Agnico Eagle Reports Third Quarter 2018 Results; Production Guidance Increased FOR 2018 and 2019; Nunavut Development Projects Continue to Advance as Planned; Drilling Extends Amaruq
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 2018 RESULTS; PRODUCTION
GUIDANCE INCREASED FOR 2018 AND 2019; NUNAVUT DEVELOPMENT
PROJECTS CONTINUE TO ADVANCE AS PLANNED; DRILLING EXTENDS AMARUQ
MINERALIZATION AT DEPTH
Toronto (October 24, 2018) – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM)
("Agnico Eagle" or the "Company") today reported quarterly net income of $17.1 million, or
$0.07 per share, for the third quarter of 2018. This result includes non-cash foreign currency
translation gains on deferred tax liabilities and non-recurring tax gains of $11.8 million ($0.05
per share) and non-cash foreign currency translation gains, mark-to-market adjustments and
derivative gains on financial instruments of $4.1 million ($0.01 per share). Excluding these
items would result in adjusted net income 1 of $1.2 million or $0.01 per share for the third
quarter of 2018. In the third quarter of 2017, the Company reported net income of $72.5
million or $0.31 per share.
Included in the third quarter of 2018 net income, and not adjusted above, is non-cash stock
option expense of $3.8 million ($0.02 per share).
In the first nine months of 2018, the Company reported net income of $67.0 million, or $0.29
per share. This compares with the first nine months of 2017, when net income was $203.3
million, or $0.89 per share.
In the third quarter of 2018, cash provided by operating activities was $137.6 million ($155.0
million before changes in non-cash components of working capital), as compared with the
third quarter of 2017 when cash provided by operating activities was $194.1 million ($207.9
million before changes in non-cash components of working capital).
In the first nine months of 2018, cash provided by operating activities was $465.4 million
($495.1 million before changes in non-cash components of working capital), as compared
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".
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with the first nine months of 2017 when cash provided by operating activities was $600.6
million ($629.9 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, lower
realized gold prices, lower by -product revenue and expected higher costs at several
operations, principally at LaRonde, Kittila and the Company's Mexican operations. Lower
gold sales were primarily as a result of the 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 decrease in net income and cash provided by operating activities in the first nine months
of 2018 compared to the prior year period was mainly due to lower gold sales volumes, lower
by-product revenue and expected higher costs at several operations, principally at
Meadowbank, Kittila and the Company's Mexican operations, partially offset by higher
realized gold prices. Lower gold sales were primarily as a result of the expected lower gold
production in the period primarily due t o reduced throughput levels at Meadowbank as
described above.
"On the back of another strong operational quarter, we have once again increased our 2018
production guidance. We now expect to produce approximately 1.60 million ounces, up from
our previous forecast of 1.58 million ounces that was announced last quarter. Total cash
costs and AISC are expected to be at or slightly below the mid-point of our guidance range",
said Sean Boyd, Agnico Eagle's Chief Executive Officer. "Our Nunavut development projects
are progressing well. Drilling continues to generate positive exploration results from the
Amaruq underground deposits and we see potential for a slightly earlier startup at Meliadine.
As a result, we now expect our 2019 gold production to exceed 1.70 million ounces, which
was the mid-point of the previous 2019 guidance", added Mr. Boyd.
Third quarter 2018 highlights include:
• Strong quarterly production with stable cost performance continues - Payable
gold production2 in the third quarter of 2018 was 421,718 ounces at production costs
per ounce of $657, total cash costs per ounce3 of $637 and all-in sustaining costs per
ounce4 ("AISC") of $848
2 Payable 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.
3 Total 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".
4 All-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 and 2019 - Based on strong operational
performance, 2018 production guidance is now forecast to be approximately 1.60
million ounces of gold, compared to previous guidance of 1.58 million ounces of gold.
Total cash costs per ounce and AISC are expected to be at or slightly below the mid-
point of the 2018 guidance range ($625 to $675 per ounce and $890 to $940 per
ounce, respectively). Given the positive development progress in Nunavut, 2019
production guidance is now forecast to exceed the mid-point of the current guidance
range (1.63 to 1.77 million ounces). The Company will update its 2019 production
guidance in February 2019
• Meliadine project on budget and slightly ahead of schedule - At the end of
September, construction at Meliadine was 89% completed and underground
development was proceeding as planned with the first production stope in the drilling
phase. Commissioning of the process plant is expected to begin in the first quarter of
2019, followed by the expected commencement of commercial production in the
second quarter of 2019
• Amaruq project continues to advance on schedule and on budget for 2018 -
Expansion of the haulage road and exterior construction activities are scheduled to be
completed in the fourth quarter of 2018. The first ore is expected to be mined early in
the second quarter of 2019. Initial production from the Whale Tail deposit is expected
to begin in the third quarter of 2019
• Drilling at Amaruq continues to expand known mineralized zones at depth,
further highlighting the potential for underground mining - Recent drilling
intersected 19.6 grams per tonne ("g/t") gold over 5.6 metres at 656 metres depth,
expanding the V Zone westward at depth. A recent confirmation hole in the Whale
Tail North deposit returned 19.5 g/t gold over 7.0 metres at 477 metres depth, which
could expand the mineral resources outline. High-grade intercepts, such as 14.2 g/t
gold over 5.1 metres at 698 metres depth, expands the deep potential of the Whale
Tail deposit to the west. Underground ramp development is continuing at Amaruq,
and the Company is evaluating potential underground mining scenarios
• A quarterly dividend of $0.11 per share was declared
Third Quarter Financial and Production Highlights
In the third quarter of 2018, strong operational performance continued at the Compa ny's
mines, which led to payable gold production of 421,718 ounces, compared to 454,362
ounces in the third quarter of 2017. In the first nine months of 2018, payable gold production
was 1,215,957 ounces, compared to 1,300,321 ounces in the prior-year period.
The lower level of production in the third quarter of 2018 and the first nine months of 2018,
when compared with the prior-year periods, was primarily due to reduced throughput levels
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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.
Production costs per ounce in the third quarter of 2018 were $657, compared to $578 in the
prior-year period. Total cash costs per ounce in the third quarter of 2018 were $637,
compared to $546 per ounce in the prior-year period.
Production costs per ounce in the first nine months of 2018 were $720, compared to $596 in
the prior-year period. Total cash costs per ounce in the first nine months of 2018 were $647,
compared with $547 in the prior-year period.
Production costs per ounce and total cash costs per ounce in the third quarter of 2018 and
the first nine months of 2018, when compared to the prior -year periods, were negatively
affected by lower gold production levels at Meadowbank and higher costs at several mines,
partially offset by the weakening of local currencies against the U.S. dollar. In addition, total
cash costs per ounce were negatively affected by lower by-product revenues.
AISC in the third quarter of 2018 were $848 per ounce, compared to $789 in the prior-year
period. The higher AISC when compared to the prior -year period is primarily due to the
expected lower gold production and higher total cash costs per ounce compared to the third
quarter of 2017.
AISC in the first nine months of 2018 were $885 per ounce, compared to $772 in the prior-
year period. The higher AISC when compared to the prior-year period 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 decreased to $533.4 million at
September 30, 2018, from the June 30, 2018 balance of $721.2 million as a result of the
capital spending primarily at the Company's Nunavut projects.
The outstanding balance on the Company's credit facility remained nil at September 30,
2018. This results in available credit lines of approximately $1.2 billion, not including the
uncommitted $300 million accordion feature.
Approximately 54% of the Company's remaining 2018 Canadian dollar exposure is hedged
at an average floor price of 1.28 C$/US$, of which approximately one third are designated
for capital expenditures at Meliadine. Approximately 49% of the Company's remaining 2018
Mexican peso exposure is hedged at an average floor price of 19.00 MXN/US$.
Approximately 14% of the Company's remaining 2018 Euro exposure is hedged at an
average floor price of 1.20 US$/EUR. The Company's full year 2018 cost guidance was
based on assumed exchange rates of 1.25 C$/US$, 18.00 MXN/US$ and 1.20 US$/EUR.
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Agnico Eagle anticipates adding to its operating currency hedges, subject to market
conditions.
Diesel relating to the Nunavut operations that is expected to be consumed through to July
2019 was purchased during the 2018 sealift season. As a result, any outstanding di esel
hedges were settled in the third quarter of 2018. Agnico Eagle anticipates opportunistically
entering into hedging arrangements with respect to its diesel exposure for future
consumption periods, subject to market conditions.
Capital Expenditures
Given the ongoing positive drill results from the deeper portions of the Whale Tail and V -
Zone deposits (see the Amaruq section of this news release), and the potential to develop an
underground mining scenario at Amaruq, in the third quarter of 2018 the Company began
capitalizing underground ramp expenditures at Amaruq, which totalled $8.7 million in the
period. Capital costs for the ramp for the remainder of the year are estimated to be $7.9
million. Capitalizing these costs is expected to reduce expensed exploration expenditures by
$16.6 million for the full year 2018.
Total capital expenditures (including sustaining capital) in 2018 remain forecast to be
approximately $1.08 billion. The additional capital costs for the Amaruq underground ramp
are expected to be offset by savings at other projects. The following table sets out capital
expenditures (including sustaining capital) in the third quarter and first nine months of 2018.
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Capital Expenditures
(In thousands of US dollars)
Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2018
Sustaining Capital
LaRonde mine $ 13,424 $ 47,036
LaRonde Zone 5 1,602 2,141
Canadian Malartic mine 13,572 42,862
Meadowbank mine 2,761 14,876
Kittila mine 14,479 37,947
Goldex mine 4,754 15,169
Pinos Altos mine 4,552 22,877
Creston Mascota mine 921 2,647
La India mine 2,498 5,422
Total Sustaining Capital $ 58,563 $ 190,977
Development Capital
LaRonde mine $ 5,208 $ 7,143
LaRonde Zone 5 4,626 19,627
Canadian Malartic mine 7,619 18,900
Amaruq satellite deposit 77,354 120,797
Amaruq underground ramp 8,700 8,700
Kittila mine 34,067 77,378
Goldex mine 7,221 23,762
Pinos Altos mine 1,707 1,991
Creston Mascota mine 4,971 14,921
La India mine 898 1,641
Meliadine project 126,398 296,852
Other 376 1,976
Total Development Capital $ 279,145 $ 593,688
Total Capital Expenditures $ 337,708 $ 784,665
Revised Guidance for 2018 and 2019 – Production Increased
Based on strong operational performance in the first nine months of the year, 2018
production guidance is now forecast to be approximately 1.60 million ounces of gold,
compared to previous guidance of 1.58 million ounces of gold. Key drivers for the increase
in 2018 production guidance includes the extension of production at Lapa to December
2018, higher grades at Meadowbank in the third quarter of 2018 and higher throughput and
grades at Canadian Malartic in the first nine months of 2018.
Total cash costs per ounce and AISC are expected to be at or slightly below the mid-point of
the 2018 guidance range ($625 to $675 per ounce and $890 to $940 per ounce,
respectively). Given the positive development progr ess in Nunavut, 2019 production
guidance is now forecast to exceed the mid-point of the current guidance range (1.63 to 1.77
million ounces). The Company will update its 2019 production guidance in February 2019.
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2018 Tax Guidance
The Company anticipate s the overall effective tax rate for 2018 to be at the previous
guidance of approximately 45% for the full year 2018.
As previously 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 Fourth Quarter of 2018
Agnico Eagle's Board of Directors has declared a quarterly cash dividend of $0.11 per
common share, payable on December 14, 2018, to shareholders of record as of November
30, 2018. Agnico Eagle has declared a cash dividend every year since 1983.
Dividend Reinvestment Plan
Please see the following link for information on the Company's dividend reinvestment plan:
Dividend Reinvestment Plan
Third Quarter 2018 Results Conference Call and Webcast Tomorrow
The Company's senior management will host a conference call on Thursday, October 25,
2018 at 11:00 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 Com pany'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 8096137. The
conference call replay will expire on November 25, 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 – Implementing Technologies to Support Futur e Automated Mining
Activities
The 100% owned LaRonde mine in northwestern Quebec achieved commercial production
in 1988.
LaRonde Mine - Operating Statistics
Three Months Ended Three Months Ended
September 30, 2018 September 30, 2017
Tonnes of ore milled (thousands of tonnes) 555 582
T onnes of ore milled per day 6,033 6,326
Gold grade (g/t) 5.18 5.87
Gold production (ounces) 88,353 105,345
Production costs per tonne (C$) $ 110 $ 93
Minesite costs per tonne (C$) $ 120 $ 101
Production costs per ounce of gold produced ($ per ounce): $ 527 $ 377
T otal cash costs per ounce of gold produced ($ per ounce): $ 514 $ 328
Production costs per tonne in the third quarter of 2018 increased when compared to the
prior-year period due to slightly higher labour costs (due to an increase in the Company's
employees versus contractors), higher underground costs, lower tonnage and the timing of
unsold concentrate inventory. Production costs per ounce in the third quarter of 2018
increased when compared to the prior-year period due to the reasons described above and
lower production.
Minesite costs per tonne5 in the third quarter of 2018 increased when compared to the prior-
year period due to slightly higher labour costs, higher underground costs and lower tonnage.
Total cash costs per ounce in the third quarter of 2018 increased when compared to the
prior-year period due to the reasons described above, lower production and lower by-product
metal revenues.
Gold production in the third quarter of 2018 decreased when compared to the prior -year
period due to lower tonnage and lower grades resulting from the mining sequence.
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" below.