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Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM) has reported quarterly net income of $76.7 million, or $0.32 per share, for the third quarter of 2019. This result includes non-cash foreign currency translation losses on deferred tax liabilities and non-recurring tax adjustments of $8.3 million ($0.04 per share), derivative losses on financial instruments, mark-to-market and other adjustments of $3.8 million ($0.02 per share) and non-cash foreign currency translation gains of $1.3 million ($0.01 per share). Excluding these items would result in adjusted net income1 of $87.5 million or $0.37 per share for the third quarter of 2019. In the third quarter of 2018, the Company reported net income of $17.1 million or $0.07 per share.
Included in the third quarter of 2019 net income, and not adjusted above, is non-cash stock option expense of $3.4 million ($0.01 per share). In the first nine months of 2019, the Company reported net income of $141.5 million, or $0.60 per share. This compares with the first nine months of 2018, when net income was $67.0 million, or $0.29 per share.
In the third quarter of 2019, cash provided by operating activities was a record $349.2 million ($275.3 million before changes in non-cash components of working capital), as compared to the third quarter of 2018 when cash provided by operating activities was $137.6 million ($155.0 million before changes in non-cash components of working capital).
In the first nine months of 2019, cash provided by operating activities was $624.2 million ($603.5 million before changes in non-cash components of working capital), as compared to the first nine months of 2018 when cash provided by operating activities was $465.4 million ($495.1 million before changes in non-cash components of working capital).
The increase in net income and in cash provided by operating activities during the third quarter of 2019 compared to the prior year period was mainly due to higher gold sales volumes and higher realized gold prices, partially offset by the contribution of production costs from Meliadine, which achieved commercial production in May 2019. Higher gold sales were primarily driven by the contribution of a full quarter of commercial production from the Meliadine mine, partially offset by expected lower throughput levels at Meadowbank as the mine transitioned to the Amaruq satellite deposit.
The increase in net income and in cash provided by operating activities in the first nine months of 2019 compared to the prior year period was mainly due to higher realized gold prices, partially offset by slightly lower gold sales volume (excluding pre-commercial production ounces at Meliadine and Amaruq) and the contribution of production costs from Meliadine. Lower gold sales were largely due to decreased production as a result of mill maintenance shutdowns at LaRonde and Kittila in the second quarter of 2019 and expected lower throughput levels at Meadowbank as described above.
“With record performance at several of our operations and the ongoing ramp up of our two new mines in Nunavut, we achieved record quarterly gold production in the third quarter of 2019. As expected, this strong result, combined with the completion of the extensive construction spending program in Nunavut, resulted in the generation of substantial free cash flow in the quarter,” said Sean Boyd, Agnico Eagle’s Chief Executive Officer. “With the expectation of growing production and strong free cash flow generation, we are in a good position to continue to invest in our project pipeline, improve our financial flexibility and grow our dividend. We are pleased to announce a 40 percent increase in our quarterly dividend,” added Mr. Boyd.
Third quarter of 2019 highlights include:
- Record quarterly gold production – Payable gold production2 in the third quarter of 2019 was 476,937 ounces (including pre-commercial production ounces of 33,134 ounces at Amaruq) at production costs per ounce of $713, total cash costs per ounce3 of $653 and all-in sustaining costs per ounce4 of $903. Production costs, total cash costs per ounce and AISC per ounce exclude the pre-commercial production ounces at Amaruq
- A return to free cash flow generation in the third quarter of 2019 – In 2017, the Company embarked on the largest capital spending program in its history in order to build two new mines in Nunavut. That construction program came to an end in the third quarter of 2019 with the declaration of commercial production at Amaruq. This contributed to a substantial increase in free cash flow generation5
- Amaruq declared commercial production on September 30, 2019 – Total pre-commercial ounces of gold produced were 35,281 (including 2,147 ounces in the second quarter of 2019). Total capital costs for the development of Amaruq were approximately $397 million, which is above the most recent forecast of $350 to $370 million primarily due to the timing of commercial production. Operations are continuing to ramp up and production at the Meadowbank Complex for 2019 (including pre-commercial production) is expected to be approximately 200,000 ounces of gold
- Production guidance increased for 2019 – Total production for 2019 is now expected to be 1.77 to 1.78 million ounces of gold (including pre-commercial production from Meliadine and Amaruq), which is a slight increase from the previous guidance of 1.75 million ounces of gold. The Company anticipates that total cash costs per ounce and AISC per ounce for 2019 will continue to be in the range of $620 to $670 and $875 and $925, respectively
- Dividend increased by 40% – A quarterly dividend of $0.175 per share has been declared. The previous quarterly dividend was $0.125 per share
- Exploration drilling continues to advance minesite and pipeline projects
- Discovery of the East Gouldie Zone at Canadian Malartic reported – Deep exploration drilling has discovered the East Gouldie Zone, which is south of the East Malartic and Odyssey zones. The new zone has a strike length of 1,300 metres in an east-west direction, dips 60 degrees north and extends from 700 metres to 1,900 metres depth below surface. Highlight intercepts include 7.6 g/t gold over 26.6 metres at 1,091 metres depth and 4.9 g/t gold over 56.0 metres at 1,523 metres depth
- Drilling at Meliadine extends Tiriganiaq deposit at depth – Mineralization intersected at depth is interpreted to be extensions of shallower lodes. A recent hole intersected 15.8 grams per tonne (“g/t”) gold over 3.1 metres at 750 metres depth and 21.5 g/t gold over 2.9 metres at 760 metres depth
- Drilling at Kirkland Lake on the Upper Beaver deposit shows potential of shallow mineralization – Exploration drilling is revealing multiple, shallow stacked zones of high-grade gold-copper mineralization. A recent hole intersected 7.3 g/t gold over 3.5 metres at 106 metres depth, 9.2 g/t gold over 4.3 metres at 139 metres depth and 6.4 g/t gold over 5.6 metres at 150 metres depth. Mineralization at shallow depths may provide added flexibility for future project development
- Drilling at Santa Gertrudis grows the Amelia high-grade deposit – The Amelia deposit in the Trinidad zone has been extended to 800 metres strike length, with highlight intercepts of 6.4 g/t gold over 7.0 metres at 364 metres depth and 9.6 g/t gold over 6.0 metres at 101 metres depth