Good morning. My name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle First 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, and thank you for joining our first quarter 2020 conference call. This presentation does include forward-looking statements. So I just want everybody to be forewarned. Hopefully wherever you are -- we're doing this remotely as well. So hopefully wherever you are, you're safe you're doing well and your family is doing well. Because we're doing this remotely during the Q&A I'll direct the questions. And hopefully that goes smoothly because we've got our senior staff working from home patched in online. But as I go through the presentation, I want to spend some time just on our thinking and mindset around the challenges around COVID-19 and how we've managed it, really how we're thinking about the business and positioning the business as we move through the issues around COVID-19. I think as you know, we've been challenged more than most companies in the quarter having seven of our eight operating mines reduced to minimum activities. We'll get into that how we managed it, how we managed that with our people, what it meant for our assets. We'll talk a little bit about that. But as we went through it, clearly the focus was the health and safety of our employees, the well-being of our employees, the comfort level of the families. So we've been able to manage through that very successfully. And while we were doing that and even on minimum activities, we were still able to position the assets and look after some issues that we have been managing through Q1. So that we could have a strong second half. In terms of our actual response to the pandemic as you said -- as we've said many times before, it's a long-term business you have to think long-term. Although the…

[Operator Instructions] Your first question comes from Fahad Tariq with Credit Suisse.

Hi, good morning. Thanks for taking my question. Just the first one is a clarification, the 480,000 to 500,000 ounces per quarter in the second half that incorporates any productivity losses. Is that right?

Yes, that's correct.

Okay. And then my other question, second half of the year is obviously looking very good from a free cash flow perspective. You don't have any debt maturities. The revolver will get repaid. Just high level, what are some of the free cash flow capital allocation priorities?

Well, I think the focus on that side really doesn't change for us. It was still always to find that balance between we do see debt essentially improving financial flexibility reinvesting in our highest quality projects not the entire pipeline. The emphasis is still trying to stage that out. And that's why we're continuing fairly actively drilling some of the key projects to get a better feel for the relative ranking and prominence of the projects within the pipeline. And then clearly we're looking to move the dividend up. And we -- no one really knows how this will all unfold. But I think as we said we alluded to at the start this has been devastating for many people, but also for industries and a lot of industries are going to take a long time to come back. The mining industry particularly the gold mining industry is one that can come back fairly quickly into a much better pricing environment for the product. And given the stimulus that's been thrown at the economies the prospects for gold are pretty good. We're not sure how again there's no guarantees on this, but I think it kind of reminds me a bit of -- now I'm dating myself but it kind of reminds me a bit of 1979, 1980 where the gold price moved fairly quickly to a level that companies didn't really anticipate. And the amount of cash that was generated by the industry in a very short period of time was huge. And I saw that when I first walked into Agnico in 1983 as an auditor. And they had as much -- almost as much cash as their market cap. And that's the year that they instituted the first cash dividend because of that. And so I would expect gold to hit a new high in U.S. dollars. It's hit a new high in almost in every other major currency. And so the industry is going to do really well at 1,700. It's going to do tremendously well at 2,000. The question then becomes -- your question becomes even more important at that point. Because what we need as an industry is the discipline to make sure that the bulk of that gets returned to shareholders. And you can see that Paul Penna made the right move way back when. Because he had way more cash than he could actually put to good use. And he decided when it wasn't the norm back then to start the dividend. And even in 1980, we actually paid a special dividend at one point. So that's going to continue to be our focus. If we're fortunate enough to continue at 1,700 plus and maybe 2,000-plus at some point.

Thank you.

Next question comes from Ralph Profiti with Eight Capital.

Good morning everyone. Thanks for taking my questions. Sean it's good to see the sort of turnaround and things going well in the West area of LaRonde. If I can maybe ask a question as you sort of put some focus on this expansion at LZ5. We've seen the grades come down to about two grams a tonne in the last few quarters. I was wondering if that's sort of a good go forward assumption on some of the grades that we can associate with this potential expansion.

Yes, I think that's roughly where we are looking at. I don't see -- we're not sort of forecasting a big bump in grade. That's generally what you get there. I think the strategy there is that the reason that we actually went there in the first place was not just to get 100,000 or 200,000 ounces and make a little bit of money. Ultimately, there's several hundred thousand ounces over there that were left at a much lower gold price by the previous owners. It was almost similar to the thinking and strategy around Goldex spent $90 million to reopen it after the issues we had in 2011. Take a view that we only had three years of mine life for that $90 million and we'll probably end up getting 10 to 12 years. So, we're not looking for grade bump, but we're looking for more tonnes which is good return, good cash flow particularly at these gold prices and the extra benefit we've had from there is the ability to test our automated equipment tested in an environment which isn't as complex as LaRonde, because I guess one of the things that this issue in pandemic has highlighted. The more you can use automated equipment better off your employees are safer. You can respect physical distancing. So, all of those were a real bonus on LZ5. Yvon I don't know if you have anything to add in terms of mining and moving forward on just ramping up some tonnes and what we're seeing over there?

Yes, I think the just moving up in tonnage has been the biggest focus. I think we've rearranged the engineering team to focus on LaRonde at depth and basically understanding potential in that area. So, the group has been focused on some satellite zone higher grade satellite zones that are -- were left behind in the Barrick days. So, these are as we go further at depth, they're also integrating some of these ideas in future life of mine. We'll update as we get more information on those.

Okay great. Separate question on Kittila and the prudence of delaying the shaft expansion. I've seen in the couple of quarters towards late 2019 you sort of hit that 500,000 tonnes on a quarterly basis. So I was wondering exclusive of the shaft expansion, do you think you can push operations there to get to that 2 million-tonne annualized rate without the expansion?

I'll just start and then I'll get Yvon to fill in some of the details. The shaft project was impacted by COVID. It really wasn't a decision to sort of suspend it outside of COVID. The shaft sinking contractor, the workers were Canadian. So we needed to make sure those Canadians got home as this thing started to ramp up. So the focus was on making sure they got home. Our team in Finland has been in touch with the Canadian ambassador to Finland to start working on a program to get the Canadian workers back. So, that we can get that project back on track. But Yvon maybe you can fill in some of the details?

Yes. Specifically to your question it's a good point. Both the mill and the mine presently and probably until the end of 2021, we'll be in a position to get it up to that 500,000 tonnes per quarter. So that's a good thing. As we go further the sooner the better the shaft is completed, the cost structure underground changes drastically. So there's a lot of focus on trying to complete this project as soon as we can, because of the magnitude of the cost reduction as we're starting to mine below like 500, 600 levels the tonne kilometer factors on the hauling is getting a little bit more challenging.

I see. I see. That's good clarity. Thank you.

Next question comes from Greg Barnes with TD Securities.

Yes. Thank you. Sean, Yvon, can you talk a little bit more about the saline water issues at Meliadine and the pace backfill what you've done to address the issues that you talked about in Q4 results?

Yes. I think on the pace backfill in reduced activities there we kept mining. So it was important to continue to mine, continue to process, and while we're mining at reduced rates and processing a little bit less, I think we're processing around 3,000 tonnes a day versus the plan at four. We were able to catch up on some voids and backfill. We've also used consolidated rock fill. So we've done a really good job just catching up on that, which is important. As far as saline water, it's more about really permits. We continue to engage the authorities. I think everybody acknowledges that the best solution is a pipeline rather than have us trucked water and dump that water during the summer season, because those trucks kick up an awful lot of dust. So we've been engaged at the local level with our Inuit partners and the Inuit associations with the Nunavut government at the federal level, who's also involved in that permitting to make that case. So we still expect to get those permits later this year. We still expect to have a pipeline in place next year. We've got storage capacity for two years. The cost is capital. From an operating cost perspective, it will be cheaper. So it's really the answer to make -- it's the right environmental solution and it's really the answer to be more productive in terms of water management. Water management is kind of the biggest issue now versus where things were at 10 years ago from a mining perspective. So this would certainly help. So we don't -- we haven't had any pushback on that. People understand that's the best way to go. It's just a matter of going through the permit process.

Okay. Thanks, Sean.

Next question comes from Carey MacRury with Canaccord Genuities.

Hi. Good morning guys. Good morning, Sean.

Good morning.

Maybe a longer-term question…

Carey, you may have to speak up a bit. We're having trouble hearing you.

Okay. Is that better?

That's a lot better. Thank you.

Okay. Yes. Maybe a longer-term question. You mentioned being potentially in a healthy gold price environment here. Just wondering how you think about your project pipeline beyond the Phase 2 at Amaruq and Meliadine? And are there projects there that you think can move forward, or do you think you'd need to supplement that with M&A at some point?

Well, I think if you look at how we built the business since 2005, we've done a lot of smaller deals. So we're certainly focused in terms of our evaluation work still monitoring sort of single asset projects, but there's nothing out there we feel compelled to own at the moment. People say, hey, maybe this is an opportunity to be proactive and maybe aggressive during this period. We don't see that at all. We haven't really sped up our project evaluation work. It's just been sort of disciplined and measured just trying to understand things. But what we're really trying to do ahead of that is just to understand like what do we have at Kirkland Lake. There's likely a buildable mine there at upper beaver, but how does it fit? We continue to watch with interest what our neighbor is doing in terms of drill results on their structures. So I think that camp has a lot of potential. Where is that -- where should that asset land? That's a question that has to be resolved at some point. We like it. Our exploration team has always liked it. They've liked it for 10 years even when Charlie Page had it at Queenston. Certainly, the gold price helps, but it has to stand on its own. And so we old have to stack that up against things like the underground at Malartic, how that one fits in. Two years ago that we were not going to make it. With East Gouldie, it's certainly got a lot more potential. But again as we said it's still early. That has the potential to extend the life of Malartic for quite a while. And with East Gouldie, you have the potential when you add in Odyssey and East Malartic, you have…

Okay. Great. And maybe just on Malartic. Any advance on the discussions around the royalties there that you can comment on?

No we just put that on hold. I don't think -- I think the position that both Yamana and Agnico are taking is that we need to think about it as -- how does it look under the existing conditions, making no assumptions that those conditions could change. And the good thing about that, when you actually own it 100% for the partner, you direct every drill hole, you apply every budget, every dollar that you want to spend on it and you determine the pace. And you've got it in the hands of some pretty good underground mining companies that have experience. So we're going to work out at a -- work on it at a pace that makes sense, but we're going to drill it. And we need to tighten the facing as we said, but although early our guys like it.

Okay. Thank you.

[Operator Instructions] We have a question from Tanya Jakusconek with Scotiabank. Please go ahead.

Yes, good morning everybody. I just wanted to come back to Nunavut, if I could for either Sean or Yvon. Maybe just talk a little bit about -- I know you've got a reduced workforce right now. Can you just talk a little bit about how you're looking at the requirements that you need to ramp up to capacity to get there for the second half just on each of the sites? And how you're going to get there with manpower? And how you're redirecting some of the jobs?

Well you look at four -- I'll start you have 400 to 500 employees with various skilled levels. So that is a much smaller subset when you look at which of those employees are actually involved in critical mining tasks and responsibilities. So these are jobs that can be filled in by contractors. Some of them can be filled in by our rotation in the summer. We usually do a fair amount of hiring during the summer. We got a lot of take-up in the summer. A lot of these jobs wouldn't take a lot in terms of training. As we said ultimately, we want our Nunavut workforce back but there's a way that we can manage sort of ahead of that and the strategy is really around contracts. So we've already started that process to assume that this may take through this summer before the Inuit workforce is comfortable coming back. We don't know for sure. We're engaged and talking to them on a regular basis. But maybe Yvon you can sort of fill in some of the details there.

Yes. Well, I think like you have to look at it from each operation standpoint. At Meliadine, there's not too much concern going forward ramping up because like we're already at roughly about 75% of normal workforce at site and adding personnel underground mostly. We're in a position that we'll find through contractors some resource in that area. So not too concerned at Meliadine, the challenges will be more because the proportions of Inuit on the operation side of things is more predominant at Meadowbank. And so far like we're more like at 55% of workforce up there. But the construction industry can supply a lot of contractors to -- for heavy equipment and operation. And what we're seeing you don't expect the Inuits to return probably for few months at least. And now as we ramp-up in tonnage we're going to be basically getting employees from that group of contractors out there to supply us.

And just so that I understand that in the press release you mentioned that you've stopped to only underground project. Are you stopping and redirecting the employees there to underground at Meliadine? Is that how it's working?

No, actually. Well yes and no. Some of the manpower has been either returned home. The maintenance guys have been returned -- have been reintroduced into the site to focus on backlog. So it's a variety of things, but we will adapt probably -- we'll probably restart some minor development work towards the end of Q2 -- Q3 and Q4.

Okay. And then maybe Sean for you and I've been trying to get a handle on this and you touched a little bit on it which has been with the new health and safety measures the spatial distancing. I'm trying to understand the long-term impacts to the cost structure and productivity to -- for the mining industry and I've been asking all of the companies this question. And I know you're doing work on it but can maybe qualitatively give us some indications of what you found to be your greatest challenge on this basis and your best opportunity maybe?

Yes. I think the greatest challenge you know a lot of these plants are fairly sizable. So you can operate these plants and still respect all the physical distancing measures. The pressure points in the mines are generally at the front gate because there's limited access and limited entrances. So it's that screening process. So the way that we've managed the screening process is you've got to stagger the shifts. And so you don't have as many people showing up at the same time as you normally do to wave hello to the security guard as they pass-through. Now there's for example at Malartic, there's a series of trailers where you have to actually go through physical screening and also a series of questions. So you have to stagger to go through that. So you can manage that without a lot of impact on costs. The employees have to adjust to a different shift schedule. But it's really in the underground mines on the cage deck and in the cage. And so the question going forward again you stagger the entry. You don't have 150 people showing up, let's say, for example at LaRonde at 8:00 in the morning or 7:30 in the morning all lining up to jump into the next cage. We're staggering the shifts, but the capacity in those are half of what they normally would be. The question we have going forward is that that's worked. People are comfortable with it. Can we get more productive and use that cage better by using face protection whether it's masks, whether it's plastic shields because we're really focused on that short-term contact. It's not like they're standing aside each other for hours as we said it's several minutes. So we're looking at ways that we can maybe utilize…

Yes. And I old assume that any additional cost Sean and maybe this is something for you to answer is that you'll be getting benefits from your FX and fuel hedges in terms of helping to offset some of these additional costs that would come through the cost structure. Would that be a fair statement?

Yes. I think that that's one thing that when we've looked at it with the treasury department is that though it's not just the Canadian dollar, but it's all it's the peso and it's the euro, which has moved in a positive direction and the diesel price relative to what we had budgeted and expected. And so what we've really tried to do is just protect levels better than the budget numbers. And on the FX side do it with zero cost collars. So we still have that participation up. And that can make a difference of $40 to $50 an ounce. So that can have a meaningful impact on the unit costs as we go forward.

Okay. We look forward to more information on that Sean. But I agree with you. I think of all industries the mining industry with all its health and safety measures already in place before COVID-19 is one that is very adaptable to what we have to do. Thank you.

Yes. And – but I think as an industry we've got to demonstrate to not just our owners but demonstrate to our employees and our communities and the government that we can take leadership on this. But because that – if we can remain essential that puts the industry in a really strong position because we know other industries are going to struggle. And the gold industry is in this position where it's getting a good price, which could be a better price and it's able to run at pretty close to normalized levels fairly quickly. Which means on a relative basis, their returns that the mining – gold mining industry are going to generate, should be viewed a lot better on a relative basis. And as generalists start to revisit as resource funds start to get a bit of inflow, as many of you know, these shares are still not widely owned, particularly with the vast pools of money in the U.S. So I think that is the opportunity. The opportunity is to run responsible businesses that stay disciplined as the gold price moves up, generate higher returns, move dividends up, that's the formula for success. No guarantee but that's the thing that's certainly in our mind as we think about strategy and tactics.

Yes. Looking forward to that that second half margin expansion. So looking forward to that.

Thank you. We'll leave it at that. We have our AGM today, which is virtual. So we've got a few things to do before that. But thank you for your attention. What we've tried to do is because we've been working at home, we have the opportunity to get our teams together fairly quickly to respond to inquiries. So as we move forward and if you'd like a one hour one-on-one to talk about some of these things in more detail more than happy to do it. So again, wherever you are, hopefully you're safe and your family is doing well and we look forward to engaging in person at some time down the road. Thank you.

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