Agnico Eagle Mines Ltd (AEM) 2012 Q1 法說會逐字稿

Good morning ladies and gentlemen, and thank you for standing by. Welcome to the Agnico-Eagle Mines Q1 2012 conference call. At this time, all participants are in a listen-only mode. Following the presentation we will conduct a question and answer session with instructions provided. (Operator Instructions) I would like to remind everyone that this conference call is being recorded today, April 27, 2012 at 8.30 a.m. Eastern time. I will now turn the conference over to Sean Boyd. Please go ahead, sir.

Thank you very much operator, and good morning everyone, and thanks for joining us. We know it's a busy morning for you. What we'd like to do is take you through a series of slides and talk about our operations this morning. We've got our full team here in Toronto, our annual meeting is also this morning in Toronto. So we'll leave some time for some questions. Just like to caution everyone that this presentation includes some forward-looking statements, so there's cautionary language in our presentation, and you can see that on our website.

As far positioning, as we know, we had a difficult year last year with some operating challenges. We've worked hard over the last several months on optimizing our operations. As we move forward, a lot of these newly built mines are getting to the point where they're more mature and we can see that reflected in the results in the first quarter. So we were extremely pleased that we had contribution from all of our mines. We had strong cash generation. We had some good cost performance. We were able to mine and process more tonnes. As we move forward, we look to continue to optimize those assets. We continue to look for expansion opportunities within the current portfolio. We're working on some of those. We'll talk about those in the presentation. We still have an aggressive exploration program on many of our assets that are large and wide open. We plan to have an update on our exploration activities in June of this year.

One of the topical items now is political risk, and our strategy doesn't changed there. We're still very much focused on being at the low end of the political risk spectrum as far as mining goes. And as we look out, we've got a business that can operate generating net free cash flow that we'll use to maintain a solid dividend, continue our exploration on our programs, reinvest back in some assets to increase our output as we move forward, and we'll also, we anticipate, be able to continue to strengthen our financial position, as we did this quarter, with a prepayment of our debt of about $90 million.

In terms of operating highlights, we did have a strong production quarter at over 250,000 ounces. We had year-over-year production growth from the five operating mines of almost 19%, We had record gold production coming out of two of our mines in Kittila, and also from our operations in Mexico. We had record throughput at Meadowbank, over 9700 tons a day, which was a strong performance, and as we indicated at the top of the presentation, that generated extremely strong cash flow generation, with cash provided by operating activities of $196 million. Specifically on the operating side, as we said, we had contributions with increased output coming out of all five of our mines, and that increased output and better performance from all five mines more than made up for the loss in gold production from the suspension of operations at Goldex.

So it was good to see all mines contributing to make up for that large production. Although we've had a very strong first quarter, it is mining. We're not prepared at this point to change our guidance. So we would just categorize our guidance as very solid and very achievable, based on the strong start in Q1 and continued good performance in April of this year. As far as the financial results, again strong cash generated of almost $200 million in the quarter with net income of $79 million and earnings of $0.46 per share. So a strong quarter. As we also talk about mine profits, we did see our operating margins at the mine increased by 21%,year-over-year in total, and that's with one less operating mines.

So again, as we talked about good contribution from all mines, on the cost side we actually, when you look through all the data, we have two mines that are actually producing gold for costs of sub-$300 per ounce. So these are quality mines. These mines are a big part of our future and a big part of our strong production base and low cost structure as we move forward. Financial position, touched on that, we repaid $90 million in debt. So net debt, a little over $600 million (sic - see press report), and available credit of almost $1 billion. So, we've got a strong and strengthening financial position. The way the business is positioned going forward, we anticipate generating strong EBIDTA as we grow our production and output over the next few years.

Our estimate of capital reinvestment required to grow that output is in the $500 million range, on average, for the next four or five years, and that would include Meliadine, Kittila expansion, work we're doing in Mexico on the shaft, La India, et cetera. So a business that generates net free cash flow, which, as we said, we'll use to pay the dividend, continue to explore these large deposits, and look for opportunities to grow output through continued and ongoing investment at these large deposits. In terms of dividends, that's been a focus for us not just recently, but for the large part of our 55-year history, and we were proud to declare our 30th consecutive annual dividend for 2012. So that's at $0.20 a quarter, which puts us among the highest dividends per share in the industry, and given the way our business is positioned, we've left room to move that higher as we grow our output over next few years.

As we look at our assets in particular, I'll start with LaRonde, which continues to be the flagship. Despite the fact that our base metal production is declining, relative to what we have been accustomed to over the last few years, we did have a strong production quarter, not just on the gold side, but on the zinc side, and as a result of that, we had cash costs of under $300. We had mine operating profit at $63 million at LaRonde, which was the second-highest out of our five assets for the quarter, and that's largely because we had about a 9% increase in our throughput, up to 7100 tons a day. Our gold output was up 17%, year-over-year, from the previous quarter, and we maintained our cost per ton in the sort of CAD90 per tonne range, which is essentially the budget for 2012.

Moving to Kittila, we had a record production quarter. We had almost 47,000 ounces, so our gold production was up 16% year-over-year. Our tonnage was up 9%. So we've been able to improve efficiencies and optimize that deposit. We averaged about 3200 tonnes a day. We had good cost performance. Our cash costs were $565 per ounce. On a per tonne basis they were EUR67 per tonne. We had extremely good performance in the plant. We had recoveries of 88%. We were expecting recoveries in the mid-80%s, so we've done a bit better than that. The mine generated almost $50 million in mine operating profit. So again, a good solid performance coming out of that mine. We continue to look at expansion opportunities.

The deposit is our largest single reserve and resource deposit. The first phase is a 25% expansion in throughput, which we're studying now. That study should be completed late this year. We are also presently studying a shaft for that deposit. We know we need a shaft, given the size of that deposit, given the extent of the mineralization below 700 meters, and also given the extent of the mineralization and what appears to be improving grades and thicknesses as we move to the north. So that shaft would serve two purposes. One, to make it much more efficient to mine below 700 meters, but also provide an underground exploration platform to drill the structures as we move to the North, and where we think we have some of our best potential.

As we look out for the balance of the year, we have budgeted in our guidance that was put out in many February for Kittila, 44 days in total of downtime, maintenance downtime, planned for the autoclave. In the second quarter we plan to have a maintenance program on the autoclave that we anticipate would take about 40 days. So that will reduce our output in the second quarter, but that was built into our guidance that was put out in mid-February. So we're sticking with our guidance at Kittila for the full year. Moving to Mexico, another really good performance, $69 million in operating profit. That's of all of our mines, that generated the most cash mine operating profit. Our milled tonnage was up 11%, year-over-year, to almost 5000 tons a day.

We had a full quarter of production from Creston Mascota. As a result of those two performances, our gold production was up about 19%, and our grade was roughly where we expected it to be, and that resulted in cash cost of sub-$300. So Mexico's a big part of our business. We have a solid core of assets there. We have a solid team that knows how to do business there. That's a part of the world that we'd like to continue to grow our business. As we look out at our projects there, we have La India, which was the recent acquisition with great resources. Currently we're doing drilling there. We're doing an economic assessment. We're working on permitting. We expect to be in a position to provide a fuller update on the status of that project in the third quarter of this year.

We also yesterday gave a approval to go ahead with an underground shaft, simply because we wanted to increase our capacity underground from what is presently about 3000 tonnes a day to 4500 tonnes per day. That will improve the flexibility of the mine as we go forward, and mine out some of our open pits. And that will make it much more cost-effective to mine that ore underground. We looked at several options, trucking, conveying, and as it turned out, the highest rate of return, the best cash-on-cash return, was to invest money in a shaft to gain access to the deeper material at the Pinos Altos. Just a quick update on Meliadine. We continue to move that project forward. We're spending $82 million this year. That's spent on exploration and infrastructure.

Our road from rank and inlet to the site is under construction. We continue to work on regulatory approvals and permitting. We're also working on an updated feasibility study, which we expect to be completed in late 2013. The road is important for us, because it sets us up to look to accelerate underground development of the ramp system, likely starting next year. We're still doing some analysis, but with the road in place it lowers the cost of doing that type of infrastructure and construction work. So the road is a key component of that project, and we're happy to say that that road construction is well underway.

Moving to Meadowbank, strong performance on the production side. 40% increase in throughput, averaging over 9700 tonnes a day. The cost per tonne, steady at CAN92 per tonne, still high cost on a per ounce basis, at around $1000 per ounce. We've got a number of cost initiatives that we're working on now, and an action plan. We're not looking for material changes in the unit cost there on a per ounce basis, but we think we can do somewhat better than that with a number of cost initiatives that we have in place now that we've been able to get our tonnage up over 9000 tonnes a day. The realized grade in the quarter, around three grams, and that generated production of almost 80,000 ounces, which generated a mine profit of $49 million, and our job, as we talked about earlier this year, as we altered the mine plan and put a lower risk mine plan in place, was really cash flow maximization.

We're certainly looking to generate about $1 billion in net free cash flow over the next six years at Meadowbank. At Lapa our realized rate was over seven grams. Our tonnage performance was good, above our expectations. We produced almost 29,000 ounces. Our focus there is simply to extend the mine life. We feel we can get it to the end of 2015. We're drilling underground and we're also -- have started a drift off to the west, following up the structure from the shaft.

Goldex, just a brief update. We'll be in a position to provide a much more fuller update in the middle of this year. We just want to simply say that we're continuing with our monitoring, our investigation. We're continuing some remediation, but we're also doing exploration work, and that includes not only drilling, but also doing drifting work to position our drills above the D Zone so we can get a better idea and sense of how big the D Zone is. I'll leave it at that until we're in a better position midyear to provide a summary of all the work that we've been actively doing there since mid-October.

So just quickly in summary, there's really no change in focus for us. It's really, in terms of strategy and operational focus, it's just on improving and optimizing the existing assets. We're looking to move some expansion opportunities within that existing asset base forward. Over the next three years, as we stated in our mid February update, we expect about 24% increase in our production through the end of 2014. That's funded from cash flow. We talked about our guidance, it's still solid, very achievable based on the start we've had, and that's not just production, but also our cost guidance.

We'll provide an exploration update in June. We continue an active exploration program. A good part of that program is spent on resource to reserve conversion around the existing assets, and that's really for planning purposes as we look at potential to increase throughput on some of these assets. Really to sum it all up, we've got a business that's generating solid cash flows in low political parts of the world, and we're simply looking at striking the right balance between allocating that cash flow to dividends, exploration, and reinvesting in our core business, and optimizing and expanding some of our key operations. So I'll leave it at that, Operator, and be happy to take -- the group will be happy to take questions.

Ladies and gentleman, we will now conduct a question and answer session.

(Operator Instructions)

Stephen Walker, RBC Capital Markets.

Just a couple of questions. Just, is there any -- in addition to the 40 day maintenance schedule at Kiittila, for the balance of the year are there any other major maintenance programs scheduled either at LaRonde or any of the other operations?

No, nothing out of the ordinary that wasn't included already in the guidance and the estimates that we put out mid-February.

Great, and just to follow up something, and again if this has been talked about before I apologize. At Goldex, has there been an official review by the Ministry of Natural Resources, the Mine Safety, the Mine Monitoring Division, as to what happened at Goldex, and if so, when did that report come out, or is there a report that is expected?

Well, that's all ongoing and that's part of the process. We've continued to work with, not only the government officials and the local government, but also with consultants that have been involved in the project for a number of years. And really what we are doing now is waiting for a series of reports to be finished, and a series of reports to come in. As they come in, we'll do an overall risk assessment, based on all the input that we get from the experts. That's what we expect to be able to provide an update on in more detail the middle of the year. So we're still waiting on some of this work to be finalized and some of the reports to come in, which would include involvement of people like CSST in the government of Quebec.

Right, and just lastly on Meadowbank, obviously a great throughput at the plant there. Can you give us a sense on how long it will take to transition from the current cutoff grades to the revised cutoff grades that you're going to be using going forward? Is that something that has occurred already, or is it something over the next couple of quarters that you'll revise that, the open pit mine plan at Meadowbank?

Our realized grade in the quarter was 3 grams, and we were looking for about 3.1 grams. So our dilution experience has been good in the quarter. Our overall estimate in the remaining life-of-mine that we put out was about 3.2 grams. So we're quite close to that. So we're comfortable with the 3.2 grams over the next six years. We've had good development performance in terms of moving waste. I think we're averaging about 90,000 tons a day, which is where we need to be. So things have actually gone quite well there, and we didn't really have a lot of complications from the weather this year.

We had what would be termed a relatively normal winter as opposed to last year, where it was just horrendous with extreme cold. We were trying to operate a portable crusher at that time, which just caused a lot of grief, and we didn't have the advantage of a secondary crushing unit. So we've got a lot of things in place now that we didn't have last year, which helps us going forward, and the biggest among them is the fact that the new plan over the next six years eliminates about a third of the waste development that was in the old plan. So we feel pretty comfortable about the grade there.

Just one more follow-up question to that, if I might. The zonation, is there much zonation in that ore, or is that fairly homogeneous? Do expect any higher grade zones that might benefit on a quarterly basis, or is it fairly homogeneous?

Could be. As we move to the south, we know that the southern pit has a bit better grade. So we do have days where you will get spikes, and really what we look for is to average around 3 grams for most of the month, and then occasionally you get spikes where you're well above that, because there is some areas where you got a lot of visible gold, and if you get three or four days where you get a bump, then you have a good month. So that's generally what happens.

Great, thank you.

One other comment there from the operating guys, just like to add onto that, Stephen.

We will have variations in grades as we ramp up into [goose pit and involved] areas. There will be variations, but overall what you're seeing now is what you'll be seeing the future.

Greg Barnes, TD Securities.

Sean, the 40 day shutdown in Kittila, is that going to be an annual event, or is it all [spaced out]?

No. No, that's one where -- I'll give Jean Robitaille to give you a bit of color on why it's 40 days and why it's now --

Hi, Greg. Essentially, normally you may see that on normal operation that each five, seven days to realign the third layer. Currently, since the beginning, we have many on and off situation, and this is why we decided to plan this year that 40 day shutdown. So normal occurrence in our case will be two times per year for now, roughly 10, 13 days, and this is built in our life-of-mine and forecast. So this year it's exceptional, and it will come back in principle in, let's say, five years from now.

But in the interim, you'll have a 10 day shutdown twice a year?

Roughly, yes, and you do the inspection and the de-scaling and do the other [platements]; small normal maintenance.

Okay. Just a second question, Sean. At Goldex, you said you're drifting above the D Zone. Does that imply that you're blasting down there?

Yes.

Joseph [Rigger], Global Hunter Securities.

Two questions for you. The first is, at Kittila do you have any cash cost guidance with the maintenance included, even like a ballpark range on it?

It doesn't change from what we put out in mid-February, and in mid February the number was -- just getting that now -- it was about $650 per ounce.

I mean more for just for the quarter, or is that too fine for you guys?

I think that's too fine. We don't really put out the quarterly cash cost guidance on a quarterly basis, but we're still comfortable based on where we are for full year guidance in the sort of $650 range.

Okay, and at Goldex, the plan you guys have right now with exploration, is there a dollar number on that that you guys have guided to, and is all of the drilling going on on the D Zone, or are you guys still drilling the original deposit as well?

No, we cannot drill the original deposit. We've just pulled away from that area entirely. So we're drilling satellite zones on the property, and in terms of the cost, it's about $2 million a month, roughly. So we'll be in a position midyear with all of the technical information, the risk assessment done, all of our work done with the officials, plus our exploration work to decide what's possible there, if anything, and we're still cautioning people, like we've done consistently, is you should have zero value in your model and zero value on expectations for Goldex.

Joung Park, MorningStar.

Question I had was I noticed that CapEx on existing mines came down dramatically during the quarter, so why is that? Have these mines kind of matured to the point where they need lower levels of sustaining CapEx?

They're right on the budget, and they will vary from quarter to quarter. So the overall level went up slightly, but that's because we've approved some additional initiatives. One of those was an acceleration of the ramp development at Kittila and exploration program at Kittila underground for purposes of evaluating the extent of the mineralization at Rimpi. The other major component of the increase was an additional $10 million in 2012 to the already budgeted $10 million at Pinos Altos for the shaft. So we're still in line with our guidance, with the exception of a couple of additional initiatives that we've decided make sense for the future of some of our key assets.

Okay. I mean, it seems like you guys don't break down how much you spent on Goldex. So can you quantify that?

Well, we have a provision that was taken last year for remediation and assessment. So we're working through that provision, but roughly it's about $2 million, $2.5 million a month that gets expensed, depending on the month, and a lot of that is exploration and economic assessment of other alternatives. We really want to be a position at the midyear, so not only we have all the technical reports, but we'll also have a sense of whether -- we'll also have a feel for economic potential of other satellite zones. If the technical reports, and this is the cautionary, tell us that we have a major technical issue, then nothing happens, even though you may have some reasonable drilling results and a growing deposit. We know the deposit will grow. Whether we can mine it, we don't know that yet.

Okay. Then going to Meadowbank. It was at almost 10,000 tonnes per day throughput during the quarter, and I was under the impression that the processing plant there runs at 8,500 tonnes per day, which the first quarter figures significantly exceeded. So what is going on there, and is the throughput during the first quarter sustainable?

Well, the design capacity there was 8,500. The experience that we've had, and probably miners in general have, is these plants tend to have some headroom above the design capacity. We've been fortunate to have some good performance in the pits to be able to feed the plant at a higher rate, but we did see this potential to run that plant at over 9,000 tonnes a day in previous quarters. We had a very successful startup of the secondary crushing unit last June, and that gave us some good throughput numbers in the second half of last year. We've done even better as we started the first part of this year. So we were looking in our guidance for a little over 8,600 tonnes a day to average for the year. So we got off to a good start because, as we said, we didn't have any -- we were building in some factor for winter, and generally, this is our toughest quarter. So we've had a good start here in what is normally our toughest quarter, bit it is mining. Like a lot of these mines, we do have things that we have to pay attention to, and so all we're saying is, good start, let's see how the rest of the year goes.

David Haughton, BMO Capital Markets.

While we're still talking on Meadowbank, following from the previous question, noticed that D&A was down. Is that reflective of how we should be thinking about the depreciation going forward?

I'll let Ammar answer that.

Yes, that's pretty reflective, David, going forward.

Okay, good. So it reflects the lower carrying value, et cetera?

Correct.

All right. Switching back to Mexico. Looking at Creston Mascota, the stacking rate there was quite a step up, more than 5,000 tonnes a day. Is that sustainable?

I'll let Tim Haldane handle that.

Yes, it's sustainable for the better part of this year. Actually, when we remodeled and came out with our new block model this year, we were fortune to have more ore in the design pit, so a little bit of ore displacing waste, and that's a positive thing for us.

Tim, the grade moved up as well. Should we be thinking about that higher grade going forward?

No, it'll drop off.

Okay. So bring it more back down to the 1.4, 1.2 gram level?

Yes, I'd have to go back and look what our plan was, but that sounds right.

Okay, and while I've got you Tim, with the expansion of the underground mining rate, would you be thinking about an expansion of the milling rate as well?

Well, I mean, we're looking fairly mid-range or long-range here, and our open pit mines are designed to be depleted pretty close to the end of this decade. So expanding the mill will have to be dependent on us finding another source of feed for the mill to supplement the underground feed. We've got a 5,000 tonne a day mill, and we'll have a nominally of 4,500 tons a day underground mine in the future. So if we find more open pit ore, or find a way to get more ore to the mill, we'll certainly think about expanding it, but the mill right now is running at 5,000 and we think we can do more with the existing mill.

So the better way to think about it going forward is just to change of mix being presented to that mill with more underground material being put there, as the pits deplete.

I think that's exactly right.

Okay. Switching over now to Kittila, similar kind of question with regards to open pit versus underground mining. Open pit mining there depleting. Don't get a sense as to how much of the quarter came from the open pit compared to the underground, and what that mix might be like going in through the balance of the year. Can you give us a sense of that, Sean?

Yes. Yvon will handle that.

Open pit production for the quarter was roughly about 25%, 30%. The rest was coming -- underground was 25%, 30%. The rest was coming from the bit. The Roura Pit is essentially complete. The Suuri Pit will be complete by the end of the year, and the mine will transition from Q2, Q3, Q4 from 40% to 75% in the last quarter, roughly. Then going forward into 2013, essentially dependent that 3 000 tonne capacity from underground.

Okay, and when we're looking at going forward with the development here, can you see justification for planned expansion? I know that you're looking at that 25% lift, but do you have a sense that it could sustain something even more than that, or is it too early to say?

At this stage the current mine plan can support -- the underground mine plan can support the 3,750 tonnes per day rate that was scoped out last year. So, we're okay on that side, but as we move on with the exploration results for that depth and on Rimpi, a larger project down the road would be defined that way, but we need to clarify the resource before we get any further.

Understood. Thank you, and Sean, just pertaining to something that you'd mentioned in the opening comments, you were saying that you'd be thinking about the CapEx in the order of $500 million per annum for the next four, five years. How's that compare to the $400 million that you're looking at this year, and I sort of expected that with the kind of profile that you've got, rather than having a flat $500 million CapEx per annum, we'd be looking at something less going forward.

Well, Meliadine is a big part of that, and Kittila, it's not just a 25% expansion, it's also a shaft. La India Is also in there, and then there's sustaining CapEx. So we have to fine-tune those, but that's sort of a rough sort of estimate. Some years it'll be above, some years it could be below.

Jeff Wright, Global Hunter Securities.

One question on Meadowbank. Can you talk about cost containment, cost initiatives a little more elaborate, the project and how you think you can get down a little bit?

Sure.

There's an action plan that's in place at Meadowbank. The action plan was essentially focused on production the last few quarters. As we move ahead with the better success rate, both milling and mining, we're going to move on to cost reduction opportunities, and that's going to be the next focus.

Operator, next question.

John Tumazos, with John Tumazos Very Independent Research.

Your disclosure on cost per tonne as well as cost per ounce is very helpful, and it's notable that, other than Pinos Altos, in round numbers the other four mines are near $100 a tonne. I fully accept that's what the cost should be. Do you think, Sean, there is a disconnect between the operating and capital costs as your operators experience, and not yours specifically, but in most of the mining companies, the exploration departments, where there's juniors running around with 0.5 gram projects, and 1 gram projects, and 2 pounds of copper, and a 0.25 gram gold. Your mines would suggest that you need 2 grams to cover operating costs and a third gram to cover capital costs in the majority of your cases. It would seem like maybe, not Agnico specifically, but everyone's exploration budget's way too high.

Yes, it's hard to say. I think that as we go out and look at smaller situations, I think generally there's not a lot of challenges in most cases, with the ore body. Where the difficulty is, is on the cost per tonne estimates to extract the ore. We find there's generally an underestimation of the expectations around the cost per tonne to operate a mine among the junior space. So that's our general experience, is that's where the disconnect is in expectation in the development project in terms of what it's going to cost per tonne versus sort of our reality, and what we know it to be. You're right. In most cases, it's around $100 per tonne.

So how do you make sure that your exploration monies are well spent, given the industry-wide tendency to chase paper dreams?

Well, a good part of our budget this year, 60% of it or so, 65%, is on the existing deposits, and that's really for resource to reserve conversion. So it's largely biased to that, which it has been over the last little while, and it's even more concentrated than that on a couple of the key projects, which are our biggest projects, Kittila and Meliadine. That's because we see the potential to add those to our production base, whether it's expanding Kittila or building Meliadine. So that's the way we come at it. How do we improve the quality of the overall calculation, and based on the fact set of costs that we have at that operation, we've got a good data set to determine what's ore and what's waste.

Anita Soni, Credit Suisse.

All my questions have been asked. Congratulations on a good quarter.

John Kratochwil, Canaccord Genuity.

My questions are actually cash cost per ounce related. Specifically at LaRonde and Pinos Altos, they were significantly lower in Q1 than your 2012 estimates. Were these kind of surprises due to higher byproduct credits on the cash costs, or were your estimates for the year kind of very conservative?

At LaRonde we did produce more zinc. So we were able to get more byproduct tonnes, and as we said, our tonnage year-over-year was up 9% to 7,100 tonnes a day. So we had the advantage of a higher realized gold grade as well as the ability to mine some more, essentially zinc tonnes. So we had about 50% more zinc production in the quarter than we had anticipated, which really drove that. At Mexico, we just continue to have good cost performance. We do have a similar byproduct credit, but I think it was roughly, in terms of production, where we thought it would be. We just got the advantage of a bit better price on our silver than we budgeted. Behind that, we still have a very efficient, low-cost operation in Mexico.

Okay, and are those kind of lower numbers, because we'd have to basically imply higher numbers for the remainder of the year in order to get to guidance. So should we, I guess, assume a slightly lower than guided number for the rest of the year?

I think all we can say there is at LaRonde we'll continue to look for ways that we can maximize the ore body by taking advantage of some of that byproduct tonnes, or largely byproduct tonnes. So that's certainly the emphasis, is to try to keep that zinc tonnage strong and that zinc production strong. Mexico, they've had a good quarter. We anticipate -- and they've have several good quarters. So this just isn't a one-off. So we expect some good performance there, but as we said, we just came out with this guidance in mid-February. So that's about three months ago. We're not prepared to change it at this point. It is mining, things do happen, but as we said, we've gotten off to a good start.

Understood. Understood. And then I guess at LaRonde, like you said, throughput was up a little bit. Is that something that's going to be sustained for the rest of the year, or is that going to come down a little bit?

Yes, hang on.

It's sustainable for the rest of the year.

(Operator Instructions)

Anita Soni, Credit Suisse.

I did have one question about LaRonde. Longer term, as it goes to the LaRonde deep, I think a couple of years ago you were talking about thinking about that operation more as a 6,000 tonne a day operation. Is that still what we should be thinking about once it's fully into the deeper sections of the mine?

That's right. We haven't changed that long-term view at 6,000 tonnes a day.

But, at that point you should be in higher grades, more along the gold and zinc side, right?

Right. The average grade of the deposit's 4.4 gram, and we're estimating to be mining that this year at about 2.3 grams. So we gradually increase the throughput from the lower part of the mine, which will increase the gold grade over the next two to three years.

David Fondrie, Heartland Funds.

I was just wondering, it seemed like almost everything went right this quarter. Production was up in almost every mine, costs were well within control. Is there room for improvement as we go out over the next three quarters, or is this kind of be, perhaps steady state? You kind of caveated everything by, well this is mining, but do you kind of see things kind of steady state the remainder of the year?

Yes. I guess we would, again, categorize it as we said. Three months ago we put out what we would term as very solid, very achievable guidance. That's still the way we want to characterize it, and as we go forward out in '13 and '14, we see some ability to increase output at some of these mines, and we're working on some of those plans right now. So I think these assets, some of them will continue to get bigger in terms of the overall size of the reserve or resource. We're focused on doing that through exploration, as we talked about the split, and the emphasis of that program, but several of them still have the ability to grow output as well. As we move through the quarters, we've continued to have good performance in April, but if you look at each of the mines, will tell you where we're paying attention.

LaRonde, we're transitioning to a deep mine. So that's not easy. The team's done a good job, but you're dealing with a mine that has congestion at depth. You have heat to deal with. Our flexibility improves there going forward as we open up new working areas, but we're still into a deep part of the mine. At Kittila, it's simply the autoclave and the availability of that autoclave, and we have to plan for regular shutdowns there. That lowers our availability there. So that's something we have to continually pay attention to. At Meadowbank, it would be cost and waste development. So that's a challenging environment to operate. Our people have done a very good job there. In Mexico, we've had a really good run there. It's a deposit that requires focus on tonnage. The grade is still below 3 grams. They've got some underground development work to do there. We have several of our mines transitioning from open pit to underground. So there's still a lot of work to do, and there's mining, and that's why we'll stick with the current guidance.

We have no further questions at this time. Please continue.

Thank you, everyone. Thank you, operator. Again, for those that have the time, you're welcome to attend our annual meeting, which is 11.00 this morning at the Westin Harbour Castle. We have all of our key people from our operations around the world will be there, and if you'd like to come and chat with them, you're certainly welcome. So thanks for your attention.

Ladies and gentlemen, that does conclude our conference call for today. Thank you for your participation. You may now disconnect your lines.