Agnico-Eagle Mines Ltd.
(AEM-N, AEM-T) US$50.59 | C$66.94
Well-positioned to Hit Higher End of 2023 Production Guidance Event
We have updated our forecasts following the release of Q2/23 results and management's quarterly conference call.
Impact: NEUTRAL
We have made only minor modifications to our forecasts. Through H1/23, production is tracking slightly above the midpoint of the 2023 guidance range (3.24 million-3.44 million ounces) and total cash operating costs are tracking towards the low end of the guidance range ($840-$890/oz). We are forecasting full-year 2023 gold production at 3.44 million ounces at a total cash operating cost of $846/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 6.00 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 the primary ventilation system. Despite the lifting of throughput restrictions, AEM has maintained its production guidance for 2023 due to lower grades than expected that were encountered in Q2/23.
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 with current guidance (190,000-210,000 ozs). If the ruling goes against AEM, Kittila would have to scale back operations in Q4/23 to remain within the permitted rate.
AEM advanced internal studies to assess potential production opportunities at the Macassa Near Surface and AK deposits, and the Upper Beaver and Wasamac projects. Management expects to consolidate the results of these various internal evaluations early in 2024 and report results through the first half of 2024, with a target of increasing production in the Abitibi region to ~2.5 million ozs by the end of the decade.
TD Investment Conclusion
Our BUY recommendation and $69.00 target price are unchanged.