Agnico Eagle Mines Limited (AEM) Q2 2012 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Agnico-Eagle Mines Limited Second Quarter 2012 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. (Operator Instructions) I would like to remind everyone that this conference call is being recorded today, July 26, 2012 at 11:00 a.m. Eastern Time. I will now turn the conference over to Mr. Sean Boyd, President and CEO. Please go ahead, sir.

Thank you, operator, and good morning everyone. Thanks for tuning into our second quarter 2012 conference call. Just like to remind everybody that this presentation and call does include forward looking statements including estimates and forecasts. So please be forewarned, and you’re welcome to read our disclosure and disclaimers in the presentation, which is posted on our website. But as we look at our second quarter, we continue to build on the momentum that our operations established in the first quarter to the point where we decided that it made sense to increase our forecasted production guidance above the upper end of the previous range, and now at 975,000 ounces. So our performance in the first half of 2012 sets us up for a solid second half to 2012. That is not a surprise to us, as we came through last year, we did have some challenges, but we did remind our shareholders and the market that we did possess a several world-class quality assets that we were going to continue to move forward, to optimize and to improve on their operations, and that’s what’s occurred in the first half of this year. If we look at our business, our business actually has a lot less risk than it had let’s say a year ago. We have less operating risk, we have much better predictability at these mines as we’ve gone through a stage of mine building and commissioning and start-up. As a result, we can now focus efforts on efficiencies and optimization. There is less technical risk in our business now as we’ve gone through the major mine building phase of building five mines over a short period of time. And the growth that we expect to achieve over the next few years will come from those newly built…

Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. (Operator Instructions) And our first question comes from the line of Stephen Walker from RBC Capital Markets. Please go ahead.

Thank you, operator, and good morning, Sean. Just a couple of questions, first of all, in Mexico post the election, I think the expectation of the mining industry is for an increase in – excuse me, the application of a new royalty structure given that there is no royalty structure currently in place and then potential for adjustment of the tax rates and so forth. Could you comment, Sean, on what your expectations would be going forward certainly later this year or early next year?

Sure, we’ll have, Tim, who runs our business there to give you an update on our thoughts.

Hi. So we get that question a lot and we hear the speculation a lot. And basically, we take care of our business and things that we can control and we recognize that Mexico benefits greatly from the mining sector. It’s one of the most important sectors in our economy. And I think that government also recognizes that they benefit greatly from that sector. So no doubt that discussion goes on. We participate with the Chamber of Mines in Mexico as the industry group that speaks with the government from time to time. I would not be surprised to see something happen, but we don’t know what or when or if something what happen.

Okay. Thank you for that. And maybe, Sean, just at LaRonde, the per ton cost of CAD $97 as you had previously indicated in the first quarter were going to go up from the CAD $84 or the year-over-year CAD $84 that are obviously up. What – do you get a sense that those costs could improve on a per ton basis or CAD $97 or CAD $95 to CAD $100 is a pretty good range going forward, particularly as you incorporate in more of the LaRonde deep gold, higher grade gold material?

I’ll let Yvon Sylvestre to answer that Steve.

I think we should forecast the CAD $90 for range for going forward for the next two months until we will get through our budget exercise.

I’m sorry. What would you think is a reasonable mining?

CAD $90.

And then into 2013, sort of next year is that – is that likely to be sustainable at those levels?

We will provide guidance at that time.

We will go ahead and go through the budget process, Steve, and so we’ll sort of reserve a number until we sort of do that exercise. Essentially, where we are now, we’re producing at the lower mine at around 4,200 tons a day. And so we need to ramp that up steadily over the next two to three years. We’re slightly below our targets in terms of tonnage coming from the lower mines. So that will really dictated by the state of our development as we move through the summer and as we move into 2013, 2014, conditions do improve there as major ventilation works get completed over the next few quarters. We’re just in a difficult period right now. We’re still able to meet our gold production targets. The grade has held up. It gets a little bit more challenging to meet the tonnage targets. We’re off a few percentage points as we indicated.

Thank you very much for that, Sean. Thank you, Tim, and thank you, Yvon.

Your next question comes from the line of Steve Butler from Canaccord Genuity. Please go ahead.

Sean, just a follow-up on Steve’s question. I suppose that the long term throughput assumption for LaRonde is in the range of 6,000 tons per day is sustainable?

Yeah, 6,000 tons from the lower mine because as you recall as we’ve been working over the last five years on building the infrastructure and opening up the lower mine. We had plan to have smaller mining blocks and that was to – that was going to result in about 6,000 tons a day versus the 7,000 tons a day from the upper mine.

Okay.

And we still – there is a possibility depending on conditions that we could do better than 6,000, but we’ll reserve judgments until we get down there and open it up and get some experience.

And Sean the grade was a nice surprise at least for me in Meadowbank in Q2. Do you have any comments on grade profile second half, is it going to be closer to 3 grams or closer to 3.5 grams? And throughput, last two quarters, it’s been in the 900 tons per day level. Do you have any view of throughput second half, in order words, what seems to be implicit is that you've assumed a slight reduction in Meadowbank’s cost – Meadowbank production pro forma second half, but of course, we’re working off one consolidated number, but are you – what’s implicit in your guidance I suppose on the Meadowbank’s second half for throughput, specifically?

I will just start. I think from a throughput expectation, there is the possibility to do what we’ve been doing in the first half from a throughput perspective. The toughest quarter is generally the first quarter. Grades are a little bit more difficult. But we’ve been saying over the last few months that we do know as we move to the south that we do have pockets within the pits that are higher grade. And we were always excited about the potential that once we’re able to maintain a rate of production above 9,000 tons a day from a mining perspective and then consistently we will be able to process that that we would have some good quarters when those parts of the pits came into the mine plan. So we expect Meadowbank to have a strong year. We’re measured in terms of our guidance and we will just sort of stick to 975 as being solidly achievable and we will leave it at that.

Okay. Leave it for me to fudge around mine by mine. Okay, thanks, Sean.

Your next question comes from the line of David Haughton from BMO Capital Markets. Please go ahead.

Yes, good morning, Sean, and thanks for hosting the call. Just for clarification on the CapEx of 500 to 600, that is inclusive of the Kittila expansion, La India and Meliadine together with Goldex, so this is just an indication as to where you're heading?

Exactly. That’s just a sort of rough estimate to just sort of give some definition around what we could expect over the next few years. But again, not backed up by a completed feasibility studies nor gone to the Board at all.

All right. And well then a little bit more about what the expectations are then on La India and Meliadine as far as CapEx timing and scope and all that kind of stuff?

So, for pieces of that, we will get some clarity on La India this year on that number and we don’t expect that number to be from what we have been talking about since we bought that. We bought it -- the expectations of the junior was about $100 million and our expectations were in the $150 million range. So, I think the $150 million range for that one is comfortable. And on the Kittila expansion, we said sub-$100 million to increase throughput by 25% and I think that’s a good number. So, that’s a small portion of the bracket that we’ve created. The bigger portions would be Meliadine and we're still a ways away from a final feasibility study on that project and that's one we are not really 100% sure on the right mix rate now between underground and open pit, because deposit continues to evolve from an exploration standpoint and you look at some of the recent results around a structure Normeg close to surface, extremely good grades, just developing with some extent as we go deeper. Those are the type of things we need to know more about before we put the pin in an infrastructure and construction program.

Yeah, given this evolving nature, would you see that that work could be ready next year?

Well, we’re saying end of 2013 for a feasibility study, a construction decision some time in ‘14 for a start at some point in 2017. But as we said at the start of the call, unless fuss the Board exactly what quarter it starts, I want to make sure, we get the right mix of underground open pit and my expectation is, that would see subsequent expansions over time based on the type of exploration results we’re getting now and the extent of the land package and the potential of land package.

Also and that number would be a sustaining CapEx number, what’s your sense of that scale of the sustaining issue?

In that sort of $200 million range.

All right. Now moving over to Goldex and decision to pursue M and E Zones away from the area of influence of the GEZ issues, 1.5 grams seems pretty skinny, and are you confident of those kind of figures given that you are looking at a different kind of mining method what you have or had used the GEZ?

Yeah, it’s been well drilled and maybe I’ll let the technical guys just provide a little bit more color on that.

Thank you.

We’re very comfortable with the block model that the – and the drilling has been done to define the blocks plus the mining method will satisfy dilution and mining recovery which are critical in getting that grid after the flat at the design rate. So we are comfortable within them.

And you’re comfortable also with the mining costs?

Yes, we are. Yes.

All right. And talking about LaRonde transition to that 6,000 tons a day, what kind of timeline would you expect to go from your 7,000 or 6,500 tons a day down to the 6000 if that’s where it is to be mined out?

Well, the full transition to the lower mine will be late 2014 into 2015 when we’re drawing the 100% of the tonnage likely from the lower mine. So it’s an transition over the next 2.5 years, but I think we can see the grade profile, it was 1.8 last year. We’re comfortably over two this year. We expect that to increase next year as we mine that deposit. So I think that’s the key, is the grade and the tonnage although it is challenging, it’s not far off our expectations. And we’re still meeting our sort of gold production guidance targets.

Okay. Thank you very much for hosting the call, Sean.

Thank you.

Your next question comes from Joung Park from Morningstar. Please go ahead.

Hey guys, thanks for taking my call and congrats on good second quarter.

Thank you.

Just wanted to know what was the main drivers behind the sequential decrease in the mine site costs at Meadowbank? Is that mostly from lower fuel and oil costs?

No, the main driver was the ounce output. So they maintained a strong volume of ores through the plant at better grades. So simply the fact that the dominator was bigger and that helped to drive the unit cost, the cash cost to produce an ounce of gold down. The cost per ton performance remained steady, so they’ve been able to maintain some of those costs on a cost per ton basis, but to get it from 1000 which were – that’s where it was roughly in Q1 down to 800, it was really a function of producing more ounces.

I guess, I was referring more to the cost per ton rather than per ounce.

The cost per ton wasn’t a huge change quarter-on-quarter. We expect to see that in that sort of $90 a ton range, so we are pretty close to our expectation. I think one of the things that we indicated earlier on the call, which I think is important going forward is that the mine has gotten to the point where its running consistently with no significant issues and now the efforts are focused on efficiencies and cost reductions. They’ve got about a 10 to 12 point action plan to improve the cost performance there which they are working on and we think that is important because it also potentially has implications for being able to extend the mine life if we can make some improvements on the cost structure. But, you indicated one point energy and oil that’s certainly makes a big difference up there. And if we continue to see weakness in the oil prices that would benefit that property.

Okay. Thanks for that. And then at Goldex, it’s great that you guys can access the M and E zones. Just wondering are you guys doing any work on accessing the D zone and if you guys want to produce some more from there, what kind of major works which you have to do?

Well, the D zone is, has been also part of the exploration program like the M and the E zone and has been over the last little while. That’s one where haven’t come to any conclusion Jeff. We still need to do more drilling on that. And we won’t be able to update or provide any definitive update on the D zone or the potential of the D zone until we complete the exploration work and finish the economic analysis.

Okay, understood. And my final question is on, you guys won’t be spending as much on CapEx with some of peers just based on your guidance. And you guys are probably generating meaningful free cash flow as long as gold prices remain at current levels. So what are you planning to do with the cash that’s going to be building up on the balance sheet?

Well, we have a 30-year track record of paying a dividend, so that’s sort of a core part of our strategy. But we do feel we have very attractive solid investment opportunities within our existing portfolio of assets. Several of them are new. We haven’t fully defined them from an exploration standpoint. We expect several of them will continue to grow. So we will be looking to reinvest back in our business and we’ll also be looking to improve our financial flexibility and strength as we go forward like we have done over the last two quarters.

Okay. Thanks so much for taking the questions.

Your next question comes from the line of Matthew Van Cleve from John Tumazos Very Independent Research LLC. Please go ahead.

Thanks very much for taking my call. My question is regarding the June 26 exploration release which was out for Meliadine and Kittila in Mexico. But not quantified in terms of ounces. Are you now more confident that year-end 2012 reserves will be an increase over 2011 by about 2 or 4 million ounces?

No, we’re not going to be able to give estimates of what we think at this point will be able to increase the reserves by that calculation is done annually. We announced the results of that work, generally, in February. So that will be when we put out the updated numbers. I think all we can take from the exploration update that came out in June and the smaller update, which came out in this release is that we continue to see a potential to grow, some of our existing deposits. We continue to actively drill them while we are in the mine building phase, we were more focused on that and now we’ve switch gears a bit and now we are sort of reemphasizing exploration at these wide open large deposits. So we expect them to continue to grow but its way too early in the year to be able to quantify what the growth could be.

Okay. Thank you very much for taking my question.

Your next question comes from the line of Barry Cooper from CIBC. Please go ahead.

Yes, good day, everyone. Sean just wondering you gave an indication of 15% hurdle rate, obviously that’s applicable to Goldex there, but I’m assuming that’s a corporate wide number. Just how do you look at the acquisition costs when determining that 15% hurdle rate?

Well, it’s baked into an analysis of where we think the reserve and resource can grow to. So we do a base case model and then we do an upside case model based on our estimates of reserve and resource growth. And in all instances except for Meadowbank, we have achieved 15% hurdle rate including the acquisition costs as these deposits have grown. But Meadowbank was the exception, we really didn’t find any other meaningful ounces there, as a result we had to write-off.

Right. Okay. Then so looking at Meliadine for an example because that’s one of the larger, more recent ones that you’ve done with the $600 million acquisition price plus, I guess its been a couple 100 million since you bought it and there’s probably another better part of the 1 billion between now and when it actually gets billed. So you would anticipate 15% rate of return on an after-tax basis on that 1.5 billion.

That is the target and I think that’s why our comments about timing being less important than what it is we build and how we build it and how we spread capital out over time and look at it from a phased expansion perspective. And some of the recent drilling has shown some attractive near surface mineralization, which was not contemplated at all in any sort of rough plan or draft or initial feasibility. So things are changing quite quickly and for us it made sense to lay out a very large drill program this year, which we did of 115,000 meters, which was on the back of 105,000 meters last year. About 115,000 meters will be extended another two months with that supplemental $10 million budget we would expect a similar type of program next year. So its changing, but I think what’s important is we continue to get higher grade intercepts. And we continue to get some near surface mineralization and have the potential to work into a mine plan in the early part of the mine life so we need to understand those.

Right. I thought I need to understand them too because when I looked at the drilling there, it almost seems like all of the holes are hitting the zone almost perfectly perpendicular based on the true width estimates versus the core length, which is not unusual or is not that common particularly, when you get drilling at depth. But I also see that some of them you’ve got an estimated true width that exceeds the actual core length, which by all classes that I ever went to is impossible. So I’m just wondering, how are these estimated through its being judged, are they being judged off of core angles or something else?

Well, just the exploration guys are just looking at that. I am not sure.

If you look at the S Zone and you look at the first two exploration hole, it goes for instance from 80 meter to 83.7 meters which is 3.7 meters, but the estimated true width is 4.2?

Yeah. Our exploration guys are going to answer that.

Maybe there is a quick list over here and a calculation but basically what we see over there the deposit is fairly predicable. They are paying at about 65 degree to the north and then we were drilling it usually with control, and we have a very good control on drilled aviation and usually we get into them fairly perpendicular. And, but on some of them like on S Zone, I think there maybe one glacial over there, but basically it’s pretty much true width if it’s not totaled through it. But it cannot exceed. You are right. It’s a mistake in the press release.

Yeah, okay. You just may check that because I don’t know whether the other ones are all perhaps slightly off there as well, but that maybe something to check. Okay. That’s all my questions. Thanks.

Your next question comes from the line of Greg Barnes from TD Securities. Please go ahead.

Yes, thank you. Sean, at LaRonde, you’ve mentioned the challenging mining conditions currently, seismicity what kind of seismicity issues are you monitoring phases?

Yes. It was hard to catch that but I think you made reference Greg to mining conditions and seismicity at depth?

At LaRonde. Yeah.

LaRonde. I’ll let Yvon handle that.

I think the challenges so far is been getting through the ramp up in the current pyramid. And it’s very quick progression production wise and the pyramid that we’re mining now. We will be opening a new pyramid – we’re actually drilling in there and scopes in the new pyramid as we speak now and that pyramid will come in to play in the third quarter. So that will add more flexibility. I think development wise there is been some areas where productivity is been impacted by heat not necessarily by – some of the areas and the ventilation system that we need to put into place. So these systems are being put into place most likely in the third quarter. And then finally we’ll have a final cooling plant next year. So as we get the final cooling plant in the next year, I think the flexibility will be far greater underground in getting to the deepwater.

And what about the seismicity? What issues have you been facing?

We’re monitoring the events like we’ve monitored from the past. There is no real issues at this stage and we’re mining at depth and we’re just being cautious about it and we’re just highlighting that as a risk as part of the mining scheme.

Thank you. And just switching to Goldex, I think you’ve completed the review of the Crown Pillar and what happened around the GEZ zone. Sean, what are the conclusions, did it moved or not moved?

The conclusion is that we should not go back and mine there. The conclusion is it’s full. The conclusion is we made the right decision and the right time. We don’t want to sort of get into a characterization of what happened. There are several litigation issues out there for us. So I think we came up with the right process, with a full assessment using some world experts and they concluded that we should continue to suspend operations in the GEZ zone, and one of the reasons, one of the examples of why that makes sense is since that has happened we basically had essentially no significant subsidence. So I think that tells us it’s full, its stable and we should leave it alone.

When you say it’s full Sean does that mean the rock have fallen into the void in the GEZ zone?

Well, we put a camera in and the camera shows that its full of broken muck and maybe I’ll just turn it over to the technical group and they can sort of characterize, what’s in there, but our sense is, is that just the ore and that we didn’t have any significant caving because we didn’t have a significant void there. So, no the operator and guys are signaling they don’t have anything to add.

Okay, fine. Thank you.

Thanks.

Your next question comes from the line of (inaudible). Please go ahead.

Actually my question was on seismicity and it’s been answered. Thank you, gentlemen.

Thank you.

Your next question comes from the line of Anita Soni from Credit Suisse. Please go ahead. Ms. Soni, your line is live. You can go ahead with your question. Your next question will come from the line of Jeff Wright. Please go ahead.

Thanks, Sean for taking the question. I had two quick ones. One on Meadowbank, could you kind of go over the cost assumptions there and you think the $800 an ounce range is sustainable or possibly able to go lower with lower fuel costs in the second half of the year.

We’re really not sort of making a call on sort of quarter-by-quarter basis from a cost perspective by mine. We’re really focused there on just maintaining the tonnage level, at above 9,000 tons a day. Our expectations on grade continue to be good. Based on our experience in the first half, so it has the potential to translate into a strong second half, which would mean lower unit costs. But we’re not going to make any sort of calls or predictions on exactly where those numbers will be.

Okay. And second question on Meliadine looking at development there. I know you’re permitting, can you give us a sense of what stage of the permitting we’re in and how long you think the permits timeline will take for that project.

The expectations are the roads been permitted. The permitting process will take likely in the 2014 and its one that’s consistent with the process that we went through at Meadowbank. So that’s our expectation, but that drives the timeline. We don’t control that 100%, it’s controlled by the regulatory authorities, but it’s the same people and body’s that we dealt with from Meadowbank. So we have good open dialogs. They understand what we’re doing. There is a lot of clarity there. So we don’t anticipate any major issues there.

Okay. Fantastic. Then lastly, you mentioned there is additional 20 days of planned maintenance in Finland. Do you think that that could be shortened or elongated or do you think – what’s your thoughts on that 20 days, is that equally spaced out in both quarters.

Yeah, we’re sort of looking at 10 in the third quarter and 10 days in the fourth quarter and what we see in the third quarter when we go in and do the maintenance will determine what will ultimately happen in the fourth quarter.

Okay. Thank you very much.

Thank you.

Your next question comes from the line of Don MacLean from Paradigm Capital. Please go ahead.

Guys thank you and a good quarter. Just a couple of things on the Goldex. Do you have any of sense this D Zone mining method that might be applicable there?

Now, I’ll just let the technical guys answer that, Don.

The mining method that will be applied to, it will be very similar to what we’re implementing now with this new developments and the M and E zone. So there will be a long haul stopping with base backed up that would most likely be the approach that we will take.

Okay, great. And notionally similar kind of mining costs. Anything particularly different that stands out?

Similar range I guess you can could that. And I think the issue that still needs to be resolved as we better understand the resources, the access to this zone and how important the zone could be with (inaudible).

Great. And, Sean, can you just update us on how much was spent to stabilize things at Goldex?

Well, we did make a provision late last year, when we decided to spend operations of about $45 million. And that was for remediation and assessment and monitoring work, so we would have spent pretty much all of that.

Great. On to Meadowbank, any change in the views about the dilution there and that was one of the things that was floating variable for sometime and then there was an assumption made, how do we look now?

I don’t think there is any changes in the way we approach it, as we better understand it. I think the geology is probably less challenging going forward. So, I guess, the lessons learned in the past two years will help us in maintaining better control and dilution and then better control on mining recovery in a bit, so. But I think the last year’s efforts were a lot of it were dealing with very flat zone and very geologically challenging basis to mine. So, I think, we’re going to see a little less than that as we go forward.

So an improvement in the dilution?

Yeah, and part of the action plan on great control has been – actually getting the results those actually getting and through all the technical aspect that had significant improvements in size.

Do you kind of quantify that, how that went in this, most recent quarter compared to say your budget?

I don’t have that reconciliation with me at this stage, so we could provide that if you needed.

Okay. Well, thanks for the color. That helps in itself. And then lastly, maybe on the Meliadine, a bit more color on, where are you going to spend the extra $2 million, Sean?

Yeah, it’s 10 million, I’ll let the expert…

Sorry, 10.

To give you the sense of where the focus is?

Well, if you look at the map – Don, if you look at the map on the – within the press release, we will be mostly following up on the Normeg discovery, which is in the western extension of Wesmeg where we hit most of these high-grade near surface into separately and also on the mostly in the F Zone and pump deposit where also we got good high grade and with over good width near surface. So to focus and to extend the resources on these three deposits.

Excellent. Thanks very much guys. Good luck. Good hunting.

Thank you.

(Operator Instructions) Your next question comes from the line of Nazima Walji from CBC Radio. Please go ahead.

Hi, I have a couple of quick questions. I was if curious to know what are the chances, you look to extend the life of the Meadowbank mines?

I didn’t hear that? We just got a new mine plan there. We’ve seen how it’s performed for two quarters. So we’ll be working on that over the next six to 12 months. We do have some flexibility that was built into the new plan to allow us to extend it a couple of years so we’re not in a position to sort of characterize what the chances are at this point.

What will be the determining factors?

Economics, return on the…

And how does it look going forward then?

Well, we can’t characterize that potential extension of the mine life. All we do know is that the current mine life we’ve had two solid quarters generating solid cash flow has achieved and exceeded our expectations. So we’re just continuing on with the existing plan for the moment.

Part of plan was to shorten the life, so that’s why I’m a bit surprised that you’ve decided to possibly extend it.

I didn’t hear that.

So from what I understand part of it was to shorten the life of the mine, and it was shortened by a few years. And I’m curious to know how the new results factor into this decision you’re going to make.

The decision last year was to create a lower risk mine plan to address some of the challenges we were having with waste development and costs. That’s the plan that was implemented to start this year. That plan has worked extremely well and for now we’ll continue on with this plan until we get information that tells us that maybe we should modify the plan.

Okay. And lastly, what’s been the biggest challenge to operating the Meadowbank’s mine?

It’s a remote location, so logistics is a challenge. It’s a higher cost environment. So that all plays into sort of the economics of where we should be investing and where do we get the satisfactory returns. But we’re seeing the results of putting in additional crushing capacity. We’re seeing some of the positive impacts of the new mine plan and those are helping to mitigate some of the structural challenges relating to costs that are driven by location.

Thank you very much.

Gentlemen, there are no further questions at this time. Please continue.

Okay. Well, thank you operator. Well, I think there’s a couple more questions, we are seeing on the screen. One more?

Okay. We have our next question from Anita Soni. Please go ahead.

Hi, I’m sorry, this has been asked and congratulations on a good quarter. I was just wondering the grades that you are mining at Meliadine, I’m sorry, at Meadowbank right now. Are we going to continue to see sort of mid-threes for next few quarters or should we kind of revert to in your guidance?

Yes. It’s hard to say Anita, we did respond earlier. We are not going to be able to categorize Meadowbank’s grades on a quarter-by-quarter basis going forward.

Okay.

I think there has been a couple of answers to questions today, which commented on the dilution, which has been what we thought it was going to be, so that’s favorable. The mining rate is favorable. All we can say is we do know that as we move to the south, they are all pockets of higher grade mineralization.

Okay.

So we’re actually – Meadowbank as we move forward for the next few years.

Okay. And then I guess just my question was just regard to LaRonde byproduct. I thought that as you got into the deeper gold grades, you actually had copper occurring with that as well. So I guess, it was a little bit surprised by the copper trending down and the zinc holding in as well as it did. So I am just wondering sort of the byproduct grades what do those look like on the zinc and on the copper side and for the rest of the year?

You’re correct in saying that the zinc values are going down and coppers are staying essentially flat, but the value of the copper credits greatly outweigh the zinc credit greatly offset the copper credits.

Okay. All right, so I was just wondering the rate of decline on the zinc, should we be still focused on the original guidance for the year or – and for the copper?

Correct. Yeah.

Okay. That’s it for my questions. Thanks.

Gentlemen. There are no further questions at this time.

Okay. Thank you, everyone for tuning in and participating in our Q2 2012 conference call. Look forward to updating you in October on our third quarter. Thank you.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.