AEM - AR06



Sean Boyd Vice-Chairman and Chief Executive Officer

fellow shareholders

	In many respects, the achievements of 2006 represent a coming of age for Agnico-Eagle. For the third consecutive year, our flagship LaRonde mine operated at steady state, continuing to be a reliable engine of earnings and cash flow.


	We made significant progress on all five of our major growth projects. Despite a large exploration and capital investment program, the company’s financial position improved, and we quadrupled the previous rate of our longstanding annual dividend. With a $5.0-billion market capitalization, Agnico-Eagle ranked among the top 10 gold producers in the world at year-end. The company was also added to the S&P/TSX 60, recognizing the company as one of Canada’s largest, most liquid corporations. We are immensely proud of our accomplishments. However, from our perspective, our work is far from done. We’ve simply enhanced our ability to do more. Our focus is on growth, on building greater value for shareholders by leveraging Agnico-Eagle’s financial strength and mining expertise to find, acquire, and build mines, and produce more gold.

	A Solid Foundation The cornerstone of Agnico-Eagle’s success is the LaRonde mine, near Val-d’Or, Quebec, which extracts gold from one of Canada’s largest gold deposits. In 2006, we began construction on a $210-million project to deepen LaRonde and extend the projected mine life beyond 2020. LaRonde processed an average of 7,300 tonnes of ore per day in 2006, producing 245,826 ounces of gold, as well as 5.0 million ounces of silver, 82,000 tonnes of zinc, and 7,300 tonnes of copper. Strong metal prices helped lower the total cash cost per ounce of gold mined at LaRonde to a record low of minus $690, compared to $43 per ounce a year earlier and to an industry average of approximately $300 per ounce. This exceptional performance meant that we were in essence mining gold for free, as the byproduct revenue greatly exceeded our total costs of mining, processing, refining, and corporate overhead. Agnico-Eagle’s annual earnings rose 436% to $161 million in 2006 and cash provided by operating activities increased 273% to $226 million, driven primarily by the solid operating performance at LaRonde and higher metal prices. Our financial position also improved, with a cash balance of $459 million at year-end, no long-term debt, and essentially undrawn bank lines of $300 million. From this position of strength, Agnico-Eagle is pursuing an ambitious development and exploration program in Canada, Finland, Mexico, and the United States, aimed at tripling annual gold production to 750,000 ounces by 2009. Four Mine projects under Construction In addition to the LaRonde extension project, we are building new mines at Goldex and Lapa that are on track to commence production in 2008. These three Canadian projects are within 50 kilometres of one another and benefit from the same infrastructure and mining team. The $135-million Goldex mine is expected to produce an average of 170,000 ounces of gold per year. The $110-million Lapa mine will average an estimated 125,000 ounces per year. Gold production at LaRonde is estimated to grow to an average of 320,000 ounces per year once the deeper ore is accessed, beginning in 2011. Construction of the $135-million Kittila mine in Finland began in the second quarter of 2006 and is targeted to begin production by the third quarter of 2008. This mine is projected to produce an average of 150,000 ounces per year. Advanced Exploration Agnico-Eagle has a proven ability to discover gold. At LaRonde, we found gold where others said there was none. What’s more, despite the mine’s high production rates, we have consistently maintained or expanded its reserves. In 2006, we allocated $30 million to finding more gold, the largest exploration budget in the company’s history. Our goal is to grow gold reserves at our existing projects to between 14 and 15 million ounces by year-end 2007. At December 31, 2006, proven and probable gold reserves stood at 12.5 million ounces, compared to 10.4 million in 2005. A primary focus of the 2006 activity was the Pinos Altos project in northern Mexico. We completed the acquisition of this large property in early 2006, after an extensive drilling campaign doubled the contained gold and silver resources. Ongoing exploration at Pinos Altos is focused on upgrading resources to reserves and drilling in under-explored regions. Agnico-Eagle will be presenting a feasibility study for the Board’s consideration by mid-2007. If approved for construction, Pinos Altos could begin producing gold and silver in 2009. We continued targeted drilling programs at all properties, discovering new gold zones at Kittila, Lapa, LaRonde, and Pinos Altos. What is particularly encouraging is that several of the recent discoveries were outside of the previously contemplated mining areas. This has given us reason to believe that, through further exploration, gold reserves could grow beyond our 14- to 15-million-ounce target within the next several years. Delivering Value Throughout 2007, we will continue to pursue our ambitious growth plans, preparing to bring three new mines on-stream in 2008 and possibly a fourth, at Pinos Altos, in 2009. In our drive to increase gold reserves, exploration activity will continue at the same aggressive pace. We anticipate ore production rates at LaRonde will remain at the same high levels as in recent years. While all gold producers are facing onerous cost pressures, economies of scale, optimization efforts, and stable energy costs in Quebec should help us mitigate the impact better than many others – as should continued buoyant byproduct metal prices. Producing gold at the lowest possible cost is a competitive advantage that positions the company to deliver value no matter what the price of gold. Already in 2007, we have announced a take-over bid to acquire Cumberland Resources Ltd., the owner of the Meadowbank gold project in northern Canada. We are optimistic that we will be able to complete the transaction, which would cause Agnico-Eagle’s pro forma gold reserves to increase by 23% and projected gold production to rise a further 39% in 2010 to approximately 1.3 million ounces. In summary, we are passionate about our growth strategy and confident in our team’s ability to execute the plan. Once again this year, a special word of thanks is due to our employees, who have always shared our enthusiasm for creating a stronger company, and whose mining expertise is making it possible to grow and build value.

	Sincerely, Sean Boyd Vice-Chairman and Chief Executive Officer February 22, 2007