Agnico Eagle Mines Ltd (AEM) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Agnico-Eagle Q4 and 2010 conference call. At this time, all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session with instructions provided. (Operator Instructions)

I would like to remind everyone this conference call is being recorded today, Thursday, February 17, 2011 at 11.00 a.m. Eastern time. I will now turn the conference call over to Sean Boyd and Ebe Scherkus.

Thank you, operator, and good morning everyone, and welcome to our Q4 2010 conference call. As usual we'll go through a series of slides. The focus this morning will be certainly on Q4 operations, focusing on a couple of our mines. We'll also talk about our reserves and resources and update you on our strategy as we look at our business going through 2010. As far as the corporate strategy goes, there's really no change in our approach to growing our business. We're still in a position to continue to grow output. We see output growing about 19% in 2011 over the 2010 number. We're looking for range of production from 1.13 million ounces to 1.23 million ounces. As we extend that out through 2014 we're looking for a 50% increase in output to 1.5 million ounces from the existing asset base. As far as the reserves go, our 2010 year end target was 20 million to 21 million ounces. We finished the year with 21.3 million ounces. So that's a record reserve position all based on the existing assets including the newly added Meliadine project. We're targeting more than 22 million ounces at the end of 2011. To get there we're anticipating a Kittila reserve update during the year when we complete the feasibility study, and from a resource perspective, we're also looking for a mid-year resource update at Meliadine, because we have an extensive exploration program on going at Meliadine.

Our overall budget for 2011 has increased by 30% to $145 million. So that's a strong commitment to exploration, and we believe that, that's going to allow us to outline additional resource, move those into reserves, and create future production opportunities for future growth. As far as M&A, no change in our approach. Still looking for those smaller opportunities relative to our size. We can go in and drill and add ounces and ultimately build them into our production profile. In terms of our cost profile, we're looking for the mid-400s as we move forward through 2011. We closed 2010 at $451 an ounce.

Our financial position continues to get stronger. We actually paid down some of the debt in 2010. Our cash flow was a record amount. We continue to grow cash flow as we increase output so that's going to further increase our financial position. What we've decided to do with that is not only increase our exploration spend but also, as we announced in December, significantly increase our dividend payout. It now stands at $0.64 a share for 2011, up substantially over 250%, and we believe that based on our future growth in output, we're in a good position to continue to grow the dividend as we move forward. As far as our general approach on the strategy, it's to look at opportunities that actually increase our per share exposure to Gold, whether it's through increased reserves per share or production per share, so we've done that consistently over many, many years, and despite lower than expected production in Q4, we're still in a strong position as we go forward to continue to increase our per share exposure to both production and reserves.

As far as operating results go, essentially we should have produced more Gold in Q4 2010. We entered the quarter on track to achieve our full year guidance. We didn't quite get there, off a little bit more than 1% on the lower end of the guidance. We expected more output at Meadowbank, which we didn't get. We're still dealing with crusher issues there which, as you know, will be solved in Q3 of 2011 when we install the permanent secondary crusher. We also had a slower ramp-up at Kittila from a planned shutdown in October.

How are both of those mines performing now? Meadowbank is having a good February. January, we had a bit of a cold temperature which affected operations, but February we're running at 8,000 tonnes a day roughly. At Kittila, since the beginning of December we have exceeded our designed capacity. We've run that plant at roughly 3,200-plus tonnes a day. Our average recoveries have been in the mid-80% range, and our plant availability has been in the mid-90% range. So we've seen a significant improvement in operations at Kittila once we completed the planned shutdown and ramped the autoclave back up.

I think it's important to mention in the fourth quarter that we had really good performance from Pinos Altos, producing almost 40,000 ounces of Gold, which is a record. Our cash costs were below $400 an ounce. So as far as our mines go, the Abitibi mines relatively steady state. Pinos Altos is also considered a steady state mine running about 4,500 tonnes a day. At Kittila, we've seen a dramatic improvement in the last two, two-and-a-half months. And Meadowbank, the ultimate fix will be in the third quarter, as we said, when we get the permanent crushing facility in place. So that left us for the full year just slightly less than a million ounces at cash cost at $451. So generating record earnings, record cash flow, which we see on the next slide.

In terms of fourth quarter, although we didn't quite hit our earnings target due to beg below our production expectations, we did generate record quarterly cash flow. Our cash flow was actually up $10 million before working capital changes in the fourth quarter versus the third quarter. On a full year basis, cash generated by the operations before working capital changes was over $580 million, and based on our anticipated growth in output in 2011, and roughly a consistent cost performance, we expect our operating cash flow to increase in 2011. That drives a strong financial position. As we said, we've used some of our stronger cash flows that were generated in the fourth quarter to pay down some of our long-term debt, so our financial position continues to strengthen. And as we go forward, as we indicated with our production growth, we would expect that financial position to strengthen further with the additional cash flow from operations, but also net-free cash flow as our capital expenditures in 2011 have declined dramatically from the levels of the past few years.

In terms of our reserve base, we saw significant increase in reserves to above the top end of our target range, now at 21.3 million ounces. We saw that increase, large increase come from the addition of Meliadine. As we said, we expect further increases to come from Kittila during the year as we complete our expansion study. We expect further growth in resources, particularly at Meliadine, and we also expect additional resources at Kittila, both of those deposits are wide open and are the focus of a big part of our exploration budget going forward. We had one issue at Meadowbank where we had a restatement of resources down about 2 million ounces. That's the first time that's ever happened in our long history. Our conversion rate from resource to reserve has been over 100% during our long history. It's something that shouldn't have happened, and we've put things in place now to ensure that, that doesn't happen again.

If we look at overall production growth over the next several years, we're looking, as we said, for 50% production growth from 2010 levels up to 1.5 million ounces in 2014. And additional production, in addition to this forecast, could come from the Kittila expansion, which we'll be able to talk more about in the third quarter of this year. Meliadine, 2015 and beyond, and the Pinos Altos plant expansion which we're studying now, given the additional capacity we have in the plant, plus the potential to build additional satellite deposits at Kittila.

Capital expenditures have declined dramatically. The estimate for 2011 is a little over $300 million, down substantially from an average of probably $600 million plus over the last four years. What we haven't incorporated in our current estimates is CapEx for Meliadine which we've been on record stating that it should be around the Meadowbank number, which is $750 million to $800 million, and also the Kittila expansion. But even putting those together with our sustaining CapEx, we have more than enough internally generated cash flow to fund internal expansions plus Meliadine. Another slide on cash flows shows that on a per-share basis, both from a cash flow per share and net-free cash flow, Agnico's positioned in among the industry leaders in terms of cash generation.

LaRonde, just quickly, another steady quarter, 6,900 tons a day, CAD79 per tonne producing about 38,000 ounces. As we look forward into 2011, looking for costs to go up about CAD1 per tonne, about CAD80 a tonne. We're on track for our initial tonnage coming from the LaRonde extension later in the year. That will begin to bring higher grade ore into our production at LaRonde. We continue to drill at depth. Our focus is on the border of Ellison and Westwood, where we have a drill program there. Our focus there is to outline some resource along that Western property boundary. So there's still some potential as we move to the west at LaRonde.

We've got a long section up on our slide deck, and you can see the target areas for exploration. We're not only focused on the Western boundary, but we're also doing exploration deep at LaRonde and also over to the east in an area that we really haven't spent a lot of time drilling over the last several years. So there's still good potential in the LaRonde camp. One of the other things we're looking at LaRonde is Bousquet. There's a little over a million ounces of resource on the Bousquet property, and we're currently studying the possibility of putting that into our production profile at some point in the future. So there's still some upside from the assets that adjoin LaRonde to the west.

Goldex continues to have excellent operating performance. Cost per ton in the quarter was CAD21, full year CAD22, which is, as we've said, right on the feasibility study that was done in 2004. Production in the quarter, 43,000 ounces. We were running that operation at 7,800 tonnes a day. So the operation has expanded nicely. And that was an operation, if we recall going back a couple years ago, that had some crushing issues like Meadowbank's facing now, and we dealt with those relatively quickly, and the mine's operating extremely well. So we would expect the same improvement in performance once we get a permanent crushing expansion set up at Meadowbank in the third quarter.

We continue to drill at Goldex. Our reserve base was maintained in 2010 at 1.6 million ounces. The resources grew 60% as we focus on the D Zone, which is below the existing mine area. So we can see potential that ultimately will hit our production profile as we move forward. We're looking at the possibility of ramping down into that area, opening it up for drilling, and we'll be doing an economic study on that as we move forward.

On Lapa, another steady quarter, 1,500 tonnes a day, which is the capacity producing about 29,000 ounces. Cost performance on a per tonne basis, very good, CAD115, which was down about 22% from a year earlier. So that's another mine that's demonstrated once we get a newly built mine to steady state, we get excellent cost performance. Our focus at Lapa is to move exploration off to the east. We're doing that on two levels, and that's to drill a resource off to the east, and we're looking to extend the mine life at Lapa through that exploration work.

At Kittila in Finland, we got off to a slow start in the quarter. And that's one of the reasons we didn't meet our production objectives. We processed in total, because of the planned shutdown, a little over 2,700 tonnes per day. The plant capacity, or the design rate is 3,000 tonnes a day. But as we said since the beginning of December, we've operated above design capacity in the 3,200 tonne to 3,300 tonne a day range, but I think, more importantly, we've continued with excellent performance on the recovery side. And that's been consistent since June, and the recoveries have actually gone up since the third quarter, and we're seeing recoveries currently in the mid-80% range. We still have some work to do on the cost per tonne side there. But that we feel will happen, as we move through 2011, at a more steady state there, which we have running right now at steady state.

The exploration focus continues. We've got $16 million allocated to exploration at Kittila. So next to Meliadine, it's the biggest single program. Our reserves are up 22% there. Our resources have declined slightly because we converted a substantial amount into the reserve base. We expect additional reserves as we complete our expansion study, and part of that expansion study, given the growth in reserves and the potential at depth, will likely include a shaft that will give us access to do more drilling and ultimately to increase the production rate as we go forward. The Kittila section, you can see the area if you're looking at the slides, where we've added a significant chunk of reserve base and additional resource, and it follows the down plunge as we move to the north. And as we move to the north, we've got a substantial area that's essentially undrilled and open for future growth in reserves and resources.

At Pinos Altos in Q4, we averaged 4,500 tonnes a day. So once we got the additional filtration capacity in place, the operations ramped up quite quickly there. Our cost per tonne, $35, producing almost 40,000 ounces at a cash cost of $365 an ounce. So an excellent quarter from Pinos Altos. It continues to run well as we move into 2011 with the start up of Creston Mascota which is the first satellite zone that we've built. The exploration focus at site continues to be at -- off the main trend, looking for satellite zones as well as now drilling off -- underneath Santo Nino and towards Cerro Colorado. So there's still potential at that deposit to grow the reserves. We maintained reserves this year, but our resources were up 40%. So we still like the potential at Pinos Altos.

At Meadowbank, we only averaged 6,600 tonnes a day in Q4 which was the same as Q3. We were hoping to do better. We were hoping to get better performance out of the temporary crushing facility. That didn't happen. So as a result, our costs are still too high at a per tonne basis. We still have some optimization to do here. It's only been in operation for a year, so there's some more work to do on optimization. We think we'll see a dramatic improvement in the performance in the second half of the year as we can increase throughput up to 8,500 tonnes a day or better, and do it on a consistent basis.

As far as exploration, our reserves were maintained at 3.5 million ounces. Our resource declined about 2 million ounces as a result of an error in our calculation, which we've talked about. What we're doing now is studying the possibility of putting a ramp in below the pit to access the resource, and looking to put that resource below the pit into a mining plan as we move forward at Meadowbank. Just close with Meliadine. Meliadine, we have an initial reserve now at 2.6 million ounces, 9.5 million tonnes at 8.5 grams per tonne. So it's high grade. That's what attracted to us this property, as well as the exploration potential.

We're spending over $60 million at the property in 2011, including 90,000 meters of drilling. So that's an extensive drill program. As we said, we're expecting to update the resource there midyear based on a significant amount of drilling being done. And we're also looking now at the potential to accelerate the underground ramp development because of the results we've had to date. We think it makes sense given the size, the potential to grow, the grades at this deposit to accelerate the underground development. So we're studying that now. We should have a better feel for what that entails by the middle of this year. So our reserves and resources overall were up 34% on this property, and we essentially didn't acquire it until January. So we've had very good performance very early on, and so it has quickly become our most exciting exploration story next to Kittila.

Just showing you a couple of maps on the slide deck, then we'll turn it over for questions. We do have a large land package here. We've got 80 kilometers of coverage over the Greenstone Belt in the region. We did have a new discovery early on at Wesmeg. So that's a near surface mineralization at good grade. So part of our program this year, we'll continue to follow up on that new discovery. So good potential across the entire property package, but also good potential at the high grade Tiriganiaq zone which continues to be the focus of both bulk sample, and we sketched out on the slide in the presentation, a potential ramp location. So that's the ramp that we're currently studying to open up that entire deposit.

So that's our formal presentation. We'd be happy, operator, to open up the lines for questions.

Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. (Operator Instructions)Your first question today comes from John Flanagan, with Fundamental Equities.

Sean, could you compare your current estimates of return of investment at Meadowbank relative to where you started? Has the price of Gold offset more or less the cost increments?

Yes, because the price of Gold when we were looking and evaluating the opportunity was in the $525 range. That's the number we were using, mid-500s. So the Gold price has increased dramatically. I think what we've seen there is, we haven't really been able to see how this asset can truly perform until we get it up to speed, but it still will be our largest producer, producing, on average, 375,000 to 400,000 ounces a year in the early years. That's going to generate significant margins. So the actual rate of return is higher than what we were estimating when we first made the investment.

So it looks as attractive to you today as did it five years ago?

That's correct.

Thank you.

Your next question comes from a private investor by the name of Richard [Hurriman], please go ahead.

My question is primarily about Pinos Altos, and it refers specifically to the violence in Northern Mexico. And I'm wondering if you have any comments about the general security, and considering the situation there with respect to the mine properties in particular, and actually the safety of the families and workers of the mine in that surrounding area?

Hi, Richard, this is Tim Haldane. Obviously we're aware of the security situation in Mexico, and we pay close attention to that. And we are -- have experienced no issues with security, no impacts or direct issues with security in Mexico. We're just following that situation very carefully. I think our best tool is that we're apart of the community where we work, and I think our workforce is something north of 99% Mexican nationals. That helps us a lot I think. And being a very heavy employer in the local area helps us a lot. And just following good security practices, best practices, having security audits, and those kind of things also helps. But, bottom line, we haven't seen any direct issues yet, and we, like you, follow that very closely.

I'm not sure of the state in particular where you're operating at Pinos Altos. Is that state reasonably stable in light of what's going on there?

The state is Chihuahua, and you hear a lot of news coming out of Chihuahua. We're not in the heavily populated area of Chihuahua, but it is our state. That's the biggest state in Mexico.

That's a fairly stable state, as far as you can tell?

It's in the news a lot. So it's a stable state, but it's also been one of the areas that gets a lot of attention.

Yes. I wonder if I could ask a follow-up question regarding labor contracts with respect to really all the mines. What are the maturity dates of those contracts and what do you perceive as far as renewal of those contracts?

Good morning, Ebe Scherkus, COO. We don't have any specific labor contracts, per se. We are essentially non-union across the board. We do review salaries on an annual basis in November, December, with our employees. We do have worker representation on all of our mine sites. And we also ensure that from a salary and benefit point of view that we are more than competitive, and that we are in the top quartile. So in our 25 year operating history in northwestern Quebec and now elsewhere, we have never had any labor issues or labor stoppages or strikes, et cetera. And we have had very, very low turnover, almost zero. And also very low absenteeism at the top of the industry.

Thank you. If I may, one more quick follow-up question on debt management. The debt level seems to be reasonably well controlled, and that is being paid off. I think long-term debt -- remaining maturities on the debt and plans for further refinancing and issuing new debt, can you comment on those two items?

Good morning, Richard. It's Ammar Al-Joundi. We are in a very strong position from a cash flow generation perspective, as Sean mentioned, generating in the neighborhood of -- in excess of $500 million. We have, since the end of the year, repaid the remaining $50 million on our bank facility. The rest of the debt outstanding is long-term fixed debt with maturities out to 2017 and 2019.

You're financing general operations from commercial paper and lines of credit, pretty much?

From cash flow. We're generating a lot of cash flow.

So you don't use a lot of commercial paper or the line of credit so much, mostly from cash flow?

As of now, we're not using any commercial paper or the bank facility.

Thank you very, very much.

Your next question comes from John Clarke, with Morningstar.

Good morning guys. Just had a question on Kittila. You guys mentioned that the high sulfur content in the ore negatively impacted the cost of processing the ore. So I was just wondering if that's something we can expect going forward at Kittila?

Jean Robitaille speaking. Presently the design of the autoclave -- essentially the autoclave is a sulfur burner. If I want to summarize it, then the design was 4.4 tonnes per hour. Presently we're pushing it. So it was just a temporary situation, and presently we expect to be able to exceed it. So we don't see on the medium and long term an issue with that.

Just to add to that a bit what we're trying to do is to stabilize the mill feed from a grade point of view and from a sulfur point of view into the mill, and to make sure that the mill finally is stable. And as Sean mentioned earlier, we have been able to do that from the end of November into December and as we speak today.

Okay. And then I also had a question on Meliadine. Seems like it's a very attractive asset with high grades. I was just wondering, for your exploration efforts at Meliadine this year, will it be focused on expanding the mineral resources or on converting existing resources to reserves?

We will be focusing on converting the resource to reserve for the feasibility study. However, we do also have a portion of the drill program, of the 65,000 meters, that will be focused outside of the main Tiriganiaq zone and a long strike. But the main focus will be to define the zone for the feasibility study.

Okay, thanks very much.

Your next question comes from David Christie, with Scotia Capital. Please go ahead.

Morning guys. Just a couple quick questions. Back to Meliadine for a second, Wesmeg, what's the size of that structure, or that zone, and how big do you think it could get as far as strike length?

[Gabe Ghislain], Vice President of Exploration will give you some color on that, David.

Hi, David. Currently we went back and some of the (inaudible) that we're done by [west miner] in the middle of the 90s. We managed to trace, while we're talking about two structures, that seems to hold on over at least one kilometer of strike length for both of them and maybe more. So it's going to be a good portion of our exploration budget this year to try to bring as much as possible of that near surface inventory to resources and reserve if it's possible.

And it's a little bit different geological environment than the rest of Meliadine. Do you see other targets like that?

Yes, we had lots of other good target like that. Basically it's pretty much the same than in Tiriganiaq . Quartz flooding, Quartz vein with visible gold, free Gold in the structure. So it seems to be pretty similar to the rest of the deposit, very next by Tiriganiaq which is one interesting feature. It's only 400 meters south of the Tiriganiaq open pit, so it could bring a lot of upside to our mill design and operation design.

I thought it was in the volcanics more so than in the sediments?

Well, yes, you could you refer it as maybe more similar to Wolf, but it's next by, it's in the volcanic, but we're still talk about Quartz vein flooding, and that's associated with arsenal Pyrite. So it's pretty much similar to the Quartz vein system in Tiriganiaq. It's not the same as rock, but it's the same Gold-bearing structures.

Okay, good. And just when you look at your labor costs in 2010 and where they're going in 2011, in which jurisdiction have you guys seen the most inflation of labor costs?

I think the most inflation that we have experienced would be northwestern Quebec, Nunavut, that area, with all of the mining activity has essentially been tapped out, and as a result, labor costs especially for some of the skilled trades and technical people in our view have gone through the roof.

What would be the percentage increase, Ebe?

Well I would say we faced about 10% to 12% average.

And that makes up, what, 30% of your total cost in those areas?

I would say 25% to 30%.

Okay. And one more question, if I may. In Pinos, you discovered a great zone at Cubiro there. How many others targets are you going to drill similar to that kind of thing next year?

For this year, we continue to drill at Cubiro. We just, at the end of the year, discovered the West branch, and we continue to drill a couple of new targets. That's it for Pinos Altos.

Okay. Thanks, guys.

Your next question comes from Steve Butler, with Canaccord Genuity.

The Cubiro zone, was it actually included in resources at the end of the year, and also the lower zone at Goldex, I think the D Zone, anything in resources at the end of the year on those two?

At Cubiro was in the -- we'll provide some color on that, but Cubiro was included in the resource. I don't have the exact number of ounces. The D Zone at Goldex is roughly 700,000 ounces of inferred resources, a significant chunk, lying just below, essentially below the main deposit that we're mining right now, the GEZ. And if you look at the sections that we provided in the press release in the presentation, you can see just how significant that is. Here I believe is -- about a 145,000 ounces and expanding, indicated and inferred.

Okay. Thank you, Ammar. Sean, how did you deal with the high sulfur content? I know that you said it's now been mitigated or come back to normal, but how did you deal with it in the autoclave, maybe in as layman's terms as you can be?

Hi, Steve. First of all, as explained earlier, we blend the ore to make sure that we do not have a peak in playing with the grade too much. But the design of the autoclave was for 4.4 tonnes per hour, but as you know and as we explained in the past, the autoclave is -- has capacity to be pushed, and presently, this is where we are in January, we're in the mid -- we were at 85% roughly recovery, and we are quite stable in the process. And now what we are targeting is to increase at the 4.5, 4.6, up to 5 tonnes per hour. So if we can do it, and we have good chance to be able to exceed the design, then that will result in more flexibility in the plan.

Okay. And Ebe, the guidance for 2011 for Kittila has EUR55 per tonne roughly versus EUR79 in Q4. So what areas do you see the biggest improvement? I assume is it mostly on the denominator on the throughput potentially increasing? Anything else you see opportunistically to lower cost on a unit per tonne basis?

The cost we have in the past quarter for the first time in Kittila's operating history also includes 62,000 tons from underground stopes, and we have started expensing underground development and services which is a first. So when you look at over the three-month period, we produced 62,000 tonnes or 20,000 tonnes a month. So that denominator is very small, and therefore those tons were very expensive in the EUR85 to EUR86 per tonne range. So as the underground ramps up to its design capacity of around 90,000 tonnes per month and the open pit winds down, we expect to see that underground number drop significantly, and then as a result, we expect our mining costs to drop significantly. So we have the impact of a denominator, but also a transition to underground operations from open pit operations.

Okay. Thanks, Ebe.

Your next question comes from Barry Cooper, with CIBC. Please go ahead.

Just wondering, you've talked about the expansion at Kittila and certainly the resources there are supporting that, and you talked about putting in a shaft. What kind of changes do you need on the processing side of things, because I guess what I look at -- the autoclave is obviously been a little bit fickle and whatnot, and I'm not sure that you're going to be all that anxious to start tweaking around with it for an expansion there, and so I'm wondering just what are the plans for the processing side of things for the expansion there?

Good morning, Barry. I will just start with a few comments and then turn it over to Jean. I think, with respect to the expansion, what we currently have, especially over the last couple months and you could even argue over the last couple years, we now have operating history and we are starting to get to know the autoclave quite intimately, and that has been reflected in the global recoveries which are now averaging in the mid-85s. We also know where we would need some corrective action, or when we want to upgrade the autoclave or add another one. We haven't finalized that, but we definitely know what we would like to do differently based on our operating history and results to date. So with that, I'll turn you over to Jean for additional comments on what the rest of the plant would look like.

Hi, Barry. Essentially, we are looking 45,000 tonnes to 6,000 tonnes per day. In both case, the grinding circuit will have to be extended, so -- in the flotation circuit. For the autoclave at 45, we presently -- the data we have, it looks that we'll be able to use the current autoclave. For sure we'll do a complete investigation, and we were just awarded a contract and we are working with Hatch on that specific topic. And for the remaining part of the circuit, it will be, as usual, increased, but it's nothing very fancy that we'll have to do at Kittila. Presently we know -- we justified the recipe and the parameters and we are stable at 85%. We expect being able to increase over 85%, and eventually with the extension touching the 87%, 89% recovery.

Okay. You indicated that at 45 you could use existing. If you went to the 6,000, then is that when you would have to incorporate another autoclave into the system?

We have different options, and we have to evaluate all of these ones first. It's another alternative to add another component instead to add another autoclave. So we are under review presently, and in principle, by end of September that will be in the report.

Right, okay. We'll have to wait until that comes out then. Then on to Pinos Altos, the cost per ounce came down nicely, but I'm just wondering how we should look on a go-forward basis in assessing this operation on a cost per tonne, which you guys always refer to when you've got such a variable mix of both underground and open pit material. And so I'm not -- obviously $35 a tonne is a blend between the two, and when you show it quarter over quarter as being flat that doesn't necessarily mean things were good and it doesn't necessarily mean things were bad because the mix can be modified there. How should we really look at this going forward? Because obviously then on top of things, you've got the influence of Silver prices and Silver credits that can obviously affect the cost per ounce. So clearly the cost per ounce is not the way that we should look at the performance of this mine when we're trying to judge quarter over quarter results.

Hi, Barry, it's Tim. I think the guidance we gave for our cost per tonne, we're pretty comfortable with. We're just starting to produce underground close to design rates. We've hit the 3,000 tonne a day rate for extended periods, weeks or 10 days or something like that. And our underground mining costs are actually slightly below what we budgeted.

And what's that number?

The breakout of the underground mining costs, I'd have to get that to you, but the overall mine site costs I think that we forecast was in the low-40s, 44. And I can get that you other number, Barry.

Just trying to assess, one you may be running at 15 and the other at 60 for whatever blended --

It's not like that because the stripping ratio is really high in the open pit. I just don't see -- I'm pretty comfortable with the number that we gave for guidance, and I don't see any bad surprises there. I think we're going to work pretty hard on beating that.

Ebe here, Barry. So in comparison to Kittila, as Tim mentioned, Pinos Altos for periods of time has already hit the 3,000 tonne per day capacity, and currently our blend, it's in transition like Kittila, but ahead of the curve. And it's currently running 50% underground and 50% open pit, and then when we do look at the cost of moving one tonne of rock underground when we're averaging 3,000 tonnes a day, as Tim mentioned, we are comfortable with our number, and we are coming in underneath our plan.

So is that 50/50 split a good go forward number for the next couple years then at least?

No, because the open pit will essentially wind down over the next five years or so and the underground will continue to ramp up. Of course, what could potentially change is we currently have a mill that's got a capacity in excess of 5,000 tonnes per day and we have a mine that has been designed for 4,000 tonnes per day. So over the next five years, that blend, we're looking at as we referred to the previous quarter, either another production ramp or potentially a shaft to increase the production of the underground to bring it closer into line with what the mill can now do.

Great. Okay, good enough then, thanks.

Your next question comes from a private investor by the name of Walter [Mulligan].

My question is to the dividends increases that you've hinted at both earlier in this conference call and last night on CNBC. Given that Gold prices have continued to be considerably higher than what is in your budget, can you give us any indication of, number one, how much additional cash revenue you will you get from that bump in Gold prices versus budget, and two, how you intend to share that with shareholders?

We can do both. At current prices, if we look at 2010, where we produced about a million ounces, the average realized price is probably a couple hundred dollars less than where it is now. We generated $580 million of operating cash flow, so we're looking for about a 20% -- almost a 20% increase in production. If Gold prices average where we are now, again, that would bring in a couple hundred dollars more in additional revenue per ounce, and so that's why we say we have the ability to increase the dividend. We haven't really talked about amounts yet. We generally do that on an annual basis when we go through our budgeting process, but I think we've been quite clear in saying -- we look at that additional cash flow and the cash flow is being generated. And we really have four pots that we look at.

One is reinvestment in projects, where we have some internal expansions that we talked about. We also look at exploration, which we have increased and we would like to maintain that level. We look at strengthening the financial position, and we'll do some of that as we've paid down some debt in the fourth quarter and recently early in this year. But then the dividend, I think all we should really say about dividend, it's hard to quantify what it could be, except to say our capacity to pay more has increased as you've pointed out. But I would also point to our track record, which is paying one for 29 straight years in an industry that's had a lot of cyclicality over that 29 year period. So it's a key part of our strategy and focus, and it will continue to be as we go forward.

Thank you.

Your next question comes from a private investor with the name of Richard Hurriman, please go ahead.

This is somewhat of a follow-up question on the previous question on Silver. With Silver prices seem to be substantially increasing over the price of Gold, I'm wondering whether, in your financial forecast, that's already built in, or whether you anticipate adjusting those forecasts in light of what Silver is doing in the market these days.

No, our budget was based on $22 Silver. So certainly that's going to be a bonus, not only in terms of additional cash, but as a credit to our unit cost, given where the current spot price is. We actually like Silver. We got our start as a company 50 years ago as a Silver producer. And that's one of the reasons why we're one of the few companies that hasn't sold its Silver stream away, because we believe in the upside of Silver. So we've got over $100 million in Silver reserves. We look at that as a key component of our ability to generate cash as a byproduct. So we're fortunate that we have 100% exposure to all of our Silver.

What percentage, for example, of your let's say EPS would be represented by your Silver production?

It's about 5% of the revenue. So that would be roughly the same.

Thank you very much.

Thank you.

(Operator Instructions)Your next question comes from Anita Soni, Credit Suisse, please go ahead.

Hi, Sean, Ebe. Just a few questions on Meadowbank. First, how should we think of the tonnage rates at Meadowbank spread across the quarters as you ramp up and I guess in the third quarter as the permanent crusher comes online?

Well, there's two things. Currently, we have discovered that the portable crushing plant that we have tried to stake our future on over the next half year or so really hasn't worked. However, we have done quite a bit of work on the grinding circuit, and that is starting to bring about -- bear fruit, and we are currently averaging over 8,000 tonnes a day with very limited use of the portable crushing plant. We expect to have the final crushing plant up and running sometime in the third quarter of this year. So far it is on schedule. We were just there two weeks ago, so it's on schedule. And mechanical installation has started. So we have seen, once we have crushed material, Meadowbank has hit peak tonnage daily rates of over 9,600 tonnes per day. So we feel that once this crushing plant gets operational that we should be able to hit a consistent design rate of 8,500 tonnes plus, and probably closer to 9,000 tonnes plus in the -- sometime in the middle of the third quarter and towards the rest of the year.

Okay. And then just a question with regards to the grades at Meadowbank. There's a bit of a swing between the third quarter and the fourth quarter in terms of the grades that you were mining. And I think the forecast for 2011 brings it back up to the -- I guess the mid range. I'm just wondering, your forecast for 2011, did that take into account the grade that you experienced in the fourth quarter?

The grades in the fourth quarter, as I mentioned, we had some operational issues with the portable crusher so we were running off some of the lower grade material right out of the pit into the mine. We also have some stockpiled material, so the actual grade that we experienced in the quarter really isn't representative of what we will be mining going forward. We expect the grade to stabilize closer to our projections once we have the secondary crusher up and running. Presently, there's too much manipulation, too much re-handling, and, therefore to be able to predict a consistent grade, it becomes difficult. However, having said that, without using the portable crusher, we will be starting to get a bit more consistent grades as we will be running off of the pit and then the mine plan.

So perhaps we should I guess tweak our grades down in the first half of the year and then in the second half of the year the tonnage rates will make up for that?

I would say tweak -- lower the grade a bit, keep the tonnage conservative, and then upgrade in the second half of the year.

Okay. All right, thank you very much.

Your next question comes from Mike Jalonen, with Bank of America, please go ahead.

I have a question for Ammar, put him to work. Ammar, just wondering what your tax rate will be in 2011. Looked like it was below 25% in 2010. So the prior CFO had been guiding a little higher. So just wondering what you thought.

Hi, Mike, thanks for the question. We expect our tax rate overall for the company to be about 30%.

I remember historically, we've even nudged closer to 40%, so just wondering what's happened?

We have different tax rates in different jurisdictions. Tax is a pretty complex overall assessment. I'm happy to go through with it in more detail, but it is about 30% in 2011 roughly.

Okay, I'll have Smitty set up an eight-hour meeting between you and me, and thank you for that.

Okay, thanks Mike.

There are no further questions at this time. Please continue.

Thank you, operator. Thank you, everyone, for tuning into our Q4 conference call. Just one reminder, we did mention in the press release, but I wanted to mention it now, we have a site visit, mine tour for Investors and Analysts to Meadowbank which will also be able to provide an update on Meliadine at the same time. So that's on June 28. So if you have an interest in attending that, you can contact our investor relations group. Thanks again.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. You may now disconnect your lines.