TD Q1/24: SOLID START TO THE YEAR; HOPE BAY DRILLING ENCOURAGING
THE TD COWEN INSIGHT
AEM reported a solid operational quarter. Gold production was 2.3% above our forecast and cash operating costs were effectively in line. Q1/24 production positions the company well to meet its guidance for the year. Upcoming catalysts include an update on the Detour Lake underground project in June and an update on the Upper Beaver project in July.
Impact: NEUTRAL
AEM reported Q1/24 adjusted EPS of $0.76, well ahead of TD at $0.62 and consensus
at $0.60. Adjusted EBITDA was ~$929mm, slightly above TD at $903mm, and above consensus at $887mm. FCF was ~$389.5mm, before changes in working capital (TD $342mm). The EPS beat vs. our forecast was driven by lower DD&A and a lower tax rate than we modeled.
AEM reported Q1/24 gold production of 878.7kozs (TD: 859kozs), cash costs of $901/oz (TD: $910/oz), and AISC of $1,190/oz (TD $1,300/oz). Gold production in Q1/24 was led by strong production at the Canadian Malartic Mine, Macassa, and the Nunavut operations. Q1/24 gold production was equivalent to ~25.5% of the mid-point of 2024 production guidance.
In mid-February, AEM replaced its $1.2 billion unsecured revolving bank credit facility with a new $2.0 billion unsecured revolving bank credit facility, including an increased uncommitted accordion feature of $1.0 billion, and having a maturity date of February 12, 2029. As at the end of Q1/24, the new credit facility was undrawn.
AEM expects to provide an update on underground mining scenarios for the Detour Lake operation during Q2/24 that will include proposed next steps to de-risk and optimize the project. Exploration drilling continues to intercept mineable grades and widths near the potential exploration ramp for the underground project.
Exploration drilling at Hope Bay during Q1/24 totaled 30,600 metres and returned strong results in the Gap area between the Patch 7 and Suluk zones of the Madrid deposit. With this emerging new mineralized area showing grades and thicknesses greater than average for the Madrid deposit, management expects that this area could have a positive impact on mining scenarios for potential project redevelopment.
2024 guidance unchanged. Expected payable gold production remains unchanged at ~3.35-3.55 million ounces in 2024, with total cash costs per ounce and AISC per ounce in 2024 unchanged at $875-$925 and $1,200-$1,250, respectively. Total capital expenditures (excluding capitalized exploration) for 2024 are still estimated to be between $1.6 billion- $1.7 billion.