DBRS Morningstar Confirms Agnico Eagle Mines Limited’s Ratings at BBB with Stable Trends

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Senior Unsecured Notes ratings of Agnico Eagle Mines Limited (Agnico or the Company) at BBB with Stable trends. The confirmations are based on the Company’s success in ramping up production at its Nunavut and Québec operations and implementing operational controls to manage the disruptions caused by the Coronavirus Disease (COVID-19) pandemic. The Stable trends are based on the Company’s favourable financial risk profile in the A (high) range that is supported by (1) the repayment of $160 million in debt in April 2020; (2) management guidance of 2.05 million ounces (oz) of payable gold production in 2021, rising to approximately 2.15 million oz in 2024; and (3) Bloomberg consensus gold price forecasts (as of March 24, 2021) that are expected to average $1,818 per oz, $1,776 per oz, and $1,682 per oz in 2021, 2022, and 2023, respectively, compared with $1,773 per oz and $1,406 per oz, respectively, in 2020 and 2019.

Agnico continues to improve its reserve base with the upgrade of the Hammond Reef resources to reserves that added approximately 3.2 million oz to a record total of 24.1 million oz at the end of 2020. As well, the acquisition of TMAC Resources Inc. and the Hope Bay operations (expected to be cash flow neutral in 2021) will further increase reserves by approximately 3.5 million oz when included in the reserve base. Additionally, the Company has a robust growth pipeline that includes the brownfield expansions to Meliadine Phase 2, Amaruq underground, Kittila, Odyssey, East Gouldie, East Malartic, and Hope Bay as well as greenfield opportunities, such as Santa Gertrudis in Mexico. During 2020, Agnico benefitted from stronger gold prices with the U.S. dollar-denominated London Metal Exchange spot gold price increasing by approximately 26% to $1,773 per oz compared with 2019, resulting in record operating cash flows and EBITDA. Finally, Agnico received recognition for its sustainability with inclusion in the Corporate Knights 2021 Global 100. DBRS Morningstar acknowledges Agnico’s proactive approach to environmental, social, and governance factors including dedicated teams for dynamically managing its permitting processes and technical issues related to climate change such as thawing permafrost.

In the near term, DBRS Morningstar does not anticipate a positive rating action because of the emergence of viral variants that could pressure the global economy despite the deployment of the new coronavirus vaccines. However, if the Company’s business risk assessment meaningfully improves, potentially by a highly accretive acquisition or merger, then a positive rating action could potentially occur. Conversely, if there is a major downward correction in gold prices that results in Agnico’s financial risk assessment declining to the BBB (low) range over a material period of time, then there could be a potential negative rating action.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodologies are Rating Companies in the Mining Industry (August 17, 2020, https://www.dbrsmorningstar.com/research/365807), DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021, https://www.dbrsmorningstar.com/research/373262), and DBRS Morningstar Criteria: Guarantees and Other Forms of Support (January 14, 2021, https://www.dbrsmorningstar.com/research/372344), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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@dbrsmorningstar.com.

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

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

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

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