(All amounts expressed in U.S. dollars unless otherwise noted)
AGNICO-EAGLE REPORTS SECOND QUARTER 2011 RESULTS;
PROVIDES EXPLORATION UPDATE ON GOLDEX AND KITTILA;
ANNOUNCES STRATEGIC INVESTMENT IN RUBICON MINERALS CORPORATION
Toronto, ON - July 27, 2011 - Agnico-Eagle Mines Limited ("Agnico-Eagle" or the �Company�) (Stock Symbol: AEM (NYSE AND TSX)) today reported quarterly net income of $68.8 million, or $0.41 per share for the second quarter of 2011. This result includes a non-cash foreign currency translation loss of $2.7 million, or $0.02 per share and stock option expense of $8.3 million, or $0.05 per share. Excluding these items would result in adjusted net income of $79.4 million, or $0.47 per share. In the second quarter of 2010, the Company reported net income of $100.4 million, or $0.64 per share.
The lower net income in 2011 was largely due to a return to normal levels of tax expense and a foreign currency translation loss versus a large tax recovery and a large foreign currency translation gain in the second quarter of 2010.
Second quarter 2011 cash provided by operating activities was $162.8 million ($161.7 million before changes in non-cash components of working capital), up from cash provided by operating activities of $161.6 million in the second quarter of 2010 ($138.9 million before changes in non-cash components of working capital).
The higher cash provided by operating activities in 2011 was primarily due to a 25% higher realized gold price and significantly higher byproduct metal prices when compared to those realized in the second quarter of 2010.
�With the installation of the permanent secondary crusher at Meadowbank, we have seen a significant improvement in our production rates. Steady state throughput is now allowing us to focus on cost cutting through optimization. The Company expects to deliver a strong second half operationally, with gold production anticipated to increase approximately 20% over the first half of 2011�, said Sean Boyd, Vice-Chairman and Chief Executive Officer. �Overall, our corporate strategy, which created significant value over the past five years, remains unchanged. Over the next several quarters, we expect to be able to lay out a new plan which will keep Agnico-Eagle at the forefront of growth in the gold industry. To that end, we have made a C$70 million strategic investment in Rubicon Minerals today, and also plan to enter into a technical services agreement to help advance their high grade Phoenix deposit in Red Lake, Ontario�, added Mr. Boyd.
Second quarter 2011 highlights include:
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Strong Cash Generation � quarterly cash provided by operating activities of $163 million, or $0.96 per share
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Record gold production at Pinos Altos � 51, 066 ounces at $299 total cash costs per ounce
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Secondary Crusher Operating at Meadowbank � installation complete in June. Mill operating at approximately 9,250 tonnes per day in July
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One of the Best Drillholes from Kittila�s Rimpi Zone - Hole RIE-11-008 returned 7.1 grams per tonne gold over 21.0 metres true width at 850 metres below surface, approximately 200 metres below the current resource envelope
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Gold Mineralization Extended at Goldex�s D Zone � Intersection of 3.0 grams per tonne gold over 117.0 metres core length at 1,100 metres depth confirms similarity of D Zone to current Goldex orebody
Payable gold production1 in the second quarter of 2011 was 239,328 ounces compared to 257,728 ounces in the second quarter of 2010. A description of the production and cost performance for each mine is set out further below.
The lower level of production in the 2011 period was largely due to issues in April relating to the March 2011 fire at the Meadowbank mine and also due to higher than expected levels of dilution in its pit during the second quarter of 2011.
Total cash costs for the second quarter of 2011 were $565 per ounce2. This compares with $482 per ounce in the second quarter of 2010. The higher cost in 2011 was largely attributable to the issues at Meadowbank that more than offset the positive impact of higher byproduct metals prices. Additionally, higher than expected costs have persisted at Kittila as two shutdowns for maintenance on the autoclave (one unplanned), higher fuel and electricity prices and high levels of labour expense (as the mine transitions from contractor to self mining), offset increased gold production.
For the first six months of 2011, the Company produced 491,690 ounces of gold at total cash costs per ounce of $548. This compares with the first half of 2010 when gold production was 445,960 ounces at total cash costs of $464 per ounce. The higher gold production in 2011 is mainly due to stronger performances from Kittila (much higher mill recoveries following a process breakthrough) and Pinos Altos (much higher mill throughput following the installation of two more tailings filters). The higher total cash costs are largely a result of high costs at Meadowbank and Kittila, as previously discussed.
As announced in the June 27, 2011 news release, Agnico-Eagle expects production of approximately 1.08 million ounces of gold for the full year 2011 at total cash costs per ounce of approximately $495.
Second Quarter 2011 Results Conference Call and Webcast Tomorrow
The Company�s senior management will host a conference call on Thursday, July 28, 2011 at 11:00 AM (E.D.T.) to discuss financial results and provide an update of the Company�s exploration and development activities.
Via Webcast:
A live audio webcast of the meeting will be available on the Company�s website homepage at www.agnico-eagle.com.
Via Telephone:
For those preferring to listen by telephone, please dial 416-644-3416 or Toll-free 800-814-4861. To ensure your participation, please call approximately five minutes prior to the scheduled start of the call.
Replay archive:
Please dial 416-640-1917 or Toll-free 877-289-8525, access code 4403802#.
The conference call replay will expire on August 28, 2011.
The webcast along with presentation slides will be archived for 180 days on the website.
Cash Position Remains Strong
Cash and cash equivalents increased to $139.0 million at June 30, 2011, up from the March 31, 2011 balance of $114.8 million.
Capital expenditures in the second quarter of 2011 were $114.4 million, including $31.1 million at Meadowbank, $22.6 million at LaRonde, $18.9 million at Kittila, $14.3 million on Goldex, $9.7 million at Pinos Altos and $4.4 million at Lapa.
Full year 2011 capital expenditures are expected to total $423 million, up from the December 15, 2010 estimate of $313 million. Major components of the increase include:
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The impact of foreign exchange movements - $25 million
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Change in dyke design at Meadowbank - $21 million
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Soil settlement remediation at Goldex - $19 million
The remaining amounts are largely accelerated capital previously expected to be spent in 2012 and amounts relating to the Meadowbank fire (of which approximately $10 million may be recovered through insurance).
With its current cash balances, anticipated cash flows and available bank lines, management believes that Agnico-Eagle remains fully funded for the development and exploration of its current pipeline of gold projects in Canada, Finland, Mexico and the USA.
Available bank lines as of June 30, 2011 were approximately $1.2 billion.
Agnico-Eagle today agreed to invest C$70 million in the common shares of Rubicon Minerals Corporation (�Rubicon�) in a non-brokered private placement. As a result of the transaction, Agnico-Eagle will own 21,671,827 shares of Rubicon, or approximately 9.2% of the basic shares outstanding. Additionally, the Company plans to enter into a technical services agreement with the goal of advancing Rubicon�s Phoenix gold project in Red Lake, Ontario.
LaRonde Mine � Strong Cash Flow Generation Continues
The 100% owned LaRonde mine in northwestern Quebec, Canada, began operation in 1988. Overall, proven and probable gold reserves at LaRonde contain approximately 4.8 million ounces from 34.7 million tonnes grading 4.3 grams per tonne (�g/t�).
The LaRonde mill processed an average of 6,587 tonnes per day (�tpd�) in the second quarter of 2011, compared with an average of 7,254 tpd in the corresponding period of 2010. The lower throughput was largely due to a planned five day maintenance shutdown and also due to an unplanned slowdown due to the declaration of force majeure by the mine�s cyanide supplier. While the supply contract remains under force majeure, alternative suppliers have been contracted and the mine is no longer impacted.
Minesite costs per tonne3 were approximately C$84 in the second quarter of 2011. These costs are higher than the C$79 per tonne experienced in the second quarter of 2010. The increase is largely due to the 9% lower throughput in 2011, as discussed above.
On a per ounce basis, net of byproduct credits, LaRonde�s total cash costs per ounce were $231 in the second quarter of 2011 on production of 27,525 ounces of gold. This compares with the second quarter of 2010 when total cash costs per ounce were $270 on production of 41,533 ounces of gold. The decrease in total cash costs is largely due to significantly higher byproduct metal prices which more than offset lower byproduct metal production. The lower gold production in the 2011 period is largely related to planned mining of lower grade areas for much of the year and also due to lower second quarter throughput, as discussed above. Higher grades are scheduled for the fourth quarter of 2011 with the first production of the higher grade LaRonde Extension.
Considering currently high byproduct metals prices, the mine is expected to maximize the contribution of its zinc and silver ores. This may extend the mine�s life and benefit the total cash cost per ounce.
Post-2011, LaRonde is expected to ramp up to an average life of mine production of 338,000 ounces of gold per year, reflecting the higher gold grades at depth.
Goldex Mine � Low Cost Underground Mine
The 100% owned Goldex mine in northwestern Quebec began operation in 2008. Proven and probable gold reserves total 1.6 million ounces from 27.8 million tonnes grading 1.8 g/t.
The Goldex mill processed an average of 8,448 tpd in the second quarter of 2011. During the second quarter of 2010, the plant processed 7,327 tpd. The mill has now demonstrated that it can sustain approximately 8,000 tonnes per day following the installation of a permanent secondary crusher and additional tailings pump capacity in the first quarter of 2010.
Minesite costs per tonne at Goldex were approximately C$20 in the second quarter of 2011, lower than the C$24 incurred in the second quarter of 2010. These lower unit costs were largely related to the 15% higher throughput in the mill.
Payable gold production in the second quarter of 2011 was 41,998 ounces at total cash costs per ounce of $385. This compares to second quarter 2010 gold production of 48,334 ounces at total cash costs per ounce of $325. The decrease in gold production is due to the mining of lower grade material during the 2011 period which also negatively impacted the total cash costs per ounce. The higher total cash costs are largely due to the lower gold production.
Grouting of a shear zone is underway to reduce the water inflow to the underground mine. This water flow has caused soil settlement issues at the minesite as previously saturated soils around the minesite are draining. However, flow rates have been controlled as remediation continues.
Goldex�s D Zone Continues to Grow
Ongoing exploration at Goldex has resulted in significant success from the D Zone, the large mineralized body directly below the current mining operation. The initial gold resource at the D Zone is 14.4 million tonnes grading 1.62 g/t in the inferred category (or 746,000 ounces of gold), as of December 31, 2010.
Incorporating recent results, the top of the D Zone is now approximately 840 metres below surface, and it has been traced to a depth of 1,350 metres below surface. The zone is estimated to be approximately 350 metres wide and between 60 metres and 120 metres thick, as shown on the linked Goldex longitudinal section.
1 Payable production of a mineral means the quantity of mineral produced during a period contained in products that are sold by the Company whether such products are shipped during the period or held as inventory at the end of the period.
2 Total cash costs per ounce is a non-GAAP measure. For a reconciliation to production costs, see Note 1 to the financial statements. See also �Note Regarding Certain Measures of Performance�.
3 Minesite costs per tonne is a non-GAAP measure. For reconciliation of this measure to production costs, as reported in the financial statements, see Note 1 to the financial statements at the end of this news release.
THIS PRESS RELESAE CONTAINS IMAGESS AND TABLES. CLICK HERE TO VIEW THE ENTIRE DOCUMENT IN PDF FORMAT.
The effective date for all of the Company�s mineral resource and reserve estimates in this press release is December 31, 2010. Additional information about each of the mineral projects that is required by NI 43-101, sections 3.2 and 3.3 and paragraphs 3.4 (a), (c) and (d) can be found in the Technical Reports referred to above, which may be found at www.sedar.com. Other important operating information can be found in the Company�s Form 20-F and its news releases dated December 15, 2010 and February 16, 2011.
The contents of this press release have been prepared under the supervision of, and reviewed by, Marc Legault P.Eng., Vice-President Project Development and a �Qualified Person� for the purposes of NI 43-101.
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Forward-Looking Statements
The information in this news release has been prepared as at July 27, 2011. Certain statements contained in this press release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and �forward looking information� under the provisions of Canadian provincial securities laws and are referred to herein as �forward-looking statements�. When used in this document, words such as "anticipate", "expect", "estimate," "forecast," "planned", "will", "likely", �schedule� and similar expressions are intended to identify forward-looking statements.
Such statements include without limitation: the Company's forward-looking production guidance, including estimated ore grades, project timelines, drilling results, orebody configurations, metal production, life of mine trends, production estimates, the estimated timing of scoping and other studies, the methods by which ore will be extracted or processed, recovery rates, mill throughput, and projected exploration and capital expenditures, including costs and other estimates upon which such projections are based; the Company's goal to increase its mineral reserves and resources; and other statements and information regarding anticipated trends with respect to the Company's operations, exploration and the funding thereof. Such statements reflect the Company's views as at the date of this press release and are subject to certain risks, uncertainties and assumptions. Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by Agnico-Eagle as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions of Agnico-Eagle contained in this news release, which may prove to be incorrect, include, but are not limited to, the assumptions set forth herein and in management�s discussion and analysis and the Company�s Annual Report on Form 20-F for the year ended December 31, 2010 (�Form 20-F�) as well as: that there are no significant disruptions affecting operations, whether due to labour disruptions, supply disruptions, damage to equipment, natural occurrences, equipment failures, accidents, political changes, title issues or otherwise; that permitting, production and expansion at each of Agnico-Eagle's mines and growth projects proceeds on a basis consistent with current expectations, and that Agnico-Eagle does not change its plans relating to such projects; that the exchange rate between the Canadian dollar, European Union euro, Mexican peso and the United States dollar will be approximately consistent with current levels or as set out in this news release; that prices for gold, silver, zinc, copper and lead will be consistent with Agnico-Eagle's expectations; that prices for key mining and construction supplies, including labour costs, remain consistent with Agnico-Eagle's current expectations; that Agnico-Eagle's current estimates of mineral reserves, mineral resources, mineral grades and metal recovery are accurate; that there are no material delays in the timing for completion of ongoing growth projects; that the Company�s current plans to optimize production are successful; and that there are no material variations in the current tax and regulatory environment. Many factors, known and unknown, could cause the actual results to be materially different from those expressed or implied by such forward-looking statements. Such risks include, but are not limited to: the volatility of prices of gold and other metals; uncertainty of mineral reserves, mineral resources, mineral grades and metal recovery estimates; uncertainty of future production, capital expenditures, and other costs; currency fluctuations; financing of additional capital requirements; cost of exploration and development programs; mining risks; risks associated with foreign operations; governmental and environmental regulation; the volatility of the Company's stock price; and risks associated with the Company's byproduct metal derivative strategies. For a more detailed discussion of such risks and other factors, see the Form 20-F, as well as the Company's other filings with the Canadian Securities Administrators and the U.S. Securities and Exchange Commission (the �SEC�). The Company does not intend, and does not assume any obligation, to update these forward-looking statements and information, except as required by law. Accordingly, readers are advised not to place undue reliance on forward-looking statements. Certain of the foregoing statements, primarily related to projects, are based on preliminary views of the Company with respect to, among other things, grade, tonnage, processing, recoveries, mining methods, capital costs, total cash costs, minesite costs, and location of surface infrastructure. Actual results and final decisions may be materially different from those currently anticipated.
Notes to Investors Regarding the Use of Resources
Cautionary Note to Investors Concerning Estimates of Measured and Indicated Resources
This news release uses the terms "measured resources" and "indicated resources". We advise investors that while those terms are recognized and required by Canadian regulations, the SEC does not recognize them. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.
Cautionary Note to Investors Concerning Estimates of Inferred Resources
This press release also uses the term "inferred resources". We advise investors that while this term is recognized and required by Canadian regulations, the SEC does not recognize it. "Inferred resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.
Scientific and Technical Data
Agnico-Eagle Mines Limited is reporting mineral resource and reserve estimates in accordance with the CIM guidelines for the estimation, classification and reporting of resources and reserves.
Cautionary Note To U.S. Investors - The SEC permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. Agnico-Eagle uses certain terms in this press release, such as �measured�, �indicated�, and �inferred�, and �resources� that the SEC guidelines strictly prohibit U.S. registered companies from including in their filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 20-F, which may be obtained from us, or from the SEC�s website at: http://sec.gov/edgar.shtml. A �final� or �bankable� feasibility study is required to meet the requirements to designate reserves under Industry Guide 7.
Estimates for all properties were calculated using historic three-year average metals prices and foreign exchange rates in accordance with the SEC Industry Guide 7. Industry Guide 7 requires the use of prices that reflect current economic conditions at the time of reserve determination, which the Staff of the SEC has interpreted to mean historic three-year average prices. The assumptions used for the mineral reserves and resources estimates reported by the Company on February 16, 2011 were based on three-year average prices for the period ending December 31, 2010 of $1,024 per ounce gold, $16.62 per ounce silver, $0.86 per pound zinc, $2.97 per pound copper, $0.90 per pound lead and C$/US$, US$/Euro and MXP/US$ exchange rates of 1.08, 1.40 and 12.43, respectively.
The Canadian Securities Administrators� National Instrument 43-101 (�NI 43-101�) requires mining companies to disclose reserves and resources using the subcategories of �proven� reserves, �probable� reserves, �measured� resources, �indicated� resources and �inferred� resources. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
A mineral reserve is the economically mineable part of a measured or indicated resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allows for losses that may occur when the material is mined. A proven mineral reserve is the economically mineable part of a measured resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. A probable mineral reserve is the economically mineable part of an indicated mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit.
A mineral resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth�s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. A measured mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. An indicated mineral resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. An inferred mineral resource is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Mineral resources which are not mineral reserves do not have demonstrated economic viability.
Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.
A Feasibility Study is a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of realistically assumed mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental considerations together with any other relevant operational factors and detailed financial analysis, that are necessary to demonstrate at the time of reporting that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study.
The mineral reserves presented in this disclosure are separate from and not a portion of the mineral resources. |
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