Earnings Call Transcript - AEM Q1 2026

Operator, Operator

Good morning. My name is Vincent, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Mines Limited Q1 2026 Conference Call. Mr. Ammar Al-Joundi, you may begin your conference.

Ammar Al-Joundi, Chief Executive Officer

Thank you, Vincent. Good morning, and thank you for joining our Agnico Eagle First Quarter 2026 Conference Call. I'd like to remind everyone that we'll be making a number of forward-looking statements, so please keep that in mind and refer to the disclaimers at the beginning of this presentation. Next slide, please. We're pleased to announce a solid start to the year with production slightly above budget and with costs in line with our guidance. This solid operating performance, coupled with exceptional gold prices has allowed Agnico Eagle to announce yet another quarter of record net income driven by record operating margins. We are reiterating 2026 production guidance with production expected to be weighted approximately 48% and 52% between the first and second halves of the year. We're also pleased to reiterate our cost guidance for 2026. This is no small task given the uncertainties and pressures in the market over the past several weeks. As you will hear on this call, this has been a strong quarter across all of our businesses. Solid operations, strong progress on moving our growth pipeline forward, continued exceptional exploration results and as mentioned, another quarter of record financial results. My team will go through all of this in more detail in a moment, but let me outline and summarize what I believe are the three key messages that are important to take away from this call. One, as mentioned, we're off to a good start to the year with solid operating performance, delivering record operational and financial results. Record mill throughput at Macassa, record development rates at Meliadine, record pit tonnage at Detour. We're delivering these solid operating results while doing an excellent job controlling costs, leveraging our relentless focus on cost control while benefiting from certain structural cost advantages that derive from our business model, including, for example, in both Ontario and Quebec, where we produce the majority of our gold, all of our electricity is either hydro or nuclear and really not exposed to changes in fuel and diesel prices. With regards to Nunavut, where we do generate our own power through diesel, we've got a lot of that diesel hedged both by necessity because we have to bring the diesel up in advance through a short barge season, and we have it stored up there, but also by some very smart and proactive hedging by our treasury department with regards to diesel exposure. We've also got the benefit of lower employee turnover and the reliable supply chain that comes from being the best customer for decades in the safe regions in which we operate. Two, we continue to strengthen our financial position and to increase returns to shareholders. This quarter, we paid a $1.3 billion 2025 tax catch-up. We distributed $375 million to shareholders. We invested almost $400 million into our high-quality growth projects, all while increasing our cash position by almost $250 million. At these gold prices, we will increase our share repurchases, and we are increasing our normal course issuer bid to $2 billion. And three, and perhaps the most important takeaway, we continue to aggressively reinvest in our business into the best pipeline in the industry, into projects that deliver exceptional returns at relatively lower risk, and we are making steady progress in many cases, ahead of schedule. Dom and Natasha will spend some time talking about the projects they're moving forward to increase production at Agnico Eagle by up to 20% to 30% over the next decade, including Detour to 1 million ounces, Malartic to 1 million ounces, Hope Bay, Upper Beaver and San Nicolas. In addition, with the expected consolidation of our Finnish platform, we now see a path to further growth that comes from building a 500,000 ounce a year multi-decade platform in what we believe to be the most prospective land package in Northern Europe. Guy will spend some time going over some of the continued great exploration results he and his team have generated focusing on Detour and Malartic, but he'll also spend a bit more time talking about this Finnish land consolidation and what he and his team see as a long-term potential well beyond the Ikkari project. Our strategy remains focused, focused on safe, responsible mining, focused on operational excellence, delivering reliable, low-cost production. We have the best land packages in the most prospective and safest gold jurisdictions in the world. We have a path to industry-leading production growth over the next decade. Our execution of delivering this growth remains on track. And at these gold prices, we think we can deliver this growth and reduce share count at the same time. Now before I turn the call over to our CFO, James Porter, I need to spend a moment on safety. Tragically, we've had two fatalities over the past five months. This is not acceptable. I recognize and I accept that the responsibility for the safety of our people rests ultimately with myself and with my team. We've mobilized our teams to reinforce across our company and at all levels and to all employees, our commitment to not only deliver on our guidance, but to do so safely and responsibly. There is nothing more important than the safety of our people and our communities, and we commit to do better. With that, I'll turn the call over to our CFO, James Porter, to review our first quarter operating and financial results.

James Porter, Chief Financial Officer

Thank you, Ammar. As highlighted earlier, we delivered another strong financial quarter, driven by solid operational performance and continued leverage to higher gold prices. We had several record financial results during the quarter, including adjusted net income of approximately $1.7 billion or $3.41 per share and adjusted EBITDA of just over $3 billion. We generated about $730 million of free cash flow in the first quarter. This is particularly impressive given that we paid roughly 50% of our expected 2026 cash taxes totaling $1.8 billion in the quarter, of which $1.3 billion had been previously disclosed as related to our 2025 tax liability. First quarter gold production of approximately 825,000 ounces was actually slightly better than planned with the lower production year-over-year reflecting mine sequencing at LaRonde, Macassa and Fosterville. With the first quarter representing about 24% of the midpoint of our annual guidance and production weighted to the second half of the year, we're well positioned to meet our full year production targets. Total cash costs were $1,093 per ounce and all-in sustaining costs were $1,483 per ounce, reflecting higher royalty costs associated with a significantly higher realized gold price, lower production volumes as expected and a stronger Canadian dollar compared to the first quarter of 2025. Importantly, costs continue to trend within our full year guidance ranges of $1,020 to $1,120 per ounce for total cash costs and $1,400 to $1,550 per ounce for all-in sustaining costs. While we continue to monitor cost volatility, including diesel prices and foreign exchange movements, we believe our regional operating model, local procurement strategies and disciplined hedging program provide meaningful mitigation against potential cost pressures. With respect to diesel prices, our 2026 cost guidance assumes an average diesel price of $0.78 per liter. Direct diesel consumption covering mobile equipment and on-site power generation in Nunavut is estimated at approximately 108 liters per ounce of gold produced, representing roughly 7% of our total operating cost base. We believe that our exposure to diesel price volatility is below industry average, reflecting the fact that the majority of our gold production comes from underground mines, which are generally less diesel intensive than open pit mines. Further, the majority of our gold production is from mines located in Ontario and Quebec, which benefit from access to non-oil-based grid power. Overall, our sensitivity to diesel prices is estimated such that a 10% change in diesel prices results in roughly a $6 per ounce impact on annual total cash costs after taking into account our hedge position. We do not currently anticipate any disruption to our procurement strategy for fuel or other key consumables, and we remain comfortable with our full year cost guidance. We turn to Slide 5. We are in the strongest financial position in the company's history. We continue to deliver meaningful returns to our shareholders alongside further balance sheet strengthening and disciplined reinvestment in the business. During the quarter, we returned approximately $375 million to shareholders through dividends and share repurchases, representing roughly half of free cash flow. As previously announced, we intend to renew the normal course issuer bid in May on substantially the same terms with an increased limit of up to $2 billion. And at current gold prices, we are still targeting returning approximately 40% of annual free cash flow through dividends and buybacks. We will also look for opportunities to offset dilution from the proposed Rupert Resources acquisition, including potentially returning proceeds from portfolio investment sales through additional share repurchases. In parallel, the balance sheet keeps getting stronger. At the end of the first quarter, our net cash position increased to approximately $2.9 billion, giving us one of the strongest balance sheets in the sector. This strength was recognized recently by Fitch, which upgraded Agnico Eagle's long-term issuer rating to A- with a stable outlook. At the same time, we continue to reinvest in the business, advancing our five key pipeline projects that are expected to underpin long-term production growth of 20% to 30% over the next decade. We are exceptionally well positioned in the current gold price environment with a continued focus on disciplined capital allocation and long-term shareholder value creation. With that, I'll turn the call over to Dom.

Dominique Girard, Chief Operating Officer

Thank you, James. Good morning, everyone. In my section, I'm going to give an update on operations and projects for Quebec, Nunavut and Finland. For the first quarter, a good start led by Malartic and Meadowbank on production, and we are in good position for the full year cost and production. An important milestone in the first quarter at Malartic, where we took the first stope at East Gouldie via the ramp approximately one kilometer underground. Why it's important? Based on the 2023 study, we're going to mine there up to 2042. But based on what we know now, we're going to be mining there up to 2060 most probably. Most probably, I will not be the COO at that time, but we have a good bench that's going to take it from there. So it's very positive. And on the shaft sinking, I'm going to talk a bit about that next slide, shaft sinking and also production hoist, it's also going well. The plan is to bring that ore to the surface via the shaft mid-2027. Everything is aligned. On continuous improvement, an important milestone achieved at LaRonde. They were working on that for a couple of years to do autonomous hauling. So it's a good example of leveraging the synergy into the region using the LZ5 expertise. So what is that autonomous hauling? We are taking the ore from 3.2 kilometers underground up to 2.9 kilometers without drivers. So this is a real example of a positive impact using technology. Instead of operating, let's say, using four trucks and eight operators for day shift or night shift, those guys in the current situation, they are able to operate effectively 10 to 12 hours per shift just by the time to go underground. Using the technology, we're able to use two trucks operating by one person, one night shift, one day shift, so a total of two, and we're able to operate on a 20-hour basis. So it's a clear example of using technology to improve productivity and very good job done at LaRonde on that. Also in Finland, what we did, we took three or four key people from each site, mainly from Canadian operations, such as the GMs and key people in continuous improvement and the VP. We brought them to Finland to see what they did there. It was the first time for most of the people, not just to see the reindeer, but also the Finland site. And it was about how they did it in Finland, the mindset on continuous improvement, their leadership and the tools they were using. It was also a very good opportunity to build relationships and share best practices across our key people in the company. Guy is going to talk about that, but very happy also about Ikkari; what's going on is very positive for the Finland team. Next slide. On the growth projects, at Malartic, the ramp and shaft, as mentioned, are going well. The pilot hole for the first shaft for the second shaft is done down to 1.8 kilometers underground. No issue related to that. The study continues on Shaft 2 and Marban and the Wasamac study. It's progressing well, and we're looking to give you an update in September later this year. At Hope Bay, look to the picture. We are in good position. That was our goal. We are in a good position to potentially announce the construction in May with the Board. So the camp is ready. The fabrication shops are ready to welcome the construction team. The mill is empty, ready to go. And we are in good position for the engineering. That was one of an important goals. So we're going to be over 50% complete on the engineering, and that gives us confidence in the cost and the schedule. We're going to give you more detail at the site visit for the lucky ones that are coming because we're going to have muskox on barbecue, charcoal barbecue. So this is the team working on that. That's going to be a good thing. Before giving the mic to Natasha, the visit at Hope Bay, you're going to see the picture over the first 10 years. But we're most probably going to be there for many decades. That's what Guy is going to show you into the car shaft, what is our vision for the region. Also, the last two years, we focused on infilling the patch, the new deposit, and to be ready for that study. But Guy is also gearing up to restart treasure hunting into the Hope Bay site eventually more next year and the years after. So on that, I will pass the mic to my great colleague, Natasha.

Natasha Nella Vaz, Senior Vice President, Operations

Thanks, Dom, and good morning, everyone. I'll cover the operational highlights for Ontario, Australia and Mexico. The regions delivered good performance to start the year. At Detour, they hit a quarterly record in tonnes mined, and they also had a record mill throughput for the first quarter with the lowest quarterly turnover that we have seen since the mine began open pit operations. Over at Macassa, the mill also delivered record quarterly throughput as a result of the ongoing optimization initiatives as we ramp up that mill towards over 2,000 tonnes per day by the end of the year. Now despite this progress, total mill tonnage was below plan this quarter, and this was mainly a function of challenges we faced with our old paste plant while commissioning the new one, which we expect to be fully operational in Q2. At Fosterville, they also performed very well this quarter. There was a significant step change in productivity, and that's really due to ongoing mine optimization efforts. Improvements this quarter were seen in both development and stope cycling. And it was the same with Pinos Altos. The team there continues to work very hard on initiatives to safely extract the most value from their assets. Now in terms of initiatives this past quarter, Dom spoke about our knowledge sharing trip to Finland to help other sites understand their continuous improvement journey and really inspire them to do the same. And of course, it was really great to network, to gain alignment and to collaborate with other sites. Another good example of collaboration between sites and really maximizing the value of our assets and of our infrastructure was between Macassa and LaRonde. I just want to take a quick second to recognize both teams here. They worked very closely together over the last few months. And with a coordinated effort, they were successful in receiving the approval to allow ore from the AK deposit to be transported and processed at the LZ5 facility. At Macassa, we also successfully completed the installation of the LTE network underground. The connectivity is expected to support a range of optimization initiatives, including the implementation of a dispatch system and enabling the site to obtain short interval control. This can enable us to make decisions quicker, to become more agile, to become more productive and as a result, further optimize our costs. So these are just a few examples of our ongoing productivity focus and our operational improvement initiatives. Moving to the next slide, I'll give you an update on the projects in Ontario and Mexico. The Detour underground project plays a very big role in the plan for the complex to be a 1 million-ounce producer annually. We're still in the early days of this project, but we're making very good progress, and we're advancing on schedule. We continue to advance the exploration ramp and have achieved just over 820 meters of development, reaching a depth of about 147 meters. We also began excavating the overburden for the conveyor portal, which is near the mill and progressed work on the camp extension. To complement the planned bulk sample, we initiated a high-intensity drill program in an area being considered for mining as early as 2028, and Guy will speak to this program shortly. Over at Upper Beaver, a lot of progress was made this quarter with both the ramp and the shaft advancing ahead of schedule. The ramp has advanced over 500 meters in the quarter and has reached a depth of 108 meters. The shaft sinking, which commenced in the fourth quarter of last year, has already reached a depth of 382 meters. Similar to Detour, to complement the planned bulk sample at the 760 level, the high-intensity drill program continued during the quarter. Now with respect to San Nicolas, we're waiting on the regulatory decision for key permits. But in the meantime, we're continuing to advance the engineering of the critical infrastructures, which will help further de-risk and build confidence in our execution strategy. We're also continuing with drilling activities focused on condemnation drilling and geological evaluation near the planned mine area. Finally, I'd like to close by recognizing the teams at our operations and our projects for their very disciplined execution in the first quarter and for their continued focus on advancing our optimization initiatives and our key projects as we move through the year. And so with that, I'll turn the call over to my friend, Guy.

Guy Gosselin, Executive Vice President, Exploration

Thank you, Natasha, and good morning, everyone. Pleasure again to be able to report on progress we're making in exploration as obviously, this is one of the key components to be able to deliver that 20% to 30% growth that we are promoting. We had an excellent quarter in terms of diamond drilling, completing 25% or nearly 360 kilometers of drilling of our overall budget of 1.4 million meters for the year, having 127 rigs in operation on mine sites and key value driver projects. We continue to advance in our journey in exploration to make drilling safer and more productive while maintaining a unit cost in the same order as the last couple of years, aiming to offset inflation with gains in productivity. Going to specific projects. In Malartic, 35 drill rigs are in operation, completing 75,000 meters in Q1: 16 underground, 13 on surface in proximity to the Odyssey infrastructure and 6 at our regional target, including Marban deposits across the three. At Odyssey, as mentioned by Dominique, the shaft and the ramp development are progressing ahead of schedule and the first stope is currently being mined at East Gouldie, which is quite exciting, considering the discovery hole in East Gouldie was made just a couple of years ago in 2018 and that we are already there with the ramp and the shaft because of the great collaboration between the various teams to turn it from a discovery into a mine in such a short period of time. This is impressive. We continue to get strong exploration results at East Gouldie with 6.7 grams over 36 meters on Level 105 in the center of the ore body and also in the internal zone between Odyssey North and Odyssey South with a new structure that returned 9 grams over 53 meters of core length. Although we do not have a full understanding yet of the true thickness of that structure, it continued to show the additional upside we see both in the internal zone at Odyssey North and South and in East Gouldie that keeps growing laterally. On the adjacent Marban project, lateral exploration drilling continued to the west and to the north of the proposed open pit, while we are, at the same time, advancing with the condemnation drilling program to confirm the potential location of surface infrastructure. At Detour Lake, nine rigs completed close to 40,000 meters of drilling in the first quarter, in line with our budget. Drilling continued to focus on the western extension of the ore body to the west of the open pit, where we are contemplating initiating underground mining early on, utilizing the exploration ramp. Some strong results such as 8.9 grams over 14 meters at 190-meter depth and 10.7 grams over 10 meters at 500-meter depth show a strong potential for high-grade underground mineralization over a large area that extends over more than a kilometer now adjacent into the west of the open pit, where the exploration ramp is currently being developed. Briefly, at Hope Bay, as mentioned by Dominique, we've had a great quarter in terms of drilling on ice, thanks to the team's great winter drilling program. We started early; we've completed north of 33,000 meters of drilling as of the end of March, and a full update will be provided on the May 19 press release along with the project announcement we've been talking about. Finally, in Finland, I would like to provide some color on the recent announcement we made with an offer to acquire all of the outstanding shares of Rupert and Aurion Resources, along with the 70% interest of B2Gold in the Fingold JV. It was a great job by our corporate development team and legal team. With these three combined transactions adding to our current landholdings, we will be consolidating close to 2,500 square kilometers, consistent with our corporate strategy of focusing on regional hubs, leveraging our 20 years of experience in exploration, permitting, mine construction and operation with a strong social license to operate in the most fertile greenstone belt in Europe. By combining the Finnish workforce of Agnico along with the workforce of Rupert and Aurion and removing property boundaries, we will aggressively explore in the near term the immediate and lateral extension of the Ikkari deposits as well as the multiple occurrences that were identified on the Fingold JV and the large land position owned by Rupert and Aurion. Personally, it reminds me a lot about the Kittila mine acquisition in 2005. At the time of the acquisition, there was approximately 2 million ounces down to less than a kilometer. Twenty years later at Kittila, it grows down to and is still open at depth below two kilometers with a global endowment of 10 million ounces, considering past production, reserves and resources known so far. I see similar potential on the structure at the Ikkari deposit as these mineral systems are similar to our Canadian greenstone belts that have demonstrated extended vertical geological fertility. By this transaction, we are aiming to deliver in Finland a platform for multiple mines over multiple decades, similar to the three regions in Canada that are Quebec, Ontario and Nunavut, where we will be leveraging our regional expertise. And on that, I will return the microphone to Ammar for some closing remarks.

Ammar Al-Joundi, Chief Executive Officer

Thank you, Guy, and thank you, James and Dominique and Natasha and everyone else on our team. Really exceptional work, really tremendous results, well done. As you can see, we continue to work hard for all of our stakeholders, and we'll continue to build off the same foundational pillars that have defined our strategy and that have served us very well over the past almost 70 years. We will focus on the best mining jurisdictions based on geologic potential and political stability. We'll be disciplined with our owners' money, making investment decisions based on technical and regional knowledge, creating value through the drill bit and through smart acquisitions where and when it makes sense. We are uniquely well positioned with a quality project pipeline, leveraging existing assets in the best regions in the world where we believe we have a competitive advantage. And we will continue to be focused on creating value on a per share basis and on being leaders in our industry in returning capital to shareholders as evidenced by over 43 years of consecutive dividend payments and increased share buybacks. We have a clear and executable strategy to create tremendous additional value per share for our owners well into the foreseeable future with manageable risk, leveraging off existing infrastructure and regional competitive advantages. We have the assets, we have the projects, we have the resources and we have the people. We are making it happen right now. We will stay focused, and we will not be distracted. Thank you again for joining us on this call. And for many of you, thank you for decades of trust and support. We will always work hard to maintain that trust, and we will never take it for granted. Operator, may I ask that we now open up the call for questions.

Operator, Operator

First question comes from the line of Lawson Winder from Bank of America Securities.

Lawson Winder, Analyst, Bank of America Securities

We'd like to start off with the Finnish acquisition, and we haven't had a chance to ask you guys about this in this type of forum since the announcement. Guy, thank you very much for the picture you've painted and for the color on getting to 500,000 ounces. But can you help us understand what are the sort of value creation steps over the next 12 to 24 months to get to a better understanding of what that ultimately looks like. So resource update, study, when do you expect permitting to start? And just any other considerations on that sort of timeline thinking? I appreciate it.

Ammar Al-Joundi, Chief Executive Officer

I can start, but maybe Dom and Guy can jump in on more details. The first thing, Lawson, and by the way, nice to hear your voice, the first thing really was to consolidate all of this property. There's a lot of potential. They're good properties, but they were individually constrained and so that's why it was very important for us. And as mentioned, our entire team, but in particular, the corporate development team and the legal team did a really good job in allowing us to consolidate all of this at the same time. It's really first and foremost, and then I'll pass it over to my colleagues about consolidating what we think is the best land position in Europe.

Dominique Girard, Chief Operating Officer

Thanks, Ammar. Lawson, Dominique speaking. Maybe I think what on my side, I need to do is to freeze the scope of that one, let's say, without the boundaries, where we should put the mill, the tailings and revamp the schedule, the study based on the new acquisition. And the exploration guys are all excited to add, but we're going to need to kind of try to kick that project for a first start but also to get some flexibility, maybe, for example, at the mill to make sure it's always a challenge to get enough detail into the study to push that into the permitting. That's what we're going to focus on by staffing the study team and eventually the construction team.

Guy Gosselin, Executive Vice President, Exploration

So maybe in complement, Lawson, Guy speaking now. As we discussed in the press release, our plan by removing the property boundary is to have sort of an updated view with the current information by the end of 2027, where we're going to have a better picture of what optionality that removing the property boundary offers on both the optimum pit design and location of infrastructure. And we will right away start drilling once the acquisition is completed because we know as well that the property boundary was also constraining the drilling close to the property boundary. That's our intent. By the end of 2027, we should have an idea of the kind of a revised concept based on the current information, while we continue to drill and maybe look at other iterations. You can refer to what we did in Malartic. We're going to be providing most likely a first version of what it could be and then keep drilling and adjust based on what we're going to discover.

Lawson Winder, Analyst, Bank of America Securities

Okay. That's helpful. And then just a follow-up from me with respect to the Detour Lake underground drill results. There were some really, really substantial intercepts, of course. With the drilling you've done to date, has your understanding of what the Detour Lake underground can be, has it evolved and changed in any way in the past, let's say, 12 months? I mean is it starting to look like it could be a much bigger system? And are you possibly reconsidering what the ultimate development plan might look like for Detour underground?

Guy Gosselin, Executive Vice President, Exploration

Well, I would say the area west of the pit is very similar to what was historically mined at Detour that we are now mining with the pit closer to surface. We are showcasing a couple of great results. On average, we think that area will be anywhere between maybe 2.5 and 3.5 grams per tonne. When you put those spectacular results along with others that are in the 2 to 3 gram range over 20 to 30 meters, it's in line with our expectation. It's aligned with what we're actually just firming up in the model of that zone. As you know, we are mindful of the history at Detour. In order to selectively mine high-grade ore, you need a ton of drilling, you need the right drill spacing. When we are getting there with the ramp, we're soon going to be able to drill it more aggressively from underground as well from the exploration ramp. So it is shaping up as we thought. It's always an area that I personally liked a lot west of the pit.

Natasha Nella Vaz, Senior Vice President, Operations

Lawson, just to add to that, it's Natasha. Because we do have a study team looking at this and looking at different iterations as we proceed with the exploration program. But with the combination of the exploration success and the high gold price environment, there is definitely optionality here at Detour. So it's fairly early stages, but the team is looking at different trade-offs for potentially a higher milling capacity, a larger underground, potentially another pushback at the pit. Again, very early days.

Operator, Operator

Your next question comes from the line of Fahad Tariq from Jefferies.

Fahad Tariq, Analyst, Jefferies

In the quarter, there was an announcement about a Nunavut collaboration agreement with B2Gold. Can you maybe just talk about the thinking behind that and what you hope to learn from their operations at Goose?

Ammar Al-Joundi, Chief Executive Officer

Well, I'll start and then maybe Dominique or Jean can comment. In general, we always like to try to work with our colleagues and our peers. We have a lot of experience in the areas we operate. We think we have some competitive advantages, but we're not so naive to think that we know everything. So any time we get an opportunity to work with our peers to see what they're doing, we take advantage of that. I think our owners would want us to do that. From B2's perspective, they're good people. We know them well, and they think that we do a good job where we operate, and they want to see if they can learn a little from our operations as well. So it's just that kind of collaboration we want to do in the industry.

Fahad Tariq, Analyst, Jefferies

Okay. And then maybe just one for James. I noticed the buyback pace slowed down quarter-over-quarter in the first quarter. Is that just a function of the pretty significant cash tax payment? And can you just remind us of the minimum cash you'd like to keep on the balance sheet going forward?

James Porter, Chief Financial Officer

Yes, that's exactly right. We put out our guidance in February that we'd be targeting returning about 40% of our free cash flow through a combination of the dividend and the share buyback. Our free cash flow was lower in Q1 as a result of the cash tax payments. Our percentage worked out closer to 50% because of those payments. We repurchased $150 million of shares in the quarter, which was half of what we did in Q4. That will ramp up certainly in Q2 and through the rest of the year as our free cash flow is expected to be higher. In terms of minimum cash balance, we're comfortable where we're at now with $3.1 billion of cash, approximately $2.9 billion of net cash. Between $3 billion and $5 billion is a good position to be in to give us financial flexibility to be able to execute on our strategy. But yes, definitely higher share buyback activity expected through the remainder of the year.

Operator, Operator

Your next question comes from the line of Josh Wolfson from RBC Capital Markets.

Joshua Wolfson, Analyst, RBC Capital Markets

I appreciate the additional disclosure on the energy sensitivity side of things. I had a question in terms of the Hope Bay project update later this month. Looking at the current market for prices, there's obviously been a high degree of inflation. How are you thinking about incorporating some of those input prices for that project update and thinking about maybe the near-term impact versus what otherwise would be a long-term, much more reasonable price?

Ammar Al-Joundi, Chief Executive Officer

Josh, it's Ammar here. I'll start and then Dom will jump in. In my experience, the most important thing in building projects is to get the engineering done and to have the execution plan well laid out. We have seen some inflationary pressure, but actually, it hasn't been that bad. The team, as Dom said, the camp is going to be there. The backup power is there, the mill building, half the mill building is there. Water treatment is there. So we're coming to this with an advantage of infrastructure in place, which allows us to execute. It's all about execution, but also exceedingly important is the amount of engineering the team has done, which allows them to get much better control overall on execution and, therefore, on cost.

Dominique Girard, Chief Operating Officer

Yes, Josh, in May we're going to give more detail on the economics. That will be positive economics. Our assumptions are based on the long-term view, and we're going to give some sensitivity to understand how that could impact the results. We don't know the future, but as Ammar mentioned, I'm very comfortable where we are right now. We've been mining in Nunavut over 17 years, and we've built three projects already with Meliadine, Meadowbank and Amaruq. So this is a good time for Nunavut to add another project that will be over 400,000 ounces per year and that's going to bring us to potentially 1 million ounces per year in the Nunavut platform.

Joshua Wolfson, Analyst, RBC Capital Markets

Great. And then another two-part question for Malartic. First, what drove the grade improvements this quarter? And should we expect to see it going forward? Second, on the September update that you referenced, given that we had expected the shaft project completion not really until year-end and then a larger update in the second half of next year, how should we be thinking about what information is disclosed ahead of that completion in September?

Dominique Girard, Chief Operating Officer

Just for the grade, it's a question of sequencing mainly into the Barnett pit. That's the only thing that changed. I'll let Jean-Marie answer on the second part.

Jean-Marie Clouet, Vice President, Malartic Projects

Josh, yes, in September the plan would be to provide an update. The last update for Malartic was in June 2023. What we want to reflect in September is the update in the reserves and resources that we've seen over the last few years and also start giving a better idea in terms of how the second shaft, Marban and Wasamac start to fit together, start giving ranges around what we think it will cost and operating estimates. The studies will be later in the year, but we should be able to provide a very good picture of what Malartic will look like to get to the 1 million ounce per year target.

Operator, Operator

Your next question comes from the line of Daniel Major from UBS.

Daniel Major, Analyst, UBS

Ammar and team, first question on the Finland acquisition and then around the balance sheet and capital returns. First, was there a reason for using Agnico shares rather than cash specifically? And then the second part: you alluded to exceeding the 40% cash flow payout potentially to reduce the share count following the acquisition. Can you give us a sense of what quantum you could be at? With $3 billion to $5 billion of net cash quite quickly through the year, should we expect that as a limit to the cash balance you'd want to hold and how that would flow through to the buyback?

Ammar Al-Joundi, Chief Executive Officer

Thank you for the question. I'll answer the first one. With regard to why we used shares instead of cash: we wanted to use cash and they wanted 100% shares. I think their view and rightfully so is Agnico shares are good shares to have, and they wanted 100% shares. We used full cash on the other deals. Our corporate development team executed well to make this consolidation possible.

James Porter, Chief Financial Officer

Daniel, in our disclosure we referred to potentially increasing repurchase activity based on the sale of some of our portfolio investments. If there are opportunities for us to do a little bit more based on our views on valuation, we will do so. With respect to minimum cash balance, we're very comfortable where we are now. As the cash balance increases, we'll look at even more activity under the share buyback. The minimum target is 40% of free cash flow returned to shareholders; we may be able to exceed that based on either our free cash flow performance or the proceeds of the sale of some of our investments.

Daniel Major, Analyst, UBS

Okay. And then my next question is on San Nicolas. It feels somewhat subscale at a 50% interest for either yourselves or the other partner. Have you had any discussions around the ownership of the project? Would you be keen to consolidate if the opportunity arose?

Ammar Al-Joundi, Chief Executive Officer

We would look at it. We still think it's a good project. I don't want to forecast what our colleagues and partners are thinking. But if they said, 'Hey, would you want to look at it,' we'd look at it.

Daniel Major, Analyst, UBS

Okay, great. And then just one quick one on Finland. I noticed Boliden deferred a pushback at Kevitsa because of the change in taxation for the mining sector in Finland. Can you give any color about how you're seeing that landscape with respect to Kittila and the new acquisitions?

Dominique Girard, Chief Operating Officer

Yes, there's a tax change in Finland, and this is included in our evaluations as well as our life of mine modeling at Kittila.

James Porter, Chief Financial Officer

I'll add that the industry is lobbying the government to look at potentially changing the structure of those taxes to make certain additional things deductible to offset the impact. All of that was factored into our modeling.

Operator, Operator

Your next question comes from the line of Bennett Moore from JPMorgan.

Bennett Moore, Analyst, JPMorgan

Congrats on the record quarter. Following the land consolidation in Finland and as you continue to think about the company's next leg of growth beyond the early 2030s, where does Australia fit in this picture? Do you see similar opportunities around Fosterville?

Ammar Al-Joundi, Chief Executive Officer

Thank you for the question. I was just out in Fosterville about a month ago. It's fantastic people and a very strong team. We spent a lot of time on some recent very good exploration results in and around Fosterville. That part of Australia was the original gold rush and it's still very early, but I was pleasantly surprised with some of the results and the enthusiasm. We think Australia is a great place to mine, not just for gold. We are careful and disciplined in what we do, and right now we continue to be focused in Australia at Fosterville and on the opportunities around that site.

Bennett Moore, Analyst, JPMorgan

It's been about six months since you launched the Avenir business. How is this progressing, what sort of new opportunities is the team evaluating? And could you comment on critical mineral opportunities in the Lapland Greenstone Belt as well?

Ammar Al-Joundi, Chief Executive Officer

Avenir is an enthusiastic team. They are looking at a lot of things and naturally narrowing down to become more focused. It's a separate entity and gives us an opportunity to see well-considered opportunities. We're supportive of it and are not obliged to do anything, but it helps broaden our pipeline.

Guy Gosselin, Executive Vice President, Exploration

In addition to our primary interest in gold, we know the rock package to the north of the main break includes similar rocks that host deposits like Kevitsa and Sakatti which are nickel, copper and PGEs. There was also evidence of massive sulfide mineralization near the old Pahtavaara mine. So all the ingredients for base and critical metals are present. Our primary focus remains gold exploration, but if we find additional mineralization of other commodities, that would be an add-on.

Operator, Operator

Your next question comes from the line of Anita Soni from CIBC World Markets.

Anita Soni, Analyst, CIBC World Markets

I wanted to ask about the cadence of the production ramp over the course of the year. You said Q2 will be similar to Q1 production. In Q1 there were some challenges with Kittila coming off the shutdown and weather impacting restart. What will offset that in Q2 if Kittila ramps back up? And going into the back half of the year, what are the things that are ramping up? Is the AK project at Macassa the main ramp driver?

Ammar Al-Joundi, Chief Executive Officer

Anita, honestly it's more mine sequencing and where we are on the plan. There are always specific items like maintenance and seasonal uncertainties such as the caribou season, but our team accounts for all of that in projecting through the year. We don't typically give a split, but we wanted people to know that everything is going quite well. The first quarter was actually a little above budget. It's mostly mine sequencing and various other elements that come into it.

Anita Soni, Analyst, CIBC World Markets

On longer-term capital allocation, as the cash balance increases, where do your priorities lie? Rank them in terms of capital return to shareholders versus reinvestment in the business. The balance sheet is strong and you're accumulating cash; has reinvestment moved up over capital return?

James Porter, Chief Financial Officer

Reinvestment in the business is always a very high priority. The five key value driver projects we're advancing are 30% to 60% IRR projects in the current gold price environment and we want to invest as much as quickly as we can in those. Our capital spending has increased from $2.3 billion last year to probably $3 billion this year all-in, and we'll look to continue to find opportunities to accelerate that to bring production forward. Beyond that, in this gold price environment we're fortunate to be able to do it all: reinvest aggressively in the business, deliver strong returns to shareholders, and continue to strengthen the balance sheet. Forty percent is the floor for returning free cash flow, and we may exceed that depending on free cash flow performance or proceeds from investment sales. Having a $3 billion to $5 billion net cash position gives us financial strength and flexibility to execute even in a lower gold price environment.

Ammar Al-Joundi, Chief Executive Officer

The exact position of cash on the balance sheet is as much an art as it is a science. It isn't a precise number; it depends on the circumstances at the time. The most important thing for the CFO is liquidity for the company. Jamie and the treasury team are balancing everything prudently.

Operator, Operator

Next question comes from the line of John Tumazos from John Tumazos Very Independent Research.

John Tumazos, Analyst, Independent Research

I'm trying to make a back-of-the-envelope concept of the Ikkari mine or Central Lapland new mine coming in 2034. Is a fair guess 15,000 tonnes a day times 2.25 grams times 95% recovery to get to the 500,000 ounces and that might cost $1.2 billion when we get to 2034, all those years out?

Ammar Al-Joundi, Chief Executive Officer

John, first of all, thank you for your service to the industry. That's a very nice introduction. We're still early in evaluating Ikkari and the broader platform, and I'd prefer to take some of the details offline. We need to be careful as these are very early stages, and we're working on it.

John Roberts, Head of European Projects

I can step in. John, I was actually expecting you might ask how we were able to put all of this together at once. For throughput, whether it's 10,000 or 15,000 tpd, we will have to define it as a function of throughput and other trade-offs. We'll be careful before providing any definitive numbers. I'm more focused on what it could be one day. We are excited with the consolidation and stay tuned because moving toward the end of 2027 we'll have more to say.

Guy Gosselin, Executive Vice President, Exploration

John, what we referred to in our press release is a platform of 500,000 ounces when combining Kittila and Ikkari together. That's our current vision for the platform for the time being, and we will work to determine if it can be made bigger.

John Tumazos, Analyst, Independent Research

Let me ask another one. On the acquisition consideration and CapEx, the 4.22 million ounces of current resources is slightly larger than the 3.5 million ounces of reserves. With $1.2 billion development capital, that works out to about $1,268 an ounce acquisition and CapEx to develop. Should we assume that resources are going to double or triple and that this is not the new normal for how much we're going to pay for developing mines?

Ammar Al-Joundi, Chief Executive Officer

John, our acquisition cost worked out by our internal assessment. We know this project quite well; we've been evaluating it for six-plus years. We acquired an asset in a region we know at a considerable discount to our internal NAV and got the rest of the land package for additional optionality. In our usual fashion, we did extensive homework before proceeding.

Operator, Operator

Your next question comes from the line of Tanya Jakusconek from Scotiabank.

Tanya Jakusconek, Analyst, Scotiabank

My first question is for Dominique. I hope the snow will be gone from Hope Bay when we're up there. Should we still be thinking that approximately $2 billion for Hope Bay would be a reasonable capital for the 10-year mine plan you've been talking about?

Dominique Girard, Chief Operating Officer

Tanya, yes, we see a bit of inflation, but the total is going to be below $2.5 billion for sure. We have a very good level of engineering now, but there are decisions to make, for example to fast track Patch 7 and to do more ounces earlier, to start the mill at 6,000 tonnes per day. The mill will be designed upfront at 6,000 tpd compared to Meliadine where we staged it. Also, we're looking to add one more wing to keep drilling ongoing. There's a decision that we're taking internally that will affect the initial CapEx, but it won't be a big surprise. It's going to be slightly over $2 billion.

Tanya Jakusconek, Analyst, Scotiabank

Okay, that's helpful. Now that I have you on, just two quick questions. You mentioned the strategy in Australia to focus around Fosterville and drilling that platform. In Mexico, besides San Nicolas, do you have anything else that you're looking at to expand that platform?

Ammar Al-Joundi, Chief Executive Officer

At San Nicolas we're looking at opportunities to expand the project. Beyond that, there's nothing substantial that we're seeing as an opportunity in Mexico at the moment.

Tanya Jakusconek, Analyst, Scotiabank

My final question: regarding the tragic fatalities at your mine sites, what have you learned and what changes to procedures and processes have you put in place from these learnings?

Ammar Al-Joundi, Chief Executive Officer

Thank you for asking because it is very important. We've learned that we must never slow down emphasizing the importance of safety. Often it's routine tasks that people get too comfortable with. That's human nature, and it's our job to continually push safety. We mandated a stand-down where we took every employee at all of our sites to reemphasize safety. We have a comprehensive safety program. These fatalities are devastating and we must do better.

Carol-Ann Plummer-Theriault, Head of Safety and Health

Tanya, any loss of life is a tragic loss. In both instances, in-depth investigations are still ongoing with the involvement of regulatory authorities. We can't share the investigation results yet. There are learnings around these incidents, and we are sharing, to the degree possible, internally and with industry peers where appropriate to prevent similar accidents elsewhere. For us, we're reemphasizing the importance of safe production and ensuring we follow procedures and always look for risks and mitigate them. We're focusing on major hazards and putting in place critical controls. We're continuing down that road toward zero accidents.

Operator, Operator

There are no further questions. I'll turn the call back over to Ammar.

Ammar Al-Joundi, Chief Executive Officer

Thank you, everyone, for joining us. And everyone, have a nice weekend. Thank you.

Operator, Operator

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