Agnico Eagle Mines - Q4 2022

Transcript

Operator (participant)

Good morning. My name is Julie, I will be your conference operator today. At this time, I would like to Welcome Everyone to the Agnico Eagle Fourth Quarter Results 2022 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'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. Thank you. Mr. Ammar Al-Joundi, you may begin your conference.

Ammar Al-Joundi (President and CEO)

Thank you very much, and good morning, everyone. It's a pleasure to be here and have the opportunity to talk about 2022, but more importantly, about 2023 and beyond, where we are quite excited, and we see some exceptional opportunities that by the end of the call, I think hopefully all of you will see them with us. Just before we jump in, some forward-looking statements you should take into account, the normal sorts of things. Why don't we then just jump right in on page five. We're gonna talk about, again, 2022 and 2023. I would say that 2022 full year can be characterized by two things.

Number one, solid and strong operational performance, but number two, and this is important, some very strategic consolidations that have led and will lead to some great opportunities that we're gonna talk about. On the operations side for the full year, we had a strong year with regards to production, meeting our guidance. I would say more impressively, costs, meeting slightly above the upper end of our guidance, where we had told the market we would come out. We all know that 2022 was a tough year for inflation. It was a tough year on the workforce side, but the company delivered quite well overall. We had continued advancement of some key development projects, Odyssey, Detour Lake, some other key projects that we're gonna talk about.

We delivered all of that with the company's best safety record in 66 year history of the company. That's impressive. At the same time, we repaid $225 million of debt with cash as it came due, and we paid a Dividend of $0.40 per share, quarterly Dividend continuing, which is at a good level. At the same time, we increased mineral reserves by 9% to almost 50 million oz. A very strong year operationally, I think, across the board. We'll talk about the fourth quarter, where there were a few more challenges, but I am very proud of the team for what they delivered this year. On the strategic consolidation, very successful merger and integration between Agnico Eagle and Kirkland Lake. That went very well. I use the past tense because it's done.

We delivered synergies faster and in, and greater quantum than we thought we would, which is great. Frankly, the teams are working exceptionally well together, and you will see that when I talk about 2023 and beyond. Secondly, we're looking forward to the pending acquisition of Yamana's Canadian assets, including, most importantly, the second, the other 50% of the world-class Malartic mine and all the potential that it has. Those two strategic deals, the consolidation of Kirkland and Agnico and the acquisition of Yamana's Canadian assets, are core and fundamental to our strategy, which is to consolidate the best operating regions in the world for gold mining. Next page, please. I wanna take a minute because we talk about this a lot, but sometimes a picture is worth 1,000 words.

What we try to show here is what this Abitibi Gold Belt means for us. It's a region about 160 by 200 km, and let's take a look at some of these numbers. Mineral reserves, over 30 million oz. Resources, over 30 million oz. Inferred resources, about 20 million oz. These numbers are about the same as the total Nevada Gold Mines JV, but in this case, we own a hundred percent of it, and we've been operating here for over 50 years. So we think this region has a lot of potential, and that's what we're gonna be talking about. We will be producing in excess of 2 million oz from this region at about $800 cash cost.

This region also is a fundamental part of our ability to operate, we think, with a strong competitive advantage in Nunavut, as this is a basis for a lot of those operations. Nunavut, again, going to be between 800,000-900,000 oz of production. You can see the quantum of this strategy of combining and consolidating what we've done over the last couple of years. When we did the merger with Kirkland, and this time last year when we had this call, there was a lot of emphasis on synergies. We said very clearly we didn't do the merger because of synergies.

We did the merger because of what we saw was a huge potential to consolidate this region and leverage off our competitive advantage in what we think is one of the best places in the world, as measured by geologic potential and political stability. As we look forward, and next page, please. That's what we're gonna be talking about in 2023 and going forward. Where last year was about integrating the companies, delivering on the production guidance, and consolidating this region, 2023 is all about optimizing what we've got. There's a lot we're working on, but I'm gonna hit three things, and I think this is the most important page in the entire presentation. These are only the three biggest, there are a lot others.

Detour Lake, we continue to have exceptional exploration results at depth and moving west. We are continuing to assess, and Natasha and the team have done a great job already with the mill expansion. We think we can expand, and we're looking at opportunities to go from 28 million tons to 30 million tons with minimal CapEx investment. Remember, the permitting is up to 32 million tons. Importantly, we are continuing to work. We promised that we would do this by the end of this year. We're making good progress towards the potential for this mine to be producing over 1 million oz a year for decades. We're looking forward to continuing to work on that and seeing where we are at the end of the year and talking more about it then.

The Canadian Malartic complex, we're now calling it a complex because that's what it is going to be. We paid a fair price for the second half of Malartic based on its current life of mine, the reason we did the deal is because we think there's a lot more potential, and we're going to talk about that a little bit. We think that there is. We have already approved an increase in exploration as soon as the deal is completed because there is a lot of exploration potential, we'll talk about that a little later. We are going to be initiating initial production in March. We are sinking the shaft, we are assessing the potential for additional ore source at Malartic.

We think that the Malartic complex, between the ore available at the mine site and opportunities to bring in ore nearby, this could be another plus 1 million ounce a year producer for decades to come. This is what we're trying to do in the best place, arguably, in the world to mine. You can see that between Detour and the Malartic complex, potential each to be in excess of 1 million oz a year for decades. The third item to hit briefly is using excess capacity of existing infrastructure throughout the region and leveraging that infrastructure. This is what we mean by getting the full potential and leveraging off our competitive advantage.

We're gonna talk about this later, but to hit the highlight, from the assets we will already own and that are near where existing mill capacity is, we think there's the potential for up to 500,000 oz of additional production by 2030. Starting slowly in 2024, but really picking up sort of 2028, 2029, 2030 when this mill capacity comes in place. In and of itself, I think that's impressive. People talk about, you know, the best growth is organic growth. This is the best of the organic growth because it's not just growth in areas where we exist. It is potentially growth with minimal additional Capital Expenditure.

If you can bring a mine into production and not have to build a mill and not have to build tailings facilities, you've probably cut the capital cost of that mine in half. You've done it in a region where you know it's safe to operate, where you have the best reputation in town, where there is minimal environmental impact, minimal permitting impact. This really is the best organic growth. It generates the most money for our shareholders. It does it with the least risk, and it does it with the smallest environmental footprint. That, we believe, is the future of mining, not just gold mining, but any mining. Just quickly hitting on 2024 and the fourth quarter. The first three quarters, I would say, were exceptional quarters from an operational perspective.

We delivered above budget on production, and very good cost control. The fourth quarter I would classify as a solid quarter. We did have some challenges, but the team still delivered pretty well. If you think, you know, we're gonna come in about the middle of our production guidance of 3.2 million oz-3.4 million oz. The bottom end to any quarter would have been 800,000 oz, and that's where we came in this fourth quarter at cost of $863. What I will say is, yes, the costs were higher, more than a little bit. The costs were higher in the fourth quarter, and that is a function of two things. One, it is a function of the full inflationary pressures affecting us.

Our team did a great job in 2022 of getting ahead of some of what we thought were going to be inflationary pressures. We bought more inventory. We put on some hedges early. We did a lot of very good things that controlled costs, but we're not immune from inflation forever. What you're seeing in the fourth quarter is some of that affecting us, including, in particular, as we had the sealift at Nunavut. The fourth quarter included those full inflationary pressures, but the costs were also impacted somewhat by some operating challenges. I'll hit Kittilä and Fosterville first. Kittilä, we have a restriction right now, a permitting restriction on the mill throughput.

We applied for the permit to go from 1.6 million to 2 million tons a year. That permit was approved, it was appealed, and right now, we are dealing with that appeal, so we're limited to 1.6 million tons a year. We have put in our guidance an assumption of 1.6 million tons a year. We are optimistic it actually gets resolved in the next couple of months, but we don't know that it will. Our budget is, I don't wanna say conservative, but it does assume the 1.6 million. If things go the way that we hope they go, and that we're optimistic they go, we will have an ability to produce more at Kittilä and probably another 30,000-40,000 oz there.

Going forward, by the way, because we have that restriction in place, in our, in our forward-year guidance as well. At Fosterville, we have a noise restriction. We were in Australia, I was in Australia with the team a couple of weeks ago. We are optimistic that that restriction, the noise restriction, which is limiting about 25% of the production at Fosterville, we are optimistic that will be lifted. We can't guarantee it, so we have not included the full production at Fosterville. If that restriction is lifted, it would be about another 50,000 oz a year. I just wanted to point that out. You know, maybe some people say we're being a little bit too conservative on that, you know, this is...

I'm speaking to the owners of the company, and our job is to identify all of these issues, and that's what we're doing. LaRonde, we talked about LaRonde last quarter. I'll talk about it again. You know, LaRonde has been in production for 35 years. It's a fantastic mine. It's a fantastic ore body. We're hitting some of the best reserve, some of the best grades we've ever hit there. The real word about LaRonde is sustainability. This is a mine that's been expanded five times. It has a huge amount of potential, but the reason we've operated safely, and I'm gonna emphasize that word safely, for 35 years and hopefully operate safely for decades more, is because we've operated sustainably.

Sustainably includes, in this case, having a team of world-class rock mechanics and internal and external advisors who guide us on the best way to sustainably mine this multi-decade asset, and they have advised that we go to a slower mining rate. The gold is still there. We are just mining at a slower rate at depth, and so the opportunity at LaRonde is, and frankly, this is a good thing, we are going to start exploring more laterally. You know, you always follow the highest grade gold, which is going down, and we know the gold continues to go down.

As we reduce the rate at depth, we are going to explore laterally and, you know, it might take a couple of years, but we are confident that we will be able to find additional operating phases and increase the production rate again. Just before I flip, it was a good year. I wanna call out to Detour, which had a record year, Amaruq that had a record year, and Goldex that had a record year since the restart. Next page, please. Just very quickly at some of the operating and financial highlights. Operating margin of about $720 million in the quarter, about $3.1 billion through the year. You've got all this data. We don't need to go into it in detail. Next slide, please.

This is impressive as well. Not only did we increase reserves by 9%, but equally important, we increased mineral resources by 12%. The mineral resources of today set the basis for the mineral reserves of tomorrow. We're very proud that we not only increased reserves, but increased resources. Frankly, we think we're going to be able to continue to do this over the next several years going forward. At this stage, we talked about 2022. We really are excited about 2023 going forward. We identified Detour, and Natasha is now gonna talk about that. We identified Malartic. Dominique's gonna talk about that. I'll talk a little bit about the potential for that additional 500,000 oz towards the end of the decade. Natasha?

Natasha Vaz (EVP and COO for Ontario, Australia, and Mexico)

Thank you, Ammar. Good morning, everyone. I'll provide a quick update on Detour and our vision to get to a million ounces per year. I'll start with the mill expansion project. We continue to advance multiple initiatives to increase our mill throughput from 23 million to 28 million tons a year by 2025. The last major initiative in our plan to achieve 28 million tons was successfully completed in 2022 with the installation of our secondary crusher screen. The installation was completed in the second half of the year, with the first line completed in Q3 and the second line completed in Q4. The initial results were very encouraging. We saw a daily average throughput equivalent to 28 million tons per year, but these rates are not sustained consistently over time yet.

Now the focus at the mill has shifted to optimizing the mill processes, analyzing the wear and tear from the higher throughput to optimize our maintenance practices, and basically just improving the mill runtime so that the higher throughput becomes more and more consistent over time. Based on the work that needs to be done, we see potential for a faster timeline that originally that was expected to be achieved in 2025. In addition to a faster timeline of getting to 28 million tons a year, as Ammar mentioned, we're also evaluating a pathway to increase the mill throughput beyond that with further optimization and fine-tuning of our mill processes and our maintenance strategy as we adapt them to higher milling rates. The mill optimization includes improved process controls.

We're also including the implementation of an expert system like we have at some of our other mills. These initiatives have the potential to achieve a range of somewhere between 29 million-30 million tons a year with limited capital. Other ongoing initiatives include the screening and sorting of low-grade ore with the potential to bring the throughput even higher. Just on the update for the underground study, an initial underground mineral resource associated with the mineralization outside of the planned final pit limits at depth and to the west is expected to be completed in the first half of 2023, this will be used as the basis for the potential underground mining scenarios that will be worked on in the second half of the year.

We expect to complete an initial technical evaluation by year end 2023. Moving to the next slide. I'll briefly touch on the exploration highlights at Detour in the last quarter. I'll start with the infill drilling program. This was a program completed in the Saddle Zone and just below the west portion of the pit, the area that you see that's highlighted in blue. The results shown on the right side of the slide in the first bullet continues to indicate a wide envelope of gold mineralization. Then just west of the infill drilling, just outside of that mineral resource shell as part of the expansion drilling program, you'll see that we continue to show a similar trend where we had a hole that intersected a wide zone with pretty high-grade inclusions.

This one included 10.2 g/t of gold over 28.9 meters. Finally, the regional drilling program also showed promise. This was a program that was conducted approximately 2.4 km west of the West Pit mineral resource, and it showed signs that these pockets of gold mineralization along the Sunday Lake deformation zone still continues. All in all, very encouraging results in the quarter for Detour. One other thing I wanted to mention is that the good exploration results discussed in prior quarters has led to the significant increase in the mineral resource, mineral reserve update at year-end. The exploration highlights that I'm talking about today and in the news release only became available after the MRMR year-end update.

It just shows the potential to continue the growth at Detour from both the open pit resources and advancing the understanding of the underground upside. With that, I'll pass the presentation on to Dominique Girard, our COO for Quebec, Nunavut, and Europe.

Dominique Girard (COO for Quebec, Nunavut, and Europe)

Good morning. Thank you, Natasha. Okay in the next couple of slides, I will give you an update on the Odyssey Project as well as on exploration, the infill drilling, what we see, and how we're gonna see the developing that complex to feed the mill that we have. On the production or let's say the development ramp, we are on target with the development and we foresee to do the first blast in March, so on time. We're gonna have approximately 50,000 oz this year coming from the Odyssey South. On the construction project, everything is going well, despite not the easiest time to build with the logistic and the workforce challenges. We have very A team at site, and we're proud with the advancement.

Bit of challenges with the wind and the crane that you could see on the top right of the picture in the last quarter. This quarter we are back on track with installing the steel into the shaft and we're gonna be ready to do shaft sinking starting at the end of this quarter. Maybe to give you a perspective about where we're gonna be at mid-year with the construction of the project, which is gonna be to feed also the updated study that we're gonna do this year. We're gonna update our PEA study. We're gonna be at the middle of the year where 80% of the surface construction is gonna be completed.

The electrical line, the shaft or let's say the headframe, the garage, the warehouse, the paste plant Phase 1's gonna be all completed. All those costs gonna be secured as well as the schedule. We're gonna have also an idea or a better idea our mining rate into the Odyssey South as well as the sinking rate that we're gonna do into the shaft. All of that is gonna be updated through the year to see about let's say, a very good vision on where we're gonna end with the project, but everything is positive. On top of that, we see this I'm gonna talk a bit about that in the next section, but we see very positive result from the infill drilling.

We did the first conversion with the Odyssey South at 100%, the equivalent of close to 200,000 oz at the Odyssey South. We also see very positive infill drilling, in the East Gouldie right now. If we go to the next slide, there is some hole that we could see here. The middle of the East Gouldie zone, which is a dark blue, that, let's say a year ago, that was more patchy. Now with the better infill, this is taking place, and we're expecting to do some conversion of that zone at the year end. Just to highlight some interesting hole at the 1.1 km below surfaces, approximately, or it is 7.6 gram on 43 meter.

If you go down 300 meters, we're 4.2 g/t, 61 meters. If you go a bit lower of that zone, we're 93 meters of 2.6 g/t. The infill drilling is confirming what we have into our study. We also see the red, the reddish zone increasing with the inferred resources, which is gonna be all included into our updated PEA. This is, let's say, the first place where it's gonna be easier to bring more ounces to that mill, is within that 5.6 s long, 1.5 wide, and 2 km deep area. We're gonna continue to work and to focus onto drilling and better understanding that zone.

If we zoom out at the next slide, page 15, on the entire area, there is also other potential satellite deposits like Camflo, LTA property, where we're gonna focus on more drilling and doing more study that eventually to bring that into the Canadian Malartic mill. Just the LTA property, which mean Les Terrains Aurifères in French or goldfield in English, the 2 million tons have been processed there. No. 2 million oz have been processed there, which was 10 million tons at 6.6 g/t. That was done or only the first 800 meters have been drilled. We're looking for eventually to focus there. This year, we'll focus more on the Camflo deposit.

There's already a drill running and we're gonna need to better understand could we mine an open pit crown pillar there. This is the vision that we have around the Odyssey Project. Maybe to close, I would just like to congratulate the construction team, which did last year, full year with a zero combined frequency. This is something not easy to achieve, but with the quality, it demonstrate the quality of the team that we have into that region and the good work that they did. On that, I'm gonna pass the mic back to Ammar.

Ammar Al-Joundi (President and CEO)

Thank you, Dominique, and thank you, Natasha. If we go to the next slide, please, and let's zoom in. Dominique talked about additional ore that's effectively proximate to the mill. What this slide shows is we've stepped back a little bit and we said, "What is the potential?" Again, there's a lot of potential. Right now I'm just talking about consolidating and optimizing the mill. There's procurement, there's central control centers, there's a whole bunch of things we're working on. For 2023, we're focused on the thing that's gonna move the needle very quickly, relatively speaking. If you look at the position here, what you see in the red line and the black line, that's the road and the railway.

Over the last 100 years where they've been mining the towns, the road, the railway has followed the Cadillac Fault. It makes sense. That's where the economic growth of this part of Quebec and Ontario has been. What you can see in the purple are our land positions. You can see that not only do we have a lot of land positions, we have a lot of land positions right on the Cadillac Fault, but also importantly, where there is existing strong transportation infrastructure. Just looking at 3 simple examples, things we already own, Macassa near surface, additional production from the AK Zone, Upper Beaver, and Kirkland Lake satellite deposits, and Wasamac. There's about 11,000 tons of ore that can be mined that conceptually could be milled at the Malartic or Lapa mill.

That's only 11,000 tons. That's one quarter of what we expect the excess capacity to be, and those 11,000 tons are roughly, potentially 500,000 oz a year. Somebody asked us, "Well, is this to fill the mill, or are you gonna, you know, are you focused on IRR?" What I would say is, again, I'll repeat, and I'm a, you know, I was a CFO for a long time, I think this way. Obviously, if you're building production and you don't have to build a mill and you don't have to build tailings facility and you've cut the CapEx in half. Your IRR, your return on capital roughly doubles. The math's more complicated, but it roughly doubles. This is not just organic growth.

This is the best organic growth you can have with the best return on capital, the least risk, and the least environmental footprint. Now, before we move on, we wanna leave time because I'm sure there's gonna be a lot of questions, it's not just these three things. As impressive as Detour is, as Malartic is, as optimizing the belt is, we've had excellent exploration results at Hope Bay, excellent exploration results at Malartic, excellent exploration results at Kittilä, at Goldex, at Fosterville, and at LaRonde. We are firing, I think, on all cylinders, but we are focused on things that are in front of us that were always part. I go back to where I started. This was always part of why two great companies like Kirkland and Agnico merged.

This is why we really wanted the second half of Malartic. By the way, nobody else could have had the second half of Malartic and delivered all this value into it because nobody else had the land positions and advantages we had. Just going on to move forward, 2023-2025 production, moderate growth, frankly, about 7% by 2025 from the 2022 production. The numbers are there, roughly about 3.3 midpoint in 2023, 3.45 midpoint 2024, and 3.5 midpoint 2025. I wanna repeat that, these numbers assume constraints at Kittilä and at Fosterville.

If we are successful in lifting those, that's another 30,000-80,000 oz, maybe a little bit more, that we can add to that. None of these numbers include any of the incremental production from filling the mill. Now granted, that'll start pretty slow in 2024 and won't really build up until 2028, 2029, but I just want people to know that, we think we can add potentially more to these. Maybe just flipping forward to the next page, just for time. You know, we are going to continue to do what we do in the most responsible way that we can.

It's not just the right thing to do, again, if your strategy is rather than going anywhere in the world to build mines one at a time where we, instead Agnico, wanna focus on regions for decades, you have to be the best at ESG. You have to be welcome in the community, not just accepted, but welcome and part of the community, you have to demonstrate environmental responsibility, because we don't wanna build just one mine, we wanna build several mines. I think our numbers, as reflected by third party, demonstrate that we are leaders in the industry for greenhouse gas emissions. We're leaders in the industry for fresh water usage. As I mentioned, we had the safest year in our 66-year history.

We have great relationships with local businesses, great relationships with local indigenous groups. We really believe we can see that we, working with the communities that we're in, improve the quality of life of the people that work with us, their families and the community that surrounds it. We are dedicated to zero carbon by 2050 and a reduction of 30% by 2030. We're putting a lot of effort into how to get there, we will get there. Next slide, please. Strong financial position, about $660 million in cash, $1.2 billion of undrawn credit facility. We paid down $225 million of debt in 2022 as it came due. You can see on the bottom left our debt profile.

We expect to continue to pay that down as it comes due with cash. Next slide, please. We've been paying a Dividend for 39 years. I don't know that there's any other gold mining company. Frank, I don't know if there's any other mining company that's done that. We are going to continue to pay a Dividend, and our Dividend yield is competitive with our peers. Next slide, please. In conclusion, and again, we wanna have time for questions, because there's a lot here, and there's a lot in our almost 150 page press release. In conclusion, 2022 was a tough year for the industry. It was a tough year for us, but I think the team did a really good job. Three exceptional quarters and a solid fourth quarter overall.

Importantly, 2022 was also a year where we successfully integrated two great companies and are going to be acquiring the second half of a world-class asset in our backyard and delivering value that nobody else could. Just stepping back, you know, it's not always easy to integrate two companies. I have to say, I've said it before, I'll say it again, it went really well, and that's only because of the quality of the people involved and the cultures that both companies had. While 2022 was a tough year, it was a good year. 2023, we are very excited about it. Where 2022 was about consolidating, 2023 is about optimizing. We are just starting to scratch the surface of the potential.

Again, you know, this time last year, we said we didn't do the merger because of the synergies, even though we've delivered very well on that. We did this merger because we see huge potential. I hope through this presentation we are starting to demonstrate that, and again, we're just scratching the surface. I will finish with how we always finish because it's our consistent strategy, which is to be a simple, consistent, disciplined company with a proven approach to value creation based on consolidating assets in premier jurisdictions, businesses that make a lot of money, a lot of cash flow, and importantly are always per share focused, proven leadership with a track record, maintaining a strong financial position to provide strategic flexibility.

ESG is important to us. We will continue to endeavor to be a trusted and valued member of the communities in which we operate and which we hope to operate for decades. The consolidation of the Abitibi Gold Belt is providing growth potential, high quality growth potential, high margin, high return on capital, low risk, and we wanna continue to build on our long history, 39 years of return of capital to our owners. With that, and thank you for your time. I know we took a little bit longer than we usually do, but there was a lot here. Operator, we'll open it up for questions.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. If you'd like to withdraw your request, please press the star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Fahad Tariq from Credit Suisse. Please go ahead.

Fahad Tariq (Director and Senior Analyst in Equity Research)

Hi. Good morning. Thanks for taking my two questions. Ammar, maybe just first on 2023 costs, which I think, you know, maybe surprised some people. You know, it looks like it's about 14% higher than the previous 2023 guidance, about 5% higher year-over-year, about 9% higher than I think what consensus expectations were. What is the market missing here when it comes to the underlying inflation? What part of the story are we not seeing that's impacting the costs?

Ammar Al-Joundi (President and CEO)

Yeah, that's an excellent question, Fahad. Part of what you're not seeing is, and I said this in previous calls, costs are a function of two things. They are a function of inflation, but they're also a function really of throughput. 2023, I'll give you an example. At Meadowbank. The stripping at Meadowbank in 2023, the ratio is 16 to 1, the strip ratio. In 2024, it's gonna be four or five to one. That simple change in stripping ratio has an impact on the entire company of about $37 an ounce in costs. Just that one thing. And it's hard for you guys to see that, and I appreciate that, but that's sort of your question.

The other thing is, you know, clearly, with the restrictions, simple things like 80,000 oz of restrictions, once those are lifted, costs at those operations go down. You're right, there is inflation, but there's things that's hard for people to see, and those are really the operating things. We hope to be able to outperform what we've given, but we had to give cost guidance at where it is because we don't know if those restrictions are gonna be lifted. We think they will be, but it would be, you know, not good of us to assume they will and then surprise you guys all at the end of the year.

Fahad Tariq (Director and Senior Analyst in Equity Research)

Okay. Fair enough. Just a quick follow-up. The synergy number that's being baked into the guidance, it looks like it's $12 an ounce. I think the number that was previously communicated, you know, the range was quite a bit higher, like $30, $40 an ounce. Did something change there when it comes to synergies and what's being included in the 2023 cost guidance? Thanks.

Ammar Al-Joundi (President and CEO)

Yeah. The synergies get a little more complicated because of inflation and, what I would say is, we are still ahead of schedule on the synergies. The administrative synergies are easy to track. I think, and I had these numbers, I apologize, but the procurement synergies are on track. I'd have to go through, Fahad, and go through the number you just gave me, and compare that to our numbers.

Fahad Tariq (Director and Senior Analyst in Equity Research)

Okay. No problem. We can take that offline. That's it for me. Thank you.

Ammar Al-Joundi (President and CEO)

Thank you.

Operator (participant)

Your next question comes from Emily Chieng from Goldman Sachs. Please go ahead.

Emily Chieng (VP and Equity Research Analyst)

Good morning, Ammar and team. Thanks for taking my questions. My first is a follow-up on the cost piece and maybe looking ahead beyond 2023 into 2024 and 2025, where you're expecting some sequential cost declines there. Perhaps could you bridge some of the items that you think about that would allow you to achieve this? I know you mentioned the Meadowbank stripping, but perhaps can you talk to maybe your diesel procurement strategy, labor, fuel, and consumables there as well? Thanks.

Ammar Al-Joundi (President and CEO)

Yeah. I think that, good question, Emily. Nice to hear your voice. Really, it's just the operations. The operations. As we're gonna have more production, as we get into, you know, different areas in the mine sequence, the costs are anticipated to go down. We have not really assumed any relief on consumables or labor or that sort of thing. You know, we will work hard to get there, but mostly it is increased throughput and mine sequencing.

Dominique Girard (COO for Quebec, Nunavut, and Europe)

I'd just add to that, Emily, that, as we said in the press release, no assumption of hedging success on any of these inputs like currency or fuel is included in our guidance, you know, because there's no guarantee those things will work out. We'll continue to attempt to add to those, hedging programs during the year if it's beneficial.

Ammar Al-Joundi (President and CEO)

Also there's no assumption on either production or costs of some of the optimization that we're working on, which would further reduce costs. We can give a fair level of confidence, absent unusual market moves that the costs should go down because we see what the life of mine is, and we know what the cost per ton is, and we know what the throughput is and all of that, and that's gonna all improve. We haven't included some of the optimization that we're working on. Clearly, you know, as you produce more ounces with the same infrastructure, your cost per ounce goes down.

Emily Chieng (VP and Equity Research Analyst)

Understood. That's very clear. Maybe my second question, just around the progress and your Abitibi Gold Belt strategy there and how you're optimizing mill throughput. How do you think about prioritizing the cadence of when each of those nearby resources start to fill in and when they should start to contribute the additional ounces that you're talking about?

Ammar Al-Joundi (President and CEO)

Well, I mean, that's an excellent question, and we've really been focused a lot on that over the last few months. The best way to answer that, Emily, is we are doing this at two levels. We're doing this at the most senior level, and Jean Robitaille is working on this with Guy and Natasha and Dominique. Also importantly, this is the key thing, each of these projects has a project leader, and a team and a timeframe with milestones. You know, it's one thing to talk about a vision, but what you really actually have to have is a plan. We have the teams in place.

We have the resources in place, and the cadence, to your point, will be driven by, those specific opportunities, both when these projects can come on stream and also frankly when the mill capacity comes on stream.

Emily Chieng (VP and Equity Research Analyst)

Great. Thank you.

Operator (participant)

Your next question comes from Greg Barnes from TD. Please go ahead.

Greg Barnes (Managing Director and Head of Mining Equity Research)

Yes, thank you. Ammar, you're forecasting CapEx around $1.4 billion-$1.6 billion in 2024 and 2025. With all of the optimization programs and plans you have for the Abitibi, does that number come down beyond 2025, or is it gonna stay in that range as we go forward to the end of the decade?

Ammar Al-Joundi (President and CEO)

I would say. Hello, Greg. I would say. Sorry, just before, Greg, I answer your question. Emily, we will provide more guidance with specific cadence towards the end of the year on some of these projects. I just didn't wanna leave you hanging there. Greg, we've actually completed a lot of big ticket items on the CapEx side in 2022. Things like the filter press at LaRonde, you know, which is gonna allow us to do dry stack tailings, which is, you know, for environmental purposes, et cetera. You know, the CapEx forecast beyond 2024, 2025 is forecast to decline based on the current life of mine.

You know, our job continues to be as you know, to look for opportunities to make profitable investments for our owners. I'm optimistic that we're gonna continue to find good opportunities to create value on a per share basis. To answer your specific question, yes, based on the life of mine models we have right now, the CapEx is expected to decline beyond 2024, 2025.

Greg Barnes (Managing Director and Head of Mining Equity Research)

Okay. Just at Macassa, it seems like you've taken a bit of a reset there in terms of production profile going forward. I think there was talk at one point it would be 350,000-400,000 oz a year, but we're not seeing that in the three-year forward look anyway. What's the view on Macassa now?

Ammar Al-Joundi (President and CEO)

Well, I'll start. Then maybe Natasha can comment a little bit. You know, this time last year, I remember the call very well 'cause it was my first call. We hit Macassa head on. We said, "Look, the previous guidance was 350, 400 a year. We think it's a great ore body. There's a lot of potential, but it's not gonna get to 350 to 400 in the timeframe that was outlined." We said this, based on the due diligence we did, and, you know, it's a great ore body, but as I said then, you know, this is a mine that Kirkland was taking from the 1930s to the 2020s, and they were making good progress. We've made very good progress this year at Macassa.

The team is energized, you know, Natasha can talk about a lot of the accomplishments. I think what I would say, Greg, is Macassa is probably 300-350, not 350-400,000 oz mine. But maybe Natasha?

Natasha Vaz (EVP and COO for Ontario, Australia, and Mexico)

No, that's correct. Thank you, Ammar. Greg, sorry. In terms of the current guidance, it reflects two main things, this lower ramp-up of mining activities and a lower gold grade when compared to the previous guidance. With respect to the lower forecasted grade, it's largely a result of adjustments to our resource model based on additional definition drilling. The slower ramp-up in 2024 is partly due to the reevaluation of the development rate and the mining sequence following the completion of Shaft Four and the new ventilation system. We're always looking at opportunities to improve on our productivities, but for now we feel that these are rates that are achievable.

The site has done a lot of work in terms of the optimization efforts, whether it's compliance to the plan, the maintenance program initiatives. There's always opportunity, and I feel like there is opportunity with Number Four Shaft and the ventilation upgrade coming on to improve on that. With respect to looking at it in the long run, like Ammar said, I envision the same thing, 300-350. The deeper mine, the South Mine complex and the Main Break, we envision it to still be approximately around 300-310. Then we foresee an additional, say, 20,000-40,000 oz coming from the near surface deposits, the AK deposits, that could potentially be trucked to another mill.

Ammar Al-Joundi (President and CEO)

Yeah, look, again, we're very proud of what Macassa has done this year. It was... I'll be perfectly frank, it was a bit of a tough mine this time last year. It is operating vastly better now, and the confidence we have in it is high.

Greg Barnes (Managing Director and Head of Mining Equity Research)

Great. Thanks, Ammar. Thanks, Natasha.

Operator (participant)

Your next question comes from Anita Soni from CIBC World Markets. Please go ahead. Anita Soni, your line is now open.

Anita Soni (Senior Equity Research Analyst)

Sorry, I said I had. I was on mute there. I had the same question as Greg. I'm just gonna pass it to the next caller. Thanks.

Ammar Al-Joundi (President and CEO)

Thank you, Anita.

Operator (participant)

Your next question comes from John Tumazos from John Tumazos Very Independent Research. Please go ahead.

John Tumazos (Managing Director)

Thank you. Sort of moving away from the details of today's press release, sort of for the long-term strategy, Ammar. Is there a level of depletion that might be too big for annual reserve replacement or a threshold you don't wanna go to, like, 4, 5, 6, 7 million oz a year? Is there a level of capital spending, 2, 3, 4 billion a year, that's too much?

Ammar Al-Joundi (President and CEO)

Yeah.

John Tumazos (Managing Director)

Clearly, you had a couple of issues this quarter, it's hard to run a company, the more moving pieces, even if they're all in the same neighborhood in Eastern Canada. There's five or 10 companies lined up wishing they're gonna sell out to you. Maybe that's too many projects for you to build at once.

Ammar Al-Joundi (President and CEO)

John, you're absolutely right, I think, on all counts. I think there is a limit, you know, that it does become unwieldy, even if they're all in areas where we are. you're right, there's a, you know, a lot of companies that are hoping that, you know, someone else will buy them out. I would say, yes, you're right. There is a size that is probably too big at some point and becomes unwieldy. you know us pretty well. We've never cared about size. I say that sincerely. We don't care on absolute size. We only care on per share metrics.

I think, I hope what we've shown today, and this is really what I'm trying to do, is this merger that we did with Kirkland and this acquisition of Malartic was not about getting bigger. Paying full value for something and just, that doesn't create any value per share. What we are trying to do, and I think what we are going to do better than people think, better than people expect, I think we're really going to, over the next few years, show that this combination is going to create a lot of value through leveraging our competitive advantage in this part of the world. I mean, you're 100% right. You don't wanna get too big. To be perfectly frank, all of our teams are very busy.

You know, we talked about to Emily's question on cadence, we're allocating resources to all of these to make them happen and we're working flat out. It's a good question, I hope I answered it to your satisfaction.

John Tumazos (Managing Director)

If we could be numerical, Ammar. For our planning, should we assume that we stay at 4 million or less ounces and the CapEx doesn't get bigger than $2 billion in a year? Even though you own 10% or 20% of four companies and another 14 wish they're going to sell to you, maybe you need to wait 10 years to worry about building all those mines.

Ammar Al-Joundi (President and CEO)

Yeah. Yes.

John Tumazos (Managing Director)

Thank you, and I'm glad to be a shareholder.

Ammar Al-Joundi (President and CEO)

Thank you. We're glad you are a shareholder.

Operator (participant)

Your next question comes from Carey MacRury from Canaccord Genuity Inc. Please go ahead.

Carey MacRury (Equity Research Analyst)

Good morning, everyone. I thought I saw in the press release that you're evaluating increasing capacity at Malartic to 60,000 tons a year. Obviously, you know, with the open pit ending and excess capacity there, just wondering sort of what's driving that?

Dominique Girard (COO for Quebec, Nunavut, and Europe)

Good morning. Dominique speaking. The mill capacity is 60,000 ton per year, per day, sorry. We're gonna start to have some capacity available, starting in 2028. This is where we all look to bring more ore to that mill. The mill is there.

Carey MacRury (Equity Research Analyst)

Okay. On Macassa, you know, it mentions higher dilution. Has that been factored into the updated, you know, reserve model there?

Greg Barnes (Managing Director and Head of Mining Equity Research)

Yes, it has.

Carey MacRury (Equity Research Analyst)

Okay, great. Maybe on last one for Ammar. I mean, you really emphasized the regional strategy that you guys have. Just wondering how Kittilä and Fosterville fit into that. They kind of seem a bit kind of orphans relative to the other regions that you have.

Ammar Al-Joundi (President and CEO)

You know, thanks, Carey. I'll start with Fosterville. Fosterville, great asset, great people. Doesn't make sense to be in a place like Australia for just one mine. We are looking at that, and we're looking at Australia, broadly speaking. You know, Australia already has a lot of good miners in it, there's a lot of opportunity. What I would say with Fosterville is, great asset, we need to make a decision long term on can we create value for our shareholders in Australia better than other people can. We're working on that assessment, as we speak. I would say, it's the same at Kittilä, frankly. You know, we are producing close to 3 million oz now out of Canada, right?

You know, we're gonna be going to $2.1 million in the Abitibi. We're gonna be going to $900,000 in Nunavut. That's a fair question, and it's a fair question in Mexico as well. Although, I have to say we are very positive on the work we're doing with Teck at San Nicolas.

Carey MacRury (Equity Research Analyst)

Got it. Very helpful. Thanks, Ammar.

Ammar Al-Joundi (President and CEO)

Thank you.

Operator (participant)

Your next question comes from Mike Parkin from National Bank. Please go ahead.

Mike Parkin (Managing Director and Head of Mining Research)

Hi, guys. Thanks for taking my question. I noticed that you flagged the big jump in power costs at Kittilä in 2022. I think I recall there was a nuclear power plant getting commissioned at the end of the year. Is that online and are you starting to see energy cost benefit from that coming online yet?

Ammar Al-Joundi (President and CEO)

You wanna go, Dom?

Dominique Girard (COO for Quebec, Nunavut, and Europe)

Yeah, I could take it. Yeah, we've saw the price getting crazy in December, up to $500-$600 per megawatt hour, because of the situation. In that, I don't know if you, what you refer, but in that case, we've run our.

Ammar Al-Joundi (President and CEO)

Generators

Dominique Girard (COO for Quebec, Nunavut, and Europe)

... generators just to save costs, and we've also reduced some activities at site. We see the future positive because there's a nuclear plant taking place, and they are finalizing the commissioning. We expect to have a better cost for next year.

Ammar Al-Joundi (President and CEO)

Mike, I think that's what you were referring, right? Is the plant online and commissioned. I don't know, Yanni, are you on the phone? Sorry to put you on... No, Yanni's not on the phone. My last update on that, Mike, was they were commissioning it. They had a couple of problems with water pumps of all things. You'd think water pump's not that complicated. My understanding is it is back online now or will be shortly. We have, we are seeing material reduction in power costs at Kittilä. Again, you know, we are, I will just say it. You know, in the budget, we've assumed higher power costs than we're seeing right now, so there is upside there for us.

Mike Parkin (Managing Director and Head of Mining Research)

Okay. Yeah, that was kind of what I was getting at, was where the guidance is kind of based on. In terms of the Canadian Malartic Mill, in the past, you kind of talked a bit potentially needing to tweak the front end of it, the grinding segment of it, to better balance the lower tonnage eventually coming through with Odyssey. Now, with this potential to fill the mill or, you know, get closer to a filled mill with regional upside, is that something you could potentially avoid having to do?

Dominique Girard (COO for Quebec, Nunavut, and Europe)

Yeah, absolutely, Mike. It is an opportunity that we have right now into our PEA study. We have money to decommission a part of the mill. Now, we see that as an opportunity to keep it running. Maybe if I go back, I think to Carey question before about the mill's capacity. Currently, we're mining with open pit at 55,000 ton per day. We're depleting those pit. Canadian Malartic's gonna end this quarter, and we're gonna move everything to Barnat Pit. The tonnage gonna decrease from the pit, and the underground tonnage gonna increase.

Coming into 2029, we're gonna be third time less throughput. We're at 19,000 tons per day, the grade is gonna be 2.5, 3 times higher than right where we are right now, which is gonna bring equivalent answers. Those two.

Mike Parkin (Managing Director and Head of Mining Research)

Okay. Just jumping over to Kittilä, with this final ruling on the greater tonnage permit, you noted that if it doesn't prove favorable, this ruling coming this year, you would, you know, submit kind of a new permit application. If that were, you know, obviously, hopefully, that's worst case and you can avoid it, but if you have to do it, do you have a sense of what the timeline of getting a new permit through would take?

Ammar Al-Joundi (President and CEO)

Yeah. I think it's. We're quite hopeful that we will. Remember, we got the permit and we got the support from all the regulatory bodies. There was an appeal. During the appeal, the court has asked us to go back to 1.6. We are hopeful. If it doesn't. Again, just to emphasize, the guidance we showed, just to be on the conservative side, is at the 1.6. If in the unexpected situation where we get denied and or there's a reversal of what was already permitted, we will have to resubmit, and that could take a few years.

Mike Parkin (Managing Director and Head of Mining Research)

Okay. That's it from me, guys. Thanks so much.

Operator (participant)

Your next question comes from Ralph Profiti from Eight Capital. Please go ahead.

Ralph Profiti (Senior Equity Research Analyst)

Great. Thanks, operator. Thanks for taking my two questions, Ammar. Firstly, on LaRonde, you know, you talked about moving to a slower mining rate. Would the same virtue be extended to development rates? Meaning that if you do slow down the mining rates, do you have an opportunity to sort of, you know, enhance productivity with, say, perhaps, you know, reduced dilution? Does the slower mining rate affect development rates as well? Maybe can you touch a little bit upon sort of the lateral exploration prospectivity as opposed to at depth?

Dominique Girard (COO for Quebec, Nunavut, and Europe)

Dominique speaking. Yes, effectively, we're gonna. The mining, the development rate is gonna be adjusted. This is offset also because we need to do more paste backfill and more. We cannot bring the waste into to use backfill. Overall, the cuts are kind of offset right now. We're gonna work with the team to really fine-tune the cuts. We're gonna see also this year what's gonna be the real pace of mining we could do at LaRonde. Overall, the LaRonde deposit is gonna be 200,000 oz per year.

There are 75 coming from LZ5, but we're gonna have coming into the second half of this year, 30,000 oz coming from 11, zone, Zone 11-3, which is a thing we're looking for, to continue to bring more ore from new zone. On that, I will pass the mic to Guy, which could give you some sense of where are we to discovering more answers in the laterally speaking.

Guy Gosselin (EVP of Exploration)

Hi, Ralph. On the lateral prospectivity, well, we already materialized some of that. You know, LZ5 is an example of what we are moving forward and trying to replicate. You know, there's on the adjacent property, the former Bousquet property that holds the LZ5, where historically, mining stopped at about 1.6 km below surface. Those zones were still open at depth. In between the current Penna Shaft and the LZ5, there are known zone of mineralization, namely Zone 3-1, Zone 3-4, that remains open at depth. We see also good potential below the LZ5. This is exactly why we're putting a lot of emphasis at developing that exploration drift on Level 215. That exploration drift will advance for another kilometer towards the west to be in a better position.

We are full steam ahead at getting that platform, exploration platform in place to target those known zone that were identified in the past and continue to investigate their extension at depth.

Ammar Al-Joundi (President and CEO)

You know, I, Rob, it's a good question. I'm a glass half full guy, and I actually see this in the long run as a good thing. I mean, you know, it's natural for any mining company to follow the highest grade in the ore development. At some point, we really did need to go laterally because there's a lot of opportunity around there laterally. This is something that we should do. Again, that's kind of why I said it might take a couple of years, but we're confident that we're going to be able to find additional ore face for the LaRonde complex and hopefully, you know, recover back to where we were last year.

Ralph Profiti (Senior Equity Research Analyst)

Got you. Okay, thanks. Maybe as a follow-up, I just wanna switch to Fosterville. Does the current technology allow you to get into that 16-20 Hz threshold to be sort of within specs on that low-level noise? Is the current technology available? And is this really just sort of an engineering solution that needs to be figured out?

Ammar Al-Joundi (President and CEO)

We have put a lot of effort and the best technology in the world to resolve this. To put this into perspective, I was out there, and I couldn't hear anything. Like nothing. We are going to be able to... I mean, we've spent a lot of money. We've brought experts in from all over the world. Sound, as you can imagine, is a bit of a complicated thing. We are going to be able to reduce it, but it's never gonna go to zero. It just isn't. This is the discussion we're having with the regulators. This is effectively something that the vast majority of people can't even hear. The regulators, I think, have asked us to do all we can. We have. It's gotten better.

It is physically impossible to go to zero. I think we have there is some sympathy there that we've that this is, you know, we've done all we can and that it's not an intolerable situation. You know, it's regulators and we do the best we can. We are genuinely hopeful this gets resolved pretty soon.

Ralph Profiti (Senior Equity Research Analyst)

Yeah, I understand, Ammar. Thanks very much.

Ammar Al-Joundi (President and CEO)

Thank you.

Operator (participant)

Your next question comes from John Tumazos, from John Tumazos Very Independent Research. Please go ahead.

John Tumazos (Managing Director)

Thank you. Just continuing the Fosterville discussion. Maybe six years ago, I went out by myself after a Fortescue iron ore trip, you know, left-hand side driving and whatnot, and I got lost and went through Bendigo and circled around a little bit. There aren't too many houses close to the mine. You know, there's other mining districts in Australia, like Kalgoorlie, where the town is right there and it's huge. I don't understand why noise abatement would be a significant issue at Fosterville. Is there some environmental impact on the thousands of green parakeets near the course shed or something?

Ammar Al-Joundi (President and CEO)

Well, you know, John, it's. We're glad we still have you after the left-hand driving. You know, this stuff is not uncommon in our business. Sometimes, and in this case, it's, you know, it might be a specific individual who, you know, is utilizing this as a way to achieve something else. You know, I don't really wanna get into it, but what's important is we will always do what we are asked to do by the relevant legal authority. We respect people's perspectives, and we are hopeful this gets resolved fairly soon.

John Tumazos (Managing Director)

Thank you.

Ammar Al-Joundi (President and CEO)

Thank you.

Operator (participant)

Presenters, there are no further questions at this time. Please proceed with your closing remarks.

Ammar Al-Joundi (President and CEO)

Well, thank you, operator, and thank you everyone. You know, I know there's been some initial questions about, you know, the production and the adjustments. I just wanna remind everybody, you know, 3 years ago, we had, you know, we had some rehabilitation and a ramp at LaRonde. We had an apron feeder that failed. We had some water we had to pump out of the bottom of a pit at Meadowbank. It was all resolved in the same quarter. You know, the fourth quarter, the team did a good job. 800,000 oz. Yes, there were a few operational challenges. That's the nature of our business. Big picture, we are a much stronger company than we were a year ago.

We are just scratching the surface of delivering, I think, exceptional value. A lot of this stuff is with minimal capital. You know, remember, we're in the business not just to produce ounces, but to produce profitable ounces, and good return on capital, and we think we're on the right track. With that, everyone, thank you again for your time, but more importantly, thank you for supporting us. We'll be marketing over the next few days and happy to take more questions then. Thank you.

Operator (participant)

Ladies and gentlemen, this concludes your conference call for today. We thank you for joining and ask that you please disconnect your lines. Thank you.