CIBCHave a $71.00 target. GLTA
EQUITY RESEARCH
June 20, 2023 Company Update
AGNICO EAGLE MINES LIMITED
First Read: Odyssey Mine Plan Highlights Additional Ounces
And Higher Production, Largely Offset By Costs And Capex
Our Conclusion
AEM provided an update on the Odyssey project plan, ahead of its site visit
today and tomorrow. Odyssey, the underground portion of the Canadian
Malartic complex, now supports an NPV5% of $1.60B at $1,650/oz vs. the
2020 study of $1.14B at $1,550/oz, driven by the addition of ~1.7Moz of gold
to the mine plan, extending the mine life from 2039 to 2042, and a $100/oz
increase in the gold price assumption. Largely offsetting the improved
production profile and larger mineable resource are an increase in operating
mine-site costs, to ~C$77.60/t (our calculation) vs. an estimate of C$63.30/t,
and development capital expenditures, which are ~$553M higher than our
estimate (+$298M to 2028, +$255M post 2028) as a result of inflation.
Further opportunities to improve the production profile remain, and in our
view Odyssey remains the best North American new discovery over the last
decade, with the added benefit of brownfields infrastructure.
Key Points
Larger Mineable Resource Improves Production Profile: With the mining
concept at the project unchanged, AEM now expects an average production
profile of 558kozpa from 2029 to 2042, vs. 547kozpa from 2029 to 2039
previously. The updated study is based on the 2022 mineral resources and
mineral reserves and includes 9Moz of gold vs. 7.3Moz previously, at a
higher confidence level given a higher proportion of indicated resources. The
production profile notably remains above the 500koz level in all years except
2027, vs. a prior profile of a production shortfall in 2026 and 2027 below
475koz. This updated profile is driven mainly by the addition of 290koz from
the Barnat pit and 113koz from low-grade stockpiles, partially offset by a slow
ramp-up expected at East Gouldie in 2027.
The surface construction is overall 60% completed and the underground
development remains on schedule, with the start of production from Odyssey
South achieved in March 2023. The next phase of construction and
underground development is expected to advance at a manageable pace.
Capex And Costs Increase, Driven By Inflationary Pressures: From 2021
to H1/23, AEM highlighted a development capex increase of 11% from
$386M to $429M (in line with our current estimate of $442M). From H2/23 to
2028, the remaining development capex is estimated at $1.28B vs. $0.95B
previously and our estimate of $0.98B. The updated study also now includes
$255M from 2029 to 2042 to complete the loading pocket at the bottom of the
shaft in 2029 and to develop the lower section of East Malartic. The
sustaining capex over the 2029-2042 period is now expected to be
$66M/year vs. $56M/year (in the 2020 study) but below our estimate of
$72M/year. Total cash costs from 2029 are now expected to average
$768/oz, up from $630/oz.