Agnico Eagle Mines - Earnings Call - Q1 2025

Transcript

Ammar Al-Joundi (President and CEO)

Hello everyone. Okay, almost.

Operator (participant)

Good morning. My name is Lydia Nell, your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Mines Limited Q1 2025 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, you may press star followed by the number two. Thank you. Mr. Ammar Al-Joundi, you may begin your conference.

Ammar Al-Joundi (President and CEO)

Thank you, Operator. Hello everyone, and thank you for joining our first quarter conference call this morning. We're pleased to be sharing with you another strong quarter with solid results across the board: strong production, excellent cost control, record financial results, excellent progress on our growth projects, including our five key value drivers, and some really great exploration results at a number of our mines. Before we jump into the call, I'd like to remind everyone that we will be making a number of forward-looking statements, so please keep that in mind. As we go through the results of the quarter, there are three key messages we want to emphasize. One, we continue to deliver strong overall performance, and we're well positioned to continue to deliver that performance for the rest of the year. Two, we continue to strengthen all areas of our business.

We are making great progress on building the foundations of our future growth and future value creation for our owners. Starting with our first quarter operating and financial performance, in a year where gold prices have increased by over $1,000 an ounce, our gold production of 874,000 ounces and our cash costs of $903 per ounce were almost identical to our production and cost numbers in the first quarter of last year. This means we are delivering the full benefit of these rising gold prices to our owners. That is why our owners invest in us, and that is our job to deliver. We do this by delivering solid production and controlling costs safely, responsibly, and reliably.

Not surprising, with good operational performance and record gold prices, we continue to deliver record financial results, record operating margins, record adjusted net income, and not just on an absolute basis, but also record adjusted net income on a per-share basis. It's the per-share metrics that matter, and it's the per-share metrics that we will always focus on. The second key takeaway is our progress in strengthening the business. This quarter, we've returned a quarter of a billion dollars to our owners through dividends and share buybacks. At the same time, we've invested in moving forward the best pipeline in the business. We've made record investments in promising exploration, and we've largely eliminated our net debt. We continue to generate record cash flows, and we're well positioned to further increase returns to shareholders. Jamie will be going through our financial performance shortly.

The third key takeaway, building the foundations of our future growth, is really the most important and the most exciting takeaway from today's call. An essential element of any quality business is sustainability. This is especially true for a company like Agnico Eagle, where our core strategy revolves around building a long-term, high-quality, sustainable business in the regions in which we operate. We're proud to have just published our 16th annual sustainability report, the highlights of which Carol Plummer, our EVP, People, Environment, and Sustainability, will briefly review in a minute. A little later in the presentation, Dominic and Natasha will speak about the steady progress we continue to make on our five key value drivers. Number one, our ongoing work to get Detour to over a million ounces a year. Number two, our vision to get Malartic to over a million ounces a year.

Number three, excellent construction progress at Upper Beaver, a brand new mine in a great region that could add over 200,000 ounces a year. Number four, continued great drill results and accelerating onsite activity at Hope Bay with a target of over 400,000 ounces a year. Finally, five, continued good progress at San Nicolas, a high-grade, high-return copper project in the best mining jurisdiction in Mexico. Finally, Guy Gosselin will spend a few minutes highlighting some of the really excellent and exciting exploration results our team is delivering at some of the most promising ore bodies in the world. With that, I'll turn over the presentation to Carol.

Carol Plummer (EVP for People, Environment, and Sustainability)

Thank you, Ammar, and good morning, everyone. Our 2024 Sustainability Report highlights our global approach and regional focus. Starting with safety, we continued our journey towards zero accidents, focusing on visible leadership in the field and identifying and mitigating risks. 2023 was the best year for safety in the company's history, and in 2024, we did not do quite as well. However, all of our sites are focused on reducing harm, and we will continue to focus on safe work in every job, every day. Our approach to climate change continued to focus on energy efficiency, technology transition, and increased use of renewable energy, and we remain amongst industry leaders with a GHG intensity of 0.38 tons of CO2 equivalent per ounce, well below the industry average of 0.79.

We're working to meet our commitments to reconciliation through the seven pillars of our reconciliation action plan, and we are focused on training and developing our employees, listening and resolving concerns, and engaging frequently, preparing our employees and our sites to succeed. We're very happy to see improved engagement through our employee survey and, importantly, low turnover rates. With that, I will pass over to Jamie.

Jamie Porter (CFO and EVP Finance)

Thank you, Carol, and good morning, everyone. We had a great start to the year with another quarter of strong operating results and excellent cost performance, pairing with higher gold prices to drive record financial results, including record revenue of $2.5 billion, record adjusted earnings of $770 million, or $1.53 per share, and record adjusted EBITDA of $1.6 billion. Gold production in the first quarter was approximately 874,000 ounces, a total cash cost of $903 per ounce, and all-in sustaining costs of $1,183 per ounce. Gold production was very similar, as Ammar mentioned, to the first quarter of last year. Pleased to report that costs were below the low end of our guidance ranges and actually right around where we were in the first quarter of 2024.

The lower-than-expected cash costs were primarily due to higher-than-expected grades, driving higher gold production at several of our mines, as well as the cost benefit from the weaker Canadian dollar relative to the U.S. dollar when compared to our budgeted assumption of 1.38 CAD/USD. These cost benefits were partially offset by higher royalty costs related to higher gold prices, and in a rising gold price environment, we do expect the burden of royalty costs to continue to increase. Every $100 increase in the gold price increases our royalty cost by approximately $5 an ounce. For the full year, we are maintaining our cost guidance and expect cash costs to be within the guided range of $915-$965 per ounce. All-in sustaining costs per ounce were lower than the guided range, primarily due to the timing of sustaining capital spend.

We are expecting higher all-in sustaining costs in subsequent quarters and expect to be within our guidance for the full year at $1,250-$1,300 per ounce. We're very proud of the work our teams have done and their continued efforts at controlling costs and on continuous improvement, as our all-in sustaining costs continue to be hundreds of dollars per ounce below those of our peers. If we move on to the next slide, pleased to report that the strong free cash flow we generated this quarter allowed us to continue to strengthen our balance sheet and increase our financial flexibility. We ended the quarter with close to zero net debt. As a reminder, we started 2024 with approximately $1.5 billion in net debt.

We have significantly deleveraged the balance sheet over the past 15 months and intend to continue to strengthen the balance sheet and improve our financial flexibility while increasing returns to shareholders. We were also pleased that Moody's revised its rating outlook for the company during the quarter from stable to positive, which reflects our improving credit profile and strong financial position. We generated $594 million of free cash flow in the quarter, which was net of significant working capital outflows, including tax installments and payments of over $500 million. At current gold prices, we would expect significantly higher free cash flow in subsequent quarters. If we move on to the next slide, looking back at 2024, we clearly prioritized returns to shareholders. Through dividends, share repurchases, and the reduction of net debt, shareholders benefited directly and indirectly by approximately $2.2 billion.

In 2024, we returned approximately 43% of our free cash flow directly to shareholders through dividends and share repurchases. This quarter, we returned approximately 42% of our free cash flow. Our capital allocation plan is designed to benefit shareholders in a rising gold price environment in several ways. We will continue to strengthen the balance sheet, increase our financial flexibility, as we believe that a strong balance sheet is a competitive advantage in this industry. We will also continue our program of strong shareholder returns through the quarterly dividend and share repurchases. At these gold prices, we see the potential to further increase shareholder returns and expect to be much more active on the share buyback. We will also continue to reinvest in the business by allocating capital to high-return internal growth projects and high-potential exploration opportunities.

At current gold prices, we're generating a lot of cash, but we will remain disciplined and continue to take a measured approach to capital allocation with a focus on increasing returns to our shareholders. With that, I'll turn the call over to Dominic, who will provide an overview of our Quebec, Nunavut, and Finland operations.

Dominique Girard (SVP of Operations)

Thank you, Jamie. Good morning, everyone. We finished the quarter strong out of the gate, driven by operations meeting their target safely and helped with geological upside at La Ronde and at Malartic Pit, where additional ounces were discovered around the old workings. In Q1, Meliadine achieved a new tonnage record following last year's mill expansion, averaging 6,200 tons per day. On the cost side, as Ammar mentioned, the quarter was excellent, with stable to slightly better cost than expected, thanks to the team's continued effort to improve productivity. This quarter, I would like to highlight Kittila's progress, focused on the shaft utilization and systematic productivity and cost-efficient improvement. We are starting to see positive results from this initiative, with cost per ton coming in 5% below target in Q1. Looking ahead, there are three key projects that I would like to highlight today.

These projects are closely tied to Ammar's comment about leveraging our assets to create value. The first one is the Meadowbank potential expansion. We continue working to extend Meadowbank life of mine beyond 2028. Our objective is to transition Meadowbank mine into an underground mine only after the pits are depleted, aiming to add five to six years of production at around 150,000-200,000 ounces per year. Given its location in Nunavut, this will not be the lowest cash cost ounces, but in today's gold price environment and the low risk associated with this, we are evaluating different scenarios and expecting primary findings by the end of this year. On top of that, the team is also working on a new scenario of doing a small pushback at the IVR Pit to potentially unlock additional ounces in 2028-2029.

Recognizing this potential, our site team is actively developing a plan to maximize Meadowbank potential, creating a seamless bridge to future production at Hope Bay, which is my next project to discuss. Hope Bay is one of the largest, biggest opportunities we have in our portfolio that could add 400,000 ounces per year in the 2030s. Hope Bay's path to success is clear. We are applying the same proven formula that led Meliadine to success, with the same experienced team that conducted the study and the project construction. This quarter, we successfully finalized all the contracts with the Engineering Firm, and we believe we've assembled an A team. The goal is to advance the detail engineering phase to approximately 50% completion by Q1 2026.

Given our confidence with the project, we are currently doing some preparation work at site by upgrading the camp facility, extending the airstrip, dismantling the mill, and completing early earthwork. We expect to report on Hope Bay in the first half of 2026. The last project update on my side is about our vision of Malartic towards 1-million-ounces gold producer. Next slide, please. To achieve our 1-million-ounces production at Malartic, we identify four key blocks. The first building block is the foundation, the current Odyssey Phase I Project, transforming the site from Canada's biggest open pit mine to the largest underground gold mine in Canada. The target is about 550,000 ounces per year for this part, and the project is progressing very well.

The ramp is on target, the shaft sinking as well, and we reached a major milestone in Q1, achieving the commissioning of the temporary loading station at level 64, unlocking efficient transportation of rock and personnel via the service hoists. The first shaft is expected to be completed by mid-2027. The second block for that 1-million-ounces story is the second shaft at Odyssey. With the promising results we see in exploration, we are evaluating the possibility of a second shaft to mine in parallel to the first one, the massive East Gouldie Ore Body. The second shaft could contribute to another 220,000 ounces per year, which brings us to 770,000 ounces per year for the Odyssey Project. There are two other blocks that we could lock on that. The first one of those, or the third one, is the Marban Pit, located 13 km from the Malartic Mill.

Marban was successfully added to our portfolio through the acquisition of O3 and could potentially contribute to another 130,000 ounces per year, which brings us to the 900,000 ounces per year. The last one is Wasamac. Wasamac is a 3,000-ton per day underground operation to be trucked at Malartic. It is about 100 km from Malartic. Wasamac can potentially contribute to another 100,000 ounces per year. With all of the four building blocks together, we are reaching the 1 million ounces vision. Over the next 5 years-6 years, our focus will be on the studies, permitting, and construction, aiming to integrate these new ore feeds into the Malartic Mill in the 2030s. We should be in good position to greenlight the second shaft, Marban and Wasamac, in early 2027. Now, I would like to hand it over to Natasha.

Natasha Vaz (SVP of Operations)

Thanks, Dom. Good morning, everyone. I'll cover the operational highlights for Ontario, Australia, and Mexico. All the regions delivered good safety, operating, and cost performance to start off the year. Detour poured their 7th millionth ounce in March and had the highest Q1 mill throughput, with the lowest turnover seen since the mine began open-pit operations. Weather, however, was challenging this quarter. We do factor in weather delays into our plans, particularly in the winter, but this was a very abnormal winter for us at Detour. This quarter, we ended up mining less of the higher-grade open pit material and instead fed lower-grade stockpiles, which was planned to be processed later in the year. Now, at Macassa, we hit a few records in safety, in lateral development, and in ounces produced.

I think the highlight is that, similar to Detour, even in a highly competitive labor market, we hit a record with the lowest turnover in its history. In terms of the production, Mecassa had a pretty strong quarter too on the back of two stopes that overperformed. Fosterville, too, had a good quarter. Here, we're working on progressive improvements to the ventilation system, and production is progressing at all three mining fronts. Of course, operational improvement efforts with a focus on cost control initiatives are continuing at all of our sites. Now, if we look ahead, we're seeing a few exciting things on the go. I'll start with Mecassa. We're focused in on mill optimization here, so we'll continue to work on initiatives to debug like parts of that circuit, reduce downtime, and further improve the mill throughput incrementally.

At Fosterville, we will continue to conduct further technical evaluations and drill to confirm the feasibility of increasing the annual throughput to an average of approximately 175,000 ounces. At San Nicolás, through the JV, we will continue to work on the feasibility study. Project approval is expected to follow, of course, dependent on the receipt of the permits and the results of the study. We anticipate all of this coming together towards the end of this year. Finally, on the next slide, I will give you a quick update on the two projects that will give us the opportunity to grow low-risk and profitable production in a very mining-friendly jurisdiction like Ontario. I will start with Detour. This is a world-class asset. Last year, we outlined a pathway for Detour to be a 1-million-ounce producer annually for over a 14-year period.

It's still early days, but this quarter, the overburden excavation was completed, the surface preparation was completed. As well, we received the permit to take water, so we're expecting to commence the ramp development in Q2. As for Upper Beaver, again, this is another low-risk opportunity to grow the production profile in Ontario. This quarter, we continue to advance on both fronts, the surface setup needed for shaft sinking and the site preparation for the ramp. You can see in the picture that we've started advancing on the steel installation of the headframe and the hoistroom. We're expecting both of them to be completed or commissioned in early Q4 this year and shaft sinking to commence soon after. As for the exploration ramp, we've completed the box cut. We're expecting to commence the ramp development in Q4 this year, if not a bit sooner.

Both Detour Underground and Upper Beaver, they're really solid projects with strong risk-adjusted returns and are going to be drivers of future growth at our Ontario platform. We look forward to continuing to advance on these projects throughout 2025. With that, I'll pass it over to Guy.

Guy Gosselin (VP of Exploration)

Thank you, Natasha, and good morning, everyone. First, on slide 12, I would like to take the opportunity to highlight the various exploration team at each mine and project site for our great health and safety performance, cost control, and productivity improvement initiative. When we look at the landscape in these photos coming from Hope Bay, we realize that it is a tough environment, and our people are doing an amazing job at working safely while implementing cost control and productivity initiatives. Overall, we had an excellent first quarter with 300 km of drilling completed on all sites, with a focus on advancing our key value driver project. Here at Hope Bay, we deliver better than budgeted drilling with almost 30 km of drilling completed in the first quarter from high-speed drilling and from the exploration gravel track that has greatly enhanced our site performance in Q4 and Q1.

Globally, we have a total of 112 drill rigs working on all sites of the company. I would also like to thank our drilling excellence team that continues to work closely with all of our drilling entrepreneurs to integrate new technology that will make drilling safer, more productive, and therefore more cost-efficient. From a results standpoint, I will briefly comment on three projects: Hope Bay, Canadian Malartic, and Detour. On slide 13, at Hope Bay, we continue to see strong results in two very interesting areas. First of all, close to surface in Patch 7, with results up to 20 g/t over 4.2 m at only 240 m below surface that could potentially be accessible early in our project development scenarios. Secondly, in the gap between Suluk and Patch 7, close to the proposed ramp with results up to 24 g/t over 9.5 m.

We anticipate these results will have a positive impact on the mineral resources at the next update. Now, on slide 13, in Malartic at Odyssey, some very exciting results in three areas. First of all, the upper east portion of the East Gouldie that we anticipate will get to mineral reserves at year-end this year. Secondly, the lower eastern extension of East Gouldie with some pretty good results, up to 5.3 g/t over 27 m, 6.6 g/t over 17 m, a couple of 100 m to the eastern limit of the current resources, and all of that between 1,800 m-1,900 m below surface. Third, in the Eclipse parallel zone with results up to 3.7 g/t over 59.7 m. These strong results in the lower east and Eclipse continue to enhance our scenarios for the location of a second shaft at Odyssey.

Last but not least, at Detour, drilling continues to infill the deposit in areas that are targeted for the underground mine project, both below the pit, in the saddle, in the central portion of the deposit, with some local very spectacular results up to 8 g/t over 78 m. To the west, close next to the planned exploration ramp, with results up to 3 g/t over 44.5 m. We had a very good start of the year in terms of drill result on our key value driver project, and we are in a very good position to deliver updates on studies as discussed in our previous press release in February and mentioned by Natasha and Dominic. On that, I would like to return the microphone to Ammar for some closing remarks.

Ammar Al-Joundi (President and CEO)

Thank you, Guy, and thank you to the full team. The gold price performance over the past year has been remarkable. Our owners invested in gold because they had the correct view that gold prices would increase, and our owners invested in us because they had the correct view that Agnico Eagle is well positioned to deliver the full benefit of gold price increases to them. To deliver that full benefit, we focused on three things, and we've delivered three things. One is production. We need to deliver the production we promised, and we need to be able to grow production per share over time, and we're doing both. Two, we need to control costs. We're delivering not only solid cost control, but we remain disciplined with capital spend.

The projects we're investing in are all expected to generate good returns, and they're the same projects that made sense at gold prices more than $1,000 below where they are now. This is our owner's money, and we're not going to spend our owner's money just because the price of gold went up. Third, and this is important, we need to deliver this production, and we need to deliver these costs reliably, steadily, and with as little risk as possible: operational risk, financial risk, political risk. We are going to stay with the same strategy that we've used now for almost 70 years. It works for us. It's not for everyone, but it works for us. We're going to focus on regions with multi-decade geologic potential and with the political stability that allows us to fine-tune our strengths over multiple decades.

If we take a look at just some of the discussion today, the team that's building the shaft at Malartic is going to be the team that builds the shaft at Upper Beaver. The team that's building Upper Beaver is the same team that just finished construction projects elsewhere in the company. Dominic made the point that the team building Hope Bay is the same team that built Malartic. Something that's really important that Natasha mentioned, which I think really sort of emphasizes this, we have the lowest turnover rates ever in the history of Detour and Meliadine. This is how you build a competitive advantage. You not only leverage off your capital assets, but you keep the best people, and you use them to their full extent. With that, I'd like to turn it over to questions.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star followed by the number one on your cell phone keypad. If you're using a speakerphone, please pick up your headset before pressing any keys. To withdraw your question, please press star followed by the number two. With that, our first question comes from the line of Ralph Profiti with Stifel. Please go ahead.

Ralph Profiti (Managing Director of Equity Research)

Thanks, Operator. Good morning, Ammar. Thanks for taking my questions. It's very encouraging to see some of these internal zones start to bear fruit at Canadian Malartic. The number two point on the Fill The Mill Strategy slide sort of talked about this second shaft. I'm just wondering how the medium-term mine planning and the shaft positioning might be impacted by Eclipse. It does seem like Eclipse may be closer in proximity to existing ramp infrastructure. Just wondering where this potential, if exploration proves out, how that might fit into the medium-term mine plan.

Dominique Girard (SVP of Operations)

Hi, Dominic speaking. Eclipse is going to be more, let's say, in the more mid-long-term thing because it's more deep. This is really a zone which is going to help for the second shaft. There is also some upside that we're not talking or maybe briefly talked at the upper east of East Gouldie and also some internal zone at Odyssey South, Odyssey North that we're still working on that could bring potential answers in 2027, 2028.

Ralph Profiti (Managing Director of Equity Research)

Okay. That's encouraging. Thanks. The drilling at Marban, 24,000 m, just wondering, are we looking at infill resource expansion? And would it be too soon to expect updated resources in the year-end 2025 reserve update?

Guy Gosselin (VP of Exploration)

I'll take that one. Good morning. Our plan for Marban for this year, we want to provide sort of a first snapshot of what it could be as we took over the project. That new drilling is dedicated to fully investigate the eastern extension because one of the facts over there is the pit, as O3 was looking at it, was property boundary constraint with land that Agnico already owned in the eastern portion of the deposit. We see some upside over there. That first phase of drilling is aiming to make a first kind of test of the shallow portion of that eastern extension on the claim that we already had. After that, we'll see.

I think we can anticipate the first update of Marban reserve and resources at the end of this year, and maybe a second update by the end of 2026, which will be, let's say, most likely the scenario will be developing. We want to provide, let's say, step by step as is and with another first phase of drilling at the end of 2026.

Ralph Profiti (Managing Director of Equity Research)

Great. Yes. Excellent. Thank you for those answers.

Operator (participant)

Your next question comes from the line of Josh Wolfson with RBC Capital Markets. Please go ahead.

Josh Wolfson (Head of Global Mining Research)

Yeah. Thanks very much. Along the same lines that some of the questions that Ralph had at Malartic, I mean, I noticed the rig count is probably near a record, at least in terms of what we've seen in the sector. Is there any ability to leverage some of the understanding here for what the potential of second shafts could be in the current design for the initial shaft and maybe look at reevaluating some scope changes and accelerate a second shaft? Along those lines, just understanding the timeline today, what you think is reasonable to think about for that second shaft. Thank you.

Dominique Girard (SVP of Operations)

Hi, Josh. That's a very good question. In fact, we are evaluating right now, should we go deeper with the first shaft because it is extending deeper? It is also in parallel looking how deep we go with the second shaft or not. We should have an internal concept on that by the end of this year. It is really all to unlock the potential. For the second shaft, we're looking for 2 million ounces in infer. This is what we're looking for. So far, the drilling is very positive, it makes sense. The second shaft target is going to be also to be a production shaft. Cheaper and easier to do, that's what we're looking for right now.

Josh Wolfson (Head of Global Mining Research)

Got it. Sorry, the timeframe that you think would be reasonable to think about the second shaft being in production?

Dominique Girard (SVP of Operations)

We're talking in the early 2030s.

Josh Wolfson (Head of Global Mining Research)

Got it. Thanks. On some of the Meadowbank opportunities you mentioned for the IVR pit pushback and potentially the underground expansion, what would be the kind of rough capital numbers you think that would be reasonable to assume there? Thank you.

Dominique Girard (SVP of Operations)

I don't have the numbers, but that's going to be no big number because it's going to be just some stripping and development as we already have all the facilities like the camp, the mill, the roads. I don't have the numbers.

Ammar Al-Joundi (President and CEO)

I mean, it's an important point because, Josh, this will allow us to extend the mine life with relatively very small capital. Dominic made the point, look, these aren't going to be cheap cash cost ounces, but they're going to be, I think, exceptional return on capital ounces. That's really what matters. Sorry, Dom?

Dominique Girard (SVP of Operations)

Yeah. Just maybe something to add that we didn't talk about. Extending the mill, it's also meaning, or the mill, the mine, that he's going to keep drilling. That also brings an interesting opportunity to eventually find more and to keep that running. I'm very excited about that. It's very great news, and the team is doing wonderful work on that.

Josh Wolfson (Head of Global Mining Research)

Great. Yeah. Thank you very much.

Operator (participant)

Your next question comes from the line of Anita Soni with CIBC Capital Markets. Please go ahead.

Anita Soni (Managing Director)

Hi. Good morning, Ammar and team, and congrats on a strong result, and congrats to your employees for delivering that result to shareholders. The first question that I have is with respect to the cost. You came in below the bottom end of the cost guidance range for this quarter, and you're maintaining the production, sorry, the cost guidance for the year. Can you just give us an idea of where you're seeing the cost evolving over the course of the year to get to that higher amount?

Jamie Porter (CFO and EVP Finance)

Yeah. Thanks, Anita. It's Jamie. Yeah. We came in at $903 in the quarter, below the low end of our guidance, which is $915-$965. We did benefit from the weakness in the Canadian dollar. I think the Canadian dollar averaged CAD 1.44 in the quarter. We had some hedges in place, so our realized FX rate was CAD 1.42, much better than the CAD 1.38 that we'd budgeted. That was a big contributor. Really, the overperformance in terms of production obviously increased the denominator, and that helped as well. We'd expect costs to go up and be fairly constant throughout Q2-Q4.

Ammar Al-Joundi (President and CEO)

Sorry, just to repeat a point we've made many times, when you have a good operating quarter, you have a good cost quarter. The team delivered a great operating quarter. Let's hope they continue to do it for the rest of the year, but for now, we're maintaining our cost guidance.

Anita Soni (Managing Director)

That is basically if you continue to assume an even sort of mid even divide by four on the midpoint of your original guidance or your guidance range, then that would put you back into your cost guidance range.

Ammar Al-Joundi (President and CEO)

Yeah. At an exchange rate of CAD 1.38 and a bunch of other assumptions. That is why it is a great start to the year. We are delighted. You always want to be off to a good start, but it is still early in the year. We expect to have a good year. We are very well positioned to have a good year, and we are going to keep working hard.

Anita Soni (Managing Director)

Okay. My second question a little bit further on Odyssey. I think Dominic mentioned you were looking for about 2 million ounces in order to develop that next shaft. Can you talk about how much you feel like you've delineated at this point?

Dominique Girard (SVP of Operations)

Hi, Anita. Obviously, in order to make a more robust case for the second shaft, we would like to see, like for the first shaft, an area with above-than-average grade north of 3 g that will be, and we're getting there. You see even those recent step out at depth where we got some better-than-average grade with good thicknesses, and those results in East Gouldie, all of that is shaping up to define that 2 million ounces at better-than-average grade that Dominic is talking about. When you look at the location to the east, I think it's a matter of getting the drill spacing. Some of those drill holes are quite long, so it takes some time to get the right drilling pattern to firm up sort of under a study. I think we're within reach.

It's a matter of maybe a year to get all of that drilling in good shape, and we'll be able to firm up the scenario where exactly it should go. It smells good based on the high-grade result we're getting in the east flank.

Anita Soni (Managing Director)

Okay. Thanks. I'll write that down for my notes. Smells good. Thank you.

Operator (participant)

Your next question comes from the line of Daniel Major with UBS. Please go ahead.

Daniel Major (Matals and Mining Analyst)

Hi. Thanks very much. Great quarter. Yeah. First question, just on the cash returns. You've obviously hit basically zero net debt and indicated an upscaling to the pace of the buyback. Two parts. I mean, is there any reason we should expect you to move into a meaningful net cash position, or should we basically assume the majority of cash is returned to shareholders? How are you feeling around the balance between special dividends and buybacks? Is this all buybacks, or would you consider a special dividend as a part of the distribution mix?

Jamie Porter (CFO and EVP Finance)

Yeah. Thanks, Dale, for the question. I think, as I indicated in my comments on the call, we're focused on certainly increasing returns to shareholders, but also continuing to strengthen our balance sheet and improve our financial flexibility. We are comfortable getting to a net cash position and comfortable at a net cash position north of $1 billion. We think that's a true competitive advantage in this business. In terms of the shareholder returns, I think we're going to do more on the share buyback. That's a big factor in why we increased the limit, why we intend to increase the limit to $1 billion over a 12-month period. I would expect more activity on the share repurchase side. Obviously, we've seen a lot of volatility in the gold price.

We'll continue to evaluate the dividend policy based on that, but certainly an uptick in share repurchases in the quarters to come.

Ammar Al-Joundi (President and CEO)

You know what? I'll add, it's Ammar here. At these prices, Agnico Eagle, and frankly, a lot of our peers should be making a lot of money. We should be generating a lot of cash, and that cash belongs to our owners. We will be returning the cash. The most important thing, in my opinion, is don't waste that cash. This is why we keep repeating, it's your cash. It's not our cash. We're going to continue to be disciplined, which means that we're going to build the business. We're going to strengthen the balance sheet, and we are going to increase returns to shareholders. It may be in a dividend. Maybe it's share buybacks. Maybe it's probably a combination of all of those. The real important question or the real important point is stay disciplined. Don't waste that money.

Don't go out and do stupid things with our owners' money. Again, that's why we emphasize from the beginning cost control. That's why we emphasize also capital discipline.

Jamie Porter (CFO and EVP Finance)

Great. Thanks. Maybe a follow-up on the project front. Hope Bay looks some good results there. Can you give us some more of an indication of timelines, if possible, around updated kind of studies, FID kind of, yeah, trajectory?

Dominique Girard (SVP of Operations)

Which project? All the projects?

Hope Bay.

Sorry, I missed it. Hope Bay, we're looking in early 2026 to have a better final picture and potentially greenlight the project.

Daniel Major (Matals and Mining Analyst)

All right. Thank you.

Dominique Girard (SVP of Operations)

Yeah. In the meantime, we're updating the study, doing detail engineering as we did at Meliadine before giving KPIs and what's going to be the cost, how long it's going to take. We would like to have more engineering done. It is also when you're doing that engineering that you find solutions and you improve and you de-risk the project. It is really our goal to be over 50% early 2026.

Ammar Al-Joundi (President and CEO)

We are also doing a lot of, as you mentioned, Dom, activity on the ground. We are getting ready not only with the engineering and the studies, but we are getting ready to get off the starting blocks very quickly. We are increasing camp space. We are upgrading some of the infrastructure. We are clearing out the old mill so that we have, frankly, an empty building to build the new mill in. It is not just the studies and the engineering, but it is work on the ground.

Ralph Profiti (Managing Director of Equity Research)

Great. Thanks. Good luck.

Operator (participant)

Your next question comes from the line of Lawson Winder with Bank of America Securities. Please go ahead.

Lawson Winder (Senior Equity Research Analyst)

Thank you, Operator here. Good morning, Amar and team. Very nice to hear from you all, and thank you for today's update. You talked about your cost control, and it's extremely impressive. You also noted there's a certain cost element, royalties, that's sort of out of your control. In a way, though, I mean, it could be in your control in the sense that you could buy back your royalties. I'd like to know how you think about that. I mean, in particular, the Canadian Malartic royalty. I mean, is there an argument for buying those back in order to actually be proactive on controlling that one cost item you can't control? Looking at it from another point of view, I mean, is that even still relevant given the extent to which the Canadian Malartic property has expanded beyond the bounds of the current royalty? Thanks.

Ammar Al-Joundi (President and CEO)

That is a very logical question. We are well aware of those royalties, and we know there is a lot of speculation around those royalties. Lawson, the answer is, of course, we look at that. We look at everything all the time, what makes sense for our shareholders. Those royalties are fantastic for, I mean, that was the smart thing that Osisko did. I mean, they found this thing. They set up the royalties. Good for them. I give them credit. We look at it. If there is an opportunity for us to get it at a level that makes sense for our owners, we would do it. If someone else has a lower cost of capital and it makes more sense for them, then that is what capital discipline is all about. Very good question. Of course, we know about it. Of course, we look at it.

If the opportunity arises that it makes sense, great. We are going to be disciplined.

Lawson Winder (Senior Equity Research Analyst)

When you think about the current footprint of Canadian Malartic, I mean, it is starting to expand beyond that current royalty. Is that a fair statement? How does the expanding resource base and the future trajectory of resource growth at that property factor into this?

Ammar Al-Joundi (President and CEO)

You are exactly right. The ore body continues to expand and potentially well beyond the boundary of the royalties. I mean, clearly, what I would say is we have probably better insight into that than any—well, not probably. We have better insight into that than anybody. We do have an advantage in knowledge when it comes to capital allocation in that area.

Lawson Winder (Senior Equity Research Analyst)

Yeah. Okay. Thanks for that perspective, Ammar. If I could just ask one follow-up, thinking about your move into or back into zinc—sorry, to be clear—I mean, you guys historically have mined a significant amount of zinc. You are moving back into zinc with your partnership with Teck. I mean, it makes a lot of sense. You produce a metal that trades at a significant sort of historical relative premium to a lot of the industrial metals. Is there an attraction to take some of those very high-return profits you are earning on gold and invest it increasingly into base metals beyond what you are doing with San Nic?

Ammar Al-Joundi (President and CEO)

We're a gold company. We're more gold-centric than anyone else, and we're happy to be in gold. Certainly, the last year has demonstrated that gold continues to do what it's expected to do. I mean, you know us well enough. We're a gold-centric company, but we just want to make money for our owners. We want to do it responsibly, and we want to do it safely. We're always going to focus and try to leverage off the competitive advantages that we have. If we find a copper mine in a region that we think has the geologic potential and we have a competitive advantage, we'd be open to that, of course. We're a little different than some of our peers. Our peers have—they picked one metal, copper. They've said they'll go anywhere in the world to do it, and they've set targets.

For Agnico Eagle, we just want to make money for our owners, which means we're going to play off our strengths. We're a gold company, but we're open to other metals. If it makes a lot of money, they have to be in places that we're comfortable operating. Probably the most important thing is the amount that we do is going to be driven by opportunity to make money. It's not going to be driven by setting an arbitrary number of 30% or 40%.

Lawson Winder (Senior Equity Research Analyst)

Okay. Very well said. Thank you, Ammar.

Operator (participant)

Your next question comes from the line of Fahad Tariq with Jefferies. Please go ahead.

Fahad Tariq (Senior Research Analyst)

Hi. Thanks for taking my question. Just looking at Micassa, very good grades in Q1. I think the highest in two years. You mentioned it was due to two stopes that outperformed. Was that a one-off type of situation? How should we be thinking about grades through the rest of the year at Micassa?

Guy Gosselin (VP of Exploration)

Yeah. Now there are a few panels. As you know, Micassa, the grade varies a lot between half and unsuspectant and several unsuspectants. It is, again, with the drill spacing pattern, very difficult to capture those jewelry box here and there. Sometimes in some panel, you are going to get some outliers like that, and we may see some more. They are difficult to predict with the drill spacing we are having. We are enjoying it when they pass, but it is not something we can predict.

Fahad Tariq (Senior Research Analyst)

Okay. Thank you.

Operator (participant)

Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.

John Tumazos (Principal)

Thank you for your service to the company. I'm looking at slide 7—slide 12, excuse me. I'm interested in the 24 g/t intercept between Suluk and Patch 7. Is it possible, Guy, that the two zones connect and are one zone? First, second, at 24 g/t, it would be 30 ft or so of $2,500 US rock at today's gold prices. What do you think the cost per ton will be when you have Hope Bay restarted? $250 a ton, $500? I'm wondering if that 24 g/t intercept is 80% or 90% gross margin rock.

Guy Gosselin (VP of Exploration)

Maybe to answer on the cost, you have to look at it. We're looking to replicate something similar to Meliadine. You should look at the cost structure at Meliadine, 6,000 ton per day, and we're generally between $230-$250 per ton if you look at the number. Yeah, you're right. Those kind of intercepts are great. They're well above. You have to look at it, as you know, on average. To your first question, as you see on the long section at slide 13, there's several overshoots within that panel. I'm not saying that they're all going to connect because typically, those are kind of the structure is kind of an anastomosis shear zone where there is some higher-grade overshoot as defined in the Patch 7 and Suluk area.

I think that in between, those recent results just demonstrate that there could be one or two other pockets in the gap in between Patch 7 and the Suluk. This is what we're going to be focusing on because that would be very positive on the project. It's close from the planned ramp in between Suluk and Patch. There's one or two other overshoots. It's pretty similar to the pattern that was observed back in the day also in Doris. It's a collection of overshoots along that trend. Those recent results just confirm our view that we could add up to maybe a million ounces between Suluk and Patch. That's my forecast.

John Tumazos (Principal)

Merci beaucoup. Bonne chance.

Guy Gosselin (VP of Exploration)

Thank you.

Operator (participant)

Your last question comes from the line of Tanya Jakusconek with Scotiabank. Please go ahead.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Thank you very much for taking my question. I have three questions. First of all, congratulations on a good set of papers. I have a few questions, if I could. Maybe, Ammar, can I start with you just on the tariffs? You had a paragraph in your press release in terms of the impact of potential tariffs on your cost structure. Can I just dive a little bit deeper into that in terms of trying to understand what portion of your cost structure, I'm assuming consumables, would be impacted and what within there would you be having the greatest impact? Just on the labor side, because as you know, if tariffs come through, it would be inflation. I am just trying to understand also what labor negotiations you're going through in 2025 with your workforce.

Lastly, it would come to sustaining and development capital and maybe any important or large sustaining or development capital purchases, new mine fleets, etc., that you could see yourself doing this year. That is my first question. Thank you.

Ammar Al-Joundi (President and CEO)

Thanks, Tanya. I guess you've got a cold, so it'll get better soon. On the tariff side, I'll just kind of give a big picture and then go into a little bit of detail with some of the questions. First of all, on the revenue side, we don't anticipate any impact, zero. We have our gold refined outside of the U.S., and we don't expect any tariff impact on the revenue side. On the cost side, about 60% of our costs are either labor or energy, and we don't see any tariff impact on any of that. On, let's say, the 40% of other costs, one of the advantages that we have of mining in regions where mining's been going on for decades and where we've helped build a robust local supply chain is we get a lot of things locally.

We will have some impact. It's impossible to say because it's the reciprocal tariffs that would affect us. Those are in flux, and we don't know. To make a long story short, no impact on revenue, no impact on labor, no impact on energy, maybe some impact on consumables, but relatively less than I think people would expect because of the local supply chains that we've got. Our high-level assessment—and take this with a grain of salt because I don't think anybody knows where we're going to end up with tariffs—in general, our view is to the extent that the tariffs have an impact, it would be—we're guessing—in the sort of maybe 3%-4% increase, but that would, of course, likely be offset by an equivalent or roughly equivalent weakness in the Canadian dollar.

Again, I'm not an economist. We've done a lot of work on this. That's our assessment. On the labor side of things, I mean, we have great relationships with our teams. We've had our usual very constructive negotiations at the start of the year. That's all been set. We'll continue to do things the way we've done them for years, which is with respect and with our partners. We don't really see anything on the labor side. Finally, on the inflation side, I think that, again, I'm not an economist. It's too early to say. I think, though, that tariffs are going to be, in general, difficult for economies. You're going to have to weigh the inflationary pressure of tariffs versus the disinflationary issues associated with a slowdown in an economy. Again, I'm with a mining company. I'm not an economist.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Yeah. No, none of us are economists here, Ammar. Maybe just on the sustaining capital side, any new fleet? I'm just trying to understand any big capital within your CapEx that would be purchased should still have an impact as well.

Natasha Vaz (SVP of Operations)

Hi, Tanya. It's Natasha. In terms of equipment, we're always buying equipment. From what we understand, the equipment is not tariffed. There's no issue on that end.

Ammar Al-Joundi (President and CEO)

Okay. Thank you for that. My second question, if I could, I just wanted to ask Ammar on your strategy of your investment portfolio. I mean, this investment portfolio is getting bigger. I am kind of wondering how you see this portfolio and sort of your strategy on it. I mean, historically, you have traded it and taken money off the table where you see fit. How should I be thinking about this portfolio and your strategy and then the investment of juniors? Yeah, I will leave it there.

Yeah. Tanya, fair question because it's gotten big. I think there's two distinct parts to my answer. The first part is, yes, we're going to continue the strategy that we've had for decades, which is get in early with projects that we think have a lot of potential. That really gets to this whole capital allocation and our strong view that capital allocation has to be based on intelligence. We make small investments early on in projects that are interesting, and we do it on purpose to learn about those projects and to be able to make a logical decision. We want to continue to be, by the way, the partner of choice for some of these juniors in the regions we operate. It's a strategy that's worked really, really well for us. We're going to continue it.

The second part, though, is, man, your position's gotten pretty big, Agnico. What are you going to do about it? The honest answer to that is, frankly, gold price went to $3,000 and everything went up in value, which is not a bad thing. We are reviewing our positions regularly. I want to emphasize that the increase isn't because we've suddenly decided to double or triple our activity in that space. It's the same pace. It's the same strategy. We've just benefited on the investment side, like hopefully all of you have.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Yeah. I appreciate that. It's just at a certain point, when you look at your portfolio, does it look like that what you had invested in now is way out of the money? And maybe it's.

Ammar Al-Joundi (President and CEO)

Luckily, it's way in the money, but I hear you.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

If I could just ask Jamie one final question on the capital returns. I know, Jamie, you are going to be more active on the share buyback in the next 12 months. You also mentioned that you'd like to go to a net cash of $1 billion to be competitive. Is that how I should be thinking? On the dividend side, do you kind of want to get to that net $1 billion in cash before you would review the dividend? What do you need to see, that a gold price stability and that net cash of $1 billion before you would review the dividend?

Jamie Porter (CFO and EVP Finance)

Yeah. Excuse me, Tanya. Yeah, I think you've touched on it. I think that's exactly right. We're targeting, in the interim, $1 billion of net cash. We'd like to see some stability in the gold price. We'll obviously reevaluate the dividend policy. I think for Q2 and likely for Q3, the focus will be on higher returns via the share buyback. We'll be evaluating the dividend and obviously having discussions with our board. If the gold price stays where it is, there's a very good chance of an increase at some point in the future.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay. Thank you very much for taking my questions. Congratulations.

Ammar Al-Joundi (President and CEO)

Thank you. Get well soon.

Operator (participant)

That concludes our question and answer session. I would like to turn it back to Mr. Ammar Al-Joundi for closing remarks.

Ammar Al-Joundi (President and CEO)

Thank you, Operator. Thank you, everyone, for participating this morning. As a reminder, we're hosting our annual general meeting today at 11:00 A.M. at Arcadian Court. We hope to see as many of you there as possible. Thank you, everyone, and have a great day and a great weekend.

Operator (participant)

Thank you. This concludes today's conference call. Thank you all for joining. You may now disconnect.