Agnico Eagle Reports First Quarter 2017 Results; Strong Operational Performance Continues; Full Year Production Guidance Increased; Canadian Malartic Extension Receives
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 FIRST QUARTER 2017 RESULTS; STRONG OPERATIONAL PERFORMANCE CONTINUES; FULL YEAR PRODUCTION GUIDANCE INCREASED; CANADIAN MALARTIC EXTENSION RECEIVES GOVERNMENT APPROVAL; EXPLORATION DRILLING YIELDS FAVOURABLE RESULTS AT AMARUQ
Toronto (April 27, 2017) – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM) ("Agnico Eagle" or the “Company”) today reported quarterly net income of $76.0 million, or $0.33 per share, for the first quarter of 2017. This result includes non-cash foreign currency translation gains on deferred tax liabilities of $7.9 million ($0.03 per share), nonrecurring gains of $3.5 million ($0.02 per share), unrealized gains on financial instruments of $2.8 million ($0.01 per share), various mark-to-market and other adjustment losses of $1.4 million ($0.01 per share) and non-cash foreign currency translation losses of $0.9 million (nil per share). Excluding these items would result in adjusted net income1 of $64.1 million or $0.28 per share for the first quarter of 2017. In the first quarter of 2016, the Company reported net income of $27.8 million or $0.13 per share.
Not included in the first quarter of 2017 adjusted net income above is non-cash stock option expense of $7.6 million ($0.03 per share).
In the first quarter of 2017, cash provided by operating activities increased by greater than 50% to $222.6 million ($224.7 million before changes in non-cash components of working capital) compared with cash provided by operating activities of $145.7 million in the first quarter of 2016 ($167.5 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 current period was mainly due to a combination of higher gold sales volumes and realized prices (approximately 7% and 3%, respectively).
1 Adjusted net income is a Non-GAAP measure. For a discussion regarding the Company’s use of non- GAAP measures, please see “Note Regarding Certain Measures of Performance”.
"Operationally, 2017 has started strongly with solid performance on both the production and cost fronts. Higher gold production at lower costs has resulted in stronger cash flow generation and has allowed us to increase our production guidance for the year”, said Sean Boyd, Agnico Eagle’s Chief Executive Officer. “In the first quarter we also made very good progress at several of our growth projects with Meliadine progressing as expected, the Canadian Malartic extension receiving government approval and the Goldex Deep project ahead of schedule and under budget”, added Mr. Boyd.
First Quarter 2017 highlights include:
- Strong production and cost performance continue – Payable gold production2 in the first quarter of 2017 was 418,216 ounces of gold at production costs per ounce of $578, total cash costs3 per ounce of $539 and all-in sustaining costs per ounce 4 (“AISC”) of $741
- Full year production guidance increased – Production is now expected to exceed 1.57 million ounces compared to previous guidance of 1.55 million ounces. The increase reflects the extension of the mine life at Lapa to the end of the second quarter of 2017
- Canadian Malartic Extension project receives Government of Quebec approval – Production activities at the project are currently forecast to begin in late 2019, subject to obtaining ancillary certificates of authorization and the progress of the road diversion
- Goldex Deep 1 production expected to come in ahead of schedule and under budget – At the end of the first quarter of 2017 construction was 75% complete, while mine infrastructure development was 100% complete. Deep 1 is now expected to start ramping up production in the third quarter of 2017, approximately one quarter ahead of schedule. Production guidance at Goldex is unchanged at this time but will be reviewed next quarter
- Exploration drilling at Amaruq extends and infills Whale Tail Deposit to the west and infills V Zone – Recent drilling indicates the potential to increase the depth of the western part of the Whale Tail pit, and expand the Whale Tail pit
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 on a byproduct 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”.
4All-in-sustaining costs per ounce is a Non-GAAP measure and unless otherwise specified is reported 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".
farther to the west. An infill drill program in the near-surface portion of the V Zone has confirmed high gold grades in multiple lenses
- Meliadine project on schedule and budget – Underground development is 5% above plan and engineering was 67% complete at the end of March 2017. Construction activities are progressing well with the concrete batch plant being commissioned and pile installation restarted in March. Full camp facilities are expected to be completed in May ahead of the barge season
- A quarterly dividend of $0.10 per share was declared
First Quarter Financial and Production Highlights – Higher Gold Production, Lower Production Costs
In the first quarter of 2017, strong operational performance continued at the Company's mines, which led to payable gold production of 418,216 ounces compared to 411,336 ounces in the first quarter of 2016. The higher level of production in the 2017 period was primarily due to higher grades at LaRonde and Meadowbank. A detailed description of the production of each mine is set out below.
Production costs per ounce for the first quarter of 2017 were $578, which was lower than the $593 in the 2016 period. Production costs per ounce were positively affected by higher gold production levels at LaRonde and Meadowbank. Total cash costs per ounce for the first quarter of 2017 were 6% lower at $539 compared to $573 per ounce for the first quarter 2016. Total cash costs per ounce in the first quarter of 2017 were positively affected by a combination of higher production of gold and by-product metals at LaRonde and higher production levels at Meadowbank compared to the first quarter of 2016. A detailed description of the cost performance of each mine is set out below.
AISC for the first quarter of 2017 were 7% lower at $741 per ounce compared to $797 in the first quarter of 2016. The lower AISC is primarily due to lower total cash costs per ounce and lower sustaining capital expenditures compared to the first quarter of 2016. AISC in 2017 remain forecast to be between $850 and $900 per ounce, but will be reviewed on an ongoing basis through 2017.
Cash Position Remains Strong
Cash and cash equivalents and short term investments increased to $804.3 million at March 31, 2017, from the December 31, 2016 balance of $548.4 million. The increase in cash and cash equivalents was largely as a result of the issuance of common shares announced in the Company's news release of March 27, 2017, but also due to strong cash generation at the mines.
The outstanding balance on the Company’s credit facility remained nil at March 31, 2017. This results in available credit lines of approximately $1.2 billion, not including the uncommitted $300 million accordion feature.
Capital Expenditures
Total capital expenditures (including sustaining capital) in 2017 remain forecast to be approximately $850 million. The following table sets out capital expenditures (including sustaining capital) in the first quarter of 2017.
Capital Expenditures (In thousands of US dollars)
Three Months Ended March 31, 2017 Sustaining Capital
LaRonde mine $ 13,805 Canadian Malartic mine 12,442 Goldex mine 3,179 Meadowbank mine 2,431 Kittila mine 9,681 Pinos Altos 8,239 Creston Mascota deposit Pinos Altos 582 La India mine 1,634
Development Capital
Canadian Malartic mine $ Goldex mine 12,555 Meadowbank mine 12,320 Meliadine project 48,565 Kittila mine 6,480 Pinos Altos 889 Other 3,150
Total Capital Expenditures $ 136,670
Revised 2017 Guidance – Production Increased
Production for 2017 is now forecast to exceed 1.57 million ounces of gold as a result of the Lapa mine life extension to the end of the second quarter of 2017 (previously 1.555 million ounces). Total cash costs per ounce in 2017 remain forecast to be between $595 and $625 per ounce. Production and total cash costs will be reviewed on an ongoing basis through 2017.
Dividend Record and Payment Dates for the Second Quarter of 2017
Agnico Eagle's Board of Directors has declared a quarterly cash dividend of $0.10 per common share, payable on June 15, 2017 to shareholders of record as of June 1, 2017. Agnico Eagle has declared a cash dividend every year since 1983.
Other Expected Dividend and Record Dates for 2017
| Record Date | Payment Date |
| September 1 | September 15 |
| December 1 | December 15 |
Dividend Reinvestment Plan
Please see the following link for information on the Company's dividend reinvestment plan: Dividend Reinvestment Plan
First Quarter 2017 Results Conference Call and Webcast Tomorrow
Agnico Eagle’s senior management will host a conference call on Friday, April 28, 2017 at 8:30 AM (E.D.T.) to discuss the Company’s financial and operating results.
Via Webcast:
A live audio webcast of the conference call will be available on the Company’s website at 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 five 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 50920688. The conference call replay will expire on May 28, 2017.
The webcast, along with presentation slides, will be archived for 180 days on the Company’s website.
Annual Meeting
The Company's Annual Meeting of Shareholders (the "AGM") will begin on Friday, April 28, 2017 at 11:00 am (E.D.T). The AGM will be held at the Sheraton Centre Toronto
Hotel (Grand Ballroom) - 123 Queen Street West, Toronto, ON.
During the AGM management will provide an overview of the Company’s activities. For those unable to attend in person, the alternatives to participate are listed below.
Via Webcast:
A live audio webcast of the AGM will be available on the Company’s website at 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 five minutes prior to the scheduled start of the AGM.
Replay archive:
Please dial 1-416-849-0833 or toll-free 1-855-859-2056, access code 50915952. The conference call replay will expire on May 28, 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 Mine – Higher Grades From Lower Mine Drive Strong First Quarter Performance
The 100% owned LaRonde mine in northwestern Quebec achieved commercial production in 1988. The LaRonde mine produced its five millionth ounce in 2016.
| LaRonde Mine - Operating Statistics Three Months Ended Three Months Ended March 31, 2017 March 31, 2016 | |
|---|---|
| Tonnes of ore milled (thousands of tonnes) 559 | 577 |
| Tonnes of ore milled per day 6,215 6,341 Gold grade (g/t) 4.61 4.24 Gold production (ounces) 78,912 75,337 Production costs per tonne (C$) $ 1 06 $ 1 05 Minesite costs per tonne (C$) $ 1 09 $ 1 03 Production costs per ounce of gold produced ($ per ounce): $ 5 62 $ 6 09 Total cash costs per ounce of gold produced ($ per ounce): $ 4 64 $ 5 29 |
Production costs per tonne in the first quarter of 2017 were essentially the same when compared to the prior-year period. Production costs per ounce in the first quarter of 2017 decreased when compared to the prior-year period due to higher production.
Minesite costs per tonne5 in the first quarter of 2017 increased when compared to the prior-year period due to lower throughput levels and higher costs in the mill. Total cash costs per ounce in the first quarter of 2017 decreased when compared to the prior-year period due to higher gold production from the lower mine and higher by-product metal revenues.
At the LaRonde 3 project, studies are continuing to assess the potential to extend the mineral reserve base and carry out phased mining activities between a depth of 3.1 kilometres and 3.7 kilometres.
In 2016, the first mineral reserves were declared in the eastern portion of LaRonde 3 and additional inferred mineral resources were declared in the western portion of LaRonde 3. Further drilling is being carried out to assess the vertical extent of the mineralization.
5 Minesite 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”.
LaRonde Zone 5 – Permit Received for Surface Construction
In 2003, the Company acquired the LaRonde Zone 5 project from Barrick Gold Corporation. The property lies adjacent to and west of the LaRonde mining complex and previous operators exploited the deposit by open pit. In February 2017 LaRonde Zone 5 was approved by Agnico Eagle’s Board of Directors for development (subject to permitting approval). Permits are expected to be received by mid-2018 with underground mining expected to commence shortly thereafter.
In the first quarter of 2017, the certificate of authorization for surface construction was received and mobilization is currently underway. For additional details on the project see the Company’s news release dated February 15, 2017.
Canadian Malartic Mine – Canadian Malartic Extension Project Receives Government of Quebec Approval
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 and operates the Canadian Malartic mine in northwestern Quebec through a joint management committee. Each of Agnico Eagle and Yamana has an indirect 50% ownership interest in the Partnership. All volume numbers 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 March 31, 2017 March 31, 2016
| Tonnes of ore milled (thousands of tonnes) | 2,433 | 2,380 | ||
| Tonnes of ore milled per day | 27,029 | 26,157 | ||
| Gold grade (g/t) | 1.03 | 1.07 | ||
| Gold production (ounces) | 71,382 | 73,613 | ||
| Production costs per tonne (C$) | $18 | $21 | ||
| Minesite costs per tonne (C$) | $22 | $24 |
Production costs per ounce of gold produced ($ per ounce): $ 455 $ Total cash costs per ounce of gold produced ($ per ounce): $ 556 $
Production costs per tonne in the first quarter of 2017 decreased when compared to the prior-year period due to a higher amount of stripping costs being capitalized and timing of unsold inventory. The average stripping ratio in the first quarter of 2017 was 1.95 to 1.0. Production costs per ounce in the first quarter of 2017 decreased when compared to the prior-year period due to the reasons described above.
Minesite costs per tonne in the first quarter of 2017 were lower when compared to the prior-year period due to a higher amount of stripping costs being capitalized. Total cash costs per ounce in the first quarter of 2017 were essentially the same when compared to the prior-year period.
On April 10, 2017, the Quebec Superior Court dismissed the application for an interlocutory injunction. No dates have been set for the hearing of the application for a permanent injunction to restrict the Canadian Malartic mine’s mining operations to sound levels and mining volumes below the limits to which it is subject. For additional information see the Company's Annual Information Form for the year ended December 31, 2016.
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 diversion of Highway 117 in Malartic (the “Project”). The preparatory work for the Project will begin after obtaining the certificates of authorization to be issued by the Ministry of Sustainable Development, Environment and Climate Change.
Diversion plans will include a temporary bridge over Highway 117 to minimize the impact of the construction work on local traffic. The road construction is expected to occur over a two-year period. The Company’s most recent production guidance assumes a modest contribution from the Project in late 2019.
The approval of the Project provides greater operating flexibility and allows for mill throughput of 55,000 tonnes per day (“tpd”). The decree sets the maximum extraction rate at 241,000 tpd (ore and waste) as long as noise and dust thresholds are not exceeded.
Drilling at Odyssey Focused on Internal Zones and Infilling the South Zone
At the Canadian Malartic mine, exploration programs are ongoing to evaluate several targets that are underground or close to current pit limits. 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. Both of these opportunities have the potential to provide new sources of ore for the Canadian Malartic mill.
During the first quarter of 2017, 34 holes (totaling 22,676 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 the mineral resources in Odyssey South.
Drilling carried out to date suggests that these internal zones could increase the mineral resources and enhance the economics of the project by adding higher grade mineral resources that would require minimal additional infrastructure to access.
Lapa – Mine Life Extended into Second Quarter 2017
The 100% owned Lapa mine in northwestern Quebec achieved commercial production in May 2009.
Lapa Mine - Operating Statistics Three Months Ended Three Months Ended March 31, 2017 March 31, 2016
| Tonnes of ore milled (thousands of tonnes) | 130 | 161 |
| Tonnes of ore milled per day | 1,439 | 1,769 |
| Gold grade (g/t) | 4.25 | 5.00 |
| Gold production (ounces) | 15,360 | 21,709 |
Production costs per tonne (C$) $ 133 $ Minesite costs per tonne (C$) $ 134 $ Production costs per ounce of gold produced ($ per ounce): $ 839 $ Total cash costs per ounce of gold produced ($ per ounce): $ 854 $
Production costs per tonne in the first quarter of 2017 increased when compared to the prior-year period due lower throughput levels and the timing of unsold inventory. Production costs per ounce in the first quarter of 2017 increased when compared to the prior-year period due to lower production.
Minesite costs per tonne in the first quarter of 2017 increased when compared to the prior-year period due to lower throughput levels and timing of unsold inventory. Total cash costs per ounce in the first quarter of 2017 increased when compared to the prioryear period due to lower production.
During the quarter, additional target zones at depth were approved for mining from the Zone Deep East and Zone 7 Deep areas. Under the current mine plan, Lapa is expected to operate until the end of the second quarter of 2017. Total gold production for 2017 is now forecast to be 30,000 ounces, up from the previous forecast of 15,000 ounces.
Goldex – Production from Goldex Deep 1 Now Expected to Begin in the Third Quarter of 2017
The 100% owned Goldex mine in northwestern Quebec began production from the M and E satellite zones in September 2013.
Goldex Mine - Operating Statistics Three Months Ended Three Months Ended March 31, 2017 March 31, 2016
| Tonnes of ore milled (thousands of tonnes) | 642 | 636 | ||
| Tonnes of ore milled per day | 7,135 | 6,991 | ||
| Gold grade (g/t) | 1.68 | 1.71 | ||
| Gold production (ounces) | 32,671 | 32,340 | ||
| Production costs per tonne (C$) | $35 | $34 | ||
| Minesite costs per tonne (C$) | $37 | $34 |
Production costs per ounce of gold produced ($ per ounce): $ 516 $ Total cash costs per ounce of gold produced ($ per ounce): $ 532 $ During the first quarter of 2017, approximately 58,000 tonnes of development ore from the Deep 1 project was milled and yielded 2,395 ounces of pre-commercial gold production. The revenue from the pre-commercial gold production was deducted from the capital expenditures of the project. The Company expects approximately 7,000 ounces of pre-commercial gold production from the Deep 1 project in 2017(the table above includes pre-commercial production).
Production costs per tonne in the first quarter of 2017 increased when compared to the prior-year period due to lower throughput levels (after deducting development ore tonnage) and lower productivity from smaller stopes. Production costs per ounce in the first quarter of 2017 increased when compared to the prior-year period due to lower production (after deducting development ore ounces).
Minesite costs per tonne in the first quarter of 2017 increased when compared to the prior-year period due to lower throughput levels (after deducting development ore tonnage) and lower productivity from smaller stopes. Total cash costs per ounce in the first quarter of 2017 increased when compared to the prior-year period due to lower production (after deducting development ore ounces).
Construction of the Deep 1 project is now 75% complete with remaining activities focused on the rock hammer room and the dump loop for the Rail-Veyor ore transport system. Mine infrastructure development is 100% complete and production from the Deep 1 Zone is expected to start ramping up in the third quarter of 2017, which is approximately one quarter ahead of schedule. The Deep 1 project initial capital costs are expected to be below the July 2015 budget of $135 to $140 million, largely due to the positive foreign exchange rate movements. Production guidance at Goldex is unchanged at this time.
An internal technical study is underway to evaluate the potential to mine a portion of the Deep 2 Zone, which starts below the Deep 1 Zone at 1200 metres below surface.
Drilling is underway on the South Zone, which is accessible from the Deep 1 Zone infrastructure. The South Zone consists of quartz veins that have higher grades than those in the primary mineralized zones at Goldex. The Company is evaluating the potential for the South Zone to provide incremental ore feed to the Goldex mill.
At the adjoining Joubi property, exploration activities by previous operators focused on the evaluation of quartz vein mineralization within a quartz diorite body. A six-hole drill program is planned to evaluate the potential for bulk mining within the Joubi intrusive body.
Agnico Eagle acquired the Akasaba West gold-copper deposit in January 2014. Located less than 30 kilometres from Goldex, the Akasaba West deposit could create flexibility and synergies for the Company's operations in the Abitibi region by utilizing extra milling capacity at both Goldex and LaRonde, while reducing overall costs. The public hearing process has been completed at Akasaba and permitting activities are expected to continue through 2017. The Company expects to begin sourcing open pit ore from Akasaba West in 2019 after the necessary permits are received.
NUNAVUT REGION
Agnico Eagle has identified Nunavut as a politically attractive and stable jurisdiction with enormous geological potential. With the Company’s largest producing mine (Meadowbank) and two significant development assets (the Meliadine project and the Amaruq satellite deposit at Meadowbank) and other exploration projects, Nunavut has the potential to be a strategic operating platform with the ability to generate strong production and cash flows over several decades.
Meadowbank – Near-term Options to Extend Production Remain Under Review
The 100% owned Meadowbank mine in Nunavut, northern Canada, achieved commercial production in March 2010. The mine produced its two millionth ounce of gold in 2015.
Meadowbank Mine - Operating Statistics Three Months Ended Three Months Ended March 31, 2017 March 31, 2016
| Tonnes of ore milled (thousands of tonnes) | 926 | 946 | ||
| Tonnes of ore milled per day | 10,287 | 10,390 | ||
| Gold grade (g/t) | 3.11 | 2.58 | ||
| Gold production (ounces) | 85,370 | 72,311 | ||
| Production costs per tonne (C$) | $77 | $73 | ||
| Minesite costs per tonne (C$) | $74 | $77 |
632 $ Production costs per ounce of gold produced ($ per ounce): $ 590 $ Total cash costs per ounce of gold produced ($ per ounce): $
Production costs per tonne in the first quarter of 2017 increased when compared to the prior-year period due to lower amount of stripping costs being capitalized and timing of unsold inventory. Production costs per ounce in the first quarter of 2017 decreased when compared to the prior-year period due to higher production.
Minesite costs per tonne in the first quarter of 2017 decreased when compared to the prior-year period due lower total tonnage mined. Total cash costs per ounce in the first quarter of 2017 decreased when compared to the prior-year period due to higher production and the reason described above.
Studies are ongoing to reduce the potential production gap between the end of the mine life at Meadowbank and the start of operations at Amaruq in 2019.
Amaruq Satellite Deposit – Exploration Drilling Extends and Infills Whale Tail Deposit to the West and Infills V Zone
Agnico Eagle has a 100% interest in the Amaruq satellite deposit which is located approximately 50 kilometres northwest of the Meadowbank mine. Amaruq is situated on a 116,717-hectare property near the 77,411-hectare Meadowbank property. A significant gold discovery was made on the Amaruq property in 2013, and activities since that time have focused on the development of satellite mineralization to feed the existing 11,000 tpd Meadowbank mill.