Q2 2019 Earnings Call
Welcome decision. Please hold for the next available operator, Wses young the especially on tape on a push and Nokia hotter despite enabler.
Good morning, all please have the name of the coffers are called to join today.
It's the agnico Eagle mines.
Thank you and your first and last name please sir.
Our same Michael last same village.
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Yes.
The CH. Thank you company name.
I felt a I.E.R.A.
Thank you our transfer to a new low.
Two new zones, nor so the pure organic mineralization. So we have always anticipated that meliadine would grow in size.
As we started production and resume exploration there, which we did a few quarters ago and in this most recent quarter Weve intersected intersected the deepest reported intercept meliadine today. So we continue to expand.
The non mineralized envelope at Meliadine at Kittila.
We're getting good grades and good wits at the Rimpi zone and at centre Gertrude as we continue to extend the high grade mineralization FC Emilia deposit.
From an operating result perspective.
Good solid performance as we said producing a little over 400000 ounces in the quarter.
Excellent performance coming out of the Abitibi.
Despite a planned shutdown at Laronde the Abitibi.
Mine's Laronde Laronde zone, five Goldex and Canadian Malartic produced a little over 200000 ounces at a weighted average cost cash cost of $578. So continued good production cost performance and cash generating coming out of our Abitibi mines as we said we're ramping up.
Leading mainly had production.
In the quarter of 61000 ounces and in Mexico.
Good results coming out of that operation with cash costs below 600, producing 80000 ounces. So good operating margin and if we look at our guidance based on how we ended the first half of the year at 810000 ounces, it's still roughly that sort of 40, 546% first half roughly 54, 55% second half production.
So that sets us up for moving.
Away from sort of an average over the last few years on a quarterly basis of 400000 ounces to a number that's closer to 500000 ounces asked what's going to drive cash flow and.
And earnings looking at the earnings and cash flow as we said we expect.
A stronger performance in the second half in the quarter, we had better net income and earnings than the prior year and that was largely due to lower amortization lower taxes.
Higher gold prices, partially offset by lower gold sales when you exclude the pre commercial ounces coming out of.
None of it.
From a financial position standpoint.
We closed the quarter with a fully undrawn credit facility.
So still good liquidity.
Entering a period, where we expect to generate free cash flow and in fact, as we said our capex.
Will decline in the second half versus the first half so the focus.
As we move forward and as we generate free cash flow will be to reduce the debt.
Increased the dividend, while we continue to invest in our project pipeline and in the quarter, our investment grade credit rating was reaffirmed.
A positive trend so another good sign.
Well run through the assets quickly and then we'll open it up for questions at Laronde.
And shut down a mine still.
Produced almost 80000 ounces at a cash cost of close to $500 an ounce. So.
Good performance coming out of Love Ron.
And also at Els at five good performance, we're seeing higher grades and throughput coming out of that operation.
And we continue to evaluate scenarios at Els at five.
So potentially go after down plunge extensions of deals at five deposits and so we're reviewing our alternatives to.
Potentially get those additional ounces into our mine plan.
To take advantage of capacity at the Laronde complex and as you know we're using elds at five operation to test our autonomous mining equipment, and we continue to make good progress.
But those assets at Canadian Malartic.
And 10, you'd steady performer quarter after quarter. It hit a quarterly mill throughput record of 58000 tons per day.
Things are progressing as planned on the Barnett extension, it's on budget on schedule, we would expect to start production activities late 2019 at Barnett and we continue an active exploration program.
And the underground.
Below the pits Canadian Malartic going after several zones, there and we continue to evaluate we do have a permit for a ramp and we continue to evaluate our options.
To go underground and continue that exploration program gold ex had a very strong quarter.
Weve got much better productivity coming out of the rail there through their system.
We mailed over 8000 tonnes a day in the quarter that was up about 14% from the year earlier and that's resulted in improved cost per tonne performance and also.
Improved cash cost performance, we continue to mine in the South zone and the stopes that we mined to date, although not a big zone. It does have higher grades and we get slightly better grades and were expecting in those zones.
We continue to evaluate the potential.
In the South zone area potentially to get additional incremental ore feed from that area and we continue to drill the deep two zones.
In the quarter, because there is a good opportunity to extend the life of gold backs by mining deeper.
No deposit.
At Meadowbank, we talked a bit about this at the start.
But metal bank, we've been able to extend.
Into the third quarter.
Through additional mining at the Port Taj.
Which gives us additional ounces into the sort of 30000 ounce range, which offsets.
The slight decline in expected production coming through.
To keep the total meadowbank complex on track to achieve its guidance.
In the quarter as expected we saw tons milled down as we mined out the remaining part of the ore body.
Cost per tonne.
Was slightly lower so they continue to get good cost performance, even though tonnage was down that degrades declined about 25% again, that's consistent and as expected as we mine out the remaining parts of that ore body and the cash costs are a bit higher.
Given the grades are down and production is down a bit but we're still generating.
Good cash as we optimize the end of the Meadowbank.
Mine life.
At Amaruq as we mentioned at the start we had.
More rain than we normally see in that period as we were starting that operation we had a much quicker.
So that impacted.
Our ability to get at our mining areas in the pit.
And we also were impacted as we said by all of our longer than expected migration period with the caribou.
In the area, we should be.
Through the de watering.
Probably mid September .
As we continue we are continuing to mine.
But it's more difficult to mind when we.
Our still pumping water at a parts of the pit at Amaruq as we said production guidance for the Meadowbank complex remains the same our capex, we're estimating somewhere in the 350 to 370 range idled and exactly on.
The date of commercial production and how many pre commercial production ounces get credited.
Against capital.
But as we said when you add up the expected capital at Amaruq with the $830 million at Meliadine.
When you add the two projects together they come in slightly below.
Our total estimated spend to build both projects in front of it. So it is a real success story there when you think about it.
In an area that is challenged by infrastructure, we were able to bring two projects online.
One ahead of schedule on roughly on schedule with the combined span at slightly below the original Capex estimates so congratulations to the team there and as we said we continue to get good exploration results and Thats really driving her desire.
To move forward and accelerate the ramp development accelerate some drilling so that we can get an underground into production.
Some time in 2022.
At Meliadine.
We are ramping up.
Production as we said ramping up the mining rate.
We've had in the mill pushed up to 3900 tonnes. A day. So we continue to ramp up to our nameplate of 30 750 tons a day recoveries are slightly below what we anticipated.
We're working on several areas within the plant to get those recoveries up to where we anticipated them to be we don't expect.
Any major issues there, we see no major fatal flaws in and as we said at the start production guidance remains unchanged at 230000 ounces and.
Ill just stop now remind everybody that we do have a site visit.
To both Meliadine in Amaruq on August 19th and Twentyth.
I know several of you on the call have signed up for that trip. If there's others that I have not had the opportunity to sign up and would like to go.
Please contact Brian or Ria, and our office to get on that.
So we look forward to seeing all of you there at Kittila, we had roughly a 60 day a planned shutdown to realign the autoclave do that every five or six years. The last time was 2013.
That went as planned.
We still managed to produce 20000 ounces so.
That was a little bit better than we had expected so good performance at Kittila.
And the shaft project and the project on expanding the plant are going along as expected.
Yes, we'll wrap up before we take questions on the southern business as we said good performance in terms of cash generation coming out of the southern business combined the three mines are producing about 80000 ounces.
Good cost performance. So good cash generation focus at Pinos Altos is on satellite zones.
Kabir One center will continue to get good results.
Crescent Skoda and we expect it to be finished by the end of this year, but they had an exceptional Q2.
Good solid performance producing.
Probably double the ounces that we expected them to produce their reduced due to some higher grades.
We would expect second half production to be lower but still for the full year, we expect crest in the skoda to be above guidance.
And that total India, we continue to drill.
Satellite deposits chip Friona now re alito and those deposits are growing as we drill them.
We would anticipate those deposits will allow us to extend the mine life at the India.
So before I open up operator for questions I, just want to thank a couple of people.
I want to thank Alain Blackburn.
Who is passing the torch over to Gewgaws land his sort of right hand man and protege for a long long time, and Elaine is a very quiet, but extremely successful.
Exploration geologist.
Who has been involved in a number of discoveries and is a huge part of our success here at agnico not going far though.
He is going to stay with us until the end of the year as a strategic advisor.
As an officer of the company and then as we go into 2020.
Elaine is going to continue to work with us as a consultant.
So we can use and benefit from his expertise on strategic issues related to exploration and project evaluation. So thank you Alain who's in the room here for all of your contribution to an echo and congratulation sticky.
Well our promotion.
He brings a lot of energy and passion was also involved with Helane and some of these key discoveries. So the team looks forward to working.
Over the next several years with E and we'd also like to thank Christian Provence shape is also not going too far.
He is going to.
Take a one year sabbatical and.
Come back at some point and his replacement is Danielle per rate. So Danielle Brad as you know has been with us for a number of years might manager.
Gold ex general manager at Laronde has also done some work with here at the corporate level and corporate development and Investor Relations. So also well deserved promotions so.
Thank you Christian and enjoy your year off.
Don't have too much fun, we expect your back in a year and congratulations and Danielle So operator I'd like to open the lineup for questions. If we can.
Certainly at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
And your first question comes from the line of Fahad Terry from Credit Suisse. Your line is open.
Hi, good morning, Thanks for taking my question.
On Meadowbank is there potential to extend the mining into Q4 even.
Whether it's to portales pit or some other deposit.
And what does the cost profile look like.
For Q3 19 at Meadowbank. Thanks.
The this is evil here the.
We will not extend past 234, guys will finish mining at that point as far as to as far as cost numbers, we'd have to get back to you and I don't want to have that fresh in my head.
Okay, and just as a follow up so it looks like the Portage pit.
You know that added on to the Meadowbank or.
Production for the year, which offset the lower amaruq.
When was this.
Like one was the decision made to mine. This was always part of the plan or was the only one amaruq with delayed.
No the.
You pushed back and forth hasn't been.
Pine in sequence over the last almost two years actually.
And this latest pushed back.
Also came with.
Some loss stability issues that we also took care and we added.
We added ounces in the planned by doing lot of pit stripping last year. So.
All of this was planned.
We've had a little bit.
Part of the surprise on the greatness come from 4000 itself with better grades, but mostly also better grade from the surface stockpile. So we're over there.
Great. Thank you.
And your next question comes from the line of Mike Parkin from National Bank. Your line is open.
Thanks, guys congrats on the good quarter.
I have a follow up on that next awards.
You mentioned that you've got the permit to this deposit amrok tailings.
Into the old pits of metal bank.
Potential deceive on sustaining capital.
I was wondering if you could give us any kind of color in terms of what that could be in terms of annual savings on the sustaining capex.
Well I think it was more at this stage, it's more a saving on on that project costs in general because the at this stage we are at with the.
With the current tailings, we're allowed to do about two more.
Two more raises per year, each raises are typically minimum of $4 million to $5 million.
Were we would have reached very quickly the capacity of the current areas and we would have liked we had to build a new area and from in a new area and that would have been quite expensive. So thats. The I think the what we referred to in the savings is mostly around US there's also a pretty.
Sizable benefit and.
Opportunities are wrong.
Optimizing their closure plan by using that.
And delaying some of the.
Closure costs overall in the space. So those are those are mostly.
It's hard to.
Put a number to this at this stage, but it's mostly related to these factors that I just numerated.
And do you have a sense.
Open pit.
A hole in the ground has more than enough capacity for what you are.
Thinking in terms of.
For processing in November at this point.
Two times the past the.
Both both bits that goosen four times will greatly exceed the current knowledge of resource that we have on the on the project at this stage.
Great Alright, that's it for me guys. Thanks, so much.
And again, if you would like to ask a question Press Star then the number one on your telephone keypad.
And your next question comes from the line of Anita Soni from see RBC. Your line is open.
Good morning, guys I just have a question with regards to Amaruq looking forward into 2020 . So it looks like given the the production shortfall being made up by Meadowbank and with that I would guess.
30 to 40000 ounces.
Do you expect that to be made up more there in 2020 or would there be any additional ongoing impacts that is to say.
The guidance that you have for next year of about 278 hamrock is that still solid.
Well I think it's safe at this stage.
We do we will be going into our budget exercise and we'll review the microphone as to where we're at but at this stage. We're we're pretty comfortable with next year's guidance.
Okay.
And then just a quick question on the Laronde zinc grades.
So those are pretty good grades this quarter I'm, just wondering is that sustainable or was that a one time blip I think it was double the guidance that you had for the year.
You will see some areas, mostly in the western pyramid or belief that weve encountered some.
Some stone some stopes in the fringe areas, where the zinc grade has been.
3% to 4% range.
So when these stopes appear to plan.
Like VR currently appearing in July so you'll you'll continue to see some of that.
But don't think of US as grant that is this is the life of mine issue. It's more of a local area at this stage, Okay and lastly on the Ron's costs. They were rather high this quarter was that.
Related solely to the shutdown or are there any issues that are.
We should be aware about moving forward with that.
No the shutdown was basically.
On line in the sense that we needed to rehabilitate the door handling system.
The daily tonnage from the mine was on it was a was significantly lower because of that and that was the main cause of.
Of the cost per ton I think going forward I think we can expect to.
Let's go back to guidance levels on the cost structure.
All right. Thank you very much.
And your next question comes from the line of Kerry Mccurry from Canaccord. Your line is open.
Hi, just had a question on Meliadine just wondering what the mining rate was in the quarter and how you expect that to us.
Over the balance of the year.
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I don't have the exact number or what the mine rate was in the quarter at this stage.
We're we're mining roughly about 90000 90000 tons per month.
And we're expecting to ramp up further over the next quarters, where we're expected to add a fourth mining horizon.
Probably in September and now we'll push the.
The daily tonnage from the mine to somewhere around 30 to 50 3300 going forward for the rest of the year.
Okay, great. Thank you.
And your next question comes from the line of Kenya Juice connects from Scotiabank. Your line is open.
Great Good morning, everybody.
Did you have some technical questions maybe for you on that if we can come back to him.
And then Rick.
Just wanted to ask.
On the.
Just on the critical path from now until.
When you start to commercial production is it just the de watering and I mean, the trucks I guess you have another set coming on a barge but is it just the de watering and.
And the stripping I'm just trying to understand what's left.
Yes, well the watering as a portion of it.
But delays in.
Getting the second half of the pit dewatered.
That is underway will be done by mid September . This has had some impact for some of the current mining areas.
And the big the big issue at this stage, it's been mostly.
Footprint and the inability to.
Bring up.
Total broken inventory in a bit so.
As the pit areas getting dry now.
We will focus on.
Bringing up that inventory so over the next six months, we will ramp up from a.
Daily rate of.
Were both 45000 tons per day now to probably around 90000 tons for there the rest of the year. So it's really the inventory.
And the second hurdle would rape is you're right about the the long haul trucks, we have several of them that have been delivered.
It will be commissioning of that the remaining units.
We'll be most of the.
Main reasons around the challenges I guess for the rest of the year.
Okay, and so I gather then 91, we won't have a stockpile to start or as we did that through the mail.
We will have some stockpile at this stage and the ramp up.
The ramp up curve or the ramp of flexibility.
We will be further validated in Q through Q3, but.
After commercial production at this stage are planning is currently showing that we will have stock pile on.
You know what size of the stockpile, you're anticipating to half a start up.
I won't go into numbers at this stage.
Okay, but your there'll be some sort of stockpile.
Correct.
And then just on the underground.
The debt because the decision to go ahead would be made at the same time in February of 2020, when you put out all of the details.
Correct, Joe we've sort of with the exploration results so far at this stage.
We're confident enough to accelerate a bit the development.
We've also started the underground exploration.
A program of the drilling program from underground as we continue also drilling from surface.
And we are finalizing the details on the.
On the mining mining plan.
Okay, and then maybe just on Meliadine that youve on just on let para Titan.
What to in terms of improving the production Im sorry, the recoveries there.
In terms of being able to get the blending Dan How's that looking in terms of how it goes through for the rest of the year are you going to have enough stopes open to start blending.
Yes, I think the brokered inventory.
As we.
As we're operating now currently in.
In July is about anywhere between 30 to 50000 tons per day.
Guns undergo.
Several stopes that are in the marketing stage show, we have that flexibility now.
I think as Weve process.
More salacious stopes in the.
In the early portion we've had several months that recovery was in the high 90 fives.
Once we start introducing some of the higher grade.
Hittite Stopes, you've had more challenges with those so we're in the process of.
Adapting the grind because.
The plant is got quite a lot of capacity so.
We will over growing that some of these sulfide.
Zones that have created some chemical issues in the plant and we were sort of.
Tight on reagents, so we've held off a bit on higher grade stopes and we're going to proceed moving forward as we have received.
Made modifications to the grinding area and receive reagents to optimize further so we're working on this work.
Okay.
And then just maybe one last question just on the expand I think come Sean you mentioned, there's another $330 million to go on for the second half of the year.
I haven't had a chance to go through everything what's left to be spent at amarin.
I'll have to get back to you down to on that part I don't know the exact number at this stage, Okay and then maybe if there's another financial question.
Just on the working capital adjustments, we've had quite a bit of outflow in the first half of the year do we start seeing them the working capital adjustment.
Reverse in the second half how do you see that playing out.
Hi, Toni it's obviously very volatile.
Pretty hard to predict and this particular quarter, we have a large buildup of accounts payable and we were going to run that down during the quarter, but.
It's too hard for me to predict in fact, when I looked at it years ago I decided to model it in our financial scenarios as zero because it was just positive negative positive negative so.
I can't give you a real answer sorry.
Okay, all right. So maybe just the capital spend left us.
Our liquidity great. Thank you.
And just on the stockpile at Amaruq, it's around at the end of the quarter, it's around 290000 tons.
And it's a great of about three and a half gram.
So the decision was made to run for Taj not from that.
We'd rather start running that as we get through core Taj and get more flexibility.
In the mining plan as we dewater, the pit and open up new areas in the pit.
It was more than anything is just the flexibility shown that if we were to have had the weather issues, whether we have a stockpile that we could start them out.
Yes, we can and so.
We could start that up now and get to commercial production earlier.
But that really doesn't do much for us. So we're just trying to build in flexibility.
In the plan.
Yeah.
Okay No I appreciate that thank you.
And there are no further questions at this time I will turn the call back over to Mr., Sean Boyd for some closing remarks.
Thank you operator, and thank you everyone for participating on the call and again, if you would like to attend our site visit in August .
Please reach out to us thanks again.
This concludes today's conference call you may now disconnect.