Following a three-year examination of opportunities in the Sierra Madre gold and silver camp, Agnico-Eagle finalized an exploration and option agreement with Industrias Peñoles S.A. de C.V. in 2005, giving us the right to purchase the Pinos Altos project upon completion of a $2.8 million drilling campaign. With its rich geology, low operating costs, political stability and mining-friendly regulatory structure, Mexico is seen as a promising place for Agnico-Eagle to grow.

The large Pinos Altos property, located 225 kilometres west of Chihuahua City, the capital of Mexico's Chihuahua state, is directly accessible by paved highway and close to a major electric power terminus, which is under construction.

The 2005 drilling campaign confirmed an indicated resource of 12.5 million tonnes, grading 3.9 grams of gold per tonne and 102 grams per tonne of silver, containing approximately 1.6 million ounces of gold and 41 million ounces of silver. The property has inferred resources of 3.2 million tonnes, grading 5.2 grams per tonne of gold and 111 grams per tonne of silver, containing approximately 0.5 million ounces of gold and 11.6 million ounces of silver.

In addition, the drilling program validated the open-pit potential of the site and indicated mineralization outside of the current resource outline. These encouraging results prompted us to exercise our option to purchase the property for $32.5 million in cash, 1,869,350 in common shares of Agnico-Eagle and an additional $6.5 million worth of shares (priced near the closing date).

In 2006, we intend to continue our aggressive drilling campaign to gather the data necessary for a bankable feasibility study.

Preliminary analysis contemplates a 3,000 tonne per day operation with the open pit and underground mines each supplying 1,500 tonnes. Capital cost estimates to bring the project into production are estimated at approximately $150 million.