Agnico Eagle Mines Ltd (AEM) 2002 Q4 法說會逐字稿

No assurance that the statements will prove to be accurate, and actual results in future events could differ materially from those anticipated in such statements.

We will begin now with an overview of the highlights of the year for us. Although we did have some difficulties, we did produce a record amount of gold in the year at over 260,000 ounces at LaRonde. We have record gold reserves and resources at LaRonde including record proven and probable reserves of $4m ounces, which is a 23 percent increase at LaRonde from the year before. We’ve commissioned the mill at 7,000 tons per day. We’ve made some changes at LaRonde that now put us in a good position to achieve record production in 2003 of 375,000 ounces and to do it at a cost of $125 per ounce.

We have the strongest balance sheet in the company’s history with over US$150m in cash. As per our policy, we have no gold sold forward and we’ve got increasing net free cash flow being generated from LaRonde in 2003.

On the exploration front, one of the key highlights, certainly in the last couple of months has been the discovery of the high grade Lapa gold resource, which is only seven miles east of LaRonde, right off of the highway, and we’ll talk about that today.

As far as the operating results, on January 14th we released our fourth quarter production and cost estimates, and indicated at that time that they did not meet our expectations as we did not have access to as many gold or mining blocks at [Bets] as we had expected.

Despite these disappointments, we have made some significant improvements in our operations and we achieved several new production records in both the fourth quarter and for the full year.

In the fourth quarter, we reported net income of US$800,000 or one cent a share, compared to a net loss of US$700,000 or two cents a share in the fourth quarter of 2001. Our cash flow from operations more than tripled in the fourth quarter to US$5.4m, or seven cents a share, and that’s up from $1.5m or two cents a share in the fourth quarter of 2001.

For the full year 2002, we recorded net earnings of US$4m or six cents a share, with operating cash flow of $20.4m or 28 cents per share.

Our gold production, in the fourth quarter as we indicated earlier was lower than planned at 75,000 ounces, as more zinc rich ore from previously developed mining blocks was processed. As a result, our cash costs to produce an ounce of gold, which includes a royalty of $70 an ounce in the quarter, rose to $198 an ounce. A better measure of the efficiency of the operation was really reflected in the cost to mine and process a ton of ore, which for the full year was right on budget averaging about C$52 per ton.

After changeover to the expanded capacity of the mill in early October, the plant processed just over 6,300 tons per day in the fourth quarter. During the quarter both the mine and the mill demonstrated the ability to operate at a 7,000 ton a day rate. Metallurgical recoveries for all metals achieved targets. Mining conditions continue to be good with dilution remaining slightly below our target levels.

As we indicated in our press release on January 14th, several initiatives have been implemented at LaRonde that should result in steady performance improvements during the first half of 2003 and beyond, as we focus on completing the infrastructure at depth and obtaining a steady flow of higher grade gold ore from the lower mining levels.

Some of these initiatives include replacing our contract development crews with LaRonde’s more experienced development crews. This has already resulted in improved development performance and helped to reduce some of the congestion on the lower mining levels.

We’ve also switched our underground crews to a seven-day work rotation for 2003, which has also reduced congestion and resulted in improved development performance. We now have two additional rock bolters active underground, that’s also improved our flexibility and our development performance. We’ve recently established ramp access between levels 206 and 215. That has also helped to reduce congestion, particularly along the main, lower level production horizon on level 215.

We’ve revised the weights and revisions and the pace backfill system which has also improved flexibility in the mining sequence. The increased production from the lower levels has allowed for more waste to be used as backfill as we fill in the open stokes, and that has allowed us to skip less waste and focus more on development.

The 5,000 ton ore silo on level 215 is now complete, and that has already started to improve the flow of ore and increase the hoisting performance from the lower levels.

The level 219 crushing plant and conveyor system will be completed in the second quarter which will also improve the ore flow efficiencies. The crushing room excavation will be complete at the end of this month and the contractor is already mobilizing to begin installation of the crusher and conveyor system. We expect delivery of a new production drill in March and that will standardize the production drill fleet which should increase our developments and production performance.

As we move forward, the reduced underground construction activity, the increased cooling capacity with the underground spot coolers and the improved ventilation as we add to our ventilation system will improve the underground ambient temperature in the summer, so that should avoid some of the difficulties we experienced in the summer of 2002.

All of these measures are really designed to optimize the expanded operations at LaRonde by eliminating bottlenecks to the ore flow and improving efficiencies.

What our operating experience to date has demonstrated since expansion in early October is that in the critical area of grade, metallurgical recoveries, of processing capacity, of mining conditions and hoisting capacity, we have met or exceed our expectations. As a result, as we said earlier, we are in a good position to achieve our production and cost targets for 2003.

Onto our financial position at the end of December, our cash position stood at US$153m. We’ve got working capital of over US$185m. We also have an undrawn bank facility of US$125m. In 2003 at LaRonde we estimate capital expenditures at US$29m, and using an average gold price of $310 US cash flow from operations in 2003 is expected to be in excess of US$50m, resulting in expected net free cash flow of approximately US$21m.

Onto the LaRonde reserve and resource and exploration portion of the presentation, during 2002 the deep drilling program at LaRonde has successfully converted 1m ounces of mineral resource to reserve. The current reserve position is now 4m ounces, which is up from 3.3m ounces a year ago. The mineral resource stands at 4.1m ounces, resulting in a combined mineral reserve, mineral resource at LaRonde of 8.1m ounces.

What the recent drilling has told us is that we have now defined the eastern limit of zone 20 north. While the zone still remains open for expansion to the west, the depth drilling is continuing along the level 215 drift to further define the zone and to drill for extensions of the zone to the west.

We have added additional development crews to the level 215 drift so we can accelerate the rate of advance, thereby speeding up our access to drill data on the zone. This is important to us because we need this information to assist in our evaluation of our deep mining options at LaRonde.

The initial work on the deep development options below the bottom of the shaft have evaluated several scenarios, including rehabilitating shaft 1, sinking a new shaft to a depth of 10,000 feet, and various shaft, winds and ramp combinations. Several mining rates have also been evaluated. Preliminary indications are that the positive depth will be economic based on the current gold resource, and with capital costs of approximately $45 to $60 per ounce.

Results of this scoping study are expected to be outlined at the company’s AGM in June. As far as regional exploration, we had some very good success very close to LaRonde at our Lapa property. Recent drilling on this property has extended the gold mineralized zone, resulting in an inferred mineral resource on this property of 815,000 ounces. This resource was calculated using a gold price of $300 per ounce.

We are earning an 80 percent interest in the Lapa property under an option agreement with our partners, Breakwater Resources. So our 80 percent share of that resource amounts to 653,000 ounces. Due to the high grade gold potential and potential operating synergies arising from the proximity of this property to LaRonde, the Lapa property is an important part of our regional development and growth strategy.

Recent drilling on Lapa has focused on extending the contact zone to the east at that depth where the zone remains open. To date, the zone has been traced over a strike length of 1,300 feet and 2,000 feet vertically. The whole Lapa property covers an additional 1.6 miles of the favorable contact which still remains to be explored. Sixteen holes have been drilled, of which 11 intersected the mineralization and confirmed that the contact zone is open at depth and to the east.

Most of the mineralized drill holes contain visible gold. The deepest hole, 118-03-04-A intercepted 99 feet of mineralization at an average gold rate of 0.26 ounces per ton and contained multiple occurrences of visible gold. Included in this intersection is 0.85 ounces of gold per ton, over 16 feet.

Another hole which was also a high grade gold interval came from drill hole 118-02-08 which did not have visible gold, demonstrating that high grade gold value can occur even in the absence of visible gold. This hole returned 12.5 feet, grading 0.6 ounces of gold per ton.

The next step at Lapa will involve the continuation of drilling which will begin in early March. The estimated budget is $2.2m. Four drills will focus on infill drilling on a spacing of 150 feet; deep drilling to test the down dip extension of the deposit at depth; step out drilling along strike to test the eastern extent of the contact zone; and larger core drilling to acquire a mineralized sample for metallurgical testing.

Moving on to the Goldex property, which is 35 miles east of LaRonde. As most of you know, this is a property that Agnico-Eagle has had for many years and has done substantial work on in the past, including a very large bulk sample extracted in 1996 of 114,000 tons. The sample did confirm the grade of the deposit in this area.

As you should know, this deposit is carried on the books at nil. We had written this deposit off many years ago, but we did keep it. It is one of the few deposits we did keep during the downturn in gold prices in the late 90’s because we always believed that this deposit has potential.

We are looking at this deposit in a totally different -- we are taking a totally different approach to this deposit than the last time we looked at it. The last time we looked at it we studied it at a 5,000 ton per day production rate. We also studied it as a standalone operation. We are now studying it using a 10,000 ton a day production rate. We are studying it based on potential synergies with LaRonde.

We feel, due to the size and thickness of the deposit, that a large-scale bulk mining method such as block caving will allow us to come in with a capital cost that will make this deposit economical. The deposit, in our mind, has the potential to add in excess of 200,000 ounces to the company’s annual production at a cash cost below $200 per ounce, assuming a 10,000 ton a day operation and reduced operating costs from economies of scale and regional synergies.

Some of the other things that will be incorporated into the study will be the availability of infrastructure that we currently own that was not available the last time we studied this property in 1996. We have hoists, we have surface ventilation systems already owned. That inventory could be applied here. One of the other things that was not in place the last time we looked at this was the new mine hoisting regulations that were in place in the Province of Quebec that were adopted by the government to accommodate LaRonde’s Penna shaft. So that will allow us, we believe, to save on capital when we put in a hoisting facility because of the increased capacity to lift a heavier load based on the new regulations.

The gold resource at Goldex of 1m ounces as indicated, and 400,000 of inferred resources, were also estimated using a $300 gold price. The deposit does remain open for expansion. We have extensive drilling here, and as I mentioned, bulk sampling. We have in fact taken four bulk samples over the years on this deposit.

We’ve hired a rock mechanic specialist firm to evaluate and re-evaluate the mining method and the development options for this property. We will incorporate the work of this specialist in a new feasibility study which we expect to be released at the company’s AGM on June 19th.

Our number one priority in the first half of 2003 is to optimize LaRonde and to get it performing up to its full capabilities so that we can maximize our gold output at this mine so we can lower our costs at this mine and generate significant net free cash flows.

Secondly, we will focus our efforts on developing our regional opportunities which are really centered around LaRonde. Although we are still in the early stages of assessing the main regional opportunities at Lapa and Goldex, we feel that the development of Lapa, Goldex and deep LaRonde has good potential to add value for our shareholders.

In fact, as we see it, and there are several advantages in our mind to a regional growth strategy. One, it is relative low risk. There are no serious permitting, political, environmental or technical issues associated with this strategy. It is extremely tax effective because it makes the most efficient use of LaRonde’s large available tax pool. It is a strategy that has relatively low overhead. There are no significant additions to overhead required because of our large technical team situated at very close proximity at LaRonde.

We feel that this is the most effective use of LaRonde’s technical resources and large infrastructure, which we feel we can generate significant synergies with. This strategy will not overly strain the LaRonde technical team.

This is a diversification of our production base away from one mine and it removes, in our mind, as we move these properties forward, the zinc stigma that is perceived by some related to LaRonde. This strategy has very good exploration upside. We have the largest land position and probably the most aggressive regional exploration program in the area. Lapa, Goldex and deep LaRonde are all open and remain open for expansion. This strategy has the potential to be very earnings positive because the strategy does not require large acquisitions, therefore there is no adverse earnings impact from goodwill.

As I said earlier, Goldex and Lapa are carried on the books of the company at essentially zero. So what we have is, we believe, a relatively low risk growth strategy with the potential to create some meaningful shareholder value.

That is a quick -- well maybe not so quick -- but that is a rundown of the quarter and the current state of operations. We are certainly not perfect. We have challenges, we have more work to do at LaRonde, but we are well on the way to meeting these challenges in meeting the value and potential at LaRonde and on the property holdings in the region. We’d like to use the rest of the call to deal with any questions or issues that you may have. We have essentially the full team available for you here to assist in answering these questions. So operator, if you could, please open your lines. We’d be pleased to take questions from the listeners.

Thank you. One moment please. (Operator Instructions) Your first question comes from [Mike Julaman] from Merrill Lynch. Please go ahead with your question.

Hi Sean.

Hi Mike.

Thanks for the run down. I thought I’d give you a break and put EBITDA to work if you don’t mind.

Perfect.

I was just wondering, in the press release the comments were more general in nature of how the first quarter was going at LaRonde. I was just wondering what you had to say about that, maybe a little more detail, tons per day if you could. What stokes are being opened up at the lower level, what percentage of production comes from the lower levels? And for Dave, some forecasts -- amid explorations and taxes rate for 2003 -- is a higher gold price. How is that all being tacked in?

Good morning, Mike. Just to give you a general rundown on how things are going in the first quarter, development continues to go well as it did the last quarter of 2002, where we are meeting our development objectives. In terms of tonnages, we have hit record tonnages from the lower levels of the mines. Some days we’ve averaged in excess of 5,000 tons from level 215 and 194, so we are definitely improving our productivity from the lower, higher grade parts of the mine.

Our daily tonnages vary from about 6,200 to all the way up to 8,000 tons per day, so I would think in terms of -- it is basically going according to plan, but this isn’t going to be a straight-line improvement. There are a lot of other improvements to come, so we see continual improvement. We are improving over the last quarter. We expect to see more improvement in the second quarter, but then of course our budget and our mining plan is all basically back-ended towards the second half of the year.

On the other questions, in terms of our administration budget, we are looking in the neighbourhood of $5.5m to $6m on G&A; $4m to $4.5m in U.S. dollars on exploration for development activity. In terms of our taxes, there won’t be any cash income of mining duties, but there will be capital taxes, provincial capital tax will be in the $2m range. Federal capital tax will be about another million. We will accrue, defer taxes, at the rate of about 30 percent this year on our earnings.

How about interest expense?

Interest expense, it will be about $6.5m cash on the debentures. It will be an additional $1.25m on standby piece for the revolver. And then we will have non-cash interest expense, amortization of issue costs and a debenture of about another million.

Okay, thank you.

Our next question comes from David [Malalou] from Scotia Capital. Please go ahead with your question.

Good morning, gentlemen. I guess I could give it to either Mark or Ebe if he’s on the line with regard to looking at the diagram for zone 20 north. Could you give me what the depth is for the bottom of the resource to reserve conversion?

It’s at elevation 2,200 metres. So that is roughly 7,200 feet below the surface.

No, the grey area on the map.

The resource, the levels of resource?

Yes. The area that you’ve blocked out, that you’ve converted from resource to reserve.

Okay. What we’ve converted from resource to reserve is in yellow on that diagram. That is what it says. The elevation is 2,200 and I will just calculate that quickly what that is in terms of depth below surface. Roughly 9,200 feet below the surface. We have converted reserves down to about 9,200 feet below the surface.

Okay, now as you proceed west from there. I mean, there are not a lot of drill holes out there I recognize, but have you recognized any change or do you have any feeling if there is a change in the mineralization going west?

The gold grades are higher. The thicknesses in general are higher, but the copper grades, curiously, appear to be decreasing. The lowest path, relatively lower copper grades than what we had initially had overall in that resource envelope when we looked at it last year.

It seems like the mineralization, there is less [chalcopyrite] and more gold, visible gold, that is involved in the most western and deepest hole.

The rock, I am pushing on this one. I mean, it’s not turning into zone five, is it?

No, the rock when you look at it, it isn’t in a [sera site] shift, but it is a sulphide zone that has disseminated mineralization that looks something like zone 5, except its more [siliceous]. It’s less foliated, in other words there are not a lot of dots, it doesn’t have a lot of fractures in it. So in that way it is not like zone 5, but it’s not like what we have in the upper part. It is sort of a gradual change towards a more [siliceous] lower sulphide zone.

Okay. Two more questions. Are you happy with the rock, or are the rock mechanic guys happy with that stuff?

Yes.

Then I am going to ask my David Garafolo question.

Thank you very much.

The mining cost definition drilling, all of that.

Definition drilling, 35 cents --these are all in Canadian, David -- Development, 690; Mining, 877; underground services, 1327; Milling, 1648; surface services, 154; admin 429 for a total of 5160.

Thank you very much.

Our next question comes from Barry Allen from Research Capital. Please go ahead with your question.

Good morning. I just have a couple quick questions. With respect to the Goldex property that you now are rethinking about, you are talking about a production rate there in the order of 10,000 tons per day, and I am assuming some operational synergies with respect to processing with LaRonde.

Is it indeed your intention to produce a concentrate at Goldex and ship a concentrate across to LaRonde?

Yes, as part of the reduction of our capital costs we are looking towards just having a grinding circuit, a gravity circuit and a floatation circuit. At the 10,000 tons per day, we expect to recover about 20 to 25 percent of the gold from the gravity circuit and about another I would estimate 7 percent or 8 percent plus from the [pyrite con] and ship that to LaRonde for cyanidation. We would estimate at 10,000 tons per day that would be about anywhere between 7 to 10 35-ton tandem trailers and that would also eliminate any potential environmental issues with respect to cyanidation within Val d’Or city limits.

What would that concentrate translate into on sort of a tons per day rate?

On a tons per day rate that would be roughly 300 to 350 tons per day of concentrate.

Thanks. While we are talking about potential in the future, can you just kind of sketch out Lapa and how that resource might in fact be exploited?

Well I think so far, as we’ve mentioned in the press release, we’ve outlined it over a horizontal distance of about 1,000 feet and a vertical distance of roughly 2,400 feet. This deposit is almost vertical and it is a very sheet-like deposit and it is a very competent deposit, it varies in thicknesses from about 10 feet to all the way up to 99 feet at depth, which is our lowest interval.

However, since it is only seven miles away from LaRonde, we have two ball mills which are currently available. The original 2,000 ton per day circuit at LaRonde is currently mothballed. We also have a surface crushing plant, a primary job crusher and secondary crushing plant which is available for any custom that must be available.

So if we were to develop this first part, I think Elaine has a very aggressive drill program planned for the rest of the year, but we could conceivably, depending on the size of the deposit -- we have roughly 3m tons so far, and still open -- we could conceivably see 1,000 or maybe a 1,500 ton per day operation.

I am arm waving here Barry, but this could be a shift to LaRonde. It could be operated from LaRonde just as a satellite operation and the ore dumped into the mill. Of course with the high visible gold content, we would envision improving our gravity circuit to capture all of this in terms of potential mining methods.

Once again, with 99 feet, a long hole mining method would be envisioned in the thicker areas and perhaps something, a combination of shrinkage in the upper parts of the deposit.

Since the grade is very high grade with some of the parts approaching 0.8 ounces of gold per ton, I think something like a shrinkage method would be very important with respect to grade control.

So those are some of the thoughts. Also, we’ve looked at, on a very early basis, the potential shaft sites. There doesn’t appear to be any problem. We’d be very close to the highway, of course, close to [Rabier Ava] and also we are very close to power. So this project has got a lot of pluses.

Okay, great. More just a historical question for David. David, I think in the January 14th press release you estimated that the direct operating costs before royalties at somewhere between $165 and $175. You actually put out very nice operating costs, about $128. What really gave rise to that good number?

Mathematical error. The January 14th press release underestimated, shifted some of the royalty up to the direct operating costs by accident. The full year estimate was correct, the quarter number, there was an error in it.

Okay. I just thought I missed something. Thanks.

Our next question comes from Arish Hared from CIBC World Markets. Please go ahead with your question.

Actually it is Barry Cooper. Just following up a bit on Barry Allen’s questions on Lapa. You are using a $300 gold price. Have you started putting economics to this, rather than just saying, well we are going to use a point one cut off, or something like that?

We haven’t really started putting any economics to it, Barry.

So how do you start applying a $300 gold price? What does that translate to in terms of a cut off?

Roughly 5.5 grams.

Okay, so it’s more an educated guess as to what would be a reasonable cut-off for profitability?

That’s right.

Fair enough. And in that area, can you just describe what kind of mineralogy we are dealing with in terms of the gold setting itself?

The zone is more actually shaped with (inaudible) so far, so far it is (inaudible). It is a very small vein. It is a weak specification and is associated with the (inaudible). What we saw in the core is actual (inaudible) is very minimal. It is under 1 percent, but the gold is associated with stiblike. When we have more stiblike we have more gold. Also we have (inaudible). Each floor we have (inaudible). We will conduct tests this summer and we expect to have a good recovery rate with this (inaudible) gold.

Okay, Ebe, just from a cursory glance, does that give you any issues with respect to processing at LaRonde?

Well the preliminary work that we have done, we don’t foresee any issues. If anything, based on the existing 2,000 ton per day per plan, the original plan was a grinding circuit. We also have a floatation circuit available there. We have room for and if necessary we can make a concentrate and we have got contracts with the Randall Horn Smelter if it came down to that to make our [sivo pyrite], that concentrate. We already know that they would accept this. So it doesn’t cause us any issues.

So disposing of any arsenic material is not a --

That would be trucked to Noranda.

Finally, on your reserve conversion at LaRonde down to the 9200 feet that Mark indicated, presumably in order to call it a reserve you have chosen one of the options that you talked about, according to the definition of how you define reserve.

Can you just elaborate what exactly you used to calculate the reserve?

What we used, Barry, we used the wins option, or the most expensive option to see whether it could pass the test. So we used that, plus we used an overall mining cost of $59 per ton, rather than the $50 per ton that we used in the upper part of the mine. That was due to the inefficiencies of the wins and also ground control issue that may happen. So that was the scenario we used and we incorporated the capital for that scenario.

Also, the higher mining cost. From our point of view this would be a worse case scenario, because operating costs, so far our studies on a larger shaft, et cetera, higher tonnage rate, the operating costs are significantly lower. But we felt that if it could pass this more stringent test, then anything else would be an improvement over and above that.

Right, and I guess in June we will hear perhaps a more optimized version.

Yes, we are working on that right now, but we feel content that at least on a worse-case scenario, those resources based on the drilling that we did, passed that test. Especially higher cost.

Okay, thanks a lot.

Our next question comes from Steve Butler from NBO Nesbitt Burns. Please go ahead. Mr. Butler, are you there? Our next question comes from Mark Smith from First Associates. Please go ahead with your question.

I would just like to get a little bit of a better feeling for geometry and distribution on Lapa. With 16 holes drilled over 1,300 feet and 2,00 feet vertical, are they clustered, those holes? Or are they spread out? Give me an idea of the drilling?

This program was 100 metre by 100 metre. This is the spacing of each hole. What we tried to do for the next program is to drill a new spacing between the hole by 50 metre horizontally and 100 metre vertically. This is the plan to inferred resource to indicated resource.

In the same time, we try enter the resources with another drill. I suppose during this summer we will have a better idea about the size, and what is possible to transfer to infrared to indicate it, because we want to try to have a pretty good idea at the end of this summer.

So let me hear this right, you say your next program is 50 by 50, or 50 by 100?

50 by 100.

50 by 100, thanks. Just in terms of the 16 holes that you drilled so far, did you have any duds in that or was it all pretty good?

I think there were two holes on the upper part which we referred to in this morning’s press release. They were what you would categorize duds, but they were on the upper limit. Within the envelope, all of them were good.

Okay, and in terms of where you see it extending right now, there may have been some drilling that preceded this program. Is it closed off to the east or west, or is it open basically everywhere?

Let me try to explain. We drilled (inaudible) hole to try to move the limit of the upheld block. At the west side we have three holes, that meet the upper block, but to the east it is completely open.

Thank you very much.

(operator instructions) We have a follow up question from [Mike Julaman] from Merrill Lynch. Please go ahead with your question.

Maybe put Don Allen to work, I haven’t heard him talk. Don, John’s strategy appears to be inwardly focus - Lapa, Goldex, LaRonde has a lot of great potential. What about on the -- I guess you are more focused externally. I am just wondering what you are seeing out there, if anything. Companies -- there have been very few asset transactions I’ve noticed. I was just wondering what you were seeing.

Mike, in terms of our activities in the corporate development area we certainly have been active. There are properties and situations out there, a lot of them haven’t been high profile, it’s been a situation where other companies may have elected to sell off; situations where there have been certain circumstances where we have been looking at situations that may be based in metal mining companies that come across. So there are certainly situations we are seeing out there and it has been active, but certainly the near-term opportunities may come up in our own backyard at present. I am certainly keeping busy looking at things throughout the Americas and Europe.

We will still, and we are continuing to look, Mike. This focus here in 2003 is really trying to leverage off of LaRonde infrastructure and our large land position, and our technical expertise to really strengthen the base and foundation of the company.

A lot of this has really been driven by the most recent success on Lapa. We do have the dominant land position, not only on the LaRonde [Busque Doyon] trend, but also on the trend to the south now. There is a lot of work that we will do in that particular area to see if we can uncover other Lapa type deposits, because we will get the best bang for our buck, as we indicated in the presentation on our tax pools, on the use of our LaRonde technical team, et cetera.

But we are still active on the corporate development, looking for opportunities.

Thank you.

We now have a follow up question from David [Malalou] from Scotia Capital. Please go ahead with your question.

Thank you very much. Sean, you mentioned [Busque]. What is happening over there, perhaps?

Our understanding is that they have stopped production, our neighbors next door, and that they are reclaiming the property. As far as anything potentially between the two companies, there is nothing imminent there at all. We know we will be there for decades, so we can be patient.

Just to follow up, digging through some of the numbers in regard to concentrates, et cetera, it looks like you had a great quarter with regard to recoveries for copper, and it looks like maybe the concentrate grades did very, very well. Is that right?

Yes, they did. The concentrate grade in December were -- let me dig this out for you, I have it. Over 18 percent.

Say again?

18 percent copper in December, and for the quarter we averaged over 18 percent as well.

And the recoveries were substantially higher, weren’t they?

The recoveries for copper in December were 81.5 percent and 80.3 percent for the quarter.

Now is that going to be sustained.

Yes.

Excellent.

It is all a function of the head grade, David. When we were in previous years running at around 0.15, 0.2 percent copper, that still fit our metallurgical model. Currently we are running anywhere between 0.4 to almost 0.7 percent copper.

I think there has been perhaps a little bit of slippage with regard to capital investment. In the last forecast -- I think it was May -- it was supposed to be C$17m for 2003. Has that been changed? What might it be on a quarterly basis?

Our capital budget for this year, I don’t think it’s ever been as low as $17m Canadian. Like, it’s $29m U.S. for the full year, and that includes the construction of a water treatment facility at LaRonde.

Any specific quarters?

I would say it is more front-end loaded in the first six months. You are looking at $13m or $14m in the first quarter. So it is currently in the first quarter, and probably another $7m in the second quarter, and it is pretty even after that.

I will ask one more, why not. With regard to the metal to weighting settlement, it was $11.9m in Q3. What was it in Q4?

Metal to weighting settlement in Q4, it should be right on the balance sheet here.

I didn’t see it.

It is just under US$30m. That is a function of a very large copper shipment that didn’t get out of the port until January 4th. We received a large cheque at that time.

My eyeglasses need to be fixed. Thanks a lot.

Thank you.

Our next question comes from John [Tumasa] from Prudential Financial. Please go ahead with your question.

Congratulations on all the success, it is great to see the reserves and resources grow so much at LaRonde. And congratulations on the development study at Goldex and other things regionally. My question is, how many dollars are involved in the efforts or offices you have in the U.S. for Canada outside LaRonde? And, the pros and cons of maintaining any effort at all outside your backyard where you are highly productive?

John, the amounts are, in the big picture, actually quite small. They amount to roughly US$3m on an annual basis. In the U.S. it is a little over US$1m, so it is not a significant number. The Canadian amount, we have been able to fund through a flow through share mechanism, so we get a significant premium when we do that, and those are on tax pools that won’t be used for many years.

So we’ve been able to find a tax effective way of funding that. It is still important to look. There are situations that have potential, so we feel that on that small scale it still makes sense for us to look outside of our area of expertise, because there are potentially deposits out there where we have an expertise underground. Polymetallic, that sort of thing.

So, it is not an onerous part of our budget and we feel it is well worth the expenditure.

Our next question comes from Steve Butler from BMO Nesbitt Burns. Please go ahead with your question.

Thanks, Operator. Sorry guys, I was perhaps indisposed at that point when called upon earlier. The Lapa inferred resource, 653,000 ounces, is that a cut resource? What is the resource uncut?

The second question is, remind me again what the historical grade reconciliation factor is at LaRonde?

The second part of the question -- I will answer the first part of the question with Lapa. The 653,000 ounces that you see at Lapa is an 80 percent chunk of the total amount that we have at Lapa, because we have an agreement right now where we can get up to 80 percent ownership of those ounces.

In essence then --

What is the cutting factor on that?

The cutting factor that will be reported is a 1.5 ounce per ton cut on that resource. On the table in the back of the press release where the reserves are broken out, Steve, footnote 4 gives you the uncut resource as well at 100 percent basis it is 927,963 ounces.

Historically, a lot from the Cadillac Belt cutting factors have varied between one ounce per ton to two ounce per ton, so what we use for this first exercise, because of the high frequency of visible gold, is 1.5 ounces of gold per ton. So the impact of that is to reduce the overall resource from around 915,000 ounces to 830,000 ounces. So there are about 80,000 ounces that have been impacted by the cutting factor.

Okay. And your historical grade reconciliation at LaRonde?

Historically over the years, at the number 1 shaft it has averaged between 10 to 15 percent higher than what we had estimated. Currently at the Penna shaft it is averaging between 3 percent to 5 percent higher.

Okay. And Dave, you gave a number of capex earlier to Mr. Malalou, $29m for the year. Sustainable capex beyond 2003?

Six to eight.

Six to eight?

Yes.

Okay. Thanks very much. Take care.

Thank you.

Mr. Boyd, there are no further questions at this time, please continue.

Thank you, operator. I just want to thank everybody for listening in on our fourth quarter conference call. I would just like to remind everyone that we are conducting a tour of LaRonde on May 22, so if you haven’t already done so and you would like to go, please contact Hazel Winchester in our office. You can reach her at 416-847-3717 and she will make sure you get on the trip. Space is limited but we think it will be a great opportunity to get a feel for the mine at the point when we have finished the infrastructure construction. So you will be able to get a first-hand feel of what the mine will be capable of doing going forward once that infrastructure is in place at the bottom of the mine. Thanks again.