Agnico Eagle Mines Limited (AEM) Q2 2025 Earnings Report, Transcript and Summary

Good morning. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Mines Limited Second Quarter 2025 Conference Call. [Operator Instructions] Mr. Ammar Al-Joundi, you may begin your conference.

Thank you, and good morning, and thank you all for joining our Agnico Eagle second quarter conference call. It's always a pleasure to speak to all of you and particularly a pleasure when things are going well, and we have good news to share like this morning. Before we come to our call, however, I'd like to remind everyone that we'll be making a number of forward-looking statements, so please keep that in mind and refer to the disclaimers at the beginning of this presentation. The message we'll be sharing with you this morning is, frankly, the same positive message we've been sharing for the last several quarters. One, we continue to report record financial results, driven by strong and consistent operational performance. Two, we continue to strengthen the company, to strengthen the balance sheet and to return record amounts of cash flows to our owners and three, we continue to invest heavily in building the foundations of our future growth, and we're excited to talk about that. By any measure, we've had another strong quarter. Gold prices are up, gold production is strong, and our costs are under control. With that, we're making a lot of money for our owners and reporting once again record financial results. Record free cash flow at $1.3 billion, record adjusted EBITDA at $1.9 billion, record adjusted net income at $1.94 a share and remember, it's always the per share metrics that matter most. We've returned record cash flow to our owners in the form of $200 million in dividends and $100 million in share buybacks, add to that a further $550 million of debt repayments. And while delivering those record financial results, these record financial results, we continue to make great progress and in some cases, accelerating progress towards building the best project pipeline we've ever had. And we continue to have great success with the most aggressive exploration program we've ever had. With 866,000 ounces of safe, responsible gold production at peer-leading costs, I want to take a moment to thank all of our Agnico Eagle family for delivering these results. We know it's not easy. We know you work under difficult conditions, whether it's 3 kilometers underground at LaRonde or at minus 50 degrees in Nunavut. We know you always work hard, there are always challenges and you push yourselves. You all do a great job quarter after quarter, reliably, safely, responsibly and I just want to acknowledge and appreciate that. We all do. I'm proud to say that as gold is up $400 this quarter, our cash costs are up a relatively modest $30 per ounce compared to Q1. This means that we're delivering 93% of this remarkable gold price increase to our owners. Jamie will go through that in a bit more detail, but again to our teams on the ground great work on cost control. Of course, one should expect record financial results when we have record gold prices. That's why people invest in a gold company and while we are naturally proud to be able to deliver these financial results, we want to emphasize that we remain regardless of gold price, absolutely laser-focused on operational improvements, on controlling our costs, on capital discipline and on continuing to build value per share for our owners. Consider the following examples in this quarter alone. At Odyssey, record gold production and record underground development. At Goldex, record tonnes processed. At Macassa, record gold production, at Detour, the best mill throughput for a second quarter ever, and that our exploration sites, Guy and his team have delivered, I think, quite remarkable 9% reduction in costs per meter drilled. These are all just a few examples, individually they may not seem material, but collectively, quarter-over-quarter, this focus on improvement adds up and makes a big difference. And it also illustrates part of the culture at Agnico Eagle, where everyone at every level is encouraged and authorized to look at all options to do things better. At the same time, we continue to invest in the future as we make steady progress on our 5 key value drivers. Ongoing work to get Detour to over 1 million ounces a year, our vision to get Malartic to over 1 million ounces a year, excellent construction progress at Upper Beaver, a brand-new mine in a great region that could add over 200,000 ounces a year, continued great drill results and accelerating on-site activity at Hope Bay with a target of over 400,000 ounces a year and continued progress at San Nicolas, a high-grade, high-return copper project in the best mining jurisdiction in Mexico. These projects cumulatively represent approximately 1.3 million to 1.5 million ounces of potential production, all from assets we already own in regions we've been operating for decades and in most cases, leveraging off existing infrastructure already in place. Dominique and Natasha will provide a brief update on some of these projects and Jamie will describe how at these gold prices, we cannot only fund acceleration of these projects but continue to strengthen our balance sheet and continue to increase returns to our shareholders. And finally, once again, Guy Gosselin will be the star of the show as he spends a few minutes highlighting some of the exciting exploration results our team is delivering at some of the most promising ore bodies in the world. And with that, I'll now turn it over to our CFO, Jamie Porter, to review the second quarter financial results.

Thank you, Ammar, and good morning, everyone. We've had an excellent first half of the year with another strong quarter of operating results and good cost performance. By delivering on our production targets and controlling costs, we continue to ensure that the benefit of margin expansion in a higher gold price environment accrues directly and indirectly to our shareholders through both direct shareholder returns and the strengthening of our balance sheet. Our strong operational performance and cost control paired with higher gold prices, drove record financial results, including record revenue of $2.8 (sic) [ $2.9 ] billion, record adjusted earnings of $976 million or $1.94 per share and record adjusted EBITDA of $1.9 billion, and record free cash flow of $1.3 billion. Free cash flow more than doubled quarter-over-quarter, benefiting from favorable working capital adjustments, primarily due to an increase in accrued taxes payable. Gold production in the second quarter was approximately 866,000 ounces at total cash costs of $933 per ounce and all-in sustaining costs of $1,289 per ounce. Gold production was better than anticipated this quarter, primarily due to better grades at LaRonde, Canadian Malartic and Macassa with this outperformance partially offset by lower production at our Nunavut operations due to an extended Caribou migration and lower gold production at Detour. I'm pleased to report that costs were within our guidance range. While our total cash costs of $933 per ounce were $30 per ounce higher than in the first quarter, the quarter-over-quarter increase was primarily due to higher royalties as a result of higher gold prices and a weakening Canadian dollar, which on a combined basis represents an increase of about $46 per ounce. If we exclude the impact of royalties on foreign exchange, our cash costs were actually lower than in the first quarter, which is, again, a testament to the ongoing optimization efforts that Dom Natasha will talk about later in the presentation. For the full year, we are maintaining our cost guidance and expect cash costs to be within the guided range of $915 to $965 per ounce. All-in sustaining cost per ounce were higher than the previous quarter, primarily due to the increased cash costs and the timing of sustaining capital spend. We continue to expect to be within our guidance for the full year at between $1,250 and $1,300 per ounce. Our all-in sustaining costs continue to be hundreds of dollars per ounce below those of our peers. This is the result of our focus on controlling costs, continuous improvement initiatives and the benefits of our regional strategy. As an example of the benefits of that regional strategy, our Abitibi platform in Quebec and Ontario has outperform in the first half of 2025 with over 1 million ounces of gold production at total cash cost of only approximately $850 per ounce and a realized operating margin of 73%. This platform hosts 5 of our 10 operating mines, including the 2 largest gold mines in Canada with multiple decades of mine life and strong potential across the region to continue to grow and expand. If we move on to the next slide, the record free cash flow we generated this quarter allowed us to continue to strengthen our balance sheet, ending the quarter with net cash of almost $1 billion, improving from a net debt position of $5 million at last quarter end. In addition, given our strong cash position, we decided to prepay $510 million of long-term debt in addition to the $40 million of debt that matured in the quarter. Over the past 15 months, we have significantly deleveraged the balance sheet, reducing our gross debt in that period by $1.3 billion. We will look for further opportunities to reduce debt in the third quarter and intend to continue to strengthen the balance sheet, increase our financial flexibility while at the same time, increasing returns to shareholders. We move on to the next slide. We delivered -- as Ammar mentioned, we delivered record shareholder returns this quarter, totaling approximately $300 million and $550 million for the first half of the year, bringing the cumulative shareholder returns in Agnico's history to approximately $4.7 billion, majority of which has been returned in the last several years. From a capital allocation perspective, we remain well positioned in this gold price environment to continue to take a balanced approach. We expect to continue to increase shareholder returns through increased share buyback activity and dividends, we also expect to continue to strengthen our financial position and flexibility by increasing our net cash position and potentially repaying additional debt. Lastly and importantly, we will continue to reinvest in our business in order to bring our high-return organic growth projects online. We have 5 key value driver projects between Detour underground, filling the mill at Canadian Malartic, Upper Beaver, Hope Bay and San Nicolas, all of which generate solid returns at gold prices $1,000 or more below current spot levels. We have a strong balance sheet, and we'll look for opportunities to accelerate reinvestment in the business to drive growth and value creation. At current gold prices, we are generating a lot of cash, and we'll remain disciplined with a measured capital allocation approach which is focused on increasing returns to shareholders over the long term. With that, I'll turn the call over to Dominique, who will provide an overview of our Quebec, Nunavut and Finland operations.

Thank you, Jamie. Good morning, everyone. First, I would like to thank the teams for the excellent quarter to continue to keep improving safetly, focusing on cost and production, productivity while protecting the environment and the wide life. The quarter was led by LaRonde -- the production was led by LaRonde in Canadian Malartic mainly because of upside grade. So at LaRonde, we had 3 of the 25 stopes better than expected and at Canadian Malartic still having more tonnes at good grade around old workings, which is a positive surprise. Very good timing because it offsets some challenges at Nunavut, where we have a longer Caribou migration, than planned in our forecast. Some years are better like last year and some years require more stoppage like this year. It is very variable and depending on the Caribou [path]. So we don't control that one, but our plan are adjusted to it. And wild life protection will remain always a priority. But despite those challenges in Q2 in Nunavut both Meliadine and Meadowbank remain on track to achieve this year's guidance. Moving to the optimization. I would like to thank specifically the Kittila team, where and congratulate them because they are doing significant change management in their way to approach underground production and we see 10% to 15% improvement in productivity underground, which lead to a 4% decrease in cost per ton if we compare the first half of '25 compared to the first half of 2024. So very good there. But the thing I would like to bring your attention is about fleet management system. Currently, our underground mine are operating mainly based on radio communication and manual scheduling. So a driver could -- a truck driver could often wait or doing unnecessarily traveling due to change of, for example, an equipment is down or just the timing so the truck drivers are not fully efficient right now. Imagine that you have -- you are in a truck underground into a tunnel, you don't have a visibility of what it is, let's say, 2, 3, 4 kilometers away. It's very difficult to be optimum. What is a fleet management system? It is a system that gives you a real-time track information about the equipment and the people that you could track. So the system knows exactly where each one is, how fast it's moving and if it is waiting. So with the fleet management system with algorithm and artificial intelligence, we will be able to optimize and to originate the fleet to reassign the trucks or to better route if needed, if something happened. So the result of that, as an example, currently, a truck could do maybe 5 trips into a shift, if we bring that to 7 trips into a shift, that's a 40% improvement. Simple like that. It's also reducing fuel consumption because there's less idle time and less route that traveling that you do, which is unnecessary. So what is our plan is to use LZ5 and to pilot a new fleet management system for underground. The LZ5 team have been the leaders to implementing the first LTE communication system in the world underground. That was 7 to 8 years ago. They've been the leaders into implementing remote operation underground, where right now, 25% of the ore is out of the mine without any truck driver operating from surfaces. And the next chapter for them is to develop the fleet management system for underground. What result we could expect from that when we look historically using those systems into open pit, which we do, could be 10% to 15% improvement. So we expect to reach that also for underground. Remains to be seen, it remains to be done, lots of work, but we count on LZ5 to develop that. We're going to pilot in 2025, the loading and the hauling and in 2026 starting went after positive results, starting to implement that also to other mines which already have equipment connected to the system. Moving to the next slide. I would like to bring your attention to the figure on the right. So you could see in black, this is the -- what is done concerning the ramp and the shaft development, shaft sinking. The good news, we are on target, we are in cost. And even though the shaft sinking is 4 to 5 weeks in advance compared to the plan, very good news. The second thing on the image, you could see the dotted line that was the resource use when we did the June '23 study. As Guy going to show you that ore body just keep growing. So right now, if we take all the resources together, we're looking to 20 million ounces into that ore body. So that brings me to my -- the point #1 and #2 below, where shaft #1, the team came with a good idea to improve it. We're going to go slightly deeper, 70 meters deeper with the shaft #1. And we're going to also add a second loading station to build flexibility to help the production and to save on costs with this one. So that's the first thing now new into the story. And the second one about the second shaft. The team is finalizing where it's going to be and the capacity of this one. But it looks like it's going to be close to this one because the reason is simple because that's the center of the mass. And it is also bringing some flexibility or synergy to work with the first shaft. So again, we're not yet finalized on that one, but this is where we're heading. And it's also -- strategically, we need to position that shaft into good rock. So with the shaft #1 at 20,000 tonnes per day, including the ramp plus shaft #2, let's say, at potentially 10,000 tonnes per day, we're going to be 30,000 tonne per day coming from that ore body and potentially getting to 750,000 to 800,000 ounces per year from 1 ore body. So that's going to be definitely the biggest underground mine in Canada in terms of production of gold. But we still have room at the mill. We have 60,000 tonnes per day. We're going to use 30 just for that ore body. This is why #3 and #4. We're looking to Marban pit which is 13 kilometers away Satellite pit of the Canadian Malartic mill. We're going to truck it to the mill, and we have the Wasamac underground satellite project, which is 100 kilometers away from the Malartic mill. When you add all of them together, we're going to be around 45,000 to 50,000 tonnes per day, and we're getting to the 1 million ounces production per year. So that vision is realistic, and this is what we're working on. All those piece of the puzzle, let's say, #2 to #4 is going to came together with advanced studies more in early 2027, we're going to be in position to give you more detail on that. On this, I will pass the microphone to Natasha.

Thanks, Dom, and good morning, everyone. So I'll cover the operational highlights for Ontario, Australia and Mexico. The regions, they delivered another strong quarter when it came to safety, operating and cost performance. At Macassa, as Ammar mentioned, the team beat their record on gold production for the second consecutive quarter. The strong quarter was really on the back of one cut and fill area that overperformed with higher-than-expected grades. Over at Detour, they have their highest Q2 mill throughput and that's a good sign that we're starting to stabilize the higher throughput. But the ounces for the quarter were affected by lower grades. Now during the first half of the year, mining was within a low-grade domain, which did result in some localized negative or tonnage reconciliation. So we ended up supplementing the shortfall with ore from our low-grade stockpiles. Now mining activities are going to remain in the low grade domain throughout Q3, and then we expect the grade to improve in Q4 as we move into higher-grade domains. So given the year-to-date gold production, we now expect to be around the lower end of the full year production guidance range at Detour. With respect to San Nicolas, through the joint venture, we're continuing to advance the feasibility study which remains on schedule to be completed by the end of this year. And we're also continuing to engage with the government authorities and stakeholders with respect to our key permits, which is specifically the environmental impact assessment, and following that, the change of land use. This quarter, the JV -- they also received an exploration permit authorizing additional drill pad across the property. So we're going to take this as a slightly positive signal from an overall permitting standpoint. And with respect to the plan to approve the project, this really hasn't changed. It's expected to follow dependent on the receipt of the permit and the results of the study. Now moving into the term -- now in terms of the operational and cost improvement efforts, they're ongoing with a strong focus on extracting the full potential at all our sites. And we've just included a couple of examples here on this slide. One of them is the internalization of the maintenance work on the 795 trucks at Detour. The team is progressing very well on this, and it does have a cost savings of about $5 million a year. But moreover, we're developing the in-house expertise and sustaining an internal knowledge base on these ultra-class trucks, which to me is really invaluable. Another example is at Macassa. The mine has over 90 years of operations and with the recent infrastructure upgrades, we're now in the very early stages of connecting the mine. And so with the work ongoing for the next, say, 2 to 3 years, similar to what Dom was saying with respect to LZ5, Macassa will also be able to leverage technology to help us optimize our processes even further than the team already has. Our GM at Macassa, Mariana says it well. She says that connecting this mine will help us "turn on the lights," which I agree because we'll be able to track in real-time personnel and equipment, provide situational awareness, automate and enhance the reliability of the data that we have, make it easier to diagnose equipment help, utilize fleet management systems, and enable us to obtain short interval control. And of course, Macassa will be utilizing the learnings from LZ5, so that as they go through their journey, so that we'll be able to make quicker decisions become more agile, become more productive and as a result, optimize our costs. Moving to the next slide, I'll give you a quick update on the 2 projects in Ontario that we continue to be excited about because it does give us an opportunity to grow low risk, profitable production in one of the best mining jurisdictions in the world. And I want to talk to you first about Detour Lake and the underground project. This is a world-class asset. We outlined a pathway for Detour to be a 1 million-ounce producer annually for over a 14-year period. It's still early days, but this quarter, we received the permit to take water. Upon receipt of that permit, we established the box cut for the ramp, mobilize the development contractors and as you see in that picture, took our first round in July. We're also continuing with the infill and expansion drilling and continuing to see positive results, but Guy will discuss this later in the presentation. As for Upper Beaver, again, this is another low-risk opportunity to grow the production profile in a camp we know well and where we can leverage the -- and the benefit of our technical expertise and our workforce at Macassa. This quarter, we continue to advance on both the surface setup needed for shaft sinking and the site preparation for the ramp. Those of you that joined us on our site visit earlier this quarter, you got to see this firsthand. Our construction team who leverage their past experiences from building our other mines has advanced very well on the installation -- the steel installation of the head frame and the installation of the hoist. We're expecting all of this infrastructure to be commissioned in early Q4 this year and then commence shaft sinking right after that in the same quarter. As for the exploration ramp, the box cut was completed in Q1. And in Q2, the team finalizes supporting infrastructure such as the storage base, the temporary air and water services. And we also made a decision to self-perform this ramp development, and we successfully recruited the team there. So now we're expecting to commence the ramp development a little sooner than we had originally planned in Q3 rather than in Q4. I know I've mentioned this before, but with the inclusion of these 2 projects, we could see gold production from our Ontario operations to grow by 50% by the early 2030s, so we're looking forward to continuing to advance these projects throughout 2025. And finally, to conclude, similar to Ammar and Dominique, I just wanted to thank all the operating sites and the project teams for all their efforts in achieving our objectives to date and for your focus on business improvement, not just on cost but on all fronts, including safety. And with that, I'll just pass it over to Guy.

Thank you, Natasha, and good morning, everyone. First of all, I would like to take a moment to highlight the work of our great exploration team, both mine site and regional exploration through the portfolio. The first half of 2025 has been excellent. We currently have 120 diamond drill rig in operation on mine site and regional exploration. Our health and safety performance continued to improve overall as our team is committed to our boots in the field program to improve our safety performance in every single aspect in collaboration with our various diamond drilling entrepreneurs. This concurrently with our drilling excellence program led to the safe delivering of our first 6 months of drilling, slightly ahead of the program with 670 kilometers of drilling completed with expenditures standing at about 9% below our budget. I'm extremely proud of the improvement observed since 2022, where we have reversed the trend in safety, productivity, and unit costs after COVID. Among highlights I would like to mention Detour Lake exploration just celebrated 5 years with 1 million-meter of core being drilled with our entrepreneur [indiscernible] partner. Malartic and Odyssey and regional exploration around the mine that has just celebrated 7 years without a reportable accident and 2 million meters of core drilled and processed at the regional core shack facility and Macassa exploration team on the ground with the entrepreneur [indiscernible] that celebrated 2-year and 300,000 meters of drilling done without a reportable accident. So across the board, world-class exploration team delivering safe and exciting drill results on world- class assets. And from a results standpoint, I would like to comment on 3 of our key value driver projects, Canadian Malartic, Detour and Hope Bay. On Slide 12, at Odyssey, we currently have 26 drill rigs working surface and underground and around the mine and are getting some very exciting results in 3 areas that I would like to highlight. In the upper eastern portion of the East Gouldie, we've seen some great results, such as 5.7 gram over 17 meters, around 900 meter, which is the upper part of the East Gouldie deposits. So we see that area that is progressing well and expand the deposit, and we'll likely get into reserve at our next year-end mineral reserves and mineral resources update. And then in the lower east extension of East Gouldie, which result up to 3.4 over 36-meter and 3.5 over 19 outside of the current mineral reserves and resources, extending the zone below 2 kilometer depth and still open at depth by the way. And also the Eclipse parallel zone with result of the 3.8 gram over 14, that continue to demonstrate the potential to add parallel zone in proximity of the existing zone currently in the mine plan, offering potential for additional optionality and flexibility for future mining. The strong result in the Lower East and Eclipse continue to expand the zones laterally and should lead to a substantial mineral resources addition at year-end this year. And continue to enhance our scenario for the location of the second shaft as what it was described by Dominique earlier. Now on Slide 13, at Detour, drilling continued with 8 drill rigs that continue to infill the deposit in the area that are targeted for the underground mine project, both below the pit in the saddle in the central portion of the deposit, with results up to 3.4 gram over 67 meters and to the west of the pit, next to the planned exploration ramp with results up to 2.9 over 32 and 1.7 over 113 meters. The West Extension of the deposit outside and to the west of the open pit and next to the proposed exploration ramp, continue to deliver strong results that could potentially outline an area where underground production could be accelerated in our underground mine development scenario. And last, but not least, on Slide 14, at Hope Bay, we have 6 drill rigs in operation and have completed almost 70,000 meters year- to-date, and we continue to see strong results in 2 very interesting area. First of all, close the surface in Patch 7 with 16-gram over 4-meter and 5.7 gram over 12-meter at around 300-meter depth. That could potentially be accessible early in the mine plan, close to surface in our project development scenario. But more importantly, I would like to bring your attention to the deep results we just got in gap between Suluk and Patch with one of the best drill results to date, as of date that we can see in the core box below that long section in all 345 that returned 53-gram over 8.4 meter. We're using 25.7 using capping of the high-grade assays at 50 gram. But that drill intercept is quite spectacular as you can see visually simple cord vein, visible gold, and that drill hole sits at 750 meters below surface where the zone remains open at depth, showing great potential for the mineralization to continue to expand at much greater depth that we currently know. So we anticipate that these results will have a positive impact on the mineral reserve for Hope Bay at year-end. So midyear, we're very confident that we are in a good position to replace mineral reserve from ongoing production depletion and potentially grow our overall year-over-year bottom line reserve total and as we continue to derisk our key value driver project and deliver economic studies that pertain to each of them. And on that, I would like to return the microphone to Ammar for some closing remarks.

Thank you, Guy, and everyone else. We began today's call by saying our key messages are largely the same as those over the past several quarters, good production, good cost control, great progress moving forward and accelerating the best pipeline we've ever had. And as Guy just discussed, excellent exploration results with the most aggressive exploration in the company's history. All of this as gold prices continue to reach new highs as we continue to generate record cash flows as we strengthen the balance sheet and as we return record amounts of cash to our owners. I have to say, in this case, it is a pleasure to be repeating the same good news message quarter-over-quarter. At Agnico Eagle, we will continue to work hard for all of our stakeholders and we will continue to build off the same foundational strategic pillars that have served us well over the past 68 years. We will focus on the best mining jurisdictions based on geologic potential and political stability. We will be disciplined with our owners' money, making investment decisions based on technical and regional knowledge and creating value through the drill bit. We believe we are uniquely well positioned with a quality project pipeline, leveraging existing assets in the best regions in the world where we believe we have a competitive advantage. And we will continue to focus on creating value on a per share basis and on being leaders in our industry in returning capital to shareholders as evidenced by over 42 years of consecutive dividend payments and increasing share buybacks. Thank you all for your time. And operator, may I ask you to open up for questions.

[Operator Instructions] And your first question is from Fahad Tariq from Jefferies.

Congratulations on the quarter generated free cash flow, about $1.3 billion and then repurchase shares of about $100 million. Maybe can you walk us through your thought process on buybacks versus dividends? And does the current share valuation play a role in determining which option you choose to return capital to shareholders?

Yes. Thanks, Fahad, for the question. It's Jamie here. As I said in my remarks today, we're doing what we said we're going to do. We're taking advantage of higher gold prices to strengthen the balance sheet to reinvest in the business and increase returns to shareholders. So we pay a half dividend, $800 million annually. We've dramatically increased our level of activity on the share buyback, and we doubled it in the second quarter relative to the first. And I think there's room through the rest of the year to do even more. I mean we're at $550 million through the first half of the year, if you annualize that. So just assuming we did the same, we're at $1.1 billion. But what we've been saying consistently over the past several years is that we're targeting about 1/3 of our free cash flow being returned to shareholders. So if the gold price stays where it is, that total return to shareholders could get up to $1.3 billion, which implies a lot more activity in the share buyback in the second half of the year. And I think that's what we're favoring in the near term. We'll certainly be evaluating the dividend as we get into our budgeting season. And if there's room for an increase there would likely be later this year or early next.

Okay. That's clear. And then maybe just switching gears to Macassa. Maybe this question is for Natasha, but can you talk a little bit about how to think about grades in the second half? There's been 2 consecutive quarters now, pretty high grade. I understand it's 1 or 2 or maybe 3 stopes, but can you talk through how to think about grades in the second half?

Yes. Fahad, thank you for the question. So both quarters, we did see some localized positive grade reconciliation. So we are not factoring that in, in the second half, and we're expecting to be a bit of a softer second half, but still meeting guidance.

And your next question is from Josh Wolfson from RBC Capital Markets.

I think this question is best for Jamie. Some of the free cash flow beat this quarter looks like it was attributed to the tax deferrals. I'm just wondering how should we think about that going forward and when that liability maybe reconcile and would be a headwind as opposed to free cash flow?

Yes. Josh, thanks for the question. Yes. No, you're absolutely right. I mean that was a big swing this quarter. I think pre-change in taxes payable. Our free cash flow is about $800 million. So it's almost $0.5 billion swing as a result of taxes. If we look at our cash taxes for 2025, we paid about $600 million in the first half of the year and we plan to pay about $600 million in the second half of the year. So in around $1.2 billion for 2025 in cash taxes. Now our income tax expense is substantially higher than that. But the way it works, we pay installments based on the prior year's profitability. So if the gold price stays where it is, we will have a significant catch-up payment in Q1 of 2026, just as we did this year. This year in Q1, we paid $400 million in relation to 2024, and at these gold prices in Q1 of 2026, we could have upwards of a $900 million catch-up payment in relation to 2025. So you're going to see this volatility in periods where the gold price is rising [at a rate] as it has been.

Got it. And then on Detour, just on the operating side, what should we think about sequencing in the second half of the year? And maybe more specifically, what sort of grade can we expect in the fourth quarter when we're out of this or this maybe more challenging zone?

So as mentioned earlier, so with Q3, we're all going to be in the lower grade domain. In Q4, we're expecting to be in higher grade, I would say, somewhere between 0.97 and 1.

Okay. That's solid. And then on Malartic, similar sort of question here for Barnett. When does the contribution from that area taper off?

Yes, Josh, it's Guy. So that's something we're going to see through the remainder of the Barnett of the open pit as we experienced back in the day, even in Canadian Malartic. And as you get towards the bottom of the cone of the pit, we're getting closer to the old workings. And around the old workings, that's basically either there was some time we are kind of taken a conservative approach about the pillar that were left around the old workings. So there is more ton left than planned on our void model, and the grade is better also. So that trend is expected to go -- but it could be variable. But theoretically for the rest of the open pit at Barnett, we should see that positive trend and with a little bit more tonnes left behind by the old miners.

Your next question is from Anita Soni from CIBC World Market.

So first question, just wanted to ask about the exploration results at East Gouldie. I think you said that you're evaluating, deepening the shaft as well as doing a second shaft. On the shaft deepening side, do you have an idea of how much that would cost in terms of the moving loading station? I'm trying to understand is that, that loading station is not built yet, it's just a matter from a design standpoint of actually moving that loading pocket further down and then adding one a little higher up. But what would that do to the CapEx for the asset?

Yes. Deeping the shaft #1 by 70 meters including doing a third loading station, which means all the infrastructure plus a crusher, we're talking approximately USD 40 million to do that but it is a payback project. So we're going to save on trucking. We're going to save on fuel. We're going to be more effective. So that's overall, that's a positive thing. And as Guy showed in his slides, it's getting deeper than expected. So the 70 meter, let's say, we're going to be at 1,870 meters with the shaft. It is like the limit of the deep we could go with that technology and the shaft we're having in head.

Okay. No, $40 million sounds very reasonable. In terms of capital allocation for Jamie, I think you mentioned 1/3 capital return to shareholders? And I could be wrong about the 1/3, but I did catch $1.3 billion at these gold prices. But could you talk about how you -- the other portions of the other 2/3 and how that's split? And could we see some accelerated investment into your organic opportunities going into the next couple of years or at least next year?

Yes, Thanks, Soni. Yes, I think absolutely. I mean we'll continue to strengthen the balance sheet. We still have almost $600 million of debt on the balance sheet. We'll look for opportunities to prepay some of that. And yes, as we alluded to in our remarks on the call, I think there will be opportunities for us to accelerate development of some of our projects. So that's what we should be doing. And in these gold prices, we're generating high returns. We should be reinvesting in high-return projects. We could well see higher capital in the years ahead in order to do that.

And Anita, it's Ammar here. To the extent that we are accelerating, it's only because they're good projects. It's only because they're good projects. And frankly, the team is doing a very good job. And these are -- there's a lot going on, these are in the future. But having been in this business a long time, I can tell you I'm pleasantly surprised that the quality of the work and the potential of the project and the ability to actually move these things forward. So it's not because we're going to have extra money at these levels that we are looking to accelerate. It's primarily because they're even, in some cases, better than we thought, and we're making faster progress than we thought.

No, for sure. I think you demonstrated a prudent capital allocation. And I think it was this time last year, I was worried about you guys building a second shaft and now I'm hoping you build a second shaft. So a lot changes in the year.

Well said.

And your next question is from Tanya Jakusconek from Scotiabank.

Congrats on a good quarter. Jamie, just coming back to you on that capital allocation, just a lot of cash and I appreciate there's some of that $600 million of debt you want to pay down or buyback. I understand you're going to be reviewing the dividend maybe third quarter, fourth quarter or early next year. Can I just ask what minimum cash balance you feel comfortable keeping on your balance sheet to run your business? First one; And number two, if we were to see additional capital be put to projects, is accelerated? Would it be for Detour, Hope Bay, and Canadian Malartic with those be the 3 that you highlighted?

Thanks, Tanya, for the question. Yes. No, I mean, on your first question with respect to the minimum cash balance. I mean at these gold prices, we could be well north of $2 billion, $2.5 billion in cash on the balance sheet by the end of this year. And I'm certainly comfortable at those levels. I mean we do -- we talked about the timing of cash tax payments. We are going to have a significant cash tax outflow in the first quarter of next year. And this goes to your second question, we do anticipate having opportunities to accelerate some of our capital spending to bring some of that production forward. I think it's really -- it's across our project pipeline. We'll be, I think, talking more about the potential to accelerate some of the underground production to Detour as an example. But across all of our key value drivers, there are opportunities for us to do more quicker and bring in that incremental production sooner.

Okay. And should I be kind of thinking that we should keep this total capital? I'm going to say it in a way, should we be thinking between the $2 billion to $2.5 billion range over the next few years? Should I be thinking about it that way?

Yes, I'd say it's too early to give you any formal guidance on that, Tanya. We're in the process, we're going through our kind of budgeting and scenario analysis now. And as we get into the fall, we'll have more clarity in terms of what the capital profile looks like over the next several years.

Okay. And then maybe I could just ask about -- as you are thinking about your capital profile, can you talk a little bit how you are thinking about your life of mine plans and your reserves and resources given the big discrepancy in the gold price where we're at versus where reserves and resources are done? And how are you thinking about approaching that?

I'll start with that, Tanya, and then maybe I'll ask Guy to jump in. I mean that's an excellent question. It's one thing managing your reserve price when gold moves $100 or $200 a year. Frankly, it becomes a more complex question when the gold price moves $1,000 or $1,500. So right now, we're maintaining and we can get into the specifics a very reasonable number for our reserves -- he'll get into -- and I don't want to steal his thunder. We're doing a good job in replacing reserves. But there could be opportunities, Tanya, and I think I've talked to you about this. So let's take a look at, for example, something like Meadowbank. Meadowbank was supposed to run out in 2028. This is not formal direction to anybody, but we are working on something that might allow us to extend it at a lower rate to, say, 2034. Now those would be lower grade ounces that weren't the best use of our owners' money at $1,800 environment to make an awful lot of money for our owners at $3,300. So those -- in that example, of course, it makes sense because you're otherwise going to shut down the mine. Of course, it makes sense to take advantage of those additional ounces. I mean we're working on that. But -- so it is a function, and you know this very well, it's a function of do you have spare mill capacity? Are you extending a mine life? If you bring in lower-grade stuff, are you displacing higher grade into many years in the future. So it's an excellent question because gold has changed a lot, and we're looking at all of that. I don't know, Guy, if you want to jump in.

Yes, exactly. So we're looking at it on a mine-by-mine approach. But as mentioned by Ammar, it is paramount for us to continue to send to the mill what was in our guidance, meaning we don't want to lower the cut-off grade and change the mining sequence. But on the mine by mine, we're looking if there's extra mill capacity that we can send additional ton at lower grade and that are profitable in the higher price environment, which is the right thing to do. And also looking at sensitivity long-term. So we started some analysis of what could be the implication on the higher gold price environment, looking at sensitivity on each of the deposits, which may help us in some design and making sure we're not, for example, putting a waste dump next to a pit that could be much larger or stuff like that. So we're running those scenarios, but our bottom line remains the same. We don't want to lower the cutoff grade. We don't want to change the mining sequence. We are committed to deliver the right -- to send the right ounces first, right ton first at the mill. And if there is available additional milling capacity, we're going to do so if they are profitable.

Okay. I don't want to ask any more questions, although I do have a lot. Hopefully, someone asks about how your exploration and reserve replacement is going. So I'll wait hopefully to hear on that.

And your next question is from Daniel Major from UBS.

I think most of the capital allocation questions have been asked in different ways, so I'll leave that one. But I suppose 2 questions. One, you mentioned about the scope to accelerate CapEx potentially. I think around this time last year, maybe it was Q3, you increased the CapEx budget for this year. Should we assume that ability to accelerate CapEx more applies to 2026, 2027 and this year's budget is kind of reasonably fixed. Is that the right way of thinking about it?

Yes, thanks for the question, Daniel. I think that's yes, I mean, I think like we're going through the process now of looking at our capital spending outlook. I think it will be -- there will be incremental spending beyond this year's budget. Examples that like Dom just spoke about. I mean, third loading shaft at Odyssey, $40 million probably has an 80% IRR. If there's things like that, that we can do to lower costs in the future to bring production on sooner, strong return projects, we'll look at them. We'll have an announcement early next year out on Hope Bay, that's going to be a new significant mine for the company but comes with a fairly hefty capital cost. So there is the potential for an increase in our overall capital spending but it's going to result in higher long-term returns and value creation for shareholders.

Okay. And the second one, just on the kind of portfolio M&A, et cetera, actually more on the sort of streamlining side. You've got a big portfolio of early-stage kind of options. Is this high gold price environment an opportunity to monetize some of those that don't meet your quality criteria?

Yes. I mean, clearly, a good question, good observation. We don't invest in this as a portfolio to trade and make money. We -- everything we invest in, we take a look what's the long-term potential. That said, historically, 9 out of 10, we decide -- don't fit exactly and your -- it's a good observation to notice that at these gold prices, the value of that portfolio has gone up a lot. And I can't really talk much more about it than that, but to say that it's not an unreasonable question.

And then final, just operational question. Grades at Fosterville continue to hold up well into [indiscernible] and you look to be tracking well ahead of the guidance. Are you still expecting that grade profile to come off in the second half? Is it kind of reconciliation largely and should normalize? Or is it -- are we more likely to sort of hold those rates into the end of the year?

So with Fosterville, reconciliation has been actually okay. It's just the mine sequence. So were expecting a high -- a stronger H1 similar to Macassa, I guess, and we're expecting a lower H2 or softer H2.

And your next question is from John Tumazos from John Tumazos Very independent Research.

With the favorable paces of underground development at the underground at Malartic. Is it possible that the East Gouldie shaft has output in the second half of 2026 or reaches full output sometime in '28 instead of '29?

Yes, John, Dominique speaking. The first shack, the end of the commissioning for the mid-shaft loading station is mid-2027. And getting to the latest loading, where we're going to be at the third now, I don't have that date, but I guess we're in the 2030.

But the commissioning of the midpoint at '27 and it is going conclude from that.

June 2027, it should be a good party at Malartic where we're going to start to bring some ore to the top with that new shaft.

You can come to that party, if you want, John.

I can ask the second one. The investment portfolio was up to $1.063 billion at June 30, should we post every night on the Investor Relations page of the website, the value of your total stockholdings, just like you're a hedge fund manager? And how do you want to safeguard these values? Some of us buy Agnico [indiscernible] nickel and all this stuff. So is this a good opportunity to take $0.5 billion off the table since the stocks are up $400 million year-to-date?

Yes. Look, I want to get to the core of our philosophy on that. We talk a lot and I talk a lot about being disciplined with your money and about capital allocation. And it's our belief, and again, my personal belief that I can't be sincere -- we can't be sincere in saying we're going to be disciplined in allocating your capital, especially into new investments if we don't know a lot about those investments. If we haven't done our homework, and so we've always had a view that we're willing to take small [end] positions and interesting companies early on as you would want us to in regions that we like with projects with good prospectivity to get to know more about them. And from that, decide based on knowledge, whether or not it makes sense to spend and invest your money. So none of these are as a portfolio. So I certainly wouldn't treat it as a hedge position. That said, as I mentioned before, quite often. And in fact, in most cases, we look at something, and we say it doesn't necessarily fit perfectly. In some cases, it does, and it's worked well but we do appreciate that the market has gone up. And to the extent it made sense to divest some of these things, we're not ignorant to market conditions.

It's just a lot of money, at least it seems like a lot of money to me.

You're welcome. And it is a lot of money, fair point.

Thank you. There are no further questions at this time. I will now hand the call back over to Mr. Ammar Al-Joundi for closing remarks.

Well, thank you, everyone, for taking the time. There's a lot going on. The business is running really well, and we continue to appreciate the support of everybody on the call, both our investors and the analysts who coverage. Thank you.

Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may all disconnect your lines.