Q2 2023 Agnico Eagle Mines Limited Earnings Call
Good morning, 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 2023 conference call.
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.
If you would like to withdraw your question you May press detailing key.
And now I will turn the call over to Mr. Ahmad Al <unk> you may begin.
Thank you very much and good morning, everyone before we jump in I would like to point out that we believe talking about some forward looking concepts and statements and.
There is some documents at the beginning of the package that you might want to go through.
We have our team with us today, we're going to be.
And a very good position to talk about the quarter and a very good position to answer questions. Afterwards, but really today. There are only three key takeaways that will go through one we had a very strong operating quarter consistent performance by the team across all the sites and I'm proud to say.
Say now for several quarters in a row.
<unk> excellent progress on our Abitibi optimization programs as many of you know we have a very ambitious program to consolidate and optimize our abitibi platform.
We believe we have the potential to add several hundred thousand ounces of additional production.
Potentially.
And we've made some good progress on that.
We'll talk about that and where we are and the third point is we've had some excellent exploration results <unk> will talk about that but excellent results across many of the operations and I would say that all of these results are in places we already operate we have infrastructure we have teams.
And we have the capacity to utilize and leverage off existing infrastructure. These are not exploration results.
Top of the mountain range in the middle of Nowhere. These are in our backyard and they will make a big difference ski will talk about it in fact.
We're still confident that we have increased as exploration budget.
Putting us over $300 million this year, demonstrating again the confidence we have in the business.
When we talk about strong operations, just hitting some highlights.
Record quarterly production.
Costs $840 cash cost at the bottom of our guidance range.
With another quarter of exceptional safety performance I am proud to say that we.
We have now had the safest first half of the year ever and the 66 year history of the company.
There is nothing more important than the safety of our people and our communities.
And I've said it before I'll say it again you cannot have.
That kind of safety performance.
Without excellent operating.
Capabilities and you can't have the kind of operating results we have had without.
That type of safety performance, that's all led to impress.
Impressively record quarterly cash flow and Jamie Porter, who will be talking about our financials later on.
So hitting some highlights.
Payable gold production of 873000 ounces good cost control.
All in sustaining costs of $11 50, an ounce cash costs of $840.
<unk> announced at the bottom end of our guidance generating almost $1 billion of operating cash flow this quarter.
Just getting into a few more just frankly I'm quite proud of this so I'm going to hit a few points.
<unk> produced at 7 million ounce since.
We had it in 2011, we've updated the Odyssey project Dominic is going to talk about that but just some highlights and additional $1 7 million ounces additional three years out to 2042.
And most importantly, still open at depth still getting some very good.
Exploration results and geologic upside.
<unk> on our call this morning.
<unk>.
Was discovered by the Golar brothers 1923.
So that mine has been around for 100 years.
It's produced with us and previously over 12 million ounces.
It's got a mine life out another 20 years, it's still open it is just a great example.
Putting yourself in the best places in the World.
Based on geologic potential and political stability 100 years.
And plus detour Natasha is going to talk about some of the great progress. The team has made there to build that mine, but from an operating perspective.
<unk> record quarterly mill throughput.
At detour at <unk> record quarterly mill throughput since the restart.
At Macassar record quarterly mill throughput record skip tons record underground development. The team there has really.
Frankly delivered on that that mine grade ore body, a great operating team Melia Dean record monthly mill throughput in May and Meadowbank record production for the first six months of the year again with one of the safest quarters in the company's history.
Now I'll address that question now because we will get it later I'm sure with the very strong start of the year. We are already being asked are we going to update and improve guidance. What I would say is it's very early.
We've only had the first two quarters.
But I will say, we are clearly off to a very strong start and we are clearly tracking production.
That would be above the midpoint of our guidance and we are clearly.
Tracking cost very well relative to our guidance so.
An excellent start of the year, we're very confident.
And we're confident going forward next slide actually keep it on this slide here. So if we do the update on the key drivers again, the passion Dominic I'm going to talk about it I'll just hit a few points.
As I mentioned Canadian melodic we updated the internal study in June we talked about the additional allowances the additional years that potential there, but really what's exciting more than anything is the significant geologic upside that we continue to see there that is a fantastic asset at detour Lake Natasha is going to talk about it.
The great progress we've made but also <unk> is going to talk about some of the exploration results.
To bring in potentially underground ore remember our objective at detour our vision.
As to try to get that two 1 million ounces a year. This is this is a mine that's already out to 2052.
That is still going to be increasing and to get it to a million ounces a year, it's going to be a combination of increasing the mill throughput and bringing in higher grade ore from the underground and we're working on that and we'll be looking to give some updates in the first half of next year.
On optimizing some of the other assets good progress and looking at the potential of <unk>.
Upper zones and amalgamated Kirkland, we're doing our work on upper Beaver, we're doing our work at Wassa Mac as I remind everyone.
The opportunities there are not just the base case standalone for those projects, but really what we're excited about and what we're working hard on is.
Can we develop those assets without having to build additional mill capacity and utilized.
<unk> infrastructure mill infrastructure and tailings infrastructure at.
<unk> <unk>.
<unk> or.
Lauren.
As a reminder.
Upper Beaver and <unk> each have a potential.
For between 150 to 200000 ounces, a year amalgamated Kirkland and the upper zones at Macassar $20 to 40000 ounces, a year and that's progressing well.
So just between those projects that.
We have the potential for an additional 350 to 450000 ounces a year using existing infrastructure.
Which reduces our.
Permitting risk, which reduces our environmental footprint and materially increases our return on capital.
That's something we're very focused on and that doesn't include other projects. For example, it can flow for example, potentially a second shaft at some point at at melodic now before I turn it over.
We are also getting questions on how are these hour. These studies going frankly, they're going well.
There are no delays whatsoever, we expect to start to come out with some.
Guidance in the first or second quarter of next year, but understand something as simple as.
The underground at melodic it just takes a lot of drilling these things just take a little bit of time, and frankly I'm very impressed with the way the team is working and the progress made.
And again, we expect to be able to start giving some guidance.
In the first or second quarter next year.
Not everything is probably going to work, but but things are looking.
Pretty well so far so with that introduction I will turn it over to Dominic to talk first about Odyssey.
Thank you Omar OTC project, if we put it in perspective, the first hole, where we discovered <unk> zone in 2018 in 'twenty 'twenty. One we released our first study and we just.
Did that one.
Last June .
Very good improvement, where we production profile increased by three years. So we have now in front of US at 20 years life of mine with eight 5 million ounces on the production plan and this is just the beginning as a more.
<unk>.
This is there is still full of potential to just increase those zones and eventual EMEA also on the original aspect too.
Maybe one important point about that updated study and where we are today as we de risking the project with now.
In 2020, we had 5% of the quality of the ounces, which were under indicated resources now we're up to 53%, which is a good news and the greatest still there. There is no discrepancy that the team are happy about that and also we have now 60% of the surface construction completed in the last two year and a half.
<unk>, which was not the easiest year to do that but I need to say the fact that we were in <unk> and the fact that also we had.
Good guys good leaders with experience to deliver that this has been done very well done.
In those years and I have in the room here sales play and Danielle <unk>, which are two leaders key guys, which I've worked on that.
We are now going to reduce the pace of the construction.
Workers that type of a decrease from foreign read through for 150, so it's going to be easier pace and now we're getting into the next phase, which is sinking the shaft, but overall at the current gold price the value of the project is $2 5 billion with a 33% a return on their investment.
An update on the rent I'll always going.
South ramp up.
<unk> on track so the team did over one kilometer drilling last month.
In May it was a record so we're now at 600 meter dilutive surfaces and we started the production from the Odyssey South.
Odyssey South zone, which is the first one we got in our mind. Therefore, the deferred the next 345 years at approximately 80000 ounces per year. We are on track with that maybe a good news on the reconciliation so far.
We talked to you about the internal zone, which with which was something difficult to to see from the surfaces are to understand from the surfaces now we're touching it and we see that there is there is upside.
<unk> zone and that could potentially add more ounces from 28, 4% in 2027, but it is celerity. We are defining the infill drilling program right now to better understand those zones. The first stope was supposed to be 30 times at two 6%. It ended up to be 45 times at two nine. So this is a great bonus that we that we.
The next important phase also has all the shafts sinking Phil to excess the east <unk> zone, which you could see on the bottom left.
Left of the figure Theres two thing we need to bring their ramp and to build all the infrastructure and to start to develop the first pyramid. We also need to thank the shaft. So its a one eight kilometers shop.
Today, we are at the 76 meter done and who I need.
We are also in the step that is now back to the or we're just initiating the full cycle.
Seeing the shafts so we.
We took the first four meter bench last week and the next one is coming in the coming weeks and we start to install in starting the sales. So that's a good news that was an important step and all the construction done behind in the PACU west to achieve that so everything is on track.
That's right.
There as we add up to 16 drills on the property in the in the second quarter. So as you could see we're still drilling intensively in the past year, we've put emphasis on to doing conversion again to derisk that study, but now we are turning back to do more exploration and potentially add resources and on top of that we need to.
Recall that the mill at a 40000 ton per day capacity is still available and one of the best place in the world. So we have homework to do to bring some answers to that Neil so on that I would pass the microphone to Natasha.
Dom and good morning, everyone I'm on slide nine.
This slide highlights the evolution of detour and the journey that it has been on to make operational improvements on all France actually from the mine to the mill on the maintenance front as well.
Culture of Detour has always been one that's focused on safety and on minimizing our footprint, but also one that focuses on cost control and value generation.
But just going back to basics on how we operate.
<unk> innovative approaches by constantly pursuing efficiencies.
And most importantly of all.
By empowering our people.
As you see yes, there are some initiatives at the site.
Hudson has successfully achieved and what we've shown here just scratches the surface.
The bottom line is that you can see that we have a track record of delivering improvements and these improvement initiatives is an ongoing process and so we continue the transformation of detour into one of the worlds largest and most profitable gold mines by assessing the potential like Omar said to achieve the 1 million ounces.
Lee.
As you know this comes in the form of two main projects, increasing the mill capacity and assessing the underground potential.
As <unk> mentioned both are currently ongoing.
On the mill tonnage perspective as shown on the graph, we have steadily been delivering year over year and growing mill capacity by 5% on an annual basis. This past year, we have completed the installation of the screens on the secondary crusher and.
And we believe that we can add an additional $1 4 million tonnes does that throughput from 2022 to get us to an annual throughput of about 27 million tonnes and.
And as mentioned before we are also advancing several projects to improve the run time and sustained throughput of 28 million tons.
By 2025 or even sooner.
And as a result of our ongoing efforts this quarter the tons per operating hour improved significantly and combined with the high mill availability. The mill recorded its best quarterly mill throughput and close to what we need to achieve the 28 million tons a year.
Now we are looking at sustaining it and so we're looking at small small modifications in different areas. We're looking to improve the efficiencies of this size discharge screen. We're looking at small changes to extend <unk> life. We're tweaking the <unk> system. So that it operates better and more efficiently in the winter, we're relocating some of the pipelines and the mill.
<unk>.
Maximize efficiency of pipe replacement doing shutdowns.
And in parallel we're also assessing a few projects to potentially exceed the mill throughput.
Beyond 28 million tons a year.
And we're going to be trialing, the ore sorting and we were going to be working on an expert system like we have at some of our other mills.
And then in terms of the underground study, while continuing to advance this based on a revised mineral resource that factors in additional drilling that was completed earlier this year.
And as <unk> mentioned, we expect the input.
And the results of this study.
To be shared with you sometime in the first half of 2024.
But in parallel the exploration team is continuing to carry out an aggressive drilling program at detour and D will be expanding on this and some other exploration programs next but before I end I just.
I want to commend the sites.
An incredible quarter than a year, so far so on behalf of Dom and myself. Thank you for all your hard work.
Passion to continually look at ways of improving and optimizing our business.
Just a detail about all of our sites and for making our job a little bit easier.
So with that I will turn the call over to Keith. Thank you Natasha and good morning, everybody. So to continue at detour on page download the slide deck.
We continue to see excellent resolve below the West Bay Attendee extension. So now the focus is really.
To get to an underground resources model redo the drills be seeing over that large area. We look at the scale, where we continue to get good result up to two kilometer a week from the Pip. So based on those good result was been getting year to date and I'm not going to go through the long list we've seen in the press release.
Those are the kind of grade and with that mix.
It makes it that first site for an underground scenario. So the focus is really to continue to advance. We're currently ahead of schedule with the drilling we see unit costs at or better than expected with good productivity from the on our drill over the air on our drilling program. So we are planning to add as part of one of our main change when overall addition.
Of $32 million a portion of that $5 million is to carry on drilling at the same pace with dose 10 drill rig and in order to be in a better position by year end to provide sort of a first overview of what could be underground resources, 40% or around which we are going to be building our business case for the underground.
Jay.
At larger scale I would say if we go to next slide 12 on the overall the rest of the portfolio.
We see an overall very good results on several asset for you to have for example at <unk> during Q1 and Q2.
We have seen resolved and to regain yak at depth.
Some of the deepest drill hole ever drill at <unk>.
That support what we what we believe that had done with the deposit remains open as significant upside. It's one of those that we see a very good potential for reserve replacement. So we want to be a bit more aggressive so with that again that stage gate approach, we want to add to the budget that was approved by adding another 20.
Five kilometer of drilling and also extending that drill platform.
The east so that we have a better understanding of how much we can continue to grow.
Moving to get to allow we've seen again some very good results closely the ramp you Ron Frost richer or those are very near term opportunity, where we can quickly bring additional resources bring them to reserves very close from existing infrastructure and in parallel while conducting some georgia Gulf geotechnical drilling tools.
Or face we've encountered some of that parallel CSR zoning in area that whereas previously.
Maybe.
Not understood property we've.
We started to understand that these are zone about six or seven years ago with a certain depth and now we realize that some of those real whole closer to surface, where potentially stop a bit short. So we are we are assisting when or if we have we left any of those potential parallel structure in the upper part of the mine, which could be very appealing because we already have.
All of those infrastructure over there, which could provide additional flexibility for the for the team over there at Kittila.
Moving to Microsoft.
Continue to get the good result in the extension both of the main break and the Softbank complex, but more importantly, now that we have an old chaparral before in place and.
Much much better capacity both with the.
Ventilation and access and everything so now we are starting to put some long term thinking and slab establishing long term exploration platform like we did back in the day is that the wrong. So we're establishing long term exploration drift to the east to the west of shaft for because we know that the deposit remains open at depth and all.
Does it open up.
Shaft number for infrastructure.
A very good playground to take long term at Mckesson.
And maybe to wrap up on a little bit on monarch take that Dominik cover India.
Going into the presentation again, another site, where we want to continue to.
To add additional drilling in the second half based on the good results that have been delivered we see again the opportunity to.
<unk> continued to grow we just took about 9 million ounces out of the total of 16 million ounces. So we see the opportunity to continue to convert the remaining resources that are currently not in our plan and bring them into future update of the project. While we continue to grow the footprint of the deposit that continue to be open.
Laterally.
Moving to next page quickly, albeit this is another one where we took sort of a stage gate approach.
We were basically starting with.
Budget for the first six months, but based on the very good result, we've seen both at the risk and more recently at Madrid, and I think this is why we see maybe.
The change in that dynamic we always knew that Madrid was open at depth and laterally now we are seeing you know accent ingrate with good thicknesses that Deb that shows that when all the.
The structure it seems to be maybe better better define higher grade with visible gold and with large step out that we've conducted that drill hole 105, which is 500 meter step out below so we see.
Excellent.
The potential to significantly grow so it is going to continue to take time to bring it to resources, but now we see you know what what what we believe when we did the acquisition that we can significantly grow the deposit and identify hire great source of ore. So those things are unraveling as.
We're pleased with the results, so far which convinced us to add another $14 5 million for the second half of the year.
On that when it will be ending over to Jamie.
Jamie I think.
Great. Thank you.
Yes.
Brief comments on the financial results for the quarter overall.
Mark summarized upfront just phenomenal performance from an operating and a safety perspective, leading to phenomenal financial results.
<unk> had a number of new records from a gold production perspective, we hit a new record of 873000 ounces and that reflected a 100% of Canadian <unk> for the second quarter in terms of operating margin again close to $1 billion of operating margin with very strong contributions from our two biggest lines, which happen to be the two biggest mines in Canada.
Detour and Canadian melodic can also a strong contribution from fosterville.
From a cash cost and all in sustaining cost performance. We're in great shape relative to guidance. We came in at $840 per ounce total cash cost, which is $25 below the midpoint of our guidance.
And $11 50 in terms of all in sustaining costs $15 below the midpoint of our guidance. So our cost did benefit from Canadian dollar weakness in the quarter relative to what we what we've guided but also the strong operating performance really really help too.
To ensure that we had a strong cost performance you can see in the table at the bottom right that we've been successful in managing our costs keeping a lid on our costs over the past three quarters, where they've actually been fairly fairly stable or in decline.
If we move over to the next slide just some financial highlights here on slide 14.
We will walk through our.
Overall, the records that I mentioned, we had record revenues for the quarter. We sold 859000 ounces, we're benefiting from the strong gold price environment at a realized price of $1975 per ounce. So again record revenues very strong earnings our adjusted earnings per share were <unk> 65 in the quarter again.
The strong operating performance, if we look at our capital spending for the second quarter. We came in if we include capitalized exploration at $416 million, which is in line with with our guidance. So great results overall.
Q2.
My last slide just talks.
Summarizes our balance sheet position current strength and financial flexibility that we have.
We were active in terms of debt repayment in the quarter Youll recall that at the end of the first quarter, we drew a $1 billion on our credit facility as part of the acquisition of the other 50% of Canadian melodic.
We repaid $900 million of that in the second quarter $600 million via the term credit facility and $300 million from cash on hand, So we ended the quarter with $433 million in cash.
Down about $300 million from where we were at the at the end of the first quarter.
But overall very strong financial position to be in we actually improved our net debt position to $1 5 billion in the quarter and increased our overall liquidity to $2 1 billion. So we're in great financial shape and with that I'll turn it back to Mark.
Thank you Jamie and.
I would like to on this first Gulf for Jamie formerly welcome him to.
To the company.
We.
We have a great leadership team and we're also <unk>.
Very protective of our culture, and I think with Jamie We got a super Smart Guy with a lot of experience, but also a nice guy who fits in very well so welcome Jamie and congratulations for already delivering the highest.
Cash flow record ever for the company.
That was mostly U.
So just finishing off before we jump into questions.
Look this is the same strategy we've had for 66 years.
As we want to provide we want to build a high quality.
Reliable consistent.
Gold company with superior leverage to gold, but not only superior leverage to gold, but importantly superior leverage to gold on a per share basis.
And on a risk adjusted basis, and we're going to do that by building profitable high quality.
Our low risk business.
Based on two key factors, while several a few key factors one our leading position in what we strongly believe are the best mining jurisdictions in the world based on two criteria.
One obviously the geologic potential but it has to have the geologic potential for multiple mines over multiple decades, and two associated with the political stability to actually operate multiple lines and multiple decades.
When you look at melodic around since 1923, when you look at detour originally as an underground mine going to Canada's largest open pit mine going back potentially to an underground mine. When you look at all of the things that <unk> talked about all of those exploration results there are tremendous but they are in.
Wished camps, where we've been for a long time. This strategy works. It's worked for years and we think it's even more important given the geopolitical issues going on in the world today.
We have built this business.
Largely on demonstrated technical skills.
All of these projects were working on.
<unk>.
Are tough, but we're going to make them happen or we're confident we're going to make them happen. We've had genre overtime as team talk about some of the things that we're working on.
We have an excellent technical team we delivered these results let me step back the team delivered these results.
Not an easy quarter, we had the fires in Ontario and Quebec.
The earliest and longest caribou migration season that we've experienced and none of it that's a good thing it shows the health of the herds up there.
But the team delivered record results.
With those challenges we're going to continue our emphasis on per share metrics, we're going to continue to understand that if you want to be in a region for 50 years or 60 years or 100 years, you can't just be good at ESG you can't just be.
Accepted in the community you have to be part of the community and that's what we've always done we're going to continue to do we're going to continue to focus on creating value through the drill bit we are going to continue disciplined capital.
Investments based on knowledge and diligence.
And we're going to continue to return capital to shareholders building on our 39 years of consecutive.
Dividends.
We sometimes people at meetings.
<unk> that agnico Eagle is the sleep well at night, Goldstock and I would say that I hope that even with the challenges what we've been able to deliver in this quarter.
Operator, I'd like to turn it over to questions.
Thank you, ladies and gentlemen, we will now conduct a question and answer session.
You have a question. Please press the star key followed by the number one on your Touchtone phone you will hear a onetime.
I'll, let James a request if.
If you would like to withdraw your question. Please press the pound key.
Also ensure you could have be handset, if you're using a speaker phone before pricing any key.
One moment, while we standby for questions.
The first question in the queue comes from Ralph <unk> with eight capital. Your line is open. Please proceed.
Great. Thanks, operator, good morning, everyone. Two questions from me Firstly, there was some discussion about the challenges in defining some of the internal zones at Odyssey and when we think about potentially adding production 2024 to 2027.
Is that dependent on sort of a successful surface exploration drilling program or will we need to move more towards an underground drilling strategy to better define those resources.
Now I'm going to take that wanted to know the internal zone that were originally weakened.
Recognize from surface drilling but.
We are a bit different in nature than the Odyssey, south and other ignore that sits at the contact of the porphyry now as we're getting closer we're adding a lot more access a lot more drilling as we are in filling and bringing the odyssey south into into production and how we get to better understand the shape of those so we took a conservative.
Roche will foray not putting any of that into the mine plan and now they are showing up as the incremental done and we see more of that that will show up as the no production will take place and we're going to get a better understanding because they are not as well defined and the south zone. So it takes more drilling.
It takes more development and youre going to see damage showing up progressively along with the life of mine and one thing and maybe Dominic you can mention on the team.
And it's a good question and the team has already changed.
The ramp positioning so that when we're down there we're much better able to exploit.
The additional ounces to the extent that they are there, but Dominic I don't know if you want to.
I guess I've explained it well enough.
No.
That's fine okay.
Great Great that's quite helpful. Maybe.
Maybe a question for for Detour Natasha.
On first off that answer does the nature of the mineralization show favorability to ore sorting and is this simply sort of a low density on mineralized versus high density and wood ore sorting sort of be more amenable in the underground scenario versus the open pit or both.
Hi, Ralph I'll start and I'll, let yeah.
Add to this.
With respect to the ortho, meaning we haven't started the phase III trial, but we are looking at about one 5 million tons of material that we plan on filing this year.
Majority of which is all of it is that.
John do you want to add.
Yeah, I will step in listen the proposals to use marginal.
Or on stockpiling, mainly and just do an upgrade with Dr. Sorting. So it's ongoing one 5 million tons. We anticipate complete the study in the next let's say 12 months and we'll see from there.
Okay. Thanks very much.
You.
Your next question in the queue comes from Anita Soni with CIBC. Please proceed.
Hi, good morning, everyone and congratulations on a strong results. My question is with respect to the trial results at Hope Bay could you just give us some context in what that.
That means to the mine plan and when you expect to restart hope they end.
The timeframe on that.
Perfect.
I'm going to put some color maybe on that.
We were obviously.
For Ob to work, we see the need for demand to be much larger like we are doing at Meadowbank <unk> something that will be between 300000 ounces to <unk> by year. Therefore, we were needing eager to find additional mining area to be able to ramp up.
Tonnage or find better great and I think what we are demonstrating and would that do drilling at Madrid is that we have potentially identify an endeavor mining.
We had good grade better grade so it shows that we can not only potentially grow.
The critical mass of resources, but get better grade and that will eventually be incorporated as we going to get more drilling into updated study. So it just means that we were right that there are a lot more gold over there locally it seems that it's even better great and we got to continue to need more time for drilling but we.
We now recognize that it's.
Net just wishful thinking it's there and those drill holes are demonstrating that it works to carry on drilling on it.
Okay. Thank you and secondly on Fosterville. So you received your permits to resume mining at your end processing at your prior rate.
I think you didn't upgrade the guidance could you catching up on development work, but would that have an impact to 2024 I think my understanding was that <unk> 30 in the order of 40000 ounces give or take 10 Donaldson for next year yet.
That could have a potential positive impact.
So right now were currently working on updating the mining sequence based.
Based on the midyear models and getting ready for the budget season, and looking at the production profile for the remainder of.
Yes.
2023, and going into 2024 onwards.
So I would say for now.
Guided to focusing on the capital development in an effort to get ahead of the critical areas of the mine and.
We'll have an update on the rest of.
The life of mine towards the end of this year.
Thank you I'll leave it there.
Thank you and ladies and gentlemen, as a reminder, should you have a question. Please press star followed by the one.
The next question in the queue comes from Mike Parkin with National Bank. Please proceed.
Hey, guys congrats on a good quarter and Jamie welcome aboard officially.
Just kind of.
Housekeeping items with Canadian Malarchuk, the depreciation per ounce.
Reported for Q2 is that fair to kind of assume a similar rate going forward.
Or is the.
The book value still.
Not quite set in stone and therefore depreciation per ounce.
Can be a little bit volatile as that asset.
Yes, Thanks, Mike.
Yes.
The ladder the way the accounting works for that as you have.
12 months from the time of acquisition to do the.
The purchase price allocation, but I'd say, we've recorded in the second quarter is a good.
Is the best estimate for Q3, Q4, and if Theres an update it would be towards the end of the year.
Okay, sorry about that.
Second.
Where are you in terms of being cash taxable in detour Lake are you paying.
Taxes are you still consuming.
Tax pools, yes.
Yes, so I think our forecasts have us actually paying cash taxes, I mean, obviously, we're paying Ontario mining taxes.
Our cash taxes, starting next year, but that's all dependent of course on the plans with respect to underground development, which would defer the payment of cash taxes to subsequent years.
Right, Okay. Good point.
And then also on detour I remember in the past.
From Paas owners negotiated discounted power costs is that something thats behind you now and you're changing kind of average grid prices or do you still have those rolling contracts with discounted rates applied.
Hi, Mike.
We still have.
The contract in place until the end of this year.
Working on a new program.
Starting next year.
And as the discount I remember it was pretty significant it's still kind of a similar scale, where it's meaningful savings for you guys.
Correct until the end of this year.
Okay.
Okay. That's it for me thanks very much.
Thank you and the next question in the queue comes from Kenya, Jackie Scott.
Your line is open. Please proceed.
Great. Good morning, everyone and that congrats on a good quarter and thank you so much for taking my questions.
Well I think I'm going to start with can you first just on the exploration results.
I know I asked this question on the Q1 call as Lal and you've had more drilling done to date.
And I know, we talked about was that.
Replacement with.
With what Youre seeing today is that still on track to replace reserves this year.
Overall with the what we foresee with the addition of east Goldie on the top of the ongoing replacement at each of the site. We expect the overall reserves to be at least replace if not growing by yearend.
One asset that you didn't talk about.
Exploration results or maybe and I apologize press releases long and maybe on next steps.
You didn't talk about foster is out.
Yes.
Has anything changed with respect to what do you think.
You see on the exploration side with exploration upside.
Though we continue to drill in specifically two area. We continue to infill the into Robbinsdale area, where we're getting kind of a mixed bag of results, but I think it is kind of in line with the known part of robbinsdale above the decline so far.
And at the bottom of the Phoenix and what we call. The Cardinals play we continue to see some interesting results. Some time wide average grade within it with some smaller scale a vein with Vg obviously nothing like this one is on that yet, but we see again good potential in the down plunge extension of the Phoenix.
Okay. Okay.
Okay. Thank you for that my second question is just a little bit to talk about the inflationary pressures on maybe that Amar.
You had mentioned.
And in the press release that you are seeing some relief and now asking and what areas are you seeing the release I'm, just trying to understand because different companies with different assets different. Thanks.
Interesting.
We're seeing really great Guy.
Guidance that included the 2022 pricing.
Thanks Tanya.
So one we had some tailwind with the currency, which helped which continues to but certainly we have seen.
Relief on.
Some of the consumables energy is a big one as I think you can see on the on.
The press release.
We've been able to hedge a good portion of our diesel I think it's at 60 65, if I recall versus 93 and.
In our budget. So the team did a pretty spectacular job in my view of waiting out the peak and coming in when the markets, where we're more advantageous we're seeing relief on steel grinding material.
<unk> of consumables.
We're also starting to see and often exploration as a leading indicator we're starting to see.
Better drillers available higher quality.
More numbers of better performance.
The biggest challenge probably remains with respect to cost pressure is.
People.
We are still working very hard to make sure we get the people in the highest quality people now I'll repeat what I've said before it's difficult as it is for US. When you are the number one employer and you've been there for 60 years and you have the best projects you always get the best teams available so.
While it's difficult to I would say our strategy leaves us in a competitive advantage even in that area.
And just on <unk>.
At the same thing with explosives and cyanide youre seeing some relief there as well yes.
Okay, that's good and I know that most of it and maybe just for myself you would have very low inventories on site given your location exactly isolated mindset rather than lines that have very low inventory on site. So it would be pretty much.
Buying on the spot markets now would that be a fair statement, but thats right I mean as you.
Correctly stated, it's a different story up and none of it because you have the barge season, but yes.
Where we operate in the Abitibi in particular.
It's a very substantial mining district, and we can operate with lower inventory so.
Much more.
Spot pricing.
And if I could ask just one final question and then I know you talked about the guidance.
Yes.
You're not changing the guidance.
Detonate client on production, maybe you can just guide us to.
I hope that kind of I would say majority of the.
Second half weighted but a strong Q4.
Can we just review with you how your second half looks like.
Evenly distributed and are any mines, taking inc.
Our production profile in the second half that we should be aware of.
I think what I would suggest is the third quarter at least by my forecasts.
I caveat with have been in this business for 25 years, and you never know what's going to happen but.
The third quarter should be very similar to the second quarter should be the fourth quarter.
The variability tenure is as you know is going to be key to the whether we get the.
Approval or not but what I would what I would say is our guidance.
Is assuming we don't get it.
And if we do.
Get the approval to.
Continue to operate at 2 million tonnes, a year than I would.
That's 30000 roughly extra ounces so.
Without changing the guidance I would expect the third quarter to be similar to the second and the fourth quarter.
To be less if we don't get the.
But that's in our guidance and if we do then it would be similar again.
To the second quarter.
Okay. That's perfect and then just a clarification I think I need to ask Tom Neff Fosterville from EMEA and about 30000 ounces maybe.
Okay I can confirm that if we could go.
Go back to the additional impact.
Yeah.
It allows you it would be an additional 30000 is that fair.
Okay.
I think we're still working on our budget for next year, what I would say is it allows us to operate those six hours at night that we werent able to operate so thats going to have an impact on ounces, we are catching up a little bit on development.
The guys.
Frankly did a stellar job in the first half of the year dealing.
With that restriction, but also and this is important.
Very important.
In the scheme of things, it's not a huge number but it also makes the work environment a lot better for our employees.
A tough work environment It was hot.
We don't like to do that to anybody and so.
Just want to make sure we emphasize that it's not just the ounces. It's also importantly, the work environment for our employees.
No no for sure Okay. Thank you I'll, let someone else ask questions.
And your next question in the queue comes from John Tumazos from John Tumazos, very independent research.
Thank you.
With $28 million drop in first half exploration expense from a year ago.
Could you.
How much of that.
As more being capitalized due to success.
Versus any streamlining.
<unk> is more or less meters being drilled.
Hi, John .
So it's mostly I would see a re prioritization of the asset. So we are doing less on other project, let's see in Mexico. For example, something like that for this we seek Lee.
Stopped drilling of a day of reassessing the potential we've also reduced activity for example, in Colombia, but I would say.
The budget on key value driver or the number of meter as in change. So it was <unk> in a lower gold price environment like we were facing during the budget period. We thought you know that that's money should be allocated to grasp with project and we should focus on operating asset in key value driver.
When you drill.
But to be sort of in your backyard or the costs lower than when you're operating in Sonora or Colombia or other grassroots places.
It's very variable depending on the location to be honest, John if you have no water if you have to.
It fits more labor intensive, but I think all in all we are running at similar costs in Mexico. When you have a.
It also depends on the size of the projects. So when we have a similar scope of work similar to kind of drill program. We can achieve good costs. The costs are just not dispatched athene will you have to transport water or if youre in the Abitibi, where you can find the water a little bit everywhere.
Thank you.
Thank you and the next question in the queue comes from Anita Soni from CIBC. Please proceed.
Hello.
So it was just a follow up to <unk> question about the cadence of Q3 and Q4 so.
The.
The downtrend, if all else being equal on Kittila not getting its permit is because you would have to throttle back Keith solar in the fourth quarter and.
And I think the second half of the year La Ronde will be will have start ups.
Periodic shutdowns.
To deal with that I guess.
Tie in of the new system, there is that correct.
Yes broadly correct Anita.
Okay, Alright, thank you very much.
Thank you.
There are no further questions at this time speakers do you have any closing remarks.
While we just want to thank everyone. We know it's a busy day.
And then finally I hope all of you got a little bit of time off in the next couple of weeks with your families.
Summers in Canada are short so thank you everyone for joining us and have a good day.
Sure.
Thank you ladies and gentlemen, this will conclude your conference. Please.
Connect your line.