Agnico-Eagle Mines' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Agnico-Eagle Mines (AEM)

Q4 2011 Earnings Call

February 16, 2012 11:00 am ET

Executives

Sean Boyd - Vice Chairman, Chief Executive Officer and Chief Executive Officer of Sudbury Contact

Ammar Al-Joundi - Chief Financial Officer and Senior Vice President of Finance

Marc Legault - Vice President of Project Development

Tim Haldane - Senior Vice President of Latin America

Daniel Racine - Senior Vice President of Operations

Jean Robitaille - Senior Vice President of Technical Services

Analysts

John D. Bridges - JP Morgan Chase & Co, Research Division

Don MacLean - Paradigm Capital, Inc., Research Division

Stephen D. Walker - RBC Capital Markets, LLC, Research Division

Joung Park - Morningstar Inc., Research Division

Patrick Chidley - HSBC, Research Division

Anita Soni - Crédit Suisse AG, Research Division

David Haughton - BMO Capital Markets Canada

Carey MacRury - TD Securities Equity Research

Steven Butler - Canaccord Genuity, Research Division

Presentation

Operator

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Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Agnico-Eagle Mines Ltd. Q4 2011 Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, Thursday, February 16, 2012, at 11 a.m. Eastern time. I will now turn the conference over to Sean Boyd, President and Chief Executive Officer. Please go ahead, sir.

Sean Boyd

Thank you, Operator, and good morning, everyone. And we've got a lot to cover today, and I'd like to get right into it. We have a series of slides, and then we'd be happy to answer all your questions. There's a lot in the press release. I'd like to start off and talk about management changes and just to give credit to both Ebe and Paul-Henri Girard for their many years of hard and dedicated work to Agnico, and allowing us to go from a single-asset regional producer to multi-mine international coal company. With respect to the timing, it was never really a question of if Ebe was going to step back because he had worked so hard over the last several years, it was just a matter of when. And we had discussions over the last couple of months, and I think it gives Ebe an opportunity to sort of step back and catch his breath and relax a bit, and then get back into things in the mining space, and I think that's a good thing for him. What it does for us is we do have Ebe on a consulting contract as do we with Paul-Henri Girard. So we'll continue to benefit from their experience and expertise and guidance and advice over the next several years. So we wanted to start off the call and thank both of them, again for their efforts on behalf of Agnico and its shareholders over many, many years.

What these changes have allowed us to do is bring up some new talent, promote some new talent from within. Agnico is fortunate over the years to have developed a lot of bench strength, and that bench strength now, we've been able to move some of those individuals up, bringing sort of new ideas and new energy, we been able to narrow their reporting responsibilities, and we've got a flatter reporting structure. And I think that's going to benefit us going forward as we look to build on our past success. The way we look at it is we've got about 1 million ounce production base. We're generating about $1 billion on operating cash flow. That's a solid base of both assets and people to sort of build the next leg for Agnico-Eagle. We've been in business for 55 years. We've had many more up years than down years. There's no question 2011 was very difficult, but we spent the last few months looking at our assets, looking at our people skills, moving those around so that we can begin 2012 on a stronger and new footing.

When you sort of sit back and look at it, as we look at it, what we've put out in our press release is very solid, achievable guidance. We're actually seeing year-on-year improvement in production in 2012 at 4 of our 5 mines, and the biggest mine we now have the mine plan that is much lower risk. So I think that reinforces the solid nature of the guidance. We still have production growth. When you take out Goldex, we still have production growth in 2013 and '14. And those are all from the existing mines. And the biggest driver of that growth is La Ronde and we built in a slower transition in the underground on those production numbers. We still have expansion and growth opportunities in the company at Kittila, and we're working on an expansion plan there. La India, which was acquired late last year and the transaction with Grayd. Also coming in the transaction was Tarachi, which we think is going to get bigger and has the potential to be a producing asset for us. And Meliadine, we continue to grow that deposit, we continue to have an aggressive drill program on that, and we still expect given the grade of that deposit that, that will be a significant contributor to us going forward.

Although Meadowbank has been a tougher situation than we had expected, it certainly doesn't diminish our enthusiasm for doing business in Nunavut, particularly with the quality of the asset at Meliadine. We're just getting started there, and the asset's already 7 million ounces. So people try to compare the 2 but they're totally different, even though they're in roughly the same geographic area. They're totally different in terms of size. Meliadine is already more than double the size of Meadowbank. They're totally different grade. Meliadine is double the grade of Meadowbank. And Meliadine is much better located to deal with the high cost of logistics in the Arctic environment.

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