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Agnico Eagle Reports First Quarter 2021 Results - Record Quarterly Gold Production; Drilling Identifies Potentially Significant Extension to the East Gouldie Zone at Odyssey; Updated Climate Change Strategy Outlined in 2020 Sustainability Report
TORONTO, April 29, 2021 /CNW/ - Agnico Eagle Mines Limited (NYSE: AEM) (TSX: AEM) ("Agnico Eagle" or the "Company") today reported quarterly net income of $136.1 million, or net income of $0.56 per share, for the first quarter of 2021. This result includes gains of $10.0 million ($0.04 per share) on the sale of certain non-core European properties, derivative gains on financial instruments of $6.8 million ($0.03 per share), non-cash foreign currency translation gains of $3.1 million ($0.01 per share), non-cash mark-to-market losses on warrants of $27.7 million ($0.11 per share), foreign currency translation losses on deferred tax liabilities of $11.2 million ($0.05 per share), a multi-year health care donation of $5.0 million (net of tax, pre-tax amount of $8.0 million) ($0.02 per share) and various other adjustment losses of $2.8 million ($0.01 per share). Excluding these items would result in adjusted net income1of $162.9 million or $0.67 per share for the first quarter of 2021. For the first quarter of 2020, the Company reported a net loss of $21.6 million or a net loss of $0.09 per share.
Included in the first quarter of 2021 net income, and not adjusted above, are non-cash stock option expense of $8.8 million ($0.04 per share) and workforce costs of employees affected by the COVID-19 pandemic (primarily Nunavut-based) of $2.6 million ($0.01 per share).
In the first quarter of 2021, cash provided by operating activities was $356.4 million ($415.2 million before changes in non-cash components of working capital), compared to the first quarter of 2020 when cash provided by operating activities was $163.4 million ($204.8 million before changes in non-cash components of working capital). The cash provided by operating activities in the first quarter of 2021 resulted in another strong quarter of free cash-flow2 generation.
The increase in net income in the first quarter of 2021, compared to the prior-year period, is primarily due to higher mine operating margins and lower losses in non-cash items related to mark-to-market adjustments on financial instruments owned by the Company, partially offset by higher amortization of property, plant and mine development due to higher production volumes and the contribution of the Hope Bay mine, higher general and administration costs related to a health care donation of $8.0 million spread over several years (C$10.0 million) that was expensed in the first quarter of 2021, and higher income and mining taxes driven by higher operating margins.
In the first quarter of 2021, the higher mine operating margins were primarily a result of strong operating performance at the LaRonde and Meadowbank complexes, the Meliadine and Canadian Malartic mines and the contribution from the recently acquired Hope Bay mine, and higher average realized metal prices. In the first quarter of 2020, gold production was negatively impacted by COVID-19 related reductions in mining activities along with short-term production ramp-up issues in Nunavut and in the high-grade West mine area at LaRonde.
The increase in cash provided by operating activities in the first quarter of 2021, compared to the prior-year period, was mainly due to an increase in mine operating margins for the reasons described above, partially offset by higher cash taxes related to the higher mine operating margins and payments for deferred taxes related to the 2020 tax year in the quarter.
"Building on the back of strong operating results in the second half of 2020, we are reporting our second consecutive quarter of record production, with strong operational and safety performance at all of our key mines and better than forecasted costs. The Company remains on track to hit its production and cost guidance for 2021, and we expect to generate strong free cashflow during the year," said Sean Boyd, Agnico Eagle's Chief Executive Officer. "We significantly increased our exploration budget for 2021 and we are already starting to see positive results from this initiative, with drilling encountering high-grade gold mineralization at Hope Bay and a significant drill result suggesting the potential for an almost one-kilometre extension to the East Gouldie Zone at the Odyssey underground project. The Company is also pleased to release its 2020 Sustainability Report, which includes an updated climate change strategy with a net-zero emissions target for 2050 and the initial declaration of Scope 3 emissions," added Mr. Boyd.
First quarter of 2021 highlights include:
- Strong operational performance in March drives record quarterly gold production – Better than forecast performance at LaRonde, Kittila, Meliadine and Meadowbank in March resulted in record payable gold production1 in the first quarter of 2021 of 504,545 ounces (excluding 12,259 ounces of payable gold production at Hope Bay, and including 8,123 ounces of pre-commercial production of gold at the Tiriganiaq open pit at Meliadine) at production costs per ounce of $782, total cash costs per ounce2 of $729 and all-in sustaining costs ("AISC") per ounce3 of $996. Including Hope Bay, payable gold production in the first quarter of 2021 was 516,804 ounces at production costs per ounce of $811, total cash costs per ounce of $734 and AISC per ounce of $1,007. Production costs, total cash costs per ounce and AISC per ounce exclude the pre-commercial production of gold at Tiriganiaq
- Production and cost guidance maintained for 2021 – Expected gold production in 2021 is unchanged at approximately 2,047,500 ounces, while total cash costs per ounce and AISC per ounce continue to be forecast in the range of $700 to $750 and $950 to $1,000, respectively. Gold production in 2021 is still expected to be split approximately 48% in the first half of the year and 52% in the second half. The second quarter is now forecast to be the weakest production quarter. This relates to stronger than expected performance in the first quarter of 2021 and scheduled maintenance at several operations in the second quarter of 2021 that requires changes in the mining sequence which will result in slightly lower expected grades. Estimated payable gold production and costs for 2021 exclude any contribution from Hope Bay
- Capital expenditures for 2021 remain unchanged – Total capital expenditures for 2021 are still estimated to be approximately $803.0 million. Capital spending levels in the first quarter of 2021 were lower than forecast largely due to the timing of expenditures. Capital spending is expected to return to more normalized levels over the balance of the year
- 2020 Sustainability Report provides an updated climate change strategy – The Company will release its 2020 Sustainability Report on April 30, 2021, highlighting the progress achieved during the past year in the areas of sustainability and responsible mining. Key initiatives include the evolution of the Company's climate change strategy with a net-zero emissions target for 2050 and the partial disclosure of Scope 3 emissions
- A quarterly dividend of $0.35 per share has been declared
- Drilling identifies a potentially significant extension to the East Gouldie Zone – At the Odyssey project at the Canadian Malartic mine, a 970-metre step-out drill hole has intersected the eastern down plunge extension of the East Gouldie Zone. This hole intersected 2.7 grams per tonne ("g/t") gold over 10.9 metres, including 3.1 g/t gold over 7.2 metres at approximately 1,995 metres depth. This new intercept suggests that the current mineral resources at East Gouldie could be expanded significantly down-plunge towards the east. Drilling is also underway to infill the East Gouldie Zone to 75 metre spacing. Highlights from this program include: 6.3 g/t gold over 22.6 metres at 1,482 metres depth and 3.7 g/t gold over 58.6 metres at 1,580 metres depth
- Optimization and exploration activities ongoing at Hope Bay – Hope Bay was acquired on February 2, 2021, and attributable gold production for the first quarter of 2021 was 12,259 ounces at production costs per ounce of $1,964, total cash costs per ounce of $929 and AISC per ounce of $1,505. Quarterly production guidance for Hope Bay is unchanged at approximately 18,000 to 20,000 ounces of gold at total cash costs per ounce of $950 to $975 and AISC per ounce of $1,525 to $1,575. The Hope Bay management team is currently focused on optimizing the underground mine and mill operations, with a longer-term view to developing a larger scale production centre. During the first quarter of 2021, exploration activities were focused on the Doris area, which is the current source of mill feed. Highlights include: 9.8 g/t gold over 16.7 metres at 343 metres depth in the BTD Extension and 11.6 g/t gold over 7.4 metres at 203 metres depth at the DCN Zone
First Quarter 2021 Financial and Production Highlights
In the first quarter of 2021, the Company set a second consecutive record in quarterly payable gold production of 504,545 ounces (excluding 12,259 ounces of payable gold production at Hope Bay, and including 8,123 ounces of pre-commercial production of gold at the Tiriganiaq open pit at Meliadine). This compares to quarterly payable gold production of 411,366 ounces in the prior-year period (which included 2,974 ounces of pre-commercial production of gold at the Barnat deposit at Canadian Malartic). Including the Hope Bay mine, the Company's quarterly gold production was 516,804 ounces in the first quarter of 2021.
The higher gold production in the first quarter of 2021, when compared to the prior-year period, was primarily due to strong performance at the LaRonde and Meadowbank complexes and at the Canadian Malartic, Meliadine and Kittila mines, especially in the month of March 2021, partially offset by lower production at Pinos Altos resulting from lower gold grades encountered under the mining sequence, at La India related to water conservation efforts and at Creston Mascota where only residual leaching remains. In the first quarter of 2020, gold production was negatively affected by COVID-19 related reductions in mining activities. A detailed description of the production at each mine is set out below.
Production costs per ounce in the first quarter of 2021 were $782 (excluding the Hope Bay mine), compared to $872 in the prior-year period. Total cash costs per ounce in the first quarter of 2021 were $729 (excluding the Hope Bay mine), compared to $836 in the prior-year period. Including the Hope Bay mine, production costs per ounce were $811 and total cash costs per ounce were $734 in the first quarter of 2021.
In the first quarter of 2021, production costs per ounce decreased when compared to the prior-year period primarily due to higher gold production, partially offset by the strengthening of the Canadian dollar against the U.S. dollar. In the first quarter of 2021, total cash costs per ounce decreased when compared to the prior-year period primarily due to higher gold production and higher by-product revenues, partially offset by the strengthening of the Canadian dollar against the U.S. dollar.
AISC per ounce in the first quarter of 2021 were $996 (excluding the Hope Bay mine), compared to $1,099 in the prior-year period. AISC in the first quarter of 2021 decreased when compared to the prior-year period primarily due to lower total cash costs per ounce. Including the Hope Bay mine, AISC per ounce were $1,007 in the first quarter of 2021.
Financial Flexibility Remains Strong After Acquisition of TMAC Resources
Cash and cash equivalents and short-term investments decreased to $132.0 million at March 31, 2021, from the December 31, 2020 balance of $406.5 million, as the Company used its cash position and the free cash flow generated from operations to acquire TMAC Resources Inc. ("TMAC") for approximately $226.0 million for its equity (or $185.9 million, net of cash and cash equivalents acquired), to advance $105.0 million to TMAC to repay its outstanding debt, to buy-back for $50.0 million a 1.5% net smelter return royalty on Hope Bay from Maverix Metals Inc. and to pay cash tax installments related to deferred taxes for the 2020 tax year. As of March 31, 2021, the outstanding balance on the Company's unsecured revolving bank credit facility was nil, and available liquidity under this facility was approximately $1.2 billion, not including the uncommitted $300 million accordion feature.
In April 2021, DBRS Morningstar and Fitch Ratings confirmed their credit ratings on the Company at BBB with a stable outlook.
Approximately 32% of the Company's remaining 2021 estimated Canadian dollar exposure is hedged at an average floor price above 1.32 C$/US$. Approximately 53% of the Company's remaining 2021 estimated Mexican peso exposure is hedged at an average floor price above 20.75 MXP/US$. Approximately 8% of the Company's remaining 2021 estimated Euro exposure is hedged at an average floor price of approximately 1.20 US$/EUR. The Company's full year 2021 cost guidance is based on assumed exchange rates of 1.30 C$/US$, 20.00 MXP/US$ and 1.20 US$/EUR.
Approximately 50% of the Company's diesel exposure relating to its Nunavut operations (excluding Hope Bay) for 2021 is hedged at an average floor price below $0.45 per litre, which is better than the 2021 cost guidance assumption of $0.50 per litre (excluding transportation costs).
The Company will continue to monitor market conditions and anticipates continuing to opportunistically add to its operating currency and diesel hedges to support its key input costs.
Capital Expenditures
Total capital expenditures (including sustaining capital) in the first quarter of 2021 were $154.9 million (excluding Hope Bay), lower than forecast primarily due to the timing of the expenditures. Including Hope Bay, the total capital expenditures in the first quarter of 2021 were $163.0 million. Capital spending is expected to return to more normalized levels over the balance of the year and the total capital expenditures (including sustaining capital) in 2021 remain forecast to be approximately $803.0 million, excluding the Hope Bay mine. The estimate is based on an exchange rate of 1.30 C$/US$. Pre-commercial production at the Tiriganiaq open pit at Meliadine is incorporated in, and netted against, the total 2021 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.
2021 Production and Cost Guidance Unchanged
Production guidance for 2021 remains unchanged at approximately 2,047,500 ounces of gold (including approximately 29,000 ounces of pre-commercial gold production from the Tiriganiaq open pit at Meliadine). The Company anticipates that total cash costs per ounce and AISC per ounce for 2021 will continue to be in the range of $700 to $750 and $950 to $1,000, respectively. Approximately 52% of expected gold production in 2021 is anticipated to occur in the second half of 2021. The second quarter is now forecast to be the weakest production quarter. This relates to stronger than expected performance in the first quarter of 2021 and scheduled maintenance at several operations (LaRonde Complex, Goldex, Meadowbank Complex, Meliadine and Kittila) in the second quarter of 2021 that results in changes in the mining sequence which brings in slightly lower grades. Estimated payable gold production and costs for 2021 exclude any contribution from Hope Bay.
On a quarterly basis, Hope Bay is expected to produce approximately 18,000 to 20,000 ounces of gold at total cash costs per ounce of $950 to $975 and AISC per ounce of $1,525 to $1,575.
General & Administration Cost Guidance
In the first quarter of 2021, general and administration expenses were $44.9 million, which was above forecast primarily due to a health care donation of $8.0 million (C$10.0 million) spread over several years that was expensed in the first quarter of 2021 and due to higher costs related to compensation and benefit expenses in the first quarter of 2021. The Company now expects its 2021 general and administration expenses to be between $90 and $100 million (previously $80 to $90 million), excluding share-based compensation expense. In 2021, share-based compensation expense is expected to be between $35 and $45 million (including non-cash stock option expense of between $10 and $15 million).
Depreciation Guidance
In the first quarter of 2021, depreciation and amortization expenses were $174.7 million (excluding the Hope Bay mine). For 2021, the depreciation and amortization expenses are still forecast to be between $700 and $750 million.
In the first quarter of 2021, the depreciation and amortization expense for the Hope Bay mine was $6.4 million and, going forward, it is forecast to be approximately $8.0 million per quarter.
2021 Tax Guidance
Income and mining taxes expense for the first quarter of 2021 was $93.4 million (an effective tax rate of 40%). The effective tax rate is within the guided overall tax rate range for 2021 of 40% to 45%.
In the first quarter of 2021, the Company made cash tax payments of approximately $109.0 million. Of these, approximately $76.0 million related to top-up payments for taxes related to the 2020 tax year for Canada ($44.0 million) and Mexico ($32.0 million). The higher than normal payments are a result of the Company's opting to defer tax installments due to COVID-19 and the annual payment of the Special Mining Duty ("SMD") in Mexico of approximately $10.0 million. This annual SMD is due in March following the tax year-end. The Company expects cash taxes in each of the next three quarters to be aligned with the forecast amounts.
As previously outlined in the Company's news release dated February 11, 2021, the Company expects its effective tax rates by jurisdiction for the full year 2021 to be:
Canada - 40% to 50%
Mexico - 35% to 40%
Finland - 20%
2020 Sustainability Report Updates Climate Change Strategy
The Company will release its 2020 Sustainability Report on April 30, 2021, highlighting the progress achieved during the past year in the areas of sustainability and responsible mining. Key initiatives include an updated climate change strategy with a net-zero emissions target for 2050, and the disclosure of Scope 3 emissions (partial).
Adaptable, sustainable, accountable. These three words express Agnico Eagle's long-standing approach to improving sustainability performance. In 2020, they represented the Company's commitment (in the face of COVID-19) to remain focused on advancing its sustainability goals while protecting the health and safety of its employees and the communities in which it operates.
- The Company is committed to maintaining the highest health and safety standards. The Company's long-term goal is to strengthen its health and safety culture through individual accountability and leadership, accompanied by aspirational zero harm safety targets and leading performance indicators. The past year was marked by the unique challenges brought on by the COVID-19 pandemic, and the Company's health & safety teams demonstrated remarkable adaptability to respond promptly to changing conditions
- In 2020, the Company's combined lost-time accident and restricted work frequency (employees and contractors) was 1.02, compared to 0.99 in 2019. The Company expects to use the many lessons learned in 2020 to improve its safety performance. It has launched the Towards Zero Accidents health and safety initiative, another step along our journey to eliminate workplace injuries and reach our goal of zero accidents
- The Company's efforts in Environmental Stewardship focus on minimizing its environmental footprint, by preventing or limiting emissions, and reducing waste. Each of the Company's operations is responsible to identify, analyze and manage environmental risks and to work in a transparent manner with local stakeholders, building a foundation of trust and cooperation
- In 2020, the Company's greenhouse gas ("GHG") Scope 1 and 2 emissions were 578,156 tonnes of CO2 equivalent ("CO2eq") representing an 11% increase compared to 2019 and our GHG emissions intensity (tonnes of CO2eq per ounce of gold processed) increased by 7% to 0.40 in 2020. Both increases relate primarily to the ramp-up of operations in Nunavut. While there is still work to do, the Company believes it has the lowest GHG emissions intensity in its peer group, achieved by sourcing 52% of its electricity needs from renewable sources
- The increase in 2019 and 2020 is mainly attributable to the expansion of Meadowbank Complex and start-up of Meliadine mine in Nunavut where there is no power grid, and the only available source of electricity is through diesel generators. The Company sees potential to materially reduce GHG emissions for not only these new mining operations, but also for the entire Kivalliq region of Nunavut, through the construction of a power (and fibre optic) line sourcing green renewable energy from northern Manitoba. The Company is actively working with the local Inuit associations, the Government of Nunavut, and the Federal Government of Canada to move this power/fibre line forward. The company is also considering alternatives, including wind generation for which the Company has permits at the Hope Bay mine. The Company continues work with local stakeholders in the north to find innovative solutions to reduce its carbon footprint
- In 2020, the Company completed a first estimate of its Scope 3 GHG emissions, following the GHG Protocol Standard and using spend-base emission factors. The Company's scope 3 GHG emissions are estimated at approximately 1.3 million tonnes of CO2eq. Most of these emissions are estimated to come from the purchase of standard goods and services from carbon intensive industries such as chemicals, mining services and construction. Given the approximate nature of this assessment and the rapidly evolving practice, it is expected that the Company's Scope 3 assessment may vary in the coming years
- The Company understands that the planet is at a critical juncture in the climate crisis. In the short term, all of the Company's sites have initiated GHG reduction initiatives and continue to research, develop and implement new ones. In the long term, the Company has committed to a net zero target for 2050. Pathways to achieve net zero, including specific reduction targets, and other key climate-related targets will be evaluated as the Company continues to move forward on improving its performance on all climate-related matters
- The Company believes that its people and culture have always been a competitive strength and advantage. Diversity and inclusion are fundamental to the Company's core values of Family, Trust, Respect, Responsibility and Equality. The Company is committed to engaging, developing and retaining the best people and empowering everyone with equal access to opportunities and recognition
- In 2020, the Company continued investing in local communities, with total spending of $5.3 million in community investments ($47.0 million since 2009), $876 million in local procurement (55% proportion of spending with locally based suppliers) and $621 million paid to employees in wages and benefits
- In 2020, the COVID-19 pandemic created unique challenges to the communities in which the Company operates. The Company worked closely with community authorities and businesses to leverage its ability to access materials to support the most vulnerable people in society and to provide critical health, safety, food and other supplies. Among the actions taken, the Company delivered food baskets and supported food banks, provided hygiene and PPE supplies to communities and frontline workers, supported local businesses through special aid and purchase of vouchers and gift cards for employees and communities and provided workforce, equipment and material for community-led support initiatives through a program called the "Good Deeds Brigade" in Nunavut
"Sustainability is a mindset and we see it as an opportunity to do better, to constantly improve and to deliver on our responsibilities and promises to all of our stakeholders", said Mr. Boyd.
First Quarter 2021 Results Conference Call and Webcast Tomorrow
Agnico Eagle's senior management will host a conference call on Friday, April 30, 2021 at 8:30 AM (E.D.T.) to discuss the Company's first quarter financial and operating results.
Via Webcast:
A live audio webcast of the conference call will be available on the Company's website www.agnicoeagle.com.
Via Telephone:
For those preferring to listen by telephone, please dial 1-647-427-7450 or toll-free 1-888-231-8191. To ensure your participation, please call approximately five minutes prior to the scheduled start of the call.
Replay Archive:
Please dial 1-416-849-0833 or toll-free 1-855-859-2056, access code 2091801. The conference call replay will expire on May 30, 2021.
The webcast, along with presentation slides, will be archived for 180 days on the Company's website.
Annual Meeting
The Company's Annual and Special Meeting of Shareholders (the "AGM") will begin on Friday, April 30, 2021, at 11:00 AM (E.D.T.). Due to the continuing public health impact of the COVID-19 pandemic, and having regard to the health and safety of the Company's employees and shareholders as well as public health guidelines to limit gatherings of people, the AGM will be held in a virtual-only meeting format and conducted via live webcast using the LUMI meeting platform at https://web.lumiagm.com/272684657. The Company expects to revert to an in-person annual meeting in future years after public health conditions have improved.
For details on how to attend, communicate and vote at the virtual AGM, please see the Company's Management Information Circular dated March 22, 2021 as well as the additional materials filed under the Company's profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Shareholders who have questions about voting their shares or attending the AGM may contact Investor Relations by telephone at 416.947.1212, by toll-free telephone at 1.888.822.6714 or by email at info@agnicoeagle.com.
About Agnico Eagle
Agnico Eagle is a senior Canadian gold mining company that has produced precious metals since 1957. Its operating mines are located in Canada, Finland and Mexico, with exploration and development activities in each of these countries as well as in the United States, Sweden and Colombia. The Company and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. Agnico Eagle has declared a cash dividend every year since 1983.
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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.