CIBC 2 EQUITY RESEARCH
June 22, 2023 Earnings Update
AGNICO EAGLE MINES LIMITED
Odyssey Project Shows Well, Outperformer, $71 PT Reiterated
Our Conclusion
On June 20–June 21, Agnico Eagle (AEM) hosted a presentation and site
visits of its Canadian Malartic Complex with a focus on the updated Odyssey
mine plan. We visited the surface operations, including the Canadian Malartic
Pit and Barnat Pit, and underground operations including the Odyssey ramp.
The tour was well-attended and the project remains on track. Overall, AEM
showcased the benefit of the current brownfields infrastructure, opportunities
to add more ounces to the production profile, some of the initiatives taken on
the costs front, and the continued focus on ESG, specifically at the
community level.
We have updated our model with the updated study, pending the release of
the detailed technical report, and we reflect the higher mined ounces as well
as higher costs and capex. Our model also factors in some potential upside
from the internal zones above the updated mine plan production profile. Our
overall NAV5% was finetuned (<1% trim) from $38.12/sh to $37.90/sh, and
our Malartic mine model DCF5% decreases 3% from $7.90/sh to $7.66/sh,
reflecting higher upfront capex (higher operating costs were offset by more
production).
Key Points
Changes To Our Model: We now model total mineable resources of
9.2Moz, slightly above the 9Moz included in the updated study as we add in
some potential upside from the Odyssey Internal zones in 2023 to 2027.
Additionally, we have updated our operating cost assumptions in line with the
underground costs provided and have slightly lowered our open pit costs
post 2025 to reflect the benefit of the in-pit tailings disposal. Our updated
initial capex is now in line with the updated study, as we incorporated the
increase as well as additional development capex post 2039, while our
average sustaining capex was trimmed to $66M from $73M (per annum).
Odyssey Internal Zones, A Real Near-term Opportunity: Aside from
advancing the construction, the focus of the updated mine plan is to look at
opportunities to fill the mill 1) during the transition period from 2023-2028 as
the Barnat pit depletes, and 2) post 2029 as the operation fully goes
underground. Near-term, AEM highlighted the Odyssey internal zones, very
close to the Odyssey South zone, as potential upside to the current plan.
However, more drilling needs to be done to get comfort over the continuity of
the grade, which sits within porphyry rock. While still very early, the first
stope provided positive reconciliation on grade and tonnes vs. plan. We are
currently assuming 250koz at ~2 g/t as additional ounces from the internal
zones, in line with what is currently included in resources, but more upside
remains as AEM continues to drill the area. AEM has now switched the
positioning of its main drift to more easily access the internal zones as part of
the mining of Odyssey South