Agnico Eagle Mines - Earnings Call - Q4 2024

Transcript

Joëlle Ouellette (Document Control Supervisor)

Good morning. My name is Joëlle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Mines Limited Q4 2024 and full year conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remark, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the two. Thank you. Mr. Ammar Al-Joundi, you may begin your conference.

Ammar Al-Joundi (President and CEO)

Thank you. Good morning, and thank you for joining us. I'd like to start by thanking our employees, our communities, and our owners for their support throughout 2024 and into what we think will be a remarkable 2025. Next slide, please. Please be advised that we will be discussing forward-looking statements, and I recommend you all review the language relating to that. Next slide, please. We'll spend a little bit of time today going over our 2024 results. You've seen the numbers. They're very good, and Jamie will do his usual excellent job of going through them in a moment. But what we really want to focus on this morning, what really excites us, is 2025 and beyond. After Jamie's review, Dominique will talk about how Patch 7 is helping to shape Hope Bay into potentially the next big multi-decade platform in Nunavut.

He will also talk about something extraordinary, which is our vision to potentially get Malartic to over a million ounces a year of gold production. Then Natasha will talk about the potential to grow the Ontario platform by 50% over the next several years, including bringing Upper Beaver online and Detour's potential to get to over a million ounces a year. When I mentioned Malartic to over a million ounces a year, I purposely used the word extraordinary. That's because there's nothing ordinary about a million ounces a year mine. With the potential for each of Malartic and Detour to produce over a million ounces per year, Agnico Eagle would have two of the six biggest gold mines in the world, with multi-decade mine lives in one of the best jurisdictions in the world, 100% owned by Agnico Eagle. We think that is extraordinary.

Guy will then provide a brief update on our exploration program. Agnico Eagle is investing more than we've ever spent on exploration, and all of that spend is justified by some of the most exciting drill results in the business. But I'm jumping ahead. I usually do. I don't want to steal their thunder. This time last year on this call, we said we were constructive on gold prices. We felt 2024 was going to be a good year for gold, and we explicitly said this time last year that we're going to focus on cost control in a rising gold price environment. Why? Because the reason our owners invest in gold mining stocks is precisely to benefit from leverage increases in gold prices. They expect margin and cash flow expansion, and it's our job to deliver that.

As it turns out, 2024 was a big year for gold, and with the gold price up several hundred dollars per ounce over the year, as Jamie will discuss, for Agnico Eagle and for our owners, this increase in gold price, along with strong operational cost controls, translated into record financial results, into record earnings, into record cash flows, and into a record share price. In 2024, we did deliver the leverage to gold prices that we promised we would, and we did this by delivering record production, by controlling costs, and by being disciplined with our owners' money. At the same time, we continue to invest heavily in and strengthen our business. We advanced important projects: Odyssey Underground, Detour to a million ounces, Upper Beaver, San Nicolás, Hope Bay, to name just a few.

We made record investments in our exploration programs, and we returned almost $1 billion directly to shareholders in the form of dividends and share buybacks, and another $1.3 billion indirectly to our shareholders by reducing our net debt. Yes, 2024 was a great year for Agnico Eagle and our owners, but what you will hear this morning is that 2025 and beyond has the potential to be even better. Next slide, please. I'll start by saying that I believe we're in the strongest position in the company's history. I don't say that lightly. Consider. We are guiding for strong and steady production over the next three years. We are guiding for the best cost profile of our peers. We have the best project pipeline I've ever seen in 25 years in this business.

We have a strong balance sheet with almost $1 billion in cash and on our way to potentially no net debt very shortly. We operate in the best jurisdictions in the world, geologically and politically. We have great people who have experience, who trust each other, and who are motivated. And on top of all of that, we remain very constructive on the gold price. While we don't have a crystal ball, I would argue that all of the elements that have pushed gold up over the last 20 years not only remain in place, but in fact are accelerating. We think 2025 will be a volatile year across many markets globally, including gold.

But for gold, we believe this volatility will be skewed to the upside, and we remain determined, as much as ever, to deliver this upside potential to our shareholders by continuing to deliver strong production and by delivering best-in-class cost control. Our production guidance for 2025 to 2026 is down marginally, about 2.9% from previous guidance. But let's put that into perspective. It's primarily due to accommodating some difficult ground conditions at Pinos Altos, some minor deferral of processing, some low-grade stockpiles at Malartic, and some other relatively small changes to mine sequencing. On the other hand, the steady production guidance for 2027 does demonstrate the ability of our team to deliver impressive, profitable production as we transition to some of our important growth projects in the early, starting in 2030 and beyond.

With strong production, peer-leading costs, and with strong gold prices, Agnico Eagle remains well-positioned to, one, continue to deliver excellent financial results, two, continue to invest in the best pipeline we've ever had, and three, continue to strengthen the balance sheet and return substantial capital to shareholders, we can do all three, and with that introduction, I'd like to turn it over to our CFO, Jamie Porter.

Jamie Porter (CFO)

Thank you, Ammar. As Ammar mentioned, 2024 was a record year on multiple operational and financial fronts. Our strong safety and operating performance drove record annual gold production, and that paired with good cost control and a higher gold price environment resulted in record earnings, record operating cash flow, and record free cash flow. We ended the year with a solid performance. Gold production the fourth quarter was approximately 847,000 ounces at total cash costs of $9.23 per ounce and all-in sustaining costs of $1,316 per ounce. Higher sustaining capital in the fourth quarter was as expected as we caught up from underspending earlier in the year. For the full year, we came in above the midpoint of our production guidance at 3.49 million ounces.

We were also very pleased to report that we achieved our cost guidance with total cash costs for the year coming in right around the midpoint of our guidance at $903 per ounce and all-in sustaining costs of $1,239 per ounce, well within our guided range. We are proud of the work our teams have done and their continued efforts at controlling costs and focusing on continuous improvement. Our all-in sustaining costs continue to be hundreds of dollars per ounce below those of our peers. We reported several financial records in the fourth quarter. Again, record revenue of $2.2 billion, record adjusted earnings of $632 million, or $1.26 per share, and record operating cash flow of over $1.1 billion, or $2.26 per share.

For the full 2024 year, we had record financial results again across the board, generating approximately $2.1 billion in free cash flow at an average gold price of $2,384 per ounce. At current spot gold prices, we expect significant further margin expansion and cash flow growth in 2025. We move on to the next slide. I'm pleased to report that continued margin expansion and leverage to the gold price allowed us to strengthen our balance sheet significantly in the fourth quarter. During the quarter, we repaid the remaining balance of $325 million on our term loan facility ahead of the April maturity. Since the beginning of the year, since the beginning of 2024, we've reduced our net debt significantly from $1.5 billion at the start of the year to just $217 million of net debt at year-end.

In 2025, our debt maturities total only $90 million, which we expect to pay as due. At current spot prices, we plan to further strengthen our balance sheet and increase our financial flexibility in 2025. If we move on to the next slide, looking at 2024, we prioritized returns to shareholders. Through dividends, share repurchases, and the reduction of net debt, shareholders benefited directly and indirectly by approximately $2.2 billion. We paid $800 million in dividends in 2024 and repurchased $120 million in shares for direct shareholder returns totaling $920 million, or approximately 40% of our free cash flow. Again, from a balance sheet perspective, the remainder of our free cash flow was allocated to net debt reduction of $1.3 billion. At current margins, we are fortunate to be in a position to do some of everything we want to do.

We can continue our program of strong shareholder returns through the quarterly dividend and opportunistic share repurchases. We can continue to strengthen the balance sheet and improve our financial flexibility. And importantly, we can reinvest in the business by allocating additional capital to our high-return internal growth projects. As you will have seen from our guidance, our sustaining capital spending in 2025 is flat relative to 2024, but we are increasing our growth capital and exploration spending. At Odyssey, Detour Underground, Upper Beaver, Hope Bay, and San Nicolás, we have an enviable pipeline of strong return internal development projects. We will continue to take a measured approach to capital allocation with a focus on generating strong returns to our shareholders. With that, I'll turn the call over to Dom, who will provide an overview of our Quebec, Nunavut, and Finland operations.

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

Thank you, Jamie. Looking to our 2024 result, we really hit the home run with production exceeding midpoint of guidance and costs well under control. These results have been bolstered by outperformance at several sites, including LaRonde, Canadian Malartic, Meliadine, and Meadowbank. Specifically, I want to recognize the exceptional work done by our Nunavut teams this year. They set several operational records, including record throughput at Meliadine and record gold production at Meadowbank over 500,000 ounces. Combined with higher gold price and excellent cost control, our Nunavut platform achieved record operating margin of $1.3 billion in 2024. I'm pleased to share that we did not only meet our cost and production guidance, but we also maintained high safety standards across the sites, setting new safety record lows at Meliadine, Meadowbank, and Kittilä.

I would like to take this opportunity to thank all our employees and contractors for their continuous effort in improving safety and their hard work, which drove the excellent result in 2024. Looking to the next three years, I'm confident that we will meet our targets that Ammar just mentioned. One of the main reasons is because we continue to be in a position with few distractions and a low turnover, allowing our team to focus on productivity improvements. We saw the result of this effort in 2024, and we intend to continue leveraging opportunities like gradually introducing technologies that enhance production, such as increasing the use of underground automated equipment at various sites. Now, moving to our growth vision, I would like to bring you to your attention three main projects. First, at Meadowbank, our team is working to extend the life of mine beyond 2028.

Considering the current gold price and the low risk associated with this, we are evaluating different scenarios, and we expect primary findings by the end of this year about Meadowbank expansion. Another exciting opportunity also in Nunavut is Hope Bay. With the new Patch 7 result, we now have in hand the resource to work on a production plan of over 400,000 ounces per year for many years. Guy will talk about Patch 7 later. It appears to be the best grade between the three known deposits at Hope Bay. While we continue to drill and expand the mineral resource, our Q1 priority is to freeze the project scope, incorporating Patch 7 resources, and then to focus on detail engineering. Our target is to reach over 40% engineering by the end of this year to de-risk and secure the project execution before potentially greenlighting the project.

It is similar to what we did at Meliadine when we built it. We expect to give more details to the market in the first half of 2026 about Hope Bay. The last exciting growth project I would like to bring to your attention is the Fill the Mill strategy at Malartic. Next slide, please. We are currently transitioning from the biggest open-pit gold mine in Canada to the biggest underground gold mine in Canada. The transition should be completed in 2029, when we forecast gold production of around 550,000 ounces per year. Our next step is to pave the road for our vision of potentially processing 1 million ounces annually at Malartic. With Canadian Malartic reaching 1 million ounces per year, we could have, as Ammar mentioned, two of the top six largest gold mines in the world.

I would like just to underline that, but it is not just only top mines, but they will also be located in Canada, a stable jurisdiction known for its high environmental and safety standards. On the top right of the slide nine, you could see the picture of the Odyssey shaft. I'm pleased to report that the project is progressing very well, both on schedule and on cost, as outlined in other slides. To finish my part, I would like to give you some insight about our Fill the Mill strategy and our vision to achieve the 1 million ounces at Malartic. The mill shown at the bottom right of the picture has a total capacity of 60,000 tons per day. Starting in 2029, as we transition to higher underground grade, approximately 400,000 ounces will become available.

We are working hard to capitalize on this opportunity, and here are the building blocks for that vision. First, a second shaft at Odyssey. Guy will provide more detail on this, but we continue to expand the underground zones, and there is a room for a second shaft, which could be adding around 200,000 ounces per year. We are expecting to provide more information by the end of 2026 about the second shaft. Second, at Marban, with the recent transaction with O3, we continue consolidating the prospective land around Malartic. The Malartic property, or the Marban property, located about 15 kilometers of Canadian Malartic, can potentially feed the Malartic mill with an additional 130,000 ounces per year. We are also anticipating to provide more detail on this in 2026.

Last, at Wasamac, we are advancing the technical evaluation, the permitting, and the community engagement for this project, which could also contribute for additional ounces of about 100,000 ounces per year at the Canadian Malartic mill. With these three blocks, in addition to the current mine plan, we see the potential for 1 million ounces at Canadian Malartic in the early 30s. In terms of tonnage, these projects together with the Odyssey, let's call it phase I, we could fill the mill up to about 45,000 tons per day, leaving approximately 10,000-15,000 tons per day still available as a capacity. So stay tuned. We currently have 25 drills turning to continue finding more gold at the Canadian Malartic camp, and I'm excited about what's next. On that, I will pass it on to Natasha.

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

Thanks, Dom, and good morning, everyone. So I'll cover the operational highlights for Ontario, Mexico, and Australia. The regions delivered good operating and cost performance in the fourth quarter, and that translated into a solid overall performance for the year. But starting on the safety front, Macassa and La India both hit records in our safety performance in 2024. Macassa is an operation that was steadily growing last year, while La India was moving more closer to closure. Given that both operations were in a state of change, it's really easy to become distracted, certainly when there's a reduction in workforce, as was the case at La India. So I just wanted to take a second and just congratulate both sites. It says a lot about the safety culture that you've developed and your consistent focus on safe production.

Now, as Dom mentioned, we have a lot of records to celebrate across our sites this year, and these records are a direct result of the continued focus on increasing operational efficiencies and cost control at all our sites. And Detour, Macassa, Fosterville, they were no exception. Detour set a third consecutive quarterly mill throughput record. And last quarter, they hit a throughput rate that was just ahead of the targeted 76,700 tons per day. Macassa also finished the year strong, and on the back of productivity improvements, they hit annual mill throughput and annual production records. Over at Fosterville, they broke their record of annual underground tons mined. They also successfully opened up a third mining front with the commencement of production at Robbins Hill, and then at Pinos Altos, this was a tough year for them.

The team worked very hard, but this is a mature mine that effectively operates six satellite deposits where we are either mining at the extremities of the ore body or in remnant areas, both of which are not easy to mine. So we have taken a step back, and we've reassessed the productivity rates going into 2025 with a focus on cost control. So looking back, yes, we had a lot of good things that our team delivered on in 2024. But looking forward, we have a lot of exciting things on the go as well. And we'll start with Macassa. We're looking at debottlenecking the mill now. This includes working on a number of initiatives to optimize parts of the circuit, reduce downtime, increase efficiencies, and basically improve the mill throughput.

At Fosterville, the site completed an initial assessment at the end of the year that shows the potential to increase annual production to an average of approximately 175,000 ounces. The team is going to continue to conduct further technical evaluations and do some infill drilling to confirm the feasibility of the scenario so that we will be able to incorporate these results into future guidance. Over at San Nicolás, the plan is to continue to work on the feasibility study and develop the execution strategy. Project approval is expected to follow, of course, dependent on the receipt of the permits and the results of the study. Now, coming back to our Ontario platform, Detour Underground and Upper Beaver are two projects that we are most excited about because it's an opportunity. It's an opportunity to grow low-risk, profitable production in one of the best mining jurisdictions in the world.

As Ammar mentioned, with the addition of these two projects, we could potentially see gold production from our Ontario operations grow by 50%, beginning as early as 2030. I'll touch on both of the projects in the following slide. Starting with Detour, this is a world-class asset. The update we provided last June outlined a pathway for Detour to be a 1 million ounce producer annually for over 14 years, beginning as early as 2030. Last year, we approved the development of an exploration ramp and a collection of bulk samples to further de-risk the project. It's still early days, but there's been some really good progress made. We've been completing the site preparation, and upon receipt of the permit to take water, we will commence the ramp development.

Now, as for Upper Beaver, this is another low-risk opportunity to grow the production profile in a camp we know well. So like at Detour, we're taking the next steps to de-risk and optimize the project. We're advancing the site preparation to excavate the exploration ramp and sink the shaft that was approved in July. And we're making very good progress here. The road access, the main earthworks for the site, and some temporary infrastructure were completed. The power line coming to the site was energized. The shaft collar was excavated. The gallery was installed, and the foundations for the head frame were completed. There's a lot of good work being done by the team there. Thinking of the exploration shaft and the ramp development is expected to commence in the fourth quarter of 2025.

Both Detour Underground and Upper Beaver are good projects with strong risk-adjusted returns and, as I said before, are drivers of future growth for our Ontario platform, and so we will continue advancing these projects throughout 2025. With that, I'll pass it over to Guy, who will discuss our exploration program and some positive results.

Guy Gosselin (EVP for Exploration)

Thank you, Natasha, and good morning, everybody. In the next couple of slides, I would like to talk about four things. One, we've been successful over the year since the merger at replacing production and growing our mineral reserve and mineral resources base. Two, Canadian Malartic has evolved since the initial acquisition in 2014 from being the largest open pit to arguably one of the largest underground deposits in Canada that continued to grow and has the potential with a satellite deposit that Dominique described previously to get to our vision of one million ounces of gold a year for decades to come. Three, our Detour that was brought into the merger by Kirkland Lake following its acquisition in 2020 has the potential to be one million ounces of gold for decades also with the combined open pit and underground while the deposit remains wide open at depth.

Four, our Hope Bay, where we continue to see excellent exploration results, has the potential to replace Meadowbank, Amaruq in the near future, as highlighted by our very nice discovery at Patch 7. To start on page 12, the mineral reserve and mineral resources profile show a growth trend over the last four years, demonstrating our ability to replace depletion from production from a combination of exploration success at our operating asset and progress made at some key value driver project that we expect to integrate in our development plan over time. That, using one of the most conservative gold price assumptions in the industry at $1,450, which is about 50% of the spot gold price.

Talking globally about our ambitious exploration program, I would like to take this opportunity to commend the exploration team and our multiple drill service provider that deliver more than 1.2 million meters of core and diamond drilling in 2024 while achieving its best health and safety performance ever. And I would also like to thank our drilling excellence team and our drill service provider that have helped our site make meaningful progress at implementing mechanized and autonomous features that make diamond drilling safer, more productive, and therefore more cost-efficient. On slide 13 in Malartic, now more than 10 years after the initial acquisition of the project, we continue to see tremendous potential.

I would like to bring your attention to the chart on the right-hand side of the slide that shows the evolution of production, mineral reserve, and mineral resources since the acquisition in 2014, what we like to call internally our what we bought, what we got chart. That shows how successful our exploration has been over the year, making discovery and growing over time while we were mining the open pit. I would like to take this opportunity to thank and congratulate the exploration team that made the discovery that will be recognized at the upcoming PDAC event in Toronto in March with the prestigious Bill Dennis Award for the discovery of the year with the East Gouldie Deposit.

In 2024, as Dominique mentioned, more than 25 rigs were on site, some infilling the deposit from increasing number of underground exploration platforms that became available with the underground mine development, and some from surface testing the lateral extension to the east, to the west, and regionally, in total completing north of 200,000 meters of drilling, leading once again to a growth in mineral reserve and mineral resources in the underground mine. Moving to slide 14 at Detour, where the surface infrastructure for advanced exploration project announced last June are being prepared for the ramp development to start in 2025, the aggressive surface exploration program continued in 2024 with north of 220,000 meters of drilling completed, returning strong results both in the Saddle, West Pit, and western extension of the orebody.

The results have led to a meaningful addition of indicated and inferred mineral resources to the west of the open pit, as we can see on the long section. When looking at the progress over the last five years on the chart on the right-hand side, it shows how the deposit has grown over time and still remains open to grow at depth to the west. Finally, on slide 15 at Hope Bay, a total of more than 118,000 meters of drilling was completed in 2024, focusing on the newly discovered Patch 7 zone in the Madrid deposit area. Infill drilling confirmed the grade and continuity of the core portion of the deposit, leading to an initial declaration of indicated mineral resources exceeding 900,000 ounces at 6.6 grams per ton diluted, plus an additional 800,000 ounces in inferred mineral resources, and still remain open to grow laterally.

That significantly increased the total mineral resources available in the Madrid deposit area that will be used to update our potential project development scenario for Hope Bay. In 2025, the focus will remain to grow the Madrid deposit area as we see other opportunities to make additional discovery like we did in the Patch 7 area along the 80 km long Greenstone Belt. I would like to return the microphone to Ammar for some closing remarks.

Ammar Al-Joundi (President and CEO)

Thank you, Guy. We are going to stick to the strategy that has worked for us for decades. One, we're going to focus on low-risk, high-quality jurisdictions. That means jurisdictions that have the geologic potential for multiple mines over multiple decades and the political stability to actually operate multiple mines for multiple decades, and that regional focus transcends into a manageable business, good cost control, low turnover, a number of things. We want to be the highest quality business we possibly can be. That means we set very high standards for ourselves, for the environment, and for our behavior in the communities that we're in. We believe in disciplined capital deployment, and to us, discipline is 90% about knowledge. Have you done your homework before you spend your owner's money, and we do that. We believe we're uniquely positioned.

We're uniquely positioned in some of the best regions in the world. We've built a competitive advantage in the areas that we operate, and we're uniquely positioned in Nunavut. We also focus on strong financials. Per-share metrics are what drive us. Return on capital, which is a fancy word for return on equity in our shareholders' money, that is something that we continue to focus on. We've paid a dividend for 41 consecutive years, and we look forward to increasing returns to shareholders going forward. I'm going to take a couple of minutes, go a little bit off script to talk about two items, two questions that are coming up, and I want to address them head-on. So one question: Is Agnico priced to perfection? Certainly, our share price has performed well over the past year. But let's face it, gold prices are up $1,000 an ounce.

As the gold prices went up $1,000 an ounce, we controlled our costs, which means we expanded margins, and we actually delivered substantially increased margins to our owners. Of course, the share price went up. It should have gone up, and it did go up. The real question is, is there room for the share price to go up even more? Looking forward, frankly, I'm not allowed to talk about future earnings. However, we've given guidance on production, and you all know what the spot price is. At current spot prices, and given our production guidance, you can do the math. It suggests annual revenue of about $10 billion, which means that Agnico Eagle is trading at around five times revenue. That's not a crazy multiple. In fact, one could argue that's a low multiple both in the gold and in other industries.

Of course, the relevance of a revenue multiple depends on margins. Well, at current spot prices and our $940 guidance, that implies about $2,000 an ounce. So that's a pretty good margin. At the same time, we see potential growth in ounces per share. We're buying back stock. We're strengthening the balance sheet. So have we performed well? Yes. Has the market rewarded us and our owners for that? Yes. Are we priced to perfection? No. I think we're priced for what we've delivered, and we have a lot of room going forward to continue to grow and to add value. The second question, and then I'll stop, is, well, look, Agnico and others, they're operating in safe jurisdictions. They perform better. Is this the time to shift from these safe jurisdictions to riskier jurisdictions? And that's a fair question and one that investors should always consider and always ask.

But let me ask you this: Do you think the world is getting less risky or more risky? Do you think we're moving towards less trade barriers or more trade barriers? Do you think the world is moving to less nationalism or more nationalism? And then finally, and this is important, at roughly $2,000 between cash costs and spot gold, do you think that governments around the world are going to pay less attention to these margins or more attention to these margins? So I would argue that Agnico Eagle has done well because we've delivered to our shareholders, and I would argue that certainly at these prices, we're going to do even better. And I would also argue, and of course, I'm speaking my own book, personally, I'd like to stay in safe jurisdictions. And with that, let's open it up to questions.

Joëlle Ouellette (Document Control Supervisor)

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two. If you are using a speakerphone, please pick up the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Anita Soni with CIBC World Markets. Your line is now open.

Anita Soni (Managing Director)

Hi. Good morning, Ammar, Jamie, Dominique, and Natasha. Congratulations on a really solid year. I'm going to limit my one question to Hope Bay. And when do you expect that? What's the timeline for delivery, and when do you expect to see that asset starting? Can you give us an idea of where that was brought into the growth pipeline?

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

Good morning, Anita. Dominique speaking. So this year, focus is really to freeze the scope of the project. As now we're including the Patch 7 resources, we still need to reshuffle and to look to the mine plan and to be at 40% engineering done by the end of the year. It is the same approach we did at Meliadine, if you recall, where before announcing a project, especially in Nunavut, we need to have to de-risk it. And we're going to be there early next year. So in the first half of 2026, we're expecting to give more detail about the project.

Anita Soni (Managing Director)

Okay. How long would it take? Is it near the end of the decade that you think this could start up, or is this more early next decade?

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

It is more early next decade.

Anita Soni (Managing Director)

Okay, and I'll leave it there and take it and pass it on to the next person.

Ammar Al-Joundi (President and CEO)

Sorry, we didn't catch that, Anita, that last part.

Anita Soni (Managing Director)

Oh, sorry. I just said I'll leave it there and pass it on to the next person. Thanks.

Ammar Al-Joundi (President and CEO)

Thank you.

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

Thanks, Anita.

Joëlle Ouellette (Document Control Supervisor)

Your next question comes from Josh Wolfson with RBC Capital Markets. Your line is now open.

Josh Wolfson (Managing Director and Head of Global Mining Research)

Thanks very much. Just a question first on the capital allocation. The free cash flow continues to be very strong here. We're projecting the company to be in a net cash position in the very near future. The dividend was kept flat. The buyback is light. The company is pretty much full tilt on project advancement. So how should we think about excess cash being allocated going forward?

Jamie Porter (CFO)

Yeah. Thanks, Josh. It's Jamie here. So yeah, I mean, if you look back at 2024, and I've referenced it in my comments, we returned about 43% of our free cash flow to shareholders directly through the dividend and through the share buyback. So the gold price has risen pretty dramatically here in the first part of the year. Our average realized price in Q4 was $2,660, and we're up around $2,900 now. So for the time being, obviously, we'll continue with the dividend at the current rate of about $800 million annually, and we'll be opportunistic in terms of share repurchases. But even with the current gold price and our projected free cash flow, we'll still be returning about a third of that cash flow directly to shareholders.

The majority of the rest is going to go to improving the balance sheet and getting to that net cash position, as you suggested.

Ammar Al-Joundi (President and CEO)

But Josh, as we've talked about, at these levels, and Jamie and the team and through the work, the operations, our balance sheet is very strong. And as Jamie said, as we're generating more cash, which we will at these levels, we are going to be returning more money to our shareholders.

Josh Wolfson (Managing Director and Head of Global Mining Research)

Got it. Okay. And then my next question is just conceptually sort of looking at the different projects and the context of the three-year guide. The outlook is for stable production, which is commendable for some of the large companies out there. Is there a point in time at which the company is looking to project growth or net volume growth? Or I mean, as an aside, is that even an objective for the team? Thank you.

Ammar Al-Joundi (President and CEO)

That's a good question. We're giving three-year guidance, so we don't give beyond that, but I'll answer it at a broad level. First and foremost, we're genuinely looking to make money per share. We are only interested in growing if that growth creates value for our shareholders. That said, we see a lot of that. We are probably a lot more conservative in our long-term projections. I think, and you know our company as well as anybody, with the projects that we have, we anticipate continued growth absolutely and per share. I mean, again, subject to a volatile world, Natasha talked about a 50% increase in production in Ontario. Dominique talked about Hope Bay being the next platform, several hundred thousand ounces a year in Nunavut, Malartic potentially getting to over a million ounces a year.

We tend, Josh, to beat our chests not very loudly, and we're always careful to not overpromise. But I was sincere when I said I think we've got the best pipeline I've ever seen in the business in 25 years. And remember, I spent a lot of that as a financial guy looking at dollars and cents. So these are profitable projects we're looking at.

Josh Wolfson (Managing Director and Head of Global Mining Research)

Thank you.

Joëlle Ouellette (Document Control Supervisor)

Your next question comes from Daniel Major with UBS. Your line is now open.

Daniel Major (Metals and Mining Analyst)

Hi. Thanks. Can you hear me okay?

Ammar Al-Joundi (President and CEO)

Yes, we can.

Daniel Major (Metals and Mining Analyst)

Great. Thanks. Yeah, my question, just looking at the pipeline and the profile beyond your three-year guidance, I guess as we move towards the end of the decade, there's a little bit of a gap before the main projects come in in the early 2030s. Can you give us an update on Meadowbank, where you see life of mine is the scope to add any extension there before Hope Bay comes through?

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

Yes, Daniel, Dominique speaking. Yeah, the team is all working on different scenarios. And the vision or the plan is to extend to operate from underground. So at this stage, we know that the pits are depleting in 2028. So the objective is going to be to keep it running just with underground. That needs to keep a good cost, for example, to run the mill probably on three weeks in, three weeks out, because it's a big mill. So we're doing different trade-offs. That will not be the cheapest ounces, but with the current gold price environment, that's going to generate cash. We could end up with 150,000 ounces per year after 2028 up to 2035. So that could be a good thing.

When you think about that, we talk about two platforms at one million ounces, but Nunavut could also, if we call it a platform, be in that range. With Meliadine and 350, 400, let's say Hope Bay in the 400, and if you add Meadowbank at 150, we're getting 200 million ounces in Canada.

Daniel Major (Metals and Mining Analyst)

Okay. Thanks. If I could ask one more, if that's okay, just a quick update on the license progression that's in San Nicolás. Any new information there?

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

Hi, Daniel. This is Natasha speaking. So we did submit the MIA-R and the ETJ, which is the Environmental Impact Assessment and the Change of Land Use Permit, in Q1 last year. Things are progressing. The regulators are looking at the documents, asking questions. So far, nothing more, to be quite honest. In terms of the proposed constitutional changes as it relates to the open-pit mining, it's still unclear on that end whether it's going to be approved or passed into law or whether it has any impacts on the San Nicolás project.

Daniel Major (Metals and Mining Analyst)

Very good. Thanks. I'll let someone else have a go. Thanks a lot.

Joëlle Ouellette (Document Control Supervisor)

Your next question comes from Lawson Winder with Bank of America Securities. Your line is now open.

Lawson Winder (Senior Equity Research Analyst)

Thank you very much, operator. Good morning, Ammar and team. Thanks for the presentation today. Wanted to ask about actually some of the comments, Guy, that you made. You spoke to the additional 10-15 thousand tons per day of capacity at Malartic, and you mentioned specifically drills at Odyssey and Wasamac. And I guess I would ask, rather than just sort of staying tuned, maybe you could give us a hint of what you're thinking there. Is there a thought that there could ultimately be the potential for a third shaft at Odyssey? And then with Wasamac, are there early indications that the underground processing rate could actually be far in excess of 3,000 tons per day at some point?

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

Hello, Lawson. Dominique, I'm going to take the question. So currently, let's start maybe with the mill throughput available. Odyssey phase one is 20,000 tons per day. Odyssey second shaft would be between 8 and 10 thousand tons per day. We're still working on that. Marban is a 15,000 ton per day, and Wasamac is 3,000 ton per day, which brings up to 45 with all of them together. The current capacity is at 60. So there's still a 10-15 thousand ton per day available. But we don't have a plan yet on that. It might be original discovery around Malartic. It could be more ton coming from Marban if we're able to expand that pit. It could be a third shaft at Odyssey, but all of those answers, we don't have it right now.

I think the team did a very good work to plan, and now we kind of have some homework to do to bring it to real life. To have a 1 million ounces, there's still some potential.

Lawson Winder (Senior Equity Research Analyst)

Okay. Fair. The additional color is helpful. Thank you. And then just on Wasamac, what is the distance you would estimate would be required to get or roughly from Wasamac to Malartic? And do you have a sense of the rough cost per ton in today's dollars?

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

I don't have the cost related, but it is 100 km. So the plan, and we're doing different trade-offs. The plan is going to be to truck it from Wasamac going to Canadian Malartic through the existing route.

Ammar Al-Joundi (President and CEO)

The one thing, Lawson, I would add is we are well aware of the value if we can fill that last 15 million. We saw the deal that our team did with O3, and that's just a transaction that made a lot of sense. That asset, frankly, is worth more to us than it is to them because we could use the mill. And the reason I referenced that is we are looking at opportunities all the time on that last 15 million, 15,000 tons a day. And then finally, what I would say is we're both happy to have that come from one of our mines, or if it makes more sense, we would enter into a toll milling agreement with someone else. So you're right. There is a lot of value in that 15,000 tons a day.

While Dominique is correct in that we don't have an explicit plan for that, we are clearly focused on that.

Lawson Winder (Senior Equity Research Analyst)

Okay. Great. Thank you very much.

Joëlle Ouellette (Document Control Supervisor)

Your next question comes from Mike Parkin with National Bank. Your line is now open.

Mike Parkin (Head of Mining Research and Precious Metals Analyst)

I was looking at slide 13, and is it correct that if you're off to the right of that Malartic property line, the 5% royalty doesn't exist?

Ammar Al-Joundi (President and CEO)

That's right.

Mike Parkin (Head of Mining Research and Precious Metals Analyst)

In the metal price environment we're looking at, where if you had ounces on that side of the property, you'd be saving $150 an ounce. I would assume your discovery cost is still probably $20-$25. Is there any thought around discovery of ounces there would almost the savings on the royalty could almost cover off the cost of discovery but also development? Are you guys still just given you're having such tremendous success to the left? Is this second shaft? I'm just trying to get a sense of where you might put that second shaft and where you might kind of focus your drilling on a go-forward basis. That savings on that royalty, given we're just a smidge away from $3,000 an ounce, could be kind of completely cost savings in terms of getting those ounces to a production.

Guy Gosselin (EVP for Exploration)

There's two parts to your question. First of all, that long section you see at 13 shows the resources where it is, and it's within the area where that royalty applies. Most likely, you see when Dominique is describing the second shaft or a potential third shaft, you see the tons that are currently known are there. But from a regional or exploration standpoint, I don't really care about the property boundary. We look both east and west, and if we can find more and we do actually drill on that part to the east, around and other property. In fact, the property extends an additional, let's say, 5 km on the right-hand side of that graph. We have actually four rigs among the 25 that Dominique was describing that is testing that.

And on top of that, now with the addition of O3 land position around Marban, you have that other land position to the north at the back of that slide that is outside of that royalty thing. So we're not limiting ourselves. We're going to discover gold where it is. And after that, it will be part of the decision-making process in the economy to figure out the impact of the underlying royalty that may exist on different parts of the land package.

Ammar Al-Joundi (President and CEO)

But it's an interesting comment, Mike, in that remember, everybody, this is a mine that was originally discovered in 1923, 100 years ago. We are winning an award for the biggest discovery 100 years later at the same mine. We've acquired or are in the process of acquiring Marban, another mine a few kilometers away. And so you're absolutely right.

There is potential as we go to the right, and it is worth pointing out that at a 5% royalty, there's an extra $150 an ounce on that, so it's a good question. Guy answered the right question. Part of it is, look, we've got 25 drills. We are drilling fast because what Dominique said, we want to get this to a million ounces, and we want to work as hard as we can. We said a year ago, we said, Look, it's going to take two years of drilling to know if we're going to have a second shaft. It looks like we're going to have a second shaft. Guy and his team are trying to balance it with what Dom's doing, but your question is a good one because it does talk about the potential in this area.

Mike Parkin (Head of Mining Research and Precious Metals Analyst)

Yeah. I just think it's going to have an interesting capital return idea that you could almost pretty much get those ounces for free other than the OpEx of sustaining. But I appreciate the color. Thanks, guys.

Ammar Al-Joundi (President and CEO)

Thank you, Mike.

Joëlle Ouellette (Document Control Supervisor)

Your next question comes from John Tumazos with John Tumazos Very Independent Research. Your line is now open.

John Tumazos (Owner and CEO)

Thank you for taking my question. For Marban, it looks like for the 1.657 million ounce reserve, you paid $86 U.S. an ounce. And for the 2.6 million ounce reserve and resource, you paid $55 U.S. an ounce. Their last technical study was October 2022. Should we expect in your next reserve report to incorporate their 1.6 million ounces, or will it be more because there's two, three years more data and you've got enough money to drill a deeper hole? Or do you need to wait two or three years to evaluate it?

Guy Gosselin (EVP for Exploration)

Hi, John. Guy speaking. You described it right. There's a fair bit of drilling. There's enough drilling in the pit. What we want to pay attention to is what part of it that we think that could reasonably be built when considering wetland, other challenge. So we're working on our plan, and we can anticipate that a good proportion of that 1.6 could become a reserve in the near term with the existing database.

John Tumazos (Owner and CEO)

Thank you. Ammar, what is your human resources strategy to have five or 10 more Jean Robitaille so that when the 25 rigs are running and the 200,000 meters are drilled, we get the results? Très rapide, do you need to take five of Elon Musk's 20-year-olds and bring them to Canada?

Ammar Al-Joundi (President and CEO)

John, that is, I'm going to say it's both a humorous and a good question. We have, in our industry, a shortage of highly qualified engineers, geologists, operators. Good news is we have a lot of accountants. But it's a good question. Everything we do is a function of capital resource allocation and human resource allocation. But I acknowledge that you're right. You're asking an insightful question, which is, look, would you be able to get to the reserves and move things forward faster if you could do the studies faster? I think we have a very strong team. I think we have a lot of people. But yes, the resource of high-quality, qualified specialist people is a challenge for us and for everyone else.

That said, I do believe the fact that we produce more gold in Canada than everyone else combined, more than 50% of total Canadian gold production. We've been in the regions. We've been for decades. We do tend to get high-quality people, sometimes relative in competition with our peers. I don't know if any Dominique, did you want to add to that?

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

Yeah. That's a good question, John, and we're working on that. And maybe one thing where we succeed in the past is working with students. And by the way, I was one of them 25 years ago, starting as a student. And I see Jason Carroll around the table here. But one thing we're doing now, we're getting back to having more students. First, the employees' kids, which it's a very good way to introduce them to the mining, but also at university, bringing more of those co-op students, so it helps us to do good selection. It's also giving them what is the taste of working with Agnico. We have a good name, and the students are, I need to say now, willing. And let's say Agnico is on the top of their choice when they're looking to work.

And also the fact that we have different mines, like fly-in fly-out or in Abitibi. It gives us more opportunities for them. And this is something really we work hard.

John Tumazos (Owner and CEO)

If I can ask one last question, I'm worried that someone might look at the $459 million spent for capital and expense exploration last year or $525 million this year and then see the reserves go up 500,000 ounces and think that it costs $1,000 an ounce or that the 25 rigs or the 200,000 meters were a bunch of dry holes, barren results, so could you sort of explain why that's not the case?

Guy Gosselin (EVP for Exploration)

Thanks for the question, John, and I did some math lately. If you look at the 2024, what really went to drilling is $270 million. And if you look at the distribution of that drilling from, let's say, what is going to inferred and what is going to making new discovery, it boils down to the fact that we spent last year $110 million on conversion, which is about $25 an ounce to move ounces from resources to reserves. And the other $160 million went to adding resources from nothing to resources at a cost of also $25 per ounce. So it's roughly, to make a discovery from scratch to bring them to inferred, it's roughly $25 an ounce. And to move them from resources to reserve, another $25 per ounce, ballpark for the overall $270 million of drilling we've done in 2024.

Ammar Al-Joundi (President and CEO)

And I'll add, John, again, good question. Guy talked about how much went directly into drilling. Of that $459 million, roughly $200 million was associated with something called capitalized exploration. And that really is primarily Detour Underground, Upper Beaver, the kinds of things where you have to build some infrastructure to be able to do more exploration, to go underground, to build drill platforms, to take bulk samples. So part of that number is actual infrastructure to be able to do exploration. What I would say, and this is important, is every time we do that, we do that with a view that whatever infrastructure we build is the right type of infrastructure that we can then later use when we build an operating mine. So it's not wasted money.

John Tumazos (Owner and CEO)

Merci beaucoup.

Ammar Al-Joundi (President and CEO)

Thank you.

Joëlle Ouellette (Document Control Supervisor)

Your next question comes from Tanya Jakusconek with Scotiabank. Your line is now open.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Oh, great. Thank you. Good morning. Thank you.

Joëlle Ouellette (Document Control Supervisor)

Oh, my gosh.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

The first one is for Jamie on the capital return. Jamie, just for my understanding, is it safe to assume that your focus will be in Q1 to pay off your $400 million in taxes and other that you have to pay and then focus on capital returns thereafter? Would that be a safe assumption?

Jamie Porter (CFO)

Hi, Tanya. Yeah. No, that's a good question, and you're absolutely right. We do have a catch-up payment of about $400 million in the first quarter that we will be making. I don't think that will preclude us, though, from being active on the normal course issuer bid if we see the opportunity and want to be active on that. We'll continue, obviously, to pay the dividend of $0.40 a share this quarter. We have the balance sheet strength to increase shareholder returns if we wanted to in Q1, despite the fact that we have that big tax payment coming up.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

And then once that is paid and you think about shareholder returns, is there a preference? You're always going to renew your share buyback program. But is there a preference for dividends or share buybacks? How do you think about that?

Jamie Porter (CFO)

Yeah. We'll certainly be evaluating that throughout the year. It depends on a number of factors, primarily, of course, the gold price, but also our relative share price. So I think there's an increased appetite. Last year, we repurchased $120 million in shares. That's more than I think Agnico's ever done in a year previously. And at these gold prices, there's room for that to increase further, certainly.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Sorry, Jamie, just the last question on the capital return. How should I be thinking about your 3.5-3.4 million ounce business in terms of a minimum cash balance that you can keep on your balance sheet?

Jamie Porter (CFO)

In terms of a minimum cash balance? So yeah, we ended 2024 at about $926 million. I'd say, again, at current gold prices, our current financial situation, we'd like to keep our cash balance around $1 billion and could grow as cash flow improves this year to up to a $1 billion net cash position before we'd be looking seriously at more dramatic increases to shareholder returns.

Ammar Al-Joundi (President and CEO)

And the one thing I would say, Tanya, and you know us well enough, it's our owner's money. It's not our money. It's our owner's money. And we will only spend the cash generated if we have a high-quality investment that generates a good risk-adjusted return. I say that because sometimes in our industry, people get more cash and they go nuts with it. We're not going to do that. We are going to continue to be committed to disciplined capital allocation and, at these prices, increased returns to our shareholders.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

No, I appreciate you for wondering, looking at your investment in the business that you have to do, plus, obviously, take care of the $90 million of debt that you have to pay this year and then sort of see what I could push in terms of shareholder return. Obviously, I understand you're not going to be prudent. And if you do touch the dividend, you tend to be a company that wants to keep a sustainable dividend. So if you increase it, it's because you think you can pay it. So I'm just trying to understand how much buffer I have to do all that. That's all.

Ammar Al-Joundi (President and CEO)

It's all good questions.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Just my second question actually has to do with your costs. I appreciate the gold price is going higher and the cost of payments because we want to see these margins come through. I'm interested in how you approach your cost forecast or your guidance this year. I think, and thank you for the sensitivities, but one of the things that you highlighted is the tariffs and obviously 60% of your costs that are insulated somewhat from what potential tariffs could come through. A second derivative is obviously FX. I just want to review with you just what percentage of your overall costs are U.S. dollar denominated. I thought about 10%-15%. I just want to make sure I'm in that ballpark. Jamie, am I correct on that?

Jamie Porter (CFO)

Yeah. Tanya, that's absolutely right. About 10%-15% are U.S. dollar denominated. And if you look at our cost guidance for 2025, we use the Canadian dollar foreign exchange assumption of 138. You compare that to our realized foreign exchange rate in 2024 of 137. So there's actually not a big delta there. A lot of it, frankly, we did better relative to inflation on our cost guidance because of some of the continuous improvement initiatives and efficiencies that we've realized at the sites.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Yeah. No, I saw that. So you've got a little bit of tailwind based on where we are today on Canadian dollar. But can I just ask, because I did not see it in the release, what gold price did you use and that impact? I thought it was about $2-$3 per ounce on royalty, $300 move. So I need the gold price that you used.

Jamie Porter (CFO)

Yeah, so our base case budget, we use the $2,500 gold price, so that's inherent in the royalty expense that factors into our cash cost. But that sensitivity is exactly right. Every $100 move in the gold price changes our royalty expense by about $3 an ounce.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay. And then my last question, sorry, on these costs is just because with these tariffs, just don't know where things go. But what assumptions did you use in 2025 as inflation in your guidance?

Jamie Porter (CFO)

So, cost inflation, the rate of inflation that we saw coming into 2025, was about 5%. And again, our cash cost and all sustaining cost guidance was up 3% and 4% respectively. With respect to tariffs, and you alluded to it, about two-thirds of our costs we don't expect to be impacted. Almost half of our cost structure is labor and contractors. Another 10%-15% is energy, power, and then another 4%-5% is royalties. So about two-thirds of our costs we think would not be impacted. The other third could potentially be impacted and.

Ammar Al-Joundi (President and CEO)

Or some portion of it.

Jamie Porter (CFO)

Some portion of the other third, exactly. But we'd have to evaluate exactly what tariffs or counter-retaliatory tariffs are imposed before we could come up with an exact determination.

Ammar Al-Joundi (President and CEO)

Tanya, you're right. There is a derivative of that, which is the FX. And so to the extent, and this is up to anybody to figure out, but if tariffs are higher, probably the Canadian dollar will go weaker and help offset some of that. But that's a calculus I don't think anybody can work out with any accuracy at this point.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

No, I agree. I'm going to have as much information. I have to get information out on these tariffs. So just, Jamie, to confirm, your 2025 guidance has assumed a 5% inflation. Yeah.

Ammar Al-Joundi (President and CEO)

That's correct.

Tanya Jakusconek (Managing Director and Senior Equity Analyst)

Okay. I appreciate that and I know there's a lot of moving parts happening with what's going on, at least just having the basic information on your costs to be able to address it should anything happen. Thank you for taking my questions.

Ammar Al-Joundi (President and CEO)

Thank you.

Joëlle Ouellette (Document Control Supervisor)

There are no further questions at this time. I will now turn the call over to Ammar for closing remarks.

Ammar Al-Joundi (President and CEO)

I just want to say to everybody, thank you to our team for all the work you've done. Thank you for keeping our people safe. I always like to say that's the most important thing. And to everyone on the call, thank you for taking time out of a Friday of a long weekend. Have a nice weekend. Thank you.

Joëlle Ouellette (Document Control Supervisor)

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