<unk> per share numbers and that extrapolates to a yearly number of more than $5 per share of cash flow and I guess this is just a commentary on current market conditions, but if you told me a few years ago that agnico, who is going to generate more than $5 per share or cash flow I would've said the share price might be.
Close to or above $100 per share. So I guess, we're seeing a market, where we're certainly not near the top of the market for evaluation of gold equities and I think we've got a really solid base here for the share price to continue moving higher as the equities and the gold price recover going into <unk>.
Year flipped.
Flipping over to the next page just talking about the balance sheet briefly of course, we do have strong liquidity more than $800 million of cash and Undrawn bank facilities of $1 2 billion.
If you look at the debt maturity schedule at the bottom, it's a very light maturity schedule.
<unk> overtime on purpose. So we've got tremendous financial flexibility to make sure that we can continue doing what we've been doing for decades.
Thank you David next slide please.
On the synergies I will hit these very quickly.
Divide them into corporate synergies operational optimization and strategic optimization on the corporate synergies.
You don't want to say it was easy but.
We've done a really good job on that.
Frankly, better even than we anticipated and roughly double the original estimate that we gave so congratulations to the team and we are continuing.
To do it every chance we get there is another $2 million saving annually by consolidating some insurance policies that we had a small things that add up and thank you to the team on that.
The real slices, obviously on the operational side of it we are targeting a $130 million a year I will tell you we have identified more than $130 million a year of opportunities, but not everything you identify happens we remain confident on the $130 million a year. We've said it'll take a couple of years to get.
There and we are going to exceed our expectation for 2022, and then on the strategic optimization, we talked a little bit about amalgamated Kirkland eight months into it the ramp is done the drilling is well underway and were hopeful to bring production there in 2024.
And again I mentioned that we were up at.
Well frankly, all of the sites recently, but including detour and I can tell you that the combination of the of the two companies. The technical discussions are already making a big difference in our mind as big and as important as detour.
Things like improvement in the maintenance programs and even the move in the analysis towards the underground mine and our target.
Over 1 million ounces a year, we've made good progress.
And I can assure everyone.
That progress is happening faster.
A combination of the companies rather than individually.
And then moving on.
Our vision remains the same.
We have a simple consistent disciplined and proven approach to value creation. It's the same. It's the same approach we've had for 65 years and it's based on the following first build a high quality business.
To us that means low costs strong margins strong cash flows and.
We've delivered that again, so far this year.
It means robust production profile from.
<unk> from Premier jurisdictions, our strategy is to go into places in the world that have the geologic potential for multiple mines over multiple decades in the political stability to operate multiple mines over multiple decades and to build a competitive advantage in those regions and to leverage that.
<unk> advantage and that's what we're doing with our expansion projects with our exploration.
<unk> proven leadership with a track record of building value per share, we don't care, how big we get we only care about creating value on a per share basis in a responsible manner and that's what we're going to continue to do and finally to always have a strong balance sheet strong financial position you need to have that in our.
<unk> business.
It is essential and we're doing that to always do this.
In the most responsible way environmentally socially.
And from a governance perspective to be not just frankly not to be just trusted.
And welcome put to actually be a part of the community in which you operate.
To have growth potential from existing mines and a high quality exploration program I think you've seen that we have largely built this company over many decades through the drill bit and we're continuing to do that.
And a long history of capital returns 38 years.
Of dividend payments.
Without missing a beat and we're very proud of that so in conclusion.
The story of Agnico remains the same this quarter as it was last quarter and it'll be the same next quarter and it'll be the same next year and hopefully the year after one.
Deliver strong operational results consistently reliably as Dave Smith, our CFO always says.
Our desire is not only to create value to be the sleep easy at night investment.
For investors to to have the best growth profile possible and the lowest risk possible.
Which we get by being in regions, where we've been for decades and building off existing infrastructure with existing teams three to continue to deliver value through the drill bit through exceptional programs in those good regions.
And four finally, it's always do it with the best ESG credentials and to be a welcome member of the communities in which we operate in with that.
The call are part of the call will end and will transfer over to questions operator.
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One moment. Please for your first question.
Your first question comes from Josh Wolfson of RBC capital markets. Please go ahead.
Thanks, Good morning, I had a couple of questions on inflation.
Commentary in the release mentions inflation ramping up for the next couple of months.
I guess I'm curious to understand what are what's causing that to be realized now versus maybe what the prior disclosures from prior quarters is that a matter of inventory or hedging that's now sort of rolling off at rolling on.
Hi, Josh its tomorrow here.
It's we don't really see an acceleration of inflation in fact, we are hopeful.
We're hopeful that we're past the peak and we're starting to see a little bit of light at the end of the tunnel is what we are trying to say, though is that it's I think too early.
To say that it's over and.
<unk>.
We are we are still planning.
To do everything we can to.
To control costs because.
<unk>.
It's our job to do that and we just want to be responsible so I don't think were seeing.
And we didn't intend to suggest that inflation is accelerating but rather that.
We're still taking it very seriously and doing everything we can to mitigate it.
Okay.
And then the other question on inflation relates to Odyssey and the costs.
Reevaluation there.
Could you maybe provide a bit more information on that.
What what was incorporated in the original study maybe.
In terms of flexibility.
And whether we should think about the greater than 5% to 7% upside being to the cost this year also being applicable.
There.
Yes, that's a good question. So we are making good progress at Odyssey, and we're going to start to have some production as you know in the first quarter.
We are every year, we go through our budget process and every year, we take a look at all the costs.
We are going through that process right now at Odyssey and taking into consideration what we've seen over the last 12 months. It's too early right now we will give guidance on that as we go through but.
Our expectation is that we're going to have to work extra hard to offset some of these cost pressures, what I will say and I'm going to ask Dominic to talk a little bit about this because the team has done to really good things. One is so there are two parts to inflation. There is the cost of material goes up and you manage that the best you can.
Yes.
But one of the big issues that the industry has been struggling with what Dominic and his team I think have done an exceptional job with is you can't lose out on the efficiency and in this case efficiency of construction means are you getting the demand power are you getting the contractors are you getting the suppliers and they've done a very good job with that but they are also.
Done a good job in looking at opportunities to increase the revenue side of things on that project, maybe Dominic if you can talk a little bit about that yes.
One of the opportunity that we have is the internal zone at <unk> solid. So we know that the mineralization is there it is complex, but still that's going to be just close to our infrastructure. So we are going to see in the coming years, some <unk> coming.
Say over what we already plan coming from those zones, and I wouldn't I need to say that the construction team as to what is quite a strong team there and they are looking to different alternatives by phasing are revising just go by doing engineering into let's say to mitigate the cost.
Two things also important about costs on the ramp development side, our cost per meter are you better than expected. So that's going to <unk> overall and also on the thinking.
That's the best place in the world to sink a shaft so right now the.
The partnership team is staffed with people from over 20 years of experience in two shafts sinking that did not own that did.
Laptop project also people that have been to the Kittila project in the shaft sinking and now our contractor that is also doing a team using people. After they have been at <unk> I've been at Kittila, where in <unk> area and a very good place to sink a shaft and.
Let's see proof is going to be in the pudding with let's see what's going to be the performances, but theyre going to have good infrastructure with a very rubbers.
Galloway system that we have.
We did achieve on that we've put a good setup and they are going to have Atms. So.
Overall, that's going to be I think thats going to be okay.
And just to finish I think I think the message Josh because theres a lot of people are.
Interested in this obviously the messages, we still see an inflationary environment out there.
We're working very hard to mitigate it we can't predict with any level of accuracy frankly, what the inflationary environment is going to be we couldnt do it in January we can't do it now I don't think anybody can but I can tell you.
The project is going well.
The team is doing a good job.
Yes.
Alright, I guess the shaft disclosures.
Speak well towards the I guess the cost for the eventual second shaft.
Maybe if I could tuck in one more question on the inflation side of things.
Just because there is.
A larger amount of.
Inventory stocking practices I guess across the northern operations and then also some hedging in place is there any kind of percentage impact he could provide.
What the overall exposure has been.
To inflation, so far look would you say half two thirds, 75%, 100% whatever the cases.
The actual inflation, we're seeing today that that's been reflected in the cost structure.
Well again, we're going through the budget right now, but you are right in that we did.
We have to do a barge shipments and so a fair number of the items.
Have been purchased.
What I would say is that yes, I would expect that on average it's in that sort of 7% more expensive than it was last year and I'll ask Dave to talk a little bit about fuel in a second because.
That's a big chunk of it.
But we've also had some relief on the currency side of things.
So and we've had some less.
Movement on wage inflation. So there is some inflation, we're going through the budgets again the message I would give everyone is we're not immune to it but the team has done a good job and it again just to emphasize before asked Dave to talk about oil. It's not just the input cost. It's we are really focusing as well.
On doing everything we can with efficiency to help to help offset some of those pressures.
Yes, so on the fuel front for 2023 were about 36% hedged on our exposure.
It is actually above our budget guidance rate, probably a little bit less than 10% from what we told you last February but we're feeling pretty comfortable about that position.
But again, who knows what the oil price is going to be in the second half of next year when we're.
We're more exposed on the physical side because of course in the second half we will have to do our shipments to <unk> four for the coming year. So it's going to be something we watch as always.
Try and pick away to make sure that we can have.
We have confidence to give guidance in February and continue to do what we said we're going to do but certainly inflation is something on the top of our mind.
Great. Thank you very much.
Thank you.
The next question comes from Anita Soni of CIBC World markets. Please go ahead.
Okay.
Anita. Please go ahead your line is open.
Hi.
Thanks for taking my call I, just had a question with regard to.
Some of the exploration highlights.
Pacifically at.
At the <unk> could you talk about some of the App.
So the high hits that you would say are more interesting to you.
What do you need to see that develop to before you would go ahead with that project.
<unk> deep so we're quite pleased we've been focusing for.
For the first part of the year and the Doris had that because we were seeing obviously some potential fold Andrew repetition at depth and we continue to validate those.
That apparent second fold ins, which as you saw in the press release, we've been we've been getting some some quite interesting results up to seven three gram over 15 meters $19 six of our $4 five.
That fold ins continue to shape up.
The drill spacing is not there yet to get the resources, but we were very close by.
Some of the lower portion of the mining infrastructure and our BTB. Therefore, we've into undertook quite early this year to extend the drift into that area very early when we saw the first sign of those good result in work arent in a position now to drill from underground as well with 200 or at two drill rig.
Addressing from that <unk> area, so while so quite interesting and.
As I mentioned as well weaker intake. We also mobilized the second drill contractor major to our pad beefing up our drawing capacity at Madrid, and we're now drilling at some extension drill hole at the bottom of Madrid stepping out at depth and to the north and we're quite pleased again.
These are still pending and when we see good quartz vein with visible gold at depth in the down plunge extension. So we are really trying to demonstrate.
Our CRE when we acquired a project that we think we can significantly grow the resources at Madrid <unk> went out with a couple of years of drilling and then come back with a better assessment on how we can.
Think about it.
Developing the project in the future.
Thank you and then can I just move to some of them more operational items like.
At.
While architect the grades came down a little bit, but I think youre running a little bit below right now, let the average for the year would be.
So I'm just wondering if that or the guidance that you had provided I think it was like $1. One four for the year. So I'm just wondering if we can see great uptick going into Q4, and then similarly at detour. It came down about 10% are you expecting a rate uptick into that into Q4 on that one.
Yes, Hi, Dominic speaking.
We are aligning with guidance at J&J and Murdoch take everything is as planned I would say, it's just a question of sequencing stockpile that we process more a bit in Q3, but everything is going as planned there.
Hi, Anita with respect to <unk>, we're still tracking against guidance well against that and so I think that's great.
With about 94 for the year and Thats, where we expect to be.
The first half of the year, we were in phase, two which is higher grade material.
Okay, and then last question just.
Natasha.
On the <unk>.
And the cash.
They seem bucking the trend it seems like the unit costs are going down.
And I was just wondering what what.
Was the main driver of that is that the legislation.
<unk>.
Sorry, the newly installed installation this quarter and can we see further gains in Q4, yes.
Yes, and yes.
We did see lower costs, but thats a function of higher throughput in comparison to budget. So yes. The ventilation has helped us.
And hopefully continue to going to the future and then when <unk> comes along we should see improvements there as well and they need it.
That's a perfect example, anita.
Never underestimate the importance of throughput and good old fashion efficiency trying to mitigate costs.
Thank you I'll leave it there.
Thank you.
The next question comes from John Tumazos, very independent research. Please go ahead.
Thank you.
As the new shaft ramps up cash.
Cash.
Can we expect.
The tonnage.
To go from <unk> 14 in the September quarter.
Towards the 2000 ton a day capacity of the mill.
With the great staying around <unk>.
21 grams.
I guess some of the deeper zones are higher grade and lower grade I don't know, which.
Which stopes you would access first.
If you can hold degrade and get towards 2000 tonnes. A day is 400000 ounce mined.
And I was wondering what year, we should hope for that.
Well I'll start with that John and it's nice to hear from you again, and then I'll pass it to Natasha I mean, what you.
You've done is you've done an excellent job of outlining the potential of that ore body. I mean, it is a great ore body.
And Thats why were investing.
<unk> the infrastructure the ventilation.
We're working on.
We are working on the budget right now it's going to take frankly, a couple of years to get there, but you're absolutely right. This this mine has the potential to be a significant producer again.
In a very good jurisdiction and I would also say with a lot of exploration potential remaining maybe I'll ask Natasha to comment yes, that's correct.
So John with respect to the shop. It has the capability of hoisting 2000 tonnes a.
Dave and it's Great news mainly.
Mainly just the South mine complex. So we expect our throughput to increase we're running scenarios right now we're looking at a new mine strategy.
Looking at different scenarios of mining methods changing up mining sequences to see how we can optimize the deposit.
And also the exploration potential we believe in the exploration potential here. So I'll reserve grade right now sits at 17 16 17 grams.
We hope to continue that trend.
But it is it is a couple of year endeavor John .
So for next year for example, what might be a reasonable expectation for tons per day.
We would feel uncomfortable giving guidance specific guidance for next year right now where that will all come out in February .
If I can switch back to agnico legacy properties.
Underground and <unk>.
And measured indicated and inferred resources is almost 8 million ounces now and.
In four zones.
Where the east Goldie.
As of about three two grams.
And the other three zones average about two grams and resources.
When the infill drilling has done.
Generic as detailed in the optimization.
Iterations have gone through.
Should we be modeling.
Three grams for east Cody and two grams for the other zones.
Or.
Is it going to get higher was optimization and infill drilling.
Or is it going to get lower unit, sometimes those mining engineers taken incremental tons into a little bit.
Well I mean.
<unk> go ahead, yes, I think on the grade.
When youre going to see the research. This update when we are having moving to indicated we are incorporating dilution. We are expecting using our are realistic mining scenario. So we youre going to see obviously, a lower grade transiting from inferred to indicated because we are adding that dilution.
But.
As you indicate.
<unk> is closer to three Gram overall and first so when adding the infill and did so we don't see we don't add any surprise in terms of the infill well on in fact, we confirm that thickness. The grade is as expected. So I do believe that our.
And it does only is growing laterally. This is the most positive surprise that we see so the core portion of it is being confirmed by infill drill hole were going to be adding the dilution when moving to indicated and the math you did is about that and then after that it will be a matter of the blend incorporating the Odyssey, South India Odyssey, North and the east Goldie so each of the three.
<unk> there a respective greatly into the mining sequence to get to the average grade of the operation.
So.
The three grams and two grams it doesn't feel as good as cash or fosterville, but it's a lot of tons and a lot of ounces.
Yes, its 19000 tonnes a day I mean, it's a big Big mine.
Thank you.
Gold price isn't so good this week and we do have this problem was inflation.
It makes me wonder if your partner Peter thought this was so good that he sold his company in <unk>.
For South deep in South Africa.
Okay.
How how low do you think your cost per tonne are going to be at 19000 tons to make real good money on us.
Well, we're going through all of those economics right now but.
As you as you're pointing out it is a big underground mine that's going from the biggest open pit mining candidate to the biggest underground mine in Canada, and we're going through the economics, but I think as <unk> said.
This is something that I think we are uniquely able to develop because of golar <unk> our experience at <unk> and this is going to be bulk underground mining like gold X, which which as you know.
Our view right from the beginning when <unk> when we acquired this asset.
Thank you.
Thank you.
Thank you. The next question comes from Tien you Jackie Jackie Sullivan from Scotiabank. Please go ahead.
Great. Good morning, everyone. Thank you so much for taking my questions.
Just wanted to circle back to Jessie inflation purchase the bigger picture.
Alright, and then last on Q2 conference call, where inflation was running in your cost at the time and I think 70% is what.
You said in Q2 is that sort of similarly, what you saw in your Q3 costs, Yes, yes, Tanya nice to hear from you by the way.
Okay. Thank you.
So just wanted to circle back on.
The relief.
I've seen out there encouraging and we all want to see that.
Fuel you mentioned, then we see that with oil coming off you mentioned supply constraints is that transportation relief and transportation costs.
How should we think about the supply constraints, helping or is it really we are seeing that.
Danielle the unique speaking them, we start to see some positive news on the supply where containers from China to North America, whereas at some point turn time to cost doing Covid, let's say, we are right now around two times the cost pre COVID-19 and it is still going down.
So this is a good news showing that supply chain slowly improving.
Then we also hear from our supply remained supplier that their inventory level is the highest since the started the start of the COVID-19 and the back orders are at the lower level. So that's that.
Signs that it's getting in the right the right place and maybe a bit also and this is a bit speculating, but on the workforce I recall <unk> told me. The beginning this is why I don't know two years ago.
<unk>, because we start having problem with vendors and youre going to be hitting six to 12 months and he was right, but now what we see on the drilling side.
Getting into better position so.
Think we're getting.
So in the workforce that should stabilize we have some projects.
We saw recently some project slowdown in Quebec and in Ontario.
So that could be a good news.
For us to take advantage of that.
And when we talk about labor right and if it does slow down and I know that labor negotiations.
Currently being worked on for the Abitibi and none of that.
Should we be thinking that the 70 percentage silicones land, we should be thinking about.
Can you sort of wages.
If we could get that data.
No. We think we're going to do a bit better of course, we need to stay competitive and we need to pay our workforce a fair price.
Negotiation is going to happen.
It depends on where which divisions, but were expecting let's say, depending where in the world.
Finland, or Canada, if I could say for those one between three five and five this is our expectation for now.
And can I just ask on late I'm, sorry, consumables have we seen any relief on consumables.
Not purely or any other consumables that youre seeing really fun, it's not oil based.
I can make a quick comment.
I get these updates all the time.
And I can tell you.
That over the last week or the first time I've seen emails where people are saying look there's a little bit of relief. So for example, in Finland, which has always been our highest inflation environment.
Or actually seeing some some relief on cyanide on steel and other consumables they to be fair. They had the biggest spike so it's not surprising that they would be at the vanguard of possible.
Relief, but we are starting to see that again I just.
So we are seeing some relief but.
Our job is to.
Hope for the best but plan for the worst and we're still all over it.
And I appreciate it may be just for that optimism and maybe coming out on this call, we'd like to see a bit of relief in SaaS.
Essentially some level that we're seeing right now so I appreciate that if I could fit one more question and just for maybe <unk> and Eric I'll actually them or maybe from a bigger picture for me I know, we're starting to think about reserves and resources at year end.
I know you have your reserves some of them at 12 15, some of them <unk> hundred <unk> at $15 75.
What are you thinking about for reserve and resource pricing. That's my first question.
Hi.
Danielle So we are still.
We're still evaluating what will be our yearend.
Year end reserve and resources assumption looking at fixed rates obtained at the tendency for the gold price the three year trimming.
So we usually come out with that number on that at the back end of the year generational too soon to comment, but we we were not too far apart in the portfolio and are moving forward. Obviously, we would like to unify the portfolio with the more across the board assumption. So we're considering all.
That then will get back to you in February .
Okay, that's fair enough.
But just on that.
What you mentioned previously.
The reserve replacements.
Obviously detour as one asset plan youre going to grow reserves at year end.
I have got kicked out of la La Ronde Melia dine in and the risks did I hear correctly that that's largely going to be replacing depletion this year.
As I mentioned when we met in August where obviously you nail down the most of the assets. So we are aware of we get we've seen the update that.
<unk> at the mid year, we're going to new to update and degree of being all of the research all of the resort resort results sorry, Andy the different mine and I still sort of reiterate what I told you mid year that are we going to be having a partial replacement in the operation plus a net gain of detour mine is the depletion from operations. So are we going to see an overall net.
<unk> how much is it.
Again, we will figure it out once we consolidate everything at the end of the year.
Okay Fair enough. Thank you very much for taking my questions.
Thank you and maybe operator, maybe just one final question and then I think we'll wrap it up.
Thank you. The final question comes from Mike Parkin of National Bank. Please go ahead.
Thanks, guys for taking my question.
Just to get a better sense in terms of how we could think about.
The <unk> project.
<unk> in the <unk>.
<unk> mill.
Our capacity.
Some of that spare capacity is obviously youre going to get chewed up with with the shaft.
Is.
It's fair to assume the ATM material would be kind of a buffer material filling the mill, but being kind of a second priority to primary makassar or.
Hi, Mike I will take this one.
Speaking listen asthma Nash I mentioned, we are reviewing the mine plan with the <unk>.
The <unk> four and the ventilation. So in fact, we will have to optimize the Neal.
This is the first element I will say, so it will be which whore will bring the largest source of the highest profit first on the unit side. We have started metallurgical test work since the.
The merger was completed and we are reviewing the full lift Neil to try to optimize to be more efficient. So it's ongoing and we expect in the first half of 'twenty three to have the all of the information on that basis after will make the proper decision.
Need to adapt the mill.
Okay. Thank you.
Well, thank you everyone and I think with that operator, we will terminate the call. Thank you everyone and have a nice weekend bye bye.
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.
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