Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Agnico-Eagle Mines Q1 2012 Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, April 27, 2012, at 8:30 a.m. Eastern time. I'll now turn the conference over to Sean Boyd. Please go ahead, sir.

Thank you very much, operator, and good morning everyone, and thanks for joining us. We know it's a busy morning for you. What we'd like to do is take you through a series of slides and talk about our operations this morning. And we've got our full team here in Toronto. Our annual meeting is also this morning in Toronto. So we'll leave some time for some questions. I'd just like to caution everyone that this presentation includes some forward-looking statements. So there's cautionary language in our presentation, and you can see that on our website. As far as positioning, as we know, we had a difficult year last year with some operating challenges. We've worked hard over the last several months on optimizing our operations. As we move forward, a lot of these newly built mines are getting to the point where they're more mature, and we can see that reflected in the results in the first quarter. So we were extremely pleased that we had contribution from all of our mines. We had strong cash generation. We had some good cost performance. We were able to mine and process more tonnes. And as we move forward, we look to optimize -- continue to optimize those assets. We continue to look for expansion opportunities within the current portfolio. We're working on some of those. We'll talk about those in the presentation. We still have an aggressive exploration program on many of our assets that are large and wide open. We plan to have an update on our exploration activities in June of this year. One of the topical items now is political risks, and our strategy doesn't change there. We're still very much focused on being at the low end of the political risk spectrum as far as mining…

[Operator Instructions] Your first question today comes from Stephen Walker with RBC Capital Markets.

Just a couple of questions. Just is there any -- in addition to the 40-day maintenance schedule at Kittila, for the balance of the year, are there any other major maintenance program scheduled either at LaRonde or any of the other operations?

No. Nothing out of the ordinary that wasn't included already in the guidance and the estimate that we've put out mid-February.

Great. And just to follow-up something, and again, if this has been talked about before, I apologize. About Goldex, has there been an official review by the Ministry of Natural Resources, the mine safety, the mine monitoring division as to what happened at Goldex? And if so, when did that report come out, or is there a report that is expected?

Well, that's all ongoing, and that's part of the process. We've continued to work with not only the government officials and the local government but also with consultants that have been involved in the project for a number of years. And really, what we're doing now is waiting for a series of reports to be finished and a series of reports to come in and as they come in, we'll do an overall risk assessment based on all the input we get from the experts and that's what we expect to be able to provide an update on in more detail the middle of the year. So we're still waiting on some of this work to be finalized and some of the reports to come in, which would include involvement of people like CSST in the government of Québec.

Right. And just lastly on Meadowbank. Obviously, a great throughput at the plant there. Can you give us a sense on how long it will take to transition from the current cutoff grades to the revised cutoff grades that you're going to be using going forward? Is that something that has occurred already or is it something over the next couple of quarters that you'll revise that, the open pit mine plant at Meadowbank?

Our realized grade in the quarter was 3 grams, and we were looking for about 3.1 grams. So our dilution experience has been good in the quarter. Our overall estimate in the remaining life of mine that we put out was about 3.2 grams. So we're quite close to that. So we're comfortable with the 3.2 grams over the next 6 years. We've had good development performance in terms of moving waste. I think we're averaging about 90,000 tonnes a day, which is where we need to be. So things have actually gone quite well there, and we didn't really have a lot of complications from the weather this year. We had what would be termed a relatively normal winter as opposed to last year where it was just horrendous with extreme cold. And we were trying to operate a portable crusher at that time, which has caused a lot of grief, and we didn't have the advantage of the secondary crushing unit. So we've got a lot of things in place now that we didn't have last year, which helps us going forward. And the biggest among them is the fact that the new plant over the next 6 years eliminates about a third of the waste development that was in the old plant. So we feel pretty comfortable about the grade there.

And just one more follow-up question to that if I might. The zonation, is there much zonation in that ore or is it fairly homogeneous? Do you expect any higher grade zones that might benefit on a quarterly basis? Or is it fairly homogeneous?

It could be. As we move to the south, we know that the southern pit has a bit better grade. So we do have days where you will get spikes and really, what we look for is to average around 3 grams for most of the month. And then, occasionally, you get spikes where you're well above that because there is some areas where you get a lot of visible gold. And if you get 3 or 4 days where you get a bump, then you have a good month. So that's generally what happens. One other comment there from the operating guy just like to add onto that, Stephen.

We will have variations in grades as we ramp up into Goose pit and Vault areas, there will be variations. But overall, what you're seeing now is what you'll be seeing in the future, essentially.

Your next question comes from Greg Barnes with TD Securities.

Sean, the 40-day shutdown at Kittila, is that going to be an annual event? Or is it more spaced out then that?

No. That's one where -- I'll give Jean Robitaille to give you a bit color on why it's 40 days and why it's now.

Greg, essentially, normally, you may see that on normal operation at each 5, 7 days to realign the third layer. Currently, since the beginning, we have many on and off situations and this is why we decided to plan this year that 40-day shutdown. So normal occurrence in our case will be 2x per year for now, roughly 10, 13 days. And this is built in our life of mine and forecast. So this year it's exceptional, and it will come back in principle in, let's say, 5 years from now.

But in the interim, you'll have a 10-day shutdown twice a year.

Roughly, yes, and you do the inspection and the descaling into the autoclave and small normal maintenance.

Okay. Just a second question, Sean. Goldex, you said you're drifting above the D Zone. Does that imply that you're blasting down there?

Yes.

Your next question comes from Joseph Reagor [ph] with Global Hunter Securities.

2 questions for you. The first is, at Kittila, do you have any cash cost guidance with the maintenance included, even like a ballpark range on it?

It doesn't change from what we put out in mid-February. And in mid-February, the number was, just getting that now, it was about 650 per ounce.

I mean, more for just the quarter, is that too fine for you guys?

I think that's too fine. We don't really put out the quarterly cash cost guidance on a quarterly basis, but we're still comfortable based on where we are for full year guidance in the sort of 650 range.

Okay. Goldex, the plan you guys have right now with the exploration as there a dollar number on that, that you guys have guided to? And is all of the drilling going on in the D Zone? Or are you guys still drilling the original deposit as well?

No. We can't drill the original deposit. We've just pulled away from that area entirely. So we're drilling satellite zones on the property. And in terms of the costs, it's about $2 million a month roughly. And so we'll be in a position, mid-year, with all of the technical information, the risk assessment done, all of our work done with the officials plus our exploration work to decide what's possible there, if anything. And we're still cautioning people, like we've done consistently, is you should have 0 value in your model and 0 value on expectations for Goldex.

Your next question comes from Joung Park with Morningstar.

Question I had was I noticed that CapEx on existing mines came down dramatically during the quarter. So why is that? Have these mines kind of matured to the point where they need lower levels of sustaining CapEx?

They're right on the budget, and they will vary from quarter to quarter. So the overall level went up slightly, but that's because we've approved some additional initiatives. One of those was an acceleration of the ramp development at Kittila and exploration program at Kittila underground for purposes of evaluating the extent of the mineralization at Rimpi. The other major component of the increase was an additional $10 million in 2012 to the already budgeted $10 million at Pinos Altos for the shaft. So we're still in line with our guidance with the exception of a couple of additional initiatives that we've decided make sense for the future of some of our key assets.

Okay. And it seems like you guys don't break down how much you spent on Goldex. So can you quantify that?

Well, we have a provision that was taken last year for remediation and assessment. So we're working through that provision. But roughly, it's about $2 million, $2.5 million a month that gets expensed depending on the month. And a lot of that is exploration and economic assessment of other alternatives. We really want to be in a position at the mid-year so not only will we have all the technical reports, but we'll also have a sense of whether -- we'll also have a feel for economic potential of other satellite zones but if the technical reports -- and this is a cautionary, tell us that we have a major technical issue, then nothing happens even though you may have some reasonable drilling results and a growing deposit. We know the deposit will grow, whether we can mine it, we don't know that yet.

Okay. And going to Meadowbank, it was at almost 10,000 tonnes per day throughput during the quarter. And I was under the impression that the processing plant there runs at 8,500 tonnes per day, which the first quarter figures significantly exceeded. So what's going on there? And is the throughput during the first quarter sustainable?

Well, the design capacity there was 8,500. The experience that we've had and probably miners, in general, have is these plants tend to have some headroom above the design capacity. We've been fortunate to have some good performance in the pits to be able to feed the plant at a higher rate. But we did see this potential to run that plant at over 9,000 tonnes a day in previous quarters. We had a very successful start up of the secondary crushing unit last June. And that gave us some good throughput numbers in the second half of last year. And we've done even better as we started the first part of this year. So we were looking in our guidance for a little over 8,600 tonnes a day to average for the year. So we got off to a good start because as we said, we didn't have any -- we were building in some factor for some -- for winter. And generally, this is our toughest quarter. So we've had a good start here in what is normally our toughest quarter, but it is mining. Like a lot of these mines, we do have things that we have to pay attention to. And so all we're saying is, good start, let's see how the rest of the year goes.

Your next question comes from David Haughton with BMO Capital Markets.

While we're still talking on Meadowbank, following from the previous question, noticed that D&A was down. Is that reflective of how we should be thinking about the depreciation going forward?

I'll let Ammar answer that on [indiscernible].

Yes. That's pretty reflective, David, going forward.

Okay. Good, so it reflects the lower carrying value, et cetera.

Correct.

All right. Switching back to Mexico. Looking at the Creston Mascota, the stacking right there was quite a step-up, more than 5,000 tonnes a day. Is that sustainable?

I'll let Tim Haldane handle that.

Yes, it's sustainable for the next -- for the better part of this year. Actually, when we remodeled and came out with our new block model this year, we were fortunate to have more ore in the design pit. So a little better ore displacing waste, and that's a positive thing for us.

And Tim, the grade moved up as well, should we be thinking about that higher grade going forward?

No, it will drop off.

Okay. So bring it more back down to the 1.4, 1.2 gram level?

Yes, I'd have to go back and look what our plan was, but that sounds right.

Okay. Well, I got you, Tim. With the expansion of the underground mining rate, would you be thinking about an expansion of the milling rate as well?

Well, I mean, we're looking fairly mid-range or long-range here, and our open pit mines are designed to be depleted pretty close to the end of this decade. So expanding the mill will have to be dependent on us finding another source of feed for the mill to supplement the underground feed. We've got a 5,000 tonne a day mill and we'll have a nominally 4,500 tonne a day underground mine in the future. So if we find more open pit ore or find a way to get more ore to the mill, we'll certainly think about expanding it. But the mill right now is running at 5,000 and we think it's -- we think we can do more of with the existing mill.

So the better way to think about it going forward is just a change of mill -- mix being presented to that mill with more underground material being put there as the pits deplete.

I think that's exactly right.

Okay. Switching over now to Kittila, similar kind of question with regards to open pit versus underground mining. Open pit mining, they're depleting. Don't get a sense as to how much of the quarter came from the open pit compared to the underground and what that mix might be like going in -- through the balance of the year. Can you give us a sense of that, Sean?

Yes, Yvon will handle that.

Yes. Open pit production for the quarter was roughly about 25%, 30%. The rest was coming -- underground was 25%, 30%. The rest was coming from the pit. The rural pit is essentially complete. The [indiscernible] pit that will be complete by the end of the year, and the mine will transition from Q2, Q3, Q4 from 40% to 75% in the last quarter roughly. And then, going forward into 2013, essentially dependent on that 3,000 tonnes capacity from underground.

Okay. And when we're looking at going forward with the development here, can you see justification for plant expansion? I know that you're looking at a 25% lift, but do you have a sense that it could sustain something even more than that? Or is it too early to say?

At this stage, the current mine plant can support -- the underground mine plant can support the 3,750 tonnes per day rate that was scoped out last year. So we're okay on that side. But as we move on with the exploration results both at [indiscernible], a larger project down the road would be defined that way, but we need to clarify the resource before we get any further.

Understood. And Sean, just returning to something that you've mentioned in the opening comments. You were saying that you'd be thinking about the CapEx in the order of $500 million per annum for the next 4, 5 years. How's that compared to the 400 that you're looking at this year. And I sort of expected that with the kind of profile that you got, rather than having a flat $500 million CapEx per annum, we'd be looking at something less going forward.

Well, Meliadine is a big part of that. And Kittila, it's not just a 25% expansion, it's also a shaft. La India is also in there. And then there's sustaining CapEx. So we have to fine tune those, but that's sort of a rough sort of estimate. Some years it will be above, some years it could be below.

Your next question comes from Jeff Wright with Global Hunter Securities.

One question on Meadowbank. Can you talk about cost containment, cost initiatives a little more elaborate on that project and how you think you can get down a little bit?

Sure.

There's an action plan that's in place at Meadowbank. The action plan was essentially focused on production in the last few quarters. As we move ahead with the better success rate, both milling and mining, we're going to move on to cost reduction opportunities. And that's going to be the next focus.

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

Your disclosure your on cost per tonne as well as cost per ounce is very helpful. And it's notable that other than Pinos Altos, in round numbers, the other 4 mines are near $100 a tonne. And I fully accept that, that's what the cost should be. Do you think, Sean, there is a disconnect between the operating and capital costs as your operators experience? And not yours specifically but in most of the mining companies, the exploration departments where there's juniors running around with 1/2 gram projects and 1 gram projects and 2 pounds of copper and a 1/4 gram gold. Your mines would suggest that you need 2 grams to cover operating costs and a third gram to cover capital costs in the majority of your cases. It would seem like maybe not Agnico specifically but everyone's exploration budget is way too high.

Yes. It's hard to say. I think that as we go out and look at smaller situations, I think generally, there's not a lot of challenges in most cases with the ore body where the difficulty is on the cost per tonne estimates to extract the ore. We find there's generally an underestimation of the expectations around the cost per tonne to operate a mine among the junior space. So that's our general experience, and that's where the disconnect is in expectation in the development project in terms of what it's going to cost per tonne versus sort of our reality and what we know it to be. And you're right, in most cases, it's around $100 per tonne.

So how do you make sure that your exploration moneys are well spent, given the industry-wide tendency to chase pipe dreams?

Well, a good part of our budget this year, 60% of it or so, 65% is on the existing deposits. And that's really for resource to reserve conversions. So it's largely biased to that, which it has been over the last little while. And it's even more concentrated than that on a couple of the key projects, which are our biggest projects, Kittila and Meliadine. And that's because we see the potential to add those to our production base, whether it's expanding Kittila or building Meliadine. So that's the way we come at it. How do we improve the quality of the overall calculation and based on the fact set of cost that we have at that operation, we've got a good data set to determine what's ore and what's waste.

Your next question comes from Anita Soni with Crédit Suisse.

All my questions have been asked.

Your next question comes from John Kratochwil with Canaccord Genuity.

My questions are actually a cash cost per ounce related specifically at LaRonde and Pinos Altos. They were significantly lower in Q1 than your 2012 estimates. Were these kind of surprises due to higher byproduct credits on the cash costs? Or were your estimates for the year kind of very conservative?

At LaRonde, we did produce more zinc so we were able to get more byproduct tonnes. And as we said, our tonnage year-over-year was up 9% to 7,100 tonnes a day. So we had the advantage of a higher realized gold grade as well as the ability to mine some more, essentially, zinc tonnes. So we had about 50% more zinc production in the quarter than we had anticipated which really drove that. And in Mexico, we just continue to have good cost performance. We do have a similar byproduct credit, but I think it was roughly, in terms of production, where we thought it would be. We just got the advantage of a bit better price on our silver than we budgeted. But behind that, we still have a very efficient low-cost operation in Mexico.

Okay. And are those kind of lower numbers because we have to basically imply higher numbers for the remainder of the year in order to get to the guidance? So should we, I guess, assume a slightly lower than guided number for the rest of the year?

I think all we can say there is that LaRonde will continue to look for ways that we can maximize the ore body by taking advantage of some of that byproduct tonnes or largely byproduct tonnes. So that certainly the emphasis is to try to keep that zinc tonnage strong and that zinc production strong. And Mexico, they've had a good quarter. We anticipate -- and they've had several good quarters, this just isn't a one-off. So we expect some good performance there. But as we said, we just came out with this guidance in mid-February. So that's about 3 months ago. So we're not prepared to change it at this point. It is mining, things do happen. But as we said, we've gotten off to a good start.

Understood. Understood. And I guess at LaRonde, the -- I think you said, the throughput was up a little bit. Is that something that's going to sustain for the rest of the year or is that going to come down a little bit? Or...

Yes. Hang on.

It's sustainable for the rest of the year.

[Operator Instructions] The next question is a follow-up from Anita Soni with Crédit Suisse.

I did have one question about LaRonde. Longer term as it goes to the LaRonde deep, I think a couple of years ago, you're thinking about thinking about that operation more than 6,000 tonnes per day operation. Is that still what we should be thinking about once it's fully into the deeper sections of the mine?

That's right. We haven't changed that long-term view at 6,000 tonnes a day.

But at that point, you should be in higher grades more along the gold and the zinc side, right?

Right. The average grade of the deposit is 4.4 grams and we're estimating to be mining this year at about 2.3 grams. So we gradually increase the throughput from the lower part of the mine, which will increase the gold grade over the next 2 to 3 years.

Your next question comes from David Fondrie with Heartland Funds.

I was just wondering, it seemed like almost everything went right this quarter. Production was up in almost every mine, costs were well within control. Is there room for improvement as we go out over the next 3 quarters, or is this going to kind of be perhaps steady state if -- you've kind of caveated everything by, "Well, this is mining," but do you kind of see things kind of steady state for the remainder of the year?

Yes. I guess we would, again, categorize it. As we said 3 months ago, we put out what we would term as very solid, very achievable guidance. That's still the way we want to characterize it. And as we go forward, out in '13 and '14, we see some ability to increase output at some of these mines. And we're working on some of those plans right now. So I think these assets, some of them will continue to get bigger in terms of the overall size of the reserve and resource. We're focused on doing that through exploration as we talked about the split and the emphasis of that program. But several of them still have the ability to grow output as well. As we move through the quarters, we've continued to have good performance in April. But if you look at each of the mines, we'll tell you where we're paying attention. LaRonde, we're transitioning to a deep mine, so that's not easy. The team has done a good job, that you're dealing with a mine that has congestion at depth. You have heat to deal with. Our flexibility improves there going forward as we open up new working areas, but we're still into a deep part of the mine. At Kittila, it's simply the autoclave and the availability of that autoclave and we have to plan for regular shutdowns there. That lowers our availability there. So that's something we have to continually pay attention to. At Meadowbank, it would be cost and waste development. So that's a challenging environment to operate. Our people have done a very good job there. In Mexico, we've had a really good run there. It's a deposit that requires focus on tonnage. The grade is still below 3 grams. They've got some underground development work to do there. We have several of our mines transitioning from open pit mine to underground. So there are still a lot of work to do and there's mining and that's why we'll stick with the current guidance.

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

Thank you, everyone. Thank you, operator. And again, for those that have the time, you're welcome to attend our annual meeting, which is 11:00 this morning at the Westin Harbour Castle. We have all of our key people from our operations around the world will be there. And if you'd like to come and chat with them, you're certainly welcome. So thanks for your attention.

Ladies and gentlemen, that does conclude the conference call for today. Thank you for your participation. You may now disconnect your lines.