Agnico-Eagle Mines Limited (
Q3 2010 Earnings Call
October 28, 2010 11:00 AM EST
Sean Boyd – Vice Chairman and CEO
Ebe Scherkus – President and COO
Ammar Al-Joundi – SVP, Finance and CFO
Michael Curran – RBC Capital Markets
John Flanagan – Fundamental Equities
David Haughton – BMO Capital Markets
Richard Herman [ph] – Private Investor
John Tumazos – John Tumazos Very Independent Research
Anita Soni – Credit Suisse
Steven Butler – Canaccord Genuity
John Bridges – JPMorgan
David Christie – Scotia Capital
Greg Barnes – TD Securities
Tanya Jakusconek – National Bank Financial
Previous Statements by AEM
» Agnico-Eagle Mines Limited Q2 2010 Earnings Call Transcript
» Agnico-Eagle Mines Limited Q1 2010 Earnings Call Transcript
» Agnico-Eagle Mines Ltd. Q4 2009 Earnings Call Transcript
» Agnico-Eagle Mines Ltd. Q3 2009 Earnings Conference Call
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Agnico-Eagle Q3 results webcast conference call. At this time, all participants are in a listen-only mode.
Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. (Operator Instructions).
I would like to remind everyone that this conference call is being recorded today, Thursday, October 28
, 2010 at 11:00 AM Eastern Time.
I’ll now turn the conference over to Sean Boyd. Please go ahead, sir.
Thank you, operator, and good morning, everyone. We have our full team here in Toronto and prepared to answer your questions.
What I’d like to do is go through some slides, some of them we’ll go through quite quickly. But I think we would characterize this quarter as continued improvement in our production. We saw a decline in our cash costs from the previous quarter, but there is still some work to do at a couple of the mines. But I think more importantly for us, we’re starting to see the cash flow generation ability now that we have six mines up and running.
So I think we look at that as an important driver for us as we look for continued expansion and output in the coming years using that cash flow to expand output, but also to increase the dividend. And we’ve been asked after our announcement yesterday about dividends. And, if you recall, we paid 28 consecutive annual dividends. We decide on those dividends towards the end of the year, so we’ve kept the same schedule. So we will be announcing that mid December when we put out our five-year plan.
In terms of the financial results, just moving through the slides, I think the biggest difference was Q3 to Q2 comparison, where we produced 28,000 more ounces or about 11% increase in production, and our cost went down about 10% or $46 per ounce. We saw a dramatic improvement year-over-year from last year to this year due to the production coming from the new mines that were commissioned in the last year.
The key for us as we mentioned was the cash flow generation before working capital changes in the quarter of a $171 million. That’s a record. It beat the Q2 record of a $139 million. So that will be the focus as we go forward is generating not only gross cash flow, but also cash flow on a per share basis.
In terms of production for the quarter, we had 285,000 ounces, which was a dramatic improvement from the prior year. As we look out through Q4, we expect a bit more production in Q3 at roughly the same costs.
In terms of the cost side, our cash cost per ounce was $4.41. As we said, there is still work to do on the cost. And part of that will come from as we get into discussing each of the mines coming from increasing throughput or we’ll be able to reduce our cost per ton, we’ll have increased gold output and that should be reflected in lower unit costs. From the CapEx front, we’re right on target in terms of our CapEx spend for the year of about $500 million.
From a financial perspective, we still have tremendous liquidity. We have got liquidity of about $1.2 billion with our large mostly undrawn credit facility.
From the strategy perspective, there’s really no change. We’re focused on expanding production mostly from the existing asset base. And over the next nine months we’ll have the results of studies for Meadowbank, for Pinos Altos, and for Kittila, and we’ll be able to share the results of those studies which will result in increasing output as we look at not only optimizing, but also expanding the asset base.
From an M&A perspective, we’re asked all the time what are we thinking there? Well, we’re thinking the same way we’ve been thinking for the last several years, earlier stage opportunities and opportunities that we can get positioned in maybe with a share position, and so we can help the company, advance their assets, and get a better sense of the risks and the opportunities associated with those assets.
I think you saw in the quarter, we did have some profits from sale of investments. So we just don’t just buy, we also will sell when we determine there is no strategic advantage to continue holding either the property or the share position.
As far as reserves go, we’ll have our reserve update in February, and that reserve update will be focused certainly on Kittila, but also on Meliadine where we’ve had some good drill results from the recent drill program. We’ll actually be putting out an exploration press release around mid December, which will provide an update on the drilling program, since our last update which was in September.