Sean Boyd
Vice-Chairman and
Chief Executive Officer
fellow shareholders:
 
 
We remain confident in the price of gold, and are excited by what it could mean by way of increasing returns for shareholders. We have built this company to be the gold stock of choice – offering significant leverage to rising metals prices and steadfastly maintaining a policy of no forward gold sales. For investors looking for quality growth and exposure to gold, this is the prime time to consider AEM.
 
     

This is a very exciting time in Agnico-Eagle's history. After more than three decades of building the company, and our reputation as an experienced mine developer and low-cost gold producer, Agnico-Eagle is poised to grow at an unprecedented rate.

Here's why investors interested in gold would do well to consider AEM – the new symbol for growth, value and gold:

     
 
Large growth pipeline   International diversification
Agnico-Eagle enjoys an unparalleled reserve position among intermediate-sized gold companies. In 2005, gold reserves grew 32% to a record 10.4 million ounces. By 2009, our five growth projects are projected to triple our gold production.   Agnico-Eagle now has large property positions in Canada, Mexico, Finland and the United States. All properties are in areas of low political risk with long-term mining camp potential, and several have near-term production prospects.
 
Quality business   Agnico-Eagle participates 100% in rising gold prices
Strong earnings and cash flows, low-cost production, a solid balance sheet, a stable and experienced mining team, and a disciplined approach to exploration deliver value no matter what the price of gold.  

We have never sold away the upside price potential of our future gold production and have no intention of doing so in the future.

 
 

 

  
  Record Operating and Financial Performance
In 2005, we demonstrated once again the underlying strength of our company, setting several operating and financial records. For the second consecutive year, our flagship LaRonde mine processed an average of approximately 7,300 tonnes of ore a day.

Total cash costs at LaRonde were at a record low level of $43 per ounce of gold compared to $56 in 2004. In an industry where the standard is approximately $250 per ounce, low-cost production provides our shareholders with valuable protection against any future decline in product prices.

This impressive result in 2005 can largely be attributed to high production volumes and significantly higher prices for our byproduct metals of silver, zinc and copper. To capitalize on soaring zinc prices, and in keeping with our goal of maximizing the value of the LaRonde orebody, we increased zinc tonnage 5% over budget. While this decision contributed to lower gold production – 241,807 ounces versus 271,567 ounces a year earlier – it also helped drive record annual revenues and operating cash flows.

In 2005, revenues from mining operations increased to $241 million, compared to $188 million a year earlier. Earnings totaled $37.0 million versus $47.9 million in 2004. The difference is largely attributable to a loss on zinc derivative financial instruments and increased exploration expenses in 2005. The exploration helped drive our gold reserves up to a record 10.4 million ounces. Cash provided by operating activities increased to a record $83.0 million from $49.5 million in 2004.

In addition, I'm extremely proud to report that Agnico-Eagle paid an annual dividend to shareholders for the 26th consecutive year. Very few gold companies can match our track record.

Our Mandate is Value-Added Growth
Thanks to the strong cash flows consistently generated at LaRonde, the mandate for 2005 and beyond is growth. Our goal is to create value for shareholders by using our broad range of technical skills to build a low-cost, multi-mine platform in mining-friendly regions around the world. This past year, we took giant steps towards achieving this goal.

Construction is well advanced at our Goldex property. Shaft sinking and underground definition drilling has begun at the Lapa project. Mine start-up is possible at both of these projects in 2008, adding close to 300,000 ounces of low-cost gold production to our annual totals and confirming the Abitibi region of northwestern Quebec as one of the world's most prolific gold mining camps.

We made a successful $130-million bid for the remaining shares of Riddarhyttan Resources AB. This acquisition includes 100% ownership of the Suurikuusikko gold deposit in Finland. The deposit hosts probable gold reserves of 2.3 million ounces. Pending the results of a final feasibility study, gold production at Suurikuusikko could commence as early as 2008.

Early in 2005, we signed an option agreement to purchase 100% of the Pinos Altos property in northern Mexico. Under this agreement, we conducted a drilling program that doubled the gold and silver resources on the property, prompting us to exercise our option to acquire the property in February of this year. Through the remainder of 2006, we intend to continue the aggressive drilling campaign to gather the data necessary for a feasibility study.

LaRonde II, the deeper extension of the current LaRonde operation, holds our most substantial reserves, with gold grades significantly higher than those of LaRonde. Having completed a feasibility study in 2005, we are awaiting the results of a third-party review. LaRonde II could be approved for construction in 2006, with initial production within five years.

Collectively, these five growth projects have the potential to triple Agnico-Eagle's gold production and add significantly to our large gold reserve base by 2009.

The Year Ahead
Our team has remained focused on building our business in a disciplined and systematic manner. As a result, Agnico-Eagle has a very solid foundation built on financial strength, superior technical skills, large and expanding gold reserves, and growing low-cost gold production. Although we have built a strong platform for growth, we will actively identify and assess promising new opportunities. And, as we diversify our gold production base into new regions of the world, we will continue to be strong contributors to the communities in which we operate and look forward to the new partnerships that will be formed.

Despite the challenges of operating a large, complex gold deposit, we are projecting 2006 LaRonde production levels to be similar to last year's results. Likewise, LaRonde is expected to maintain its leading, low-cost position and generate significant cash flow to help fund our growth plans.

Our exploration budget in 2006 is expected to be the largest in the company's history. The focus will be on the Suurikuusikko and Pinos Altos properties.

In closing, I would like to welcome our newest board member, Mr. Pertti Voutilainen. Mr. Voutilainen is a mining industry veteran who was most recently the Chairman of the Board of Riddarhyttan. He will be an invaluable resource as we advance our growth projects.

I would also like to extend a heartfelt thanks to Agnico-Eagle employees for their dedication and hard work. We value their contributions to our success and recognize their importance to our growth plans. I am especially pleased that the company's expansion will provide our people with opportunities to enhance their skill sets and gain international experience.

 
     
  Sincerely,

Sean Boyd
Vice-Chairman and Chief Executive Officer
February 22, 2006