Agnico Eagle Reports Second Quarter 2020 Results – Successful RAMP up of Operations Post Temporary COVID-19 Shutdowns; 2020
Stock Symbol: AEM (NYSE and TSX)
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(All amounts expressed in U.S. dollars unless otherwise noted)
AGNICO EAGLE REPORTS SECOND QUARTER 2020 RESULTS – SUCCESSFUL
RAMP UP OF OPERATIONS POST TEMPORARY COVID-19 SHUTDOWNS; 2020
PRODUCTION GUIDANCE INCREASED, CAPEX AND COST GUIDANCE
MAINTAINED – OPERATIONS ON TRACK FOR STRONG SECOND HALF; CREDIT
FACILITY NOW FULLY REPAID
Toronto (July 29, 2020) – Agnico Eagl e Mines Limited (NYSE:AEM, TSX:AEM)
("Agnico Eagle" or the "Company") today reported a quarterly net income of $105.3 million,
or net income of $0.44 per share, for the second quarter of 2020. This result includes non-
cash mark-to-market gains on warrants of $33.7 million ($0.14 per share), derivative gains
on financial instruments of $16.0 million ($0.07 per share), foreign currency translation
gains on deferred tax liabilities of $15.2 million ($0.06 per share), and various other
adjustments losses of $3.9 million ($0.01 per share). Excluding these items would result
in adjusted net income1 of $44.3 million or $0.18 per share for the second quarter of 2020.
For the second quarter of 2019, the Company reported net income of $27.8 million or $0.12
per share.
Included in the second quarter of 2020 net income, and not adjusted above, are a non-
cash stock option expense of $3.2 million ($0.01 per share) and temporary suspensions
costs related to the COVID-19 pandemic of $22.1 million ($13.0 million, net of tax, or $0.05
per share) and direct and incremental COVID-19 costs of $2.3 million ($1.4 million, net of
tax, or $0.01 per share).
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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In the first six months of 2020, the Company reported net income of $83.7 million, or $0.35
per share. This compares with th e first six months of 2019, when net income was $64.8
million, or $0.28 per share.
In the second quarter of 2020, cash provided by operating activities was $162.6 million
($185.2 million before changes in non-cash components of working capital), as compared
with the second quarter of 2019 when cash provided by operating activities was $126.3
million ($157.3 million before changes in non-cash components of working capital).
In the first six months of 2020, cash provided by operating activities was $326.0 m illion
($389.9 million before changes in non-cash components of working capital), as compared
with the first six months of 2019 when cash provided by operating activities was $275.0
million ($328.1 million before changes in non-cash components of working capital).
The increase in net income and in cash provided by operating activities during the second
quarter of 2020, compared to the prior year period, was mainly due to higher average
realized gold prices, and lower exploration and general and administrat ive expenses,
partially offset by lower gold sales volume, and temporary suspension costs. The lower
gold sales volumes, lower exploration expenses and suspension costs were mainly driven
by the Company's response to the COVID -19 pandemic. For part of the quarter, mining
activities were reduced or suspended at seven out of the Company's eight mines and
exploration work was interrupted. Net income was favourably affected by an unrealized
gain on warrants and on financial instruments owned by the Company.
The increase in net income and in cash provided by operating activities during the first six
months of 2020, compared to the prior year period, was mainly due to higher average
realized gold prices, and lower exploration expenses, partially offset by lower gold sales
volume, the contribution of six months of production costs from Meliadine and higher costs
from the Meadowbank Complex as the mine transitioned to the Amaruq satellite deposit,
and temporary suspension costs. The lower gold sales volume, lower exploration
expenses and suspension costs are mostly driven by the Company's response to the
COVID-19 pandemic as described above.
"The second quarter was challenging given the global COVID-19 pandemic and its impact
on our operations. While our business returned to normal production levels ahead of
schedule in June, we did have seven of our eight mines on care and maintenance at one
point during the quarter. We finished the quarter strong as our employees responded
quickly and effectively with a plan to manage the mine shut downs and subsequent restart
and ramp- up of operations while protecting the health, safety and well being of our
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employees and the communities in which we operate", said Sean Boyd, Agnico Eagle's
Chief Executive Officer. "With the ramp- up of operations now complete and with July
production expected to exceed 160,000 ounces of gold, the Company is well positioned to
have a strong second half with gold production expected to average 480,000 to 500,000
ounces per quarter with declining unit costs. As a result, we anticipate generating
significant free cash flow in the second half of 2020", added Mr. Boyd.
Second quarter of 2020 highlights include:
• Solid operational performance in the second quarter of 2020 despite COVID-19
interruptions – Payable gold production2 in the second quarter of 2020 was 331,064
ounces (including 2,651 ounces of pre- commercial gold production from the Barnat
deposit at Canadian Malartic) at production costs per ounce of $854, total cash costs
per ounce3 of $825 and all-in sustaining costs per ounce4 of $1,142. Production costs,
total cash costs per ounce and all -in-sustaining-costs ("AISC") per ounce exclude the
pre-commercial production ounces from the Barnat deposit
• Financial Impact of COVID -19 – Additional costs incurred in the second quarter
of 2020, slight increase to operating costs going forward and limited impact on
productivity to-date – Temporary suspension costs in the second quarter of 2020 were
$22.1 million (excluded from production costs and included in Other Expense). Dir ect
and incremental costs related to COVID -19 incurred by the Company in the second
quarter of 2020 were $2.3 million (included in production costs). Going forward,
COVID-19 protocols (not including compensation paid to Nunavut -based employees)
are expected to add approximately $1.0 million per month to the Company's operating
costs (or approximately $6 per ounce). In addition, the Company continues to pay for
75% of the base salaries for Nunavut-based employees at a cost of approximately $1.4
million per month (included in Other Expense). To-date, the Company has seen limited
impact on productivity as a result of COVID-19
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 AISC 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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• Full year 2020 production guidance increased while guidance for unit costs and
capital expenditures unchanged; longer -term guidance m aintained – Gold
production in 2020 is now expected to be 1.68 to 1.73 million ounces (versus previous
guidance of 1.63 to 1.73 million ounces), while total cash costs per ounce and AISC per
ounce continue to be in the range of $740 to $790 and $1,025 to $ 1,075, respectively.
Capital expenditures are expected to be approximately $690 million in 2020. Previous
gold production guidance for 2021 and 2022 remains unchanged with a mid- point of
2.05 million and 2.10 million ounces, respectively
• Strong second half 2020 outlook – The Company expects gold production to ramp
up in the second half of 2020 and average approximately 480,000 to 500,000 ounces
per quarter with total cash costs per ounce expected to be in the range of $690 to $740,
primarily as a result of the expected increase in gold production
• Successful ramp up at all operations post temporary COVID -19 shutdowns –
During the second quarter of 2020, seven of the Company's eight mines experienced
either temporary shutdowns or reduced activity levels related to government mandated
COVID-19 restrictions. All operations were subsequently restarted in a timely manner
during the quarter, with production progressively ramping up to more "steady state"
levels in June at all operations. Key operational highlights are as follows:
◦ LaRonde – with infrastructure upgrades largely completed in the first quarter of
2020, production gradually resumed in the higher -grade West mine area in late
April 2020. Grades in the West mine area continued to exceed block model
forecasts during the second quarter. Daily throughput at the LaRonde Complex
in the second half of 2020 is expected to average approximately 8,500 tonnes
per day ("tpd") with approximately 12% of the tonnage being sourced from the
West mine area. In addit ion, there is a renewed focus on minesite exploration
to expand mineral reserves and mineral resources
◦ Nunavut – Meadowbank and Meliadine both returned to the regular 14/14 work
schedule in June (although the Nunavummiut workforce has not yet returned to
work due to COVID -19 precautions). In June, mining and milling operations
returned to more normal levels at both operations. At Meliadine, mill throughput
exceeded 4,300 tpd in June and a new apron feeder will be installed in August
along with other plant modifications to complete the planned mill expansion to
4,600 tpd by the fourth quarter of 2020. Water discharge activities are
proceeding as planned. Higher grade stopes from the third mining horizon are
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being prepared for extraction in late July. At Meadowbank, progress was made
on the equipment maintenance backlog and total ore moved in June exceeded
110,000 tpd. The Meadowbank mill is currently operating as intended in excess
of 9,500 tpd from run-of-mine ore and existing stockpiles
◦ Kittila – The mine operated continuously through the COVID -19 pandemic in
the second quarter of 2020 and established a new quarterly ore production
record in the second quarter of 2020. The permit allowing for processing of 2.0
million tonnes per annum ("mtpa") was gr anted in May 2020. The expansion
project is progressing well and contractors resumed shaft sinking activities in
July 2020 following a four month delay due to COVID-19
• Exploration restarted post COVID -19 interruption – The Company's exploration
focus remains on pipeline projects, near mine opportunities and mineral reserve and
mineral resource replacement. Key exploration highlights include:
◦ Kittila – Drilling has extended the Sisar Zone by up to 500 metres to the south
with intercepts such as 5.3 grams per tonne ("g/t") gold over 3.9 metres at 1,613
metres depth, further indication of the potential of the Sisar Zone to be developed
into a new mining horizon
◦ Canadian Malartic Underground – 10 drill rigs are currently targeting the East
Gouldie Zone, and the exploration budget for 2020 has been increased by 19%
to 107,000 metres (100% basis). The aim is to tighten the drill spacing in the
high-grade core of the deposit to 75 metres ( from 150 metres currently) and to
update inferred mineral resources by year -end 2020. Initial work on an
underground exploration ramp is expected to begin in August 2020
◦ Kirkland Lake Project – Resource conversion drilling at the Upper Beaver
deposit is validating historical results in the upper portions of the deposit and
extending mineralization between 1,200 and 1,400 metres depth with intercepts
such as 9.5 g/t gold and 0.40% copper over 5.9 metres at 1,307 metres depth.
Regional drilling is also ongoing at the project's Amalgamated Kirkland ("AK")
property and Anoki deposit
◦ Santa Gertrudis – Exploration drilling at the high- grade Amelia deposit
continues to confirm the mineralization and extend it along the projected plunge
of the main ore shoot, which remains open at depth. Combined with the drilling
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of other gold targets on the property, the results show the potential for an
increase in mineral resources at year-end
• A quarterly dividend of $0.20 per share was declared
Second Quarter Financial and Production Highlights
During the second quarter of 2020, seven of the Company's eight mines experienced either
temporary shutdowns or reduced mining activities related to government mandated
COVID-19 restrictions. Following government approvals, all op erations were restarted in
a timely manner with production progressively ramping up to more "steady state" levels in
June at all operations.
The chart below illustrates the gradual monthly ramp up of production in the various
operating regions during the second quarter of 2020 and into July. Based on actual and
forecast production rates, the Company expects to reach a monthly production rate in July
2020 of approximately 160,000 to 170,000 ounces of gold. The Company expects that this
monthly rate will b e sustainable through the second half of 2020. The chart below also
shows the corresponding projected reduction in total cash costs per ounce, which is
primarily due to increased production levels.
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Notes
1. Mining activities at the Company's operations in the Abitibi region of Quebec (the LaRonde Complex, the Goldex mine and the
Canadian Malartic mine (50%)) were suspended from March 23, 2020, to April 15, 2020
2. Meadowbank and Meliadine operated at reduced levels from March 19, 2020, to early June 2020
3. Kittila operated at normal levels with the exception of a 3-day underground mine shutdown to manage one positive COVID-19 case
at the mine in April 2020. The mill operated normally during the period
4. Mining operations in Mexico (Pinos Altos, Creston Mascota and La India) were suspended from April 2, 2020, to May 18, 2020;
during the suspension residual leaching continued
5. By end of June, all operations had returned to normal operating levels
6. July 2020 forecast is representative of third quarter 2020 expected monthly operating levels; total cash-costs per ounce based on
exchange rate assumptions of USD:CAD 1.35, EUR/USD 1.15 and USD:MXN 22.22
In the second quarter of 2020, payable gold production was 331,064 ounces (including
2,651 ounces of pre- commercial gold production from the Barnat deposit at Canadian
Malartic), compared to 412,315 ounces in the prior -year period (including 31,486 ounces
of pre-commercial gold production at Meliadine and Amaruq).
In the first six months of 2020, payable gold production was 742,430 ounces (including
5,625 ounces of pre- commercial gold production from the Barnat deposit at Canadian
Malartic), compared to 810,532 ounces in the prior -year period (including 49,428 ounces
of pre-commercial production at Meliadine and Amaruq).
The lower level of gold production in the second quarter of 2020 and the first six months of
2020, when compared with the prior-year periods, was primarily due to lower production at
seven of the Company's eight mines as a result of temporary shutdowns or reduction in
activities related to government mandated COVID -19 restrictions. The Kittila mine, the
only site from the Company to operate continuously through the COVID -19 pandemic in
the second quarter of 2020, achieved an all time high quarterly ore throughput. A detailed
description of the production at each mine is set out below.
Production costs per ounce in the second quarter of 2020 were $854, compared to $735
in the prior-year period. Total cash costs per ounce in the second quarter of 2020 were
$825, compared to $652 in the prior-year period.
Production costs per ounce and total cash costs per ounce in the second quarter of 2020
increased when compared to the prior- year period primarily due to lower gold production
related to the COVID-19 shutdowns or reduction in activities as discussed above.
Production costs per ounce in the first six months of 2020 were $864, compared to $731
in the prior-year period. Total cash costs per ounce in the first six months of 2020 were
$832, compared to $638 in the prior-year period.
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Production costs per ounce and total cash costs per ounce in the first six months of 2020
increased when compared to the prior -year period primarily due to lower gold production
related to the COVID-19 shutdowns or reductions in activities and higher costs during the
first quarter of 2020 at the Meadowbank Complex and Meliadine mine which were still
ramping up.
AISC in the second quarter of 2020 was $1,142 per ounce, compared to $953 in the prior-
year period. AISC in the first six months of 2020 was $1,118 per ounce, compared to $895
in the prior-year period.
AISC in the second quarter of 2020 and the first six months of 2020 increased when
compared to the prior -year periods primarily due to higher total cash costs per ounce,
higher sustaining capital and lower gold production as described above. A detailed
description of the cost performance of each mine is set out below.
Strong Financial Flexibility; Bank Credit Facility Fully Repaid
Cash and cash equivalents and short -term investments decreased to $336.4 million at
June 30, 2020, from the March 31, 2020 balance of $1,263.4 million, primarily as a result
of the $750 million repayment of the Com pany's unsecured revolving bank credit facility
during the quarter and the $360 million repayment of the 6.67% Series B senior notes on
April 7, 2020, partially offset by the issuance of $200 million of notes with a weighted
average maturity of 11 years and a weighted average interest rate of 2.83% during the
quarter.
With operations largely back to normal, and record- high gold prices providing for strong
margins, the Company expects to generate strong net free cash flow during the second
half of the year. Consequently, the Company has (subsequent to this quarter end) repaid
the remaining $250 million outstanding on its unsecured revolving bank credit facility. The
outstanding balance on the Company's unsecured revolving bank credit facility is now nil,
and available liquidity under this facility is $1.2 billion, not including the uncommitted $300
million accordion feature.
On April 30, 2020, Fitch Ratings issued its inaugural credit rating for Agnico Eagle,
assigning a rating of BBB with a Stable Outlook considering the Company's strong credit
and growing production profile.
As of June 30, 2020, approximately 50% of the Company's remaining 2020 Canadian dollar
exposure is hedged at an average floor price above 1.34 C$/US$ and approximately 20%