Our view: Positive—AEM reported operating results that firmly surpassed RBC/cons expectations. 1Q production was 813koz (+6% RBCe, +4% cons) at AISC of $1,125/oz (-4% RBCe, -2% cons), supported by incremental output across various mines (grade at Macassa and Kittila, and grade/throughput at Fosterville and Meadowbank)—despite better production and below-guidance range costs, AEM reiterated annual targets. Adj. EPS was a higher $0.58 (RBCe $0.56, cons $0.49), supported by these better operating results, but largely offset by higher depreciation vs RBCe. Headline EPS of $3.87 includes a remeasurement gain of $1.5b from the closing of the 50% Malartic acquisition. We calculate FCF of $265m (RBCe $196m, cons $186m), largely supported by underlying operating performance. 1Q cash increased to $745m (4Q: $659m), although net debt increased to $1.6b (4Q: $0.7b), reflecting $1b in drawn credit to fund the 50% Malartic cash purchase portion. Post-quarter AEM entered into a $600m unsecured credit agreement, to partially repay revolving debt. AEM repurchased a nominal 100k shares in 1Q for $5m, and the company intends on renewing its $500m NCIB ($75m in purchases from May 2022 to March 2023). Post-quarter, AEM closed the San Nicolas acquisition. A key upcoming catalyst is a Malartic site tour and mine plan update, scheduled for June. Odyssey shaft sinking has commenced and the first production blast has occurred, both on schedule. At Macassa, the #4 shaft was commissioned, guided to improve materials handling going forward. At Fosterville, AEM indicated constructive developments toward resolving noise challenges that could lead to improved production. At Kittila, AEM is scheduled to host the Supreme Administrative Court, which could lead to a positive resolution of curtailed throughput in 2H23. AEM reiterated 20-40koz upside from Macassa surface deposits and the AK target as early as 2024. The company largely reiterated existing project upside opportunities, including; Detour achievement and potential exceeding 28.0mtpa throughput targets by 2025 (note: record 25.6mtpa rate achieved in 1Q), an updated Detour resource model including potential underground scenarios in early 2024, San Nicolas submission of its EIA for permitting in 2023 plus completion of an FS in 2024, and updated technical evaluations in late 2023 for Upper Beaver and Wasamac.
Conference call: Friday, April 28, 8:30 am ET, Dial in: +1-(888) 664-6392