Detour BMOOctober 5, 2022 | 18:48 ET~ Agnico Eagle Mines AEM-NYSE AEM-TSX Rating Outperform Price: Oct-5 $44.43 Target $59.00 Total Rtn 36%
Spotlight on Detour Lake: Much More Upside Than the Current LOM Plan
Bottom Line: We attended a management presentation on the Detour operations today in lieu of a site visit (canceled due to weather). Agnico Eagle reiterated its Detour life-of-mine ("LOM") plan, previously published on July 27, 2022 and which we currently follow in our estimates (unchanged). Agnico Eagle reports that initial results show the potential to optimize mill throughput beyond 28 Mtpa capacity, which represents upside to our estimates. We maintain our Outperform rating and US$59.00/share target. Key Points High confidence in the 28 Mtpa by 2025 target reiterated. When operating at steady state, the hourly run rate to achieve this target is already reached, although operations at this level are not yet consistent. Agnico Eagle has installed sorting screens on one crusher which increases milling efficiency by preventing fine ores from re-entering the crusher. When installed on the second crusher (planned 2022) the benefit will be more consistent. With all other initiatives required of the 28Mtpa target implemented (improved primary crusher choke feeding, curved pulp lifters, etc), the 28Mtpa target could be exceeded by 2025.
Growth and expansion under study. Scoping studies for the underground are in progress, with PEA targeted for 2023 and construction start ~2027. Technology continues to be a major potential contributor as well including improved drill and blast capacity, trolley assist (in place at First Quantum mines and under consideration by Teck Resources) currently undergoing prefeasibility study, autonomous haulage (conceptual study completed March 2021), improved grade control models (expected completion 2022), daily plan and short interval control (deployment 2023), autonomous assay lab at site (completion 2023), ore sorting (trial conducted 2021), and cyanide regeneration. Exploration also offers upside — drilling continues to the west and has indicated potential higher grade ores. Upside to the current LOM plan represent upside to our estimates. The site is permitted for 32.8Mtpa and this is likely achievable (or, in our view, potentially higher!) with additional expansion including higher-grade underground production.
Management continues to investigate growth opportunities to 1Moz/year and expects to provide further information on these studies in late 2023, building from a number of the studies mentioned above. We continue to forecast production averaging 782koz/ year in the period 2032-2042 which is consistent with the current LOM plan but well below the upside potential currently under study.