Agnico-Eagle reports record low cash costs in second quarter; shaft sinking and underground program started at Lapa

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Agnico-Eagle reports record low cash costs in second quarter; shaft sinking and underground program started at Lapa Stock Symbols: AEM (NYSE) AGE (TSX) TORONTO, Aug. 4 /PRNewswire-FirstCall/ -- Agnico-Eagle Mines Limited today announced continued improvements in financial and operating results as it reported second quarter earnings of $8.8 million, or $0.11 per share compared to a net loss of $3.8 million, or $(0.05) per share, in the second quarter of 2003. Operating cash flow in the quarter was $17.1 million, or $0.20 per share compared to $0.6 million, or $0.01 per share, in the prior year's second quarter. For the year to date, net earnings were $21.7 million, or $0.26 per share, compared to a net loss of $10.0 million, or $(0.12) per share, in the first six months of 2003. Over the same periods, operating cash flow increased to $37.9 million, or $0.45 per share, from essentially nil. Highlights for the quarter include: - Record ore processed at LaRonde of nearly 8,300 tons per day drives gold production up 8% to over 65,000 ounces and cash costs down 70% to a record $77 per ounce. - $30 million shaft sinking, underground development, drilling and metallurgical program initiated at Lapa. - Drill intercepts from LaRonde's Level 215 exploration drift encounter highest grade gold value at depth to date in Zone 20 North and intersect recurrence of Zone 20 South at depth. - High gold grade intersected in 3-4 Zone on Bousquet outside known resource envelope. "Our LaRonde mine has now delivered three solid quarters of steady-state operations and positive earnings," said Sean Boyd, President and Chief Executive Officer. "This performance creates a solid base for future growth and has allowed Agnico-Eagle to move forward with confidence to the next phase of potential production growth at our Lapa project," added Mr. Boyd. Conference Call Tomorrow The Company's senior management will host a conference call on Thursday, August 5, 2004 at 11:00 a.m. (E.S.T.) to discuss financial results and provide an update on the Company's exploration and development activities. 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. A live audio webcast of the call will be available on the Company's website at http://www.agnico-eagle.com/. The conference call will be replayed from Thursday, August 5, 2004 1:00 p.m. (E.S.T.) to Thursday, August 12, 2004 11:59 p.m. (E.S.T.). Please dial the toll-free access number 877-289-8525, passcode 21031482 followed by the number sign. LaRonde Continues its Record Performance Record quarterly tonnage of over 753,000 tons of ore, or 8,276 tons per day, was hoisted from the underground operations at LaRonde in the second quarter. Mill throughput also established a new record as nearly 754,000 tons of ore was processed averaging 8,283 tons per day. The surface stockpile of LaRonde ore is currently over 74,000 tons. As a result of the increased ore production, onsite unit operating costs improved by 2% to C$47 per ton, when compared to the second quarter of 2003. Net metals revenue per ton amounted to nearly C$84 per ton resulting in a gross profit margin of approximately C$37 per ton mined and processed in the second quarter. Production of all metals in the second quarter improved when compared to the prior year's second quarter with gold production up 8% to 65,233 ounces while byproduct silver, zinc and copper production increased by 49%, 38% and 1%, respectively. As a result of the improvement in metals production, improved prices for all byproduct metals and the elimination of production royalties, total cash operating costs improved by 70% to $77 per ounce of gold produced in the second quarter of 2004 as compared to the second quarter of 2003. Cash Costs Expected to be Well Below Target for 2004 Given the record underground and mill performance in the first half of the year, the Company is revising its targets for all metals production. A comparison between the new forecast and the original budget for production and operating costs follows: ------------------------------------------------------------------------- New Forecast Original Budget ------------------------------------------------------------------------- Ore processed (000's tons) 2,900 2,555 Daily throughput rate (tons) 7,945 7,000 Grades: Gold (oz./t) 0.11 0.13 Silver (oz./t) 2.43 2.50 Zinc (%) 3.87 3.40 Copper (%) 0.54 0.60 Payable metal production: Gold (ozs.) 293,000 300,000 Silver (000's ozs.) 5,500 4,700 Zinc (000's lbs.) 155,000 120,000 Copper (000's lbs.) 23,200 24,000 Minesite operating costs (C$/ton) 45-47 49-51 Total cash operating costs ($/oz.) 70-80 155-165 ------------------------------------------------------------------------- LaRonde's total cash operating costs are expected to decline significantly for the full year 2004 from an original target range of $155 to $165 per ounce to new target range of $70 to $80 per ounce. The decline in total cash operating unit costs from the original estimate for 2004 is attributable to higher byproduct zinc and silver production as well as increases in byproduct metal prices. The new target for total cash operating costs is based on a balance of the year silver price of $6.00 per ounce, zinc price of $0.45 per pound, copper price of $1.20 per pound and C$/US$ exchange rate of 1.30. The estimated sensitivity of LaRonde's 2004 total cash operating costs to changes in metal prices and exchange rates in the last six months of the year follows: ------------------------------------------------------------------------- Change in variable Impact on total cash operating costs ($/oz.) ------------------------------------------------------------------------- $0.10 in C$/US$ 13 $0.50/oz. in silver 5 $0.05/lb. in zinc 9 $0.10/lb. in copper 4 ------------------------------------------------------------------------- Please refer to the Summary Management Discussion and Analysis later in this press release for a discussion of the financial results. Underground Program at Lapa to Test High Grade Potential The Company has commenced a $30 million underground development, drilling and metallurgical program at its 100% owned Lapa property. Located seven miles east of the Company's flagship LaRonde mine in northwestern Quebec, Lapa contains 1.2 million ounces of proven and probable gold reserves. Since Agnico-Eagle discovered the deposit in 2002, the Company has conducted 268,000 feet of surface drilling tracing the deposit to a depth of 4,000 feet below surface over a strike length of 2,000 feet and a vertical extent of 3,000 feet with thicknesses ranging from 10 to 100 feet. While the diluted reserve grade is 0.26 ounces of gold per ton, the reserve estimate incorporates a cutting factor, depending on the deposit lens, of between 1.5 and 2.0 ounces per ton. Due to the high frequency of coarse visible gold in the drill core, the uncut grade of the Lapa deposit is 0.35 ounces per ton. Historically, underground drill programs in the Abitibi mining camp have in some cases resulted in material increases in mineralization, as was the case at LaRonde. Lapa remains open for expansion at depth with gold grades also improving with increasing depth. Preparation for Shaft Sinking at Lapa Now Underway The engineering and shaft sinking contract has been awarded and surface mobilization has commenced for a 2,700-foot shaft sinking project. The 16-foot diameter concrete-lined shaft will be completed by the first half of 2006 providing access for an underground diamond drilling program to test the depth potential of the deposit, confirm the mining method, continuity and estimated dilution factor and to extract a 15,000 ton metallurgical bulk sample. The objective of the bulk sample is to refine the metallurgical process and determine whether the frequency of coarse visible gold is sufficient to justify an increase in the reserve grade closer to the uncut grade, which would have a materially positive impact on the project's economics. Positive results from this program would result in an extension of the shaft to a depth of approximately 4,500 feet below surface. Incremental capital costs to bring the project into full production after the bulk sample are currently estimated at approximately $80 million. Assuming no further additions to reserves, the Company envisages an eight-year mine life with full production levels by late 2008 of approximately 125,000 ounces of gold per annum at cash operating costs of approximately $175 per ounce. Lapa Program to be Partially Financed by Flow-through Share Financing The Company has agreed to a private placement from treasury of 1,000,000 shares to flow-through investors for total proceeds of C$23 million ($17.5 million). Under the terms of the private placement, Agnico-Eagle will renounce an equivalent amount of tax deductions from its Lapa program expenditures to the investors. As a result, the shares will be issued at C$23.00 per share, a 33% premium to the Company's closing stock price today. With over $600 million in Canadian tax pools available to offset future taxable income, Agnico-Eagle is uniquely positioned among gold producers to issue flow-through common equity at a significant premium to market to finance the expansion of its Canadian production base. Deep Drilling at LaRonde Continues to Indicate Higher Grade Core Seven drills were in operation at LaRonde during the second quarter working on the following target areas: - Three drills on LaRonde II exploration program below Level 215 exploration drift. - Three drills on definition-delineation drilling on Level 215 mining horizon. - One drill on Level 152 mining horizon. Over 38,000 feet of diamond drilling was completed during the quarter. Year to date, nearly 74,000 feet has been drilled. On deep exploration, three drills tested Zone 20 North below the bottom of the Penna Shaft, the highlights of which follow: ------------------------------------------------------------------------- Gold (oz/ton) Drill True Cut Silver Copper Zinc Hole Thickness(ft) From To (1.5 oz) (oz/ton) (%) (%) ------------------------------------------------------------------------- 3215-74B 72.2 2,538.1 2,625.3 0.13 0.37 0.47 0.04 ------------------------------------------------------------------------- Including 30.5 2,558.4 2,595.1 0.20 0.60 0.79 0.05 ------------------------------------------------------------------------- 3215-76A 10.8 2,436.0 2,447.2 0.07 0.10 0.01 0.01 ------------------------------------------------------------------------- 3215-83 40.0 3,357.9 3,406.5 0.18 0.13 0.15 0.02 ------------------------------------------------------------------------- 3215-84 52.5 2,431.8 2,501.6 0.18 0.44 0.25 0.01 ------------------------------------------------------------------------- 3215-85A 9.2 4,141.1 4,147.6 0.02 1.04 Tr 0.13 ------------------------------------------------------------------------- 3215-89 56.1 2,480.3 2,574.8 0.17 0.18 0.13 0.02 ------------------------------------------------------------------------- Including 24.3 2,480.3 2,521.0 0.24 0.13 0.02 0.03 ------------------------------------------------------------------------- 3215-85D 12.1 3,784.1 3,800.2 0.26 1.95 0.37 9.66 ------------------------------------------------------------------------- Uncut 12.1 3,784.1 3,800.2 0.59 1.95 0.37 9.66 ------------------------------------------------------------------------- TR(equal sign)Trace Value The two most significant results were drill holes 3215-85A and 85D, both of which tested for the western extension of the polymetallic values encountered in previously disclosed drill hole 3215-68A. Drill hole 3215-85A, drilled approximately 1,000 feet to the west of 3215-68A, intersected strong alteration but no significant economic values. Drill hole 3215-85D was subsequently completed 500 feet west of drill hole 3215-68A and intersected the highest gold grade to date at depth. This intersection occurred at a depth of 9,800 feet below surface and is the second economic value on the 100% owned Terrex Property, located immediately south of LaRonde. As was the case with drill hole 3215-68A, silver, copper and zinc values were intersected and visible gold was noted in the core. The overall zone was very similar in thickness to that in drill hole 3215-68A in that the higher grade mineralization was restricted to a massive sulfide core. However, the stringer mineralization in the footwall of 3215-68A was economic while the gold values in 3215-85D were not. Since the drilling is still limited at depth and to the west, it is unknown how much tonnage is involved in the higher grade polymetallic zone to the west. A higher grade polymetallic zone along with the confirmed higher grade gold zone located above these values could potentially have a significant impact on the economics and development plans for LaRonde II. Additional drilling will be conducted from the Level 215 exploration drift which is currently at the former Bousquet-LaRonde property boundary. In light of these results, drill hole 3215-84 was extended into Zone 20 South at depth, returning the following value at a depth of 8,900 feet below surface. ------------------------------------------------------------------------- Gold (oz/ton) Drill True Cut Silver Copper Zinc Hole Thickness(ft) From To (1.5 oz) (oz/ton) (%) (%) ------------------------------------------------------------------------- 3215-84 26.6 2,844.2 2,876.6 0.11 0.46 0.85 0.08 ------------------------------------------------------------------------- Including 9.2 2,844.2 2,855.3 0.26 0.42 0.45 0.04 ------------------------------------------------------------------------- The mineralization was typical of Zone 20 South consisting of pyrite, pyrrhotite and chalcopyrite stringers. At 26.6 feet, the zone was significantly thicker and represents the deepest and highest grade intersection of Zone 20 South to date, confirming the western down plunge extension of the mineralization and horizon. It also confirms that the horizon is lenticular and could reoccur at any point. Drill holes will now be systematically extended into Zone 20 South. As is the case with Zone 20 North drill results at depth, an additional higher grade satellite lens could potentially have a positive impact on LaRonde II project economics. Drilling at Bousquet Encounters High Grade During the quarter three drills operated on the Bousquet-Ellison property: - One at the western end of Level 9-0 exploration drift testing the Ellison Property. - One drill on the western end of Level 9-0 testing the 3-4 Zone below Bousquet 1 workings. - One drill testing the western down plunge extension of the 3-1 Zone from the ramp. Over 23,000 feet were drilled during the quarter. The most interesting result, obtained from the 3-4 Zone, follows: -------------------------------------------------- Gold (oz/ton) Drill True Cut Hole Thickness(ft) From To (1.5 oz) -------------------------------------------------- D04-2789HW 10.5 2,728.0 2,744.7 0.36 -------------------------------------------------- D04-2789FW 10.5 2,676.0 2,695.8 0.17 -------------------------------------------------- The drill hole intersected two parallel zones. The FW zone occurred within 60-foot wide sericitized and silicified unit containing 2.20% pyrite at a depth of 6,100 feet and 140 feet west of the Bousquet-Ellison boundary. The latest result is encouraging because it is in a largely untested area of the 3-4 Zone where preliminary studies have indicated that the zone could be economic. The 3-4 Zone currently hosts an inferred resource of 2.2 million tons grading 0.32 ounces of gold per ton containing 710,000 ounces of gold. Two drills are currently testing the 3-4 Zone. Where to Find Maps The longitudinal illustrations that detail the drill results presented in this news release can be viewed and downloaded from the Company's website http://www.agnico-eagle.com/ (Press Release) or: LaRonde & Bousquet Zone 20 North & LaRonde Zone 20 South-New Diamond Drill Results http://ir.thomsonfn.com/IRUploads/10493/FileUpload/LARONDE.pdf Bousquet Property Exploration Results http://ir.thomsonfn.com/IRUploads/10493/FileUpload/Long_B2.pdf Property Map http://ir.thomsonfn.com/IRUploads/10493/FileUpload/Property_Map.pdf Scientific and Technical Data A qualified person, Guy Gosselin, P.Eng., P.Geo., LaRonde Division's Chief Geologist, has verified the LaRonde exploration information 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 2004 Mineral Resource and Mineral Reserve Report, Agnico-Eagle Mines Limited, LaRonde Division, dated March 26, 2004, filed on SEDAR. The qualified person responsible for the Bousquet and Ellison exploration information is Normand Bedard P.Geo., Regional Division's Senior Geologist. 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 24 consecutive years. SUMMARIZED QUARTERLY MANAGEMENT DISCUSSION AND ANALYSIS UNITED STATES GAAP (all figures are expressed in US dollars unless otherwise noted) Results of Operations Agnico-Eagle reported second quarter net income of $8.8 million, or $0.11 per share, compared to a net loss of $3.8 million, or $(0.05) per share, in the second quarter of 2003. Gold production in the second quarter of 2004 was 65,233, an increase of 8% over 60,157 ounces in the second quarter of 2003. For the year to date, Agnico-Eagle reported net income of $21.7 million, or $0.26 per share, compared to a net loss of $10.0 million, or $(0.12) per share, in the first six months of 2003. Gold production increased 18% in the first six months of 2004 to 135,421 ounces from 115,162 ounces in 2003. Production continued to increase compared to the same periods of 2003 as LaRonde continues to benefit from operational improvements and a more focused mining plan. Increased production is also partially due to increased throughput. Ore throughput continues to increase as the mill established another quarterly throughput record processing 753,724 tons. Year to date tonnage processed increased 15% to 1,442,926 tons in the first six months of 2004 compared to 1,250,925 tons in the same period in 2003. The table below summarizes the key variances in net income for the second quarter and year to date of 2004 from the net loss reported for the same periods in 2003. (millions of dollars) Second Quarter Year to Date ------------------------------------------------------------------------- Increase in gold production $ 1.8 $ 7.1 Elimination of Production royalty 3.0 7.1 Increase in gold price 3.5 8.1 Increase in net copper revenue 4.5 7.6 Increase in net zinc revenue 1.0 4.6 Increase in net silver revenue 4.8 6.8 Stronger Canadian dollar, net of hedges 0.2 (1.9) Increased amortization (1.1) (2.1) Cost of increased ore throughput (4.3) (6.2) Corporate costs and other (0.8) 0.6 ------- ------- Net positive variance $12.6 $31.7 ------- ------- ------- ------- As shown in the table above, revenues from all metals benefited from increased production and increased metal prices in both the second quarter and year to date. Net copper and zinc revenues benefited from increased production and metal prices but these benefits were partially offset by increased smelting and refining charges attributable to the increase in production of these metals and increasing costs associated with shipping these metals to overseas smelters. Transportation charges associated with LaRonde's zinc concentrates are expected to decline in the second half of 2004 as LaRonde begins delivering material to Falconbridge's Kidd Creek facility, as previously disclosed. In all, revenues from mining operations increased 52% and 58% respectively in the second quarter and first six months of 2004. Net income was also positively affected by the elimination of the production royalty as that area of the mine is essentially mined out. In the second quarter of 2004 total cash operating costs per ounce decreased significantly to $77 per ounce of gold produced from $258 per ounce in the second quarter of 2003. For the year to date 2004, total cash operating costs decreased to $78 from $251 in the same period of 2003. The main drivers leading to the decrease in total cash operating costs, for both the quarter and year to date, were higher gold production, higher net byproduct revenue resulting from increased production and higher byproduct metal prices, and the elimination of the production royalty. Operating costs per ton decreased to C$47 in the second quarter of 2004 compared to C$48 in the second quarter of 2003 due mainly to the mill achieving record quarterly tonnage of 753,724 tons in the second quarter of 2004. Similarly, operating cost per ton decreased to C$47 in the first six months of 2004 compared to C$50 in the first six months of 2003 due mainly to a 15% increase in mill throughput and improved underground productivity for the year to date 2004 compared to the similar period in 2003. The following tables provide a reconciliation of the total cash operating costs per ounce of gold produced and operating cost per ton to the financial statements: (thousands of dollars, except where noted) Q2 2004 Q2 2003 YTD 2004 YTD 2003 ------------------------------------------------------------------------- Cost of production per Statement of Income (Loss) $ 25,680 $ 24,581 $ 49,821 $ 48,928 Adjustments: Byproduct revenues (19,921) (9,488) (38,132) (20,867) Production royalty - (3,000) - (7,074) Inventory adjustment(i) (603) 531 (898) 1,111 Non-cash reclamation provision (131) (112) (261) (217) --------- --------- --------- --------- Cash operating costs $ 5,025 $ 12,512 $ 10,530 $ 21,881 Gold production (ounces) 65,233 60,157 135,421 115,162 --------- --------- --------- --------- Cash operating cost (per ounce) $ 77 $ 208 $ 78 $ 190 Production royalty (per ounce) - 50 - 61 --------- --------- --------- --------- Total cash operating costs (per ounce)(iii) $ 77 $ 258 $ 78 $ 251 --------- --------- --------- --------- --------- --------- --------- --------- (thousands of dollars, except where noted) Q2 2004 Q2 2003 YTD 2004 YTD 2003 ------------------------------------------------------------------------- Cost of production per Statement of Income (Loss) $ 25,680 $ 24,581 $ 49,821 $ 48,928 Adjustments: Production royalty - (3,000) - (7,074) Inventory adjustment(i) and hedging adjustments(ii) 383 860 1,211 1,293 Non-cash reclamation provision (131) (112) (261) (217) --------- --------- --------- --------- Minesite operating costs (US$) $ 25,932 $ 22,329 $ 50,771 $ 42,930 --------- --------- --------- --------- Minesite operating costs (C$) $ 35,201 $ 31,220 $ 67,990 $ 62,342 --------- --------- --------- --------- Tons milled (000's tons) 754 648 1,443 1,251 --------- --------- --------- --------- Operating costs per ton (C$)(iii) $ 47 $ 48 $ 47 $ 50 --------- --------- --------- --------- --------- --------- --------- --------- Notes: (i) Under the Company's revenue recognition policy, revenue is recognized on concentrates when legal title passes. Since total 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 period. (ii) Hedging adjustments reflect gains and losses on the Company's derivative positions entered into to hedge the effects of foreign exchange fluctuations on production costs. These items are not reflective of operating performance and thus have been eliminated when calculating operating costs per ton. (iii) Total cash operating cost and operating cost per ton data are not a recognized measures under US GAAP. Management uses these generally accepted industry measures in evaluating operating performance and believes them to be realistic indications 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. Given the record underground and mill performance in the first half of the year, the Company is revising its targets for all metals production. A comparison between the new forecast and the original budget for production and operating costs follows: ------------------------------------------------------------------------- New Forecast Original Budget ------------------------------------------------------------------------- Ore processed (000's tons) 2,900 2,555 Daily throughput rate (tons) 7,945 7,000 Grades: Gold (oz./t) 0.11 0.13 Silver (oz./t) 2.43 2.50 Zinc (%) 3.87 3.40 Copper (%) 0.54 0.60 Payable metal production: Gold (ozs.) 293,000 300,000 Silver (000's ozs.) 5,500 4,700 Zinc (000's lbs.) 155,000 120,000 Copper (000's lbs.) 23,200 24,000 Minesite operating costs (C$/ton) 45-47 49-51 Total cash operating costs ($/oz.) 70-80 155-165 ------------------------------------------------------------------------- LaRonde's total cash operating costs are expected to decline significantly for the full year 2004 from an original target range of $155 to $165 per ounce to new target range of $70 to $80 per ounce. The decline in total cash operating unit costs from the original estimate for 2004 is attributable to higher byproduct zinc and silver production as well as increases in byproduct metal prices. The new target for total cash operating costs is based on a balance of the year silver price of $6.00 per ounce, zinc price of $0.45 per pound, copper price of $1.20 per pound and C$/US$ exchange rate of 1.30. The estimated sensitivity of LaRonde's 2004 total cash operating costs to changes in metal prices and exchange rates in the last six months of the year follows: ------------------------------------------------------------------------- Change in variable Impact on total cash operating costs ($/oz.) ------------------------------------------------------------------------- $0.10 in C$/US$ 13 $0.50/oz. in silver 5 $0.05/lb. in zinc 9 $0.10/lb. in copper 4 ------------------------------------------------------------------------- Liquidity and Capital Resources At June 30 2004, Agnico-Eagle's cash and cash equivalents were $99.3 million while working capital was $147.3 million. At December 31, 2003, the Company had $110.4 million in cash and cash equivalents and $140.6 million in working capital. The Company currently has $100 million in undrawn credit lines and expects to have an additional $25 million available in the fourth quarter of 2004 once certain completion tests are satisfied in connection with the LaRonde expansion to 7,000 tons per day. Cash flow from operating activities, before working capital changes, was $17.1 million in the second quarter of 2004 compared to $0.6 million in the second quarter of 2003. For the year to date, operating cash flow, before working capital changes, was $37.9 million compared to essentially nil in the first six months of 2003. Operating cash flow was positively impacted by higher gold production and increased gold and byproduct metal prices partially offset by a stronger Canadian dollar. For the year to date, positive operating cash flow was partially offset by a buildup in metal settlements receivable and ore inventories. The buildup in metal settlements receivable began to reverse in the second quarter of 2004 and is expected to reverse further over the course of 2004. For the three months ended June 30, 2004, capital expenditures were $11.8 million compared to $10.7 million in the second quarter of 2003. Capital expenditures at the LaRonde mine decreased marginally to $9.7 million from $9.8 million in the second quarter of 2003. For the year to date ended June 30, 2004, capital expenditures were $22.0 million compared to $21.5 million in the first six months of 2003. Capital expenditures at the LaRonde mine decreased to $18.2 million from $20.3 million in the first six months of 2003. The capital expenditures in 2004 represent sustaining capital and the final construction costs for Phase I of LaRonde's water treatment facility and bulk air cooling plant. The remainder of the capital expenditures in 2004 represents continued expenditures for the Company's regional projects, namely Lapa, Goldex and LaRonde II, all of which have met the requirement for capitalization under US GAAP. For the full year, capital expenditures are now forecast to be $54.7 million compared to the original budget of $36.9 million. The increase is primarily due to the commencement of the underground program at Lapa. In the second quarter of 2004, Agnico-Eagle purchased a 14% stake in Riddarhyttan Resources AB ("Riddarhyttan"). Agnico-Eagle purchased 12.7 million common shares in Riddarhyttan from its largest shareholder, Swedish private company Dunross & Co. AB. Along with a further 0.8 million shares purchased in the second quarter and transaction costs, total cash consideration of $11.8 million was paid by Agnico-Eagle. Summarized Quarterly Data (Unaudited) Agnico-Eagle Mines Limited ------------------------------------------------------------------------- (thousands of United States Dollars Three months ended Six months ended except where noted, June 30, June 30, US GAAP basis) 2004 2003 2004 2003 ------------------------------------------------------------------------- Financial Data Income and cash flow LaRonde Division Revenues from mining operations $ 45,664 $ 30,014 $ 94,268 $ 60,126 Mine operating costs 25,680 24,581 49,821 48,928 ------------------------------------------------------------------------- Mine operating profit $ 19,984 $ 5,433 $ 44,447 $ 11,198 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) for period $ 8,805 $ (3,779) $ 21,714 $ (10,016) Net income (loss) per share $ 0.11 $ (0.05) $ 0.26 $ (0.12) Operating cash flow (before non-cash working capital) $ 17,124 $ 632 $ 37,946 $ 55 Weighted average number of shares - basic (in thousands) 84,648 83,836 84,592 83,781 Tons of ore milled 753,724 648,292 1,442,926 1,250,925 Head grades: Gold (oz. per ton) 0.09 0.10 0.10 0.10 Silver (oz. per ton) 2.26 2.24 2.26 2.34 Zinc 3.80% 3.14% 3.80% 3.34% Copper 0.54% 0.52% 0.54% 0.48% Recovery rates: Gold 91.69% 90.62% 91.69% 91.11% Silver 85.88% 80.80% 85.92% 82.65% Zinc 83.37% 77.80% 83.38% 78.00% Copper 78.99% 79.20% 78.96% 79.20% Payable production: Gold (ounces) 65,233 60,157 135,421 115,162 Silver (ounces in thousands) 1,558 1,049 2,686 2,085 Zinc (pounds in thousands) 37,483 27,080 74,130 55,044 Copper (pounds in thousands) 5,075 5,015 10,915 8,971 Realized prices per unit of production: Gold (per ounce) $ 393 $ 349 $ 401 $ 350 Silver (per ounce) $ 6.22 $ 4.57 $ 6.42 $ 4.61 Zinc (per pound) $ 0.47 $ 0.35 $ 0.48 $ 0.35 Copper (per pound) $ 1.26 $ 0.73 $ 1.25 $ 0.74 Onsite operating costs per ton milled (Canadian dollars) $ 47 $ 48 $ 47 $ 50 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Operating costs per gold ounce produced: Onsite operating costs (including asset retirement expenses) $ 394 $ 371 $ 368 $ 373 Less: Non-cash asset retirement expenses (2) (2) (2) (2) Foreign exchange and byproduct metals hedge gains (15) - (16) - Net byproduct revenues (300) (161) (272) (181) ------------------------------------------------------------------------- Cash operating costs $ 77 $ 208 $ 78 $ 190 Accrued Production royalties - 50 - 61 ------------------------------------------------------------------------- Total cash operating costs $ 77 $ 258 $ 78 $ 251 Non-cash costs: Reclamation provision 2 2 2 2 Amortization 90 80 84 81 ------------------------------------------------------------------------- Total operating costs $ 169 $ 340 $ 164 $ 334 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Balance Sheet Agnico-Eagle Mines Limited ------------------------------------------------------------------------- (thousands of United States dollars, US GAAP basis) June 30, December 31, 2004 2003 ------------------------------------------------------------------------- (Unaudited) ASSETS Current Cash and cash equivalents $ 99,257 $ 110,365 Metals awaiting settlement 42,080 34,570 Income taxes recoverable 9,849 7,539 Inventories: Ore stockpiles 8,526 6,557 In-process concentrates 449 1,346 Supplies 6,275 6,276 Prepaid expenses and other 6,447 10,363 ------------------------------------------------------------------------- Total current assets 172,883 177,016 Fair value of derivative financial instruments 2,742 7,573 Investments and other assets 21,260 11,214 Future income and mining tax assets 43,156 41,579 Mining properties 410,215 399,719 ------------------------------------------------------------------------- $ 650,256 $ 637,101 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities $ 22,453 $ 29,915 Dividends payable 733 3,327 Interest payable 2,426 3,161 ------------------------------------------------------------------------- Total current liabilities 25,612 36,403 ------------------------------------------------------------------------- Long-term debt 143,750 143,750 ------------------------------------------------------------------------- Asset retirement obligation and other liabilities 16,062 15,377 ------------------------------------------------------------------------- Future income and mining tax liabilities 44,915 40,848 ------------------------------------------------------------------------- Shareholders' Equity Common shares Authorized - unlimited Issued - 84,596,533 (2003 - 84,469,804) 604,269 601,305 Warrants 15,732 15,732 Contributed surplus 7,181 7,181 Employee stock options 309 - Deficit (196,341) (218,055) Accumulated other comprehensive loss (11,233) (5,440) ------------------------------------------------------------------------- Total shareholders' equity 419,917 400,723 ------------------------------------------------------------------------- $ 650,256 $ 637,101 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Note: Certain items have been reclassified from financial statements previously presented to conform to the current presentation. Statement of Income (Loss) and Agnico-Eagle Mines Limited Comprehensive Income (Loss) (Unaudited) ------------------------------------------------------------------------- (thousands of United States Dollars except Three months ended Six months ended per share amounts, June 30, June 30, US GAAP basis) 2004 2003 2004 2003 ------------------------------------------------------------------------- REVENUES Revenues from mining operations $ 45,664 $ 30,014 $ 94,268 $ 60,126 Interest and sundry income 158 2,122 363 2,763 ------------------------------------------------------------------------- 45,822 32,136 94,631 62,889 COSTS AND EXPENSES Production 25,680 24,581 49,821 48,928 Exploration and corporate development 452 966 742 2,438 Equity loss in junior exploration companies 609 - 898 - Amortization 5,859 4,787 11,441 9,304 General and administrative 2,012 2,240 3,811 3,707 Provincial capital tax 739 285 1,194 774 Interest 2,272 2,241 4,029 4,458 Foreign currency loss (gain) (518) 193 (379) (24) ------------------------------------------------------------------------- Income (loss) before taxes 8,717 (3,157) 23,074 (6,696) Federal capital tax 275 264 541 589 Income and mining tax expense (363) 358 819 988 ------------------------------------------------------------------------- Income (loss) before cumulative catch-up adjustment 8,805 (3,779) 21,714 (8,273) Cumulative catch-up adjustment relating to SFAS 143 - - - (1,743) ------------------------------------------------------------------------- Net income (loss) for the period $ 8,805 $ (3,779) $ 21,714 $ (10,016) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) before cumulative catch-up adjustment per share - basic and diluted $ 0.11 $ (0.05) $ 0.26 $ (0.10) Cumulative catch-up adjustment per share - - - (0.02) ------------------------------------------------------------------------- Net income (loss) per share - basic and diluted $ 0.11 $ (0.05) $ 0.26 $ (0.12) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of shares (in thousands) basic 84,648 83,636 84,592 83,781 diluted 85,141 83,636 85,084 83,781 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Comprehensive income (loss): Net income (loss) for the period $ 8,805 $ (3,779) $ 21,714 $ (10,016) Other comprehensive income (loss): Unrealized gain (loss) on hedging activities (1,247) 4,773 (1,062) 8,000 Unrealized gain (loss) on available-for-sale securities (726) (151) (1,168) (16) Adjustments for derivative instruments maturing during the period (2,147) - (2,931) - Adjustments for realized gains on available-for-sale securities due to dispositions in the period (124) (1,485) (632) (1,485) ------------------------------------------------------------------------- Other comprehensive income (loss) (4,244) 3,137 (5,793) 6,499 ------------------------------------------------------------------------- Comprehensive income (loss) for the period $ 4,561 $ (642) $ 15,921 $ (3,517) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Note: Certain items have been reclassified from financial statements previously presented to conform to the current presentation. Statement of Deficit and Accumulated Agnico-Eagle Mines Limited Other Comprehensive Loss (Unaudited) ------------------------------------------------------------------------- (thousands of United States Dollars except Three months ended Six months ended where noted, June 30, June 30, US GAAP basis) 2004 2003 2004 2003 ------------------------------------------------------------------------- Deficit Balance, beginning of period $ (205,146) $ (202,260) $ (218,055) $ (196,023) Net income (loss) for the period 8,805 (3,779) 21,714 (10,016) ------------------------------------------------------------------------- Balance, end of period $ (196,341) $ (206,039) $ (196,341) $ (206,039) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Accumulated other comprehensive loss Balance, beginning of period $ (6,989) $ (17,804) $ (5,440) $ (21,166) Other comprehensive income (loss) for the period (4,244) 3,137 (5,793) 6,499 ------------------------------------------------------------------------- Balance, end of period $ (11,233) $ (14,667) $ (11,233) $ (14,667) ------------------------------------------------------------------------- -------------------------------------------------------------------------- - Note: Certain items have been reclassified from financial statements previously presented to conform to the current presentation. Statement of Cash Flows (Unaudited) Agnico-Eagle Mines Limited ------------------------------------------------------------------------- (thousands of United Three months ended Six months ended States Dollars, June 30, June 30, US GAAP basis) 2004 2003 2004 2003 ------------------------------------------------------------------------- Operating activities Net income (loss) for the period $ 8,805 $ (3,779) $ 21,714 $ (10,016) Add (deduct) items not affecting cash from operating activities: Amortization 5,859 4,787 11,441 9,304 Provision for future income and mining taxes 532 738 2,489 2,064 Unrealized (gain) loss on derivative contracts (42) (236) 174 (2,506) Cumulative catch-up adjustment related to SFAS 143 - - - 1,743 Amortization of deferred costs and other 1,970 (878) 2,128 (534) ------------------------------------------------------------------------- Cash flow from operations, before working capital changes 17,124 632 37,946 55 Change in non-cash working capital balances Metals awaiting settlement 337 (3,606) (7,510) 513 Income taxes recoverable (1,194) (476) (2,310) (871) Inventories 600 (1,533) (1,071) (2,356) Prepaid expenses and other 676 1,122 2,376 1,693 Accounts payable and accrued liabilities (4,270) (648) (7,576) (1,318) Interest payable 1,628 1,686 (735) 73 ------------------------------------------------------------------------- Cash flows from (used in) operating activities 14,901 (2,823) 21,120 (2,211) ------------------------------------------------------------------------- Investing activities Additions to mining properties (11,774) (10,671) (21,997) (21,508) Investments and other (11,719) (7,699) (10,877) (7,887) ------------------------------------------------------------------------- Cash flows used in investing activities (23,493) (18,370) (32,874) (29,395) ------------------------------------------------------------------------- Financing activities Dividends paid - - (2,480) (2,431) Common shares issued 1,552 1,125 2,964 2,320 ------------------------------------------------------------------------- Cash flows from (used in) financing activities 1,552 1,125 484 (111) ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents 110 (92) 162 (139) Net decrease in cash and cash equivalents (6,930) (20,160) (11,108) (31,856) Cash and cash equivalents, beginning of period 106,187 141,238 110,365 152,934 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 99,257 $ 121,078 $ 99,257 $ 121,078 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Other operating cash flow information: Interest paid during the period $ 353 $ 322 $ 3,466 $ 3,924 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital taxes paid during the period $ 1,369 $ 1,169 $ 2,530 $ 1,169 ------------------------------------------------------------------------- -------------------------------------------------------------------------- Note: Certain items have been reclassified from financial statements previously presented to conform to the current presentation. DATASOURCE: Agnico-Eagle Mines Limited CONTACT: Barry Landen, V.P. Corporate Affairs, Agnico-Eagle Mines Limited, (416) 947-1212

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