Toronto (July 29, 2020) – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM) ("Agnico Eagle" or the "Company") today reported a quarterly net income of $105.3 million, or net income of $0.44 per share, for the second quarter of 2020. This result includes non-cash mark-to-market gains on warrants of $33.7 million ($0.14 per share), derivative gains on financial instruments of $16.0 million ($0.07 per share), foreign currency translation gains on deferred tax liabilities of $15.2 million ($0.06 per share), and various other adjustments losses of $3.9 million ($0.01 per share). Excluding these items would result in adjusted net income1 of $44.3 million or $0.18 per share for the second quarter of 2020. For the second quarter of 2019, the Company reported net income of $27.8 million or $0.12 per share.
Included in the second quarter of 2020 net income, and not adjusted above, are a non-cash stock option expense of $3.2 million ($0.01 per share) and temporary suspensions costs related to the COVID-19 pandemic of $22.1 million ($13.0 million, net of tax, or $0.05 per share) and direct and incremental COVID-19 costs of $2.3 million ($1.4 million, net of tax, or $0.01 per share).
1 Adjusted net income is a non-GAAP measure. For a discussion regarding the Company's use of non-GAAP measures, please see "Note Regarding Certain Measures of Performance".
In the first six months of 2020, the Company reported net income of $83.7 million, or $0.35 per share. This compares with the first six months of 2019, when net income was $64.8 million, or $0.28 per share.
In the second quarter of 2020, cash provided by operating activities was $162.6 million ($185.2 million before changes in non-cash components of working capital), as compared with the second quarter of 2019 when cash provided by operating activities was $126.3 million ($157.3 million before changes in non-cash components of working capital).
In the first six months of 2020, cash provided by operating activities was $326.0 million ($389.9 million before changes in non-cash components of working capital), as compared with the first six months of 2019 when cash provided by operating activities was $275.0 million ($328.1 million before changes in non-cash components of working capital).
The increase in net income and in cash provided by operating activities during the second quarter of 2020, compared to the prior year period, was mainly due to higher average realized gold prices, and lower exploration and general and administrative expenses, partially offset by lower gold sales volume, and temporary suspension costs. The lower gold sales volumes, lower exploration expenses and suspension costs were mainly driven by the Company's response to the COVID-19 pandemic. For part of the quarter, mining activities were reduced or suspended at seven out of the Company's eight mines and exploration work was interrupted. Net income was favourably affected by an unrealized gain on warrants and on financial instruments owned by the Company.
The increase in net income and in cash provided by operating activities during the first six months of 2020, compared to the prior year period, was mainly due to higher average realized gold prices, and lower exploration expenses, partially offset by lower gold sales volume, the contribution of six months of production costs from Meliadine and higher costs from the Meadowbank Complex as the mine transitioned to the Amaruq satellite deposit, and temporary suspension costs. The lower gold sales volume, lower exploration expenses and suspension costs are mostly driven by the Company's response to the COVID-19 pandemic as described above.
"The second quarter was challenging given the global COVID-19 pandemic and its impact on our operations. While our business returned to normal production levels ahead of schedule in June, we did have seven of our eight mines on care and maintenance at one point during the quarter. We finished the quarter strong as our employees responded quickly and effectively with a plan to manage the mine shut downs and subsequent restart and ramp-up of operations while protecting the health, safety and well being of our employees and the communities in which we operate", said Sean Boyd, Agnico Eagle's Chief Executive Officer. "With the ramp-up of operations now complete and with July production expected to exceed 160,000 ounces of gold, the Company is well positioned to have a strong second half with gold production expected to average 480,000 to 500,000 ounces per quarter with declining unit costs. As a result, we anticipate generating significant free cash flow in the second half of 2020", added Mr. Boyd.
Second quarter of 2020 highlights include:
• Solid operational performance in the second quarter of 2020 despite COVID-19 interruptions – Payable gold production2 in the second quarter of 2020 was 331,064 ounces (including 2,651 ounces of pre-commercial gold production from the Barnat deposit at Canadian Malartic) at production costs per ounce of $854, total cash costs per ounce3 of $825 and all-in sustaining costs per ounce4 of $1,142. Production costs, total cash costs per ounce and all-in-sustaining-costs ("AISC") per ounce exclude the pre-commercial production ounces from the Barnat deposit
• Financial Impact of COVID-19 – Additional costs incurred in the second quarter of 2020, slight increase to operating costs going forward and limited impact on productivity to-date – Temporary suspension costs in the second quarter of 2020 were $22.1 million (excluded from production costs and included in Other Expense). Direct and incremental costs related to COVID-19 incurred by the Company in the second quarter of 2020 were $2.3 million (included in production costs). Going forward, COVID-19 protocols (not including compensation paid to Nunavut-based employees) are expected to add approximately $1.0 million per month to the Company's operating costs (or approximately $6 per ounce). In addition, the Company continues to pay for 75% of the base salaries for Nunavut-based employees at a cost of approximately $1.4 million per month (included in Other Expense). To-date, the Company has seen limited impact on productivity as a result of COVID-19
2 Payable production of a mineral means the quantity of a mineral produced during a period contained in products that have been or will be sold by the Company whether such products are shipped during the period or held as inventory at the end of the period.
3 Total cash costs per ounce is a non-GAAP measure and, unless otherwise specified, is reported on a by-product basis. For a reconciliation to production costs and for total cash costs on a co-product basis, see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance".
4 AISC per ounce is a non-GAAP measure and, unless otherwise specified, is reported on a by-product basis. For a reconciliation to production costs and for all-in sustaining costs on a co-product basis, see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance".
• Full year 2020 production guidance increased while guidance for unit costs and capital expenditures unchanged; longer-term guidance maintained – Gold production in 2020 is now expected to be 1.68 to 1.73 million ounces (versus previous guidance of 1.63 to 1.73 million ounces), while total cash costs per ounce and AISC per ounce continue to be in the range of $740 to $790 and $1,025 to $1,075, respectively. Capital expenditures are expected to be approximately $690 million in 2020. Previous gold production guidance for 2021 and 2022 remains unchanged with a mid-point of 2.05 million and 2.10 million ounces, respectively
• Strong second half 2020 outlook – The Company expects gold production to ramp up in the second half of 2020 and average approximately 480,000 to 500,000 ounces per quarter with total cash costs per ounce expected to be in the range of $690 to $740, primarily as a result of the expected increase in gold production
• Successful ramp up at all operations post temporary COVID-19 shutdowns – During the second quarter of 2020, seven of the Company's eight mines experienced either temporary shutdowns or reduced activity levels related to government mandated COVID-19 restrictions. All operations were subsequently restarted in a timely manner during the quarter, with production progressively ramping up to more "steady state" levels in June at all operations. Key operational highlights are as follows:
? LaRonde – with infrastructure upgrades largely completed in the first quarter of 2020, production gradually resumed in the higher-grade West mine area in late April 2020. Grades in the West mine area continued to exceed block model forecasts during the second quarter. Daily throughput at the LaRonde Complex in the second half of 2020 is expected to average approximately 8,500 tonnes per day ("tpd") with approximately 12% of the tonnage being sourced from the West mine area. In addition, there is a renewed focus on minesite exploration to expand mineral reserves and mineral resources
? Nunavut – Meadowbank and Meliadine both returned to the regular 14/14 work schedule in June (although the Nunavummiut workforce has not yet returned to work due to COVID-19 precautions). In June, mining and milling operations returned to more normal levels at both operations. At Meliadine, mill throughput exceeded 4,300 tpd in June and a new apron feeder will be installed in August along with other plant modifications to complete the planned mill expansion to 4,600 tpd by the fourth quarter of 2020. Water discharge activities are proceeding as planned. Higher grade stopes from the third mining horizon are
being prepared for extraction in late July. At Meadowbank, progress was made on the equipment maintenance backlog and total ore moved in June exceeded 110,000 tpd. The Meadowbank mill is currently operating as intended in excess of 9,500 tpd from run-of-mine ore and existing stockpiles
? Kittila – The mine operated continuously through the COVID-19 pandemic in the second quarter of 2020 and established a new quarterly ore production record in the second quarter of 2020. The permit allowing for processing of 2.0 million tonnes per annum ("mtpa") was granted in May 2020. The expansion project is progressing well and contractors resumed shaft sinking activities in July 2020 following a four month delay due to COVID-19
• Exploration restarted post COVID-19 interruption – The Company's exploration focus remains on pipeline projects, near mine opportunities and mineral reserve and mineral resource replacement. Key exploration highlights include:
? Kittila – Drilling has extended the Sisar Zone by up to 500 metres to the south with intercepts such as 5.3 grams per tonne ("g/t") gold over 3.9 metres at 1,613 metres depth, further indication of the potential of the Sisar Zone to be developed into a new mining horizon
? Canadian Malartic Underground – 10 drill rigs are currently targeting the East Gouldie Zone, and the exploration budget for 2020 has been increased by 19% to 107,000 metres (100% basis). The aim is to tighten the drill spacing in the high-grade core of the deposit to 75 metres (from 150 metres currently) and to update inferred mineral resources by year-end 2020. Initial work on an underground exploration ramp is expected to begin in August 2020
? Kirkland Lake Project – Resource conversion drilling at the Upper Beaver deposit is validating historical results in the upper portions of the deposit and extending mineralization between 1,200 and 1,400 metres depth with intercepts such as 9.5 g/t gold and 0.40% copper over 5.9 metres at 1,307 metres depth. Regional drilling is also ongoing at the project's Amalgamated Kirkland ("AK") property and Anoki deposit
? Santa Gertrudis – Exploration drilling at the high-grade Amelia deposit continues to confirm the mineralization and extend it along the projected plunge of the main ore shoot, which remains open at depth. Combined with the drilling
of other gold targets on the property, the results show the potential for an increase in mineral resources at year-end
• A quarterly dividend of $0.20 per share was declared
Second Quarter Financial and Production Highlights
During the second quarter of 2020, seven of the Company's eight mines experienced either temporary shutdowns or reduced mining activities related to government mandated COVID-19 restrictions. Following government approvals, all operations were restarted in a timely manner with production progressively ramping up to more "steady state" levels in June at all operations.
The chart below illustrates the gradual monthly ramp up of production in the various operating regions during the second quarter of 2020 and into July. Based on actual and forecast production rates, the Company expects to reach a monthly production rate in July 2020 of approximately 160,000 to 170,000 ounces of gold. The Company expects that this monthly rate will be sustainable through the second half of 2020. The chart below also shows the corresponding projected reduction in total cash costs per ounce, which is primarily due to increased production levels.
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