DBRS Confirms Agnico Eagle Mines Limited at BBB (low) with Positive Trends

DBRS Limited (DBRS) confirmed the Issuer Rating and Senior Unsecured Notes rating of Agnico Eagle Mines Limited (Agnico or the Company) at BBB (low) with Positive trends. The confirmation is based on the Company’s strong performance in executing its development of the Meliadine and Amaruq operations and maintaining its financial risk profile in line with its rating during this period, including issuing an incremental $350 million in debt in April 2018. The Positive trends reflect DBRS’s expectation that the Company will successfully increase production during a period of higher expected gold prices (Bloomberg consensus as of June 20, 2019).

Between 2011 and 2018, Agnico produced approximately 11.2 million ounces of payable gold (oz. Au) from reserves while increasing its proven and probable reserves by 17% to 22.0 million oz. Au (as at the end of 2018) by upgrading resources to reserves and acquisitions, most notably acquiring its 50% ownership in the Canadian Malartic mine in 2014. Based on the Company’s robust growth pipeline, which includes the LaRonde Zone 3, Goldex Deep 2, Odyssey and East Malartic brownfield expansions as well as greenfield opportunities such as Barsele in Sweden and Santa Gertrudis in Mexico, the Company is now providing guidance that payable gold production of 2.0 million oz. Au in 2020 is expected to be sustainable, compared with the average payable gold production of 1.5 million oz. Au per year since the Canadian Malartic acquisition. These developments should underpin the move to sustained higher production beyond 2021 and increased revenue.

During the last 12 months ending March 31, 2019, the U.S. dollar-denominated London Metal Exchange gold price declined by approximately 2% while the Canadian dollar appreciated by 6% -- both headwinds that the Company navigated in successfully advancing two large capital projects. This has set the stage for Agnico to benefit in 2019, as gold prices are expected to average $1,319 per oz (Bloomberg consensus as of June 20, 2019) compared with $1,266 per oz in 2018, or an increase of about 4%. This should further bolster the Company’s ability to repay as opposed to re-finance the $360 million in Notes maturing in April 2020.

If the Company can, as per its guidance, materially increase production in 2020, and if gold prices remain at forecast levels (Bloomberg consensus as of June 20, 2019), which results in the $360 million in debt maturing in April 2020 to be repaid, then a positive rating action could result. Alternatively, if the ramp-up to full production at the Nunavut projects is delayed or results in lower production or higher costs than current guidance, this could set the stage for a potential negative rating action.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Mining Industry (September 2018), DBRS Criteria: Guarantees and Other Forms of Support (January 2019) and DBRS Criteria: Rating Corporate Holding Companies and Their Subsidiaries (November 2018), which can be found on dbrs.com under Methodologies & Criteria.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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