Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Agnico-Eagle First Quarter 2011 Results Webcast Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, Friday, April 29, 2011, at 8:30 a.m. Eastern Time. I'll now turn the conference over to Sean Boyd, Vice Chairman and Chief Executive Officer; Ebe Scherkus, President and Chief Operating Officer; Ammar Al-Joundi, Senior Vice President of Finance and CFO; and the rest of the senior management team. Please go ahead.

Thank you, operator, and good morning, everyone, and thanks for joining us on our first quarter 2011 conference call. It's a big day for us today. We have our annual meeting later this morning. What I'd like to do today is move through the front end of the slides fairly quickly so that we can get to a discussion of the operations, but also talk a bit about the exploration results that we announced yesterday on a separate press release. And this is an important next phase for us now that the mines are built and up and running to accelerate infrastructure, increase our drill programs at our newly built mines so we can convert more resource into reserve and hopefully, translate that into future growth and production. In general, when we look at the quarter, we saw some continued improvement at Pinos Altos in Mexico, some good improvements at Kittila on the recovery side, some steady results coming out of our Abitibi mine. There's still some work to do on the cost side at Kittila, and there's still some work to do at Meadowbank. As you know, we had a fire in the kitchen facility at Meadowbank. I think from our perspective, what was important was the quick reaction and response of the team in the middle of the night, who reacted quite quickly to isolate the fire at the kitchen facilities, and the team worked extremely hard to get the mine up and running in short order with portable kitchen facilities. I think the important -- another important aspect of their response was the fact that we're not going to see a delay in the installation of the secondary crushing unit that we expect to be ready for the second half of this year. And I think that's…

Good morning, everyone. I'd just like to discuss briefly our operations and then really focus on the exploration highlights, which were highlighted in our exploration press release yesterday. First off, LaRonde. LaRonde is our anchor, our steady-state producer. Tonnage was down a bit because we were in the process of developing more zinc-rich, silver-rich mining blocks in the upper part of the mine. And those blocks are smaller than what we are traditionally used to at LaRonde. But having said that, the progress has been excellent and the tonnage is back to normal levels so far in the second quarter. The second quarter and the third quarter will be a transitional period for LaRonde, as LaRonde extension, the construction gets completed. So far, it's on schedule and on budget, and we expect to have our first production from LaRonde extension from the new internal shaft in the fourth quarter of this year. As far as exploration is concerned, we were off to a bit of a slow start at LaRonde. We have gone through our third drill contractor in a little over a year. However, presently we are back to our original contractor and the drilling underground has resumed at LaRonde. Our main focus will be to the west, towards Bousquet. We've got open-ended intersections to the exploration drive on level 215. So we will be testing that particular target. Also, we have 2 machines testing the extension of the IAMGOLD's Westwood zone on to Ellison, and that is ongoing. Unfortunately, we lost 1 hole, so we had to start again. These are deep holes, and they do take time and they do take a lot of work and they aren't cheap. Also, what we have been working on is the confirmation of Zone 5 on the original Bousquet property.…

Thanks, Ebe. I think what we'd like to do is just open the lines up for questions now. We're happy to answer them.

[Operator Instructions] First question today comes from David Haughton with BMO Capital Markets.

I've got a few questions. Having a look at Kittila, very good results there on the recoveries, obviously. What should we be thinking about on a go-forward basis? Would it be the 86% level or should we stick to the 83%? What do you feel comfortable with?

I will feel that you keep 83% and beat the 83% to 86% constantly.

All right. And with regards to unit costs, €75 to the tonne, should we be thinking about that as a steady state kind of number?

No you should not. What we were faced in this particular quarter is a lot of stockpile manipulation to provide a constant feed of sulfur to the mill. We feel we can beat that. Also, what we were faced is significantly higher fuel costs. And because of the winter conditions, where all the equipment ran around the clock for a good part of the quarter, we feel that, that is another area that we can work on. The third area that we have to work on is we're transitioning to self-mining. We've used a lot of contract labor to help us catch up over the past couple of years. We've had issues. So we expect to have lower unit cost on a per tonne basis and also, with respect to development on a per meter basis. So we feel our cost will be slightly higher than our budget. We did get a 13% tax on electricity due to a new tax imposed by the Finnish government. So I would feel comfortable with a number in the low 60s, David.

Okay. So that's 10% to 15% better than what you've got now?

Yes.

For the quarter, you had a blend. I'd expect of the open pit and the underground ore. How much ore came from underground, and were the grades consistent with the open pit?

The underground ore produced approximately 30% in that area. And so far, from a reconciliation point of view, we are getting better dilution results than we expected. And as a result, the grade is about 5%, 6% higher.

And the other thing was, quite a step down in the D&A rate, which is in contrast to the other assets. Perhaps we could talk about the depreciation and the reason for the overall lift, but in Kittila's case a little bit lower.

David, it's Ammar here. Overall, the depreciation was still within our $200 to $250 guidance. It was at the high end of it. We do depreciation on a per tonne basis. And as a function of a lot of process of low-grade stockpile at Meadowbank on average our depreciation was higher. Similarly, to some extent, at Kittila, with a slightly higher grade, you would have had a proportionately lower depreciation.

All right. Moving now, Ebe, to Canada. Having a look at LaRonde. Unit cost there CAD $68 (sic) [CAD $86] per tonne, quite a lift from what we've seen in the past. What should we be thinking about going forward?

Go back to the original budget, which would be about CAD $81 per tonne, that is our budget. Right now, when you look at the denominator because LaRonde was slightly under budget with respect to tonnage, that inflated the unit cost by about 12% thereabout. So right now, it's back to normal levels. So it's more a function of tonnage process through the mill.

Okay, so a function of fixed versus variable components?

Yes.

Okay. And you mentioned in the discussion at Lapa your considering a lower cut-off grade. What should we be thinking about ahead for those cut-off grade, should it be something like we saw in the first quarter or more likely what we've seen last year?

I think we're looking at a lower cut-off grade at Lapa. It'll depend on the gold price assumption going forward. That's where we are.

Okay. So you had about 6.8 grams in that first quarter. Is that the sort of target rate that we should be thinking about? Is that the new norm?

Yes. Well, as the gold price has increased, we've incorporated more lower-grade material. We don't only face that at Lapa. We face that at all of our operations. And from a planning point of view and even from a guidance point of view, with increasing gold prices, we'll see typical lower grades. And then to be able to maintain guidance, then we have to increase throughput to be able to process lower-grade material and meet guidance. And so that's part of the issuance, so you look at things like Goldex or even Meadowbank, Pinos Altos. Pinos Altos is running over -- at 5,000 or over 5,000 tonnes per day. The solution there is we increase the throughput. But the benefit of that is we also increase the life of mine.

Okay. All right. Well, that's a natural outcome, given where the gold prices at the moment. Okay, I'll let someone else have a go.

Your next question comes from John Tumazos with John Tumazos Very Independent Research.

Congratulations on the 86% at Kittila. And I'd appreciate it if you'd take a victory lap and explain to us what changes brought about the full utilization, full recovery rate, whether the nature of the ore will change as you move into deeper or lateral zones to make it easier or more difficult? The second question, if fortuitously each of the operations performed to plan in the same quarter, what do you think is your production capacity at the moment?

I'll answer your last question first, John. We're looking at about 300,000 ounces rather than the 252,000. And the main stumble that we had this quarter was Meadowbank. All of the rest were pretty close on target. So we feel that Meadowbank gets resolved, and we believe it will, then we should be very close to the -- closer above the 300,000 ounce per quarter mark. With respect to your first question, before I turn it over to Jean, the metallurgical part, we don't see any change with respect to ore characteristics at depth. We have tested it and appears to be more of the same. So this is something that we're going to have to live with at Kittila. And with what we did metallurgically, I'll turn it over to Jean.

John, first of all thank you for the congratulations. This is a teamwork, and I can tell that all of the support and the team at Kittila did a very good job. We were able to sustain constantly during the last 3 months and it's still going on presently. So essentially, it's optimization process, a good control in the organic and the same good control on the removal of terrain. And we think with the other parameter is that it's normal in any optimization, so temperature and pressure.

Congratulations. I know we all raked you over the coals when things were going badly a year or two ago.

If I may add to that, it's also a better understanding of the chloride and the organic material itself. And as a result of that, we've been -- as Jean and his team have been able to do a much better job at removing it and controlling the oxidation process in the autoclave.

Your next question comes from Joung Park with Morningstar.

This is Joung Park at Morningstar. So my first question was on Meadowbank. So it seems like to be able to reach the $700 per ounce projections at Meadowbank, you would have to generate cash cost to something like under $600 per ounce back in the back half of 2011 once the permanent crusher is installed. So is that what you look at as a sustainable long-term cost figure for that mine?

I would say at this point in time, yes, but quantify that a bit. What we are planning, we think we may have some extra capacity and what we would like to do is adopt a fill the mill strategy and by that one of the issues that we currently have at Meadowbank, we sort the ore into low grade, medium grade, high grade, et cetera. And as a result, that has cost a lot of money with respect to rehandling and contractor costs. So with that fill the mill strategy, anything that is above our cut-off grade will then go directly to the mill, so we foresee significant savings on a cost per tonne basis, and that should be reflected on a cost per ounce basis.

How much of a benefit would that potentially be?

I didn't get that.

How much of a benefit will it be?

How much of a benefit on a per tonne?

Yes, on a per tonne basis?

Well, I think what it would do is probably help us -- rather than maintain our budgeted cost per tonne, rather than face additional increases.

Okay. And in Slide 17 of the presentation, for the CapEx forecast for 2012 and beyond, does that incorporate growth projects such as Meliadine or is that just truly sustaining?

On the gray bars, it's just sustaining. But what we did on that slide, we drew sort of an illustrative line making the assumption that we're going to proceed with a Kittila expansion. We'll make that determination later this year, and we also built in an assumption for Meliadine based on what it cost us to build Meadowbank. But ultimately, Meliadine CapEx will be determined by the size of the deposit and it's growing quite quickly, and as Ebe mentioned, it's growing quickly with near surface mineralization. So we'll have to make a determination at some point based on our drilling, what proportion will we open pit versus underground and we may see a bigger footprint than originally thought of when we bought it last year.

Okay, that's fair enough. And just a follow-up. So when I added up the sustaining CapEx figures for the quarter and kind of annualized that, it turned out to be somewhere close to $200 million. But I look at the CapEx estimates for 2013, 2014, and that looks more like $100 million. So just wondering how we should look at sustainable maintenance CapEx levels going forward?

We've incorporated some significant CapEx, especially at Meadowbank. This coming year, we still have some great construction. We have airstrip construction, so as a result CapEx, especially at Meadowbank is higher. We also have the completion of LaRonde extension, which once completed we will not have going forward next year. So a lot of these big ticket items will not be -- will be completed. And as a result, we expect sustaining them to drop.

So some are close to the $100 million level that the slide seems to indicate?

That is correct. But then we -- and we also have other projects that may be attractive with respect to the processing plant at LaRonde CIL conversion to back to CIP from Merrill-Crowe. So there's a whole bunch of projects we may follow up on, if they have the proper rate of return and also the side benefit, additional benefit of reducing or putting a lid on our operating cost.

Okay, that's fair enough.

Your next question comes from Barry Cooper with CIBC World Markets.

Congratulations on getting Creston Mascota up and running. Just had a question on the commercialization there. Was the 4,600 ounces that were produced, was that all produced in March or was that produced over the course of the quarter such that part of that was commercial and part of it was not?

I'll let Tim Haldane answer that.

No, that was the full quarter production, Barry.

Okay, so how much would have been commercial then?

I can get that number, but the March production was around, I think, 1,500 ounces, 1,700 ounces.

Okay, so looking at the number then, if -- it kind of looks what you've done, at least from the footnotes and whatnot there, that you've taken the cost and whatnot for March and then amortized it over the entire quarter production to give your $3.19 an ounce. So I'm guessing that it had you kind of just done it over the commercial production then with the commercial cost, the cost at Mascota would have been much, much higher. Am I wrong in that?

This is Picklu, the Controller. All the costs were inventoried prior to March 1, so all the costs attributable to the production before March 1 was within the production cost post-March 1.

Okay. So you didn't capitalize like normal procedure is to capitalize that noncommercial production and absorb those costs into capital cost; that's not what you did is what you're telling me?

Correct.

Okay, good enough. Then further on Mascota, obviously that entire region of Mexico has difficulties with respect to silver recoveries and indeed you face that problem at the rest of Pinos Altos with material going through the mill and whatnot, but your recovery at Mascota is basically 0 for 12 gram that was mined. Is there anything that can be done on that, Tim, to improve those silver recoveries?

Well, we never plan to get much silver out of Creston Mascota. I think the head grade is very low. The heap leach recovery on silver for us anyway in this district is going to be 10% or 15% and I don't think there's much realistic opportunities to increase that. We are doing some research now obviously to see where we can get more silver production out of Pinos Altos and Creston Mascota, but we're sort of subject to the mineralization there, and we don't see any instant answers on being able to increase the recovery of silver.

Yes, I can appreciate the complexities and the difficulties there, although at almost $50 an ounce it may start paying people to pay attention to some of these problems because even small incremental changes can probably make a huge difference in your bottom line effect.

We are definitely paying a lot of attention to that. We just don't have the breakthrough yet.

Right. And then on Kittila drilling, maybe Ebe you can answer this. You gave a table in here of uncut grades. Would there have been any difference if you would have cut those grades? And what is kind of a top cutting factor you use on your drilling to bring things down?

There wouldn't have made any significant difference, Barry. Kittila does not have a very coarse nugget effect and so cutting, I believe, we cut the equivalent of 1 ounce of about 32 grams per tonne. But the population is so small, so it's got to -- next to no effect whatsoever.

Right. Okay, good enough. That's all my questions.

[Operator Instructions] Your next question comes from Tony Lesiak with Macquarie Securities.

First question I guess is for Ebe. Ebe, what should we be looking for, for Meadowbank in terms of production over the next few quarters?

We see a similar production the coming quarter, maybe slight improvement as we get the secondary crushing plant. Our mining plan is actually back ended. So for the next couple of quarters, I just have the number here. We're looking at close to 100,000 ounces per quarter going forward in the next 2 quarters. I mean in the third quarter and fourth quarter, slightly better than the first quarter and the second quarter. We'll have more consistent mill feed and more consistent availability. So we'll see a ramp-up, but it is back ended over last 2 quarters.

Okay. If I remember correctly the crusher wasn't supposed to be up until I think sometime in September. So with it hopefully being in by midyear, does it appear now that your guidance, the revised guidance for the year looks potentially a bit conservative here?

I think with everything that's happened at Meadowbank, we're going to be ultraconservative.

It's probably a good idea. A question for Sean on silver. Sean, do you think the silver price looks extended here, and would you look at potentially hedging some of your by-product production?

I think silver has probably run a bit too far at the moment. We're not looking at hedging silver. We actually think the gold price is going to continue to move up and silver is going to move up with it. We actually ran some numbers for next year using an $1,800 gold price and a $60 silver price, and the numbers are extremely strong, particularly on the cost per ounce side, because at 6 million ounces a silver production using a $60 silver price, we get an extensive credit. So we're actually optimistic about gold and as a result, silver. So we're not contemplating doing anything on the silver side.

Okay. Maybe on that, could you give us a sense of where your views are right now on maybe implementing a gold-linked strategy like Newmont and what your view is on where dividends for gold companies should be heading in order to compete with that ETFs?

Yes, we had a substantial increase in the dividend as you know in December. That's consistent with our sort of 29-year track record, and we're sort of one of the leaders as far as that goes. Going back to one of the slides in the presentation that outlines sort of an illustrated reinvestment program for the existing assets relative to our EBITDA. You can see there's room to increase that dividend. We're currently paying a little over $100 million gross on an annual basis. So there's room to pay more. How we it? We haven't decided, whether we go to something tied to the gold price or whether we bump the quarterly payout and then look at a special payout at the end of the year based on how the metal prices have performed throughout that year. We haven't really decided, but it's something that we're looking at over the next couple of months. As far as where they should be from an industry perspective is that, I think, everybody acknowledges that the equity valuations are at the lower end of the historical range for a number of reasons. The next to bump those valuations we need obviously more generalist investors in the space, traditional gold investors can take a dividend or leave a dividend, but we think the next wave of investors that will be forced to look at this space because of the performance of the gold price will be focused on the dividend, as well as the strategy and management. So I think it should be in the 1.5% to 2% range versus a minus 0.4% range on the ETF. Then you'd have a spread of 2% to 2.5%. I think that would be really important. But I think overall, it's more than just the dividend. I think it's a -- and I think we're seeing this in the industry, a little bit more disciplined in terms of capital allocation. The companies have a lot of capital. It's getting difficult to grow if you're really big. That's why we like our position. We can still grow the million ounce base over the next 10 years, we think. So I think more important than the dividend is the strategy, keeping it gold focused, not diluting it, and sort of trying to keep a lid on the share count is more important than the dividend.

Your next question comes from Anita Soni from Crédit Suisse.

Just a couple of questions. At Creston Mascota, do you expect to still be booking about $5 per tonne in unit cost going forward?

No, it's going to be closer -- between $10 and $15. I think we're expecting $13 this year, $14.

Okay. All right. And then just in terms of the grades at Creston, was that a result of the recent cut-off or was that just a result of -- it was slightly lower than the forecast that you put out, or was that a result of basically not wanting to chuck high grade ounces at the startup of the mine?

Well, the early mining at Creston Mascota we've actually had some positive variance. We found a little bit more ore on the upper benches than what was in our original plan, and we just took the ores that was mined, and put it on a heap. So...

Okay, because the original guidance that was put out in December was looking at about 1.62 grams per tonne for the heap leached stock, and I think you came in at 1.4. Then just on LaRonde, in terms of the by-products again, the grades were slightly lower. When do you expect to get back into the higher grade? Or should we be rethinking our grade assumptions for the LaRonde on the by-products?

Well, it will also be impacted by higher gold grades at depth and more tonnage from LaRonde extension. So that will have an impact of lowering the effect of zinc and silver and copper grades, so that's -- it's an effect of that. But as far as the ore body itself, there's no change with respect to the zinc grades or silver grades per tonne. It's more a function of the blend.

Okay. I guess I'm just a little confused because again in December it was -- on silver, it was more like 2 ounces per tonne that you were looking at. It came in at about 1.5 ounce this quarter?

We're a lot closer to that in Q2, so that's just the mining sequence.

Okay, so you're back into the -- what price you previously guided?

Yes.

All right. And just on Meadowbank, I guess with the split that you were describing about a -- close to 100,000 ounces per quarter in Q3 and Q4. I guess that 45-55 split that you were originally talking about with the March 28 guidance is not as valid as it was before?

I don't understand.

Sorry, it looks like it's more back-end loaded than you had originally described in the guidance press release that you put in March 28.

Ebe, go ahead.

I think, Anita -- it's Ammar here. I think overall it will still be approximately that 45-55 for the company overall and as we said in the press release, about a 20% increase in the second half versus first, which is about the 45-55.

Okay. All right, all right. And then just if you could perhaps, what kind of throughput rates are you expecting for the second quarter at Meadowbank?

Currently, we're averaging close to 8,000 tonnes per day. For us, the main challenge has been availability. I mean we have had days where we have exceeded 10,000 tonnes. For us, the challenge is to make absolutely steady-state operations, and we are currently achieving availabilities close to 90%. So we are seeing significant improvement. So I think for the second quarter, max it out at an average of 8,000 tonnes and then that will be ramped up in the third and fourth quarter.

We have no further questions at this time. Please continue.

Thank you, operator, and thanks everyone for tuning in. And if there's an interest to go to our site visits at Meadowbank, Kittila or Pinos Altos, give us a call here and we'd be happy to accommodate you. Thanks, again.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.