Agnico Eagle Reports First Quarter 2022 Results – Strong Operational Performance; Integration Ahead of Schedule and Corporate Merger Synergies Better Than Expected; Good
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Stock Symbol: AEM (NYSE and TSX)
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AGNICO EAGLE REPORTS FIRST QUARTER 2022 RESULTS – STRONG
OPERATIONAL PERFORMANCE; INTEGRATION AHEAD OF SCHEDULE AND
CORPORATE MERGER SYNERGIES BETTER THAN EXPECTED; GOOD
PROGRESS AT KEY EXPLORATION AND DEVELOPMENT PROJECTS
Toronto (April 28, 2022) – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM)
("Agnico Eagle" or the "Company") today reported financial and operating results for the
first quarter of 2022.
First quarter of 2022 highlights:
• Solid quarterly production and costs despite COVID -19 challenges – Payable
gold production1 in the first quarter of 2022 was 660,604 ounces at production costs
per ounce of $1,002, total cash costs per ounce2 of $811 and all-in sustaining costs
("AISC") per ounce 3 of $1,079. These results include a full quarter of production
1 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.
2 Production costs per ounce and total cash costs per ounce are non-GAAP ratios that are not standardized
financial measures under the financial reporting framework used to prepare the Company's financial
statements and, unless otherwise specified, is reported on a by -product basis in this news release. For the
detailed calculation of production costs per ounce and the 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".
3 AISC per oun ce is a non -GAAP ratio that is not a standardized financial measure under the financial
reporting framework used to prepare the Company's financial statements and, unless otherwise specified, is
reported on a by -product basis in this news release. For a r econciliation 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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from the Agnico Eagle mines and 52 days of production from the legacy Kirkland
Lake Gold Ltd. ("Kirkland Lake Gold") mines (Detour Lake, Macassa and Fosterville)
reflecting the peri od after the closing of the merger between Agnico Eagle and
Kirkland Lake Gold on February 8, 2022 (the "Merger"). Including a full quarter of
production from the legacy Kirkland Lake Gold mines, total payable gold production
in the first quarter of 2022 was 806,329 ounces with total cash costs per ounce
approximately in line with the mid-point of 2022 total cash cost guidance announced
in February 2022
• Several key cornerstone assets delivered strong operational performance in
the first quarter of 2022 – The LaRonde Complex and the Detour Lake and
Fosterville mines all encountered higher grades which resulted in better than
expected gold production and costs. At LaRonde, production was 105,037 ounces
of gold at total cash costs per ounce of $560. In the post-Merger period, Detour
Lake produced 100,443 ounces of gold at total cash costs per ounce of $600, while
Fosterville produced 81,827 ounces of gold at total cash costs per ounce of $309.
The strong operational performance in the first quarter of 2022 puts these mines in
a good position to deliver on 2022 guidance forecasts
• COVID-19 challenges seen in late 2021 and early 2022 appear to be
moderating – Most of the Company's operations were affected by COVID-19 over
the past few months, but production levels and costs in the first quarter of 2022 were
generally in line with forecasts. All sites are still maintaining active protocols but
risks now appe ar to be more manageable and the situation improved through the
quarter. As a result, the Company began the reintegration of its Nunavummiut
workforce (which had been sent home in December 2021) in mid -March, after
consultation with the Nunavut Government and other local stakeholders. The
reintegration was completed in early April 2022
• Gold production, cost and capital expenditure guidance reiterated for 2022 –
Expected payable gold production in 2022 remains unchanged at approximately 3.2
to 3.4 million ounces with total cash costs per ounce expected to be between $725
and $775 and AISC per ounce expected to be between $1,000 and $1,050. Total
capital expenditures (excluding capitalized exploration) for 2022 are still estimated
to be approximately $1.4 billion. Guidance for 2022 includes production, costs and
capital for the period commencing January 1, 2022 for the Detour Lake, Macassa
and Fosterville mines
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• Inflationary cost environment continues to evolve – Cost pressures were
relatively minor in the first quarter of 2022, largely due to cost savings initiatives,
long-term agreements with local suppliers, existing fuel hedges and the
predominantly locally sourced labour force. The inflationary cost environment
continues to be dynamic given the changi ng political landscape and the effects of
COVID-19. As such, the Company will continue to monitor and assess any impacts
on forecast costs in the coming months as inflation could have more of an effect
during the remainder of the year
• Merger completed February 8, 2022; Focus Now on Delivering Synergies and
Maximizing Value Drivers – The Merger with Kirkland Lake Gold was completed
on February 8, 2022 and the integration process is gaining momentum. The senior
management team has been finalized and is focused on optimizing and leveraging
best practices to deliver on corporate and operational synergies and to maximize
value drivers:
• Expected Corporate G&A synergies (before tax) are now expected to be up
to $200 million in the first five years (up from prev ious guidance of $145
million) and up to $400 million over the next ten years (up from previous
guidance of $320 million)
• The estimate for potential operational synergies remains unchanged at
approximately $130 million per year ($440 million over five years, $1.1 billion
over 10 years). The estimate of strategic opportunities to reduce current and
future expenditures as part of the project pipeline also remains unchanged
at up to $240 million over five years and $590 million over 10 years. While
realization of these benefits will be a multi -year endeavour, encouraging
progress was made in the first quarter of 2022
• Updates on key value drivers are set out below and additional summaries
are provided in the operational section of this news release
• Update on key value drivers
• Odyssey project – Underground development and surface construction
activities remain on schedule and on budget. Inflationary cost pressures
remain manageable at this time. From a labour perspective, the Company is
successfully building a highly skilled team and the Odyssey project is
considered an employer of choice in the Abitibi. Fifteen drills are active on
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the property, with three underground drills completing infill drilling on the
Odyssey South deposit and 12 surface dr ills focused on infilling and
expanding the East Gouldie mineralization. Shaft sinking is expected to
begin in the fourth quarter of 2022 and the first underground production is
expected to commence in the first half of 2023
• Detour Lake – Mill optimizati on projects are progressing as planned and
drilling continues to intersect mineralization west of the resource pit shells,
including 30.9 grams per tonne ("g/t") gold over 16.0 metres at 451 metres
depth. Additional mineralization has also been encountered at depth (3.5 g/t
over 45.1 metres at 822 metres depth), further supporting the potential for
future underground mining. A technical evaluation is underway with the goal
of converting a portion of last year's measured and indicated mineral
resources into mineral reserves in the second quarter of 2022
• Kirkland Lake regional update – At the Amalgamated Kirkland ("AK")
deposit, the underground ramp from Macassa has been extended by 225
metres and nine drill holes have been completed in the higher-grade portion
of the deposit (assays pending). AK ore could complement the feed at the
Macassa mill as early as 2024. At Upper Beaver, infill drilling continues to
intersect significant mineralization, including 7.4 g/t gold and 0.4% copper
over 14.2 metres at 1,582 metres depth. In addition, drilling appears to have
encountered a new zone of mineralization 500 metres southeast of the main
mineralized zone (assays pending)
• Hope Bay – Drilling at the Doris deposit has discovered extensions to the
known mineralized zones. Deep exploration drilling in the BTD Connector
area returned highlights of 23.0 g/t gold over 5.0 metres at 502 metres depth
and 9.4 g/t gold over 14.9 metres at 491 metres depth. Additional drills are
expected to begin operating in the coming we eks. Exploration is expected
to continue through 2023 while a larger production scenario is being
evaluated
• Strong investment grade balance sheet; normal course issuer bid ("NCIB")
expected to commence in early May 2022 – On February 9, 2022, Fitch Ratings
placed Agnico Eagle's BBB credit rating on a Positive Outlook. At March 31, 2022,
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the Company's net debt4 totaled $503.7 million. Subsequent to the quarter end, the
Company repaid with cash the $125 million 6.77% Series C senior notes at maturity
on April 7, 2022. Under the proposed NCIB, the Company intends to purchase up
to $500 million of its common shares (up to a maximum of 5% of its issued and
outstanding common shares)
• A quarterly dividend of $0.40 per share has been declared
"I am pleased to report that our newly consolidated operations have performed very well in
the first quarter of 2022 despite challenges related to COVID -19. Supported by strong
metal prices, the first quarter generated solid operating cash flow which allo wed the
Company to continue to deliver on shareholder returns while paying down debt, and
investing in our operations and pipeline projects," said Ammar Al -Joundi, Agnico Eagle's
President and Chief Executive Officer. "During the quarter, we made good progress on the
integration of the Kirkland Lake Gold management team, workforce and mining operations,
and corporate synergies from the merger are now expected to be better than originally
expected. While most of our operations are keeping costs in line wit h forecast, we do
remain cautious as inflation and the global political and economic context has increased
pressure on costs and supply chains," added Mr. Al-Joundi.
First Quarter 2022 Financial and Production Results
In the first quarter of 2022 , net income was $109.8 million ($0.29 per share). This result
includes the following items (net of tax): a non-cash fair value adjustment on inventory sold
during the quarter related to the Merger included in production costs of $78.8 million ($0.20
per share), severance costs of $34.5 million ($0.09 per share), transaction costs relating
to the Merger of $31.3 million ($0.08 per share), derivative gains on financial instruments
of $16.0 million ($0.04 per share) and various other adjustment gains of $2.8 million ($0.01
per share). Excluding these items would result in adjusted net income 5 of $235.6 million
or $0.61 per share for the first quarter of 2022. For the first quarter of 2021, the Company
reported net income of $145.2 million or net income of $0.60 per share.
4 Net debt is a non -GAAP measure tha t is not a standardized measure under the financial reporting
framework used to prepare the Company's financial statements. For a reconciliation to long -term debt see
"Reconciliation of Non -GAAP Financial Performance Measures – Reconciliation of Long -Term Debt to Net
Debt". See also "Note Regarding Certain Measures of Performance".
5 Adjusted net income and adjusted net income per share are non-GAAP measures that are not standardized
financial measures under the financial reporting framework used to prepa re the Company's financial
statements. For a reconciliation to net income and net income per share see "Reconciliation of Non -GAAP
Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance".
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Included in the first quarter of 2022 net income, and not adjusted above, is a non -cash
stock option expense of $6.1 million ($0.02 per share), care and maintenance costs of $6.3
million ($0.02 per share) and workforce costs of employees affected by the COVID -19
pandemic (primarily Nunavut-based) of $5.2 million ($0.01 per share).
For financial reporting purposes, the Merger has been determined to be a business
combination with Agnico Eagle identified as the acquirer. As a result, the pu rchase
consideration was allocated to the identifiable assets and liabilities of Kirkland Lake Gold
based on their fair values as of February 8, 2022 (the "Purchase Price Allocation") and was
recorded in the first quarter of 2022. The finalization of the Purchase Price Allocation will
take place within twelve months following the acquisition date.
Upon closing of the Merger, under the Purchase Price Allocation, any gold inventory held
by Kirkland Lake Gold on February 8, 2022 was revalued at the forecaste d gold price in
the period the inventory was expected to be sold. The revalued inventory subsequently
sold during the first quarter of 2022 resulted in additional production costs of approximately
$113.7 million ($78.8 million after tax) during the quarte r. Given the extraordinary nature
of the fair value adjustment on inventory related to the Merger, this non -cash adjustment,
which increased the cost of inventory sold during the quarter, was normalized from net
income and net income per share and adjuste d out of the total cash costs per ounce and
AISC in the first quarter of 2022.
The decrease in net income in the first quarter of 2022 compared to the prior -year period
is primarily due to Merger costs recognized in the quarter, including a fair value adjustment
on inventory sold during the quarter (included in production costs) and transaction and
severance costs. In addition, higher exploration and development costs, higher
amortization due to the inclusion of the Detour, Macassa and Fosterville mines and higher
general and administrative costs contributed to the decrease in net income in the first
quarter of 2022 compared to the prior-year period. These higher costs were partially offset
by higher operating margins 6 (higher average realized metal pric es and higher sales
volumes) and higher gains on derivatives.
In the first quarter of 2022, cash provided by operating activities was $507.4 million ($366.0
million before changes in non -cash components of working capital), compared to the first
quarter of 2021 when cash provided by operating activities was $366.6 million ($425.5
6 Operating margin is a non-GAAP measure. For a reconciliation to net income see "Reconciliation of Non -
GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of
Performance".
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million before changes in non -cash components of working capital). The non -cash fair
value adjustment on inventory related to the Merger of $113.7 million was included in
production costs and as result included in cash provided by operating activities before
changes in non-cash components of working capital for the first quarter of 2022. The non-
cash fair value adjustment on inventory was then reversed through changes in non -cash
components of working capital.
Excluding the non-cash fair value adjustment on inventory of $113.7 million related to the
Merger, cash provided by operating activities before changes in non -cash components of
working capital was $479.7 million in the fir st quarter of 2022 and increased when
compared to the prior year period primarily due to higher sales volumes and higher realized
prices. The cash provided by operating activities before changes in non-cash components
of working capital of $479.7 million included non-recurring costs related to the Merger of
$34.8 million in transaction costs and $46.0 in severance costs.
In the first quarter of 2022, the Company's payable gold production was 660,604 ounces.
Including the entire quarter's production from the legacy Kirkland Lake Gold mines, total
gold production in the first quarter of 2022 was 806,329 ounces. This compares to
quarterly payable gold production of 516,804 ounces in the prior-year period.
Gold production in the first quarter of 2022, when compared to the prior-year period, was
higher primarily due to the inclusion of the production from the Detour Lake, Macassa and
Fosterville mines. This was partially offset by lower production at the Meadowbank
Complex and the Meliadine mine largely due to the reduction of activities at the beginning
of the quarter due to the impacts of COVID-19.
Production costs per ounce in the first quarter of 2022 were $1,002, compared to $821 in
the prior-year period. Total cash costs per ounce in the first q uarter of 2022 were $811,
compared to $734 in the prior -year period. Including the entire quarter's production from
the Kirkland Lake Gold mines, total cash costs per ounce in the first quarter of 2022 were
approximately in line with the mid-point of the 2022 cost guidance.
In the first quarter of 2022 , production costs per ounce and total cash costs per ounce
increased when compared to the prior -year period primarily due to higher minesite costs
per tonne and lower production at various operations including the Meadowbank Complex
and the Meliadine, Kit tila and Pinos Altos mines. Production costs per ounce also
increased when compared to the prior -year period due to the fair value adjustment on
inventory sold during the quarter as discussed above. A detailed description of the minesite
costs per tonne at each mine is set out below.
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AISC per ounce in the first quarter of 2022 were $1,079, compared to $1,007 in the prior -
year period. AISC per ounce in the first quarter of 2022 increased when compared to the
prior-year period primarily due to higher total cash costs per ounce, partially offset by lower
sustaining capital expenditures.7
Integration Process Gaining Momentum; Focus on Maximizing Key Value Drivers
The senior management team has now been finalized and is working at optimizing and
leveraging best practices across the Company's combined operations, with a focus on
delivering previously announced synergies and maximizing value creation. With the
second quarter of 2022 being the first full quarter of combined operations, the Company
expects to add further value in 2022 through increased production and operating cash flow
per share.
Key value drivers are listed below with additional details set out in the operational section
of this news release.
• Detour Lake mine – An updated life of mine plan is expected to be included in the
second quarter of 2022 news release in July. The Company is also evaluating the
potential to expand operations to 32 million tonnes per year and develop an
underground mining operation
• Kirkland Lake region – At Macassa, the focus is on completing Shaft #4
infrastructure and ramping up production. The Company is also evaluating the
potential integration of the AK deposit (potential production start in 2024) and the
Upper Beaver project with the existing regional infrastructure
• Odyssey project – The Canadian Malartic GP (the"Partnership remains focused
on maintaining the project schedule and budget and finding additional sources of
ore to maximize the production profile especially early in the mine life
• Kittila mine – The key priority is the completion of the shaft project and the potential
increase in throughput to 2.35 million tonnes per year
• Meliadine mine – The Phase 2 expansion to 6,000 tonnes per day ("tpd") is
expected to be complete by mid-2024. Exploration efforts are focused on increasing
mineral reserves and mineral resources to extend mine life
• Meadowbank Complex – At Amaruq, the focus remains on optimizing open pit
operations and ramping up underground production starting in the second half of
2022
7 Sustaining capital is a non-GAAP measure that is not a standardized financial measure under the financial
reporting framework used to prepare the Company's financial statements. See "Note Regarding Certain
Measures of Performance".