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

Good morning. My name is Judith Elliott, and I'm the analyst covering mining at Raymond James. It's my pleasure today to introduce Chris Vollmershausen, Executive VP, Legal, General Counsel and Corporate Strategy at Agnico Eagle. Agnico is Canada's largest mining company and the second largest gold producer in the world with operating mines in Canada, Australia, Finland and Mexico. The company is advancing a pipeline of high-quality development projects in these regions to support sustainable growth over the next decade, while returning significant free cash flow to shareholders in the form of buybacks and dividends. Chris is a key member of Agnico's leadership team and runs the company's global legal, indigenous community, government relations and communication teams, providing strategic legal counsel to the Board and executive team. Please join me in welcoming Chris. Thank you for joining us today. Chris will provide an overview on Agnico, and then we'll transition to a fireside chat, and we welcome any of your questions. Chris, go ahead.

Thank you, Judith, and good afternoon, everyone. Today, I'd like to introduce Agnico Eagle to the room, who we are, what we do and probably most importantly, what makes us different from some of our other mining peers. Before we get started, as the lawyer, I'd like to point out the forward-looking statements, make sure everybody takes the time to read those, very important stuff. Okay. And so Agnico Eagle, as Judith said, we're the second largest gold mining company in the world, the largest mining company in Canada, currently the fourth largest publicly traded company in Canada. In 2025, we produced 3.45 million ounces of gold at peer-leading costs. We're approximately $200 to $300 below our closest competitors. As Judith noted, we operate 10 mines spread across Canada, Australia, Finland and Mexico. Those are all what we believe to be premier mining jurisdictions, where assets are organized into what we call 6 regional platforms and about 85% of our production comes from Canada. Financially, 2025 was a record year. We generated about $8 billion of EBITDA and $4.4 billion of free cash flow. This allowed us to end the year with net cash of approximately $2.7 billion, and we were able to return $1.4 billion to our shareholders through buybacks and our dividend. Today, as I said, largest mining company in Canada. What differentiates us is how we think about our business. We like to think that we're not just a good mining business, but a good business that happens to mine. We don't see ourselves as a global company, but really more as a regional company. Unlike our peers who operate globally and will chase the assets wherever they are, our strategy is to operate only in regions that meet 2 important criteria. One, they must have the geologic potential to operate multiple mines for multiple decades. That part is probably self-evident. But number two, and probably more importantly, is they must have the political stability and the community support to operate those multiple mines for multiple decades. And that's how we find ourselves in the regions that we're in. Why does that matter? Because operating multiple assets over long periods of time in the same region creates a tangible and durable competitive advantage. With a global workforce of about 18,000 people, the advantage doesn't come from scale. It comes from local knowledge and long-standing relationships. In the regions we are, we benefit from the deep operational expertise and engaged workforce. In some cases, we even have third-generation workers at our mines. Our regional focus also gives us competitive advantage as we enter our next phase of growth. And does the strategy work? I think the results speak for themselves. As you look at the slide there, over the past 20 years, we've grown total gold production by about 14x. Well, yes, that's impressive alone, what really matters is the value creation per share. Over that same 20-year period, we have nearly tripled gold production per share. Our EBITDA per share is up by 18x, and our dividend has grown around 50x. We have outperformed both the S&P 500 and the XAU Index with a compound annual return of about 13% over 20 years. We think that's quite impressive. And it's not accidental. That's our disciplined regional strategy in action. What we're most proud of today is we see a clear path to continue growing value per share over the next decade, so 20 years back and 10 years forward. Consistently growing production per share is difficult over long periods of time and it becomes even more challenging as the company grows. Yet notwithstanding those challenges, as the world's second largest gold producer with approximately 3.5 million ounces a year, we see a clear and credible path to continue growing by that potential 20% to 30% over the next decade. Our high-quality growth pipeline has that potential, and that will bring us over 4 million ounces in the 2030s. This growth comes from expanding world-class assets, namely the Detour Lake and Canadian Malartic mine and from developing new mines at Upper Beaver in Ontario and at Hope Bay in Nunavut. These are all located in regions where we currently operate where infrastructure is in place and where we have a clear competitive advantage. This is disciplined growth aligned with our strategy and will create long-term value for shareholders. So first, I'll talk a little bit about Detour Lake. Detour Lake is the largest gold mine in Canada and one of the most significant global gold assets. The operation was first an underground mine in the '80s and '90s, and then it restarted as an open pit in the 2010s. Over the last 5 years, we've added approximately 27 million ounces across all categories of reserves and resources, growing the resource base from 20 million to 43 million ounces of gold, while at the same time also depleting 4 million ounces. This was achieved at an existing operation with an experienced workforce and green electricity from Ontario. This production is expected to grow from 700,000 ounces in 2026 to more than 1 million ounces a year in 2030s. This growth will be driven by the addition of an underground component, which will replace lower-grade open pit material with higher ground, underground ore while modestly expanding the mill capacity. With a mine life extending beyond 2050, Detour Lake offers scale, low cost and strong risk-adjusted returns. Next is Canadian Malartic. Canadian Malartic is the second largest gold mine in Canada, second only to Detour, the one we just talked about and another cornerstone asset for Agnico. This deposit was discovered over 100 years ago. It operated as an underground mine from the '50s and '60s and was restarted as an open pit in the early 2000s. Over the past 8 years, our exploration team has added approximately 22 million ounces of mineral reserves and resources at this mine. Combined with Detour Lake, we have added nearly 50 million ounces of gold at Canada's 2 largest gold mines in just the last decade. Canadian Malartic is going to transition from open pit back to underground. Production is expected to grow from approximately 550,000 ounces this year to over 1 million ounces per year by the mid-2030s. This growth will be driven by higher-grade underground mining, as you can see on the slide, the addition of a second shaft and the development of 2 satellite operations in the region. This asset offers scale, low cost and attractive risk-adjusted returns by leveraging the existing infrastructure we have in place. The third element of our growth strategy is Upper Beaver. Upper Beaver is going to be a new mine that's under development in the Kirkland Lake camp of Ontario, located only about 20 kilometers from one of our existing assets called Macassa. This project benefits from our strong regional presence and is being advanced through a phased approach. Development is ahead of schedule, and we are accelerating spending to bring initial production forward to 2030. Once in operation, Upper Beaver is expected to produce 200,000 to 220,000 ounces of gold per year and can unlock additional regional exploration potential. And finally, of the projects today, we're going to talk about Hope Bay. Hope Bay is a redevelopment of a past-producing mine in Nunavut, Northern Canada and represents our next major platform of growth in that region. The project has the potential to produce approximately 400,000 to 425,000 ounces of gold a year, starting around 2030 with significant exploration upside and potential along an 80-kilometer greenstone belt. This would be the fourth mine that we'll have built in Nunavut, allowing us to leverage existing infrastructure, regional experience, long-standing relationships with the Inuit community and deliver, again, attractive risk-adjusted returns. To conclude, Agnico Eagle is very well positioned to continue creating value for shareholders. We have a clear and credible path to grow production by 20% to 30% over the next decade, supported by our high-quality project pipeline. Beyond that, we see additional upside driven by strong exploration, opportunities to expand and extend our existing assets and further optionality within the portfolio that we continue to review. We're in the strongest position we've ever been, supported by high-quality assets, disciplined capital allocation and our proven regional strategy that works. We're confident in our ability to deliver on this next phase of growth and to continue creating long-term value for you, our owners. Judith?

Thanks, Chris. So now we'll move into some Q&A. Before I get going with my questions, does anyone have anything they'd like to ask? Sure, go ahead.

So you guys seem to have [indiscernible].

So the question, sorry, with such a strong pipeline, how do you balance your projects? And what are key execution risks to look for?

Sure. Thanks for the question. And so I think a couple of elements to that. One is the phased approach we're taking. So for example, Detour Lake under development now for the underground component. When we initially announced that, it was a start with just $100 million to develop the exploration ramp and take a bulk sample. That phased approach allows us to kind of turn it off or on if circumstances change, but gives us that flexibility. Upper Beaver as well, an initial $200 million investment to do an exploration ramp and an exploration shaft with that same sort of phased approach. Up at Hope Bay, for example, given the logistics there, everything has to come in by barge. So there's already been a lot of preplanning that's been done in order to have the logistics in place and the materials in place. So again, we're confident in that. Probably the largest challenge we face is really on the human capital side. Our estimates are that we're going to have to hire about 10,000 people over the next 5 years in order to build and operate these new mines as they come online. That also factors regular turnover retirements, et cetera. But that's still a lot of people that we need to find, train and hire. So we've internalized a lot of the effort to do that, and we're making good strides, but that's probably the biggest challenge we face. And I think the other thing that allows us to function quite well as we develop these multiple projects is our in-house construction capability. So most of our peers, when they announced they're going to build a project, the first thing they could do -- they do is go hire a big EPCM contractor, hand over the project to them. They spend 5 years building it and hand over the keys and the company takes over. Our approach is quite different. We have our internal engineering and construction teams that run it ourselves. So that allows us to sort of allocate the people with the appropriate skills across the portfolio to be where they can bring the most value and bring those projects forward successfully.

Yes, go ahead.

Can you talk a little bit about your M&A strategy?

So M&A strategy.

Sure. So I'll start. We're in the privileged position with our internal growth pipeline that we're -- we don't need to do anything. So that's a healthy starting point to have. I think we've shown a track record of disciplined M&A over the years and in particular, sort of the last decade, say. So we come from a good place. Our view is that, first, it comes back to that regional strategy. So we only want to be in places where we're going to have multiple mines, multiple decades with that political stability. And so that's the lens that first off, where we consider where we'll look at opportunity. Once we're comfortable that those 2 boxes have been ticked, then our view is it's our job to look at everything. And so we look from the most junior of junior companies, all up to the producing peer companies and we really look to have a -- we try to have a knowledge advantage of what those projects are today and what they could be in the future. And so we're absolutely willing to do bolt-on acquisitions around our existing assets. A good example of that would be last year, we bought O3 Mining that brought the Marban deposit. That's going to be part of our fill-the-mill strategy to get Malartic to 1 million ounces a year. That stuff is pretty easy to do, but we're willing to do other stuff. And really, it comes down to that knowledge. It's not about growth for growth's sake. It's really about growth that is accretive on a per share basis for our shareholders, and that's the way we analyze these things. And generally, really where we see the upside is the exploration, right? The market does a good job of valuing what's known today, where we think we have an advantage is our ability to -- with our regional approach, our geologists who know the rock, know the ground well, have a good sense of what could be there in the future. So when we talk about Detour and Malartic bringing close to 50 million ounces over the last 6 years, that's all upside to our owners. And those are both things that we had a strong view when we acquired them that, that growth was going to be there. It's hard to quantify it at the time, but our belief was that Detour was going to go underground, that we were going to have exploration success in Malartic, and that has proven out.

Maybe just before your question, as a follow-up to that, how do you think about moving outside of your core jurisdictions and away from gold?

Sure. Also fair questions. And so among the senior gold mining companies, we're by far the most pure-play gold. Last year, our revenue was 99% gold derived and then the rest byproduct metals. What makes us a little bit different on the other metals side is we haven't set targets. We haven't set goals to be 80% gold, 20% copper. We're really more opportunity-driven and metals agnostic. And so what we've done recently is we announced that we'd set up a subsidiary called Avenir Minerals. And its job is to look at other metals opportunistically, again, in those regions where either we operate today or we think we could be comfortable operating. And so they're looking at things like nickel, lithium, phosphate, et cetera, to see if there is an ability to create value for shareholders. At the end of the day, if there happened to be a nickel mine or a nickel deposit, I should say, probably like immediately adjacent to one of our operating gold mines, and we thought we had a competitive advantage and an ability to operate that, there's no reason why we wouldn't if it created value for shareholders. But we're not going to chase other metals, and we're certainly not going to chase jurisdiction. As we think about other jurisdictions where we could be comfortable operating, first, our view, and we've said this for years now, is there's probably the 3 best places in the world to mine for gold, certainly, are either the Abitibi in Canada, where we've got a strong presence through Ontario and Quebec, Australia, but probably Western Australia, where we don't currently have a presence and Nevada down in the States. So we've got one locked up pretty well. Two, we continue to -- we look at it from time to time. But more generally, we'd be comfortable operating in the U.S. for sure, comfortable operating in Western Canada, whether that be BC or the Yukon. And then Latin America, we dip our toe in from time to time through our junior portfolio of strategic investments. That's often how we try to learn about a new jurisdiction. So we will make a small investment, get to learn the management team, get to learn the project better, but also importantly, get to learn the country, start to form those relationships with local contractors, local service providers, et cetera, to kind of develop that knowledge and see if maybe it would be a place we want to operate over the longer term.

Okay. Yes, go ahead.

[indiscernible] projects, have you [indiscernible] geopolitical risk...

So underwriting your projects and the price of gold and geopolitical risk and gold price, yes.

Sure. So the first thing I'll say is it's important to know the 4 projects I talked about today, those are the same 4 projects we were talking about 2 or 3 years ago when gold prices were $1,800 an ounce. So it's not that because the gold price went up, we decided to look at these projects. They were economic about 15% rate of return at $1,800 gold. At current prices, that goes to between 30% and 50% likely IRRs. So very healthy projects. We don't forecast the price of gold. We don't hedge the price of gold. We're price takers. But I think what we're seeing is there probably is somewhat of a new normal now. Is it going to stay exactly where it is today, tomorrow? Who knows? There's still volatility. But it does appear like there might be a new floor under the price, whether that's $3,000, $3,500, time will tell. But that does seem to be a real change in the market now for how we underwrite the new projects, so we self-fund. So right now, the intention is to fund these projects through cash flow, not to take on additional debt or issue more shares to do it, which will help with those per share returns. And as I say, they were economic at a much lower price, so we think they'll continue to be economic. Long-term gold price, I think all the factors that have precipitated the current shift in the price, we don't see those going away anytime soon, right? So the -- whether it be the weakening of fiat currencies sort of that really started to kind of happen probably following the Russia invasion of Ukraine, they get kicked out of the SWIFT system, all of a sudden, people realize maybe U.S. dollars aren't the best thing to hold. So that's not going away anytime soon. Global debt levels continue to increase. We see how tough it is to curtail entitlement programs. Everybody says they're going to cut the budget, but then it doesn't ever seem to really move. So that's not going away anytime soon. And then on top of that, when you layer in the geopolitical, obviously, what's going on around the world right now, that's probably a bit more of a volatile piece to the puzzle, but the world doesn't seem to be getting any easier that way either. So we're -- certainly long term, we're bullish on the gold price, but we don't forecast or use that as we're making our current decision.

[indiscernible] So I think with the current [indiscernible] green light now [indiscernible].

So I think the way -- I wouldn't say green light now, but certainly projects that we're now relooking at, right? So the 4 I talked about, those are already moving towards production decisions or phased approaches to production decisions. So that's ongoing. As well in our pipeline, we have other earlier-stage projects. For example, we've got Hammond Reef in Northwestern Ontario. We've got a project in the Northern Territory of Australia. We've got a project near Timmins, Ontario. Those 3 with the elevated gold price could make more sense now. So we're going to -- part of our plans for '26 and '27 is to relook at those and see if there's -- once we're through the current phase of growth to get that 20% to 30%, maybe that's the next phase of growth. So we're definitely looking at that. And I think the other element that the elevated gold price allows is at current operations that aren't mill constrained, if you have excess throughput capacity, maybe now it makes sense to run lower grade ore through the mill and might be, by definition, higher cost, but still significant margins at today's prices. So a good example of that is our Meadowbank complex in Nunavut. It's nearing the end of its mine life, but we have mill capacity there and infrastructure in place. So if we can run additional ounces through that maybe instead of our all-in cost of $1,400 to $1,500 an ounce, maybe they cost $2,300 an ounce. But if you're selling it for $5,200, it's still a very healthy margin.

And then just with margin of safety [indiscernible].

Yes. So it's certainly much lower than $5,000. So we run our reserves. The way we calculate our reserves and run our mine plans, this year, we just announced the update is at $1,600 an ounce. And so that number is how we sort of protect our 3-year forecast of production guidance. And so it will increase incrementally over time, but that $1,600 gives us good confidence in our mine planning. Our all-in costs are $1,450, $1,500 an ounce. That's before the dividend, that's before taxes and things, but that's sort of a good proxy for what it takes us to mine an ounce of gold and then you add on the return to shareholders and things. So there's lots of room certainly in the $5,000 gold price environment. And we do sensitize our budget and our strategy. We sensitize down quite a bit, both up and down to make sure we have that margin of safety. But probably the best example would be our dividend. We just announced a 12.5% increase. In '26, we expect that to be a little over USD 900 million, but our intention is to never reduce the dividend. So when we announced that increase, that's a demonstration of confidence in the business ability to pay that. It's really the buyback is where we kind of be more opportunistic, but we're very confident in the ability of the business to keep generating...

Yes, go ahead.

Are you deploying any new technologies to help increase your profitability? And Is there anything -- I mean -- I know it's a [indiscernible] discovery, whatever. But is there any new technologies [indiscernible]?

Yes and yes. And so I'll start maybe on the discovery side on exploration. So there, a couple of things we're doing. One is we're working on automated drills, which allow us to drill more efficiently to get more drilling done for the same number of dollars. So that's -- and we've seen -- I think last year, we saw about an 8% improvement on our unit cost per drilling. So that's significant. Across our overall exploration budget of $600 million, that can make a big difference. And then the other thing that we're doing on exploration specifically is new core scanning technology that ultimately uses machine learning to analyze the core as it comes through. And so instead of a team of geologists looking at the split core to decide what's what and what's where, the machines are able to do that quite efficiently.

[indiscernible].

A lot less expensive. And then also there's benefits, especially some of our like remote camps, where now you don't need to fly the same number of people up and house them and feed them and everything else. So there's benefits there. And then on the operational side, where we're seeing a lot of benefit is through automation or remote operation. And so the best example of that is our LZ5 is a satellite mine beside our LaRonde mine. It was developed, I think it was about 2016. And really, when we brought that on, the idea was to use it as a learning ground for some of this new technology. And so when it began in 2016, the target was 1,750 tonnes a day. And now we're operating over 3,500 tonnes a day, and most of that is thanks to automation. And so there, for example, it's an underground mine, Friday night, when the Friday day shift ends from Friday night to Sunday evening, that mine continues to operate with nobody underground. So it's all done either automatic where the trucks know where to haul to and from and that can happen automatically and/or there's people at surface with joysticks running the machines. So there's definitely operational savings there. And the other big thing that does for us, particularly underground is -- so our LaRonde mine, currently, we're operating about 3.4 kilometers deep, so a little over 2 miles deep. As you get deeper, the seismic stress goes up, the heat goes up. So it's better to not have to expose your employees to that. So the automated machines allow us to continue to mine safely at deeper depths.

[indiscernible].

Yes. The opportunities there are real. It opens up more ore. It doesn't necessarily overall reduce costs, but it allows you to mine ore that you otherwise wouldn't be able to mine.

I have a couple more questions we can discuss. So something that is often taken for granted is the ability to meet guidance. Mining is a very challenging business. So million things can go wrong. And Agnico has consistently met guidance for a number of years, and year-over-year has been able to maintain stable operating costs. So what do you think gives Agnico the ability to continuously meet guidance and operate at peer-leading costs year-over-year?

Sure. And so I think meeting guidance is a hallmark and a trademark of Agnico. Our CEO, Ammar, often says, we don't get paid for volatility, and we all take that to heart. And we certainly see across the market. If you meet your guidance by an ounce, the market is happy. If you miss it by an ounce, the market punishes you. But it's definitely not symmetric, and we've taken that lesson to heart over the years. First, I think it's back to that regional strategy. So 85% of our production coming from Canada with 7 mines that gives us significant synergy locally where we're able to learn from each other, develop best practice, deploy that across the business. If and when there is a hiccup, it also allows us to deal with it faster. And so the best example of that would be, I guess, in 2023, I think it was, our Detour Lake mine, a transformer blew on site, so we didn't have power. And so we had a spare on site, so they installed the spare and within 24 hours, the spare blew. And so ordinarily to get a new transformer these days now is months and months and months, crazy long lead times. Through our supplier network in the region, we were able to what we kind of call Frankenstein a transformer back together. And within 3 weeks, our team was able to get it back up and running and ultimately didn't really have much of a hiccup. And at the same time, with that portfolio of assets, our COOs were able to talk to each other and able to find opportunities to kind of push the threshold a little bit at some of the other operations. So on balance, we were still able to meet guidance. I think the regional approach, the working together, the strength of the teams, I think, is what allows us to do that together with a strong planning culture. One thing we do that's a little bit different is every year, we have our annual strategy session where we bring about 200 -- this year, 225 people together. And a big focus of that is making sure as you go deeper in the organization, people understand the importance of meeting the guidance and delivering on our promises. So notwithstanding gold at whatever it is, $5,200 an ounce, the message there was really don't get complacent, focus on cost, focus on delivering because that's ultimately what we're paid for.

We have time for one more question. I can jump in. If we think about the next 12 months, what catalysts should investors focus on for Agnico?

Sure. So flowing from the last question, number one is meeting our cost and production guidance. That's what we're laser-focused on at all times. I think the next important thing would be moving forward our plans to develop that 20% to 30% growth by the early 2030s. So over the course of the next 12 months, you can expect updates on some of those projects. Some of those updates will be in 2027, but you can expect updates on those projects. I think in September, we'll give a comprehensive update on Malartic. In May, we expect to be in a position to make a construction and development decision at Hope Bay. That will be a significant milestone and otherwise progress on those projects.

Okay. Thank you. Thank you to Agnico for participating, and thank you to Chris for the conversation. If you have any more questions, we'll be in the breakout room downstairs. Thanks.

Thanks, everyone.