Conference Transcript - AEM 2026-05-13

Lawson, Moderator

Newmont we have the world's second largest 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.

Jamie Porter, CFO

Good morning everyone. So I will start the presentation today with an overview of AgNICO. We'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, but obviously a phenomenal start to the year from a financial perspective with the gold price environment we're in. I'll briefly present are our recently announced proposed consolidation in finland where we've uh through the proposed acquisition of rupert resources orion resources and the fin gold joint venture we've consolidated 2500 square kilometer land package and what we believe is the most highly prospective ground in in northern europe and lastly i'll touch on our key value drivers and 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 percent 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 two, 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 four 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 five mines that reflect almost two-thirds 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 longstanding 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 five operations. It gives us a tangible competitive advantage that we see in our cost structure our costs are three four hundred dollars an ounce below the industry average and it's because of this regional approach and the results really speak for themselves we go back the last 20 years 2005 agnico was producing 240 000 ounces a year from one mine the laran mine in northern quebec fast forward to 2025 producing 14 times 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 three. Very few of our peers can say that. 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 two 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 half a 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 to the dividend in 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 half a billion a quarter, which means free cash flow will be closer to one to one and a half billion per quarter, and we'll be doing two to three times 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 Acre project with Orion 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 Ketula mine, produces about 210,000 ounces a year. We started in Finland 20 years ago, acquiring Ketula 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 Ikari project and start the permitting process. We see potential production by 2034 of up to 300,000 ounces a year from Ikari, which when combined with Ketila will give us half a 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 my life for decades to come. Now, I'll end on just an overview of our organic growth pipeline. We like to say the company's 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 five projects collectively represent 1.5 million ounces of potential annual production growth. These are relatively low-risk projects. They're 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 a million ounces a year at a million ounces a year detour will be one of the top five or six largest gold mines in the world and i'd argue one of the most profitable at current spot gold prices at a million ounces a year detour will generate three billion dollars 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 and will do so for decades and decades. At Canadian Malardic, 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 tons per day of relatively low grade, one gram per ton material. And we're transitioning to an underground mine at a third of the volume, but three times 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 tons per day of excess mill capacity. We have a plan through the addition of a second shaft and the development of two satellite deposits to fill the majority of that mill and get production from Canadian Malartic up to a million ounces a year as well. So between detour and Canadian Malartic, two 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 Makassah 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 for that announcement. This will be our fourth mine that we will have built in Nunavut. It 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, Meliodine and Meadow Bank in Nunavut, We see the potential to get production from Nunavut as a territory to north of a million ounces a year. So we're looking forward to that next week. And lastly, we have a 50-50 joint venture with tech 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 million ounces of total annual production growth potential here. And this excludes the proposed acquisition of Rupert and its Icarina 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. And with that, come join you, Lawson.

Lawson, Moderator

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 higher growth projects, consider repaying at least 40% of free cash flow and continuing to build a 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? Yeah, that's a good question.

Jamie Porter, CFO

I mean, I think, and I have said that many times, in the current gold price environment, we can do everything. I think our number one priority would be to continue to invest in our organic growth pipeline. I mean, these projects are projects that we were looking at at $1,800 gold and, you know, had 15% approximate IRR at $1,800 gold. With Hope Bay being the one exception, it was slightly lower. So, you know, 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 number one. priority number two again in this price environment would be returning capital to our shareholders we've significantly delevered the balance sheet over the past several years you know we've gone from a net debt position a few years ago to you know 2.9 billion dollars of net cash at the end of q1 i anticipate will be close to 5 billion of net cash at the end of this year so you know 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, you know, 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.

Lawson, Moderator

That's exciting.

Jamie Porter, CFO

So 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 it's had to cut it once and we don't want to have to cut it again so the the idea behind the dividend is that it's sustainable uh even in a much lower gold price environment and we use the 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, you know, we will continue to increase the dividend. It went from $800 million a year to $900 million a year, so 12.5% increase this year. And there's scope for it to increase, but, you know, not by 50%. I think it'll 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 that's something that's that's certainly not out of the question again when you look forward to to 2027 um yeah current production levels and gold prices we're generating eight billion a year of operating cash flow uh we're spending this year if you factor in proposed spending associated with hope bay maybe three billion dollars in capital so that leaves five billion of free cash flow left over uh that's going to be similar in in 2027 and, you know, that could be returned through the dividend. I mentioned we're going to keep that on a relatively modest through the share buyback or through a special dividend and we'll evaluate it based on, you know, the gold price at the time.

Lawson, Moderator

Okay, great. I'd like to move the conversation back to Finland. Thank you for touching on that. Great overview of that transaction. Effectively, what you've done is Finland's 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?

Jamie Porter, CFO

Sure. So, I mean, we're very happy with what we got. With the acreage deposit, that we see having the potential, again, to be developed into a 300,000-ounce-a-year mine that, when combined with Kitla, will represent half a million ounces of annual production in Finland. In terms of next steps or, you know, catalysts along the way, we have already closed the acquisition of B2 Gold's 70% interest in the Fingold joint venture. That's complete. We're looking to close the Rian 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 three 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 project. So we'll figure out what makes the most sense. we now having all three of those properties together, we can unconstrained 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.

Lawson, Moderator

Perfect. You also emphasize 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.

Jamie Porter, CFO

Yeah, I think, you know, similar to what Natasha said in behalf of NewMod, the bar is pretty high because we have a number of very high return organic growth projects already. So any, you know, external M&A opportunity would have to compete for capital with uh with with the projects that you know we already have which you know i've mentioned many of them are 30 to 50 to 60 percent irr uh you know high very high return projects so um i think you know we'll continue with the ag nico strategy which is you know focusing on on regions where we currently operate um we'll you know 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, you know, minimum 20 to 30 percent growth starting in 2030. We've got Ickery and projects like Hammond Reef on top of that. We can afford to be very patient and very selective.

Lawson, Moderator

OK, so when you talked about your growth, I was thinking very impressive for a company of your size. there's five assets potentially a six with um uh hayman reef and potentially more that haven't been uh surfaced yet when you think about the current bench strength that uh at agnico do you feel you have the resources necessary to drive that growth are there any limitations that that you worry about internally yeah no it's it's a great question i i one of one of the things that I think differentiates Agnico is that we build our own minds so we have a 240 person strong construction team and we oversee any expansions or or new construction we we will use contractors

Jamie Porter, CFO

and consultants but we manage them rather than you know handing them the project to to build and then you know the keys 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, a 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 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, Northern Quebec. So we're in great shape now. I think we could do Hammond Reef and Nickery. 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.

Lawson, Moderator

The 20 to 30 percent, 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 percent.

Jamie Porter, CFO

How would you frame the blue sky upside potential for growth over the next decade? yeah so the the blue sky potential i think is significant you know you look at the our five key value driver projects they collectively represent 1.5 million ounces of of annualized production growth uh you've got hammond reef which could produce 300 000 ounces a year by you know 2032 2033 and you've got icory which could produce 300 000 ounces a year by 2034 2035 so you know you add that all together you're north of two million ounces but that's not all going to be incremental we will have depletion at some of our existing mines metal bank for example which was scheduled to be closed this year we 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 at gold x and perhaps some of our other operations we could see a production decline um so you know i'm not going to say that's that's incremental production but uh could we be you know well north of 4.5 million ounces assuming all those projects go as planned in a decade um absolutely it's possible um folks if anybody has a question if you put up your hand we'd be happy to address it uh perhaps well you're all thinking about that

Lawson, Moderator

but 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 who cite 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 deals with prices, there's cost pressures in the current macro environment. How do you think about protecting that?

Jamie Porter, CFO

So I think the best way for us to have certainty on, you know, 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, you know, about 60% of detailed engineering. Our experience building three 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 three 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, you know, 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, you know, that's a factor across all of our operations, not only our construction projects. But, you know, 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.

Lawson, Moderator

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 Like. You highlighted it as one of the major producers, taking you to a 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?

Jamie Porter, CFO

Yeah, and that's something that we're studying internally now. I mean, we have a plan to ramp up detour to a million ounces by 2030. At that ramped up million ounce per year rate, we're processing 29 million tons a year of ore. It's a massive mine, but we're permitted to 32.8 million tons 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 a 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.

Lawson, Moderator

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