Agnico Eagle Mines Ltd (AEM) 2010 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Agnico-Eagle first quarter 2010 results webcast conference call.

(Operator Instructions).

I would like to remind everyone this conference is being recorded today, Friday, April 30, 2010, at 8:30 Eastern Time. I would now like to turn the conference over to Mr. Sean Boyd, Chief Executive Officer. Please go ahead, sir.

Thank you, operator, and good morning, everyone and welcome to our 2010 first quarter conference call. We've got our entire team here with us in Toronto, our Annual Meeting was this morning at 11:00, so with the full team, once we finish the formal part of the presentation we'll be happy to answer your questions. In terms of the highlights for the quarter, it was a big quarter for us from the perspective of bringing Meadowbank into production. We achieved commercial production at Meadowbank. The mine continues to run well in April. We'll talk about that in a little bit more detail. Kittila, we'll also give you some updates on Kittila, our recovery slipped a bit. We are continuing to do test work with the concentrate, looking to improve the stability of the reaction in the autoclave through additives in the concentrate. But we'll give you more detail on that particularly in the question and answer session. And as you saw from our release, we're still anticipating getting up to feasibility level recoveries, as we move towards the end of 2010. But we're going to move through the slide presentation, and we're going to move through it as quickly as we can so that we can get to questions.

In terms of the strategy, nothing really changes for Agnico. We continue to move forward in an optimization and expansion phase on the existing asset base that we've built over the last several years. We're still targeting production in the million to 1.1 million ounce range for 2010. We continue to work as we said on optimization of the assets we've built. But we also continue to study internal expansion opportunities. And we'll touch on a few of those, as we move through the presentation. Our reserves are at record levels. We still see continued growth in those reserves as we continue to drill our deposits, and the resource, the large resource around the existing deposits. Our strategy for growing is not only based on looking to optimize and expand the existing portfolio of assets, but also looking for smaller acquisitions. We have an agreement in principle, as we announced a few weeks ago with Comaplex Minerals to acquire Comaplex Minerals.

We have a date of March 3rd to achieve and complete,or May 3rd, sorry, to complete our due diligence and get Board approval. So we're working towards the May 3rd deadline which is Monday. Our costs, we still expect them to be below industry average, as we optimize all of these mines and as we continue to expand the output. And our financial position was strengthened in the quarter, just post the quarter, as we completed and finalized a $600 million long term bond issue. And we used the proceeds of that to pay down the shorter term line of credit. In terms of the actual operating results, we had record output of 188,000 ounces as we achieved commercial production at Meadowbank. The quarterly performance was really anchored by the performance of our three Quebec-based Mines, which all exceeded budgeted production. and they all exceeded the budgeted cost per ton, so they're performing extremely well. Our guidance is still in the 1 million to 1.1 million-ounce range for 2010, at costs of around $400 an ounce.

In terms of the earnings, we had some foreign exchange translation loss, which hurt the headline number, as the Canadian Dollar strengthened. We also had as we normally would in the first quarter a stock option expense, we issue our stock options in January of each year. S o our earnings were low on a headline number because of those two adjustments. On a normalized basis we were essentially right on consensus. I think what's more important is cash flow was up 50%, from where we were in the quarter a year ago. As we continue to increase output, our expectation is that our cash flow will continue to move forward, not only on an overall basis but on a per share basis.

Our financial position as we said, was improved. Our long term debt is $600 million in bonds with an average tenure of about 10 years, and we still have a little bit drawn under the Credit Facility. Our available liquidity, with what we have left available to borrow if we need it, plus our cash position is over $850 million. so we're in a strong position, as we move forward to continue to not only grow our output through focusing on internal expansion. But we can also do it in a way where we can increase the return to our shareholders, through improvements in our dividend payout, because of the increase in net free cash flow as our capital expenditure requirements declined significantly from what they were over the last three years.

In terms of the growth from a reserve point of view, our 18.4 million ounce position of reserves. In addition to that, we also have over 10, 11 million ounces in resource. We're spending $75 million in exploration 2010, which is our biggest budget ever. And more than half of that is focused around the existing deposits, looking to convert some of that large resource into the reserve position. Our production, this is an extremely good growth profile for the industry. Again, we see a doubling of output in 2010. We see consistent steady growth in production out through to 2014. We are working on three expansion opportunities at three of our properties. At Kittila, we're looking for an increase in throughput. The base case increase in throughput would be about a 50% increase. We think that's achievable at the existing mine without the need for a shaft, but ultimately we would still like to put a shaft down, and hopefully increase that tonnage rate at some point. But that's a study that will still take us several months to complete, and we won't be in a position to talk about that until first part of 2011.

We are also looking at a 1500 ton a day potential increase in throughput at Meadowbank, and we're looking at a potential increase in throughput at Pinos Altos at the mill, and also looking at several satellite deposits. And hopefully these expansions will augment the production profile we have currently out in the market. Our production growth profile puts us among the leadership, one of the leaders in the industry in terms of the rate of growth in production per share. That's going to allow us to drive cash flow per share, which is one of the key valuation metrics we think when looking at the gold stocks. When we look at our capital expenditures, made reference to this earlier, we see a dramatic decline as we complete our construction in 2010 at the newly built mines.

We go into more of a sustainable CapEx environment, but we are looking as we said at several expansions. But order of magnitude, those capital expenditure requirements are no where near what we were spending, or the rate of spending over the last three years. So that's why we feel we've now set our business up, where we cannot only reinvest in the properties and continue to grow output and reserves. But also to increase our returns to shareholders through an improvement in our dividend payout. Again, when you look at our cash flow per share and our free cash flow per share, we are again among one of the industry leaders. Largely because we've been able to keep our share countdown over an extended period of time, and because we bought assets early. And we built them during a lower gold price environment, we're in a position now to take advantage of those assets, and our decision to construct them when we did.

Just looking at the asset base, we feel continue to grow through internal expansion, and through selective smaller acquisitions, and maintain a steady growth and output and reserves over the next several years, without any dramatic change to where we operate in the world. And we're proud of our political risk profile. It's probably the best in the industry and we hope to maintain that advantage as we move forward. LaRonde continues to be a very strong performer not only from a production point of view, but also from a cost point of view. Our cost per ton was CAD71 in the quarter versus a budget of CAD75 CAD76. And so again, great performance at LaRonde. The mine has operated steady-state since the expansion, the last expansion in 2003. As far as our preparation to access the higher grade gold ore at depth, everything is on target to start to pull initial tonnage by the end of 2011. We completed the change over from shaft sinking. We've commissioned the service hoist and we've started level development on two levels. So the mine continues to perform well, should meet its guidance of 180,000 ounces at very low cash costs.

We continue to explore the property. It's still open. We continue to drill the boundary, along Westwood and Ellison, and looking to follow-up on some results that IM Gold had on the boundary that actually crossed into our ground. So there's still exploration potential at the LaRonde site. Goldex continues to perform extremely well, tonnage and ounces above budget. In addition, recoveries improve. They continue to improve, they were in excess of 92% , so we continue to optimize at this mine. We're on track to achieve our expanded tonnage rate of 8,000 tonnes a day by 2011. The mine is actually ahead of schedule in terms of its development, in terms of how much ore its got drilled off and blasted. This should allow us to maintain our excellent cost per ton performance, as we go forward. So no issues there with the guidance. We're expecting strong output and strong cost performance from Goldex, as we move forward. And we continue to explore it, the deposit is open and we've ramped up our exploration efforts at Goldex.

At Lapa, we had record production of 31,000 ounces, about 5,000 ounces ahead of budget. Q1 tonnage was also above budget. Q1 costs per ton was below our budget due to the higher throughput rate. Our recoveries are still a little bit below plan but we expect to see improvements going forward as we optimize the circuit. What we've got as we move through the Second Quarter is improved operating flexibility underground as we connect the ramps which will be connected shortly, so that will hopefully allow us to continue with the very strong cost performance there and the mine had a good quarter and looking to achieve its guidance as we move through the balance of 2010.

At Kittila and Finland we had a longer than expected maintenance shutdown, expected to be about ten days. The actual shutdown was 24 days. We had to do additional brick work, and that required an autoclave. And as we look at that, it was due to normal wear and tear so nothing really out of the ordinary. Mill recoveries were below plan. We achieved an average of 71% versus 76% in Q4. As a result, we are anticipating a slower ramp up to the feasibility recovery levels. We are continue to work with treating the concentrate stability we can improve the stability of the reaction in the autoclave. So we are continuing to do test work there. So that is going to result in a slower ramp up. We have seen some higher grade. We've seen the ability to put more tonnes through than the design capacity of 3000 tonnes per day. So we still expect to achieve our guided production of 147,000 ounces.

That's certainly what we have. we were there a couple weeks ago and we modified the mine plan. So that's what we're working towards as we move through 2010. We continue to drill it. It's wide open as you know. And we'll move to the the longitudinal section on the next page. We've got an extensive drill program here, ramped up from last year. We look to convert more of that resource to reserve as we move through 2010. As a result of the increasing reserve, which grew by 25% last year, we're looking at various expansion scenarios here. And one of the scenarios we're studying is to get to an increase throughput, without the need for initially for a shaft, where we can hopefully do it through accelerated underground development of the ramp system. So we're looking at those different scenarios and we should have the results of that work in the first half of 2011.

At Pinos Altos, we made significant improvements from Q4, due to several modifications to the filtered tailing system. In March, we averaged almost 3200 tonnes a day versus 2000 tonnes a day in December. In April, we've continued to do better and we've improved on our performance in March. We've ordered and expect to have delivered to the site, additional filtration capacity. Once that capacity is installed in the third quarter, we should have the ability to run at a higher than initially planned throughput rate which was 4000 tonnes a day. So we've got additional capacity on the way which will resolve the issue that we've had with the filtered tailings system. Our mill recoveries have exceeded 90%. The underground and open pit are performing according to plan. We've started development of Creston-Mascota, which is the first of the satellite deposits.

Our capital cost and our schedule on Creston-Mascota is both on budget, and we continue to drill it. We've seen encouraging in fill drill results there. So that one is looking, the first of the satellite deposits is certainly looking quite good. As far as our guidance we're still looking for 150,000 ounces in 2010 at Pinos Altos. We continue to drill the satellite deposits. There's an extensive exploration program. We hope to be providing an update in and around our second quarter results, which will be in July. In Meadowbank, we achieved commercial production in March. We started the mills in February. So it was a relatively quick ramp up. In March we were at 6400 tonnes a day. Our recoveries in March were about 85%. They will improve to average 93% in 2010, as we increase our tonnage, and as we increase our grade, as we put reserve grade through the plant. We're currently running around 7000 tonnes a day, so we're ramping up to 8500 tonnes a day. We're working out a few bugs we are having in the crushing system, but nothing fatal, that's normal part of start up. So relatively uneventful start up at Meadowbank, our April production is on track. So that's going to be our biggest producer. And that start up is or that uneventful start up, is why we feel very comfortable with our guidance for 2010. I'll stop there. And Operator, we would love to open the lines up for

Thank you.

(Operator Instructions).

Your first question comes from Anita Soni of Credit Suisse.

Just a question with respect to the grades at Kittila, and the grades at Lapa as well. Let's start with Lapa. The grade was a little bit higher than the guidance you provided in December. Is that expected to continue, or is it expected to come down to the eight gram per tonne level?

Good question. We just had a little bit of trouble hearing that, Anita. The question is on Lapa, and the grade was higher than our guidance, and you want to know why that was?

Not really why, but whether or not it's expected to continue?

We were in a bit of a high grade cycle, so it basically is according to plan. And we are having slightly lower grades this particular month, but once again that's according to plan. And the other reason was we had slightly lower dilution during this quarter because we had the thicker stokes, so it was a function of that as well.

So overall for the average for the year, you're still expecting to come in at around eight grams per tonne?

8.9 grams.

8.9 grams. Okay, and then a similar question with Kittila, although it wasn't just pronounced it was just a slightly lower grade there?

Kittila, actually the grades that we are expecting out of the pit are slightly higher. That's why we expect to make our forecast or our guidance. The average grade out of the pit reconciled with the mill is currently running anywhere between 2% to 3% higher. So we expect our grade to be average out about 5.2 to the 5.4 grams per ton range.

Okay, and then lastly, just the base metal, the by-product grades at LaRonde, they were a little bit lower than you were forecasting previously. Is that expected to come up, or will you still be in a lower grade area?

I would think we would be very close to guidance. It's also a function of metal prices, compared to when we did the budget. So we would be able to mine slightly lower grade material, and that offsets some of the original plan. So we are basically maximizing the LaRonde ore body. and it will be judged almost on a month by month basis what becomes economic.

Okay, thank you very much.

Your next question comes from Mahal Paul of Canaccord Adams. Please go ahead. Mr. Paul if you're on speaker phone would you mind picking up the handset? I'm sorry, we cannot hear you. Perhaps your line is on mute. Your next question comes from John Tumazos of John Tumazos Very Independent Research.

Congratulations on the improvements.

Thank you.

Could you explain how you chose 600 million as the amount for the bond offering? Clearly, with the five mines built, a lot of cash is going to come in. So you're looking at more expansions possibly more acquisitions after Comoplex, etc. Second, will the acquisitions be limited to the same three countries and the various districts where you're currently operating, or would you entertain new areas, Nevada, other places in Latin America, other parts of Canada?

Hi, John. On the debt issuance, what we are looking to do is essentially term out some of our shorter term bank lines, and take advantage of historically low interest rates, and very tight credit spreads. We didn't want to do an overly large financing. We targeted about 5% of our market cap. But the demand was very very strong, so we sized up the deal marginally to $600 million. And our objective is always to drive down our cost of capital. And we think ten year money at 6.6% is very prudent financing. And we think over that ten year tenure, it will prove to be a very low cost of capital for our business. You're right, we will be generating significant net free cash flow. And our objective is to maintain on an ongoing basis a net debt of essentially nil. And so we will carry cash on the balance sheet. But we think ultimately, we'll probably generate higher interest rate, than we'll be paying on this debt over the tenure of ten years.

And then just to the second part of that, John, as far as political risk profile, and where we're looking in terms of geographies. Currently, the focus is on the three countries that we currently operate in. And as you can see in the agreement in principle at Comoplex, we looked at that not only because we like the potential of the deposit, but it's in an area where we feel comfortable operating in. So what we see going forward is with the internal expansions, we have steady growth out through 2014. We can manage that very handily with the cash that we are going to be generating for the mines. Something like a Comoplex, assuming that goes forward, would come in beyond that 2014 period, which would drive reserves and production growth beyond that. So we feel comfortable with that position, so we're not in a rush to look elsewhere. But we're in the mining business so we will look but the way we're trying to grow is without really having a major increase in our political risk profile.

If I could ask one more, what was the current interest rate on the bank loans that you just repaid?

LIBOR plus 3.5, but we haven't permanently reduced those bank lines. They still remain fully available to us. And we're in fact looking at actually expanding them and extending them out further, just to have that much available liquidity to us.

The LIBOR plus 3.5 would be 4% and 4.5% today?

Yes.

So you termed it out by paying 2.5% more interest?

That's right, so we got ten year money, and we think it's very cost effective for this. By next year, we're paying cash taxes in Canada. So that will help shelter some of the income we generate in Canada as well. So on an after-tax basis, this is a very effective cost of capital.

Thank you.

Your next question comes from David Hutton of BMO Capital Markets.

Good morning and thank you for the presentation. Just having a look at your CapEx slide on the presentation was number 12. And just wondering where some of these development projects might fit on this. And I guess one of the things that I'm looking at is you've already started on Creston Muscota. Previous guidance said it would be about $60 million in CapEx, and I'm just wondering if based on your early experience if that's still a valid number to use?

That is still a valid number, David. And as far as the other projects are concerned, we're looking at spreading them out across into 2014. A Meadowbank expansion to 10,000 tonnes, we would see that perhaps coming in around 2012, 2013, similarly with the Pinos Altos. But these expansions are -- I wouldn't consider them major. They are all in the about maybe $65 million to $100 plus million range. Goldex is essentially complete. We can go to 8500 tonnes per day pending on the mining plan. And as Sean mentioned we're about a year and a half ahead of schedule on that to be able to supply additional ore from underground. And then we also have things like [El Cinter], another roughly about $60 million project similar to a Muscota The biggest one that we would be could be Kitilla. But once again, that's an underground development project along with expansion in the mill. So we would be able to see that starting in the later years. and spread out over a couple of years. In our strategic plan, we do not want to go through like the last three years, and have a massive spending spree and construction spree as well. We want this to be more orderly.

Thanks for that, very thorough answer because I had anticipated where that question was leading. So thank you very much.

Your next question comes from Barry Cooper of CIBC. Please go ahead.

Yes, good day. Ebe, while you're on the line there, just wondering, and I realize it's going to be a tough question to answer but maybe you'll have some sort of a scope that you can direct us to. The reversal of the recovery rate for Kittila, how much do you think would that have been related to let's say a hiccup that you discovered during the quarter versus the stop starts and the shut downs and everything else like that because I'm assuming there's a bit of both of those components in that reversal.

Well, I think I will start with the question and then I will refer it to Jean in more detail. Obviously the issues that we went through during the first year, all of the stop-and-start are not exactly conclusive to autoclave wear and tear, so we experienced more wear and tear and I think that's the key point. It is wear and tear and it's not a design deficiency, so when we went in we were able to just rebrick it and as far as all of our experts and consultants have said to us, this is par for the course and it is not unusual wear and tear and it's part of sort of the Research and Development of finding the optimal brick type and mortar type for our ore and reaction conditions. Also, we went on and did more testwork using the advice from some of our other consultants and some of those results were not favorable. In other words, they did not work as planned and with that, I can turn you over to Jean, and he can give you more flavor exactly what we did and what the ultimate result was, and where we are today.

Good morning, Barry. Just a bit of history, last year the same quarter we're at 28% recovery. So we're able to raise gradually to achieve in the fourth quarter 76, and in December it was 78.6. We still are targeting the 83, and eventually being above it. And we have decided to change the pattern in the autoclave. Essentially, it was the first quarter. We have some good results but also we have more downside, and it's part of the experimentation. The what we forecast will we'll extend it, but by year-end, we are still targeting the 83%. As Ebe mentioned, the grade is a bit higher so in terms of gold production, we don't see an issue out there. And in the future, if you look at the life of the mine of Kittila, a couple months more will not be a disaster. We want to make sure that we'll have a stable process, and have a stable operation. For the autoclave itself, it's normal maintenance. The fact is that we did the inspection, and we find that wearing. We just repair, and we'll come to that on the preventive maintenance according to what we have to do.

Okay, good enough then. So is there something specific that you think you've mastered in terms of making the improvements that you've done, and how is it reacted since restart on April 10th there?

It's hard to answer, Barry. You can see what we did last year. We surprised people that were able to raise from the lower recovery to that as 78. Presently, we are working under confidential agreement with the other Company, and this is the reason I can not give more detail.

Right, okay and then just wondering, Dave, if you could tell us there's quite a bit of tax paid. Or at least booked on the income statement. What kind of numbers should we look for the year and why was it so high in Q1?

Well the reason it was so high was we had a foreign currency translation loss. If you took that out effectively we're round about 35% which is where we expected to be in the foreign currency translation losses. And in accounting, it's not a deductible expense at all. So 35% long term is where I would stick. And that takes into consideration the increase in mining duties in Quebec that was recently announced in the first Quarter.

Right, okay. Good enough then. Thanks a lot.

Your next question comes from Greg Barnes of TD Newcrest.

Yes, just wondering, the changes that you made to the autoclave or the concentrate or whatever you did at Kittila that didn't work, what were they?

Sorry, can you repeat that question?

Sure, the changes that you made to the concentrate or the autoclave parameters at Kittila that did not work, what were they?

Essentially as I mentioned to Barry previously, we work under confidentiality agreements but in a sense we had a new additive to try to stabilize the reaction and during that process. Presently, we did not achieve at this time the expected benefit, and during the experimentation, we have some data that was to impact the entire month, when we drop the recovery during the test work and this is a result that you are seeing presently.

Okay, so you have a new additive that you're putting in there?

We'll extend the experimentation. This quarter, we expect being in the mid 75, mid 70 and going up to the 83 by year-end.

Okay, are you going to put out a new recovery curve like you did last year?

I did not really have the intention.

Okay. It would be nice to see.

Your next question comes from Rahul Paul of Canaccord Adams.

Guys, can you hear me? We'll try this again.

Yes.

Yes, Steven Butler, sorry, the wonders of technology. Pinos Altos guys, despite the bottleneck of the tailings filtration circuit you were able to get to 4000 tonnes per day in the first three weeks of April. What explains that?

Okay, I'll pass that over to Tim Haldane, our Senior VP of Latin America. Tim?

Yes, we've been working pretty hard on the filters obviously and lots of mechanical upgrades to the filters, hydraulics, structure. And at the same time on the process side, we've been adjusting the detox chemistry, and the coarseness of the grind, and those kind of things. So it's just a combination of a lot of changes and typically, with tailings filtration, it takes a long time to get the benefits to start showing. and that's where we are now.

Okay, sounds good, Tim. Guys, on Lapa, recoveries grades were excellent. It was just great that recoveries still not quite where you wanted to be I think for the full year plan, 86%, you're at 77 or so. What explains that, and how do you plan to get recoveries higher at Lapa? Thank you.

Okay, for Lapa, presently we have a gravity circuit at the front of the circuit. And after a complete analysis, it was, it showed we have to move at the SAG mills it instead of the ball mill circuit. It's undergoing and we expect to reach the 80%, when it will be completed. And by the end of Q2, beginning of Q3, it will be in position. We still are doing the investigation, and we expect to be by year-end to be above the 80%, nearly 85% currently based on the information that we have.

Okay, thanks, Sean. Thank you.

(Operator Instructions).

Your next question is a follow-up from Anita Soni of Credit Suisse. Please go ahead.

Thanks, it's already been asked and answered, thank you.

Your next question comes from Don MacLean of Paradigm Capital.

Good morning guys. Some good progress on a number of the mines and good to see Meadowbank start up. Just a question, Ebe, on where you might expect some further cost savings on Meadowbank. If you take the 840 for the month dollars per ounce, and you adjust for the fact that the production was about 25% less than design, and the recovery was about 8% or 9% less than design, that would bring you down to assuming all your costs were fixed which they probably are at this point, down to about $580. And I think the guidance for the year is about 460. So can you give us a sense of where you might see other, than just the economies to scale and the recovery, where you expect to see some further cost savings?

Well, one thing, Don, is that this is one month--

Exactly.

And it is also a month of start up. And what we did have, is that our production drills had issues in the open pit due to arctic winter conditions. So our availability was very low so we added additional contract costs in there. And similarly, with our truck fleet. However, what we did do is put the priority on getting the process plant built. And like the support facilities are such as the shop facilities are currently in the process of being completed, and will be ready during the month of May. So as a result those numbers you presently see include operating inefficiencies, due to some of the maintenance issues, and start up issues. And we expect to have those resolved very shortly. So therefore, we expect to have our number drop. With respect to recoveries in April, already we have hit the design recoveries significantly higher. And so as you know for the first month to hit 85%, already on a brand new plant, we feel that's a figure that we are satisfied with. And as I've mentioned we already hit the design recoveries in April.

I guess it was a long winded question and answer, you're comfortable with the 460 guidance?

Yes, we are.

That's great and good luck as you carry through. At least you're moving into an easier part of the year, couldn't have picked a harder time to start up. Well done.

Your next question comes from David Dean of Cormark Securities. Please go ahead.

Thanks for taking the question. Do you have everything that you need from your diligence process to make a decision on moving forward or not with Comoplex on Monday?

Well as we said at the start, there was an extension announced to Monday, May the 3rd, and both parties are working towards Monday, May 3rd.

Okay, does that mean though that to receive the assay results from the drilling, and you have everything that you need to make the decision?

No, all that means is both parties are working towards May 3rd.

Okay, thanks.

And your next question comes from Tonya Jakusconek of National Bank Financial. Please go ahead.

Great, thanks. I just have a question on Kittila, just on the recoveries again. Just wanted to talk a little bit about the tests that you're doing, and I appreciate you're under the confidentiality. But can you just tell us at least if you're happy with the retention time and the autoclave? Is that sort of resolved? Has the PH been resolved? Is the temperature that 190 to 210, is that the temperature you're happy with? That right now it's just these additives that you're adding? Just a little bit on exactly what you're doing.

Good morning, Tonya. The new project we are having, or the change is to essentially smooth the reaction, and reduce the impact of retention time, so we haven't found the proper window at this time. And all of the different parameters are linked with that. Yes, the autoclave is still too big, good for the future expansion at 4500 tonnes per day. Now we are struggling a little bit, and as I mentioned earlier, then for the life of mine, we don't see any problem. But we will have a little bit more difficulty this year. Year-end, we still are targeting 83%.

But just on the retention time, what were we operating at retention time when we were at that 76%? I mean, and I know there were days over 80%. What was that retention time?

Presently the retention time was near the 80 minutes, instead of the 45 to 60 minutes. It's a function of the flow but at that time it was a near 75 to 80 minutes.

Okay so you still think you have to play around with that?

We would like to go more in the 45 to 60 minutes.

Okay, and then the PH? And the temperature, those are to be played around too?

We keep that in the ballpark of last year, in terms of acid concentration and temperature. So you're happy with that as of last year? Yes.

So it's really this retention time, and then these additives that you're dealing with?

At this time, yes.

Okay. Thank you.

Your next question is a follow-up from Anita Soni of Credit Suisse. Please go ahead.

Could you just elaborate a little bit, I know you said they were not fatal flaws, but could you talk about some of the issues you've been having with the crushing system at Meadowbank?

Good morning again.

Good morning.

All we had was installation, uses at Meadowbank. There's a backing material when we install the liners. And that material was supposed to be kept warm, while inadvertently during the shipping from Baker Lake to Meadowbank, it froze. So we had an improper installation, and we had to reinstall. And then the second thing that we noted, was that the type of liners that had been originally ordered, and these had been ordered couple of years ago, were not the best liners for the gyratory crusher. And so as a result of that, they had premature failures. So then we installed a third set of liners, and made some adjustments with the backing material. And also how the ore was dumped into the crusher, and we haven't had any significant issue since, so they are largely resolved.

And then with respect to the additional, sorry, the additional contractor costs, kind of supplementing your production drills, is that something you expect to continue on in the future, in the winter months?

No, we don't. Part of the issues that we have are with the cooling system of the drills and the suppliers realizes that there is a design flaw, and is working on resolution. So we expect to have that resolved and like at all of our mines, our objective is to minimize the contractor presence.

Okay, thank you very much.

Your next question is a follow-up from Don MacClean of Paradigm Capital. Please go ahead.

Just had forgotten to ask Jean about with the greater wear and tear on the autoclave, how many days of maintenance do you think you'll require now going forward on an ongoing basis, for maintenance for the process plant versus your original expectations?

The original expectation was to stop one year doing a complete maintenance. And now as a security, we'll stop two times per year. But this will not impact the annual production the way we have worked that. We have a filtration system, and we'll be able to filter a part of the production, and after that reintroducing the autoclave.

Right, so you can make it up, and that's you've got lots of extra capacity in the autoclave. Is that part of the answer?

It's part of the answer. for sure we'll have to find the proper window, but we'll stay on the plan. And if you look at the big picture in the Company, now we have six mines. And if we are struggling a little bit at Kittila, we have to look also at the other parts so if you see Goldex at 92%, when we started the same quarter last year we're at 84%. If you look already, as Ebe mentioned at Meadowbank, we're touching the 94% to 95% the last couple of -- so in general, the big picture is we are going on a good trend.

Great. Thanks, Jean.

Mr. Boyd, there are no further questions at this time. Please continue.

Thanks, operator and thanks everyone for your attention this morning. And we welcome all of you to our Annual Meeting at 11:00 this morning if you'd like to come. Thanks again.

Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation and you may now disconnect your lines.