Good day and welcome to the Agnico Eagle Mines Limited’s First Quarter 2015 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Sean Boyd. Please go ahead, Mr. Boyd..

Thank you, operator, and good morning everyone and thank you for joining us for our first quarter 2015 conference call. Before we get into the materials, I’d just like to note the forward-looking statements or cautionary statements included in the package. We do have some forward-looking statements here. So please be aware of that.

As far as the quarter goes, it’s really a story of strong operating performance and we had solid contributions across all the operations. As a result, we’re generating very good cash flow and also net free cash flow. And more importantly, we’re not doing that at the expense of leaving [ph] our best projects or our best exploration opportunities.

And as you know in the press release, we noted that we had record gold production, a little over 400,000 ounces at a cash cost of below $600 an ounce and an all-in sustaining cost of approximately $800 an ounce. We had records in Mexico in terms of total production. But also more importantly in Mexico, our cash cost there are below $400 an ounce.

We had success in really good cost performance in the Abitibi. We’ve had both Goldex and Lapa producing gold for cash cost of under $600 an ounce. As a result of that good start to 2015, we’re in good shape with respect to both the production and the cost guidance.

But I think what’s more exciting to us is that we have been very focused over the last little while on our exploration opportunities not just in Nunavut but at a number of our operations work. We continue to see very good results and we’ll talk this morning clearly at Amaruq and Nunavut and continued to move in a very good direction.

But we’ve also seen some good results in Kittila where we have potentially fixed [ph] up a new zone within 150 meters of the main zone. So that could provide us with some interesting economics as we look to develop the underground mine at Kittila.

The balance sheet is strong and we were able to, given the strength of the first quarter, pay down $100 million on our credit facility. And in the quarter, we declared a quarterly dividend of $0.08 per share. Specifically on the operating results, as we said, good start, so they’re tracking well.

So the guidance in the northern business is producing a little over 300,000 ounces at a cash cost of $645 per ounce; in the southern business of 90,000 ounces at below $400 an ounce. So, again, a stellar performance and tracking well for the guidance which is 1.6 million ounces at cash cost between $610 and $620 per ounce.

Financial position, we noted that at the start. We have net debt of $1.1 billion. We have a very manageable debt repayment schedule. And as a result of the deployments in the first quarter, we were able to reduce our credit line by $100 million and borrowings [ph] under that. So we now have available credit facilities of $800 million.

Financial highlights, we did generate some good cash flow despite the fact that gold was down $100 from the quarter of the previous year. Before working capital changes, we generated a little over $175 million.

Looking at the northern operation within more detail, LaRonde continues to open up the lower part of the mine where we do have our best grades. We continue to work on and saw infrastructure that will improve our mine flexibility and improve our cost position. The coarse oar conveyor system, we’ve got that in.

A new conveyor will be commissioned in September of 2015. As we said, that helps with the flexibility of the mine. We’re also looking at a study below 3.1 kilometers underground. We’ve got resource there and we’re starting to plan for that. The lead time on something like that can be as long as 10 years. We still have a long life left at LaRonde reserve.

We do have resource but we have to start doing more planning. We’re still drilling there. We still see strong mineralization. I think what’s important in the quarter is our best grades are in the lower mines. As you know, we’ve been mining well below reserve grades. Reserve grade is 5.2 grams per ton.

In Q1, we were mining 3.5 grams per ton at a rate of 6,200 tons a day. We had a little less by-product credit than we had expected. We’ve had a couple of stopes resequence. We’ve got those back and that should help lower the cash cost when we get that extra by-product revenue in future quarters.

At Meadowbank, good cost performance on a per ton basis, CAD71. That’s versus CAD76 a year ago in the quarter. We see a lower cost, a lower reagent consumption. We’ve produced just shy of 90,000 ounces, cash cost of $655, roughly 3 grams per ton at 11,000 tons a day which is roughly the same tonnage as the quarter a year ago.

But as you recall in the quarter a year ago, we were in our high grade, a very high grade produced hemp [ph] where we were averaging over 5.1 grams per ton and we had record production in the quarter last year. And we bring [ph] to a lower grade area and it’s moved through the Vault pit. That is a bit lower grade.

We’re looking at a study to optimize Vault right now. And that Vault study is really designed to extend the mine life at Meadowbank and we’re hopeful that we can extend it about a year which would take us to Q3 of 2018.

And we’re looking at that by bringing in those 240,000 ounces or so that was previously removed from the mine plant a couple years ago. So we’ll have the results for that work by the middle of this year. But our current gold prices, particularly in Canadian dollars and the oil price where it’s at was looking like something that we should be doing.

And with that, we do hope to close any potential gap between Meadowbank and the satellite deposit at Amaruq. Looking at Amaruq, we’ve got a couple of slides in here which highlight the location of the drilling. Currently, there’s five drills in operation. Within a couple of weeks, we’ll have another three drills. So we’ll have a total of eight drills.

The current volume [ph] is $20 million. The capacity is the - we can stand up to 50. It’ll be results-driven. The resource that was announced earlier this year on Whale Tail was 1.4 million ounces. That’s 7.25 grams per ton.

The objective in the early stages of this year’s program was to drill from the ice on the lake into the gap that we couldn’t access last year during the summer drill program. We’ve announced several drill results that essentially close that up and fill it in with mineralization. Several of them are very good grades.

So our team is confident that that resource is going to grow. And that is a open pit resource. And so we’ll be updating the market on the results of the program as we go through the drilling season, as we extend the budget.

And we’ll likely have a midyear resource update which will incorporate certainly the drilling and the gap but also looking to tighten up the drill stakes [ph] on the resource that we pointed out earlier this year. And we also hope not only to grow the resource but improve the confidence of the resource by moving it up from inferred to indicated.

We’re also drilling to the west of Whale Tail. We’re drilling Mammoth Lake now. And Mammoth Lake is the area where we think is the source of the boulder trains. We have several boulder trains and Mammoth Lake has the same mag [ph] signature as Whale Tail.

And so it’s not only a program to do initial [ph] drilling on the Whale Tail resource but to extend that resource to the west. And at that point, we’re also looking along the strike. And what we have at Whale Tail is a sizeable horizontal structure with both a strike length and depth potential.

And we’re not really seeing a vertical constraint on Whale Tail that we saw at Meadowbank. So there’s lots of promise here and lots of potential. And I think the fortunate thing for us is the fact that it’s by boat about 60 kilometers or so from Meadowbank. So that’s something we’re very focused on piecing together.

And as you know, we do have the Meliadine project as well. So we’re working on how these all come together.

And what we know now based on the size of Meliadine and the potential of Meliadine and the large land package of Meliadine combined with the discovery and potential at Amaruq and the large land package in Amaruq, we’re in a part of the world where there’s tremendous mineral potential. And you can actually do business in Nunavut.

So we’re fortunate to be in this spot and we’re fortunate to be in early. And we’re fortunate to have a lot of ground and own it 100%. And we’re fortunate to have the skill sets that know how to do business there. So we see that as a big part of our future. Moving to Canadian Malartic, very good performance there, record gold production in March.

Costs were approximately $20 a ton. The average in the quarter about 52,000 tons a day. In February and March, we averaged 53,740 tons a day. So we expect to be in a range for the next year or so, late through 2016, in a range of 53,000 to 55,000 tons a day. We produced through our count 68,000 ounces at cash cost in the low $600.

So good performance, good cash flow generator for us. I think one of the things that we were excited about was being able to get the drills on the Odyssey project. So we have drills going there. We always thought that this had very good exploration potential.

As we had always said to the Abitibi Royalties group that it would be a shame if we couldn’t sort out the issues that we had because we’ve got some of the best exploration people in the business waiting to drill it. And now those people that work here are putting drill holes down.

And I think we’re quite hopeful that we’re going to be able to help find mineralization that is good grade with good businesses. And ultimately, we hope to be able to apply what we do currently at Goldex to an underground scenario on that part of the Canadian Malartic property. At Goldex, a very strong quarter.

6,300 tons a day, little over 1.7 grams per ton, throughput was up 16% from a year ago, mine site costs of $34 a ton. We produced better than expected 29,000 ounces at cash cost of $541. So good start to the year. We accelerated development for these mines and we’ve allocated some more capital there.

We’ve also allocated more money to do drilling and we’ll have those studies done later this year, early next year. And we’ll also be working on the Akasaba study which is the satellite deposit about 30 kilometers away. So what we’re really trying to do is continue to optimize Goldex.

So after the restart, the team has done a very good job proving the cost model. And we’re trying to take advantage of the headroom that we have with the plant. We know the plant can do 8,000 tons a day. It used to do that consistently in the early days. So we’re still working on optimization. At Lapa, a strong quarter.

1,700 tons a day, getting good grades, good recoveries. The team is doing an exceptional job through a mine that’s got a short life. So even though the mine is set to close before the end of next year, the team is working as hard as they’ve ever worked to make that mine generate free cash flow. We’ve decided at the group to continue the exploration.

We’re doing exploration on the Lapa property in the Zulapa area. We’re getting some interesting results. And we’re also drilling with our partner Yamana to the west of Lapa on the Pandora property. And we’re also getting interesting results at Pandora. So we haven’t given up. And we continue to invest in areas that we think have some potential.

So hopefully, we’ll get a break there and maybe we can reward the Lapa people for working so hard and hopefully extend the mine. At Kittila, a solid performance, tonnage up 12% from a year ago, cost per ton at EUR77, cash cost below $700 an ounce. I think the most exciting thing with Finland is we have been drilling there for a number of years.

For the longest time, we were basically drilling from surface. For the last little while, we had access in the underground ramp and we’ve got underground drills going. We continue to follow the trend with deposits. We know the directions of the plunge [ph] as we move to the north and we continue to follow those.

Not only are we getting good results in trends [ph], but now we’ve just drilled a hole which seems to indicate we have a parallel zone to the main zone, about 150 meters to the east. And it confirms drilling that we did a couple of years ago. So that’s the focus. We’re adding a drill. That would certainly change the economics at Kittila.

As you know, we have a mineral deposit. It is large. It does require extensive development. We’ve been contemplating a shaft for a number of years. As we’ve said all along, ultimately we need a shaft. But a parallel zone with good grade and decent size would certainly help us in making that decision. Meliadine, we’ve talked about that.

Recently, we put out our 43-101 simply based on the reserve. Our focus right now is an internal study using that base case on the reserve and adding a significant quantity of the resource - the resource was 6.8 million ounces - to the economic study. We call that our base case offstudy [ph].

And that will really drive a lot of our decisions around Meliadine. But we’re hopeful that we can improve the economics by adding some resource there. And we also, as we’ve said many times, see Meliadine as a big part of our business platform in Nunavut.

And when we combine it with Amaruq and spread the overhead, we have a platform that could be one of our biggest contributors in not only our production but also our cash flow as we go forward. In southern business, record gold production, record silver production, excellent quarter in the first quarter, cash cost below $400.

So we’re getting good strong performance out of Pinos Altos which produced 50,000 ounces, cash cost around $350 ounce level. The shaft sinking program is ongoing, on time, on budget, expected for completion in 2016. At Creston Mascota, steady output, good cash cost in the mid $400s, so no surprises there. We seem to be picking up additional work.

We’re mining some more outside of the block model. So that’s always positive. At La India, we had a new record for quarterly production of 27,000 ounces, cash cost in and around the $400 range. We do see potential to add more mineralization in that mine plan.

We did acquire an adjoining property of small concession from Alamos Gold which consolidates our land package there. And that has additional potential to add ounces to La India. So just before we take questions, it’s our view now as we look at sort of our positioning in the market, it’s still a challenging time for many gold companies.

But as we look both [ph] at our sort of long history, we think it’s really the best time to be thinking longer term rather than short term. We continue to believe this is the best time to be drilling, the best time to be building new production platforms. We think it’s the best time to be looking at new opportunities.

And I think for us the key is being able to keep doing those things but do it in as part of the longer term strategy and do it in our sort of customary measured way to make sure we not only understand the risks but we also have a good appreciation and understanding about the opportunity and we don’t lose sight of the opportunity as we sort of try to understand the risks.

So today is an important day. We have our annual general meeting at 11 o’clock at the Sheraton Hotel, so all of you are certainly welcome to attend. And I also just want to mention that we do have a couple of site visits coming up over the next several months. We have a site visit to Nanavut and see Amaruq. And that’s on August the 20th.

Space will be a bit limited there. And we also have a site visit to Barqueño in Mexico. So that is a project that came from the acquisition of Cayden Resources. We have several drills on that project ongoing now. So we’ll have an update on that over the next couple of weeks on how drilling is going there.

And so that is at September 23rd and 24th, tied on to the end of Denver Gold show. Our expectation is that we should have an updated resource at Amaruq prior to that visit. And we’re hopeful that we’ll have an initial resource at Barqueño prior to that visit. So, operator, we’d be happy to take some questions..

Thank you. [Operator Instructions] And our first question will come from the line of Andrew Quail of Goldman Sachs. Please go ahead..

Good morning, Sean. Thanks very much for taking my question and congratulations on such a strong quarter..

Thank you..

A couple of questions. One on Pinos Altos.

Obviously, your grade jumped up there to a surprise of - do you expect that sort of going into the second half of 2015 to remain at Q1 level which is more like your reserve there [ph]?.

Well, Q1 was higher than subsequent quarters will be. We’ve got a little bit of higher grades just due to sequencing and we also got lucky and mine [ph] ourselves underground and had a higher grade than we expected. So it’ll moderate in the rest of the year..

Got you, thank you. Also just a question on what went on on Amaruq. Obviously we get an upside [ph] midyear and we’re going to go up there hopefully in August, but when you look at - and looking at your guidance at Meadowbank, it obviously comes off in 2017 and this obviously looks very positive.

Can you talk about the strategy maybe as much as you can? I mean, one of the headwinds obviously are the transport and you’re trying to get the permits there. What’s the strip like of the area and what are sort of, I’d say, key issues that we should be sort of be focusing on? These can’t sort of be delivered in 2017 into the right gap [ph]..

There’s a few things there. And so the focus right now is not just on drilling but it’s also on - we probably have a couple of thousand people that will be there in the summer and are there doing great planning work. So we’re always sort of thinking and preparing earlier than you otherwise would. And what we contemplate there is certainly the road.

We know the location of the road. The road would be about 62 kilometers long. We would be mining an open pit for start at Amaruq. We’d have to put up a dam, so we have to dewater part of the lake. So all of those things are things that we do currently and have done at Meadowbank.

So we’re not really asking the authorities to allow us to do something that we haven’t otherwise done. But in order to do that and to stay on track, we will have to obtain it at some point this year, the actual purpose for the updated resource. And then we’ll turn it over to the engineering guys and they’ll design the pit.

But right now, we’ve done some sort of preliminary work. But it’s really done on two pits because we didn’t have the gap drilled up [ph]. So it’s too early to say what the strip ratio would be, if Meadowbank lake [ph] is a little big higher than Meadowbank. Those are sort of the general range.

But I think what we’ve got is we’ve got something that’s at least the initial resource, something that’s at this point sort of half the size in Meadowbank in terms of total ounces at double the grade. And so we expect that 1.4 million ounces to grow based on the result we’ve got so far. And we’ll continue to tighten up that spacing.

As we said, this has got lots of strike length of potential, the mineralization is very continuous, the rock quality is extremely good. So we expect it to get bigger. So it will be a bigger number.

When we were up there sort of a year ago, our guys were saying that from an operating standpoint to the exploration to the team, we’d need about 1 million ounces of high ground. So we’ve already passed that hurdle. Now, in terms of timing, if you actually take - and we’ve been saying this for the last few months.

If you actually take a Meliadine permitting timeline and that may or may not be appropriate, but if you apply that - and Meliadine is a bit more complicated as we’re - Meliadine is [indiscernible], et cetera. We’d be looking at Amaruq sometime in the second half of 2019.

And so we have pushed out Meadowbank to later in 2018 and then we start to work from the Amaruq dams [ph] and hopefully move that forward. We adjusted this to eliminate that production gap. And we’ve been very clear with the regulators and people that could be involved and with you in what we would be hoping at Amaruq.

And that’s essentially the same groups and the same people we’ve worked with on Meadowbank and Meliadine. We’ve made that known to them that the timeline is largely driven by the resources that the authorities can bring to the table to review.

And so the federal government has just put more money into the Nunavut Impact Review Board to actually boost those resources at that board. And maybe that will help accelerate the timeline. But we see a couple things. We see more resources on the other side. We’ve offered to add resources that same year to help with that review process.

And we’re also seeing a project that is yet complex in Meliadine. And as we said, we’re not asking to do something that we haven’t been able to do obviously during the past. And I think this is a good point to make this - our experience with Nunavut in terms of getting things done has actually been quite good.

And it’s not a part of the world where they’re adversarial with respect to mining. In fact, I would say they’re positive towards mining. They want to understand the impacts of mining. But generally, they’re positive because of the economic impacts that it has there. And Meadowbank’s been a great example for that.

And this morning in the annual meeting, we’ll have the Premier of Nanavut there in town. And so the government of Nanavut is a big supporter, the [indiscernible] in Nanavut and so is the central government and the local community. So we’ve got all the support we need to keep moving our business forward.

We just see a great platform with tons of mineral potential and asset types to do business. And I think the industry will challenge to find these types of places. So we’re fortunate to have it..

Thanks for that, Sean. That’s certainly helpful..

Your next question will come from the line of Stephen Walker of RBC Capital Markets. Please go ahead..

Okay, thank you, and good morning, everybody. Sean, I just want to circle back on something that you said about the shared benefits between Meadowbank, Amaruq and Meliadine.

Are there tangible synergies or is it more just you’ve got a team that is used to dealing with the regulators and with the permitting folks in Nanavut?.

It’s some of that. But I think if you go back a year ago, all the work we were doing in Meliadine is over [ph] compared with higher overheads and all the burden. But now we can spread that over two projects.

And I think the advantage that we have at the Nunavut base is its connection and link to the Abitibi region, not just the physical link, but the logistical support base at the Val-d’Or Airport and the technical link and the technical skills that helped us develop that. And how is this sort of manifested.

We can see it already just in our drilling cost in Amaruq, which are in the sub $300 a meter, which are as competitive as what we’re spending in Mexico. And so if a junior company is drilling in Nunavut, probably be triple of what we’re spending. So it’s that platform of Meadowbank that helps us with the skill set that helps us.

So there’s a lot of things there that make a lot of sense for us [ph]. We’re looking at what’s the overall strategy there, what is the business - I’ve been asking, what does Nunavut look like in 10 or 15 years? Is it a series of satellite deposits where gold is being spread into two or three plants? Those are the things we’re trying to figure out.

But the more critical mass that we have which we should have with two mines, the more efficient [indiscernible] is to optimize the business platform there..

Great. And just maybe to follow a geological question with respect to Mammoth drilling and Whale Tail, is that the same geological, structural continuity? I know that there was some - as you suggested [indiscernible] several things lines up.

But what you’re seeing in the drill hole so far, does that suggest a geologic continuity, it’s on the same type of structural, geological trend?.

Yes, it’s exactly the same kind of mineralization that we’re seeing in Whale Tail [ph] and some churns that we saw [ph] in the boulder train, what we see basically is a [indiscernible] that explained the mag and em anomalies that we’re going hit in the lake [ph].

And now we are in a waiting time to get to see how much gold we’re going to get from these first two drill holes because we just started drilling in the Mammoth Lake about a week ago. We’re getting four, five drill holes completed there. So this will be incorporated in the next update to the markets..

But you’re seeing similar geologic, geology and obviously visible gold to what occurred in the boulder train from the sounds of it..

Yes. While we see draining [ph] and [indiscernible] overextend to 20 meters, which looks good, we haven’t seen visible gold per se, but if we compare it with the Amaruq area, we’ll see visible gold every even say three holes, so it’s not necessary to see visible gold. We saw that in the boulder train as you mentioned.

But all other right ingredients in literally in the drill holes. Now, we have to wait for the land to tell us what the real gold rate of that..

Thanks, [indiscernible]. Maybe I just want to get you talking at or looking at the Kittila, you got parallels on increases of tons per vertical foot.

Today, what’s the geometry? What’s the potential for that to yield significant tons or ultimately significant ounces in the reserve? Is this a parallel structure that has some continuity as this shift to small lands or display off the main structure at Kittila? Can you talk a little bit about what this parallel zone is?.

It’s too early to comment. There are only three holes drilled on that part of structure. It’s on just 50 meter east of the main structure, the [indiscernible] and what I’ve done, we do, at the end of 2011 [indiscernible] that we hit that 10 gram of this in April [ph] and the way to get that gram - and the gram is there right now.

And is the first the hope that we hit again that new zone [ph]. And we don’t have to spend between gold from the 2011 and now it’s over 500 meters. And now the plan is to [indiscernible] to see what could be the size of this creature. But it’s sitting well [indiscernible] sitting pretty well together.

And now we cross our finger, we look what we can hit here in between and see that side. We don’t know exactly what to decide from now, but we’re in for the week right now..

Great. Thank you for that, Alain..

And your next question will come from the line of Anita Soni of Credit Suisse. Please go ahead..

Hi. Good morning and congratulations on the good quarter and on these significant exploration results. My question just with regards to Meadowbank unit cost. So it came in a little bit below your budget.

Do you expect that to continue throughout the year or will that revert more towards budget?.

We’re a bit - cost [ph], we’re slightly below expectations in the quarter. Some of that might be due to skipping [ph] but I think going forward, I think the guide [indiscernible] this year. It’s pretty well in line with what we preannounced..

All right. Thank you..

[Operator Instructions] And your next question will come from the line of Phil Russo of Raymond James. Please go ahead..

Thanks, operator. Good morning, guys. Hi, Sean, and the team there. Congrats on the quarter. Just maybe on Meliadine here, can you just remind us what the timeline this year for going forward decision? And then sort of secondly, you seem to be talking pretty optimistically about what things are happening out there in Nunavut.

Maybe talk about your willingness to fund the project, your capacity to fund it here at spot [ph].

Is it more debt or are you still talking JV partners and those types of things?.

Sure. Meliadine in terms of timeline per decision, our expectations are on the permit side that it’s early next year to get the permits. So between now and sort of early next year, the base case offstudy will be done probably this year, so around second quarter. So we’ll have a good chance. We’re well advanced with that on what that looks like.

And we take [indiscernible] and incorporate a subset of the resource. In terms of the funding, as we said, it’s in that sort of $1 billion range. We do some capital coming off as we complete the shop at [indiscernible]. So we do have several moving parts. We do have some debt capacity. We have been approached by people looking to partner with us.

We’re not sure that that’s the right thing. But there is a lot of exploration upside. So we’re looking at a lot of different options up there. But it’s our view from a strategy point of view, that this - it is an important part of our business.

It’ll probably be a more important part of our business given the mirror of [ph] potential and the ability to get things done. And it reminds us a little bit of the loan [ph] in terms having to get that first production starting to get up the ace [ph] established.

And we think this is a place that once we get that production base established, that we’ll be there for a long time. So that’s the way we’re approaching it. We’re moving the studies forward as quickly as we can. We’ve added some more people resources to the team because of the Amaruq and adding sort of more options and more opportunities up there.

And so we’re just trying to follow along with that stuff but, I don’t know [ph]..

Thanks..

And your next question will come from the line of Mike Parkin of Desjardins. Please go ahead..

Hi guys, good quarter. Just a couple of questions on the Nunavut area. Are you looking to secure diesel prices like [indiscernible] any kind of hedging? I know the shipping season is still a little bit out. So just comment on that.

And then also, on Kittila, this new heavy drill rig, when do you expect to have that on site? And what’s the distance from this new zone that you expect to be drilling from?.

Michael, I’ll take the first part of that. We do actually consume a fair amount of diesel already in the north at Meadowbank. We do hedge part of that. We have our shipping season. We do have some hedging outside of that because our requirements have increased due to the acquisition of Malartic specifically in a big open pit.

So that’s something we’re active in. We’re trying to take advantage of the currently low prices. And then longer term, we’re actually doing some work at the moment to see how we can contribute to the overall return profile of the new projects like Meliadine as well. So we are definitely active, not only in fuel but also in currencies.

That also has a major impact on our result..

And just from the Kittila?.

Yes. At Kittila, we have high UD [ph] rigs in place. The idea is we continue to drill between that one and the harbor part [ph]. And if we drill, it would be above there in three months, four months to drill and to follow and to understand the size of the deposit. But we already drilled between the two holes. It’s done..

Okay. Thanks very much. That’s it for me, guys..

And your next question will come from the line of Steve Parsons of National Bank Financial. Please go ahead..

Yes. Thank you. Good morning. Thanks for taking my call. I guess the question will be on LaRonde and specifically with respect to the coarse oar conveyor that’s being planned for commissioning later this year.

Can you just maybe elaborate a little bit about the indication that you should expect to see sort of increased mine flexibility there? Is that a potential for the grades to tick hard and maybe close to reserve once that’s in place or is it related to cost or maybe just add a bit of color on what the benefits of that would be..

I think we’re in a position of completing the construction that occurred there [ph] and essentially establishing commissioning in the third quarter for this year.

At this time, on the cost side, we’re not expecting major impacts on the cost side but we’re more focused on flexibility, minimizing traffic and then just basically establishing the line of sequence in [indiscernible], being able to involve the board and raise [ph] for the more productive phase. So it’s basically flexibility..

Okay. Maybe secondly, as it relates to LaRonde, there’s an indication in the quarter that there was some harder ore, maybe some harder stopes that complicated some drilling efforts and impacted cost in the quarter.

Is it something that should get into the deeper part of the mine that we’re going to see more of, more harder ore or maybe higher drilling costs and potential implications in the mill [ph]?.

We’ve seen as we’ve more adapted the - the board [ph] profile is getting harder. We’re dealing with dealers and buyers to find solutions with that in mind. We’ve seen that it had some recent success in good carriers [ph].

So I think it’s more a question of readapting to block strength in that area and basically putting in planning and proper tools to adapt. But we’re not necessarily very focused with how this profile has put in large cost on different spending [ph]..

Got it. Okay. And maybe lastly on Pinos Altos to follow-up on Andrew’s question on grade there. It looks like - if I take a look at the delta between gold sold and gold produced, there’s about 10,000 ounces of gold not sold to Pinos Altos which would suggest to me that maybe some of these higher grades were hit later in the quarter.

I don’t know if that was true.

But if so, is there a chance that that higher grade structure, whatever it was, extends into Q2?.

So now, there’s - everything’s gone okay. But I would just stick with my answer. We’re going to take rough or moderate and kind of [indiscernible] for the rest of the year. That’s our forecast. And yes, we did get some good production in March and later in the year. You’re right about that..

Okay, very good. That’s it for me. Thank you..

And your next question will come from the line of Stephen Walker of RBC Capital Markets. Please go ahead..

Thank you. Just as a follow-up for David, and I apologize, Sean, I believe you touched on this a bit. But I just want to get more details on the debt repayment. You did begin to pay back again or continue to pay back some of the debt this quarter.

Is that just the excess cash that was generated with the lower all-in sustaining cost, the lower sustaining capital that was spent in the quarter? You generated obviously a little more free cash with that.

And do you expect to continue to repay the debt at the same rate or will it be lumpy depending on the free cash flow generated in the quarter? Maybe you can give us a sense of what we could see between now and year end or what those plans are?.

It’s definitely going to be lumpy, so once you max those cash in the quarter due to a very strong quarter. We actually have an expectation.

We pointed that out in the press release that based on success at some exploration properties and at some good capital projects, we think there’s an opportunity to actually spend more than our initial capital budget for the year. So we’re probably going to be doing that.

And as a result, that will consume some of the forecast free cash flow for the year..

But as a follow-up, Sean and David, when you look at the debt to total cap, you look at the level of debt that you have in the balance sheet, are you comfortable with that at these levels? It’s kind of moving into the upper end of the range where historically it hasn’t been.

Where do you see that level of debt going forward, particularly as you start to invest more capital into some of these projects in the next 24 to 36 months?.

Yes. We’re most certainly comfortable with the balance sheet. I describe it as neither high nor low. I think it’s moderate. As Sean said earlier, we feel like we have debt capacity at this point without threatening our investment grade credit range. We don’t feel constrained on the balance sheet for our future growth plans at all.

We feel like we have access to both that and equity markets. So as we do generate opportunity to reinvest and improve the business, we feel like the balance sheet is there to help us do that..

Great. Thank you very much, David..

And your next question will come from the line of Don Maclean of Paradigm Capital. Please go ahead..

Hello, good morning, guys. Well done on the quarter. Two questions. One for Alain, just a quick one on the infill drilling.

How is it looking compared to the other side’s? Are you getting the same kind of density grading [ph] and frequency of high grade mineralization or is there something different about this gap?.

No, it’s exactly the same thing. And what we - one is looking good partially [ph]. And the average rate is looking a little bit better. But [indiscernible] calculation that we did in the beginning of this year, that you saw the 7.2 grand [ph] and looking at the price only, it’s a little bit above.

But when looking also at what we do under the lake, we have one to two inches to the eastern part and going to fall into the western part. And that means [ph] actually the same thing. And one thing that we did not mention last year, the last section for the work, we gave assessment. And now we are pushing to the north to define that momentum.

And what we saw in the two holes was documented as well. And it could be in the footprint of the detail and how has outstanding for [indiscernible] a bit more..

Great. Okay. And the second question is on Meliadine.

Maybe, Sean, you can talk about what are the differences that you’re considering in the base case plus scenario that will get that 10% rate of return at $1,300 to look more appealing?.

By simply taking more resource, extending the mine life. So we will add all of the 6.8 million ounces of the mine, we’ll put in a subset of that. But we’re already seeing numbers about what we put out in the base case study on the reserve. So it’s just fine-tuning that at the moment.

And the investment opportunity there is really you’ve got 80 kilometers of coverage, more than 100%. We’ve only drilled sort of the central part of that, so there’s still a lot of potential in the district, and just to get that production base established and that should be a focus right now.

And we know that if you look at some of that resource, the grade of that resource or a chunk of that resource is as high as the reserve. There’s a chunk of that resource that’s in that sort of 7 gram range as well. So the resource is good quality and so that’s why we’re feeling comfortable. So we can get that rate of return up..

And you’ve indicated in the - you’ve got a potentially long life asset, just looking at - what kind of rate of return would you feel comfortable taking to the board?.

Well, our base case is 15% after tax. But you’re one of the old guys like me and you can remember that we built along that 8% or 9%. And so we don’t need 15%. It’s a little bit less than that.

And the theory is we’re building a platform that’s going to be a significant part of your business for a couple of decades, then we don’t [indiscernible] and there’s that long-term thinking. And the reason we do it here at Anglico is where we tend to create the most value is once we get established, we set out our teams to look on it and off they go.

And we’ve proven that consistently whether it’s in Quebec, whether it’s in Finland, whether it’s in Mexico. And although we got off to a rocky start in Meadowbank, we didn’t quit. We didn’t pack up and leave because we saw that as a great place to do business and we saw it with a lot of mineral potential, and wouldn’t you know it.

Alain Blackburn and [indiscernible] and Jérôme Lavoie put their heads together and said - you know what, let’s look beyond Meadowbank and let’s see what’s out there and here we are on [indiscernible] being a significant discovery. So that’s long-term thinking. And so IRR is always at a point in time. And it’s a mathematical number.

And all of those moving parts to do with it do change. And we’ve experienced that over our long career and the longest bulk [ph] of that turns out to be the world’s best deposit.

Alain Blackburn there is the mine geologist followed by Marc Legault, followed by regional plant [ph] and all of that good thinking resulted in us developing [indiscernible] deposit. So as Mr. Penny used to say, if the gold is not there, we can’t put it there. If it’s there, we’re going to find it and we look at Nunavut as the perfect example of that.

And we think there’s lots of gold there as we’ve got the smart people that are going to find it..

And just lastly on the same topic on Nunavut within the context of considering new opportunities, would you consider increasing your footprint on Nunavut or would you like to diversify elsewhere if find an [ph] opportunity?.

That’s a good question. That’s sort of long-term thinking. We have a huge land package now. We’ve got 115,000 hectares around Amaruq as we set the trends of that [indiscernible] 80 kilometers, certainly where other opportunities in the region, but it’s really how much can you take on.

And that’s the question that should the inventory project that looked to that. So we haven’t answered that question yet. And is Nunavut a place to find sort of [indiscernible] in terms of the value and the project, yes, absolutely. As is other parts of Canada, as is Mexico, as is other parts of the [indiscernible].

So we just look at, try to find other opportunities and not to be focused too much on the folks at Nunavut..

And you don’t get this 90% off sales very often in your lifetime. Okay. That’s good. Thank you very much, guys..

And your next question will come from the line of Patrick Chidley of HSBC. Please go ahead..

Hi, everybody. Just maybe just quick a one. Just a question on Meliadine and just coming back to the sort of discussion of moving ahead with that project and what the synergies might be.

Are you absolutely certain that you need to build a plant there or are you thinking about the sort of maybe more innovative idea in terms of shipping or barging or something like that..

We are thinking about options and alternatives. But those old things come together in time. And that’s the real question we have. And so we certainly looked at building a road and we looked at the possibility of building a road which would then connect to Meadowbank.

But the question there is we’re going to potentially - if Mammoth Lake turns out to be an additional source of ore. And between Amaruq and Mammoth Lake, then we have to enough to supply and utilized to full capacity of Meadowbank.

And so the question is more long-term, do we want to process in the facilities that can be said and use the innovation group and the technology group to find ways to transport that ore, other than the gold, which is we’re also looking at.

But I think in terms of innovations and things that would improve the cost structure there, I think one that has the most potential is on the energy side. And that’s where we’re focusing more our attention rather than on the transportation of ore side at the moment..

All right..

And we’re looking at generating hydropower. We’re looking at LNG. And those are the things that can have more sort of immediate benefits and it’s certainly helped something like Meliadine..

Are there real hydropower opportunities there in that region?.

There could be and the Nunavut government is certainly looking at them as our lead. And I think that’s a portion of the portion of the head in that raise would be LNG at the moment. And so those are things that we know the Quebec government is looking at.

And the Quebec government is looking at it in conjunction with business groups in Quebec to take that LNG over the top [ph] of Quebec. And that’s pretty close to Ranklin Inlet, it’s just across that Hudson Bay. So there’s a number of things on that. I think that’s an important point.

And a good question is that you look at Nunavut today, it’s not going to be the Nunavut 5 years from now or 10 years from now. It will be easier to do business there because the two questions they are working hard to resolve is infrastructure and energy. And energy probably is the most important one right now.

And that not only affects businesses, but it affects the communities. And the communities still are generating power from diesel. It’s not the most environmentally friendly way to do it. And there are other options that a lot of people are working pretty hard at and that’s another reason, it’s not just mineral potential that gets us excited.

But we can see technology that isn’t that far away that can certainly help lower our cost structure up there and improve our business..

All right. Makes sense. So thanks, Sean..

And there are no further questions at this time. So I want to hand it back it over to our speakers for closing remarks..

Thank you, operator and thank you everyone and you’re all welcome to join us at 11 o’clock and there’s a lunch following, we have all of our exploration teams here and they’ve got core and they’ve got Matt [ph] and they’d be happy to chat about what they’re thinking and how they’re going to move some of these things forward. So thanks again..

Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your line and have a great day..