Sean Boyd - Chief Executive Officer.

David Houghton - CIBC Stephen Walker - RBC Capital Markets Carey MacRury - Canaccord Genuity.

Good morning, my name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to the Agnico Eagle Second Quarter Results 2018 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

[Operator Instructions] Thank you. Mr. Sean Boyd, you may begin your conference..

Thank you, operator, and good morning, everyone, and thank you for joining our second quarter 2018 conference call. We'll be going through a series of slide and I just like to make you aware that there will be forward-looking statements in the presentation. So there is some disclosure on that in the slide deck.

Just to get a set sort of on our thinking, our mindset where we are mid-year 2018 in this transition year as we transition from mining the deposits in the vicinity of metal back and moving to a much larger and broader platform in Nunavut.

We remained focused on adding value through the growth in our production base largely in Nunavut, while keeping the risks in our business low. Specifically, we remained focused on the execution of the Nunavut growth plan moving those projects forward.

And we also remained focused on exploring our existing assets near and around our main deposits to grow our reserves in our resource base and also focus on the project pipeline that we expect to come in post building out the Nunavut platform.

But if we look at the operations, we continue to see operations that in a transition year are performing well from a production point of view. As a result, we've increased our full year guidance.

Our gold reserves and our resources we expect them to continue to grow this year based on the exploration results that we're getting in and around our existing mines which are showing extension outside of currently known mineralization.

Those expanding reserves and resources will support the production growth that we will see over the next several years. We're on track to hit our target of 2 million ounces in 2020 and we'll talk about that.

And that's important because that will drive our growth in cash flow per share and free cash flow as the capital that will be required to be spent in the business to sustaining gold production beyond 2020. It is his significantly less in the amount we've been spending in 2017 and will spend in 2018.

So we'll update you specifically on the projects, but we continue to make very good progress at our key growth projects. In terms of the pace of our growth, I think that's important because what we've been able to do is put together a collection of assets that are well matched to our technical skills and our experience.

And it's important to work those projects at a manageable pace with realistic targets and when you combine that approach with a broad range of skills, it gives a what we call a high quality low risk broke story, little progress, low execution risk and that will remain the focus as we move through the balance of this year and move into next year when we see our production begin to grow again.

As far a second quarter goes, generally as expected as we set from a production and from a cost standpoint and payable production a little over 400,000 ounces, cost came in roughly at the midpoint of the guidance, as a result of the strong second quarter, as we said we've increased our full year production guidance to 1.58 million ounces.

We expect based on second half projections to see a slight decrease in our total cash cost as we move through the second half of 2018 and then as we move into the 2019. Our particular note in the quarter as we said was moving some key projects forward.

As expected we received our water license A which has allowed us to begin construction of the Whale Tail pit and that timeline is tracking very well to have production coming out of the Whale Tail pit in the third quarter of 2019.

And that we continue to make excellent progress there both in surface construction, in underground development and also we've got some new news on the exploration front because for the first time in three years we resumed exploration drilling in and around the Meliadine.

We also received a permit at Akasaba that's a satellite deposit for Goldex that allows us to leverage off of the Goldex and infrastructure, so reviewing the timeline for the integration of that project. And we've also in the quarter declared commercial production at the LZ5 zero, and the Lapa mine we've been able to extend further into 2018.

And both of those situations again our allowing us to leverage off of infrastructure and skill set to add incremental value in those regions where we've been for many decades.

As we said on the operating side on our operating results, we're tracking about the initial guidance on full year production, as a result we race the guidance and we're tracking roughly at the midpoint of the cost guidance. In the quarter, we saw significant contributions coming from both LaRonde and Canadian Malartic.

That was important because they partly offset the lower production and the higher unit cost that was expected at Meadowbank as we complete the last year mining at the deposit in and around Meadowbank. We generated good cash flow per share and our cash flow per share numbers are right in line with the consensus.

As far as our position financially, we closed the quarter with over $700 million in cash. We've fully undrawn credit lines of $1.2 billion, so we're well positioned to complete the build out of our next stage of growth in Nunavut.

Specifically on the asset, as we mentioned LaRonde been a major contribution not only to production but also to cash generation and operating margin. The grades were over five grams per ton. They produced 85,000 ounces at a total cash cost of $395 an ounce.

So we can see the impact that the lower part of the LaRonde mine having not only on production and costs but also on cash generation. We continue to drill the lower part of the ore body will be systematically adding additional levels as we move forward over the next several years.

And as you remember some of our best drilling is on the lower part of the mine on the western side of that deposit. So that should be important for production and unit cost as we move into the lower part of the mine. And as we said, LaRonde Zone 5 hit commercial production.

And what was important about LaRonde Zone 5 is the use of new communications technology to test automated equipment.

That we're looking to employ that at LaRonde and we have the pleasure today here in the room to have a team from LaRonde that put the concept together about automated equipment using the LTE technology and they're here to accept an award that we give annually to the best idea coming from the sites to improve our business.

So congratulations to the team at LaRonde for that technology. And that will be important as we open up the LaRonde mine to manage cost to become a more efficient in that part of the mine. I talked about the LaRonde Zone 5. The opportunity there is really not just to bring the smaller result that we're working on now that the base case.

The opportunity is to prove the concepts and to original feasibility because there's several hundreds of thousands of ounces on that property which will be focused on analyzing to see if we can also bring that into the mine plan over time.

And we mentioned Lapa just never seems to go away, not that we wanted to go away, they keep doing an exceptional job of taking advantage of already built infrastructure and skills and allowing us to add additional ounces. And we're expecting to add about 15,000 more ounces from the original guidance earlier this year.

And that's one of the reasons why we're confident in setting new full year 2018 production target. At Canadian Malartic, we also mentioned that is being a major contributor in the quarter.

They set several records two of which are quarterly record gold production and also a quarterly record for average daily throughput at the mill which average almost 58,0000 tons a day. To recall four years ago in 2014, when Yamana and the Eagle acquired the asset, the throughput rate was 48,500 tones times a day.

So the team at Canadian Malartic has done an exceptional job, steadily each quarter optimizing that mine and taking advantage of efficiencies and turning it into a significant cash flow generator for both Yamana and Eagle. We're on track for the Barnett extension and the construction work is proceeding as planned.

We also continue to do exploration work at both the Odyssey zone and the East Malartic zone and we're continuing to do that work to determine the extent of the mineralization and then to figure out the appropriate next steps for both Odyssey and East Malartic.

At Goldex, the focus as we said was on acquiring permit for Akasaba, which we did in the quarter but we've also been focused on drilling at depth at Goldex, drilling Goldex Deep 2 and the Deep 3 Zone and also we're got to drill holes in the quarter that suggests that those zones can continue to grow.

And we've also -- our drilling is also suggested that the currently smaller but higher grade has the potential to expand. And that could be important given the grades and we haven't done a lot of drilling there in the past so that's certainly open for expansion.

At Meadowbank, as we said it's the final year of mining at Meadowbank essentially from the bulk head which was always a bit lower grade. The production in cost, we expect them to slightly improve in the second half. But essentially at Meadowbank, we had in Q2 about a 26% decline in grade year-over-year in the quarter.

Our tons processed were down 15%, all of this was expected in that final year. Production was down 36,000 ounces. Our unit costs were up about $360 per ounce. And as we said the offset to that was partly LaRonde and Meadowbank.

So as we look out, as we start to go back a couple years, the expectation was that we would have had a significant production gap at Meadowbank between Meadowbank and Amaruq.

The team has done an exceptional job of squeezing out additional tons at Meadowbank of extending the life at Meadowbank will be processing Meadowbank's stock pile into 2019 to smooth that transition between Meadowbank and Amaruq. So everything going as we expected.

At the Amaruq site, the important milestone there was the receipt of the Type A water license, that's now allowed us to begin the tight construction in the older birds and waste stripping. That timeline sort of tracking as expected in terms of permits and beginning the construction.

Everything is tracking according to the original plan, which will start up the Q3 2019, also tracking close to the budget. What we've been doing as well waiting for the pit and the permit to develop the pit has been extending the ramp. The ramps now been advanced to total advance of 478 meters, down of depth of 60 meters.

So that wrap is important to do some drilling to determine the extent of the mineralization in both and Whale Tail area and the D Zone area. And drilling in the quarter does suggest that we can extend the size of both Whale Tail and D Zones from underground.

We've got drilling outside of the known mineral resource and we're going to continue to follow-up with drilling as we move through the second half of this year. As we said at the start, we continue to make excellent progress at Meliadine, the Sealift is underway at first July and early July. Surface construction has gone extremely well.

Site construction at the end of June is 74%. We actually finished the mine, the small tight service building includes the mine dry and the offices that turned over to the team in the second quarter of 2018.

In the plant, we've actually done substantial work on mechanical piping and electrical and instrumentation work to the point where essentially we’re just waiting for the larger key components to be offloaded off of the barges so that we can get them stalled.

So we’re tracking extremely well to start commissioning that plant in the first quarter of 2019 which sets us up nicely for production from the original plan in Q2 of 2019.

We are also well positioned given the advances we’ve been making in underground development while we’ve been building on surface and developing underground, we’ve also been compiling a stockpile of developing order.

And when we combine to development order that we have stockpiled and continue to stockpile over the next few quarters combine that with the mining blocks that we expect to extract in the fourth quarter and in the first quarter of next year, we will have a sizeable stockpile available to us when we start up the plant in the first quarter of 2019.

And I think what’s also got us quite excited besides the progress we’ve been making on construction development is exploration.

As we mentioned earlier, we had stopped exploration at deposits over the last three years just in focus more on moving the project forward from a construction point of view, we’ve resumed exploration drilling, we encountered very good grades, but we’re very good with outside of the currently known resource.

And I think that’s telling us is that we expect the deposit to continue to grow. So in the second half, we will continue with follow-up drilling. We’re looking for additional extensions of that as we said own mineralization at the depth, the deposit is wide open.

So our job now is to, as we get it up and running is continue with an active exploration program to determine how big that structure is. In Kittila in Finland, the expansion is progressing on schedule and on budget. We’re also focused at Kittila on improving the reserve picture, it’s already a largest single reserve base.

Our focus on drilling this year is to convert more about large resource into reserves for the end of the year. So we continue to encounter mineralization outside of the known envelope and we should not only see an increase in reserves but potentially an increasing in resource.

Moving to the Southern business at Pinos Altos, we’re moving towards almost entirely an underground mining operation at Pinos Altos that’s associated with the higher cost structure. To help offset that we will focus on developing a few satellite zones in the near vicinity of Pinos Altos infrastructure.

At Sinter, we continue to work also at Cubiro, and we are more drilling Reyna de Plata. So these will be two or three additional satellite deposits that we will bring into the mine plan over the next couple of years.

At Creston Mascota, same strategy, focused on near surface mineralization in and around the deposit both at Bravo and Madrono to extend the mine life at Creston Mascota. At La India, essentially the same strategy as well, looking at areas like El Realito which was acquired a couple of years ago.

We’ve been active in exploring in and around the La India deposit, we’ll be adding additional sources of ore largely to stem mine life at La India, so they’ve made good progress there.

Just quickly in summary, as we said in the start, the objective is to stick to the strategy at works just focus on bringing these growth projects in on time and budget. Focus on the platform in Nunavut which we think has the potential to be a major contributor to Agnico for many, many years. We know is going to grow.

I think importantly what that platform does combined with the other production basis including the large production bases in the Abitibi has is put us in a really good position to begin to generate some significant net free cash flow next year because our CapEx is expected to come down from peak levels in 2018.

So what I’d like to do operator, is open up the lines and take some questions..

[Operator Instructions] Your first question comes from David Houghton from CIBC. Your line is open..

Hi, Sean. Thank you very much for the update.

It’s very good to see the rates exceeding the 55,000 tons a day, what should we be thinking about as a sustainable throughput at that operation?.

To take the 56,000 is pretty good number to focus on at this stage going forward..

Okay.

And to set alter in any way when it comes on?.

Perhaps, yeah, this is been defined as to be potentially softer and by not only developing them but the opportunity that have perhaps in that area to maintain that throughput rate..

Okay. Excellent.

Over to LaRonde, the gold rate and particularly the zinc rate was ahead of expectation, what should we be looking at for the remainder of the year do you think?.

Pretty similar to what you saw in the second quarter. We continue to mine some zinc ore from the upper portion of the mine which will continue throughout the rest of the year. As we continue western pyramid grades profile that seen will pursue..

Okay.

And the throughput right there, should we be thinking similar to what we had in Q2 which is a little bit dip compared to recent quarters?.

Yeah, well we have a one week shutdown. We had a maintenance shutdown and unplanned long haul shutdown in the quarter, so they shift model on Q1 rates..

Okay. All right. And last question for me over to Kittila. Still mining and processing below a reserve grade of 4.2 grams.

What should we be thinking about for the grade there and when would we expect for the grade to move into the 4 plus kind of category?.

Well we’ve had some development delays mostly in the rural area. We admire grades stokes that two or three higher grade stokes in the sequence that we supposed to be mine in Q2 and Q3 that have been basically delayed to Q4 and Q1 in next year. I think you should be modeling the guidance grade for the year as started in Q4..

Thank you. That’s fantastic..

[Operator Instructions] Your next question comes from Stephen Walker from RBC Capital Markets. Your line is open..

Just a follow-up to David’s question excuse me, Zone 5, I know historically when lack in Barrick were mining, there was significant positive reconciliation are at times there was good positive reconciliation.

Are you seeing evidence of that I know it’s relatively modest production in 2019 but are the grades holding up as expected?.

Yeah, so far the great same on target. We’ve seen some periods were grades have little bit exceeded our expectation, recovery is strictly exceeded our expectation at this stage. So far pretty well everything is on production models..

Thanks for that. And Sean, just to step back, talking about free cash flow and I think we’ve all got that modeled into our forecasts 2019, 2020.

With respect to returning capital to shareholders in 2013, there was dividends of $0.88 of share and clearly that declined has gold price declined you kind of back up to $0.44 a share, I realize it’s a board decision as to what the return of capital may be in future periods.

But do you have any view that you’d like to target the dividend and at what point we could kind of get back up to $0.88 or possibly above that level on an annual basis?.

That’s clearly gold price dependent, but I think if we look at the history here 35 years of paying a dividend consistently even after 2013 not eliminating it, reducing it but then – since it was reduced we’ve moved it up each of the last two years all be at small but we still did move it up sort of signaling confidence in the plan to grow production and grow cash flow.

So it’s certainly a focus of the board, certainly a focus of the team when we’re looking at capital allocation. If you ask us, we never really sort of have the specific miracle goals that if we don’t sort of get there we feel that, it’s been a bust.

But I would say that one number that we certainly all like to get back up to a beat is that $0.88 a share. So that we keep that in mind as we look at our budgeting, as we look at capital allocation to the pipeline.

I think that’s one of the things about how the pipeline which ties in a bit to this question is that we’re spending a lot of time prioritizing the pipeline.

We do have the permit Akasaba that doesn’t mean we’re going to rush and start to building, because we’re doing our budget and we have an envelope in mind on capital that we want to spend for next year and the year after.

So that’s got to fit in and the dividend would sort of play into that concept of return to shareholders would play into that discussion. So we’re hoping that it can trend up, we feel confident it can based on where the business is headed but the gold price will be a determinant of that..

Thank you very much. Sean, that’s very helpful..

[Operator Instructions] Your next question comes from Carey MacRury from Canaccord Genuity. Your line is open..

Hi, good morning. Sean, you mentioned some of the exploration that’s happening underground, I’m just wondering if you could touch on exploration from an open pit perspective, is there any confidence that you’re build increase reserves or resources from an open bid for this year..

Yes, as speaking and already have a rigs on this side and we have a good results on western part of D Zone, and depending on the design what is economic could be new answers coming from that deposit could increase in the future, but we have a good number right now..

Okay. Great.

And I’m just wondering on the workforces Meadowbank kind of wind down and [indiscernible] gramps up, is it more or less the same workforce, further changes going to be happening there?.

The workforce that is at Meadowbank will essentially be the same although there has been some transfer from Meadowbank commodity. So that’s proceeding as planned.

On the margin recruitment side that we are following the finest and we are staffing both the mill and the pit and the underground mine operations stuff and service and so far we’re tracking very well and getting all crew on board..

And you also mention the stockpile, how big is stockpile do you think you’d have before you start up down there in terms of months of production or weeks?.

Well, at this stage by the end of January, you could be in a position to have the about 200,000 tons of hybrid stockpiles..

What sort of grade?.

Around 7 or 8 grams..

Okay. Great. Thank you very much..

There are no further questions at this time. I turn the call back over to Mr. Boyd..

Thank you, operator, and thank you everyone for joining us on the conference call. We would like to remind you that we do have a site visit planned to Meliadine 2018 September 6, that’s a one full day, leave early in the morning from Toronto and return that evening.

So that’s an opportune time to come up and see the progress that we’re making and we’ll make through the summer as we offload the barges and get some of the key components installed in the processing facility and the power plant. So thanks again. If there is an interest contact, Brian or Ria or Melissa and we’d be happy to have you join us.

Thanks again..

This concludes today’s conference call. You may now disconnect..