TSX:AEM - Post Discussion
Post by
retiredcf on Jun 22, 2023 10:25am
RBC
Current and upside scenario targets are $US$55.00 and US$86.00. GLTA
Outperform
NYSE: AEM; USD 49.16; TSX: AEM
Agnico Eagle Mines Limited
Malartic site tour; where there's a mill, there's a way
Our view: On June 20-21 we attended a site tour to AEM's Malartic mine in Quebec (21% of NAV; 17% of EBITDA), joined by senior management and ~25 buy and sell-side analysts. The tour coincided with an updated mine plan which incorporated incremental mine life, but was offset by higher capital costs. While negative to near-term forecasts, AEM maintains various opportunities to improve this base-case plan via mill throughput upside and significant resource conversion, which we anticipate will be revealed over time. Incorporating the revised plan as well as high resource conversion, our updated NAV declines by 1%.
Key points:
Malartic is undergoing a major transformation that will transition production from an open pit mine today to an underground mine by 2028. Initial underground production will be via a ramp (initially at Odyssey South in 2023), while the bulk of underground production will be via shaft at East Gouldie that should commence in 2027. Although the complexity and duration of the project construction in our view is high, the project is reasonably well-advanced and on schedule vs. AEM's original targets issued in early 2021. An updated mine plan issued on June 20 largely refreshed the existing plan, adding incremental mine life (+3 years to 2042), plus updating costs and capital spending for the current environment (approx. +20-40%).
Malartic's production profile outlines a decline over 2025-2027 that could ultimately be offset by exploration opportunities under evaluation.Over this transition period, open pit mining will wind down, resulting in lower grades/production and higher costs. However, the incorporation of internal zones at the Odyssey underground mine represents a key opportunity. While early in its evaluation and limited in sample size, a single stope's internal zones were optimized with a final design of +70% ounces. Internal zones are narrower and generally below-average grade, but are directly adjacent to existing infrastructure and could be rapidly mined and processed. In addition to these zones, AEM is currently drilling 4km from Odyssey at the historical-producing Camflo property (produced 1.65moz at 5.78 g/t), which could provide near-surface resources over this period.
Longer term, excess Malartic mill throughput represents a considerable opportunity, but is challenging to assess today. With the transition of the mine, throughput is scheduled to decline from ~60ktpd to ~20ktpd. Utilizing this excess throughput could provide significant production upside and also reduce the cost structure (mill costs today are C$11/t, but will increase to C$19/t as volumes decline). In our view, the range of potential opportunities for upside are extensive, but all are reasonably early in their evaluation, including increasing shaft throughput (+1-5ktpd upside), processing regional development opportunities including Upper Beaver and Wasamac (each supplementing 5ktpd / ~200koz/a), and evaluating synergies between existing LaRonde and Goldex mine processing
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