Earnings Call Transcript - AEM Q1 2021

Operator, Operator

Good morning. My name is Schwing and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle First Quarter Results 2021 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. Thank you. I would now like to turn the call over to Chief Executive Officer, Mr. Sean Boyd, you may begin your conference.

Sean Boyd, CEO

Thank you, operator, and good morning, everyone, and welcome to our first quarter 2021 results conference call. We are moving through our slide deck and in that slide deck will be forward-looking information. So please review the cautionary language that is in our PowerPoint material. What I’d like to do is just review a bit of an overview of the strategy, touch on the progress we are making on ESG and Greenhouse gas emissions and what our plans are there going forward in terms of additional investments, particularly in the north; review the results of the quarter, talk about our exploration, which is a real push for us with a huge increase in our budget this year. So, if we look at the quarter, again, we were able to build for the momentum and strength that we saw in the second half of 2020 with the second consecutive quarter of record gold production. We achieved that strong operational performance with probably the most employees we’ve ever had and extremely good safety performance. Not only are we producing gold, we are doing it very safely. Our costs were slightly better than forecast in the quarter. Financial position remains strong. We’ve declared a cash dividend again, which keeps our track record going. We’ve been paying a cash dividend since 1983. So the focus continues to be on growth and executing our Brownfield opportunities and project pipeline. We are still looking for 24% growth in production from last year through 2024. Exploration is a big part of the story. In terms of gathering information on the Brownfields opportunities, we are seeing extremely good results at LaRonde, good results at Meliadine, and we featured some results here at Canadian Malartic and Hope Bay. We plan to have a more comprehensive exploration update later on in the second quarter. We decided to break it down and provide some forums with our exploration team to discuss the progress we are making in a number of areas. Having said that, Guy Gosselin, who runs our exploration group and has been with us for 20 plus years, is on the call and available to answer questions on exploration. No change in the strategy; it continues to focus on optimizing existing assets through taking advantage of the ability to convert more resources to reserves and extending the mine lives of our key mines. That’s a low-risk, high-quality strategy given that those are high-quality ounces near existing infrastructure. We continue to be focused on ESG. We score very well on ESG and are recognized as one of the leaders in the industry in terms of ESG by a number of external independent rating agencies and research agencies. We’ve put out our sustainability report. Our Annual Meeting is today, so we make that available around the Annual Meeting time. So, that is out today. We are adopting a net zero emissions target for 2050 and have begun the disclosure of Scope 3 emissions. We are fortunate in our business because a lot of our production is powered by electricity, over 50% of our production. So on a relative basis, we have very, very low greenhouse gas emission intensity within the peer group. In Nunavut, we are required to use diesel to power those mines. As we move forward to achieve our targets of reducing and getting to net zero, that will require investments in renewable energy. We continue to work with the governments on alternatives like wind power and also a power line from Northern Manitoba up into Nunavut. In fact, at Hope Bay, the government has given the okay for a wind turbine there. We still have some work to do on that. We’ve made some pretty good progress there. We talked about safety earlier. It continues to be a priority. We’ve achieved one of the lowest combined lost time action records in our history and continue to win a number of safety awards at several of our mines. One of the highlights over the last year—it’s been challenging for many—but our team has really stepped up in the communities. They’ve done a professional job, a classy job of not being asked to help, but stepping up and taking the initiative to provide food and medical assistance in certain areas. Our Nunavut workforce is still at home; it’s been over a year. We are getting closer as more vaccinations are being administered in Nunavut. They were able to start the vaccination program earlier. We are getting closer to the point where we can welcome our Nunavut-based employees back, and we look forward to having them back. As far as the quarter goes, record production for the second consecutive quarter, as we said. Without Hope Bay, it was 505,000 ounces, which is a record. That sets us up nicely to beat our guidance and produce over two million ounces for the first time in our history. That’s over 300,000 ounces more than we produced in 2020. Our CapEx estimate continues at a little over $800 million, and we talked about the declaration of a quarterly dividend of $0.35 a share. As we look at the quarter, we are pleased and happy to be delivering strong cash flows, strong earnings, good cost, and record production. But I think the real value driver continues to be exploration. We saw the beginnings of this about a year ago with several projects. East Gouldie, the extensive step-out there is potentially significant. It has turned what was a very marginal underground project into what will become Canada’s largest underground gold mine, which we announced last February. Given the location of East Gouldie in a totally different rock package than the main structure along that main break in the region, it opens up the potential, and we have over 20 kilometers of ground covering that major structure. To have a step out over 1000 meters to the east is important—we believe it demonstrates the immense potential of that area to find additional gold. In our study published in February, we initially assumed we would mine about 7 million ounces of an overall envelope, which currently is known to be in excess of 14 million ounces. A step out of 1,000 meters to the east of the East Gouldie mineralized envelope is why we view it as significant. It's close to the boundary of The Rand Malartic property, which we acquired a couple of years ago. That's a property where there is a 2% NSR, but we have the ability to buy it all back for about $7 million. We like that area. We have been involved in this since 2014 because we felt there was potential for significant underground opportunity, and that’s unfolding as we hoped. Stay tuned for more results. At Hope Bay, we have a steady pace of work with a team from Agnico augmenting the team at Hope Bay. We are making improvements in operations focused on the Doris deposit. Exploration is largely centered on Doris. We think we can extend that part of the operation while we continue to drill Madrid and the Boston deposits. At Upper Beaver, we reported the best drill hole intersect ever on that property—over 60 grams, almost 1% copper, just over 16 meters at a depth of 1200 meters. We continue to drill and analyze both the Hope Bay and Upper Beaver opportunities. The next slide is the long section of Canadian Malartic. There are ten rigs going, with a $30 million program that’s 50:50 with our partner Yamana. The structure is wide open and covers 20 kilometers. You can see on the right the Rand Malartic property boundary, which hasn’t had much exploration; hence, we say the structure is totally wide open. This will be a main focus of our exploration program as the thickness and grade at East Gouldie drives the entire Odyssey underground mine opportunity. We also see on the next slide a long section of the Doris deposit, the Hope Bay Mine. Just to remind you of the program—$16 million; approximately 70,000 meters of drilling, and about 30,000 meters of that is delineating Doris, while 40,000 meters will be exploring targets around Doris, Madrid, and Boston. From an operational perspective, we see improvement in recoveries at Hope Bay to over 90%. We are making steady, solid progress there, but the real prize is the two large geological belts, 80 kilometers long. That will take some time to drill, and we are not in a hurry. While we optimize and improve operations at Doris, we will focus on assessing the overall size of the mineralized deposits on these two large trends, which will form the basis for our analysis to expand production capacity at some point in the future. As for operating results, we have seen excellent contributions from several of our big producers. Starting with LaRonde, the key to the quarter was excellent productivity in the west mine area and at LZ5. At the west mine area, we produced more than our forecasted mining rate, as we also did at LZ5. At LZ5, we had record production averaging over 3100 tonnes a day, well above the forecast, driven by ongoing improvements and optimizing the usage of automated equipment. We are seeing that at the main LaRonde deposit as well. We are making steady progress; at LaRonde, 26% of mucking was done from surface, while at LZ5 it was 21% of production. We continue the exploration program, developing three exploration drifts to explore areas below LZ5, from one kilometer to three kilometers below the surface. The same rock package holds all deposits on LaRonde, so it’s wide open with excellent exploration potential. This type of program is key to our full potential plan. If you understand how we can continue to optimize these large cash flow generators and extend mine life, we see potential to do that at several of our mines, including LaRonde. Goldex shows steady progress, with 35,000 ounces produced. We have good cost performance largely driven by the continued outperformance of the Rail-Veyor system, averaging over 7,000 tonnes a day in the quarter. We are continuing to explore that deposit around the south zone, which is higher grade. We are seeing good performance from Canadian Malartic, producing almost 90,000 ounces, which is half of that operation. We had record tonnes mined in January, and mill performance was above target, averaging over 58,000 tonnes a day on a 100% basis. We discussed the Odyssey drilling, which will be key for this project as we look forward. What we saw in February was essentially a first cut that will optimize continually as we understand exactly how much gold exists in the Pontiac sediments holding the East Gouldie deposits. This could have a meaningful impact on the valuation of that opportunity at Canadian Malartic. Kittila set records in March for monthly gold production and tonnage milled; they are also making good progress on autonomous production in drilling and haulage, with trials underway in Q1, which is important for that mine as it looks to expand further. We have been impacted by COVID there in terms of the Kittila Shaft delays because the team that was doing the work is out of the country. Travel restrictions in and out of Finland have hindered progress. We have transitioned to local employees there, which doesn’t impact our ability to obtain ounces since we can use the ramp system, albeit at a higher cost. We expect the shaft to be in place in the second half of next year, about six months behind schedule. Meadowbank has seen steady improvement, producing about 80,000 ounces, setting a record in March for long-haul trucking performance, and showing good performance that particularly helped in March. Meliadine, when adding the Tiriganiaq ounces, produced more gold than any of our other mines for the first time with 96,000 ounces. We have made significant advances in productivity. We processed 4600 tonnes a day, which has been the target over the last year. We expect to reach 4800 tonnes a day by the fourth quarter of this year and ultimately, continue to expand to 6000 tonnes a day by 2025. This project will be long-lived. We began exploration drilling about 18 months ago, continuing to find good intersections at Pump South and Wesmeg, indicating the deposit remains open at depth. In Mexico, we have seen steady performance and good cash generation, although there’s been an issue with water at La India. We expect to ramp up production in the second half of the year. Adding it all up, pre-Hope Bay, it comes to approximately 505,000 ounces, which is a record. This has generated good earnings and cash flow per share of $1.47 for a strong quarter. Our financial position remains strong. We paid cash for Hope Bay, including the buyback or buy down of the royalty on that property. Moving forward, we will continue to rebuild our cash position as we generate strong net free cash flow. Quick summary: for the second consecutive quarter, record production continues, and we are focused on delivering 24% growth from last year through 2024, concentrating on Brownfield opportunities and our project pipeline. As we gather more information on these opportunities through our expanded exploration budgets, we can provide updates. Our focus remains on low geopolitical risk regions, which we consider extremely important as we look at the business. These are places we are very comfortable operating in. A component of our strategy is identifying synergies and transferring technology and knowledge between operations to help keep costs down and to help us understand new opportunities found through exploration, integrating them into the project pipeline. Operator, I will open the line for questions. We have our full team here and will be happy to take questions.

Operator, Operator

Your first question comes from Fahad Tariq from Credit Suisse. Your line is open.

Fahad Tariq, Analyst

Hi, good morning. Thanks for taking my questions. Maybe first on Nunavut, you talked about in the release, have you started having discussions with local authorities about reintegrating the local workforce. Can you remind us what that would mean from a cost perspective? I know there are a number of initiatives that Agnico spent on while those employees were unavailable, but as they come back, can you just remind us from a quarterly basis what that means from a – maybe a cost savings perspective?

Martin Plante, CFO

Tariq, it’s Mart here. We will end up saving money when they come back. As we’ve expressed before, the additional cost is that we are still paying those employees 75% of their salaries, which works out to about $1 million a month. There’s a lot of work gone into transitioning them back, mostly around safety for the communities as well as the employees. But yes, there will be a savings of about $1 million a month as they return to the workforce.

Fahad Tariq, Analyst

Okay. Okay. Thanks. And then, sorry, just a follow-up on cost. I know one of your peers talked about the stronger Canadian dollar having an impact on Canadian exposure. You have about 32% exposure, I think in 2021. Any color on, if FX rates stay where they are today for the rest of the year, what does that mean for annual cost guidance including CapEx? Thanks.

Martin Plante, CFO

Yes, on – it’s about – sorry, it’s Dave, do you want to take that or should I take it? Go ahead.

David Smith, CFO

Go ahead, Mart.

Martin Plante, CFO

It’s about 32% as you mentioned, hedge sensitivity. We’ve been able to offset that. You saw in the first quarter, we dealt with that. The dollar right now is averaging about 126 versus our budget of 130. So, we are more than able to offset that. But it is something that we monitor all the time with regards to mitigating it. Right now, we haven’t adjusted our guidance even with the movement in the currency. Yes, go ahead, Dave.

David Smith, CFO

Yes, I would just add — sorry, Sean, what were you going to say?

Sean Boyd, CEO

No, I was just going to turn it over to you, maybe just give some color on your thoughts on hedging and what’s in place.

David Smith, CFO

Yes, absolutely. Thanks for the question, Fahad. It’s an interesting time because with the Canadian dollar lower than 1.23 at the moment, and the guidance was set at 1.30, you get into an interesting situation where you probably end up trying to protect things like 1.28 that you probably wouldn’t have considered previously. There does seem to be some strength in the Canadian dollar. The Canadian government is making some noise about raising interest rates while the U.S. government is not. So, I think that has contributed to the strength of the Canadian dollar. We just talked about possibly using some more exotic instruments to try and benefit the company, while paying attention to volatility and picking our moments because, with the addition of TMAC, we feel a little under hedged. We would normally be around 50% hedged for CAD on the year at this point, so it’s something we are looking to add to opportunistically.

Fahad Tariq, Analyst

Okay. Great. Thanks for the color.

David Smith, CFO

Thanks.

Operator, Operator

Your next question comes from Tyler Langton from JP Morgan. Your line is open.

Tyler Langton, Analyst

Yes. Good morning. Thanks for taking my question. Just a follow-up question on cost. I mean, are you seeing the exchange rate pressure? Do you think that it came with sort of labor tightness, like other materials? Any concerns there for the cost guidance?

Sean Boyd, CEO

I’ll start and then I’ll turn it over to Dominique Girard. In terms of labor tightness, that’s been pretty stable regarding what we see as annual increases in our wage costs, particularly in Canada, which is the biggest part of our business, which has been around 3% a year. We don’t see any pressure on that as we look forward. As far as inputs, I’ll turn that over to Dominique who is on the call regarding the input price side.

Dominique Girard, CFO

Yes, we are starting to see some increases in the coming time, mainly in steel, concrete, and also tires. Our procurement team is well-tuned on that and tries to take opportunities whenever we get a contract, although people seem to be a bit hesitant due to volatility. So far, prices remain within our range, but we are all aware challenges may arise. We see some pressure, particularly on the workforce. We see a bit more competition, particularly in Canada and Europe, but other than that, we are still okay.

Tyler Langton, Analyst

Okay. Great. Thanks. And then just, I know, I think that the cash cost in the quarter is around $6.28 an ounce, which is below the annual guidance of around $7.30, $7.40. Can you just talk about how you think about costs for the remainder of the year at the mines?

Dominique Girard, CFO

Well, on cost per ounce, we produced more ounces, so that’s the main driver. We had better grades in the mines with good productivity. Looking at the trend in cost per ton in Nunavut, we see that the improvement continues. There is increased productivity and better cost control. I expect this to continue in the coming quarters.

Tyler Langton, Analyst

Okay. Great. Thanks so much.

Operator, Operator

Your next question comes from Anita Soni from CIBC World Markets. Your line is open.

Anita Soni, Analyst

A question on cost—the unit cost seems to have been better than what you had put out for guidance in February. Can you just run down some of the assets and the main drivers and help me understand why those costs might revert to what you were guiding to? Or do you expect those unit costs to continue to outperform?

Sean Boyd, CEO

I’ll start, and Dominique stated that a few more ounces in the quarter certainly helped from a unit cost perspective. In terms of the drivers, we will see some impact from FX. We think we can offset some of the input costs through productivity. I wouldn’t expect to lower the cost guidance as FX remains volatile and unknown. Thus, we felt it was premature to make a long-term call or extend our view on cost performances. We do have opportunities at some mines to produce a bit more gold, and we will see how that unfolds as we get through the next quarters. As we said in the release, Q2 is expected to be a bit less; we have planned shutdowns at LaRonde, Goldex, Kittila, and others, so several operations will be down for a few days, resulting in lower production in Q2, but that should recover strongly in the second half. Achieving the guidance we seek requires a robust Q3 and Q4 production.

Anita Soni, Analyst

Okay. So if the Canadian dollar cost stays the same and the U.S. dollar remains strong, how would that affect the overall per ounce guidance?

Sean Boyd, CEO

Dominique, please handle that one.

Dominique Girard, CFO

Yes, sure. I think the throughput is between 600 and 700 tonnes per day, with grades varying around 9-10 grams per tonne, which brings about 18,000 to 20,000 ounces per quarter. We started the year with higher grades while moving to lower grades as we progress. The throughput and ongoing improvements we've seen will bring positive results moving forward.

Anita Soni, Analyst

I just wanted to follow up about levels of capital spending for 2021 and beyond. Should we expect to maintain similar levels, or will there be increases as we move into the longer term?

Dominique Girard, CFO

I don’t have an answer to that question. We are revising a new baseline, as we are considering the ongoing project with Madrid. That’s helped for short-term CapEx as we avoid some costs. We still need more analysis to finalize infrastructure planning. From the current baseline, we’ll have a clearer picture in Q2, but spending right now is about $10 million per quarter at Hope Bay.

Anita Soni, Analyst

Okay. Thank you. That answers my question.

Sean Boyd, CEO

Yes, Anita, just on the strategy there, we aim to be cash neutral while drilling and gathering more information. Based on what we’ve seen, we believe more ounces exist at Doris, allowing for a longer production timeline. We’ve paused on Madrid, as we’re concerned about the ramp’s location and the rock's type. We are in no rush; we need time to understand and find more ounces, ensuring we keep drilling and our expenses cash-neutral.

Anita Soni, Analyst

Okay. So the focus is on identifying more ounces rather than simply enhancing efficiency at 91%.

Sean Boyd, CEO

Yes. Thank you.

Operator, Operator

Your next question comes from Puneet Singh from Industrial Alliance. Your line is open.

Puneet Singh, Analyst

Hi, thanks. Good morning. Just related to Q2, are there any higher grade stockpiles at some of these assets that might help lower the impact of maintenance in Q2?

Sean Boyd, CEO

Dominique?

Dominique Girard, CFO

Not really. When we have high-grade stockpiles, we tend to pressure them. We don’t wait for that. The planned shutdowns in Q2 are necessary to ensure mill equipment is well-maintained. We’ll see pressure in Q2, but we expect improved grades and productivity in the second half.

Puneet Singh, Analyst

Okay. Great. At Meadowbank, you did really well this quarter. Are you calling for a similar production rate next quarter? Do you expect to have some of that softer ore assisting next quarter?

Dominique Girard, CFO

Yes, the mine is performing better than planned, partially due to softer ore and solid maintenance availability. As we receive four additional trucks on the barge, we’ll gain more flexibility in transportation, leading to potentially higher production in the second half of the year.

Puneet Singh, Analyst

Okay. Great. Those are all my questions. Thank you.

Operator, Operator

Your next question comes from John Tumazos from John Tumazos Very Independent Research. Your line is open.

Sean Boyd, CEO

Hello, John.

Operator, Operator

And at this time, that question has been withdrawn. Your next question comes from Greg Barnes from TD Securities. Your line is open.

Greg Barnes, Analyst

Thank you. Sean, just a bit about Malartic and East Gouldie. Did that potentially change how you approach underground development and mining?

Sean Boyd, CEO

Yes, I think it’s too early. I’ll let Guy provide his color on what we are seeing. What we do know is that there is tremendous capacity in the plant once we transition into underground. The question is whether the existing ore plans will accommodate more than 7 million ounces of the 14 as we see it reach beyond 2039. The drilling has suggested that the life could be significantly longer and we should drill the Pontiac sediments to see if East Gouldie is bigger. If it’s on non-royalty ground, then the economics could improve. But it’s early. We could have a multi-shaft area like LaRonde; it’s too early to say.

Greg Barnes, Analyst

Okay.

Sean Boyd, CEO

When you see significant potential like this, it’s wise to pay attention, follow through, and factor that into development decisions. Regarding Kittila, we thought was a potential LaRonde, given the size of that deposit. It continues to solve issues for the future; LaRonde has proven to be a long-term mine; could Malartic become similar? We have an underground mine that was initially mining in 1950. We’ve shut down before, and Osisko was smart enough to operate the open pit. That provides us an opportunity to build what we see as Canada’s largest underground mine. Duration is uncertain, but the question of ore sources becoming more extensive is important. Guy, can you provide your insights?

Guy Gosselin, Head of Exploration

It’s a good question. The East Gouldie ore body remains unchanged with around 6.4 million ounces and more. We have ongoing drilling at the Rand Malartic, extending it, and we’ve been able to project and predict ore body location accurately, yielding good drill results. It’s clear that we need more drilling to understand the extent and quality of the ore.

Greg Barnes, Analyst

I understand the hole was drilled from the Rand Malartic property. Given the mineralization higher up in the property, does that influence your strategy?

Guy Gosselin, Head of Exploration

Yes, within Rand Malartic, there have been known periphery intrusions with lower-grade results, but we view this hole positively, projecting deeper ore zones within the Pontiac over 600 meters and anticipate more targets.

Greg Barnes, Analyst

Great. Thank you.

Operator, Operator

Your next question comes from Tanya Jakusconek from Scotiabank. Your line is open.

Tanya Jakusconek, Analyst

Hi. Yes. Good morning, everybody. I have a couple of questions. Just circling back to the cost structure. Regarding inflation and currency, is it still reasonable to assume that a 10% shift from the 1.30 mark would have an impact of about $50 per ounce on your cost structure?

David Smith, CFO

Yes, that’s the idea. However, with TMAC now in play, it’s a bit different. While we can still protect that 1.30, it may shift closer to 1.28 due to current conditions. Overall, I believe a 100 basis points change would yield about $5 or $6 in cost per ounce.

Tanya Jakusconek, Analyst

Okay. That’s helpful, thank you. Regarding inflationary pressures, are you seeing anything in freight or cyanide?

Dominique Girard, CFO

I don’t have detailed info on cyanide. We don’t foresee challenges meeting our guidance so far, and mine productivity is offsetting increases. We monitor delivery times closely to see if we might need to adjust inventory levels, particularly for tires.

Tanya Jakusconek, Analyst

Okay, so you’re protected for now? That’s great, thank you. On a bigger picture regarding exploration, what’s your plan this year for reserve replacement? You have many promising targets; where do you see reserves growing?

Sean Boyd, CEO

Yes, Guy, can you take that?

Guy Gosselin, Head of Exploration

Absolutely. LaRonde has been strong, adding reserves at LZ5. I don’t expect complete replacements at LaRonde this year; however, positioning exploration drifts underneath Bousquet represents a long-term strategy. At Malartic, with an extensive deposit, we deplete 350,000 ounces a year. Until further studies on East Gouldie, we won’t see replacements. On the other hand, Goldex stands in good shape for complete replacement. Kittila also demonstrates long-term potential as we further research deposits below the shaft. We are also maintaining production levels at Pinos Altos and expect upsides, while La India may see net depletion until further plans are established.

Tanya Jakusconek, Analyst

Understood. So, you see LaRonde and Canadian Malartic remaining strong for reserves, while others will take a bit longer. Is that correct?

Sean Boyd, CEO

Yes, with LaRonde and Malartic while Hope Bay remains under review.

Tanya Jakusconek, Analyst

Great. Thank you for that. I’d like to follow up on the water pipeline for Meliadine, particularly regarding public hearings and permits.

Sean Boyd, CEO

Dominique, you can take that one.

Dominique Girard, CFO

Certainly. Public hearings have been postponed due to the COVID situation in Nunavut. However, our good practices lead to inflows being 50% lower than expected and the mining rate outperforming our plans. We have enough capacity, so it’s not a pressing issue. We’ll follow the process for the hearings and await updates.

Tanya Jakusconek, Analyst

Okay, thank you very much.

David Smith, CFO

Tanya, just before you leave, I want to clarify something regarding hedging. Our guidance on currency sensitivity doesn’t account for hedging; therefore, a full $50 per ounce on all-in sustaining costs isn’t accurate depending on how we hedge. With existing hedges, it would be reduced to around $30 per ounce based on 100 basis point changes.

Tanya Jakusconek, Analyst

That clarification is really valuable—thank you.

Operator, Operator

Your next question comes from Ralph Profiti from Eight Capital. Your line is open.

Ralph Profiti, Analyst

Good morning. Thanks for taking my questions. Sean, I wanted to revisit East Gouldie’s step-out. When does the decision need to be made regarding the initial shaft position? And how flexible is the permitting process if we see successful drilling to the east?

Sean Boyd, CEO

We’ve essentially selected the shaft location. The question now is if additional ore into exploration will necessitate more access. We envision this as a long-term project, which means if we want to extract more than 7 million ounces of the 14, we need to identify and systematically drill the Pontiac sediments to uncover more potential in areas delivering good results from our drilling.

Ralph Profiti, Analyst

Understood. Thank you very much.

Operator, Operator

Your next question comes from John Tumazos from John Tumazos Very Independent Research. Your line is open.

John Tumazos, Analyst

Thank you. Apologies for having the mute button on. Sean, if all your technical teams succeed and you see significant progress on projects like Santa Gertrudis, Upper Beaver, Hope Bay, Hammond Reef, and other exploration projects, should we anticipate moving toward 3 million ounces or more? And will that be evaluated based on internal rate of return despite the conservative gold price scenario?

Sean Boyd, CEO

We’ve consistently stated that due to various reasons, especially risk levels, our approach emphasizes disciplined capital allocation. It’s fine to increase exploration budgets based on results to clarify what we own, in line with our strategy at LaRonde. While we work to understand our discoveries and rank projects, we remain cautious about spreading our CapEx budget too thinly. We believe in a measured approach to long-term development. As we noted in the reserve numbers, our February count may not decrease, particularly with the addition of Hope Bay, which isn’t included in the 24 million ounces of reserves. Our strategy continues to emphasize careful management of our share count and maintaining the quality of our projects, ensuring sustainable growth over time.

John Tumazos, Analyst

Thank you.

Operator, Operator

There are no further questions at this time. I would now like to turn the call back to Mr. Boyd for closing remarks.

Sean Boyd, CEO

Thank you, operator, and thank you everyone for your attention. We have our AGM today at 11. I don’t think you’ll hear anything new from what you just heard over the last hour on the conference call, but you are certainly welcome to join us virtually. Enjoy the rest of your day and thanks for your time and the questions. Take care.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.