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

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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

by ahnationtalk on April 30, 202117 Views

TORONTO, April 30, 2020 – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM)(“Agnico Eagle” or the “Company”) today reported a quarterly net loss of $21.6 million, or net loss of $0.09 per share, for the first quarter of 2020.  This result includes non-cash foreign currency translation losses on deferred tax liabilities of $44.2 million ($0.18 per share), mark-to-market derivative losses on financial instruments of $22.1 million ($0.09 per share), non-cash foreign currency translation losses of $3.8 million ($0.02 per share), costs relating to the temporary suspension of operations of $2.3 million ($0.01 per share) and various other adjustments of $5.2 million($0.02 per share).  Excluding these items would result in adjusted net income1 of $56.0 million or $0.23 per share for the first quarter of 2020.  For the first quarter of 2019, the Company reported net income of $37.0 million or $0.16 per share.

Included in the first quarter of 2020 net loss, and not adjusted above, is a non-cash stock option expense of $6.6 million ($0.03 per share).

In the first quarter of 2020, cash provided by operating activities increased to $163.4 million ($204.8 million before changes in non-cash components of working capital), as compared with the first quarter of 2019 when cash provided by operating activities was $148.7 million ($170.8 million before changes in non-cash components of working capital).

The increase in cash provided by operating activities during the first quarter of 2020, compared to the prior year period, was mainly due to higher gold sales volumes and higher realized gold prices, partially offset by higher costs at the Meadowbank Complex and Meliadine mine which were still ramping up operations during the quarter.  Higher gold sales volumes were largely a result of the increased production due to the commencement of commercial production at Meliadine during May 2019.

The decrease in net income during the first quarter of 2020, compared to the prior year period, was mainly due to non-recurring losses on deferred taxes due to non-cash foreign currency translation, primarily due to the weakening of local currencies during the first quarter of 2020, unrealized losses on derivatives and higher production costs and amortization at the Meadowbank Complex and Meliadine mine, partially offset by higher gold sales volumes and higher realized gold prices.

“The first quarter of 2020 was challenging given the global COVID-19 pandemic and its impact on our gold production and unit costs in March as operations were reduced to minimum activities at all five of our Canadian mines.  Throughout this crisis the health, safety and well-being of all our employees and the communities that we operate in have been our top priority and remain a key focus as we have begun to carefully restart and ramp up our Canadian operations”, said Sean Boyd, Agnico Eagle’s Chief Executive Officer.  “Furthermore, despite the temporary shutdowns required to manage COVID-19, substantial progress was made in the first quarter at our LaRonde, Meliadine and Amaruq operations.  As a result, we expect to have a strong second half this year with quarterly gold production expected to return to levels similar to the fourth quarter of 2019.  Given the strong gold price and much weaker local currency environment than budgeted, we anticipate generating significant free cash flow in the second half of 2020.  In addition, our dividend has remained unchanged and we declared a quarterly dividend of $0.20 per share”, added Mr. Boyd.

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1 Adjusted 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”.

Agnico Eagle’s Response to the COVID-19 Pandemic and the Impact on its Business

From the start of the pandemic the Company took immediate steps to ensure the safety and well-being of its employees.  In addition to enhanced screening, hygiene and physical distancing measures, where possible, many employees continue to work remotely.  For the northernmost operations, the Company began testing all its employees for COVID-19 as an additional level of protection against the transmission of the virus.  The Company expects many of these measures to remain in effect for several more months as it moves towards a new way of operating to ensure employees remain safe, comfortable in their work environment and productive.  Although there are additional costs associated with these measures, Agnico Eagle is working on ways to offset these costs moving forward into the second half of the year.

The more immediate impact of the COVID-19 pandemic has negatively affected gold production and unit costs in the first and second quarter of 2020 as seven of the Company’s eight mines were operating at much reduced activity levels at the same time.  The Company has recently begun to gradually ramp up and restart several of its mines allowing it to position the business to return to normal operating conditions.

The following summary outlines the impact of COVID-19 and the current status of the Company’s business:

First Quarter and Second Quarter of 2020 Gold Production and Unit Costs Negatively Impacted by COVID-19 Related Shutdowns

In March, the Company sent home its Nunavut-based workforce and reduced its mining activities at Meliadine and Amaruq.  In addition, the Company’s operations in Quebec were temporarily suspended for three weeks in March and April 2020.  Post the end of the first quarter of 2020, Agnico Eagle’s Mexican operations were also put on temporary suspension.  The Quebec operations progressively restarted on April 15, 2020 and the Mexican operations are expected to restart in early June 2020.  Other than a three-day shutdown of underground operations in March, the Kittila mine in Finland has remained in full operation throughout the COVID-19 pandemic.

As a result, quarterly gold production was lower and unit costs were higher than anticipated due to the temporary shutdowns and reduced mining activities. Payable gold production2  in the first quarter of 2020 was 411,366 ounces (including pre-commercial production ounces of 2,974 (50% basis) at Canadian Malartic from the Barnat deposit) at production costs per ounce of $872, total cash costs per ounce3 of $836 and all-in sustaining costs per ounce4  (“AISC”) of $1,099.  Production in the first quarter of 2020 was affected by a nine-day shutdown of the Company’s Quebec operations, as mandated by the Quebec Government, and significantly reduced mining activities in Nunavut since March 19, 2020 related to COVID-19 precautionary measures.

2020 Gold Production and Unit Cost Guidance

Gold production for 2020 is expected to be 1.63 to 1.73 million ounces, compared to withdrawn guidance of 1.875 million ounces5.  This gold production guidance for 2020 was reduced due to impacts from COVID-19 related shutdowns.  The Company expects gold production to gradually ramp up in Quebec, Mexico and Nunavut in the second quarter of 2020 and average approximately 480,000 to 500,000 ounces per quarter in the second half of 2020.  The previous gold production guidance for 2021 and 2022 remains unchanged with a mid-point of 2.05 million and 2.10 million ounces, respectively.

Capital expenditures in 2020 are now forecast to be $690 million (compared to previous guidance of $740 million).  Total cash costs per ounce in 2020 are forecast to be $740 to $790 (compared to withdrawn guidance of $725 to $775).  Total cash costs per ounce are expected to be significantly lower in the second half of 2020 at $690 to $740 as a result of the expected increase in gold production.  AISC per ounce in 2020 are now forecast to be $1,025 to $1,075 (compared to previous guidance of $975 to $1,025).  The total cash costs per ounce and AISC per ounce guidance for 2020 were increased due to the substantial reduction in production caused by the temporary suspension of operating activities at seven of the Company’s mines, partially offset by favourable moves in foreign exchange rates.

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