Agnico-Eagle Mines Ltd.
(AEM-N, AEM-T) US$52.21 | C$68.89
Q2/23: Fosterville Noise Restrictions Lifted Event
AEM reported Q2/23 adjusted EPS of $0.65, ahead of TD and consensus at $0.56. We estimate EBITDA at $863mm, beating TD and consensus at $845mm and $850mm, respectively. FCF was ~$270mm, before changes in working capital.
Impact: POSITIVE
AEM reported Q2/23 gold production of 873kozs (TD: 856kozs) and cash costs of $840/oz (TD: $873/oz) and AISC of $1,150/oz. Lower-than-expected costs reflect strong operating performance, favourable foreign exchange rates and the easing of certain inflationary pressures. Production is tracking slightly above the mid-point of the 2023 guidance range. We expect that AEM's Q2/23 results will again be the strongest among the senior producers — we are forecasting that the other senior producers still to report (GOLD and KGC) will have cash operating costs close to or above $1,000/oz.
On May 29, 2023, the Victorian EPA lifted the prohibition notice on the Fosterville operation with respect to low frequency noise that was imposed in late 2021, which restricted underground activities from midnight to 6 a.m., reducing capacity by ~25%. The Fosterville mine returned to full operating hours in June, with resources focused on advancing delayed mine development and upgrading of the primary ventilation system.
AEM hosted the Supreme Administrative Court (SAC) of Finland for a site visit in Q2/23 as part of the review of the permit limitation. AEM expects a final decision from the SAC in Q3/23. AEM continues to rely on the current mining permit of 1.6 Mtpa while maintaining operational flexibility to reach the 2.0 Mtpa volume in the event of a positive decision by the SAC. If the decision is in AEM's favour, the mine would produce an incremental 30,000 ozs compared to current guidance (190,000-210,000 ozs). If the ruling goes against AEM, Kittila would have to scale back operations during Q4/23 to remain within the permitted rate.
Gold production, cost, and capital expenditure guidance reiterated for 2023
– Expected payable gold production in 2023 remains unchanged at 3.24 to 3.44 million ounces with total cash costs expected to be between $840-$890/oz and AISC between $1,140-$1,190/oz. Total capital expenditures for 2023 are still estimated to be ~$1.42 billion.