Agnico Eagle(AEM) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record free cash flow of $1.3 billion, record adjusted EBITDA of $1.9 billion, and record adjusted net income of CAD1.94 per share [4][12] - Revenue reached CAD2.8 billion, with free cash flow more than doubling quarter over quarter due to favorable working capital adjustments [12][13] - Total cash costs were $933 per ounce, which was $30 higher than the previous quarter, primarily due to increased royalties and a weakening Canadian dollar [13][14] Business Line Data and Key Metrics Changes - Gold production for the quarter was approximately 866,000 ounces, with strong performance from operations at LaRonde and Canadian Malartic, offset by lower production in Nunavut [13][19] - The Abitibi platform in Quebec and Ontario produced over 1 million ounces at total cash costs of approximately $850 per ounce, achieving a realized operating margin of 73% [15][16] - The company maintained its cost guidance for the full year, expecting cash costs to remain within the range of $915 to $965 per ounce [14] Market Data and Key Metrics Changes - Gold prices increased by $400 this quarter, contributing to the record financial results [6][8] - The company emphasized its focus on operational improvements and cost control, which allowed it to deliver 93% of the gold price increase to shareholders [7][8] Company Strategy and Development Direction - The company is focused on building a strong project pipeline, with five key value drivers aimed at increasing production significantly in the coming years [10][17] - Strategic investments are being made in high-return organic growth projects, including Detour Underground and Upper Beaver, which are expected to generate solid returns even at lower gold prices [17][39] - The company aims to leverage existing assets in stable mining jurisdictions to create long-term value for shareholders [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's operational performance and cost control, highlighting the ability to generate record cash flows and strengthen the balance sheet [4][48] - The management team remains focused on maintaining a disciplined approach to capital allocation, balancing shareholder returns with reinvestment in growth projects [17][49] - The company is optimistic about its exploration results and the potential for future production increases, particularly in light of favorable gold prices [48][49] Other Important Information - The company has significantly reduced its gross debt by CAD1.3 billion over the past fifteen months, ending the quarter with net cash of almost CAD1 billion [16][17] - The exploration team is actively engaged, with 120 diamond drill rigs in operation, and has achieved notable safety and productivity improvements [42][43] Q&A Session Summary Question: Can you walk us through your thought process on buybacks versus dividends? - The company is targeting about a third of its free cash flow to be returned to shareholders, with plans for increased share buyback activity in the second half of the year [50][52] Question: Can you talk about how to think about grades in the second half? - The company expects a softer second half in terms of grades but still aims to meet guidance [56][57] Question: How should we think about tax deferrals and free cash flow going forward? - The company anticipates significant cash tax outflows in 2026, which may create volatility in free cash flow [60][62] Question: What should we expect in terms of sequencing and grades at Detour in the second half? - The company will remain in a lower grade domain in Q3, with expectations for improved grades in Q4 [64] Question: Can you provide insights on exploration results at East Gouldie? - The company is evaluating the costs associated with deepening the shaft and adding a loading station, which is expected to be a payback project [70][71] Question: What is the minimum cash balance the company feels comfortable maintaining? - The company is comfortable maintaining a cash balance well north of CAD2.25 billion by the end of the year, while also looking to accelerate capital spending across its project pipeline [84][85]