CIBCPotential for them to raise their current target of US$69.00. GLTA
EQUITY RESEARCH
April 27, 2023 Flash Research
AGNICO EAGLE MINES LIMITED
First Read: Strong Q1 Beat; Good Costs Control; On Track For
Guidance
AEM reported a better-than-expected Q1/23 financial and operating result on
the back of higher gold production and lower costs and reiterated its 2023
guidance. As expected, the company also announced the consolidation of its
interest in Canadian Malartic and highlighted potential optimizations in the
Abitibi gold belt and positive exploration results across its portfolio.
Production Better-than-expected, EPS Beat On Lower Costs And Taxes:
AEM reported adjusted EPS of $0.58 (which excluded $3.29/sh or $1.5B in
revaluation gain from the acquisition of Malartic), above our estimate and
consensus estimates of $0.47/sh. The beat was driven by lower cash costs
of $832/oz vs. our estimate of $859/oz, as well as lower taxes. Gold
production for the quarter of 813koz came in 4% better than our estimate of
785koz on the back of higher grades at multiple operations as well as record
mill throughput at Detour. While costs benefitted from the strong operating
results, AEM also noted positive impacts from favourable currency
movements and a slight easing of inflationary pressures. AISC of $1,125/oz
came in slightly below our estimate of $1,133/oz on lower costs and capex.
2023 Guidance Reiterated And In Line With Our Estimates: AEM
reiterated its 3.24M-3.44Moz production guidance with total cash costs of
$840/oz-$890/oz, AISC of $1,140/oz-$1,190/oz, and total capex of $1.42B
(excluding capitalized exploration). The guidance numbers include a 50%
ownership of Malartic in Q1/23 and 100% thereafter. We currently forecast
attributable production of 3.42Moz, near the top end of guidance, at cash
costs of $848/oz, AISC of $1,120/oz, which is below the bottom end of
guidance, and total capex (including exploration) of $1.54B.
Optimization Of The Abitibi Belt: AEM highlighted the potential for higher
future gold production through the use of the excess mill capacity of up to
40ktpd at Malartic starting in 2028. Specifically, the near surface and AK
deposits, accessible from the existing ramp at Macassa, could add ~20koz-
40koz starting in 2024. To avoid capex spend on a Macassa expansion,
these ores could also be processed at the LaRonde complex, 130km away.
Additionally, scenarios are being considered for Upper Beaver, which could
contribute 150koz-200koz with moderate capital costs starting in 2029 with
the potential to transport the ore to Malartic for processing. Finally, AEM
expects to review the Wasamac project following the acquisition with an
updated technical evaluation expected in late 2023.
Positive Exploration Highlights: AEM also highlighted its continued
exploration success at Meliadine, Kittila, LaRonde Zone 5 (LZ5) and Goldex.
At Meliadine, a recent intercept returned 17.2g/t over 4.9m at Tiriganiaq. At
Kittila, drilling extended the Rimpi Main Zone to the north, outside of current
mineral resources, with highlights of up to 5g/t over 9.2m. At LZ5, inferred
resources are expected to be added at depths between 770m and 950m by
the end of the year, following the expansion of the mineral resource envelope
through drilling. At Goldex, infill drilling in the South Zone Sector 3 returned
intercepts such as 9.8g/t over 15.5m and 6g/t over 12m.