Agnico Eagle Mines Limited (AEM) Earnings Call Transcript & Summary

Good morning, good evening, good afternoon, wherever this finds you. Welcome to the 88th Emerging Growth Conference and day 2 of our Virtual Investor Conference. I'm Ana Berry. Today, we're running until 5 Eastern. [Operator Instructions] Now during each company's presentation, you can submit questions through the webcast module and we will attempt to address as many of these as possible at the end of the presentation. Now all of our conferences are uploaded to the Emerging Growth Conference YouTube channel. So please subscribe youtube.com/Emerging Growth Conference. And after today's event, you'll be redirected to the registration page for our next conference in the new year. So please stay on or come back to preserve your spot early. Happy to begin with Agnico Eagle Mines. They trade on the New York Stock Exchange under the symbol AEM and on the TSX under the symbol AEM. It's Canada's largest mining company and the second largest gold producer in the world. It produces precious metals from operations in Canada, Australia, Finland and Mexico and has a pipeline of high-quality exploration and development projects. Happy to welcome the VP of Investor Relations, Jean-Marie Clouet. Welcome to the program today, Jean-Marie.

Thank you, Ana, and good morning. It's a pleasure to talk to everyone listening in today. I'll be presenting the story of Agnico and discuss why Agnico, we think, is very well positioned to continue delivering superior leverage to gold. If we look at the gold sector, actually, it's having this moment in the sun, being one of the best-performing asset classes in 2025. Gold itself has risen over 60% year-to-date, and it's really reaching record levels. The rise has been driven by geopolitical uncertainty by central bank buying by the high debt levels around the world and a push for the [indiscernible] of the world. So again, record levels at this point in time with gold over $4,200 an ounce. What we've seen, it's really a strong performance that builds on another strong performance in 2024 and reflects the enduring role of the gold as a safe haven. And we believe there is still upside coming into 2026. Looking at the gold equities themselves, they actually outperformed gold this year with share performance of over 100%. And this really demonstrates the interest from investors looking for additional leverage to gold. Based on this, I'm going to really just mention that there are some forward-looking statements in this presentation, so please be aware, and I'll start talking about Agnico Eagle. If you look at Agnico Eagle, this is a high-quality, low-risk senior gold producer. As mentioned, we're the second largest gold producer in the world, and we've built that over the last 20 years. Agnico has 10 operating assets located in 5 regions and 4 countries. So we have a simple and manageable business that relies on regional concentration, providing synergies that really benefits us in terms of building a reliable, consistent business. We have approximately 85% of our production and value coming out of Canada from our 3 regions of Quebec, Ontario and Nunavut. Each region has the potential to produce over 1 million ounces per year for decades to come. So providing us with a strong basis for our production profile for the next years. We are also located in Finland. Kittila is the largest gold mine in Europe. It has also a very long life. It's cash flow generating. It's producing over $1 million of free cash flow per year. Similarly, in Australia, we have one asset, Fosterville, located in Victoria State. Fosterville is probably the best gold exploration option in the world, generating also close to $1 million of free cash flow per year. And finally, we're in Mexico, we do have one operating asset, the Pinos Altos operation. It's a mature asset coming close to end of life. But we have in place a local team that's recognized for its mine building, operating and social acceptance capability and that really will be building our next phase in the country. So as you can see, we have a differentiated strategy where our strategy is regional. We look at regions based on 2 criteria. First, we are in regions that have the geological potential for multiple mines over multiple decades. And we do that because we believe that's how you become good and that's how you create significant value. And second, we are in regions that have political stability. We believe that's important to be able to operate those mines over multiple decades as it takes really years to discover, build and operate an asset. So thinking about it, it's like what does that matter? Why do we think that regional approach is key. If you think about what makes a good miner, there's a few things that you need to think about. Do you know the ground better? So do you know the juniors that are in the region? Do you have a workforce in place? Do you have relationships with local contractors? Do you have suppliers? Do you know the suppliers in the region? Do you have actually an established supply chain and economies of scale? Do you have strong relationships with the communities, with the governments, with the indigenous communities? Do you have -- have you built mine in those regions? Do you have infrastructure in place that you can leverage? So this is what we have in the regions where we are, and we believe it does provide you a competitive advantage. And this is really our business and why we believe we've been able to really outperform a lot of our peers. So if you think about Canada, we're bigger than the 8 next companies in terms of gold production in Canada. We've been there for decades. We have an established relationships. We're the employer of choice, where we have lower turnover and we have the ability really to generate strong value in that region. And this is true in a lot of the regions where we operate. So does that work? It does, demonstrably so. If you look how we've generated value over the last 20 years, there's really 2 approaches that we look at. We're trying to increase your exposure to gold on a per share basis because that's what you care. It's like how much additional value can we generate on a per share basis. And second, can we deliver leverage to gold as the gold price goes up. Looking at the gold exposure per share, if you look on the left-hand side, we've gone over the last 20 years from 1 operating mines to 10 operating mines, actually, and now we have 1 mine to close at the end of 2024. We've gone from production of 250,000 ounces per year to a production of close to 3.5 million ounces per year. So an increase of about 14x. But that's not really what you care about. What you care about the next 3 metrics. Have we been able to generate value per share. Our gold production per share has gone -- has increased by about 3x. That's difficult to do. Our EBITDA per share has gone up 10x. Our dividend that we've been paying consistently quarter after quarter for the last 42 years, has gone up 50x. This is really how we create value for you, how we add additional production. So over the last 20 years, on a compound basis, we've increased production per share for about 4% to 5% per year. That's impressive. And so when you look at the bottom table, that explains why we've been able to outperform the gold equity index by about twice as much. We've outperformed the S&P 500, and we've outperformed the gold price. So that's really how we create value over the long term. Looking at the leverage to gold, we've delivered reliable and stable production quarter-over-quarter. We've maintained our cost under control. By doing so, we've been able to expand our margins to over 60% as the gold price increase. That matters. That's how we really return the value to shareholders. If you think about it, like over the last year, gold price has gone up at $1,200 an ounce. Our costs have gone up about $10 an ounce. So really, we've delivered the margin -- we've delivered about 99% of the gold price increase to our investors. This is how we perform. This is how we deliver. And -- so over the last 2 years, we've really generated a lot of cash, and we've strengthened our financial position and we've achieved record stock prices, as you would expect at this record gold prices. So since the start of the year, we've reduced -- we've paid down the debt. We've reduced our net debt position of about $200 million per year to a net cash position as at the end of September of $2.2 billion, and we expect to be close to $3 billion net cash position at the end of the year. So we'll strengthen our financial position. We'll continue to do so. We believe it is a competitive advantage in this sector to have a stronger balance sheet in a sector that is cyclical, that is capital intensive and especially in a period where we are building an organic pipeline that will support our production profile for decades to come and where we also would like to remain opportunistic through the cycle. If we look at our capital allocation, with this strong performance, we're in a fortunate position to be able to do a bit of everything, while maintaining a balanced and disciplined approach to capital allocation. So as mentioned, we strengthened our balance sheet position, anticipating to be in a net cash position of about $3 billion at year-end. We've also continued to pay a sustainable dividend as we've done consistently over the last 42 years. We've paid $600 million year-to-date, and we should pay about $800 million on a full year basis. We've also increased returns to shareholders through our share buyback program. We've returned about $300 million year-to-date. We expect to do another $200 million in the fourth quarter that would bring us to about $500 million and an overall return to investors this year of close to $1.3 billion, so close to 1/3 of our free cash flow generated. This is what we're targeting. We're also reinvesting in the business to a level of about $2.1 billion in sustaining growth CapEx as we continue to grow. We expect to accelerate some of that reinvestments in the coming year as we have what we believe is the best pipeline we've ever had that can really generate significant value and value per share in the coming years. And so we continue to do so in a safe manner and doing it responsibly in the communities where we operate. So moving to our projects. Again, we believe like those 5 key projects -- key value drivers, as we call them, will move the needle in the coming years. On an aggregate basis, these projects can add close to 1.3 million to 1.5 million ounces of annual production in the next 5 to 8 years. This won't be fully additive. There will be some production coming off, especially if you think about our Meadowbank operation in Nunavut and Pinos Altos operation in Mexico, which are close to end of life. However, unlike with these 5 projects, we see the potential to grow production by about 20% over the next 5 to 8 years. And more importantly, again, be able to increase our production per share, about 20% as all these projects will be self-funded. If you look at the projects themselves, Detour Lake and Canadian Malartic, those are large open pit gold mines in Canada, but the largest open pit gold mines in Canada. They have the potential to grow to about 1 million ounce all producing per year -- gold production per year, and the up decades of mine life ahead of them. Those are world-class assets, unique. They have like green electricity. They have the infrastructure, the people in place. So all those are simple expansions that will provide strong returns at current gold prices and even really when we approve those projects at a gold price of $900 an ounce. Upper Beaver, that's a project located in our Kirkland Lake camp, close to our Macassa mine, about 20 kilometers. So it benefits from synergies from, again, having infrastructure in place from our workforce and expertise in place. It has a potential to add about 210,000 ounces of gold per year starting in 2031 and contribute to the production increase in Ontario from about 1 million ounce to 1.5 million combined with Detour Lake. So this is an asset that we're advancing in terms of the exploration. We're advancing the ramp, the shaft, and we think we'll be able to approve it in 2027 and start producing in 2031. Hope Bay that's located in Nunavut. This asset has the potential to produce close to 400,000 ounces of gold per year and maintained the platform. So the Nunavut platform to a production level of 1 million-ounce per year for decades to come. We've had tremendous exploration results over the last 2 years, and we're getting ready to announce construction in the coming year. And finally, San Nicolás. This is a joint venture with Tech located in Zacatecas in Mexico, one of the best states in terms of geological potential. We're currently advancing the feasibility study, and we're waiting for the permit, and we hope we'll be able to sanction it also in the coming year. So again, overall, those 5 projects provide strong risk-adjusted returns, risk-adjusted because we either have -- they're either simple expansions of existing assets or there are mines that are being built in regions where we already operate, where we have expertise, where we have a competitive advantage in place. And so like we're really looking forward to be able to advance these projects over the next 5 to 8 years. And I'll go a bit more in detail for the main ones, so for Detour Lake, Canadian Malartic and Hope Bay. Detour Lake is the largest open pit gold mine in Canada, producing close to 700,000 ounces of gold per year. If you look at this long section, mined out in brown, you can see about 8 million ounces have been mined to date. In orange below, that's the pit reserve. That's what is in the plans to be mined over the next -- all the way to 2054. It's about 19 million ounces. And it's really all in place. below in light blue as pit resource as close to another 18 million ounces. If we include that in the production profile, it extend the mine life to 2070. And then we've also, through exploration, identified significant potential underground below the pit and to the west and we've provided a pathway really to bring this operation to 2 million-ounce per year. This is the way you can generate value here. The mill is close to capacity at 28 million tons per year. We think we can increase it to 29 million tons per year. But the key thing to bring value forward is to bring some higher grade forward. And to do so, we're looking to add an underground component and replacing about 12,000 ton per day of open pit ore at 0.9 grams per ton with underground ore at 2.3 grams per ton. By doing so, we go increasing production from several 700,000 ounces per year to 1 million ounce. We think we can get there in 2030, 2031. And when we're at the 1 million-ounce per year production for the next 14 years, that asset would be generating over $2 billion of free cash flow per year at current gold prices. So an incredible asset, long life support for our production profile for years to come. Moving on to Odyssey. This is located in Quebec. This mine, the initial discovery was in 1923, so over 100 years ago. It has been in operations as an underground mine in the '50s to the '80s. It was reopened as an open pit in 2010. So that's what you see in brown. The open pit operation is coming to an end, close to 2028. At that point, we'll be fully transitioned underground. So the proposition here is a bit different than to Detour. We do have currently an open pit mine in operation that produces about -- that runs at about 60,000 tons per day at about 1 gram per ton, producing close to 600,000 ounces per year. We are transitioning to a full underground operations. It will be the largest underground gold operation in Canada and operating at about 19,000 tons per day, but at 3 grams per ton. So the gold production overall is expected to remain fairly stable at around 550,000 ounces per year. But by doing that transition by 2029, what we'll do is we'll liberate some excess mill capacity to a level of about 40,000 tons per day. And the opportunity there is to find new ore sources to fill in that mill and increase the production from 550,000 ounces per year to 1 million ounces per year. How do we do this? First, if you look at the underground deposit itself, it's grown to over 20 million ounces over the last 8 years. We've established -- we're developing the underground mine with a ramp with a shaft. Again, that will produce about 90,000 tons per day. Because of the size of the deposit and because it keeps on extending, we believe we can add a second shaft -- a second mining front that would add about 10,000 tons per day and contribute about 220,000 ounces to the underground operations. So key here is the geological potential is still very much alive. We have 29 drill rigs operating this year and extending this deposit to the east, to the west and at depth. So continuing to expand the potential there. We're also expanding within the cap itself, the 16.5 kilometer strike that we own and where we believe there's other opportunities to keep on finding [ resources ]. If we look at how do we get to 1 million ounces, so we have the first shaft, as we mentioned, that will sustain operation about 150,000 ounces. The second shaft could bring us another 220,000 ounces. That probably will be around the 2032, 2033. And then within the region, we have satellite opportunities that we can add to our mill. The Marban deposit that we acquired this year, that will be a satellite open pit looking about 15 kilometers away from our meal. We could track ore there. We're currently drilling the deposit to define the optimum pit shape, and then we'll have to permit it. We think we'll be able to bring production fully around 2032, '33 also, adding another 15,000 tons per day at the mail and adding about 130,000 ounces to the production. And then finally, we also have the Wasamac project. That's a satellite underground project, located about 100 kilometers away from the mill. It could operate about 3,000 tons per day at about 100,000 ounces a year. So combining those 4 elements, we'll be able to get to 1 million ounce close to that 2033 year time line. There are other opportunities within the regions, as you see in this map in purple are the land package that we own and where we pretty have the ability to keep on drilling and finding additional deposits. So a lot of potential in this asset. We're working towards providing some more concrete figures as we're advancing the studies and the exploration, and we'll be able -- we're hoping to provide an update to the market in early 2027. And then moving on to the third project, Hope Bay, again, located in Nunavut. The challenging in Nunavut has always been the high fixed costs. It's -- the logistical requirements are fairly unique. You can bring material only by sea barge for about 2 months a year. So you really need to plan well in advance for your consumables, for your equipment, you need to plan for 2 years in advance, you bring everything a year in advance, and that implies a lot of fixed cost. So to be able to make this project economics, we believe you need to be at a level of over 350,000 ounces per year, and that has been the focus in -- at Hope Bay. We really want to get -- to be able to prove economics of a project over 400,000 ounces per year for the next 10 years and returned over 15% to really go ahead and build the product. So over the last 3 years, we've really focused on exploration. We've been able to prove sufficient mineralization and 3 mining fronts that would be able to report that 400,000 ounces per year. The last -- over the last 2 years, we really focused on the Patch 7 area, where we've added about 1.7 million ounces in resources over the last 2 years. We're at a level now where we're close to completing our study and being able to provide an update in early 2026. And where we really be able to advance the construction. So we're advancing some of the surface infrastructure, just to be ready for construction. We're upgrading our camps. We're bringing our power supply, our port. And so we're in a good position really to go ahead and move ahead with this project. Hope Bay, again, will be able to support the platform, the Nunavut platform to close to 1 million-ounce per year for decades to come. So between Ontario, where we have Detour, that will be 1 million ounce plus Upper Beaver, another 200,000 and Macassa, another 300,000. So Ontario will be at 1.5 million ounce per year. Quebec with Canadian Malartic itself will be a 1 million ounce with the addition of LaRonde and Goldex will also be above that, about the 1 million, 1.5 million ounce and then Nunavut at 1 million ounce. So we have a very strong basis in Canada to continue supporting our production platform for years to come. And to conclude, I really want to mention that we'll stick to the strategy that has worked. We're going to continue to be in safe jurisdictions. We're going to play off our strengths, so our regional competitive advantage. We're going to be leveraging this infrastructure as much as we can as that provides the best low-risk returns in the business. We'll treat our people well. We'll treat our communities well, our indigenous communities well and really continue to do what we've been doing really well so far. So it's a business that makes sense. We've got the best pipeline that we've had in years. And we're really looking to continue advancing it and sustaining our margins over 60% per year. So really a business that's running very well and has a lot of potential to go on in the future. And on that, like I'll pass on for any questions.

All right. Thank you so much, Jean-Marie. Yes, a few questions for you. Starting with Mike, what are you mine life estimates on your properties?

So we have about 53 million ounces in mineral reserves. So combined, we have over 15 years of mine life. Now depending on the assets, like some are extremely long life. You look at Detour, we're past 2050. Canadian Malartic, we passed 2040 and probably once we upgrade our reserves and resources, it will be past 2050. So we have very -- Kittila is over 17 years mine life. So we have very long-life assets, which is key really in terms of giving us the opportunity to build our platform organically and not being under the gun really to do some acquisitions. We can be opportunistic as we evaluate projects and look at how to fill in the pipeline in the future.

And Braden wants to know how many operating mines versus development-stage projects do you manage? And are you still exploring and/or developing other sites?

So we're operating 10 mines. But importantly, like the way we look at it, it's through our original. We have 5 regions that we manage, and that's really how we maintain a simple and manageable business. We have like those 5 key products that we talked about. That's really our key focus going forward, but we also have additional optionality within the portfolio that we're working on and we hope to be able to bring to the market in the coming years.

And Jordan wants to know what are your recovery rates? And how have they changed with the metallurgical improvements?

So that depends on the projects. We're typically between 90% to 95%, but it's going to depend on the project, on the grade, high-grade operations tend to have a much higher recovery, lower grade, lower recovery, but we're in that level. We're focused a lot on continuous improvement on increasing our throughput, increasing our recoveries year-over-year. That's now part of what has been our success over the last few years.

And Jayden asks, what are your all-in sustaining costs per ounce? And do you see any geopolitical or political factors that can change this?

Yes. So our all-in sustaining costs, it's close to $1,300 per ounce. So we're really a leader in the sector. We're easily $200 lower than our peers, our senior peers. The benefit for investing in Agnico is actually our low geopolitical risk with 85% of our production coming out of Canada, also being located in Finland, Australia, Mexico, we are already at low risk. And it's really one of the benefits and we're seeing really that our ability to operate being in places where the rule of law is maintained, and we are not concerned about the ability to maintain our operations in...

Perfect. And how sensitive are your operations to gold price fluctuations?

Yes. So we're definitely sensitive to gold. We've seen with the margin expansion like with gold price going up, our margins have gone from 50% to over 60% over the last year. So for every increase of $100 in the gold price, we generate an additional $250 million of free cash flow, and that's really like the key metric there.

And George asked, how do you engage with local communities and you mentioned this and the indigenous groups?

So any operation, any projects requires the involvement of the indigenous community. So we have indigenous relationship groups at each of our sites, at each of our regions. We have IBAs in place. We have so impact benefit agreements with the communities in which we operate. And we're actually -- Agnico is the largest payer to indigenous communities in Canada by far.

Wonderful. And last question for you, Jean-Marie. Aiden asks what are the next major catalysts that could materially change production and/or valuation?

Yes, I think the key ones. So the 5 key projects are really the main ones. The ones pretty to highlight our Detour Lake and Canadian Malartic. Again, those are world-class assets. They have the ability to produce over 1 million ounces per year. There's about 5 operations in the world that do that. There's only one in the Western Hemisphere. That's the Nevada joint venture between Barrick and Newmont in Nevada. So once we have those 2 assets operating, that will have a long mine life, where we have a strong -- what's important there is operations that have a long life that have the ability to generate significant free cash flow year-over-year and have the ability to benefit from several cycles in the gold price.

Perfect. Well, thank you so much for joining us on the conference. We wish you a very successful start to the new year.

Thank you very much, and have a good day, everybody.

Thank you. All right, everyone. We'll be right back.

Bye-bye.