Agnico Eagle Mines Ltd (AEM) 2011 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Agnico-Eagle Mines Limited Q4 2011 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 that this conference call is being recorded today Thursday, February 16, 2012 at 11 AM Eastern Time. I will now turn the conference over to Sean Boyd, President and Chief Executive Officer. Please go ahead, sir.

Thank you, operator, and good morning everyone, and we've got a lot to cover today, and I'd like to get right into it. We have a series of slides and then we'd be happy to answer all your questions. There's a lot in the press release. I'd like to start off and talk about management changes, and just give credit to both Ebe and Paul-Henri Girard for their many years of hard and dedicated years of hard and dedicated work to Agnico and allowing us to go from a single-asset regional producer to a multi-mine international gold company. With respect to the timing, it was never really a question of if Ebe was going to step back because he had worked so hard over the last several years, it was just a matter of when. And we had discussions over the last couple months, and I think it gives Ebe an opportunity to step back and catch us breath and relax a bit and then get back into things in the mining space, and I think that's a good thing for him. What it does for us is we do have Ebe on a consulting contract as do we with Paul-Henri Girard, so we'll continue to benefit from their experience and expertise and guidance and advice over the next several years. So we wanted to start off the call and thank both of them again for their efforts on behalf of Agnico and its shareholders over many, many years.

What these changes have allowed to us do is bring up some new talent, promote some new talent from within. Agnico's fortunate over the years to have developed a lot of bench strength, and that bench strength now, we've been able to move some of those individuals up, bringing sort of new ideas and new energy. We've been able to narrow their reporting responsibilities. We've got a flatter reporting structure, and I think that's going to benefit us going forward, as we look to build on our past success. The way we look at it is, we've got about 1 million-ounce production base. We're generating about $1 billion in operating cash flow.

That's a solid base of both assets and people to sort of build the next leg for Agnico-Eagle. We've been in business for 55 years. We've had many more up years than down years. There's no question 2011 was very difficult, but we spent the last few months looking at our assets, looking at our people skills, moving those around, so that we can begin 2012 on a stronger and new footing. When you sort of sit back and look at it, as we look at it, what we've put out in our press release as very solid achievable guidance, we're actually seeing year-on-year improvement in production in 2012 at four of our five mines and the biggest mine, we now have a mine plan that is much lower risk. So I think that reinforces the solid nature of the guidance.

We still have production growth when you take out Goldex. We still have production growth in 2013 and 2014 and those are all from the existing mines, and the biggest driver of that growth is LaRonde, and we've built in a slower transition in the underground on those production numbers. We still have expansion and growth opportunities in the company at Kittila and we're working on an expansion plan there. La India, which was acquired late last year in the transaction with Grayd, also coming in that transaction was Tarachi, which we think is going to get bigger and has the potential to be a producing asset for us. And Meliadine, we continue to grow that deposit. We continue to have an aggressive drill program on that, and we still expect given the grade of that deposit that will be a significant contributor to us going forward.

Although Meadowbank has been a tougher situation than we had expected, it certainly doesn't diminish our enthusiasm for doing business in Nunavut, particularly with the quality of the asset at Meliadine, and we're just getting started there, and the asset is already 7 million ounces. So people try to compare the two, but they're totally different, even though they're in roughly the same geographic area. They're totally different in terms of size. Meliadine is already more than double the size of Meadowbank. They're totally different in grade. Meliadine is double the grade of Meadowbank and Meliadine is much better located to deal with the high cost of logistics in the Arctic environment.

When we look at our ability to move these assets forward, as we have said, we're still generating $1 billion in mine operating profit, so not only are we able to maintain a very strong exploration budget again in 2012, and that exploration budget is focused on Kittila, Meliadine, and in Mexico where we maintain an aggressive program, we're also able to reinvest in our assets to expand the output, and we're also able to continue our long-standing dividend. We have paid a dividend as we move into 2012 for 30 consecutive years, which is not easy to do in the gold business. We're in a position to raise that dividend by 25% to $0.20 a quarter, which I think speaks to the confidence that we have in our business going forward.

I'm going to move into the slides, just a quick recap on earnings in the fourth quarter, when you take away all of the write-down at Meadowbank and the other non-recurring charges, we had normalized earnings of $0.45, which is pretty close to where we expected to be. It was a little tougher quarter from a production standpoint than we were looking for. We had an unplanned shutdown in the last week of the year at Kittila, and what we should say coming out of the fourth quarter, here we are six weeks into the year and we've gotten off to an extremely good start at all of the operations. I think that goes to the first point we made at the start of the call, that what we have now out is very solid, achievable guidance.

From a financial position standpoint, our net debt is $700 million. We are net free cash flow going forward, as we look at even expanding some of our assets. We have a substantial credit line, which is undrawn, of almost $900 million. So we've got a lot of financial flexibility, when you include the cash flow that's generated from our five operating mines, despite losing the large net free cash flow out of Goldex.

In terms of operating results, we've talked briefly about the earnings impact and the cash flow impact. We closed the year at 985,000 ounces, at cash costs of $580 an ounce, which is pretty close to our revised guidance, which was at $575 per ounce. As we move forward, we see production, when we take out Goldex, going in the low 900,000s and rising in 2013 to about 990,000 ounces, and then in 2014 to 1.055 million ounces. Our cost goes up, but the costs goes up largely because we're taking out Goldex low-cost ounces, but also because we have much lower by-product revenue and that impacts LaRonde. So LaRonde goes from a cost per ounce of less than $100 to a cost per ounce in the high $500s because we're losing about $80 million in by-product of revenue, which is not insignificant. As we go forward though, we'll make that up, as we ramp up the gold output and generate more cash coming out of LaRonde. Again, the other impact on cost is Meadowbank, when you take out Goldex, and there's more reliance placed on the biggest producer at Meadowbank, your cost per ounce goes up.

Net free cash flow, our expectation, based on the production guidance we've put out is EBITDA of a little over $1 billion with estimated CapEx going forward, likely over the next five years, averaging about $500 million, which would include Meliadine and Kittila expansion, et cetera. Production growth, we talked about that. It's still, when you take out Goldex, so after Goldex, we're still growing the production base from the existing assets, and beyond that, we haven't incorporated anything from potential expansion at Kittila or La India or some of the Pinos Altos satellite zones, and Meliadine would come after 2014. That drives production per share, which you can see on that slide. Our reserve base, we did transfer some reserves into resource out of the Meadowbank mine plan with a lower-risk mine plan. We also transferred the ounces from Goldex from reserve into resource. So that lowered our number this year. We expect continued growth as we move forward next year with the active exploration program, particularly at assets like Meliadine and Kittila, and the assets that we have under exploration in Mexico. Again that drives per-share growth in reserves as we move forward.

We talk about our four cornerstones and as we said, these mines generate about $1 billion in gross mine profit. They did in 2011, so going forward, we're looking for mine profit in about the $1 billion range, generating free cash flow from these mines. LaRonde is an asset that continues to perform well. In 2012, we're looking for an increase in output as we are in 2013 and 2014. That's going to be the major driver of our growth going forward, simply based on the fact that we're accessing higher-grade material. So it continues to be a solid asset for us, with almost 5 million ounces left in reserve and almost 2 million ounces in resource.

At Kittila, we're looking for growth in output next year. We're seeing better grades. We're seeing good recoveries as we start the year. Again, this is an extremely long-lived mine. We continue to look at opportunities to expand it. It's definitely going to require a shaft at some point, but in the interim, we're looking at an initial expansion of about 25% and we're currently, our through-put from 3,000 tonnes a day to 3,750 tonnes a day, and we're doing the economic work on that right now, so we'll have some more news on that as we go through 2012.

Mexico, solid steady performer, 200,000 ounces at about $400 cash cost. Again, another long-life asset. We expect that asset to continue to grow through exploration. As we indicated in our production profile, we're moving the La India project forward. We currently do not have that in any of our three-year production guidance. We'll be able to provide people with an update on a more definitive timeline on that asset towards the end of this year, as we continue our drilling program and complete the economic study work on that asset.

At Meliadine, it's a 7 million-ounce reserve and resource. It's still growing. Again, the grade is the key for this, as well as the location and the size. We believe it will continue to grow. We've got an active exploration program on that, and we'll talk to that in a minute on one of the upcoming slides.

At Goldex, there's not a lot new that we'd like to report at this point. It's still too early. There's really nothing conclusive there. We continue with our monitoring. We continue with our assessment. We continue with our remediation, but we also continue with our drilling. We will also continue with our ramp development at the D-Zone. So we are still active there underground. We just suspended the extraction of the ore out of the GEZ zone. So again, as we said, we feel we'll be in a better position sometime in the second quarter of this year to be able to determine what the next steps should be at Goldex.

At Meadowbank, we have a new mine plan that we've shortened the life on that mine plan, but it's a much lower-risk mine plan. Over a six-year period it reduces the requirement of waste development by about 70 million tonnes, and that's been one of our difficulties in a harsh environment, is moving that waste. So this is much lower risk. We've also incorporated a 20% dilution factor into our reserves, which affects our production profile. So that's the basis for a lower-risk plan going forward. That plan should still generate net free cash flow over the next six years of about $1 billion, so it's still a core part of our operation going forward. We benefit from the experience there. We'll apply that as we look at options at Meliadine.

Lapa, again, a steady producer for the next several years. Believe we can extend life there one or two years. We've also built in some added dilution there. We've now moved it from 54% to 74%, so we're taking a more conservative approach in the production profile for Lapa. We'll touch on some of the exploration upside.

At Meliadine, as we said, combined reserve and resource has continued to grow. We increased the reserve base. We've seen additions at Wesmeg, we've seen additions and extensions of the deposit at Tiriganiaq. In 2012, we're going to drill 90,000 kilometers of drilling on the known areas. We're going to drill about 25,000 meters on areas that are new potential discoveries on the property package, so we've got an 80-kilometer trend there. We still have some results coming in from 2011 program, about a third of the assays are still to receive, and we still have the bulk sample results to finalize. Initial bulk sample results have tended to confirm the continuity of the mineralization. So we're happy with what we see so far, but we'll put out a full report when we see all of the bulk sample results, and all of the assays likely in the second quarter of this year.

Just a focus on the Tiriganiaq zone, we've now traced it down to about 350 meters. The focus of drilling was really down to 350-meters in 2011. It actually extends below that, but that's where the focus of drilling was on. The bulk sample was also focused on Tiriganiaq, and again the initial results on that give us improved confidence around the continuity.

At Kittila, we continue to be active drilling. The Kittila is now our single biggest reserve at 5.2 million ounces. We've got now 2million-plus ounces in resource. It's still open for expansion. In 2012, we're going to do 32,000 meters of drilling, so still an aggressive exploration budget focused on Rimpi, the Rimpi area and continuing up to the north. The mineralization in Rimpi in 2011 was extended about 450 meters below the previous resource outline, so we've seen better grades. We've seen good thicknesses in that area. That could potentially change the economics, and that's why we've put off a decision on location and size of a shaft, but we continue to look at options and opportunities for that as well.

Creston Mascota, we were able to extend the life, minimum two years. So we've had some exploration success at Creston Mascota. The potential exists to continue making discoveries to the southwest. So we continue an active drilling program at the Creston Mascota deposit.

So moving forward, we've made some changes to our approach to putting numbers together. We've been able to introduce some newer members of our team, give them more responsibility, bringing in some new ideas going forward. Again, the way we've generated the budget numbers is a different process, a lot of input at the mine management level, and also a lot of input from the mine managers in terms of public guidance and how we should approach that, so that was helpful in generating our numbers this year. We look at our valuation and we certainly have been hit hard in 2011, but our feeling is that we've put together, as we said, a really solid plan, achievable plan in terms of meeting targets.

We're still generating significant cash flow coming out of these mines. We've got good exploration upside on several world-class deposits. We're still able to focus on an aggressive exploration program moving assets forward, and still able to increase our dividend. So we know it's been a difficult year. We've been able to adapt and adjust, and we feel we have a solid plan to sort of rebase and build from there, and go back to building the per-share value again. So I'll open it up, operator, now for questions.

(Operator Instructions). Your first question today comes from John Bridges with JPMorgan. Please go ahead.

You made mention in your remarks about the differences between Meadowbank and Meliadine, but I wonder if you could sort of just explain how you've had the write-down in Meadowbank, but even though you don't have a feasibility study yet at Meliadine, that there's no write-down apparent there.

Right. We do have a feasibility study at Meliadine. It's been filed. It's based on the smaller subset of reserves, doesn't include the resources. That's why we've been able to get a subset in reserve. But I think the key differences on the economics are strictly from the fact that we're dealing with much higher grade. We're dealing with better logistics. We're dealing with a larger deposit.

And we did go through that carrying value analysis on all the assets very closely including Meliadine, and the one that needed to be adjusted was Meadowbank, largely because when we looked at the original valuation a year ago, we were dealing with higher grades. We were dealing with a different cost structure. 2011, we've been able to understand better the cost structure and one of the key drivers in terms of the valuation was the cost side, so we're using a higher cost.

We didn't incorporate a much higher gold price in the valuation analysis. So, we probably had a $250 increase in the cost side of our equation on the valuation, but we only had about a $50 increase in the gold price. so when you add those up, the one that didn't make the cut and had to have a write-down was Meadowbank.

Okay. And then Goldex, in part of your report, you're talking about additions to the D-Zone there, but I just wonder if there is any update as to the prognosis for getting into that D-Zone at some later stage?

No update at this time. We'll be in a better position. We've been targeting sort of end of March to gather all of the information on our assessment and monitoring, and using that timeline, we'll feel we'll be able to update the market in the second quarter of this year on the results of the assessment work, the monitoring work, the results of the remediation, the results, in fact, of the exploration that we continue to do on the D-Zone and the level of development that we're doing on the D-Zone.

There's a lot of misinformation out there on Goldex that we can't even go underground, that it's flooded, that there's a lot of caving. In fact, we're underground right now, doing assessment work on the D-Zone doing drilling. What we can't do is, we can't pull tonnage from the GEZ zone, and that's where we suspended mining operations.

But we haven't given up on looking at ways that we can salvage some value there, but it's too early to make any definitive conclusion one way or the other and we won't be in a position to do that until the second quarter, is our estimate of the timeline.

Okay, great. And could you give our regards to Ebe, and I just wondered --

Ebe is actually here. Ebe is here. I asked him if he wanted to address a lot of his friends that would be out there on the call. He was sort of reluctant, but he's now sort of moved closer to the microphone. He's laughing, so he's free to talk.

Thanks for your comments, John. As Sean mentioned, 2011 was a horrible year, and it certainly is not the way that I would have wanted to leave Agnico. But I think getting close to 27 years in the saddle here, 37 years in the mining business, and the first number is turning to a six.

So it's time to contemplate other things. And with the bench strength that we do have and the strategy that we do have going forward, it's never an appropriate time, but to be able to carry these things through, it was best that I retire earlier rather than later, say maybe in a year and a half or two years or whatever. So the timing, looking back maybe in a year's time, this will have been the best time.

So I'd like to thank everyone out there for their support over the years. As Sean mentioned, we've had more ups than downs, and we've always come back, and the strategy we currently have, is we're going to make another comeback. I have no doubt about that. And the fact that I will be consulting and behind the scenes, and still be looking over everyone's shoulder a bit. That isn't bad, either. So once again, thank you very much.

Thanks, Ebe. It was a tough year for the analysts and we just talk about the stocks, so I can just imagine what it was like for you guys. Anyway, you can work on your guitar riffs.

Ebe and his team are playing at the PDAC at Steam Whistle. What night is it?

March 6.

March 6, so everybody is welcome to go, and Ebe has the next couple of weeks to get those guitar riffs perfected. So, he's looking forward to that.

Good luck.

Your next question comes from Don MacLean with Paradigm Capital. Please go ahead.

It's again for Ebe. It's not really a question. It's just a comment. Ebe, like John said, it's really been a pleasure dealing with you over the years as an analyst. Sean talked about the growth side of it, but I think the greatest legacy that most of us see is one of those unquantifiable legacies, the collegiality and the family spirit that you've left Agnico with, and you've created there.

When we look at how hard it is to attract quality people and the skill shortage out there, that not-quantifiable ability of Agnico to keep and to attract people is impressive. Anyway you've got the mining bug. We expect to see you around before too long. Take care.

Thanks, Don.

Your next question comes from Stephen Walker with RBC Capital Markets. Please go ahead.

Sean, just to follow-up on John's questions on Goldex, two things. First of all, the GEZ zone, has the caving stopped, and I guess as a sort of follow-up to that, is there any seismic activity, or has that - -any ground movement associated with that rock movement in the Zone subsided?

We've really seen no negative, since the middle of October we've seen real no show-stoppers. We've seen no significant subsidence, but Ebe is sort of chomping at the bit to jump in here, and Goldex was his baby and, even despite the fact that we had to suspend it based on consultants' reports, he's had a different view, and was always optimistic about being able to do something at the time, but there was never any guarantees, but he's got some comments to add.

We did observe some cracking up to surface. However, we also drilled into the surface bedrock. We did seismic studies, and we did not find any caving or lowering of the surface bedrock contour from originally. We did not find anything where the underground workings had broken through to surface.

What we did note is upon stopping all of the water injection, because we were trying to keep the public houses up, and keep the water table up, upon stopping that surface injection, water injection, the surface soil subsidence stopped almost immediately and we have seen very little movement in the soil subsidence since the end of October.

We have seen very little movement of our surface infrastructure and our grouting program so far has -- the jury is still out, but we have seen some success in grouting where we have seen the water table come back up in certain locations. So, we're in the process of installing instrumentation both in the rock and in the soil, and we will continue to monitor that very closely before making any future development decisions on M-Zone or looking at going back in the GEZ, but as Sean mentioned, there have been no show stoppers to date.

We'll be able to provide a much fuller update in Q2 based on the results of those programs, and those monitoring and assessment programs.

Okay. Just out of curiosity, the $63 million that's planned in the way of capital spending, and the bulk of that's spent in the first quarter, what is the actual breakdown of that? That seems like an inordinate amount of money sort of coming out of the blocks in the first quarter.

Stephen, it's Ammar here. There is a little bit more concentration in the first quarter because we are putting a lot of emphasis on remediation obligations that we have, and those are not going to take all year. What I would say is, a lot of those costs have already been taken into account in last year's write-down.

What we've done, Stephen, is, in terms of planning purposes, we were using an end of March date in terms of whether we will continue to do drilling and ramp development on the D-Zone. So that's sort of a point in time that we have put out there in 2012 with our Board. We feel by then, we'll have enough information from the monitoring and the assessment to make a call on whether we should keep doing the development and keep putting ourselves in a position to possibly recover at the D-Zone.

Okay, great. Thank you for that, and just on Meliadine again, what have you learned from Meadowbank that gives you the confidence that Meliadine will be an easier project? And then second part of that, is that development of Meliadine contingent the government putting infrastructure into the coast whether it's rank and inlet or some other community?

Yes. Our experience is we have a much tighter fact set in terms of the costs of doing business up there. One of the things that Meliadine has that could certainly help on the cost side is its proximity to Rankin inlet versus Meadowbank's distance from Baker Lake and Baker Lake being an Inland port. So, Rankin benefits from the fact that it's on the western shore of Hudson's Bay, longer shipping season, easier to manage, big deliveries like fuel.

In terms of infrastructure, government infrastructure, we don't need anything. In fact, we're just going through the process right now to secure the permit to build the road. That will give us a year-round link from Rankin inlet into Meliadine. It's about 25, 30 kilometers versus the link from Baker Lake to Meadowbank, which is 110-kilometers.

That may provide opportunities in terms of logistics and camp size, which would reduce the costs and one of the big experience we have found is that a two week in, two week out schedule even for the Inuits is something that culturally they have to get used to being away from home for even a two-week period.

We think we may have an opportunity being this close to Rankin Inlet with Meliadine to get them home on a more frequent basis, which would lower our costs and improve productivity, and I think that's one of the biggest things that we spent some time on in our last visit, when we all went up there, is to talk about those types of things that we can create better conditions and work conditions, and we would benefit from the efficiencies around that.

Great. Thank you very much for that, Sean. Thank you very much, Ebe.

Your next question comes from Joung Park with Morningstar. Please go ahead.

Just wanted to touch on Meadowbank for a second. It seems like the reserve grade at Meadowbank is actually lower despite the higher cutoff grade assumptions that you guys have been using. I've been getting 2.8 grams per tonne versus 3.2 grams per tonne at end of last year. So, could you reconcile that for me?

Yes. We'll let Marc do that. I think with the new mine plan we will be mining above the reserve grade for the next six years. We'll be mining an average of probably 3.2 grams, but I'll let Marc Legault just talk about the reconciliation and the cutoff factors.

Obviously, there is a higher gold price, but there's a higher operating cost and that should be offset, but we increased the dilution factor on an equivalent basis, essentially doubling the dilution. That had the effect of bringing the gold grade down. Don't forget, we also mined there last year, so that is in effect, as well. This is using the measures that we have, that's the grade that we have, 2.2 grams per tonne, yes.

Okay. And then I also ran the numbers. It looks like the cash costs will be around $1,000 per ounce. Is that fair?

Yes, that's fair.

Okay. And then lastly on Meadowbank, which pit is most of the loss to reserve ounces coming from?

Vault is a big chunk. To a lesser extent, the Main Portage, but essentially it's Vault that we're -- where we had a big drop in reserves there.

Just one other point on Meadowbank is that, although we've laid out a new mine plan which is effectively a six-year mine life, which is going to generate about $1 billion, we do have some flexibility as we move forward in a higher gold price environment, particularly around vault, as Marc indicated, to bring in some of those resource ounces into a mine plan. So, despite the fact that we've shortened the mine life, there is some flexibility going forward to move some resource ounces into reserve and the mine plan.

Okay, perfect. And with the LaRonde extension you guys also mentioned that you'll have a lower cutoff grade for that, as well. So, what kind of average grades are we looking at once we are established at that, meaning once you get past the lower grade stokes that are forecast for 2012 to 2014?

The reserve grade at LaRonde actually went up this year from average proven and probable reserves last year was about 4.3. This year it's 4.4. They went up slightly higher. So going forward, yes, the grade will be -- we'll see eventually -- that's according to the sequence, and I think it has to do with the sequence, but we should see an increase in gold production, which we're anticipating.

Yes. We're looking for a doubling of the reserve of the mine grade at LaRonde as we transition fully into the lower part of the mine. The reserve grade is 4.4 grams. We've been mining recently lower than 2-gram material, 1.8-gram material. So that's really the basis for growth going forward, is getting in a position to fully transition to the lower mine and get access to that 4-plus gram material.

Okay. Perfect and then on La India, could you give us rough parameters about what we can expect in terms of annual production costs, CapEx, et cetera?

Yes. Tim?

I think the best reference is the preliminary economic analysis that was put together by Grayd. That was something we looked at pretty closely before we acquired the project. But rough numbers, average 80,000-ounce per year producer, open pit heap leach mine with a very low stripping ratio, so the cash costs should be on the low end of the average in the industry. So, I'd refer you back to the PEA from Grayd for now.

Okay, yes. I'll take a look and then final question is a little bigger picture with just the recent setbacks at Goldex and Meadowbank, I was wondering how that changes your capital allocation strategy. Are you guys trying to replace some of those lost ounces through acquisitions or more aggressive green field exploration? Or are you guys trying to play it more safe and focus on optimizing mines and doing more brown field expansions, and things of that nature?

Well, we've maintained our exploration budget, and that's been a fairly aggressive budget over the last couple of years. We do have several large deposits that are still wide open, so we expect those to continue to grow and give us opportunities for production growth going forward.

As far as our acquisition strategy, we completed four acquisitions in about a five-year period. From a size perspective they were relatively small when compared to our market capitalization at the time.

That's still the intent and plan going forward and focus going forward for the corporate development group. With the changes in restructuring of the management team, we have allocated more resources to project evaluation. We will be looking at more things and looking at them in more in-depth.

We think there will be opportunities out there for us, but we're not feeling pressure to do something. And even internally, we could actually rush ahead at Kittila and put an expansion plan in place to try to quickly replace the ounces lost in Goldex.

We're actually doing the opposite. We're actually being patient around our drilling because we're seeing results that may change the economics. So, why rush it when you have a mine life of that length?

So, it's more of the same for us, and that's the way we've set the business up going forward, off of the base we have. And we're just trying to focus on building that per share value. We're not feeling pressured just because we've lost a quality asset like Goldex.

Okay. Thank you, Sean, and thanks for taking my questions.

Your next question comes from Patrick Chidley with HSBC. Please go ahead.

Just a question on Meadowbank. What does this mean for the strip ratio of the mine in terms of the new mine plan, and is six years all that's there? I noticed that you talk about the reserve grade being higher, the mine grade over six years being higher than the reserve grade. Does that mean those reserves are not in the mine plan?

We're just getting Dan Racine to give us some information on the strip ratio. It's obviously going to come down, because we've eliminated about 12 million tonnes of waste development a year over a six-year period in the plan.

Yes. It's true. The strip ratio will go quite down. We're mining three years less the Meadowbank zone. So, it's quite different. It's around 9 to 1, the stripping ratio. It was higher than that before.

Yes. It's Ammar here. Just looking at the models, the strip ratio is down from about, as Dan said, down from about 9 to 1 and it's down to closer to under 7 to 1. It's about 6.5 to 1.

Now right now going forward, okay. And just coming back to Goldex, the comments, are you trying to say that maybe the structural integrity there, I guess of the hanging wall is not as bad as the consultants were saying, and this was water influx from surface or is that not the right conclusion?

No. We don't know yet, and what the consultants were saying is we were having major movements in the rock mass, and we needed to do the monitoring and do the assessment work to conclude whether, in fact, that was true, and we still have work to do there. But I think the fact that we wrote it down to almost zero, I think left people with an impression that the mine was totally flooded, it was undergoing massive caving.

That certainly was not the case, and we have other resources outside of the GEZ zone. So, it's incumbent on us to look at ways that we can maybe possibly recover those, and that's really the process we've been going through right now.

And we want to be careful, though. We don't want to leave people with the impression that they should be buying Agnico stock because they feel that we're going to announce a restart there in the next few months. We're not saying that.

All we're saying is that we're doing the monitoring work. We're doing the assessment work. We're continuing to think as engineers and miners on how we could maybe salvage some value there, but up till now, we don't have an answer one way or the other.

Okay. Thanks, Sean. And just finally, just any comments on the Meliadine, about sampling, has that come up with any conclusions on that?

Hi, Jean speaking. The purpose of the bulk sample was to validate the grade and all of the results are not -- we don't have all of the information. In terms of the metallurgy, all of the tests were done. It's confirmed, what was in the original study. So, we do not anticipate any issue with that part.

Okay. Thank you very much.

Your next question comes from Anita Soni with Credit Suisse. Please go ahead.

Just a couple questions. With respect to the Kittila feasibility -- I'm sorry, the 25% expansion. You're going to deliver a feasibility study there. What's the appropriate way to think about that in terms of the expansion? Is that a 25% throughput expansion? Could you also benefit from grades there? I presume that's because you're going underground, right?

Yes. It's a 25% throughput expansion that we're looking at from 3,000 tonnes a day to 3,750 tonnes a day. So it requires some accelerated underground development, but also some additions in the plant to handle some additional tonnage.

And then with respect to the permit -- sorry, Meliadine, when would you have to start constructing there for potential production in 2017?

2014, 2015.

And then the last question with respect to the D-Zone and I know this is probably premature, but have the consultants taken a look at whether or not there would be some impact of blasting in the D-Zone, and whether or not that would have any kind of influence on the GEZ zone?

Not yet, no. That will be part of their assessment work on whether we can go back there and I guess the key determinant there in anything that may happen at the D-Zone is, I think it's fair to assume that if something's doable in the D-Zone, that the GEZ zone gets left in place. I think that would be fair to assume, but those are things that the consultants are looking at now, with our technical team.

Okay. So if you opt for the D-Zone, the GEZ zone would effectively be required to be basically the muck left in place to act as backfill?

We have -- they haven't told us definitively, but that's probably a reasonable assumption, that you'd have to leave it in place while you mine the D-Zone, doesn't mean you may not be able to come back to it at some point.

Okay. So, you'd have to re-sequence it and perhaps go back to the GEZ zone later, then?

Yes. We'll wait for the consultants, but that's probably a fair assumption.

All right. Thank you very much.

Your next question comes from David Haughton with BMO Capital Markets.

Just going over to Kittila again, should we be thinking about this 25% lift in throughput as the first step of potentially a multi-phase kind of development with further expansions and possibly a shaft leading to maybe a doubling of throughput?

Yes and I think that the way that we see it now given the long-life nature of it and the fact that we own about it 100%, it tends to remind us of the early days of the Abitibi belt with LaRonde and Bousquet and Doyon, and we can envision 20 years from now having multiple shafts there. And so what we've really tried to do is step back, not make major commitments on capital until we actually get more exploration information, particularly as we move to the north around Rimpi, because it could actually change the economics.

It's early, but the early indications are that there's something developing under Rimpi that could have much better economics. So, before we commit to shaft size, location and major capital we want to do that exploration, but we feel in the interim we should move forward on a plan to get to the first step, being 3,750 tonnes a day and let the exploration and the quality of what we find dictate how it unfolds over a number of years.

And your sense of the timing of getting that initial lift in throughput, should we be thinking about by 2014?

It's early now, but I think we did not put it in our production profile for three years for a reason. So, I would assume 2015.

All right. And do you get -- do you have a feeling for the sort of capital here? Are we talking $100 million plus or minus?

Yes. Lower than $100 million.

All right, thank you. And just now thinking about Meadowbank life through 2017, Meliadine starting up at that level, is there any suggestion that Meadowbank equipment or plant could be relocated down from Meadowbank to Meliadine?

That thinking has started, given that the new mine plan was just approved by the Board this week, and so that's a logical thing to be doing. You've picked up on it, and we're certainly looking for synergies or being able to leverage off of some of the capital investment we made at Meadowbank to assist Meliadine.

Whatever we can do there to lower CapEx and improve our IRR we'll be looking to do, and that just doesn't include equipment. It also includes people. And I think that's a major driver for us, because we've been spending a lot of money on training, and we will continue to spend a lot of money on training, and we'll be looking to use those individuals at Meliadine and the experience that they've gained through their work at Meadowbank

Of course, one of the limitations of that thought is that it means that for Meadowbank it's a hard end if you are going to relocate some of the plant, in particular.

The plant's going to be a tough one, and we have discussed that. That's the hardest one. Mobile equipment's easier. People are easier, but the plant, we still have to do a lot more thinking on that one.

All right. Thank you very much.

Your next question comes from Carey MacRury with TD Securities. Please go ahead.

I just had a follow-up question on Meadowbank. I think in the past, you have mentioned that having accelerated stripping in 2012 to catch up for the conditions you experienced last winter. I'm just wondering, is that currently the plan under the new mine plan, and if so, how many tonnes are you expecting to mine this year versus last year?

That's currently the plan. The contractors are on site at Meadowbank right now, and we're averaging close to 100,000 tonnes a day in waste development. So, we've picked that up substantially. In the first part of year at Meadowbank last year we were struggling in the winter environment, and we were at the 30,000 to 40,000 tonne a day range.

So, it's picked up dramatically over the last six months or so, and continues to be strong as we enter 2012. The first six weeks have been good, not only in terms of production, but also in terms of waste development at Meadowbank.

So do you expect that rate to continue through this year or should it --

We expect the contractors to be there for the year.

What's your approximate mining cost per tonne?

$90, $90 all-in, the mining costs, breakdown. Do you have that, Ammar, what the mining costs would be? $4.25 per tonne for waste development, and that's one of the factors that when we look at it, has really changed the cost structure for us.

We were estimating about $2.25 and once development costs have come in a little over $4, and that's what forced to us look -- revisit the mine plan and look at ways that we could shrink the pit shells and reduce the requirements to move waste. Not only is it more costly, it's difficult to do at those levels in that harsh environment. So, that's why the plan going forward is lower risk.

Okay, thanks and one follow-up question. I believe the CapEx number at Meadowbank is $88 million for this year. I'm just wondering does that contain some amounts related to completing dike construction?

Yes. That's the major component there, is the dike construction.

And how much would that be roughly?

Oh, $50 million.

And does that complete the dike construction for the rest of the mine?

There's some more in 2013, and then it will be finished, and that's why, towards the tail end of the mine life, the cost per tonne dropped to $80 or so.

Okay. And last question on that same topic, what's a reasonable sustaining capital number, then that, we could think about post the dike construction? We'll just get that in a minute.

The total sustaining capital is estimated at about $160 million to $170 million. It's going to be -- over the life of the mine. So, it's going to be substantial this year and a little bit into next year to finish the dikes. The dikes are the main component of that.

So, that $160 million to $170 million includes the dike amounts?

What was that? I missed that.

That $160 million to $170 million includes the dike construction?

Yes. About $120 million of that money is dikes.

Okay. That's great. Thank you.

Your next question comes from Stephen Butler with Canaccord Genuity. Please go ahead.

My regards to Ebe and Paul-Henri. Sean, the LaRonde forecast for 2014, is that up to the 4-gram plus grade level, in other words 280,000 ounces per year? Does it get any better than that or is that a reasonable longer-term number for LaRonde?

We'll just check and see on the 2014. What was the grade that we were using there, guys? Should be more than that. 2014. We'll get that to you, Steve.

Yes. That's fine. That's fine. And another question is relating to Kittila. The mill recovery of 84%, and I'm just confused a bit with mill availability. 84% versus the budget of 89%, but in fact, those are almost the same numbers we were thinking about in terms of recovery. Are they two separate items, for one thing?

And is the mill recovery expected to be conservatively 84% here as we go forward for Kittila or do you still think you can do better? I saw 85% or so in Q4. And lastly, mine site costs per tonne EUR71, that's lower than Q4, but is that as good as you can do or do you still think there's room for improvement at Kittila costs, site costs?

You have many questions there, Steve, Jean speaking. We'll start with availability. Currently the availability is 84%. I know it's confusing.

The recovery was 84.6% last year, but it's two different items, but they are in the same range. I will be comfortable, I said last year use 83%. I will be comfortable that you can use 85%. Our target is to still do improvement, but it will be more prudent to use 85% as recovery I would say.

In terms of cost I think EUR71 is a fair number. We're certainly looking to optimize as we move along, but I think that's a good number to use. Just to add some color, January was a record month for Kittila. So, recoveries are good.

Availability in the mill is good, and I think as we look through 2012, we have built in some more down days in our forecasts, based on a couple of unplanned shutdowns that we had in 2011. And still with that, we're showing more ounces in 2012 at Kittila than 2011

Okay. Thanks, guys and hope you have that answer, and great, and otherwise I'll sign off.

(Operator Instructions). Your next question is a follow-up from Anita Soni with Credit Suisse. Please go ahead.

That's okay. It's been answered. It was with respect to the sustaining capital number, if you have that on a per ounce basis that would be good, just for Meadowbank.

I'm sorry, Anita. Did you say the sustaining CapEx on it per ounce?

You can follow up with me later on. It's largely been answered already.

Okay, thanks. And Steven, if you don't mind, I'll follow up on the grade for 2014 at LaRonde. I just don't have that with me right here.

Mr. Boyd, we have no further questions at this time. Please continue.

Thank you, operator, and thank you, everyone and just a couple of points. Again we wanted to thank Ebe and Paul-Henri Girard for their contribution over many, many years. And Ebe certainly appreciates the comments in he's received both on the call here today and people communicating directly with him.

We would remind everybody, our in-house counsel has sent me a note to remind everybody to look at the forward-looking information statement disclaimer. So I just want to pass that along. But just wanted to summarize that as we've gone through a process in 2011, we've put out what we feel are very solid and achievable numbers with, as we said, year-on-year improvements in production coming out of four of the five mines.

When you take out Goldex, there's still production growth over the next couple of years, led by LaRonde. We still have several expansion opportunities within the existing portfolio of assets, so we're focused on those. We're focused on exploration, and again we're happy to be able to increase our dividend, and I think that demonstrates the confidence we have in our Business going forward. So, thanks again.

Ladies and gentlemen, that does conclude our conference call for today. Thank you for your participation. You may now disconnect your lines.