How Life of Mine and Budgets are Developed Toronto February 14, 2014 agnicoeagle.com

Transcription

1 How Life of Mine and Budgets are Developed Toronto February 14, 2014

2 FORWARD LOOKING STATEMENTS The information in this document has been prepared as at February 12, Certain statements contained in this document constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward looking information under the provisions of Canadian provincial securities laws. When used in this document, the words anticipate, expect, estimate, forecast, will, planned, and similar expressions are intended to identify forward-looking statements or information. Such statements include without limitation: statements regarding timing and amounts of capital expenditures and other assumptions; estimates of future reserves, resources, mineral production, optimization efforts and sales; estimates of mine life; estimates of future internal rates of return, mining costs, total cash costs, minesite costs, all-in sustaining 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; the anticipated timing of events with respect to the Company s mine sites and statements and information regarding the sufficiency of the Company s cash resources. Such statements and information reflect the Company s views as at the date of this document 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 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; community protests; risks associated with foreign operations; governmental and environmental regulation; the volatility of the Company s stock price; and risks associated with the Company s byproduct metal derivative strategies. For a more detailed discussion of such risks and other factors that may affect the Company s ability to achieve the expectations set forth in the forward-looking statements contained in this document, see the Company s Annual Report on Form 20-F for the year ended December 31, 2012, 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. Alain Blackburn, a Qualified Person and the Company s Senior Vice-President, Exploration, reviewed the technical information disclosed herein. For a detailed breakdown of the Company s reserve and resource position see the February 12, 2014 press release on the Company s website. That press release also lists the Qualified Persons for each project. 2

3 NOTES TO INVESTORS Note Regarding the Use of Non-GAAP Financial Measures This document presents estimates of future total cash cost per ounce, minesite cost per tonne, and all-in sustaining cost per ounce of gold produced 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 sites 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 notes to the financial statements included in the Company s Annual Information Form and Annual Report on Form 20-F, for the year ended December 31, 2012, as well as the Company s other filings with the Canadian Securities Administrators and the SEC. Note Regarding Production Guidance The gold production guidance is based on the Company s mineral reserves but includes contingencies and assumes metal prices and foreign exchange rates that are different from those used in the reserve estimates. These factors and others mean that the gold production guidance presented in this disclosure does not reconcile exactly with the production models used to support these mineral reserves. 3

4 AGENDA 2013 Highlights & Operating Results Estimated Payable Production ( ) Life of Mine (LOM) and Budgeting Process 4

5 2013 HIGHLIGHTS Record annual production at lower costs Record annual gold production of 1.10M oz, vs. guidance of 1.06M oz 2013 total cash costs at $672/oz, below $690/oz guidance 2013 all-in sustaining cost at $952/oz, below guidance of $1,025/oz Record annual gold production at Meadowbank 430,613 oz at a total cash cost of $774/oz Commercial production declared at Goldex and commissioning on track at La India Lower gold price environment leads to : Non-cash after-tax impairment charge of $436M at Meadowbank, Meliadine and Lapa Quarterly dividend reduced to $0.08 per share to ensure financial flexibility Average reserve grade increased by 11% to 3.5 g/t despite 0.7 Moz reduction in reserves at year end 2013 (before production) 5

6 2013 OPERATING RESULTS Record production and improved cost performance Production (oz) Total Cash Cost ($/oz) Operating Margin ($, 000 s) Northern Business LaRonde 181,781 $763 $99,989 Lapa 100,730 $678 $71,635 Goldex 20,810 $782 $8,246 Kittila 146,421 $601 $111,277 Meadowbank 430,613 $774 $227, ,355 $732 $518,726 Southern Business Pinos Altos 181,773 $412 $173,074 Creston Mascota 34,027 $485 $21,679 La India 3,180 n.a. n.a. 218,980 $424 $194,753 Total 1,099,335 $672 $713, Revenue By Metal Total Operating Margin - $713M Pinos Altos, 24% Creston Mascota, 3% Base Metals 2% Silver 6% Gold 92% Kittila, 16% Meadowbank, 32% Goldex, 1% Lapa, 10% Laronde, 14% 6

7 ESTIMATED PAYABLE PRODUCTION ( ) Estimated Mid Point (oz) Total Cash Cost ($/oz) Estimated Mid Point (oz) Estimated Mid Point (oz) Northern Business LaRonde 215,000 $ , ,000 Lapa 80,000 $850 75,000 45,000 Goldex 80,000 $ ,000 90,000 Kittila 150,000 $ , ,000 Meadowbank 430,000 $ , , ,000 $ , ,000 Southern Business Pinos Altos 145,000 $ , ,000 Creston Mascota 40,000 $754 40,000 40,000 La India 50,000 $743 90,000 90, ,000 $ , ,000 Total Gold Production 1,190,000 $678 1,250,000 1,275,000 Estimated Byproduct Production 2014 Ag Production Zn Production Cu Production 000 s oz (tonnes) (tonnes) Northern Business LaRonde 1,272 7,461 6,023 Meadowbank 72 Northern Total 1,344 7,461 6,023 Southern Business Pinos Altos 2, Creston Mascota La India Southern Total 2, Total 3,623 7,461 6,023 7

8 Life of Mine and Budget Process

9 RE-DEFINING THE LOM PROCESS Given the rapid growth in mines and production during the period 2007 to 2011, Agnico decided in 2012 that planning practices would be reviewed by management and an independent consultant. Recommendations from both groups were implemented over the past two years Improvements were designed to help us: Understand data more easily Increase access to data across all levels of management Facilitate the decision making process Make realistic plans. Execute what is planned. 9

10 IMPROVEMENTS TO LOM PLANNING Aligned financial accounts to facilitate better analysis of data across the company Implemented a central data-base for financial planning (Hyperion) Dedicated personnel to optimize the LOM and budgeting process. In-house experts (mining, metallurgy, maintenance, environment, finance) were assigned to work with mine management to increase accuracy of plans and reduce production and capital risk Implemented a structured review process Improved rigor of capital approvals (business approach) Focus on execution and de-risking the plans: Capital and production risk is estimated by site management Mitigation is built into the plans Opportunities discussed at all levels and incorporated into plans where appropriate 10

11 AGNICO EAGLE YEARLY PLANNING CYCLE Planning cycle updated with reserves at year end followed by LOM optimization in the spring. Strategic alignment, detailed budgets and 3 year plans in the fall. Highest level of confidence and detail is in the budget year, lower detail in following 2 years and then diminishing over LOM. Postmortem is done following budget process to see if further improvements can be implemented. 11

12 IT ALL STARTS WITH THE GEOLOGY AN INCREASING LEVEL OF INFORMATION IS AVAILABLE AS THE RESERVE IS DEFINED AND THE OREBODY DEVELOPED. Cost Classification: Area to drill: Expensed CapEx OpEx Targets (Greenfield or Brownfield outside of mining lease, more than 500m below the bottom of an existing shaft or more than 1000m below surface at a mine with no shaft) Inferred (Inside mining lease area and in proximity *1 of existing resource/reserve) Indicated Reserve (at mine prior to Commercial Production) Reserve (within economic limits of orebody in production) Type of drilling: Exploration Conversion Delineation Delineation Delineation Notes: A geological Positive results Increased A positive Once the mine is model with a good and an approved information from Economic Study is in commercial potential of mining lease conversion drilling used to convert production, becoming an results in the is used to convert Indicated continued economic mine declaration of Inferred to delineation drilling justifies exploration drilling. Inferred. to Indicated. Reserves. Delineation drilling adds information for the mining plan. adds information to the detailed mining plan. 12

13 MINE PLANS ARE BASED ON GEOLOGICAL DATA Section showing 2 holes already drilled (with red intersections showing ore) and several planned holes. Geologists and Engineers interpret geological and operational data to determine size, quality and location of the orebody and design the stopes. The more data available, the higher probability that plans will be realized the way engineers envisioned. More data leads to lower risk, however, collecting the data is expensive, so a balance is needed to ensure adequate data at a reasonable cost. Older, established mines generally have a higher density of data than new mines under development. 13

14 ALL MINE PLANS ARE BASED ON GEOLOGICAL DATA Kittila UG Suuri Roura Each dot is a diamond drill hole intersection. Note high density of data near active mining zones and low density of data further away from available development. This is why planning is more precise in the first year, a bit less in the second year and then less and less precise further into the future. 14

15 EXAMPLE OF DETERMINING THE RESERVE AT AN EXISTING UNDERGROUND MINE 15

16 PIT PLANNING Whittle, MineSite and other pit software is used to optimize pit planning. Meadowbank Portage Pit Critical information: geology & geometry (rock quality, dip, thickness, grade, road design, bench height, haulage distances, capacity), fixed and variable costs, processing capacity Information produced: tonnes, grade, units of work, manpower and equipment requirements 16

17 PIT PLANNING Multiple pit shells are generated at assumed metal prices and costs Tonnes moved for each shell is used to evaluate cost vs revenue return Highest return at lowest tonnage moved is generally selected for optimization and inclusion in the LOM. Once the pit shell is selected the detailed planning begins: roads are added, benches designed, sequence is planned, equipment selected 17

18 RED FLAGS OPEN PIT PLANNING Precision too high vs density of data Planned costs unrealistic vs benchmarked costs and/or current costs Production rates unsupported by manpower and equipment Unrealistic number of benches sequenced in year Geotechnical parameters not understood or not accounted for in the planning Dilution and mining recovery not included in plan 18

19 UNDERGROUND MINE PLANNING Kittila UG Note mined out stopes and planned stopes in sequence. Deswick and other underground planning software is used to optimize stope sequencing. Software is chosen according to the orebody. Critical information: geology & geometry (rock quality, dip, thickness, grade distribution, stope dimensions, sequence, geotech., haulage distances, capacity), fixed and variable costs, processing capacity Information produced: tonnes, grade, units of work, manpower and equipment requirements 19

20 MINE PLANNING 20

21 MINE PLANNING Kittila Mine Sequence 21

22 RED FLAGS UNDERGROUND PLANNING Precision too high vs density of data Planned costs unrealistic vs benchmarked costs and/or current costs Production and development rates unsupported by manpower and equipment Unrealistic number of stopes sequenced in year Unrealistic development advance in critical headings Geotechnical parameters not understood or not accounted for in the planning Dilution and mining recovery not included in plan 22

23 PROCESS PLANT PLANNING Metallurgical models used to optimize mill throughput and recoveries Critical items considered: production (feed grade, throughput, recovery, etc), deleterious elements, reagent consumption, manpower, fixed and variable costs Information produced: metal production, units of work, manpower and equipment requirements 23

24 BUDGETING Detailed plans are done for maintenance, site services, environmental, administrative and other support services. AEM s financial model is built in a centralized software called Hyperion. Cost calculations are driver based (T, m, m3, hours, volume of materials, etc). They are specific to the mine site and work area. Revenues are calculated in the same way Information is consolidated at site level and fully reviewed Information is consolidated at corporate level for analysis and approval 24

25 SUMMARY - PLANNING AND OPTIMIZATION Planning and Optimization is a continual process at AEM. As we learn more we do better. Better understanding of geological, production and financial planning models decreases reaction time to major changes in the market. With the drop in gold price in 2013 prior to mid-year, personel were able to re-evaluate reserves, re-optimize mid to long-term plans and provide detailed budget and 3 year plan information to senior management in a timely manner. Keys to good long term planning: Good data at an appropriate density Standard Key Performance Indicators (KPI s) Use of best practices in planning and operations Long term planning and technical support resources available to plan and optimise Appropriate software for financial and production planning and for analyzing data Having personnel capable of interpreting information and making corrections over time Transparent communications - information is available to make critical decisions 25

26 AGNICO EAGLE PLANNING CYCLE Planning is a process that continues year-round J F M A M J J A S O N D J F M A M J J A S O N D Reserves Drill, sample, assay, geostats, wireframes, blockmodels, CoG evaluation, economic evaluation, calculations, peer review, auditing, reporting 26 Calculation/Peer Review Audit / Report Analyse Data Calculation/Peer Review Audit / Report Analyse Data LOM - U/G LOM - Pit Budget - U/G Budget - Pit Stope design, economic analysis, sequencing, development plans & schedules, recovery calcs., equipment evaluation, scenario analysis, cost evaluation, reporting, peer Guidance from H/O Production Plan Optimisation / Cost Analysis Cost Analysis / Peer Review Presentation / Consolidation Approval Guidance from H/O Production Plan Optimisation / Cost Analysis Cost Analysis / Peer Review Presentation / Consolidation Block Model Production Plan Optimisation Cost Analysis Peer Review Presentation Block Model Production Plan Optimisation Cost Analysis Peer Review Presentation review, presentation Pit design, economic analysis, sequencing, road design, recovery calcs., equipment evaluation, scenario analysis, cost evaluation, reporting, peer review, presentation Stope design, economic analysis, sequencing, development plans & schedules, recovery calcs., equipment evaluation, scenario analysis, cost evaluation, reporting, peer review, presentation Pit design, economic analysis, sequencing, road design, recovery calcs., equipment evaluation, scenario analysis, cost evaluation, reporting, peer review, presentation

27 Appendix

28 GOLD AND SILVER RESERVES AND RESOURCES December 31, 2013 Gold Tonnes (000 s) Gold (g/t) Gold (ounces) (000 s) Silver Tonnes (000 s) Silver (g/t) Silver (ounces) (000 s) North Proven & Probable 93, ,841 North Proven & Probable 24, ,192 South Proven & Probable 55, ,024 South Proven & Probable 28, ,354 Total Reserves 149, ,865 Total Reserves 52, ,546 North Measured & Indicated 86, ,276 North Measured & Indicated 4, ,436 South Measured & Indicated 70, ,378 South Measured & Indicated 13, ,066 Total Measured & Indicated 157, ,654 Total Measured & Indicated 18, ,502 North Inferred 69, ,434 South Inferred 99, ,686 Total Inferred 169, ,121 North Inferred 10, ,986 South Inferred 17, ,962 Total Inferred 28, ,948 See AEM Feb 12, 2014 press release for detailed breakdown of reserves and resources. Reserves are not a subset of resources. 28

29 COPPER, ZINC AND LEAD RESERVES AND RESOURCES December 31, 2013 Copper Tonnes (000 s) Copper (%) Copper (tonnes) Zinc Tonnes (000 s) Zinc (%) Zinc (tonnes) Lead Tonnes (000 s) Lead (%) Lead (tonnes) North Proven & Probable 24, ,519 North Proven & Probable 24, ,108 North Proven & Probable 24, ,964 South Proven & Probable South Proven & Probable South Proven & Probable Total Reserves 24, ,519 Total Reserves 24, ,108 Total Reserves 24, ,964 North Measured & Indicated 4, ,981 North Measured & Indicated 4, ,127 North Measured & Indicated 4, ,793 South Measured & Indicated South Measured & Indicated South Measured & Indicated Total Measured & Indicated 4, ,981 Total Measured & Indicated 4, ,127 Total Measured & Indicated 4, ,793 North Inferred South Inferred Total Inferred 10, ,118 10, ,118 North Inferred South Inferred Total Inferred 10, ,463 10, ,463 North Inferred South Inferred Total Inferred 10, ,176 10, ,176 See AEM Feb 12, 2014 press release for detailed breakdown of reserves and resources. Reserves are not a subset of resources. 29

30 NOTES TO INVESTORS REGARDING THE USE OF RESOURCES Cautionary Note to Investors Concerning Estimates of Measured and Indicated This document uses the terms measured resources and indicated resources. We advise investors that while those terms are recognized and required by Canadian regulations, 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 This document 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. Agnico Eagle uses certain terms in this press release, such as measured, indicated, and inferred, and resources that the SEC guidelines strictly prohibit U.S. registered companies from including in their filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 20-F and other U.S. filings, which may be obtained from us, or from the SEC s website at: In prior periods, reserves for all properties were typically estimated using historic three-year average metals prices and foreign exchange rates in accordance with the SEC guidelines. These guidelines require the use of prices that reflect current economic conditions at the time of reserve determination, which the Staff of the SEC has interpreted to mean historic three-year average prices. Given the current lower commodity price environment, Agnico Eagle has decided to use price assumptions that are below the three-year averages. The assumptions used for the mineral reserves estimates at all mines and advanced projects as of December 31, 2013, reported by the Company on February 12, 2014, are $1,200 per ounce gold, $18.00 per ounce silver, $0.82 per pound zinc, $3.00 per pound copper, $0.91 per pound lead and C$/US$, US$/Euro and MXP/US$ exchange rates of 1.03, 1.32 and 12.75, respectively. The Canadian Securities Administrators National Instrument ( NI ) 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. 30

31 NOTES TO INVESTORS REGARDING THE USE OF RESOURCES A mineral reserve is the economically mineable part of a measured or indicated mineral 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 mineral resource demonstrated by at least a preliminary feasibility study. A probable mineral reserve is the economically mineable part of an indicated, and in some circumstances, a measured mineral resource demonstrated by at least a preliminary feasibility study. A mineral resource is a concentration or occurrence of natural, solid, inorganic material, or natural solid fossilized organic material including base and precious metals 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 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. 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 reasonably 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 technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of realistically assumed mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental considerations together with any other relevant operational factors and detailed financial analysis, that are necessary to demonstrate at the time of reporting that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study. The effective date for all of the Company s mineral resource and reserve estimates in this presentation is December 31, Additional information about each of the mineral projects that is required by NI , sections 3.2 and 3.3 and paragraphs 3.4 (a), (c) and (d) can be found in the Technical Reports referred to above, which may be found at Other important operating information can be found in the Company s Form 20-F and the news release dated February 12, The mineral reserve and resource information has been reviewed and approved by Daniel Doucet, Corporate Director, Reserve Development, under the supervision of Alain Blackburn, Senior Vice-President, Exploration. Both Mr. Doucet and Mr. Blackburn are designated P.Eng. with the Ordre ingenieurs du Quebec and qualified persons as defined by NI

32 AGNICOEAGLE.COM Trading Symbol: AEM on TSX & NYSE Investor Relations: