AGNICO EAGLE REPORTS SECOND QUARTER 2022 RESULTS - STRONG OPERATIONAL PERFORMANCE DRIVES RECORD QUARTERLY GOLD PRODUCTION; PRODUCTION AND COST GUIDANCE REITERATED FOR 2022; UPDATED DETOUR LAKE MINE PLAN BASED ON 38% INCREASE IN MINERAL RESERVES

2022-07-27

TSXV - TSX Venture Exchange · Gold · Silver · Antimony · Canada

Canada NewsWire

Stock Symbol: AEM (NYSE and TSX)

(All amounts expressed in U.S. dollars unless otherwise noted)

TORONTO , July 27, 2022 /CNW/ - Agnico Eagle Mines Limited (NYSE: AEM) (TSX: AEM) ("Agnico Eagle" or the "Company") today reported financial and operating results for the second quarter of 2022.

Second quarter of 2022 highlights:

Record gold production and strong earnings and cash flow generation in the second quarter of 2022 – Payable gold production 1 in the second quarter of 2022 was 858,170 ounces at production costs per ounce of $766 , total cash costs per ounce 2 of $726 and all-in sustaining costs ("AISC") per ounce 3 of $1,026 . These results include the first full quarter of production following the completion of the merger between Agnico Eagle and Kirkland Lake Gold Ltd. ("Kirkland Lake Gold") on February 8, 2022 (the "Merger"). For the second quarter of 2022, the Company reported quarterly net income of $0.61 per share, with adjusted net income 4 of $0.76 per share. Operating cash flow was of $1.39 per share

| | | 1 Payable production of a mineral means the quantity of a mineral produced during a period contained in products that have been or will be sold by the Company whether such products are shipped during the period or held as inventory at the end of the period. | | 2 Production costs per ounce and total cash costs per ounce are non-GAAP ratios that are not standardized financial measures under the financial reporting framework used to prepare the Company's financial statements and, unless otherwise specified, is reported on a by-product basis in this news release. For the detailed calculation of production costs per ounce and the reconciliation to production costs and for total cash costs on a co-product basis, see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance". | | 3 AISC per ounce is a non-GAAP ratio that is not a standardized financial measure under the financial reporting framework used to prepare the Company's financial statements and, unless otherwise specified, is reported on a by-product basis in this news release. For a reconciliation to production costs and for all-in sustaining costs on a co-product basis, see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance". | | 4 Adjusted net income and adjusted net income per share are non-GAAP measures that are not standardized financial measures under the financial reporting framework used to prepare the Company's financial statements. For a reconciliation to net income and net income per share see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance". |

Ontario and Nunavut platforms drive solid operational performance – Gold production and costs in the second quarter of 2022 were better-than-expected primarily due to positive grade reconciliation at Amaruq and Detour Lake and productivity improvements at Macassa. Better grade performance allowed Amaruq to have its best operational quarter since start up with payable production of 96,698 ounces of gold at production costs per ounce of $1,110 and total cash costs per ounce of $993 . In total, Nunavut payable production was 194,270 ounces of gold at production costs per ounce of $997 and total cash costs per ounce of $915 . In Ontario, payable production was 256,777 ounces of gold at production costs per ounce of $664 and total cash costs per ounce of $626 . The strong operational performance in the second quarter of 2022 puts the Company in a good position to deliver on 2022 guidance forecasts

Gold production, cost and capital expenditure guidance reiterated for 2022 – Expected payable gold production in 2022 remains unchanged at between 3.2 and 3.4 million ounces with total cash costs per ounce and AISC per ounce between $725 and $775 and $1,000 and $1,050 , respectively. Given that inflationary pressures are expected to continue in the second half of 2022, the Company believes that total cash costs per ounce and AISC per ounce could trend towards the top end of these ranges. Gold production in the second half of 2022 is expected to be approximately equally split between the third and fourth quarters. Total expected capital expenditures (excluding capitalized exploration) for 2022 remain estimated to be approximately $1.4 billion . Guidance for 2022 includes production, costs and capital for the period commencing January 1, 2022 for the Detour Lake, Macassa and Fosterville mines

Inflationary environment expected to remain challenging in the second half of 2022 – During the first half of 2022, cost pressures were largely offset by strong operational performance, optimization and cost saving initiatives, positive foreign exchange impacts (weaker Euro and Canadian and Australian dollars) and currency and fuel hedging programs. In the second half of 2022, the Company's focus will continue to be on increasing operational efficiencies and cost optimization at all mining operations. In addition, the Company anticipates continuing to opportunistically add to operating currency and fuel hedges

Corporate synergies largely completed and exceed initial estimate; Focus shifts to delivering operational synergies and strategic optimizations – Corporate synergies related to the Merger (approximately $40 million to date) have been the primary driver of realized synergies in 2022. While the realization of the operational synergies and strategic optimization will be a multi-year endeavour, further progress to identify and secure opportunities was made in the second quarter of 2022 including: Detour Lake Mine update – A recently completed technical evaluation shows increased mineral reserves, a more robust mine plan and potential for exploration and production upside – Among other things, the new technical evaluation lowers the mine plan's risk, extends expected mine life by 10 years to 2052, increases gold reserves by 38% (or 5.6 million ounces ("Moz")) to 20.4Moz (835.1 million tonnes at 0.76 grams per tonne ("g/t") of gold), increases recovered gold by 38%, increases production in 2028 to 2031 by 0.4Moz (reduces a dip in production that was in previous mine plan), increases production in 2032 to 2042 by 1.8Moz, increases production in 2043 to 2052 by 3.0Moz, has higher average grades and lowers average costs for period between 2022 and 2042. The Detour Lake mine continues to have strong exploration upside primarily to the west and at depth, suggesting potential for an underground mine and extensions to the current open pits. The Company is evaluating additional scenarios to potentially increase mill throughput beyond 28.0 million tonnes per year ("Mtpa") after 2025. In addition, the Company is assessing the potential for Detour Lake to increase production to 1.0 million ounces or more per year. The Company expects to have an initial assessment on this potential completed in late 2023

Drilling at Detour Lake has encountered significant intersections that extend the deposit two kilometres west of the current pit outline – Drilling has encountered gold-bearing mineralization along the Sunday Lake Deformation Zone and has continued to intersect a key gold-bearing chloritic-greenstone geological marker horizon found in both the Main Pit and West Pit zones. Highlights include 32.3 g/t gold over 4.8 metres at 955 metres depth (a two kilometre step-out hole), 2.9 g/t gold over 29.7 metres at 305 metres depth and 6.0 g/t gold over 32.7 metres at 481 metres depth. The Company plans drilling to further investigate the westerly trend of the deposit to assess the potential for pit extensions and underground mining

Key Exploration and Development Projects Continue to Advance Strong investment grade balance sheet; $125M debt repayment in April 2022 and commencement of normal course issuer bid ("NCIB") in June 2022 – On April 7, 2022 , the Company repaid with cash the $125 million 6.77% Series C senior notes at maturity. At June 30, 2022 , the Company's net debt 5 totaled $434.3 million . Subsequent to the quarter end, the Company repaid with cash the $100 million 4.87% Series C senior notes at maturity on July 24, 2022 , further reducing the Company's indebtedness. The Company's NCIB was initiated in June 2022 and 453,000 common shares were repurchased in the second quarter of 2022 for $22.3 million . Under the NCIB, the Company is authorized to purchase up to $500 million of its common shares (up to a maximum of 5% of its issued and outstanding common shares)

A quarterly dividend of $0.40 per share has been declared

"In the second quarter of 2022 the Company set a new quarterly production record driven by both strong operational and safety performance. In Nunavut, Amaruq had a record quarter for both costs and production, and the Ontario mines exceeded forecast. This strong production performance led to better than expected earnings and cashflow and puts us in a good position to deliver on 2022 guidance forecasts, despite ongoing inflationary cost pressures," said Ammar Al-Joundi , Agnico Eagle's President and Chief Executive Officer. "During the quarter, exploration continued to deliver exciting results at Detour Lake, Odyssey and Hope Bay. I am particularly excited by the step-out drilling at Detour which suggests good potential for an underground operation and extensions to the current open pits. A number of opportunities to improve the mining operations and enhance production are currently under evaluation, and the Company's long-term vision for Detour Lake is to increase production to 1.0 million ounces per year or more," added Mr. Al-Joundi.

| | | 5 Net debt is a non-GAAP measure that is not a standardized measure under the financial reporting framework used to prepare the Company's financial statements. For a reconciliation to long-term debt see "Reconciliation of Non-GAAP Financial Performance Measures – Reconciliation of Long-Term Debt to Net Debt". See also "Note Regarding Certain Measures of Performance". | | |

Second Quarter 2022 Financial and Production Results

In the second quarter of 2022, net income was $275.8 million ( $0.61 per share). This result includes the following items (net of tax): a non-cash fair value adjustment on inventory sold during the quarter related to the Merger included in production costs of $27.1 million ( $0.06 per share), mark-to-market losses of $18.4 million ( $0.04 per share) on the Company's investment portfolio, foreign currency translation losses on deferred tax liabilities of $14.6 million ( $0.03 per share), derivative losses on financial instruments of $11.2 million ( $0.02 per share), non-cash foreign currency translation gains of $10.3 million ( $0.02 per share), severance costs of $8.1 million ( $0.01 per share) and various other adjustment losses of $2.2 million ( $0.01 per share). Excluding these items would result in adjusted net income 6 of $347.1 million or $0.76 per share for the second quarter of 2022. For the second quarter of 2021, the Company reported net income of $196.4 million ( $0.81 per share).

Included in the second quarter of 2022 net income, and not adjusted above are care and maintenance costs net of tax of $5.7 million ( $0.01 per share) and a non-cash stock option expense of $3.2 million ( $0.01 per share).

In the first six months of 2022, the Company reported net income of $385.6 million ( $0.92 per share). This compares with the first six months of 2021, when net income was $341.6 million ( $1.40 per share).

For financial reporting purposes, the Merger was determined to be a business combination with Agnico Eagle identified as the acquirer. As a result, the purchase consideration was allocated to the identifiable assets and liabilities of Kirkland Lake Gold based on their fair values as of February 8, 2022 (the "Purchase Price Allocation") and was recorded in the first quarter of 2022. The finalization of the Purchase Price Allocation will take place within twelve months following the acquisition date.

Upon closing of the Merger, under the Purchase Price Allocation, any gold inventory held by Kirkland Lake Gold on February 8, 2022 was revalued at the forecasted gold price in the period the inventory was expected to be sold. The revalued inventory subsequently sold during the second quarter of 2022 resulted in additional production costs of approximately $39.2 million ( $27.1 million after tax) during the quarter. The revalued inventory subsequently sold during the first six months of 2022 resulted in additional production costs of approximately $152.9 million ( $105.9 million after tax). Given the extraordinary nature of the fair value adjustment on inventory related to the Merger, this non-cash adjustment, which increased the cost of inventory sold during the quarter, was normalized from net income and net income per share and adjusted out of the total cash costs per ounce and AISC in the second quarter of 2022.

The increase in net income in the second quarter and first six months of 2022 compared to the prior-year period is primarily due to higher mine operating margins 6 (from higher sales volumes following the Merger and higher realized metal prices). The overall increase in net income was partially offset by higher exploration costs and amortization due to the inclusion of the Detour, Fosterville and Macassa mines and higher general and administrative costs. In addition, higher losses on derivatives, other expenses and care and maintenance costs offset the higher operating margins.

In the second quarter of 2022, cash provided by operating activities was $633.3 million ( $706.0 million before changes in non-cash components of working capital), compared to the second quarter of 2021 when cash provided by operating activities was $419.4 million ( $444.6 million before changes in non-cash components of working capital). A non-cash fair value adjustment on inventory related to the Merger of $39.2 million was included in production costs and as result included in cash provided by operating activities before changes in non-cash components of working capital for the second quarter of 2022. The non-cash fair value adjustment on inventory was then reversed through changes in non-cash components of working capital.

Excluding the non-cash fair value adjustment on inventory of $39.2 million related to the Merger, cash provided by operating activities before changes in non-cash components of working capital was $745.2 million in the second quarter of 2022 and increased when compared to the prior-year period primarily due to higher sales volumes and higher realized prices. This included non-recurring costs related to the Merger of $10.8 million in severance costs.

| _ | | 6 Operating margin is a non-GAAP measure. For a reconciliation to net income see "Reconciliation of Non-GAAP Financial Performance Measures" below. See also "Note Regarding Certain Measures of Performance". | | |

In the first six months of 2022, cash provided by operating activities was $1,140.7 million ( $1,072.0 million before changes in non-cash components of working capital), compared to the first six months of 2021 when cash provided by operating activities was $786.0 million ( $870.1 million before changes in non-cash components of working capital). Excluding the non-cash fair value adjustment on inventory of $152.9 million related to the Merger, cash provided by operating activities before changes in non-cash components of working capital was $1,224.9 million in the first six months of 2022.

The increase in cash provided by operating activities in the second quarter and first six months of 2022, compared to the prior-year periods, is primarily due to higher net income driven by higher sales volumes following the Merger and higher realized metal prices. This included non-recurring costs related to the Merger of $34.8 million in transaction costs and $56.8 million in severance costs.

In the second quarter of 2022, the Company's payable gold production was a record 858,170 ounces. This compares to quarterly payable gold production of 526,006 ounces in the prior-year period.

In the first six months of 2022, the Company's gold production was a record 1,518,774 ounces. Including the entire first six month's production from the pre-Merger Kirkland Lake Gold mines, total gold production in the first half of 2022 was 1,664,499. This compares to payable gold production of 1,042,810 ounces in the first six months of 2021, which included 17,176 ounces and 348 ounces of pre-commercial production of gold at the Tiriganiaq open pit at Meliadine and Amaruq underground project, respectively.

Gold production in the second quarter of 2022 and the first six months of 2022, when compared to the prior-year periods, was higher primarily due to the inclusion of the production from the Detour Lake, Fosterville and Macassa mines. This was partially offset by the cessation of gold production in 2022 at the Hope Bay mine following the Company's decision to dedicate the infrastructure to exploration activities and lower production at the Company's Pinos Altos mine, as a result of lower tonnage sourced from the underground mine.

Production costs per ounce in the second quarter of 2022 were $766 , compared to $838 in the prior-year period. Total cash costs per ounce in the second quarter of 2022 were $726 , compared to $748 in the prior-year period.

Production costs per ounce in the first six months of 2022 were $869 , compared to $829 in the prior-year period. Total cash costs per ounce in the first six months of 2022 were $763 , compared to $741 in the prior-year period. Including the entire first six month's production from the pre-Merger Kirkland Lake Gold mines, total cash costs per ounce in the first six months of 2022 were slightly below the mid-point of 2022 cost guidance.

In the second quarter, production costs per ounce and total cash costs per ounce decreased when compared to the prior-year period primarily due to lower minesite costs per tonne. Total cash costs per ounce also decreased when compared to the prior-year period due to the fair value adjustment on inventory sold during the second quarter, partially offset by lower by-product metal revenue from lower silver and zinc production in 2022. In the first six months of 2022, production costs per ounce and total cash costs per ounce increased when compared to the prior-year period primarily due to higher minesite costs per tonne and lower production at various operations in the first three months of the year. A detailed description of the minesite costs per tonne at each mine is set out below.

AISC per ounce in the second quarter of 2022 were $1,026 , compared to $1,037 in the prior-year period. AISC per ounce in the first six months of 2022 were $1,051 , compared to $1,022 in the prior-year period.

AISC per ounce in the second quarter of 2022 decreased when compared to the prior-year period primarily due to lower total cash costs per ounce, partially offset by higher sustaining capital expenditures. 7 AISC per ounce in the first six months of 2022 increased when compared to the prior-year period primarily due to higher total cash costs per ounce in the first six months of 2022 and slightly higher sustaining capital expenditures and general and administrative costs.

Update on Key Value Drivers

Activities are progressing well at the Company's key exploration, development, and mine expansion projects. Highlights on the key value drivers are set out below and details on the various mine expansion projects (Kittila shaft, Meliadine Phase 2, Macassa Shaft #4 and Amaruq underground) are set out in the operational section of this news release.

Detour Lake Mine technical evaluation – Mineral reserves increased by 38% to 20.4 million ounces; Production profile improved and extended by 10 years; Ongoing exploration expected to further increase mineral resources; Future focus on potential expansion scenarios