Agnico Eagle Mines Limited ($AEM)

Gold company by market capitalization. And that would be Agnico Eagle Mines. And from Agnico, we have Executive Vice President and Chief Financial Officer, Jamie Porter. Jamie, I see you coming up to the stage, and I believe you're going to make a few initial remarks. So I'll turn the podium over to you, and then I believe you'll join me at the chairs for a chat. Good morning.

Good morning, everyone. So I will start the presentation today with an overview of Agnico. I'll talk about our strategy and how we believe it's led to strong value creation over the last several decades and how we expect it to continue to do so in the decades ahead. I'll touch on our first quarter results, talk about the strong start that we had to the year from an operational perspective and obviously, a phenomenal start to the year from a financial perspective with the gold price environment we're in. I'll briefly present our recently announced proposed consolidation in Finland, where we've -- through the proposed acquisition of Rupert Resources, Aurion Resources and the Fingold joint venture. We've consolidated a 2,500 square kilometer land package in what we believe is the most highly prospective ground in Northern Europe. And lastly, I'll touch on our key value drivers. And that, I believe, is a key differentiator for Agnico. We currently produce 3.4 million ounces a year, but we have 20% to 30% production growth in the decade ahead, and we're excited to look forward to delivering on that. So I will be making forward-looking statements as part of the presentation today. So I'd encourage you to refer to Slide 2, our cautionary notes disclosure. So just by way of overview, Agnico is, as Lawson mentioned, the second largest gold producer in the world. Our targeted production this year is about 3.4 million ounces. We operate 10 mines across 4 different countries. So while we are a global mining company, we consider ourselves to be a regional miner. We focus on regions where we see the geologic potential and political stability to operate multiple mines over multiple decades. A great example of this is our footprint in the Abitibi, what we call the Abitibi in Northern Ontario and Northern Quebec. There, we operate 5 mines that reflect almost 2/3 of our production, and they're all within 300 kilometers of one another. We believe that regional consolidation creates a competitive advantage by having those mines in close physical proximity to one another, we gain a competitive cost advantage. In the Abitibi, we are the employer of choice. Our employee turnover rates are less than half of the industry average, which keeps our costs down. We have long-standing supplier relationships that we've developed over decades. We've been operating in this region for over 60 years. In many cases, we helped our suppliers initially set up their business. We're also the largest mining company in Canada, which means we benefit from economies of scale given our purchasing volumes. Lastly, we're able to benefit from tremendous synergies associated with that physical proximity. We can share people, technical resources, parts supplies and even equipment between those 5 operations. It gives us a tangible competitive advantage that we see in our cost structure. Our costs are $300, $400 an ounce below the industry average, and it's because of this regional approach. And the results really speak for themselves. We go back over the last 20 years, 2005, Agnico was producing 240,000 ounces a year from one mine, the LaRonde mine in Northern Quebec. Fast forward to 2025, producing 14x that amount of gold, just shy of 3.5 million ounces from 10 operations. So that's great gross gold production growth. However, what's most important is production per share. And over that period, we've increased production per share by a factor of 3. Very few of our peers can say that. And what that means is that we're delivering more exposure per share to investors, and that's really why they're investing in gold equities in the first place. And obviously, with the increase in the gold price, our EBITDA per share over that period has increased by a factor of 18. And it's reflected in our share price. If you look back again over the last 20 years, our compound annual growth rate in the share price is approximately 13%, double the XAU and significantly outperforming the S&P. So very strong historical performance over the past 2 decades, and we expect that to continue. So I'll briefly touch on our first quarter results. As I mentioned, a very strong operational start to the year. We produced about 830,000 ounces in Q1, which was actually ahead of our budget, and we were below budget with respect to costs. Record realized gold price in the quarter of $4,881 an ounce, the highest we've ever experienced, driving significant increase in financial results and earnings. We had record EBITDA for the quarter, record earnings per share. By controlling costs, we're effectively able to pass on the benefit of higher gold prices to investors by directly returning capital through our share buyback and dividend and by indirectly improving the company through the strengthening of our balance sheet. We repaid $1 billion of debt in 2025, amassed a $2.9 billion net cash position at the end of March. So the balance sheet is in the strongest position in the company's history. We've got the financial flexibility and strength to be able to execute on our long-term strategic plan. Now we did have a very significant cash tax payment in the first quarter, $1.3 billion related to 2025 and $0.5 billion related to the first quarter of 2026, which drove our free cash flow slightly lower. We were about $730 million for the quarter. We returned 51% of that to shareholders through the dividend and the share buyback. We bought back $150 million of stock, paid a $225 million dividend. In subsequent quarters, we expect our cash taxes to normalize at around $0.5 billion a quarter, which means free cash flow will be closer to $1 billion to $1.5 billion per quarter, and we'll be doing 2 to 3x what we did on the share buyback in Q1. So significant growth in direct shareholder returns expected through the remainder of this year. So with respect to our recently announced Finnish consolidation, effectively, what we're doing here is looking to combine the acquisition of Rupert Resources and their Ikkari project with Aurion Resources and the Fingold joint venture, consolidating again, this 2,500 square kilometer package of land in what we believe, again, is the most highly prospective area in Europe. We've been operating in Finland for 20 years. We operate the Kittila mine. It produces about 210,000 ounces a year. We started in Finland 20 years ago, acquiring Kittila when it had 3 million ounces. We now have 10 million ounces of reserves and resources in front of us. And over that 20-year period, we've produced 4 million ounces. So we've created significant value in Finland over the past several decades, and we see the potential to really double down on that with this proposed acquisition. Over the next 18 months, we will be drill testing the property boundaries and the depth extent of this land package and looking to move forward, freezing the scope of the Ikkari project and start the permitting process. We see potential production by 2034 of up to 300,000 ounces a year from Ikkari, which when combined with Kittila, will give us 0.5 million ounces of annual production in Finland. And with that very prospective land package, we expect to be able to improve on that and add mine life for decades to come. Now I'll end on just an overview of our organic growth pipeline. We like to say that the company is in the strongest position in its history, certainly is from a financial perspective with virtually no debt and almost $3 billion of net cash and growing, but also with respect to our development pipeline. We have what we call our key value drivers. These 5 projects collectively represent 1.5 million ounces of potential annual production growth. These are relatively low-risk projects. They are expansions of existing mines or new construction in regions where we know how to operate, where we've built mines in the past. I'll start with Detour Lake. Detour is currently the largest gold mine in Canada. It's producing 700,000 ounces a year. We are looking to go underground to access higher grades and ultimately ramp up production by 2030 to approximately 1 million ounces a year. At 1 million ounces a year, Detour will be one of the top 5 or 6 largest gold mines in the world, and I'd argue one of the most profitable. At current spot gold prices at 1 million ounces a year, Detour will generate $3 billion a year of after-tax annual free cash flow. So this is a unicorn in our industry, a massive operation that will generate significant annual production will do so for decades and decades. At Canadian Malartic, we are transitioning from what's the second largest gold mine in Canada, an open pit mine that's processing -- that has historically processed 60,000 tonnes per day of relatively low-grade 1 gram per tonne material. We're transitioning to an underground mine at 1/3 of the volume, but 3x the grade. So our production stays about the same at 550,000 to 600,000 ounces a year, but we're opening up 40,000 tonnes per day of excess mill capacity. We have a plan through the addition of a second shaft and the development of 2 satellite deposits to fill the majority of that mill and get production from Canadian Malartic up to 1 million ounces a year as well. So between Detour and Canadian Malartic, 2 million ounces of annualized production, again, long-life assets that are going to go for decades. Upper Beaver is located just down the street, about 14 kilometers away from our Macassa mine in Kirkland Lake. It's currently considered an advanced exploration project, but we're looking to make a construction and move forward decision on that next year. That will add up to 210,000 ounces a year, again, right in our backyard, starting in 2030, 2031. Our Hope Bay project in the northernmost part of Nunavut, we're actually planning to announce a construction decision on that next week. We're going to have investors and federal government officials at site to -- for that announcement. This will be our fourth mine that we will have built in Nunavut, has the potential to produce north of 400,000 ounces a year for over a decade. And with the exploration potential that we see there, we think it will be going for decades and decades. When you combine that with our other operations, Meliadine and Meadowbank and Nunavut, we see the potential to get production from Nunavut as a territory to north of 1 million ounces a year. So we're looking forward to that next week. And lastly, we have a 50-50 joint venture with Teck Resources on the San Nicolas project. It's located in central Zacatecas. We're updating the feasibility study on that project and looking to move it forward ultimately pending permitting. So we're very excited about this platform. Again, 1.5 billion ounces of total annual production growth potential here. And this excludes the proposed acquisition of Rupert and its Ikkari deposit. It excludes other projects in our portfolio such as Hammond Reef, which is a potential development project in Northern Ontario that we see having the potential to add up to 300,000 ounces a year. So we have tremendous growth. We've got the balance sheet and financial strength to be able to execute on this in any gold price environment. And we're looking forward to delivering value per share as we have in the past and in the decades ahead. With that, come join you, Lawson.

Please do. Thank you very much, Jamie. That was a fantastic presentation, very comprehensive. But I mean, I think where I'd like to start is on your capital allocation framework. You've indicated on recent calls that you have the ability to do it all, meaning invest in high IRR growth projects, consider repaying at least 40% of free cash flow and continuing to build the balance sheet. But if you could rank those in terms of priority, how would you do that? And then what could possibly lead you to change that set of priorities?

Yes, it's a good question. I mean I think -- and I have said that many times, in the current gold price environment, we can do everything. I think our #1 priority would be to continue to invest in our organic growth pipeline. I mean these projects are projects that we were looking at $1,800 gold and had a 15% approximate IRR at $1,800 gold. With Hope Bay being the one exception, it was slightly lower. So at current gold prices, these projects have a 30% to 60% rate of return. We are looking to do everything we can to aggressively move them forward and bring that production growth into reality. So I would say that would be priority #1. Priority #2, again, in this price environment would be returning capital to our shareholders. We've significantly delevered the balance sheet over the past several years. We've gone from a net debt position a few years ago to $2.9 billion of net cash at the end of Q1. I anticipate we'll be close to $5 billion of net cash at the end of this year. So excess cash beyond that, we're returning to shareholders. Our target this year is 40% of free cash flow. Based on current gold prices, that will represent a return of at least $2.1 billion to shareholders this year, which is 50% higher than what we did last year. And when we look forward into 2027 with the balance sheet that strong, we won't have a need to further add cash to the balance sheet, which means the percentage of our free cash flow, which goes -- is returned to our shareholders could increase substantially.

That's exciting. So a follow-up question on that then would be between buybacks and the dividend, why emphasize buybacks? I mean, is there room for the dividend to potentially increase as well?

So Agnico has paid a dividend for 43 years and has had to cut it once and we don't want to have to cut it again. So the idea behind the dividend is that it's sustainable even in a much lower gold price environment. And we use the share buyback as a tool that we can flex depending on, obviously, the gold price and our corresponding profitability. So that's the way we look at it. I think we will continue to increase the dividend. It went from $800 million a year to $900 million a year, so a 12.5% increase this year. And there's scope for it to increase, but not by 50%. I think it will be marginal sustainable increases over time such that, again, even in a much lower gold price environment, we'd be able to afford it and not have to look at cutting it.

What about the concept of a special dividend?

I think that's something that's certainly not out of the question. Again, when you look forward to 2027, current production levels and gold prices, we're generating $8 billion a year of operating cash flow. We're spending this year, if you factor in proposed spending associated with Hope Bay, maybe $3 billion in capital. So that leaves $5 billion of free cash flow left over. That's going to be similar in 2027, and that could be returned through the dividend. I mentioned we're going to keep that on a relatively modest to the share buyback or through a special dividend, and we'll evaluate it based on the gold price at the time.

Okay. Great. I'd like to move the conversation back to Finland. Thank you for touching on that. Great overview of that transaction. Frankly, what you've done is Finland has become a single-asset part of the portfolio for you guys to a consolidated district play. What should we be watching over the next 12 to 24 months for investors to get some confidence, certainty and a more clear picture in terms of what that's ultimately going to become in the long term?

Sure. So I mean, we're very happy with what we got. With the Ikkari deposit, we see having the potential again to be developed into a 300,000 ounce a year mine that when combined with Kittila will represent 0.5 million ounces of annual production in Finland. In terms of next steps or catalysts along the way, we have already closed the acquisition of B2Gold's 70% interest in the Fingold joint venture. That's complete. We're looking to close the Aurion Resources and Rupert Resources transactions in either late Q2 or early Q3. Guy, our Head of Exploration, is here in the room. He's basically started drilling already. We'll be spending $20 million a year over the next 3 years on further drill testing, the property boundaries where the previous operators couldn't -- it didn't make sense for them to drill. And we'll look to optimize the layout of the proposed projects. So we'll figure out what makes the most sense. We -- now having all 3 of those properties together, we can unconstrain the open pit and maximize the value out of that pit. And by the end of 2027, I think we'll be releasing an updated study that will show what we're going to permit and what we're ultimately planning on doing.

Perfect. You also emphasized the need for external M&A to compete with internal projects. I think it would be really helpful if you could just characterize the framework for what the bar is on M&A and how you think of that more specifically?

Yes. I think similar to what Natasha said on behalf of Newmont, the bar is pretty high because we have a number of very high-return organic growth projects already. So any external M&A opportunity would have to compete for capital with the projects that we already have, which I've mentioned many of them are 30% to 50% to 60% IRR, very high-return projects. So I think we'll continue with the Agnico strategy, which is focusing on regions where we currently operate. We'll look for opportunities to add value. But the reality is we're in a very fortunate position of not having to do anything because we have that growth. We've got minimum 20% to 30% growth starting in 2030. We've got Ikkari and projects like Hammond Reef on top of that. We can afford to be very patient and very selective.

Okay. So when you talked about your growth, I was thinking very impressive for a company of your size. There's 5 assets, potentially a 6th with Hammond Reef and potentially more that haven't been surfaced yet. When you think about the current bench strength at Agnico, do you guys feel you have the resources necessary to drive that growth? Are there any limitations that you worry about internally?

Yes. No, it's a great question. One of the things that I think differentiates Agnico is that we build our own mines. So we have a 240-person strong construction team, and we oversee any expansions or new construction. We will use contractors and consultants, but we manage them rather than handing them the project to build and then the key is thrown back at us at the end of it. So that team is busy right now. But if you look at a lot of what we're doing, a lot of our growth is coming from -- is being managed by the mine site operations teams themselves. For example, at Detour, we're basically ramping underground to get some higher grade, but we have an operating team there that's overseeing that project. Similarly at Canadian Malartic. So I would say, again, the execution risk associated with a lot of our development pipeline is relatively low risk. We have the capacity in Finland, we have a team there that had the excess capacity to be able to run with that project development without it being a drain at all on our corporate resources, our team that's working and focused on Nunavut, Northern Ontario and Northern Quebec. So we're in great shape now. I think we could do Hammond Reef and Ikkari. Beyond that, we could potentially become a bit stretched because we do want to maintain control and make sure that when we say we're going to do something, we can do it, and we can get our construction development projects completed on time and on budget.

The 20% to 30%, I don't think that included Hammond Reef. I think there's some other options within the portfolio that might not have been considered within that 20% to 30%. How would you frame the blue-sky upside potential for growth over the next decade?

Yes. So the blue sky potential, I think, is significant. You look at our 5 key value driver projects, they collectively represent 1.5 million ounces of annualized production growth. You've got Hammond Reef, which could produce 300,000 ounces a year by 2032, 2033. And you've got Ikkari, which could produce 300,000 ounces a year by 2034, 2035. So you add that all together, you're north of 2 million ounces, but that's not all going to be incremental. We will have depletion at some of our existing mines. Meadowbank, for example, which was scheduled to be closed this year, we see the potential to extend well beyond 2030, but at a lower rate of production. So production is going to drop from 500,000 ounces a year down to closer to 200,000 ounces a year. Similarly, at Goldex and perhaps some of our other operations, we could see a production decline. So I'm not going to say that's incremental production, but could we be well north of 4.5 million ounces, assuming all those projects go as planned in a decade? Absolutely, it's possible.

Folks, if anybody has a question, if you put up your hand, we'd be happy to address it. Perhaps while you're all thinking about that, I might touch on Hope Bay. We're expecting an update on that next week. And you're also hosting a group of investors and analysts to site next week as well. I'll be there as well. Thank you for including me. How do you think about protecting the returns on an asset like that? I mean, actually, in our model, I mean, the returns on spot are well north of 50%. But then there's a lot of execution risk. Of course, there's diesel prices, there's cost pressures in the current macro environment. How do you think about protecting that?

So I think the best way for us to have certainty on the return that we're going to generate from an investment like that is through detailed engineering. Like we have purposely waited to announce construction of this project until we got to about 60% of detailed engineering. Our experience building 3 mines in Nunavut has dictated that that's how you make sure you have a really good grasp of the capital and construction cost and can give yourself the best possible chance of getting a project completed on time and on budget. So that's been the focus is getting that level of detailed engineering up to 60%. Again, we've built 3 mines in Nunavut. We have a lot of experience. The first one was a bit of a challenge. The second and third ones were done on time and on budget. So -- we have the logistics and procurement expertise to be able to get things done properly up there, and we're confident in being able to do so. Obviously, diesel headwinds currently, that's a factor across all of our operations, not only our construction projects. But the one thing I'd point out is we're fortunate in that we are not -- we're only generating our own power in Nunavut. Across the rest of our operations in -- majority of our production comes from Ontario and Quebec, where we're on the grid and it's nuclear hydroelectric power. So our diesel consumption per ounce of production is about 100 liters. Most of our peers are at 140 or 150, which means we're less sensitive and exposed to higher diesel prices.

Look, it doesn't look like there's any questions in the audience. So before things wrap up here, I really wanted to ask about Detour Lake. You highlighted it as one of the major producers, taking you to 1 million ounces at that particular asset, becoming one of the largest gold producing mines in the world. Nevertheless, I mean, based on what we've heard recently, particularly in Q1 results, there's clearly a lot of optionality, both with the underground and other potential expansion scenarios. How do you think about the potential for that mine to continue growing beyond 1 million ounces?

Yes. And that's something that we're studying internally now. I mean we have a plan to ramp up Detour to 1 million ounces by 2030. At that ramped up 1 million ounce per year rate, we're processing 29 million tonnes a year of ore. It's a massive mine. But we're permitted to 32.8 million tonnes a year. So we're evaluating internally the economics around expanding the mill and potentially processing more earlier. Just given the fact that we have a multi-decade mine life there, it may make sense to bring some of that production forward and maximize value, which could increase production to north of 1 million ounces a year. But that study is still in the early stages, and we'll likely provide an update on that next year.

Fantastic. I think that's a great place to leave it. Thank you for being here, Jamie.

Thanks, Lawson.