Earnings Call Transcript - AEM Q4 2021

Operator, Operator

Good morning. My name is Chris and I'll be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Fourth 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. I'd now like to turn the call over to Sean Boyd, Executive Chairman. Please go ahead.

Sean Boyd, Executive Chairman

Thank you, operator, and good morning, everyone. And thank you for joining Agnico Eagle's fourth quarter conference call. I'd like to start off by thanking Tony Makuch and the Kirkland Lake team, particularly Tony for his contributions to Kirkland Lake, but more particularly for his work over the past several months in laying the foundation for the combined new Agnico Eagle, which you know, as we've said, is well-positioned to deliver on its production and cost guidance and deliver a high quality, low risk senior gold producer. What I will do today is, I will pass the call over to our new CEO, Ammar Al-Joundi, I’ll congratulate Ammar. And I'd like to congratulate also the Agnico Eagle senior leadership team, I'm looking forward to working with all of them. And I'm highly confident in the team's collective ability and experience to deliver on the promise of the merger.

Ammar Al-Joundi, CEO

Thank you, Sean, and good morning to everyone. It's a pleasure to connect with many of you whom I've known for a long time. I feel honored and humbled to have this opportunity, and I'm eager to engage in today's discussion. You will see how promising the future is for Agnico. Over the past six months, I have had the privilege of getting to know Tony Makuch. We have collaborated closely, and I want to acknowledge his integrity and character. I believe he will succeed in his future endeavors, and I wish him all the best moving forward, both personally and professionally. Working with the new team has been exceptional, and I'm excited about the potential to add value now more than ever in my 23 years in this industry. I hope this sentiment resonates clearly today. Our key messages will focus on the future rather than the past. Please pay attention to the forward-looking statements, which now span four pages in fine print. It’s important to note that Agnico Eagle will uphold its consistent and disciplined approach to value creation, similar to Kirkland’s practices, with low costs, strong margins, and substantial cash flow. We have a robust production profile with significant growth potential in secure jurisdictions and an experienced leadership team with a solid track record of creating shareholder value. We will discuss our three-year guidance of producing between 3.2 to 3.4 million ounces, positioning this as a foundation for growth. Furthermore, we have set a record mineral reserve of 44.6 million ounces of gold, with opportunities for both short-term and long-term growth, which we will elaborate on later. I will also detail the synergies we expect to achieve, which exceed our initial merger expectations. Additionally, we are pleased to announce a 14% increase in our quarterly dividend to $0.40 per share and our commitment to a normal course issuer bid to repurchase up to $500 million of our shares. It's worth noting that many of us are actively repurchasing shares now, highlighting a shift from a decade ago when share prices rose without buybacks. This reflects a new discipline across the industry, which is beneficial for gold investors. Our leadership team is experienced and trustworthy, led by our Executive Chair, Sean Boyd, along with strong Board members such as Jeff Parr and Jamie Sokalsky, both respected figures in the gold sector. We also have a capable management team that blends talent from both companies, enhancing our bench strength. We remain committed to growing our business. While we have record reserves, it’s crucial that we build a pipeline to create long-term value. This means discovering gold to translate into reserves and resources, which we are diligently doing. Our combined entity has increased its reserves by over 100% in the last decade, highlighting our proficiency in this challenging aspect of the business. We will continue to prioritize the growth of mineral reserves and resources through our aggressive exploration program this year, which will be evident in our upcoming technical report in the middle of the year. Our production strategy, which emphasizes returning capital, is critical. We are focused on maintaining safe jurisdictions and utilizing existing infrastructure for optimal capital returns. Our gold production history demonstrates our capacity to grow both in overall production and production per share, the latter being our primary focus as it relates to profitability. Despite slight growth in production guidance to 3.3 to 3.35 million ounces over the next three years, this serves as a solid base with potential for expansion. Our cornerstone assets continue to yield over 300,000 ounces annually. With a commitment of over $300 million toward exploration, we are investing substantially in our future. I’ll now invite Guy Gosselin and Eric Kallio to share insights on our exploration efforts, which are indeed exciting. Eric, who has led exploration at Kirkland Lake and will take on the Chief Growth and Exploration role, will kick off the discussion about Detour, Macassa, and Fosterville.

Eric Kallio, Head of Exploration

Thanks, Ammar. Good morning, everyone. Regarding Detour, we have a significant program planned for 2022, building on the successes of 2021. We anticipate approximately 234,000 meters of drilling, primarily targeting the west pit and saddle areas to extend these further both in depth and westward. Additionally, we're planning around 30,000 meters to explore new targets along the strike of the named deposit area, both east and west of the Cadillac Larder Lake deformation zone, in hopes of discovering the next extension of the mine. For Macassa, we have a substantial drilling program lined up for this year as well, with around 150,000 meters aimed at expanding the SMC mainly to the east and west. We are also starting work on key projects, particularly the deep extension of Rimminvuoma, located just east of the number four shops, where we've identified a highway corridor. This will allow us to access new levels for accelerated drilling. Additionally, we will focus on new drilling targets in the middle part of the mine, particularly around the near-surface brake ramp. We're also looking to extend from the near-surface ramp toward the AK zone, which is approximately 400 meters south on the Agnico property. This area already hosts around half a million ounces of indicated inferred resources, which we can quickly access and aim to further define for integration into the mine plan. As for Fosterville, we have another significant program planned, with about 200,000 meters of drilling mainly focused on the Lower Phoenix and Robin's Hill deposits, alongside additional depth extensions at LaRonde Zone, and converting more inferred material to the indicated category. Exciting elements of this year's program include new extensions to the drifts on the Lower Phoenix 3912 and the Robin's Hill decline, which will provide excellent new platforms in both areas. We feel optimistic about replacing resources and reserves for a second consecutive year. I will now pass it over to Ammar.

Ammar Al-Joundi, CEO

Thank you, Eric. Could you discuss some of the highlights or projects you are currently working on?

Eric Kallio, Head of Exploration

Yeah. Thank you, Ammar. So very briefly, main priority moving forward continues to be at advancing in Goldex, we've seen tremendous success so far in the infilling of the deposits. So we're moving towards converting is Goldex from Inferred resources to indicated. Again having in mind to deliver in the near future, the study and converting the large U.S Goldex deposits and the surrounding Odyssey project into reserves. Continuing at LaRonde, extending the life of mine, it's been particularly special this year, even after close to 34 years of operation at LaRonde mine was successful, that completely replacing what they've mined during the course of the year. So completely replacing the 400,000 ounces that was mined by a combination of success converting the recently discovered 20 North Zinc lands extending in the main LaRonde and also integrating more and more of the LZ5 into the reserve, as we continue to build on success at ramping up production at the LZ5. Moving to the north, at Meliadine, again, deposit that remains open in all directions, establishing now an exploration drift. And that will allow us to increase the pace of operation moving forward, to replace production with the large quantity of targets that we have across the property, but more precisely in proximity of the current mining area. And last but not least, we oversee at Kittila, with continued success at depth, all the way down to 2 kilometers. So we've seen that we've been now integrating inferred resources estimation all the way down to those drill holes and continue to have an aggressive plan to extend the deposit at depth and towards the north. And I'll leave it there for now. Ammar?

Ammar Al-Joundi, CEO

Thank you, Ian and Eric. Before I continue, I want to emphasize the opportunities we've discussed, particularly two significant gold discoveries in the last two years. These include the potential for around 15 million ounces at Malartic and a similar amount at Detour in additional ounces. These are remarkable finds located in assets that have existed for decades, highlighting the geologic potential of the Abitibi-Kirkland Lake corridor. We anticipate synergies exceeding $2 billion and believe there are even more opportunities ahead. Moving to page 12, we’ve outlined $700 million for development capital and highlighted several projects that you are likely familiar with. These are not speculative projects; they are operating assets that have demonstrated their viability, where we're planning expansions and investments, leveraging existing infrastructure. Detour has the potential to be one of the top gold mines globally in a prime jurisdiction, and as Eric mentioned, we continue to see significant promise there. Fosterville has seen substantial investment as it remains one of the highest-grade gold mines worldwide. At Meliadine, we previously halted drilling after discovering 10 million ounces, and it has consistently performed well. We have resumed drilling at depth with excellent results. Canadian Malartic and East Gouldie both have tremendous potential. Kittila is advancing with a new shaft, and the ore body remains open at depth. We also have ongoing opportunities at Macassa and Goldex. It’s important to mention that we've decided to shift our focus at Hope Bay entirely towards exploration. We acquired Hope Bay for its exploration potential, and our recent exploration efforts have increased our confidence in this upside. We're reallocating resources from smaller operations to concentrate entirely on exploration over the next couple of years. Then moving to page 13, regarding synergies, we believe we can achieve much better than the anticipated $2 billion over ten years. We have closely examined this potential and are optimistic. Although the deal officially closed on the 8th, we've been preparing for this for longer. For corporate synergies, we initially targeted $35 million per year, which we believe we can surpass. We're already looking at realizing between $15 million and $25 million in 2022, which has come sooner than expected. We aim to reach $35 million by the end of next year and go beyond that in 2024. Operational synergies present even more opportunities and are more complex, but we are confident in achieving our $130 million target. We have identified the potential for significantly more, possibly closer to $200 million, but we will stick with the $130 million target for now. We expect to realize around $25 million to $35 million this year, aiming for the $130 million run rate in subsequent years. Regarding strategic optimization, we aimed for approximately $600 million over ten years. A key target we've discussed is Amalgamated Kirkland. During my summer visit for due diligence, we got quite close to the Amalgamated Kirkland ore body. Our technical team has been working diligently, and we believe we might start producing ounces there as early as 2024 at low cash costs, which could account for about half of our total target. While there is significant potential, achieving these synergies will require a substantial effort and time. On page 14, we've presented a chart we've discussed previously. Now, I’d like to invite Dave Smith, our CFO, to elaborate on this and discuss our capital discipline and return strategies.

Dave Smith, CFO

Thank you, Ammar. As you can see, on page 14, we have a very impressive amount of operating margin generated from the mine sites, close to US$4 billion per year. Of course, we'll use that to run the rest of the business as well. But it will result in large amounts of cash available to continue to push exploration forward. We do believe in creating value with the drill bit, if there's anything easy in this business, I think that's the way to do it. We find gold for about $25 per ounce. So, a lot of value-add from that program. But also I think we'll be able to push that pipeline forward; a lot of growth capital being spent. That's great, as Ammar mentions, that’s high return projects because of the existing infrastructure and the nature of our pipeline, which is effectively in the shadow of the headframe as we like to joke. We'll also have the ability to increase return of capital to the shareholders, specifically dividends, I think we have a significant capacity to increase that dividend over time, as we continue to push everything forward. We'll grow cash on the balance sheet as well. And all-in-all, I think what we're going to do for shareholders is a little bit of everything and that includes letting them sleep soundly at night, as we only operate in the best parts of the world. Just flipping over to page 15, talking about the financial position, obviously, very strong with the merger, Kirkland Lake brought over a lot of cash and an unlevered balance sheet. And when you added that to Agnico's already conservative balance sheet investment-grade, you see that we have a lot of financial capacity, especially with the mine operating margins being very, very strong and enhanced as well. Acknowledging the strong Agnico balance sheet for new combined Agnico, Agnico's three credit ratings agencies immediately put us on a positive outlook. For our credit ratings, we're already BBBB mid company, very strong investment-grade. Fitch has already confirmed a positive trend and in coming days, we'll be meeting with Moody's and Dominion Bond Rating Service DBRS, as well. So, very excited about our financial capacity, very conservative. And that's how we intend to remain going forward, committed to that investment-grade balance sheet. And then finally turning the page 16 on the dividend. As I mentioned, we've got a 14% increase here, but I believe we have room to grow this dividend as well going forward. I think the industry has done a great job of paying attention to the shareholders in recent years and you'll see that our peers are also paying increased dividends and increasing return of capital with buybacks as well. So, I think in summary, we've got the capability and capacity to continue moving all of these great initiatives forward for the shareholders.

Ammar Al-Joundi, CEO

Thank you, David. Looking at page 17, I want to highlight a few points. This marks our fifth consecutive quarter of producing over 500,000 ounces. This quarter, excluding Hope Bay, we achieved 502,000 ounces. We were on track for around 525,000 ounces, but the rapid onset of Omicron forced us to slow production in Nunavut. To put this in context, there was an outbreak at Hope Bay in both September and October, leading us to shut down the mill at Meadowbank for the latter half of December. Historically, we only faced one or two infections that we identified at the airport, but this time the number of infections increased and impacted operations. I want to emphasize that while our production decreased and costs rose more than expected, it was primarily due to COVID. However, we believe we are through the worst of it. Currently, we are operating at nearly full capacity. Although we faced some challenges at the start of January, we anticipate a recovery. I wanted to make this clear and we will have time for questions afterwards. To wrap up, the package includes more detailed information for discussion during the Q&A. The standout CEOs in delivering value for shareholders in our industry have been Tony and Sean. They have spent two years discussing the opportunity to unite and strengthen the company. Neither felt compelled to merge as both companies were thriving, but it was a deliberate decision driven by sound industrial rationale, and that rationale still holds strong. We are enthusiastic about this strategy moving forward; it's the same approach that has driven results for both Agnico Eagle and Kirkland Lake. We focus on the best gold mining jurisdictions globally, considering geological potential and the feasibility of developing and operating multiple mines over several decades, which is essential for achieving success. Our strategy aims to create value through exploration and by managing high-margin, low-risk assets with significant exploration potential and longevity. We emphasize capital discipline, ensuring investments meet our after-tax hurdle rate of 15%. In capital investing, the key question is whether you will achieve that return. Our capital discipline not only adheres to the 15% threshold but is also informed by thorough analysis in familiar regions and projects. Furthermore, this strategy has allowed us to return capital to shareholders for over 38 consecutive years, an industry-leading achievement. Our approach is grounded in per-share metrics: profitable production per share translates to higher earnings and cash flow per share. We are committed to generating returns for our shareholders based on per-share performance. Finally, our strategy reflects our commitment to ESG leadership. For instance, we've been integrated into some communities for over 60 years. To be a valued community member, one must prioritize environmental and social responsibilities. Before we move to questions, I want to express how honored and humbled we are to guide this great company forward. Many of us from both Agnico and Kirkland are deeply passionate about the company and our communities. While we can't guarantee everything, we promise we will work diligently and remain focused. Now, we'll open the floor for questions.

Operator, Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Tyler Langton, JPMorgan. Tyler, please go ahead.

Tyler Langton, Analyst

Good morning. Thanks for taking my questions. I guess just starting with the cash costs and the ASIC guidance, I think in the release you mentioned they'd be flat in ’23 and ’24, but that he also expect them to decline. As you realize the synergies is that, I guess saying that the operations on a standalone cost would be flat, but you expect cost to be down when you sort of factor into synergies. And then I guess, can you provide any details on sort of how much these costs could potentially decline over the next couple of years?

Dave Smith, CFO

I will begin and then may ask some of my colleagues from operations to contribute. We anticipate a reduction in costs for a couple of reasons. If we look at it independently, without considering synergies, we expect costs to decrease. I can elaborate on that. Additionally, factoring in the synergies, we believe we will achieve our target of $30 to $40 per ounce, which hasn't yet been included in our guidance. For instance, one reason costs will decrease is due to the sequencing at some of our mines this year and next year. Some mines will have higher stripping costs initially, but then those costs will significantly decline. Part of the all-in sustaining costs is due to accounting related to timing, and a considerable portion also relates to stripping. Dominique, perhaps you could address a few key points as well.

Dominique Girard, Analyst

Yeah. In terms of synergy, this year we could take around USD 10 per ounce. And as Kamar mentioned on the more mid-long term, 30 to 40 plus, that's what we had into our plan right now. That includes improving productivity at each site by using our technical skills and technical skills to help each other to be best practices. This is what we see on the procurement side to 35 to 50 million to come by having a more bigger volume and a better position to negotiate and to get good pricing. This is also part of those cost savings that we see coming into the synergies.

Tyler Langton, Analyst

Great. Thanks. And then just question on Macassa. I know you lowered the production guidance for the next two years. I guess you mentioned some of it was just looking at the mine sequence and then also some battery issues. Could you just provide a little bit more details on the issues there and kind of what gives you sort of the confidence that production will continue to ramp?

Dave Smith, CFO

I'll start by saying that Macassa is an outstanding mine rich in high-grade gold. Currently, the main challenge we face is the mining rate, which is being limited. Macassa, a mine that dates back to the 1930s, has seen significant modernization efforts from Kirkland in recent years, though the process is still ongoing. The shaft has been constructed but won't be operational for about a year, which will significantly enhance our drilling capabilities and lower drilling costs. However, the key issue we are facing is the mining rate, primarily influenced by the mine's historical infrastructure. The ventilation system was not designed for diesel equipment, prompting Kirkland to switch to battery-operated vehicles. While they’ve made commendable progress, this technology is slightly ahead of its time, leading to some challenges with battery performance. We are addressing these issues seriously and are making headway. Once we improve the mining rate, the potential at Macassa will be substantial.

Tyler Langton, Analyst

Great. Thanks so much. I'll turn it over.

Operator, Operator

Thank you. Your next question comes from Fahad Tariq, Credit Suisse. Fahad, please go ahead.

Fahad Tariq, Analyst

Hi. Good morning. Thanks for taking my question. Just following up on the Macassa comments. So you mentioned the battery performance as well. Is there any talk or consideration of maybe going back to conventional fleet? And, you know, it's the right way to think about this guidance is being conservative for the next several years? Thanks.

Ammar Al-Joundi, CEO

Thank you, Fahad. I think the guidance is not necessarily conservative, but there is significant potential for it to be increased. When we visited in the summer, we asked the team if they would prefer diesel equipment if ventilation were available, and they expressed interest. We're considering this option. While the future of underground mining tends towards electric solutions, that transition is likely a decade away. Therefore, I anticipate we will have a hybrid fleet with both battery and diesel equipment, enabling us to boost the mining rate to produce between 350,000 to 400,000 ounces, instead of just 200,000 ounces.

Fahad Tariq, Analyst

Understood. And just a quick follow-up. So as you think about 2023-2024 guidance, which relatively flat versus 2022. Just like there's potential upside at Macassa. Where else in the portfolio do you see potential upside?

Ammar Al-Joundi, CEO

Well, we certainly see upside at Odyssey to come in a little bit quicker. We see upside, potentially at Gold some projects that we're looking at there. We see a total based on things that we're working on. And again, this is stuff that we haven't put in the budget, but we think is possible, you know, in and around another 100,000 to 250,000 ounces a year potentially added to 2024.

Operator, Operator

Thank you. Your next question comes from Josh Wilson, RBC Capital Markets. Josh, please go ahead.

Josh Wilson, Analyst

Thank you. Just continuing on those questions for Macassa. It just so I understand either. are these same issues expected to affect the long-term production from the asset. I think, like Agnico now was guided to over 350,000 ounces. The prior commentary was something like over 400,000 ounces. So is that the same mining equipment related item?

Ammar Al-Joundi, CEO

We don't anticipate the battery issue to be a limitation. Essentially, one of two scenarios will occur: either the technology improves and we adopt it, or it doesn't improve and we continue using diesel. We can't remain in this situation indefinitely, and we don't plan to. I believe we will navigate through this successfully. Furthermore, the mine certainly has the potential to produce around 350,000 to 400,000 ounces. And then also just, the cap there, it's not just Macassa there's, so for example, Amalgamated Kirkland could add 40,000 ounces a year, that's a small thing. But it's $650 to $750 an ounce with almost no capital; you can see how valuable that is. And this is a campus produced more than 25 million ounces. And we have a tremendous land position in areas where we know there's a lot of gold. So I think there's one message I would give all of you, we didn't do this merger, because we're going to transition electric batteries to diesel equipment. We did this because of the potential in this region. And that, in our view, is the future of mining, its taking the best positions in the best camps in the world, and leveraging off those strengths.

Josh Wilson, Analyst

In terms of other large assets, whether it is an opportunity, Detour and the upcoming mine plan update, we'll have to wait for the details. But I noticed that was not signaled as an opportunity for upside within at least the three-year guidance. Is that a potential with this update, or maybe there's just not that visibility yet, or is the opportunity for upside longer term?

Ammar Al-Joundi, CEO

There's great opportunity for upside longer term. And that's a good point, Josh, maybe we should have articulated that better. We absolutely do see upside at Detour. They're almost finding gold faster than we can figure out a mine plan to mine it. So that's a good thing. But no, there is absolutely upside both in production and longevity.

Josh Wilson, Analyst

Okay. But sorry, just to clarify is that upside is asking for your guidance based on the benefit?

Ammar Al-Joundi, CEO

Yes.

Operator, Operator

Thank you. Your next question comes from Anita Soni, CIBC World Markets. Anita, please go ahead.

Anita Soni, Analyst

Hi, guys, thanks for taking my questions. I was just wondering, in terms of growth in dividends, would you outline the strategy, or sort of a framework that you have in mind, or is it just, when we see that you have a comfortable position there that you'll continue to increase, or is there a target or goal in mind?

Ammar Al-Joundi, CEO

Hi, Anita. We have not adopted any formulaic dividend policy on purpose, nor do we have a specific target in mind, because it all depends on market conditions and opportunity in the rest of the pipeline as well frankly. But our dividend strategy, I would say overall remains unchanged, in that we like a sustainable dividend, that over time we increase and then it's sustainable until it increases. So I think as of today, that's where we still stand. And as you've seen, we have the intention to launch an NCIB as well, to give us further flexibility in improving return of capital to our loyal shareholders.

Anita Soni, Analyst

Thank you. Regarding Detour and some of the plants that KL previously operated there, can you provide guidance on the next steps and how you will assess those? Additionally, how will you balance the capital expenditures or construction process with the Odyssey project being built at the same time? How do those two align?

Ammar Al-Joundi, CEO

Hi, Anita. Well, we have the capacity to do both financially and from a technical expertise basis. And I will say, as you would expect, actually, as soon as this merger was announced, we had technical teams from both camps going to each other's sites to look at the best practices. But Detour, it's pretty clear we're going to be coming up with a technical report in the middle of the year that will talk not only incorporate some of the drilling that's been done, that 10 plus million ounces are added to resources and don't be surprised if more is added by the time you see the technical reports, and it will also have an update on reserves. So we're working hard. We have really an excellent team that knows what they're doing, working on it. We're finding opportunities. Jon Rubinstein and his team have already found opportunities that might allow us to do even better longer-term, but stay with the guidance that Kirkland had given, which is an update in the middle of the year.

Anita Soni, Analyst

All right. Thank you all letting me ask questions.

Operator, Operator

Thank you. Your next question comes from Mike Jalonen, Bank of America. Mike, please go ahead.

Mike Jalonen, Analyst

Hi, Ammar. Congratulations on your new position; it's well deserved. I have a question about Fosterville in Australia. I noticed that the reserve grade decreased by 33%. However, Fosterville has added roughly 570,000 ounces of new reserves, which is positive. Last year, the mine averaged about 23 grams, but this year's average is 16.66 grams. So, Eric, is the pace of exploration shifting more towards lower-grade material? I understand that you're typically focused on high-grade, but it seems you're encountering lower grades. I'm curious about the plans for placing reserves this year and next year. Thanks.

Ammar Al-Joundi, CEO

Eric, and thanks, Mike, for the congratulations. Thank you. Eric, would you mind responding to Mike's excellent question?

Eric Kallio, Head of Exploration

We are definitely putting in significant effort at Fosterville to identify new high-grade zones. However, we recognize that this won't be solely achieved by extending known zones. For instance, at lower Phoenix, we have noticed a slight decline in grade at depth, with only localized higher grades available. Our long-term goal remains to identify higher grades, but currently, we are focused on converting inferred resources and extending existing zones, which tend to be lower grade, while still locating some higher-grade sections within them. We are somewhat limited in areas like lower Phoenix, where our development does not extend the grade to the limits of the inferred resources, allowing us to drill only part of it. We have plans for a new decline this year that's set to be ready by June, providing access to a larger portion of the deposits. Similarly, for Robin's Hill, we are currently drilling west of the resource since the decline to Robin's Hill isn't complete. Later this year, particularly in the second half, we expect to have a much better opportunity to target and convert more resources into reserves. I hope this clarifies things. Regarding Macassa, I should also address that as well.

Mike Jalonen, Analyst

I dare you, but why not?

Eric Kallio, Head of Exploration

Okay. No, I mean, I thought you mentioned both the Macassa, yes the grade is down a little bit this year. And like a lot of other places, we – I mean, we were hampered quite a bit by having the contractor shortages, specifically the drillers, so that, we did not do nearly as much drillings as what we would have hoped. And so – but we did generate new resources, but in the inferred category. We were not able to convert those to indicate it in time. So you'll see we did have a good pumping inferred, but we didn't convert as many to reserves and indicated. We also saw some of the zones, where we are struggling a little bit with grades in the areas we mined. So we did adjust some parameters, and that that's going to help with giving us a higher confidence in some of those areas. You do see that reflected in the reserve. Once we get back to in the depletion, of course, you've taken away higher grade, you're not adding as many and you're adjusting parameter a bit.

Mike Jalonen, Analyst

Thanks a lot, Eric. I had been in Macassa since like 1995. So, look forward to going back. And maybe Ammar, just one question on Amaruq, it's based on your production plans and reserves, it looks like there's about a six-year life. But correct me, if I'm wrong. Just wondering what the plans are to extend that because obviously you have 100 mills there? Thanks.

Ammar Al-Joundi, CEO

Thanks, Mike. So Amaruq, we are going underground. That's going well. The plan right now is to drill aggressively underground we think there, that this is going to continue well below the permafrost. And then we will take a look at the economics of that. So the ore body is still open underground. And as you said, if we can prove up enough underground and some additional open pits, then we'll be able to extend that and hopefully materially I don't know, Guy, if you wanted to comment at all on that.

Guy Gosselin, Analyst

Yeah. Well, we are very aggressive this year close to 20 million will be spent both at the mine and in regional exploration. And it's going to come from a combination, as Ammar mentioned that the deposit remains open at depth. So we could extend potentially the life of mine, if we can combine that with the new open pit discovery in that large land position around Meadowbank and our teams are actively working at making it happen.

Ammar Al-Joundi, CEO

Thanks, Guy.

Operator, Operator

Thank you. Your next question comes from John Tumazos of John Tumazos Very Independent Research. John, please go ahead.

John Tumazos, Analyst

Congratulations to everybody on everything.

Sean Boyd, Executive Chairman

Thank you.

Ammar Al-Joundi, CEO

Thank you, John.

John Tumazos, Analyst

Concerning synergies, could you give us some granularity on the revenue line, for example, when the amalgamated Kirkland gold might start going through the Macassa mine or when Upper Beaver ores might start going through the Holt Mill or the benefits of the gold getting sold and make revenue over and above the cost savings and now your due diligence on all fronts?

Ammar Al-Joundi, CEO

A good question, John. I'm going ask Jean Robitaille to respond to that.

Jean Robitaille, Analyst

Hi, John. Thank you. I want to emphasize that I will continue to serve as I have for over 30 years, and I'm excited about the potential of our combined company and the skills we bring. Regarding synergies, it's important to note that Agnico had limited access in the past, but now we're creating substantial value as we're close to the near-surface rim. For production, we're expecting 2020 to be in its early stages, and we will keep you updated. We're aiming for a rate of nearly 40,000 ounces after 2024, and exploration opportunities remain open, suggesting the potential for a long-life asset. Additionally, this will positively impact our operations at Macassa, adding value to certain lower-grade resources we can process there. We see the numbers we provided as conservative, but we are confident in achieving them. For Upper Beaver, we are evaluating different options and have decided to postpone the sharp sinking project for now. Throughout the year, we will provide updates. In terms of contracts, we're expecting to save over $1 per ounce from Kirkland at this time, and that will be addressed. We are confident in our collaboration with Macassa, Detour, and Fosterville, leveraging our combined expertise to reach our goals and possibly exceed them.

Ammar Al-Joundi, CEO

Thank you.

John Tumazos, Analyst

If I could do a follow up. This is in within the securities law. Could you tell us how you're merging the hockey teams Kirkland used to win the tournament and Agnico was famous for having excellent NHL players on their hockey teams?

Sean Boyd, Executive Chairman

You know what, John, we used to complain because he would use to hire people based on their hockey skills at one point to try to be gold X and all the other teams.

Ammar Al-Joundi, CEO

I think given Finland's performance, we're going to be relying on Ketola this year.

John Tumazos, Analyst

So Sean, are you General Manager of the Hockey League in Finland, Quebec, Ontario, Nunavut or all of the above?

Sean Boyd, Executive Chairman

I'm a Toronto Maple Leafs fan. And I can't say that too loudly here, because there's a lot of Montreal Canadian fans. So certainly, we're watching the hockey closely. And I know the Pittsburgh Penguins are near and dear to your heart. So we're cheering for them as well.

John Tumazos, Analyst

So black and gold. On terms of the band is George and IR and Mark Guy in explorations still going forward, or have they gotten golden parachutes? Do we still have the band?

Sean Boyd, Executive Chairman

George is sitting here right across from us. And he's nodding. He still got the band and Mark’s on the line here. And he's still very much in the band as well.

John Tumazos, Analyst

We got hockey, we got the band and we got gold. All right.

Sean Boyd, Executive Chairman

Yeah. And Ead still in the band. And Ead turned 70 this weekend. So that shows you how time flies.

John Tumazos, Analyst

Congratulations, everybody, and good health. Thank you.

Sean Boyd, Executive Chairman

Thank you, John.

Operator, Operator

Thank you. Ladies and gentlemen, we conclude your conference call for today. We thank you for participating and ask that you please disconnect your lines.