Good morning. My name is Jessy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Second Quarter Results 2020 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Sean Boyd, you may begin your conference.

Thank you, operator, and good morning, everyone, and welcome to our second quarter 2020 conference call. Prior to getting into the slides just be forewarned. We are presenting forward-looking statements in this presentation and there are two slides which go through the disclaimers on forward-looking statement. So please at your leisure read those. What I'd like to do is talk a little bit about Q and how we managed through the pandemic, but focus more on our position going forward but the emphasis will be on our business in terms of driving a free cash flow and using that to reinvest in the business and increase our dividend as we move forward. As you know it has been a challenge. It's been a challenge for everyone. From a business standpoint, we had seven of our eight mines were impacted either with temporary shutdowns or with significant reductions in our activity levels at those mines due to COVID-19 and the fact that in some of our jurisdictions mining was not considered an essential business. We were fortunate to be able to restart those operations earlier than we had expected. We continued our dialogue with the governments in our respective regions on our safety protocols and how we were positioned to restart and keep our employees safe and in both in Quebec and Mexico, both of those governments allowed the mining industry to restart before many other industries. So that allowed us to ramp up and get things moving quicker than what was in our original plan. As we've said before, the number one priority for us was to ensure that our employees were not only safe but they were comfortable, their families were comfortable with our approach also our communities were comfortable with our approach. And we used some unique --…

[Operator Instructions] Your first question comes from Ralph Profiti with Eight Capital. Your line is open.

Hi. Good morning, everyone. I'd like to have two questions, if I may please. Firstly, what's your gut feel on how big Kittila can be? You talked about sort of the sweet spot being above the 2 million ton per annum rate. Maybe you can give us some context around what you're thinking? How big the investment can be and is this going to be sort of a larger high grade or a larger low-grade deposit compared to what we see now?

Our sense is that we're just taking it a step at a time. I think that it's pretty clear that we bought it initially for C$150 million when it was a little over 2 million ounces resource because we expected it to get bigger. I think the reserve and resource roughly 8 million ounces or so we've mined over 1 million ounces. We're in the middle of that program to get the 2 million tons a year. We started it around 1 million tons a year. I think so we've doubled it. The challenge we always had was to try to match the production rate with the size of ore body. It's an anomaly as you know in Scandinavia most deposits tend to be around 1 million ounces. This one will likely mine out at maybe 10 million ounces because it's still wide open. It's still growing. So I think our next level, our team is now starting to think beyond 2 million tons a day. I think a logical next level could be 2.4 to 2.5 million tons a day that'll take a few years. But we're already in the initial stages of thinking about how that could be done as we drill this is our zone of depth maybe that opens up another mining horizon for us to allow us to increase the mining rate. So it's still early but given the size of the opportunity the fact that we've been staging investment over a number of years to increase capacity there. I think that was the right approach. And we'll continue with that steady sort of measured approach to maximizing what is a strong geological asset for us.

Yes. Okay. Sean, what we see from East Gouldie more drill results before the year end 2020 reserve and resource statement comes out. And maybe just a broader question given the care and the due diligence and you're doing around all these operations. When it comes to reserve and resource replacement, how are you guys shaping up as you bring back the full capabilities of the exploration program?

Okay, we'll start with the East Gouldie. Our plan is to have drill results come out with the Q3 results. Exploration activities were suspended in Quebec for actually longer than the production activities were suspended. So we weren't able to drill things like LaRonde and the targets at Canadian Malatric Underground, so that's resumed as we've said in the release with 10 drills. So there's certainly lots of information that will be available to us prior to the end of October when we put out our Q3, so the expectation is that we will put those results out and then the plan is to update the resource in February to put out a PEA at some point in the first part of 2021. But our sense is that we'll have to make a bigger decision for the overall project, which would include a shaft. And we'll have to make that decision based on resource. We won't have or won't be in a position to have drilled it all off to the levels of a reserve. We're comfortable doing that based on what we know we believe. We think the drilling now where we tighten up the spacing will increase our confidence level to be able to do that. We've done this a number of times. So I think what we're seeing in East Gouldie is thick and higher grade with a higher-grade core. It's still open. So I think that's what we're facing in terms of decisions as we move forward. That's why we're not rushing it. We're taking this a step at a time. But I think it's important, I think the Yamana and Agnico both recognize now that it adds a lot of value because you could have potentially a significantly sized underground mine from a tonnage perspective,…

Your next question comes from Jackie Przybylowski with the BMO Capital Markets. Your line is open.

Thanks very much. I just wanted to ask, I guess, another exploration question. The results that you've put out on the zinc deposit at LaRonde look fantastic. I know it's still very early. I guess more strategically, how do you guys think about zinc in your portfolio? Is this something that you'd be comfortable mining yourself and having in your portfolio longer term?

Absolutely. At one point, our friends at Barrick years ago when Agnico was 50% zinc revenue and 50% gold that of LaRonde we were happy to take that zinc because we were selling it at $1.50. My friends at Barrick used to see me at conferences and say, how's the zinc mine going, Sean? As we have a history of zinc. We've made a lot of money at zinc. We've used the money we made zinc to build a gold business partly to build a gold business. So we feel really comfortable with that. We hope it's a sizeable lens. These things are lenses. It's relatively near infrastructure down there. It would certainly give us flexibility; the NSR value of some of these holes is very high. So it's not a surprise, it's something we're used to seeing. And I think that the fact that we've hit something, I think just reinforces the fact that we have to continue the systematic drilling. So, what we've decided to do is focus more drilling there ultimately, do we need to extend the ramp eastward, to give us a better platform to drill below three kilometers as we move to the east, and potentially move on to the adjoining property which we own which used to be Barrick called [El Coco], because that wasn't really drilled depth at all. As we move to the West, Barrick -- on Bousquet never really drilled that at the depths we are mining at LaRonde. So, there's lots of potential there. And really, what you have is you have a very well or wide felsic package of rocks, which run through that belt, and there are still lots of open areas which haven't been drilled. So, it's our job over the next few years to make sure we keep the wheels turning now to see what we have there. Because it's not only the physical infrastructure we can leverage off. It's the skill set that we have in place there. So that's part of our strategy.

Your next question comes from John Tumazos with Very Independent Research. Your line is open.

As you go forward, how do you plan for 2021 or investment decisions? Whether it's, I probably now $1,200 gold from two years ago, but you probably aren't using 1954 today either. And how do you plan vis-à-vis the health protocols in mining? Clearly if you have less people at your site, it's spread towards virus and that's a great advance. Thank you.

I think we're assuming that most of the protocols remain in place. Ultimately, I guess there's a vaccine possibly or there's an effective treatment. And if that occurs, then I'd say face coverings go away and testing goes away. But I think hygiene and the focus on hygiene and possibly screening I think probably stays going forward. I think the way we've looked at this strategically, not knowing whether there's a second wave or whether we stay at an increased level going forward. What we tried to do in the second quarter is get to our governments who made a call that mining is not essential. And the fact that we were able to open up earlier, or mining was able to open up early. I think the mining say -- the governments in those regions have concluded that mining can operate safely because there's a lot of natural physical distancing; the government's got very comfortable with our screening and hygiene and testing procedures. So, I think that was part of the equation. And part of the reason for doing it was the unknown. If there were more cases in the regions we operate in, we want it to be able to make the strong case that mining was essential to be able to continue to operate. I think we've done that. And I think the fact that we've been able to open up earlier than other industries is a testament to that. But I think in our dialogue with the government's; the governments have said to us, they've congratulated us on the methods and procedures to keep our employees safe and the communities things like sending the workforce home, the extra testing, but they've also added that they have concluded that mining will be important going forward because of…

Your next question comes from Anita Soni with CIBC. Your line is open.

Hi, good morning, everyone. My question, let's go back to Canadian Malatric in East Gouldie. So I'm just wondering what kinds of, I know it's fairly early stage, you're going to do a PFS and that's going to be out in early 2021. But if we're trying to figure out how to envision this opportunity here? What kind of tonnage would you be able to pull from an underground because you got to 50,000 ton per a day now that you're going to be feeding into?

Yes, it's too early to really give some clarity on that. But I think the reason that I think both Yamana and Agnico -- there's two reasons I think it's sort of become elevated in terms of priority. It was the ability to have multiple mining horizons now, when you include Odyssey, when you include the old East Malatric and then you add East Gouldie, which is thicker and better grade. What that ultimate number is, it's too early to put a number out we still need to do the work, but I think it's at a level which gives both Yamana and Agnico some comfort, and when you layer in the higher grade from East Gouldie, you potentially have a sizable opportunity here. So I think we have to be able to drill it. I think the fact that we're starting to ramp this quarter is important. We had that permitted while ago, but it makes sense now to move that forward. That creates an ability to drill it better. But in planning, the exploration ramp can easily be converted to a production ramp and ultimately leading shafts. So we've got or coming up from a ramp ultimately and the shaft. When you think about the shaft that's further down the line, you may have some impact in terms of production before our shaft is completed. Not that significant, helpful, but not that significant ultimately need the shaft to augment what's coming out of the ramp. So we'll provide more clarity early in 2021 on those types of numbers.

Okay, thank you. And then question with regards to 2021 costs. So, second half of the year, we're guiding -- you're guiding now to $740 to $690 on the cash cost range, and you can see that with the graph that you've put out that you're starting to hit those kinds of number with higher production levels. So is that okay run rate to be using for next year considering the production levels are similar, if not slightly higher?

I think it's reasonable. We're still in the middle of our budgeting process, but I think it's reasonable.

Okay. And then in terms of capital, I know you said there's sort of an ongoing $500 million to $700 million that people should be using for their combined growth capital and sustaining capital projections, and then you add exploration on top of that. Do you think that continues to remain a valid assumption or should we be sort of tweaking things in terms of the exploration with a higher gold price or some project moving forward accelerating some spending?

Yes, I think the fact that Kittila starts to come down, gives us some room to add things. Next year Canadian Malatric, it's not that significant, it's the ramp, which is not a totally big number. So some things in there to replace things like Kittila. So I think it's reasonable to assume we're at the higher end of that range at $700 explorations around a 100. So I don't think that's unrealistic, but we still have to do the work. And that's part of the budget process, which concludes in November, December of this year.

And last question, because that's been the focus of questions from investors just about the gold companies in general. I mean is there any view to changing in the gold price assumptions that you're using on your reserves going into next year?

Not significantly, no. That's always a healthy discussion here exploration, their biases for more ounces, which they'd like a higher price but our operating teams have won that arm-wrestling match for the last several years. And so the bias is knowing it's important to deliver on production and cost targets. You need to stay conservative. We feel as we calculate reserve and resource. So the way our plans laid out is to maintain reserves now, maybe increase them a bit without having to adjust the gold price. We'll see how that all sort of unfolds over the next six months as we pick up drilling and try to make up for the meters, we didn't get in Q2.

Okay. And then just last comment, congrats to Yvon on making it out, and I know you're still with us until the end of the year, but congratulations. And to Dominique, on his promotion.

Thank you. And you didn't mention Ammar, who's got more reports to him and the fact that --

Yes, I'm not sure, if I should.

No, that’s okay, because Ammar has been wandering around the halls here for since he came back from Barrick second time with nothing to do. So we figured, we better give him something to do. Just kidding. I think everybody's earned their increasing responsibility. I think we're fortunate here that we have some pretty deep bench strength. And we've been very focused on how we bring along our younger people and give them different exposure and different levels of responsibility. Dominick's a good example that he started as a summer student 20 plus years ago. And so he's worked at a number of our operations in the Abitibi and Kittila and Nunavut. So he's gone through tech services, mine planning, and enrollment strategy. So I think we're fortunate. And that's just part of our natural process that good companies do. They develop people and so we're lucky. But thanks for congratulating Yvon. Yvon, really, though his focus, his wife beats him at golf all the time and he just couldn't take it anymore. So he said he needed to spend more time golfing.

Your next question comes from Carey MacRury with Canaccord Genuity. Your line is open.

Hi, good morning, Sean. Maybe you just a question on cash costs for the second half in terms of you've had the quick ramp up now back at Meliadine and Amaruq, just wondering what we can expect on a cash cost from those two operations.

Meadowbank, that's going to decrease because obviously the units are going to decrease, cash flow is going to be between 1,100 and 1,200 for the second half at the Meadowbank. And the Meliadine is going to be in the 650-ish around that for the second half. This is what we forecast for now.

And then maybe there are a lot of questions around the Malatric Underground. But do you envision that this operation will be concurrent with the open pit or really, it's sort of up closed open pit.

Yes, that's a tough one now because of the need for a shaft. And so the timeline is very much a focus. But you can see how we manage the timeline in Nunavut. We didn't sort of goes -- go too fast. We wanted to make sure that we were careful with respect to the timeline. So we don't want to have to speed up. If there's a gap, there's a gap, because the underground could be around for 10 to 20 years. So we got to make sure we get all the right infrastructure in place in the right time frame.

So in the event of an underground only scenario, can you just reconfigure the mills so to operate at a lower level, is that the potential thinking.

Yes, we can.

Your next question comes from Tanya Jakusconek with Scotiabank. Your line is open.

Good morning, everybody. I'm going to ask, I think, a question to the technical team. So I don't know who wants to take it, Yvon, Dominick, Ammar. What do you guys need to see at Amaruq to start on the underground again?

Well, the development restarted. We see we continue to do the ramp. The underground is an opportunity, which is a higher grade that we put at with the open pit. Underground along with another project. But on top of the DR, with the pit, it is a project. So we're still doing the study on that to finalize our numbers. And we're going to provide information beginning next year about the results of that.

And then how often it fits into the mine plan?

How -- sorry, what's the question?

Yes. And how it fits into the mine plan. We will have more details on more about a mine plan in February of next year?

Yes, that's going to be integrated. Again, the underground could be as long as we have open pit. So should -- we should be able to do have answers starting in 2022 going to the end of the life of mine that we have right now at 2027.

Okay. And more to come back, okay. And then maybe, Sean, just for you. I mean, I'm just looking at the year 480,000 to 500,000 ounces per quarter coming through the second half of the year and into next year. And, which is the gold price, but you look like you're going to be generating a lot of cash flow and then you deduct that $700 million of free cash -- CapEx and think the debt repayment is minimal. You're going to generate quite a bit of a really free cash flow, unallocated free cash flow. Can you talk a little bit about how you see that and your priorities for that? And what minimum cash balance you're going to keep on the balance sheet, so that we can have an idea of where we can go with this dividend?

Yes. I'll just start with the allocation of the free cash flow. Dave, can talk about sort of the strategy and thinking around the balance sheet. I think it's pretty clear that our current dividend is at $0.80, which is around $200 million a year based on where the gold price is now. We can certainly pay more and a lot more. And the propensity and the track record are to pay more. So, that's certainly something we're looking at now. Now that we've come through the impacts of the virus on the operations in Q2. And we're heading into a stronger period of production and cash generation. So that'll certainly be a priority. We'll continue to work the project pipeline explorations are focus for us. I think the Canadian Malatric Underground has sort of moved up the ladder in terms of priorities. So, that's a focus, but that doesn't chew up a lot of cash next year. It's more when we decide to go with a shaft. So, we need to make room for that. As we look at it. Certainly part of it will be increasing our financial flexibility. I think this is a period where the gold industry will find itself with a lot of cash like it did back in the late 70s and in 1980 when gold went from sub $50 to $800. We certainly have that potential now and our debt repayment as you're mentioned, there isn't anything until 2022, so we're going to sort of build up a bunch of flexibility. But I'll let Dave talk about some of his thoughts on that.

So, Tanya, as you may know, we used to carry a minimum balance of about $100 million of cash for working capital purposes. I think given the virus and all this uncertainty related to that, it's probably prudent to carry more than that, at least in the near term. So I would think that we would be more like $150 million to $200 million of cash as a minimum balance, just due to that uncertainty. But as Sean was saying, starting basically now, we expect to start generating strong net free cash flow, and I think you're going to see our cash balance, start to grow very quickly, especially next year, which leads us of course, to the fun problems of what are you going to do with all the money and Sean already talked about increasing the dividend. So, I think we're probably going to have the opportunity to do that. Again, near term we will carry more cash. I think longer term; we're a bigger company than we used to be. So, maybe we will carry a little bit more cash for working capital purposes. So, let's just round off my answer at about $150 million minimum.

Okay. So, we've got that $100 million of exploration that Sean had mentioned, going through we've got that $700 million or there about just CapEx, really not much in terms of debt repayment and anything in excess of $150 million or thereabout in the balance sheet could potentially go to dividends?

Yes, theoretically, it's just how we split it up. And I just think that it's not all going to go to dividends. I think it will have a bigger cushion on the balance sheet, but I think our track record of 37 years and the fact that we didn't eliminate it when others did a few years back and we were the first to actually start it up again and increase it. And it's gone up and six for the last, and each of the last six years. I think sort of demonstrates our mindset around dividends. So kind of means it's going up. But it's not really up to the board, and we'll have those discussions around the Q3 results.

There are no further questions at this time I turn the call back to the presenter for any closing remarks.

Thank you, operator. Thank you, everyone. Thanks for your attention. If there are any follow-up questions, feel free to contact us. Thanks again. Bye.

This concludes today's conference call. You may now disconnect.