Agnico Eagle Reports Second Quarter 2018 Results; Production Guidance Increased FOR 2018; Amaruq Project Receives Permit Approval; Meliadine Project Progressing ON Budget and ON
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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 SECOND QUARTER 2018 RESULTS; PRODUCTION
GUIDANCE INCREASED FOR 2018; AMARUQ PROJECT RECEIVES PERMIT
APPROVAL; MELIADINE PROJECT PROGRESSING ON BUDGET AND ON
SCHEDULE; DRILLING CONTINUES TO EXTEND MINERALIZATION AT MULTIPLE
MINE SITES
Toronto (July 25, 2018) – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM)
("Agnico Eagle" or the "Company") today reported quarterly net income of $5.0 million, or
$0.02 per share, for the second quarter of 2018. This result includes a realized gain on
asset disposals of $25.0 million ($0.11 per share) primarily related to the sale of the West
Pequop Joint Venture, Summit and PQX properties in Nevada, non-cash foreign currency
translation losses on deferred tax liabi lities of $15.9 million ($0.07 per share), non-cash
foreign currency translation losses of $3.9 million ($0.02 per share) and mark-to-market
adjustments and derivative losses on financial instruments of $2.8 million ($0.01 per
share). Excluding these items would result in adjusted net income1 of $2.6 million or $0.01
per share for the second quarter of 2018. In the second quarter of 2017, the Company
reported net income of $54.9 million or $0.24 per share.
Included in the second quarter of 2018 net income, and not adjusted above, is non-cash
stock option expense of $3.8 million ($0.02 per share).
Income and mining taxes expense for the second quarter of 2018 was $35.4 million, or an
effective tax rate of 88%. In the first six months of 2018, the income and mining taxes
expense was $59.9 million, or an effective tax rate of 55%. These tax rates are higher than
prior guidance partly due to the distribution of earnings by jurisdiction in the second quarter
of 2018 . The Company anticipates the overall effective tax rate to normalize over the
remainder of 2018 to approximately 45% for the full year 2018.
In the first six months of 2018, the Company reported net income of $49.9 million, or $0.21
per share. This compares with the first six months of 2017, when net income was $130.8
million, or $0.57 per share.
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".
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In the second quarter of 2018, cash provided by operating activities was $120.1 million
($159.5 million before changes in non-cash components of working capital), as compared
with the second quarter of 2017 when cash provided by operating activities was $184.0
million in ($197.2 million before changes in non-cash components of working capital).
In the first six months of 2018, cash provided by operating activities was $327.8 million
($340.1 million before changes in non-cash components of working capital), as compared
with the first six months of 2017 when cash provided by operating activities was $406.6
million ($421.2 million before changes in non-cash components of working capital).
The decrease in net income and cash provided by operating activities during the current
quarter compared to the prior year period was mainly due to lower gold sales volumes and
higher costs, partially offset by higher realized gold prices. Lower gold sales were as a
result of expected lower gold production in the period primarily due to reduced throughput
levels at Meadowbank as the mine transitions through the last full year of mining at site.
The higher costs were principally a result of the strengthening of local currencies against
the U.S. dollar and higher costs at several operations, principally at Meadowbank and
Kittila.
"Our mines continued to deliver strong operational performance during the quarter, which
has allowed us to increase 2018 production guidance to 1.58 million ounces of gold from
1.53 million ounces. Cash costs remained at the mid-point of our guidance, but we expect
these costs to trend lower in the second half of the year", said Sean Boyd, Agnico Eagle's
Chief Executive Officer. "In the second quarter, we continued to make good progress on
our development projects in Nunavut. We recently received the Type A water licence for
the Whale Tail pit at Amaruq, which allowed us to begin construction in late July, and the
shipping season is now underway at Meliadine, which should facilitate timely completio n
of the project allowing for the expected start of production in the second quarter of 2019"
added Mr. Boyd.
Second quarter 2018 highlights include:
• Operational performance remains strong – Payable gold production 2 in the
second quarter of 2018 was 404,961 ounces at production costs per ounce of $750,
total cash costs3 per ounce of $656 and all-in sustaining costs per ounce4 ("AISC")
of $921
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 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".
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".
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• Production guidance increased for 2018 – Full year production guidance is now
forecast to be 1.58 million ounces of gold compared to previous guidance of 1.53
million ounces of gold. Unit cost guidance is unchanged, with total cash costs per
ounce of $625 to $675 and AISC of $890 to $940 per ounce. However, the
Company expects total cash costs per ounce to trend lower in the second half of
2018
• Amaruq project receives permit approval – The Type A water licence for the
Whale Tail pit was approved by the Minister of Crown- Indigenous Relations and
Northern Affairs Canada on July 11, 2018. Preliminary construction work and
stripping of the Whale Tail pit began in late July , as expected, and t he Whale Tail
deposit remains on schedule and budget for the start of production in the third
quarter of 2019
• Meliadine project proceeding on schedule and on budget; step- out drilling
extends Tiriganiaq mineralization – The 2018 shipping season is underway at
Meliadine and d evelopment activities remain on track for the expected
commencement of production in the second quarter of 2019. A recent drill hole
returned 27.3 grams per tonne ("g/t") gold over 12.8 metres at 483 metres depth.
This hole is expected to extend the inferred mineral resources envelope at
Tiriganiaq
• Akasaba West Project receives Federal and Provincial authorization – The
Company will now proceed with applications for the Mining Lease and Certificates
of Authorization. The Company is reviewing the timeline for the integration of the
Akasaba West project into the Goldex production profile
• LaRonde Zone 5 (LZ5) declares commercial production and Lapa mine life
extended until the fourth quarter of 2018 – LZ5 declared commercial production
on June 1, 2018. In order to maximize production, ore from LZ5 will be batch
processed with ore from Lapa until the end of 2018
• A quarterly dividend of $0.11 per share was declared
Second Quarter Financial and Production Highlights
In the second quarter of 2018, strong operational performance continued at the Company's
mines, which led to payable gold production of 404,961 ounces, compared to 427,743
ounces in the second quarter of 2017. In the f irst six months of 2018, payable gold
production was 794,239 ounces, compared to 845,959 ounces in the 2017 period.
The lower level of production in the second quarter of 2018 and the first six months of 2018,
when compared with the prior-year periods, was primarily due to reduced throughput levels
at Meadowbank as the mine transitions through the last full year of mining at site. A
detailed description of the production of each mine is set out below.
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Production costs per ounce for the second quarter of 2018 were $750, compared to $634
in the prior-year period. Total cash costs per ounce for the second quarter of 2018 were
$656, compared to $556 per ounce in the prior-year period.
Production costs per ounce in the first six months of 2018 were $754, compared to $606
in the prior-year period. Total cash costs per ounce in the first six months of 2018 were
$652, compared with $548 in the prior-year period.
Production costs per ounce and total cash costs per ounce in the second quarter of 2018
and the first six months of 2018, when compared to the prior-year periods, were negatively
affected by lower gold production levels at Meadowbank, the strengthening of local
currencies against the U.S. dollar and higher costs at several mines (principally at
Meadowbank and Kittila). The impact of the strengthening of local currencies compared
to the second quarter of 2017 was approximately $23 per ounce.
AISC for the second quarter of 2018 were $921 per ounce, compared to $785 in the prior-
year period. The higher AISC is primarily due to expected lower gold production and higher
total cash costs per ounce compared to the second quarter of 2017.
AISC in the first six months of 2018 were $906 per ounce, compared to $764 in the prior-
year period. The higher AISC is primarily due to the same reasons as described above.
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 increased to $721.2 million at June
30, 2018, from the March 31, 2018 balance of $464.8 million.
The outstanding balance on the Company's credit facility remained nil at June 30, 2018.
This results in available credit lines of approximately $1.2 billion, not including the
uncommitted $300 million accordion feature.
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 $250 million at 4.63% due 2033. The terms of the notes are substantially the same as
the terms of the outstanding notes of the Company. The Company previously announced
the issuance of these notes in its news release dated April 26, 2018. During the quarter,
DBRS Limited changed the trend on the Company’s investment grade credit rating to
Positive from Stable and confirmed the rating at BBB (low).
Approximately 56% of the Company's remaining 2018 Canadian dollar exposure is hedged
at an average floor price of 1.28 C$/US$, of which approximately one third are designated
for capital expenditures at Meliadine. Approximately 48% of the Company's remaining
2018 Mexican peso exposure is hedged at an average floor price of 19.00 MXN/US$.
Approximately 8% of the Company’s remaining 2018 Euro exposure is hedged at a rate of
1.20. The Company’s full year 2018 cost guidance was based on assumed exchange rates
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of 1.25 C$/US$, 18.00 MXN/US$ and 1.20 US$/EUR. Agnico Eagle anticipates adding to
its operating currency hedges, subject to market conditions.
Approximately 20% of the Company's diesel exposure relating to the Nunavut operations
for the July 2018 to July 2019 consumption period is hedged at prices better than the 2018
cost guidance assumption of C$0.80 per litre. Agnico Eagle anticipates adding to its diesel
hedges, subject to market conditions.
Capital Expenditures
Total capital expenditures (including sustaining capital) in 2018 remain forecast to be
approximately $1.08 billion. The following table sets out capital expenditures (including
sustaining capital) in the second quarter and first six months of 2018.
Capital Expenditures
(In thousands of US dollars)
Three Months Ended Six Months Ended
June 30, 2018 June 30, 2018
Sustaining Capital
LaRonde mine 18,215$ 33,612$
LaRonde Zone 5 539 539
Canadian Malartic mine 13,172 29,290
Meadowbank mine 9,225 12,115
Kittila mine 13,670 23,468
Goldex mine 5,303 10,415
Pinos Altos mine 11,150 18,325
Creston Mascota mine 1,224 1,726
La India mine 1,494 2,924
Total Sustaining Capital 73,992$ 132,414$
Development Capital
LaRonde mine 1,093$ 1,935$
LaRonde Zone 5 7,448 15,001
Canadian Malartic mine 6,070 11,281
Amaruq satellite deposit 28,467 43,443
Kittila mine 24,732 43,311
Goldex mine 8,229 16,541
Pinos Altos mine 246 284
Creston Mascota mine 6,889 9,950
La India mine 182 743
Meliadine project 109,124 170,454
Other 1,158 1,600
Total Development Capital 193,638$ 314,543$
Total Capital Expenditures 267,630$ 446,957$
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Revised 2018 Guidance – Production Increased
Production for 2018 is now forecast to be 1.58 million ounces of gold (previously 1.53
million ounces). Unit cost guidance is unchanged with total cash costs per ounce of $625
to $675 and AISC of $890 to $940 per ounce. However, the Company expect s total cash
costs to trend lower in the second half of 2018.
2018 Tax Guidance
The Company anticipates the overall effective tax rate to normalize over the remainder of
2018 and expects the overall tax rate to be near the higher end of the previous guidance
range of 40% to 45% for the full year 2018.
As previousl y outlined in the Company’s news release dated February 14, 2018, the
Company expects its effective tax rates by jurisdiction for the full year 2018 to be:
Canada - 40% to 50%
Mexico - 35% to 40%
Finland - 20%
Dividend Record and Payment Dates for the Third Quarter of 2018
Agnico Eagle's Board of Directors has declared a quarterly cash dividend of $0.11 per
common share, payable on September 14, 2018 , to shareholders of record as of August
31, 2018. Agnico Eagle has declared a cash dividend every year since 1983.
Other Expected Dividend and Record Dates for 2018
Record Date Payment Date
November 30 December 14
Dividend Reinvestment Plan
Please see the following link for information on the Company's dividend reinvestment plan:
Dividend Reinvestment Plan
Second Quarter 2018 Results Conference Call and Webcast Tomorrow
The Company's senior management will host a conference call on Thursday, July 26, 2018
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.
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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 3680786. The
conference call replay will expire on August 26, 2018. The webcast, along with
presentation slides, will be archived for 180 days on the Company’s website.
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NORTHERN BUSINESS REVIEW
ABITIBI REGION, QUEBEC
Agnico Eagle is currently Quebec's largest gold producer with a 100% interest in the
LaRonde, Goldex, Lapa and LaRonde Zone 5 mines 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 Gold Grades Continue to Drive Increased Quarterly
Production
The 100% owned LaRonde mine in northwestern Quebec achieved commercial production
in 1988.
Production costs per tonne in the second quarter of 2018 increased when compared to the
prior-year period due to higher underground and mill maintenance costs, lower tonnage
and the timing of unsold concentrate inventory. The higher mill maintenance costs were
primarily related to an unscheduled five-day mill shutdown in second quarter of 2018.
Production costs per ounce in the second 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 tonne5 in the second quarter of 2018 increased when compared to the
prior-year period due to higher underground and mill maintenance costs and lower
tonnage. Total cash costs per ounce in the second quarter of 2018 decreased when
compared to the prior-year period due to higher production and by-product metal revenues,
partially offset by higher underground and mill maintenance costs and the strengthening of
the Canadian dollar relative to the U.S. dollar between periods.
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
Three Months E nded Three Months E nded
June 30, 2018 June 30, 2017
Tonnes of ore milled (thousands of tonnes) 507 520
Tonnes of ore milled per day 5,571 5,708
Gold grade (g/t) 5.46 4.51
Gold production (ounces) 84,526 72,090
Production costs per tonne (C$) 158$ 118$
Minesite costs per tonne (C$) 120$ 113$
Production costs per ounce of gold produced ($ per ounce): 744$ 647$
Total cash costs per ounce of gold produced ($ per ounce): 395$ 482$