CIBC NotesAlso gathered from the forum. GLTA
Agnico Eagle - With Strong Free Cash Flow Generation, Capital Allocation Remains A Key Focus Area:
Ammar Al-Joundi, President and Chief Executive Officer, highlighted Agnico’s overall strategy and views on capital allocation. The company previously guided to 2024 production guidance of 3.35Moz-3.55Moz at cash costs of $875-$925/oz and AISC of $1,200-$1,250/oz. Agnico delivered stronger-than-expected operational results in Q2/24, generating pre-working capital free cash flow of $582M.
Agnico highlighted the three pillars of its strategy: 1) being regionally focused, where its regions must have the geologic potential to support multiple mines spanning multiple decades and the political stability to mine for multiple decades; 2) being a mining company that is technically competent and strong on exploration; and 3) focusing on per-share metrics.
Mr. Al-Joundi believes the three best regions to mine in the world are Nevada, Western Australia, and the Abitibi given the overall potential and opportunity for discoveries.
AEM also emphasized that investors choose to invest in Agnico because they want a strong view on gold and leverage to gold prices. Mr. Al-Joundi indicated that over the last 20 years, the gold price has increased by 9.9% compounded, beating the S&P500 at 8.2% compounded. However, the XAU is only up 2.5% compounded, which he believes is due to companies failing to deliver the leverage shareholders expect. He believes AEM has outperformed gold throughout this period because it has delivered the leverage. The company also highlighted its ability to contain costs through its regional focus, low turnover,
reliable contractors, and reliable First Nations partners. Capital allocation remains a key focus area for the company, and AEM noted that 90% of its FCF is being returned to shareholders in the form of dividends, debt repayment, and share buybacks. In Q2/24, AEM paid down $397M of debt (and a further $250M subsequent to the quarter). In the accompanying presentation, AEM indicated it plans to either use excess cash or opportunistically refinance the $540M in debt coming due in the next 12 months. In H1/24, the company repurchased $70M of common shares through its normal course issuer bid (NCIB), which expires on May 3, 2025, and it maintains the ability to repurchase up to a total of $500M of common shares.
Agnico also addressed its medium-term growth pipeline, including potential for a second shaft at Canadian Malartic, the Wasamac Project, Detour Lake Underground, the Upper Beaver
Project, Hope Bay project, and San Nicolas JV. With the updated technical study results at Detour (released in June) and at Upper Beaver (released with Q2 results), the company had
previously approved additional spending of $300M over three years (2024-2026). We now forecast overall capex (including capitalized exploration) at $2B per annum over 2024-2026.