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 2018 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. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press the pound key. Thank you, Mr. Sean Boyd, you may begin your conference.
Thank you, operator. Good morning everyone, and welcome to our first quarter 2018 conference call. We would also like to remind those who have an interest in attending our annual general meeting, which is this morning as well at 11:00 A.M. at the Delta Hotel, on Lower Simcoe Street in Toronto. You are certainly welcome to join us. We have a full room here in our boardroom in Toronto. A lot of our employees have come in to participate in the annual meeting, so they are looking their best this morning. I would like to remind everybody there is a couple of slides, small print, which is the cautionary language that we put out around production guidance and forward-looking statements. Please take note of that. I would like to start and just talk a little bit about the strategic direction. Of course, there is no change.
The focus continues to be on transitioning in 2018, into a larger production platform in Nunavut as we continue as well to optimize our existing assets. That will take us to 2 million ounces in 2020 with an ability to grow beyond that. That remains the focus. In the quarter, we continue to generate good cash flow to support the CapEx this year, which is a little over $1 billion. We have made very good progress on the Nunavut projects, and we will talk about that, which positions us very well. We have also got some positive drill results, from an exploration standpoint, with a budget in 2018 of over $150 million. As we said in the start, we have been focused on that transition, and in that transition, we had a solid quarter this quarter, 390,000 ounces produced at total cash costs of $648. That was expected.
As a result of that, we are tracking slightly ahead of our full-year production guidance of 1.53 million ounces. We are at the lower end of our full-year cost guidance. Essentially, the drop in production that we saw in the quarter from Meadowbank as was expected, and also at Lapa as we wind down that asset, was offset slightly by increases in production at both LaRonde and Canadian Malartic, and we will talk a little bit about those projects. We are also active adding to our pipeline in the quarter. We closed on the previously announced deal with our partner Yamana to acquire the other 50% of the Kirkland Lake property position and also the Hammond Reef property position. We see that as an important district for us.
It's the type of land package and resource base that we've had a track record of creating a lot of value over the past several decades in the company. We're going to actively explore Kirkland Lake, we're going to continue to update our studies on both Kirkland Lake and Hammond Reef. We've also been busy just streamlining our portfolio. As we said, the focus continues to be on executing on our growth plan. We've been moving out some non-core assets with the sale of our West Pequop and Summit properties to Newmont, our neighbor in Nevada, for some cash, and they retained a net smelter royalty on the properties. We also announced, from a strategic investment portfolio move to sell our position in Belo Sun.
We just look at that and that area as something that doesn't fit, given that we've just brought in some new properties, not just Kirkland Lake, but also Santa Gertrudis in Mexico, we've got an expanding base in Nunavut, we've announced the expansion of the asset in Finland. We've got enough on our plate, just a matter of helping us increase our financial flexibility and adding some cash, we'll talk about the balance sheet in a minute. As we look at the operating results by mine, just as a summary, good cash generation coming out of LaRonde. We mentioned that that was producing more ounces than a year ago in the quarter. Also at Canadian Malartic, over $60 million in cash contribution, our Mexican business generated almost $60 million. Good cash being generated across the board throughout the mines.
On a per-share basis, I think that's important because you look at cash provided by operating activities in total of $208 million, which is $0.89 per share. I think that's important because that was driven off of production of 390,000 ounces at total cash costs of $650. If we look out as we expand our platform in Nunavut, continue to optimize our other assets and expand them where we can, we're expecting to see our quarterly production go from a current level of around 390,000 ounces to 500,000-550,000 ultimately from the current asset base at potentially lower cash costs. You can see the potential significant impact on cash provided by operating activities with that production and cost level.
I think more importantly, when you think about the ability then to drive per share cash from operations, that's really the key, that's been our focus. As we started to understand the potential to grow our output in Nunavut and optimize our other assets, we realized that this was a unique opportunity that we could move those forward in a way where we had the financial resources, we had the technical skill sets, we could keep the share count down and have that additional value, being pushed down to a per share level. That remains the focus. On the balance sheet, on the next page, we ended the quarter with $465 million in cash, but just in the first week of Q2, we completed the previously announced or closed on the previously announced, debt deal where we added $350 million in cash.
Early April, our cash position's around $800 million. We're in excellent shape to continue with the build-out of our Nunavut platform and the other expansions that we have announced. Just dealing with the assets, in a little bit more detail. LaRonde, another extremely strong quarter, 90,000 ounces produced, very low total cash costs at $427 an ounce, generating significant operating profit. That came from higher grades in the lower part of the mine. We should see a little bit of a drop in grade as we move through the balance of the year, we should see increased throughput going through the mine. We're in a very strong position to achieve our guidance at LaRonde. We continue with the work in the lower part of the mine, looking to provide additional production levels over the next several years from around 3.1 kilometers to 3.5 kilometers underground.
We've made very good progress at LaRonde Zone 5. We were actually at the site a couple of weeks ago. We went underground at LaRonde Zone 5. They've made excellent progress there. We're starting to develop the stopes. The paste plant looked great and is being commissioned this quarter. We also have some additional ounces this year coming out of Lapa. I think that's a good example of how we've taken advantage of opportunities that exist in the region and simply leveraging off of existing infrastructure and more importantly, existing skills there. That's one of our big competitive advantages. I think it's also important to note that the approach for LaRonde Zone 5, we were patient there. I think we bought that asset off of Barrick about 15 years ago for CAD 7 million.
We actually used a bunch of the equipment and moved it to Pinos Altos to get that mine started, to keep our CapEx down. The approach at LaRonde Zone 5, very similar to the restart at Goldex. Take a base case that we're comfortable with, get that into production, then sort of leverage off of that new production base. What we're focused on now is getting LaRonde Zone 5 up. We're actually using it as a bit of a test case to test some new technology that we hope to apply at LaRonde in a bigger context. We're also looking that once we get that production base established, there's a sizable resource that exists on that property package and land position. We'd certainly be looking to extend mine life by bringing the additional known gold resources into a mine plan.
Canadian Malartic, we made reference to it earlier, record quarterly production, another excellent quarter there, 83,000 ounces. Excellent total cash cost of $566 per ounce. Grade was good, over 1.1 grams per ton. Permitting activities are underway for a exploration ramp at Odyssey South and East Malartic. We got a good update on that when we were there two weeks ago. There's very good potential there, that's one of the reasons we wanted to get involved with this situation back in 2014, is our geologists and team felt that there was an opportunity to extend the mine life and to maybe augment the feed with some higher grade underground ore. Both Yamana and Agnico are actively working on various scenarios, we're permitting a exploration ramp, which is now designed to go into both the Odyssey Zone area and the East Malartic Zone area.
We should also add that the Barnat expansion remains on budget and schedule for commencement in late 2019. The team's doing an excellent job there. At Goldex, the production ramp at Deep 1's ongoing. We continue to optimize that asset. We're looking at potential to accelerate mining activities in the Deep 2 zone. A lot of the work there is just to optimize what we've been doing. We've got a potential sweetener in grade in the second half with the sub-stope, which is higher grade, which would augment the production and help with our cash costs. At Meadowbank, as we said, a transition year. Year-over-year, our throughput in the quarter was down about 10%. Grade was down. That was expected. This is the sort of final full year of mining there.
As a result, our production was down 24,000 ounces, which again, was expected. The result of the production being down, unit costs were up, due to the lower production. We're still tracking our guidance of about 220,000 ounces at Meadowbank as we transition into Amaruq. Update on Amaruq. Our permitting activities, most importantly, are on schedule. We believe that we'll receive the permits the middle of the year. We do have the project certificate that was received in March from the Nunavut Impact Review Board. That's an important step. We're just waiting for final approvals to issue us the Whale Tail Water Licence A. We're still very active there. We've got a ramp going. The road's complete. We continue to do drilling there.
Essentially, the second half of the year will involve dike construction and developing the open pit for a start date, which is on schedule for Q3 of 2019. At Meliadine, very good construction quarter there. Fortunately, the team did an excellent job in the second half of last year getting prepared for the winter. It was an unusually cold winter and difficult and harsh winter there, but the teams were able to work entirely inside in the process plant, in the power plant, and in the main service building. They made excellent progress. Site construction, about 60% complete. The procurement is done for the 2018 barge season. The stopes are approximately 90% of them have been delineated for 2018. Good start with underground development, making good progress, slightly ahead of schedule.
We would expect that we can start the commissioning of the process plant in Q1 2019. We'll be hosting a site tour in both June and also in September. No change in the capital cost estimate and no change in the schedule, which was advanced in our February release to the second quarter of 2019. At Kittila, good production, 48,000 ounces. Higher tonnage compensated for lower grades. We do have a planned shutdown in this quarter. It will not impact the guidance that was factored in, and we continue to move forward on the expansion project, doing some analysis, getting some quotes, and that will take the Kittila production from roughly a run rate of 200,000 ounces to 260,000-275,000 ounces. In Mexico, good production coming out of Pinos Altos, 42,000 ounces. Total cash cost, $539. The focus there is on advancing the satellite deposits.
Similar to what we're doing around LaRonde with the LaRonde Zone 5, we're doing in Mexico. We've known about these deposits for several years. It's time to do some additional work and bring them into the mine plan, taking advantage of skills and infrastructure that are already in place. We've made good progress on Sinter and Quero, and we continue to drill another one called Reina de Plata. Lots of activity around Pinos Altos. Creston Mascota, the focus is on transition to the Bravo deposit and getting more information on Madroño. Again, satellite opportunities around an existing operation, which allows us to generate high rates of return on our investments in and around our current production facilities in Mexico. La India, 23,000 ounces. At that site, again, we're focused on mine site exploration in and around La India.
We've got a few small modifications as part of the optimization plan around the heap leach process, and we expect that to improve our gold production as we move forward. Just to wrap up, I think it's key for us is to stay focused on execution, stay focused on keeping our share count down so we could take advantage of the expected increase in operating cash flow and more importantly, net free cash flow. As we said on our February call, we see a significant drop in our total capital investment required in this business. We see roughly about $300 million in sustaining, and we can see based on a project pipeline, which largely includes just extensions of existing infrastructure, LaRonde 3, Goldex 2, Kittila, Amaruq underground. These are small CapEx relative to the program that we are in the middle of through 2017 and 2018.
Our focus is getting this thing ramped up, getting to 2 million ounces, optimizing from 2 million ounces, and also working on things like Kirkland Lake, Odyssey, East Malartic, and also take advantage of things that we have in Mexico like Santa Gertrudis, El Barqueño. We're working on another small option earning deal in Mexico. Keeping it small, going early, using our drilling and mine building expertise to make incremental steps and low risk investments to build cash flow per share. I'd like to open it up for questions, operator.
At this time, I would like to remind everyone, in order to ask a question, press star, then 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Once again, that's star 1 to ask a question. We do have a question from David Haughton with CIBC. Please go ahead. Your line is open.
Hi, Sean and team. Thank you very much for the update.
Hi.
I'm just looking beyond what you've got in your current pipeline, which is well in hand, and just thinking what your plans could be for the Akasaba deposit near Goldex, how that could be moving forward because it's got some copper in it. What your thinking is with Kirkland. I know that early days yet, you've only earmarked $5 million thereabouts for exploration, but where you can see that going forward?
Yvon will give a little bit of detail. Akasaba is still in the pipeline. It's just going through a permitting process in Quebec. From the perspective of Kirkland Lake, it's one that we've clearly liked for years. We had an investment in Queenston at one point. We just felt it was a good opportunity for a reasonable price to bring it into the fold, own it 100%, and use our expertise. We've currently got a drill program of about $5 million planned at Kirkland Lake. We're reviewing that now to see whether we should increase that. There's multiple targets there, as you know, Upper Beaver, Upper Canada. Upper Canada's grown in recent years. As we've said in the last week, as we've gathered with our teams ahead of the annual meeting, we'd rather know sooner than later how big it is, just for planning purposes.
We should also just tie in our view of spending capital there. We wouldn't be spending meaningful capital there till after the Nunavut platform is expanded in 2019. We're sort of thinking late 2019, maybe getting started on something there by way of a shaft. We still need to do a lot of work over the next 12 months to sort of fully define those plans. I'll turn it over to Yvon, who can give you some more color.
Okay, thank you.
Well, just briefly on Akasaba. I think the permitting will be completed by the end of the year. We're expecting the last permit from the federal side in the second half. At this stage, as we go through the life of mine process and budgeting process, we'll integrate the project. The plan is to begin perhaps some work on it next year once all the permits are in. That's the plan. Basically just a delay of one year. On the Kirkland Lake opportunity-
Just before we move off Akasaba, if you don't mind, you intend this to be an open pit operation. Would you have any beneficiation of the ore on site, or would it be direct truck to LaRonde, I presume, given that you've got some base component in it? What's the broader thinking?
The plan would be to truck it directly to the Goldex mill and then ship the copper con for those, well, the pyrite copper concentrate to process at LaRonde.
Okay, thank you. For Kirkland, interested to hear potential for a shaft is possibly even next year. I'm just wondering where the center of gravity is as far as you can see, moving forward, how you can see that unfold.
Yeah. There's two ways to approach that, one of the concepts they're looking at is maybe you go slower a bit and you use the LaRonde plant as well. Given its proximity to our operations in Quebec. We're still working a number of different options.
I think we're in a scenario analysis at this stage, we're looking at either a ramp or a shaft. These options are going to be looked at within studies over the next six or seven months, we're planning to look at the, also in this scenario analysis, to look at the synergies of the longer-term plan of integrating also Upper Canada within the Upper Beaver story. Probably by the end of the year, early into Q1, we'll provide some clarity on what's our plan in that respect.
Okay, thank you. I'll leave it there for now. Thanks.
Once again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from Steven Butler with GMP Securities. Your line is open.
Good morning, guys. Question for you at LaRonde. The guidance for the year, I think, implied about, or gave us about CAD 115 per ton, Yvon. Costs were about CAD 155 on the production side or CAD 121 per ton mine site. Maybe just a brief comment, if you don't mind, about your confidence about getting those costs back towards guidance as you go throughout the year.
I think Q1 was a little lower on the total tons produced. Our grade was obviously higher, That affected the cost to ton basis. I think the other aspect is we're going to come back on the budget for the second half of the year as far as tonnage from the underground operation. We're not too concerned about that at this stage. Also, the base metal component is likely to start progressing also going forward for the rest of the year towards getting closer to guidance. We're pretty comfortable that the cash costs and all-in sustaining cash costs profile will be online.
Okay, sounds good. Thank you. That's it.
Next question comes from Carey MacRury with Canaccord Genuity. Your line is open.
Hey, good morning, guys. Just had a question on East Malartic Odyssey. Do you have a potential development timeline in mind on that, or is it still too early?
No, we don't. Sorry. At this stage, we're thinking perhaps a decision towards the end of the year on the project. We're in the final stages of the studies and the permitting process. Likely, we would probably start development early into Q1 and perhaps as early as Q4.
Any thinking on how much tons per day you could pull out of there?
No, we are not at that stage. We will provide more clarity on that as we go through 2019.
Okay, great. Thank you.
Yeah, one of the things we did do, Carey, when we were up there a couple of weeks ago, we were sort of reviewing exploration plans, and the guys had some ideas to drill deeper, which we encouraged them to do. The process now is to do some more drilling while we focus on permitting the ramp. I think what was interesting is that the ramp, the sort of proposal that they outlined was basically going into both the Odyssey and the East Malartic zones.
Is there any technical risks you see at this point there, or is it pretty straightforward from a mining perspective?
No risk specific at this stage. Obviously, East Malartic is an old operation, we've taken that into consideration as far as the shallow area that we're considering to look at with the current ramp would be far away enough from the existing operations to get away from the mining risk and rock mechanic challenges underground. At this stage, there are nothing that really concerns us at this stage.
Okay. Thank you very much.
The next question comes from John Bridges with J.P. Morgan. Your line is open.
Morning, Sean, everybody.
Morning.
You mentioned new technology in Zone 5, which might be applied to LaRonde later. I just wondered which you were looking at. Was this automation or something else?
I think we've purchased our fleet of equipment underground. We were originally looking at going with used equipment, certain sectors, and we've decided that we had the perfect lab setting to test more autonomous equipment, both on the loading and then the trucking side. We're going to use our LaRonde Zone 5 sector to identify how robust this with the LTE technology, how we could adapt it further as we continue to design mining sequence at LaRonde. We would sort of benchmark that going forward as how we would think perhaps of mining below 3.1, for example.
Safer and fewer people. Yeah, all good.
I think on the people side of things, I think as you get at depth on a lot of these deposits, we're trying to maximize the 24 hours a day. A lot of the focus at this stage on the automation front is to get the full operating time opportunity. There's a lot of that involved, and the rest, we'll always need people, but trying to rationalize our manpower going forward.
How many hours a day do you lose at LaRonde at depth because of clearing blasting fume?
Well, you're probably marking about eight hours per day, eight hours per shift, roughly, so.
Yeah, I was just wondering between shifts when you blast. Anyway, the normal two-hour gap?
Correct. Yeah.
Okay, cool. Thank you very much. Good luck.
Thank you.
Once again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Next question comes from Mike Parkin with National Bank. Your line is open.
Yeah, just a follow-up on that last comment. In terms of, you're running kind of like 16 hours of productivity per day. With an autonomous vehicles, what would you think you could be running at? Would it be closer like north of 20?
Probably get close to that number. Yeah, that's a fair assumption.
Okay. With a major focus in the market on earnings, is there any major, like you mentioned here, for the April period had a 10-day outage at Kittila? Is there any other major outages at any of your other core assets that we should be considerate of in our quarterly earnings estimates going to go forward for this year?
No.
Okay. Well, that's easy. All right. That's it for me, guys. Thanks.
Okay.
Once again, if you'd like to ask a question, please press star, then the number one on your telephone keypad. We do not have any questions at this time. I will turn the call over to the presenters.
Thank you, everyone. Thanks for participating, and again, a reminder, 11:00 A.M., Delta Hotel Annual Meeting. If you can't make 11, we're serving a nice lunch at noon. Love to have you over. Thank you.
This concludes today's conference call. You may now disconnect.