Good morning. My name is Rain, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle First Quarter Results 20 21 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
I would now like to turn the call over to Chief Executive Officer, Mr. Sean Boyd. You may begin your conference.
Thank you, operator, and Good morning, everyone, and welcome to our Q1 2021 results conference call. We are moving through our slide deck and in that slide deck will be forward looking information. So please review the cautionary language that to is in our PowerPoint material. What I'd like to do is just review a bit of the sort of an overview of the to strategy, touch on the progress we're making on ESG and greenhouse gas emissions and what our plans are there going forward in terms of additional investment, particularly in the North, review the results of the quarter, talk about our exploration, which is a real push for us with a huge increase in our budget this year. So if we look at the quarter again, we essentially were able to build off of the momentum and strength that we saw in the second half of twenty twenty with the 2nd consecutive quarter of record gold production.
We did that strong operational performance with probably the most employees we've ever had and extremely good safety performance. Not only we're producing more gold, we're doing it very safely. Our costs were slightly better than forecast in the quarter. Financial position remains strong. We've declared a cash dividend again, so that keeps our track record going.
We've been paying, as you know, a cash dividend since 1983. The focus continues to be on growth and execution of our brownfield opportunities and project pipeline. We're still looking for 24% growth production from last year out through 2024. As we said, we'll touch on exploration. It's a big part of the story in terms of gathering information on the brownfields opportunities.
We're seeing extremely good results at LaRonde, good results at Meliadine. We featured some results here at Canadian Malartic and Hope Bay. We'll talk a little bit more about that. We plan to have a more fulsome exploration update later on in the second quarter. What we decided to do is not pile it all into a quarterly release like we did last time.
There was just too much information last February. So we'll be able to break it down and provide some forums with our exploration team to be able to discuss to the progress we're making on exploration in a number of areas. Having said that, Guy Gosselin, who runs our exploration group and has been with us for 20 plus years is on the call here, and he's available to answer questions on exploration. So no change in the strategy. That continues to be focused on optimizing the existing assets through taking advantage of the ability to convert more resource to reserve extending the mine lives of our key mines.
That's a low risk, high quality strategy, given that those are high quality ounces near existing infrastructure. And also we continue to to be focused on ESG. We score very well on ESG. We're recognized as one of the leaders in the industry in terms of ESG to the company by a number of external independent rating agencies and research agencies on ESG. We put out our sustainability report.
Our annual meeting is today. So we make that available around annual meeting time. So that today and we're adopting a net zero emissions target for 2,050 and we've begun the disclosure of Scope 3 emissions. We're fortunate and we look at our business because a lot of our production is powered by electricity. Over 50% of our production.
So on a relative basis, we have very, very low greenhouse gas emission intensity within the peer group. In Nunavut, We are required to use diesel to power those mines. So as we move forward to achieve our targets of reducing in getting to net 0 that will require investments in renewable energy and we're as we've talked many times before, we continue to work with the governments on alternatives like wind power and also a power line from Northern Manitoba up into Nunavut. In fact, at Hope Bay, the government has given the okay for a wind turbine there. We still have some work to do on that.
So we have made some on pretty good progress there. We talked about safety earlier, continues to be a priority. We've achieved one of the lowest to combine lost time accident records in our history and we continue to win a number of safety awards at several of our mines. One of the highlights over the last year, it's been challenging for many, but our teams have really stepped up in the communities. They've done a real professional job, a real classy job of not being asked to help, but stepping up and taking the initiative to provide food in certain areas, to provide medical assistance in certain areas.
As you know, our Nunavut workforce is still at home. It's been over a year. We're getting closer as more vaccinations are being put into people's arms in Nunavut. They were able to start the vaccination program there earlier. So we're getting closer to the point where we can welcome our Nunavut based employees back and we look forward to having them back.
As far as the quarter goes, record production for the 2nd consecutive quarter. As we said, without Hope Bay, it was 505 1,000 ounces, which is a record. That sets us up nicely to beat our guidance, but also to produce 2,000,000 ounces for the first time in our history, over 2,000,000 ounces. That's over 300,000 ounces more that we produced in 2020. So we continue to make very good progress.
Our CapEx estimate It continues at a little over $800,000,000 and we talked about the declaration of a quarterly dividend of $0.35 a share. As we look at the quarter, we're pleased and happy to be delivering strong cash flows, strong earnings, good cost, record production. I think the real value driver though continues to be exploration. We saw to the beginnings of this about a year ago at several projects. We highlighted, as we said, a few of our exploration results in quarter in this release.
East Goldie, the extensive step out there is potentially significant Because essentially, what East Goldie has done is turn what was a very marginal underground project into what will become Canada's largest underground gold mine, which we announced last February. We have always said from the start that Given the location of East Goldie in a totally different rock package than what the main structure is along that main break in that region. It opens up the potential, and we have over 20 kilometers of ground covering that to Atris' structure. So to have a step out over 1,000 meters to the east is important, we believe. It just demonstrates the immense potential of that area to find additional gold.
And as you recall in our study, which we put out in February, We only assumed that we would mine about 7,000,000 ounces of an overall envelope, which is currently known to be in excess of 14,000,000 to the east of the East Goldie mineralized envelope. So That's why we view it as potentially significant. It's close to the boundary of the Rand Malartic property, which we acquired a couple of years ago. That's a property where there is a 2% NSR, but we have the ability to buy it all back for, I think, dollars 7,000,000 So We just like that area. And I think as you recall, we said many times, one of the reasons that we got involved in this back in 2014 Is the fact that we were on that in that region for decades and we felt that there was the potential for Significant underground opportunity and that's unfolding as we had hoped.
So stay tuned for more results there. At Hope Bay, to a steady pace of work. We've got our team in place from Agnico that's augmenting the team at Hope Bay. We're making improvements in the operations. They are focused on the Doris deposit.
Exploration is largely focused on Doris. We think we can extend that part of the operation while we continue to drill the DRED and the Boston deposits. And at Upper Beaver, We had the best reported drill hole intersect ever on that property over 60 grams, almost 1% copper, a little over 16 meters at a depth of 1200 meters. So we continue to drill and work on our analysis of the Hope Bay of both the Hope Bay and the Upper Beaver opportunity. The next slide is really just a long section of Canadian Malartic.
There's 10 rigs going, to $30,000,000 program split fifty-fifty with our partner, Yamana. As we said, The structure is wide open. It covers 20 kilometers. You can see on the right, the Rand Malartic property boundary. That's a property that hasn't had much exploration on it, and that's why we say the structure It is totally wide open and that will be a main focus of our exploration program because it's the thickness and grade of East Goldie, which really drives to the entire Odyssey underground mine opportunity.
We also see on the next slide a long section of the Doris to deposit Hope Bay Mine. Just a reminder, the program is $16,000,000 approximately 70,000 meters of drilling, about 30,000 meters of that is delineating Doris and 40,000 meters will be exploring targets around Doris, to Madrid and Boston. From an operational perspective, we see improvement in recoveries at Hope Bay to over 90%. So step by step, making it a bit better, but the real prize we feel here is to the 2 large geological belts, 80 kilometers long. It's going to take some time to drill them.
We're not in a hurry here. While we optimize an approval, we have at Doris, we'll be really focused on what is the overall size of the mineralized deposits on these two large trends and that will form the basis for our analysis to look at how we can expand to the production capacity at this operation at some point in the future. As far as operating results, We got really good contribution from several of our big producers. We'll start with LaRonde. The key to the Quarter was really excellent productivity in the West Mine area and at LZ5.
At the West Mine area, we were able to produce more then our forecasted mining rate as we did also at LZ5. At LZ5, we have record production averaging over 3,100 tonnes a day, which was well above the forecast. And that was really driven by ongoing improvements and optimizing the usage of automated equipment. And we're also seeing that at the main L'Orange deposit. We continue to make Steady progress as we said at LaRonde, 26% of the mucking was done from surface at the LaRonde deposit And at LZ5, 21% of the production, mucking was automated, hauling done from surface.
So to a solid progress there. We continue the exploration program. We're developing 3 exploration drifts to explore areas below LZ5 from 1 kilometer to 3 kilometers below surface, which essentially Barrick and lacked Prior to that, we didn't do much exploration on. That's the same rock package. It's holds all the deposits on LaRonde, so it's wide open.
So excellent exploration potential. And that type of program is really a key component of our full potential program to understand how we can continue to optimize these large cash flow generators and extend the mine lives. And we see potential to do that at several of our mines, including La Ronde. Goldex, steady progress, 35,000 ounces, to a good cost performance, largely driven by the continued outperformance of the Railveyor system. It was above target at over 7,000 tonnes a day on average in the quarter.
So that technology, the teams have done an excellent job in not only looking at how they could apply it at Goldex, but actually ramping up and improving its productivity, continue to explore that deposit, Particularly around the South Zone, which is higher grade. So good solid performance coming out of Goldex. At Canadian Malartic, again, good contribution, Producing almost 90,000 ounces or half of that operation. We had record tonnes mined in January. Mill performance was above target, averaging over 58,000 tonnes a day on a 100% basis, so good performance there.
To the Odysee drilling and that will be a key part of this project as we look forward. What we saw in February, as we said at the time, was basically what we would call the first cut. This will be optimized continually as we go forward, particularly as we understand how much gold exists in Pontiac Sediments, which host to the East Goldie deposit. So this could have a meaningful impact on the valuation of that opportunity at Canadian Malartic. Kittila set records in March for monthly gold production and tonnage milled.
They're also making good progress on autonomous production, both in drilling and haulage. Trials were underway in Q1. That will be important for that mine as it looks to expand further. We are impacted by COVID there in terms of the Kittila shaft and delays there because the team that was doing the work held us back. We've been transitioning into local employees there.
That doesn't really impact our ability to do the ounces because we can simply take them from the ramp system. It's just a little bit more costly to be using the ramp, but we'll get the shaft in place to second half of next year, about 6 months behind schedule. Meadowbank steady improvement produced about 80,000 ounces. They set a record in March for long haul trucking performance. So good steady solid improvement there.
With good production coming particularly in March, which allowed them to post a quarter of about 80,000 ounces. At Meliadine, when you add in the tiorganiac ounces, Meliadine produced more gold than any of our other mines for the first time producing 96,000 ounces. So we've made major advances in terms of productivity. We processed 4,600 tonnes a day, which was the target. Over the last year or so, gradually working up to that target.
We expect to be at 4,800 tons a day by the Q4 of this year and ultimately continue to expand to 6,000 tonnes a day by 2025. This is another project which will be long life. We have continued to explore it, starting exploration drilling back about 18 months ago once we got into commercial production. We continue to get good intersections at Pump South and West Megg, Which indicate that the deposit continues to be wide open at depth as we drill it. So in Mexico, Steady performance, good cash generation there.
India, little bit of an issue with water. We would expect to be able to ramp up production in the second half of the year there. But when you add it all up, pre Opay 505,000 ounces approximately, which was a record. That generated good earnings, good cash flow per share of $1.47 which is a strong quarter. Our financial position remains strong.
We paid cash for Hope Bay, including the buyback or buy down of the royalty that was on that property. So as we move forward, we'll continue to rebuild that cash position as we generate strong net free cash flow. So just a quick summary. As we said, 2nd consecutive quarter of record production. We continue to be focused on delivering the growth of 24% from last year out through 2024 as we focus on brownfield opportunities and our project pipeline as we get more information on these opportunities through our expanded exploration budgets, we can provide updates on that.
Our focus is still on low geopolitical risk regions. We think that's extremely important as we look at the business going forward. These are places we're very comfortable being in. We've operated in them for a number of years. A big part of our strategy is synergies and being able to transfer technology, but also knowledge and experience between these operations to help to keep our costs down, but also to help us understand new opportunities that we find through exploration and how we build them into the project to the line.
So I think what I'll do, operator, is open the line for questions. We've got our full team here, and we'd be happy to take questions.
Thank you. Your first question comes from Fahad Tariq from Credit Suisse. Your line is open.
Hi, good morning. Thanks for taking my two questions. Maybe first on Nineveh. You talked about in the release, at least starting to have discussions with local authorities reintegrating the local workforce. Can you remind us what that would mean from a cost perspective?
I know there's a number of initiatives that Nikolas spent on while those employees were unavailable, but as they come back, can you just remind us from a quarterly basis what that means from to the cost savings perspective.
Yes. Hi, terrific, it's Tamara here. We will end up saving money when they come back. As I think we've expressed before, the additional cost, We're still paying those employees 75 percent of their salaries. So that works out to about $1,000,000 a month.
There's a lot of work that's gone in transitioning them back, mostly about safety for the communities as well as the employees. But Yes, there will be a savings of about $1,000,000 a month as they come back into the workforce.
Okay. Thanks. And then I'm sorry, just to follow-up on cost as well. So I know 1 of your peers talked about like the stronger Canadian dollar having an impact on obviously the Canadian exposure or Canadian exposed costs and operations. 32% of your exposure is hedging in 2021.
Any color on if FX rates stay where they are today for the rest of the year. What does that mean for maybe annual cost guidance, including CapEx?
Yes. It's about sorry, it's Dave, did you want to take that or should I take it?
Go ahead, Amar.
Okay. It's about as you mentioned, it's about 32% hedged. The sensitivity we've been able to Obviously, you saw in the Q1, we dealt with that. The dollar right now is it was averaging about $1.26 versus our budget of 1 So we're more than able to offset that, but it is something that we're on top of all the time with regards to mitigating it. Right now, we haven't adjusted our guidance even with the movement in the
currency. To Yes,
I would just add
sorry, Sean, what were you going to say?
No, I was just going to turn it over to you, maybe just give some color on your thoughts on hedging and what's in place instead of?
Yes, absolutely. Thanks for the question, Fahad. It's an interesting time because with the Canadian dollar lower than $1.23 at the moment and the guidance was set at $1.30 You get into the interesting situation where you probably end up trying to protect things like 128 that you Probably wouldn't have considered previously, but there does seem to be some strength in the Canadian dollar. The Canadian government is making some noise about raising interest rates. The U.
S. Government is not making noise about raising interest rates. So I think that has contributed to the strength of the Canadian dollar. And one of the things we just talked about a couple of days ago was to perhaps use some more exotic instruments to try and benefit the company, but pay a little bit more attention to the volatility and really pick our moments here because we with the addition of TMAT, I would say we're feeling a little bit under hedged. We would normally be around 50% hedged for the current for CAD on the year at this point.
And so it's something that we're looking to add to opportunistically. And I think there's always volatility. So I believe we'll get our chance.
Okay, great. Thanks for the color. Thanks.
Your next question comes from Tyler Langton from JPMorgan. Your line is open.
Yeah, Good morning. Thanks for taking my question. Just a follow-up question on costs. I mean, are you seeing outside of the exchange rate pressures, are you seeing anything with Sort of labor, labor tightness, like other materials, just any concerns there for the cost guidance?
I'll start and then I'll turn it over to Dominic Gerard. In terms of labor tightness, that's been pretty stable in terms of what we see is sort of annual increases in our wage costs, particularly in Canada, which is the biggest part of our business, which has been sort of 3% or so a year. We don't see any sort of pressure on that as we look forward. As far as inputs, I'll turn that over to Dominic Gerard, who's on the call on the input price side.
Yes. We start to see some increase, let's say, in the coming time, mainly steel, concrete, also tires. But what we're doing, our procurement team is well to on that and try to take some opportunity on that. Let's say when we give a contract, People start to be hesitant a bit to give a price because it is really volatile. So far, price are still into our range.
But again, this is as everybody to have the situation in our own lives that we see pressure coming. And maybe on the workforce, As Sean mentioned, this is still well, we're in good position except on the drillers where we see a bit more of a competitive into Canada and Europe, but other than that, this is still okay.
Okay, great. Thanks. And then just, I know, Dean, I think the cash costs in the quarter were like around $6.28 an ounce, and I think that's a decent amount below the annual guide of around $730,000,000 $740,000,000 Can you just talk about, I guess, what and you talked about good productivity, but was there anything else in the quarter and just kind of how you think about for the remainder of the year at the mine.
Well, on cost per ounces, we produce more ounces. So that's the main driver. We have a better grade into the month with a good productivity. I think an interesting note at the cost, if you look to that, I think Slide 17 or 18 where you see the Nunavut operation cost per tonne in Canadian going down. So that trending is still continuing with the, let's say, optimization at sites, more productivity, better control on cost.
I think we're going to just continue to see that in the coming quarters.
Okay, great. Thanks so much.
Your next question comes from Anita Soni from CIBC World Markets. Your line is open.
Question on cost, on the unit cost. Across the board, the unit costs seem to have been better than what you had to put out our guidance in February. Can you just give me a like run down some of the assets and some of the main drivers and try to get us get me to understand why those costs would maybe revert to what you were guiding to or do you expect those unit costs You too outperformed.
Well, maybe I'll start. And as Dominic said, a lot of it was a few more ounces in the quarter, Which certainly helped from a unit cost perspective. But in terms of the drivers, We will see some impact on FX. I think some of the input prices we can offset just through productivity. Will we be able to lower that cost guidance?
I wouldn't think so given that the FX continues to be volatile and unknown to us. So that's why we felt that it was sort of premature to make any sort of to longer term call or extend our view on the cost performance going out. We do have opportunities at some of the mines to produce a bit more gold. We'll see how that unfolds as we get through the next quarters. As we said in the release, Q2 is a bit less.
We have to planned shutdowns at LaRonde, Goldex, Kittila had some work being done as well, El Yadeen. So there's several of the operations that are down for a few days, which puts a little bit lower production in Q2, but that comes back strongly in the second half. So if you look at achieving the guidance, we're looking for really Strong Q3, Q4 from an ounce perspective. So that will help the unit costs at the back end of the year.
Okay. So maybe on the Canadian dollar Costs, they would be the same, but if we're looking at the U. S. With the stronger dollars, the overall per ounce guidance on U. S.
Dollars would be the same. And then second question would be with respect to the TMAC acquisition. So the Hope Bay, I noticed you had some pretty good grades for TMAC. I mean, I had the pleasure of covering that before you bought them out. So 10.8 gram per tonne material is pretty good grades.
What can we expect? Is that like similar with similar throughput levels? Or Will it be variable with variable throughput and variable
grade? Dominic, can you
handle that one? Yes, I could take that one. The throughput is, let's say, between 600 tons per day to 700 tons per day and the grade is going to vary, I don't know, 9, 10 grams per tonne, which bring us to the 218,000 to 20,000 ounces per quarter. In the first part of the let's say, in the Q1, we were more in the BTD zone, which is more higher grade. Through the year.
We're going to move to the DCN zone, which I think it's around 7, 8 grams per ton zone, so a bit lower grade, but with a bit more tons. So that's really the plan. It is honestly very interesting grade. And it's good to see progress at the mill reaching 91% recovery in the first quarter. We're a bit higher than that Q2 up to date.
Let's see if we could maintain that, but that's interesting. And if the mine is able to to produce more with optimization. We have room at the mill. So it's encouraging to see the continuous improvement there.
Okay. And then just to follow-up on that. The development work, When do you expect like the capital levels that you were spending this quarter that was probably maintained for the course of the year, I think I saw in your guidance. But as we move forward into next year and the year after, when will you have to invest to really get continue to produce these ounces?
You mean in 2021 or?
Like looking into 2022, 2023, Should we expect the similar capital levels for going in longer term?
I don't have answer to that question yet. The thing is revising a new base plan because now we've put the Madrid ore body and care and maintenance. We postponed that. That have helped for the CapEx because we avoid some cost at the short term. We still need to do some thinking to really put the right position for the ramp and the infrastructure.
And from that new baseline, which is going to be ready in 2022, we're going to have a better view in Q2. We're going to have a better view, but so the spending right now is approximately EUR 10,000,000 per quarter. I believe that's what we're doing in terms of CapEx at the whole bay.
Okay. Thank you.
I answered my question.
Yes. Anita, just on the strategy there. The strategy is to sort of be cash neutral on that as we drill and get more information. What we think based on what we've seen so far is we think there's more at Doris, so that would extend Doris longer. As we said, we've stepped back at Madrid because we just don't like the location Of the ramp, particularly the type of rock it's in.
So it's required us to sort of rethink that. But again, as we said, we're not in a hurry. We're in a hurry to drill it and to understand it, but we're not in a hurry to to ramp up CapEx. We just see this thing as very, very long term. We're going to find more ounces there.
So we're going to take our time in terms of next big steps. But in the meantime, if we can keep it sort of cash neutral and keep those drills turning, That's a good objective for us.
Yes. I mean, it looks like the focus would be on finding similar grades and more ounces there rather than necessarily improving the mill, it's running at 91%. Yes. Okay. Thank you.
Thank you.
Your next question comes from Puneet Singh from Industrial Alliance. Your line is open.
Thanks. Good morning. Just related to Q2, are there any higher grade stockpiles that you already have at some of these Assets that could potentially lower the impact of maintenance in Q2. Dominic?
Yes, not really. We don't usually when we have high grade stockpile, we process them. We don't wait for that. And the Let's say the shutdown in Q2 are there question of mill liners wearing that their lifetime is done. There is a shutdown at Kittila for the autoclave where we need to do a dentist job because the scaling is built up.
We need to clean it. It's to the 10 day shutdown. There's one at the Laron. It is also a 10 day shutdown where we do more in deep electrical maintenance. We use that season that part of the year because it's a better season to do it and also it's prior to summer holiday.
So strategically, it happens that we have more shutdown in Q2, but that's normal operation. We're going to see through the second half of the year better grade at La Ronde not at La Ronde, at Meadowbank And also a good productivity everywhere and that's going to be a better second half, but it's just a question of timing.
Okay, great. And at Meadowbank, you did really well this quarter and you're calling for a similar production rate next quarter. Do you think you'll still have some of that softer ore helping you next quarter? How should we think about that?
Yes. Let's say the mine is better is producing better than planned and the mill is also able to process more. A part of that is related to the software, part of that is related to the very good to the performance on maintenance availability and operation productivity. So we there is opportunity to do better. Let's say, the bottleneck remains the hauling in between the 2, the mine and the mill.
We saw record numbers in March at 11,000 tonne per day. So there's also 4 other trucks coming on the barge. So that's going to give us more flexibility for the second half of the year. If we're able to do more transportation, there's opportunity to do more tons.
Okay, great. Those are all my questions. Thank you.
Your next question comes from John Tumazos from John Tumazos Very Independent Research. Your line is open.
Hello, John.
At this time, that question has been withdrawn. Your next question comes from Greg Barnes from TD Securities. Your line is open.
Thank you. Sean, this big Step out
at Malartic East Goldie. Does that potentially change your development approach
on the ground and where you would Orion Mining.
Yes. Okay. I think it's too early. I'll let Guy in a minute just to give you his color on what we're seeing. I think that what we do know there is that there's tremendous capacity in the plant once we transition into an underground.
So I think we need to drill the Pontiac sediments and see if there's if East Goldie is bigger, if there's another repeat of something like East Goldie, if it's on non royalty ground, then Certainly, the economics could be better. So this could be, I don't know, it's early. It could be something like the LaRonde area where we have multiple shafts over 20 years. So we don't know. It's too early.
But I think when you see something like this. I think our experience tells us you pay attention, you follow it up and you understand it and then you try to factor it in for additional development. And so I think when we look at Kittila, we always thought it was a potential L'Orange in terms of multiple shafts over time, Given the size of that deposit, we continue as we move to the north, continue to see that deposit grow. As we go deeper, we continue to see that deposit grow. LaRonde was the example of multiple shafts over 30 plus years.
Could the Malartic area to be something like that. I think what's interesting to us is here you have an underground mine and area that was mining initially in 1950 We're shut down and then the Osisko team was astute enough to get the open pit up and running and that Gives us an opportunity now to build what we see as being Canada's largest underground mine. How long does it go? I think that's the question. And the other question, as you just said is, is there an ability because of multiple sources of ore that we don't know of yet to actually have more tonnage coming from underground.
I think that's the question we have to answer. Guy, can you provide some of your color? I know you're probably Feeling lonely there. We've won't answer questions without an exploration.
No, I think Yes. No, it's a pretty good question. But when you look at it, it certainly doesn't move the center of gravity of the ore body yet because the with the core part of East Goldie that has Now that's 6,400,000 ounces and more with good grade and width you see also that we've provided result from the tight fill, the infill drilling within the main ore body. So that is not changing the center of gravity of something that is already quite sizable with the total 14,000,000 ounces. So I think that from that perspective, But as Sean mentioned, our team basically when we were looking at the ore body, because the ore body at East Goldie is quite Predictable.
It is simple like we see plywood shape and we've basically looked at that structure and let's say, well, using the known geometry, projecting it the kilometer to the east. We were having some ongoing drilling at the Rand to Artech, we've extended those draw. And even a week before we got to the zone, our team told us, well, we should get into the zone at 2250 meters down the hole. They got into the zone 10 meter off from their predicted target. So they got into the structure right where it was supposed to be with exactly the same type of war, cut and paste of what we see within Usbodie.
And we were quite amazed that we were able to project and predict the location of the ore body a kilometer to the east and get into it right where it was predicted. But yes, we well, that first roll is interesting in terms of the fact that the zone is predictable and where it was Supposed to be. And are we yet in the best part of the deposit at that easting? So a lot more drilling will be planned moving forward to better understand at that listing where the center of gravity is and are we as we see in the known part of the East Goldie, there will be higher grade. The grade Varies from 2 grams to 8 grams with an average of about 3.5 grams, 4 grams, so pretty interesting.
So I understand the hole was drilled from
the Rand Malartic property. Are you hitting mineralization higher up in the hole on that side of the property boundary?
Yes, we usually within the Rand Monarch, there are known porphyry intrusion like porphyry 12 that holds the Odyssey, But with some 1 gram, 2 gram over 10, 15 meter, but at the end of the day, we use that drill hole and we push it way deeper, enter into the Pontiac for 600 meter to reach out for the East Goldie. So we have multiple targeting every single of those draw holes. So we usually start quite far to the north, get into the entire volcanic
Your next question comes from Tanya Dukasonek from Scotiabank. Your line is open.
Yes. Good morning, everybody. Good morning. I have a couple of questions. If I could come back just to again the cost structure.
I just want to check on just a couple of things on inflation and currency. Maybe just Dave, just on the sensitivity for the Canadian dollar, I just want to check if this number is still holding, about a 10% move from the $130 mark, having an impact of about $50 per ounce on your cost structure. Is that still a reasonable assumption?
Yes. When we put that number out though, we didn't have the exposure from TMAC yet. So it would be a little bit different than that. The way I think about it is, We can still protect that $130,000,000 if we're able to do the same amount. I'd say $128.
So what we think now with the TMAC is probably $5 or $6 for 1% change or 100 basis points, pardon me.
Okay. That's helpful. Thank you. And just coming back on to the inflationary pressures and maybe it's Dominic that's going to take this one. But You mentioned steel, concrete and tires.
Are you seeing anything in freight? Any inflation there or in cyanide?
I don't have the detail for cyanide freight. I will say most probably, but the again, we don't see challenges to meet our guidance so far and let's say the minds of productivity are offsetting those increase. But we Let's say, we keep an eye and it keep under the radar mainly on delivery time. And if we see something, For example, in tires that creep up, we could take decision to put more into inventory if needed. So that's type of thing we're doing a close follow-up.
The barge season, lots of the material, let's say, if I took the North an example, a lot of the material have already been ordered because that needs to be at Beacon Core for June, July when we start to do the shipping. So all those ones have been protected. But now we're Starting to look okay, what could happen in for 2022 and maybe to take some position if needed.
Okay. So you're protected for this year. It's just more for next. Okay, perfect. And if I could come back to I know Guy has been feeling lonely and maybe Sean from a bigger picture on the exploration side.
So I just want to understand just the strategy for you this year in terms of reserve replacement. I mean, you've got a lot of interesting exploration targets and success. Maybe just review some of the assets for us where you think you're going to be able to replace reserves or the strategy of move or increase
Yes. Guy, can you take that one?
Yes, certainly. I'll go over the main assets. I guess, Laurent, as you know, it's some of those mine, they know they come in sequence until we kind of demonstrate the concept, extend the production. Last year was a good year at Lawang where we've been adding more reserves at LD5 with the continued success this year. I do not anticipate, let's For example, at Laurent specifically that we're going to replace completely what we're going to mine.
Although there's drilling ongoing, We are positioning ourselves, let's say, for Laurent, the more important thing this year is that we're positioning those exploration drift beneath the busque, but it's more kind of a long term payoff. So we made this year and Maybe not completely see a complete replacement and eventually down the road we'll get some more answers showing up further down the road. Same thing in Malartic. Malartic, quite sizable deposit. As you know, we our share are depleting 350,000 ounces roughly a year.
Well, until we get the study to bring East Goldie into reserve, we won't see a replacement. So right off the bat, if we're not replacing Malartic. So from the existing mine, those 2 have those specificity that they're going to come further down the road, there will be a chubby addition of reserves. On the other hand, you have something like Goldex where we see a complete replacement. We see Kittelah where we see a complete replacement.
Kittelah, it's more again, Now we're having the shaft, we're having a case that we can get 500 meter below the We're more looking at the long term because we know that there's still mineralization at kilometer below the bottom of the shaft. So now we're moving more into to put some more robustness on the resources and reserve beneath the bottom of the shaft. So I think for the near term, we can to expect that Quetzalcoatl will replace what they're going to mine for the upcoming 2, 3 years. After that, it's going to have to come with, let's say, a plan to convert a bigger part at depth. In Mexico, in Los Altos, I think we're in good shape to replace a fair part of what we're going to mine.
Line Via, It's more of a reminding the outside until we get a plan to do something with the sulfide. So we will see a net depletion at La India. Santo Gertrudis will come further down the road. I guess we're getting good results, good signs. So eventually we'll come out with a reserve.
Will it be in 2 to the phase where we cut the oxide first and the sulfide further down the road. So we're working on it. And then you enter into the project. Obviously, we've been drilling a lot at Upper Beaver, and we anticipate that potentially next year at the February update. We'll be able to come out with an updated study.
We'll come with some addition of reserve in line with the good result we've been seeing. And we're currently looking at to the old Bay Historical Resources to make up our mind about what we're going to do with those historical reserve and resources integrating into our business for year end.
Okay. So that I know so just in my understanding, so I should think of more, La Ronde and Canadian Malartic and maybe Hope Bay has more resource growth for year end and the other mines you've given me in terms of reserve replacement. Would that be a fair way of looking at it?
Laurent and Malartic, yes. Obate, not We're still under review of our plan over there.
Okay. That's helpful. And if I could just add just on Meliadine, Sean, just On the saline water pipeline, just maybe a little update there in terms of where we are with to public hearings, which have had to be postponed and just getting the permit.
Yes. Dominic, you're involved with that one.
Yes. I can take that one. Yes. Related to the COVID breakout in Nunavut, the public hearing has been postponed. But we don't have issue because mainly with our good performances on grounding practice, We see that inflows are 50% lower than what we've planned, plus the mining rate into the pit is going also better than planned.
So We have enough room capacity. It's not an issue. And we're going to continue to follow the process for the hearing. We don't have news yet when it's going to happen. Again, everything is going to depend on how it's going to go with the COVID, But we stay tuned on that.
Okay. Thank you so much.
Hey, Tanya. Before you go, I just want to Clarify one thing on the hedging. When we give guidance on the sensitivity to currencies, We do not consider the impact of hedging and because we have hedged CAD for 1 100 basis points move from budget, so 130 CAD to 120 CAD would not be the full $50 per ounce on all Because of the existing hedges, it would only be about $30 per ounce. I just wanted to make sure you understand that the guidance Doesn't include any impact of hedging.
Okay. No, that's really helpful because that's meaningful. Thank you.
Yes, it is meaningful. Yes. Thanks.
Your next question comes from Ralph Profiti from 8 Capital. Your line is open.
Good morning. Thanks for taking my questions. Sean, I wanted to come back to the East Goldie step out with 2 quick questions. First one, it doesn't sound like there's going to be an impact on the planned or target positioning of this initial shaft. But when does that Definitive decision have to be made in terms of where it goes.
And then my second question is, how flexible is the permitting process If we run into a situation where we have successful drilling to the east over time and sort of the mine plan can become a little bit more dynamic.
As far as the shaft location, we've essentially selected the shaft location there. So that shaft will continue. The question is, is there additional ore that's found through exploration, which causes us to add additional underground access? So I think that's the real question here. So we've always looked at this as being large and long life.
And so I think what we're seeing is that If we were to incorporate much more than 7,000,000 ounces of the 14, this would go well beyond 2,039. I think what the drilling has suggested is There's a possibility that it's longer life, but is there now a possibility for additional sources of ore? Because that's essentially why This is now a successful project because East Goldie gave us that additional thick higher grade source of ore that allowed us to pull it all together. So I I think, although it's early, I think we need to sort of drill that entire length of the Pontiac sediments and do it systematically. To initially follow-up on this drilling that's been done from Rand Malartic to see what's around this latest drill hole And that may start to change our thinking in terms of additional investment going forward.
So we have to certainly do that in conjunction with our partner. But what we see so far, we like. And as you heard from Guy, It matches up perfectly where you would expect it to be given the orientation of East Goldie and how it plunges. As far as permitting, maybe Dominic or Guy can talk about the sort of permit process there. It's pretty straightforward because we have an existing operation.
So it's not like we need, we're starting from scratch there. So the authorities are pretty amenable to that and it helps that it's underground. But is there anything else, Dominic or Guy on the permit side. If we decided that we had to initiate additional underground access at some point to to increase the underground mining rate.
No constraint from the exploration standpoint.
Well, Amit, as you mentioned, Sean, it's easy to permit an underground. Let's say, we've hit the first, East Goldie 2, 3 years ago, and now we're sinking the shafts. I guess, if we have another shaft to build that could be the same type of thinking. So go gi drill that.
Understood. Thanks very much.
Your next question comes from John Tumazos from John Tumazos Very Independent Research. Your line is open.
Thank you. Sorry, I had the mute button on before. Sean, just in case, your good technical people Succeed on many fronts and everything comes up roses. Santa Gertrudis, Upper Beaver, Hope Bay, Hammond Reef and a couple of the exploration projects among 17 on the exploration spot on your webpage. Would you rule out going to 3,000,000 ounces or more.
And should we assume that you're just going to rank the projects by internal rate of return At a conservative gold price scenario, it sounds like there's a lot of progress.
Yes. I think that we've been pretty consistent in saying that for a lot of reasons, largely due to risk and not wanting to increase the risk underlying risk level of the business. Our preferred approach is sort of measured discipline as far as allocating the build capital. It's okay to bump up exploration budgets, particularly when you're getting results so that you can get information, Which is kind of consistent with the approach we took at LaRonde early. People would say, why the heck are you drilling at 8,000 feet at LaRonde when we were doing it?
You're never going to get there. And our view was, well, we want to know what we own. And I think this is exactly the approach we're taking is that we want to know as soon as we can what we own to actually help us work through the options and the ranking, the relative ranking, and I think that's going to be important. What we don't want to do is build multiple projects at the same time, blow our CapEx budget out, to heat up free cash flow. That's not a high quality business.
So I think that we're comfortable with this approach. As we said on something like Hope Bay, we are literally in no rush. When we bought it, people were somewhat nervous, oh my goodness, this is going to blow their CapEx budget up. No, it's not, because we view it as long as we No, it's not, because we view it as long term. Look at how patient we've been with Laron for 30 plus years, 40 years, step by step as the drill sort of led us to the next step, we just gradually invested in that opportunity.
So this ties into the question about reserve replacement as well. When we think about it, There's a pretty good chance our reserve number in February of next year is the same or higher. We have Hope Bay, which isn't in our 24,000,000 ounces of reserves. So, and Guy went through the list and we're getting good exploration results on a number of projects. So that's the basis.
But I think the nice thing about it, John, is we have this combination of brownfield opportunities at places like LaRonde, Kisla, Goldex, Eliudyne, and then we have the pipeline. And it's how do we to put together a mix of both brownfield and pipeline so that we can get the best bang for what will be a predetermined capital allocation pie that everybody is competing for internally and that we just find that that's going to be the most effective approach. And A lot of that is really just we just happen to be a gold mining business. That's just good business. But we like the jurisdictions we're in.
We like the fact that think about it, you know, Laurent, you've been there many times. We're putting out 3 exploration drifts to the west into the Bousquet property, something we bought 15 years ago for CAD7 1,000,000 And there's ounces there. We've got a massive sulfide zone to the east of the main ore body at LaRonde. Look at the drill results at Canadian Arctic. There's a lot of life left here.
Look at Kittila as we go deeper. I think it got lost in the February release. I think the step out At Kittila, it was several 100 meters that stepped out from the main deposit there. So for us, this is all about per share value over time. And if we're patient and keep a lid on the share count and work the drills hard, we have some pretty smart people throughout the business that know what to do with this stuff when we find it.
And so that's going to be the approach because it's worked for many, many years, there's no need to change it. But I have to say, and I've been here 36 years, the best The most exciting part of this has always been the exploration stuff. And we never know. This whole step out of Malartic, it may not be anything, But it may be something pretty important. And so that's the excitement.
That's what keeps us coming to work every day to see how the teams are able to continue to grow these deposits and then turn it over to the project teams and the construction teams and the operating teams to see how they can turn it into meaningful cash flow generator. So no change in the strategy.
Thank you.
There is no further question at this time. I would now like to turn the call over back to Mr. Boindt for closing remarks.
Thank you, operator, and thank you everyone for your attention. We have our AGM today at 11. I don't think you'll hear anything new from what you just heard over the last hour or so on the conference call, but you're certainly welcome to join us. It's virtual. But anyways, enjoy the rest of your day and thanks for your time and the questions.
Take care.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.