Agnico Eagle Reports Third Quarter 2022 Results – Solid Production and Cost Performance; Guidance Reiterated FOR 2022; Commercial Production Declared at Amaruq Underground
1
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 2022 RESULTS – SOLID
PRODUCTION AND COST PERFORMANCE; GUIDANCE REITERATED FOR 2022;
COMMERCIAL PRODUCTION DECLARED AT AMARUQ UNDERGROUND;
CONTINUED PROGRESS AT KEY DEVELOPMENT AND EXPLORATION PROJECTS
Toronto (October 26, 2022) – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM)
("Agnico Eagle" or the "Company") today reported financial and operating results for the
third quarter of 2022.
Third quarter of 2022 highlights:
• Strong performance resulted in solid quarterly gold production and costs –
Payable gold production 1 in the third quarter of 2022 was 816,795 ounces at
production costs per ounce of $804, total cash costs per ounce 2 of $779 and all-in
sustaining costs ("AISC") per ounce 3 of $1,106. For the third quarter of 2022, the
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 Total cash costs per ounce 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 the detailed calculation of production
costs per ounce and the reconciliation of total cash costs to production costs, see "Reconciliation of Non -
GAAP Financial Performance Measures" below. See also "Note Regarding Certain Meas ures of
Performance".
3 AISC per ounce 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 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".
2
Company reported quarterly net income of $0.17 per share, with adjusted net
income4 of $0.52 per share. Operating cash flow after changes in non -cash
components of working capital was of $1.26 per share
• Operating results include record gold production at Amaruq and sustained
productivity improvements at Macassa – In the third quarter of 2022 at Amaruq,
continued positive grade reconciliation and overall stron g operating performance
which resulted in a record quarter, with payable production of 122,994 ounces of
gold. At Macassa, enhanced ventilation, better equipment availability and other
operational efficiencies resulted in better -than-forecast production, with payable
production of 51,775 ounces of gold
• Gold production, cost and capital expenditure guidance reiterated for 2022 –
Expected payable gold production in 2022 remains unchanged at between 3.2 and
3.4 million ounces. Due to cost inflation in 2022 , total cash costs per ounce and
AISC per ounce are now expected to be near the top end of the guided ranges of
between $725 and $775 and $1,000 and $1,050, respectively. Total expected
capital expenditures (excluding capitalized exploration) for 2022 rem ain estimated
to be approximately $1.4 billion. The Company's guidance for 2022 includes
production, costs and capital expenditures for the period commencing January 1,
2022 for the Detour Lake, Macassa and Fosterville mines
• Pressures related to cost inf lation, workforce availability and COVID -19
remained manageable through the third quarter of 2022, but these pressures
could be challenging in the coming months – In the third quarter of 2022, inflation
on production costs was largely driven by higher inpu t prices in key consumables
(such as energy, cyanide and steel), which have experienced increases above the
5% to 7% general inflation rate forecast at the beginning of the year. Workforce
availability and supply chain issues for equipment parts also rema ined challenging
during the quarter. These pressures continued to be partially offset by solid
operational performance, the pooling of resources within the regions in which the
Company operates, optimization and cost saving initiatives, synergies resulting from
the merger with Kirkland Lake Gold Ltd. ("Kirkland Lake Gold") on February 8, 2022
(the "Merger") and positive foreign exchange impacts (weaker Euro and Canadian
4 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 prepare 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".
3
and Australian dollars). Although the Company has started to see a gradual easing
of i nflationary pressures and some relief in supply chain procurement, these
pressures could still be challenging in the fourth quarter of 2022 and into 2023. The
Company's focus will continue to be on increasing operational efficiencies and cost
optimization at all mining operations
• Interim Target of 30% Greenhouse Gas Reduction by 2030 – The Company
continues to be committed to addressing climate -change and reaching net-zero by
2050. Supporting this commitment, the Board approved adopting an interim target
to reduce greenhouse gas emissions by 30% by 2030. The Company will be
releasing a Climate Action report in the fourth quarter of 2022
• Development Projects Progressing as Planned
• Amaruq Underground – The project was completed on schedule and on
budget with commercial production achieved on August 1, 2022
• Odyssey project – Construction and development activities remain on
schedule. Shaft sinking activities expected to commence in early January
2023, with initial production from the Odyssey South ramp expected in March
2023
• Detour Lake mine – Projects to increase mill throughput to 28 million tonnes
per year ("Mtpa") continue to advance as planned. Installation of the screen
before the secondary crusher on line two was completed in August 2022 and
resulted in daily average throughput of 3,515 tonnes per hour (equivalent to
28 Mtpa) for the month of September. Installation of a screen on line one is
expected to be completed in the fourth quarter of 2022 and the focus will be
on maximizing daily throughput levels
• Exploration Continues to Deliver Positive Results at Minesites and
Development Projects
• Odyssey project – In the third quarter of 2022, an expanded drill program
focused on infill drilling at Odyssey South, on drill testing the Odyssey
Internal zones and on infill and step -out drilling at East Gouldie. A recent
intercept at Odyssey South yielded 5.7 grams per tonne ("g/t") gold over 21.8
metres at 367 metres depth. At East Gouldie, the drilling in the core of the
deposit continues to return wide, high-grade intersections, with recent results
4
including 4.6 g/t gold over 50.7 metres at 1,537 metres depth. Step -out
drilling to the west of East Gouldie continues to test the western extension
and filling the gap between East Gouldie and the Norrie Zone, with a recent
intercept of 4.2 g/t gold over 12.8 metres at 1,331 metres depth in an area
approximately 100 metres above the Norrie Zone and 670 metres west of the
current East Gouldie mineral resources
• Detour Lake mine – The conversion and expansion drilling program in the
West Pit extension continues to intersect wide zones of mineralization
immediately adjacent to the current open pit, with recent results including 1.9
g/t gold over 118.8 metres at 419 metres depth, and higher -grade intervals
along the westerly plunge, with a recent highlight including 6.1 g/t gold over
12.2 metres at 918 metres depth and approximately 1,935 metres west of the
pit, where infill drilling continues to confirm the down -plunge and western
extension of the deposit
• Macassa mine – The extension of the ramp from Macassa to the
Amalgamated Kirkland ("AK") deposit is now completed. Two underground
drills are operating in the ramp, with one focused on infill drilling higher grade
areas near the proposed bulk sample. The Company believes ore could be
sourced for the Macassa mill in early 2024, which could provide flexibility to
the operations. Recent r esults include a highlight intercept of 30.7 g/t gold
over 3.6 metres at 64 metres depth
• Fosterville mine – In the third quarter of 2022, step-out drilling returned high-
grade results west of the Lower Phoenix zone and identified a new
mineralized structure (Cardinal zone) in the hanging wall of Lower Phoenix.
Highlight visible-gold intercepts from the Cardinal zone include 365.5 g/t gold
over 1.1 metre at 1,682 metres depth; 226.2 g/t gold over 1.4 metres at 1,716
metres depth; and 168.6 g/t gold over 2.9 metres at 1,682 metres depth
• Hope Bay project – Drilling continues to ramp -up with eight rigs now in
operation and the addition of a second drill contractor. Good grades and
thicknesses were encountered at Doris in the BCO and BCN zones. Recent
results west of the BTD Connector zone include 7.3 g/t gold over 15.8 metres
at 459 metres depth and 19.6 g/t go ld over 4.5 metres at 520 metres depth.
Drilling ramped up at Madrid in the third quarter of 2022
5
• Focus remains on disciplined capital allocation and strong financial flexibility
– On July 24, 2022, the Company repaid the $100 million 4.87% Series C seni or
notes at maturity with available cash. At September 30, 2022, the Company's net
debt5 totalled $519.9 million. In the third quarter of 2022, the Company repurchased
999,320 common shares for $42.6 million through its normal course issuer bid
("NCIB"). Under the NCIB, the Company is authorized to purchase up to $500
million of its common shares (up to a maximum of 5% of its issued and outstanding
common shares) and year to date approximately $65 million has been purchased
• A quarterly dividend of $0.40 per share has been declared
"In the third quarter of 2022, the Company posted the best safety performance in its 65
year history and delivered solid operational results. With a strong first nine months of the
year, the Company is tracking well to deliver on its production and cost guidance in 2022,"
said Ammar Al-Joundi, Agnico Eagle's President and Chief Executive Officer. "Despite
headwinds from a lower gold price and cost inflation, the Company's financ ial position
remains strong. It gives us strategic flexibility and provides us with the ability to continue
advancing our key development projects and exploration programs while maintaining
capital returns to our shareholders," added Mr. Al-Joundi.
Third Quarter 2022 Financial and Production Results
In the third quarter of 2022 , net income was $79.6 million ($0.17 per share). This result
includes the following items (net of tax): unrealized mark-to-market losses on foreign
exchange and oil hedges of $134.5 million ($0.30 per share), foreign currency translation
losses on deferred tax liabilities of $19.6 million ( $0.04 per share), non -cash foreign
currency translation gains of $7.2 million ($0.02 per share), realized losses on foreign
exchange and oil hedges of $6.9 million ($0.02 per share), mark -to-market gains on the
Company's investment portfolio of $3.1 million ($0.01 per share), and various other
adjustment losses of $5.1 million ($0.02 per share). The unrealized mark-to-market losses
on foreign exchange hedges losses are a result of the rapidly appreciating U.S. dollar
relative to the Euro, and Canadian and Australian dollars over the last two weeks of the
quarter (for additional details see section on the Company's financial flexibility below).
5 Net debt is a non -GAAP measure that 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 Mea sures – Reconciliation of Long -Term Debt to Net
Debt". See also "Note Regarding Certain Measures of Performance".
6
Excluding these items would result in adjusted net income of $235.4 million or $0.52 per
share for the third quarter of 2022 . For the third quarter of 2021 , the Company reported
net income of $119.0 million ($0.49 per share).
Included in the third quarter of 2022 net income, and not adjusted above are care and
maintenance costs net of tax of $5.9 million ($0.01 per share) and a non-cash stock option
expense of $3.3 million ($0.01 per share).
In the first nine months of 2022, the Company reported net income of $465.2 million ($1.08
per share). This compares with the first nine months of 2021, when net income was $460.6
million ($1.89 per share).
For financial reporting purposes, the Merger was determined to be a business combination
with Agnico Eagle identified as the acquirer. As a result, the purchase 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 revalue d at the forecast gold price in the
period the inventory was expected to be sold. The revalued inventory subsequently sold
during the third quarter of 2022 resulted in additional production costs of approximately
$3.1 million ($2.1 million after tax) during the quarter. The revalued inventory subsequently
sold during the first nine months of 2022 resulted in additional production costs of
approximately $156.0 million ($108.0 million after tax). 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 adjusted out of the total cash costs per ounce and
AISC in the third quarter of 2022.
The decrease in net income in the third quarter of 2022 compared to the prior-year period
is primarily due to unrealized mark -to-market losses on foreign exchange hedges, higher
exploration and amortization costs due to the inclusion of the Detour, Fosterville and
7
Macassa mines and higher general and administrative expenses, offset by higher mine
operating margins6 (from higher sales volumes following the Merger).
The increase in net income in the first nine months of 2022 compared to the prior-year
period is primarily due to higher mine operating margins (from higher sales volumes
following the Merger). The overall increase in net income was partially offset by the
unrealized mark -to-market losses on foreign exchange hedges, higher explor ation and
amortization costs due to the inclusion of the Detour, Fosterville and Macassa mines and
higher general and administrative costs. In addition, other expenses and care and
maintenance costs offset the higher operating margins.
In the third quart er of 2022 , cash provided by operating activities was $575.4 million
($558.4 million before changes in non-cash components of working capital), compared to
the third quarter of 2021 when cash provided by operating activities was $297.2 million
($419.9 million before changes in non-cash components of working capital).
The increase in cash provided by operating activities (before changes in non -cash
components of working capital) in the third quarter of 2022 , compared to the prior -year
period, is primarily due to higher sales volumes following the Merger, partially offset by
lower realized metal prices.
In the first nine months of 2022, cash provided by operating activities was $1,716.1 million
($1,630.3 million before changes in non -cash components of working capital), compared
to the first nine months of 2021 when cash provided by operating activities was $ 1,083.2
million ($1,289.9 million before changes in non -cash components of working capital). A
non-cash fair value adjustment on inventory re lated to the Merger of $156.0 million was
included in production costs and as a result included in cash provided by operating
activities before changes in non -cash components of working capital for the first nine
months of 2022 . The non -cash fair value ad justment on inventory was then reversed
through changes in non-cash components of working capital. Excluding the non-cash fair
value adjustment on inventory of $156.0 million, cash provided by operating activities
before changes in non-cash components of working capital was $1,786.3 million in the first
nine months of 2022.
6 Operating margin is a non -GAAP measure that is not a standardized measure under the financial report
framework used to prepare the Company' s financial statements. For a reconciliation to net income see
"Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain
Measures of Performance".
8
The increase in cash provided by operating activities in the first nine months of 2022 ,
compared to the prior -year period, is primarily due to higher net income driven by higher
sales volumes following the Merger, partially offset by lower realized metal prices. This
included non-recurring costs related to the Merger of $35.3 million in transaction costs and
$57.0 million in severance costs.
In the third quarter of 2022, the Company's payable gold production was 816,795 ounces.
This compares to quarterly payable gold production of 541,663 ounces in the prior -year
period. In the first nine months of 2022 , the Company's gold production was a record
2,335,569 ounces. Including the entire first nine month's production from the pre -Merger
Kirkland Lake Gold mines, total gold production in the first nine months of 2022 was
2,481,294. This compares to payable gold production of 1,584,473 ounces in the first nine
months of 2021 , which included 24,057 ounces and 348 ounces of pre -commercial
production of gold at the Tiriganiaq open pit at Meliadine and Amaruq underground project,
respectively.
Gold production in the third quarter of 2022 and the first nine months of 2022 , when
compared to the prior -year periods, was higher primarily due to the inclusion of the
production from the Detour Lake, Fosterville and Macassa mines. This was partially offset
by the cessation of gold production in 2022 at Hope Bay following the Company's decision
to dedicate the infrastructure to exploration activities and lower production at the
Company's Pinos Altos mine and the LaRonde complex.
Production costs per ounce in the third quarter of 2022 were $804, compared to $852 in
the prior-year period. Total cash costs per ounce in the third quarter of 2022 were $779,
compared to $784 in the prior-year period.
Production costs per ounce in the first nine months of 2022 were $846, compared to $837
in the prior-year period. Total cash costs per ounce in the first nine months of 2022 were
$769, compared to $755 in the prior -year period. Including the entire first nine month's
production from the pre -Merger Kirkland Lake Gold mines, total cash costs per ounce in
the first nine months of 2022 were slightly above the mid-point of 2022 cost guidance.
In the third quarter of 2022, production costs per ounce and total cash costs per ounce
decreased when compared to the prior-year period primarily as a result of the combination
of operations following the Merger. In the first nine months of 2022, production costs per
ounce and total cash costs per ounce increased when compared to the prior -year period
primarily due to lower production volumes from the Canadian Malartic, Hope Bay and Pinos
Altos mines, partially offset by the contribution of lower cost production (on a per ounce