Osisko - Hammond Reef
Agnico Eagle Reports Second Quarter 2020 Results - Successful Ramp Up Of Operations Post Temporary Covid-19 Shutdowns; 2020 Production Guidance Increased, Capex And Cost Guidance Maintained - Operations On Track For Strong Second Half; Credit Facility Now
TORONTO, July 29, 2020 /CNW/ - Agnico Eagle Mines Limited (NYSE: AEM) (TSX: AEM) ("Agnico Eagle" or the "Company") today reported a quarterly net income of $105.3 million, or net income of $0.44 per share, for the second quarter of 2020. This result includes non-cash mark-to-market gains on warrants of $33.7 million ($0.14 per share), derivative gains on financial instruments of $16.0 million ($0.07 per share), foreign currency translation gains on deferred tax liabilities of $15.2 million ($0.06 per share), and various other adjustments losses of $3.9 million ($0.01 per share). Excluding these items would result in adjusted net income1 of $44.3 million or $0.18 per share for the second quarter of 2020. For the second quarter of 2019, the Company reported net income of $27.8 million or $0.12 per share.
Included in the second quarter of 2020 net income, and not adjusted above, are a non-cash stock option expense of $3.2 million ($0.01 per share) and temporary suspensions costs related to the COVID-19 pandemic of $22.1 million ($13.0 million, net of tax, or $0.05 per share) and direct and incremental COVID-19 costs of $2.3 million ($1.4 million, net of tax, or $0.01 per share).
In the first six months of 2020, the Company reported net income of $83.7 million, or $0.35 per share. This compares with the first six months of 2019, when net income was $64.8 million, or $0.28 per share.
In the second quarter of 2020, cash provided by operating activities was $162.6 million ($185.2 million before changes in non-cash components of working capital), as compared with the second quarter of 2019 when cash provided by operating activities was $126.3 million ($157.3 million before changes in non-cash components of working capital).
In the first six months of 2020, cash provided by operating activities was $326.0 million ($389.9 million before changes in non-cash components of working capital), as compared with the first six months of 2019 when cash provided by operating activities was $275.0 million ($328.1 million before changes in non-cash components of working capital).
The increase in net income and in cash provided by operating activities during the second quarter of 2020, compared to the prior year period, was mainly due to higher average realized gold prices, and lower exploration and general and administrative expenses, partially offset by lower gold sales volume, and temporary suspension costs. The lower gold sales volumes, lower exploration expenses and suspension costs were mainly driven by the Company's response to the COVID-19 pandemic. For part of the quarter, mining activities were reduced or suspended at seven out of the Company's eight mines and exploration work was interrupted. Net income was favourably affected by an unrealized gain on warrants and on financial instruments owned by the Company.
The increase in net income and in cash provided by operating activities during the first six months of 2020, compared to the prior year period, was mainly due to higher average realized gold prices, and lower exploration expenses, partially offset by lower gold sales volume, the contribution of six months of production costs from Meliadine and higher costs from the Meadowbank Complex as the mine transitioned to the Amaruq satellite deposit, and temporary suspension costs. The lower gold sales volume, lower exploration expenses and suspension costs are mostly driven by the Company's response to the COVID-19 pandemic as described above.
"The second quarter was challenging given the global COVID-19 pandemic and its impact on our operations. While our business returned to normal production levels ahead of schedule in June, we did have seven of our eight mines on care and maintenance at one point during the quarter. We finished the quarter strong as our employees responded quickly and effectively with a plan to manage the mine shut downs and subsequent restart and ramp-up of operations while protecting the health, safety and well being of our employees and the communities in which we operate", said Sean Boyd, Agnico Eagle's Chief Executive Officer. "With the ramp-up of operations now complete and with July production expected to exceed 160,000 ounces of gold, the Company is well positioned to have a strong second half with gold production expected to average 480,000 to 500,000 ounces per quarter with declining unit costs. As a result, we anticipate generating significant free cash flow in the second half of 2020", added Mr. Boyd.
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1Adjusted net income is a non-GAAP measure. For a discussion regarding the Company's use of non-GAAP measures, please see "Note Regarding Certain Measures of Performance".
Second quarter of 2020 highlights include:
- Solid operational performance in the second quarter of 2020 despite COVID-19 interruptions – Payable gold production2 in the second quarter of 2020 was 331,064 ounces (including 2,651 ounces of pre-commercial gold production from the Barnat deposit at Canadian Malartic) at production costs per ounce of $854, total cash costs per ounce3 of $825 and all-in sustaining costs per ounce4 of $1,142. Production costs, total cash costs per ounce and all-in-sustaining-costs ("AISC") per ounce exclude the pre-commercial production ounces from the Barnat deposit
- Financial Impact of COVID-19 – Additional costs incurred in the second quarter of 2020, slight increase to operating costs going forward and limited impact on productivity to-date – Temporary suspension costs in the second quarter of 2020 were $22.1 million (excluded from production costs and included in Other Expense). Direct and incremental costs related to COVID-19 incurred by the Company in the second quarter of 2020 were $2.3 million (included in production costs). Going forward, COVID-19 protocols (not including compensation paid to Nunavut-based employees) are expected to add approximately $1.0 million per month to the Company's operating costs (or approximately $6 per ounce). In addition, the Company continues to pay for 75% of the base salaries for Nunavut-based employees at a cost of approximately $1.4 million per month (included in Other Expense). To-date, the Company has seen limited impact on productivity as a result of COVID-19
- Full year 2020 production guidance increased while guidance for unit costs and capital expenditures unchanged; longer-term guidance maintained – Gold production in 2020 is now expected to be 1.68 to 1.73 million ounces (versus previous guidance of 1.63 to 1.73 million ounces), while total cash costs per ounce and AISC per ounce continue to be in the range of $740 to $790 and $1,025 to $1,075, respectively. Capital expenditures are expected to be approximately $690 million in 2020. Previous gold production guidance for 2021 and 2022 remains unchanged with a mid-point of 2.05 million and 2.10 million ounces, respectively
- Strong second half 2020 outlook – The Company expects gold production to ramp up in the second half of 2020 and average approximately 480,000 to 500,000 ounces per quarter with total cash costs per ounce expected to be in the range of $690 to $740, primarily as a result of the expected increase in gold production
- Successful ramp up at all operations post temporary COVID-19 shutdowns – During the second quarter of 2020, seven of the Company's eight mines experienced either temporary shutdowns or reduced activity levels related to government mandated COVID-19 restrictions. All operations were subsequently restarted in a timely manner during the quarter, with production progressively ramping up to more "steady state" levels in June at all operations. Key operational highlights are as follows:
- LaRonde – with infrastructure upgrades largely completed in the first quarter of 2020, production gradually resumed in the higher-grade West mine area in late April 2020. Grades in the West mine area continued to exceed block model forecasts during the second quarter. Daily throughput at the LaRonde Complex in the second half of 2020 is expected to average approximately 8,500 tonnes per day ("tpd") with approximately 12% of the tonnage being sourced from the West mine area. In addition, there is a renewed focus on minesite exploration to expand mineral reserves and mineral resources
- Nunavut – Meadowbank and Meliadine both returned to the regular 14/14 work schedule in June (although the Nunavummiut workforce has not yet returned to work due to COVID-19 precautions). In June, mining and milling operations returned to more normal levels at both operations. At Meliadine, mill throughput exceeded 4,300 tpd in June and a new apron feeder will be installed in August along with other plant modifications to complete the planned mill expansion to 4,600 tpd by the fourth quarter of 2020. Water discharge activities are proceeding as planned. Higher grade stopes from the third mining horizon are being prepared for extraction in late July. At Meadowbank, progress was made on the equipment maintenance backlog and total ore moved in June exceeded 110,000 tpd. The Meadowbank mill is currently operating as intended in excess of 9,500 tpd from run-of-mine ore and existing stockpiles
- Kittila – The mine operated continuously through the COVID-19 pandemic in the second quarter of 2020 and established a new quarterly ore production record in the second quarter of 2020. The permit allowing for processing of 2.0 million tonnes per annum ("mtpa") was granted in May 2020. The expansion project is progressing well and contractors resumed shaft sinking activities in July 2020 following a four month delay due to COVID-19
- Exploration restarted post COVID-19 interruption – The Company's exploration focus remains on pipeline projects, near mine opportunities and mineral reserve and mineral resource replacement. Key exploration highlights include:
- Kittila – Drilling has extended the Sisar Zone by up to 500 metres to the south with intercepts such as 5.3 grams per tonne ("g/t") gold over 3.9 metres at 1,613 metres depth, further indication of the potential of the Sisar Zone to be developed into a new mining horizon
- Canadian Malartic Underground – 10 drill rigs are currently targeting the East Gouldie Zone, and the exploration budget for 2020 has been increased by 19% to 107,000 metres (100% basis). The aim is to tighten the drill spacing in the high-grade core of the deposit to 75 metres (from 150 metres currently) and to update inferred mineral resources by year-end 2020. Initial work on an underground exploration ramp is expected to begin in August 2020
- Kirkland Lake Project – Resource conversion drilling at the Upper Beaver deposit is validating historical results in the upper portions of the deposit and extending mineralization between 1,200 and 1,400 metres depth with intercepts such as 9.5 g/t gold and 0.40% copper over 5.9 metres at 1,307 metres depth. Regional drilling is also ongoing at the project's Amalgamated Kirkland ("AK") property and Anoki deposit
- Santa Gertrudis – Exploration drilling at the high-grade Amelia deposit continues to confirm the mineralization and extend it along the projected plunge of the main ore shoot, which remains open at depth. Combined with the drilling of other gold targets on the property, the results show the potential for an increase in mineral resources at year-end
- A quarterly dividend of $0.20 per share was declared
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2 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.
3 Total cash costs per ounce is a non-GAAP measure and, unless otherwise specified, is reported on a by-product basis. For a reconciliation to production costs and for total cash costs on a co-product basis, see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance".
4 AISC per ounce is a non-GAAP measure and, unless otherwise specified, is reported on a by-product basis. 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".
Second Quarter Financial and Production Highlights
During the second quarter of 2020, seven of the Company's eight mines experienced either temporary shutdowns or reduced mining activities related to government mandated COVID-19 restrictions. Following government approvals, all operations were restarted in a timely manner with production progressively ramping up to more "steady state" levels in June at all operations.
The chart below illustrates the gradual monthly ramp up of production in the various operating regions during the second quarter of 2020 and into July. Based on actual and forecast production rates, the Company expects to reach a monthly production rate in July 2020 of approximately 160,000 to 170,000 ounces of gold. The Company expects that this monthly rate will be sustainable through the second half of 2020. The chart below also shows the corresponding projected reduction in total cash costs per ounce, which is primarily due to increased production levels.
Notes
1. Mining activities at the Company's operations in the Abitibi region of Quebec (the LaRonde Complex, the Goldex mine and the Canadian Malartic mine (50%)) were suspended from March 23, 2020, to April 15, 2020
2. Meadowbank and Meliadine operated at reduced levels from March 19, 2020, to early June 2020
3. Kittila operated at normal levels with the exception of a 3-day underground mine shutdown to manage one positive COVID-19 case at the mine in April 2020. The mill operated normally during the period
4. Mining operations in Mexico (Pinos Altos, Creston Mascota and La India) were suspended from April 2, 2020, to May 18, 2020; during the suspension residual leaching continued
5. By end of June, all operations had returned to normal operating levels
6. July 2020 forecast is representative of third quarter 2020 expected monthly operating levels; total cash-costs per ounce based on exchange rate assumptions of USD:CAD 1.35, EUR/USD 1.15 and USD:MXN 22.22
In the second quarter of 2020, payable gold production was 331,064 ounces (including 2,651 ounces of pre-commercial gold production from the Barnat deposit at Canadian Malartic), compared to 412,315 ounces in the prior-year period (including 31,486 ounces of pre-commercial gold production at Meliadine and Amaruq).
In the first six months of 2020, payable gold production was 742,430 ounces (including 5,625 ounces of pre-commercial gold production from the Barnat deposit at Canadian Malartic), compared to 810,532 ounces in the prior-year period (including 49,428 ounces of pre-commercial production at Meliadine and Amaruq).
The lower level of gold production in the second quarter of 2020 and the first six months of 2020, when compared with the prior-year periods, was primarily due to lower production at seven of the Company's eight mines as a result of temporary shutdowns or reduction in activities related to government mandated COVID-19 restrictions. The Kittila mine, the only site from the Company to operate continuously through the COVID-19 pandemic in the second quarter of 2020, achieved an all time high quarterly ore throughput. A detailed description of the production at each mine is set out below.
Production costs per ounce in the second quarter of 2020 were $854, compared to $735 in the prior-year period. Total cash costs per ounce in the second quarter of 2020 were $825, compared to $652 in the prior-year period.
Production costs per ounce and total cash costs per ounce in the second quarter of 2020 increased when compared to the prior-year period primarily due to lower gold production related to the COVID-19 shutdowns or reduction in activities as discussed above.
Production costs per ounce in the first six months of 2020 were $864, compared to $731 in the prior-year period. Total cash costs per ounce in the first six months of 2020 were $832, compared to $638 in the prior-year period.
Production costs per ounce and total cash costs per ounce in the first six months of 2020 increased when compared to the prior-year period primarily due to lower gold production related to the COVID-19 shutdowns or reductions in activities and higher costs during the first quarter of 2020 at the Meadowbank Complex and Meliadine mine which were still ramping up.
AISC in the second quarter of 2020 was $1,142 per ounce, compared to $953 in the prior-year period. AISC in the first six months of 2020 was $1,118 per ounce, compared to $895 in the prior-year period.
AISC in the second quarter of 2020 and the first six months of 2020 increased when compared to the prior-year periods primarily due to higher total cash costs per ounce, higher sustaining capital and lower gold production as described above. A detailed description of the cost performance of each mine is set out below.
Strong Financial Flexibility; Bank Credit Facility Fully Repaid
Cash and cash equivalents and short-term investments decreased to $336.4 million at June 30, 2020, from the March 31, 2020 balance of $1,263.4 million, primarily as a result of the $750 million repayment of the Company's unsecured revolving bank credit facility during the quarter and the $360 million repayment of the 6.67% Series B senior notes on April 7, 2020, partially offset by the issuance of $200 million of notes with a weighted average maturity of 11 years and a weighted average interest rate of 2.83% during the quarter .
With operations largely back to normal, and record-high gold prices providing for strong margins, the Company expects to generate strong net free cash flow during the second half of the year. Consequently, the Company has (subsequent to this quarter end) repaid the remaining $250 million outstanding on its unsecured revolving bank credit facility. The outstanding balance on the Company's unsecured revolving bank credit facility is now nil, and available liquidity under this facility is $1.2 billion, not including the uncommitted $300 million accordion feature.
On April 30, 2020, Fitch Ratings issued its inaugural credit rating for Agnico Eagle, assigning a rating of BBB with a Stable Outlook considering the Company's strong credit and growing production profile.
As of June 30, 2020, approximately 50% of the Company's remaining 2020 Canadian dollar exposure is hedged at an average floor price above 1.34 C$/US$ and approximately 20% of the Company's 2021 Canadian dollar exposure is hedged at an average floor price of approximately 1.37 C$/US$.
As of June 30, 2020, approximately 42% of the Company's remaining 2020 Mexican peso exposure is hedged at an average floor price above 20.00 MXP/US$ and approximately 30% of the Company's 2021 Mexican peso exposure is hedged at an average floor price above 21.00 MXP/US$. Approximately 10% of the Company's remaining 2020 Euro exposure is hedged at an average floor price of approximately 1.13 US$/EUR.
As of June 30, 2020, over 90% of the Company's remaining diesel exposure relating to its Nunavut operations for 2020 is hedged at levels approximately 15% below the budget price of C$0.85 per litre (excluding transportation costs) used in the preparation of its 2020 guidance. In addition, approximately 35% and 20% of the Company's 2021 and 2022 diesel exposure, respectively, relating to its Nunavut operations is similarly hedged at prices significantly below the values used in our 2020 guidance and mine planning assumptions. In the second quarter of 2020, the mark-to-market valuation of the total currency and diesel hedge positions resulted in an unrealized gain of approximately $38.4 million ($16.0 million, net of tax), which was excluded from adjusted net income. The Company will continue to monitor market conditions and anticipates continuing to add to its operating currency and diesel hedges to support its key input costs.
Capital Expenditures
The total capital expenditure forecast (including sustaining capital) for the full year 2020 remains at approximately $690 million. The Company's spending levels have been below budget during the first and second quarters of 2020 mostly due to the temporary shutdowns and travel restrictions related to the COVID-19 pandemic and from the foreign exchange benefit of weakening local currencies. Underground development costs at various operations decreased during the period, the Amaruq underground project was deferred to 2021 and shaft sinking activities at Kittila were delayed approximately four months. The Company is currently reviewing the Amaruq underground project development timeline and ramp-up. Shaft sinking activities at Kittila resumed in early July.
Anticipated pre-commercial production gold sales from the Barnat deposit at Canadian Malartic, from the Tiriganiaq pit at Meliadine, and from the IVR pit at Amaruq are incorporated in, and netted against, the total 2020 capital expenditure forecast. As a result, some variability is likely, depending on the timing of the achievement of commercial production, prevailing gold prices and foreign exchange rates.
Source: https://www.agnicoeagle.com/English/investor-relations/news-and-events/news-releases/news-release-details/2020/Agnico-Eagle-Reports-Second-Quarter-2020-Results---Successful-Ramp-Up-Of-Operations-Post-Temporary-Covid-19-Shutdowns-2020-Production-Guidance-Increased-Capex-And-Cost-Guidance-Maintained---Operations-On-Track-For-Strong-Second-Half-Credit-Facility-N/default.aspx
Heavy Duty Equipment Mechanic
Reporting to the Maintenance Supervisor, the Heavy Duty Equipment Mechanic will perform his/her duties as a member of the Maintenance Department and collaborate with other departments of the division.
General Trainer
Reporting to the Training Coordinator, the General Trainer will perform his/her duties as a member of the Training Department and collaborate with other departments of the mine.
Organizational Development Coordinator
Reporting to the Manager of People, the Organizational Development Coordinator is responsible for developing training programs.
Underground Engineering Coordinator
Reporting to the Engineering Superintendent, the Underground Engineering Coordinator will perform his/her duties as a member of the Engineering Department and collaborate with other departments of the division.
Open Pit Production Geology Technician
Reporting to the Open Pit Geology Coordinator, the Open Pit Production Geology Technician is part of the Geology Department and collaborates with other departments of the mine.
Energy Maintenance Supervisor
Reporting to the Energy and Infrastructure General Supervisor, the Energy Maintenance Supervisor is part of the Energy & Infrastructure Department and collaborates with other departments of the mine.
Fixed Equipment Operator
Reporting to the Maintenance Supervisor, the Fixed Equipment Operator will perform his/her duties as a member of the site services departments and collaborate with other departments of the division.
Human Resources Coordinator
Under the supervision of the Human Resources Superintendent, the Human Resources Coordinator will structure, maintain and enhance the organization's Human Resources to support the Meliadine Mine.