雅虎香港財經 Agnico Eagle Mines Limited (NYSE:AEM) Q1 2024 Earnings Call Transcript
Agnico Eagle Mines Limited (NYSE:AEM) Q1 2024 Earnings Call Transcript April 26, 2024
Agnico Eagle Mines Limited isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning. My name is Ludi, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Q1 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Mr. Ammar Al-Joundi, you may begin your conference.
Ammar Al-Joundi: Thank you and good morning, everyone. Thank you for joining us. I have the great pleasure, along with my colleagues to report on another strong quarter for Agnico Eagle. But before we get into that, I'd like to acknowledge that the reason we're having another strong quarter is because of all the hard work of all of our employees, our people at the rock face work every day, sometimes in tough conditions, our geologists who are away from their families, sometimes for weeks at a time, our engineers and professionals who do the studies, I want to thank all of you for delivering. Again, it makes our job easier here at corporate. We'll have a number of executives talking about a good quarter. But again, it's thanks to all of you.
Please keep yourself safe, keep the community safe, and the environment safe. Before we jump into the presentation, I'd ask you to turn your attention to the forward-looking notes. We will be talking about some expected good results going forward. But again, please take a look at the forward-looking notes and statements. And if I could ask operator if we could start, I see on Page 6, that's great. We're going to cover a lot this morning, but there's really three key takeaways. One, we've had a very good start to the year. Two, we continue to make excellent progress on some of our key value drivers and the catalysts that will really move this company forward over the next 12 to 36 months. And three, we've had some tremendous drill results that we are excited to share with you today.
On the strong start to the year, solid operating results, approximately 880,000 ounces of production, good cost control, reiterating guidance both production guidance and cost guidance. Those strong operating results, along with an excellent gold price, has delivered strong financial results, as you would expect. Jamie will review these, but some of the highlights include our second consecutive quarter of record operating margins and our second consecutive quarter of record free cash flow. On the key projects and the value drivers, Detour to a million ounces. We said a couple of years ago that we thought Detour had the potential to get to a million ounces a year. The team has been working very hard on that since, systematically, professionally, and we're making good progress.
And we remain on target to talk about this midyear. In fact, we expect at this point to have a technical session in June, followed by a site visit, at which point we will talk about the project parameters as we see them at this point, and we will talk about the next step. And we've talked, we've hinted about what that next step will be, and it will be likely an exploration ramp that will allow us to get into the ore body, take some bulk samples, confirm continuity, put in an exploration platform, and really the first step of what we think will be an exciting project. And clearly that exploration ramp will become an important part of a future production ramp. At Upper Beaver, also very good progress. Also on target, also confirming that we expect to provide an update towards the middle of the year.
With Upper Beaver, it'll likely be with our second quarter results, at which point we will be outlining the parameters of the project as we see it, and again, the next step. And the next step, as we've already discussed in February, is what you would expect, the likely next, the logical next step, an exploration shaft and an exploration ramp that will allow us to take a couple of bulk samples, again, confirm continuity, again, put in exploration platforms. At Malartic, we continue to make excellent progress. The shaft is continuing well, and the underground development, as I think most of you know, is ahead of schedule, and the initial stokes are generating positive reconciliation. With Malartic, however, there's also been some excellent drill results, and that leads us to our third key takeaway today.
Guy will be discussing some, frankly, pretty amazing drill results at Malartic, at Detour, and at Hope Bay. Big assets in good parts of the world that really just continue to deliver. We think that these are potentially big enough to move the needle, and causing us to rethink in a positive way some of our growth options going forward. And because of that, we've added a little extra time at the end of today for Guy to talk about it. At $2,300 gold, you should fully have expected us to report strong results, and we are. We continue to be very constructive on the gold price. I came into this business in 1999. Gold was $290. People have hated the gold price since, and it's now $2,350. And we think that we are just starting a long-term secular move.
That said, and important, and we want to emphasize this, we do not take this higher gold price for granted. We remain absolutely focused on cost control. We remain focused on per share metrics, and we remain focused on capital discipline. We are absolutely determined at Agnico that increases in gold price go to our owners. And these increases are not going to be eaten away with higher costs. In fact, when Dominique and Natasha go through their sections, and they'll go through it briefly, but the overriding theme you will hear over and over again is a theme of continued focus on business improvement at every mine and every opportunity. Our focus on cost of $2,300 is as strong as ever and our key projects, Detour, Upper Beaver, Malartic, Wasamac, Amalgamated Kirkland, etcetera, those are the same projects at $2,300 as they were at $1,800.
We are remaining focused. So a very good start to the year but at Agnico Eagle, we believe strongly that it's not only what you do, but how you do it. And with that, our next speaker is Carol Plummer, our EVP Sustainability, People, and Culture, who will discuss our 15th Annual Sustainability Report.
Carol Plummer : Thank you, Ammar, and good morning everybody. We're certainly happy to release this 15th Annual Sustainability Report, which is titled Global Approach, Regional Focus. This report highlights how we are deeply rooted in and committed to the regions in which we operate even as we grow and evolve as an organization. While our vision and goals are global, our strategies are tailored to each region, taking into account their environmental, social and economic context and adapting to their specific needs, priorities and challenges. We're proud of our people who are working every day, not only to complete the work of a global miner, but doing it safely and respecting our commitment to the environment and our communities.
ESG is central to our strategy and it's through the stories of our people, the partnerships they have created, the relationships that they maintain, and the challenges that they face, that you can see how it is integrated into the very fabric of our company. We prioritize close collaboration with local communities and Indigenous peoples, valuing their perspectives as integral components of our operational approach. This is how we make mining work for everyone. Working together, we can reduce our environmental impact, increase social benefits, and positively contribute to local economies. You can see on this slide some of the highlights from 2023. I'm particularly happy to point out the safety record and a 34% improvement in safety frequency year-on-year.
We continue to work on our decarbonization plans, we invested in our communities and we worked with our employees to make sure that we can maintain our commitment to mine responsibly. The full report can be found on our website or by clicking on the link in the press release. And I will now pass on to Jamie to discuss the Q1 results.
Jamie Porter: Thank you, Carol. As Ammar mentioned in his opening remarks, we had a great start to the year with stable, consistent operating results and excellent cost performance, pairing with higher gold prices to drive record cash flows and financial results. First quarter gold production totaled 879,000 ounces at total cash costs of $901 per ounce and all in sustaining costs of $1191 per ounce. With this strong start to the year, we are very well positioned to achieve our full year production and cost guidance. Our all in sustaining costs for the first quarter were actually below the low end of our guidance range at $11.91 per ounce. This resulted from the deferral of certain sustaining capital expenditures at Detour Lake to later in the year.
As a result, we do expect higher all in sustaining costs in subsequent quarters, but still expect all in sustaining costs per ounce to be within our guidance range of $1,200 to $1,250 for the full 2024 year. The higher gold price in the first quarter, combined with our strong operating and cost performance led to significant margin expansion and we had record operating margins in the first quarter at over $1 billion led by our two largest mines, Detour Lake and Canadian Malartic. We will maintain our focus on costs and ensure that the benefit of higher gold prices is allocated to strengthening our balance sheet, providing financial flexibility, and continuing to return capital to our shareholders. We move on to Slide 9, a look at our financial highlights.
Our revenues increased 21% over the first quarter of 2023 to over $1.8 billion. Importantly, our cash provided by operating activities increased by the same percentage and our free cash flow actually increased by over 50% to a record of $396 million for the quarter. We are seeing the benefit of higher gold prices with margin expansion helping to strengthen our financial position, adding approximately $190 million of cash to our balance sheet in the quarter. On an adjusted basis, net income per share was $0.76 in the first quarter, approximately a 30% increase relative to the prior year period. We continue to pay a strong quarterly dividend of $0.40 per share, which is at a healthy level and represents approximately half of the free cash flow we generated in the quarter.
We also repurchased 375,000 common shares for approximately $20 million through our normal course issuer bid in the first quarter. While we expect the majority of our capital returns to shareholders will continue to be through the dividend, we do have the financial flexibility to be opportunistic with respect to additional share buybacks. At current gold prices we would expect to generate substantial free cash flow in subsequent quarters. We will remain disciplined with our capital allocation, with excess cash being directed to further strengthening our balance sheet, paying down debt, reinvesting and improving our business, and continuing to return capital to shareholders. We move on to Slide 10, I'm very proud of the work our team has done this quarter to further strengthen our financial position and flexibility.
Strong quarterly operational and financial results added cash to our balance sheet and reduced our net debt position to $1.3 billion. During the quarter, we upsized our revolving credit facility to $2 billion. This new facility reflects Agnico's size, scale, and investment grade status and significantly increased our available liquidity. We do have approximately $800 million of debt maturities over the next 15 months and we will look to either repay those from cash on hand or refinance at the appropriate time. We were also pleased that Moody's upgraded our credit rating during the quarter to BAA1 with a stable outlook, which reflects our strong and strengthening credit profile. Overall the balance sheet is in great shape. We are always looking for opportunities to strengthen it, improve our liquidity, and overall financial flexibility.
I will now turn the call over to Dominique who will provide an overview of our Quebec and Nunavut operations.
Dominique Girard: Thank you, Jimmy. I am at Slide 11. A good quarter, all-time record at Canadian Malartic Complex. So with the addition of the higher grade from underground at Odyssey, Canadian Malartic is breaking new record after 12 years of operation. We also did a strong quarter on the project development with the ramp, the shaft sinking, and the surface construction. And also, Guy's going to talk about potential extending of the East Gouldie zone, which is feeding the field a meal strategy. So we're very excited with that. On the automation side, Agnico is recognized as a worldwide leader in remote control operation. And this leadership can be seen at LZ5. As an example, during the quarter, the Friday night shift, which traditionally was from, let's say, manual operation, now have been transitioned to fully automated operation.
So, this is not just only improving productivity, but it is also improving the life quality of our workers by not having to work anymore on the night, Friday night shift. So, from now on, the Friday night, Saturday night, and the Sunday night shift are fully operated remotely. I'm also happy to highlight that at 40 kilometers of LZ5 in LaRonde Mine, the Odyssey team executed the first fully automated truck load during shift change. So I wrap up the Quebec section by saying a big thank you to the teams to keep pushing automation boundaries and leveraging of regional synergy. Moving to Slide 12, Nunavut delivered an outstanding first quarter both on cost control and gold production. Both Meliadine and Meadowbank achieved better performances and budgeted, especially at the underground operation where mocking, hauling and development activities beat the budget.
This is the result of a team effort to improve the business. Following last year's cost pressure, the Nunavut management team heads down and initiated bold action plans. But why did it succeed? Let me explain why. I stole four important points from Jean-Claude Blais presentation. Jean-Claude is the General Manager at Meliadine and here is what he said. First, focus on what matters. Second, empower and staff a dedicated team to succeed. Third, be open-minded to challenge the status quo. Fourth, last but not least, execute like hell. So here's why they succeed and we're very proud of that one. I would like to conclude by congratulating the [indiscernible] team for their leadership and the soft landing quarter. All those improvements are not only building flexibility for 2024 in the coming years, but Hope Bay will be able to build upon those important improvements.
On that, I will pass the call to Natasha.
Natasha Nella Vaz: Thanks, Dom and good morning, everyone. So I'll start with the operations in Ontario. Here we had another strong quarter and solid performance. Combined, the sites generated around $300 million in operating margins with, as you can see on this table, with industry leading costs. At both operations, Macassa and at Detour, we are continuing to steadily ramp up production and just coming back to Ammar's point earlier on, we remain laser focused on optimizing and continuously improving on our assets. I will give you a few examples. We'll start with Macassa. First off, we have seen improved productivities throughout the mine and the mill this quarter. The site, they hit records. They hit records in underground development, they hit a record in skipped tons, they hit a record in milled tons.
Really incredible work by the team and they keep going. They keep their heads down and they're working on other initiatives such as improvements in energy management and workforce availability or productivity and also fleet availability, just to name a few. And then in keeping with our regional strategy, we're continuing to integrate the AK deposits into the production profile this year. We're still tracking well to complete a bulk sample extraction of the AK later in Q4 and just as a reminder, this is the ore that will be sent to the LaRonde mill. Moving to Detour, we set a record, a quarterly record, for total tonnage mined, but we also delivered mill throughput that was the highest for our first quarter period. The team already knows this, I've mentioned this to them a couple of times, but I'm particularly proud of them and our results this quarter, especially considering we faced some challenges with abnormal breakage of our grinding media.
And in terms of continuous improvement efforts at Detour, we have many, but of course as you know our main focus is to continue advancing the mill optimization efforts. We still expect to reach the mill throughput of 76,000 tons per day, roughly around 28 million tons a year late in the second half of 2024. Now moving on to Slide 14, I'll touch on our other assets starting in Finland. At Kittila, the team had an inaugural celebration for the commissioning of the new shaft in March and based on the performance in the quarter, they are tracking pretty well to meet the guidance. They are also continuing to see positive exploration results demonstrating the expansion potential at the main zone, the CSAR zone, and in the Rura area. And then over in Australia, Fosterville, they continue to generate strong cash flows with costs among the lowest in the industry despite decreasing grades.
And this is a testament to not just the team's ability but their continued focus on improving productivity and controlling their costs. Finally, in Mexico at Pinos Altos we continue to operate with consistent stable production. Here also we focused our efforts over the past year on improving productivity and controlling our costs. All in all, our operations are continuing to exhibit a stable and a consistent approach to safely delivering on our objectives. Our site teams are continuing to work hard on improvement initiatives while also advancing on our pipeline projects. And with that, I will now pass it over to Guy, who will provide us with an update on exploration.
Guy Gosselin: Thank you, Natasha and good morning, everybody online. This quarter, we continue our exploration efforts to build on last year's record mineral reserves momentum, focusing on opportunity near mine and key value driver project in our portfolio. Our strategy remains the same. One, extend life of mine; two, maximize available milling capacity at our key operation; and three, advance some specific high potential project by increasing mineral resources and mineral reserves, both in quantity and quality. Today I would like to discuss three projects in particular where we see strong opportunities. First of all, Malartic and Odyssey. We have seen some excellent results in the extension of the [indiscernible] that could significantly contribute to our fill the mill strategy.
Second, at Detour, we continue to see broad mineralized intercepts in the upper part of the underground extension of the deposit to the West of the open pit that continue to support our vision of an underground project at Detour. And third, Hope Bay, where we got what I would qualify some very spectacular exploration results in the gap between Suluk and Patch 7 at the Madrid deposit. That could move the needle because of the high-grade nature of those intercepts that could significantly improve the scenario for future project development. So, starting with Malartic on Slide 15, we saw that the zone is getting thicker again in the eastern extension, with some very solid intercepts returning 3 gram over 32 meter and 4.5 gram over 33 meter, respectively at 400 and 1000 meter away from the current mineral reserve.
And that, you know, at a depth between 1.1 and 1.6 km depth this could lead to the development of another tape mining area along the East Gouldie horizon, demonstrating that the zone remains open for additional significant discovery and future potential reserve addition that could help in our long-term fill-the-mill strategy. Moving on to Detour on Slide 16, exploration efforts continue to focus on the western extension of the deposit, completing 58,000 meters in the first quarter, focusing in particular into the shallow portion of the potential underground project, where we continue to see broad mineral interval of good grade mineralization with example of 5.4 over 16, 3.9 over 25, and 3.4 gram over 29 meter in a large area located at shallow depth of the width of the potential underground project close to the conceptual exploration ramp that we are envisioning at Detour.
These results show potential for mineralization adding in both grade and width characteristics that are likely amenable for underground mining, supporting our vision to bring the Detour Lake mine to a million ounces of gold a year production from a combined open pit and underground operation in the future. And last but not least, on Slide 17, I'm particularly proud, we complete 30,000 meters of drilling at Hope Bay this quarter, which is almost 50% than last year, safely. We focused this year's winter drilling campaign for ice-based drilling at the Madrid deposit in a previously unexplored gap between Suluk and Patch 7, to follow up on some of the exciting results that were communicated in February. The most recent follow-up drilling returned exceptional results, 12 gram over 19 meter, 20 gram over 18 meter, 14 gram over 16 meter, and those are cap-grade and estimated through width.
The core length intercept on those were just spectacular, solid from wall to wall, demonstrating the potential for a significant new thick mineralized area that could potentially host up to a million ounces between 10 grams and 20 grams that could have a very positive impact on future project redevelopment scenarios, considering the high-grade nature compared to the rest of the deposit and the apparent simple geometry of this new zone. I would like to thank our exploration team in the various jurisdictions that put a lot of good thinking and hard work into these large exploration programs to deliver them safely and in the most cost-efficient manner. Our focus in exploration remains to focus on opportunity by advancing key value driver projects, to accelerate their integration into mine development scenarios, and with those excellent results, we can anticipate that additional exploration budget could be added in the second half of the year.
And on that, I would like to return the mike to Ammar for some closing remarks.
Ammar Al-Joundi: Well, thank you very much, Guy. We probably should have started with that. Well, good work. And thank you, Carol, Dom, Natasha, and Jamie. Before we jump into questions and next slide, if we could please, thank you. Just really to summarize, we had a strong quarter operationally, strong quarter financially. We're all proud of our team for delivering results, but also for continuing focus on business improvement and our commitment to capturing gold price increases for the benefits of our shareholders. We made good progress on our key value drivers and we have had, as you just heard, some excellent exploration results. We are delivering on 2024, but we're also building the company for the future. Our strategy remains the same as it's been for the last 67 years.
Focus on the best regions based on geologic potential and political stability. Try to build the highest quality of business that we can for our shareholders, for our communities, and for our employees. Continue to focus on the bottom line, continue to focus on per share metrics, continue to focus on return on capital. And we think we are uniquely positioned with a competitive advantage in some of the best places in the world to mine for gold. So with that, I want to thank my colleagues for their presentations, thank all of you for being patient, and operator, if we can now open it up for questions, please.
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