Agnico Eagle Mines Limited (AEM) John Tumazos Very Independent Research 2023 Conference (Transcript)

Agnico Eagle Mines Limited (NYSE:AEM) John Tumazos Very Independent Research 2023 Conference June 6, 2023 8:30 AM ET

Company Participants

Jean-Marie Clouet - Director Investor Relations

Conference Call Participants

John Tumazos - John Tumazos Very Independent Research

John Tumazos

We're pleased to have Jean-Marie Clouet, the Director of Investor Relations of Agnico Mines -- Agnico Eagle Mines, will bring us up to date on their optimization programs. Please?

Jean-Marie Clouet

Thank you, John. And good morning, everybody. Since we talked to you about -- shared with you at the April story, I present to you where we are today looking at the business through the lens of our strategy, our operations, our unique growth implications and I may finish off with our financial.

So before starting, I just want to highlight that I would be making forward-looking statements. So I would ask you to read and consider the statement.

So who is Agnico Eagle? Many of you know the company, started about 66 years ago in the time of troubles and it remains to stay very much focused on path, which almost 75% of our production coming from Canada at this stage, and that's important from a geopolitical risk perspective, and it's something that I'll light through the presentation. At this stage, the company is expected to produce 3.3 million ounces at a cash cost of about [$865] per ounce, which is a leading among peers. And we have a very strong mineral reserve and mineral resource bases to go forward. How do you get there? It's pretty clear, very simple and consistent strategy, something not too hard. We focus on areas with very high reserves, full potential and low geopolitical risk. And second, we focus on per share metrics. We believe that the key to success for us is basically our value on a per share basis since the beginning of the business.

Going forward, we see an environment where -- because the fact that in the industry will continue to consolidate and we believe we are very well positioned to succeed in it. We have competitive advantages, not just on a regional scale, but also in scale and liquidity, and we would like to grow in our regions going forward. We also see ourselves as a pretty mature business. We will continue to put the indices on a disciplined approach and lowering our costs going forward. How we see the success going forward? We see production that will be about 3 million ounces for the next several years. We see our growth overall, but also on a per share basis. We see we’ll have outstanding business, but also a business that allows continue to innovate when it comes to climate, in addition of new technologies, safety initiatives, and managing and improving our operational excellence through the years.

One of the key and critical elements to be successful is through our ESG leadership. We believe that to be successful in the region where we operate, we need to be a partner of choice. And we need to demonstrate that we're a company that can be trusted and we'll work with all stakeholders for the benefit and it’s reasonable. We've been successful in doing so in the regions where we’ve been and we intend to continue. And we are one of the best performers in terms of water usage, in terms of carbon intensity. And as of the end of last year, we published our first action plan, showing how we intend to reduce greenhouse gases from -- by 30% by 2030. And we are also committed to net zero carbon by 2050.

Essentially, we have like four pillars when we think about ESG. We pursue innovation wherever we can, and improving, for instance, on the electrical equipment, automation, technologies that we either have implemented or we continue to work on to improve the business. We're adapting to the evolving responsibilities to get to our commitment for net zero in the future. And we also are looking to work with our communities, our partners to make sure that we're respected and we contribute to the benefit of all, particularly and important since we're located in remote areas, and we can really benefit and support the local economy, we think that's what we've done in Mexico with price, and we intend to continue doing it in all the regions where we operate.

And finally, but not least, like the ESG is also a way of looking at managing the business, surrounding our -- the risk surrounding our business, and we’ve been successful to protect our operations, our community and our environment.

Maybe quickly, I just want to touch on the first quarter results. We have strong operating results with approximate 813,000 ounces in the quarter at a cash cost of $832 per ounce, while lower than our current guidance, which really sets us well for the rest of the year, to meet the guidance in terms of production costs and CapEx. In the following quarters, we expect production to be around near 845,000 ounces per quarter as we will sell online to meet our production guidance.

We had very strong financial results with $0.58 per share for adjusted EPS. Operating cash flow was also $1.30 per share and our dividend remains unchanged at $0.40 per share. If you look at the operating margins, again very strong results with [157 million] produced in the quarter. And the pie graph shows you really where that operating margin is being generated, it’s pretty representative of where our business is. Again very strong positioning in Canada, which about 20% Quebec margin, 32% Ontario, 20% Nunavut and Australia is representing a fairly strong generating cash flow also through our Fosterville mine.

And finally, but importantly, we've been successful in improving our safety performance over the years. In 2022, we had our best safety year on record and the Q1 2022 was also our best on record. So that's really key is we can continue to increase our production, increase our margin, doing it safely, that's really key for the business.

Let's get back on to why we define strategy relatively consistent after the years. We consider ourselves really regional miner, we -- rather than the global miners, like that’s how we see ourselves. What do we define as a regional miner? When we see, it need to be in regions with two criteria. One is geological potential to build and operate multiple mines over multiple decades as we think that that’s how we can really build a competitive advantage and generate significant return as we leverage the infrastructure today. And second, but also very importantly, we have to be able to be operating in a region for multiple bases. And that speaks towards political stability, but it also speaks towards being a partner of choice. And we believe we've done that [indiscernible] if you look at the Odyssey region where we've been for over 60 years, we there have the competitive advantage. In Nunavut, we’re one company that has about 30% of the economy by itself, we also have a very strong competitive advantage.

So really, that's what it means in terms of being [indiscernible] a stable strategy. At the end of the day, in the regions where we are we aim to know the geology better, the ground better, the supply is better, the employees are engaged in this -- been working for us for many years, and [indiscernible] have been working for us. We know how to get projects early. We can leverage our expertise, our expertise really to build and continue to grow in those regions.

So with that strategy, really what we've seen is maybe a slight change in path in 2022. We had some significant acquisitions and mergers. We had the Kirkland Lake Gold and we acquired 50% of the Canadian assets from Yamana, which has allowed us to really consolidate key region, the Abitibi region and we're going to talk about that results. We've also done joint venture with Teck in Mexico for San Nicolás projects that really provides an ability for our team to leverage their expertise and they are a significant cash flow generator in Mexico. And we also acquired the Hope Bay projects in Nunavut, again strengthening our regional presence in the North.

So in 2022 was a year of transformation. 2023 you will see that's a year of optimization and in particular what we want to do, we want to leverage our expertise, our infrastructure to generate significant growth. There’s huge potential to going forward production, CapEx will be lower than what has been all along projects, and to be able to use our infrastructure, also lower our environmental footprint and should also simplify the permitting process.

So let's go and see what those initiatives are. We are located in the Abitibi Gold Belt, just making sure, it's a region where we have five operating mines, contributes over 2 million ounces per year of gold production. We have mineral reserve of 30 million ounces, 31 million ounces and measured and indicated resources of 33 million ounces, inferred gold -- inferred mineral resource of 20 million ounces. So that’s 10 million through our Nevada JV for busy months. The difference is, is that we control this area. We also have two of the world class assets with Detour Lake and Canadian Malartic and those two assets are multi-decade mines with a lot of exploration upside that are growing really to be the base for the company for the years to come. We also have two mines, some strong assets with LaRonde. LaRonde has really been like the company builder. Macassa, Goldex. We have projects like Wasamac, Upper Beaver. So we have a lot of potential that we believe has generated [indiscernible].

Let's have to look at what those two projects are. First of all, looking at Detour Lake, we currently produce about 70,000 ounces per year. We have a vision to increase production to 1 million ounce. There are two key projects to get there. First, we need to continue improve the mill throughput. And we have projects in place further to expand the 28 new accounts per year that we achieved so far and potentially increasing 30 new accounts per year with minimal capital. Second, the underground project that would allow us to get a lower grade material from the bit of about 0.8 grams per ton with higher grade ore from underground of about 2.5 to 3 grams per ton, that is really two products coming together that will allow us to get to 1 million ton.

Second we came up with the progress that we just finished consolidating with the execution of the Yamana Canadian platform. Currently we're transitioning from upper bit to underground. This project is expected to continue carrying about 600,000 ounces per year in the years to come once we are fully transitioned. But more importantly, what's happening, actually, we’re operating at about 60,000 tons per day. We will transition to bring about 20,000 tons per day across to [indiscernible] coming from the open pit, that’s about [3,000] tons coming from underground. So that will leave us with excess mill capacity of about 40,000 tons per day starting in 2028. Even the exploration potential within the property, we believe that we can for the -- new production enters either in the East Gouldie extension, we talked about this about the second chart, that way to go. But also near surface opportunities within the property to [indiscernible], we'll have a look at that. So that has potential to add production in the years to come.

And third, but not least, like the regional pipeline. These are the three use our regional infrastructure to bring forward and accelerate the development of some projects, at lower CapEx, at lower environmental footprint. Safety first here, the potential just with Wasamac and Upper Beaver, those two projects could add up to about 4,000 ounces by 2030 and we have also [indiscernible].

Let's have a look at Detour. So I'll start first with the mill optimization. It's been a journey as you can see to go from 21 million tons per year in '21 to about 27 million tons per year. And this brings on -- most of the daily call or equipment changes have already been done while we're looking at it improving runtime production and ready to achieve the 28 million tons per year. We expect to get there, we've indicated 2025, we expect we should be able to get there before 2025.

So when we talked about runtime improvements, were we talking about it for instance, we want to extend the mine life of our grinding and our equipment in our strip. We're adjusting the pipeline to just maximize the efficiency of the pipe replacement to ensure that it's really small things that need to be done on a consistent basis. It does take time to get it all right and get it exactly what we want.

Going forward, we think we can get to about 30 million tons per year. How we can do that? We'll continue to optimize the processes, better management processes to gain targeted tons per year. We also want to make sure, we've done that now in our operation, we want to leverage the knowledge from Malartic, and that would connect us to the throughput. And finally, we are also looking at potentially to prepare some material to add capacity to the mill. With that, we'll be able to increase production to about 30 million tons per year.

Looking at the underground, if you look at this section, what do you see it’s in brown in reserve, where West Pit already at production at '23. What we see in blue below is the resources. So there's definitely potential for we to add or continue drilling around the Saddle Zone, we continue drilling off of the West and see good potential. But more importantly, where we see really an opportunity is to develop an underground component that will go and engage the rich part under the pit. What that will do is will gain open pit material 8.9 grams per ton where that could be 2.5 to 3 grams per ton. But we see in the current drill is the mineralization where we extend to increase out of the pit, but also to the West, 2.4 kilometers to the West. We are currently developing initial underground resource. And with reputation on that first underground study to see if we can really bring that to realize all that potential. So we're targeting to have the study completed by the end of the year, which of course, is 311 study in early next year.

Moving onto Canadian Malartic. So here are a couple of things I want to talk about. We talked already about the excessive capacity going forward as we transition to underground. Let's talk a bit about like that transition. In the first quarter of 2023 we achieved our first milestone of start producing in the Odyssey South Zone, which is [indiscernible] and we have a first blast. So we're on that really to produce 50,000 ounces for 2023 coming from Odyssey.

The initial strong differentiation of the [indiscernible] and grade but has been positive. We also -- our second-last zone that we are working is really the shaft sinking. So the shaft sinking has had a bit of delay during the construction, due to the high wind. But we believe, we can really catch some of that delay by taping maybe the first 18 month ramp at 54 level. You should be able to actually reach out to where the rock should be in the picture and accelerate some of the sinking by accessing chunk from the rock.

So in terms of the project itself, construction is going well. We'll provide an update to the market later in the month in terms of where the assets and where we see the spend. But what’s really exciting about this project is, if you look East Gouldie deposit, it's a potential that we have. We call of the East Gouldie deposit is very continuous and it's very well defined in terms of thickness, in terms of continuity of the mineralization, in terms of grade. The quality is higher grade that's between 3 to 4 grams per ton compared to an average of about 2.5 grams per ton. So we are pretty good confidence that we'll be able to convert some of that inferred resources to reserve by year-end.

Importantly, what we see obviously is an extension of the mineralization to the East and to the West, and that's why we talked we see potential to have a second shaft or second production chair, it’s we think about that extension, and we're going to be drilling significantly over the next two years to try and prove that and see very potential to add to it. So that the deposit will take a longer term, but there is potential, yes

In addition to that, the Malartic, if you look at it, it's not just the underground resource itself, but we are also looking at it from a reliance perspective. So again, Malartic data sits at the center of this map. Recently, we've added two properties, two historical lines to the properties the Camflo mine and also the LTA, both were historically compared, roughly it’s about like 1.8 million to 2 million ounces at about 600 meters on the underground mine.

As Camflo, we can see drilling to see if there is potential for an open pit, with mine life [indiscernible] but also for lower grade. The LTA property that we just finished the acquisition in Q1. We think that’s pretty potential and the mine finish at 8 kilometers, you know that the drill hole that goes maybe about a 1 kilometer deeper, still has some significant mineralization. And there's also some pretty near surface opportunity. Why this is significant? Again, if you think about the existing capacity that will be starting in 2028, while those are two projects within the property, still that we would be able to -- we should be able to do to add some production tonnage to the mill. Those two sites are located about 5 kilometers from the asset peak. So that could be a significant upside. Currently, we're drilling at Camflo to try and have under contract, which has consolidated data that we have and it's definitely changed the drilling program for the years to come.

And lastly but not least the slide in terms of key growth projects is to be the regional itself. So here's kind of a zoomed the Abitibi region, it follows really the Cadillac fault through Abitibi going from Macassa all the way to Goldex. With the Agnico properties, so we do control a lot of properties along that fault.

In black, you see the railroad, in red you see the road. And not surprisingly, you can see regional development finding, which has followed the Cadillac fault. What we think we can do with Canadian Malartic, adding some excessive capacity starting 2024 we pretty should be able to work that with the potential to use the Canadian Malartic mill to process some of the ore from Wasamac and Upper Beaver. If we do that, it would allow us to build high grade mills at Wasamac and Upper Beaver, we need the capital requirements. But more important it also will prevent us from to build a new phase. The Canadian Malartic bit is going to be used for internal in-bit technical forwards, so all the parts actually are already in place. What does that mean? It means that like an old project, really we can drill to production at the lower capital levels and lower environmental footprint and again that -- which is a type of organic growth that we already generate at lower risk level. We have the expertise, we have the people and where we have the potential.

So at this point in time, in 2023, we're planning a lot about health study to really be able to try to prove our potential. We're updating the studies for Upper Beaver and Wasamac. We're looking at the potential for the rail, looking at the potential from that work in Malartic. A lot of work is being done to try and better define the potential, and better define [indiscernible].

Question-and-Answer Session

Q - John Tumazos

Jean-Marie, is it possible that the permits could arrive earlier in mining, start earlier at Wasamac and Upper Beaver if you don't have to permit tailings?

Jean-Marie Clouet

Yes, but that's kind of part of the thinking. Because a big part of the permitting as you mentioned, it's really getting the -- to find the right side and you need to also approve like -- making sure you are probably going to stay. So, by doing so, you reduce your impact on the land, you also react to the tailings at Canadian Malartic. So yes, it is possible, but we will simplify -- accelerate -- simplify the permitting of those projects.

I'd just like to touch very quickly on the exploration success in the first quarter of 2023. Overall, for 2023, the overall budget is around [250 million], really expense. If you look at Amphi, we’ve had some good success to extend the zone down to another 50 meters, we got production of 3 grams intercept over 30 meters, 3.7 grams over 10 meters. So we show the potential to extend the project like that and especially convert from mill ore [indiscernible] extending the potential a little bit.

At Goldex, we've had some significant intercept in the South Zone, the South Zone is kind of parallel to the Main Zone. It’s high grade below bit and again we see potential to add resources. Like I said we continue to be focused on the exploration on the South line compass. So we just completed the exploration of the shaft looking at extending the trade underground, provide exploration places to the East by expanding two exploration trades of all those historical mines around that, there is potential to continue to grow the mineral resource and reserve going forward.

Meliadine actually has been pretty exciting with the drill holes at 5 meters which adjusted up an exploration trade at that but [indiscernible] and we are planning to see positive results and extending the mineralization of the Tiriganiaq and Wesmeg deposits. So again, all of these, both for mineral replacements by year end.

Hope Bay, as mentioned on the next slide. For us to be able to continue to drill and in the Lower Phoenix area with kind of structure, drilling the bit holes right now, as we add a new exploration drill to be able to drill properly that kind of structure and we expect we'll get some results going forward in the year. And at Kittila the deposits continue to grow actually to the North, and through the Main Zone and the Suuri. So there's really again potential to continue to grow the deposits, but we're just also commissioning the shaft, and that will get us further access to be able to pure copper through the extension. So overall the exploration results are positive. And we do believe that we have still half of the extended mine lives and…

John Tumazos

Jean-Marie, are any of these seven zones that you're discussing in the side, likely to change the output profile? For example, is there a timetable to build a new mill and reopen Hope Bay?

Jean-Marie Clouet

Hope Bay, let me switch to Hope Bay. So Hope Bay, in 2022 we have already shown that we've got some very good results. If we keep on drilling, we keep on finding gold with our relaunched Doris deposit, that's where the original mine was. And we know that deposit can sustain about 500,000 ounces per year. The challenge we have is we know we need to have an operation to be profitable in the long if we need to be in the 350,000 to 400,000 ounces per year. And to be able to get there we need to prove the potential metrics. And that's where we are focusing this year. We've had some good results. The [TAs] are showing no extension of follow-on zones where we really need about another 18 months drilling before we can really define if we can get to the level where we need to be to be able to sustain that projected [3,000] ounces of gold. So, it's too early to say. We have some very positive results, drop of gold results are very exciting. We need to be able to increase the size of the trade, and especially increase the economic health on the trade that would sustain an upgrade -- a larger upgrade but we're not there yet. But we're definitely working towards it. And we expect that we would be able to really benefit, find the opportunity in the next 18 months.

So just want to move on to our operating margins and the free cash flow generation. We're very excited to with the growth opportunities and we're very excited with the exploration results so far. But as important is we want to show that actually we're building a strong cash flow generating business that we'd be able to sustain and continue to grow or fund our growth while also returning capital to investors. So currently with the current forecast of about 3.3 million ounces to 3.5 million ounces within 2025, we're at gold price of 1,850. We produce a margin -- operating margin of about $3.3 billion.

Our CapEx spending, the envelope, that we need to sustain this growth and extend the mine life and work on that we've just highlighted, we say we need about $1.5 billion per year. On top of that we've about $200 million in capital expense. The $1.5 billion of CapEx is capitalized coverage.

If you look at the G&A and all the interest and all the costs, we have $300 million, cash taxes about $250 million. So overall what we see is we can drive a free cash generation about $1 billion at gold price of 1,850. If the gold price into results is around 1,950, it would add 12 ounces. About $1.3 billion of cash that allows us to pay down our debt that becomes due but also continuously return capital to our investors, we've done that for the last 39 years and we intend to continue doing it. And then also adding to that share buyback, we'll be able to use that as flexible field to return capital to our investors.

So we have a strong business that will allow us to self-fund going forward, our growth, our exploration, while also paying down our debt and returning capital to our investors.

Just quickly just before finishing, our financial position is still very strong. We have a very strong balance sheet. We added $1 billion with the acquisition of the Canadian assets of Yamana to our balance sheet, but the balance still remain very strong with a net debt around $1.6 billion. The payment of our debt is pretty well phased over the next 10 year.

Our focus is really to continue to return cash to our shareholders while growing.

So let me just -- to conclude, let me provide you with a clear view of where our business is and [indiscernible]. I want to highlight again, the key value drivers for going forward are the potential with our Detour growing from 700,000 ounces per year to 1 million ounce for mine that's going to be there for 2050. Canadian Malartic transitioning to underground, the implication is very well, it is going very well. With lot of projects, we see a base production of about 600,000 ounces for two years until '25. So there's a lot of exploration potential, the potential to grow within mineralization of the Odyssey East Gouldie deposit, but also within the program and condition to next phase of capacity in 2028, we will be able to add production to that project.

The regional pipeline again this year especially, we have unique organic growth that we can provide at the lower CapEx and environment footprint. So that it's unique execution and best return we can get in terms of investments.

And finally in terms of exploration we got some significant results on our mines to be able to extend the life of those operations and potentially to add new operational tools clearly to drill, the potential is there. So we're doing that. Again by itself -- we are pumping ourselves by continuing to further advance and returning capital to our investors. So really look forward to continue to be able to deliver going forward. And we're very excited about the prospects of the company.

And I can hand back, John, to you for questions.

John Tumazos

If anyone on the webcast has a question, just enter it into the question box and I'll ask it. Jean-Marie in several places you chose your words carefully. And I want to just make sure that no one misunderstands any conservative wording as a reduction in guidance. So the production and cash cost guidance for this year is 3.3 million to 3.5 million ounces at about 850 cash cost?

Jean-Marie Clouet

The guidance for 2023 is 3.34 million ounces exactly at cash cost of 865,000 per annum. We expect to go to a midpoint of 3.45 million ounces for 2024 and 3.5 million ounces for 2025.

John Tumazos

So when you said at least 3 million ounces, you were just being succinct. And you weren't trying to guide us to a dip anywhere?

Jean-Marie Clouet

No. Sorry, exactly, yes. Like as I said, we continue to pay the base revenue and are in growth. So we still like growth. In May, we have highlighted. But a key aspect also is how we want to grow, not just grow, think about how pretty well to grow in terms of earnings per share. Key focus remains for us on improving our share metrics, per share metrics.

John Tumazos

Now, there's two big depletions coming, the Malartic open pit in 2027 and Amaruq, one or two years later. So the Malartic underground is a delayed replacement and 0.5 million ounces from Wasamac, Upper Beaver and Macassa. Surface zones in effect replace Amaruq and maybe some smaller things, La India or other small depletions occur. So broadly looking out 10 years, should we expect output to remain in that 3.5 million ounce trend?

Jean-Marie Clouet

So as data insisted, it's a bit of a challenge to really go too far in the future. We've talked about -- if you write about Canadian Malartic, they transitioned to the underground as well as replace the treated production coming from there. Amaruq will come off yet, like about one or two years after. That's where we think probably Hope Bay will be able to replace a big part of that production. And we'll talk about the potential we see in the Abitibi region, so with addition at Detour. Potentially if we have another production center in the Canadian Malartic Complex, even through a second shaft to the Camflo, to LTA about 200,000 ounces that still needs to be refined. And the regional pipeline as well the 500,000 ounce to Wasamac and Upper Beaver, up in AK at LaRonde. So we have a lot of optionality really in the region.

So we do see some growth, which then we probably were to be able to go above the 3.3 where we were able to get for first time with Kirkland, but as you know like this is a business that changes quite a bit. We continue to focus on optimizing our region, adding to our projects. We've done that recently and we'll continue to work towards that future goal.

The basics for the next three, five years is very clear. What will be 10 year? It’s difficult to talk about. As you know like we talk about where we were -- 10 years ago where we would be, would that be very difficult actually to tell.

John Tumazos

What should we expect to be the lowest output year as these depletions occur and how low will it be? Would it be 2027 and would you hold 3 million ounces in 2027?

Jean-Marie Clouet

It will be higher, but it’s difficult to tell. We don't provide guidance for 2027. We provided guidance for next year. But we expect to be able to sustain the level that we are for growth.

John Tumazos

So it should you hold about 3 million ounces in the low year?

Jean-Marie Clouet

I think it will be higher than that. We will define better in February next year.

John Tumazos

Well, that's great if you can -- the peak output was 660,000 or 700,000 ounces at the Malartic pit and Amaruq is over 400,000. So you have 1.1 million ounces of depletion staring you in the face. And if you can swallow that without having an output decline year, you're doing fabulously.

Jean-Marie Clouet

That's what we're working towards. We've been in a similar situation in the past. We were looking at 2014, and we're seeing probably a gap in the year 2018, 2019. And the team really worked together to drive it forward. And that's when we built this platform, which is very lean at Amaruq. And we're able really to offset at least in the past. So the team is actually -- this is a liquid business. It's been reality of all the miners. And we are working towards making sure we don’t have dip or show the guaranteed growth going forward.

John Tumazos

So on the Exploration tab of your website, there's 16 or 18 advanced projects. And maybe there's more of that you don't even talk about largely. And there's more opportunities than you maybe have people to execute. You expect to divest any of them and do spin off companies or offer other companies earnings or is there any way to create a cash NPV in the next five years from the surplus of projects? Agnico is a little bit like a royalty company, you never sell an asset almost?

Jean-Marie Clouet

In any likely event, that’s not been a right fit to sell any of the assets. We tend to be pulling all the assets that we purchased. But for the first time I think ever, probably around a year ago Jean has been mentioning that we need to really focus on optimizing our portfolio, and that implies that if we want to acquire the best of breed, it might be tactic to look at divest it also.

So we are actually looking at what we can do in terms of probably divesting some of those projects, so that's ongoing, but we haven't done really yet anything so far. But really we are definitely looking at it.

John Tumazos

The market for gold, nonproducing assets, and exploration shares is terrible. So while the gold price is good, it's not a good time to sell an asset. And the company, as you noted, has over $1 billion of excess free cash flow right now. So it's not -- it's an opportunity, not an urgent problem.

Jean-Marie Clouet

Correct. And so we are also looking at what the options are, right? Like in terms of maybe a partnership and maybe other people who may be partnering on some of those properties in events, rather than the real focus might be somewhere else. So all the options are on the table.

John Tumazos

Hammond Reef was added to reserves two years ago. So that's been sort of dressed up and ready to be farmed out for a couple of years. But it's not a lucrative time for a 1 gram or sub 1 gram medium sized deposit.

Jean-Marie Clouet

Yes. Exactly right. Yes. We still see Hammond Reef as optionality on gold price going forward. We have a very strong position in Ontario at this point. And we're not discounting that. That project can still be part of our operation, it’s shovel-ready. It's lower margin and to the grade. But in a higher gold price environment, it could very well be a very good project that could add up to 20,000 ounces per year to our production profile.

John Tumazos

In terms of Wasamac and Upper Beaver, is the optimization studies give the green light to using the Malartic Mill without having to build and permit to mill on site? How much sooner might they enter production? Could they be 2027 rather than 2029 projects?

Jean-Marie Clouet

So in terms of Wasamac, we'll need to figure it out basis off on what time you are looking at. The timing could effectively work towards 2027. When we get there and it’s very good frame where we need to go through our view of the project and establish when it could be, but that's in terms of permitting and production, it is a possibility.

John Tumazos

Now Wasamac is Northwest of Malartic. How much of the route from Wasamac to Malartic has rail already?

Jean-Marie Clouet

It cannot be railed. So what we would have to do is really just adding some entries to the site. So in terms of rail [block], it’s one of the measures of bringing.

John Tumazos

So it's just a little bit of a local extension and is it the same for Upper Beaver?

Jean-Marie Clouet

Yes. It is very close. So the rail going through beyond Canadian Malartic property, I think on the Upper West-like property and it's very close to the Upper Beaver cover. So it's really more creating a diversity to be able to create a loading station and while dealing the projects.

Just in terms of Upper Beaver, just finish in terms of the timing. The production will take a bit longer at Upper Beaver, it's really due to the fact that it requires a shaft and that will be at least four to five years before we can really get to the main production fault.

John Tumazos

Is the permitting a longer lead time in Ontario?

Jean-Marie Clouet

I believe that's fairly similar to Quebec, in Ontario, to be relatively flat. But I don’t think there is a big difference.

John Tumazos

Once again, anyone for questions from the webcast, just type them in. So Jean-Marie, the gold price is a little better than expected, the output is trending well. Should we expect the extra dollars to pay down the borrowing for the other half of Malartic?

Jean-Marie Clouet

Yes, exactly right. So I think that is really full capping region that we have with the higher gold price. It will go towards reducing, if you go to your 10 zones in April. This will be back to pay back with cash if we can…

John Tumazos

Well, super. Super. Thank you very much for the great update on exploration and the outlook. And it sounds like there's a chance to hit 4 million ounces. But we have to manage the depletion of the Malartic pit and Amaruq and get these new mines built and you're just being careful and so everything is documented and done and permitted, which is printed.

Jean-Marie Clouet

Yes, and we do have a lot of work that comes up and a lot of potential. So we're doing our best to demonstrate that potential and showing our work where we can get, what the big projects are, our goal.

John Tumazos

Super. Congratulations on all the progress. Regards to the team. Merci beaucoup.

Jean-Marie Clouet

Thank you very much. Thanks to everybody. Have a good day.

John Tumazos

Thank you.