Agnico Eagle Mines Limited -- Moody's assigns Baa2 issuer rating to Agnico Eagle Mines; outlook stable

Rating Action: Moody's assigns Baa2 issuer rating to Agnico Eagle Mines; outlook stableGlobal Credit Research - 11 Feb 2021Toronto, February 11, 2021 -- Moody's Investors Service, ("Moody's") has today assigned a Baa2 long-term issuer rating to Canadian gold producer Agnico Eagle Mines Limited ("Agnico"). The outlook on the rating is stable.Assignments:..Issuer: Agnico Eagle Mines Limited.... Issuer Rating, Assigned Baa2 ..Outlook Actions: ....Outlook, Stable RATINGS RATIONALE Agnico Eagle Mines Limited ("Agnico"; Baa2 LT issuer rating) benefits from 1) good scale, with production expected to grow towards 2.3 million attributable gold-equivalent ounces (GEOs: revenues divided by average gold price) in 2022, 2) low leverage, with adjusted debt/EBITDA of about 1.0x expected in 2022, 3) mine diversity achieved through nine operating mines in favourable mining jurisdictions, 4) excellent liquidity and 5) conservative financial policies. The company is constrained by 1) the volatility of gold prices, and 2) limited product diversity (95% of revenues are from gold).Agnico's operating cash costs of $971/GEO ((Revenue-EBITDA)/GEO) for the trailing 12 months ending September 2020 have been affected by the COVID-19 pandemic but remain in line relative to its investment grade rated mining peers. We expect that costs will decline towards $800/GEO in the next 12-18 months with expected higher production and the lessened effects of the pandemic on operations.Agnico has excellent liquidity, with about $2.1 billion of total sources and about $330 million of uses over the next year. Sources include about $500 million of cash at year end 2020, almost full availability on its $1.2 billion revolving credit facility (matures June 2023), and our estimate of about $400 million of free cash flow (using a $1,500 gold price sensitivity for 2021). We expect Agnico to use about $330 million for its recent acquisition of TMAC Resources, including retirement of TMAC debt. The company's next scheduled debt maturity is $225 million in 2022.The outlook is stable because Moody's expects Agnico to maintain 1) cash costs in line with its investment grade peers, 2) low leverage and 3) production over 2 million GEOs per year. The outlook also assumes that the company will maintain its conservative financial policies.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGThe rating could be upgraded should Agnico be able to Increase its scale, while maintaining a consistent operating performance and cost profile below $750/GEO. An upgrade would also require Agnico maintain adjusted debt/EBITDA below 1.5x (1.3x at Q3/20) and (CFO-dividends)/debt is maintained above 50% (52% at Q3/20) through various price points on a sustained basis.Ratings could be downgraded if Agnico's operating costs are sustained near or above $900/GEO on a sustained basis, adjusted debt/EBITDA is maintained above 2.0x (1.3x at Q3/20) or (CFO-dividends)/debt of falls below 35% (52% at Q3/20) on a sustained basis.The principal methodology used in this rating was Mining published in September 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1089739. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Headquartered in Toronto, Canada, Agnico has nine operating mines in Canada, Finland and Mexico and exploration and development activities in each of these countries as well as in the United States and Sweden. Revenues for the twelve months ended September 2020 were approximately $3 billion and production was about 1.9 million GEOs.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. 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