Agnico Eagle Reports First Quarter 2018 Results; Nunavut Development Projects Progressing on Budget and on Schedule; Exploration Drilling Yields Favourable Results at Multiple
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 2018 RESULTS; NUNAVUT DEVELOPMENT PROJECTS PROGRESSING ON BUDGET AND ON SCHEDULE; EXPLORATION DRILLING YIELDS FAVOURABLE RESULTS AT MULTIPLE PROJECTS
Toronto (April 26, 2018) – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM) ("Agnico Eagle" or the "Company") today reported quarterly net income of $44.9 million, or $0.19 per share, for the first quarter of 2018. This result includes non-cash foreign currency translation gains on deferred tax liabilities of $6.7 million ($0.03 per share), mark-to-market adjustments and derivative gains on financial instruments of $0.5 million (nil per share) and non-cash foreign currency translation gains of $3.5 million ($0.01 per share). Excluding these items would result in adjusted net income1 of $34.2 million or $0.15 per share for the first quarter of 2018. In the first quarter of 2017, the Company reported net income of $76.0 million or $0.33 per share.
Included in the first quarter of 2018 net income and not adjusted above is non-cash stock option expense of $7.8 million ($0.03 per share).
In the first quarter of 2018, cash provided by operating activities decreased by 7% to $207.7 million ($180.5 million before changes in non-cash components of working capital), compared with cash provided by operating activities of $222.6 million in the first quarter of 2017 ($224.7 million before changes in non-cash components of working capital). The decrease in cash provided by operating activities before changes in non-cash components of working capital during the current period was mainly due to lower gold sales volumes and higher costs, partially offset by higher realized gold prices. The higher costs were primarily a result of the strengthening of local currencies against the U.S. dollar and higher costs at several operations, principally at Meadowbank.
"Our operations continued to deliver strong cash flow in the first quarter with unit production costs on the lower end of full year guidance and gold production tracking slightly above full year guidance. We remain focused on optimizing unit costs and increasing production as
1Adjusted 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".
we transition through 2018 and begin to see the positive results of our growth phase in 2019", said Sean Boyd, Agnico Eagle's Chief Executive Officer. "During the first quarter, we continued to make very good progress at our Nunavut growth projects, with Amaruq permitting activities advancing as expected and development of the underground exploration ramp proceeding as planned. Construction activities and underground development remain on schedule and on budget at Meliadine", added Mr. Boyd.
First quarter 2018 highlights include:
- Solid operational performance – Payable gold production2 in the first quarter of 2018 was 389,278 ounces at production costs per ounce of $759, total cash costs3 per ounce of $648 and all-in sustaining costs per ounce4 ("AISC") of $889
- Production and cost guidance reiterated for 2018 – Full year production guidance is unchanged at 1.53 million ounces of gold at total cash costs per ounce of $625 to $675 and AISC of $890 to $940 per ounce
- Nunavut development projects progressing on schedule and on budget – Amaruq permitting is on track for approval in the second quarter of 2018 and the underground exploration ramp is proceeding as planned. Meliadine construction and development is progressing well and procurement activities for the 2018 barge season are now complete
- Infill drilling at the East Malartic property yields favourable results, potential development options under review – Recent drilling at East Malartic has returned significant intersections of 2.5 grams per tonne ("g/t") gold over 37.7 metres at 238 metres depth, including 3.6 g/t gold over 10.6 metres. Studies are underway to evaluate potential mining scenarios at both East Malartic and the neighbouring Odyssey project. Permitting activities to provide ramp access to both projects are currently underway
- Acquisition of Yamana Gold Inc.'s ("Yamana") 50% interest in the Canadian
exploration assets of Canadian Malartic Corporation ("CMC") completed in late March 2018 – Agnico Eagle now owns the exploration assets of CMC, which include the Kirkland Lake and Hammond Reef projects. At Kirkland Lake, a 25,700
2Payable production of a mineral means the quantity of a 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 metre drill program will be carried out in 2018 to further evaluate known deposits and test new target areas
- Monetization of non-core assets – The Company is assessing opportunities to monetize non-core assets, including the West Pequop Joint Venture, Summit and PQX properties in Nevada, the Cobalt mining properties in the historic Cobalt silver district in Ontario, and its equity investment in Belo Sun Mining Corp. ("Belo Sun") which it disposed of this month as previously announced
- A quarterly dividend of $0.11 per share was declared
First Quarter Financial and Production Highlights
In the first quarter of 2018, stable operational performance continued at the Company's mines, which led to payable gold production of 389,278 ounces, compared to 418,216 ounces in the first quarter of 2017. This lower level of production in the 2018 period was primarily due to reduced throughput levels at Meadowbank as the mine transitions through the last full year of mining at site and at Lapa as mill processing did not resume until March 2018. A detailed description of the production of each mine is set out below.
Production costs per ounce for the first quarter of 2018 were $759, compared to $578 for the first quarter of 2017. Total cash costs per ounce for the first quarter of 2018 were $648, compared to $539 for the first quarter of 2017. Production costs per ounce and total cash costs per ounce in the first quarter of 2018 were affected by lower gold production levels at Meadowbank and Lapa, the strengthening of local currencies against the U.S. dollar and higher costs at several mines (principally at Meadowbank) compared to the first quarter of 2017. The impact of the strengthening of the local currencies was approximately $40 per ounce.
AISC for the first quarter of 2018 were $889, compared to $741 for the first quarter of 2017. The higher AISC is primarily due to expected lower gold production and higher total cash costs per ounce compared to the first quarter of 2017. A detailed description of the cost performance of each mine is set out below.
Cash Position Remains Strong
Cash and cash equivalents and short-term investments decreased to $464.8 million at March 31, 2018, from the December 31, 2017 balance of $643.9 million due to the ongoing investment in the Company's growth projects and the recent acquisition of the Kirkland Lake and Hammond Reef projects.
The outstanding balance on the Company's credit facility remained nil at March 31, 2018. This results in available credit lines of approximately $1.2 billion, not including the uncommitted $300 million accordion feature.
Subsequent to the quarter end, on April 5, 2018, the Company issued notes to certain institutional investors totalling $350 million. The notes consist of $45 million at 4.38% due 2028, $55 million at 4.48% due 2030 and $250 million at 4.63% due 2033. The terms of the notes are substantially the same as the terms of the outstanding notes of the Company. The Company previously announced its intention to issue these notes in its news release dated February 14, 2018.
Approximately 40% of the Company's remaining 2018 Canadian dollar exposure is hedged at an average floor price of 1.28 C$/US$, of which about one third are designated for capital expenditures at Meliadine. Approximately 10% of the Company's remaining 2018 Mexican peso exposure is hedged at an average floor price of 19.00 MXN/US$. The Company's remaining 2018 Euro exposure is currently unhedged. The Company’s full year 2018 cost guidance was based on assumed exchange rates of 1.25 C$/US$ and 18.0 MXN/US$. Agnico Eagle anticipates adding to its operating currency hedges, pending market conditions.
Monetization of Non-Core Assets
The Company has been assessing the opportunity to monetize several non-core assets in its portfolio, including the West Pequop Joint Venture, Summit and PQX properties in Nevada, the Cobalt mining properties in the historic Cobalt silver district in Ontario and its equity investment in Belo Sun which it disposed of this month.
West Pequop Joint Venture, Summit and PQX Properties
The Company has entered into an agreement with a subsidiary of Newmont Mining Corp ("Newmont"), whereby Newmont will purchase Agnico Eagle's 51% interest in the West Pequop Joint Venture, and the Company's 100% interest in the Summit and PQX properties in northeastern Nevada (collectively, the "Nevada Properties"). The Nevada Properties are adjacent to Newmont's Long Canyon mine.
Under the purchase and sale agreement, the Company will receive a cash payment of $35 million and be granted a 0.8% net smelter return ("NSR") royalty on the Nevada Properties held by the West Pequop Joint Venture and a 1.6% NSR on the Summit and PQX properties. The sale is expected to close in the second quarter of 2018.
Cobalt Mining Properties
In the mid-1950's, five mining companies merged to become Cobalt Consolidated Mining Company ("CCMC"), one of the predecessors to Agnico Eagle. CCMC and, later, Agnico Eagle operated 25 mines in the Cobalt area and produced approximately 30 million ounces of silver and 3.2 million pounds of cobalt between 1957 and 1989.
The Company currently has two sizeable land packages in the Cobalt region, the Coleman property (178 claims covering approximately 1,750 hectares) and the South Lorrain Property (37 claims covering approximately 350 hectares).
The Company has initiated a strategic review of its Cobalt properties with the intent to realize value for the historical property portfolio. The Company expects that the outcome of such review may result in the sale of all or a portion of its Cobalt properties.
Disposition of Investment in Belo Sun
The Company reviews its portfolio of equity investments in junior mining companies on an ongoing basis. As previously announced, the Company has disposed of 44,551,000 common shares of Belo Sun for aggregate proceeds of C$14,924,585. For further details, please see the Company’s new release dated April 20, 2018.
Capital Expenditures
Total capital expenditures (including sustaining capital) in 2018 remain forecast to be approximately $1.08 billion. The following table sets out capital expenditures (including sustaining capital) in the first quarter of 2018.
Capital Expenditures (In thousands of US dollars)
Three Months Ended March 31, 2018 Sustaining Capital
LaRonde mine $ 15,397 Canadian Malartic mine 16,118 Meadowbank mine 2,890 Kittila mine 9,798 Goldex mine 5,112 Pinos Altos mine 7,175 Creston Mascota mine 502 La India mine 1,430 Total Sustaining Capital 58,422
Development Capital
LaRonde mine $ LaRonde Zone 5 7,653 Canadian Malartic mine 5,211 Meadowbank mine 14,976 Kittila mine 18,579 Goldex mine 8,312 Pinos Altos mine - Creston Mascota mine 3,061 La India mine 561 Meliadine project 61,330 Other 480 Total Development Capital 121,005
Total Capital Expenditures $ 179,427
Dividend Record and Payment Dates for the Second Quarter of 2018
Agnico Eagle's Board of Directors has declared a quarterly cash dividend of $0.11 per common share, payable on June 15, 2018 to shareholders of record as of June 1, 2018. Agnico Eagle has declared a cash dividend every year since 1983.
Other Expected Dividend and Record Dates for 2018
| Record Date | Payment Date |
| August 31 | September 14 |
| November 30 | December 14 |
Dividend Reinvestment Plan
Please see the following link for information on the Company's dividend reinvestment plan: Dividend Reinvestment Plan
First Quarter 2018 Results Conference Call and Webcast Tomorrow
Agnico Eagle's senior management will host a conference call on Friday, April 27, 2018 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 7288308. The conference call replay will expire on May 27, 2018.
The webcast, along with presentation slides, will be archived for 180 days on the Company's website.
Annual Meeting
The Company's Annual and Special Meeting of Shareholders (the "AGM") will be held on Friday, April 27, 2018 at 11:00 am (E.D.T). The AGM will be held at the Delta Toronto
Hotel (SoCo Ballroom) - 75 Lower Simcoe St, Toronto, ON M5J 3A6.
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 9189563. The conference call replay will expire on May 27, 2018.
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 Drive Strong First Quarter Performance as the Mine Enters its Thirtieth Year of Production
The 100% owned LaRonde mine in northwestern Quebec achieved commercial production in 1988.
LaRonde Mine - Operating Statistics Three Months Ended Three Months Ended March 31, 2018 March 31, 2017
| Tonnes of ore milled (thousands of tonnes) | 531 | 559 |
| Tonnes of ore milled per day | 5,901 | 6,215 |
| Gold grade (g/t) | 5.49 | 4.61 |
| Gold production (ounces) | 89,785 | 78,912 |
Production costs per tonne (C$) $ 155 $ Minesite costs per tonne (C$) $ 121 $ Production costs per ounce of gold produced ($ per ounce): $ 723 $ Total cash costs per ounce of gold produced ($ per ounce): $ 427 $
Production costs per tonne in the first quarter of 2018 increased when compared to the prior-year period due to higher underground and mill maintenance costs, lower throughput and the timing of unsold inventory. Production costs per ounce in the first quarter of 2018 increased when compared to the prior-year period due to the reasons described above and the strengthening of the Canadian dollar relative to the U.S. dollar between periods, partially offset by higher gold production. For the remainder of the year, grades are expected to be more in line with 2018 guidance and mill throughput is expected to increase from levels seen in the first quarter of 2018.
Minesite costs per tonne5 in the first quarter of 2018 increased when compared to the prioryear period due to lower throughput levels and higher underground and mill maintenance costs. Minesite costs per tonne are expected to be in line with guidance over the balance of 2018. Total cash costs per ounce in the first quarter of 2018 decreased when compared to the prior-year period due to higher gold production and higher by-product metal revenues.
Gold production in the first quarter of 2018 increased when compared to the prior-year period due to higher grades resulting from the mining sequence in the lower part of the mine.
5Minesite costs per tonne is a Non-GAAP measure. For a reconciliation of this measure to production costs, see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding At the LaRonde 3 project, conversion and exploration drilling is ongoing at depth as the Company continues to evaluate a phased approach to development between the 311 level (a depth of 3.1 kilometres) and the 350 level (a depth of 3.5 kilometres). Under this phased approach, an additional two or three levels will be developed per year in either the east or west areas of the mine through 2022. This is expected to result in the conversion of approximately 1.2 million ounces of mineral resources into mineral reserves, with full mining activities to commence in 2022. The Company believes that this phased approach is a lower risk, less capital intensive option for developing the deeper levels of the LaRonde mine.
LaRonde Zone 5 – Commercial Production Remains on Schedule for Early Third Quarter 2018
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.
In the first quarter of 2018, development of the first five mining stopes was essentially completed and the first production blast is expected in early May 2018. The paste plant is expected to be commissioned in the second quarter of 2018. The development of LaRonde Zone 5 is on budget and on schedule with commercial production on schedule for early in the third quarter of 2018. For additional details on the project see the Company's news release dated February 15, 2017.
Canadian Malartic Mine – Record Quarterly Gold Production; First Drill Results Reported for East Malartic Project
In June 2014, Agnico Eagle and Yamana acquired 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, 2018 March 31, 2017
| Tonnes of ore milled (thousands of tonnes) | 2,510 | 2,433 | ||
| Tonnes of ore milled per day | 27,888 | 27,029 | ||
| Gold grade (g/t) | 1.17 | 1.03 | ||
| Gold production (ounces) | 83,403 | 71,382 | ||
| Production costs per tonne (C$) | $24 | $18 | ||
| Minesite costs per tonne (C$) | $25 | $22 |
Production costs per ounce of gold produced ($ per ounce): $ 567 $ Total cash costs per ounce of gold produced ($ per ounce): $ 566 $
Production costs per tonne in the first quarter of 2018 increased when compared to the prior-year period primarily due to higher contractor and fuel costs and the timing of unsold inventory, partially offset by higher throughput. Production costs per ounce in the first quarter of 2018 increased when compared to the prior-year period due to the reasons described above and the strengthening of the Canadian dollar relative to the U.S. dollar between periods, partially offset by higher production.
Minesite costs per tonne in the first quarter of 2018 were higher when compared to the prior-year period due to the reasons described above. Total cash costs per ounce in the first quarter of 2018 were higher when compared to the prior-year period due to the reasons described above, partially offset by higher production.
Gold production in the first quarter of 2018 increased when compared to the prior-year period due to higher throughput and higher grades.
The Barnat extension project continues to progress on schedule and on budget. Since the beginning of the first quarter of 2018, the following activities have been undertaken:
- Construction of the temporary bridge which became operational in January 2018
- Ongoing overburden stripping and overload (new road bed foundation) preparation
- Backfill of the historically mined Buckshot pit was essentially completed
Production activities at Barnat are scheduled to begin in late 2019.
Infill Drilling at Odyssey Confirms Resource Grade; First Drill Results Reported from the East Malartic Zone
At the Canadian Malartic mine, exploration programs are ongoing to evaluate a number of near pit and underground targets. In addition, the Partnership is exploring the East Malartic and the Odyssey properties, which are located to the east of the Canadian Malartic open pit. These opportunities have the potential to provide new sources of ore for the Canadian Malartic mill.
The 2018 exploration program will consist of 140,000 metres of drilling with a budgeted cost (50% basis) of $8.6 million, including 80,000 metres for valuation in the upper and middle parts of the East Malartic Zone. There are currently three drill rigs at the East Malartic project and six rigs at the Odyssey project. In the first quarter of 2018, 22,089 metres of drilling (46 holes) were completed at the Odyssey project and 13,600 metres (18 holes) were completed at the East Malartic project.
Odyssey Zone
The Odyssey Zone lies on the east side of the Canadian Malartic property, approximately 3.0 kilometres east of the current limit of the Canadian Malartic open pit. Exploration results from the Odyssey Zone were last reported in the Company's news release dated February 15, 2017.
The Odyssey Zone is composed of multiple mineralized bodies spatially associated with a porphyritic intrusion close to the contact of the Pontiac Group sediments and the Piché Group of volcanic rocks. They are grouped into two parallel elongated sheets, the Odyssey North and Odyssey South zones approximately 500 metres apart, which strike eastsoutheast and dip steeply south. The Odyssey North Zone plunges shallowly to the east and has been traced from a depth of 600 to 1,400 metres below surface along a strike length of approximately 1.3 kilometres. The Odyssey South Zone has been located between approximately 200 and 550 metres below surface over a strike length of 1.2 kilometres.
Initial indicated mineral resources for the Odyssey Zone are estimated at 9,000 ounces of gold (108,000 tonnes grading 2.45 g/t gold), while inferred mineral resources for the Odyssey Zone are estimated at 838,000 ounces of gold (11.2 million tonnes grading 2.32 g/t gold) as of December 31, 2017. All mineral resources are on a 50% basis.
Selected recent drill intercepts from the Odyssey South Zone are set out in the table below. The drill-hole collars are located on the Canadian Malartic and Odyssey local geology map, and the pierce points are shown on the composite longitudinal section. The intercepts reported for the Odyssey South Zone show uncapped and capped grades over estimated true widths, based on a preliminary geological interpretation that is being updated as new information becomes available with further drilling.
Recent exploration drill results from the Odyssey South Zone
| Drill hole | Location | From (metres) | To (metres) | Depth of midpoint below surface (metres) | Estimated true width (metres) | Gold grade (g/t) (uncapped) | Gold grade (g/t) (capped)* |
|---|---|---|---|---|---|---|---|
| ODY17-5189 | Odyssey South | 499.0 | 521.0 | 427 | 18.1 | 2.1 | 2.1 |
| ODY17-5191 | Odyssey South | 479.7 | 489.0 | 421 | 7.8 | 2.9 | 2.9 |
| ODY18-5196 | Odyssey South | 337.2 | 347.0 | 270 | 8.9 | 7.3 | 3.7 |
| ODY18-5198 | Odyssey South | 385.7 | 388.6 | 273 | 2.8 | 39.1 | 18.5 |
| ODY18-5201 | Odyssey South | 444.0 | 463.1 | 319 | 18.2 | 2.2 | 2.2 |
| ODY18-5202 | Odyssey South | 410.4 | 420.5 | 369 | 8.3 | 2.4 | 2.4 |
| ODY18-5207 | Odyssey South | 319.0 | 339.2 | 241 | 18.8 | 2.5 | 2.5 |
| ODY18-5218 | Odyssey South | 448.6 | 453.0 | 379 | 3.9 | 2.5 | 2.5 |
| and | Odyssey South | 462.0 | 469.5 | 391 | 6.7 | 2.9 | 2.9 |
| ODY18-5219 | Odyssey South | 455.5 | 466.5 | 399 | 9.5 | 2.4 | 2.4 |
| ODY18-5221 | Odyssey South | 367.5 | 374.8 | 271 | 6.9 | 3.6 | 3.6 |
- Results from the Odyssey Zone use a capping factor of 20 g/t gold.
[Canadian Malartic and Odyssey Local Geology Map]
[Canadian Malartic and Odyssey Composite Longitudinal Section]