Agnico Eagle Reports Third Quarter 2017 Results Including Record Quarterly Gold Production; Improved 2017 Production and Cost Guidance; Nunavut Projects Remain on Schedule and on Budget
Stock Symbol: AEM (NYSE and TSX)
For further information: Investor Relations (416) 947-1212
(All amounts expressed in U.S. dollars unless otherwise noted)
AGNICO EAGLE REPORTS THIRD QUARTER 2017 RESULTS INCLUDING RECORD QUARTERLY GOLD PRODUCTION; IMPROVED 2017 PRODUCTION AND COST GUIDANCE; NUNAVUT PROJECTS REMAIN ON SCHEDULE AND ON BUDGET; DIVIDEND INCREASED BY 10%
Toronto (October 25, 2017) – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM) ("Agnico Eagle" or the "Company") today reported quarterly net income of $71.0 million, or $0.31 per share, for the third quarter of 2017. This result includes non-cash foreign currency translation gains on deferred tax liabilities of $5.7 million ($0.03 per share), unrealized gains on financial instruments (net of tax) of $5.3 million ($0.02 per share), non-cash foreign currency translation losses of $4.3 million ($0.02 per share) and various mark-to-market and other adjustment losses (net of tax) of $2.2 million ($0.01 per share). Excluding these items would result in adjusted net income1 of $66.5 million or $0.29 per share for the third quarter of 2017. In the third quarter of 2016, the Company reported net income of $49.4 million or $0.22 per share.
Not included in the third quarter of 2017 adjusted net income is non-cash stock option expense of $3.7 million ($0.02 per share).
For the first nine months of 2017, the Company reported net income of $208.8 million, or $0.91 per share. This compares with the first nine months of 2016 when net income was $96.2 million, or $0.43 per share. Financial results in the 2017 period were positively affected by higher gold sales volumes (approximately 3%) and lower depreciation expense partly offset by lower realized gold prices.
In the third quarter of 2017, cash provided by operating activities decreased to $194.1 million ($207.9 million before changes in non-cash components of working capital) compared with cash provided by operating activities of $282.9 million in the third quarter of 2016 ($233.7 million before changes in non-cash components of working capital). The decrease in cash provided by operating activities before changes in non-cash
1Adjusted net income is a non-GAAP measure. For a discussion regarding the Company's use of non- GAAP measures, see "Note Regarding Certain Measures of Performance".
components of working capital during the current period was largely due to lower realized gold prices.
For the first nine months of 2017, cash provided by operating activities was $600.6 million ($629.9 million before changes in non-cash components of working capital), as compared with the first nine months of 2016 when cash provided by operating activities was $658.0 million ($593.9 million before changes in non-cash components of working capital). The increase in cash provided by operating activities before changes in working capital during the first nine months of 2017 was mainly due to a combination of higher gold and by-product metals sales volumes partly offset by lower realized gold prices.
"We continued to see strong operating performance in the third quarter, culminating in record gold production and strong cash flow generation. Given these strong results, we have increased our 2017 production guidance and have increased our dividend by 10%", said Sean Boyd, Agnico Eagle's Chief Executive Officer. "Our major projects in Nunavut continue to advance on time and on budget and we are excited by the significant growth in gold production and the related cash flows that these projects are forecast to provide", added Mr. Boyd.
Third quarter 2017 highlights include:
- Continued strong operating performance yields record quarterly gold production – Payable gold production2 in the third quarter of 2017 was 454,362 ounces at production costs per ounce of $578, total cash costs3 per ounce of $546 and all-in sustaining costs per ounce 4 ("AISC") of $789
- Higher than expected grades and tonnage drive record quarterly gold production at the LaRonde mine – Payable gold production in the third quarter of 2017 was 105,345 ounces at production costs per ounce of $377 and total cash costs per ounce of $328
- Full year production guidance increased and unit cost forecasts reduced – Given the strong nine month operational performance, 2017 production is now expected to exceed 1.68 million ounces of gold compared to previous guidance of 1.62 million ounces of gold. Total cash costs per ounce are now expected to be
2Payable production of a mineral means the quantity of mineral produced during a period contained in products that have been or will be sold by the Company whether such products are shipped during the period or held as inventory at the end of the period.
3Total cash costs per ounce is a non-GAAP measure and, unless otherwise specified, is reported in this news release on a by-product basis. For a reconciliation to production costs and for total cash costs on a co-product basis, see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance" below.
4All-in sustaining costs per ounce is a non-GAAP measure and, unless otherwise specified, is reported in this news release on a by-product basis. For a reconciliation to production costs and for all-in sustaining costs on a co-product basis, see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance" below.
$570 to $600 (previously $580 to $610) and AISC are expected to be $820 to $870 per ounce (previously $830 to $880)
- Meliadine project continues to advance on schedule and on budget – Surface construction activities are progressing well, with outside cladding and roofing expected to be completed on the mill facility, multi-service building and powerhouse in November 2017. Underground development is on plan and critical mining equipment, which was received during the 2017 summer sealift, is currently being commissioned
- Drilling at Amaruq extends Whale Tail mineralization at depth, and
demonstrates continuity and improving grades in the eastern part of V Zone
- Significant results include: 7.3 grams per tonne ("g/t") over 16.1 metres at a
depth of 627 metres at Whale Tail and 20.6 g/t gold over 6.2 metres at the V Zone at 452 metres depth, beneath the current planned pit outline
- Quarterly dividend increased by 10% – Company has declared an $0.11 quarterly dividend. The previous quarterly dividend was $0.10
Third Quarter Financial and Production Highlights – Record Gold Production, Lower Production Costs – 2017 Cost Forecasts Decrease
In the third quarter of 2017, strong operational performance continued at the Company's mines. Payable gold production was 454,362 ounces, compared to 416,187 ounces in the prior-year period. The higher level of production in the 2017 period was primarily due to higher grades mined at LaRonde, Meadowbank and Canadian Malartic. A detailed description of the production of each of the Company's mines is set out below.
In the first nine months of 2017, payable gold production was 1,300,321 ounces, compared to 1,236,455 ounces in the prior-year period. The higher level of production in the 2017 period was primarily due to higher grades mined at LaRonde, Meadowbank and Canadian Malartic.
Production costs per ounce for the third quarter of 2017 were $578, which was 13% lower, compared to $666 in the prior-year period. Total cash costs per ounce for the third quarter of 2017 were $546, which was 5% lower compared to $575 per ounce in the prior-year period. Production costs per ounce and total cash costs per ounce in the third quarter of 2017 were positively affected by record quarterly production. A detailed description of the cost performance of each of the Company's mines is set out below.
Production costs per ounce for the first nine months of 2017 were $596, which was 5% lower, compared to $628 in the prior-year period. Total cash costs per ounce for the first nine months of 2017 were $547, compared with $580 in the prior-year period. Production costs per ounce and total cash costs per ounce in the first nine months of 2017 were positively affected by higher production of gold at LaRonde, Meadowbank, and Canadian Malartic. The Company now forecasts a decrease in total cash costs per ounce for 2017 to $570 to $600 per ounce, which is down from previous guidance of $580 to $610 per ounce.
AISC for the third quarter of 2017 were $789, which was 4% lower, compared to $821 in the prior-year period. The lower AISC is primarily due to lower total cash costs per ounce and lower sustaining capital expenditures compared to the prior-year period.
AISC for the first nine months of 2017 was $772, compared to $821 in the prior-year period. The lower AISC is primarily due to lower total cash costs per ounce and lower sustaining capital expenditures compared to the prior-year period. The Company now forecasts a decrease in AISC for 2017 to $820 to $870 per ounce, which is down from previous guidance of $830 to $880 per ounce.
Cash Position Remains Strong
Cash and cash equivalents and short term investments decreased to $865.6 million at September 30, 2017, from the June 30, 2017 balance of $952.4 million due to the ongoing investment in the Company's growth projects.
The outstanding balance on the Company's credit facility remained nil at September 30, 2017. This results in available credit lines of approximately $1.2 billion, not including the uncommitted $300 million accordion feature.
On October 25, 2017, the Company amended its $1.2 billion credit facility to extend the maturity date from June 22, 2021 to June 22, 2022.
The Company's $500 million short form base shelf prospectus expired on October 4, 2017. The Company intends to file a new base shelf prospectus, on substantially the same terms, qualifying up to $500 million of debt securities, common shares and warrants. The Company has no present intention to offer securities pursuant to the new base shelf prospectus. It has been the Company's practice to maintain a $500 million base shelf prospectus since 2002. The notice set out in this paragraph does not constitute an offer of any securities for sale or an offer to sell or the solicitation of an offer to buy any securities.
Approximately 35% of the Company's remaining 2017 Canadian dollar exposure is hedged at a floor price of 1.30 US$/C$. Approximately 11% of the Company's remaining 2017 Euro exposure is hedged at a floor price of 1.10 EUR$/US$. Approximately 31% of the Company's remaining 2017 Mexican Peso exposure is hedged at a floor price of 18.60 US$/MXP.
Capital Expenditures
The total estimated initial capital costs at both the Meliadine and Amaruq projects in Nunavut remain unchanged at $900 million and $330 million, respectively. The forecast for the Company’s total 2017 capital expenditures is now approximately $895 million, which is an increase of approximately $36 million over the previous forecast. The increase is largely due to an acceleration of capital spending at the Meliadine and Amaruq projects due to good progress made in 2017 on development and construction activities at both projects. The following table sets out capital expenditures (including sustaining capital expenditures) in the third quarter and first nine months of 2017.
Capital Expenditures (In thousands of US dollars)
Three Months Ended Nine Months Ended September 30, 2017 September 30, 2017 Sustaining Capital
LaRonde mine $ 13,908 $ 50,245
| Canadian Malartic mine | 15,527 | 40,597 |
| Meadowbank mine | 10,959 | 16,712 |
| Kittila mine | 14,465 | 36,400 |
| Goldex mine | 10,140 | 18,352 |
| Pinos Altos | 11,103 | 27,485 |
| Creston Mascota deposit at Pinos Altos | 2,343 | 4,307 |
| La India mine | 2,510 | 6,409 |
Development Capital
LaRonde Zone 5 $ 5,447 $ 12,319
| Canadian Malartic mine | 6,516 | 7,957 |
| Amaruq satellite deposit | 25,762 | 76,623 |
| Kittila mine | 6,979 | 19,614 |
| Goldex mine | 4,290 | 23,929 |
| Pinos Altos | 1,563 | 8,500 |
| Creston Mascota deposit at Pinos Altos | 446 | 446 |
| La India mine | 112 | 2,595 |
| Meliadine project | 144,714 | 286,404 |
| Other | - | 885 |
Total Capital Expenditures $ 276,784 $ 639,779
Revised 2017 Guidance – Production Increased and Costs Lowered for the Sixth Year in a Row
Production for 2017 is now forecasted to exceed 1.68 million ounces of gold (previously 1.62 million ounces) with total cash costs per ounce expected to be $570 to $600 (previously $580 to $610) and AISC expected to be $820 to $870 per ounce (previously $830 to $880).
Dividend Record and Payment Dates for the Fourth Quarter of 2017
Agnico Eagle's Board of Directors has increased the dividend by 10% and has declared a quarterly cash dividend of $0.11 per common share, payable on December 15, 2017 to shareholders of record as of December 1, 2017. The previous quarterly dividend was $0.10 per common share. Agnico Eagle has declared a cash dividend every year since 1983.
Dividend Reinvestment Plan
Please follow the link below for information on the Company's dividend reinvestment plan. Dividend Reinvestment Plan
Third Quarter 2017 Results Conference Call and Webcast Tomorrow
The Company's senior management will host a conference call on Thursday, October 26, 2017 at 11:00 AM (E.D.T.) to discuss financial results and provide an update of the Company's operating activities.
Via Webcast:
A live audio webcast of the conference call will be available on the Company's website www.agnicoeagle.com.
Via Telephone:
For those preferring to listen by telephone, please dial 1-647-427-7450 or toll-free 1-888- 231-8191. To ensure your participation, please call approximately ten minutes prior to the scheduled start of the call.
Replay Archive:
Please dial 1-416-849-0833 or toll-free 1-855-859-2056, access code 50998337. The conference call replay will expire on November 26, 2017. The webcast, along with presentation slides will be archived for 180 days on the Company's website.
NORTHERN BUSINESS REVIEW
ABITIBI REGION, QUEBEC
Agnico Eagle is currently Quebec's largest gold producer with a 100% interest in three mines (LaRonde, Goldex and Lapa) and a 50% interest in the Canadian Malartic mine. These mines are located within 50 kilometres of each other, which provides operating synergies and allows for the sharing of technical expertise.
LaRonde – Higher than Expected Grades and Tonnage Drive Record Quarterly Gold Production
The 100% owned LaRonde mine in northwestern Quebec achieved commercial production in 1988.
LaRonde Mine - Operating Statistics Three Months Ended Three Months Ended All results exclude pre-commercial production tonnes and ounces
September 30, 2017 September 30, 2016 from LaRonde Zone 5
| Tonnes of ore milled (thousands of tonnes) | 582 | 522 |
| Tonnes of ore milled per day | 6,326 | 5,677 |
| Gold grade (g/t) | 5.87 | 4.47 |
| Gold production (ounces) | 105,345 | 71,784 |
Production costs per tonne (C$) $ 93 $ 101 $ Minesite costs per tonne (C$) $ 377 $ Production costs per ounce of gold produced ($ per ounce): $ 328 $ Total cash costs per ounce of gold produced ($ per ounce): $
Production costs per tonne in the third quarter of 2017 decreased when compared to the prior-year period due to higher tonnage and the timing of unsold concentrate inventory. Production costs per ounce in the third quarter of 2017 decreased when compared to the prior-year period due to higher gold production and the reasons described above.
Minesite costs per tonne5 in the third quarter of 2017 decreased when compared to the prior-year period due to higher tonnage of ore milled. Total cash costs per ounce in the third quarter of 2017 decreased when compared to the prior-year period due to higher production and higher by-product metal revenues.
5Minesite costs per tonne is a non-GAAP measure. For a reconciliation of this measure to production costs as reported in the financial statements, see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance" below.
LaRonde Mine - Operating Statistics
All results exclude pre-commercial production tonnes and ounces from LaRonde Zone 5
| Tonnes of ore milled (thousands of tonnes) | 1,661 | 1,668 |
| Tonnes of ore milled per day | 6,084 | 6,087 |
| Gold grade (g/t) | 5.02 | 4.33 |
| Gold production (ounces) | 256,347 | 222,280 |
105 $ 107 $ 510 $ 413 $
Production costs per tonne for the first nine months of 2017 decreased when compared to the prior-year period due to the timing of unsold concentrate inventory. Production costs per ounce for the first nine months of 2017 decreased when compared to the prioryear period due to higher production and the reason described above.
months of 2017 decreased when compared to the prior-year period due to higher gold production and higher by-product metal revenues.
The record gold production in the third quarter of 2017 was largely a result of higher tonnage and grades being sequenced from the 293 pyramids during the quarter. This was particularly evident in September, when production totaled 46,100 ounces of gold at a grade of 6.88 g/t gold. Gold grades for the remainder of the year are expected to return to the previously forecasted 2017 level of approximately 4.77 g/t.
At the LaRonde 3 project, the Company is evaluating the potential to mine below the currently planned 311 level (a depth of 3.1 kilometres). The current mineral resources in the western portion of the deposit are all in the inferred mineral resource category, extending to the 371 level.
An infill drill program is continuing from the 311 to the 340 levels, with a focus on the western portion of the deposit where recent drilling has continued to encounter highergrade mineralization (for additional details on this drilling see the Company's news release dated July 26, 2017). These new high-grade intercepts support the geological model and are expected to result in conversion of inferred mineral resources to indicated mineral resources in the western portion of the LaRonde 3 project in the year-end 2017 mineral resource update.
LaRonde Zone 5 – Initial Production Permit Received; Start-up on Schedule for Early Third Quarter 2018
In 2003, the Company acquired the LaRonde Zone 5 project. The project lies adjacent to and west of the LaRonde mining complex and previous operators mined the deposit by open pit. In February 2017, the Company approved LaRonde Zone 5 for development (subject to permitting approval). The permit to operate at an initial mining rate of 1,900 tonnes-per-day has now been received.
To date, 4.1 kilometres of underground development have been completed and the ramp has reached level 18, which is the first production level. Work is progressing on the main ventilation network, and underground installation of the paste fill system is expected to begin shortly.
During the quarter, a 7,700 tonne bulk sample of development ore was processed at the Lapa gold circuit (part of the LaRonde mining complex) yielding 515 ounces of gold. The material was processed to test paste fill blends and ore grinding characteristics. The revenue from the pre-commercial production was deducted from the capital expenditures of the project. Commercial production remains on track for early in the third quarter of 2018. For additional technical details on the project see the Company's news release dated February 15, 2017.
Canadian Malartic Mine – Higher Grades and Mill Throughput Drive Increased Production
In June 2014, Agnico Eagle and Yamana Gold Inc. ("Yamana") acquired all of the issued and outstanding common shares of Osisko Mining Corporation and created the Canadian Malartic General Partnership (the "Partnership"). The Partnership owns the Canadian Malartic mine in northwestern Quebec and operates it through a joint management committee. Each of Agnico Eagle and Yamana has an indirect 50% ownership interest in the Partnership. All volume measures in this section reflect the Company's 50% interest in the Canadian Malartic mine, except as noted.
Canadian Malartic Mine - Operating Statistics Three Months Ended Three Months Ended September 30, 2017 September 30, 2016
| Tonnes of ore milled (thousands of tonnes) | 2,528 | 2,483 |
| Tonnes of ore milled per day | 27,476 | 26,995 |
| Gold grade (g/t) | 1.14 | 1.07 |
| Gold production (ounces) | 82,097 | 76,428 |
Production costs per tonne (C$) $ Minesite costs per tonne (C$) $ 24 $ Production costs per ounce of gold produced ($ per ounce): $ 548 $ Total cash costs per ounce of gold produced ($ per ounce): $ 577 $
Production costs per tonne in the third quarter of 2017 were the same when compared to the prior-year period. Production costs per ounce in the third quarter of 2017 decreased when compared to the prior-year period due to higher production.
Minesite costs per tonne in the third quarter of 2017 were essentially the same when compared to the prior-year period. Total cash costs per ounce in the third quarter of 2017 decreased when compared to the prior-year period due to higher production.
Canadian Malartic Mine - Operating Statistics
| Tonnes of ore milled (thousands of tonnes) | 7,564 | 7,388 |
| Tonnes of ore milled per day | 27,707 | 26,964 |
| Gold grade (g/t) | 1.09 | 1.06 |
| Gold production (ounces) | 235,988 | 222,543 |
22 $ 23 $ 552 $ 558 $
Production costs per tonne for the first nine months of 2017 were essentially the same when compared to the prior-year period. Production costs per ounce for the first nine months of 2017 decreased when compared to the prior-year period due to higher production.
months of 2017 decreased when compared to the prior-year period due to higher production.
On April 19, 2017, the Government of Quebec announced the issuance of two decrees authorizing the Partnership to carry out the proposed expansion of the Canadian Malartic mine and the deviation of Highway 117 in Malartic, which will allow the Partnership to access the Barnat deposit. Deviation plans include a temporary bridge over Highway 117 to minimize the impact of the construction work on local traffic.
During the third quarter of 2017, construction commenced on the temporary bridge, approximately 75-80% of the vegetation has been cleared (mainly over the tailings and waste storage areas) and overburden stripping is underway in two areas.
Road construction is expected to take two years. The Company's production guidance (see news release dated February 15, 2017) assumes a modest contribution from Barnat in late 2019.
Odyssey and East Malartic Properties – Exploration Programs Ongoing to Increase Mineral Resources and Evaluate Underground Mining Potential
At the Canadian Malartic mine, exploration programs are ongoing to evaluate several near-pit/underground targets and the potential to mine portions of the East Malartic deposit, which is located adjacent to, and east of, the Canadian Malartic mine. In addition, the Partnership continues to explore the Odyssey project, which is located approximately 1.5 kilometres east of the current limit of the Canadian Malartic open pit. These opportunities have the potential to provide new sources of ore for the Canadian Malartic mill.
During the third quarter of 2017, 37 holes (totalling 20,704 metres) were drilled at Odyssey with a primary focus on further defining the internal mineralized zones between the Odyssey North and South Zones and expanding and upgrading the mineral resources in Odyssey South. Drilling carried out to date suggests that these internal zones could increase the mineral resource base and enhance the economics of the project by adding higher grade mineral resources that would require minimal additional infrastructure to access.
An updated mineral resource estimate is expected to be completed by the end of 2017, and the Partnership is evaluating potential underground mining scenarios at both Odyssey and East Malartic. Permitting activities will start in the fourth quarter of 2017 for potential underground mining scenarios.
Canadian Malartic Corporation
Each of Agnico Eagle and Yamana has an indirect 50% interest in Canadian Malartic Corporation ("CMC") which holds a portfolio of exploration properties that includes properties in the Kirkland Lake area of Ontario and the Pandora property in the Abitibi region of Quebec.
During the third quarter of 2017, CMC completed a review of strategic alternatives for the Kirkland Lake assets. At this time, the assets remain part of CMC's longer-term development pipeline and additional work will be carried out to further evaluate the potential of these assets.
In the third quarter of 2017, 30 holes (totaling 7,512 metres) were drilled at Kirkland Lake with a primary focus on testing targets on the Upper Beaver and Amalgamated Kirkland properties. It is expected that an updated mineral resource estimate will be completed on the Upper Canada property at year-end 2017.
Lapa – Mining Expected to Continue Through Year-End 2017 at a Reduced Rate; Mill Processing Expected to Resume in 2018
The 100% owned Lapa mine in northwestern Quebec achieved commercial production in May 2009.
Lapa Mine - Operating Statistics Three Months Ended Three Months Ended September 30, 2017 September 30, 2016
| Tonnes of ore milled (thousands of tonnes) | 134 | 141 |
| Tonnes of ore milled per day | 1,457 | 1,536 |
| Gold grade (g/t) | 4.41 | 4.26 |
| Gold production (ounces) | 17,169 | 16,242 |
Production costs per tonne (C$) $ Minesite costs per tonne (C$) $ Production costs per ounce of gold produced ($ per ounce): $ 703 $ Total cash costs per ounce of gold produced ($ per ounce): $ 706 $ Production costs per tonne in the third quarter of 2017 were the same when compared to the prior-year period. Production costs per ounce in the third quarter of 2017 decreased when compared to the prior-year period due to higher production.
Minesite costs per tonne in the third quarter of 2017 were the same when compared to the prior-year period. Total cash costs per ounce in the third quarter of 2017 decreased when compared to the prior-year period due to higher production.
Lapa Mine - Operating Statistics Nine Months Ended Nine Months Ended September 30, 2017 September 30, 2016
| Tonnes of ore milled (thousands of tonnes) | 398 | 463 |
| Tonnes of ore milled per day | 1,458 | 1,689 |
| Gold grade (g/t) | 4.24 | 4.84 |
| Gold production (ounces) | 48,410 | 59,865 |
121 $ Production costs per tonne (C$) $ 120 $ Minesite costs per tonne (C$) $ 758 $ Production costs per ounce of gold produced ($ per ounce): $ 755 $ Total cash costs per ounce of gold produced ($ per ounce): $
Production costs per tonne for the first nine months of 2017 increased when compared to the prior-year period due to lower throughput levels as the mine approaches the end of its mine life. Production costs per ounce for the first nine months of 2017 increased when compared to the prior-year period due to lower production.
Minesite costs per tonne for the first nine months of 2017 increased when compared to the prior-year period due to lower throughput levels as the mine nears the end of its mine life. Total cash costs per ounce for the first nine months of 2017 increased when compared to the prior-year period due to lower production.
Mining operations at Lapa are expected to continue through year-end 2017 at a reduced rate. The ore mined will be stockpiled in the fourth quarter of 2017 and is expected to be processed during the first half of 2018. Gold production from Lapa for 2018 (not previously included in the Company's production guidance) is now expected to be approximately 5,000 ounces.
Goldex – Deep 2 and South Zones Show Potential to Extend Current Mine Life
The 100% owned Goldex mine in northwestern Quebec began operation from the M and E satellite zones in September 2013. The Deep 1 Zone entered commercial production in July 2017. Production from Deep 1 is expected to extend the Goldex mine life through 2025.