(All dollar amounts expressed in U.S. dollars unless otherwise
noted and all units of measurement expressed in metric unless
otherwise noted) TORONTO, June 5 /PRNewswire-FirstCall/ --
Agnico-Eagle Mines Limited today announced a number of major steps
in its strategy of expanding gold output and gold reserves: -
Kittila gold project (on the Suurikuusikko deposit) in northern
Finland to be built for $135 million, and is expected to produce an
average of 150,000 ounces of gold annually at average total cash
costs of approximately $250 per ounce. Production expected to begin
by the middle of 2008 and extend over 13 years. - Lapa gold project
in Quebec to be completed for an additional investment of $90
million, and is expected to produce an average of 125,000 ounces of
gold annually at average total cash costs of approximately $210 per
ounce. Production expected to begin by the fourth quarter of 2008
and continue for seven years. - Expenditures on Pinos Altos project
in Mexico increased to an estimated $23 million to conduct an
extensive exploration program and complete a feasibility study by
the end of the second quarter of 2007. - Agnico-Eagle to raise $250
million in a marketed equity offering to fund its growth
initiatives and for general corporate purposes. "With today's
project decisions, Agnico-Eagle has set the stage for a significant
increase in its gold output with four gold projects under
construction and a potential fifth new mine entering the
feasibility stage," said Sean Boyd, Vice Chairman and Chief
Executive Officer. "Our existing cash position and strong cash
flows combined with the proceeds of the proposed $250 million
equity issue should enable us to finance our growth and maintain a
strong financial position," added Mr. Boyd. Kittila Mine to be
built on Suurikuusikko Deposit Construction will begin immediately
at the Kittila Mine (on the Suurikuusikko deposit) in northern
Finland, approximately 900 kilometers north of Helsinki. The
Kittila mine, named after the nearby community of the same name,
will initially be extracted via open pit followed by underground
mining via ramp access. The mining operation will feed a 3,000
tonne per day surface processing plant. The feasibility study has
recently been reviewed by independent third parties. The study's
base case projects an after tax rate of return of 15.0%, based on a
gold price of $450 per ounce, and a US$/(euro) exchange rate of
1.20. Annual gold production is expected to average 150,000 ounces
at total cash costs of $250 per ounce, with initial gold production
occurring by the middle of 2008. The feasibility study anticipates
capital expenditures of $135 million and incorporates minesite
costs per tonne of $34 and sustaining capital expenditures of
approximately $5 million per year. Current probable reserves are
2.4 million ounces of gold, from 14.2 million tonnes grading 5.16
grams per tonne yielding an estimated mine life of 13 years. See
Note to Investors regarding the Use of Non-GAAP Financial Measures.
Eight drills are currently operating at the Kittila mine project
and are focused on converting the large gold resource to reserve
and on drilling the extensive land position along strike of the
known gold reserve. The Kittila mine project contains a measured
resource of 0.1 million tonne containing 4.07 grams of gold per
tonne, an indicated mineral resource of 1.5 million tonnes
containing 4.39 grams of gold per tonne and an inferred mineral
resource of 6.7 million tonnes containing 4.35 grams of gold per
tonne. See the notes to U.S. Investors Relating to the Use of
"Resources". Lapa Mine to be Completed by 2008 The Lapa mine
project is located in northwestern Quebec, approximately 11
kilometres east of Agnico-Eagle's operations at LaRonde, providing
operating synergies. The initial phase of construction began in
July 2004. The shaft, currently at a depth of 760 metres, will be
extended to approximately 1,370 meters below surface. In April
2006, 2,800 tonnes of development ore was extracted at Lapa and
sorted through a sampling tower to form a representative appraisal.
Together with the results of a diamond drilling program, the ore
was estimated to contain on average 10.65 grams per tonne of gold.
These results, and results from other sampling methods, predicted
higher gold grades than the Company's reserve model from February
2005. These results were incorporated into a revised feasibility
study. A revised feasibility study on the Lapa mine project was
recently completed and reviewed by independent third parties. The
study's base case projects the mine reaching full production in the
fourth quarter of 2008 with an after tax rate of return of 21.8%,
based on a gold price of $450 per ounce, and a C$/US$ exchange rate
of 1.25. Based on current estimates of mineral reserves and grades,
annual gold production is expected to average 125,000 ounces
annually at total cash costs of $210 per ounce. Additional capital
costs to bring the Lapa mine into production are projected to be
$90 million. Based on an operation of up to 1,500 tonnes of ore per
day, the revised feasibility study incorporates minesite costs of
C$70 per tonne and average sustaining capital expenditures of
approximately $4 million per year. See Note to Investors regarding
the Use of Non-GAAP Financial Measures. The Lapa deposit contains
1.1 million ounces of gold reserves from 3.4 million tons of ore at
a grade of 10.17 grams per tonne, sufficient for an initial mine
life of approximately seven years. Lapa also contains an indicated
mineral resource of 1.1 million tons grading 5.92 grams of gold per
tonne and an inferred mineral resource of 1.4 million tonnes
grading 9.36 grams of gold per tonne. See the notes to U.S.
Investors Relating to the Use of "Resources". Pinos Altos Program
to Explore Property and Prepare Feasibility Study An estimated $23
million exploration and feasibility program will be initiated at
the 100% owned Pinos Altos project in northern Mexico. The
objectives of the program include: - 29,800 meter drilling program
to convert resources to reserves; - 21,400 meter drilling program
to drill at depth and expand the resource by drilling in
under-explored regions along strike; - completion of a feasibility
study by the end of the second quarter of 2007; - development of a
1,330 meter underground ramp to provide a deeper drilling platform,
and to expose ore for sampling and examination. The deposit remains
open at depth and only approximately one third of the entire
property position has been drilled. The Pinos Altos project's
indicated resource contains 12.5 million tonnes at 3.9 grams per
tonne gold, and 102.3 grams per tonne silver. The project's
inferred resource contains 3.2 million tonnes at 5.2 grams per
tonne gold, and 111.0 grams per tonne silver. See the Notes to U.S.
Investors Relating to the Use of "Resources". Agnico-Eagle's
preliminary analysis contemplates a 3,000 tonne per day mining
scenario with the open pit and underground operations each
supplying 1,500 tonnes per day. The preliminary estimate of capital
cost required to bring the project into production is approximately
$150 million. $250 Million Underwritten Equity Offering is Prudent
for Growth Plans The Company plans to offer common shares under its
existing shelf prospectus filed in Canada and under the
multijurisdictional disclosure system in the United States. The
Company proposes to raise approximately $250 million in an
underwritten offering. The Underwriters will also have the option
to purchase up to an additional 15% of the common shares issued to
cover over- allotments. The offering is to be lead-managed by
Merrill Lynch and it is anticipated to close in mid-June 2006. Over
the next three years, the Company projects consolidated capital
expenditures of $170 million in 2006, $250 million in 2007 and $115
million in 2008, excluding any potential construction expenditures
on the Pinos Altos project. The Company expects that financing of
these expenditures, including those anticipated at Pinos Altos,
will come from the proposed offering, existing cash balances and
cash flows from its LaRonde mine. Additionally, the Company
maintains substantially undrawn credit lines of $150 million. The
Company has filed a registration statement (including a prospectus)
with the Canadian Securities Administrators and the U.S. Securities
and Exchange Commission ("SEC") for the offering to which this
communication relates. Before you invest, you should read the
prospectus including any prospectus supplement in that registration
statement (SEC File No. 333-120043) and the other documents the
Company has filed with the Canadian Securities Administrators and
the SEC for more complete information about the Company and this
offering. You may get these documents for free by visiting EDGAR on
the SEC website at http://www.sec.gov/. The documents are also
available electronically at http://www.sedar.com/. Alternatively,
you can request the prospectus and prospectus supplement by
contacting Merrill Lynch at 4 World Financial Center, 250 Vesey
Street, New York, NY 10080 (telephone: 212-449-1000) or 181 Bay
Street, Suite 400, Toronto, Ontario M6G 2S9 (telephone:
416-369-7400). Forward-Looking Statements The information in this
press release has been prepared as at June 5, 2006. Certain
statements contained in this press release constitute "forward-
looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995, or "forward-looking
information" under provisions of Canadian provincial securities
laws. When used in this document, the words "anticipate",
"believe", "could", "expect", "estimate," "forecast," "may",
"outlook" "planned", "should", "will" and similar expressions are
intended to identify forward-looking statements or information.
Such statements and information include without limitation:
statements regarding future rates of return, and the sensitivity of
those rates of return to gold prices, gold grades, capital and
operating costs, currency exchange rates, timing of capital
expenditures and other assumptions; estimates of future mineral
production and sales; estimates of mine life; estimates of future
mining costs, cash costs, minesite costs and other expenses;
estimates of future capital expenditures and other cash needs, and
expectations as to the funding thereof; statements and information
as to the projected development of certain ore deposits, including
estimates of exploration, development and production and other
capital costs, and estimates of the timing of such exploration,
development and production or decisions with respect to such
exploration, development and production; estimates of reserves and
resources, and statements and information regarding anticipated
future exploration and feasibility study results; the anticipated
timing of events with respect to the Company's minesites;
statements and information regarding the sufficiency of the
Company's cash resources; statements regarding the anticipated
equity offering including the anticipated amount and timing
thereof; and other statements and information regarding anticipated
trends with respect to the Company's capital resources and results
of operations. Such statements and information reflect the
Company's views as at the date this press release and are subject
to certain risks, uncertainties and assumptions, and undue reliance
should not be placed on such statements and information. Many
factors, known and unknown, could cause the actual results to be
materially different from those expressed or implied by such
forward looking statements and information. Such risks include, but
are not limited to: the risk that the Company may not complete its
anticipated equity offering on a timely basis in the amounts
anticipated, if at all; the volatility of the Company's stock
price; the volatility of prices of gold and other metals;
uncertainty of mineral reserves, mineral resources, mineral grades
and mineral recovery estimates; uncertainty of future production,
capital expenditures, and other costs; currency fluctuations;
financing of additional capital requirements; cost of exploration
and development programs; mining risks; risks associated with
foreign operations; risks related to title issues at the Pinos
Altos project; governmental and environmental regulation; and risks
associated with the Company's byproduct metal derivative
strategies. For a more detailed discussion of such risks and other
factors, see Company's Annual Information Form and Annual Report on
Form 20-F, as amended, for the year ended December 31, 2005, as
well as the Company's other filings with the Canadian Securities
Administrators and the U.S. Securities and Exchange Commission. The
Company does not intend, and does not assume any obligation, to
update these forward-looking statements and information. Certain of
the foregoing statements and information, primarily related to
projects, are based on preliminary views of the Company with
respect to, among other things, grade, tonnage, processing, mining
methods, capital costs, and location of surface infrastructure and
actual results and final decisions may be materially different from
those currently anticipated. About Agnico-Eagle Agnico-Eagle is a
long established Canadian gold producer with operations located in
Quebec and exploration and development activities in Canada,
Finland, Mexico and the United States. Agnico-Eagle's LaRonde Mine
is Canada's largest gold deposit. The Company has full exposure to
changes in gold prices consistent with its policy of no forward
gold sales. It has paid a cash dividend for 26 consecutive years.
Note to Investors Regarding the Use of Non-GAAP Financial Measures
This press release presents estimates of future "total cash cost
per ounce" and "minesite cost per tonne" that are not recognized
measures under United States generally accepted accounting
principles ("US GAAP"). This data may not be comparable to data
presented by other gold producers. These future estimates are based
upon the total cash costs per ounce and minesite costs per tonne
that the Company expects to incur to mine gold at the applicable
projects and do not include production costs attributable to
accretion expense and other asset retirement costs, which will vary
over time as each project is developed and mined. It is therefore
not practicable to reconcile these forward-looking non-GAAP
financial measures to the most comparable GAAP measure. A
reconciliation of the Company's total cash cost per ounce and
minesite cost per tonne to the most comparable financial measures
calculated and presented in accordance with US GAAP for the
Company's historical results of operations is set forth in the
Company's Annual Information Form and Annual Report on Form 20-F,
as amended, for the year ended December 31, 2005, as well as the
Company's other filings with the Canadian Securities Administrators
and the U.S. Securities and Exchange Commission. Notes to U.S.
Investors Regarding the Use of Resources Cautionary Note to
investors concerning estimates of Measured and Indicated Resources.
This press release uses the terms "measured resources" and
"indicated resources". We advise investors that while those terms
are recognized and required by Canadian regulations, the U.S.
Securities and Exchange Commission (the "SEC") does not recognize
them. Investors are cautioned not to assume that any part or all of
mineral deposits in these categories will ever be converted into
reserves. Cautionary Note to investors concerning estimates of
Inferred Resources. This press release also uses the term "inferred
resources". We advise investors that while this term is recognized
and required by Canadian regulations, the SEC does not recognize
it. "Inferred resources" have a great amount of uncertainty as to
their existence, and great uncertainty as to their economic and
legal feasibility. It cannot be assumed that all or any part of an
inferred mineral resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of inferred mineral
resources may not form the basis of feasibility or pre-feasibility
studies, except in rare cases. Investors are cautioned not to
assume that part or all of an inferred resource exists, or is
economically or legally mineable. Scientific and Technical Data
Agnico-Eagle Mines Limited is reporting mineral resource and
reserve estimates in accordance with the CIM guidelines for the
estimation, classification and reporting of resources and reserves.
Cautionary Note to U.S. Investors-The SEC permits U.S. mining
companies, in their filings with the SEC, to disclose only those
mineral deposits that a company can economically and legally
extract or produce. We use certain terms in this press release,
such as "measured," "indicated," and "inferred," "resources," that
the SEC guidelines strictly prohibit U.S. companies from including
in their filings with the SEC. U.S. Investors are urged to consider
closely the disclosure in our Form 20-F, which may be obtained from
us, or from the SEC's website at: http://sec.gov/edgar.shtml. A
feasibility study is required to meet the requirements to designate
reserves under Guide 7. Estimates were calculated using historic
three-year average metals prices and foreign exchange rates in
accordance with the SEC Industry Guide 7. Industry Guide 7 requires
the use of prices that reflect current economic conditions at the
time of reserve determination which Staff of the SEC has
interpreted to mean historic three-year average prices. The
assumptions used for 2005 mineral reserves and resources estimates
reported by the Company were $405 per ounce gold, $6.35 per ounce
silver, $0.51 per pound zinc, $1.24 per pound copper and C$/US$,
US$/(euro) , and Mexican Peso/US$ exchange rates of 1.30, 1.21 and
11.0, respectively Canadian Securities Administrators, National
Instrument 43-101 ("NI 43-101") requires mining companies to
disclose reserves and resources using the subcategories of "proven"
reserves, "probable" reserves, "measured" resources, "indicated"
resources and "inferred" resources. Mineral resources that are not
mineral reserves do not have demonstrated economic viability. A
mineral reserve is the economically mineable part of a measured or
indicated resource demonstrated by at least a preliminary
feasibility study. This study must include adequate information on
mining, processing, metallurgical, economic and other relevant
factors that demonstrate, at the time of reporting, that economic
extraction can be justified. A mineral reserve includes diluting
materials and allows for losses that may occur when the material is
mined. A proven mineral reserve is the economically mineable part
of a measured resource for which quantity, grade or quality,
densities, shape and physical characteristics are so well
established that they can be estimated with confidence sufficient
to allow the appropriate application of technical and economic
parameters, to support production planning and evaluation of the
economic viability of the deposit. A probable mineral reserve is
the economically mineable part of an indicated mineral resource for
which quantity, grade or quality, densities, shape and physical
characteristics can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and
economic parameters, to support mine planning and evaluation of the
economic viability of the deposit. A mineral resource is a
concentration or occurrence of natural, solid, inorganic or
fossilized organic material in or on the earth's crust in such form
and quantity and of such a grade or quality that it has reasonable
prospects for economic extraction. The location, quantity, grade,
geological characteristics and continuity of a mineral resource are
known, estimated or interpreted from specific geological evidence
and knowledge. A measured mineral resource is that part of a
mineral resource for which quantity, grade or quality, densities,
shape, physical characteristics, can be estimated with a level of
confidence sufficient to allow the appropriate application of
technical and economic parameters, to support mine planning and
evaluation of the economic viability of the deposit. The estimate
is based on detailed and reliable exploration, sampling and testing
information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes that are
spaced closely enough to confirm both geological and grade
continuity. An indicated mineral resource is that part of a mineral
resource for which quantity, grade or quality, densities, shape and
physical characteristics can be estimated with a level of
confidence sufficient to allow the appropriate application of
technical and economic parameters, to support mine planning and
evaluation of the economic viability of the deposit. The estimate
is based on detailed and reliable exploration and testing
information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes that are
spaced closely enough for geological and grade continuity to be
reasonable assumed. An inferred mineral resource is that part of a
mineral resource for which quantity and grade or quality can be
estimated on the basis of geological evidence and limited sampling
and reasonably assumed, but not verified, geological and grade
continuity. The estimate is based on limited information and
sampling gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes. Mineral
resources which are not mineral reserves do not have demonstrated
economic viability. Investors are cautioned not to assume that part
or all of an inferred resource exists, or is economically or
legally mineable. A feasibility study is a comprehensive study of a
mineral deposit in which all geological, engineering, legal,
operating, economic, social, environmental and other relevant
factors are considered in sufficient detail that it could
reasonably serve as the basis for a final decision by a financial
institution to finance the development of the deposit for mineral
production. The qualified person responsible for the Lapa mineral
reserve and mineral resource estimate is Normand Bedard P.Geo.,
Senior Geologist. The effective date of that portion of the
estimate is May 31st, 2006. Mr. Bedard also supervised the
exploration program at Lapa and reviewed the exploration results
disclosed in this press release. A technical report describing the
mineral resource and reserve estimate will be filed with the
securities regulatory authorities in due course. Wireframe models
of zones comprising the Lapa deposit that were used to estimate the
mineral resource were derived using drill hole intercepts. The key
assumptions used to determine the drill hole intercept intervals
were a gold price of $405 per ounce, metallurgical recoveries of
81.4% for gold. Gold assays were cut to 110.0 grams per tonne. For
the mineral resource models, a minimum insitu gold grade cut-off of
5.0 grams per tonne was used to evaluate drill hole intercepts that
have been adjusted to respect a minimum mining width of 2.8 metres
(horizontal width). The Lapa mineral resource estimate was derived
using a three dimensional block model of the deposit; the grades
were interpolated using the inverse distance power squared method.
In order to estimate the mineral reserve, a dilution factor that
averaged 30% was applied (at an average grade of 0.46 gram of gold
per tonne). For the underground reserve models, the minimum diluted
gold grade cut-off was 5.0 grams per tonne (corresponding to the
average mining cost of C$68.55 per tonne). The data verification
process for Lapa consisted, in the case of the assay data obtained
prior to 2006, of comparing duplicate results or, in the case of
assay data obtained in 2006, of selecting approximately 10% of the
samples for check assaying. These methods do not eliminate all of
the possible sample error; for example, sample bias. Sample bias
was partially mitigated at Lapa by the sample tower sampling
program. There are no known environmental, permitting, legal,
title, taxation, socio-political, marketing, or other relevant
issues that may materially affect the estimate of mineral resources
and reserves. The qualified person responsible for the Kittila mine
project's mineral resource and the underground portion of the
mineral reserve estimate is Normand Bedard P.Geo., Senior
Geologist. The effective date of that portion of the estimate is
February 22, 2006. Since then the open pit mineral reserve was
revised on April 11th 2006 by a qualified person, Patrice Live
Eng., of Breton, Bandeville et Associes of Montreal, Quebec. For
the revised open pit reserves, a minimum 1.40 gram per tonne gold
grade was used. This resulted in a minor change in the Kittila mine
project's probable reserves and mineral resources. Other than the
open pit parameters described above, information regarding the
scientific and technical information contained herein, including a
discussion of verification procedures, is set out in the technical
report on the Suurikuusikko project (now the Kittila mine project)
posted on SEDAR on March 14, 2006. DATASOURCE: Agnico-Eagle Mines
Limited CONTACT: David Smith, Director, Investor Relations, (416)
947-1212
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