Stock Symbols: AEM (NYSE)
AGE (TSX)
(All amounts expressed in U.S. dollars unless otherwise noted)
TORONTO, Oct. 29 /PRNewswire-FirstCall/ - Agnico-Eagle Mines Limited
today reported a net loss of $11.9 million, or $0.14 per share, in the third
quarter of 2003 compared with a net loss of $0.6 million, or $0.01 per share
last year. For the year to date, the net loss was $21.9 million, or $0.26 per
share, compared with net income of $3.2 million, or $0.05 per share, in the
first nine months of 2002. Management's Discussion and Analysis for the third
quarter of 2003 is appended to this press release.
"While there has been steady progress in resolving LaRonde's operating
issues this year, our progress has been slower than expected and our third
quarter operating results are very disappointing. We are taking the steps
necessary to ensure that LaRonde will become a strong cash flow generator for
many years and form the foundation for our regional growth plan", said Sean
Boyd, President & Chief Executive Officer.
"During the quarter, Agnico-Eagle made significant progress in advancing
our regional growth strategy by increasing our gold resources and expanding
our land coverage of the two major gold trends in the region. Our strong
financial position puts us in a good position to pursue our regional growth
opportunities", added Mr. Boyd.
A summary of third quarter activities includes:
- Slowdown in production drilling, blasting and extraction generated
weaker operating results due to lower-than-planned ore production from
higher gold grade areas of mine. Fourth quarter production expected to
be 70,000 to 75,000 ounces; cash operating costs of $210 to $230 per
ounce, $240 to $260 per ounce including El Coco royalty.
- Longer-term gold production target from LaRonde revised downwards to
300,000 ounces per annum as a result of change in ore mix leading to
increased byproduct production.
- Deep drilling at LaRonde continues to point to higher grade "core"
which could significantly enhance economics of LaRonde II. Continued
conversion of gold resource to reserve expected at year end.
- High grade "multi-ounce" gold drill intersections encountered at Lapa
Deposit lead to possible new gold zone, larger gold resource and over
60% conversion of inferred to indicated gold resource.
- Goldex Deposit progressing towards independently reviewed feasibility
study by year end.
- Consolidation of property position west and south of LaRonde opens up
previously unexplored gold horizon for systematic drill program.
- Establishment of dedicated regional development team to evaluate and
prioritize Company's pipeline of projects in the region.
Live Conference Call Scheduled for October 30, 2003
The Company's senior management will host a live conference call in the
Toronto II Room at the Toronto Hilton, 145 Richmond Street West, Toronto,
Ontario on Thursday, October 30, 2003 at 11:00 a.m. (ET). The Company will
discuss its third quarter 2003 financial and operating results and provide an
update on regional exploration activities. All those interested are invited to
attend in person, by telephone or by webcast.
To participate in the conference call, please dial (416) 640-4127. To
ensure your participation, please call approximately five minutes prior to the
scheduled start of the call. The replay number will be 1-877-289-8525 pass
code 233186 followed by the number sign. A live audio webcast of the call will
be available on the Company's website at www.agnico-eagle.com.
LaRonde Operating Performance
Despite record tonnage from the lower part of the mine in the third
quarter, production drilling challenges slowed down planned extraction time.
As a result, five mining blocks containing approximately 27,000 ounces were
not extracted as planned in the third quarter which negatively affected
operating results. The mill also realized lower-than-planned recoveries due to
numerous "stop-start" cycles resulting from shortages of ore and electrical
problems as well as variable ore types coming from the different levels of the
mine.
A number of initiatives have been undertaken to accelerate the drilling,
blasting and extraction cycle. These include the addition of two production
drills acquired with the Bousquet purchase, increasing drill hole diameter,
the blasting of stopes in one mass blast rather than four separate blasts and
using electronic detonators. The blasting results have been positive with good
fragmentation, less vibration, minimal damage to the surrounding walls and
higher productivity. The lower mine is currently entering a phase with a
higher proportion of secondary stopes available to be mined. These secondary
mining blocks are de-stressed and have historically been easier to extract.
All of these factors are expected to result in increasing quantities of higher
gold grade ore being extracted from the lower mine.
In spite of these difficulties, over 361,000 tons, or 63% of the ore
produced in the third quarter was hoisted from the lower levels of the mine.
Total ore processed for the quarter was nearly 571,000 tons, or 6,200 tons per
day on average, which was well below target of 7,800 tons per day resulting in
increased onsite operating costs of C$56 per ton. At target ore production
levels, these costs are expected to be approximately C$45 per ton.
The proportion of ore from the lower levels of the mine is expected to
continue to increase as ore development has been on plan this year and all the
stopes slated for production in the fourth quarter have been fully developed.
Including underground broken ore, over 283,000 tons was stockpiled at the end
of the quarter, an increase of over 64,000 tons from the previous quarter. The
ramp system between the two lower level mining horizons is now complete which
facilitates the efficient movement of production equipment and manpower
throughout the lower mine. The mine's overall performance is expected to
improve steadily with underground crushing infrastructure now optimized, the
ability to hoist at design capacity in the Penna Shaft and the mill's proven
ability to mill at or above 8,000 tons per day.
Also boding well for production is the fact that the rock fall
experienced during the first quarter has been completely backfilled and normal
mining operations in the immediate area resumed in the third quarter.
Operating Challenges over Past Year Leads to Reduction of Gold Production
Projections
Gold production was 51,192 ounces in the third quarter, slightly higher
than the third quarter of 2002 but well below expectations. Cash operating
costs to produce an ounce of gold were $309 per ounce compared to $197 per
ounce in the third quarter of 2002 due to fewer than planned higher grade gold
mining blocks being extracted, resulting in lower than expected gold
production, and a significantly stronger Canadian dollar. Including the
El Coco royalty, total cash operating costs were $368 per ounce compared to
$208 per ounce last year. The ore from El Coco and the related royalty
payments will be largely exhausted by the end of 2003.
Given the third quarter results, the Company will not achieve its most
recent production target of 300,000 ounces for 2003. In the fourth quarter,
production is expected to be between 70,000 and 75,000 ounces at a cash
operating cost between $210 and $230 per ounce. Total cash operating costs,
including the El Coco royalty, are projected to be between $240 and $260 per
ounce. The cash operating cost projection has been prepared based on assumed
byproduct prices and exchange rates for the fourth quarter of $4.90 per ounce
silver, $0.40 per pound zinc, $0.85 per pound copper and
$1.30 US dollar/Canadian dollar exchange rate.
The Company is undertaking a comprehensive review of short-term and long-
term production targets with a more conservative view, based on recent
experience, of daily tonnage targets at depth thereby placing more emphasis
than originally planned on the upper levels of the mine. While this does not
have an impact on gold reserves, the resultant change in the originally
planned ore mix would more evenly distribute gold production over LaRonde I's
life. The new mine plan will be devised with an annual gold production target
of 300,000 ounces per annum. Any displacement of gold/copper mining blocks at
depth will result in a corresponding increase in production from silver/zinc
mining blocks. The mine planning process is ongoing and is expected to be
completed in December.
LaRonde Continues Aggressive Drilling Program
Eight drills were in operation during the third quarter and focused on
the following target areas:
- Three drills on production delineation drilling on Zone 20 North
between Level 137 and 209.
- Two drills testing Zone 7 between Levels 170 to 194.
- One drill on definition drilling Zone 20 North between Levels 182 to
209
- Two drills on LaRonde II below level 215.
A total of 33,020 feet of diamond drilling was completed during the
quarter with 113,796 feet completed year to date.
Delineation drilling continued between Levels 137 and 209 on Zone 20
North. With continued improvement in access, now down to Level 182, the pace
of drilling is accelerating with grades encountered to date above reserve
grade. These results continue to confirm the existence of higher grade
mineralization towards the western limit of the deposit.
Definition and delineation drilling started on Zone 7 from Levels 170 and
194. The results summarized below point to higher grades at the eastern limit
of Zone 7:
-------------------------------------------------------------------------
Gold
True (oz/ton)
Drill Thickness Cut Silver Copper Zinc
Hole (ft) From To (1.5 oz) (oz/ton) (%) (%)
-------------------------------------------------------------------------
17007732 9.2 161.7 172.9 0.41 2.84 0.97 3.75
-------------------------------------------------------------------------
17007741 9.8 188.6 203.4 0.55 4.39 1.32 2.94
-------------------------------------------------------------------------
17007742 27.2 183.1 225.4 0.20 1.32 0.33 2.55
-------------------------------------------------------------------------
3170-46 15.4 401.9 422.6 0.26 1.96 0.42 4.01
-------------------------------------------------------------------------
3170-47 9.2 530.5 545.6 0.34 1.81 0.14 4.04
-------------------------------------------------------------------------
3170-48 9.2 297.9 308.4 0.11 0.30 0.06 0.72
-------------------------------------------------------------------------
3194-69A 9.8 587.3 600.7 0.19 1.02 0.44 3.08
-------------------------------------------------------------------------
3194-70 10.5 404.2 416.7 0.14 1.07 0.71 1.96
-------------------------------------------------------------------------
3194-71 9.2 488.2 501.0 0.19 0.80 0.91 2.56
-------------------------------------------------------------------------
On LaRonde II, two drills tested Zone 20 North below the bottom of the
Penna Shaft with results summarized below:
-------------------------------------------------------------------------
Gold
True (oz/ton)
Drill Thickness Cut Silver Copper Zinc
Hole (ft) From To (1.5 oz) (oz/ton) (%) (%)
-------------------------------------------------------------------------
3215-60C 45.9 2,172.5 2,234.6 0.10 0.12 0.23 0.03
-------------------------------------------------------------------------
3215-64A 32.8 2,874.6 2,927.5 0.15 0.69 0.64 0.16
-------------------------------------------------------------------------
3215-65 32.8 3,378.9 3,423.2 0.10 0.56 0.30 0.11
-------------------------------------------------------------------------
3215-65A 49.2 3,046.2 3,120.0 0.28 0.64 0.24 0.02
-------------------------------------------------------------------------
3215-66 32.8 1,237.5 1,272.6 0.18 0.28 0.24 0.07
-------------------------------------------------------------------------
Currently, two drills are testing Zone 20 North and 20 South at depth
with the objective of obtaining sufficient drilling for continued conversion
of gold resource to reserve at year end and testing the limits of the ore
body. While drilling essentially defined the eastern limit of Zone 20 North,
drill hole 3215-65A intersected mineralization grading 0.28 ounces gold per
ton over a true thickness of 49.2 feet. This continues to confirm a higher
grade core at depth and to the west as was suggested in earlier drilling
results. Currently, one of the deepest and most westerly drill holes is being
attempted outside the present resource envelope and close to the former
Bousquet boundary where previous drilling had entered Zone 20 North and
encountered encouraging gold values prior to being halted due to the former
southern boundary. Results from this drill hole are expected in the fourth
quarter.
Additional results from drill hole 3215-65A of 9.2 feet grading 0.08
ounces of gold per ton were also returned from an intersection of a broad,
silicified alteration zone of 30 feet with stringer pyrite, chalcopyrite and
sphalerite mineralization corresponding to Zone 20 South. This mineralization
occurred at a depth of 10,000 feet and was located on the newly acquired
Terrex Property, immediately south of the LaRonde Property. The drill hole had
previously intersected Zone 20 North but was halted within 150 feet of the
former southern boundary. Follow up drilling was also constrained by the
southern boundary. Previous drilling had also intersected mineralization,
however, it was also constrained by the boundary and by drill station
availability from the Level 215 exploration drift. Assuming a typical western
rake, the potential zone remains untested. As the Level 215 exploration drift
continues to the west, additional drilling will be conducted. The intercept,
while narrow and low grade, is the first indication of gold mineralization at
a depth of 10,000 feet other than Zone 20 North. A full bankable feasibility
study on LaRonde II is scheduled to be completed by the third quarter of 2004.
Lapa Encounters Possible New Zone at Depth with High Grade Gold
Intercepts
On the 100% owned Lapa Property, located 7 miles east of LaRonde, seven
diamond drills are continuing to drill the Contact Zone with the most
significant results highlighted below (full results are included in Appendix A
of this press release):
-------------------------------------------------------------------------
True Gold(oz/ton) Gold(oz/ton)
Drill Hole Thickness(ft) From To Cut(1.5 oz) Uncut
-------------------------------------------------------------------------
118-03-06A 11.8 2,561.3 2,577.1 0.36 0.36
-------------------------------------------------------------------------
118-03-25C 10.2 4,016.7 4,028.8 0.16 0.16
-------------------------------------------------------------------------
118-03-28B 12.1 3,760.5 3,775.2 0.10 0.10
-------------------------------------------------------------------------
118-03-28F 9.5 3,551.8 3,561.6 0.13 0.13
-------------------------------------------------------------------------
118-03-29 9.8 3,836.7 3,850.7 0.16 0.16
-------------------------------------------------------------------------
118-03-29B 10.5 3,655.6 3,667.6 0.20 0.20
-------------------------------------------------------------------------
118-03-31 17.4 1,784.1 1,813.6 0.21 0.21
-------------------------------------------------------------------------
118-03-35 29.2 3,811.0 3,841.8 0.21 0.21
-------------------------------------------------------------------------
118-03-36 9.2 1,921.9 1,940.3 0.10 0.10
-------------------------------------------------------------------------
118-03-33A 21.7 2,509.8 2,536.7 0.32 0.32
-------------------------------------------------------------------------
118-03-35A 25.3 4,288.0 4,328.4 0.49 1.71
-------------------------------------------------------------------------
118-03-39 11.2 2,290.0 2,315.6 0.24 0.24
-------------------------------------------------------------------------
In addition to confirming and further defining the shape, size and high-
grade nature of the main Contact Zone gold lens, the diamond drilling has
traced mineralization further at depth and discovered both a new and adjacent
zone of high-grade gold mineralization to the west with indications of a new
zone recurring along the main trend but further to the east. The Lapa Deposit
is currently open at depth, to the west and east. To date, the Lapa Deposit
has been traced over a vertical extent of 2,630 feet, to a depth of 3,870 feet
and a strike length of 1,580 feet.
Drill hole intercept 118-03-35A which returned an uncut grade of 1.71
ounces of gold per ton over 25 feet is located 430 feet west and 65 feet
deeper than a previously reported drill hole intercept 118-03-25 which
returned 0.24 oz/ton of gold over 13.8 feet. This new intercept, located at an
approximate depth of 3,870 feet below the surface, contains multiple
occurrences of visible gold and is the deepest and also the richest
intersection ever returned on the Contact Zone to date.
Drill hole 118-03-21A originally targeting the western extension of the
main Contact Zone horizon intersected visible gold mineralization in a
possible new zone. Additional drilling has located this zone less than 20 feet
to the south and west of the main gold lens. The strength of the gold
mineralization at depth is very encouraging as the Contact South Zone is open
in all directions, except to the east. The most significant drill results from
this new Contact South Zone are summarized as follows (full results are
included in Appendix A of this press release):
-------------------------------------------------------------------------
True Gold(oz/ton) Gold(oz/ton)
Drill Hole Thickness(ft) From To Cut(1.5 oz) Uncut
-------------------------------------------------------------------------
118-03-21A 11.5 3,148.9 3,163.0 0.32 0.32
-------------------------------------------------------------------------
118-03-28E 12.8 3,358.6 3,372.7 0.52 2.24
-------------------------------------------------------------------------
118-03-28F 20.3 3,401.5 3,422.9 0.19 0.19
-------------------------------------------------------------------------
118-03-35A 16.4 4,237.8 4,265.0 0.14 0.14
-------------------------------------------------------------------------
The two highest grade drill holes, 118-03-35A in the Contact Zone and
118-03-28E in the Contact South Zone, indicated a high frequency of visible
gold and in the case of the Contact Zone, declining arsenopyrite
mineralization at depth. The former drill hole intersected 0.49 ounces (1.71
ounces uncut) of gold per ton over 25.3 feet while the latter returned 0.52
ounces (2.24 ounces uncut) of gold per ton over 12.8 feet.
Lapa Gold Mineral Resource Growing and Indicated Category Now Defined
Due to the increased density of drill holes, recent drilling results and
a growing deposit, a new resource calculation was completed to quantify the
new results.
The Lapa Deposit is now estimated to have an indicated mineral resource
of 722,000 ounces of gold in 2.5 million tons grading 0.29 ounces per ton and
an inferred mineral resource of 462,000 ounces of gold in 1.9 million tons
grading 0.25 ounces per ton. If the current indicated and inferred resource
estimate of the Lapa Deposit were disclosed as an inferred resource, then the
Lapa resource has increased, compared to that previously disclosed, by 17% in
terms of gold ounces, 9% in gold grade and 7% in tonnage. The full mineral
resource estimate is included in Appendix A of this press release.
Over the next three months, three drill rigs will continue to drill for
extensions to the Contact Zone, Contact South Zone and the new occurrences of
significant gold mineralization intercepted to the east in holes 118-03-29 and
118-03-29B. Four other rigs will continue to drill in-fill holes and further
define the upper block of Contact Zone mineralization. This aggressive
drilling program will continue to at least the end of the year in order to
provide results for a pre-feasibility study, also expected to be completed by
year end. Preliminary engineering and baseline environmental studies have been
initiated.
Goldex Progressing Towards Feasibility
A draft feasibility study is currently being reviewed by an independent
engineer. Baseline environmental studies have also been initiated and
preliminary plans are being drawn up with respect to potentially dewatering
Goldex at the beginning of 2004.
Bousquet to Serve as Regional Hub for Exploration and Development
With the acquisition of the Bousquet property, the former mine office is
now being used by a dedicated regional development team to evaluate and
prioritize the Company's pipeline of projects in the region.
The former mine's infrastructure is being restored for a planned
underground drilling program, with three main target areas identified. The
first is the thickening felsic rock package on the western portion of Bousquet
and on the adjacent Ellison property to the west of Bousquet. Ellison in turn
is to the east and adjacent to Cambior's Westwood discovery. The second target
is the down plunge extension of the Bousquet Mine's 3-1 Zone with the third
target area below the Bousquet II/LaRonde No. 1 Shaft Zone at depth. This area
will also be tested for potential extensions of Zone 20 North across the
former boundary at depth. Three drills will be in operation at Bousquet by
next week, bringing the number of Agnico-Eagle drills active in exploration on
the Cadillac-Bousquet Belt to 21.
LaRonde Mine Tour
Analysts and investors are invited to a tour of the LaRonde minesite on
Thursday, November 20, 2003. The visit will focus on operations and will
include an underground tour. A regional exploration and development update
will also be provided on the Company's projects and programs on the Cadillac-
Bousquet Belt. Space is limited and will be reserved on a first-come first-
serve basis. Please register with Hazel Winchester at 416-847-3717.
Download Illustrations from Company's Website
The longitudinal illustrations that detail the drill results and a map of
the properties discussed in this news release can be viewed and downloaded
from the Company's website www.agnico-eagle.com (Press Release) or:
http://files.newswire.ca/3/PropertyPlan.pdf
http://files.newswire.ca/3/LONG7Upper.pdf
http://files.newswire.ca/3/LONG7Lower.pdf
http://files.newswire.ca/3/LONG20N.pdf" target
http://files.newswire.ca/3/LONG20S.pdf
http://files.newswire.ca/3/Lapa.pdf
Scientific and Technical Data
All Lapa drill core has been logged and the results have been verified by
Dino Lombardi, P.Geo., Senior Geologist for the Company's Exploration Division
and who is fully qualified per the standards outlined in National Instrument
43-101. The drill core is sawed in half with one half sent to a commercial
laboratory and the other half retained for future reference. Upon reception of
the assay results, the pulps and rejects are recovered and submitted to a
second laboratory for check-assay purposes. The gold assaying method uses a
30-gram sample by Fire Assays or Metallic Sieve finish as requested by the
project geologist. The laboratories used are Bourlamaque Assay Laboratories
Ltd., Val d'Or, Quebec, and Expert Laboratories Inc., Rouyn-Noranda, Quebec.
A qualified person, Guy Gosselin, P.Eng., P.Geo., LaRonde Division's
Chief Geologist, has verified the LaRonde data disclosed in this news release.
The verification procedures, the quality assurance program and quality control
procedures used in preparing such data may be found in the 2003 Ore Reserve
Report, Agnico-Eagle Mines Limited, LaRonde Division, dated May 12, 2003,
filed on SEDAR.
The effective date of the Lapa Deposit estimate is October 29th, 2003.
The estimate is based on a $300 per ounce gold price, a US dollar/Canadian
dollar exchange rate of $1.50 and a grade cut-off of 0.15 ounces per ton. The
estimate was derived using a three dimensional model of the deposit based on
drill hole intercepts that were adjusted so that a minimum measured zone
orthogonal thickness of 9.2 feet was reached. The deposit drill hole intercept
sample results were recombined into 1.0 metre long composites prior to
interpolating the grade using the inverse distance power squared interpolation
method. It is not known to what extent, if any, the mineral resource estimate
may be materially affected by any known environmental, permitting, legal,
title, taxation, socio-political, marketing, or other relevant issues. Mineral
resources which are not mineral reserves do not have demonstrated economic
viability. A qualified person, Marc Legault, P.Eng., Agnico-Eagle's Manager,
Project Evaluations, supervised the preparation of the Lapa mineral resource
estimate disclosed in this press release.
Forward Looking Statements
This news release contains certain "forward-looking statements" (within
the meaning of the United States Private Securities Litigation Reform Act of
1995) that involve a number of risks and uncertainties. There can be no
assurance that such statements will prove to be accurate; actual results and
future events could differ materially from those anticipated in such
statements. Risks and uncertainties are disclosed under the heading "Risk
Factors" in the Company's Annual Information Form (AIF) filed with certain
Canadian securities regulators (including the Ontario and Quebec Securities
Commissions) and with the United States Securities and Exchange Commission (as
Form 20-F).
About Agnico-Eagle
Agnico-Eagle is a long established Canadian gold producer with operations
located in northwestern Quebec and exploration and development activities in
eastern Canada and the southwestern United States. Agnico-Eagle's LaRonde Mine
in Quebec is Canada's largest gold deposit. The Company has full exposure to
higher gold prices consistent with its policy of no forward gold sales. It has
paid a cash dividend for 23 consecutive years.
Schedules Attached:
Management's Discussion and Analysis
Summarized Quarterly Data
Consolidated Financial Statements (excluding notes)
Appendix A Full Lapa Drill and Gold Resource Results
QUARTERLY MANAGEMENT DISCUSSION AND ANALYSIS - UNITED STATES GAAP
(all figures are expressed in US dollars unless otherwise noted)
Results of Operations
Agnico-Eagle reported a third quarter net loss of $11.9 million, or
$0.14 cents per share, compared with a net loss of $0.6 million, or
$0.01 cents per share, in the third quarter of 2002. For the year to date,
Agnico-Eagle reported a net loss of $21.9 million, or $0.26 cents per share,
compared with net income of $3.2 million, or $0.05 cents per share, in the
first nine months of 2002. The year to date figures include a non-cash charge
of $1.7 million (net of tax), or $0.02 per share, representing the cumulative
effect of adopting Financial Accounting Standards Board Statement No. 143,
"Accounting for Asset Retirement Obligations" ("FAS 143"). For a full
description of the accounting change, please see the Company's 2002 Management
Discussion and Analysis of Operations and Financial Condition under the
caption "Critical Accounting Policies - Reclamation Costs."
In the third quarter of 2003, the Company produced 51,192 ounces compared
with 50,073 ounces produced in the third quarter of 2002. Year to date, the
Company has produced 166,354 ounces of gold compared with 184,948 ounces
produced in the first nine months of 2002. Despite record tonnage from the
lower part of the mine in the third quarter, production drilling challenges
slowed down planned extraction time. As a result, five mining blocks
containing approximately 27,000 ounces were not extracted as planned in the
third quarter which negatively impacted operating results. In addition, the
mill experienced a difficult quarter with numerous "stop-start" cycles due to
shortages of ore and electrical problems as well as variable ore types with
increasing production from the lower levels.
Given these operating challenges, the Company will not achieve its most
recent production target of 300,000 ounces for 2003. In the fourth quarter,
production is expected to be 70,000 to 75,000 ounces at a cash cost of $210 to
$230 per ounce. Total cash operating costs, including the El Coco royalty, are
projected to be $240 to $260 per ounce. The cash operating cost projection has
been prepared based on assumed byproduct prices and exchange rates for the
fourth quarter of $4.90 per ounce silver, $0.40 per pound zinc, $0.85 per
pound copper and $1.30 US/Canadian dollar.
The table below summarizes the key variances in net loss for the third
quarter and year to date 2003 from the net income (loss) reported for the
comparable periods in 2002:
(millions of dollars) Third Quarter Year to Date
-------------------------------------------------------------------------
Increase in gold price $2.6 $7.3
Increase in copper production 1.4 5.7
Increase in silver production and price 0.6 4.4
Increase in operating costs (5.6) (13.1)
Increase (decrease) in gold production 0.3 (6.7)
Stronger Canadian dollar (2.4) (4.5)
Increase in El Coco royalty (2.5) (4.6)
Cumulative effect of adopting FAS 143 - (1.7)
Increase in amortization (1.2) (3.5)
Decrease in zinc production - (2.1)
Increase in deferred tax expense (0.1) (1.1)
Increase in interest expense (0.4) (1.2)
Exploration and other corporate items (4.0) (4.0)
------- -------
Net negative variance $(11.3) $(25.1)
------- -------
------- -------
The increase in operating costs was attributable to the operating
difficulties encountered in the third quarter of 2003 as well as the increased
throughput rate. In the first nine months of 2003, the mill processed 396,000
more tons of ore than in the same period of 2002 and achieved onsite operating
costs of C$52 per ton compared to C$51 per ton in the first nine months of
2002. In the third quarter of 2003, the operational difficulties discussed
above led to an increase in operating costs to C$56 per ton from C$51 per ton
in the third quarter of 2002.
In the third quarter of 2003 cash operating costs per ounce, excluding
the El Coco royalty, increased to $309 per ounce from $197 per ounce in 2002.
In the third quarter of 2003, total cash operating costs to produce an ounce
of gold were $368 compared to $208 in the same quarter of 2002. For the year
to date 2003, cash operating costs increased to $226 from $143 excluding the
El Coco royalty and total cash operating costs increased to $287 from $173 in
the first nine months of 2002. Total cash operating costs increased over 2002
due to lower gold production, a higher El Coco royalty, lower byproduct zinc
production and a stronger Canadian dollar. As illustrated in the table above,
these negative impacts on total cash operating costs were only partially
offset by increases in byproduct copper and silver production.
The following table provides a reconciliation of the total cash operating
costs per ounce of gold produced to the financial statements:
(thousands of dollars,
except where noted) Q3 2003 Q3 2002 YTD 2003 YTD 2002
-------------------------------------------------------------------------
Cost of production per
Consolidated Statements of
Income (Loss) $25,909 $15,460 $74,837 $52,676
Adjustments:
Byproduct revenues (7,150) (5,225) (28,017) (19,473)
El Coco royalty (3,000) (573) (10,074) (5,532)
Revenue recognition
adjustment (i) 132 432 1,165 (299)
Non cash reclamation provision (85) (250) (302) (925)
-------- -------- -------- --------
Cash operating costs $15,806 $9,844 $37,609 $26,447
Gold production (ounces) 51,192 50,073 166,354 184,948
-------- -------- -------- --------
Cash operating cost (per ounce) $309 $197 $226 $143
El Coco royalty (per ounce) 59 11 61 30
-------- -------- -------- --------
Total cash operating costs
(per ounce) (ii) $368 $208 $287 $173
-------- -------- -------- --------
-------- -------- -------- --------
Notes:
(i) Under the Company's revenue recognition policy, revenue is
recognized on concentrates when legal title passes. Since cash
operating costs are calculated on a production basis, this
adjustment reflects the portion of concentrate production for which
revenue has not been recognized in the year.
(ii) Total cash operating cost data is prepared in accordance with The
Gold Institute Production Cost Standard and is not a recognized
measure under US GAAP. Adoption of the standard is voluntary and
this data may not be comparable to data presented by other gold
producers. Management uses this generally accepted industry measure
in evaluating operating performance and believes it to be a
realistic indication of such performance. The data also indicates
the Company's ability to generate cash flow and operating earnings
at various gold prices. This additional information should be
considered together with other data prepared in accordance with
US GAAP.
Amortization expense increased 35% to $4.5 million in the third quarter
of 2003 from $3.3 million in the third quarter of 2002 and increased 35% to
$13.8 million in the first nine months of 2003 from $10.2 million in the first
nine months of 2002. The increase in amortization is attributable to the
increased mill throughput of approximately 28% and an increased capital base
resulting from the Company's expansion of the LaRonde Mine to 7,000 tons of
ore treated per day.
Income and mining taxes increased to $0.1 million and $1.1 million
respectively in the third quarter and nine months ended September 30, 2003
compared to nil in both comparable periods in 2002. The Company does not
expect to pay cash income and mining taxes in 2003 however it accrues deferred
income and mining taxes to reflect the drawdown of tax pools.
Liquidity and Capital Resources
At September 30, 2003, Agnico-Eagle's consolidated cash and cash
equivalents were $115 million while working capital was $144 million. At
December 31, 2002, the Company had $153 million in cash and cash equivalents
and $185 million in working capital. Including the undrawn portion of its bank
credit facility, the Company had $215 million of available cash resources at
September 30, 2003 compared to $253 million at December 31, 2002. The Company
currently has $100 million in undrawn credit and expects to have an additional
$25 million available once certain completion tests are satisfied in
connection with the LaRonde expansion to 7,000 tons per day. The credit
agreement in respect of the undrawn $125 million bank facility was amended in
the third quarter to temporarily defer the completion test covenant. The
Company now expects to achieve completion in 2004 and will likely seek a
further amendment to reflect the 2004 completion date.
Cash deficiency from operating activities, before working capital
changes, was $6.6 million and $6.5 million, respectively in the quarter and
nine months ended September 30, 2003 compared to cash flow of $2.3 million and
$14.9 million, respectively in the quarter and nine months ended September 30,
2002. Operating cash flow was impacted by lower gold production, a higher
El Coco royalty, lower byproduct zinc production and a stronger Canadian
dollar offset partially by higher byproduct copper and silver production.
For the three and nine months ended September 30, 2003, capital
expenditures and investments were $11.7 million and $41.1 million respectively
compared to $22.0 million and $51.7 million in the three and nine months ended
September 30, 2002. Capital expenditures at the Company's LaRonde Mine
decreased to $7.5 million and $29.0 million in the three and nine months ended
September 30, 2003 from $21.5 million and $50.9 million in the three and nine
months ended September 30, 2002. The decrease is due to the Company having
substantially completed the expansion of the LaRonde Mine to 7,000 tons per
day. In the third quarter of 2003, the Company invested approximately
$4.2 million in cash to acquire Barrick Gold Corporation's interest in the
Bousquet property. This cash outflow is netted in "Acquisitions, investments
and other" in the Company's Consolidated Statements of Cash Flows.
Summarized Quarterly Data (Unaudited) Agnico-Eagle Mines
Limited
-------------------------------------------------------------------------
(thousands of United States Three months ended Nine months ended
dollars, except where noted, September 30, September 30,
US GAAP basis) 2003 2002 2003 2002
-------------------------------------------------------------------------
Consolidated Financial Data
Income and cash flow
LaRonde Division
Revenues from mining
operations $ 24,845 $ 20,224 $ 84,971 $ 76,387
Mine operating costs 25,909 15,460 74,837 52,676
-------------------------------------------------------------------------
Mine operating profit (loss) $ (1,064) $ 4,764 $ 10,134 $ 23,711
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) for period $ (11,869) $ (630) $ (21,885) $ 3,207
Net income (loss) per share $ (0.14) $ (0.01) $ (0.26) $ 0.05
Operating cash flow (before
non-cash working capital) $ (6,580) $ 2,343 $ (6,525) $ 14,948
Weighted average number of
shares - basic (in thousands) 83,954 69,549 83,838 68,863
Tons of ore milled 570,661 456,818 1,821,585 1,425,234
Head grades:
Gold (ounces per ton) 0.10 0.13 0.10 0.15
Silver (ounces per ton) 1.69 2.25 2.14 2.34
Zinc 2.71% 4.01% 3.18% 4.30%
Copper 0.62% 0.31% 0.53% 0.28%
Recovery rates:
Gold 91.60% 92.43% 91.26% 93.28%
Silver 79.79% 77.60% 81.43% 80.41%
Zinc 75.00% 67.20% 77.10% 78.28%
Copper 79.90% 63.60% 79.40% 63.44%
Payable production:
Gold (ounces) 51,192 50,073 166,354 184,948
Silver (ounces in thousands) 648 547 2,733 1,990
Zinc (pounds in thousands) 20,561 20,713 75,605 81,450
Copper (pounds in thousands) 5,411 1,728 14,382 4,943
Realized prices per unit
of production:
Gold (per ounce) $ 365 $ 314 $ 354 $ 307
Silver (per ounce) $ 5.04 $ 4.73 $ 4.98 $ 4.65
Zinc (per pound) $ 0.37 $ 0.37 $ 0.36 $ 0.36
Copper (per pound) $ 0.80 $ 0.74 $ 0.76 $ 0.75
Onsite operating costs per ton
milled (Canadian dollars) $ 56 $ 51 $ 52 $ 51
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total operating costs per
gold ounce produced:
Onsite operating costs
(including asset retirement
expenses) $ 451 $ 304 $ 396 $ 256
Less: Non-cash asset
retirement expenses (2) (5) (2) (5)
Net byproduct revenues (140) (102) (168) (108)
-------------------------------------------------------------------------
Cash operating costs $ 309 $ 197 $ 226 $ 143
Accrued El Coco royalties 59 11 61 30
-------------------------------------------------------------------------
Total cash operating costs $ 368 $ 208 $ 287 $ 173
Non-cash costs:
Asset retirement expenses 2 5 2 5
Amortization 87 66 83 55
-------------------------------------------------------------------------
Total operating costs $ 457 $ 279 $ 372 $ 233
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Balance Sheets Agnico-Eagle Mines Limited
-------------------------------------------------------------------------
(thousands of United States September December
dollars, US GAAP basis) 30, 2003 31, 2002
-------------------------------------------------------------------------
(Unaudited)
ASSETS
Current
Cash and cash equivalents $ 114,873 $ 152,934
Metals awaiting settlement 18,861 29,749
Income taxes recoverable 4,748 2,900
Inventories:
Ore stockpiles 5,701 4,604
In-process concentrates 2,531 1,008
Supplies 5,652 5,008
Prepaid expenses and other 9,796 10,025
-------------------------------------------------------------------------
Total current assets 162,162 206,228
Fair value of derivative financial instruments 6,178 1,835
Investments and other assets 13,287 8,795
Future income and mining tax assets 23,759 23,890
Mining properties 397,452 353,059
-------------------------------------------------------------------------
$ 602,838 $ 593,807
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 17,043 $ 15,246
Dividends payable 756 3,013
Income and mining taxes payable - 954
Interest payable 310 1,873
-------------------------------------------------------------------------
Total current liabilities 18,109 21,086
-------------------------------------------------------------------------
Long-term debt 143,750 143,750
-------------------------------------------------------------------------
Fair value of derivative financial instruments - 5,346
-------------------------------------------------------------------------
Asset retirement obligation and other liabilities 21,806 5,043
-------------------------------------------------------------------------
Future income and mining tax liabilities 23,140 20,889
-------------------------------------------------------------------------
Shareholders' Equity
Common shares
Authorized - unlimited
Issued - 84,391,716 (2002 - 83,636,861) 600,447 591,969
Warrants 15,732 15,732
Contributed surplus 7,181 7,181
Deficit (217,908) (196,023)
Accumulated other comprehensive loss (9,419) (21,166)
-------------------------------------------------------------------------
Total shareholders' equity 396,033 397,693
-------------------------------------------------------------------------
$ 602,838 $ 593,807
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note: Certain items have been reclassified from financial statements
previously presented to conform to the current presentation.
Consolidated Statements of Income (Loss)
and Comprehensive Income (Loss) (Unaudited) Agnico-Eagle Mines Limited
-------------------------------------------------------------------------
(thousands of United States Three months ended Nine months ended
dollars, except per share September 30, September 30,
amounts, US GAAP basis) 2003 2002 2003 2002
-------------------------------------------------------------------------
REVENUES
Revenues from mining
operations $ 24,845 $ 20,224 $ 84,971 $ 76,387
Interest and sundry income 489 2,160 3,252 2,773
-------------------------------------------------------------------------
25,334 22,384 88,223 79,160
COSTS AND EXPENSES
Production 25,909 15,460 74,837 52,676
Exploration and corporate
development 2,199 1,081 4,637 2,724
Amortization 4,471 3,313 13,775 10,242
General and administrative 1,594 1,364 5,301 3,863
Provincial capital tax 408 182 1,182 1,174
Interest 2,236 1,833 6,694 5,486
Foreign currency (gain) loss (17) (439) (41) (940)
-------------------------------------------------------------------------
Income (loss) before income,
mining and federal
capital taxes (11,466) (410) (18,162) 3,935
Federal capital tax 309 220 898 728
Income and mining tax expense 94 - 1,082 -
-------------------------------------------------------------------------
Income (loss) before
cumulative catch-up
adjustment (11,869) (630) (20,142) 3,207
Cumulative catch-up adjustment
relating to FAS 143 - - (1,743) -
-------------------------------------------------------------------------
Net income (loss) for
the period $ (11,869) $ (630) $ (21,885) $ 3,207
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) before
cumulative catch-up
adjustment per share -
basic and diluted $ (0.14) $ (0.01) $ (0.24) $ 0.05
Cumulative catch-up adjustment
per share - basic and diluted - - (0.02) -
-------------------------------------------------------------------------
Net income (loss) per share -
basic and diluted $ (0.14) $ (0.01) $ (0.26) $ 0.05
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average number of
shares (in thousands)
basic 83,954 69,549 83,838 68,863
diluted 83,954 69,549 83,838 68,863
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Comprehensive income (loss):
Net Income (loss) for
the period $ (11,869) $ (630) $ (21,885) $ 3,207
Other comprehensive income
(loss):
Unrealized gain (loss) on
hedging activities,
net of tax (901) 557 7,099 (2,731)
Dilution gain on issuance
of shares by subsidiary,
net of tax 4,500 - 4,500 -
Unrealized gain (loss) on
available for sale
securities, net of tax 1,649 - 1,633 -
Realized gain on available
for sale securities,
net of tax - - (1,485) -
-------------------------------------------------------------------------
Other comprehensive income
(loss) $ 5,248 $ 557 $ 11,747 $ (2,731)
-------------------------------------------------------------------------
Comprehensive income (loss)
for the period $ (6,621) $ (73) $ (10,138) $ 476
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note: Certain items have been reclassified from financial statements
previously presented to conform to the current presentation.
Consolidated Statements of Deficit
and Accumulated Other Comprehensive
Loss (Unaudited) Agnico-Eagle Mines Limited
-------------------------------------------------------------------------
Three months ended Nine Months ended
(thousands of United States September 30, September 30,
dollars, US GAAP basis) 2003 2002 2003 2002
-------------------------------------------------------------------------
Deficit
Balance, beginning of period $(206,039) $(193,383) $(196,023) $(197,220)
Net income (loss) for
the period (11,869) (630) (21,885) 3,207
-------------------------------------------------------------------------
Balance, end of period $(217,908) $(194,013) $(217,908) $(194,013)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated other
comprehensive loss
Balance, beginning of period $ (14,667) $ (18,864) $ (21,166) $ (15,576)
Other comprehensive income
(loss) for the period 5,248 557 11,747 (2,731)
-------------------------------------------------------------------------
Balance, end of period $ (9,419) $ (18,307) $ (9,419) $ (18,307)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note: Certain items have been reclassified from financial statements
previously presented to conform to the current presentation.
Consolidated Statements of
Cash Flows (Unaudited) Agnico-Eagle Mines Limited
-------------------------------------------------------------------------
Three months ended Nine months ended
(thousands of United States September 30, September 30,
dollars, US GAAP basis) 2003 2002 2003 2002
-------------------------------------------------------------------------
Operating activities
Net income (loss) for
the period $ (11,869) $ (630) $ (21,885) $ 3,207
Add (deduct) items not
affecting cash from
operating activities:
Amortization 4,471 3,313 13,775 10,242
Provision for future income
and mining taxes 187 541 2,251 541
Unrealized (gain) loss on
derivative contracts (171) (1,344) (2,677) (1,344)
Cumulative catch-up
adjustment relating to
FAS 143 - - 1,743 -
Amortization of deferred
costs and other 802 463 268 2,302
-------------------------------------------------------------------------
Cash flow from operations,
before working capital changes (6,580) 2,343 (6,525) 14,948
Change in non-cash working
capital balances
Metals awaiting settlement 10,375 11,913 10,888 2,426
Income taxes recoverable (977) (649) (1,848) (1,189)
Inventories (908) (507) (3,264) (330)
Prepaid expenses and other (2,802) (124) (1,109) 189
Accounts payable and accrued
liabilities 3,289 (3,016) 1,971 2,712
Interest payable (1,636) (1,659) (1,563) (1,645)
-------------------------------------------------------------------------
Cash flows from (used in)
operating activities 761 8,301 (1,450) 17,111
-------------------------------------------------------------------------
Investing activities
Additions to mining properties (7,468) (21,486) (28,976) (50,940)
Acquisitions, investments
and other (4,192) (504) (12,079) (808)
-------------------------------------------------------------------------
Cash flows used in investing
activities (11,660) (21,990) (41,055) (51,748)
-------------------------------------------------------------------------
Financing activities
Dividends paid - (25) (2,431) (1,344)
Common shares issued 4,640 3,502 6,960 16,066
Proceeds from long-term debt - - - 143,750
Financing costs - - - (5,266)
Repayment of the Company's
senior convertible notes - - - (122,169)
-------------------------------------------------------------------------
Cash flows from financing
activities 4,640 3,477 4,529 31,037
-------------------------------------------------------------------------
Effect of exchange rate
changes on cash and
cash equivalents 54 (400) (85) 119
Net decrease in cash and
cash equivalents (6,205) (10,612) (38,061) (3,481)
Cash and cash equivalents,
beginning of period 121,078 28,311 152,934 21,180
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 114,873 $ 17,699 $ 114,873 $ 17,699
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other operating cash flow
information:
Interest paid during
the period $ 3,477 $ 3,708 $ 7,401 $ 22,950
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Taxes paid during the period $ 1,065 $ 663 $ 2,234 $ 3,302
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note: Certain items have been reclassified from financial statements
previously presented to conform to the current presentation.
APPENDIX A
FULL LAPA DRILL AND GOLD RESOURCE RESULTS
Contact Zone
-------------------------------------------------------------------------
True Gold Gold
Thickness (oz/ton) (oz/ton)
Drill Hole (ft) From To Cut(1.5 oz) Uncut
-------------------------------------------------------------------------
118-03-06A 11.8 2,561.3 2,577.1 0.36 0.36
-------------------------------------------------------------------------
118-03-25B 9.2 4,305.7 4,317.9 0.08 0.08
-------------------------------------------------------------------------
118-03-25C 10.2 4,016.7 4,028.8 0.16 0.16
-------------------------------------------------------------------------
118-03-26 10.5 1,717.8 1,734.2 n.s.r. n.s.r.
-------------------------------------------------------------------------
118-03-27A 11.2 1,899.9 1,918.3 0.05 0.05
-------------------------------------------------------------------------
118-03-28B 12.1 3,760.5 3,775.2 0.10 0.10
-------------------------------------------------------------------------
118-03-28F 9.5 3,551.8 3,561.6 0.13 0.13
-------------------------------------------------------------------------
118-03-28E 16.7 3,508.5 3,526.9 0.06 0.06
-------------------------------------------------------------------------
118-03-29 9.8 3,836.7 3,850.7 0.16 0.16
-------------------------------------------------------------------------
118-03-29A 9.5 3,388.7 3,398.9 0.05 0.05
-------------------------------------------------------------------------
118-03-29B 10.5 3,655.6 3,667.6 0.20 0.20
-------------------------------------------------------------------------
118-03-30A 10.8 2,409.4 2,422.9 0.02 0.02
-------------------------------------------------------------------------
118-03-31 17.4 1,784.1 1,813.6 0.21 0.21
-------------------------------------------------------------------------
118-03-32 9.5 2,570.3 2,585.3 0.04 0.04
-------------------------------------------------------------------------
118-03-32A 11.8 2,440.9 2,455.7 n.s.r. n.s.r.
-------------------------------------------------------------------------
118-03-34A 9.5 3,966.2 3,982.6 0.07 0.07
-------------------------------------------------------------------------
118-03-35 29.2 3,811.0 3,841.8 0.21 0.21
-------------------------------------------------------------------------
118-03-36 9.2 1,921.9 1,940.3 0.10 0.10
-------------------------------------------------------------------------
118-03-33A 21.7 2,509.8 2,536.7 0.32 0.32
-------------------------------------------------------------------------
118-03-35A 25.3 4,288.0 4,328.4 0.49 1.71
-------------------------------------------------------------------------
118-03-39 11.2 2,290.0 2,315.6 0.24 0.24
-------------------------------------------------------------------------
n.s.r. (equal sign) no significant result
Contact South Zone
-------------------------------------------------------------------------
True Gold Gold
Thickness (oz/ton) (oz/ton)
Drill Hole (ft) From To Cut(1.5 oz) Uncut
-------------------------------------------------------------------------
118-03-21A 11.5 3,148.9 3,163.0 0.32 0.32
-------------------------------------------------------------------------
118-03-28B 20.0 3,570.5 3,595.1 0.04 0.04
-------------------------------------------------------------------------
118-03-28E 12.8 3,358.6 3,372.7 0.52 2.24
-------------------------------------------------------------------------
118-03-28F 20.3 3,401.5 3,422.9 0.19 0.19
-------------------------------------------------------------------------
118-03-35 12.1 3,712.6 3,725.7 0.08 0.08
-------------------------------------------------------------------------
118-03-35A 16.4 4,237.8 4,265.0 0.14 0.14
-------------------------------------------------------------------------
Gold Mineral Resource(1)
-------------------------------------------------------------------------
Gold Gold
(oz/ton) Gold (oz/ton) Gold
Category Tons Cut(1.5 oz) (ozs) Uncut (ozs)
-------------------------------------------------------------------------
Indicated 2,460,700 0.29 722,012 0.41 997,611
-------------------------------------------------------------------------
Inferred 1,880,300 0.25 462,069 0.38 709,413
-------------------------------------------------------------------------
(1) The disclosure of indicated and inferred resource in this document is
for cut gold values only. The disclosure of uncut grades for
indicated resources is for comparative purposes only.
SOURCE Agnico-Eagle Mines Limited
CONTACT:
Barry Landen
V.P. Corporate Affairs
Agnico-Eagle Mines
Limited, (416) 947-1212
(AGE. AEM)
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