Agnico Eagle Mines Ltd (AEM) 2004 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Agnico-Eagle fourth quarter 2004 financial results conference call.

[Operator Instructions]

I will now turn the conference over to Mr. Sean Boyd, President and Chief Executive Officer. Please go ahead, sir.

Thank you, operator, and good morning everyone. We know it's a busy schedule today with several other conference calls. We thank you for your participation in our call. We're doing something a little bit different here. We do have some slides that are on the Internet for those of you who just have access on a phone right now but are near a computer. If you go to our website, www.agnico-eagle.com, you can follow along. We've got about a dozen slides in the formal part of your presentation and then we'll open it up for question and answer.

We have our full team in place here. We have a new member with us today. David Smith, who is our new Manager of Investor Relations, just started this week. He's a rock mechanics engineer. Had spent 6 years at DBRS. So he's well qualified and we're looking forward to have him join the team and be a big part of -- getting our story out to the market.

It was a good quarter for us. Our operations continue to perform well. As a result we generated record earnings, cash flow, record low cost, cash cost to produce an ounce of gold as well. Our reserves, we replaced our production. They remain unchanged at 7.9 million ounces. Our Goldex project had positive bulk sample results resulting in a confirmation of the gold reserves and improved gold grade. So we remain in a very strong position to move our regional projects forward and realize our objective of building a multi-mine production base.

As far as earnings and cash flow go, the earnings and cash flow records are really driven by the ability of our team who have done an exceptional job at the mine to mine and process high volumes of ore from underground. In 2004 we processed almost 3 million tons, which is up over a half a million tons from 2003. And we averaged approximately 8150 tons per day. In addition, we had record tonnage from the lower levels; almost 1.2 million of the 3 million tons came from the lower mine representing about 63% of the total of lower mine.

Another key for the company was our ability not only to bring up and process a record amount of tons but also to do it at a very efficient cost. We were able to produce and process each ton of ore for $48 CAD per ton. So those are the key metrics at this mine, we need to produce 8000 tons a day or better and do it cost of under $50 CAD a ton and we have been able to achieve that throughout 2004.

As a result of the record throughput we had metal production of 271,000 ounces of gold, 5 million ounces of silver, 165 million pounds of zinc and 20 million pounds of copper. The record metal production and obviously higher byproduct prices resulted in a significant in our cost to produce a ounce of gold for 2004 down to a record on annual basis of $56 an ounce. As a result we generate a record full year earnings of almost $48 million or $0.56 a share, and we generate a record full year operating cash flow of $78 million.

Just want to touch on the cost position and look at Agnico's position relative to a group of our peers. We are in a position where we are one of the leaders in terms of low cost of production and that low total cost when we had everything in, including interest, exploration, administration, everything in for the first 9 months of 2004, our all in cost were $240 an ounce versus an average of 12 of our peer companies of $352 per ounce. In the fourth quarter we averaged well under $200 an ounce in our all in total cost which is a significant improvement even over the first 9 months. So we're sitting here in a very good position to generate continued earnings and cash flow based on LaRonde's production profile and cost profile.

Our financial results have left us in a very strong financial position. Our balance sheet at the end of the December, we had $106 million in cash. We had working capital of $178 million. We do have convertible debt remains at $144 million. The conversion price is $14 US. So the convertible debentures are in the money. We can force conversion on that in early 2006 where we can call those debentures. We have an undrawn credit facility which was recently re-negotiated in much more favorable terms. It is totally undrawn and it provides us with further liquidity of additional $100 million. We have basic shares outstanding of 86 million, fully diluted 106 million and the difference between the basic and fully diluted would be about 10 million shares on the conversion of the debt. About 7 million in warrants which have a strike price of $19 US and the balance about 3 million would be options which mostly of them be in the money.

Focusing on the fourth quarter, we had record tonnage in the quarter of 792,000 tons, averaging over 8,600 tons a day. Our mill operating time increased to almost 96%. In October the mill processed an average of 8,900 tons per day. We can see the mill is performing extremely well. Underground or development continues to go well. We exceeded our quarterly targets. Our costs again inline the quarter we averaged $48 CAD a ton. Our metal production was 69,000 ounces of gold, million and half ounces of silver, almost 45 million pounds of zinc and 6 million pounds of copper. That gave us a record low quarterly to produce a ounce of gold to $13 per ounce in the fourth quarter. That drove earnings to $15.6 million or $0.18 a share and it doubled our operating cash flow quarter over quarter to almost $21 million.

In the fourth quarter we had some benefits to earnings on a deferred tax benefit which amounted to about $0.05 per share but we also were adversely affected on our earnings by a $0.02 per share foreign exchange loss and we also had a negative impact of about $0.05 per share related to the build-up of copper concentrate inventory. Therefore the fourth quarter had the potential to have even better earnings than we posted at $0.18 a share.

In terms of our 2005 operating budget, we have not changed our guidance in terms of production. We're still looking for 280,000 ounces of production, 5.5 million ounces of silver, 18 million pounds of copper and approximately 160 million pounds of zinc. Our cash costs forecasts on a per ounce basis still in the range of $1.35 to $145. To derive that number we've used very conservative byproduct metal prices. We're using silver at $6. zinc at $0.45, copper at $1.15 and we are using exchange rate of $1.27.

Our sensitivities in terms of the impact on costs per ounce to a 10% change in the foreign exchange Canadian/US dollar rate would be a $39 an ounce for every 10%change. For zinc for every 10% change of $17 an ounce impact on cost. For silver, 10% change would be $11 an ounce. And copper would be $6 an ounce. If we use the current foreign exchange rate Canadian/US dollar and current metal prices that would give us a cash cost of well below $100 an ounce for 2005.

As far as LaRonde gold reserves we have seen a slight increase of 5.1 million ounces after production replacement. These reserves were calculated using a 360 gold price, 542 silver price, $0.41 zinc price and $0.95 copper price and these assumptions were really driven by SEC Industry Guide 7, which eventually everyone will be required to follow and that essentially requires reserves to be calculated based an on historic 3-year average of pricing, metal prices. What these gold reserves do not include, they're straight gold. They are not gold equivalent. These reserves do not include the significant quantity of byproduct metals that LaRonde contains. We have in reserve an additional 63 million ounces of silver, over 2 billion pounds of zinc and about 275 million pounds of copper in addition to the 5.1 million ounces of gold. So very large ore body we continue to drill it and hopefully will continue to convert the resource into reserve.

As far as the company's growth plan, we continue to move our regional growth program forward. The LaRonde mine, as you've seen gives us a very low cost production base which is generating significant earnings and more importantly cash flow for us. For LaRonde II we'll get into a little more detail there. We continue to see a higher-grade core. We have a feasibility in progress. We'll talk about that. The Lapa deposit, the reserve resources increase through deeper drilling, we'll provide some details on that. We have an underground program in progress there. And Goldex we had some positive bulk sample results. We've confirmed our reserves. The bulk sample indicated a higher gold grade and we've got a feasibility in progress that should be completed in the second quarter of 2005 very shortly. That puts us, we believe, in a very strong position to build a multi-mine production base for this company.

In terms of what we're spending on the various projects to build this multi-mine production base in 2005, we're spending about $12 million on Lapa to continue with the shaft sinking and underground program. We're spending about $1.5 million on Goldex to complete the bulk sample and feasibility work. That can obviously change depending on the results of that feasibility work so it doesn't envision at this point spending additional dollars. But we're certainly looking for a positive feasibility so we'll have to update you on the capital requirements for Goldex. Bousquet, we should be finished the drilling in second quarter of 2005.We contemplated spending 1.6 million there. LaRonde II, doing drilling development, drifting off into the Bousquet area to drill the bottom of the western limit of the deposit spending about 12.7 million. Expecting to have a feasibility done in the second quarter of 2005. All in total on our projects would be almost $28 million US for 2005.

Focusing on LaRonde II which is largely the 20 north zone at depth where we continued to see an expansion of deposits to the west, we continue to convert a large resource into reserve. We're getting a higher gold grade core confirmed there. That continues and we continue to see good poly metallic results at depth, which confirm as well the poly metallic zone. All of those, both the higher gold grade core and the poly metallic zone core are exhibiting net higher smelter values than we are getting in LaRonde I, which is our current production base. So we believe they should have a positive impact on our deep study as we continue to work on that deep study.

We have been doing a substantial amount of work on the deep study over the last year or so. And we had been studying various options on what made the most sense to go after the deeper material on LaRonde II. We have as a result of that work we have discounted the ability to use the Bousquet II shaft. That shaft is just too far away from the zones, would require extensive development and would also result in a longer lead time to access the material. So we're now -- we have now narrowed the studying to 2 possible options. One is a new shaft and one is a wings off the tennis shaft infrastructure and we'll have more results in the second quarter and certainly will be in a position to talk more about it when we have visitors up to the mine, which we are contemplating on May 10 and May 11. We should have more information on what we're planning on LaRonde II.

As for Lapa, we've made extensive headway in terms of putting up surface infrastructure. We started back in July clearing the site. We now have the head frame in place, installing the hoists. We are in a position to start shaft sinking in a few weeks in March. The deep drilling has added about 300,000 ounces to the resource so we're sitting now with 1.2 million ounces of reserve and a half a million ounces of resource. The nature of the deposit is high grade visible gold. We've used a cutting factor on our high-grade intersections.

Our reserve stands at 4.5 million tons with a grade of 0.26. If we didn't apply a cutting factor it would be closer to a third of an ounce. Therefore the need to do an underground program, which is underway now, a $30 million shaft sinking underground program which is designed to confirm mining conditions, confirm the ultimate grade of deposit and if we get some upgrading, if we get closer to the uncut grade, that would certainly improve the economics of this deposit. We expect to be in a position to make a decision on the second phase in the second half of 2006. That second phase could cost up to $80 million to put the mind into production by late 2008 at a production rate of about 125,000 ounces per year.

Goldex, we'll talk about that before we turn things over for question and answers. We have done extensive work over the years on that and have drilled this thing extensively. Have thousands and thousands of data points. It is a granite plug quartz vain of highly there's a lot of visible gold. There is a definite nugget effect here. What we felt we needed to do is go through and take a much more representative sample of the material. As a result we embarked last year on a razing program and a drilling program, which resulted in us taking in 18,000 ton bulk sample and processing it at a custom mill.

That custom bulk sample returned a grade of 0.018 ounces per ton versus 0.074 previously ounces per ton. What we've essentially done is confirmed the reserve. We've used a more conservative grade in our reserve calculation of 0.074 rather than the 0.081 and when using that as the basis for our feasibility study, which is an update of preliminary economic analysis which showed at a grade of 0.069 and gold prize of 360 we would have a rate of return around 15%. So based on what we've seen so far we're hoping to improve on that economic analysis as we carry out and complete the feasibility study.

On the next slide for those of you looking at the slide, we show a longitudinal section, which outlines the areas of the deposit where we completed the razing and extracted the bulk sample. And that's compared to the area where we extracted the bulk sample in 1996, which is outlined in red on the slide. It's a much more representative sample although not as large. But we think it gives us fair approximation of what types of grades we should expect as we mine this project.

And I think what will be apparent as we continue on our feasibility work and announce the results in the second quarter is that from a technical point of view it's a relatively straightforward project from a mining pointed of view, from a development point of view and from a processing point of view. It's a very simple ore. So I think that bodes well and the way we look at it is that it's much more difficult in an environment like LaRonde to process 7,500 to 8,000 tons a day. This is a much more easier environment to do that. So based on our experience and our performance at LaRonde we feel confident this is a situation where we could mine at those types of volumes which are critical to maximizing this asset and generating the return we feel we need to put it into production.

Just summarizing our overall gold reserve position, we've maintained it at 7.9million ounces due to a very successful regional exploration and development program. We have 2 potential new gold mines as a result of our hard work over the last couple of years. One Lapa which was our discovery and two Goldex, which is one we have been very patient with over many, many years and we've re-looked at that, re-engineered that and feel we have a formula that could work here and we'll soon find out in the second quarter of 2005. When we sum it up, our gold production has continued to increase and it's done that on a declining cost basis which is unusual in this industry. The cost structure seemed to be going up.

That's generated record earnings and cash flow. Our balance sheet remains strong to fund this growth. Our reserves continue to strengthen. We have tremendous exploration potential in the region with our projects. And we also have not sold away any of our gold or silver so we've got full leverage to precious metal prices.

Just in wrapping up, we do have a very strong regional position with potential new gold mines. It's certainly the foundation of the company. But we continue to look at other opportunities so that we can possibly accelerate our move to a multi-mine production base. On that, I will turn it back to you, operator, so that you can conduct the question and answer portion of the conference call.

Thank you. Ladies and gentlemen, we will now conduct the question and answer session.

[Operator Instructions].

Your first question comes from Mike Jalonen from Merrill Lynch. Please go ahead.

Just a quick -- just wondering on the -- you guys got looks like 3 potential big projects here for a company your size to build mines for. With --I guess you've got 120 million Canadian Or U.S. for Goldex but 200 million for the Lapa combined and the deep LaRonde II, that's I think I remember a number last year you might have said North of 200 million. So like $400 million, just wondering how you would stage all of this?

Yeah, we don't have the final feasibility work done on LaRonde II or on Goldex. We anticipate Goldex at $120 million and Lapa at $80 million would be built over a period of about 3 years, which would be roughly $60 to $70million U.S. year-after-year. As you know our cash flow this year was close to $80million in 2004. Given current metal prices we should generate close to that again this year. We have 100 million dollars in cash. We have an undrawn bank facility of $100 million. We have an ability to finance Goldex and Lapa using flow through funding like we did last year and we were able to sell a million shares at a price of $23 Canadian which represented about a 35% premium over the current stock price.

We were able to do that because we have substantial tax pools so we're selling some of our tax pools by taking a large 35% plus premium. So we've got those 2 projects well in hand. The wild card is LaRonde II. In terms of its start date and ultimate capital, that we don't know. But I think overall we're in a good position. In terms of our outstanding shares, we have the fewest number of shares outstanding of the mid tier. We're in a good position to create per share value and we're going to be very prudent in the way we approach the capital markets. And we have substantial resources, we feel, currently.

Okay. I guess just going to the - I think you guys provided a breakdown of the LaRonde I and II. And I guess the current infrastructure you have, can that only access LaRonde I reserves or LaRonde II? Only looks like a 7 or 8 year of the mine shaft.

It can access some of the LaRonde II reserves here. We are currently developing a ramp system below the shaft. It's currently at level 221. Its target depth is to go down to 236. However, that may be extended to 246. We're evaluating that right now. So with each particular sub level you add approximately an additional million to 1.5 million tons. So you would add about half a year, if you add a sub level.

Okay. Thank you Ebe. Just one question for Dave. How long, Dave, before you guys deplete your tax pools and move to full taxable?

Well, we have about $700 million in tax pools. I think it really depends on what your price assumptions are going forward but it's going to be multiple years. Probably north of 5 years even at the current prices.

Did you have less last year or like 600 million?

Did we have -- no, I think it was 700 last year as well.

Okay. All right. Thank you.

Your next question comes from Vista Flores from HSBC. Please go ahead.

Thank you, good morning. I wonder if you could just give us a few words on your investment in Riddarhyttan and following on that some talks about you know other opportunities that you might be pursuing this year outside of the general LaRonde, Lapa, Goldex complex.

We're currently -- we have embarked on a phase 2 program of Riddarhyttan of about 200,000 feet. We just completed 60,000 feet of diamond drilling and we're in the process of updating our reserve resource estimate. But coincidentally, with that Agnico has signed a technical services agreement with Riddarhyttan and as a result of that we're working together on a mining study, a mining plan. We're revising the existing studies that Riddarhyttan had. We're also conducting metallurgical tests, some conducted in Canada and also some of it being conducted in Australia.

So according to the Riddarhyttan plan, we should be in a position or they should be in the position by sometime in May, mid May, to put all the numbers together, to look at the overall -- to come up with a feasibility and make a final decision with respect to putting it into production. The latest resource estimate, the deposit contained about 2.5million ounces, around 12 million tons at an average grade of just under 6 grams. So we're following -- Agnico is following this one very closely. With respect to our other projects, Sean, would you like to.

Yeah, our geographic focus Vista would be Europe with the investment in Riddarhyttan and North or South America. Our Reno office has a mandate for Mexico and South America. So they're looking at opportunities in both of those areas.

Great. Thank you.

Okay.

Your next question comes from Shawntel Groslene (ph) from Hewitt Securities. Please go ahead.

Good morning. Just a quick question regarding the resource. I noticed that the infer resource from 2003 to 2004, there's like 30% less tons and there's some changes in grade. Could you comment on that?

Yes, there is. If you look at the longitudinal that we put out in the press release, if you look at drill hole 3215-85A, that had a negative impact and so what we are basically looking at is a snapshot of some time in mid February. But that could change very quickly. Shawntel, if you look at, we have 2 drill holes in progress, 3215-104B and 3215-106. And if those holes are successful that resource could change dramatically.

It would be mostly related to in fill holes that you've put in this year?

Yes.

Okay. That's it. Thanks.

Your next question comes from Barry Cooper from CIBC World Markets. Please go ahead.

Yeah. Question for Ebe. My memory tells me here that Ebe what I recall on Goldex is that the original bulk sample you had positive reconciliation on the grade of somewhere around 5 or 10%. I'm just wondering on this latest bulk sample, although you've told us, you know, it was higher, what were you expecting it to be? And how can we relate that to that prior reconciliation?

Well, we had originally set out to at least confirm the 1996 bulk sample. But the issue with the 1996 bulk sample, although it was significantly larger, it was located in one specific area of the deposit. So that's why we decided to put these 3 razes through. There are about 1,000 feet apart. They go up almost 700 feet vertically. And if you looked at our website and you look at the longitudinal we also drilled drill holes, a series of fan holes around each of the razes so that we could get an idea of how the diamond drilling in those areas would compare with the muck samples and also with the channel samples and then ultimately with the mill.

And I think one thing that we can say in comparison to the 1996 test, once again the actual graze that we obtained by the mill tests were higher than those that were indicated by diamond drilling. In diamond drilling indicated a grade of about, 0.65 0.67 and the mill test came back at 0.081. I think also in this particular case with this mill test we zeroed the mill before the bulk sample. By that we cleaned out the mill. We removed all the liners. We scrubbed it clean. We cleaned all the pump boxes.

We drained all the solutions in the mill to zero and then we started up. Upon completion of the test, once again we did the same thing and although we were grinding in cyanide, which wasn't what we did back in 1996, over this 18,000 ton sample we were able to recover over 250 ounces of gold from the mill, once again indicating the very high frequency of visible gold. So all in all we were pleased with the result and the outcome of this particular campaign.

So Ebe did that 250 ounces of gold into your calculation of the 0.081 then?

Yes, it did.

Okay.

Just like in 1996 we were able to recover a 1,000 ounces and it went into that calculation. So both calculations were similar.

So what's really the next step there? Are you going to do more bulk sampling or have you kind of satisfied your concerns and reaffirmed thinking and say that's good enough?

I think we have -- we are satisfied. I believe we have reduced the risk on this number, on the grade. This is a much harder number than any previous number. It was done under extremely controlled conditions so I think we are going to be -- we still have -- due to the time frame involved, we just generated this number yesterday morning because we just got the final number from the mint yesterday morning as well. So we are going to continue to do some checking on our math. However, in general we're very confident in the number and that will probably be the number we use in our study.

Okay. So basically something that's between 10% and 20% higher than the drill indicated?

Yes.

Okay. Thanks a lot.

Your next question comes from Steve Butler from Canaccord Capital. Please go ahead.

Yeah. Ebe, I just wanted to follow up on various questions on Goldex. Just to confirm because you know that the slide show talks about Goldex potential new mine where you have bulk sample with the relative grade of 0.069. But are we talking about 0.081 before and after dilution? In other words that should be a reasonably diluted appropriate reserve grade.

We're talking now; the previous grade that we used in our study was 0.069. The grade that we will use in our revised study will be 0.074.

Okay.

And not the 0.081.

Okay. Based on what? Just based on some external level of conservatism?

Yes.

Okay. And a question for David with respect to any particular adjustments, positive or negative, on concentrate pricing David, or settlements in the fourth quarter?

Yeah, both $3 million or so cash costs without those settlement gains would have been probably about $40 odd higher. But of course that means we overstated the cash costs the previous quarter. So we did have positive pricing -- they were primarily price adjustments because of the spike up in the buy product prices in the fourth quarter.

Yeah, that explains your $0.03 or $0.04 on zinc price above LME average.

Yeah. That's exactly right.

Okay. Thanks.

[Operator Instructions].

Your next question comes from Terrence Ortslan from TSO and Associates.

Thanks. Terrence Ortslan. Just to follow up on Steve's question, on the zinc treatment charges, the terms are coming down, I can't remember if you're going to be fully exposed to have a better treatment charges here?

Yeah, I mean, premium charges on the zinc side have been quite stable. There is tremendous smelter capacity there and I think we've seen the benchmark in the 150 to 160 range, give or take.

I thought they were down beyond that.

Well, we're still looking at probably I guess the -- in 2005 we're seeing spots around 128.

Yeah. Okay. Can you tell me if your grade's going to fluctuate this year at all from the indicated grades you have for 2005? Are you seeing any quarterly fluctuations, Ebe?

No, I think in terms of grade fluctuation as Sean referred our blend will be about 64% from the bottom of the mine and 36% from the upper part of the mine, so we expect grades very similar this year. That's what we've budgeted.

Fair enough, guys. Thanks. Good results.

Thank you.

Your next question comes from John Bridges from JP Morgan. Please go ahead.

Good morning, Sean, everybody.

Good morning.

Good morning. Question for Ebe maybe. I just wondered what the issues were between the 2 options for LaRonde II and possibly, you know, do you have the voicing capacity to handle the shaft development and a lots of work.

We have Don conduct a part of the work we have done this past year is we've conducted detailed time studies of hoisting at LaRonde. And we have now been able to exceed our capacity as we -- as you saw we've been able to hoist 8,600 tons as an average in the fourth quarter. So we feel that we now have time to lower -- to be able to go through the Penna shaft and have the capacity to be able to develop our winds. I think one of the main driving factors is if we had any ore below 10,000 feet, if we were to go from surface than that would mean to go below 10,000 feet we would be pushing the technological envelope.

There's an article just on some of the records set by western areas on their south D project whereas with the winds, if you look at 4,000 foot winds we could go a bit deeper and not be pushing the technological envelope. So that is one thing that we have been able to, you know, discover over the past 4 months. So we have to give that some serious consideration. And also when you start looking at the timing of some of these options, the winds option also gives us the potential of completing the job a bit quicker.

And I imagine also that means you can get some more life out of the Penna shaft as previously discussed.

That's right, yes.

Any sort of sense as to the capital of the 2 options?

Not yet, John. We're working on that. We're getting bids. We've got consulting engineering companies working on that. We expect to have a number in the second quarter of this year.

What is the magnitude?

The magnitude, we'd like to be close to what we announced before, however, it's -- it's too early.

Okay. Thanks a lot. Good luck, guys.

Thanks.

Your next question comes from Vista Flores from HSBC. Please go ahead.

Good morning, just a quick follow-up question. Could you just remind me again, when you break out the LaRonde I and LaRonde II reserves what are you using as the top of the LaRonde II, the bottom of the Penna shaft or the bottom of the Ramp?

Level 236. That is what is in our current mining plan.

Okay, great. Thank you so much.

Your next question comes from Barry Cooper from CIBC World Markets. Please go ahead.

A question for David. David, I was wondering if you want to take a stab at your tax rate for this year, seeing as it was all over the map in '04.

Yeah, I know. Given that our cumulative earnings over the last few years are now positive under U.S. GAAP we actually get to recognize some tax assets we weren't previously able to recognize. So I expect that our deferred tax provision in '05 will actually be close to nil.

Okay. So close to nil. So what happened with, you know, I guess in '04, as I seem to recall it started out at 10, then 20, then 25% quarter by quarter. That's all disappeared now?

Yeah. And essentially what happened there is we've started to release some of those deferred tax assets that I just mentioned. But also we had a change in filing position in June that I won't get into detail here, that resulted in more favorable tax treatment on some capital gains that we had on our books and that resulted in an asset being recognized that we didn't think we had.

Okay. What about then for '06?

For '06, I would expect it will actually start to get up to more closer to more statutory rates, sort of 30 to 35% in terms of our deferred tax provision.

Okay. Would that kind of build over the course of the year?

I haven't really looked at '06 in detail quarter by quarter. I don't have that sort of breakout. But I would say on average over the course of that year we would be looking at 30 to 35%.

That's close enough for me right now. Thanks.

Your next question comes from Steve Parsons (ph) from GMP Securities. Please go ahead.

Hi. I guess this is a question for Ebe. I see you provided a reserve sensitivity to the gold price. Do you have any sense what the gold sensitivity would be for the C dollar, for your exchange rate for your reserve calculation?

I don't know. I'm looking at our principal geologists here. I don't know if we've done that sensitivity.

That will be a calculation on --

The 142 exchange rate was driven by the S.E.C. New guideline, which required a 3-year average. So although that may be a bit aggressive, the Zinc $0.41 is very, very conservative. So that's the offset.

Okay. Thanks.

Your next question comes from (background noise) Haywood Securities. Please go ahead.

Hi again. It's just two questions. One is LaRonde CapEx in 2005, could you give us a sense?

I don't have that right in front of me right now. But I think we -- in that press release we did in December --

14 million.

14 million, thank you. But we did provide a breakdown of our CapEx in that December 7 press release for all the projects. And of course that's absent any positive decisions on, say, Goldex or LaRonde II.

The projects in the presentation 27.9, and then LaRonde I is 14.1. So total $42 million, absent doing anything further on Goldex.

Okay. And Ebe, could you just comment on the mining dilution this quarter?

We averaged around 19% and about 4 to 5% higher than what we had counted on. And the sum of that was still remained backfill related. But that was an average figure.

Did you make any adjustment to the reserve or did you --

The new reserves have taken that into consideration and so as our 2005 budget.

Okay, very good. Thank you.

Your next question comes from David Christy from TD Newcrest. Please go ahead.

Good morning, guys. Just on 2006 can you give me a stab at what your grade profile looks like going forward that way?

I think we're pretty flat over the next couple of years, David. Very similar to 2004, 2005, and we expect similar results in 2006.

So for all metals or just are you talking about gold here?

All metals.

Okay, good. When does the zinc start to tail off?

You mean when does the zinc start to increase?

Increase or whatever. When does it start to change?

I think it starts to change around 2008, 2009.

Okay. Perfect. Okay, thanks.

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

Thank you, operator. And thanks, everyone, on the line and on the Internet for your participation. Just a couple of dates of note. May 6 is our annual meeting in Toronto. And as we mentioned earlier, we have a trip up to Northwestern Quebec on May 10, the afternoon of May 10 and through May 11, the following day so that we cannot only take you through the customary tour at LaRonde and see the operations there but also talk to you about Goldex and Lapa and show you the progress we've made there. So our -- we envision flying up from Toronto by charter sometime mid day on May 10 and returning on the evening of May 11. So if there is an interest out there, please contact Hazel Winchester in our office to book your spot. And again, thanks for your attention and we'll see you at conferences and out on the road. Thanks.

Ladies and gentlemen this concludes the conference call for today. Thank you for participating. Please disconnect your lines.