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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from
to
Commission file number: 1-13422
AGNICO-EAGLE MINES LIMITED
(Exact name of Registrant as Specified in its Charter)
Not Applicable
(Translation of Registrant's Name into English)
Ontario, Canada
(Jurisdiction of Incorporation or Organization)
145 King Street East, Suite 400
Toronto, Ontario, Canada M5C 2Y7
(Address of Principal Executive Offices)
R. Gregory Laing
145 King Street East, Suite 400
Toronto, Ontario, Canada M5C 2Y7
Telephone: 416-947-1212 Fax: 416-367-4681
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Common Shares, without par value
(Title of Class)
The Toronto Stock Exchange and
the New York Stock Exchange
(Name of exchange on which registered)
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
170,859,604 Common Shares as of December 31, 2011
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Act.
Yes

No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the
past 90 days.
Yes

No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes

No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and
large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)
Large Accelerated Filer 
Accelerated Filer 
Non-Accelerated Filer 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP 
International Financial Reporting Standards as issued
by the International Accounting Standards Board 
Other 
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17

Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes

No

TABLE OF CONTENTS
Page
PRELIMINARY NOTE
1
NOTE TO INVESTORS CONCERNING ESTIMATES OF MINERAL RESOURCES
2
Cautionary Note to Investors Concerning Estimates of Measured and Indicated Mineral
Resources
2
Cautionary Note to Investors Concerning Estimates of Inferred Mineral Resources
2
NOTE TO INVESTORS CONCERNING CERTAIN MEASURES OF PERFORMANCE
3
PART I
4
ITEM 1
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
4*
ITEM 2
OFFER STATISTICS AND EXPECTED TIMETABLE
4*
ITEM 3
KEY INFORMATION
4
Selected Financial Data
4
Currency Exchange Rates
5
Risk Factors
6
ITEM 4
INFORMATION ON THE COMPANY
16
History and Development of the Company
16
Business Overview
19
Mining Legislation and Regulation
20
Organizational Structure
23
Property, Plant and Equipment
25
ITEM 4A
UNRESOLVED STAFF COMMENTS
84
ITEM 5
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
84
ITEM 6
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
116
ITEM 7
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
142
Major Shareholders
142
Related Party Transactions
142
ITEM 8
FINANCIAL INFORMATION
Dividend Policy
ITEM 9
THE OFFER AND LISTING
Market and Listing Details
142
142
143
143
ITEM 10
ADDITIONAL INFORMATION
145
Memorandum and Articles of Incorporation
145
Disclosure of Share Ownership
147
Material Contracts
147
Exchange Controls
151
Restrictions on Share Ownership by Non-Canadians
151
i
Table of Contents
Corporate Governance
152
Canadian Federal Income Tax Considerations
152
United States Federal Income Tax Considerations
153
Audit Fees
155
Available Documents
156
ITEM 11
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
156
ITEM 12
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
158
PART II
ITEM 13
159
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
159
ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS
159
ITEM 15
CONTROLS AND PROCEDURES
159
ITEM 15T CONTROLS AND PROCEDURES
160
ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT
160
ITEM 16B CODE OF ETHICS
160
ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
160
ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
160
ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
160
ITEM 16F CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
160
ITEM 16G CORPORATE GOVERNANCE
160
PART III
161
ITEM 17
FINANCIAL STATEMENTS
161 **
ITEM 18
FINANCIAL STATEMENTS
161
ITEM 19
EXHIBITS
215
SIGNATURES
216
*
Omitted pursuant to General Instruction E(b) of Form 20-F.
**
Pursuant to General Instruction E(c) of Form 20-F, the registrant has elected to provide the financial statements and related information specified in
Item 18.
ii
Table of Contents
PRELIMINARY NOTE
Currencies:
Agnico-Eagle Mines Limited ("Agnico-Eagle" or the "Company") presents its consolidated financial statements in
United States dollars. All dollar amounts in this Annual Report on Form 20-F ("Form 20-F") are stated in United States dollars
("U.S. dollars", "$" or "US$"), except where otherwise indicated. Certain information in this Form 20-F is presented in Canadian
dollars ("C$") or European Union euros ("Euro" or "€"). See "Item 3 Key Information – Currency Exchange Rates" for a history of
exchange rates of Canadian dollars into U.S. dollars.
Generally Accepted Accounting Principles:
Agnico-Eagle reports its financial results using United States generally accepted
accounting principles ("US GAAP") due to its substantial U.S. shareholder base and to maintain comparability with other gold
mining companies. Unless otherwise specified, all references to financial results herein are to those calculated under US GAAP.
Forward-Looking Information:
Certain statements in this Form 20-F, referred to herein as "forward-looking statements",
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. These statements relate to, among
other things, the Company's plans, objectives, expectations, estimates, beliefs, strategies and intentions and can generally be
identified by the use of words such as "anticipate", "believe", "budget", "could", "estimate", "expect", "forecast", "intend", "likely",
"may", "plan", "project", "schedule", "should", "target", "will", "would" or other variations of these terms or similar words.
Forward-looking statements in this report include, but are not limited to, the following:
•
the Company's outlook for 2012 and future periods;
•
statements regarding future earnings, and the sensitivity of earnings to gold and other metal prices;
•
anticipated levels or trends for prices of gold and byproduct metals mined by the Company or for exchange rates
between currencies in which capital is raised, revenue is generated or expenses are incurred by the Company;
•
estimates of future mineral production and sales;
•
estimates of future costs, including mining costs, total cash costs per ounce, minesite costs per tonne and
other expenses;
•
estimates of future capital expenditure, exploration expenditure and other cash needs, and expectations as to the
funding thereof;
•
statements regarding the projected exploration, development and exploitation 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 thereto;
•
estimates of mineral reserves, mineral resources and ore grades and statements regarding anticipated future
exploration results;
•
estimates of cash flow;
•
estimates of mine life;
•
anticipated timing of events with respect to the Company's minesites, mine construction projects and exploration
projects;
•
estimates of future costs and other liabilities for environmental remediation;
•
statements regarding anticipated legislation and regulation regarding climate change and estimates of the impact on
the Company; and
•
other anticipated trends with respect to the Company's capital resources and results of operations.
Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable
by Agnico-Eagle as of the date of such statements, are inherently subject to significant business, economic and competitive
uncertainties and contingencies. The factors and assumptions of Agnico-Eagle upon which the forward-looking statements in this
Form 20-F are based, and which may prove to be incorrect, include, but are not limited to, the assumptions set out elsewhere in
this Form 20-F as well as: that there are no significant disruptions affecting Agnico-Eagle's operations, whether due to labour
disruptions, supply disruptions, damage to equipment, natural or man-made occurrences, mining or milling issues, political
changes, title issues or otherwise; that permitting, development and
2011 ANNUAL REPORT
Table of Contents
1
expansion at each of Agnico-Eagle's mines and mine development projects proceed on a basis consistent with current
expectations, and that Agnico-Eagle does not change its exploration or development plans relating to such projects; that the
exchange rates between the Canadian dollar, Euro, Mexican peso and the U.S. dollar will be approximately consistent with current
levels or as set out in this Form 20-F; that prices for gold, silver, zinc, copper and lead will be consistent with Agnico-Eagle's
expectations; that prices for key mining and construction supplies, including labour costs, remain consistent with Agnico-Eagle's
current expectations; that production meets expectations; that Agnico-Eagle's current estimates of mineral reserves, mineral
resources, mineral grades and mineral recovery are accurate; that there are no material delays in the timing for completion of
development projects; and that there are no material variations in the current tax and regulatory environment that affect
Agnico-Eagle.
The forward-looking statements in this Form 20-F reflect the Company's views as at the date of this Form 20-F and involve known
and unknown risks, uncertainties and other factors which could cause the actual results, performance or achievements of the
Company or industry results to be materially different from any future results, performance or achievements expressed or implied
by such forward-looking statements. Such factors include, among others, the Risk Factors set forth in "Item 3 Key
Information – Risk Factors". Given these uncertainties, readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date made. Except as otherwise required by law, the Company expressly
disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change
in the Company's expectations or any change in events, conditions or circumstances on which any such statement is based. This
Form 20-F contains information regarding anticipated total cash costs per ounce and minesite costs per tonne at certain of the
Company's mines and mine development projects. The Company believes that these generally accepted industry measures are
realistic indicators of operating performance and are useful in allowing year over year comparisons. Investors are cautioned that
this information may not be suitable for other purposes.
NOTE TO INVESTORS CONCERNING ESTIMATES OF MINERAL RESOURCES
The mineral reserve and mineral resource estimates contained in this Form 20-F have been prepared in accordance with the
Canadian securities regulatory authorities' (the "CSA") National Instrument 43-101 Standards of Disclosure for Mineral Projects
("NI 43-101"). These standards are similar to those used by the United States Securities and Exchange Commission's (the "SEC")
Industry Guide No. 7, as interpreted by Staff at the SEC ("Guide 7"). However, the definitions in NI 43-101 differ in certain
respects from those under Guide 7. Accordingly, mineral reserve information contained or incorporated by reference herein may
not be comparable to similar information disclosed by U.S. companies. Under the requirements of the SEC, mineralization may
not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally
produced or extracted at the time the reserve determination is made. The SEC does not recognize measures of "mineral
resource".
The metal grades reported in the mineral reserve and mineral resource estimates represent in-place grades and do not reflect
losses in the recovery process, that is, the metallurgical losses associated with processing the extracted ore. The mineral reserve
figures presented herein are estimates, and no assurance can be given that the anticipated tonnages and grades will be achieved
or that the indicated level of recovery will be realized. The Company does not include equivalent gold ounces for byproduct metals
contained in mineral reserves in its calculation of contained ounces.
Cautionary Note to Investors Concerning Estimates of Measured and Indicated Mineral Resources
This document uses the terms "measured mineral resources" and "indicated mineral resources". Investors are advised 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 mineral reserves .
Cautionary Note to Investors Concerning Estimates of Inferred Mineral Resources
This document uses the term "inferred mineral resources". Investors are advised that while this term is recognized and required by
Canadian regulations, the SEC does not recognize it. "Inferred mineral resources" have a great amount of uncertainty as to their
existence and as to their economic and legal feasibility. It cannot be assumed that any part or all 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 any part or all of an
inferred mineral resource exists, or is economically or legally mineable .
2
AGNICO-EAGLE MINES LIMITED
Table of Contents
NOTE TO INVESTORS CONCERNING CERTAIN MEASURES OF PERFORMANCE
This Form 20-F presents certain measures, including "total cash costs per ounce" and "minesite costs per tonne", that are not
recognized measures under US GAAP. This data may not be comparable to data presented by other gold producers. For a
reconciliation of these measures to the figures presented in the consolidated financial statements prepared in accordance with US
GAAP, see "Item 5 Operating and Financial Review and Prospects – Results of Operations – Production Costs". The Company
believes that these generally accepted industry measures are realistic indicators of operating performance and are useful in
allowing year over year comparisons. However, both of these non-US GAAP measures should be considered together with other
data prepared in accordance with US GAAP, and these measures, taken by themselves, are not necessarily indicative of
operating costs or cash flow measures prepared in accordance with US GAAP. This Form 20-F also contains information as to
estimated future total cash costs per ounce and minesite costs per tonne for projects under development. These 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 those
projects and, consistent with the reconciliation provided, 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-US GAAP financial measures to the most comparable US GAAP measure.
2011 ANNUAL REPORT
Table of Contents
3
PART I
ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Pursuant to the instructions to Item 1 of Form 20-F, this information has not been provided.
ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3 KEY INFORMATION
Selected Financial Data
The following selected financial data for each of the years in the five-year period ended December 31, 2011 are derived from the
consolidated financial statements of Agnico-Eagle audited by Ernst & Young LLP. The selected financial data should be read in
conjunction with the Company's operating and financial review and prospects set out in Item 5 of this Form 20-F, the consolidated
financial statements and the notes thereto set out in Item 18 of this Form 20-F and other financial information included elsewhere
in this Form 20-F.
Year Ended December 31,
2011
2010
2009
2008
2007
(in thousands of U.S. dollars, US GAAP basis,
other than share and per share information)
Income Statement Data
Revenues from mining operations
Production costs
Exploration and corporate development
Equity loss in junior exploration company
Amortization
General and administrative
Write-down of available-for-sale securities
Loss (Gain) on derivative financial
instruments
Provincial capital tax
Interest
Interest and sundry income
Loss on Goldex mine
Impairment loss on Meadowbank mine
Gain on acquisition of Comaplex, net of
transaction costs
Gain on sale of available-for-sale-securities
Foreign exchange (gain) loss
1,821,799
876,078
75,721
–
261,781
107,926
8,569
1,422,521
677,472
54,958
–
192,486
94,327
–
613,762
306,318
36,279
–
72,461
63,687
–
368,938
186,862
34,704
–
36,133
47,187
74,812
432,205
166,104
25,507
–
27,757
38,167
–
(3,683 )
9,223
55,039
5,188
302,893
907,681
(7,612 )
(6,075 )
49,493
(10,254 )
–
–
–
5,014
8,448
(16,172 )
–
–
–
5,332
2,952
(11,721 )
–
–
5,829
3,202
3,294
(25,142 )
–
–
–
(4,907 )
(1,082 )
(57,526 )
(19,487 )
19,536
–
(10,142 )
39,831
–
(25,626 )
(77,688 )
–
(4,088 )
32,297
Income before income and mining taxes
Income and mining taxes (recoveries)
(778,628 )
(209,673 )
435,203
103,087
108,038
21,500
95,991
22,824
159,278
19,933
Net income
Attributed to non-controlling interest
Attributed to common shareholders
(568,955 )
(60 )
(568,895 )
332,116
–
–
86,538
–
–
73,167
–
–
139,345
–
–
Net income per share – basic
(3.36 )
2.05
0.55
0.51
1.05
Net income per share – diluted
(3.36 )
2.00
0.55
0.50
1.04
170,275,475
162,342,686
155,942,151
144,740,658
132,768,049
170,275,475
0.00
165,842,259
0.64
158,620,888
0.18
145,888,728
0.18
133,957,869
0.18
Weighted average number of shares
outstanding – basic
Weighted average number of shares
outstanding – diluted
Dividends declared per common share
4
AGNICO-EAGLE MINES LIMITED
Table of Contents
Balance Sheet Data (at end of period)
Mining properties (net)
Total assets
Long-term debt
Reclamation provision and other liabilities
Net assets
Common shares
Shareholders' equity
Total common shares outstanding
3,895,355
5,034,262
920,095
145,988
3,215,163
3,181,381
3,215,163
170,859,604
4,564,563
5,500,351
650,000
145,536
3,665,450
3,078,217
3,665,450
168,720,355
3,581,798
4,247,357
715,000
96,255
2,751,761
2,378,759
2,751,761
156,625,174
2,997,500
3,378,824
200,000
71,770
2,517,756
2,299,747
2,517,756
154,808,918
2,123,397
2,735,498
–
57,941
2,058,934
1,931,667
2,058,934
142,403,379
Currency Exchange Rates
All dollar amounts in this Form 20-F are in U.S. dollars, except where otherwise indicated. The following tables set out, in
Canadian dollars, the exchange rates for the U.S. dollar, based on the noon buying rate as reported by the Bank of Canada
(the "Noon Buying Rate"). On March 12, 2012, the Noon Buying Rate was US$1.00 equals C$0.9935.
Year Ended December 31,
High
Low
End of Period
Average
2011
2010
2009
2008
2007
1.0604
0.9449
1.0170
0.9891
1.0778
0.9946
0.9946
1.0299
1.3000
1.0292
1.0466
1.1420
1.2969
0.9719
1.2246
1.0660
1.1853
0.9170
0.9881
1.0748
2012
March
(to March 12 )
High
Low
End of Period
Average
1.0015
0.9849
0.9935
0.9929
2011
February
January
December
November
October
September
1.10016
0.9866
0.9866
0.9965
1.0272
0.9986
1.0052
1.0134
1.0406
1.0105
1.0170
1.0238
1.0487
1.0126
1.0197
1.0258
1.0604
0.9935
0.9935
1.0207
1.0389
0.9752
1.0389
1.0026
On December 31, 2011 and March 12, 2012, US$1.00 equalled €0.7729 and €0.7623, respectively, as reported by the European
Central Bank.
2011 ANNUAL REPORT
Table of Contents
5
Risk Factors
The Company's financial performance and results may fluctuate widely due to volatile and unpredictable commodity
prices.
The Company's earnings are directly related to commodity prices, as revenues are derived from the sale of precious metals (gold
and silver), zinc and copper. Gold prices, which have the greatest impact on the Company's financial performance, fluctuate
widely and are affected by numerous factors beyond the Company's control, including central bank purchases and sales, producer
hedging and de-hedging activities, expectations of inflation, investment demand, the relative exchange rate of the U.S. dollar with
other major currencies, interest rates, global and regional demand, political and economic conditions, production costs in major
gold-producing regions, speculative positions taken by investors or traders in gold and changes in supply, including worldwide
production levels. The aggregate effect of these factors is impossible to predict with accuracy. In addition, the price of gold has on
occasion been subject to very rapid short-term changes because of speculative activities. Fluctuations in gold prices may
materially adversely affect the Company's financial performance or results of operations. If the market price of gold falls below the
Company's total cash costs per ounce of production at one or more of its projects at that time and remains so for any sustained
period, the Company may experience losses and/or may curtail or suspend some or all of its exploration, development and mining
activities at such projects or at other projects. In addition, such fluctuations may require changes to the mine plan. Also, the
Company's decisions to proceed with the operations at its current mines were based on a market price of gold between $400 and
$450 per ounce. If the market price of gold falls below these levels, the mines may be rendered uneconomic and production may
be suspended. Also, the Company's evaluation of the Meliadine project acquisition was based on an assumption of a market price
of gold of $950 per ounce and the evaluation of the La India project acquisition was based on an assumption of a market price of
gold of $1,150 per ounce. If the market price of gold falls below these respective levels, future activity at the Meliadine project or
the La India project may be rendered uneconomic and activities may be suspended. In addition, the Company's current mine
plans are all based on a gold price of $1,500 per ounce and reserve and resource estimates are based on a gold price of
$1,255 per ounce; if the price of gold falls below these levels the mine plans may have to be changed, which may result in
reduced production, higher costs than anticipated or both and estimates of reserves and resources may have to be reduced.
Further, the prices received from the sale of the Company's byproduct metals produced at its LaRonde mine (zinc, silver, lead and
copper) and its Pinos Altos mine (silver) affect the Company's ability to meet its targets for total cash costs per ounce of gold
produced. These byproduct metal prices fluctuate widely and are also affected by numerous factors beyond the Company's
control. The Company's policy and practice is not to sell forward its future gold production; however, under the Company's price
risk management policy, approved by the Company's board of directors (the "Board"), the Company may review this practice on a
project by project basis. See "Item 11 Quantitative and Qualitative Disclosures about Market Risk – Derivatives" for more details
on the Company's use of derivative instruments. The Company occasionally uses derivative instruments to mitigate the effects of
fluctuating byproduct metal prices; however, these measures may not be successful.
The volatility of gold prices is illustrated in the following table which sets out, for the periods indicated, the high, low and average
afternoon fixing prices for gold on the London Bullion Market (the "London P.M. Fix").
2012
(to March 12 )
High price ($ per ounce)
Low price ($ per ounce)
Average price ($ per ounce)
1,781
1,598
1,698
2011
2010
2009
2008
2007
1,895
1,319
1,572
1,421
1,058
1,125
1,212
810
972
1,011
712
872
841
608
695
On March 12, 2012, the London P.M. Fix was $1,698 per ounce of gold.
The assumptions that underlie the estimate of future operating results and the strategies used to mitigate the effects of risks of
metal prices are set out herein and in "Item 5 Operating and Financial Review and Prospects – Outlook – Gold Production
Growth" of this Form 20-F.
6
AGNICO-EAGLE MINES LIMITED
Table of Contents
Based on 2012 production estimates, the approximate sensitivities of the Company's after-tax income to a 10% change in certain
metal prices from 2011 market average prices are as follows:
Income
per share
Gold
Silver
Zinc
Copper
$
$
$
$
0.64
0.06
0.02
0.01
Sensitivities of the Company's after-tax income to changes in metal prices will increase with increased production.
The Company is largely dependent upon its mining and milling operations at its Meadowbank mine in Nunavut and at its
LaRonde mine in Quebec, and any adverse condition affecting those operations may have a material adverse effect on
the Company.
The Company's operations at the Meadowbank mine accounted for approximately 27% of the Company's gold production and are
expected to account for approximately 30% of the Company's gold production in 2012 (using 912,500 ounces, being the midpoint
of the Company's production guidance range of 875,000-950,000 ounces). The LaRonde mine in the Abitibi region of northern
Quebec accounted for approximately 12.6% of the Company's gold production in 2011 and is expected to account for
approximately 17% of the Company's gold production in 2012. In 2011, gold production at the Meadowbank mine was
approximately 90,000 ounces below the Company's expectation as a result of issues that included a fire that destroyed the
minesite's kitchen facilities and above anticipated dilution. For the year ended December 31, 2011, the Company performed a full
review of the Meadowbank mine's operation and updated the related life of mine plan. The review considered the exploration
potential of the area, the current mineral reserves and resources, the projected operating costs in light of persistently high
operating costs experienced since the commencement of commercial operations, metallurgical performance and gold price. The
updated life of mine plan contemplates a shorter mine life and reduced reserves and resources and required the Company to incur
a pre-tax asset impairment charge of $907.7 million. At the LaRonde mine, the Company is now extracting ore from below
Level 245, which was previously referred to as the LaRonde mine extension. The depth of these operations, as well as the new
infrastructure required to extract this deeper ore, could pose significant challenges to the Company such as geomechanical risks
and ventilation and air conditioning requirements, which could result in difficulties and delays in achieving gold production
objectives. Any adverse condition affecting mining or milling conditions at the Meadowbank or LaRonde mines could be expected
to have a material adverse effect on the Company's financial performance and results of operations. The Company also
anticipates using revenue generated by its operations at these mines to finance a substantial portion of its capital expenditures in
2012, including new projects at the Pinos Altos mine and the Meliadine and La India projects.
The Kittila, Pinos Altos and Lapa mines commenced commercial production in 2009 and commercial production at the Creston
Mascota deposit at Pinos Altos was achieved in the first quarter of 2011. However, unless the Company otherwise acquires
significant gold-producing assets in other regions, the Company will continue to be dependent on its operations at the
Meadowbank and LaRonde mines for a substantial portion of its gold production. Further, there can be no assurance that the
Company's current exploration and development programs at the LaRonde or Meadowbank mines will result in any new
economically viable mining operations or yield new mineral reserves to replace and expand current mineral reserves.
The Company may experience difficulties operating its Meadowbank mine and developing the Meliadine project as a
result of their remote location.
The Company's Meadowbank mine is located in the Kivalliq District of Nunavut in northern Canada, approximately 70 kilometres
north of Baker Lake. The closest major city is Winnipeg, Manitoba, approximately 1,500 kilometres to the south. Though the
Company constructed a 110-kilometre all-weather road from Baker Lake, which provides summer shipping access via Hudson
Bay to the Meadowbank mine, the Company's operations will be constrained by the remoteness of the mine, particularly as the
port of Baker Lake is only accessible approximately 2.5 months per year. Most of the materials that the Company requires for the
operation of the Meadowbank mine must be transported through the
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port of Baker Lake during this shipping season, which may be further truncated due to weather conditions. If the Company is
unable to acquire and transport necessary supplies during this time, this may result in a slowdown or stoppage of operations at
the Meadowbank mine. Furthermore, if major equipment fails, items necessary to replace or repair such equipment may have to
be shipped through Baker Lake during this window. Failure to have available the necessary materials required for operations or to
repair or replace malfunctioning equipment at the Meadowbank mine may require the slowdown or stoppage of operations. For
example, the February 2011 fire at the Meadowbank Mine's kitchen facilities required the mine to be on reduced operations which
resulted in reduced gold production at the mine.
The Company's Meliadine project, 290 kilometres southeast of the Meadowbank mine, is also located in the Kivalliq District of
Nunavut, approximately 25 kilometres northwest of the hamlet of Rankin Inlet on the west coast of Hudson Bay. Access to the
property is by helicopter from Rankin Inlet year-round and by tracked vehicles overland on a winter road from approximately late
December to mid-May. An all-weather access road between the project and Rankin Inlet is at the permitting stage. The
Company's operations at the Meliadine project may be constrained by its remoteness and, prior to the completion of the all
weather access road, lack of access if the winter road season is shortened by permit delays or unusually warm weather, or if
construction of the all-weather road is delayed. Most of the materials that the Company requires to operate the advanced
exploration program, and may require if it determines to build a mine in the future, must be transported through the port of Rankin
Inlet during its six-week shipping season. If the Company cannot identify and procure suitable equipment and materials within a
timeframe that permits transporting them to the project within this shipping season, this could result in delays and/or cost
increases in the exploration program and, if the Company determines to build a mine, any construction or development on
the property.
The remoteness of the Meadowbank mine and Meliadine project also necessitates the use of fly-in/fly-out camps for the
accommodation of site employees and contractors, which may have an impact on the Company's ability to attract and retain
qualified mining, exploration and construction personnel. If the Company is unable to attract and retain sufficient personnel or
sub-contractors on a timely basis, the Company's operations at the Meadowbank mine and future development plans at the
Meliadine project may be adversely affected.
The Company's recently opened mines, mine construction projects and expansion projects are subject to risks
associated with new mine development, which may result in delays in the start-up of mining operations, delays in
existing operations and unanticipated costs.
The Company's production forecasts are based on full production being achieved at all of its mines, and the Company's ability to
achieve and maintain full production rates at these mines is subject to a number of risks and uncertainties. Production from these
mines in 2012 may be lower than anticipated if the anticipated full production rate cannot be achieved.
The LaRonde mine extension, which commenced operation in late 2011, will be one of the deepest operations in the Western
Hemisphere with an expected maximum depth of 3,110 metres. The operations of the LaRonde mine extension will rely on new
infrastructure for hauling ore and materials to the surface, including a winze (or internal shaft) and a series of ramps linking mining
deposits to the Penna Shaft that services current operations at the LaRonde mine. The depth of the operations could pose
significant challenges to the Company such as geomechanical risks and ventilation and air conditioning requirements, which may
result in difficulties and delays in achieving gold production objectives.
The development of the Kittila and Pinos Altos mines requires the construction and operation of significant new underground
mining operations. The construction and operation of underground mining facilities is subject to a number of risks, including
unforeseen geological formations, implementation of new mining processes, delays in obtaining required construction,
environmental or operating permits and engineering and mine design adjustments.
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If the Company experiences mining accidents or other adverse conditions, the Company's mining operations may yield
less gold than indicated by its estimated gold production.
The Company's gold production may fall below estimated levels as a result of mining accidents such as cave-ins, rock falls, rock
bursts, pit wall failures, fires or flooding or as a result of other operational problems such as a failure of a production hoist,
autoclave, filter press or semi-autogenous grinding ("SAG") mill. In addition, production may be reduced if, during the course of
mining or processing, unfavourable weather conditions, ground conditions or seismic activity are encountered, ore grades are
lower than expected, the physical or metallurgical characteristics of the ore are less amenable than expected to mining or
treatment, dilution increases, electrical power is interrupted or heap leach processing results in containment discharge. In seven of
the last nine years, as a result of such adverse conditions, the Company has failed to meet production forecasts due to: a rock fall,
production drilling challenges and lower than planned mill recoveries in 2003; higher than expected dilution in 2004; increased
stress levels in a sill pillar requiring the temporary closure of production sublevels in 2005; and delays in the commissioning of the
Goldex production hoist and the Kittila autoclave in 2008. In 2009, gold production was 492,972 ounces, down from the
Company's initial estimate of 590,000 ounces, primarily as a result of delays in the commencement of production at the Kittila
mine due to issues with the autoclave, at the Pinos Altos mine resulting from problems in commissioning the dry tailings filter
presses and at the Lapa mine resulting from dilution issues. In 2010, gold production of 987,607 ounces was below the initial
anticipated range of 1 million to 1.1 million ounces primarily as a result of lower throughput at the Meadowbank mine mill due to a
bottleneck in the crushing circuit and because there were autoclave issues at the Kittila mine in the first half of the year. In 2011,
gold production of 985,460 ounces was below the initial anticipated range of 1.13 to 1.23 million ounces primarily as a result of
suspension of mining operations at the Goldex mine due to suspected rock subsidence in the hanging wall above the main
orebody, a fire in the Meadowbank mine kitchen complex which negatively impacted production and lower than expected grades
at the Meadowbank and LaRonde mines. Occurrences of this nature and other accidents, adverse conditions or operational
problems in future years may result in the Company's failure to achieve current or future production estimates.
The Company's total cash costs per ounce of gold production depend, in part, on external factors that are subject to
fluctuation and, if such costs increase, some or all of the Company's activities may become unprofitable.
The Company's total cash costs per ounce of gold are dependent on a number of factors, including the exchange rate between
the U.S. dollar and the Canadian dollar, Euro or Mexican peso, smelting and refining charges, production royalties, the price of
gold and byproduct metals and the cost of inputs used in mining operations. At the LaRonde mine, the Company's total cash costs
per ounce of production are primarily affected by the prices and production levels of byproduct zinc, silver and copper, the
revenue from which is offset against the cost of gold production. Total cash costs per ounce from the Company's operations at the
Pinos Altos mine are affected by the exchange rate between the U.S. dollar and the Mexican peso and the price and production
level of byproduct silver, the revenue from which is offset against the cost of gold production. Total cash costs per ounce from the
Company's operations at its mines in Canada and the Kittila mine are affected by changes in the exchange rates between the
U.S. dollar and the Canadian dollar and the Euro, respectively. Total cash costs per ounce at all of the Company's mines are also
affected by the costs of inputs used in mining operations, including labour (including contractors), steel, chemical reagents and
energy. All of these factors are beyond the Company's control. If the Company's total cash costs per ounce of gold rise above the
market price of gold and remain so for any sustained period, the Company may experience losses and may curtail or suspend
some or all of its exploration, development and mining activities.
Total cash costs per ounce is not a recognized measure under US GAAP, and this data may not be comparable to data presented
by other gold producers. Management uses this generally accepted industry measure in evaluating operating performance and
believes it to be a realistic indicator of such performance and useful in allowing year over year comparisons. The data also reflects
the Company's ability to generate cash flow and operating income at various gold prices. This additional information should be
considered together with other data prepared in accordance with US GAAP and is not necessarily indicative of operating costs or
cash flow measures prepared in accordance with US GAAP. See "Item 5 Operating and Financial Review and
Prospects – Results of Operations – Production Costs" for reconciliation of total cash costs per ounce and minesite costs per
tonne to their closest US GAAP measure and "Note to Investors Concerning Certain Measures of Performance" for a discussion
of these non-US GAAP measures.
The Company may experience operational difficulties at its mines in Finland and Mexico.
The Company's operations include a mine in Finland and a mine in northern Mexico. These operations are subject to various
levels of political, economic and other risks and uncertainties that are different from those encountered at the Company's
Canadian properties. These risks and uncertainties vary from country to country and may include: extreme
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fluctuations in currency exchange rates; high rates of inflation; labour unrest; risks of war or civil unrest; expropriation and
nationalization; renegotiation or nullification of existing concessions, licences, permits and contracts; illegal mining; corruption;
restrictions on foreign exchange and repatriation; hostage taking; and changing political conditions and currency controls. In
addition, the Company must comply with multiple and potentially conflicting regulations in Canada, the United States, Europe and
Mexico, including export requirements, taxes, tariffs, import duties and other trade barriers, as well as health, safety and
environmental requirements.
Changes, if any, in mining or investment policies or shifts in political attitude in Finland or Mexico may adversely affect the
Company's operations or profitability. Operations may be affected in varying degrees by government regulations with respect to
matters including restrictions on production, price controls, export controls, currency controls or restrictions, currency remittance,
income and other taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land use,
land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local
practices relating to mineral rights applications and tenure could result in loss, reduction or expropriation of entitlements or the
imposition of additional local or foreign parties as joint venture partners with carried or other interests.
In addition, Finland and Mexico have significantly different laws and regulations than Canada and there exist cultural and
language differences between these countries and Canada. Also, the Company faces challenges inherent in efficiently managing
an increased number of employees over large geographical distances, including the challenges of staffing and managing
operations in several international locations and implementing appropriate systems, policies, benefits and compliance programs.
These challenges may divert management's attention to the detriment of the Company's operations in Canada. There can be no
assurance that difficulties associated with the Company's foreign operations can be successfully managed.
Mineral reserve and mineral resource estimates are only estimates and such estimates may not accurately reflect future
mineral recovery.
The figures for mineral reserves and mineral resources published by the Company are estimates and no assurance can be given
that the anticipated tonnages and grades will be achieved or that the indicated level of recovery of gold will be realized. Mineral
reserve and resource estimates are based on gold recoveries in small scale laboratory tests and may not be indicative of the
mineralization in the entire orebody and the Company may not be able to achieve similar results in larger scale tests under on-site
conditions or during production. The ore grade actually recovered by the Company may differ from the estimated grades of the
mineral reserves and mineral resources. The estimates of mineral reserves and mineral resources have been determined based
on assumed metal prices, foreign exchange rates and operating costs. For example, the Company has estimated proven and
probable mineral reserves on all of its properties based on, among other things, a $1,255 per ounce gold price. Monthly average
gold prices have been above $1,255 per ounce since September 2010; however, prior to that time, monthly average gold prices
were below $1,255 per ounce. Prolonged declines in the market price of gold (or applicable byproduct metal prices) may render
mineral reserves containing relatively lower grades of mineralization uneconomical to recover and could materially reduce the
Company's mineral reserves. Should such reductions occur, the Company may be required to take a material write-down of its
investment in mining properties or delay or discontinue production or the development of new projects, resulting in increased net
losses and reduced cash flow. Market price fluctuations of gold (or applicable byproduct metal prices), as well as increased
production costs or reduced recovery rates, may render mineral reserves containing relatively lower grades of mineralization
uneconomical to recover and may ultimately result in a restatement of mineral resources. Short-term factors relating to the mineral
reserve, such as the need for orderly development of orebodies or the processing of new or different grades, may impair the
profitability of a mine in any particular accounting period.
Mineral resource estimates for properties that have not commenced production or at deposits that have not yet been exploited are
based, in most instances, on very limited and widely spaced drill hole information, which is not necessarily indicative of conditions
between and around the drill holes. Accordingly, such mineral resource estimates may require revision as more drilling information
becomes available or as actual production experience is gained.
The Company may experience problems in executing acquisitions or managing and integrating any completed
acquisitions with its existing operations.
The Company regularly evaluates opportunities to acquire securities or assets of other mining businesses. Such acquisitions may
be significant in size, may change the scale of the Company's business and may expose the Company to new geographic,
political, operating, financial or geological risks. The Company's success in its acquisition activities depends on its ability to
identify suitable acquisition candidates, acquire them on acceptable terms and integrate their
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operations successfully with those of the Company. Any acquisition would be accompanied by risks, such as the difficulty of
assimilating the operations and personnel of any acquired businesses; the potential disruption of the Company's ongoing
business; the inability of management to maximize the financial and strategic position of the Company through the successful
integration of acquired assets and businesses; the maintenance of uniform standards, controls, procedures and policies; the
impairment of relationships with employees, customers and contractors as a result of any integration of new management
personnel; and the potential unknown liabilities associated with acquired assets and businesses. In addition, the Company may
need additional capital to finance an acquisition. Debt financing related to any acquisition may expose the Company to the risks
related to increased leverage, while equity financing may cause existing shareholders to suffer dilution. The Company is permitted
under the terms of its unsecured revolving bank credit facility and its $600 million of guaranteed senior unsecured notes referred
to under the heading "Item 4 Information on the Company – History and Development of the Company" to incur additional
unsecured indebtedness, provided that it maintains certain financial ratios and meets financial condition covenants and, in the
case of the bank credit facility, that it complies with certain covenants, including that no default under the bank credit facility has
occurred and is continuing, or would occur as a result of the incurrence or assumption of such indebtedness, the terms of such
indebtedness are no more onerous to the Company than those under the bank credit facility and such indebtedness does not
require principal payments until at least 12 months following the then existing maturity date of the bank credit facility. There can be
no assurance that the Company would be successful in overcoming these or any other problems encountered in connection with
such acquisitions.
Fluctuations in foreign currency exchange rates in relation to the U.S. dollar may adversely affect the Company's results
of operations.
The Company's operating results and cash flow are significantly affected by changes in the U.S. dollar/Canadian dollar exchange
rate. All of the Company's revenues are earned in U.S. dollars but the majority of its operating costs at the LaRonde, Goldex,
Lapa and Meadowbank mines, as well as the Meliadine project, are incurred in Canadian dollars. The U.S. dollar/Canadian dollar
exchange rate has fluctuated significantly over the last several years. From January 1, 2007 to January 1, 2012, the Noon Buying
Rate fluctuated from a high of C$1.3000 per $1.00 to a low of C$0.9170 per $1.00. Historical fluctuations in the
U.S. dollar/Canadian dollar exchange rate are not necessarily indicative of future exchange rate fluctuations. Based on the
Company's anticipated 2012 after-tax operating results, a 10% change in the U.S. dollar/Canadian dollar exchange rate from the
2011 market average exchange rate would affect net income by approximately $0.30 per share. To attempt to mitigate its foreign
exchange risk and minimize the impact of exchange rate movements on operating results and cash flow, the Company has
periodically used foreign currency options and forward foreign exchange contracts to purchase Canadian dollars; however, there
can be no assurance that these strategies will be effective. See "Item 5 Operating and Financial Review and
Prospects – Outlook – Gold Production Growth" for a description of the assumptions underlying the sensitivity and the strategies
used to mitigate the effects of risks. In addition, the majority of the Company's operating costs at the Kittila mine are incurred in
Euros and a portion of operating costs at the Pinos Altos mine and exploration and development costs at the La India project are
incurred in Mexican pesos. Each of these currencies has fluctuated significantly against the U.S. dollar over the past several
years. There can be no assurance that the Company's foreign exchange derivatives strategies will be successful or that foreign
exchange fluctuations will not materially adversely affect the Company's financial performance and results of operations.
If the Company fails to comply with restrictive covenants in its debt instruments, the Company's ability to borrow under
its unsecured revolving bank credit facility could be limited and the Company may then default under other debt
agreements, which could harm the Company's business.
The Company's unsecured revolving $1.2 billion bank credit facility limits, among other things, the Company's ability to permit the
creation of certain liens, make investments in a business or carry on business unrelated to mining, dispose of the Company's
material assets or, in certain circumstances, pay dividends. In addition, the Company's $600 million guaranteed senior unsecured
notes limit, among other things, the Company's ability to permit the creation of certain liens, carry on business unrelated to mining
or dispose of the Company's material assets. The bank credit facility and the guaranteed senior unsecured notes also require the
Company to maintain specified financial ratios and meet financial condition covenants. Events beyond the Company's control,
including changes in general economic and business conditions, may affect the Company's ability to satisfy these covenants,
which could result in a default under one of the bank credit facility or the notes. At March 12, 2012 there was approximately
$320 million drawn under the bank credit facility, and the Company anticipates that it will continue to draw on the bank credit
facility to fund part of the capital expenditures required in connection with its current development projects. If an event of default
under the bank credit facility or the notes occurs, the Company would be unable to draw down further on the bank credit facility
and the lenders
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could elect to declare all principal amounts outstanding thereunder at such time, together with accrued interest, to be immediately
due and it could cause an event of default under the notes. An event of default under either the bank credit facility or the notes
may also give rise to an event of default under existing and future debt agreements and, in such event, the Company may not
have sufficient funds to repay amounts owing under such agreements.
The exploration of mineral properties is highly speculative, involves substantial expenditures and is frequently
unsuccessful.
The Company's profitability is significantly affected by the costs and results of its exploration and development programs. As
mines have limited lives based on proven and probable mineral reserves, the Company actively seeks to replace and expand its
mineral reserves, primarily through exploration and development as well as through strategic acquisitions. Exploration for minerals
is highly speculative in nature, involves many risks and is frequently unsuccessful. Among the many uncertainties inherent in any
gold exploration and development program are the location of economic orebodies, the development of appropriate metallurgical
processes, the receipt of necessary governmental permits and the construction of mining and processing facilities. Substantial
expenditures are required to pursue such exploration and development activities. Assuming discovery of an economic orebody,
depending on the type of mining operation involved, several years may elapse from the initial phases of drilling until commercial
operations are commenced and during such time the economic feasibility of production may change. Accordingly, there can be no
assurance that the Company's current or future exploration and development programs will result in any new economically viable
mining operations or yield new mineral reserves to replace and expand current mineral reserves.
The mining industry is highly competitive, and the Company may not be successful in competing for new mining
properties.
There is a limited supply of desirable mineral lands available for claim staking, leasing or other acquisitions in the areas where the
Company contemplates conducting exploration activities. Many companies and individuals are engaged in the mining business,
including large, established mining companies with substantial capabilities and long earnings records. The Company may be at a
competitive disadvantage in acquiring mining properties, as it must compete with these companies and individuals, some of which
have greater financial resources and larger technical staff than the Company. Accordingly, there can be no assurance that the
Company will be able to compete successfully for new mining properties.
The success of the Company is dependent on good relations with its employees and on its ability to attract and retain
employees and key personnel.
Production at the Company's mines and mine projects is dependent on the efforts of the Company's employees and contractors.
The Company competes with mining and other companies on a global basis to attract and retain employees at all levels with
appropriate technical skills and operating experience necessary to operate its mines. Relationships between the Company and its
employees may be affected by changes in the scheme of labour relations that may be introduced by relevant government
authorities in the jurisdictions that the Company operates. Changes in applicable legislation or in the relationship between the
Company and its employees or contractors may have a material adverse effect on the Company's business, results of operations
and financial condition.
The Company is also dependent on a number of key management personnel. The loss of the services of one or more of such key
management personnel could have a material adverse effect on the Company. The Company's ability to manage its operating,
development, exploration and financing activities will depend in large part on the efforts of these individuals.
The Company faces significant competition to attract and retain qualified personnel and there can be no assurance that the
Company will be able to attract and retain such personnel.
The Company may have difficulty financing its additional capital requirements for its planned mine construction,
exploration and development.
The sustaining capital required for operations (including potential expansions) and the development of the Meliadine and La India
projects, and the exploration and development of the Company's properties, including continuing exploration and development
projects in Quebec, Nunavut, Finland, Mexico and Nevada, will require substantial capital expenditures. The Company estimates
that capital expenditures will be approximately $382.3 million in 2012 and $277.4 million in 2013. As at March 12, 2012, the
Company had approximately $844.4 million available to be borrowed under its bank credit facility. Based on current funding
available to the Company and expected cash from operations, the Company believes it has sufficient funds available to fund its
projected capital expenditures for all of its current properties. However, if cash from
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operations is lower than expected or capital costs at these mines or projects exceed current estimates, or if the Company incurs
major unanticipated expenses related to exploration, development or maintenance of its properties, or if advances from the bank
credit facility are unavailable, the Company may be required to seek additional financing to maintain its capital expenditures at
planned levels. In addition, the Company will have additional capital requirements to the extent that it decides to expand its
present operations and exploration activities, construct additional mining and processing operations at any of its properties or take
advantage of opportunities for acquisitions, joint ventures or other business opportunities that may arise. Additional financing may
not be available when needed or, if available, the terms of such financing may not be favourable to the Company and, if raised by
offering equity securities, or securities convertible into equity securities, any additional financing may involve substantial dilution to
existing shareholders. Failure to obtain any financing necessary for the Company's capital expenditure plans may result in a delay
or indefinite postponement of exploration, development or production on any or all of the Company's properties, which may have a
material adverse effect on the Company's business, financial condition and results of operations.
The continuing weakness in the global credit and capital markets could have a material adverse impact on the
Company's liquidity and capital resources.
The credit and capital markets experienced significant deterioration in 2008, including the failure of significant and established
financial institutions in the United States and abroad, and continues to show weakness and volatility. These unprecedented
disruptions in the credit and capital markets have negatively impacted the availability and terms of credit and capital. If
uncertainties in these markets continue, or these markets deteriorate further, it could have a material adverse effect on the
Company's liquidity, ability to raise capital and costs of capital. Failure to raise capital when needed or on reasonable terms may
have a material adverse effect on the Company's business, financial condition and results of operations.
Due to the nature of the Company's mining operations, the Company may face liability, delays and increased production
costs from environmental and industrial accidents and pollution, and the Company's insurance coverage may prove
inadequate to satisfy future claims against the Company.
The business of gold mining is generally subject to risks and hazards, including environmental hazards, industrial accidents,
unusual or unexpected rock formations, changes in the regulatory environment, cave-ins, rock bursts, rock falls, pit wall failures
and flooding and gold bullion losses. Such occurrences could result in damage to, or destruction of, mineral properties or
production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal
liability. The Company carries insurance to protect itself against certain risks of mining and processing in amounts that it considers
to be adequate but which may not provide adequate coverage in certain unforeseen circumstances. The Company may also
become subject to liability for pollution, cave-ins or other hazards against which it cannot insure or against which it has elected not
to insure because of high premium costs or other reasons, or the Company may become subject to liabilities which exceed policy
limits. In these circumstances, the Company may incur significant costs that could have a material adverse effect on its financial
performance and results of operations.
The Company's operations are subject to numerous laws and extensive government regulations which may cause a
reduction in levels of production, delay or the prevention of the development of new mining properties or otherwise
cause the Company to incur costs that adversely affect the Company's results of operations.
The Company's mining and mineral processing operations and exploration activities are subject to the laws and regulations of
federal, provincial, state and local governments in the jurisdictions in which the Company operates. These laws and regulations
are extensive and govern prospecting, exploration, development, production, exports, taxes, labour standards, occupational health
and safety, waste disposal, toxic substances, environmental protection, mine safety and other matters. Compliance with such laws
and regulations increases the costs of planning, designing, drilling, developing, constructing, operating, closing, reclaiming and
rehabilitating mines and other facilities. New laws or regulations, amendments to current laws and regulations governing
operations and activities of mining companies or more stringent implementation or interpretation thereof could have a material
adverse impact on the Company, cause a reduction in levels of production and delay or prevent the development of new mining
properties.
Title to the Company's properties may be uncertain and subject to risks.
The acquisition of title to mineral properties is a very detailed and time-consuming process. Title to, and the area of, mineral
concessions may be disputed. Although the Company believes it has taken reasonable measures to ensure proper
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title to its properties, there is no guarantee that title to any of its properties will not be challenged or impaired. Third parties may
have valid claims on underlying portions of the Company's interests, including prior unregistered liens, agreements, transfers or
claims, including native land claims, and title may be affected by, among other things, undetected defects. In addition, although
the Company believes that it has sufficient surface rights for its operations, the Company may be unable to operate its properties
as permitted or to enforce its rights in respect of its properties.
Increased regulation of greenhouse gas emissions and climate change issues may adversely affect the Company's
operations.
The Company operates in a number of jurisdictions in which regulatory requirements have been introduced or are being
contemplated to monitor, report and/or reduce greenhouse gas emissions. Under the Copenhagen Accord, Canada has
committed to reducing greenhouse gas emissions by 17%, relative to 2005 levels, by 2020, but this commitment is subject to
future alignment with reduction targets and regulatory requirements in the United States. Canada is also considering new
regulatory requirements to address greenhouse gas emissions. Similarly, the Province of Quebec is a member of the Western
Climate Initiative and has passed legislation enabling the establishment of a greenhouse gas emissions registry, greenhouse gas
reduction targets and a cap-and-trade system to achieve Quebec's commitment to reduce greenhouse gas emissions by 20%,
relative to 1990 levels, by 2020. The Company's operations in Quebec use primarily hydroelectric power and as a consequence
are not large producers of greenhouse gases. The Meadowbank mine produces approximately 165,110 tonnes of carbon dioxide
equivalent per year from its own production of electricity from diesel-power generation and it is expected that any mining operation
at the Meliadine project would also produce some of its power from diesel-power generation. The Pinos Altos mine purchases
electricity that is largely fossil-fuel generated. The Pinos Altos mine also generates electricity locally with a diesel-powered genset
during "peak" periods. As a result, it is the Company's second highest greenhouse gas producer at 109,483 tonnes of carbon
dioxide equivalent per year. None of the Company's other operations emit more than 30,400 tonnes of carbon dioxide equivalent
per year. As a result, notwithstanding the ongoing uncertainty around the regulation of greenhouse gas emissions, new regulatory
requirements in respect of greenhouse gasses and the additional costs required to comply are not expected to have a material
effect on the Company's operations and financial condition.
The Company is subject to the risk of litigation, the causes and costs of which cannot be known.
The Company is subject to litigation arising in the normal course of business and may be involved in disputes with other parties in
the future which may result in litigation. The causes of potential future litigation cannot be known and may arise from, among other
things, business activities, environmental laws, volatility in stock price or failure to comply with disclosure obligations, such as in
the litigation referred to in note 21 to the Financial Statements contained in Item 18 hereof. The results of litigation cannot be
predicted with certainty. If the Company is unable to resolve these disputes favourably, it may have a material adverse impact on
the Company's financial performance, cash flow and results of operations.
In the event of a dispute involving the foreign operations of the Company, the Company may be subject to the exclusive
jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada. The
Company's ability to enforce its rights could have an adverse effect on its future cash flows, earnings, results of operations and
financial condition.
The use of derivative instruments for the Company's byproduct metal production may prevent gains from being realized
from subsequent byproduct metal price increases.
While the Company's general policy is not to sell forward its future gold production, the Company has used, and may in the future
use, various byproduct metal derivative strategies, such as selling future contracts or purchasing put options. The Company
continually evaluates the potential short- and long-term benefits of engaging in such derivative strategies based upon current
market conditions. No assurance can be given, however, that the use of byproduct metal derivative strategies will benefit the
Company in the future. There is a possibility that the Company could lock in forward deliveries at prices lower than the market
price at the time of delivery. In addition, the Company could fail to produce enough byproduct metals to offset its forward delivery
obligations, causing the Company to purchase the metal in the spot market at higher prices to fulfill its delivery obligations or, for
cash settled contracts, make cash payments to counterparties in excess of byproduct revenue. If the Company is locked into a
lower than market price forward contract or has to buy additional quantities at higher prices, its net income could be adversely
affected. None of the current contracts establishing the byproduct metal derivatives positions qualified for hedge accounting
treatment under US GAAP and therefore any year-end mark-to-market adjustments are recognized in the "Gain on derivative
financial instruments" line item of the
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AGNICO-EAGLE MINES LIMITED
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consolidated statements of income and comprehensive income. See "Item 11 Quantitative and Qualitative Disclosures about
Market Risk – Derivatives".
The trading price for the Company's securities is volatile.
The trading price of the Company's common shares and, consequently, the trading price of securities convertible into or
exchangeable for the Company's common shares, have been and may continue to be subject to large fluctuations which may
result in losses to investors. The trading price of the Company's common shares and securities convertible into or exchangeable
for common shares may increase or decrease in response to a number of events and factors, including:
•
changes in the market price of gold or other byproduct metals the Company sells;
•
events affecting the economic situation in Canada, the United States and elsewhere;
•
trends in the mining industry and the markets in which the Company operates;
•
changes in financial estimates and recommendations by securities analysts;
•
acquisitions and financings;
•
quarterly variations in operating results;
•
the operating and share price performance of other companies that investors may deem comparable; and
•
purchases or sales of large blocks of the Company's common shares or securities convertible into or exchangeable for
the Company's common shares.
Wide price swings are currently common in the markets on which the Company's securities trade. This volatility may adversely
affect the prices of the Company's common shares and the securities convertible into or exchangeable for the Company's
common shares regardless of the Company's operating performance.
The Company may not be able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act.
Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX") requires an annual assessment by management of the effectiveness of
the Company's internal control over financial reporting. Section 404 of SOX also requires an annual attestation report by the
Company's independent auditors addressing the effectiveness of the Company's internal control over financial reporting. The
Company has completed its Section 404 assessment and received the auditors' attestation as of December 31, 2011.
If the Company fails to maintain the adequacy of its internal control over financial reporting, as such standards are modified,
supplemented or amended from time to time, the Company may not be able to conclude that it has effective internal control over
financial reporting in accordance with Section 404 of SOX. The Company's failure to satisfy the requirements of Section 404 of
SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in
turn could harm the Company's business and negatively impact the trading price of its common shares and securities convertible
or exchangeable for common shares. In addition, any failure to implement required new or improved controls, or difficulties
encountered in their implementation, could harm the Company's operating results or cause it to fail to meet its reporting
obligations. Future acquisitions of companies may provide the Company with challenges in implementing the required processes,
procedures and controls in its acquired operations. Acquired companies may not have disclosure controls and procedures or
internal control over financial reporting that are as thorough or effective as those required by securities laws currently applicable to
the Company.
No evaluation can provide complete assurance that the Company's internal control over financial reporting will prevent
misstatement due to error or fraud or will detect or uncover all control issues or instances of fraud, if any. The effectiveness of the
Company's controls and procedures could also be limited by simple errors or faulty judgments. In addition, as the Company
continues to expand, the challenges involved in maintaining adequate internal control over financial reporting will increase and will
require that the Company continue to improve its internal control over financial reporting. Although the Company intends to devote
substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, the Company cannot be certain that it
will be successful in continuing to comply with Section 404 of SOX.
Potential unenforceability of civil liabilities and judgments.
The Company is incorporated under the laws of the Province of Ontario, Canada. A majority of the Company's directors and
officers as well as the experts named in this Form 20-F are residents of Canada. Also, almost all of the Company's
2011 ANNUAL REPORT
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15
assets and the assets of these persons are located outside of the United States. As a result, it may be difficult for shareholders to
initiate a lawsuit within the United States against these non-U.S. residents, or to enforce U.S. judgments against the Company or
these persons. The Company's Canadian counsel has advised the Company that a monetary judgment of a U.S. court predicated
solely upon the civil liability provisions of U.S. federal securities laws would likely be enforceable in Canada if the U.S. court in
which the judgment was obtained had a basis for jurisdiction in the matter that was recognized by a Canadian court for such
purposes. The Company cannot provide assurance that this will be the case. It is less certain that an action could be brought in
Canada in the first instance on the basis of liability predicated solely upon such laws.
ITEM 4 INFORMATION ON THE COMPANY
History and Development of the Company
The Company is an established Canadian-based international gold producer with mining operations in northwestern Quebec,
northern Mexico, northern Finland and Nunavut and exploration activities in Canada, Europe, Latin America and the
United States. The Company's operating history includes over three decades of continuous gold production primarily from
underground operations. Since its formation on June 1, 1972, the Company has produced almost 7.5 million ounces of gold. For
definitions of certain technical terms used in the following discussion, see "– Property, Plant and Equipment – Glossary of
Selected Mining Terms".
The Company's strategy is to focus on the continued exploration, development and expansion of its properties, all of which are
located in politically stable jurisdictions. The Company has spent approximately $2.7 billion on mine development over the last five
years. Through this development program, the Company transformed itself from a regionally focused, single mine producer to a
multi-mine international gold producer with five operating, 100% owned mines.
Since 1988, the LaRonde mine, in the Abitibi region of Quebec, has been the Company's flagship operation, producing
approximately 4.3 million ounces of gold as well as valuable byproducts. The Lapa mine, the Company's highest grade metals
mine, is 11 kilometres east of the LaRonde mine. The synergies between these sites contribute to the Company's efforts to reduce
costs. The Kittila mine, in Finland, achieved commercial production in May 2009, has a long reserve life and has significant
production expansion potential. The Pinos Altos mine, in Mexico, achieved commercial production in November 2009 and also
has significant production expansion potential. The Company's fifth mine, Meadowbank, in Nunavut, achieved commercial
production in March 2010 and is expected to produce the most gold (295,000 ounces) in 2012. In addition, the Company plans to
pursue opportunities for growth in gold production and gold reserves through the prudent acquisition or development of
exploration properties, development properties, producing properties and other mining businesses in the Americas and Europe.
In 2011, the Company produced 985,460 ounces of gold at total cash costs per ounce of $580 net of revenues from byproduct
metals. For 2012, the Company expects to produce between 875,000 and 950,000 ounces of gold at a total cash costs per ounce
of gold produced between $690 and $750 net of byproduct revenue. These expected higher total cash costs compared to 2011
reflect the closure of the Goldex mine, the Company's second lowest cost mine, in October 2011 due to suspected rock
subsidence issues; the higher proportion of production coming from the Meadowbank mine, which is expected to have higher total
cash costs per ounce compared to the Company's average; higher costs associated with the transition to underground mining
operations at the Pinos Altos mine and the Kittila mine; and increased production from the Company's mines and mine projects
that do not contain byproduct metals, revenue from which reduces total cash costs per ounce. In addition, the higher total cash
costs per ounce also reflect the Canadian dollar strengthening against the U.S. dollar and continued escalations in labour,
shipping and transportation costs. See "Note to Investors Concerning Certain Measures of Performance" for a discussion of the
use of the non-US GAAP measure total cash costs per ounce. The Company has traditionally sold all of its production at the spot
price of gold due to its general policy not to sell forward its future gold production.
The Company operates through four segments: Canada, Europe, Latin America and Exploration.
The Canadian Segment is comprised of the Province of Quebec and the Territory of Nunavut. The Company's Quebec properties
include the LaRonde mine, the Goldex mine (mining operations suspended in October 2011) and the Lapa mine, each of which is
held directly by the Company. In 2011, the Quebec properties accounted for 37.2% of the Company's gold production, comprised
of 12.6% from the LaRonde mine, 13.7% from the Goldex mine and 10.9% from the Lapa mine. In 2012, the Company anticipates
that its Quebec properties will account for 26.4% of the Company's gold production, of which 17.3% and 9.1% of the Company's
gold production will come from the LaRonde mine and the Lapa mine, respectively.
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AGNICO-EAGLE MINES LIMITED
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The Company's Nunavut properties are comprised of the Meadowbank mine and the Meliadine project, which are both held
directly by the Company. In 2011, the Meadowbank mine accounted for 27.5% of the Company's gold production and the
Company anticipates that in 2012 the Meadowbank mine will account for approximately 32.3% of the Company's gold production.
The Company's operations in the European Segment are conducted through its indirect subsidiary, Agnico Eagle Finland Oy,
which indirectly owns the Kittila mine in Finland. In 2011, the Kittila mine accounted for 14.6% of the Company's gold production
and the Company anticipates that in 2012 the Kittila mine will account for approximately 16.9% of the Company's gold production.
The Company's mining operations in the Latin American Region are conducted through its subsidiary, Agnico Eagle Mexico S.A.
de C.V., which owns the Pinos Altos mine, including the Creston Mascota deposit at Pinos Altos. The La India project is owned by
the Company's indirect subsidiary, Resource Grayd De Mexico, S.A. de C.V.. In 2011, the Pinos Altos mine accounted for 20.7%
of the Company's gold production and the Company anticipates that in 2012 the Pinos Altos mine will account for approximately
22.5% of the Company's gold production.
The Exploration Segment includes the Company's grassroots exploration operations in the United States, the European
exploration office, the Canadian exploration offices and the Latin American exploration office. In addition, the Company has an
international exploration office in Reno, Nevada.
Agnico-Eagle's expertise in acquiring mine projects and developing mines is shown through the launch of five operating mines.
The following table sets out the date of acquisition, the date of commencement of construction and the date of achieving
commercial production for the Company's mines and mine projects.
Date of Acquisition
LaRonde mine
Goldex mine (suspended in October, 2011)
Kittila mine
Lapa mine
Pinos Altos mine
Meadowbank mine
Meliadine project
La India project
1992 (1)
December 1993 (1)
November 2005
June 2003 (1)
March 2006
April 2007
July 2010
January 2012
Date of
Commencement
of Construction
1985
July 2005
June 2006
June 2006
August 2007
Pre-April 2007
2014 (2)
–
Date of achieving
Commercial
Production
1988
August 2008
May 2009
May 2009
November 2009
March 2010
2017 (2)
–
Notes:
(1)
Date when 100% ownership was acquired.
(2)
Anticipated.
The Company's exploration program focuses primarily on the identification of new mineral reserves and resources and new
development opportunities in proven gold producing regions. Current exploration activities are concentrated in Canada, Europe,
Latin America and the United States. Several projects were evaluated during the year in other countries where the Company
believes the potential for gold occurrences is excellent and which the Company believes to be politically stable and supportive of
the mining industry. The Company currently manages 77 properties in Canada, 6 properties in the United States, three groups of
properties in Finland, one property in Sweden, six projects in Mexico and one project in Argentina. Exploration activities are
managed from offices in Val d'Or, Quebec; Reno, Nevada; Chihuahua, Mexico; Kittila, Finland; and Vancouver, British Columbia.
In addition, the Company continuously evaluates opportunities to make strategic acquisitions, such as the acquisition of Grayd
Resource Corporation ("Grayd") completed in January 2012 that resulted in 100% ownership of the La India project. Five of the
Company's new mines or projects came from relatively recent acquisitions.
In the second quarter of 2004, the Company acquired an approximate 14% ownership interest in Riddarhyttan Resources AB
("Riddarhyttan"), a Swedish precious and base metals exploration and development company that was at the time
2011 ANNUAL REPORT
17
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listed on the Stockholm Stock Exchange. In November 2005, the Company completed a tender offer (the "Riddarhyttan Offer") for
all of the issued and outstanding shares of Riddarhyttan that it did not own. The Company issued 10,023,882 of its common
shares and paid and committed an aggregate of $5.1 million cash as consideration to Riddarhyttan shareholders in connection
with the Riddarhyttan Offer. On March 28, 2011, Riddarhyttan was merged with Agnico-Eagle AB and Agnico-Eagle Sweden AB,
with Agnico-Eagle Sweden AB as the continuing entity. The Kittila mine, located approximately 900 kilometres north of Helsinki
near the town of Kittila in Finnish Lapland, is currently 100% owned by Agnico-Eagle Finland Oy, which is owned by Agnico-Eagle
Sweden AB.
In the first quarter of 2005, the Company entered into an exploration and option agreement with Industrias Penoles S.A. de C.V.
("Penoles") to acquire the Pinos Altos property in northern Mexico. The Pinos Altos property is comprised of approximately
11,000 hectares in the Sierra Madre gold belt, approximately 225 kilometres west of the city of Chihuahua in the state of
Chihuahua in northern Mexico. In February 2006, the Company exercised its option and acquired the Pinos Altos property on
March 15, 2006. Under the terms of the exploration and option agreement, the purchase price of $66.8 million was comprised of
$32.5 million in cash and 2,063,635 common shares of the Company.
In February 2007, the Company made an exchange offer for all of the outstanding shares of Cumberland Resources Ltd.
("Cumberland") not already owned by the Company. At the time, Cumberland was a pre-production development stage company
listed on the Toronto Stock Exchange (the "TSX") and American Stock Exchange whose primary asset was the Meadowbank
property. In May 2007, the Company acquired approximately 92% of the issued and outstanding shares of Cumberland that it did
not previously own and, in July 2007, the Company completed the acquisition of all Cumberland shares by way of a compulsory
acquisition. The Company issued 13,768,510 of its common shares and paid $9.6 million in cash as consideration to Cumberland
shareholders in connection with its acquisition of Cumberland.
In April 2010, the Company entered into an agreement in principle with Comaplex Minerals Corp. ("Comaplex") whereby the
Company would acquire all of the outstanding shares of Comaplex that it did not already own. At the time, Comaplex owned a
100% interest in the advanced stage Meliadine gold property, which is located approximately 300 kilometres southeast of the
Company's Meadowbank mine. In May 2010, the Company executed the definitive agreements with Comaplex and, in July 2010
by plan of arrangement, the Company acquired 100% of the Meliadine gold property through the acquisition of Comaplex, which
was renamed Meliadine Holdings Inc. ("Meliadine"). Pursuant to the arrangement, Comaplex transferred to Geomark
Exploration Ltd. all assets and related liabilities other than those relating to the Meliadine project. In connection with the
arrangement, the Company issued 10,210,848 of its common shares as consideration to Comaplex shareholders. On January 1,
2011, the Company amalgamated with Meliadine.
In September 2011, the Company entered into an acquisition agreement with Grayd, a Canadian-based natural resource
company listed on the TSX Venture Exchange, pursuant to which the Company agreed to make an offer to acquire all of the
issued and outstanding common shares of Grayd. At the time, Grayd held a 100% interest in the La India project located in the
Mulatos Gold Belt of Sonora, Mexico and had recently discovered the Tarachi gold porphyry prospect located approximately ten
kilometres north of the La India project. In October 2011, the Company made the offer by way of a take-over bid circular, as
amended and supplemented, and, in November 2011, acquired approximately 95% of the outstanding common shares of Grayd.
In January 2012, the Company completed a compulsory acquisition of the remaining outstanding common shares of Grayd and
Grayd became a wholly-owned subsidiary of the Company. In aggregate, the Company issued 1,319,418 of its common shares
and paid C$179.7 million in cash as consideration to Grayd shareholders in connection with the transaction.
In 2011, the Company's capital expenditures were $482.8 million. The 2011 capital expenditures included $90.7 million at the
LaRonde mine (which included approximately $49.5 million of expenditures relating to the LaRonde mine extension), $42.2 million
at the Goldex mine, $86.5 million at the Kittila mine, $18.4 million at the Lapa mine, $40.0 million at the Pinos Altos mine (which
included approximately $7.6 million related to the Creston Mascota deposit), $116.9 million at the Meadowbank mine and
$73.9 million at the Meliadine project and $14.2 million at other minor projects. In addition, the Company spent $11.0 million on
mine site exploration and $64.7 million on exploration activities at the Company's grassroots exploration properties, including
corporate development expenses.
Budgeted 2012 capital expenditures of $382.3 million include $74.8 million at the LaRonde mine, $10.2 million at the Lapa mine,
$31.5 million at the Pinos Altos mine, $51.9 million at the Kittila mine, $88.5 million at the Meadowbank mine and $44.5 million in
capitalized exploration expenditures. In addition, the Company plans exploration expenditures on grassroots exploration projects
of approximately $80.4 million, including $52.0 million at the Meliadine project and $3.5 million at the La India project. Depending
on the success of the exploration programs at these and other properties, the Company may be required to make additional
capital expenditures for exploration, development and pre-production.
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The financing for the expenditures set out above is expected to be from internally generated cash flow from operations, from the
Company's existing cash balances and from drawdowns of the Company's bank credit facility. Please see "Item 10 Additional
Information – Material Contracts – Credit Agreement". Based on current funding available to the Company and expected cash
flows from operations, the Company believes it has sufficient funds available to fund its projected capital expenditures for all
its properties.
Capital expenditures by the Company in 2010 and 2009 were $512 million and $657 million, respectively. The 2010 capital
expenditures included $97 million at the LaRonde mine (which included approximately $62 million of expenditures relating to the
LaRonde mine extension), $24 million at the Goldex mine, $72 million at the Kittila mine, $33 million at the Lapa mine,
$104 million at the Pinos Altos mine (which included approximately $43 million related to the Creston Mascota deposit at Pinos
Altos) and $174 million at the Meadowbank mine and $8 million at the Meliadine project and other minor properties. In addition,
the Company spent $35 million on exploration activities at the Company's grassroots exploration properties. The 2009 capital
expenditures included $76 million at the LaRonde mine (which included approximately $39 million of expenditures relating to the
LaRonde mine extension), $22 million at the Goldex mine, $90 million at the Kittila mine (which included $36 million of
expenditures on construction of the underground mine), $47 million at the Lapa mine (which included $22 million on construction
of the mine), $133 million at the Pinos Altos mine and $288 million at the Meadowbank mine. In addition, the Company spent
$55 million on exploration activities at the Company's grassroots exploration properties.
The Company was formed by articles of amalgamation under the laws of the Province of Ontario on June 1, 1972, as a result of
the amalgamation of Agnico Mines Limited ("Agnico Mines") and Eagle Gold Mines Limited ("Eagle"). Agnico Mines was
incorporated under the laws of the Province of Ontario on January 21, 1953 under the name "Cobalt Consolidated Mining
Corporation Limited". Eagle was incorporated under the laws of the Province of Ontario on August 14, 1945.
On December 19, 1989, Agnico-Eagle acquired the remaining 57% interest in Dumagami Mines Limited not already owned by it,
as a consequence of the amalgamation of Dumagami Mines Limited with a wholly-owned subsidiary of Agnico- Eagle, to continue
as one company under the name Dumagami Mines Inc. ("Dumagami"). On December 29, 1992, Dumagami transferred all of its
property and assets, including the LaRonde mine, to Agnico-Eagle and was subsequently dissolved.
On December 8, 1993, the Company acquired the remaining 46.3% interest in Goldex Mines Limited not already owned by it, as a
consequence of the amalgamation of Goldex Mines Limited with a wholly-owned subsidiary of the Company, to continue as one
company under the name Goldex Mines Limited. On January 1, 1996, the Company amalgamated with two wholly-owned
subsidiaries, including Goldex Mines Limited.
In October 2001, under a plan of arrangement, the Company amalgamated with an associated corporation, Mentor Exploration
and Development Co., Limited ("Mentor"). In connection with the arrangement, the Company issued 369,348 of its common
shares in consideration for the acquisition of all of the issued and outstanding shares of Mentor that it did not already own.
On August 1, 2007, the Company, Agnico-Eagle Acquisition Corporation, Cumberland and a wholly-owned subsidiary of
Cumberland, Meadowbank Mining Corporation, amalgamated under the laws of the Province of Ontario and continued under the
name of Agnico-Eagle Mines Limited.
On January 1, 2011, the Company and 1816276 Ontario Inc. (the successor corporation to Meliadine, which in turn was the
successor corporation to Comaplex) amalgamated under the laws of the Province of Ontario and continued under the name of
Agnico-Eagle Mines Limited.
The Company's executive and registered office is located at Suite 400, 145 King Street East, Toronto, Ontario, Canada M5C 2Y7;
telephone number (416) 947-1212; website: http://www.agnico-eagle.com. The information contained on the website is not part of
this Form 20-F. The Company's principal place of business in the United States is located at 8725 Technology Way, Suite B,
Reno, Nevada 89521.
Business Overview
The Company believes that it has a number of key operating strengths that provide distinct competitive advantages.
Growth Profile.
The Company has a proven track record of increasing production capacity at existing operations through a
combination of acquisitions, operational improvements, expansions and development. The closure of the Goldex mine in
October 2011 was an unanticipated event and has negatively impacted the growth profile. However, the Company
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19
anticipates production of between 875,000 and 950,000 ounces of gold in 2012 with continued growth to 2014. In 2012, the
Company expects production increases at the LaRonde, Meadowbank and Kittila mines. The Company's production growth in
2012 is expected to come principally from the Meadowbank Mine, as well as from the continued operational improvements at the
Kittila and LaRonde mines. Over the last five years, the Company has spent over $2.7 billion on the development of five new
mines, and its significant extension of the LaRonde mine at depth. With the large majority of mine development projects complete
and with five mines having achieved steady state operational status, capital expenditures are expected to decline from 2011
onward, significantly increasing free cash flow. Future capital expenditures are expected to be primarily for incremental expansion
projects and exploration and development of the Meliadine project.
Operations in Politically Stable, Mining-Friendly Regions.
The Company and its predecessors have over three decades of
continuous gold production experience and expertise in metals mining. The Company's operations and exploration and
development projects are located in regions that the Company believes are supportive of the mining industry. Two of the
Company's producing mines are located in northwestern Quebec, one of North America's principal gold-producing regions. The
Company's Kittila mine in northern Finland, Pinos Altos mine in northern Mexico and Meadowbank mine in Nunavut are also
located in regions which the Company believes are also supportive of the mining industry.
Strong Operating Base.
Through its acquisition, exploration and development program, the Company has been transformed
from a regionally focused, single mine producer to a multi-mine international gold producer with five operating, 100% owned
mines. The Company's existing operations at the LaRonde mine provide a strong base for additional mineral reserve and
production development at the property and in the Abitibi region of northwestern Quebec and for the development of its mines and
projects in Nunavut, Finland and Mexico. The experience gained through building and operating the LaRonde mine has assisted
with the Company's development of its other mine projects. In addition, the extensive infrastructure associated with the LaRonde
mine supports the nearby Lapa mine.
Highly Experienced Management Team.
The members of the Company's senior management team have an average of over
22 years of experience in the mining industry. Management's significant experience has underpinned the Company's historical
growth and provides a solid base upon which to expand the Company's operations.
Based on these strengths, the Company's corporate strategy is to grow production and reserves in mining-friendly regions.
Optimize and Further Expand Operations.
The Company continues to focus its resources and efforts on the exploration and
development of its properties in Quebec, Nunavut, Finland and Mexico with a view to increasing annual gold production and gold
mineral reserves.
Leverage Mining Experience.
The Company believes it can benefit not only from the existing infrastructure at its mines but also
from the geological knowledge that it has gained in mining and developing its properties. The Company's strategy is to capitalize
on its mining expertise to exploit fully the potential of its properties.
Expand Gold Reserves.
The Company is conducting drilling programs at all of its properties with a goal of further increasing its
gold reserves. In 2011, on a contained gold ounces basis, the gold reserves of the Company decreased to 18.75 million ounces
(157 million tonnes grading 3.71 grams of gold per tonne), a decrease from the 21.3 million ounces reported as at December 31,
2010, primarily as a result of the reclassification of reserves to resources at the Goldex mine due to the suspension of operations
and a reduction of reserves at the Meadowbank mine due to a new mine plan.
Growth Through Primary Exploration and Acquisitions.
The Company's growth strategy has been to pursue the expansion of its
development base through the acquisition of additional properties in the Americas and Europe. Historically, the Company's
producing properties have resulted from a combination of investments in advanced exploration companies and primary exploration
activities. By investing in pre-development stage companies, the Company believes that it has been able to acquire control of
projects at favourable prices and reasonable valuations.
Mining Legislation and Regulation
Canada
The mining industry in Canada operates under both federal and provincial or territorial legislation governing prospecting and the
exploration, development, operation and decommissioning of mines and mineral processing facilities. Such legislation relates to
the method of acquisition and ownership of mining rights, labour, occupational or worker health and safety standards, royalties,
mining, exports, reclamation, closure and rehabilitation of mines and other matters.
The mining industry in Canada is also subject to extensive laws and regulations at both the federal and provincial or territorial
levels concerning the protection of the environment. The primary federal regulatory authorities with jurisdiction
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AGNICO-EAGLE MINES LIMITED
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over the Company's mining operations in respect of environmental matters are the Department of Fisheries and Oceans (Canada)
and Environment Canada. The construction, development and operation of a mine, mill or refinery requires compliance with
applicable environmental laws and regulations and/or review processes, including obtaining land use permits, water permits, air
emissions certifications, industrial depollution attestations, hazardous substances management and similar authorizations from
various governmental agencies. Environmental laws and regulations impose high standards on the mining industry to reduce or
eliminate the effects of waste generated by mining and processing operations and subsequently deposited on the ground or
affecting the air or water. Laws and regulations regarding the decommissioning, reclamation and rehabilitation of mines may
require approval of reclamation plans, provision of financial guarantees and long-term management of closed mines.
Quebec
In Quebec, mining rights are governed by the Mining Act (Quebec) and, subject to limited exceptions, are owned by the province.
A mining claim entitles its holder to explore for minerals on the subject land. It remains in force for a term of two years from the
date it is registered and may be renewed indefinitely subject to continued exploration works in relation thereto. In order to retain
title to mining claims, in addition to paying a small bi-annual rental fee currently ranging from C$27 to C$123 per claim depending
on its location and area (as set by Quebec government regulations), exploration work (or an equivalent value cash payment) has
to be completed in advance (either on the claim or on adjacent mining claims, concessions or leases) and filed with the Ministry of
Natural Resources and Wildlife (Quebec) prior to the date of expiry of the claim. The amount of exploration work required
bi-annually currently ranges from C$48 to C$3,600 per claim depending on its location, area and period of validity (as set by
Quebec government regulations). In 1966, the mining concession system set out for lands containing mineralized zones in the
Mining Act (Quebec) was replaced by a system of mining leases, but the mining concessions sold prior to such replacement
remain in force. A mining lease entitles its holder to mine and remove valuable mineral substances from the subject land, provided
it pays the annual rent set by Quebec government regulations, which currently ranges from C$21 per hectare (on privately held
land) to C$44 per hectare (on land owned by the province). Leases are granted initially for a term of 20 years and are renewable
up to three times, each for a duration of ten years. After the third renewal, the Minister of Natural Resources and Wildlife (Quebec)
may grant an extension thereof on the conditions, for the rental and for the term he or she determines.
Bill 14, An Act respecting the development of mineral resources in keeping with the principles of sustainable development , was
introduced in the Quebec National Assembly in May 2011 and is currently being studied by a parliamentary commission. If
adopted, Bill 14 will amend a number of rules relating to the mining regime in Quebec, including measures to stimulate exploration
work on claims, to enhance the protection of the environment and to promote social acceptability of mining activities, all of which
will likely impact the Company's activities in Quebec. Among other provisions of Bill 14, obligations respecting exploration work
expenditures on claims will become more stringent; mine operators will be required to provide a financial guarantee respecting a
broader scope of rehabilitation and restoration work and such financial guarantee will need to be provided within a shorter
timeframe; public consultations will be required before commencing mining operations; in certain urban, residential, vacationing or
recreational areas, exploration and mining activities may be restricted; and the Minister of Natural Resources and Wildlife will have
an increased ability to withdraw land from mining activity or otherwise limit mining activities to avoid conflicts with other land uses.
Bill 14 will also increase penalties for contraventions of the Mining Act (Quebec).
In Quebec, the primary provincial regulatory authorities with jurisdiction over the Company's mining operations in respect of
environmental matters are the Ministry of Sustainable Development, Environment and Parks (Quebec) and the Ministry of Natural
Resources and Wildlife (Quebec).
Nunavut
As a result of the Nunavut Land Claims Agreement (the "Land Claims Agreement") of July 1993, ownership of large tracts of land
was granted to the Inuit. These Inuit-owned lands include areas with high mineral potential. Further, as a result of other rights
granted to the Inuit in the Land Claims Agreement, Inuit organizations play an important role in the management of natural
resources and the environment in Nunavut. These duties are shared among the federal and territorial governments and Inuit
organizations. Under the Land Claims Agreement, the Inuit own surface rights to certain lands representing approximately 16% of
Nunavut. For a portion of the Inuit-owned lands representing approximately 2% of Nunavut, the Inuit own mineral (subsurface)
rights in addition to the surface rights.
In Nunavut, the Crown's mineral rights are administered by the Aboriginal Affairs and Northern Development Canada in
accordance with the Northwest Territories and Nunavut Mining Regulations (the "Territorial Mining Regulations") under
2011 ANNUAL REPORT
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21
the Territorial Lands Act (Canada). The Inuit mineral rights in subsurface Inuit-owned lands are owned and administered by
Nunavut Tunngavik Incorporated ("Nunavut Tunngavik"), a corporation representing the Inuit people of Nunavut.
Future production from Nunavut Tunngavik-administered mineral claims is subject to production leases which include a 12% net
profits interest royalty from which annual deductions are limited to 85% of gross revenue. Production from Crown mining leases is
subject to a royalty of up to 14% of adjusted net profits, as defined in the Territorial Mining Regulations. Before the operation of a
Major Development Project, as defined in the Land Claims Agreement, can begin, developers must also negotiate an Inuit impact
benefits agreement with the regional Inuit Association.
The Kivalliq Inuit Association (the "KIA") is the Inuit organization that holds surface title to the Inuit-owned lands in the Kivalliq
region and is responsible for administering surface rights on these lands on behalf of the Inuit of the region. In order to conduct
exploration work on Inuit-owned lands, the Company is required to submit a project proposal or work plan. This proposal is subject
to approval by the KIA for surface land tenure and to review by other boards established by the Land Claims Agreement to
determine environmental effects and, if needed, to grant water rights. Federal and territorial government departments participate
in the reviews conducted by these boards. For mine development, the Company requires a surface lease and water compensation
agreement with the KIA and a licence under federal legislation for the use of water, including the deposit of waste.
During mine construction and operations, the Company is subject to additional Nunavut and federal government regulations
related to environmental, safety, fire and other operational matters.
Finland
Mining legislation in Finland consists of the Mining Act, the Mining Safety Decree and the Mining Hoisting Equipment Decree. The
new Mining Act was implemented on July 1, 2011 and replaced the previous Mining Act (503/1965) as a result of overall reform of
mining legislation in Finland.
In Finland, subject to certain area restrictions, anyone has a right irrespective of land ownership to conduct survey work and take
geological measurements and observations, with the right to take small samples from the soil provided that these measures do
not cause other than only minor damage or inconvenience. However, before sampling, notice must be given to the owner of the
respective land.
A prospecting permit is required for more comprehensive survey work and it entitles its holder to conduct necessary research and
explorations in certain areas defined in the prospecting permit in order to discover the quality and extent of the deposit and to build
or move temporary facilities and machinery onto the prospecting area. The prospecting permit does not grant a right to exploit a
deposit, for which purpose a mining permit is required, but it grants its holder a priority to receive the mining permit on the
prospecting area.
A mining permit entitles its holder to exploit all minerals found on the mining area defined in the permit as well as all organic and
non-organic surface material and the soil and bedrock as considered necessary for the purposes of the mining work. In addition to
the mining permit a mining safety permit regarding safety measures of the contemplated mining operations is required in order to
build and operate a mine.
The mining area must either be owned or leased by voluntary agreements by the permit holder for mining work to commence in
accordance with the terms of the permit. In certain cases, if the mining operator and the owner of the land cannot come to a
voluntary agreement on the use of the land for mining purposes, the Council of State of Finland may grant a mining area
redemption permit which entitles its holder the right to establish a mining area on the area owned by another landowner without
consent, provided that the mining project is required by public interest.
The Finnish Safety and Chemicals Agency is responsible for granting prospecting permits, mining permits and mining safety
permits upon an application provided that statutory requirements are fulfilled. Prospecting permits are issued for fixed periods of
time (a maximum period of four years at a time which can be extended for three-year periods, up to a maximum of 15 years).
Mining permits are generally granted without an expiry date. However, the Safety and Chemicals Agency investigates grounds for
the continued existence of the permit at least once every ten years. In some cases, depending on the prevailing circumstances
and the deposit, mining permits may only be granted for a fixed period of time (to a maximum period of ten years at a time).
Prospecting permits and mining permits may be cancelled if the holder of the permit does not perform mining operations in
accordance with the permit and its terms or violates rules of the Mining Act.
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AGNICO-EAGLE MINES LIMITED
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Without specific permission of the National Board of Patents and Registrations of Finland a right to apply for and acquire a
prospecting permit and mining permit is limited to Finnish corporations and individuals and foreign individuals and corporations
domiciled in a state belonging to the European Economic Area.
All mining operations must be carried out in accordance with the permit terms and with laws and regulations concerning
conservation and environmental protection issues. Under the Environmental Protection Act, mining activities require an
environmental permit which may be issued either for a definite or indefinite period of time. The Environmental Protection Act is
based on the principles of prevention and minimization of damages and hazards, application of the best available technology,
application of the best environmental practice and the "polluter pays" principle.
The Act on Compensation for Environmental Damage includes provisions on the compensation for damage to a person or a
property resulting from pollution of water, air, soil, noise, vibration, radiation, light, heat, smell or other similar nuisances, caused
by an activity carried out at a fixed location. This act is based on the principle of strict liability.
In addition to the permits listed above, mining operators may require several other permits and may be subject to other obligations
under Finnish legislation.
According to the Act on Environmental Impact Assessment Procedure, certain projects require compliance with an environmental
impact assessment procedure. These include major projects with a considerable impact on the environment, such as the
excavation, enrichment and handling of metals and other minerals in cases where the excavated material is estimated to exceed
550,000 tonnes annually. A permit authority may not give its approval to an activity covered by the scope of the Act on the
Environmental Impact Assessment Procedure without having taken an environmental impact assessment report into
consideration.
Mexico
Mining in Mexico is subject to the Mining Law, a federal law. Under the Mexican Constitution, all minerals belong to the Mexican
Nation. Private parties may explore and extract minerals pursuant to mining concessions granted by the executive branch of the
Mexican government, as a general rule to whoever first claims them. While the Mining Law touches briefly upon labour,
occupational and worker health and safety standards, these are primarily dealt with by the Federal Labour Law. The Mining Law
also briefly addresses environmental matters, which are primarily regulated by the General Law of Ecological Balance and
Protection of the Environment, also of federal jurisdiction.
The primary agencies with jurisdiction over mining activities are the Ministry of the Economy, the Ministry of Labor and Social
Welfare and the Ministry of the Environment and Natural Resources. The National Water Commission has jurisdiction regarding
the granting of water rights and the Ministry of Defense with respect to the use of explosives.
Concessions are granted for 50 years, renewable once. The main obligations to keep concessions current are the semi-annual
payment of mining duties (taxes), based on the surface area of the concession, and the performance of work in the areas covered
by the concessions, which is evidenced by minimum expenditures or by the extraction of ore.
Organizational Structure
The Company's significant subsidiaries (all of which are directly or indirectly wholly-owned by the Company, unless otherwise
indicated) are 1715495 Ontario Inc., Agnico-Eagle Mines Sweden Cooperatie U.A., which owns all of the shares of Agnico-Eagle
Sweden AB, a Swedish company through which the Company holds its interest in Oijarvi Resources Oy, and Agnico-Eagle
Finland Oy, a Finnish company through which the Kittila mine is held. In addition, the Company's interest in the Pinos Altos mine
in northern Mexico is held through its indirect wholly-owned Mexican subsidiary, Agnico Eagle Mexico S.A. de C.V., which is
owned, in part, by 1641315 Ontario Inc. and Tenedora Agnico Eagle Mexico S.A. de C.V., which is owned in part by Agnico-Eagle
Mines Mexico Cooperatie U.A. and the Company's interest in the La India project in Mexico is held through its indirect
wholly-owned Mexican subsidiary, Resource Grayd De Mexico, S.A. de C.V., which is owned by Grayd, which is directly wholly
owned by the Company, and Tenedora Agnico Eagle Mexico S.A. de C.V. The LaRonde mine, the Lapa mine, the Goldex mine,
the Meadowbank mine and the Meliadine project are owned directly by the Company.
The Company's wholly-owned subsidiaries, Servicios Agnico Eagle Mexico, S.A. de C.V., Servicios Pinos Altos, S.A. de C.V. and
Minera Agave, S.A. de C.V. provide services in connection with the Company's operations in Mexico. The Company's operations
in the United States are conducted through Agnico-Eagle (USA) Limited.
2011 ANNUAL REPORT
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23
The following chart sets out the corporate structure of the Company, each of its significant subsidiaries and certain other
subsidiaries, together with the jurisdiction of organization of the Company and each such subsidiary as at March 12, 2012:
Agnico-Eagle Organizational Chart
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AGNICO-EAGLE MINES LIMITED
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Property, Plant and Equipment
Location Map of the Abitibi Region
LaRonde Mine
The LaRonde mine is situated approximately halfway between the City of Rouyn-Noranda and the City of Val d'Or in northwestern
Quebec (approximately 470 kilometres northwest of Montreal, Quebec) in the municipalities of Preissac and Cadillac. At
December 31, 2011, the LaRonde mine was estimated to contain proven and probable mineral reserves of approximately
4.7 million ounces of gold comprised of 33.2 million tonnes of ore grading 4.40 grams per tonne. The Company's LaRonde mine
consists of the LaRonde property and the adjacent El Coco and Terrex properties, each of which is 100% owned and operated by
the Company. The LaRonde mine can be accessed either from Val d'Or in the east or from Rouyn-Noranda in the west, which are
located approximately 60 kilometres from the LaRonde mine via Quebec provincial highway No. 117. The LaRonde mine is
situated approximately two kilometres north of highway No. 117 on Quebec regional highway No. 395. The Company has access
to the Canadian National Railway at Cadillac, Quebec, approximately six kilometres from the LaRonde mine.
The LaRonde mine operates under mining leases obtained from the Ministry of Natural Resources and Wildlife (Quebec) and
under certificates of approval granted by the Ministry of Sustainable Development, Environment and Parks (Quebec). The
LaRonde property consists of 35 contiguous mining claims and one provincial mining lease and covers in total 1,044.9 hectares.
The El Coco property consists of 22 contiguous mining claims and one provincial mining lease and covers in total 356.7 hectares.
The Terrex property consists of 21 mining claims that cover in total 424.4 hectares. The mining leases on the LaRonde and El
Coco properties expire in 2018 and 2021, respectively, and are automatically renewable for three further ten-year terms upon
payment of a small fee. The Company also has three surface rights leases that cover in total approximately 301.5 hectares that
relate to the water pipeline right of way from Lake Preissac and the eastern extension of the LaRonde tailings pond #7 on the El
Coco property. The surface rights leases are renewable annually.
2011 ANNUAL REPORT
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25
Location Map of the LaRonde Mine
The LaRonde mine includes underground operations at the LaRonde and El Coco properties that can both be accessed from the
Penna Shaft, a mill, a treatment plant, a secondary crusher building and related facilities. The El Coco property is subject to a 50%
net profits interest in favour of Barrick Gold Corporation ("Barrick") on future production from approximately 500 metres east of the
LaRonde property boundary. The remaining 1,500 metres is subject to a 4% net smelter return royalty. This area of the property is
now substantially mined out and the Company has not paid royalties since 2004 and does not expect to pay royalties in 2012. In
2003, exploration work started to extend outside of the LaRonde property onto the Terrex property where a down-plunge
extension of Zone 20 North was discovered. The Terrex property is subject to a 5% net profits royalty to Delfer Gold Mines Inc.
and a 2% net smelter return royalty to Barrick. The Company does not expect to pay royalties on this part of the property in 2012.
In addition, the Company owns 100% of the Sphinx property immediately to the east of the El Coco property.
In 2012, payable gold production at the LaRonde mine is expected to increase to approximately 157,500 ounces, and total cash
costs per ounce are expected to be approximately $570.
The Abitibi region has a continental climate with average annual rainfall of 64 centimetres and average annual snowfall of
318 centimetres. The average monthly temperatures range from a minimum of -23 degrees Celsius in January to a maximum of
23 degrees Celsius in July. Under normal circumstances, mining operations are conducted year-round without interruption due to
weather conditions. The Company believes that the Abitibi region of northwestern Quebec has sufficient experienced mining
personnel to staff its operations in the Abitibi region. The elevation is 337 metres above sea level. The LaRonde property is
relatively flat with a maximum relief of approximately 40 metres. The topography gently slopes down from north to south and is
characterized by boreal-type forest at LaRonde and the nearby properties. All of the LaRonde mine's power requirements are
supplied by Hydro-Quebec through connections to its main power transmission grid. Water used in the LaRonde mine's
operations is sourced from Lake Preissac and is transported approximately four kilometres to the minesite through a surface
pipeline.
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AGNICO-EAGLE MINES LIMITED
Table of Contents
Mining and Milling Facilities
Surface Plan of the LaRonde Mine
The LaRonde mine was originally developed utilizing a 1,207-metre shaft (Shaft #1) and an underground ramp access system.
The ramp access system is available down to Level 25 of Shaft #1 and continues down to Level 248 at the Penna Shaft. The
mineral reserve accessible from Shaft #1 was depleted in September 2000 and Shaft #1 is no longer in use. A second production
shaft (Shaft #2), located approximately 1.2 kilometres to the east of Shaft #1, was completed in 1994 to a depth of 525 metres and
was used to mine Zones 6 and 7. Both ore zones were depleted in March 2000 and the workings were allowed to flood up to
Level 6 (approximately 280 metres). A third shaft (the Penna Shaft), located approximately 800 metres to the east of Shaft #1,
was completed down to a depth of 2,250 metres in March 2000. The Penna Shaft is used to mine Zones 20 North, 20 South, 6
and 7. In 2009, as part of the LaRonde mine extension, the Company completed construction of an 823-metre internal shaft from
Level 203 to access the ore below Level 245, approximately 2,858 metres below surface.
Mining Methods
Four mining methods have historically been used at the LaRonde mine: open pit for the three surface deposits; sublevel retreat;
longitudinal retreat with cemented rock backfill or paste backfill; and transverse open stoping with paste, cemented rock backfill or
unconsolidated backfill. The primary source of ore at the LaRonde mine continues to be from underground mining methods.
During 2011, two mining methods were used: longitudinal retreat with cemented rock backfill or paste backfill and transverse open
stoping with cemented rock backfill, paste or unconsolidated backfill. In the underground mine, sublevels are driven at between
30-metre and 40-metre vertical intervals, depending on the depth. Stopes are undercut in 15-metre wide panels. In the longitudinal
method, panels are mined in 15-metre sections and backfilled with 100% cemented rock backfill or paste backfill. The paste
backfill plant was completed in 2000 and is
2011 ANNUAL REPORT
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27
located on the surface at the processing facility. In the transverse open stoping method, approximately 50% of the ore is mined in
the first pass and filled with cemented rock backfill or paste backfill. On the second pass, the remainder of the ore is mined and
filled with unconsolidated waste rock backfill or cemented paste backfill.
Surface Facilities
Surface facilities at the LaRonde mine include a processing plant with a daily capacity of 7,200 tonnes of ore, which has been
expanded four times since 1987 from the original rate of 1,630 tonnes per day. Beginning in 1999, transition to the LaRonde mine
poly-metallic massive sulphide orebody required several modifications to the processing plant which consisted of a new coarse
ore handling system, new SAG and ball mill, the addition of a zinc flotation circuit and capacity increases to the existing copper
flotation and precious metals circuits. In 2008, the installation of a limited copper/lead separation flotation circuit, following the
copper flotation circuit, was completed. Also in 2008, operation of a small cyanidation plant, for the treatment of sulphide
concentrate from the Goldex mine, began. A new carbon-in-leach circuit is under construction and will replace the existing
LaRonde precious metal Merrill Crowe circuit by year end. The LaRonde mine is also the site for the Lapa mine ore processing
plant (1,500 tonnes per day), which the Company commissioned in the second quarter of 2009.
The ore requires a series of grinding, copper/lead flotation and separation, zinc flotation and zinc tails precious metals leaching
circuits, followed by a counter-current decantation circuit and Merrill Crowe precipitation. Paste backfill and cyanide destruction
plants operate intermittently. The tailings area has a dedicated cyanide destruction and metals precipitation plant that water
passes through prior to recirculating to the mill. A biological water treatment plant was commissioned in 2005 to address the
build-up of thiocyanate in the tailings ponds at the LaRonde mine. This build-up was the result of the high sulphide content of the
LaRonde mine ore and 90% recirculation of the process water. The plant uses bacteria to oxidize and destroy thiocyanate and
removes phosphate from the water before it is released to the environment.
The Goldex concentrate circuit consists of pulp received from the Goldex mill via truck and subsequent leaching of the pulp with
cyanide. The leached material is sent to the Lapa cyanide leach with carbon circuit ("CIL") for gold recovery with Lapa residual
pulp. The Goldex circuit ceased to operate in November 2011 following the suspension of mining operations at Goldex on
October 19, 2011. This circuit is currently on standby pending a decision regarding future production from the Goldex operations.
The Lapa process consists of a two-stage grinding circuit to reduce the granularity of the ore. A gravity recovery circuit that is
incorporated into the grinding circuit recovers up to 45% of the available gold, depending on feed grades. The residual pulp is
leached in a conventional CIL circuit to dissolve the balance of the precious metal. Prior to November 2011, when the Goldex
circuit ceased operations, the leached slurry from the Goldex concentrate circuit was mixed with the Lapa pulp for carbon contact.
A carbon strip circuit recovers the gold from the carbon which is recycled to the leach circuit.
2012 annual production at the LaRonde mill is expected to consist of approximately 2,100,000 ounces of silver, 4,800 tonnes of
copper, up to 570 tonnes of lead and 33,000 tonnes of zinc. Gold recovery at the LaRonde mine is distributed approximately 73%
in the copper concentrate, 1.5% in the lead concentrate, 4.25% in the zinc concentrate and 12.4% via leaching.
Mineral Recoveries
During 2011, gold and silver recovery averaged 89.6% and 88.3%, respectively. Zinc recovery averaged 86.9% with a concentrate
quality of 56% zinc. Copper recovery averaged 77.1% with a concentrate quality of 8.66% copper. Approximately 2.4 million
tonnes of ore were processed averaging 7,027 tonnes of ore per day at 93.8% of available time.
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AGNICO-EAGLE MINES LIMITED
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The following table sets out the metal recoveries, concentrate grades and contained metals for the 2.4 million tonnes of ore
extracted by the Company at the LaRonde mine in 2011.
Copper
Concentrate
(41,970 tonnes
produced)
Head
Grades
Gold
Silver
Copper
Lead
Zinc
1.79 g/t
54.42 g/t
0.20%
0.36%
3.09%
Grade Recovery
54.8 g/t
1,226 g/t
8.66%
–
–
53.35%
39.30%
77.12%
–
–
Zinc
Concentrate
(115,717 tonnes
produced)
Grade Recovery
1.7 g/t
175 g/t
–
–
55.9%
4.68%
15.40%
–
–
86.87%
Lead
Concentrate
(4,006 tonnes
produced)
Grade Recovery
108.2 g/t
3,319 g/t
–
60.33%
–
10.29%
10.39%
–
28.33%
–
Overall
Metal
Recoveries
Payable
Production
89.64%
88.28%
77.10%
28.33%
86.87%
124,173 oz
3,196,496 oz
3,216 t
2,342 t
54,894 t
Environmental Matters
Currently, water is treated at various facilities at the LaRonde mine operations. Water contained in the tailings to be used as
underground backfill is treated to degrade cyanide using a sulphur dioxide and air process. The tailings entering the tailings pond
are first decanted and the clear water subjected to natural cyanide degradation. This water is then transferred to sedimentation
pond #1 to undergo a secondary treatment at a plant located between sedimentation ponds #1 and #2 that uses a peroxy-silicate
process to destroy cyanide, lime and coagulant to precipitate metals. The tailings pond occupies an area of about 175 hectares.
Waste rock that is not used underground for backfill is brought up to the surface and stored in close proximity to the tailings pond
to be used to build coffer dams inside the pond. A waste rock pile containing approximately 500,000 tonnes of waste and
occupying about nine hectares is located west of the mill.
Due to the high sulphur content of the LaRonde mine ore, the Company has had to address toxicity issues in the tailings ponds
since the 1990s. Since introducing and optimizing a biological treatment plant in 2004, the treatment process is now stable and
the effluent has remained non-toxic since 2006. In 2006, the Company commenced an ammonia stripping operation involving an
effluent partially treated by the biological treatment plant which allowed an increase in treatment flow rate, while keeping the final
effluent toxicity-free. In 2009, to further increase the treatment flow rate of the biological plant, the Company commenced
construction of ammonia stripping towers, which became operational in June 2010. In addition, water from mine dewatering and
drainage water are treated to remove metals prior to discharge at a lime treatment plant located at the LaRonde mill.
Capital Expenditures
In 2006, the Company initiated construction to extend the infrastructure at the LaRonde mine to access the ore below Level 245,
referred to as the LaRonde mine extension. Hoisting from the LaRonde mine extension began in the fourth quarter of 2011 and
commercial production was achieved in November 2011. The LaRonde mine extension infrastructure includes a 823-metre
internal shaft (completed in November 2009) starting from Level 203, which provides a total depth of 2,858 metres. A ramp is used
to access the lower part of the orebody up to 3,110 metres in depth. The internal winze system is used to hoist ore from depth to
facilities on Level 215, approximately 2,150 metres below surface, where it is transferred to the Penna Shaft hoist.
Capital expenditures at the LaRonde mine during 2011 were approximately $93 million, which included $41 million on sustaining
capital expenditures and $52 million comprised primarily of expenditures on the LaRonde mine extension. Budgeted 2012 capital
expenditures at the LaRonde mine are $74 million, including $21 million on sustaining capital expenditures and capitalized
exploration and $43 million on the LaRonde mine extension. Another $10 million will be added to the carbon-in-pulp ("CIP") / high
density sludge ("HDS") project. Total capital expenditures for the LaRonde mine and the LaRonde mine extension are estimated
at $366 million from 2012 to 2024 (including the CIP/HDS project).
2011 ANNUAL REPORT
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29
Development
In 2011, a total of 14,116 metres of lateral development was completed. Development was focused on stope preparation of mining
blocks for production in 2011 and 2012, especially the preparation of the lower mine production horizon. A total of 4,925 metres of
development work was completed for the LaRonde mine extension infrastructure and the ramp to access the LaRonde
mine extension.
A total of 14,500 metres of lateral development is planned for 2012. The main focus of development work continues to be stope
preparation. The Company plans to develop and prepare the access to Zone 20 South down to Level 245. For the LaRonde mine
extension, a total of 6,370 metres of development is planned, mainly to develop the ramp access to the orebody and for future
ventilation infrastructure. At the same time, development work will continue to prepare for mining below Level 245.
As the LaRonde mine extension has substantially been completed and will be the primary location of mining going forward, the
"extension" designation will be dropped and the entire complex will be referred to as the LaRonde mine.
Geology, Mineralization and Exploration
Geology
The LaRonde property is located near the southern boundary of the Archean-age (2.7 billion years old) Abitibi Subprovince and
the Pontiac Subprovince within the Superior Geological Province of the Canadian Shield. The most important regional structure is
the Cadillac-Larder Lake ("CLL") fault zone marking the contact between the Abitibi and Pontiac Subprovinces, located
approximately two kilometres to the south of the LaRonde property.
The geology that underlies the LaRonde mine consists of three east-west-trending, steeply south-dipping and generally
south-facing regional groups of rock formations. From north to south, they are: (i) 400 metres (approximate true thickness) of the
Kewagama Group, which is made up of a thick band of interbedded wacke; (ii) 1,500 metres of the Blake River Group, a volcanic
assemblage that hosts all the known economic mineralization on the property; and (iii) 500 metres of the Cadillac Group, made up
of a thick band of wacke interbedded with pelitic schist and minor iron formation.
Zones of strong sericite and chlorite alteration that enclose massive to disseminated sulphide mineralization (including the ore that
is mined for gold, silver, zinc, copper and lead at the LaRonde mine) follow steeply dipping, east-west-trending, anastomosing
shear zone structures within the Blake River Group volcanic units across the property. These shear zones are part of the larger
Doyon-Dumagami Structural Zone that hosts several important gold occurrences (including the Doyon gold mine, the Westwood
project and the former Bousquet mines) and has been traced for over ten kilometres within the Blake River Group, from the
LaRonde mine westward to the Mouska gold mine.
Mineralization
The gold-bearing zones at the LaRonde mine are lenses of disseminated stringers through to massive, aggregates of coarse
pyrite with zinc, copper and silver content. Ten zones that vary in size from 50,000 to 40,000,000 tonnes have been identified, of
which four are (or are believed to be) economic. Gold content is not proportional to the total sulphide content but does increase
with copper content. Gold values are also higher in areas where the pyrite lenses are crosscut by tightly spaced north-south
fractures.
These historical relationships, which were noted at LaRonde Shaft #1's Main Zone, are maintained at the Penna Shaft zones. The
zinc-silver ( i.e ., Zone 20 North) mineralization with lower gold values, common in the upper mine, grades into gold-copper
mineralization within the lower mine. Gold value enhancement associated with crosscutting north-south fractures also occurs
within the LaRonde mine. The predominant base metal sulphides within the LaRonde mine are chalcopyrite (copper) and
sphalerite (zinc).
The Company believes that Zone 20 North is one of the largest gold-bearing massive sulphide mineralized zones known in the
world and one of the largest mineralized zones known in the Abitibi region of Ontario and Quebec. Zone 20 North contains the
majority of the mineral reserves and resources at the LaRonde mine, including 33,113,000 tonnes of proven and probable mineral
reserves grading 4.51 grams of gold per tonne, representing 94% of the total proven and probable mineral reserves at the
LaRonde mine, 5,419,000 tonnes of indicated mineral resources grading 1.61 grams of gold per tonne, representing 75% of the
total measured and indicated mineral resources at the LaRonde mine, and 9,297,000 tonnes of inferred mineral resources grading
4.00 grams of gold per tonne, representing 82% of the total inferred mineral resources at LaRonde.
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The depth of Zone 20 North extends between 700 metres below surface and 3,500 metres below surface, and possibly lower.
With increased access on the lower levels of the mine ( i.e. from Level 215 to Level 255), the transformation from a "zinc/silver"
orebody to a "gold/copper" deposit is expected to continue during 2012.
Zone 20 North can be divided into an upper zinc/silver-enriched gold-poor zone and a lower gold/copper-enriched gold-rich zone.
The zinc zone has been traced over a vertical distance of 1,700 metres and a horizontal distance of 570 metres, with thicknesses
approaching 40 metres. The gold zone has been traced over a vertical distance of over 2,200 metres and a horizontal distance of
900 metres, with thicknesses varying from three to 40 metres. The zinc zone consists of massive zinc/silver mineralization
containing 50% to 90% massive pyrite and 10% to 50% massive light brown sphalerite. The gold zone mineralization consists of
30% to 70% finely disseminated to massive pyrite containing 1% to 10% chalcopyrite veinlets, minor disseminated sphalerite and
rare specks of visible gold. Gold grades are generally related to the chalcopyrite or copper content. At depth, the massive sulphide
lens becomes richer in gold and copper. During 2011, 2.2 million tonnes of ore grading 1.72 grams of gold per tonne, 57.18 grams
of silver per tonne, 3.27% zinc, 0.20% copper and 0.39% lead were mined from Zone 20 North.
Exploration
The combined tonnage of proven and probable mineral reserves at the LaRonde mine for year-end 2011 is 33.2 million tonnes
which represents a 4% decrease in the amount compared to year-end 2010 (34.7 million tonnes). This mineral reserve includes
the replacement of 2.4 million tonnes of ore that were mined in 2011. The reduction in reserves is principally associated with the
tonnes mined during 2011.
Diamond drilling is used for exploration on the LaRonde property. In 2011, a total of 181 holes were drilled on the LaRonde
property for a total length of 16,190 metres, compared to 212 holes for a total length of 19,188 metres in 2010. Of the drilling in
2011, 165 holes (8,181 metres) were for production stope delineation, 12 holes (2,614 metres) were for definition drilling and
4 holes (5,396 metres) were for exploration. In 2010, 187 holes (5,397 metres) were for production stope delineation, 21 holes
(6,016 metres) were for definition drilling and 4 holes (5,403 metres) were for exploration. Expenditures on diamond drilling at the
LaRonde mine during 2011 were approximately $2.41 million, including $0.97 million in definition and delineation drilling expenses
charged to operating costs at the LaRonde mine. Expenditures on exploration in 2011 were $1.44 million, and are expected to be
$1.15 million in 2012.
The main focus of the 2011 exploration program was continuing the investigation of Zone 20 North at depth. This program was
conducted from the Level 215 exploration drift, approximately 2,150 metres below the surface. The first hole of the program was
completed at the end of 2009 to a final length of 1,852 metres. This hole intersected Zone 20 North at a depth of 3,520 metres
below surface, which is approximately 410 metres below the current reserve envelope. The intersection returned 14.3 metres (true
width) grading 3.03 grams of gold per tonne. In 2010, a second branch was drilled from this mother hole and returned 4.1 metres
grading 1.77 grams of gold per tonne at a depth of 3,595 metres below surface. Another hole was initiated in 2011 and drilling was
still in progress at the end of the year. The drilling will continue in 2012. Another important focus of 2011 drilling was to start the
deep exploration campaign to the east of the current reserves from the 086 level exploration drift. The purpose of this campaign is
to explore stratigraphy to the east at a depth of 2,000 to 2,500 metres below surface which is similar to structures at the LaRonde
mine that often contain mineralisation. In 2011, two holes were completed with no significant values and another hole was in
progress at year end.
In addition, definition and delineation drilling was undertaken in the 20 North and 20 South Zones to assist in finalizing mining
stope designs. Zone 20 North was the main focus of the definition drilling in 2011. Infill drilling from Level 260 to Level 236
confirmed the previous Zone 20 North reserves with a significant gain of 16,000 ounces mainly located in the western edge of
the orebody.
Bousquet and Ellison Properties
The Bousquet property is located immediately west of the LaRonde mine and consists of two mining leases covering
80.0 hectares and 31 claims covering 384.9 hectares. The property, along with various equipment and other mining properties,
was acquired from Barrick in September 2003 for $2.9 million in cash, $1.1 million in common shares of the Company and the
assumption of specific reclamation and other obligations related to the Bousquet property. The property is subject to a 2% net
smelter return royalty interest in favour of Barrick.
From 2004 to 2007, the Company recovered 108,407 tonnes of ore grading 2.33 grams of gold per tonne from Zone 4 in a small
open pit. In 2006 and 2007, the Company recovered 99,342 tonnes of ore grading 7.02 grams of gold per tonne from two small
ore blocks underground at Bousquet. There has been no mining of this property since 2007.
2011 ANNUAL REPORT
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31
In 2011, the Company completed a diamond drilling program consisting primarily of twinning and resampling historic holes to
evaluate the production potential of an open pit at Bousquet Zone 5. This work led to a new resource estimate for Zone 5 and an
internal feasibility study has been conducted for a resumption of production in the Zone 5 open pit. This study led to a positive
scenario and a final estimate of new probable reserves of approximately 0.2 million ounces of gold comprised of 3.2 million tonnes
of ore grading 1.88 grams per tonne. For the whole Bousquet property, including Zone 5, the December 31, 2011 indicated
mineral resource is approximately 9.8 million tonnes grading 2.44 grams of gold per tonne. The inferred mineral resource is
4.6 million tonnes grading 4.04 grams of gold per tonne. Expenditures on exploration in 2011 were $2.40 million, which includes
the cost of drilling 18,616 metres in 70 holes. In 2012, the Company expects to spend $1.5 million in exploration including
$0.3 million in drilling of 3,000 metres at Bousquet and continue optimisation of the feasibility study.
The Ellison property is located immediately west of the Bousquet property and consists of eight claims covering 101.0 hectares.
The property was acquired in August 2002 for $0.32 million in cash and a commitment to spend $0.49 million in exploration over
four years. The commitment was fulfilled in 2004 and the property is 100% owned by the Company. The property is subject to a
net smelter return royalty interest in favour of Yorbeau Resources Inc. that varies between 1.5% and 2.5% depending on the price
of gold. Should commercial production from the Ellison property commence, the Company will be required to pay Yorbeau
Resources Inc. an additional C$0.5 million in cash.
From 2009 to 2011, the Company conducted drilling for a total of 12,465 metres on the deep exploration program on the Ellison
property, at a cost of $7.4 million in order to better define the mineralization at depth, interpreted to be in the Westwood horizon.
The potential exists for a large gold resource with similar geology to the LaRonde mine extension.
The December 31, 2011 indicated mineral resource at Ellison is approximately 0.4 million tonnes grading 5.68 grams of gold per
tonne, and the inferred resource is 0.8 million tonnes grading 5.81 grams of gold per tonne. A follow-up exploration program was
approved for Ellison in 2012, including 3,600 metres of drilling at a budget of $1.0 million.
Goldex Mine
The Goldex mine, which achieved commercial production in August 2008, is located in the City of Val d'Or, Quebec,
approximately 60 kilometres east of the LaRonde mine. On October 19, 2011, the Company suspended mining operations and
gold production at Goldex, following the receipt of recommendations from independent consultants to halt underground mining
operations during the investigation into ground stability issues. As a result, the Company wrote off substantially all of its
investment in the Goldex mine (approximately $254 million), took a closure provision of approximately $44 million and reclassified
all of the remaining 1.6 million ounces of proven and probable gold reserves (approximately 0.9 million ounces of gold in proven
reserves (14.8 million tonnes grading 1.87 grams of gold per tonne) and approximately 0.7 million ounces of gold in probable
reserves (13.0 million tonnes grading 1.6 grams of gold per tonne) estimated as of December 31, 2010), other than the ore
stockpiled on surface, as mineral resources in the third quarter of 2011. The surface stockpile was processed in the Goldex mill by
October 30, 2011. The Goldex property is now considered an advanced exploration project with significant measured, indicated
and inferred mineral resources in several zones, but no mineral reserves.
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At the present time, development work continues underground on the M-Zone (as defined below) and the exploration ramp into
the D-Zone (as defined below), and exploration continues, with diamond drilling from surface and underground.
Location Map of the Goldex Mine
The Goldex property is accessible by provincial highway. The elevation is approximately 302 metres above sea level. All of the
Goldex mine's power requirements were supplied by Hydro-Quebec through connections to its main power transmission grid. All
of the water that was required at the Goldex mine was sourced directly by aqueduct from the Thompson River immediately
adjacent to the minesite or through recirculation of water from the surface pond and the auxiliary tailings pond. For additional
information regarding the Abitibi region in which the Goldex mine is located, including information with respect to climate,
topography, vegetation and mining personnel, see "– Property, Plant and Equipment – LaRonde Mine".
The Goldex mine operated under a mining lease obtained from the Ministry of Natural Resources and Wildlife (Quebec) and under
certificates of approval granted by the Ministry of Sustainable Development, Environment and Parks (Quebec). The Goldex
property, in which the Company has a 100% working interest, consists of 22 contiguous mining claims and, since April 2006, one
provincial mining lease (98.6 hectares), covering an aggregate of 331.2 hectares. The property is made up of three blocks: the
Probe block (130.7 hectares); the Dalton block (10.4 hectares); and the Goldex Extension block (190.1 hectares). The claims are
renewable every second year upon payment of a small fee. The mining lease expires in 2028 and is automatically renewable for
three further ten-year terms upon payment of a small fee. The Company also has one lease covering 418.5 hectares of surface
rights that are used for the auxiliary tailings pond. This lease is renewable annually upon payment of a small fee.
The Goldex mine includes underground operations that can be accessed from two shafts, a processing plant, an ore storage
facility and other related facilities. The Goldex Extension Zone ("GEZ"), which was the gold deposit on which the Company was
focusing its production efforts before production was suspended indefinitely on October 19, 2011, was discovered in 1989 on the
Goldex Extension block (although the Company believes a small portion of the GEZ occurs on the Probe block). Probe Mines Ltd.
holds a 5% net smelter return royalty interest on the Probe block. In 2011, exploration and development work continued on the
zone located on the Probe block 150 metres above the western end of the GEZ (the "M-Zone").
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33
In late 1997, the Company completed a mining study that indicated the deposit was not economically viable to mine at the
then-prevailing gold price (approximately $323 per ounce of gold) using the mining approach chosen and drill-hole-indicated
grade. The property was placed on care and maintenance and the workings were allowed to flood. In February 2005, a new
mineral reserve and resource estimate was completed for the GEZ which, coupled with a feasibility study, led to a probable
mineral reserve estimate of 1.6 million ounces of gold contained in 20.1 million tonnes of ore grading 2.54 grams of gold per
tonne. The GEZ resource model was revised and, in March 2005, the Company approved a feasibility study and the construction
of the Goldex mine. The mine achieved commercial production on August 1, 2008 and consistently operated at or above the
designed rate of 6,900 tonnes per day until its operations were suspended in October 2011.
Based on the results of a scoping study completed in July 2009, the Company determined to expand the mine and mill operations
at the Goldex mine to 8,000 tonnes per day. This project was completed in 2010. Capital costs in connection with the expansion
totalled $10 million. The crusher for the expansion was commissioned at the end of the first quarter of 2010 at a rate of
7,811 tonnes per day.
The Goldex mine produced 135,478 ounces of gold in 2011 at total cash costs of $472 per ounce. The Goldex mine is not
expected to produce more gold until the suspected rock stability issues are resolved.
Mining and Milling Facilities
Surface Plan of the Goldex Mine
At the time the Company commenced construction of the Goldex mine, the surface facilities included a headframe, a hoistroom, a
surface building containing a mechanical shop, a warehouse and an office. In addition, the Goldex property had a 790-metre deep
shaft (Shaft #1), which provided access to underground workings. Shaft #1 is predominantly used to hoist waste rock from
development activities.
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The sinking of a new production shaft was completed in 2007. This shaft (Shaft #2) is a 5.5-metre diameter shaft with a
50-centimetre thick concrete lining and is used for ventilation as well as hoisting services. Shaft #2 is 865 metres deep and
includes five stations. A refurbished friction hoist was installed for production and service duties, and an auxiliary hoist was
installed for emergency and personnel service. The production hoist is equipped with one cageskip. Each skip has a 21.5-tonne
capacity and the shaft can hoist an average of 7,000 to 8,000 tonnes of ore per day.
Mining Method
Prior to the suspension of mining operations on October 19, 2011, the Goldex mine used a high volume bulk mining method,
which was made possible through the use of large mining stopes. Drilling and blasting of 165-millimetre production holes was
used to obtain a muck size large enough to be economically efficient. Using this method required a percentage of the broken ore
to be kept in the stope to reduce the backfilling cost and to reduce sloughing on the walls. Little ore and waste development was
necessary to mine out the deposit. Following the suspension of mining on October 19, 2011, future mining methods, if any, are
under evaluation.
Surface Facilities
Plant construction at the Goldex mine commenced in the second quarter of 2006 and was completed in the first quarter of 2008.
The plant reached design capacity in the second quarter of 2009. Grinding at the Goldex mill was done through a two-stage circuit
comprised of a SAG mill and a ball mill. As part of the expansion project commenced in 2009, a surface crusher was added to
reduce the size of ore transferred to the surface from 150 millimetres to 50 millimetres. A lamellar decanter was also added to
recover small particles present in the water overflow of the concentrate thickener. The underflow pump of this thickener was
upgraded following flotation circuit modification to increase the pull rate of the small particles. Approximately two-thirds of the gold
was recovered through a gravity circuit, passed over shaking tables and smelted on site. The remainder of the gold and pyrite was
recovered by a flotation process. The concentrate was then thickened and trucked to the mill at the LaRonde mine where it was
further treated by cyanidation. Gold recovered was consolidated with precious metals from the LaRonde and Lapa mines. The
Company reached an average gold recovery of 93.38% in 2011, prior to the suspension of mining.
In addition, surface facilities at the Goldex property include an electrical sub-station, a compressor building, a service building for
administration and changing rooms, a warehouse building, a concrete headframe above Shaft #2, a hazardous waste storage
facility and a dome covering the ore stockpile.
Mineral Recoveries
Prior to the suspension of mining operations on October 19, 2011, the Goldex mill processed approximately 2.48 million tonnes of
ore, averaging approximately 8,173 tonnes of ore treated per day and operating at approximately 95% of available time. The
following table sets out the metal recoveries at the Goldex mine in 2011.
Head
Grades
Gold
1.82 g/t
Environmental Matters
Gravity Recovery
Flotation-Cyanidation
Recovery
Global Recovery
Payable
Production
67.76%
25.63%
93.38%
135,478 oz
Environmental permits for the construction and operation of an ore extracting infrastructure at the Goldex mine were received from
the Ministry of Sustainable Development, Environment and Parks (Quebec) in October 2005. The permits also covered the
construction and operation of a sedimentation pond for mine water treatment and sewage facilities, and these facilities have been
built at the Goldex mine site. In June 2009, the permits were revised to allow the expansion of the mine and mill operations to
8,500 tonnes per day.
In November 2006, the Company and the Quebec government signed an agreement permitting the Company to dispose of the
Goldex tailings at the Manitou minesite, a tailings site formerly used by an unrelated third party and abandoned to the Quebec
government. The Manitou tailings site has issues relating to acid drainage and the construction of tailings facilities by the
Company and the deposit of tailings from the Goldex plant on the Manitou tailings site was accepted by the Ministry of Sustainable
Development, Environment and Parks (Quebec) as a valid rehabilitation plan to address the acid generation problem at Manitou.
Under the agreement, the Company managed the construction and operation of the tailings facilities and the Quebec government
paid all additional costs above the Company's budget for tailings facilities set
2011 ANNUAL REPORT
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35
out in the Goldex feasibility study. The Quebec government retains responsibility for all environmental contamination at the
Manitou tailings site and for final closure of the facilities. In addition, the Company has built a separate tailings deposit area
(auxiliary tailings pond) near the Goldex mine. Environmental permits for the construction and operation of the auxiliary tailings
pond at the Goldex mine were received in March 2007. In 2011, 237,615 tonnes of Goldex tailings were discharged to the
auxiliary pond for a total to date of 764,077 tonnes. At the Manitou site, 2.20 million tonnes of Goldex tailings were discharged for
a total to date of 8.095 million tonnes.
A new dyke was built in the summer of 2011 in the auxiliary tailings pond to create a second polishing basin to reduce total
suspended solids in the discharged water during spring time. Construction of this dyke was necessary following a notice of
infraction received in 2011 from the Quebec Ministry of Environment for exceeding of the permitted total suspended solids.
Following suspension of mining operations at the Goldex property, the mine closure costs were revised to account for the change
in conditions at the site. The estimated total for the closure costs of the Goldex mine is approximately $51.4 million, comprised of
the following: $1.2 million for demolition, $1 million for engineering, $0.45 million for site preliminary works, $5.4 million for mining
site rehabilitation (primarily for backfilling of the zone with high subsidence), $23.2 million for rock grouting and soil improvement,
$0.26 million for revegetation of the site, $0.06 million to rehabilitate the sedimentation pond, $0.2 million to rehabilitate the waste
rock pile, $1.03 million to rehabilitate the South Tailings basin area, $0.7 million for geotechnical and environmental monitoring;
$17.6 million for property purchases and $0.3 million for Baie-Dorée road rehabilitation. In addition, a separate provision of
approximately $4.6 million exists for the remaining participation of the Company in the rehabilitation of the Manitou site.
Capital Expenditures
Prior to the suspension of mining operations on October 19, 2011, capital expenditures at the Goldex mine in 2011 were
approximately $48.4 million, which included $7.8 million on sustaining capital expenditures, $7.1 million on the construction of
facilities in the M-Zone and water management, $10.7 million in deferred development expenses, $16.3 million for remediation
work at the surface and $5.3 million in exploration expense. For 2012, an interim budget of $69.8 million has been approved to
further develop the M-Zone, complete remediation work, perform crown pillar investigations and explore the D-Zone.
Development
During 2011, approximately 4,256 metres of lateral and vertical development were completed at a cost of $15.3 million, including
development following the suspension of mining operations on October 19, 2011. At the present time, development work
continues underground on the M-Zone and the exploration ramp into the D-Zone, and exploration continues with diamond drilling.
For 2012, 900 metres of development at a cost of $6.1 million is planned to develop the M-Zone and for exploration of the D-Zone.
Geology, Mineralization and Exploration
Geology
Geologically, the Goldex property is similar to the LaRonde property and is located near the southern boundary of the
Archean-age (2.7 billion years old) Abitibi Subprovince, a typical granite-greenstone terrane located within the Superior Province
of the Canadian Shield. The southern contact of the Abitibi Subprovince with the Pontiac Subprovince is marked by the
east-southeast trending CLL Fault Zone, the most important regional structural feature. The Goldex deposit is hosted within a
quartz diorite sill, the "Goldex Granodiorite", located in a succession of mafic to ultramafic volcanic rocks that are all generally
oriented west-northwest.
The GEZ extends from 500 to 800 metres below the surface and is entirely hosted by the Goldex Granodiorite. The limits of the
zone are defined by the intensity of the quartz vein stockwork envelope and by gold assays. The zone is almost egg-shaped; it is
over 300 metres tall by 450 metres long (in a west-northwest direction) and its thickness increases rapidly from 25 metres along
the east-west edges to almost 150 metres in the centre.
In 2011, exploration efforts at Goldex were focused on the satellite M-Zone and D-Zone. These satellite zones are defined by
quartz tourmaline veins and gold assays that are similar to the GEZ. The M-Zone has been defined as having a length of
160 metres, a height of 120 metres and a thickness of 115 metres. The D-Zone is approximately 150 metres below the GEZ and
close to 1,350 metres below the surface. It appears to have an approximate length of 500 metres.
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Mineralization
Gold mineralization at Goldex corresponds to the quartz-tourmaline vein deposit type. The Goldex gold-bearing
quartz-tourmaline-pyrite veins and veinlets have strong structural control. The most significant structure directly related to
mineralization is a discrete shear zone, the Goldex Mylonite, that is up to five metres wide and occurs within the Goldex
Granodiorite, just south of the GEZ and most other gold occurrences. The quartz-tourmaline-pyrite vein mineralization is controlled
by minor fracture zones that are oriented west-northwest and dip steeply north or south. The fractures are parallel to, but north of,
the Goldex Mylonite. Within the GEZ are three vein sets, the most important of which are extensional-shear veins dipping
30 degrees south and usually less than 10 centimetres thick. The vein sets and associated alteration combine to form stacked
envelopes up to 30 metres thick.
Strong albite-sericite alteration of the host-rock quartz diorite surrounds the quartz-tourmaline-pyrite veins and covers almost 80%
of the mineralized zone; outside of the envelopes, prior chlorite alteration affects the quartz diorite and gives it a darker grey-green
colour. Occasionally, enclaves of relatively unaltered medium grey-green-coloured quartz diorite (with no veining or gold) are
found within the GEZ; they are included exceptionally as internal waste to allow for a smooth shape, required for mining purposes.
Most of the gold occurs as microscopic particles that are almost always associated with pyrite, generally adjacent to grains and
crystals but also 20% included within the pyrite. The gold-bearing pyrite occurs in the quartz-tourmaline veins and in narrow
fractures in the sericite-albite-altered quartz diorite (generally immediately adjacent to the veins). Less than 1.5% of the gold
occurs as the mineral calaverite, a gold telluride.
Exploration
In 2011, $7.8 million was spent on exploration at Goldex. A total of 107 holes were drilled using diamond drilling methods at the
Goldex mine for a total length of approximately 47 kilometres, compared to 122 holes for a total length of 44 kilometres in 2010.
The expenses include an exploration ramp drifted on a length of 475 metres from Level 86 to explore the D-Zone at depth. Three
different zones in the Goldex Granodiorite intrusive were drilled in 2011. The main exploration focus (83%) with 38.8 kilometres of
drilling was for the D-Zone, the remaining 7.4 kilometres (16%) were drilled for the top of the M-Zone and 750m (1%) for the
sector to the East of the GEZ.
The 2012 exploration program is budgeted to include 8,000 metres of diamond drilling at a cost of $1.2 million. The primary target
is the D-Zone.
Kittila Mine
The Kittila mine, which commenced commercial production in May 2009, is located approximately 900 kilometres north of Helsinki
and 50 kilometres northeast of the town of Kittila in northern Finland. At December 31, 2011, the Kittila mine was estimated to
contain proven and probable mineral reserves of 5.2 million ounces of gold comprised of 34.6 million tonnes of ore grading
4.66 grams per tonne. The Kittila mine is accessible by paved road from the village of Kiistala, which is located on the southern
portion of the main claim block. The gold deposit is located near the small village of Rouravaara, approximately ten kilometres
north of the village of Kiistala, accessible via a paved road. The property is close to infrastructure, including hydro power, an
airport and the town of Kittila. The project also has access to a qualified labour force, including mining and construction
contractors.
The total landholdings surrounding and including the Kittila mine comprise one mining licence covering an area of approximately
847 hectares, 120 individual tenements (prospecting permits) covering approximately 10,652 hectares and 168 prospecting permit
applications covering approximately 14,910 hectares. The mineral titles form a continuous block around the Kittila mining licence.
The block has been divided into the Suurikuusikko area, the Suurikuusikko West area and the Kittila mining licence centred at
25.4110 degrees longitude east and 67.9683 degrees latitude north.
The boundary of the mining licence is determined by ground-surveyed points whereas the boundaries of the other tenements are
not required to be surveyed. All of the tenements in the Kittila mine are registered in the name of Agnico-Eagle Finland Oy, an
indirect, wholly-owned subsidiary of the Company. According to the Finnish government's land tenure records, all tenements are
in good standing. The expiry dates of the tenements vary from May 2012 up to June 2015. Tenements are initially valid for four
years, provided exploration work in the area is reported annually and a small annual fee is paid to maintain title; extensions for
titles can be granted for 11 additional years on payment of a slightly higher fee and active exploration in the area. Agnico-Eagle
Finland Oy also holds the mining licence in respect of the Kittila mine. The mine is subject to a 2.0% net smelter return royalty
payable to the Republic of Finland.
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37
The Kittila mine area is sparsely populated and is situated between 200 and 245 metres above sea level. The topography is
characterized by low rolling forested hills separated by marshes, lakes and interconnected rivers. The gold deposit is situated on
an area of land that has no special use at present and there is sufficient land available for tailings facilities. Water requirements for
the Kittila mine are sourced from the nearby Seurujoki River, recirculation of water from pit dewatering and tailings pond water.
The Kittila region is located within the South-West Lapland zone of the northern boreal vegetation zone characterized by spruce
forests, marshes and bogs.
The mine is located within the Arctic Circle but the climate is moderated by the Gulf Stream off the coast of Norway such that
northern Finland's climate is comparable to that of eastern Canada. Winter temperatures range from -10 to -30 degrees Celsius,
whereas summer temperatures range from 10 degrees Celsius to the mid-20s. Exploration and mining work can be carried out
year-round. Because of its northern latitude, winter days are extremely short with a brief period of 24-hour darkness around the
winter solstice. Conversely, summer days are very long with a brief period of 24-hour daylight in early summer around the summer
solstice. Annual precipitation varies between five and 50 centimetres, one-third of which falls as snow. Snow accumulation usually
begins in November and remains until March or April.
Location Map of the Kittila Mine
The Company acquired its 100%, indirect interest in the Kittila mine through the acquisition of Riddarhyttan completed in
November 2005. See "– History and Development of the Company". In June 2006, on the basis of an independently reviewed
feasibility study, the Company approved construction of the Kittila mine. The Kittila mine is currently an open pit mining operation
with underground mining via ramp access. The current open pits will be mined out by the end of 2012 and from 2013 onward all
mining will be from the underground portion of the mine. The initial underground stope was
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mined in early 2010. Ore is processed in a 3,000-tonne per day surface processing plant that was commissioned in late 2008.
Limited gold concentrate production started in September 2008 and gold dore bar production commenced in January 2009. During
2010 throughput at the Kittila mine approached design levels and gold recoveries continued to improve. The Kittila mine is
anticipated to produce approximately 155,000 ounces of gold in 2012 at estimated total cash costs per ounce of approximately
$650. Over the period of 2012 to 2038, total annual average gold production of approximately 150,000 ounces is anticipated. A
scoping study is underway to assess the feasibility of significantly increasing the annual gold production.
Mining and Milling Facilities
Surface Plan of the Kittila Mine
The orebodies at Kittila are being mined initially from two open pits, followed by underground operations to mine the deposits at
depth. Additional, smaller open pits will be used to mine any remaining mineral reserves close to the surface in the future. Open
pit mining started in May 2008 and the extracted ore was stockpiled. As of December 2011, a total of 2.8 million tonnes of ore
have been processed, 0.4 million tonnes of ore have been stockpiled and 31.5 million tonnes of waste rock have been excavated.
Work on the ramp to access the underground reserves continued throughout 2011 and total underground development to date is
approximately 14,521 metres. Underground mining commenced in the fourth
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quarter of 2010 and, as of December 2011, a total of 0.45 million tonnes of ore have been mined from the underground portions of
the mine.
Mining Methods
The Kittila mine currently mines the Suurikuusikko orebody with a 160-metre deep open pit. Ore is mined in 7.5-metre benches
together with waste rock using buffer blasting techniques and is loaded selectively to minimize dilution and maximize ore recovery.
Hydraulic excavators load ore into 100-tonne trucks that haul the ore to the crusher and the waste rock to the waste disposal area.
Approximately 3,000 tonnes of ore per day are fed to the concentrator. Surface mining is expected to continue through 2012.
Underground development continued throughout the year and ore production from the underground started at a steady rate in the
fourth quarter of 2011.
The underground mining method is open stoping with delayed backfill. Stopes are between 25 and 40 metres high and yield
approximately 10,000 tonnes of ore per stope. To ensure sufficient ore production is available to supply the mill, approximately
6,000 metres of tunnels will be developed each year. After extraction, stopes will be filled with cemented backfill or paste backfill
to enable the safe extraction of ore in adjacent stopes. Ore will be trucked to the surface crusher via the ramp access system.
Surface Facilities
Construction of the processing plant and associated equipment was completed in 2008 and facilities on site include an office
building, a maintenance facility for the open pit equipment, a warehouse, a maintenance shop, an oxygen plant, a processing
plant, a tank farm, a crusher, conveyor housings and an ore bin. In addition, some temporary structures house contractor offices
and work areas.
The ore at Kittila is treated by grinding, flotation, pressure oxidation and carbon-in-leach circuits. Gold is recovered from the
carbon in a Zadra elution circuit and is recovered from the solution using electrowinning and then poured into dore bars using an
electric induction furnace.
Mineral Recoveries
In 2011, the Kittila mill processed 1.1 million tonnes of ore with an availability of 84% for an average throughput of 2,824 tonnes
per day. Low mill availability was caused by maintenance issues associated with the autoclave and scrubber, mainly related to
leaking mechanical seals, brick lining failures in the autoclave and blocked pipelines on the autoclave and the scrubber.
The following table sets out the gold production at the Kittila mine in 2011:
Gold
Head
Grade
Overall
Metal
Recovery
Payable
Production
5.11 g/t
84.6%
143,560 oz
Ore processing at Kittila consists of two stages. In the first stage, ore is enriched by flotation and in the second stage the gold is
extracted by pressure oxidation and cyanide-in-leach processes. Flotation recoveries were stable during 2011 and flotation
recovery averaged 93% during the year. Trials are still in progress with the aim to try to further increase the flotation recovery. An
in-house metallurgical laboratory was built in 2011 and will allow further flotation test work to be undertaken to attempt to optimize
flotation recoveries.
Recoveries in the second stage of the process were also relatively stable in 2011. Lower recoveries in the second quarter of 2011
were related to mechanical failures and operating difficulties in the autocalve. Modifications inside the autoclave allowed for better
oxygen distribution management, which resulted in better sludge flow and oxidation within the autoclave, leading to better
recovery availability. Also, further optimizing and improved control of the process enabled continuous improvement in recoveries.
A large amount of test work was done in 2011 and the testing and optimization of the process will continue in 2012. Large-scale
test-work is ongoing to find optimized pressure oxidation and results are expected in 2012.
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Environmental Matters
The Company currently holds a mining licence, an environmental permit and operational permits in respect of the Kittila mine. All
permits necessary to begin production were received during 2008.
The construction of the first phase of the tailings dam and waterproof bottom layer was completed in the fall of 2008. This first
phase is sufficient to hold tailings from three years of production. Work began on the second phase in 2009 and continues
according to plans and permit requirements. Water from dewatering the mine and water used in the mine and mill is collected and
treated by sedimentation. Emissions and environmental impact are monitored in accordance with the comprehensive monitoring
program that has been approved by the Finnish environmental authorities. To further improve environmental performance,
scrubbing of mill-off gas will be enhanced and this work was initiated in the fourth quarter of 2011. There are no material
environmental liabilities related to the Kittila mine.
Capital Expenditures
Capital expenditures at the Kittila mine during 2011 were approximately $92 million, which included paste backfill plant
construction, mill modification costs, underground mine development costs, exploration and conversion drilling costs within the
mining licence area and sustaining capital costs. The Company expects capital expenditures at the Kittila mine to be
approximately $67 million in 2012, most of which will be used for mill scrubber improvements, mining equipment for underground
mining, development and construction of underground mining infrastructure, construction of the paste backfill plant and exploration
and conversion drilling.
Development
Mining at the Suurikuusikko and Roura open pits progressed throughout 2011 with a total of 650,000 tonnes of ore and 5.7 million
tonnes of waste mined from the open pit. The Company expects that 600,000 tonnes of ore and 1.6 million tonnes of waste will be
mined from the Suurikuusikko and Roura pits during 2012. Total costs for open pit development in 2011 were $2.8 million.
In 2011, underground development progressed in both the Rouravaara and Suurikuusikko zones with 6,440 metres of ramp and
sublevel access development completed during the year. A total of 103,000 tonnes of ore from development and 280,000 tonnes
of stope ore were mined in 2011. The Company expects to complete 6,000 metres of lateral development and 400 metres of
vertical development during 2012.
Geology, Mineralization and Exploration
Geology
The Kittila mine is situated within the Kittila Greenstone belt, part of the Lapland Greenstone belt in the Proterozoic-age
Svecofennian geologic province. The appearance and geology of the area is similar to that of the Abitibi region of the Canadian
Shield. In northern Finland, the bedrock is typically covered by a thin but uniform blanket of unconsolidated glacial till. Bedrock
exposures are scarce and irregularly distributed.
The mine area is underlain by mafic volcanic and sedimentary rocks metamorphosed to greenschist assemblages and assigned to
the Kittila group. The major rock units trend north to north-northeast and are near-vertical. The volcanics are further sub-divided
into iron-rich tholeiitic basalts (Kautoselka Formation) located to the west and magnesium-rich tholeiitic basalt, coarse
volcaniclastic units, graphitic schist and minor chemical sedimentary rocks (Vesmajarvi Formation) located to the east. The
contact between these two rock units consists of a transitional zone (the Porkonen Formation) varying between 50 and
200 metres in thickness. This zone is strongly sheared, brecciated and characterized by intense hydrothermal alteration and gold
mineralization, features consistent with major brittle-ductile deformation zones. It includes the north-northeast-oriented
Suurikuusikko Trend.
Mineralization
The Porkonen Formation hosts the Kittila gold deposit, which contains multiple mineralized zones stretching over a strike length of
more than 25 kilometres. Most of the work has been focused on the 4.5-kilometre stretch that hosts the known gold reserves and
resources. From north to south, the zones are Rimminvuoma ("Rimpi-S"), North Rouravaara ("Roura-N"), Central Rouravaara
("Roura-C"), depth extension of Rouravaara and Suurikuusikko ("Suuri/Roura Deep"), Suurikuusikko ("Suuri"), Etela and Ketola.
The Suuri and Suuri/Roura Deep zones include several parallel sub-zones that have previously been referred to as Main East,
Main Central and Main West. The Suuri zone hosts approximately 34% of the current probable gold reserve estimate on a
contained-gold basis, while Suuri Deep has approximately 20%, Roura-C
2011 ANNUAL REPORT
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approximately 11%, Roura Deep approximately 25%, Roura-N approximately 2%, Rimpi-S approximately 6%, Ketola
approximately 1% and Etela approximately 0.1%.
Gold mineralization in these zones is associated with intense hydrothermal alteration (carbonate-albite-sulphide), and is almost
exclusively refractory, locked inside fine-grained sulphide minerals: arsenopyrite (approximately 73%) or pyrite (approximately
23%). The rest is "free gold", which is manifested as extremely small grains of gold in pyrite.
Exploration
In 1986, the discovery of coarse visible gold in quartz-carbonate veining along a road cut near the village of Kiistala alerted the
Geological Survey of Finland ("GTK") to the gold exploration potential of the area. Following this discovery, GTK initiated regional
exploration over the area and deployed a wide range of indirect exploration tools to explore this relatively unexplored area. Over
the period from 1987 to 2005, GTK and later Riddarhyttan undertook drilling programs and other testing on the property. After it
acquired the property in 1998, Riddarhyttan continued to investigate the metallurgical properties of the refractory gold
mineralization with the objective of demonstrating its recoverability and assessing suitable processing scenarios and initiated
engineering and environmental studies to assess the feasibility of a mining project.
Diamond drilling is used for exploration on the Kittila property. Most of the work on the mining licence area has focused on the
Suuri and Roura zones. Up to the end of December 2011, a total of 2,315 drill holes, totalling 639,774 metres, have been
completed on the property. In 2011, between six and eight drill machines worked on the Kittila property: two drills on underground
infill drilling; three to six drills on mine exploration; and one to two drills on resource-to-reserve conversion drilling. A total of
445 holes were completed for a length of 82,377 metres. Of these drill holes, 353 drill holes (30,197 metres) were for definition
drilling, 44 drill holes (20,535 metres) were for conversion drilling and 48 drill holes (31,645 metres) were related to mine
exploration. Total expenditures for diamond drilling in 2011 were $17.5 million, including $3.7 million for definition and delineation
drilling.
Exploration during 2011 increased proven and probable gold reserves to 5.2 million ounces (34.6 million tonnes of ore grading
4.66 grams per tonne). Most of the increase came from the Roura Deep zone (239,002 ounces) and the Rimpi zone
(119,753 ounces). Indicated mineral resources decreased by 2.4 million tonnes to 13.0 million tonnes of ore grading 2.46 grams
per tonne. Inferred mineral resources tonnage decreased by 0.4 million tonnes to 8.0 million tonnes of ore grading 4.55 grams per
tonne, but because of higher gold grades the contained gold ounces in this category increased by 74%.
The decrease in indicated mineral resources reflects the successful conversion of resources to reserves, especially in the Roura
Deep and Rimpi zones.
The successful deep drilling program in 2011 at the Roura Deep zone, which is located immediately below the Roura zone and
north of the Suuri Deep zone, has confirmed that most of the Roura ore lenses are present in the Roura Deep zone and most of
the ore lenses in the Suuri Deep zone continue north to the Roura Deep zone. The gold mineralization is open at depth and to
the north.
A resource-to-reserve conversion drilling campaign was carried out at Suuri, Roura and Roura-N in 2011. As a result of this work,
probable reserves increased by 119,753 ounces from Rimpi, but drilling at Suuri did not increase reserves significantly. Suuri will
be the main target for resource-to-reserve conversion drilling in 2012.
Outside of the Kittila mining licence area, systematic geochemical sampling and diamond drilling continued on targets along the
Suurikuusikko Trend, and a number of new targets were tested by diamond drilling. Encouraging results were received from a new
gold zone in the Kuotko area located approximately ten kilometres north of the mine construction site. A total of 68 diamond drill
holes totalling 19,948 metres were drilled on exploration targets outside of the mining licence area in 2011.
The 2012 exploration budget for the Kittila mine is approximately $13.5 million ($10.3 million for minesite exploration, $1.2 million
for resource-to-reserve conversion and $2.0 million for 400 metres of development in an exploration ramp at the 600-metre mine
level), and includes over 39,700 metres in diamond drilling (32,200 metres for minesite exploration and 7,500 metres for
resource-to-reserve conversion), using up to five drills throughout the year to help further identify the gold reserve and resource
potential of the Kittila property. In addition, $2.9 million of exploration expenditures, including an estimated 10,900 metres of
diamond drilling, is planned for exploration along the 25-kilometre Suurikuusikko Trend.
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Lapa Mine
The Lapa mine, which achieved commercial production in May 2009, is located approximately 11 kilometres east of the LaRonde
mine near Cadillac, Quebec. At December 31, 2011, the Lapa mine was estimated to contain proven and probable mineral
reserves of 0.5 million ounces of gold comprised of 2.38 million tonnes of ore grading 6.54 grams per tonne. The Lapa property is
made up of the Tonawanda property, which consists of 43 contiguous mining claims and one provincial mining lease covering an
aggregate of 702.4 hectares, and the Zulapa property, which consists of one mining concession of 93.5 hectares.
Location Map of the Lapa Mine
The Company's initial interest in the Lapa property was acquired in 2002 through an option agreement with Breakwater
Resources Ltd. ("Breakwater"). The Company undertook an aggressive exploration program and discovered a new gold deposit
almost 300 metres below the surface. In 2003, the Company purchased the Lapa property from Breakwater for a payment of
$8.9 million, a 1% net smelter return royalty on the Tonawanda property and a 0.5% net smelter return royalty on the Zulapa
property. In 2008, the Company purchased all royalties from Breakwater for C$6.35 million. In addition, both the Zulapa and
Tonawanda properties are subject to a 5% net profit royalty payable to Alfer Inc. and René Amyot. In 2004, an additional claim of
9.4 hectares was added to the Company's holdings at the Lapa mine. In January 2009, a mining lease covering 66.8 hectares was
entered into with the Ministry of Natural Resources and Wildlife (Quebec).
The Lapa mine is accessible by provincial highway. The elevation varies between approximately 320 and 390 metres above sea
level. All of the Lapa mine's power requirements are supplied by Hydro-Quebec through connections to its main power
transmission grid. All of the water required at the Lapa mine is sourced from the Heva river located 3.5 kilometres to the south of
the mine. The water is pumped into an existing open pit nearby the property that has been allowed to flood and from which the
mine is supplied. The topography slopes relatively gently from north to south. The property is generally covered by a boreal-type
forest consisting mainly of black spruce and white pine with minor amounts of birch and poplar.
For additional information regarding the Abitibi region in which the Lapa mine is located, see "– Property, Plant and
Equipment – LaRonde Mine".
Gold production during 2012 at the Lapa mine is expected to be approximately 100,000 ounces at estimated total cash costs per
ounce of approximately $750.
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Mining and Milling Facilities
Surface Plan of the Lapa Mine
The Lapa site hosts an underground mining operation and the ore is trucked to the processing facility at the LaRonde mine, which
has been modified to treat the ore, recover the gold and store the residues. Tailings from the Lapa mine are deposited in the
tailings pond at the LaRonde mine.
In July 2004, the Company initiated the sinking of an 825-metre deep shaft at the Lapa property. In April 2006, 2,800 tonnes of ore
development was extracted at Lapa and was estimated to contain on average 10.65 grams of gold per tonne. These results and
results from other sampling methods were incorporated into a feasibility study and in June 2006, the Company accelerated
construction of the Lapa mine. This construction included extending the shaft to a depth of 1,369 metres, which was completed in
October 2007. Significant additional construction was required in order for the Lapa mine to achieve commercial production in
May 2009, including the construction of the mill.
Mining Methods
Two underground mining methods are used at the Lapa mine: longitudinal retreat with cemented backfill and locally transverse
open stoping with cemented backfill. Sublevels are driven at 30-metre vertical intervals. Stopes are mined in 12-metre sections
and backfilled with 100% cemented rock backfill. Excavated ore from the Lapa site is trucked via provincial highway to the
processing facility at the LaRonde mine.
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Surface Facilities
The infrastructure on the Lapa property includes the refurbished former LaRonde Shaft #1 headframe and shafthouse, service
buildings, offices, a settling pond for waste water, dry facilities, an ore bin, a diesel reservoir and a water treatment plant. In
November 2007, lateral development began on three horizons. A backfill plant was commissioned in December 2008 and the
sedimentation pond was extended in 2007 to control suspended solids from underground dewatering discharge.
Ore at the Lapa mine is processed through grinding, gravity and leaching circuits. Dedicated milling facilities have been integrated
into the mill at the LaRonde mine. Based on an average ore head grade of 6.63 grams per tonne, gold recovery averaged 81% in
2011. With an average production in excess of 1,700 tonnes per day in 2011, the mine operated consistently above its design rate
of 1,500 tonnes per day. The Company is attempting to reduce the mining dilution caused by weaker than expected rock
conditions in the south wall, which is mainly composed of talc chlorite schist.
Mineral Recoveries
In 2011, the Lapa mine produced 598,464 tonnes of ore grading 6.63 grams of gold per tonne. The Lapa processing facility
treated 620,712 tonnes of ore in 2011 (approximately 1,700 tonnes per day) and operated at about 96% of available time.
Gold
Environmental Matters
Head
Grades
Overall
Metal
Recoveries
Payable
Production
6.63 g/t
81.04%
107,068 oz
Water used underground at the Lapa mine was initially re-circulated from mine dewatering after settling in the sedimentation pond.
The re-circulation led to ammonia concentration in the water, and the Company experienced occasional toxicity problems in the
water pond in 2008 and 2009. To address the ammonia content in the water, the Company built a 3.5-kilometre pipeline to obtain
fresh water from the Heva River. The pipeline was commissioned in November 2009. The Company also commissioned a water
treatment plant on site in 2010, which was completed in the fourth quarter of 2010, to reduce the ammonia from mine dewatering.
Output is currently within the target range at approximately eight parts per million of ammonia and average efficiency is at
approximately 70%. Optimization of the plant is ongoing.
A sedimentation pond is used to remove suspended solids from the dewatering water before either release to the environment or
re-use in the underground mining operation. The waste rock pile naturally drains towards the sedimentation pond. A waste rock
sampling program implemented during the shaft sinking phase verified the non-acid generating nature of the waste rock. Water
effluent from the sedimentation pond is being sampled as required under the Quebec mining effluent guidelines, and is expected
to comply with the water quality criteria. The mill residues will be sent to the LaRonde mine tailings area.
There are no known environmental liabilities associated with the Lapa site. The Certificates of Authorization to proceed with mine
production and with mill construction were issued by the Ministry of Sustainable Development, Environment and Parks (Quebec)
in October and December 2007, respectively. The Certificate of Authorization for mill and tailings production was received in 2008.
Capital Expenditures
The Company incurred approximately $18.0 million in capital expenditures at the Lapa mine in 2011 and expects to incur
approximately $13.8 million in 2012, of which $8.9 million relates to deferred development, $2.8 million to sustaining capital
expenditures (including underground construction and mining equipment) and $3.0 million for exploration.
Development
In 2011, a total of 5,685 metres of lateral development was completed. Development focused on permanent drifts (ramps and
haulage way), stope preparation of mining blocks set for production in 2011 and 2012, and access to the newly
2011 ANNUAL REPORT
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45
discovered East Zone, which is expected to begin production in early 2012. Since mid-2010, all three main mining horizons are
linked via a ramp.
Geology, Mineralization and Exploration
Geology
The Lapa property is geologically similar to the LaRonde property and is also located near the southern boundary of the
Archean-age (2.7 billion years old) Abitibi Subprovince and the Pontiac Subprovince within the Superior Province of the Canadian
Shield. The most important regional structure is the CLL fault zone marking the contact between the Abitibi and Pontiac
Subprovinces. The fault zone passes through the property from west to east, and is marked by schists and mafic to ultramafic
volcanic flows that comprise the Piché group (up to approximately 300 metres thick in the mine area). On the Lapa property, the
fault zone displays a "Z" shaped fold to which all of the lithologic groups in the region conform. Feldspathic dykes cut the Piché
group, especially near the fold. North of the Piché group lies the Cadillac sedimentary group, which consists of 500 metres or
more of well-banded wacke, conglomerate and siltstone with intercalations of iron formation. The Pontiac group sedimentary rocks
(up to approximately 300 metres thick) that occur to the south of the Piché group are similar to the Cadillac group but do not
contain conglomerate nor iron formation.
Mineralization
All of the known gold mineralization along the CLL fault zone is epigenetic (late) vein type, controlled by the structure. The
mineralization is associated with the fault zone and occurs within or immediately adjacent to the Piché group rocks.
The Lapa deposit is comprised of the Contact zone and five satellite zones. The Contact zone accounts for approximately 82% of
the mineral reserves.
The ore zones are made up of multiple quartz veins and veinlets, often smoky and anastomosing, within a sheared and altered
envelope containing minor sulphides and visible gold. The Contact zone is generally located at the contact between the Piché
group and the Cadillac group. The satellite zones are located within the Piché group at a distance varying from ten to 50 metres
from the contact with the Cadillac group, except for the Contact North zone, which is located approximately ten metres north of the
Contact zone within the Cadillac group. The sheared envelope consists of millimetre-thick foliation bands of biotite or sericite with
silica and, in places, cuts across rock units. Quartz veins and millimetre-sized veinlets parallel to the foliation account for 5% to
25% of the mineralization. Visible gold is common in the veins and veinlets but can also be found in the altered host rock.
Sulphides account for 1% to 3% of the mineralization; the most common sulphides, in order of decreasing importance, are
arsenopyrite, pyrite, pyrrhotite and stibnite. Graphite is also rarely observed as inclusions in smoky quartz veins.
The Contact and satellite zones are tabular mineralized envelopes oriented east-west and dipping very steeply to the north,
turning south at depth. The economic portion of the zone has been traced from depths of approximately 450 metres to more than
1,300 metres below surface. The Contact zone has an average strike length of 300 metres, varies in thickness from 2.8 to
5.0 metres and is open at depth. Locally some thicker intervals have been intersected but their continuity has not been
demonstrated. The satellite zones have thicknesses similar to the Contact zone.
Exploration
Two exploration diamond drilling programs occurred at the Lapa mine during 2011. The first program concentrated on confirming
and expanding the known orebodies (Contact zone and the other satellite zones) in the immediate vicinity of the ore zones. The
drilling tested the eastern area of the Contact zone reserve at roughly 1,000 metres depth below the surface and 300 metres east
of the Contact zone reserve limit. Good results, including visible gold, were returned and additional resources were identified. This
area was added in the mine plan in March 2011. The 2012 program will focus on expanding mineral resources in this area.
Additional drilling was done below Level 128 (the deepest producing level). Technical services will evaluate the economics of this
area during 2012. The second program was executed from the newly excavated exploration track drift on Level 101 (one kilometre
deep) toward the east. This program will continue through 2013.
Overall, there was a reduction of approximately 175,000 ounces of gold in reserves at Lapa from 2010 to 2011 after mining
129,000 ounces of gold. The net reduction of 46,000 ounces in reserves was a result of a lower-than-expected grade from 2011
delineation diamond drilling. Mineral underground resources at the Lapa mine remained mostly unchanged. Approximately
0.5 million tonnes of inferred resources were added on surface following surface drilling in 2010 and 2011. Drilling and evaluation
will continue in 2012. In 2011, a total of 231 holes were drilled on the Lapa property for a total
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AGNICO-EAGLE MINES LIMITED
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length of 28,386 metres, compared to 264 holes for a total length of 25,660 metres in 2010. Of the drilling in 2011, 165 holes
(9,257 metres) were for production stope delineation and 66 holes (19,129 metres) were for exploration. In 2010, 207 holes
(13,263 metres) were for production stope delineation, 8 holes (1,477 metres) were for definition drilling and 49 holes
(10,920 metres) were for exploration. Expenditure on diamond drilling at the Lapa mine during 2011 was approximately
$2.39 million, including $0.76 million in definition and delineation drilling expenses charged to operating costs.
In 2012, the Company expects to spend $3.0 million on exploration, including $0.76 million on the excavation of a track drift
toward the east. In 2012, 18% of the exploration drilling budget will be used for exploration in close vicinity of the mine
infrastructure and 82% will be used for drilling from the exploration drift.
Pinos Altos Mine
The Pinos Altos mine achieved commercial production in November 2009. It is located on an 11,000-hectare property in the Sierra
Madre gold belt, 285 kilometres west of the City of Chihuahua in the State of Chihuahua in northern Mexico. At December 31,
2011, the Pinos Altos mine was estimated to contain proven and probable mineral reserves of 3.1 million ounces of gold and
88.5 million ounces of silver comprised of 46.8 million tonnes of ore grading 2.06 grams of gold per tonne and 58.85 grams of
silver per tonne. The Pinos Altos property is made up of two blocks: the Agnico Eagle Mexico Concessions (22 concessions,
26,810.2 hectares), and the Minerales El-Madroño Concessions (18 concessions, 5,053.1 hectares).
Location Map of the Pinos Altos Mine
The Madrono Concessions (which cover approximately 74% of the current mineral resources) are subject to a net smelter royalty
of 3.5% payable to Minerales El Madrono S.A. de C.V. ("Madrono"). The Pinos Altos Concession (which covers approximately
26% of the current mineral resources) is subject to a 2.5% net smelter return royalty payable to the Consejo de Recursos
Minerales, a Mexican Federal Government agency. After 2029, this portion of the property will also be subject to a 3.5% net
smelter return royalty payable to Madrono. The assets at Pinos Altos acquired by the Company in 2006 included an assignment of
rights under contracts to explore and exploit the Madrono Concessions and the Pinos Altos Concession, the right to use up to
400 hectares of land owned by Madrono for mining installations for a period of 20 years after formal mining operations have been
initiated and sole ownership of the Parrena Concessions. During 2008, the Company and Madrono entered an agreement under
which the Company acquired further surface rights for open pit
2011 ANNUAL REPORT
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47
mining operations and additional facilities. Infrastructure payments, surface rights payments and advance royalty payments
totalling $35.5 million were made to Madrono in 2009 in respect of this agreement.
In 2006, the Company concluded negotiations with communal land owners (ejidos) and others for the purchase of 5,745 hectares
of land contained within the Parrena and Pinos Altos Concessions. In addition, a temporary occupation agreement with a 30-year
term expiring in 2036 was negotiated with ejido Jesus del Monte for 1,470 hectares of land covered by these same concession
blocks. The acquisition of these surface rights for the geologically prospective lands within the district surrounding Pinos Altos will
facilitate future exploration and mining development in these areas.
The Pinos Altos mine is directly accessible by a paved interstate highway that links the cities of Chihuahua and Hermosillo and is
within ten kilometres of an extension of the state power grid. Existing and planned underground mine workings will intercept water
resources sufficient to sustain the requirements for future operation. The land position is sufficient for construction of all planned
surface, infrastructure and mining facilities at the Pinos Altos mine, including its tailings impoundment area. The Company further
believes that a sufficient local and trained workforce is available in northern Mexico to support the operation of the mine.
The Pinos Altos property is characterized by moderate to rough terrain with mixed forest (pine and oak) and altitudes that vary
from 1,770 metres to 2,490 metres above sea level. The climate is sub-humid, with about one metre of annual precipitation. The
average annual temperature is 18.3 degrees Celsius. Exploration and mining work can be carried out year-round.
In August 2007, on the basis of an independently reviewed feasibility study, the Company approved construction of a mine at
Pinos Altos. The mine achieved commercial production in November 2009.
Combined production from the Pinos Altos mine and the Creston Mascota deposit at Pinos Altos was 204,380 ounces of gold and
1.85 million ounces of silver in 2011 at total cash costs per ounce of gold of $299. In 2012, combined gold production from the
Pinos Altos mine and the Creston Mascota deposit at Pinos Altos is expected to be approximately 205,000 ounces and silver
production is expected to be approximately 2.0 million ounces. Total cash costs per ounce of gold are forecast at approximately
$415. From 2012 to 2026, combined gold production from the Pinos Altos mine, including the Creston Mascota deposit at Pinos
Altos, is expected to average approximately 170,000 ounces of gold per year.
Based on a feasibility study prepared in 2009, the Company determined to build a stand-alone heap leach operation at the
satellite open pit Creston Mascota deposit at Pinos Altos. Creston Mascota is expected to produce approximately 50,000 ounces
of gold per year during its five-year mine life. Capital costs in connection with the project were approximately $65 million, of which
approximately $12 million was incurred in 2011. The first gold pour from the Creston Mascota deposit at Pinos Altos occurred on
December 28, 2010 and commercial production from the Creston Mascota deposit at Pinos Altos was achieved in the first quarter
of 2011.
The Company has engaged the local communities in the project area with hiring, local contracts, education support and medical
support programs to ensure that the project provides long-term benefits to the residents living and working in the region.
Approximately two-thirds of the operating workforce at Pinos Altos are locally hired and more than 99% of the permanent
workforce are Mexican nationals.
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Mining and Milling Facilities
Surface Plan of the Pinos Altos Mine
In 2011, the Creston Mascota deposit at Pinos Altos achieved commercial production and the optimization of the Pinos Altos mine
continued. Milling operations at Pinos Altos averaged 4,770 tonnes processed per day as compared to the design expectation of
4,000 tonnes per day. In its first full year of operation, the underground mine at Pinos Altos produced an average 2,983 tonnes of
ore per day as compared to the design expectation of 3,000 tonnes per day. The open pit mines at Pinos Altos and the Creston
Mascota deposit at Pinos Altos produced 28.5 million tonnes of ore, overburden and waste in 2011, which met the expectation of
the mine plan for the year.
Mining Methods
The surface operations at the Pinos Altos mine use traditional open pit mining techniques with bench heights of seven metres and
double benches on the footwall and single benching on the hanging wall. Mining is accomplished with front end loaders, trucks,
track drills and various support equipment. Based upon geotechnical evaluations, the final pit slopes will vary between 45 degrees
and 50 degrees. Performance at the open pit mining operation at Pinos Altos during 2011 continues to indicate that the
equipment, mining methods and personnel selected for the project are satisfactory for future production phases. Approximately
28.5 million tonnes of ore, overburden and waste were mined during 2011, meeting the expected production for the year. During
the first ten years of the project's life, it is expected that approximately half of the ore volume processed will be derived from open
pit operations, principally at Santo Niño, Oberon de Weber and the Creston Mascota at Pinos Altos. Underground mine production
will produce the balance of the ore for the processing plant.
The underground mine, which commenced operations in the second quarter of 2010, uses the long hole sublevel stoping method
to extract the ore. The Company has considerable expertise with this mining method, having used the same method at the
LaRonde mine in Quebec. This method has also been used at various other Mexican mining operations. The stope height is
planned at 30 metres and the stope width at 15 metres. Ore is hauled to the surface utilizing underground trucks via a ramp
system. The paste backfill system and ventilation system were commissioned in the fourth quarter of 2010 and are now fully
operational. During 2011, approximately 1,090,000 tonnes of ore were produced from the underground portion of the mine,
averaging 2,984 tonnes per day. At full capacity, the underground mine is expected to produce an average of 3,000 tonnes of ore
per day. Performance of the underground mine continues to indicate that the equipment, mining methods, ground control and
personnel selected are satisfactory for future production phases. A
2011 ANNUAL REPORT
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scoping study is expected to be completed in the second quarter of 2012 to evaluate the potential benefit of building a shaft
installation to improve the capacity and increase the efficiency of the underground mine. Total lateral development completed as
of December 31, 2011 was approximately 22.6 kilometres.
Surface Facilities
The principal mineral processing facilities at the Pinos Altos mine are designed to process 4,000 tonnes of ore per day in a
conventional process plant circuit which includes single stage crushing, grinding in a SAG and ball mill in closed loop, gravity
separation followed by agitated leaching, counter current decantation and metals recovery in the Merrill Crowe process. Tailings
are detoxified and filtered and then used for paste backfill in the underground mine or deposited as dry tailings in an engineered
tailings impoundment area. The Pinos Altos mill processed an average of 4,770 tonnes of ore per day during 2011. Low grade ore
at Pinos Altos is processed in a heap leach system designed to accommodate approximately five million tonnes of mineralized
material over the life of the project. The production from heap leach operations is expected to be relatively minor, contributing
about 5% of total metal production planned for the life of the mine.
A separate heap leach operation and ancillary support facilities were built at the Creston Mascota deposit at Pinos Altos, which is
designed to process approximately 4,000 tonnes of ore per day in a three stage crushing, agglomeration and heap leach circuit
with carbon adsorption. This project began commissioning in the latter part of 2010, with commercial production achieved in the
first quarter of 2011. During 2011, a total of 1,452,708 tonnes of ore were produced at the Creston Mascota deposit at Pinos Altos,
averaging 3,980 tonnes per day. Based on early performance of the mine and process facilities at the Creston Mascota deposit at
Pinos Altos, the equipment, mining methods and personnel are satisfactory for completion of the planned production phases. The
Creston Mascota deposit at Pinos Altos is expected to produce approximately 50,000 ounces of gold per year during a five-year
remaining mine life.
Surface facilities at the Pinos Altos mine include a heap leach pad, pond, liner and pumping system; administrative support offices
and change room facilities; camp facilities; a laboratory; a process plant shop; a maintenance shop; a generated power station;
surface power transmission lines and substations; the engineered tailings management system; and a warehouse.
Over the life of the mine, recoveries of gold and silver in the milling circuit at Pinos Altos (other than from the Creston Mascota
deposit at Pinos Altos operation) are expected to average approximately 93% and 49%, respectively. Precious metals recovery
from low grade ore processed in the Pinos Altos heap leach facility will average about 68% for gold and 12% for silver. Heap leach
recoveries for Creston Mascota ore are expected to average 71% for gold and 16% for silver.
Mineral Recoveries
During 2011, the Pinos Altos mill processed 1.74 million tonnes of ore, averaging approximately 4,770 tonnes of ore treated per
day and operating at approximately 93.3% of available time. The following table sets out the metal recoveries at the Pinos Altos
mill in 2011.
Gold
Silver
Head
Grade
Overall
Metal
Recovery
Payable
Production
2.86 g/t
65.73 g/t
93.7%
43.1%
149,867 oz
1,545,773 oz
An additional 992,992 tonnes of ore were processed and placed on the heap leach pad at Pinos Altos, with an average grade of
0.65 grams of gold per tonne and 17.45 grams of silver per tonne. Cumulative metals recovery on the heap leach pad at Pinos
Altos are 57.5% gold and 11.7% silver. Heap leach recovery is following the expected cumulative recovery curve and it is
anticipated that the ultimate recovery of 68% for gold and 12% for silver will be achieved when leaching is completed.
An additional 1,452,708 tonnes of ore were processed and placed on the heap leach pad at the Creston Mascota deposit at Pinos
Altos, with an average grade of 1.52 grams of gold per tonne and 7.5 grams of silver per tonne. Cumulative metals recovery on
the heap leach pad at the Creston Mascota deposit at Pinos Altos are 48.0% gold and 4.8% silver. Heap leach
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recovery is following the expected cumulative recovery curve and it is anticipated that the ultimate recovery of 71% for gold and
16% for silver will be achieved when leaching is completed.
Total metal production (from mill and heap leach) at Pinos Altos, including the Creston Mascota deposit, during 2011 was
204,380 ounces of gold and approximately 1.85 million ounces of silver.
Environmental Matters
The Pinos Altos mine has received the necessary permit authorizations for construction and operation of a mine, including a
Change of Land Use permit and an Environmental Impact Study approval from the Mexican environmental agency
("SEMARNAT"). As of December 31, 2011, all permits necessary for the operation of the Pinos Altos mine, including the
operations at the Creston Mascota deposit at Pinos Altos, had been received and requests for modifications to allow for future
expansion of facilities, including at the Creston Mascota deposit at Pinos Altos, had been approved or were under review by
SEMARNAT. Pinos Altos uses the dry stack tailings technology to minimize the geotechnical and environmental risk that can be
associated with the rainfall intensities and topographic relief in the Sierra Madre region of Mexico. All of the Mexican
environmental regulatory requirements are expected to be met or exceeded by the Pinos Altos mine (including operations at the
Creston Mascota deposit at Pinos Altos). Operations at Pinos Altos and the Creston Mascota deposit at Pinos Altos were deemed
to qualify for the "Industria Limpia" (clean industry) designation by SEMARNAT in 2011.
Capital Expenditures
Capital expenditures at the Pinos Altos mine during 2011 were approximately $24 million. Capital expenditures relating to
operations at the Creston Mascota deposit at Pinos Altos during 2011 were approximately $12 million.
The Company expects sustaining and deferred capital expenditures at Pinos Altos to be approximately $31 million in 2012 with
average sustaining and deferred capital of approximately $15.7 million per year for a projected mine life of approximately 17
years. Approximately $0.5 million in development capital is forecast at the Creston Mascota deposit at Pinos Altos in 2012 with
sustaining capital expenditures of $10 million during its anticipated five-year mine life.
Development
At December 31, 2011 more than 71.7 million tonnes of overburden and waste had been removed from the open pit mine at Pinos
Altos and more than 22.6 kilometres of lateral development had been completed in the underground mine. At the Creston Mascota
deposit at Pinos Altos, approximately 10.6 million tonnes of ore and overburden had been removed from the open pit mine as of
December 31, 2011.
Geology, Mineralization and Exploration
Geology
The Pinos Altos mine is in the northern part of the Sierra Madre geologic province, on the northeast margin of the Ocampo
Caldera, which hosts many epithermal gold and silver occurrences including the nearby Ocampo mining operation and
Moris mine.
The property is underlain by Tertiary-age (less than 45 million years old) volcanic and intrusive rocks that have been disturbed by
faulting. The volcanic rocks belong to the lower volcanic complex and the discordantly-overlying upper volcanic supergroup. The
lower volcanic complex is represented on the property by the Navosaigame conglomerates (including thinly-bedded sandstone
and siltstone) and the El Madrono volcanics (felsic tuffs and lavas intercalated with rhyolitic tuffs, sandy volcanoclastics and
sediments). The upper volcanic group is made up of the Victoria ignimbrites (explosive felsic volcanics), the Frijolar andesites
(massive to flow-banded, porphyritic flows) and the Buenavista ignimbrites (dacitic to rhyolitic pyroclastics).
Intermediate and felsic dykes as well as rhyolitic domes intrude all of these units. The Santo Nino andesite is a dyke that intrudes
along the Santo Nino fault zone.
Structure on the property is dominated by a 10-kilometre by 3-kilometre horst, a fault-uplifted block structure oriented
west-northwest, that is bounded on the south by the south-dipping Santo Nino fault and on the north by the north-dipping Reyna
de Plata fault. Quartz-gold vein deposits are emplaced along these faults and along transfer faults that splay from the Santo
Nino fault.
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Mineralization
Gold and silver mineralization at the Pinos Altos mine consists of low sulphidation epithermal type hydrothermal veins and
breccias. The Santo Nino structure outcrops over a distance of roughly six kilometres. It strikes at 060 degrees azimuth on its
eastern portion and turns to strike roughly 090 degrees azimuth on its western fringe. The structure dips at 70 degrees towards
the south. The four mineralized sectors hosted by the Santo Nino structure consist of discontinuous quartz rich lenses named from
east to west: El Apache, Oberon de Weber, Santo Nino and Cerro Colorado.
The El Apache lens is the most weakly mineralized. The area hosts a weakly developed white quartz dominated breccia. Gold
values are low and erratic over its roughly 750 metre strike length. Past drilling suggests that this zone is of limited extent at depth.
The Oberon de Weber lens has been followed on surface and by diamond drilling over an extent of roughly 500 metres. Shallow
holes drilled by the Company show good continuity both in grade and thickness over roughly 550 metres. From previous drilling
done by Penoles, continuity at depth appears to be erratic with a weakly defined western rake.
The Santo Nino lens is the most vertically extensive of these lenses. It has been traced to a depth of approximately 750 metres
below surface. The vein is followed on surface over a distance of 550 metres and discontinuously up to 650 metres. Beyond its
western and eastern extents, the Santo Nino andesite is massive and only weakly altered. Gold grades found are systematically
associated with green quartz brecciated andesite.
The Cerro Colorado lens is structurally more complex than the three described above. Near the surface, it is marked by a complex
superposition of brittle faults with mineralized zones which are difficult to correlate from hole to hole. Its relation to the Santo Nino
fault zone is not clearly defined. Two deeper holes drilled by the Company suggest better grade continuity is possible at depth.
The San Eligio zone is located approximately 250 metres north of Santo Nino. The host rock is brecciated Victoria Ignimbrite,
occasionally with stockworks. There is no andesite in this sector. Unlike the other lenses, the San Eligio lens dips towards the
north. The lateral extent seems to be continuous for 950 metres. Its average width is five metres and never exceeds 15 metres.
Surface mapping and prospecting has suggested good potential for additional mineralization on strike and at depths below
150 metres. Visible gold has been seen in the drill core.
Several other promising zones are associated with the horst feature in the northwest part of the property. The Creston Mascota
deposit at Pinos Altos is 7 kilometres northwest of the Santo Nino deposit, and is similar, but dips shallowly to the west. The
Creston Mascota deposit at Pinos Altos is about 1,000 metres long and 4 to 40 metres wide, and extends from surface to more
than 200 metres depth. Ore production from the Creston Mascota deposit at Pinos Altos began in July 2010, with the first gold
poured in December 2010 and commercial productions commencing in February 2011.
Exploration
In 2011, minesite exploration activities were primarily focused on definition and delineation of the resources at Santo Nino, Oberon
de Weber, San Eligio and Creston Mascota. A total of 15 kilometres of minesite exploration drilling, 10.1 kilometres of definition
drilling and 4.4 kilometres of delineation drilling were completed during the year. Regional exploration in 2011 focused on the El
Cubiro prospect. Diamond drilling consisted of 30.6 kilometres in 84 drill holes. More than 6,000 core samples and 1,250 rock
samples were sent to a certified laboratory and assayed mainly for gold and silver.
The recently discovered Cubiro mineralization is two kilometres west of the Creston Mascota deposit at Pinos Altos. Cubiro is a
surface deposit that strikes northwest, has a steep dip and has been followed along strike for approximately 850 metres. Drilling
has intersected significant gold and silver mineralization up to 30 metres wide. The Cubiro deposit is split by a fault that caused
200 metres of displacement to the west, which has been traced by drilling. The zone is still open to the southeast and possibly
at depth.
The Sinter zone is 1,500 metres north northeast of the Santo Nino zone and is part of the Reyna de Plata gold structure. The
steeply dipping mineralization is four to 35 metres wide and almost 900 metres long, with over 350 metres of vertical depth. Sinter
is being evaluated for its open pit mining and heap leach potential.
Other identified mineral resources in the Pinos Altos region include the Bravo and Carola zones adjacent to the Creston Mascota
deposit at Pinos Altos and the Reyna de la Plata prospect further to the east. Exploration efforts will be allocated to these zones
as the development continues at Pinos Altos and the Creston Mascota deposit at Pinos Altos.
In 2012 the Company expects to spend $4.7 million on exploration at the Pinos Altos mine, including $3.2 million on
11,800 metres of conversion drilling and $1.5 million on 5,000 metres of exploration drilling. In addition, $1.1 million is expected to
be spent on regional exploration on the Pinos Altos property, including 3,000 metres of drilling at the Cubiro, Escalon and
Penasco deposits.
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Meadowbank Mine
The Meadowbank mine, which achieved commercial production in March 2010, is located in the Third Portage Lake area in the
Kivalliq District of Nunavut in northern Canada, approximately 70 kilometres north of Baker Lake. At December 31, 2011, the
Meadowbank mine was estimated to contain proven and probable mineral reserves of 2.2 million ounces of gold comprised of
24.5 million tonnes of ore grading 2.79 grams of gold per tonne. The Company acquired its 100% interest in the Meadowbank
mine in 2007 as the result of the acquisition of Cumberland (see "– History and Development of the Company").
The fresh water required for domestic camp use, mining and milling is obtained from the intake barge at Third Portage Lake.
Power is supplied by a 29-megawatt diesel electric power generation plant with heat recovery.
Location Map of the Meadowbank Mine
The Meadowbank mine is held under ten Crown mining leases, three exploration concessions and 40 Crown mineral claims. The
Crown mining leases, which cover the Portage, Goose Island and Goose South deposits, are administered under federal
legislation. The mining leases, which have renewable ten-year terms, have no annual work commitments but are subject to annual
rent fees that vary according to their renewal date. The mining leases cover approximately 7,400 hectares and expire in either
2016 or 2019. The production lease with the KIA is a surface lease covering 1,354 hectares and requires payment of C$124,530
annually. Production from subsurface lease areas is subject to a royalty of up to 14% of the adjusted net profits, as defined in the
Territorial Mining Regulations. In order to conduct exploration on the Inuit-owned lands at Meadowbank, the Company must
receive approval for an annual work proposal from the KIA, the body that holds the surface rights in the Kivalliq District and
administers land use in the region through various boards. The Nunavut Water Board, one such board, provided the
recommendation to the Ministry of Indian Affairs and Northern Development (Canada) to grant the Meadowbank mine's
construction and operating licences in July 2008. The Company has obtained all of the approvals and licences required to build
and operate the Meadowbank mine.
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The three Meadowbank exploration concessions comprise approximately 23,100 hectares and are granted by Nunavut Tunngavik,
the corporation responsible for administering subsurface mineral rights on Inuit-owned lands in Nunavut. Exploration concessions
cover the Vault deposit at Meadowbank and in 2012 will require annual rental fees of approximately C$92,504 and exploration
expenditures of approximately C$693,780. During the exploration phase, the concessions can be held for up to 20 years and the
concessions can be converted into production leases with annual fees of C$1 per hectare, but no annual work commitments.
Production from the concessions is subject to a 12% net profits interest royalty from which annual deductions are limited to 85% of
the gross revenue.
The 40 Crown mineral claims cover approximately 36,433 hectares at Meadowbank and are subject to land fees and work
commitments. Land fees are payable only when work is filed. The most recent filing was in 2011, when approximately C$8,998 in
land fees were paid and approximately C$2,266,670 in assessment work was submitted.
The Kivalliq region in which the Meadowbank mine is located has an arid arctic climate. The Meadowbank property is situated in
an area characterized by low, rolling hills that are covered predominantly in heath tundra with numerous lakes and ponds.
Elevation ranges from approximately 130 metres at lakeshores up to 200 metres on ridge crests. Operations at the Meadowbank
mine are expected to be year-round with only minor weather-related interruptions to mining operations; however, these
interruptions are not expected to affect ore availability for milling operations or other operating activities.
The Meadowbank mine is accessible from Baker Lake, located 70 kilometres to the south, over a 110-kilometre all-weather road
completed in March 2008. Baker Lake provides 2.5 months of summer shipping access via Hudson Bay and year-round airport
facilities. The Meadowbank mine also has a 1,100-metre long gravel airstrip, permitting access by air. The Company uses ocean
transportation for fuel, equipment, bulk materials and supplies from Montreal, Quebec, (or Hudson Bay port facilities) via barges
and ships into Baker Lake during the summer port access period that starts at the end of July in each year. Fuel and supplies are
transported year-round to the site from Baker Lake by conventional tractor trailer units using an all-weather private access road.
Transportation for personnel and air cargo are provided on scheduled or chartered flights. The permanent bases for employees
from which to service the Meadowbank mine are Val D'Or and Montreal in Quebec and the Kivalliq communities. Since
February 2009, all chartered flights have landed directly at Meadowbank.
The Meadowbank mine achieved commercial production in March 2010 and produced 270,801 ounces of gold in 2011 at total
cash costs per ounce of $1,000. In 2012, total cash costs at Meadowbank are expected to be approximately $1,040 per ounce.
In 2012, payable gold production at Meadowbank is expected to be approximately 295,000 ounces, reflecting a slower than
expected ramp-up to design rates as a result of a number of issues during startup over the past two years. While the mill
throughput is now exceeding the original design rate, the grades to the mill continue to be lower than expected. This, combined
with the unexpected rise in minesite costs has resulted in a new mine plan which forecasts lower gold production over a shorter
mine life. The mine life now extends to 2017 rather than 2020.
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Mining and Milling Facilities
Surface Plan of the Meadowbank Mine
Meadowbank has three major deposits that have sufficient drilling definition to sustain reserves; Portage, Goose and Vault. By the
end of 2009, all of the camp infrastructure (dormitories and kitchen), a mill, a service building shop and generator buildings were
built. All required aggregates used in the mining process are produced from waste material taken from the north end of the
Portage pit. In 2008, a dewatering dyke was constructed in order to access the north half of the Portage pit in preparation for
production in 2010. Construction of the Bay-Goose dyke, a major dewatering dike required to access the southern portion of the
Portage and the Goose Island pits, commenced in the summer of 2009 and was completed in the spring of 2011. Three tailings
impoundment dykes, Saddle Dam 1, Saddle Dam 2 and Stormwater Dykes, were built in 2009 and 2010. Also, the first phase of
the main tailings impoundment dyke, Central Dyke, was started in 2011 and will be in construction for the duration of the mine life.
The eight-kilometer long access road to the Vault pit was started in 2011 and will be completed in 2012.
Mining Methods
Mining at the Meadowbank mine is done by open pit with trucks and excavators. The ore is extracted conventionally using drilling
and blasting, then hauled by trucks to a primary gyratory crusher adjacent to the mill. The marginal-grade material (material
grading under the cut-off grade at a gold price of $1,255 per ounce but which has the potential to increase the reserves at the end
of the mine life if the metal prices justify its processing) is stockpiled separately. Also, a sub-grade material stockpile (material for
which extraction has already been paid but currently is lower than the mill feed grade) has
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55
been created for potential processing at the end of the mine life. Waste rock is hauled to one of two waste storages on the
property, used for dyke construction or construction material or backfilled into the mined out area.
Mining first commenced in the Portage pit in 2010 and was the only mine in production in 2011. Mining is scheduled to commence
in March 2012 in the Goose pit and in 2014 in the Vault pit.
Surface Facilities
The accommodations complex at the Meadowbank mine consists of a permanent camp and a temporary camp to accommodate
extra workers. The camp is supported with a sewage treatment, solid waste disposal and potable water plant. In 2008, the
exploration group was relocated eight kilometres south of the minesite location to a separate camp with an 80-person capacity.
Plant site facilities include a mill building, a maintenance mechanical shop building, a generator building, an assay lab and a
heavy vehicle maintenance shop. A structure comprised of two separate crushers flank the main process complex. Power is
supplied by an 29-megawatt diesel electric power generation plant with heat recovery and an onsite fuel storage (5.6 million litres)
and distribution system. The mill-service-power complex is connected to the accommodations complex by enclosed corridors. In
addition, the Company will build peripheral infrastructure including tailings and waste impoundment areas.
Facilities constructed at Baker Lake include a barge landing site located three kilometres east of the community and a storage
compound. A fuel storage and distribution complex with a 60-million litre capacity has been built next to the barge landing facility.
The process design is based on a conventional gold plant flowsheet consisting of two-stage crushing, grinding, gravity
concentration, cyanide leaching and gold recovery in a CIP circuit. The mill is designed for year-round operations with a design
capacity of 9,800 tonnes per day. The overall gold recovery is projected to be approximately 92.9%, based on projections from
metallurgical test work, with approximately 15% typically recovered in the gravity circuit.
The run-of-mine ore is transported to the crusher using an off-road truck. The ore is dumped into the gyratory crusher or into
designated ore-type stockpiles. The product from the primary crusher is conveyed to the cone crusher in closed circuit with a
vibrating screen. The crushed ore is delivered to the coarse ore stockpile and ore from the stockpile is conveyed to the mill. The
grinding circuit is comprised of a primary SAG mill operated in open circuit and a secondary ball mill operated in closed circuit with
cyclones. A portion of the cyclone underflow stream is sent to the concentrator, which separates the heavy minerals from the ore.
The grinding circuit incorporates a gravity process to recover free gold and the free gold concentrate is leached in an intensive
cyanide leach-direct electrowinning recovery process.
The cyclone overflow is sent to the grinding thickener. The clarified overflow is recycled to the grinding circuit and thickened
underflow is pumped to a pre-aeration and leach circuit. The cyanide circuit consists of seven tanks providing approximately
42 hours retention time. The leached slurry flows to a train of six CIP tanks. Gold in the solution flowing from the leaching circuit is
adsorbed into the activated carbon. Gold is recovered from the carbon in a Zadra elution circuit and is recovered from the solution
using an electrowinning recovery process. The gold sludge is then poured into dore bars using an electric induction furnace.
The CIP tailings are treated for the destruction of cyanide using the standard sulphur-dioxide-air process. The detoxified tailings
are then pumped to the permanent tailings facility. The tailings storage is designed for zero discharge, with all process water being
reclaimed for re-use in the mill to minimize water requirements.
Mineral Recoveries
Gold recoveries are expected to average 92.9% for all deposits. The different ore zones have slightly different grind sensitivities to
gold recovery and, as such, different particle size distributions are recommended as target grinds in the process. The use of a
slightly coarser grind for the Vault ores will allow all three of the ore zones to be processed at a consistent process throughput.
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During 2011, gold recovery averaged 93.8%. Approximately 2,977,723 tonnes of ore were processed, averaging 8,158 tonnes of
ore per day with the mill operating 87.19% of available time. The following table sets out the metal recoveries contained for the
2,977,723 tonnes of ore extracted at the Meadowbank mine in 2011.
Gold
Environmental Matters (including Inuit Impact and Benefit Agreement)
Head
Grade
Overall
Metal
Recovery
Payable
Production
3.01 g/t
93.82%
270,801 oz
The development of the Meadowbank mine was subject to an extensive environmental review process under the Nunavut Land
Claims Agreement administered by the Nunavut Impact Review Board (the "NIRB"). On December 30, 2006, a predecessor to the
Company received the Project Certificate from the NIRB, which includes the terms and conditions to ensure the integrity of the
development process. The Nunavut Water Board provided the recommendation to the Ministry of Aboriginal Affairs and Northern
Development Canada to grant the Meadowbank mine's construction and operation under a water licence in July 2008.
In February 2007, a predecessor to the Company and the Nunavut government signed a Development Partnership Agreement
(the "DPA") with respect to the Meadowbank mine. The DPA provides a framework for stakeholders including the federal and
municipal governments and the KIA, to maximize the long-term socio-economic benefits of the Meadowbank mine to Nunavut.
An Inuit Impact Benefit Agreement for the Meadowbank mine (the "IIBA") was signed with the KIA in March 2006. This agreement
was renegotiated and a revised IIBA was signed October 18, 2011. The IIBA ensures that local employment, training and
business opportunities arising from all phases of the project are accessible to the Kivalliq Inuit. The IIBA also outlines the special
considerations and compensation that Cumberland agreed to provide to the Inuit regarding traditional, social and cultural matters.
The Company currently holds a renewable exploration lease from the KIA that expires December 31, 2015. In July 2008, the
Company signed a production lease for the construction and the operation of the mine, the mill and all related activities. In
April 2008, the Company and KIA signed a water compensation agreement for the Meadowbank mine addressing Inuit rights
under the Land Claims Agreement respecting compensation for water use and water impacts associated with the project.
The Meadowbank mine consists of several gold-bearing deposits: Portage, Goose and Vault. A series of six dykes have been built
to isolate the mining activities at the Portage and Goose deposits from neighbouring lakes. An additional dyke will be built in 2013
to isolate the mining activities at the Vault deposit. Waste rock from the Portage, Goose Island and Vault pits will primarily be
stored in the Portage and Vault rock storage facility, and a portion of the waste will be stored in the Portage Pit. The control
strategy to minimize the onset of oxidation and the subsequent generation of acid mine drainage includes freeze control of the
waste rock through permafrost encapsulation and capping with an insulating convective layer of neutralizing rock (ultramafic and
non-acid generating volcanic rocks). Because the site is underlain by about 450 metres of permafrost, the waste rock below the
capping layer is expected to freeze, resulting in low rates of acid rock drainage generation in the long term.
Tailings are stored in the Second Portage arm. Initially the tailings will be deposited in a subaqueous environment, but the majority
of tailings will be deposited on tailings beaches. A reclamation pond will be operated within the tailings storage facility. The control
strategy to minimize water infiltration into the tailings storage facility and the migration of constituents out of the facility includes
freeze control of the tailings through permafrost encapsulation. A four-metre-thick dry cover of acid neutralizing ultramafic rock
backfill will be placed over the tailings as an insulating convective layer to confine the permafrost active layer within relatively inert
materials.
The water management objective for the project is to minimize the potential impact on the quality of surface water and
groundwater resources at the site. Diversion ditches will be constructed in 2012 to avoid the contact of clean runoff water with
areas affected by the mine or mining activities. Contact water originating from affected areas is intercepted, collected, conveyed to
the tailings storage facility for re-use in process or decanted to treatment (if needed) prior to release to receiving lakes.
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Capital Expenditures/Development
A total of $86.1 million has been budgeted to be spent at the Meadowbank mine (excluding exploration) in 2012, including
$55 million on dyke construction, $29.1 million on sustaining capital and equipment and $4 million on construction projects carried
over from 2011. As well, $1.6 million has been budgeted for 5,000 metres of diamond drilling to convert resources to reserves in
the Vault deposit area. Regional exploration in the Meadowbank area has been budgeted at $5.1 million and will include
13,000 metres of exploration diamond drilling.
The Meadowbank mine started production in 2010. Total capital costs of construction incurred since the date of acquisition by the
Company amounted to $838 million. The mine life is expected to be six years.
Geology, Mineralization and Exploration
Geology
The Meadowbank mine comprises a number of Archean-age gold deposits hosted within polydeformed volcanic and sedimentary
rocks of the Woodburn Lake Group, part of the Western Churchill supergroup in northern Canada.
Three minable gold deposits – Goose, Portage and Vault – have been discovered along the 25-kilometre long Meadowbank gold
trend, and the PDF deposit (a fourth deposit) has been outlined on the northeast gold trend. These known gold resources are
within 225 metres of the surface, making the project amenable to open pit mining.
Mineralization
The predominant gold mineralization found in the Portage and Goose deposits is associated with iron sulfides, mainly pyrite and
pyrrhotite, which occur as a replacement of magnetite in the oxide facies iron formation host rock. To a lesser extent, pyrite and
chalcopyrite may be found and, on rare occasions, arsenopyrite may be associated with the other sulphides. Gold is mainly
observed in native form (electrum), occurring in isolated specs or as plating around sulfide grains. The ore zones are typically
6-7 metres wide, following the contacts between the iron formation units and the surrounding host rock. Zones extend up to
several hundred metres along strike and at depth. The sulphides primarily occur as replacement of the primary magnetite layers,
as well as narrow stringers or bands of disseminated sulphides that almost always crosscut the main foliation and/or bedding
which would imply an epigenetic mode of emplacement. The percentage of sulphides is quite variable and may range from trace
to semi-massive amounts over several centimetres to several metres in length. The higher gold grades and the occasional
occurrence of visible gold are almost always associated with greater than 20% sulphide content.
The main mineralized banded iron formation unit is bounded by an ultramafic unit to the west which locally occurs interlayered
with the banded iron formation and to the east by an intermediate to felsic metavolcaniclastic unit.
In the Vault deposit, pyrite is the principal ore bearing sulphide. The disseminated sulphides occur along sheared horizons that
have been sericitized and silicified. These zones are several metres wide and may continue for hundreds of metres along strike
and down dip.
Three of the four known gold deposits are currently planned to be mined. The Goose Island and Portage deposits are hosted
within highly deformed, magnetite-rich iron formation rocks, while intermediate volcanic rock assemblages host the majority of the
mineralization at the more northerly Vault deposit. The fourth deposit, PDF, shows the same characteristics as Vault, though it is
not currently anticipated to be a mineable deposit.
Defined over a 1.85-kilometre strike length and across lateral extents ranging from 100 to 230 metres, the geometry of the
Portage deposit consists of general north-northwest-striking ore zones that are highly folded. The mineralization in the lower limb
of the fold is typically six to eight metres in true thickness, reaching up to 20 metres in the hinge area.
The Goose Island deposit is located just south of the Portage deposit and is also associated with iron formation but exhibits
different geometry, with a north-south trend and a steep westerly dip. Mineralized zones typically occur as a single unit near
surface, splaying into several limbs at depth. The deposit is currently defined over a 750-metre strike length and down to
500 metres at depth (mainly in the southern end), with true thicknesses of three to 12 metres (reaching up to 20 metres locally).
The Goose underground resource (100 to 500 metres at depth) extends 700 metres to the south of the Goose pit. The ore zones
show the same characteristics as the Goose pit, which is two to five main zones sub-parallel and undulating. The average
thickness rarely exceeds three to five metres.
The Vault deposit is located seven kilometres northeast of the Portage and Goose deposits. It is planar and shallow-dipping with a
defined strike of 1,100 metres. The deposit has been disturbed by two sets of normal faults striking east-west and
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north-south and dipping moderately to the southeast and steeply to the east, respectively. The main lens has an average true
thickness of eight to 12 metres, reaching as high as 18 metres locally. The hanging wall lenses are typically three to five metres,
and up to seven metres, in true thickness.
Exploration
Grass roots exploration in the project area began as early as 1980. As some interesting targets arose, several companies
conducted various types of work between 1980 and 2007. Throughout these years, six deposits were the main focus of
exploration: Portage, Cannu, Bay Zone, Goose, Vault and PDF. Over time, the Cannu, Bay Zone and Portage deposits were
combined into one mineable deposit referred to as Portage. Exploration has extended the Goose Island deposit southward,
adding the Goose South and Gosling zones.
In 2009, the mine exploration group took over the pit and adjacent areas. Three goals were targeted: exploration drilling, resource
conversion and waste pad condemnation.
In 2010, 102 holes totalling 37,928 metres were drilled. The focus of the exploration campaign was testing the underground
potential of the Goose deposit, resource conversions at the Vault deposit and on the south continuity of the Portage and Goose
deposits. On the Goose underground deposit, a total of 23 holes for 11,145 metres were drilled from 200 to 750 metres in depth.
These holes contributed to increase the continuity and understanding of the mineralization. The drilling was predominantly to
expand the Goose deposit at depth and towards the south, as well as to conduct infill drilling in areas where large gaps occurred
between auriferous intersections. The program was successful in expanding the Goose deposit at depth and towards the south.
On the Vault deposit, a total of 39 holes for 5,943 metres were drilled from 25 to 200 metres in depth. These holes were aimed at
converting resources close to the pit shell and also to extending resources to the south-west continuity towards the Tern
Lake porphyry.
On the southern portion of the Portage deposit, a total of 18 holes for 8,070 metres were drilled from 50 to 250 metres in depth
with the aim of converting resources directly south of the Portage pit and other inferred occurrences within a close proximity to
the pit.
On the Goose south trend, a total of 13 holes for 7,320 metres were drilled from 150 to 250 metres in depth. These holes were
aimed at following the south trend of the Portage-Goose iron formation.
In 2011, 284 diamond drill holes totalling 24,229 metres were drilled. The exploration program had four goals: exploring the
southern trend of the Goose deposit at depth; following-up on the regional results of testing on the Farwest Iron Formation and the
geophysics of the Tern Lake porphyry completed in 2010; continuing resource conversion work initiated on the Vault deposit in
2010 and extending resources on the south west part of deposit; and a resources conversion with a definition program in
Portage pit.
The definition program on the Portage pit was conducted in phases from May to December 2011 and represented 165 holes
totalling 11,431 metres of diamond drilling. In addition, a new method was tried in the Portage pit for definition drilling, a reverse
circulation drill was used to drill over 42 holes totalling 1,074 metres. This method will reduce the cost of drilling.
On the Goose South trend, 6 holes totalling 2,382 metres were drilled. On the Farwest Iron Formation, 7 holes for a total of
2,721 metres were drilled along the trend and verified the potential of the west contact with the granitic mass. On the Tern Lake
porphyry, 19 holes totalling 931 metres were drilled.
At the Vault pit, 19 holes were drilled for a total of 1,250 metres, 43 holes totalling 3,545 metres were drilled in Vault South and
25 holes totalling 1,969 metres were drilled in Vault East.
Drilling carried out during the period of 2009 to 2011 returned significant results on the Goose underground and Vault deposits. At
the Goose underground deposit, the increase in indicated mineral resources comes from a confirmation of continuity towards the
south and at depth. At the Vault deposit, the increase in mineral reserves is the result of converting resources to reserves along
the east pit wall. Positive drill results show continuity of mineralization toward the southwest, indicating that the pit can be
expanded in that direction.
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Meliadine Project
The Meliadine project is an advanced exploration property located near the western shore of Hudson Bay in the Kivalliq region of
Nunavut, about 25 kilometres north of the hamlet of Rankin Inlet and 290 kilometres southeast of the Meadowbank mine. The
closest major city is Winnipeg, Manitoba, about 1,500 kilometres to the south.
Agnico-Eagle acquired its 100% interest in the Meliadine project through its acquisition of Comaplex in July 2010 (see "– History
and Development of the Company").
The mineral reserves and resources of the Meliadine project are estimated at December 31, 2011, to contain proven and probable
mineral reserves of 2.9 million ounces of gold in 12.5 million tonnes of ore grading 7.18 grams per tonne. In addition, the project
has 12.6 million tonnes of indicated mineral resources grading 4.09 grams of gold per tonne, and 12.7 million tonnes of inferred
mineral resources grading 5.98 grams of gold per tonne.
The Meliadine property is a large, almost entirely contiguous land package that is nearly 80 kilometres long. It consists of
55,603 hectares of mineral rights, of which 52,173 hectares are held under the Canada Mining Regulations and administered by
the Department of Indian Affairs and Northern Development and referred to as Crown Land. The Crown Land is made up of
mining claims covering 887 hectares and mineral leases covering 51,285 hectares. There are also 3,430 hectares of subsurface
Nunavut Tunngavik Inc. concessions administered by a division of the Nunavut Territorial government.
The Kivalliq region has an arid arctic climate. The Meliadine property is mainly covered by glacial overburden with the presence of
deep-seated permafrost. The property is about 60 metres above sea level in low-lying topography with numerous lakes. Surface
waters are usually frozen by early October and remain frozen until early June. Surface geological work can be carried out from
mid-May to mid-October, while exploration drilling can take place throughout the year, though is reduced in January and February
due to cold and darkness.
Equipment, fuel and dry goods are transported on the annual warm-weather sealift by barge to Rankin Inlet via Hudson Bay.
Ocean-going barges from Churchill, Manitoba or eastern Canadian ports can access the community from late June to early
October. Churchill, which is approximately 470 kilometres south of Rankin Inlet, has a deep-water port facility and a year-round
rail link to locations to the south.
Personnel, perishables and lighter goods arrive at the Rankin Inlet regional airport by commercial or charter airline, from which
they can be flown to the property by chartered helicopter. An all-weather gravel road extends from Rankin Inlet to within two
kilometres of the Meliadine River, which is approximately 15 kilometres away from the property, but there is winter-road access for
tracked vehicles from Rankin Inlet directly to the Meliadine project exploration camp from January to mid-May. The Company has
proposed the building of a 23.8-kilometre long all-weather gravel road linking Rankin Inlet with the project site to support ongoing
exploration activities at the Meliadine project property. An application to construct this road was submitted to the NIRB and other
regulatory agencies in 2011. A positive decision from the NIRB on the application was received in February, 2012 and approvals
from other regulatory agencies are pending. A positive decision will allow construction to begin in 2012, in which case the road is
expected to be completed by the summer of 2013.
Exploration personnel for the Meliadine project are mainly sourced from other parts of Canada on a fly-in/fly-out rotation from Val
d'Or, Quebec, and Winnipeg, Manitoba, approximately 1,500 kilometres south of the Meliadine project property, respectively,
although there is preferential employment of qualified people from the Kivalliq region. The hamlet of Rankin Inlet has developed a
strong taskforce of entrepreneurs that provide a wide variety of services, such as freight expediting, equipment supply
and outfitting.
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Location Map of the Meliadine Project
2011 ANNUAL REPORT
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61
Facilities
Surface Plan of the Meliadine Project
Current facilities at the Meliadine project include the Meliadine project exploration camp located on the shore of Meliadine Lake,
approximately 2.3 kilometres north of the Tiriganiaq deposit. The camp is constructed of Weatherhaven tents and can
accommodate up to 150 personnel. Covered wooden walkways connect all tents to the washrooms and kitchen facilities. A
100-person, self-contained trailer camp, complete with two diesel generators, was installed adjacent to the existing exploration
camp in early 2011. A second 100-person, self-contained trailer camp is expected to be installed in the first half of 2012.
Power is currently generated using diesel generators for the Meliadine exploration camp on an as-required basis. Potable water
for the Meliadine project camp is pumped from Meliadine Lake and water for the previous underground operations and surface
drill programmes is pumped from Pump Lake. The current water licence allows for a maximum daily water use of 290 cubic
metres (Meliadine West), while a request for an amendment to the water licence was filed in October 2010 with the Nunavut
Water Board (Meliadine East) to increase water use to 299 cubic metres per day.
The Meliadine project exploration camp has an incinerator on site to burn all flammable materials, such as camp and food wastes.
Plastics and metal objects, along with incinerator ash, are set aside for transport to be disposed of in the Rankin Inlet landfill. All
hazardous and liquid wastes are held at the Meliadine project site for transport to a waste management company in southern
Canada.
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Sewage has been treated through a Biodisk treatment system since the summer of 2010. Run-off water is contained in the
primary water containment area and released only when sampling results meet acceptable water quality standards. Routine water
sampling has been conducted since the mid-1990s and reported on a monthly basis to the authorities.
The Meliadine East camp on Atulik Lake was decommissioned during the summer of 2010, with completion in the winter of 2010
and 2011. The core shack and storage building remain at the former camp site.
An underground portal allowing access to an exploration decline was built at the Tiriganiaq deposit in 2007 and 2008 in order to
extract a bulk sample for study purposes. A waste rock and ore storage pad was generated during excavation of the decline and a
sampling tower was installed for processing the bulk sample. There is a two-kilometre road between the Meliadine project
exploration camp and the portal site. Another bulk sample was taken from underground via this portal in 2011 and results are
expected to be available in early 2012.
Environmental Matters (including Inuit Impact Benefit Agreement)
Land and environmental management in the region of the Meliadine project is generally governed by the provisions of the Nunavut
Land Claims Agreement ("NLCA"). Pursuant to the NLCA, land use leases must be obtained from the KIA. The Meliadine project
has been granted a commercial lease for exploration and underground development activity, a prospecting and land use lease for
exploration and development activities, an exploration land use lease for exploration and drilling on the Inuit-owned lands of
Meliadine East and a parcel drilling permit for drilling activity on Inuit-owned lands. A number of right-of-way leases covering road
access to the Meliadine project property and esker quarrying on the Inuit-owned lands were also granted by the KIA.
Pursuant to the NLCA, an exploration water licence and a bulk sample water licence were granted by the Nunavut Water Board
(the "NWB"). An application was made to the NIRB and the NWB for the construction of an access road to the Meliadine project
camp to be able to carry out the exploration program year-round.
A Project Certificate from the NIRB is the next approval required by the Meliadine project. Other operating permits and licences
can only be issued after such Project Certificate is received. An Inuit Impact Benefit Agreement and an Inuit Water Compensation
Agreement will also need to be negotiated with the KIA.
Geology, Mineralization and Exploration
Geology and Mineralization
Archean volcanic and sedimentary rocks of the Meliadine greenstone belt underlie the property, which is mainly covered by glacial
overburden with deep-seated permafrost and is part of the Western Churchill supergroup in northern Canada. The rock layers
have been folded, sheared and metamorphosed, and have been truncated by the Pyke Fault, a regional structure that extends the
entire 80-kilometre length of the large property.
The Pyke Fault appears to control gold mineralization on the Meliadine project property. At the southern edge of the fault is a
series of oxide iron formations that host all six Meliadine project deposits currently known. The deposits consist of multiple lodes
of mesothermal quartz-vein stockworks, laminated veins and sulphidized iron formation mineralization with strike lengths of up to
three kilometres. The Upper Oxide iron formation hosts the Tiriganiaq and Wolf North zones. The two Lower Lean iron formations
contain the F Zone, Pump, Wolf Main and Wesmeg deposits, which are all within five kilometres of Tiriganiaq. The Discovery
deposit is 17 kilometres east southeast of Tiriganiaq and is hosted by the Upper Oxide iron formation. Each of these deposits has
mineralization within 120 metres of surface, making them potentially mineable by open pit methods. They also have deeper ore
that could potentially be mined with underground methods.
Exploration
The Meliadine property has been explored for gold from 1987 through 2010 at a cost of C$166.8 million by former owners
Asamera Inc., Rio Algom Limited, Comaplex, Cumberland and Western Mining International, as well as the Company and
numerous reputable consultants. For many years the property was divided into two halves – Meliadine East and Meliadine
West – which were consolidated into the Meliadine property in December 2009. A detailed history of exploration on the property is
given in a technical report by the Company posted on SEDAR on March 8, 2011.
Lack of outcropping bedrock in the area resulted in the use of high-density magnetic surveying followed by diamond drilling as the
most common and successful exploration strategy on the property. This has included 193,318 metres of drilling in 682 holes from
1993 through 2010, as well as geophysical surveying, prospecting and sampling. In 2007 and 2008, there was an underground
exploration and bulk sample program on the Tiriganiaq deposit. This was followed by a
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Preliminary Assessment for the property in 2009, which indicated the potential of the project to support a mining operation.
In 2010, there were 128 exploration drill holes (32,000 metres) at the Meliadine project, of which 53% were drilled by the
Company after acquiring the property in July 2010. Agnico-Eagle spent $10 million on exploration from July through
December 2010.
The Company initiated a $129.6 million exploration program in the summer of 2010. Approximately 200,000 metres of drilling is
planned through early 2013, mainly to convert mineral resources to reserves at Tiriganiaq. At the end of 2011, the Company spent
$74.7 million, principally in diamond drilling (105,000 metres), bulk sample, updated feasibility study, permitting, all-weather road
and camp expansion. Another $54.9 million has been budgeted through early 2013 to complete the exploration program (diamond
drilling, feasibility study, permitting and the construction of an all-weather road linking the project to Rankin Inlet). The Company
spent an additional $12 million in 2011 for the ramp project and has budgeted $16.1 million for this purpose in 2012.
La India Project
Location Map of the La India Project
The La India project is located in the Mulatos Gold Belt in the municipality of Sahuaripa, southeast Sonora State in northern
Mexico. The Mulatos Gold Belt is part of the Sierra Madre gold and silver belt that also hosts the operating Mulatos gold mine
immediately southeast of the La India project property and the Pinos Altos mine and Creston Mascota at Pinos Altos deposit
70 kilometres to the southeast.
The La India project includes the La India feasibility-stage heap leach gold project as well as the recently discovered Tarachi gold
zone and several other prospective targets in the belt. The property consists of 43 mining concessions totalling approximately
56,000 hectares, making the Company the largest mineral title holder by area in the Mulatos Gold
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Belt. The climate is semi-arid with seasonal temperatures ranging from 35 degrees Celsius to –2 degrees Celsius, and torrential
rainfall from July to September. Exploration activities may be conducted year-round.
The project is located between the small rural towns of Tarachi and Matarachi, which offer basic infrastructure in the form of
roads, rural telephone service, small grocery stores and unpaved air strips. More services are available in the town of Sahuaripa
located 60 kilometres by gravel road (about 2.5 hours) northwest of the La India project. The population of the district is estimated
to be a few thousand, with most of the inhabitants involved in cattle ranching, farming, forestry and mining and exploration. An
adequate supply of labour for mining operations can be drawn from the region. Trained exploration personnel for the La India
project are mainly sourced from northern Mexico including Hermosillo, Sonora.
The closest major city with an international airport is Hermosillo, the capital of Sonora, located 210 kilometres west-northwest of
the La India project. Road travel from Hermosillo to the site takes approximately seven hours. Alternatively, the project can be
accessed by small aircraft. The federally owned and operated electric transmission grid extends to within approximately
60 kilometres of the project.
Grayd began to actively explore the project in 2004, and began preliminary metallurgical test work in 2006. Grayd produced
NI-43-101 compliant technical reports as of 2004, 2006, 2008, 2009 and May 2010. A Preliminary Economic Assessment ("PEA")
was completed on behalf of Grayd on December 6, 2010 by independent consultants, based on only the oxide portion of the La
India project resources (as reported in May 2010). The PEA envisioned an open pit mine with gold recovery of 80% by heap leach
with an overall average annual production of 92,000 ounces over its nine-year life. According to the PEA, annual production could
range from a low of 66,000 ounces in year six to a high of 108,000 ounces in year seven.
As of December 31, 2011, the La India project consisting of the La India feasibility-stage heap leach gold project and Tarachi gold
zone had a measured resource of 3.7 million tonnes of ore grading 1.06 grams of gold per tonne, and an indicated resource of
44.5 million tonnes of ore grading 0.72 grams of gold per tonne and inferred resources of 32.1 million tonnes grading 0.69 grams
of gold per tonne, using a cut-off of 0.40 grams of gold per tonne. These resources are in the North and Main zones of the La
India project and the Tarachi gold zone.
The defined mineral resources and all lands required for infrastructure as proposed by the PEA for the La India project are wholly
contained within three privately held properties.
At the Tarachi gold zone, the surface rights in the project area are owned by the Matarachi Ejido (agrarian community) and private
parties. All measured, indicated and inferred project resources lie within privately owned or ejido possessed land. Surface access
lease agreements have been executed with the property owners or possessors for all identified target areas. The existing
agreements permit exploration activities only; if mining activity is contemplated in this exploration area the Company will require
further negotiations to acquire the surface rights needed for project development.
Mining and Milling Facilities
Surface Facilities
Current facilities at the La India project include an exploration camp, which consists of former ranch house buildings that have
been modified for housing requirements. The power for the exploration camp is supplied by diesel generators, water is supplied by
a local spring and septic discharges are managed in a leach field. Non-organic waste from the camp is disposed in the Matarachi
Ejido landfill. The camp will be modified and expanded as the Company develops the La India project in 2012.
Environmental Matters
Baseline environmental information has been collected at the La India project since late 2008. This information includes surface
water sampling, archeological assessment and soil, fauna and flora assessments.
The La India project is not located in an area with a special Federal environmental protection designation. Therefore, basic
exploration activities are regulated under Norma Oficial Mexicana NOM-120-ECOL-1997, which allows for most exploration
activities including mapping, geochemical sampling, geophysical surveys, mechanized trenching, road building and drilling. Mine
construction and operation activities generally require the preparation of a Manifesto de Impacto Ambiental (MIA, an
environmental impact statement), and a Cambio de Uso de Suelo (CUS, a land use change) permit.
No factors have been identified that would be expected to hinder authorization of Federal and State environmental permits
required for construction and operation of a mine at the La India project. Some historic mining has been observed in the
2011 ANNUAL REPORT
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65
area but the remaining waste dumps and tailings are small and are not considered to present significant environmental issues. No
obstacles to obtaining the permits are anticipated providing Agnico-Eagle obtains the necessary surface rights and meets the
design and mitigation criteria required by the Mexican permitting authorities. The Company has considerable permitting
experience in Mexico and is familiar with the regulatory requirements as a result of its ongoing operations at the Pinos Altos mine
and the Creston Mascota deposit at Pinos Altos.
Agreements & Licences
The mining concessions for the La India project and Tarachi are controlled by the Company by means of direct ownership and by
11 separate agreements whereby Agnico-Eagle can earn a 100% interest in certain concessions by making cash and share
payments. For the La India project, should the Company elect to acquire all currently optioned concessions, an additional
$2.3 million in payments would be required. Payment has been made in full for the claims that host most of the measured,
indicated and inferred resources. Some concessions are subject to underlying net smelter royalties varying between 1% and 3%,
some of which may be purchased by the Company which would result in net smelter royalties between 0% and 0.5%.
For the Tarachi gold zone, payments totalling $3.3 million and shares with value equivalent to $967,500 over an eight year period
are required for the Company to earn a 100% interest in the relevant concessions. To date $1 million has been paid toward these
concessions. Should the Company elect to acquire all currently optioned concessions, an additional $2.3 million in payments
would be required. Some concessions are subject to underlying net smelter royalties varying between 1% and 3%, some of which
may be purchased by the Company, which would result in net smelter royalties between 0% and 0.5%.
The defined mineral reserve and resource and all lands required for infrastructure as proposed by the PEA are wholly contained
within three privately-held properties. Agnico-Eagle has acquired the surface rights for the Bronces y Bajios and la Armagosa
ranches and negotiations are underway with the owner of the el Duraznito ranch. The current land agreements are sufficient to
permit exploration activities that are conducted under environmental regulation NOM-120. Construction and mine development
could begin on the Bronces y Bajios and la Armagosa ranches subject to receipt of necessary permits, and the development of
mining activity on the el Duraznito ranch is pending a final surface agreement.
At the Tarachi gold zone, the surface rights in the project area are owned by the Matarachi Ejido and private parties. All
measured, indicated and inferred project resources lie within privately owned or ejido possessed land. Surface access lease
agreements have been executed with the property owners or possessors for all identified target areas. The existing agreements
permit exploration activities only, further negotiation would be required for any future mine development at the Tarachi gold zone.
Geology, Mineralization and Exploration
Geology and Mineralization
The La India project lies within the Sierra Madre Occidental ("SMO") province, an extensive Eocene to Miocene volcanic field from
the United States-Mexico border to central Mexico. The La India project lies within the western limits of the SMO in an area
dominated by outcrops of andesite and dacitic tuffs, overlain by rhyolites and rhyolitic tuffs that were affected by large-scale
north-northwest-striking normal faults and intruded by granodiorite and diorite stocks. Incised fluvial canyons cut the uppermost
strata and expose the Lower Series volcanic strata.
The project area is predominantly underlain by a volcanic sequence comprised of andesitic and felsic extrusive volcanic strata
with interbedded epiclastic volcaniclastic strata of similar composition. The mineral occurrences present in the project area, and
the deposit type being sought, are volcanic-hosted epithermal, high-sulphidation gold-silver deposits. Such deposits may be
present as veins and/or disseminated deposits. The La India project deposit area is one of several high-sulphidation epithermal
mineralization centres recognized in the region.
Epithermal high-sulphidation mineralization at the La India project developed as a cluster of gold zones (Main and North) aligned
north-south within a genetically related zone of hydrothermal alteration in excess of 20 square kilometres in area. Gold
mineralization is confined to the Late Eocene rocks within zones of intermediate and advanced argillitic alteration originally
containing sulphides, and subsequently oxidized by supergene processes. The North and Main zones are within two kilometres of
each other.
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Surface outcrop mapping and drill-hole data so far indicate that the gold system at the Tarachi gold zone is likely best classified as
a gold porphyry deposit.
Exploration
Gold was discovered at the Mulatos deposit by the Spanish colonials in 1806, but indigenous peoples likely exploited the
native-gold-bearing oxidized zone of the deposit prior to this. Small underground mines and prospects are present throughout the
La Cruz and La Viruela areas, where modern exploration was conducted by New Golden Sceptre Minerals Ltd. and New Goliath
Minerals Ltd. (late 1980s), Noranda Inc. (early 1990s) and San Fernando Mining Co. Ltd. (from 1993).
Grayd began to actively explore the project in 2004, including geologic mapping, geochemical rock chip sampling, airborne and
ground geophysical surveys, photogrammetric topographic mapping, diamond drilling, reverse circulation drilling, baseline
environmental studies and metallurgical testing. Newmont Mining Corp. funded the work between July 2005 and July 2006 and
then declined to continue, retaining no interest in the property. The Tarachi gold zone, located approximately 10 kilometres north
of the La India project on the same property, was discovered in 2010.
From 2004 through February 7, 2011, Grayd completed 129 diamond drill holes (13,834 metres) and 560 reverse circulation drill
holes (49,552 metres) at the La India project. In 2011, 13 diamond drill holes (1,119 metres) and 30 reverse circulation drill holes
(2,728 metres) were drilled at the La India project and 25 diamond drill holes (5,400 metres) and 67 reverse circulation drill holes
(16,144 metres) were drilled at the Tarachi gold zone.
The La India feasibility-stage heap leach gold project deposit and the Tarachi gold zone will continue to be actively explored by
Agnico-Eagle. The Company has initiated an $18.6 million exploration and development program at the La India feasibility-stage
heap leach gold project deposit for 2012 that will include infill drilling, technical studies, land acquisition, water acquisition,
infrastructure and permitting efforts. At the Tarachi gold zone, the Company has planned a $5 million exploration program with
approximately 9,850 metres of diamond drilling and 10,000 metres of reverse circulation drilling planned in 2012.
Regional Exploration Activities
During 2011, the Company continued to actively explore in Quebec, Ontario, Nunavut, Nevada, Finland, Sweden, Mexico and
Argentina. The Canadian exploration activities were focused on the Ellison/Bousquet and Maritime/Lapa properties in Quebec, as
well as on the Meadowbank property in Nunavut where activities were conducted both within and outside the mining lease and the
Meliadine project, also in Nunavut. In the United States, exploration activities during 2011 were concentrated on the West Pequop
project located in northeast Nevada and the Rattlesnake project located in Wyoming. At the LaRonde, Goldex, Lapa, Pinos Altos
and Kittila mines, the Company continued exploration programs around the mines. Most of the exploration budget was spent on
drilling programs near the mine infrastructure, along previously recognized gold trends.
At the end of 2011, the Company's land holdings in Canada consisted of 77 projects comprised of 2,879 mineral titles covering an
aggregate of 270,513 hectares. Land holdings in the United States consisted of 6 properties comprised of 3,486 mineral titles
covering an aggregate of 30,552 hectares. Land holdings in Finland consisted of three groups of properties comprised of
133 mineral titles covering an aggregate of 11,757 hectares. Land holdings in Sweden consisted of one project comprised of four
mineral titles covering an aggregate of 2,830 hectares. Land holdings in Mexico consisted of six projects comprised of 111 mining
concession titles covering an aggregate of 125,820 hectares. Land holdings in Argentina consisted of one project with two mineral
titles covering an aggregate of 2,691 hectares.
The total amount spent on regional exploration in 2011 was $76.1 million, which included drilling 775 holes for an aggregate of
approximately 216 kilometres. The budget for regional exploration expenditures in 2012 is approximately $67.4 million, including
approximately 212 kilometres of drilling.
Mineral Reserves and Mineral Resources
Cautionary Note to Investors Concerning Estimates of Measured and Indicated Mineral Resources
This section uses the terms "measured mineral resources" and "indicated mineral resources". Investors are advised that while
these 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 mineral reserves .
2011 ANNUAL REPORT
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67
Cautionary Note to Investors Concerning Estimates of Inferred Mineral Resources
This section uses the term "inferred mineral resources". Investors are advised that while this term is recognized and required by
Canadian regulations, the SEC does not recognize it. "Inferred mineral 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 any part or all 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 any
part or all of an inferred mineral resource exists, or is economically or legally mineable .
The preparation of the information set forth below with respect to the mineral reserves at the LaRonde mine (which includes
mineral reserves at the LaRonde mine extension), the Lapa, Kittila, Pinos Altos and Meadowbank mines and the Meliadine and
Bousquet projects has been supervised by the Company's Vice-President, Project Development, Marc Legault, P.Eng, a "qualified
person" as that term is defined in NI 43-101. The Company's mineral reserves estimate was derived from internally generated
data or geology reports.
The criteria set forth in NI 43-101 for reserve definitions and guidelines for classification of mineral reserve are similar to those
used by Guide 7. However, the definitions in NI 43-101 differ in certain respects from those under Guide 7. Under Guide 7, among
other things, a mineral reserve estimate must have a "final" or "bankable" feasibility study. Guide 7 also requires the use of
commodity 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. In addition to the differences noted above, Guide 7 does not recognize
mineral resources.
The assumptions used for the 2011 mineral reserves and resources estimate reported by the Company in this Form 20-F were
based on three-year average prices for the period ending December 31, 2011 of $1,255 per ounce gold, $23.00 per ounce silver,
$0.91 per pound zinc, $3.25 per pound copper, $0.95 per pound lead and exchange rates of C$1.05 per $1.00, 12.86 Mexican
pesos per $1.00 and $1.37 per €1.00. The assumptions used for the 2010 mineral reserves and resources estimate reported by
the Company in this Form 20-F were based on three-year average prices for the period ending December 31, 2010 of $1,024 per
ounce gold, $16.62 per ounce silver, $0.86 per pound zinc, $2.97 per pound copper, $0.90 per pound lead and exchange rates of
C$1.08 per $1.00, 12.43 Mexican pesos per $1.00 and $1.40 per €1.00. The assumptions used for the 2009 mineral reserves and
resources estimate used by the Company in this Form 20-F were based on three-year average prices for the period ending
December 31, 2009 of $848 per ounce gold, $14.35 per ounce silver, $1.03 per pound zinc, $3.15 per pound copper, $0.97 per
pound lead and exchange rates of C$1.09 per $1.00, 11.00 Mexican pesos per $1.00 and $1.37 per €1.00. Other assumptions
used for estimating 2010 and 2009 mineral reserve and resource information may be found in the Company's annual filings in
respect of the years ended December 31, 2010 and December 31, 2009, respectively.
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Set out below are the reserve estimates as of December 31, 2011, as calculated in accordance with NI 43-101 and Guide 7,
respectively (tonnages and contained gold quantities are rounded to the nearest thousand):
National Instrument 43-101
Property
Industry Guide No. 7
Tonnes
Gold
Grade
(g/t)
Contained
Gold (oz)
Tonnes
Gold
Grade
(g/t)
Contained
Gold (oz)
5,331,000
319,000
383,000
702,000
1,044,000
34,000
848,000
2.60
3.86
6.11
5.09
6.45
7.31
0.80
445,000
40,000
75,000
115,000
217,000
8,000
22,000
5,331,000
319,000
383,000
702,000
1,044,000
34,000
848,000
2.60
3.86
6.11
5.09
6.45
7.31
0.80
445,000
40,000
75,000
115,000
217,000
8,000
22,000
1,139,000
1,987,000
1,931,000
11,029,000
2.59
1.83
1.49
2.80
95,000
117,000
92,000
994,000
1,139,000
1,987,000
1,931,000
11,029,000
2.59
1.83
1.49
2.80
95,000
117,000
92,000
994,000
27,901,000
3,165,000
802,000
33,060,000
33,862,000
1,340,000
5,292,000
4.74
1.88
5.66
4.63
4.65
6.61
5.80
4,255,000
191,000
146,000
4,916,000
5,062,000
285,000
987,000
27,901,000
3,165,000
802,000
33,060,000
33,862,000
1,340,000
5,292,000
4.74
1.88
5.66
4.63
4.65
6.61
5.80
4,255,000
191,000
146,000
4,916,000
5,062,000
285,000
987,000
7,142,000
8.20
1,882,000
7,142,000
8.20
1,882,000
12,434,000
19,599,000
7.18
1.68
2,869,000
1,059,000
12,434,000
19,599,000
7.18
1.68
2,869,000
1,059,000
25,193,000
2.38
1,927,000
25,193,000
2.38
1,927,000
44,792,000
22,563,000
146,057,000
2.07
2.91
3.78
2,986,000
2,109,000
17,757,000
44,792,000
22,563,000
146,057,000
2.07
2.91
3.78
2,986,000
2,109,000
17,757,000
157,086,000
3.71
18,750,000
157,086,000
3.71
18,750,000
Proven Reserves
LaRonde mine (underground)
Kittila mine (open pit)
Kittila mine (underground)
Kittila mine total proven
Lapa mine (underground)
Meliadine project (open pit)
Pinos Altos mine (open pit)
Pinos Altos mine
(underground)
Pinos Altos mine total proven
Meadowbank mine (open pit)
Total Proven Reserves
Probable Reserves
LaRonde mine (underground)
Bousquet (open pit)
Kittila mine (open pit)
Kittila mine (underground)
Kittila mine total probable
Lapa mine (underground)
Meliadine project (open pit)
Meliadine project
(underground)
Meliadine project total
probable
Pinos Altos mine (open pit)
Pinos Altos mine
(underground)
Pinos Altos mine total
probable
Meadowbank mine (open pit)
Total Probable Reserves
Total Proven and Probable
Reserves
In the following tables setting out mineral reserve information about the Company's mineral projects, tonnage information is
rounded to the nearest thousand tonnes, the total contained gold ounces stated do not include equivalent gold ounces for
byproduct metals contained in the mineral reserve, and the reported metal grades in the estimates represent in-place grades and
do not reflect losses in the recovery process, that is, the metallurgical losses associated with processing the extracted ore. The
mineral reserve and mineral resource figures presented in this Form 20-F are estimates, and no assurance can be given that the
anticipated tonnages and grades will be achieved or that the indicated level of recovery will be realized.
2011 ANNUAL REPORT
Table of Contents
69
LaRonde Mine Mineral Reserves and Mineral Resources
As at December 31,
2011
2010
2009
4,100,000
3.10
26,700,000
4.91
3,200,000
3.07
27,900,000
4.90
2,700,000
3.37
26,500,000
5.16
1,200,000
0.97
1,200,000
1.22
33,200,000
4.40
4,700,000
1,600,000
0.95
2,000,000
1.01
34,700,000
4.32
4,818,000
2,100,000
1.03
3,100,000
0.99
34,400,000
4.39
4,849,000
Gold-Rich Orebody
Proven mineral reserves – tonnes
Average grade – gold grams per tonne
Probable mineral reserves – tonnes
Average grade – gold grams per tonne
Gold-Poor Orebody
Proven mineral reserves – tonnes
Average grade – gold grams per tonne
Probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total proven and probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total contained gold ounces
Notes:
(1)
The 2011 proven and probable mineral reserves set forth in the table above are based on a net smelter return cut-off value of the ore that varies between
C$82.00 per tonne and C$103.00 per tonne depending on the deposit. The Company's historical metallurgical recovery rates at the LaRonde mine from
January 1, 2004 to December 31, 2011 averaged 90.8% for gold, 87.0% for silver, 86.3% for zinc and 81.8% for copper. The historical metallurgical
recovery rate for lead from January 1, 2008 to December 31, 2011 was 14.8%. The Company estimates that a 10% change in the gold price would result
in an approximate 0.9% change in mineral reserves.
(2)
In addition to the mineral reserves set out above, at December 31, 2011, the LaRonde mine contained indicated mineral resources of 7,225,000 tonnes
grading 1.79 grams of gold per tonne and inferred mineral resources of 11,400,000 tonnes grading 3.68 grams of gold per tonne.
(3)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the LaRonde mine by category at December 31, 2011
with those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves
and mineral reserves added from exploration activities during 2011.
Proven
December 31, 2010
Mined in 2011
Revision
December 31, 2011
4,838
2,406
2,899
5,331
Probable
29,892
0
(1,991 )
27,901
Total
34,729
2,406
909
33,232
(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other
factors that may materially affect scientific and technical information presented in this Form 20-F relating to the LaRonde mine may be found in the
Technical Report on the 2005 LaRonde Mineral Resource & Mineral Reserve Estimate filed with Canadian securities regulatory authorities on SEDAR on
March 23, 2005.
(5)
At December 31, 2011, the Bousquet project contained probable mineral reserves of 3,165,000 tonnes grading 1.88 grams of gold per tonne. In addition,
the Bousquet project contained indicated mineral resources of 9,805,000 tonnes grading 2.44 grams of gold per tonne and inferred mineral resources of
4,567,000 tonnes grading 4.04 grams of gold per tonne.
70
AGNICO-EAGLE MINES LIMITED
Table of Contents
Goldex Mine Mineral Reserves and Mineral Resources
As at December 31,
2011
2010
2009
–
–
–
–
–
–
–
14,804,000
1.87
12,990,000
1.62
27,794,000
1.75
1,566,000
5,217,000
2.02
19,524,000
2.06
24,741,000
2.05
1,630,000
Gold
Proven mineral reserves – tonnes
Average grade – gold grams per tonne
Probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total proven and probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total contained gold ounces
Notes:
(1)
The suspension of mining operations at the Goldex mine on October 19, 2011 resulted in a restatement, as of that date, of all Goldex proven or probable
reserves (as stated on December 31, 2010), that had not already been mined, as indicated resources, except stockpiled ore on surface that was
reclassified as measured resources.
(2)
As at December 31, 2011, the Goldex mine contained measured mineral resources of 12,360,000 tonnes grading 1.86 grams of gold per tonne, indicated
mineral resources of 24,448,000 tonnes grading 1.72 grams of gold per tonne and inferred mineral resources of 31,081,000 tonnes grading 1.59 grams of
gold per tonne.
(3)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Goldex mine by category at December 31, 2011 with
those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves and
the restatement of mineral reserves to another category.
Proven
December 31, 2010
Mined in 2011
Revision
December 31, 2011
14,804
2,477
(12,327 )
–
Probable
12,990
0
(12,990 )
–
Total
27,794
2,477
(25,317 )
–
(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other
factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Goldex mine may be found in the
Technical Report on Restatement of the Mineral Resources at Goldex Mine, Quebec, Canada as at October 19, 2011 filed with the Canadian securities
regulatory authorities on SEDAR on December 5, 2011.
2011 ANNUAL REPORT
Table of Contents
71
Kittila Mine Mineral Reserves and Mineral Resources
As at December 31,
2011
2010
2009
702,000
5.09
33,862,000
4.65
34,564,000
4.66
5,177,000
403,000
4.23
32,329,000
4.64
32,732,000
4.64
4,880,000
257,000
3.71
25,704,000
4.83
25,961,000
4.82
4,025,000
Gold
Proven mineral reserves – tonnes
Average grade – gold grams per tonne
Probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total proven and probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total contained gold ounces
Notes:
(1)
The 2011 proven and probable mineral reserve and mineral resource estimates were calculated using a metallurgical gold recovery of 89%. Gold cut-off
grades used were 1.90 grams per tonne, undiluted (1.69 grams per tonne, diluted) for open pit reserves and between 2.97 grams per tonne and
3.24 grams per tonne, undiluted (between 2.52 grams per tonne and 2.80 grams per tonne, diluted), depending on the deposit, for underground reserves.
The open pit operating cost was estimated to be €43.28 per tonne in 2011, while the underground cost averaged €68.30 per tonne. The Company
estimates that a 10% change in the gold price would result in an approximate 6% change in mineral reserves.
(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Kittila mine contained indicated mineral resources of 12,978,000 tonnes
grading 2.46 grams of gold per tonne and inferred mineral resources of 7,953,000 tonnes grading 4.55 grams of gold per tonne.
(3)
The breakdown of proven and probable mineral reserves between planned open pit operations and underground operations at the Kittila mine (with
tonnage and contained ounces rounded to the nearest thousand) at December 31, 2011 is:
Category
Proven mineral reserves
Proven mineral reserves
Total proven mineral reserves
Probable mineral reserves
Probable mineral reserves
Total probable mineral reserves
Mining Method
Tonnes
Gold Grade
(g/t)
Contained
Gold (oz)
Open pit
Underground
319,000
383,000
702,000
802,000
33,060,000
33,862,000
3.86
6.11
5.09
5.66
4.63
4.65
40,000
75,000
115,000
146,000
4,916,000
5,062,000
Open pit
Underground
(4)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Kittila mine by category at December 31, 2011 with
those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves and
mineral reserves added from exploration activities during 2011.
December 31, 2010
Mined in 2011
Revision
December 31, 2011
Proven
Probable
Total
403
1,031
1,330
702
32,329
0
1,533
33,862
32,732
1,031
2,863
34,564
(5)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other
factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Kittila mine may be found in the Technical
Report on the December 31, 2009, Mineral Resource and Mineral Reserve Estimate and the Suuri Extension Project, Kittila Mine, Finland, filed with the
Canadian securities regulatory authorities on SEDAR on March 4, 2010.
72
AGNICO-EAGLE MINES LIMITED
Table of Contents
Lapa Mine Mineral Reserves and Mineral Resources
As at December 31,
2011
2010
2009
1,044,000
6.45
1,340,000
6.61
2,384,000
6.54
501,000
1,122,000
7.24
1,709,000
7.56
2,831,000
7.43
677,000
897,000
8.33
2,319,000
8.09
3,216,000
8.16
843,000
Gold
Proven mineral reserves – tonnes
Average grade – gold grams per tonne
Probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total proven and probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total contained gold ounces
Notes:
(1)
The 2011 mineral reserve and mineral resource estimates were calculated using an assumed metallurgical gold recovery of 74.7% and a cut-off grade of
3.80 grams of gold per tonne. The operating cost per tonne estimate for the Lapa mine in 2011 was C$119.41. The Company estimates that a 10%
change in the gold price would result in an approximate 4% change in mineral reserves.
(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Lapa mine contained indicated mineral resources of 1,964,000 tonnes
grading 4.08 grams of gold per tonne and inferred mineral resources of 719,000 tonnes grading 4.74 grams of gold per tonne.
(3)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Lapa mine by category at December 31, 2011 with
those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves and
mineral reserves added from exploration activities during 2011.
Proven
December 31, 2010
Mined in 2011
Revision
December 31, 2011
1,122
621
543
1,044
Probable
1,709
0
(369 )
1,340
Total
2,831
621
174
2,384
(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other
factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Lapa mine may be found in the Technical
Report on the Lapa Gold Project, Cadillac Township, Quebec, Canada filed with Canadian securities regulatory authorities on SEDAR on June 8, 2006.
2011 ANNUAL REPORT
Table of Contents
73
Pinos Altos Mine Mineral Reserves and Mineral Resources
As at December 31,
2011
2010
2009
1,987,000
1.83
51.59
44,792,000
2.07
59.17
46,779,000
2.06
58.85
3,103,000
88,508,000
2,864,000
1.90
54.06
41,298,000
2.33
65.53
44,162,000
2.30
64.78
3,271,000
91,982,000
880,000
1.51
26.53
41,080,000
2.54
70.31
41,960,000
2.52
69.39
3,396,000
93,613,000
Gold and Silver
Proven mineral reserves – tonnes
Average gold grade – grams per tonne
Average silver grade – grams per tonne
Probable mineral reserves – tonnes
Average gold grade – grams per tonne
Average silver grade – grams per tonne
Total proven and probable mineral reserves – tonnes
Average gold grade – grams per tonne
Average silver grade – grams per tonne
Total contained gold ounces
Total contained silver ounces
Notes:
(1)
The 2011 proven and probable mineral reserve estimates are based on a net smelter return cut-off value of the open pit ore between $7.96 per tonne and
$26.39 per tonne, depending on the deposit, and a net smelter return cut-off value of the underground ore of $52.93 per tonne. The operating cost per
tonne estimate for the Pinos Altos mine in 2011 was $32.03 without deferred stripping ($27.00 with deferred stripping). The metallurgical gold recovery
used in the reserve estimates varied between 59% and 96.5%, depending on the deposit. The metallurgical silver recovery used in the reserve estimates
varied between 10% and 47.4%, depending on the deposit. The Company estimates that a 10% change in the gold price would result in an approximate
2% change in mineral reserves.
(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Pinos Altos mine contained indicated mineral resources of
20,576,000 tonnes grading 1.27 grams of gold per tonne and 28.13 grams of silver per tonne and inferred mineral resources of 23,113,000 tonnes grading
1.05 grams of gold per tonne and 22.65 grams of silver per tonne.
(3)
The proven and probable mineral reserves of the Pinos Altos mine set forth in the table above include proven mineral reserves from the Creston Mascota
deposit of 278,000 tonnes grading 0.84 grams of gold per tonne and 1.95 grams of silver per tonne and probable mineral reserves from the Creston
Mascota deposit of 12,039,000 tonnes grading 1.12 grams of gold per tonne and 12.00 grams of silver per tonne. The indicated mineral resource at the
Pinos Altos mine also includes indicated mineral resources from the Creston Mascota deposit of 1,947,000 tonnes grading 0.57 grams of gold per tonne
and 3.58 grams of silver per tonne. The inferred mineral resource at the Pinos Altos mine also includes inferred mineral resources from the Creston
Mascota deposit of 1,687,000 tonnes grading 0.88 grams of gold per tonne and 7.18 grams of silver per tonne.
(4)
The breakdown of mineral reserves between planned open pit operations and underground operations at the Pinos Altos mine (with tonnage and
contained ounces rounded to the nearest thousand) at December 31, 2011 is:
Category
Proven mineral reserves
Proven mineral reserves
Total proven mineral reserves
Probable mineral reserves
Probable mineral reserves
Total probable mineral reserves
74
Mining Method
Tonnes
Gold
Grade
(g/t)
Open pit stock pile
Underground
848,000
1,139,000
1,987,000
19,599,000
25,193,000
44,792,000
0.80
2.59
1.83
1.68
2.38
2.07
Open pit
Underground
AGNICO-EAGLE MINES LIMITED
Table of Contents
Silver
Grade
(g/t)
Contained
Gold (oz)
Contained
Silver (oz)
13.82
79.73
51.59
37.51
76.02
59.17
22,000
95,000
117,000
1,059,000
1,927,000
2,986,000
377,000
2,919,000
3,296,000
23,634,000
61,578,000
85,212,000
(5)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Pinos Altos mine by category at December 31, 2011
with those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves
and mineral reserves added from exploration activities during 2011.
Proven
Probable
Total
2,864
4,509
3,632
1,987
41,298
0
3,494
44,792
44,162
4,509
7,126
46,779
December 31, 2010
Mined in 2011
Revision
December 31, 2011
(6)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other
factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Pinos Altos mine may be found in the
Pinos Altos Gold-Silver Mining Project, Chihuahua State, Mexico, Technical Report on the Mineral Resources and Reserves as of December 31, 2008
filed with the Canadian securities regulatory authorities on SEDAR on March 25, 2009.
Meadowbank Mine Mineral Reserves and Mineral Resources
As at December 31,
2011
2010
2009
1,931,000
1.49
22,563,000
2.91
24,494,000
2.79
2,201,000
839,000
3.13
33,259,000
3.18
34,098,000
3.18
3,486,000
600,000
4.57
31,600,000
3.51
32,200,000
3.53
3,655,000
Gold
Proven mineral reserves – tonnes
Average grade – gold grams per tonne
Probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total proven and probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total contained gold ounces
Notes:
(1)
The 2011 mineral reserve and mineral resource estimates were calculated using a metallurgical gold recovery of 91.0% or 94.0% depending on the
deposit. The economic cut-off grade used to determine the open pit reserves varied from 1.40 grams of gold per tonne to 1.47 grams of gold per tonne,
depending on the deposit, and is 1.02 grams of gold per tonne as a marginal cut-off grade. The estimated ore-based operating costs used for the 2011
mineral reserve estimate varied between C$52.84 per tonne and C$53.63 per tonne, depending on the deposit, with an additional haulage cost of C$4.95
for Vault deposit reserves. The Company estimates that a 10% change in the gold price would result in an approximate 2% change in mineral reserves.
(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Meadowbank mine contained indicated mineral resources of
17,213,000 tonnes grading 2.38 grams of gold per tonne and inferred mineral resources of 3,745,000 tonnes of ore grading 3.81 grams of gold per tonne.
(3)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Meadowbank mine by category at December 31, 2011
with those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves,
an update to mineral reserves based on changed mine plans, and mineral reserves added from exploration activities during 2011.
Proven
December 31, 2010
Mined in 2011
Revision
December 31, 2011
839
2,978
4,070
1,931
Probable
33,259
0
(10,696 )
22,563
Total
34,098
2,978
(6,626 )
24,494
(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other
factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Meadowbank mine may be found in the
Technical Report on the Mineral Resources and Mineral Reserves dated February 15, 2012, Meadowbank Gold Project, Nunavut, Canada filed with
Canadian securities regulatory authorities on SEDAR on March 23, 2012.
2011 ANNUAL REPORT
Table of Contents
75
Meliadine Project Mineral Reserves and Mineral Resources
As at December 31,
2011
2010
2009
34,000
7.31
12,434,000
7.18
12,468,000
7.18
2,877,000
0
–
9,467,000
8.54
9,467,000
8.54
2,600,000
–
–
–
–
–
–
–
Gold
Proven mineral reserves – tonnes
Average grade – gold grams per tonne
Probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total proven and probable mineral reserves – tonnes
Average grade – gold grams per tonne
Total contained gold ounces
Notes:
(1)
The 2011 mineral reserve and mineral resource estimates were calculated using metallurgical gold recovery curves for Tiriganiaq and F-Zone. The curves
give a maximum recovery of 96% for Tiriganiaq and 93% for F-Zone. The 2011 mineral resource estimates for all others were calculated using a
metallurgical gold recovery of 92%. The cut-off grade used to determine the open pit reserves was 2.19 grams of gold per tonne, undiluted (1.91 grams of
gold per tonne, diluted), and the cut-off grade used to determine the underground reserves was 5.29 grams of gold per tonne, undiluted (4.10 grams of
gold per tonne, diluted). The estimated operating cost used for the 2011 mineral reserve estimate was C$74.71 per tonne for open pit and C$165.65 per
tonne for underground. The Company estimates that a 10% change in the gold price would result in an approximate 3.4% change in mineral reserves.
(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Meliadine project contained indicated mineral resources of
12,621,000 tonnes grading 4.09 grams of gold per tonne and inferred mineral resources of 12,687,000 tonnes of ore grading 5.98 grams of gold
per tonne.
(3)
The breakdown of mineral reserves between planned open pit operations and underground operations at the Meliadine project (with tonnage and
contained ounces rounded to the nearest thousand) at December 31, 2011 is:
Category
Proven mineral reserves
Probable mineral reserves
Probable mineral reserves
Total proven and probable mineral reserves
Mining Method
Tonnes
Gold Grade
(g/t)
Contained
Gold (oz)
Open pit stockpile
Open pit
Underground
34,000
5,292,000
7,142,000
12,468,000
7.31
5.80
8.20
7.18
8,000
987,000
1,882,000
2,877,000
(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other
factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Meliadine project may be found in the
Technical Report on the December 31, 2010 Mineral Resource and Mineral Reserve Estimate, Meliadine Gold Project, Nunavut, Canada, dated
February 16, 2011, filed with the Canadian securities regulatory authorities on SEDAR on March 8, 2011.
La India Project Mineral Reserves and Mineral Resources
At December 31, 2011, the La India project, consisting of the La India feasibility-stage heap leach gold project and the Tarachi
gold zone, contained no proven or probable mineral reserves, but contained measured mineral resources of 3,730,000 tonnes
grading 1.06 grams of gold per tonne, indicated mineral resources of 44,496,000 tonnes grading 0.72 grams of gold per tonne and
inferred mineral resources of 32,125,000 tonnes grading 0.69 grams of gold per tonne.
Risk Mitigation
The Company mitigates the likelihood and potential severity of the various risks it encounters in its day-to-day operations through
the application of high standards in the planning, construction and operation of mining facilities. In addition, emphasis is placed on
hiring and retaining competent personnel and developing their skills through training in safety and loss control. The Company's
operating and technical personnel have a solid track record of developing and operating precious metal mines and several of the
Company's mines have been recognized for excellence in this regard with various safety and development awards. Nevertheless,
the Company and its employees continue with a focused effort to improve workplace safety and the Company has placed
additional emphasis on safety procedure training for both mining and supervisory employees.
The Company also mitigates some of the Company's normal business risk through the purchase of insurance coverage. An
Insurable Risk Management Policy, approved by the Board, governs the purchase of insurance coverage and only permits the
purchase of coverage from insurance companies of the highest credit quality. For a more complete list of the risk factors affecting
the Company, please see "Item 3 Key Information – Risk Factors".
76
AGNICO-EAGLE MINES LIMITED
Table of Contents
Glossary of Selected Mining Terms
"alteration"
Any physical or chemical change in a rock or mineral subsequent to
formation. Milder and more localized than metamorphism.
"anastomosing"
A network of branching and rejoining fault or vein surfaces or surface
traces.
"andesite"
A dark-coloured igneous, calc-alkaline volcanic rock, of intermediate
composition (containing between 52-63% silica).
"assay"
An analysis to determine the presence, absence or concentration of one or
more chemical components.
"bedrock"
The solid rock underlying surface deposits.
"breccia"
Said of rock formations consisting mostly of angular fragments hosted by a
fine-grained matrix.
"brittle"
Of minerals, proneness to fracture under low stress. A quality affecting
behaviour during comminution of ore, whereby one species fractures more
readily than others in the material being crushed.
"bulk mining"
A mining method in which large quantities of low-grade ore are mined
without an attempt to segregate the high-grade portions.
"byproduct metal"
A secondary or additional metal recovered from the processing of rock.
"carbon-in-leach process"
A process step in which granular activated carbon particles much larger
than the ground ore particles are introduced into the ore pulp. Cyanide
leaching and precious metal adsorption onto the activated carbon occur
simultaneously. The loaded activated carbon is mechanically screened to
separate it from the barren ore pulp and processed to remove the precious
metals and prepare it for reuse.
"carbon-in-pulp (CIP)
circuit"
A process by which soluble gold within a finely ground slurry is recovered
by adsorption onto coarser activated carbon. A CIP circuit comprises a
series of tanks through which leached slurry flows. Gold is captured onto
captive activated carbon that will periodically be moved counter-currently
from tank to tank. Head tank carbon is extracted periodically to further
recover adsorbed gold before being returned to the circuit tails tank.
"clast"
A fragment of mineral, rock or organic structure that has been moved
individually from its place of origin.
"concentrate"
The clean product recovered in froth flotation.
"conglomerate"
A sedimentary rock consisting of rounded, water-worn pebbles or boulders
cemented into a solid mass.
"counter-current
decantation"
Clarifying wash water and concentrating tailings by use of several
thickeners in series. The water flows in the opposite direction from the
solids. The final products are slurry that is removed as fluid mud and clear
water that is reused in the circuit.
"crosscut"
A horizontal opening driven from a shaft at or near right angles to the strike
of a vein or other orebody.
"cut-off grade"
(A) In respect of mineral resources, the lowest grade below which the
mineralized rock currently cannot reasonably be expected to be
economically extracted.
(B) In respect of mineral reserves, the lowest grade below which the
mineralized rock currently cannot be economically extracted as
demonstrated by either a preliminary feasibility study or a feasibility study.
Cut-off grades vary between deposits depending upon the amenability of
ore to gold extraction and upon costs of production and metal prices.
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77
"deposit"
A mineralized body that has been physically delineated by sufficient drilling,
trenching and/or underground work and found to be of sufficient average
grade of metal or metals to warrant further exploration and/or development
expenditures; such a deposit does not qualify as a commercially mineable
orebody or as containing mineral reserves, until final legal, technical and
economic factors have been resolved.
"development"
The preparation of a mining property or area so that an orebody can be
analyzed and its tonnage and quality estimated. Development is an
intermediate stage between exploration and mining.
"diamond drill hole"
A borehole drilled using a bit inset with diamonds as the rock-cutting tool.
The bit cuts a circular channel around a core of rock that can be recovered
to provide a more-or-less continuous and complete columnar sample of the
rock penetrated.
"dilution"
The effect of waste rock or low-grade ore being included in mined ore,
increasing tonnage mined and lowering the overall ore grade.
"dip"
The angle at which a surface is inclined from the horizontal.
"discordant"
Said of a contact between an igneous intrusion and the country rock that is
not parallel to the foliation or the bedding planes of the latter.
"disseminated"
Said of a mineral deposit (especially of metals) in which the desired
minerals occur as scattered particles in the rock, but in sufficient quantity to
make the deposit an ore. Some disseminated deposits are very large.
"drift"
A horizontal underground opening that follows along the length of a vein or
rock formation, as opposed to a crosscut that crosses the rock formation.
"ductile"
Of rock, able to sustain, under a given set of conditions, 5% to 10%
deformation before fracturing or faulting.
"dyke"
An earthen embankment, as around a drill sump or tank, or to impound a
body of water or mill tailings. Also, a tabular body of igneous rock that cuts
across the structure of adjacent rocks.
"electrowinning"
An electrochemical process in which a metal dissolved within an electrolyte
is plated onto an electrode. Used to recover metals such as copper and
gold from solution in the leaching of concentrates, etc.
"envelope"
1. The outer or covering part of a fold, especially of a folded structure that
includes some sort of structural break.
2. A metamorphic rock surrounding an igneous intrusion.
3. In a mineral, an outer part different in origin from an inner part.
"epigenetic"
An orebody formed by hydrothermal fluids and gases that were introduced
into the host rocks from elsewhere, filling cavities in the host rock.
"epithermal"
A hydrothermal mineral deposit formed within one kilometre of the Earth's
surface and in the temperature range of 50 to 200 degrees Celsius,
occurring mainly as veins. Also, said of that depositional environment.
"extensional-shear vein"
A vein put in place in an extension fracture caused by the deformation of a
rock.
"fault"
A fracture or a fracture zone in crustal rocks along which there has been
displacement of the two sides relative to one another parallel to the fracture.
The displacement may be a few inches or many kilometres long.
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"feasibility study"
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 about whether
to finance the development of the deposit for mineral production.
A " preliminary feasibility study " or " pre-feasibility study " is a
comprehensive study of the viability of a mineral project that has advanced
to a stage where the mining method (in the case of underground mining) or
the pit configuration (in the case of an open pit) has been established, and
an effective method of mineral processing has been determined. It includes
a financial analysis based on reasonable assumptions of technical,
engineering, legal, operating, economic, social and environmental factors
and the evaluation of other relevant factors that are sufficient for a qualified
person, acting reasonably, to determine if all or part of the mineral resource
may be classified as a mineral reserve.
"flotation"
A process for concentrating minerals based on the selective adhesion of
certain minerals to air bubbles in a mixture of water and ground ore. When
the right chemicals are added to a frothy water bath of ore that has been
ground to the consistency of talcum powder, the minerals will float to the
surface. The metal-rich flotation concentrate is then skimmed off the
surface.
"foliation"
A general term for a planar arrangement of textural or structural features in
any type of rock, especially the planar structure that results from flattening
of the constituent grains of a metamorphic rock.
"fracture"
A general term for any break in a rock, whether or not it causes
displacement, due to mechanical failure by stress. Fractures include cracks,
joints and faults.
"free gold"
Gold not combined with other substances.
"glacial till"
Dominantly unsorted and unstratified drift, generally unconsolidated,
deposited directly by and underneath a glacier without subsequent
reworking by meltwater, and consisting of a heterogeneous mixture of clay,
silt, sand, gravel and boulders ranging widely in size and shape. Also
referred to as "till" and ice-laid drift.
"grade"
The relative quality of the percentage of metal content in a mineralized
body, i.e., grams of gold per tonne of rock.
"head grade"
The average grade of ore fed into a mill.
"hectare"
A metric measurement of area. 1 hectare = 10,000 square metres =
2.47 acres.
"horst"
An up-faulted block of rock.
"hydrothermal alteration"
Alteration of rocks or minerals by reaction with hydrothermal fluids.
"indicated mineral
resource"
The 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 and 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. Mineral resources that are not mineral
reserves do not have demonstrated economic viability.
While this term is recognized and required by Canadian regulations, the
SEC does not recognize it. Investors are cautioned not to assume that
any part or all of the mineral deposits in this category will ever be
converted into mineral reserves.
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79
"inferred mineral
resource"
The 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.
While this term is recognized and required by Canadian regulations, the
SEC does not recognize it. Investors are cautioned not to assume that
any part or all of the mineral deposits in this category will ever be
converted into mineral reserves. Investors are cautioned not to
assume that part of or all of an inferred mineral resource exists, or is
economically or legally mineable.
"infill drilling"
Drilling within a defined mineralized area to improve the definition of known
mineralization.
"intrusive"
A body of igneous rock formed by the consolidation of magma intruded
below surface into other rocks, in contrast to lavas, which are extruded
upon the Earth's surface.
"iron formation"
A chemical sedimentary rock, typically thin-bedded or finely laminated,
containing at least 15% iron of sedimentary origin and commonly containing
layers of chert.
"kilometre"
A metric measurement of distance. 1.0 kilometre = 0.62 miles.
"lens"
Generally used to describe a body of ore that is thick in the middle and
tapers towards the ends, resembling a convex lens.
"lithologic groups"
Geological groups.
"lode"
A mineral deposit consisting of a zone of veins, veinlets or disseminations.
"longitudinal retreat"
An underground mining method where the ore is excavated in horizontal
slices along the orebody and the stoping starts below and advances
upwards. The ore is recovered underneath in the stope.
"massive"
Said of a mineral deposit, especially of sulphides, characterized by a great
concentration of ore in one place, as opposed to a disseminated or vein-like
deposit. Said of any rock that has a homogeneous texture or fabric over a
large area, with an absence of layering or any similar directional structure.
"matrix"
The non-valuable minerals in an ore, i.e., gangue.
"measured mineral
resource"
The 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 and 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.
While this term is recognized and required by Canadian regulations, the
SEC does not recognize it. Investors are cautioned not to assume that
any part or all of the mineral deposits in this category will ever be
converted into mineral reserves.
"Merrill-Crowe process"
A separation technique for removing gold from a cyanide solution. The
solution is separated from the ore by methods such as filtration and
counter-current decantation, and then the gold is precipitated onto zinc
dust. Silver and copper may also precipitate. The precipitate is filtered to
capture the gold slimes, which are further refined, e.g., by smelting, to
remove the zinc and by treating with nitric acid to dissolve the silver.
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"mesothermal deposit"
A mineral deposit formed at moderate temperature and pressure by
deposition from hydrothermal fluids along a fissure or other opening in rock
at an intermediate depth.
"metallurgical properties"
Properties characterizing metals and minerals behaviour under various
processing techniques.
"metamorphism"
The process by which the form or structure of sedimentary or igneous rocks
is changed by heat and pressure.
"mill"
A mineral treatment plant in which crushing, wet grinding and further
treatment of ore is conducted.
"mineral reserve"
The economically mineable part of a mineral resource. The economics of
the mineral reserve should be demonstrated by a 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 is justified. A mineral reserve
includes diluting materials and allowances for losses that may occur when
the material is mined.
"mineral resource"
A concentration or occurrence of natural solid inorganic material or natural
solid 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. Investors are
cautioned not to assume that any or all of a mineral resource will ever be
converted into a mineral reserve.
"muck"
Finely blasted rock (ore or waste) underground.
"net smelter return
royalty"
A phrase used to describe a royalty payment made by a producer of metals
based on gross metal production from the property, less deduction of
certain limited costs including smelting, refining, transportation and
insurance costs.
"ounce"
A measurement of mass. 1 troy ounce = 31.1035 grams.
"outcrop"
An exposure of bedrock at the surface.
"oxidation"
A chemical reaction caused by exposure to oxygen, which results in a
change in the chemical composition of a mineral.
"oxidative"
Descriptive of an oxidation reaction.
"phenocryst"
A term for large crystals or mineral grains occurring in the matrix or
groundmass of a porphyry.
"plunge"
The inclination of a fold axis or other linear structure from a horizontal
plane, measured in the vertical plane.
"polydeformed"
A rock that has been subjected to more than one instance of folding,
faulting, shearing, compression or extension as a result of various tectonic
forces.
"porphyritic"
Rock texture in which one or more minerals has a larger grain size than the
accompanying minerals.
"porphyry"
Any igneous rock in which relatively large crystals, called phenocrysts, are
set in a fine-grained groundmass.
"pressure oxidation
process"
A process by which sulphide minerals are oxidized in order to expose gold
that is encapsulated in the mineral lattice. The main component of a
pressure oxidation circuit consists of one or more pressurized vessels
(autoclaves). Oxygen level, process temperature and acidity are the primary
control parameters of such units.
"probable mineral
reserve"
The economically mineable part of an indicated mineral resource
demonstrated by a feasibility study.
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81
"proven mineral reserve"
The economically mineable part of a measured mineral resource
demonstrated by a feasibility study.
"pyroclastic"
Produced by explosive or aerial ejection of ash, fragments and glassy
material from a volcanic vent. Term applicable to the rocks and rock layers
as well as to the textures so formed.
"recovery"
A term used in process metallurgy to indicate the proportion of valuable
material obtained in the processing of an ore. It is generally stated as a
percentage of valuable metal in the ore that is recovered compared to the
total valuable metal present in the ore before processing.
"reverse circulation
drilling"
A type of drilling into rock using a solid bit to produce a hole and deliver
rock chips (rather than core) to surface for analysis. Less expensive and
faster than diamond drilling but not as accurate.
"run-of-mine ore"
The mined ore as it is delivered, prior to sorting, stockpiling or treatment.
"schist"
A strongly foliated crystalline rock that can be readily split into think flakes
or slabs due to the well developed parallelism of more than 50% of the
minerals present in it.
"scrubber"
A device for separating particulate material from a waste gas stream.
"semi-autogenous
grinding" or "SAG"
A method of grinding rock whereby larger chunks of the rock itself and steel
balls form the grinding media.
"shear" or "shearing"
The deformation of rocks by lateral movement along innumerable parallel
planes, generally resulting from pressure and producing such metamorphic
structures as cleavage and schistosity.
"sill"
An intrusive sheet of igneous rock of roughly uniform thickness that has
been forced between the bedding planes of existing rock.
"slurry"
Fine rock particles in circulating water.
"stope development"
Driving subsidiary openings to prepare blocks of ore for extraction by
stoping.
"strike"
The bearing of the outcrop of an inclined bed, vein or fault plane on a
horizontal surface; the direction of a horizontal line perpendicular to the
direction of the dip.
"stringers"
Mineral veinlets or filaments occurring in a discontinuous subparallel pattern
in a host rock.
"sublevel retreat"
An underground mining method in which the ore is excavated in horizontal
slices along the orebody, starting below and advancing upwards. The ore is
recovered underneath in the stope.
"tabular"
Said of a feature having two dimensions that are much larger or longer than
the third, such as a dyke.
"tailings"
Material rejected from the mill after most of the recoverable valuable
minerals have been extracted.
"tailings dam"
A natural or man-made confined area suitable for depositing tailings.
"tailings pond"
A low-lying depression used to confine tailings, the prime function of which
is to allow enough time for metals to settle out or for cyanide to be naturally
destroyed before the water is discharged into the local watershed.
"tenement"
A synonym of mineral title.
"thickness"
The distance at right angles between the hanging wall and the footwall of a
lode or lens.
"tonne"
A metric measurement of mass. 1 tonne = 1,000 kilograms =
2,204.6 pounds.
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"transfer fault"
A structure that can accommodate lateral variations of deformation and
strain.
"transverse open
stoping"
An underground mining method in which the ore is excavated in horizontal
slices perpendicular to the orebody length and the stoping starts below and
advances upwards. The ore is recovered underneath the stope through a
drawpoint system.
"twinned drill hole"
A borehole drilled very close to an original hole in the same direction and
dip in order to verify the results from the original drill hole.
"vein"
Minerals filling a fissure, fault or crack in rock.
"wacke"
A "dirty" sandstone that consists of a mixture of poorly sorted mineral and
rock fragments in an abundant matrix of clay and fine silt.
"winze"
An internal mine shaft.
"Zadra elution circuit"
The process in this part of a gold mill strips gold and silver from carbon
granules and puts them into solution.
"zone"
An area of distinct mineralization, i.e., a deposit.
2011 ANNUAL REPORT
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83
ITEM 4A UNRESOLVED STAFF COMMENTS
None.
ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Results of Operations
Revenues from Mining Operations
In 2011, revenue from mining operations increased 28% to $1,822 million from $1,423 million in 2010. The increase in revenue
was mainly attributable to higher sales prices realized on gold and silver in 2011 compared with 2010.
In 2011, sales of precious metals (gold and silver) accounted for 95% of revenues, up from 93% in 2010 and 87% in 2009. The
increase in the percentage of revenues from precious metals when compared to 2010 is due to an increase in gold and silver
prices, offset partially by decreases in both zinc and copper sales volumes and average realized prices. Revenue from mining
operations are accounted for net of related smelting, refining, transportation and other charges. The table below sets out net
revenue, production volumes and sales volumes by metal:
2011
2010
2009
(thousands)
Revenues from mining operations:
Gold
Silver
Zinc
Copper
Lead
$
$
1,563,760
171,725
70,522
14,451
1,341
1,821,799
$
$
1,216,249
104,544
77,544
22,219
1,965
1,422,521
$
$
474,875
59,155
57,034
22,571
127
613,762
Production volumes:
Gold (ounces)
Silver (000s ounces)
Zinc (tonnes)
Copper (tonnes)
985,460
5,080
54,894
3,216
987,609
4,812
62,544
4,224
492,972
4,035
56,186
6,671
Sales volumes:
Gold (ounces)
Silver (000s ounces)
Zinc (tonnes)
Copper (tonnes)
996,090
5,089
54,499
3,194
973,057
4,722
59,566
4,223
463,660
3,871
58,391
6,689
Revenue from gold sales increased by $347.5 million, or 29%, in 2011. Gold production decreased to 985,460 ounces in 2011
from 987,609 ounces in 2010. The decrease in gold production levels between 2010 and 2011 was due primarily to the
suspension of production at the Goldex mine on October 19, 2011 and to lower grades and throughput at the LaRonde mine,
offset partially by the achievement of commercial production at the Creston Mascota deposit at Pinos Altos on March 1, 2011.
Average realized gold price increased 26% in 2011 to $1,573 per ounce from $1,250 per ounce in 2010.
Silver revenue increased by $67.2 million, or 64%, in 2011 when compared to 2010 due to an increase in the realized sales price
and increased production. Revenue from zinc sales decreased by $7.0 million, or 9%, in 2011 when compared to 2010. The
decrease in zinc revenue was due to decreases in realized zinc sales prices and production. Revenue from copper sales
decreased by $7.8 million, or 35%, in 2011 when compared to the previous year due to decreases in realized zinc sales prices
and production.
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Interest and Sundry Income (Expense)
Interest and sundry income (expense) consists mainly of acquisition costs of $(3.8) million related to the acquisition of Grayd
during 2011 and a net loss recorded on asset disposals, partially offset by interest earned on cash balances. Interest and sundry
expense was $(5.2) million in 2011 compared with interest and sundry income of $10.3 million in 2010.
Available-for-sale Securities
From time to time, the Company takes minority equity positions in other mining and exploration companies. As part of the
Company's procedures to assess whether the value of its available-for-sale securities portfolio is reasonable for accounting
purposes, it was determined (in accordance with the requirements of Accounting Standards Codification ("ASC") 320
Investments – Debt and Equity Securities) that a non-cash write-down of $8.6 million was required in 2011. These write-downs do
not necessarily reflect management's long-term outlook on the value of the securities, but rather an "other-than-temporary"
impairment as defined in ASC 320. In 2010 and 2009, this determination resulted in no write-downs relating to the Company's
various investments.
In 2011, the sale of various available-for-sale securities resulted in a gain before taxes of $4.9 million compared with $19.5 million
in 2010. During 2010, there was a net gain on the acquisition of Comaplex of $57.5 million. The gain was driven by the
mark-to-market gain on the shares of Comaplex purchased prior to the announcement of the acquisition that were accumulated
within other comprehensive income and were reversed through the Consolidated Statements of Income upon acquisition of
control, partially offset by the costs of the acquisition.
Production Costs
In 2011, total production costs were $876.1 million compared to $677.5 million in 2010. This increase is mainly due to a full year of
production and persistently high costs at the Meadowbank mine in 2011 which achieved commercial production on March 1, 2010,
and the achievement of commercial production at the Creston Mascota deposit at Pinos Altos on March 1, 2011. The increase in
production costs from these factors was partially offset by the suspension of operations at the Goldex mine on October 19, 2011.
The table below sets out the components of production costs:
Production Costs
2011
2010
2009
(thousands)
LaRonde
Goldex
Kittila
Lapa
Pinos Altos
Meadowbank
Production costs per Consolidated Statement of Income
$
$
209,947
56,939
110,477
68,599
145,614
284,502
876,078
$
$
189,146
61,561
87,740
66,199
90,293
182,533
677,472
$
$
164,221
54,342
42,464
33,472
11,819
–
306,318
Production costs at the LaRonde mine during 2011 were $209.9 million, an increase of approximately 11% as compared to 2010.
During 2011, LaRonde processed an average of 6,592 tonnes of ore per day, compared to 7,102 tonnes of ore per day during
2010. Minesite costs per tonne were C$79 in the fourth quarter of 2011, compared with C$79 in the fourth quarter of 2010. For the
full year 2011, minesite costs per tonne were C$84 compared with C$75 per tonne in 2010. The increase in minesite costs per
tonne during 2011 is attributable to lower throughput due to issues with sequencing and dilution, and the achievement of
commercial production at the LaRonde mine extension on December 1, 2011, meaning that many costs began to be expensed.
Production costs at the Goldex mine were $56.9 million compared with $61.6 million in 2010. The decrease is due to the
suspension of Goldex mine operations on October 19, 2011. Minesite costs per tonne were C$21 in the fourth quarter of 2011
when the remaining surface stockpile was milled compared to C$21 in the fourth quarter of 2010. For the full year, minesite costs
per tonne were C$21 compared with C$22 per tonne in 2010.
2011 ANNUAL REPORT
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85
Production costs at the Kittila mine during 2011 were $110.5 million compared with $87.7 million in 2010. The increase is mainly
due to a full year of commercial production in the underground mine where costs are higher as compared to the open pit and to
unbudgeted tonnes being mined during the remediation of a slip in the Suuri pit east wall. The mine also experienced higher costs
for energy and chemical reagents in 2011 as compared to 2010. During 2011, Kittila processed an average of 2,824 tonnes of ore
per day, above the 2010 average production of 2,631 tonnes of ore per day. The processing design capacity of the Kittila mill is
approximately 3,000 tonnes per day. The underachievement in actual processing versus capacity was mainly due to several
unplanned shutdowns during 2011. Minesite costs per tonne were €80 in the fourth quarter of 2011 compared to €79 in the fourth
quarter of 2010. For the full year, the minesite costs per tonne were €75, compared with €66 per tonne in 2010.
Production costs at the Lapa mine during 2011 were $68.6 million compared with $66.2 million in 2010. During 2011, Lapa
processed an average of 1,701 tonnes of ore per day, above the 2010 average production of 1,512 tonnes of ore per day due to
the realization of design efficiencies. The processing design capacity of the Lapa mill is approximately 1,500 tonnes per day.
Minesite costs per tonne were C$117 in the fourth quarter of 2011 compared to C$115 in the fourth quarter of 2010. For the full
year, the minesite costs per tonne were C$110, compared with C$114 per tonne in 2010. With total production costs essentially
unchanged and a decrease in minesite costs per tonne between 2010 and 2011, the overall improved operating performance is
attributable to realized efficiencies as the Company gained experience with the orebody.
Production costs at the Pinos Altos mine during 2011 were $145.6 million compared with $90.3 million in 2010. The increase is
mainly due to the achievement of commercial production at the Creston Mascota deposit at Pinos Altos on March 1, 2011. During
2011, Pinos Altos processed an average of 12,355 tonnes of ore per day, significantly higher than the 2010 average production of
3,638 tonnes of ore per day due primarily to the addition of the Creston Mascota deposit at Pinos Altos. Minesite costs per tonne
were $24 in the fourth quarter of 2011, compared to $35 in the fourth quarter of 2010. For the full year, the minesite costs per
tonne were $27 compared with $35 per tonne in 2010. The decrease in minesite costs per tonne between 2010 and 2011 is
mainly attributable to a greater proportion of lower cost heap leach tonnes processed from the Creston Mascota deposit at
Pinos Altos.
Production costs at the Meadowbank mine during 2011 were $284.5 million compared with $182.5 million in 2010. The increase is
due primarily to a full year of production in 2011 versus 10 months of production in 2010 as the Meadowbank mine achieved
commercial production on March 1, 2010 and to higher costs realized in nearly all aspects of operating the mine in 2011. During
2011, the Meadowbank mine processed an average of 8,158 tonnes of ore per day, above the 2010 average production of
6,653 tonnes of ore per day due primarily to the June 2011 addition of the permanent secondary crusher, but below design
capacity of 8,500 tonnes per day. Minesite costs per tonne were $98 in the fourth quarter of 2011, compared to $91 in the fourth
quarter of 2010. For the full year, the minesite costs per tonne were $91 compared with $95 per tonne in 2010. The decrease in
minesite costs per tonne between 2010 and 2011 is mainly attributable to increased throughput.
Total Production Costs by Category
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In 2011, total cash costs per ounce of gold increased to $580 from $451 in 2010 and $346 in 2009, representing a weighted
average over all the Company's producing mines. In 2011, the LaRonde mine total cash costs per ounce were $77, the Goldex
mine total cash costs per ounce were $401, the Kittila mine total cash costs per ounce were $739, the Lapa mine total cash costs
per ounce were $650, the Pinos Altos mine total cash costs per ounce were $299 and the Meadowbank mine total cash costs per
ounce were $1,000. Total cash costs per ounce are comprised of minesite costs incurred during the period and, for the LaRonde
and Pinos Altos mines, reduced by their related net byproduct revenue. Total cash costs per ounce are affected by various factors
such as the quantity of gold produced, operating costs, exchange rates and, at the LaRonde and Pinos Altos mines, the quantity
of byproduct metals produced and byproduct metal prices. The Company has decided to report total cash costs using the more
common industry practice of deferring certain stripping costs that can be attributed to future production. The methodology is in line
with the Gold Institute Production Cost Standard. The purpose of adjusting for these stripping costs is to enhance the
comparability of cash costs to the majority of the Company's peers within the mining industry.
Total cash costs per ounce is not a recognized measure under US GAAP and this data may not be comparable to data presented
by other gold producers. Management believes that this generally accepted industry measure is a realistic indication of operating
performance and is useful in allowing year-over-year comparisons. This measure is calculated by adjusting production costs as
shown in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for net byproduct revenues, royalties,
inventory adjustments, certain stripping costs that can be attributed to future production and asset retirement provisions and then
dividing by the number of ounces of gold produced. Total cash costs per ounce is intended to provide investors with information
about the cash generating capabilities of mining operations. Management uses this measure to monitor the performance of mining
operations. Since market prices for gold are quoted on a per ounce basis, using this per ounce measure allows management to
assess a mine's cash generating capabilities at various gold prices. Management is aware that this per ounce measure of
performance is affected by fluctuations in byproduct metal prices and exchange rates. Management compensates for the
limitations inherent in this measure by using it in conjunction with minesite costs per tonne (discussed below) as well as other data
prepared in accordance with US GAAP. Management also performs sensitivity analyses in order to quantify the effects of
fluctuating metal prices and exchange rates.
Minesite costs per tonne is not a recognized measure under US GAAP and this data may not be comparable to data presented by
other gold producers. This measure is calculated by adjusting production costs as shown in the Consolidated Statement of
Income (Loss) and Comprehensive Income (Loss) for inventory adjustments, certain stripping costs that can be attributed to future
production and asset retirement provisions and then dividing by tonnes of ore processed through the mill. Since total cash costs
per ounce data can be affected by fluctuations in byproduct metals prices, exchange rates and other adjusting items, management
believes this measure provides additional information regarding the performance of mining operations and allows management to
monitor operating costs on a more consistent basis as the per tonne measure eliminates the cost variability associated with
varying production levels. Management also uses this measure to determine the economic viability of mining blocks. As each
mining block is evaluated based on the net realizable value of each tonne mined, in order to be economically viable the estimated
revenue on a per tonne basis must be in excess of the minesite costs per tonne. Management is aware that this per tonne
measure is affected by fluctuations in production levels and thus uses this measure as an evaluation tool in conjunction with
production costs prepared in accordance with US GAAP. This measure supplements production cost information prepared in
accordance with US GAAP and allows investors to distinguish between changes in production costs resulting from changes in
level of production versus changes in operating performance.
Both of these non-US GAAP measures used should be considered together with other data prepared in accordance with US
GAAP, and none of the measures taken by themselves is necessarily indicative of production costs or cash flow measures
prepared in accordance with US GAAP. The tables below reconcile total cash costs per ounce and minesite costs per tonne to the
production costs presented in the consolidated financial statements prepared in accordance with US GAAP.
2011 ANNUAL REPORT
Table of Contents
87
Total Production Costs by Mine
2011
2010
2009
(thousands, except as noted)
Total production costs per Consolidated Statements of Income and
Comprehensive Income
Attributable to LaRonde
Attributable to Goldex
Attributable to Lapa
Attributable to Kittila
Attributable to Pinos Altos
Attributable to Meadowbank
Total
$
$
876,078
209,947
56,939
68,599
110,477
145,614
284,502
876,078
$
$
677,472
189,146
61,561
66,199
87,740
90,293
182,533
677,472
$
306,318
164,221
54,342
33,472
42,464
11,819
–
306,318
$
Reconciliation of Production Costs to Total Cash Costs per Ounce of Gold by Mine
LaRonde Total Cash Costs per Ounce
2011
2010
2009
(thousands, except as noted)
Production costs per Consolidated Statements of Income and
Comprehensive Income
Adjustments:
Byproduct metal revenues, net of smelting, refining and marketing charges
Inventory and other adjustments (i)
Non-cash reclamation provision
Cash operating costs
Gold production (ounces)
Total cash costs (per ounce) (ii)
$
$
$
Goldex Total Cash Costs per Ounce
209,947
$
189,146
$
(194,000 )
(2,309 )
(4,062 )
9,576 $
124,173
77 $
(192,155 )
3,287
(1,344 )
(1,066 ) $
162,806
(7 ) $
2011
2010
164,221
(138,262 )
(3,809 )
(1,198 )
20,952
203,494
103
2009
(thousands, except as noted)
Production costs per Consolidated Statements of Income and
Comprehensive Income
Adjustments:
Byproduct metal revenues, net of smelting, refining and marketing charges
Inventory and other adjustments (i)
Non-cash reclamation provision
Cash operating costs
Gold production (ounces)
Total cash costs (per ounce) (ii)
88
AGNICO-EAGLE MINES LIMITED
Table of Contents
$
$
$
56,939
$
395
(2,778 )
(173 )
54,383 $
135,478
401 $
61,561
$
727
(253 )
(216 )
61,819 $
184,386
335 $
54,342
–
383
(196 )
54,529
148,849
366
Lapa Total Cash Costs per Ounce
2011
2010
2009
(thousands, except as noted)
Production costs per Consolidated Statements of Income and
Comprehensive Income
Adjustments:
Byproduct metal revenues, net of smelting, refining and marketing charges
Inventory and other adjustments (i)
Non-cash reclamation provision
Cash operating costs
Gold production (ounces)
Total cash costs (per ounce) (ii)
$
$
$
Kittila Total Cash Costs per Ounce
68,599
$
66,199
$
33,472
663
631
(348 )
69,545 $
107,068
650 $
644
(4,683 )
(57 )
62,103 $
117,456
529 $
–
6,072
(25 )
39,519
52,602
751
2011
2010
2009
(thousands, except as noted)
Production costs per Consolidated Statements of Income and
Comprehensive Income
Adjustments:
Byproduct metal revenues, net of smelting, refining and marketing charges
Inventory and other adjustments (i)
Non-cash reclamation provision
Stripping costs (capitalized vs expensed) (iii)
Cash operating costs
Gold production (ounces)
Total cash costs (per ounce) (ii)
$
$
$
Pinos Altos Total Cash Costs per Ounce
110,477
$
87,740
$
42,464
152
(1,267 )
(206 )
(3,018 )
106,138 $
143,560
739 $
252
(4,774 )
(334 )
–
82,884 $
126,205
657 $
–
1,565
(254 )
–
43,775
65,547
668
2011
2010
2009
(thousands, except as noted)
Production costs per Consolidated Statements of Income and
Comprehensive Income
Adjustments:
Byproduct metal revenues, net of smelting, refining and marketing charges
Inventory adjustments (i)
Non-cash reclamation provision
Stripping costs (capitalized vs expensed) (iii)
Cash operating costs
Gold production (ounces)
Total cash costs (per ounce) (ii)
Table of Contents
$
$
$
145,614
$
90,293
$
11,819
(60,653 )
(25,052 )
(625 )
1,871
2,925
(5,356 )
(1,372 )
(858 )
(100 )
(24,260 )
(11,857 )
(253 )
61,200 $
55,451 $
5,485
204,380
130,431
9,634
299 $
425 $
570
2011 ANNUAL REPORT
89
Meadowbank Total Cash Costs per Ounce
2011
2010
2009
(thousands, except as noted)
Production costs per Consolidated Statements of Income and Comprehensive
Income
Adjustments:
Byproduct metal revenues, net of smelting, refining and marketing charges
Inventory adjustments (i)
Non-cash reclamation provision
Stripping costs (capitalized vs expensed) (iii)
Cash operating costs
Gold production (ounces)
Total cash costs (per ounce) (ii)
$
$
$
284,502
$
(546 )
(1,670 )
(1,679 )
(9,746 )
270,861 $
270,801
1,000 $
$
–
(584 )
6,911
(1,315 )
(4,321 )
183,224 $
264,576
693 $
–
–
–
–
–
–
–
182,533
Reconciliation of Production Costs to Minesite Costs per Tonne by Mine
LaRonde Minesite Costs per Tonne
2011
2010
2009
(thousands, except as noted)
Production costs
Adjustments:
Inventory and other adjustments (iv)
Non-cash reclamation provision
Minesite operating costs (US$)
Minesite operating costs (C$)
Tonnes of ore milled (000s tonnes)
Minesite costs per tonne (C$) (v)
$
209,947
$
$
(22 )
(4,062 )
205,863 $
202,957 $
2,406
84 $
$
Goldex Minesite Costs per Tonne
Production costs
Adjustments:
Inventory and other adjustments (iv)
Non-cash reclamation provision
Minesite operating costs (US$)
Minesite operating costs (C$)
Tonnes of ore milled (000s tonnes)
Minesite costs per tonne (C$) (v)
90
AGNICO-EAGLE MINES LIMITED
Table of Contents
$
189,146
3,287
(1,344 )
191,089 $
194,993 $
2,592
75 $
2011
2010
$
56,939
$
$
(2,407 )
(173 )
54,359 $
53,208 $
2,477
21 $
$
$
$
61,561
164,221
234
(1,198 )
163,257
184,233
2,546
72
2009
$
(253 )
(216 )
61,092 $
62,545 $
2,782
22 $
54,342
383
(196 )
54,529
60,986
2,615
23
Lapa Minesite Costs per Tonne
2011
Production costs
Adjustments:
Inventory and other adjustments (iv)
Non-cash reclamation provision
Minesite operating costs (US$)
Minesite operating costs (C$)
Tonnes of ore milled (000s tonnes)
Minesite costs per tonne (C$) (v)
Production costs
Adjustments:
Inventory and other adjustments (iv)
Non-cash reclamation provision
Stripping costs (capitalized vs expensed)
Minesite operating costs (US$)
Minesite operating costs (€)
Tonnes of ore milled (000s tonnes)
Minesite costs per tonne (€) (v)
Table of Contents
68,599
$
$
$
1,071
(348 )
69,322 $
68,403 $
621
110 $
2011
$
(iii)
$
€
€
Pinos Altos Minesite Costs per Tonne
Production costs
Adjustments:
Inventory and other adjustments (iv)
Non-cash reclamation provision
Stripping costs (capitalized vs expensed)
Minesite operating costs (US$)
Tonnes of ore milled (000s tonnes)
Minesite costs per tonne (US$) (v)
$
$
Kittila Minesite Costs per Tonne
2010
110,477
66,199
2009
$
(4,683 )
(57 )
61,459 $
62,771 $
552
114 $
2010
$
(1,324 )
(206 )
(3,018 )
105,929 $
76,817 €
1,031
75 €
2011
87,740
$
(4,774 )
(334 )
–
82,632 $
63,464 €
960
66 €
42,464
1,565
(254 )
–
43,775
30,568
563
54
2009
$
145,614
$
(169 )
2,925
(5,356 )
(1,372 )
(858 )
(100 )
(24,260 )
(11,857 )
(253 )
119,813 $
80,503 $
6,110
4,509
2,318
227
27 $
35 $
27
2011 ANNUAL REPORT
91
(iii)
$
90,293
6,072
(26 )
39,518
42,055
299
140
2009
2010
$
33,472
$
11,819
Meadowbank Minesite Costs per Tonne
Production costs
Adjustments:
Inventory and other adjustments (iv)
Non-cash reclamation provision
Stripping costs (capitalized vs expensed)
Minesite operating costs (US$)
Minesite operating costs (C$)
Tonnes of ore milled (000s tonnes)
Minesite costs per tonne (C$) (v)
2011
$
(iii)
$
$
$
284,502
2010
$
253
(1,679 )
(9,746 )
273,330 $
272,157 $
2,978
91 $
2009
$
–
6,911
(1,315 )
(4,321 )
183,808 $
190,980 $
2,001
95 $
–
–
–
–
–
–
–
182,533
Notes:
(i)
Under the Company's revenue recognition policy, revenue is recognized on concentrates when legal title passes. Since total cash costs are calculated on
a production basis, this inventory adjustment reflects the sales margin on the portion of concentrate production for which revenue has not been recognized
in the period.
(ii)
Total cash cost per ounce is not a recognized measure under US GAAP and this data may not be comparable to data presented by other gold producers.
The Company believes that this generally accepted industry measure is a realistic indication of operating performance and is useful in allowing year over
year comparisons. As illustrated in the tables above, this measure is calculated by adjusting production costs as shown in the Consolidated Statements of
Income and Comprehensive Income for net byproduct revenues, royalties, inventory adjustments and asset retirement provisions. This measure is
intended to provide investors with information about the cash generating capabilities of the Company's mining operations. Management uses this measure
to monitor the performance of the Company's mining operations. Since market prices for gold are quoted on a per ounce basis, using this per ounce
measure allows management to assess the mine's cash generating capabilities at various gold prices. Management is aware that this per ounce measure
of performance can be impacted by fluctuations in byproduct metal prices and exchange rates. Management compensates for the limitation inherent with
this measure by using it in conjunction with the minesite costs per tonne measure (discussed below) as well as other data prepared in accordance with US
GAAP. Management also performs sensitivity analyses in order to quantify the effects of fluctuating metal prices and exchange rates.
(iii)
The Company has decided to report total cash costs per ounce and minesite costs per tonne using the more common industry practice of deferring certain
stripping costs that can be attributed to future production. The methodology is in line with the Gold Institute Production Cost Standard. The purpose of
adjusting for these stripping costs is to enhance the comparability of cash costs to the majority of the Company's peers within the mining industry.
(iv)
This inventory adjustment reflects production costs associated with unsold concentrates.
(v)
Minesite costs per tonne is not a recognized measure under US GAAP and this data may not be comparable to data presented by other gold producers.
As illustrated in the tables above, this measure is calculated by adjusting production costs as shown in the Consolidated Statements of Income and
Comprehensive Income for inventory, asset retirement provisions and deferred stripping costs, and then dividing by tonnes processed through the mill.
Since total cash costs data can be affected by fluctuations in byproduct metal prices and exchange rates, management believes minesite costs per tonne
provides additional information regarding the performance of mining operations and allows management to monitor operating costs on a more consistent
basis as the per tonne measure eliminates the cost variability associated with varying production levels. Management also uses this measure to determine
the economic viability of mining blocks. As each mining block is evaluated based on the net realizable value of each tonne mined, in order to be
economically viable the estimated revenue on a per tonne basis must be in excess of the minesite costs per tonne. Management is aware that this per
tonne measure is impacted by fluctuations in production levels and thus uses this evaluation tool in conjunction with production costs prepared in
accordance with US GAAP. This measure supplements production cost information prepared in accordance with US GAAP and allows investors to
distinguish between changes in production costs resulting from changes in production versus changes in operating performance.
The Company's operating results and cash flow are significantly affected by changes in the US dollar/Canadian dollar exchange
rate due to its operating mines located in Canada. Exchange rate movements can have a significant impact as all of the
Company's revenues are earned in US dollars but most of its operating costs and a substantial portion of its capital costs are in
Canadian dollars. The US dollar/Canadian dollar exchange rate has varied significantly over the past several years. During the
period from January 1, 2005 to December 31, 2011, the noon buying rate, as reported by the Bank of Canada has fluctuated
between C$0.92 per US$1.00 and C$1.30 per US$1.00. In addition, a significant portion of the Company's expenditures at the
Kittila mine and the Pinos Altos mine are denominated in Euros and Mexican pesos, respectively. Each of these currencies has
varied significantly against the US dollar over the past several years as well.
Exploration and Corporate Development Expense
Proven and probable gold reserves decreased to 18.8 million ounces in 2011 from 21.3 million ounces in 2010. The decrease is
attributed to 2011 gold production, the October 19, 2011 suspension of mining operations at the Goldex mine and the associated
reclassification of its reserves to resources and the new mine plan at the Meadowbank mine that resulted in lower reserves.
Set out below is a summary of the significant exploration and corporate development activities undertaken in 2011:
•
Canadian regional exploration expenditures were $29.9 million in 2011, an increase of $1.6 million compared with
2010.
92
AGNICO-EAGLE MINES LIMITED
Table of Contents
•
Approximately $8.3 million of regional exploration expenses were incurred on the Pinos Altos mine in Mexico. The
most concentrated drill programs in 2011 focused on the potential at satellite deposits including Cubiro, Sinter and
San Eligio.
•
The Company incurred exploration expenditures of $7.5 million during 2011 in Nevada and Wyoming, an increase of
$0.5 million compared with 2010. Exploration activities during 2011 were concentrated on the West Pequop property
located in the northeastern region of Nevada and on the Rattlesnake Hills property located in the southwestern region
of Wyoming.
•
During 2011, regional exploration expenditures in Finland amounted to $6.3 million, an increase of $1.8 million
compared with 2010. The Company continued its exploration program at the Suurikuusikko structures around the
Kittila mine.
•
During 2011, mining operations at the Goldex mine were suspended as a result of rock subsidence above the
northeastern limit of the deposit. Investigation expenditures of $19.7 million were incurred which included rock
mechanic and mining studies, drilling and development exploration of the deeper D zone and care and maintenance of
general infrastructure.
•
The Company's corporate development team was active in 2011 in evaluating new properties and possible acquisition
opportunities. During 2011, the team's accomplishments included the Grayd acquisition.
The table below sets out exploration expense by region and total corporate development expense:
2011
2010
2009
(thousands)
Canada
Latin America
United States
Europe
Goldex mine
Corporate development expense
$
$
29,885
8,263
7,520
6,332
19,656
4,065
75,721
$
$
28,346
8,268
7,042
4,569
–
6,733
54,958
$
$
11,194
9,212
7,176
5,325
–
3,372
36,279
General and Administrative Expenses
General and administrative expenses increased to $107.9 million in 2011 from $94.3 million in 2010, attributable primarily to
increases in salaries, benefits, insurance, and office and information technology costs. There was an increase in stock option
expense due to an increase in the number of stock options granted and an increase in the Black-Scholes calculated value of the
options granted. Of the total general and administrative expenses, stock-based compensation was $42.2 million and $38.1 million
in 2011 and 2010, respectively.
Provincial Capital Taxes
These taxes are assessed on the Company's capitalization (paid-up capital and debt) less certain allowances and tax credits for
exploration expenses incurred. Ontario capital tax was eliminated on July 1, 2010, while Quebec capital tax was eliminated at the
end of 2010. There was however, a government audit assessment related to prior years concluded in 2011 that resulted in a
$9.2 million expense. In 2010, the Company had a recovery of $6.1 million due to non-recurring items relating to prior years. The
provincial capital tax expense is expected to be nil going forward.
Amortization Expense
The consolidated amortization expense for the year increased to $261.8 million in 2011, compared to $192.5 million in 2010,
largely as a result of a full year of production at the Meadowbank mine and the underground operations at the Kittila and Pinos
Altos mines in 2011. Additionally, commercial production commenced at the Creston Mascota deposit at Pinos
2011 ANNUAL REPORT
Table of Contents
93
Altos and the LaRonde mine extension in 2011. Amortization expense commences once a mine achieves commercial production.
Interest Expense
In 2011, interest expense increased to $55.0 million from $49.5 million in 2010 and $8.4 million in 2009. The table below shows
the components of interest expense:
2011
2010
2009
(thousands)
Stand-by fees on credit facilities
Amortization of credit facilities, financing and note issuance costs
Government interest, penalties and other
Interest on credit facilities
Interest on notes
Interest capitalized to construction in progress
$
$
7,345 $
4,810
3,078
1,764
39,067
(1,025 )
55,039 $
8,159 $
3,507
2,165
10,795
29,423
(4,556 )
49,493 $
2,730
2,392
3,326
15,470
–
(15,470 )
8,448
Foreign Currency Translation Gain (Loss)
The foreign currency translation gain was $1.1 million in 2011 compared with a loss of $19.5 million in 2010 as the US dollar
strengthened against the Canadian dollar, Euro and the Mexican peso during 2011. The gain in 2011 is due primarily to the impact
of translation on liabilities denominated in Euros, Canadian dollars and Mexican pesos, offset partially by the impact of translation
on cash balances denominated in Canadian dollars.
Income and Mining Taxes
In 2011, the Company had an effective tax rate of 26.9% compared with 23.7% in 2010 and 19.9% in 2009. The tax provision for
2011 was a recovery due to the write-downs of the Goldex and Meadowbank mines. The effective tax rate of 26.9% was lower
than the statutory tax rate of 27.8% due to permanent differences, principally stock-based compensation that is not deductible for
tax purposes in Canada, and various other minor adjustments.
Supplies Inventory
The supplies inventory balance as of December 31, 2011 increased to $182.4 million, compared to the December 31, 2010
balance of $149.6 million. This increase is mainly attributable to the build-up of supplies inventory at the Meadowbank mine to
facilitate operations, including the June 2011 startup of the permanent secondary crusher, and increased maintenance
requirements. In addition, supplies inventory at the Pinos Altos mine increased to support underground mining operations and
operations at the Creston Mascota deposit at Pinos Altos, which achieved commercial production on March 1, 2011.
Liquidity and Capital Resources
At the end of 2011, the Company's cash and cash equivalents, short-term investments and restricted cash totalled $221.5 million,
compared to $104.6 million at the end of 2010. This increase, which resulted from financing and operating activities, was partially
offset by investing activities. Cash provided by financing activities of $182.5 million in 2011 compared with cash used in financing
activities of $21.9 million in 2010 due primarily to a change from net repayments of long-term debt in 2010 to net proceeds from
long-term debt of $270.0 million in 2011. Cash flow provided by operating activities increased significantly to $663.5 million in
2011 from $483.5 million in 2010 mainly due to an increase in gold prices realized. The increase in cash flow provided by
operating activities was offset to some degree by the suspension of production at the Goldex mine on October 19, 2011 and by
lower grades and throughput realized at the LaRonde mine as it transitions into the LaRonde mine extension. In 2011, cash used
in investing activities increased to $760.5 million from $523.3 million in 2010, due primarily to the November 2011 acquisition of
Grayd, an increase in
94
AGNICO-EAGLE MINES LIMITED
Table of Contents
available-for-sale securities investments, and an increase in restricted cash relating to the environmental remediation of the
Goldex mine.
In 2011, the Company invested $482.8 million of cash in new projects and sustaining capital expenditures. Major expenditures in
2011 included $116.9 million on construction at the Meadowbank mine, $73.9 million on construction at the Meliadine project,
$49.5 million on construction at the LaRonde mine extension, and $220.8 million for sustaining capital expenditures at the Kittila,
Goldex, LaRonde, Pinos Altos and Lapa mines. Capital expenditures to complete the Company's growth initiatives are expected
to be funded by cash provided by operating activities and cash on hand. A significant portion of the Company's cash and cash
equivalents are denominated in US dollars.
During 2011, the Company received net proceeds on available-for-sale securities equal to $9.4 million compared to $36.6 million
during 2010. Also during 2011, the Company purchased available-for-sale securities amounting to $91.1 million compared to
$42.5 million in 2010. On July 27, 2011, the Company made a strategic investment in Rubicon Metals Corporation in a
non-brokered private placement for cash consideration of approximately $73.8 million.
Subsequent to year end on February 16, 2012, the Company declared a dividend, its 30 th consecutive year paying a cash
dividend. During 2011, the Company paid dividends of $98.4 million. Although the Company expects to continue paying dividends,
future dividends will be at the discretion of the Board and will be subject to factors such as income, financial condition and capital
requirements. Also in 2011, the Company issued common shares for gross proceeds of $26.5 million. This was mainly due to
stock option exercises and issuances under the Company's employee share purchase plan.
In 2010, the Company increased amounts available from the syndicate of banks that comprised its lenders from an aggregate of
$900 million to $1.2 billion in a transaction under which the Company also terminated one of its bank credit facilities. In 2011, the
maturity date of the remaining credit facility was extended two years from June 22, 2014 to June 22, 2016 (see note 5 to the
Company's audited consolidated financial statements).
As at December 31, 2011, the Company had drawn $320.0 million from its bank credit facility. In addition, the amounts available
under the credit facility are reduced by letters of credit drawn under the facility. Letters of credit outstanding under the credit facility
at December 31, 2011 totaled $30.6 million. Accordingly, the amount available for future drawdowns as at December 31, 2011,
was approximately $849.4 million. The credit facility requires the Company to maintain specified financial ratios and meet financial
condition covenants. These financial condition covenants were met as of December 31, 2011.
In June 2009, the Company entered into a C$95 million financial security guarantee issuance agreement with Export Development
Canada (the "EDC Facility"). Under the agreement, which matures in June 2014, Export Development Canada agreed to provide
guarantees in respect of letters of credit issued on behalf of the Company in favour of certain beneficiaries in respect of
obligations relating to the Meadowbank mine. As at December 31, 2011, outstanding letters of credit drawn under the EDC Facility
totaled C$79.6 million.
On April 7, 2010, the Company closed a note offering with institutional investors in the United States and Canada of a private
placement of $600 million of guaranteed senior unsecured notes due in 2017, 2020 and 2022 (the "Notes"). At issuance, the
Notes had a weighted average maturity of 9.84 years and weighted average yield of 6.59%. Proceeds from the offering of Notes
were used to repay amounts under the Company's then outstanding credit facilities.
2011 ANNUAL REPORT
Table of Contents
95
Agnico-Eagle's contractual obligations as at December 31, 2011 are set out below:
Contractual Obligations
Less
than
1 Year
Total
1-3 Years
More
than
5 Years
4-5 Years
(millions)
Letter of credit obligations
Reclamation obligations (i)
Purchase commitments
Pension obligations (ii)
Capital and operating leases
Long-term debt repayment obligations (iii)
Total (iv)
$
$
2.2
336.2
62.3
4.5
49.2
920.1
1,374.5
$
$
–
26.1
11.5
0.4
14.4
–
52.4
$
$
2.2
16.5
15.0
1.0
26.1
0.1
60.9
$
$
–
2.9
9.4
0.9
4.9
320.0
338.1
$
$
–
290.7
26.4
2.2
3.8
600.0
923.1
Notes:
(i)
Mining operations are subject to environmental regulations that require companies to reclaim and remediate land disturbed by mining operations. The
Company has submitted closure plans to the appropriate governmental agencies which estimate the nature, extent and costs of reclamation for each of its
mining properties. The estimated undiscounted cash outflows of these reclamation obligations are presented here. These estimated costs are recorded in
the Company's consolidated financial statements on a discounted basis in accordance with ASC 410-20 – Asset Retirement Obligations and on an
undiscounted basis in accordance with ASC 410-30 – Environmental Obligations. See Note 6(a) to the audited consolidated financial statements.
(ii)
The Company has retirement compensation arrangement plans (the "RCA Plans") with certain executives. The RCA Plans provide pension benefits to
each of these executives equal to 2% of the executive's final three-year average pensionable earnings for each year of service with the Company, less the
annual pension payable under the Company's basic defined contribution plan. Payments under the RCA Plans are secured by letter of credit from a
Canadian chartered bank. The figures presented in this table have been actuarially determined.
(iii)
For the purposes of the Company's obligations to repay amounts outstanding under its credit facility, the Company has assumed that the indebtedness will
be repaid at the current expiry date of the credit facility.
(iv)
The Company's estimated future positive cash flows are expected to be sufficient to satisfy the obligations set out above.
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Off-Balance Sheet Arrangements
The Company has the following off-balance sheet arrangements: operating leases (see Note 13(b) to the audited consolidated
financial statements) and $119.0 million of outstanding letters of credit for environmental and site restoration costs, custom
credits, government grants and other general corporate purposes (see Note 12 to the audited consolidated financial statements).
If the Company were to terminate these off-balance sheet arrangements, the penalties or obligations would be insignificant based
on the Company's liquidity position, as outlined in the table below.
2012 Liquidity and Capital Resources Analysis
The Company believes that it has sufficient capital resources to satisfy its 2012 mandatory expenditure commitments (including
the future obligations set out above) and discretionary expenditure commitments. The following table sets out expected future
capital requirements and resources for 2012:
Amount
(millions)
2012 Mandatory Commitments:
Contractual obligations (from table above)
Dividend payable (declared in February 2012)
Environmental remediation liability
Goldex government grant
Total 2012 mandatory expenditure commitments
$
$
2012 Discretionary Commitments:
Budgeted capital expenditures
Dividend payable
Total 2012 discretionary expenditure commitments
Total 2012 mandatory and discretionary expenditure commitments
$
$
2012 Capital Resources:
Cash, cash equivalents and short term investments (at December 31, 2011)
Estimated 2012 operating cash flow
Working capital (at December 31, 2011) (excluding cash, cash equivalents and short-term investments)
Available under the Credit Facilities
Total 2012 Capital Resources
$
$
52
34
26
1
113
382
103
485
572
186
490
381
849
1,906
While the Company believes its capital resources will be sufficient to satisfy all 2012 commitments (mandatory and discretionary),
the Company may choose to decrease certain of its discretionary expenditure commitments, which includes its construction
projects and future dividends, should extremely negative financial circumstances arise in the future.
Outlook
The following section contains "forward-looking statements" and "forward-looking information" within the meaning of applicable
securities laws. Please see "Preliminary Note – Forward-Looking Information" for a discussion of assumptions and risks relating to
such statements and information.
2011 ANNUAL REPORT
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97
Gold Production Growth
LaRonde Mine Extension
In 2012, payable gold production at the LaRonde mine is expected to be approximately 150,000 - 165,000 ounces of gold. The
commencement of production at the LaRonde mine extension, which achieved commercial production on December 1, 2011, is
expected to provide higher grade ore. Over the 2012 to 2014 period, annual average gold production is expected to be
approximately 219,167 ounces.
Total cash costs per ounce at the LaRonde mine are expected to be approximately $570 in 2012, reflecting expectations of lower
grades and metal prices for the mine's byproducts going forward. However, depending on prevailing byproduct prices over the
next several years, the potential exists to extend the life of the upper mine by mining lower grade (predominantly zinc) ore that
becomes economic. The effect of this would likely be lower total cash costs per ounce due to the byproduct metal revenue.
Kittila Mine
In 2012, the Kittila mine is expected to produce approximately 150,000 - 160,000 ounces of gold, while from 2012 through 2014, it
is expected to produce an average of 160,000 ounces per year. Total cash costs per ounce in 2012 are expected to be
approximately $650 per ounce due to improvements in the overall cost structure.
Reflecting the continued growth of the Kittila mine's orebody, it is expected that a study on a 25% throughput expansion at the
Kittila mine will be completed by the end of 2012. It is believed that a smaller initial expansion supported by current reserves
followed by the possibility of a larger expansion at a later date would be prudent.
Lapa Mine
Gold production during 2012 is expected to be approximately 95,000 - 105,000 ounces at estimated total cash costs per ounce of
approximately $750. Over the period of 2012 to 2014, annual average gold production of approximately 101,667 ounces is
expected. The current forecast reflects lower grades to the mill than previously expected.
Pinos Altos Mine
Total gold production in 2012 is expected to be approximately 200,000 - 210,000 ounces at estimated total cash costs per ounce
of approximately $415. Over the period of 2012 to 2014, the mine (including production from the Creston Mascota deposit at Pinos
Altos) is expected to produce an average of 201,667 ounces of gold per year. Construction on the satellite Creston Mascota
deposit at Pinos Altos was completed with the first gold production occurring during the fourth quarter of 2010. Commercial
production at this heap leach operation was achieved in March 2011.
New reserves at the Creston Mascota deposit at Pinos Altos have resulted in a new, larger open pit design. Exploration results
indicate that the Creston Mascota deposit at Pinos Altos may extend further to the southwest to include the adjacent Bravo/Carola
deposits, increasing the potential for a significantly larger open pit that would include all three deposits. The Sinter deposit, located
approximately two kilometers north of the main Santo Nino zone at the Pinos Altos mine, is being examined as a possible source
of open pit ore for the mill at the Pinos Altos mine, potentially extending its mine life.
Meadowbank Mine
Gold production in 2012 is expected to be approximately 280,000 - 310,000 ounces at estimated total cash costs per ounce of
approximately $1,040. The mine is expected to produce an average of 303,333 ounces of gold per year from 2012 to 2014.
The Meadowbank mine has experienced a number of issues during its start-up over the past two years and while the mill
throughput is now exceeding the original design rate, the grades to the mill continued to be lower than expected through the end
of 2011. The ore body geometry is more complex than originally thought making selective mining difficult and more costly,
resulting in persistently high operating costs. These facts, as previously discussed, has resulted in a new mine plan that forecasts
lower gold production over a shorter mine life. The mine life now extends to 2017 rather than 2020.
Meliadine Project
In July 2010, the Company acquired Comaplex, which owned the Meliadine project located in Nunavut, Canada, 290 kilometres
southeast of the Company's existing Meadowbank mine. The Company expects to achieve efficiencies by
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leveraging experience gained from the development of the Meadowbank mine, if it determines to build a mine at the Meliadine
project.
The 2011 drilling program at the Meliadine project was primarily focused on the Tiriganiaq and Wesmeg zones. With a focus on
reserve conversion drilling continuing in 2012 and the completion of a feasibility study expected in late 2013, a determination by
the Company to commence mining operations may be made at the Meliadine project. If a decision to build a mine at Meliadine is
made, first production is not anticipated prior to 2017 with capital expenditures expected to be distributed over the 2012 to
2016 period.
La India Project and Tarachi Exploration Property
The La India project in Sonora State, Mexico, acquired in November 2011 as part of the Grayd acquisition, is currently undergoing
drilling with the goal of converting current resources into reserves. Additionally, the Company is advancing the engineering study
and permitting process. The Company anticipates that any mining operations at La India would be a low cost open pit, heap leach
mine. First production at a mine, if built, is not expected prior to 2015.
The Tarachi exploration property is located approximately ten kilometers to the northwest of the La India project in Sonora State,
Mexico. Initial drilling and sampling suggest that the mineralized structure extends over several kilometers. This property is
expected to be a focus of exploration drilling in 2012.
Growth Summary
With the achievement of commercial production of the Kittila, Lapa and Pinos Altos mines in 2009, the Meadowbank mine in
March 2010, and the Creston Mascota deposit at Pinos Altos and LaRonde mine extension in 2011, the Company continues its
transformation from a one mine operation to a five mine company resulting in record cash provided by operating activities in 2011.
As the Company begins the next growth phase from its expanded production platform, it expects to continue to deliver on its vision
and strategy. Based on exploration results to date and planned exploration programs in 2012, the Company is targeting reserves
to grow to approximately 20.0 million ounces of gold in 2012 compared with 18.8 million ounces in 2011. Further internal growth
opportunities are expected to add to production in the future. In summary, the Company anticipates that the main contributors to
the targeted increase in gold production, gold reserves and increases to gold resources could include:
•
Continued conversion of Agnico-Eagle's current gold resources to reserves.
•
Increased production from the higher grade orebody in the LaRonde mine extension.
•
The 2011 acquisition of the La India project and Tarachi exploration property in Mexico.
•
A positive conclusion on the 25% throughput expansion at the Kittila mine, reflecting continued growth of orebody.
•
Potential extension of the Creston Mascota deposit at Pinos Altos to include the adjacent Bravo/Carola deposits.
•
The Sinter deposit as a possible source of open pit ore for the mill at the Pinos Altos mine.
2011 ANNUAL REPORT
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99
Financial Outlook
Mining Revenue and Production Costs
In 2012, the Company expects to continue to generate strong cash flow as production volumes are expected to be between
875,000 and 950,000 ounces, down from 985,460 ounce in 2011 due primarily to the suspension of production at the Goldex mine
on October 19, 2011. Metal prices will have a large impact on financial results and, although the Company cannot predict the
prices that will be realized in 2012, gold prices in early 2012 (to March 12, 2012) have remained strong. On March 12, 2012, the
gold spot price closed at $1,701 per ounce.
The table below sets out actual production for 2011 and estimated production in 2012.
Gold (ounces)
Silver (000s ounces)
Zinc (tonnes)
Copper (tonnes)
2012 Estimate
2011
Actual
875,000 - 950,000
4,508
33,044
5,650
985,460
5,080
54,894
3,216
For 2012, the Company is expecting total cash costs per ounce at the LaRonde mine to be $570 compared to $77 in 2011. In
calculating estimates of total cash costs per ounce, net silver, zinc and copper revenue is treated as a reduction of production
costs, and therefore production and price assumptions for these metals play an important role in these estimates for the LaRonde
mine, due to its large byproduct production. An increase in byproduct metal prices above forecast levels would result in improved
cash costs for the LaRonde mine. In addition, the Pinos Altos mine contains significant byproduct silver.
In 2012, total cash costs per ounce at the Kittila, Lapa, Pinos Altos and Meadowbank mines are expected to be $650, $750, $415
and $1,040, respectively. As production costs at the LaRonde, Lapa and Meadowbank mines are denominated mostly in
Canadian dollars, production costs at the Kittila mine are denominated mostly in Euros and production costs at the Pinos Altos
mine are denominated mostly in Mexican pesos, the Canadian dollar/US dollar, Euro/US dollar and Mexican peso/US dollar
exchange rates also affect the estimates.
The table below sets out the metal price assumptions and exchange rate assumptions used in deriving the estimated total cash
costs per ounce for 2012 (production estimates for each metal are shown in the table above) as well as the market average
closing prices for each variable for the period of January 1 to March 12, 2012.
Cash Cost
Assumptions
Silver (per ounce)
Zinc (per tonne)
Copper (per tonne)
C$/US$ exchange rate
Euro/US$ exchange rate
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AGNICO-EAGLE MINES LIMITED
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$
$
$
$
$
30.00
1,800
7,000
1.0000
0.7407
Market
Average
$
$
$
$
$
32.74
2,028
8,283
0.9967
0.7640
The table below sets out the estimated approximate sensitivity of the Company's 2012 estimated total cash costs per ounce to a
change in metal price and exchange rate assumptions:
Impact
on
total
cash
costs
Change in variable (i)
($/oz.)
$1/oz Silver
$100/per tonne of Zinc
$100/per tonne of Copper
1% C$/US$
1% Euro/US$
$
$
$
$
$
5
3
1
7
1
Note:
(i)
The sensitivities presented are based on the production and price assumptions set out above. Operating costs are not affected by fluctuations in
byproduct metal prices. The Company may use derivative strategies to limit the downside risk associated with fluctuating byproduct metal prices and
enters into forward contracts to lock in exchange rates based on projected Canadian dollar, Euro and Mexican peso operating and capital needs. Please
see "Risk Profile – Metal Price and Foreign Currency" and "Item 11 Quantitative and Qualitative Disclosures about Market Risk – Risk Profile – Financial
Instruments". Please see "– Results of Operations – Production Costs" above for a discussion about the use of the non-US GAAP financial measure total
cash costs per ounce.
Exploration Expense
In 2012, Agnico-Eagle expects expenditures of $106.3 million on minesite exploration, grassroots exploration and corporate
development $61.9 million is expected to spent on grassroots exploration outside of the Company's currently contemplated mining
areas in Canada, Latin America, Finland and the United States. Exploration is success driven and thus these estimates could
change materially based on the success of the various exploration programs. In addition, when it is determined that a mining
property can be economically developed as a result of established proven and probable reserves, the costs of drilling to further
delineate the ore body on such property are capitalized. In 2012, the Company expects to capitalize $39.9 million on drilling
related to further delineating ore bodies and converting resources into reserves.
Other Expenses
Cash general and administrative expenses are not expected to increase significantly in 2012; however non-cash variances may
occur as a result of variances in the Black-Scholes pricing of any stock options granted by the Company in 2012. In 2012,
provincial capital taxes are expected to be nil since the Ontario provincial capital tax was eliminated on July 1, 2010 and Quebec
capital tax was eliminated at the end of 2010. Amortization is expected to be approximately $265.6 million in 2012. Interest
expense in 2012 is expected to be approximately $48.1 million due to long-term debt and standby fees associated with the
$1.2 billion credit facility and the $600 million Notes. The Company's effective tax rate is expected to be approximately 35% to
40% in 2012 compared to an effective rate of 26.9% in 2011. The 2011 effective rate was due to the factors mentioned in
"– Results of Operations – Income and Mining Taxes" above.
Capital Expenditures
Agnico-Eagle's gold growth program remains well funded. Capital expenditures, including construction and development costs,
sustaining capital and capitalized exploration costs, are expected to total approximately $382.3 million in 2012. During 2012, the
Company expects to generate internal cash flow from the sale of 875,000 - 950,000 ounces of gold and the associated byproduct
metals. The major components of the 2012 capital expenditures program are as follows:
•
$88.5 million in sustaining capital expenditures related to the Meadowbank mine;
•
$74.8 million in sustaining capital expenditures related to the LaRonde mine;
•
$52.0 million in capital expenditures related to construction and development of the Meliadine project;
•
$51.9 million in sustaining capital expenditures related to the Kittila mine;
•
$44.5 million in capitalized drilling expenditures;
•
$42.9 million in capital expenditures related to the Pinos Altos mine;
2011 ANNUAL REPORT
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101
•
$10.2 million in sustaining capital expenditures related to the Lapa mine; and
•
$3.5 million in capital expenditures related to construction and development at the La India project.
The Company continues to examine other possible corporate development opportunities which may result in the acquisition of
companies or assets with securities, cash or a combination thereof. If cash is used, depending on the size of the acquisition,
Agnico-Eagle may be required to borrow money or issue securities to fund such cash requirements.
Outstanding Securities
The following table sets out the maximum number of common shares that would be outstanding if all dilutive instruments
outstanding at March 12, 2012 were exercised:
Common shares outstanding at March 12, 2012
Employee stock options
Warrants
170,928,545
11,657,901
8,600,000
191,186,446
Critical Accounting Estimates
The preparation of the consolidated financial statements in accordance with US GAAP requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company evaluates the
estimates periodically, including those relating to trade receivables, inventories, deferred tax assets and liabilities, mining
properties and asset retirement obligations. In making judgments about the carrying value of assets and liabilities, the Company
uses estimates based on historical experience and various assumptions that are considered reasonable in the circumstances.
Actual results may differ from these estimates.
The Company believes the following critical accounting policies relate to its more significant judgments and estimates used in the
preparation of its audited consolidated financial statements. Management has discussed the development and selection of the
following critical accounting policies with the Audit Committee of the Board and the Audit Committee has reviewed the Company's
disclosure in this Form 20-F.
Mining Properties, Plant and Equipment and Mine Development Costs
Significant payments related to the acquisition of land and mineral rights are capitalized as mining properties at cost. If a mineable
ore body is discovered, such costs are amortized to income when production begins, using the unit-of-production method, based
on estimated proven and probable reserves. If no mineable ore body is discovered, such costs are expensed in the period in
which it is determined the property has no future economic value.
Expenditures for new facilities and improvements that can extend the useful lives of existing facilities are capitalized as plant and
equipment at cost. Interest costs incurred for the construction of projects are capitalized.
Mine development costs incurred after the commencement of production are capitalized or deferred to the extent that these costs
benefit the entire ore body. Costs incurred to access single ore blocks are expensed as incurred; otherwise, such vertical and
horizontal development is classified as mine development costs.
Agnico-Eagle records amortization on both plant and equipment and mine development costs used in commercial production on a
unit-of-production basis based on the estimated tonnage of proven and probable mineral reserves of the mine. The
unit-of-production method defines the denominator as the total proven and probable tonnes of reserves.
Repairs and maintenance expenditures are charged to income as production costs. Assets under construction are not depreciated
until the end of the construction period. Upon achievement of commercial production, the capitalized construction costs are
transferred to the various categories of plant and equipment.
Mineral exploration costs are charged to income in the year in which they are incurred. When it is determined that a mining
property can be economically developed as a result of established proven and probable reserves, the costs of drilling and
development to further delineate the ore body on such property are capitalized. The establishment of proven and probable
reserves is based on results of final feasibility studies, which indicate whether a property is economically feasible. Upon
commencement of the commercial production of a development project, these costs are transferred to the appropriate asset
category and are amortized to income using the unit-of-production method mentioned above. Mine development costs, net of
salvage values, relating to a property that is abandoned or considered uneconomic for the foreseeable future are written off.
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The carrying values of mining properties, plant and equipment and mine development costs are periodically reviewed for possible
impairment, when impairment factors exist, based on the future undiscounted net cash flows of the operating mine or development
property. If it is determined that the estimated net recoverable amount is less than the carrying value, then a write down to the
estimated fair value amount is made with a charge to income. Estimated future cash flows of an operating mine and development
properties include estimates of recoverable ounces of gold based on the proven and probable mineral reserves. To the extent that
economic value exists beyond the proven and probable mineral reserves of an operating mine or development property, this value
is included as part of the estimated future cash flows. Estimated future cash flows also involve estimates regarding metal prices
(considering current and historical prices, price trends and related factors), production levels, capital and reclamation costs, and
related income and mining taxes, all based on detailed engineering life-of-mine plans. Cash flows are subject to risks and
uncertainties and changes in the estimates of the cash flows may affect the recoverability of long-lived assets.
Goodwill
Business combinations are accounted for using the purchase method whereby assets and liabilities acquired are recorded at their
fair values as of the date of acquisition and any excess of the purchase price over such fair values is recorded as goodwill. As of
the date of acquisition, goodwill is allocated to reporting units by determining estimates of the fair value of each reporting unit and
comparing this amount to the fair values of assets and liabilities in the reporting unit. Goodwill is not amortized.
The Company performs goodwill impairment tests on an annual basis as well as when events and circumstances indicate that the
carrying amounts may no longer be recoverable. In performing the impairment tests, the Company estimates the fair values of its
reporting units that include goodwill and compares those fair values to the reporting units' carrying amounts. If a reporting unit's
carrying amount exceeds its fair value, the Company compares the implied fair value of the reporting unit's goodwill to the carrying
amount, and any excess of the carrying amount of goodwill over the implied fair value is charged to earnings.
Revenue Recognition
Revenue is recognized when the following conditions are met:
(a)
persuasive evidence of an arrangement to purchase exists;
(b)
the price is determinable;
(c)
the product has been delivered; and
(d)
collection of the sales price is reasonably assured.
Revenue from gold and silver in the form of dore bars is recorded when the refined gold and silver is sold and delivered to the
customer. Generally, all the gold and silver in the form of dore bars recovered in the Company's milling process is sold in the
period in which it is produced.
Under the terms of concentrate sales contracts with third-party smelters, final prices for the gold, silver, zinc, copper and lead in
the concentrate are set based on the prevailing spot market metal prices on a specified future date, which is based on the date
that the concentrate is delivered to the smelter. Agnico-Eagle records revenues under these contracts based on forward prices at
the time of delivery, which is when transfer of legal title to concentrate passes to the third-party smelters. The terms of the
contracts result in differences between the recorded estimated price at delivery and the final settlement price. These differences
are adjusted through revenue at each subsequent financial statement date.
Revenues from mining operations consist of gold revenues, net of smelting, refining and other marketing charges. Revenues from
byproduct metals sales are shown net of smelter charges as part of revenues from mining operations.
Reclamation Costs
On an annual basis, the Company assesses cost estimates and other assumptions used in the valuation of Asset Retirement
Obligations ("ARO") at each of its mineral properties to reflect events, changes in circumstances and new information available.
Changes in these cost estimates and assumptions have a corresponding impact on the fair value of the ARO. For closed mines,
any change in the fair value of AROs results in a corresponding charge or credit within other expense, whereas at operating mines
the charge is recorded as an adjustment to the carrying amount of the corresponding asset. The Company has recorded
adjustments for changes in estimates of the AROs at our operating mines in 2011. AROs arise from the acquisition, development,
construction and operation of mining property, plant and equipment, due to government controls and regulations that protect the
environment on the closure and reclamation of
2011 ANNUAL REPORT
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103
mining properties. The major parts of the carrying amount of AROs relate to tailings and heap leach pad closure/rehabilitation;
demolition of buildings/mine facilities; ongoing water treatment; and ongoing care and maintenance of closed mines. The fair
values of AROs are measured by discounting the expected cash flows using a discount factor that reflects the credit-adjusted
risk-free rate of interest. The Company prepares estimates of the timing and amount of expected cash flows when an ARO is
incurred. Expected cash flows are updated to reflect changes in facts and circumstances. The principal factors that can cause
expected cash flows to change are: the construction of new processing facilities; changes in the quantities of material in reserves
and a corresponding change in the life of mine plan; changing ore characteristics that impact required environmental protection
measures and related costs; changes in water quality that impact the extent of water treatment required; and changes in laws and
regulations governing the protection of the environment. When expected cash flows increase, the revised cash flows are
discounted using a current discount factor, whereas when expected cash flows decrease, the reduced cash flows are discounted
using the historical discount factor used in the original estimation of the expected cash flows. In either case, any change in the fair
value of the ARO is recorded. Agnico-Eagle records the fair value of an ARO when it is incurred. AROs are adjusted to reflect the
passage of time (accretion), which is calculated by applying the discount factor implicit in the initial fair value measurement to the
beginning-of-period carrying amount of the AROs. For producing mines, accretion expense is recorded in the cost of goods sold
each period. Upon settlement of an ARO, Agnico-Eagle records a gain or loss if the actual cost differs from the carrying amount of
the ARO. Settlement gains/losses are recorded in other (income) expense.
Environmental remediation liabilities are differentiated from AROs in that they do not arise from environmental contamination in
the normal operation of a long-lived asset or from a legal obligation to treat environmental contamination resulting from the
acquisition, construction, or development of a long-lived asset. The Company is required to recognize a liability for obligations
associated with environmental remediation liabilities arising from past acts.
Other environmental remediation costs that are not AROs or environmental remediation liabilities as defined by ASC 410 – Asset
Retirement and Environmental Obligations and 410-30 – Environmental Obligations, respectively, are expensed as incurred.
Deferred Tax Assets and Liabilities
Agnico-Eagle follows the liability method of tax allocation for accounting for income taxes. Under this method of tax allocation,
deferred income and mining tax bases of assets and liabilities are measured using the enacted tax rates and laws expected to be
in effect when the differences are expected to reverse.
The Company's operations involve dealing with uncertainties and judgments in the application of complex tax regulations in
multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in
various jurisdictions and resolution of disputes arising from federal, provincial, state and international tax audits. The Company
recognizes the effect of uncertain tax positions and records tax liabilities for anticipated tax audit issues in Canada and other tax
jurisdictions where it is more likely than not based on technical merits that the position would not be sustained. The Company
recognizes the amount of any tax benefits that have greater than 50 percent likelihood of being ultimately realized upon
settlement.
Changes in judgment related to the expected ultimate resolution of uncertain tax positions are recognized in the year of such
change. Accrued interest and penalties related to unrecognized tax benefits are recorded in income tax expense in the current
year. The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some
of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current
estimate of the tax liabilities. If the Company's estimate of tax liabilities proves to be less than the ultimate assessment, an
additional charge to expense would result. If the estimate of tax liabilities proves to be greater than the ultimate assessment, a tax
benefit would result.
During the second quarter of 2010, the Company executed the newly enacted Quebec foreign currency election to commence
using the U.S. dollar as its functional currency for Quebec income tax purposes. As the related tax legislation was enacted in the
second quarter of 2010, this election applies to taxation years ended December 31, 2008 and subsequent. This election resulted
in a deferred tax benefit of $21.8 million for the year ended December 31, 2010.
Financial Instruments
Agnico-Eagle uses derivative financial instruments, primarily option and forward contracts, to manage exposure to fluctuations of
byproduct metal prices, interest rates and foreign currency exchange rates and may use such means to manage exposure to
certain input costs as well. Agnico-Eagle does not hold financial instruments or derivative financial instruments for trading
purposes.
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The Company recognizes all derivative financial instruments in the consolidated financial statements at fair value regardless of the
purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized
periodically in the consolidated statement of income (loss) or in shareholders' equity as a component of accumulated other
comprehensive income (loss), depending on the nature of the derivative financial instrument and whether it qualifies for hedge
accounting. Financial instruments designated as hedges are tested for effectiveness on a quarterly basis. Gains and losses on
those contracts that are proven to be effective are reported as a component of the related transaction.
Stock-Based Compensation
The Company's Stock Option Plan provides for the granting of options to directors, officers, employees and service providers to
purchase common shares. Options have exercise prices equal to market price on the day prior to the date of grant. The fair value
of these options is recognized in the consolidated statement of income (loss) or in the consolidated balance sheet if capitalized as
part of property, plant and mine development over the applicable vesting period as a compensation cost. Any consideration paid
by employees on exercise of options or purchase of common shares is credited to share capital.
Fair value is determined using the Black-Scholes option valuation model which requires the Company to estimate the expected
volatility of the Company's share price and the expected life of the stock options. Limitations with existing option valuation models
and the inherent difficulties associated with estimating these variables create difficulties in determining a reliable single measure
of the fair value of stock option grants. The dilutive impact of stock option grants is factored into the Company's reported diluted
income per share.
Commercial Production
The Company assesses each mine construction project to determine when a mine moves into the production stage. The criteria
used to assess the start date are determined based on the nature of each mine construction project, such as the complexity of a
plant and its location. The Company considers various relevant criteria to assess when the mine is substantially complete and
ready for its intended use and moved into the production stage. The criteria considered include: (1) the completion of a reasonable
period of testing of mine plant and equipment; (2) the ability to produce minerals in saleable form (within specifications); and
(3) the ability to sustain ongoing production of minerals. When a mine construction project moves into the production stage, the
capitalization of certain mine construction costs ceases and costs are either capitalized to inventory or expensed, except for
sustaining capital costs related to property, plant and equipment and underground mine development or reserve development.
Stripping Costs
Pre-production stripping costs are capitalized until an "other than de minimis " level of mineral is produced, after which time such
costs are either capitalized to inventory or expensed. The Company considers various relevant criteria to assess when an "other
than de minimis " level of mineral is produced. The criteria considered include: (1) the number of ounces mined compared to total
ounces in mineral reserves; (2) the quantity of ore mined compared to the total quantity of ore expected to be mined over the life
of the mine; (3) the current stripping ratio compared to the expected stripping ratio over the life of the mine; and (4) the ore grade
compared to the expected ore grade over the life of the mine. Please refer to notes (ii) and (iii) of the "Reconciliation of Production
Costs to Total Cash Costs per Ounce of Gold by Mine" section for a discussion of stripping costs with regards to "cash costs".
Recently Issued Accounting Pronouncements and Developments
Under the SEC Staff Accounting Bulletin 74, the Company is required to disclose information related to new accounting standards
that have not yet been adopted. The Company is currently evaluating the impact that the adoption of these statements will have
on the Company's consolidated financial position, results of operations and disclosures.
Comprehensive Income
In June 2011, ASC guidance was issued related to comprehensive income. Under the updated guidance, an entity will have the
option to present the total of comprehensive income either in a single continuous statement of comprehensive income or in two
separate but consecutive statements. In addition, the update requires certain disclosure requirements when reporting other
comprehensive income. The update does not change the items reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to income. In December 2011, updated guidance was issued to defer the effective
date pertaining to reclassification adjustments out of accumulated other comprehensive income until the Financial Accounting
Standards Board (the "FASB") is able to reconsider those
2011 ANNUAL REPORT
Table of Contents
105
paragraphs. The Company does not expect the updated guidance to have an impact on the consolidated financial position, results
of operations or cash flows.
Fair Value Accounting
In May 2011, ASC guidance was issued related to disclosures around fair value accounting. The updated guidance clarifies
different components of fair value accounting including the application of the highest and best use and valuation premise
concepts, measuring the fair value of an instrument classified in a reporting entity's shareholders' equity and disclosing
quantitative information about the unobservable inputs used in fair value measurements that are categorized in Level 3 of the fair
value hierarchy. The update is effective for the Company's fiscal year beginning January 1, 2012. The Company does not expect
the updated guidance to have a significant impact on the consolidated financial position, results of operations or cash flows.
Goodwill Impairment
In September 2011, ASC guidance was issued related to testing goodwill for impairment. Under the updated guidance, entities are
permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is
less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test
per Topic 350. Previous guidance required an entity to test goodwill for impairment, on at least an annual basis, by comparing the
fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit is less than its carrying
amount, then the second step of the test would be performed to measure the amount of the impairment loss, if any. An entity is no
longer required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair
value is less than its carrying amount. The update is effective for the Company's fiscal year beginning January 1, 2012, with
earlier application permitted. The Company does not expect the updated guidance to have a significant impact on the
consolidated financial position, results of operations or cash flows.
Disclosures about Offsetting Assets and Liabilities
In November 2011, ASC guidance was issued related to disclosures around offsetting financial instrument and derivative
instrument assets and liabilities. Under the updated guidance, entities are required to disclose both gross information and net
information about both instruments and transactions eligible for offset in the statements of financial position and instruments and
transactions subject to an agreement similar to a master netting arrangement. The update is effective for the Company's fiscal
year beginning January 1, 2013. The Company is evaluating the potential impact of adopting this guidance on the Company's
consolidated financial position, results of operations and cash flows.
International Financial Reporting Standards
Based on recent guidance from the Canadian Securities Administrators and the SEC, as a Canadian issuer and existing US
GAAP filer, the Company will continue to be permitted to use US GAAP as its principal basis of accounting. The SEC has not yet
committed to a timeline which would require the Company to adopt International Financial Reporting Standards ("IFRS"). A
decision to voluntarily adopt IFRS has not been made.
An IFRS project group and a steering committee have been established by the Company and a high level project plan has been
formulated. The implementation of IFRS would be done through three distinct phases:
(i)
diagnostics;
(ii)
detailed IFRS analysis and conversion; and
(iii)
implement IFRS in daily business.
The initial diagnostics phase has been completed, and the detailed IFRS analysis has commenced. A report has been prepared
with the primary objective to understand, identify and assess the overall effort required by the Company to produce financial
information in accordance with IFRS. The key areas for the diagnostics work was to review the consolidated financial statements
of the Company to obtain a detailed understanding of the differences between IFRS and US GAAP to be able to identify potential
system and process changes required as a result of converting to IFRS.
106
AGNICO-EAGLE MINES LIMITED
Table of Contents
SUMMARIZED QUARTERLY DATA
CONSOLIDATED FINANCIAL DATA
Three months ended
March 31,
2010
June 30,
2010
September 30,
2010
December 31,
2010
Total
2010
(thousands of United States dollars, except where noted)
Operating margin
Revenues from mining
operations
Production costs
Operating margin
Income contribution
analysis
LaRonde mine
Goldex mine
Kittila mine
Lapa mine
Pinos Altos mine
Meadowbank mine
Operating margin
Amortization
Corporate expenses
Income before tax
Income and mining taxes
Net income for the period
Net income per
share – basic
Net income per
share – diluted
Cash flows
Operating cash flow
Investing cash flow
Financing cash flow
Realized prices
Gold (per ounce)
Silver (per ounce)
Zinc (per tonne)
Copper (per tonne)
Table of Contents
$
237,583
118,227
119,356
$
347,456
166,573
180,883
$
$
$
45,388
26,423
11,470
21,273
12,631
2,171
119,356
30,503
47,579
41,274
18,942
22,332
$
$
43,614
42,635
16,625
20,204
22,626
35,179
180,883
44,003
28,331
108,549
8,189
100,360
$
0.14
$
$
0.14
$
$
$
$
74,491 $
(119,329 ) $
(1,646 ) $
161,574 $
(116,826 ) $
(10,422 ) $
156,829 $
(163,798 ) $
531 $
90,576 $
(123,353 ) $
(10,408 ) $
$
$
$
$
1,111
17.87
2,235
7,288
1,222
19.29
1,890
6,581
1,235
20.53
2,151
8,689
1,387 $
31.96 $
2,391 $
10,311 $
2011 ANNUAL REPORT
$
$
$
$
$
$
$
$
$
439,004
195,998
243,006
65,516
50,122
17,467
25,477
34,998
49,426
243,006
69,835
51,268
121,903
33,940
87,963
$
$
48,722 $
44,349
26,838
17,764
15,089
49,042
201,804
48,145
(9,818 )
163,477
42,016
121,461 $
$
203,240
163,529
72,400
84,718
85,344
135,818
745,049
192,486
117,360
435,203
103,087
332,116
0.64
$
0.73
$
0.53
$
2.05
0.63
$
0.71
$
0.51
$
2.00
$
$
$
$
$
398,478
196,674
201,804
$
$
$
$
$
$
1,422,521
677,472
745,049
483,470
(523,306 )
(21,945 )
1,250
22.56
2,165
8,182
107
Payable production: (i)
Gold (ounces)
LaRonde mine
Goldex mine
Kittila mine
Lapa mine
Pinos Altos mine
Creston Mascota deposit at Pinos
Altos
Meadowbank mine
Silver (ounces in thousands)
LaRonde mine
Pinos Altos mine
Creston Mascota deposit at Pinos
Altos
Meadowbank mine
Zinc (LaRonde mine) (tonnes)
Copper (LaRonde mine) (tonnes)
Payable metal sold:
Gold (ounces)
LaRonde mine
Goldex mine
Kittila mine
Lapa mine
Pinos Altos mine
Meadowbank mine
45,036
42,269
24,547
31,553
26,228
41,533
48,334
31,593
28,927
29,665
37,832
50,672
40,344
27,687
35,248
38,405
43,111
29,721
29,289
39,289
162,806
184,386
126,205
117,456
130,431
–
18,599
188,232
–
77,676
257,728
–
93,395
285,178
666
75,990
256,471
666
265,659
987,609
875
222
860
248
1,080
290
766
427
3,581
1,185
–
2
1,099
14,224
1,052
–
12
1,120
18,465
1,056
–
18
1,388
14,915
1,181
–
14
1,207
14,939
935
–
46
4,812
62,544
4,224
45,240
37,863
30,674
34,193
20,965
7,103
176,038
41,666
48,310
28,588
31,920
30,634
70,182
251,300
36,979
49,117
41,655
25,846
31,759
93,495
278,851
39,896
48,067
28,722
31,177
39,156
79,849
266,867
163,781
183,357
129,639
123,136
122,514
250,629
973,056
Note:
(i)
Payable production means the quantity of mineral produced during a period contained in products that are or will be sold by the Company, whether such
products are sold during the period or held as inventory at the end of the period.
108
AGNICO-EAGLE MINES LIMITED
Table of Contents
CONSOLIDATED FINANCIAL DATA
Three months ended
March 31,
2011
June 30,
2011
September 30,
2011
December 31,
2011
Total
2011
(thousands of United States dollars, except where noted)
Operating margin
Revenues from mining
operations
Production costs
Operating margin
Income contribution
analysis
LaRonde mine
Goldex mine
Kittila mine
Lapa mine
Pinos Altos mine
Meadowbank mine
Operating margin
Amortization
Impairment Loss
Loss on Goldex
Corporate expenses
Income (loss) before tax
Income and mining taxes
Net income (loss) for the
period
$
412,068
198,567
213,501
$
48,983
40,333
27,831
19,178
47,259
29,917
213,501
61,929
–
–
74,210
77,362
32,098
45,264
Attributed to non-controlling
interest
$
Attributed to common
shareholders
Net income (loss) per
share – basic
Net income (loss) per
share – diluted
Cash flows
Operating cash flow
Investing cash flow
Financing cash flow
Table of Contents
$
433,691
212,754
220,937
$
$
46,017
46,739
18,934
27,737
52,568
28,942
220,937
59,235
–
–
56,936
104,766
35,941
68,825
$
–
$
–
$
$
45,264
$
68,825
$
0.27
$
$
0.26
$
$
$
$
171,043 $
(89,956 ) $
(68,842 ) $
520,537
237,190
283,347
$
59,081
48,974
34,751
28,286
65,777
46,478
283,347
67,104
–
298,183
28,644
(110,584 )
(28,970 )
(81,614 ) $
455,503
227,567
227,936
$
1,821,799
876,078
945,721
34,581
24,677
33,619
23,736
67,111
44,212
227,936
73,513
907,681
4,710
92,204
(850,172 )
(248,742 )
(601,430 ) $
188,662
160,723
115,135
98,937
232,715
149,549
945,721
261,781
907,681
302,893
251,994
(778,628 )
(209,673 )
(568,955 )
$
(60 ) $
(60 )
$
(81,614 ) $
(601,370 ) $
(568,895 )
0.41
$
(0.48 ) $
(3.53 ) $
(3.36 )
0.40
$
(0.48 ) $
(3.53 ) $
(3.36 )
162,821 $
(116,173 ) $
(22,180 ) $
197,570 $
(247,772 ) $
29,106 $
–
132,028 $
663,462
(306,583 ) $
(760,484 )
244,461 $
182,545
2011 ANNUAL REPORT
109
Realized prices
Gold (per ounce)
Silver (per ounce)
Zinc (per tonne)
Copper (per tonne)
Payable production: (i)
Gold (ounces)
LaRonde mine
Goldex mine
Kittila mine
Lapa mine
Pinos Altos mine
Meadowbank mine
$
$
$
$
1,400
36
2,509
10,027
1,530
39
2,257
8,565
$
$
$
$
1,717
37
2,166
8,561
$
$
$
$
1,640
27
2,188
8,510
$
$
$
$
1,573
34
1,892
7,162
36,893
38,500
40,317
26,914
48,001
61,737
252,362
27,525
41,998
30,811
28,552
51,066
59,376
239,328
29,069
40,224
37,924
27,881
52,739
78,141
265,978
30,686
14,756
34,508
23,721
52,574
71,547
227,792
124,173
135,478
143,560
107,068
204,380
270,801
985,460
680
406
13
1,099
11,941
817
736
452
13
1,201
14,678
666
968
485
16
1,469
15,684
731
785
508
18
1,311
12,591
1,002
3,169
1,851
60
5,080
54,894
3,216
37,459
41,895
40,698
25,776
45,484
61,928
253,240
28,589
41,564
29,794
29,749
48,847
58,767
237,310
26,729
37,380
36,745
27,955
54,297
74,416
257,522
31,342
20,863
37,769
23,854
55,611
78,579
248,018
124,119
141,702
145,006
107,334
204,239
273,690
996,090
Silver (ounces in thousands)
LaRonde mine
Pinos Altos mine
Meadowbank mine
Zinc (LaRonde mine) (tonnes)
Copper (LaRonde mine) (tonnes)
Payable metal sold:
Gold (ounces)
LaRonde mine
Goldex mine
Kittila mine
Lapa mine
Pinos Altos mine
Meadowbank mine
$
$
$
$
Note:
(i)
Payable production means the quantity of mineral produced during a period contained in products that are or will be sold by the Company, whether such
products are sold during the period or held as inventory at the end of the period.
110
AGNICO-EAGLE MINES LIMITED
Table of Contents
FIVE YEAR FINANCIAL AND OPERATING SUMMARY
FINANCIAL DATA
2011
2010
2009
2008
2007
(thousands of United States dollars, except where noted)
Revenues from mining operations
Interest, sundry income and gain on
available-for-sale securities
$
1,821,799
$
1,422,521
Costs and expenses
Income (loss) before income taxes
Income and mining taxes
Net income (loss)
$
(5,167 )
1,816,632
2,595,260
(778,628 )
(209,673 )
(568,955 ) $
Attributed to non-controlling interest
$
Attributed to common shareholders
Net income (loss) per share – basic
Net income (loss) per share – diluted
Operating cash flow
Investing cash flow
Financing cash flow
Dividends declared per share
Capital expenditures
Average gold price per ounce realized
Average exchange rate – C$ per $
Weighted average number of
common shares outstanding
(in thousands)
Working capital (including undrawn
credit lines)
Total assets
Long-term debt
Shareholders' equity
Table of Contents
$
613,762
94,879
1,517,400
1,082,197
435,203
103,087
332,116
(60 ) $
$
(568,895 ) $
$
$
$
$
$
$
$
$
C
$
(3.36 )
(3.36 )
663,462
(760,484 )
182,545
–
482,831
1,573
0.9893
$
$
$
$
$
$
$
$
C
$
169,353
$
$
$
$
1,472,300
5,026,564
920,095
3,215,163
$
368,938
$
432,205
$
26,314
640,076
532,038
108,038
21,500
86,538
$
(37,465 )
331,473
235,482
95,991
22,824
73,167 $
29,230
461,435
302,157
159,278
19,933
139,345
–
$
–
$
–
$
–
332,116
$
86,538
$
73,167
$
139,345
2.05
2.00
483,470
(523,306 )
(21,945 )
0.64
511,641
1,250
$
$
$
$
$
$
$
$
C
$
0.55
0.55
115,106
(587,611 )
559,818
0.18
657,175
1,024
$
$
$
$
$
$
$
$
C
$
0.51
0.50
121,175
(917,549 )
558,072
0.18
908,853
879
$
$
$
$
$
$
$
$
C
$
1.05
1.04
246,329
(373,099 )
126,508
0.18
523,793
748
1.0301
162,343
$
$
$
$
1,491,471
5,500,351
650,000
3,665,450
1.1415
155,942
$
$
$
$
598,581
4,427,357
715,000
2,751,761
1.0669
144,741
1.0738
132,768
$
508,335 $
751,587
$
3,378,824 $
2,735,498
$
200,000 $
–
$
2,517,756 $
2,058,934
2011 ANNUAL REPORT
111
Operating Summary
LaRonde mine
Revenues from mining operations
Production costs
Gross profit (exclusive of amortization
shown below)
Amortization
Gross profit
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
Silver production – ounces
(in thousands)
Zinc production – tonnes
Copper production – tonnes
Total cash costs (per ounce):
Production costs
Less:
Net byproduct revenues
Inventory adjustments
Accretion expense and other
Total cash costs (per ounce) (i)
Minesite costs per tonne (i)
$
398,609
209,947
$
392,386
189,146
$
352,221
164,221
$
330,652
166,496
$
432,205
166,104
$
188,662
31,089
157,573
$
203,240
30,404
172,836
$
188,000
28,392
159,608
$
164,156
28,285
135,871
$
266,101
27,757
238,344
$
$
$
$
$
$
2,406,342
2
124,173
2,592,252
2
162,806
2,545,831
3
203,494
2,638,691
3
216,208
2,673,463
3
230,992
3,169
54,894
3,216
3,581
62,544
4,224
3,919
56,186
6,671
4,079
65,755
6,922
4,920
71,577
7,482
1,691
$
$
(1,562 )
(19 )
(33 )
77 $
C
$
84
C
$
1,162
$
(1,180 )
19
(8 )
(7 ) $
75
C
$
807
$
(699 )
1
(6 )
103 $
72
C
$
770
$
(658 )
–
(6 )
106 $
67
C
$
719
(1,082 )
4
(6 )
(365 )
66
Note:
(i)
Total cash costs per ounce and minesite costs per tonne are non-US GAAP measures of performance that the Company uses to monitor the performance
of its operations. See "– Results of Operations – Production Costs" above.
112
AGNICO-EAGLE MINES LIMITED
Table of Contents
2011
Goldex mine
Revenues from mining operations
Production costs
Operating margin
Amortization
Gross profit
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
Total cash costs (per ounce):
Production costs
Less:
Net byproduct revenues
Inventory adjustments
Accretion expense and other
Total cash costs (per ounce) (i)
Minesite costs per tonne (i)
Lapa mine
Revenues from mining operations
Production costs
Operating margin
Amortization
Gross profit
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
Total cash costs (per ounce):
Production costs
Less:
Net byproduct revenues
Inventory adjustments
Accretion expense and other
Total cash costs (per ounce) (i)
Minesite costs per tonne (i)
$
$
$
217,662
56,939
160,723
16,910
143,813
2010
$
$
$
2,476,515
1.79
135,478
225,090
61,561
163,529
21,428
142,101
2009
$
$
$
2,781,564
2.21
184,386
$
420
$
$
3
(21 )
(1 )
401 $
333
142,493
54,342
88,151
21,716
66,435
2008
$
$
$
2,614,645
1.98
148,849
$
4
(1 )
(1 )
335 $
365
38,286
20,366
17,920
7,250
10,670
2007
$
$
$
–
–
–
1,118,543
1.86
57,436
$
3
(1 )
367 $
–
–
–
–
–
$
–
(9 )
(2 )
419 $
–
–
–
430
C
$
21
C
$
22
C
$
23
C
$
27
C
$
–
$
167,536
68,599
98,937
37,954
60,983
$
150,917
66,199
84,718
31,986
52,732
$
43,409
33,472
9,937
9,906
31
$
–
–
–
–
–
$
–
–
–
–
–
$
$
$
$
620,712
6.62
107,068
$
641
$
C
$
$
$
551,739
8.26
117,456
$
$
636
6
6
(3 )
650 $
5
(40 )
–
529 $
–
115
–
751
110
114
140
C
$
$
$
–
–
–
299,430
7.29
52,602
$
C
$
564
$
$
–
$
–
–
–
–
C
$
–
–
–
–
$
–
$
–
–
–
–
C
$
–
Note:
(i)
Total cash costs per ounce and minesite costs per tonne are non-US GAAP measures of performance that the Company uses to monitor the performance
of its operations. See "– Results of Operations – Production Costs" above.
2011 ANNUAL REPORT
Table of Contents
113
2011
Kittila mine
Revenues from mining operations
Production costs
Operating margin
Amortization
Gross profit
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
Total cash costs (per ounce):
Production costs
Less:
Net byproduct revenues
Inventory adjustments
Accretion expense and other
Stripping costs (capitalized vs expensed)
Total cash costs (per ounce) (i)
Minesite costs per tonne
Pinos Altos mine
Revenues from mining operations
Production costs
Operating margin
Amortization
Gross profit
(i)
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
Total cash costs (per ounce):
Production costs
Less:
Net byproduct revenues
Inventory adjustments
Accretion expense and other
Stripping Costs (capitalized vs.
expensed)
Total cash costs (per ounce) (i)
Minesite costs per tonne
(i)
$
$
$
225,612
110,477
115,135
26,574
88,561
2010
$
$
$
1,030,764
5.11
143,560
160,140
87,740
72,400
31,488
40,912
2009
$
$
$
960,365
5.41
126,205
$
770
$
$
1
(10 )
(1 )
(21 )
739 $
695
61,457
42,464
18,993
10,909
8,084
2008
$
$
$
2
(38 )
(2 )
–
657 $
$
–
–
24
(4 )
–
668 $
648
$
$
$
–
–
–
563,238
5.02
71,838
$
–
–
–
–
–
2007
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
$
–
–
–
–
–
€
75
€
66
€
54
€
–
€
–
$
378,329
145,614
232,715
36,989
195,726
$
175,637
90,293
85,344
21,577
63,767
$
14,182
11,819
2,363
1,524
839
$
–
–
–
–
–
$
–
–
–
–
–
$
$
$
$
4,509,407
1.80
204,380
$
712
$
$
2,318,266
1.95
130,431
$
(297 )
9
(6 )
(119 )
692
$
$
(192 )
22
(6 )
(91 )
1,227
$
–
–
–
227,394
1.08
16,189
$
$
$
–
–
–
–
$
–
–
–
–
(65 )
(556 )
(10 )
–
–
–
–
–
–
$
299
$
425
$
596
$
–
$
–
$
27
$
35
$
28
$
–
$
–
Note:
(i)
Total cash costs per ounce and minesite costs per tonne are non-US GAAP measures of performance that the Company uses to monitor the performance
of its operations. See "– Results of Operations – Production Costs" above.
114
AGNICO-EAGLE MINES LIMITED
Table of Contents
2011
Meadowbank mine
Revenues from mining operations
Production costs
Operating margin
Amortization
Gross profit
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
Total cash costs (per ounce):
Production costs
Less:
Net byproduct revenues
Inventory adjustments
Accretion expense and other
Stripping Costs (capitalized vs.
expensed)
Total cash costs (per ounce) (i)
Minesite costs per tonne
(i)
$
$
$
434,051
284,502
149,549
112,624
36,925
2010
$
$
$
2,977,722
3.02
270,801
$
1,051
318,351
182,533
135,818
55,604
80,214
2009
$
$
$
(2 )
(6 )
(7 )
(36 )
690
$
$
$
–
–
–
2,000,792
4.34
265,659
$
–
–
–
–
–
2008
$
–
$
$
$
–
–
–
$
–
–
–
–
(2 )
26
(5 )
(16 )
–
–
–
–
–
2007
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
$
1,000
$
693
$
–
$
–
$
–
C
$
91
C
$
95
C
$
–
C
$
–
C
$
–
Note:
(i)
Total cash costs per ounce and minesite costs per tonne are non-US GAAP measures of performance that the Company uses to monitor the performance
of its operations. See "– Results of Operations – Production Costs" above.
2011 ANNUAL REPORT
Table of Contents
115
ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
The articles of Agnico-Eagle provide for a minimum of five and a maximum of fifteen directors. By special resolution of the
shareholders of Agnico-Eagle approved at the annual and special meeting of Agnico-Eagle held on June 27, 1996, the
shareholders authorized the Board to determine the number of directors within that minimum and maximum. The number of
directors to be elected is thirteen as determined by the Board by resolution passed on February 15, 2012.
The by-laws of Agnico-Eagle provide that directors will hold office for a term expiring at the next annual meeting of shareholders of
Agnico-Eagle or until their successors are elected or appointed or the position is vacated. The Board annually appoints the officers
of Agnico-Eagle, who are subject to removal by resolution of the Board at any time, with or without cause (in the absence of a
written agreement to the contrary).
The following is a brief biography of each of Agnico-Eagle's directors:
Dr. Leanne M. Baker , 59, of Sebastopol, California, is an independent director of Agnico-Eagle. Dr. Baker is the President and
Chief Executive Officer and a director of Sutter Gold Mining Inc. ("Sutter"), a gold company that is developing its Lincoln Project in
California's Mother Load. Sutter's shares trade on the TSX Venture Exchange and the OTCQX. Previously, Dr. Baker was
employed by Salomon Smith Barney where she was one of the top-ranked mining sector equity analysts in the United States.
Dr. Baker is a graduate of the Colorado School of Mines (M.S. and Ph.D. in mineral economics). Dr. Baker has been a director of
Agnico-Eagle since January 1, 2003, and is also a director of Reunion Gold Corporation (a mining exploration company traded on
the TSX Venture Exchange), McEwen Mining Inc. and Kimber Resources Inc. (mining exploration companies traded on the NYSE
Arca and the TSX). Area of expertise: Corporate Finance and Mineral Economics.
Douglas R. Beaumont, P.Eng. , 79, of Mississauga, Ontario, is an independent director of Agnico-Eagle. Mr. Beaumont, now
retired, was most recently Senior Vice-President, Process Technology of SNC Lavalin. Prior to that, he was Executive
Vice-President of Kilborn Engineering and Construction. Mr. Beaumont is a graduate of Queen's University (B.Sc.). Mr. Beaumont
has been a director of Agnico-Eagle since February 25, 1997. Area of expertise: Mining and Metallurgy.
Sean Boyd, CA , 53, of Toronto, Ontario, is the Vice-Chairman, President and Chief Executive Officer and a director of
Agnico-Eagle. Mr. Boyd has been with Agnico-Eagle since 1985. Prior to his appointment as Vice-Chairman, President and Chief
Executive Officer in February 2012, Mr. Boyd served as Vice-Chairman and Chief Executive Officer from 2005 to 2012 and as
President and Chief Executive Officer from 1998 to 2005, Vice-President and Chief Financial Officer from 1996 to 1998, Treasurer
and Chief Financial Officer from 1990 to 1996, Secretary Treasurer during a portion of 1990 and Comptroller from 1985 to 1990.
Prior to joining Agnico-Eagle in 1985, he was a staff accountant with Clarkson Gordon (Ernst & Young). Mr. Boyd is a Chartered
Accountant and a graduate of the University of Toronto (B.Comm.). Mr. Boyd has been a director of Agnico-Eagle since April 14,
1998. Area of expertise: Executive Management, Finance.
Martine A. Celej , 46, of Toronto, Ontario, is an independent director of Agnico-Eagle. Ms Celej is currently the Vice-President,
Investment Advisor with RBC Dominion Securities and has been in the investment industry since 1989. She is a graduate of
Victoria College at the University of Toronto (B.A. (Honours)). Ms Celej became a director of Agnico-Eagle on February 14, 2011.
Area of expertise: Investment Management.
Clifford J. Davis , 69, of Kemble, Ontario, is an independent director of Agnico-Eagle. Mr. Davis is a mining industry veteran and
formerly a member of the senior management teams of New Gold Inc., Gabriel Resources Ltd. and TVX Gold Inc. Mr. Davis is a
graduate of the Royal School of Mines, Imperial College, London University (B.Sc., Mining Engineering). Mr. Davis has been a
director of Agnico-Eagle since June 17, 2008 and is also a director and member of the Compensation Committee, Nominating and
Corporate Governance Committee and Audit Committee of Zenyatta Ventures Ltd. Area of expertise: Mining.
Robert J. Gemmell , 55, of Toronto, Ontario, is an independent director of Agnico-Eagle. Now retired, Mr. Gemmell spent
25 years as an investment banker in the United States and in Canada. Most recently, he was President and Chief Executive
Officer of Citigroup Global Markets Canada and its predecessor companies (Salomon Brothers Canada and Salomon Smith
Barney Canada) from 1996 to 2008. In addition, he was a member of the Global Operating Committee of Citigroup Global Markets
from 2006 to 2008. Mr. Gemmell is a graduate of Cornell University (B.A.), Osgoode Hall Law School (LL.B) and the Schulich
School of Business (M.B.A.). Mr. Gemmell became a director of Agnico-Eagle on January 1, 2011. Area of expertise: Corporate
Finance and Business Strategy.
Bernard Kraft, CA , 81, of Toronto, Ontario, is an independent director of Agnico-Eagle. Mr. Kraft is a retired senior partner of the
Toronto accounting firm Kraft, Berger LLP, Chartered Accountants and now serves as a consultant to that firm. He is
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AGNICO-EAGLE MINES LIMITED
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also a principal in Kraft Yabrov Valuations Inc. Mr. Kraft is recognized as a Designated Specialist in Investigative and Forensic
Accounting by the Canadian Institute of Chartered Accountants. Mr. Kraft is a member of the Canadian Institute of Chartered
Business Valuators, the Association of Certified Fraud Examiners and the American Society of Appraisers. Mr. Kraft has been a
director of Agnico-Eagle since March 12, 1992, and is also a director and a member of the Audit Committee, Governance
Committee and Health, Safety and Environment Committee of St. Andrews Goldfields Limited and a director and a member of the
Audit Committee of Harte Gold Corp. Area of expertise: Audit and Accounting.
Mel Leiderman, CA, TEP, ICD.D , 59, of Toronto, Ontario, is an independent director of Agnico-Eagle. Mr. Leiderman is the
managing partner of the Toronto accounting firm Lipton LLP, Chartered Accountants. He is a graduate of the University of
Windsor (B.A.) and is a certified director of the Institute of Corporate Directors (ICD.D). He has been a director of Agnico-Eagle
since January 1, 2003 and is also a director and a member of the Audit Committee and Corporate Governance and Compensation
Committee of Colossus Minerals Inc. Area of expertise: Audit and Accounting.
James D. Nasso, ICD.D , 78, of Toronto, Ontario, is Chairman of the Board of Directors and an independent director of
Agnico-Eagle. Mr. Nasso is now retired and is a graduate of St. Francis Xavier University (B.Comm.) and is a certified director of
the Institute of Corporate Directors (ICD.D). Mr. Nasso has been a director of Agnico-Eagle since June 27, 1986. Area of
expertise: Management and Business Strategy.
Dr. Sean Riley , 58, of Antigonish, Nova Scotia, is an independent director of Agnico-Eagle. Dr. Riley has served as President of
St. Francis Xavier University since 1996. Prior to 1996, his career was in finance and management, first in corporate banking and
later in manufacturing. Dr. Riley is a graduate of St. Francis Xavier University (B.A. (Honours)) and of Oxford University (M. Phil,
D. Phil, International Relations)). Dr. Riley became a director of Agnico-Eagle on January 1, 2011. Area of Expertise :
Management and Business Strategy.
J. Merfyn Roberts, CA , 61, of London, England, is an independent director of Agnico-Eagle. Mr. Roberts has been a fund
manager and investment advisor for more than 25 years and has been closely associated with the mining industry. Mr. Roberts is
a graduate of Liverpool University (B.Sc., Geology) and Oxford University (M.Sc., Geochemistry) and is a member of the Institute
of Chartered Accountants in England and Wales. He has been a director of Agnico-Eagle since June 17, 2008, and is also a
director and a member of the Audit Committee and Compensation and Corporate Governance Committee of Eastern Platinum
Limited, a director and a member of the Remuneration Committee and Audit Committee of Rambler Metals and Mining plc, a
director of Mena Hydrocarbons Inc. and a director of Blackheath Resources Inc. Area of expertise: Investment Management.
Howard R. Stockford, P.Eng. , 70, of Toronto, Ontario, is an independent director of Agnico-Eagle. Mr. Stockford is a retired
mining executive with 50 years of experience in the industry. Most recently he was Executive Vice-President of Aur
Resources Inc. ("Aur") and a director of Aur from 1984 until August 2007, when it was taken over by Teck Cominco Limited.
Mr. Stockford has previously served as President of the Canadian Institute of Mining, Metallurgy and Petroleum and is a member
of the Association of Professional Engineers of Ontario, the Prospectors and Developers Association of Canada and the Society
of Economic Geologists. Mr. Stockford is a graduate of the Royal School of Mines, Imperial College, London University,
U.K. (B.Sc., Mining Geology). Mr. Stockford has been a director of Agnico-Eagle since May 6, 2005, and is also a director, a
member of the Audit Committee, the Corporate Governance Committee and the Technical Committee of Victory Nickel Inc. Area
of expertise: Executive Management, Mining.
Pertti Voutilainen, M.Sc., M.Eng. , 70, of Espoo, Finland, is an independent director of Agnico-Eagle. Mr. Voutilainen is a mining
industry veteran. Most recently, he was the Chairman of the board of directors of Riddarhyttan Resources AB. Previously,
Mr. Voutilainen was the Chairman of the board of directors and Chief Executive Officer of Kansallis Banking Group and President
after its merger with Union Bank of Finland until his retirement in 2000. He was also employed by Outokumpu Corp., Finland's
largest mining and metals company, for 26 years, including as Chief Executive Officer for 11 years. Mr. Voutilainen holds the
honorary title of Mining Counselor (Bergsrad), which was awarded to him by the President of the Republic of Finland in 2003.
Mr. Voutilainen is a graduate of Helsinki University of Technology (M.Sc.), Helsinki University of Business Administration (M.Sc.)
and Pennsylvania State University (M.Eng.). He has been a director of Agnico-Eagle since December 13, 2005. Area of expertise:
Mining and Finance.
The following is a brief biography of each of Agnico-Eagle's senior officers:
Ammar Al-Joundi , 48, of Toronto, Ontario, is Senior Vice-President, Finance and Chief Financial Officer of Agnico-Eagle.
Mr. Al-Joundi joined Agnico-Eagle as Senior Vice-President, Chief Financial Officer in 2010. Prior to joining Agnico-Eagle,
Mr. Al-Joundi spent 11 years at Barrick in various senior financial roles including Senior Vice-President of Finance, Senior
Vice-President of Business Strategy and Capital Allocation and two years as Executive Director and CFO of Barrick South
America. Prior to that, Mr. Al-Joundi spent eight years as an investment banker with Citibank Canada. Mr. Al-Joundi is a
2011 ANNUAL REPORT
Table of Contents
117
graduate of the Ivey Business School (M.B.A.) at the University of Western Ontario and is a graduate of the University of Toronto
(B.Eng., Mechanical Engineering).
Donald G. Allan , 56, of Toronto, Ontario, is Senior Vice-President, Corporate Development of Agnico-Eagle, a position he has
held since December 14, 2006. Prior to that, Mr. Allan had been Vice-President, Corporate Development since May 6, 2002. Prior
to that, Mr. Allan spent 16 years as an investment banker covering the mining and natural resources sectors with the firms
Salomon Smith Barney and Merrill Lynch. Mr. Allan is a graduate of the Amos Tuck School, Dartmouth College (M.B.A.) and the
University of Toronto (B.Comm.). Mr. Allan is also qualified as a Chartered Accountant.
Alain Blackburn, P.Eng. , 55, of Oakville, Ontario, is Senior Vice-President, Exploration of Agnico-Eagle, a position he has held
since December 14, 2006. Prior to that, Mr. Blackburn had been Vice-President, Exploration since October 1, 2002. Prior to that,
Mr. Blackburn served as Agnico-Eagle's Manager, Corporate Development from January 1999 and Exploration Manager from
September 1996 to January 1999. Mr. Blackburn joined Agnico-Eagle in 1988 as Chief Geologist at the LaRonde mine.
Mr. Blackburn is a graduate of Université du Quebec de Chicoutimi (P.Eng.) and Université du Quebec en Abitibi-Temiscamingue
(M.Sc.).
Louise Grondin, Ing. P.Eng. , 58, of Toronto, Ontario, is Senior Vice-President, Environment and Sustainable Development of
Agnico-Eagle, a position she has held since January 1, 2011. Prior to that, Ms. Grondin was Vice President, Environment and
Sustainable Development and before that she was the Regional Environmental Manager and Environmental Manager, LaRonde
Division. Prior to her employment with Agnico-Eagle, Ms. Grondin worked for Billiton Canada Ltd. as Manager Environment,
Human Resources and Safety. Ms. Grondin is a graduate of the University of Ottawa (B.Sc.) and McGill University (M.Sc.).
Tim Haldane, P.Eng. , 55, of Tucson, Arizona, is Senior Vice-President, Latin America of Agnico-Eagle. Prior to joining
Agnico-Eagle in May 2006, he was Vice President, Development for Glamis Gold Inc. where he participated in numerous
acquisition and development activities in North America and Central America. Mr. Haldane is a graduate of the Montana School of
Mines and Technology (B.S. Metallurgical Engineering) and has 30 years of experience in the precious metals and base metals
industries.
R. Gregory Laing, B.A., LL.B. , 53, of Oakville, Ontario, is General Counsel, Senior Vice-President, Legal and Corporate
Secretary of Agnico-Eagle, a position he has held since December 14, 2006, prior to which, Mr. Laing had been General Counsel,
Vice-President, Legal and Corporate Secretary since September 19, 2005. Prior to that, he was Vice President, Legal of
Goldcorp Inc. from October 2003 to June 2005 and General Counsel, Vice President, Legal and Corporate Secretary of TVX
Gold Inc. from October 1995 to January 2003. He worked as a corporate securities lawyer for two prominent Toronto law firms
prior to that. Mr. Laing is a director of Andina Minerals Inc. (a mining exploration company), a TSX Venture Exchange listed
company and Hy Lake Gold Inc. (a mining exploration company), traded on the Canadian National Stock Exchange. Mr. Laing is a
graduate of the University of Windsor (LL.B.) and Queen's University (B.A.).
Marc H. Legault, P.Eng, 52, of Mississauga, Ontario, is Senior Vice-President, Project Evaluations of Agnico-Eagle, a position he
has held since February 2012. Prior to that, he was Vice-President, Project Development since 2007. Mr. Legault has been with
Agnico-Eagle since 1988, when he was hired as an exploration geologist in Val d'Or, Quebec. Since then, he has taken on
successively increasing responsibilities in the Company's exploration, mine geology and project evaluation activities. Mr. Legault
is a graduate of Carleton University (M.Sc. in geology in 1985) and Queen's University at Kingston (B.Sc.H. in Geological
Engineering in 1982). Marc is a registered Professional Engineer. He is also a director of Golden Goliath Resources Ltd., a mining
exploration company that trades on the TSX Venture Exchange.
Jean-Luk Pellerin , 55, of Toronto, Ontario, is Senior Vice-President, Human Resources. Mr. Pellerin joined Agnico-Eagle in
January 2012. Prior to that, he spent four years at Transat A.T. Inc. as Senior Vice-President, Human Resources and Chief Talent
Officer. Before Transat, Mr. Pellerin spent six years in consulting at the helm of his own firm and as National Partner with Mercer
Consulting. Prior to that, he held senior management and executive positions at Bombardier Inc., Domtar Corporation and
General Electric. Mr. Pellerin has also taught in the MBA program at the H.E.C. Montreal in the Master's program in
Organizational Development, as well as at American University and at the McGill International Executive Institute. Mr. Pellerin is a
graduate of the University of Laval in Industrial Relations.
Daniel Racine, Ing., P.Eng. , 49, of Oakville, Ontario, is Senior Vice-President, Mining of Agnico-Eagle, a position he has held
since June 2008. Prior to his appointment, he served Agnico-Eagle in various capacities for 22 years, including Vice-President,
Operations, Operations Manager, LaRonde mine Manager, Underground Superintendent and Mine Captain. Prior to joining
Agnico-Eagle, Mr. Racine worked as a mining engineer for several mining companies. Mr. Racine graduated as a mining engineer
from Laval University (B.Sc.) in December 1986.
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AGNICO-EAGLE MINES LIMITED
Table of Contents
Jean Robitaille , 49, of Oakville, Ontario, is Senior Vice-President, Technical Services and Project Development of Agnico-Eagle,
a position he has held since June 2008. Prior to his appointment, he served Agnico-Eagle in various capacities for more than
22 years, most recently as Vice-President, Metallurgy & Marketing, General Manager, Metallurgy & Marketing and Mill
Superintendent and Project Manager for the expansion of the LaRonde mill. Prior to joining Agnico-Eagle, Mr. Robitaille worked as
a metallurgist with Teck Mining Group. Mr. Robitaille is a mining graduate of the College de l'Abitibi-Témiscamingue with a
specialty in mineral processing.
David Smith, P.Eng. , 48, of Toronto, Ontario, is Senior Vice-President, Strategic Planning and Investor Relations of
Agnico-Eagle, a position he has held since January 1, 2011. Prior to that he was Vice-President, Investor Relations. He started
work in investor relations at Agnico-Eagle in February 2005. Prior to that, he was a mining analyst at Dominion Bond Rating
Service for more than five years. Mr. Smith's professional experience also includes a variety of engineering positions in the mining
industry, both in Canada and abroad. He is a graduate of Queen's University (B.Sc.) and the University of Arizona (M.Sc.).
Mr. Smith is also a Professional Engineer.
Yvon Sylvestre, 50, of Mississauga, Ontario, is Senior Vice-President, Operations, a position he has held since February 2012.
Prior to that, he was Vice-President, Construction; Mine General Manager at the Goldex division of Agnico-Eagle and, previously,
Mill Superintendent at the LaRonde division. Mr. Sylvestre is a Metallurgical Engineering Technology graduate from Cambrian
College in Sudbury. Following graduation, he served as Mettallurgist and Mill Superintendent at the Joutel division of
Agnico-Eagle and also held the position of Mill Superintendent at the Trollus division of Inmet Mining Corporation.
There are no arrangements or understandings between any director or executive officer and any other person pursuant to which
such director or executive officer was selected to serve, nor are there any family relationships between any such persons.
Compensation of Executive Officers
The senior officers of Agnico-Eagle are:
•
Sean Boyd, Vice-Chairman, President and Chief Executive Officer
•
Ammar Al-Joundi, Senior Vice-President, Finance and Chief Financial Officer
•
Donald G. Allan, Senior Vice-President, Corporate Development
•
Alain Blackburn, Senior Vice-President, Exploration
•
Louise Grondin, Senior Vice-President, Environment and Sustainable Development
•
Tim Haldane, Senior Vice-President, Latin America
•
R. Gregory Laing, General Counsel, Senior Vice-President, Legal and Corporate Secretary
•
Marc Legault, Senior Vice-President, Project Evaluations
•
Jean-Luk Pellerin, Senior Vice-President, Human Resources
•
Daniel Racine, Senior Vice-President, Mining
•
Jean Robitaille, Senior Vice-President, Technical Services and Project Development
•
David Smith, Senior Vice-President, Strategic Planning and Investor Relations
•
Yvon Sylvestre, Senior Vice-President, Operations
2011 ANNUAL REPORT
Table of Contents
119
The following Summary Compensation Table sets out compensation during the three fiscal year ended December 31, 2011 for the
Vice-Chairman, President and Chief Executive Officer, the Senior Vice-President, Finance and Chief Financial Officer and the
three other most highly compensated officers (the "Named Executive Officers") of Agnico-Eagle measured by total compensation
earned during the fiscal years ended December 31, 2011, 2010 and 2009.
Summary Compensation Table – Agnico-Eagle Mines Limited
Non-Equity
Incentive Plan
Compensation (1)
Name and
Principal
Position
Sean Boyd
Vice-Chairman and
Chief Executive
Officer
Eberhard Scherkus
President and
Chief Operating
Officer
Ammar Al-Joundi
Senior
Vice-President,
Finance and
Chief Financial
Officer
Alain Blackburn
Senior
Vice-President,
Exploration
Donald G. Allan
Senior
Vice-President,
Corporate
Development
Sharebased
Awards
Year
Optionbased
Awards (3)
Annual
Incentive
Plans
LongTerm
Incentive
Plans
(C$)
Salary
(2)
(C$)
(C$)
(C$)
(C$)
2011
2010
2009
1,260,000
1,200,000
925,000
52,000
46,250
39,000
4,120,800
4,893,000
6,147,500
1,197,000
1,656,000
1,175,000
2011
2010
2009
800,000
775,000
660,000
38,750
33,000
33,000
2,403,800
2,854,250
4,303,250
2011
2010
490,000
151,635
23,750
7,308
2011
2010
438,000
425,000
2009
2011
2010
2009
All Other
Total
Pension Compensation Compensation
(4)
(5)
Value
(C$)
(C$)
(C$)
n/a
n/a
n/a
257,642
290,182
1,025,107
95,005
19,200
21,264
6,982,447
8,104,632
9,332,871
656,000
775,000
596,000
n/a
n/a
n/a
172,669
132,035
410,055
100,707
19,200
21,944
4,171,926
4,588,485
6,024,249
1,030,200
1,615,500 6
457,000
322,000
n/a
n/a
119,080
nil
56,202
5,908
2,154,832
2,102,351
15,600
15,600
1,030,200
1,631,000
335,000
344,000
n/a
n/a
92,980
92,900
55,092
19,200
1,966,872
2,527,700
340,000
420,000
400,000
15,600
16,900
13,000
2,459,000
1,030,200
1,223,250
260,000
378,000
276,000
n/a
n/a
n/a
68,000
96,730
78,950
23,444
57,216
19,700
3,166,044
1,999,046
2,010,900
340,000
14,300
1,844,250
175,000
n/a
55,250
19,700
2,448,500
(1)
All amounts earned on non-equity incentive plan compensation were paid during the financial year.
(2)
This represents the Company's contribution to shares purchased by the Named Executive Officers pursuant to the Employee Share Purchase Plan.
(3)
The value of option-based awards, being C$17.17 (2010 – C$16.31; 2009 – C$24.59) per Option, was determined using the Black-Scholes option pricing
model. The Black-Scholes option pricing model is a commonly used pricing model that assumes the valued option can only be exercised at expiration. All
options were granted at an exercise price of C$76.60 (2010 – C$56.92; 2009 – C$62.77), which was the closing price for the common shares of the
Company on the TSX on the day prior to the date of grant. Key additional assumptions used were: (i) the risk free interest rate, which was 1.96%
(2010 – 1.87%; 2009 – 1.3%); (ii) current time to expiration of the option which was assumed to be 2.5 years; (iii) the volatility for the common shares of
the Company on the TSX, which was 34.63% (2010 – 44%; 2009 – 64%); and (iv) the dividend yield for the common shares of the Company, which was
0.88% (2010 – 0.43%; 2009 – 0.42%).
(4)
Consists of premiums paid for term life and health insurance, automobile allowances, education and fitness benefits and, beginning in 2011, extended
health coverage and computer-related allowances for the Named Executive Officers.
(5)
The total compensation was paid in Canadian dollars. The Company reports its financial statements in United States dollars. On December 31, 2011 the
Noon Buying Rate was C$1.00 equals US$1.0170.
(6)
Mr. Al-Joundi joined the Company as Senior Vice-President, Finance and Chief Financial Officer on September 1, 2010 and received a grant of options
with a Black-Scholes value of C$14.46 on that date based an exercise price of C$69.44, a risk-free interest rate of 1.51%, a time to expiration of 5 years, a
volatility of 31.4% and dividend yield of 0.24%.
Stock Option Plan
Under the Stock Option Plan, options to purchase common shares may be granted to directors, officers, employees and
consultants of the Company. The exercise price of options granted may be denominated in Canadian dollars or United States
dollars, but generally may not be less than the closing market price for the common shares of the Company on the TSX or the
NYSE, repectively, on the trading day prior to the date of grant. The maximum term of options granted under the Stock Option
Plan is five years and the maximum number of options that can be issued in any year is 2% of the Company's outstanding
common shares. In addition, a maximum of 25% of the options granted in an option grant vest
120
AGNICO-EAGLE MINES LIMITED
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upon the date they are granted with the remaining options vesting equally on the next three anniversaries of the option grant. The
value of options granted to non-executive directors participating in the Stock Option Plan is limited to C$100,000 per year;
however, in July 2011, the Board amended its director compensation program such that non-executive directors now receive
restricted share units ("RSUs") instead of options. The number of common shares which may be reserved for issuance to any one
person pursuant to options (under the Stock Option Plan or otherwise), warrants, share purchase plans or other compensation
arrangements may not exceed 5% of the outstanding common shares. Additionally, the number of common shares which may be
reserved for issuance to insiders of the Company pursuant to options (under the Stock Option Plan or otherwise), warrants, share
purchase plans or other compensation arrangements, at any time, cannot exceed 10% of outstanding common shares and the
number of common shares issued to insiders of the Company pursuant to options (under the Stock Option Plan or otherwise),
warrants, share purchase plans or other compensation arrangements, within any one year period, cannot exceed 10% of the
outstanding common shares.
The Stock Option Plan provides for the termination of an option held by an option holder in the following circumstances:
•
the option expires (no later than five years after the option was granted);
•
30 days after the option holder ceases to be an employee, officer, director of or consultant to the Company or any
subsidiary of the Company;
•
twelve months after the death of the option holder; and
•
where such option holder is a director, four years after the date he or she resigns or retires from the Board (provided
that in no event will any option expire later than five years after the option was granted).
An option granted under the Stock Option Plan may only be assigned to eligible assignees, including a spouse, a minor child, a
minor grandchild, a trust governed by a registered retirement savings plan of an eligible participant, a corporation controlled by
such participant and of which all other shareholders are eligible assignees or a family trust of which such participant is a trustee
and of which all beneficiaries are eligible assignees. Assignments must be approved by the Board and any stock exchange or
other authority.
The Board may amend or revise the terms of the Stock Option Plan without the approval of shareholders as permitted by law and
subject to any required approval by any stock exchange or other authority, including amendments of a "housekeeping" nature,
amendments necessary to comply with applicable law (including, without limitation, the rules, regulations and policies of the TSX),
amendments respecting administration of the Stock Option Plan (provided such amendment does not entail an extension beyond
the original expiry date), any amendment to the vesting provisions of the Stock Option Plan or any option, any amendment to the
early termination provisions of the Stock Option Plan or any option, whether or not such option is held by an insider (provided such
amendment does not entail an extension beyond the original expiry date), the addition or modification of a cashless exercise
feature, amendments necessary to suspend or terminate the Stock Option Plan and any other amendment, whether fundamental
or otherwise, not requiring shareholder approval under applicable law (including, without limitation, the rules, regulations and
policies of the TSX). No amendment or revision to the Stock Option Plan which adversely affects the rights of any option holder
under any option granted under the Stock Option Plan can be made without the consent of the option holder whose rights are
being affected.
In addition, no amendments to the Stock Option Plan to increase the maximum number of common shares reserved for issuance,
to reduce the exercise price for any option, to extend the term of an option held by an insider, to increase any limit on grants of
options to insiders of the Company, to amend the designation of who is an eligible participant or eligible assignee, to change the
participation limits in any given year for non-executive directors or to grant additional powers to the Board to amend the Stock
Option Plan or entitlements can be made without first obtaining the approval of the Company's shareholders. In response to a
TSX staff notice regarding amendments to security based compensation arrangements, the Stock Option Plan was amended in
2007 such that where the Company has imposed trading restrictions on directors and officers that fall within ten trading days of
the expiry of an option, such option's expiry date shall be the tenth day following the termination of such restrictions. The Stock
Option Plan does not expressly entitle participants to convert an option into a stock appreciation right.
Under the Stock Option Plan, only eligible persons who are not directors or officers of the Company are entitled to receive loans,
guarantees or other support arrangements from the Company to facilitate option exercises. During 2011, no loans, guarantees or
other financial assistance were provided under the plan.
2011 ANNUAL REPORT
Table of Contents
121
The number of common shares currently reserved for issuance under the Stock Option Plan is 12,221,186 common shares
(comprised of 11,657,901 common shares relating to options issued but unexercised and 563,285 common shares relating to
options available to be issued), being 7.1% of the Company's 170,928,545 common shares issued and outstanding as at
March 12, 2012.
In 2011, officers exercised options to receive notional proceeds of, in aggregate, C$4,089,391 (7 people) (C$21,775,538
(17 people) in 2010; C$23,741,131 (17 people) in 2009). In 2011, the Company received proceeds from the exercise of options in
the amount of $3,822,087 (C$76,129,773 in 2010; C$42,395,941 in 2009).
The following table sets out the value vested during the most recently completed financial year of the Company of incentive plan
awards granted to the Named Executive Officers.
Incentive Plan Awards Table – Value Vested or Earned During Fiscal Year 2011
Name
Sean Boyd
Eberhard Scherkus
Ammar Al-Joundi
Alain Blackburn
Donald G. Allan
122
AGNICO-EAGLE MINES LIMITED
Table of Contents
Option-Based
Awards –
Value Vested
During the Year
Share-Based
Awards –
Value Vested
During the Year
Non-Equity
Incentive Plan
Compensation –
Value Earned
During the Year
(C$)
(C$)
(C$)
nil
nil
nil
nil
nil
n/a
n/a
n/a
n/a
n/a
1,197,000
656,000
457,000
335,000
378,000
The following table sets out the outstanding option awards of the Named Executive Officers as at December 31, 2011.
Outstanding Incentive Plan Awards Table
Option-Based Awards
Name
Sean Boyd
Eberhard
Scherkus
Ammar Al-Joundi
Alain Blackburn
Donald G. Allan
Share-Based Awards
Value of
Unexercised
In-The-Money
Options (1)
Number
of
Shares
or
Units of
Shares
that
have
not
Vested
Market or
Payout
Value of
Share-Based
Awards
that have
not Vested
Market or
Payout
Value of
Vested
Share Based
Awards
not Paid Out
or
Distributed
(C$)
(#)
(C$)
(C$)
Number of
Securities
Underlying
Unexercised
Options
Option
Exercise
Price
(#)
(C$)
100,000
200,000
250,000
300,000
240,000
48.09
54.42
62.77
56.92
76.60
1/2/2012
1/2/2013
1/2/2014
1/4/2015
1/4/2016
nil
nil
nil
nil
nil
nil
nil
nil
75,000
125,000
175,000
175,000
140,000
75,000
60,000
39,750
100,000
100,000
60,000
30,000
60,000
75,000
75,000
60,000
48.09
54.42
62.77
56.92
76.60
69.44
76.60
54.42
62.77
56.92
76.60
48.09
54.42
62.77
56.92
76.60
1/2/2012
1/2/2013
1/2/2014
1/4/2015
1/4/2016
9/1/2015
1/4/2016
1/2/2013
1/2/2014
1/4/2015
1/4/2016
1/2/2012
1/2/2013
1/2/2014
1/4/2015
1/4/2016
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
Option
Expiration
Date
(1)
Based on a closing price of the Company's shares on the TSX of $37.05 on December 31, 2011. On December 31, 2011, the Noon Buying Rate was
C$1.00 equals US$1.0170.
2011 ANNUAL REPORT
Table of Contents
123
The following table shows, as at December 31, 2011, compensation plans under which equity securities of Agnico-Eagle are
authorized for issuance from treasury. The information has been aggregated by plans approved by shareholders and plans not
approved by shareholders, of which there are none.
Equity Compensation Plan Information
Plan Category
Equity compensation plans approved by shareholders
Equity compensation plans not approved by shareholders
Number of
securities to
be issued on
exercise of
outstanding
options
Weighted
average
exercise price
of outstanding
options
Number of
securities
remaining
available
for future
issuances
under equity
compensation
plans
8,959,051
nil
C$62.88
nil
3,262,135
nil
Employee Share Purchase Plan
In 1997, the shareholders of Agnico-Eagle approved the Employee Share Purchase Plan to encourage directors, officers and
full-time employees of Agnico-Eagle to purchase common shares of Agnico-Eagle. In 2009, the Employee Share Purchase Plan
was amended to prohibit non-executive directors from participating in the plan. Full-time employees who have been continuously
employed by Agnico-Eagle or its subsidiaries for at least twelve months are eligible at the beginning of each fiscal year to elect to
participate in the Employee Share Purchase Plan. Eligible employees may contribute up to 10% of their basic annual salary
through monthly payroll deductions or quarterly payments by cheque. Agnico-Eagle contributes an amount equal to 50% of the
individual's contributions and issues common shares that have a market value equal to the total contributions (individual and
Company) under the Employee Share Purchase Plan. In 2008, the shareholders of Agnico-Eagle approved an amendment to the
Employee Share Purchase Plan to increase the number of shares available under such plan to 5,000,000 common shares. Of the
5,000,000 common shares approved, Agnico-Eagle has, as of March 12, 2012, reserved 2,150,088 common shares remaining for
issuance under the Employee Share Purchase Plan.
Pension Plan Benefits
The Company's basic defined contribution pension plan (the "Basic Plan") provides pension benefits to employees of
Agnico-Eagle generally, including the Named Executive Officers. Under the Basic Plan, the Company contributes an amount
equal to 15% of each designated executive's pensionable earnings (including salary and short-term bonus) to the Basic Plan. The
Company's contributions cannot exceed the money purchase limit, as defined in the Income Tax Act (Canada). Upon termination,
the Company's contribution to the Basic Plan ceases and the participant is entitled to a pension benefit in the amount of the
vested account balance. All contributions to the Basic Plan are invested in a variety of funds offered by the plan administrator, at
the direction of the participant.
In addition to the Basic Plan, effective January 1, 2008, in line with the Company's compensation policy that compensation must
be competitive in order to help attract and retain the executives needed to lead and grow the Company's business and to address
the weakness of the Company's retirement benefits when compared to its peers in the gold production industry, the Company
adopted a supplemental defined contribution plan (the "Supplemental Plan") for designated executives at the level of
Vice-President or above. On December 31 of each year, the Company credits each designated executive's account an amount
equal to 15% of the designated executive's pensionable earnings for the year (including salary and short term bonus), less the
Company's contribution to the Basic Plan. In addition, on December 31 of each year, the Company will credit each designated
executive's account a notional investment return equal to the balance of such designated executive's account at the beginning of
the year multiplied by the yield rate for Government of Canada marketable bonds with average yields over ten years. Upon
retirement, after attaining the minimum age of 55, the designated executive's account will be paid out in either (a) five annual
installments subsequent to the date of retirement, or (b) by way of lump sum payment, at the executive's option. If the designated
executive's employment is terminated prior
124
AGNICO-EAGLE MINES LIMITED
Table of Contents
to reaching the age of 55, such designated executive will receive, by way of lump sum payment, the total amount credited to his or
her account.
The RCA Plans for Messrs. Boyd and Scherkus provide pension benefits which are generally equal (on an after-tax basis) to what
the pension benefits would be if they were provided directly from a registered pension plan. There are no pension benefit limits
under the RCA Plans. The RCA Plans provide an annual pension at age 60 equal to 2% of the executive's final three-year
average pensionable earnings for each year of continuous service with the Company, less the annual pension payable under the
Company's Basic Plan. The pensionable earnings for the purposes of the RCA Plans consist of all basic remuneration and do not
include benefits, bonuses, automobile or other allowances, or unusual payments. Payments under the RCA Plans are secured by
a letter of credit from a Canadian chartered bank. Messrs. Boyd and Scherkus may retire early, any time after reaching age 55,
with a benefit based on service and final average earnings at the date of retirement, with no early retirement reduction. The
Company does not have a policy to grant extra years of service under its pension plans. With the departure of Mr Scherkus from
the Company in March 2012, his pension plans, including his RCA Plan, were triggered.
The following table sets forth the benefits to Messrs. Boyd and Scherkus and the associated costs to the Company in excess of
the costs under the Company's Basic Plan.
Defined Benefit Plan Table
Annual Benefits
Accrued
Name
Number
of Years
of
Service (1)
At Year
End (1)
(#)
Sean Boyd
Eberhard
Scherkus
At age 60
Accrued
Obligation
at the Start
of the Year
Compensatory
Change
NonCompensatory
Change
Accrued
Obligation
at Year End
(C$)
(C$)
(C$)
(C$)
(C$)
(C$)
26
759,643
955,064
6,230,164
257,642
1,421,450
7,909,256
26
367,008
368,043
4,263,286
172,669
709,329
5,145,284
(1)
As at December 31, 2011
The following tables set forth summary information about the Basic Plan and the Supplemental Plan for each of the Named
Executive Officers as at December 31, 2011.
Defined Contribution Plan Table – Basic Plan
Name
Sean Boyd
Eberhard Scherkus
Ammar Al-Joundi
Alain Blackburn
Donald G. Allan
Table of Contents
Accumulated
Value at
Start of Year
Compensatory
NonCompensatory
Accumulated
Value at
Year End
(C$)
(C$)
(C$)
(C$)
397,580
353,373
22,450
287,608
171,902
22,970
22,970
22,970
22,970
22,970
(27,578 )
13,507
4,470
(24,250 )
11,110
2011 ANNUAL REPORT
392,972
389,850
41,000
286,328
183,763
125
Defined Contribution Plan Table – Supplemental Plan
Name
Accumulated
Value at
Start of Year
Sean Boyd (1)
Eberhard Scherkus (1)
Ammar Al-Joundi
Alain Blackburn
Donald G. Allan
Compensatory
NonCompensatory
Accumulated
Value at Year
End
(C$)
(C$)
(C$)
(C$)
nil
nil
nil
217,423
187,690
nil
nil
119,080
92,980
96,730
nil
nil
nil
5,261
4,452
nil
nil
119,080
315,664
288,962
(1)
Messrs. Boyd and Scherkus do not participate in the Supplemental Plan.
In 2011, the Company's management retained Mercer (Canada) Limited ("Mercer") to provide consulting services with respect to a
market review of the total direct compensation levels for the Named Executive Officers relative to 11 gold and base metals
companies in Agnico Eagle's peer group. Mercer was also retained to review Agnico Eagle's long-term incentive structure and to
compare it with Agnico Eagle's mining peer group and best practices. In 2011, the Company paid a total of C$29,275 in fees to
Mercer. The information provided by Mercer was used by the Compensation Committee and the Board in recommending and
approving, respectively, the revised long-term incentive structure for Agnico Eagle's senior executives. In recommending these
revisions to the compensation of the senior executives, the Compensation Committee also considered the
PricewaterhouseCoopers LLP 2011 "Mining Industry Salary Survey – Corporate Report"
Employment Contracts/Termination Arrangements
Agnico-Eagle has employment agreements with all of its executive officers that provide for an annual base salary, bonus and
certain pension, health, dental and other insurance and automobile benefits. These amounts may be increased at the discretion of
the Board of Directors upon the recommendation of the Compensation Committee. For the current base salary for each Named
Executive Officer see "Summary Compensation Table" above. If the individual agreements are terminated other than for cause,
death or disability, or upon their resignation following certain events, all of the Named Executive Officers would be entitled to a
payment equal to two and one-half times their annual base salary at the date of termination plus an amount equal to two and
one-half times their annual bonus (averaged over the preceding two years but not including options) and a continuation of benefits
for up to two and one-half years (or, at the election of the employee, the amount equal to the Company's cost in providing such
benefits) or until the individual commences new employment. Certain events that would trigger a severance payment are:
•
termination of employment without cause;
•
substantial alteration of responsibilities;
•
reduction of base salary or benefits;
•
office relocation of greater than 100 kilometres;
•
failure to obtain a satisfactory agreement from any successor to assume the individual's employment agreement or
provide the individual with a comparable position, duties, salary and benefits; or
•
any change in control of the Company.
If a severance payment triggering event had occurred on December 31, 2011, the severance payments that would be payable to
each of the Named Executive Officers, other than Mr. Scherkus, would be approximately as follows: Mr. Boyd – C$6,953,763;
Mr. Al-Joundi – C$2,339,256; Mr. Blackburn – C$2,081,482; and Mr. Allan – C$2,010,539.
126
AGNICO-EAGLE MINES LIMITED
Table of Contents
Compensation of Directors and Other Information
Mr. Boyd, who is a director and the Vice-Chairman, President and Chief Executive Officer of the Company, does not receive any
remuneration for his services as director of the Company. In addition, Mr. Scherkus, who was a director and the President and
Chief Operating Officer of the Company (until February 2012), did not receive any remuneration for his services as a director of
the Company in 2011.
Effective as of July 1, 2011, director compensation was amended to more closely align the equity component of director
compensation with shareholder interests by discontinuing the former practice of granting options to non-executive directors and
replacing such Option grants with grants of RSUs. As RSUs are effectively shares, the equity value of director compensation will
now correspond directly with share price movements, thereby directly aligning director and shareholder interests.
The tables below set out the annual retainers (annual retainers for the Chairs of the Board of Directors and other Committees are
in addition to the base annual retainer) and attendance fees paid to the other directors during the year ended December 31, 2011.
Directors do not receive meeting attendance fees.
Compensation during
the period between
January 1, 2011 and
June 30, 2011 (1)
Annual Board retainer (base)
Additional Annual retainer for Chairman of the Board
Additional Annual retainer for Chairman of the Audit Committee
Additional Annual retainer for Chairpersons of other Board Committees
C$115,000
C$125,000
C$25,000
C$10,000
(1)
The annualized retainers set out above were prorated for a period of six months during which these retainers were in effect.
Compensation during
the period between
June 30, 2011 (1) and
December 31, 2011
Annual Board retainer (base)
Additional Annual retainer for Chairman of the Board
Additional Annual retainer for Chairman of the Audit Committee
Additional Annual retainer for Chairs of other Board Committees
C$120,000
C$120,000
C$25,000
C$10,000
(1)
The annualized retainers set out above were prorated for a period of six months during which these retainers were in effect.
In addition, each non-executive director received a grant of options in January 2011 (February 2011 for Ms Celej, who joined the
Board on February 14, 2011) having a value per director of not greater than C$100,000.
Beginning in 2012, each director will receive an annual grant of 3,000 RSUs (Chairman of the Board – 4,000 RSUs). If a director
meets the minimum share ownership requirement (as described under "Director Shareholding Guidelines" below), he or she can
elect to receive cash in lieu of a portion of the RSUs to be granted, subject to receipt of a minimum grant of 1,000 RSUs. No RSUs
were granted to non-executive directors in 2011.
2011 ANNUAL REPORT
Table of Contents
127
Director Shareholding Guidelines
To align the interests of directors with those of shareholders, directors, other than Mr. Boyd, are required to own a minimum of
10,000 Agnico-Eagle common shares and/or RSUs. Directors have a period of the later of: (i) two years from the date of adoption
of this policy (August 24, 2011) or (ii) five years from the date of joining the Board, to achieve this ownership level through open
market purchases of common shares, grants of RSUs or the exercise of options held.
As of March 12, 2012, all of the directors have achieved the minimum share ownership requirement, other than Dr. Riley who has
until January 1, 2016 and Ms Celej who has until February 14, 2016 (five years from the time each became a director) and
Dr. Baker, Mr. Davis, Mr. Leiderman, Mr. Roberts and Mr. Stockford, who have until August 24, 2013 (two years from the date of
adoption of this policy), to achieve the minimum share ownership requirement.
The table below sets out the number and the value of common shares and RSUs held by each director of the Company; all
directors have increased their total shareholding (common shares and RSUs) in the Company since the last Management
Proxy Circular.
Aggregate common shares and RSUs owned by director and
aggregate value thereof as of March 12, 2012
Name
Leanne M. Baker
Douglas R. Beaumont
Sean Boyd
Martine A. Celej
Clifford J. Davis
Robert J. Gemmell
Bernard Kraft
Mel Leiderman
James D. Nasso
Sean Riley
John Merfyn Roberts
Howard R. Stockford
Pertti Voutilainen
Aggregate
Number of
Common
Shares
Aggregate
Value of
Common
Shares (1)
Aggregate
Number of
RSUs
Aggregate
Value of
RSUs (1)
(#)
(C$)
(#)
(C$)
5,500
17,960
116,812
2,000
6,000
10,000
12,657
6,000
18,289
2,000
6,000
6,068
21,000
192,610
628,959
4,090,756
70,040
210,120
350,200
443,248
210,120
640,480
70,040
210,120
212,250
735,420
3,000
1,000
24,660
3,000
3,000
3,000
1,000
3,000
4,000
3,000
3,000
3,000
1,000
105,060
35,020
863,593
105,060
105,060
105,060
35,020
105,060
140,080
105,060
105,060
105,060
35,050
(1)
The valuation is based on C$35.02, being the closing price of the Company's shares on the TSX on March 12, 2012.
128
AGNICO-EAGLE MINES LIMITED
Table of Contents
Deadline to
meet Guideline
August 24, 2013
Meets Guideline
n/a
February 14, 2016
August 24, 2013
Meets Guideline
Meets Guideline
August 24, 2013
Meets Guideline
January 1, 2016
August 24, 2013
August 24, 2013
Meets Guideline
The following table sets out the compensation provided to the members of the Board of Directors, other than Messrs. Boyd and
Scherkus, for the Company's most recently completed financial year.
Director Compensation Table
Name
Leanne M. Baker
Douglas R. Beaumont
Martine A.Celej
Clifford J. Davis
Robert Gemmell
Bernard Kraft
Mel Leiderman
James D. Nasso
John Merfyn Roberts
Sean Riley
Howard R. Stockford
Pertti Voutilainen
Fees
Earned
ShareBased
Awards
Option-Based
Awards (1)(2)
Non-Equity
Incentive Plan
Compensation
Pension
Value
All Other
Compensation
Total (3)
(C$)
(C$)
(C$)
(C$)
(C$)
(C$)
(C$)
138,750
120,000
117,500
125,000
125,000
117,500
123,500
240,000
125,000
117,500
120,000
117,500
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
99,998
99,998
99,991
99,998
99,998
99,998
99,998
99,998
99,998
99,998
99,998
99,998
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
238,748
219,998
217,491
224,998
224,998
217,498
223,498
339,998
224,998
217,498
219,998
217,498
(1)
For a discussion of the key assumptions underlying the value of the option-based awards, other than for Ms Celej, see Note 1 to the "Summary
Compensation Table". For the option grant for Ms Celej, the value of the option-based award, being C$21.18, was determined using the Black-Scholes
option pricing model. The Black-Scholes option pricing model is a commonly used pricing model that assumes the valued option can only be exercised at
expiration. The options for Ms Celej were granted at an exercise price of C$70.28, which was the closing price for the common shares of the Company on
the TSX on the day prior to the date of grant. Key additional assumptions used were: (i) the risk free interest rate, which was 2.97%; (ii) current time to
expiration of the Option which was assumed to be 2.5 years; (iii) the volatility for the common shares of the Company on the TSX, which was 31.27%; and
(iv) the dividend yield for the common shares of the Company, which was 0.98%.
(2)
Option-based awards given to non-executive directors are limited to the lesser of: (a) 1% of the outstanding common shares at any given point in time;
and (b) an annual equity award value of C$100,000.
(3)
Set out in Canadian dollars. On December 31, 2011 the Noon Buying Rate was C$1.00 equals US$1.0170.
2011 ANNUAL REPORT
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129
The following table sets out the value vested during the most recently completed financial year of the Company of incentive plan
awards granted to the directors of the Company, other than Messrs. Boyd and Scherkus.
Incentive Plan Awards Table – Value Vested During Fiscal Year 2011
Name
Leanne M. Baker
Douglas R. Beaumont
Martine A. Celej
Clifford J. Davis
Robert Gemmell
Bernard Kraft
Mel Leiderman
James D. Nasso
Sean Riley
John Merfyn Roberts
Howard R. Stockford
Pertti Voutilainen
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Options-Based
Awards –
Value Vested
During the Year
Share-Based
Awards –
Value Vested
During the Year
Non-Equity
Incentive Plan
Compensation –
Value Earned
During the Year
(C$)
(C$)
(C$)
nil
nil
nil
6,822
nil
nil
nil
nil
nil
6,822
nil
nil
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
The following table sets out the outstanding option awards of the directors of the Company, other than Messrs. Boyd and
Scherkus, as at December 31, 2011.
Outstanding Incentive Plan Awards Table
Option-Based Awards
Name
Leanne M. Baker
Douglas R. Beaumont
Martine A. Celej
Clifford J. Davis
Robert Gemmell
Bernard Kraft
Mel Leiderman
James D. Nasso
John Merfyn Roberts
Sean Riley
Howard R. Stockford
Pertti Voutilainen
Number of
Securities
Underlying
Unexercised
Options
Option
Exercise
Price
(#)
(C$)
35,000
4,000
6,120
5,824
25,000
35,000
4,000
6,120
5,824
4,721
1,800
4,000
6,120
5,824
5,824
4,000
6,120
5,824
25,000
4,000
6,120
5,824
53,000
4,000
6,120
5,824
7,200
4,000
6,120
5,824
5,824
28,750
4,000
6,120
5,824
35,000
4,000
6,120
5,824
54.63 (2)
51.33 (2)
54.00 (2)
76.70 (2)
48.09
54.42
62.77
56.92
76.60
70.26
33.26
62.77
56.92
76.60
76.60
62.77
56.92
76.60
54.42
62.77
56.92
76.60
54.42
62.77
56.92
76.60
33.26
62.77
56.92
76.60
76.60
54.42
62.77
56.92
76.60
54.42
62.77
56.92
76.60
Option
Expiration
Date
Share-Based Awards
Value of
Unexercised
In-The-Money
Options (1)
Number
of
Shares
or
Units of
Shares
that have
not
Vested
Market or
Payout
Value of
Share-Based
Awards
that have
not Vested
(C$)
(#)
(C$)
nil
nil
nil
nil
nil
nil
nil
6,822
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
27,288
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
1/2/2013
1/4/2014
1/2/2015
1/4/2016
1/2/2012
1/2/2013
1/2/2014
1/2/2015
1/4/2016
2/21/2016
11/3/2013
1/2/2014
1/4/2015
1/4/2016
1/4/2016
1/2/2014
1/4/2015
1/4/2016
1/2/2013
1/2/2014
1/4/2015
1/4/2016
1/2/2013
1/2/2014
1/4/2015
1/4/2016
11/3/2013
1/2/2014
1/4/2015
1/4/2016
1/1/2016
1/2/2013
1/2/2014
1/4/2015
1/4/2016
1/2/2013
1/2/2014
1/4/2015
1/4/2016
(1)
Based on a closing price of the Company's shares on the TSX of C$37.05 on December 31, 2011.
(2)
Value of Dr. Baker's awards are in United States dollars and based on a closing price of the Company's shares on the New York Stock Exchange
(the "NYSE") of US$36.32 on December 31, 2011.
2011 ANNUAL REPORT
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131
In 2009, shareholders of Agnico-Eagle approved an amendment to the Employee Share Purchase Plan to prohibit participation by
non-executive directors. During the year ended December 31, 2011, Agnico-Eagle issued a total of 5,077 common shares to the
following executive directors under its Employee Share Purchase Plan as follows:
•
•
Mr. Boyd
Mr. Scherkus
2,910
2,167
The following table sets out the attendance of each of the directors to the Board of Directors meetings and the Board Committee
meetings held in 2011.
Director
Leanne M. Baker
Douglas R. Beaumont
Sean Boyd
Martine A. Celej
Clifford J. Davis
Robert Gemmell
Bernard Kraft
Mel Leiderman
James D. Nasso
John Merfyn Roberts
Eberhard Scherkus
Sean Riley
Howard R. Stockford
Pertti Voutilainen
Indebtedness of Directors, Executive Officers and Senior Officers
Board
Meetings
Attended
Committee
Meetings
Attended
9 of 11
11 of 11
11 of 11
11 of 11
10 of 11
11 of 11
11 of 11
11 of 11
11 of 11
11 of 11
11 of 11
11 of 11
11 of 11
11 of 11
7 of 8
7 of 7
N/A
3 of 3
6 of 6
3 of 3
8 of 8
8 of 8
8 of 8
8 of 8
8 of 8
2 of 2
7 of 7
6 of 6
There is no outstanding indebtedness to Agnico-Eagle by any of its directors or officers. Agnico-Eagle's policy is to not make any
loans to directors and officers.
Directors' and Officers' Liability Insurance
The Company has purchased, at its expense, directors' and officers' liability insurance policies to provide insurance against
possible liabilities incurred by its directors and officers in their capacity as directors and officers of the Company. The premium for
these policies for the period from December 31, 2011 to December 31, 2012 is C$748,437. The policies provide coverage of up to
C$100 million per occurrence to a maximum of C$100 million per annum. There is no deductible for directors and officers and a
C$2,500,000 deductible for each claim made by the Company (C$1 million deductible for securities claims). The insurance applies
in circumstances where the Company may not indemnify its directors and officers for their acts or omissions.
Board Practices
The Board and management have been following the developments in corporate governance requirements and best practices
standards in both Canada and the United States. As these requirements and practices have evolved, the Company has
responded in a positive and proactive way by assessing its practices against these requirements and
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modifying, or targeting for modification, practices to bring them into compliance with these corporate governance requirements
and best practices standards. The Company revises, from time to time, the Board Mandate and the charters for the Audit
Committee, the Compensation Committee, the Corporate Governance Committee and the Health, Safety and Environment
Committee to reflect the new and evolving corporate governance requirements and what it believes to be best practices standards
in Canada and the United States.
The Board believes that effective corporate governance contributes to improved corporate performance and enhanced
shareholder value. The Company's governance practices reflect the Board's assessment of the governance structure and process
which can best serve to realize these objectives in the Company's particular circumstance. The Company's governance practices
are subject to review and evaluation through the Board's Corporate Governance Committee to ensure that, as the Company's
business evolves, changes in structure and process necessary to ensure continued good governance are identified and
implemented.
The Company is required under the rules of the CSA to disclose its corporate governance practices and provide a description of
the Company's system of corporate governance. This Statement of Corporate Governance Practices has been prepared by the
Board's Corporate Governance Committee and approved by the Board.
Director Independence
The Board consists of thirteen directors. The Board has made an affirmative determination that twelve of its thirteen current
members are "independent" within the meaning of the CSA rules and the standards of the New York Stock Exchange. With the
exception of Mr. Boyd, all directors are independent of management and free from any interest or any business that could
materially interfere with their ability to act as a director with a view to the best interests of the Company. In reaching this
determination, the Board considered the circumstances and relationships with the Company and its affiliates of each of its
directors. In determining that all directors except Mr. Boyd are independent, the Board took into consideration the facts that none
of the remaining directors is an officer or employee of the Company or party to any material contract with the Company and that
none receives remuneration from the Company other than directors' fees and option and RSU grants for service on the Board.
Mr. Boyd is considered related because he is an officer of the Company. All directors, other than Mr. Boyd, also meet the
independence standard as set out in the Sarbanes-Oxley Act of 2002 ("SOX").
The Board may meet independently of management at the request of any director or may excuse members of management from
all or a portion of any meeting where a potential conflict of interest arises or where otherwise appropriate. The Board also meets
without management before or after each Board meeting, including after each Board meeting held to consider interim and annual
financial statements. In 2011, the Board met without management at each Board meeting, being eleven separate occasions,
including the four regularly scheduled quarterly meetings.
To promote the exercise of independent judgment by directors in considering transactions and agreements, any director or officer
who has a material interest in the matter being considered may not be present for discussions relating to the matter and any such
director may not participate in any vote on the matter.
Chairman
Mr. Nasso is the Chairman of the Board and Mr. Boyd is the Vice-Chairman, President and Chief Executive Officer of the
Company. Mr. Nasso is not a member of management. The Board believes that the separation of the offices of Chairman and
Chief Executive Officer enhances the ability of the Board to function independently of management and does not foresee that the
offices of Chairman and Chief Executive Officer will be held by the same person.
The Board has adopted a position description for the Chairman of the Board. The Chairman's role is to provide leadership to
directors in discharging their duties and obligations as set out in the mandate of the Board. The specific responsibilities of the
Chairman include providing advice, counsel and mentorship to the Chief Executive Officer, appointing the Chair of each of the
Board's committees and promoting the delivery of information to the members of the Board on a timely basis to keep them fully
apprised of all matters which are material to them at all times. The Chairman's responsibilities also include scheduling, overseeing
and presiding over meetings of the Board and presiding over meetings of the Company's shareholders.
2011 ANNUAL REPORT
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133
Board Mandate
The Board's mandate is to provide stewardship of the Company, to oversee the management of the Company's business and
affairs, to maintain its strength and integrity, to oversee the Company's strategic direction, its organization structure and
succession planning of senior management and to perform any other duties required by law. The Board's strategic planning
process consists of an annual review of the Company's future business plans and, from time to time (and at least annually), a
meeting focused on strategic planning matters. As part of this process, the Board reviews and approves the corporate objectives
proposed by the Chief Executive Officer and advises management on the development of a corporate strategy to achieve those
objectives. The Board also reviews the principal risks inherent in the Company's business, including environmental, industrial and
financial risks, and assesses the systems to manage these risks. The Board also monitors the performance of senior management
against the business plan through a periodic review process (at least every quarter) and reviews and approves promotion and
succession matters.
The Board holds management responsible for the development of long-term strategies for the Company. The role of the Board is
to review, question, validate and ultimately approve the strategies and policies proposed by management. The Board relies on
management to perform the data gathering, analysis and reporting functions which are critical to the Board for effective corporate
governance. In addition, the Vice-Chairman, President and Chief Executive Officer, the Senior Vice-President, Finance and Chief
Financial Officer, the Senior Vice-President, Corporate Development, the Senior Vice-President, Exploration and the Senior
Vice-President, Technical Services report to the Board at least every quarter on the Company's progress in the preceding quarter
and on the strategic, operational and financial issues facing the Company.
Management is authorized to act, without Board approval, on all ordinary course matters relating to the Company's business.
Management seeks the Board's prior approval for significant changes in the Company's affairs such as major capital expenditures,
financing arrangements and significant acquisitions and divestitures. Board approval is required for any venture outside of the
Company's existing businesses and for any change in senior management. Recommendations of committees of the Board require
the approval of the full Board before being implemented. In addition, the Board oversees and reviews significant corporate plans
and initiatives, including the annual five-year business plan and budget and significant matters of corporate strategy or policy. The
Company's authorization policy and risk management policy ensure compliance with good corporate governance practices. Both
policies formalize controls over the management or other employees of the Company by stipulating internal approval processes
for transactions, investments, commitments and expenditures and, in the case of the risk management policy, establishing
objectives and guidelines for metal price hedging, foreign exchange and short-term investment risk management and insurance.
The Board, directly and through its Audit Committee, also assesses the integrity of the Company's internal control and
management information systems.
The Board oversees the Company's approach to communications with shareholders and other stakeholders and approves specific
communications initiatives from time to time. The Company conducts an active investor relations program. The program involves
responding to shareholder inquiries, briefing analysts and fund managers with respect to reported financial results and other
announcements by the Company and meeting with individual investors and other stakeholders. Senior management reports
regularly to the Board on these matters. The Board reviews and approves the Company's major communications with
shareholders and the public, including quarterly and annual financial results, the annual report and the management information
circular. The Board has a Disclosure Policy which establishes standards and procedures relating to contacts with analysts and
investors, news releases, conference calls, disclosure of material information, trading restrictions and blackout periods.
The Board's mandate is posted on the Company's website at www.Agnico-Eagle.com .
Position Descriptions
Chief Executive Officer
The Board has adopted a position description for the Chief Executive Officer, who has full responsibility for the day-to-day
operation of the Company's business in accordance with the Company's strategic plan and current year operating and capital
expenditure budgets as approved by the Board. In discharging his responsibility for the day-to-day operation of Agnico-Eagle's
business, subject to the oversight by the Board, the Chief Executive Officer's specific responsibilities include:
•
providing leadership and direction to the other members of Agnico-Eagle's senior management team;
•
fostering a corporate culture that promotes ethical practices and encourages individual integrity;
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•
maintaining a positive and ethical work climate that is conducive to attracting, retaining and motivating top-quality
employees at all levels;
•
working with the Chairman in determining the matters and materials that should be presented to the Board;
•
together with the Chairman, developing and recommending to the Board a long-term strategy and vision for
Agnico-Eagle that leads to enhancement of shareholder value;
•
developing and recommending to the Board annual business plans and budgets that support Agnico-Eagle's long-term
strategy;
•
ensuring that the day-to-day business affairs of Agnico-Eagle are appropriately managed;
•
consistently striving to achieve Agnico-Eagle's financial and operating goals and objectives;
•
designing or supervising the design and implementation of effective disclosure and internal controls;
•
maintaining responsibility for the integrity of the financial reporting process;
•
seeking to secure for Agnico-Eagle a satisfactory competitive position within its industry;
•
ensuring that Agnico-Eagle has an effective management team below the level of the Chief Executive Officer and has
an active plan for management development and succession;
•
ensuring, in cooperation with the Chairman and the Board, that there is an effective succession plan in place for the
position of Chief Executive Officer; and
•
serving as the primary spokesperson for Agnico-Eagle.
The Chief Executive Officer is to consult with the Chairman on matters of strategic significance to the Company and alert the
Chairman on a timely basis of any material changes or events that may impact upon the risk profile, financial affairs or
performance of the Company.
Chairs of Board Committees
The Board has adopted written position descriptions for each of the Chairs of the Board's committees, which include the Audit
Committee, the Corporate Governance Committee, the Compensation Committee and the Health, Safety and Environment
Committee. The role of each of the Chairs is to ensure the effective functioning of his or her committee and provide leadership to
its members in discharging the mandate as set out in the committee's charter. The responsibilities of each Chair include,
among others:
•
establishing procedures to govern his or her committee's work and ensure the full discharge of its duties;
•
chairing every meeting of his or her committee and encouraging free and open discussion at such meetings;
•
reporting to the Board on behalf of his or her committee; and
•
attending every meeting of shareholders and responding to such questions from shareholders as may be put to the
Chair of his or her committee.
Each of the Chairs is also responsible for carrying out other duties as requested by the Board, depending on need and
circumstances.
Orientation and Continuing Education
The Corporate Governance Committee is responsible for overseeing the development and implementation of orientation programs
for new directors and continuing education for all directors.
The Company maintains a collection of director orientation materials, which include the Board Mandate, the charters of the
Board's committees, a memorandum on the duties of a director of a public company and a glossary of mining and accounting
terms. A copy of such materials is given to each director and updated annually.
The Company holds periodic educational sessions with its directors and legal counsel to review and assess the Board's corporate
governance policies. This allows new directors to become familiar with the corporate governance policies of the Company as they
relate to its business. In addition, the Company provides extensive reports on all operations to the directors at each quarterly
Board meeting and conducts yearly site tours for the directors at a different mine site each year.
2011 ANNUAL REPORT
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135
The Corporate Governance Committee conducts an annual assessment that addresses the performance of the Board, the Board's
committees and the individual directors. These assessments help identify opportunities for continuing Board and director
development. In addition, it is open to any director to take a continuing education course related to the skill and knowledge
necessary to meet his or her obligations as a director at the expense of the Company.
Ethical Business Conduct
The Board has adopted a Code of Business Conduct and Ethics, which provides a framework for directors, officers and
employees on the conduct and ethical decision making integral to their work. In addition, the Board has adopted a Code of
Business Conduct and Ethics for Consultants and Contractors. The Audit Committee is responsible for monitoring compliance with
these codes of ethics and any waivers or amendments thereto can only be made by the Board or a Board committee. These
codes are available on www.sedar.com .
The Board has also adopted a Confidential Anonymous Complaint Reporting Policy, which provides procedures for officers and
employees who believe that a violation of the Code of Business Conduct and Ethics has occurred to report this violation on a
confidential and anonymous basis. Complaints can be made internally to the General Counsel, Senior Vice-President, Legal and
Corporate Secretary or the Senior Vice-President, Finance and Chief Financial Officer. Complaints can also be made
anonymously by telephone, e-mail or postal letter through a hotline provided by an independent third party service provider. The
General Counsel, Senior Vice-President, Legal and Corporate Secretary periodically prepares a written report to the Audit
Committee regarding the complaints, if any, received through these procedures.
The Board believes that providing a procedure for employees and officers to raise concerns about ethical conduct on an
anonymous and confidential basis fosters a culture of ethical conduct within the Company.
Nomination of Directors
The Corporate Governance Committee, which is comprised entirely of independent directors, is responsible for participating in the
recruitment and recommendation of new nominees for appointment or election to the Board. When considering a potential
candidate, the Corporate Governance Committee considers the qualities and skills that the Board, as a whole, should have and
assesses the competencies and skills of the current members of the Board. Based on the talent already represented on the
Board, the Corporate Governance Committee then identifies the specific skills, personal qualities or experiences that a candidate
should possess in light of the opportunities and risks facing the Company. The Corporate Governance Committee may maintain a
list of potential director candidates for its future consideration and may engage outside advisors to assist in identifying potential
candidates. Potential candidates are screened to ensure that they possess the requisite qualities, including integrity, business
judgment and experience, business or professional expertise, independence from management, international experience, financial
literacy, excellent communications skills and the ability to work well in a team situation. The Corporate Governance Committee
also considers the existing commitments of a potential candidate to ensure that such candidate will be able to fulfill his or her
duties as a Board member.
Compensation
Remuneration is paid to the Company's directors based on several factors, including time commitments, risk, workload and
responsibility demanded by their positions. The Compensation Committee periodically reviews and fixes the amount and
composition of the compensation of directors. For a summary of remuneration paid to directors, please see "Compensation of
Directors and Other Information" and the description of the Compensation Committee below.
Board Committees
The Board has four Committees: the Audit Committee, the Compensation Committee, the Corporate Governance Committee and
the Health, Safety and Environment Committee.
Audit Committee
The Audit Committee is composed entirely of directors who are unrelated to and independent from the Company (currently,
Dr. Baker (Chair), Mr. Kraft, Mr. Leiderman and Dr. Riley), each of whom is financially literate, as the term is used in the CSA's
Multilateral Instrument 52-110 – Audit Committees. In addition, Mr. Leiderman and Mr. Kraft are Chartered Accountants;
Mr. Leiderman is currently in private practice and Mr. Kraft while retired, remains active in the profession and the Board has
determined that both of them qualify as audit committee financial experts, as the term is defined in the rules of the United States
Securities and Exchange Commission (the "SEC"). The education and experience
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of each member of the Audit Committee is set out under "– Directors and Senior Management". Fees paid to the Company's
auditors, Ernst & Young LLP, are set out under "Item 10 Additional Information – Audit Fees". The Audit Committee met six times
in 2011.
The Audit Committee has two primary objectives. The first is to advise the Board of Directors in its oversight responsibilities
regarding:
•
the quality and integrity of the Company's financial reports and information;
•
the Company's compliance with legal and regulatory requirements;
•
the effectiveness of the Company's internal controls for finance, accounting, internal audit, ethics and legal and
regulatory compliance;
•
the performance of the Company's auditing, accounting and financial reporting functions;
•
the fairness of related party agreements and arrangements between the Company and related parties; and
•
the independent auditors' performance, qualifications and independence.
The second primary objective of the Audit Committee is to prepare the reports required to be included in the management proxy
circular in accordance with applicable laws or the rules of applicable securities regulatory authorities.
The Board has adopted an Audit Committee charter, which provides that each member of the Audit Committee must be unrelated
to and independent from the Company as determined by the Board in accordance with the applicable requirements of the laws
governing the Company, the applicable stock exchanges on which the Company's securities are listed and applicable securities
regulatory authorities. In addition, each member must be financially literate and at least one member of the Audit Committee must
be an audit committee financial expert, as the term is defined in the rules of the SEC. The Audit Committee must pre-approve all
audit and permitted non-audit services to be provided by the external auditors to the Company.
The Audit Committee is responsible for reviewing all financial statements prior to approval by the Board, all other disclosure
containing financial information and all management reports which accompany any financial statements. The Audit Committee is
also responsible for all internal and external audit plans, any recommendation affecting the Company's internal controls, the
results of internal and external audits and any changes in accounting practices or policies. The Audit Committee reviews any
accruals, provisions, estimates or related party transactions that have a significant impact on the Company's financial statements
and any litigation, claim or other contingency that could have a material effect upon the Company's financial statements. In
addition, the Audit Committee is responsible for assessing management's programs and policies relating to the adequacy and
effectiveness of internal controls over the Company's accounting and financial systems. The Audit Committee reviews and
discusses with the Chief Executive Officer and Chief Financial Officer the procedures undertaken in connection with their
certifications for annual filings in accordance with the requirements of applicable securities regulatory authorities. The Audit
Committee is also responsible for recommending to the Board the external auditor to be nominated for shareholder approval who
will be responsible for preparing audited financial statements and completing other audit, review or attest services. The Audit
Committee also recommends to the Board the compensation to be paid to the external auditor and directly oversees its work. The
Company's external auditor reports directly to the Audit Committee. The Audit Committee reports directly to the Board
of Directors.
The Audit Committee is entitled to retain (at the Company's expense) and determine the compensation of any independent
counsel, accountants or other advisors to assist the Audit Committee in its oversight responsibilities.
Compensation Committee
The Compensation Committee is composed entirely of directors who are unrelated to and independent from the Company
(currently, Mr. Gemmell (Chair), Mr. Beaumont, Ms Celej and Mr. Stockford). The Compensation Committee met five times
in 2011.
The Compensation Committee is responsible for, among other things:
•
recommending to the Board policies relating to compensation of the Company's executive officers;
•
recommending to the Board the amount and composition of annual compensation to be paid to the Company's
executive officers;
•
matters relating to pension, option and other incentive plans for the benefit of executive officers;
2011 ANNUAL REPORT
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137
•
administering the Stock Option Plan;
•
reviewing and fixing the amount and composition of annual compensation to be paid to members of the Board and
committees; and
•
reviewing and assessing the design and competitiveness of the Company's compensation and benefits programs
generally.
The Compensation Committee reports directly to the Board. The charter of the Compensation Committee provides that each
member of the Compensation Committee must be unrelated and independent.
The Board considers Messrs. Gemmell and Beaumont particularly well-qualified to serve on the Compensation Committee given
the expertise they have accrued during their business careers: Mr. Gemmell as a senior manager of divisions of a major financial
services company (where part of his duties included assessing personnel and setting compensation rates) and Mr. Beaumont as a
former founder and senior executive of an international engineering services company (where part of his duties included oversight
of the establishment of appropriate compensation structures for the organization).
Corporate Governance Committee
The Corporate Governance Committee is composed entirely of directors who are unrelated to and independent from the Company
(currently, Mr. Roberts (Chair), Mr. Kraft, Mr. Nasso and Mr. Voutilainen). The Corporate Governance Committee met four times
in 2011.
The Corporate Governance Committee is responsible for, among other things:
•
evaluating the Company's governance practices;
•
developing its response to the Company's Statement of Corporate Governance and recommending changes to the
Company's governance structures or processes as it may from time to time consider necessary or desirable;
•
reviewing on an annual basis the charters of the Board and of each committee of the Board and recommending
any changes;
•
assessing annually the effectiveness of the Board as a whole and recommending any changes;
•
reviewing on a periodic basis the composition of the Board to ensure that there remain an appropriate number of
independent directors; and
•
participating in the recruitment and recommendation of new nominees for appointment or election to the Board.
The Corporate Governance Committee also provides a forum for a discussion of matters not readily discussed in a full Board
meeting. The charter of the Corporate Governance Committee provides that each member of the Corporate Governance
Committee must be independent, as such term is defined in the CSA rules.
Health, Safety and Environment Committee
The Health, Safety and Environment Committee is comprised of three directors who are unrelated to and independent from the
Company (currently Mr. Davis (Chair), Mr. Beaumont and Mr. Stockford). The Health, Safety and Environment Committee met
four times in 2011.
The Health, Safety and Environment Committee is responsible for, among other things:
•
monitoring and reviewing health, safety and environmental policies, principles, practices and processes;
•
overseeing health, safety and environmental performance; and
•
monitoring and reviewing current and future regulatory issues relating to health, safety and the environment.
The Health, Safety and Environment Committee reports directly to the Board and provides a forum to review health, safety and
environmental issues in a more thorough and detailed manner than could be adopted by the full Board. The Health, Safety and
Environment Committee charter provides that a majority of the members of the Committee be unrelated and independent.
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Assessment of Directors
The Company's Corporate Governance Committee (see description of the Corporate Governance Committee above) is
responsible for the assessment of the effectiveness of the Board as a whole and participates in the recruitment and
recommendation of new nominees for appointment or election to the Board of Directors.
Each of the directors participates in a detailed annual assessment of the Board and Board committees. The assessment
addresses performance of the Board, each Board committee and individual directors, including through a peer to peer evaluation.
A broad range of topics is covered such as Board and Board committee structure and composition, succession planning, risk
management, director competencies and Board processes and effectiveness. The assessment helps identify opportunities for
continuing Board and director development and also forms the basis of continuing Board participation.
Employees
As of December 31, 2011, the Company had 5,106 employees comprised of 3,600 permanent employees, 1,197 contractors,
253 temporary employees and 56 students. Of the permanent employees, 794 were employed at the LaRonde mine, 232 at the
Goldex mine, 212 at the Lapa mine, 1,098 at the Pinos Altos mine, 386 at the Kittila mine, 558 at the Meadowbank mine (with
555 at Baker Lake and Meadowbank and 3 in Quebec), 13 at the Meliadine project, 26 in the Exploration group in Canada and the
U.S., 177 at the regional technical office in Abitibi and 104 at the corporate head office in Toronto. The number of permanent
employees of the Company at the end of 2011, 2010 and 2009 was 3,600, 3,243 and 2,781, respectively.
Share Ownership
As at March 12, 2012, the Named Executive Officers and directors as a group (17 persons) beneficially owned or controlled
(excluding options to purchase 3,440,365 common shares) an aggregate of 436,406 common shares or about 0.2553% of the
170,928,545 issued and outstanding common shares. See also "– Compensation of Executive Officers".
2011 ANNUAL REPORT
Table of Contents
139
Security Ownership of Directors and Executive Officers
The following table sets forth certain information concerning the direct and beneficial ownership by each director and Named
Executive Officer of the Company of common shares of the Company and options to purchase common shares of the Company.
Unless otherwise noted, exercise prices are in Canadian dollars.
Beneficial Owner
Leanne M. Baker
Director
Douglas R. Beaumont
Director
Sean Boyd
Director, Vice Chairman, President and Chief
Executive Officer
Martine A. Celej
Director
Clifford J. Davis
Director
Robert J. Gemmell
Director
Bernard Kraft
Director
Mel Leiderman
Director
James D. Nasso
Director and Chairman of the Board
Sean Riley
Director
J. Merfyn Roberts
Director
140
AGNICO-EAGLE MINES LIMITED
Table of Contents
Share
Ownership (1)
Total
Common
Shares
under
Option (2)
8,500
50,944
18,960
50,944
141,472
1,315,000
5,000
4,721
9,000
17,744
13,000
5,824
13,657
15,944
9,000
40,944
22,289
68,944
5,000
5,824
9,000
23,144
Common
Shares
under
Option
Exercise
Price
(C$, except
as noted)
Expiry
Date
5,824
6,120
4,000
35,000
5,824
6,120
4,000
35,000
325,000
240,000
300,000
250,000
200,000
4,721
US$76.70
US$54.00
US$51.33
US$54.63
76.60
56.92
62.77
54.42
37.05
76.60
56.92
62.77
54.42
70.26
1/4/2016
1/4/2015
1/2/2014
1/2/2013
1/4/2016
1/4/2015
1/2/2014
1/2/2013
1/3/2017
1/4/2016
1/4/2015
1/2/2014
1/2/2013
2/21/2016
5,824
6,120
4,000
1,800
5,824
76.60
56.92
62.77
33.26
76.60
1/4/2016
1/4/2015
1/2/2014
11/3/2013
1/4/2016
5,824
6,120
4,000
5,824
6,120
4,000
25,000
5,824
6,120
4,000
53,000
5,824
76.60
56.92
62.77
76.60
56.92
62.77
54.42
76.60
56.92
62.77
54.42
76.60
1/4/2016
1/4/2015
1/2/2014
1/4/2016
1/4/2015
1/2/2014
1/2/2013
1/4/2016
1/4/2015
1/2/2014
1/3/2013
1/4/2016
5,824
6,120
4,000
7,200
76.60
56.92
62.77
33.26
1/4/2016
1/4/2015
1/2/2014
11/3/2013
Howard R. Stockford
Director
9,068
44,694
Pertti Voutilainen
Director
22,000
50,944
Eberhard Scherkus
Director, President and
Chief Operating Officer
85,726
790,000
Ammar Al-Joundi
Senior Vice-President, Finance and Chief
Financial Officer
Donald G. Allan
Senior Vice-President, Corporate Development
29,498
235,000
21,881
345,000
Alain Blackburn
Senior Vice-President, Exploration
13,355
374,750
5,824
6,120
4,000
28,750
5,824
6,120
4,000
35,000
175,000
140,000
175,000
175,000
125,000
100,000
60,000
75,000
75,000
60,000
75,000
75,000
60,000
75,000
60,000
100,000
100,000
39,750
76.60
56.92
62.77
54.42
76.60
56.92
62.77
54.42
37.50
76.60
56.92
62.77
54.42
37.05
76.60
69.44
37.05
76.60
56.92
62.77
54.42
37.05
76.60
56.92
62.77
54.42
1/4/2016
1/4/2015
1/2/2014
1/2/2013
1/4/2016
1/4/2015
1/2/2014
1/2/2013
1/3/2017
1/4/2016
1/4/2015
1/2/2014
1/2/2013
1/3/2017
1/4/2016
9/1/2015
1/3/2017
1/2/2016
1/4/2015
1/2/2014
1/2/2013
1/3/2017
1/4/2016
1/4/2015
1/2/2014
1/2/2013
Notes:
(1)
As at March 12, 2012. In each case, shareholdings (which includes common shares and RSUs) constitute less than one percent of the issued and
outstanding common shares of the Company. The total number of common shares and RSUs held by directors and named executive officers constitutes
less than 0.2553% of the issued and outstanding common shares of the Company.
(2)
As at March 12, 2012.
2011 ANNUAL REPORT
Table of Contents
141
ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
To the knowledge of the directors and senior officers of the Company, as of March 12, 2012, no person or corporation beneficially
owns or exercises control or direction over common shares of the Company carrying more than 5% of the voting rights attached to
all common shares of the Company other than as set out below:
Major Shareholder
Number of
common
shares
Percentage of
outstanding
common shares
BlackRock, Inc. (1)
Van Eck Associates Corporation (2)
18,161,284
11,253,461
10.64%
6.59%
Notes:
(1)
According to reports filed with applicable securities regulators dated January 7, 2011, February 7, 2011, November 10, 2011 and January 6, 2012, the
percentage ownership of common shares of the Company held by BlackRock, Inc. has varied from 10.31% to 9.69% to 10.80% to 10.64%, respectively.
(2)
According to a report filed with applicable securities regulators dated February 14, 2012.
None of the Company's major shareholders have different voting rights than other holders of the Company's common shares.
As of March 12, 2012, there were 3,696 holders of record of Agnico-Eagle's 170,928,545 outstanding common shares, of which
641 holders of record were in Canada and held 122,266,828 common shares or about 71.53% of the outstanding common shares.
The Company is not aware of any arrangements the operation of which may at a subsequent date result in a change in control of
the Company. To the knowledge of the Company, it is not directly or indirectly owned or controlled by another corporation, by any
government or by any natural or legal person severally or jointly.
Related Party Transactions
The Company has not entered into any material related party transactions since January 1, 2011.
ITEM 8 FINANCIAL INFORMATION
The consolidated financial statements furnished pursuant to Item 18 are presented in accordance with US GAAP.
During the period under review, inflation has not had a significant impact on the Company's operations.
The Company is not aware of any legal or arbitration proceedings which may have, or have had in the recent past, a significant
effect on the Company's financial position or profitability.
Dividend Policy
The Company's policy is to pay annual dividends on its common shares and, on February 15, 2012, the Company announced that
it had declared a quarterly dividend of $0.20 per common share, payable on March 15, 2012. In 2011, the dividend paid was $0.64
per common share (quarterly payments of $0.16 per common share) and in each of 2010, 2009 and 2008, the dividend paid was
$0.18 per common share, in 2007, the dividend paid was $0.12 per common share and, from 2003 to 2006, the dividend paid was
$0.03 per common share. Although the Company expects to continue paying a cash dividend, future dividends will be at the
discretion of the Board and will be subject to such factors as the Company's earnings, financial condition and capital
requirements. The Company's bank credit facility contains covenants that restrict the Company's ability to declare or pay
dividends if a default under the bank credit facility has occurred or would result from the declaration or payment of the dividend.
142
AGNICO-EAGLE MINES LIMITED
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ITEM 9 THE OFFER AND LISTING
Market and Listing Details
The Company's common shares are listed and traded in Canada on the TSX and in the United States on the NYSE.
The following table sets forth the high and low sale prices and the average daily trading volume for Agnico-Eagle's common
shares on the TSX and the NYSE for each of the fiscal years in the five-year period ended December 31, 2011 and for each
quarter during the fiscal years ended December 31, 2010 and 2011.
TSX (C$)
2007
2008
2009
2010
2011
2010
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Table of Contents
NYSE ($)
High
Low
Average Daily
Volume
High
Low
Average Daily
Volume
55.86
82.80
77.32
88.52
75.39
35.70
26.60
50.80
53.16
35.35
913,173
1,184,654
979,369
750,312
856,906
59.45
83.45
74.00
88.20
77.00
33.25
20.87
42.65
49.64
34.50
2,076,082
3,842,836
4,172,474
2,508,059
2,285,842
64.12
68.16
73.41
88.52
53.16
57.05
56.08
70.00
718,042
837,814
759,806
698,995
61.80
66.80
71.33
88.20
49.64
55.43
54.12
67.66
2,956,480
2,870,655
2,081,771
2,151,791
75.39
66.17
72.51
64.14
62.93
58.82
53.05
35.35
781,613
733,270
952,868
960,318
77.00
63.53
70.00
59.78
73.09
54.19
61.17
34.50
2011 ANNUAL REPORT
2,534,857
2,059,362
2,297,630
2,255,181
143
The following table sets forth the high and low sale prices and the average daily trading volume for the Company's common
shares on the TSX and the NYSE since January 1, 2011.
TSX (C$)
2011
January
February
March
April
May
June
July
August
September
October
November
December
2012
January
February
March (to March 12)
NYSE ($)
High
Low
Average Daily
Volume
High
Low
Average Daily
Volume
72.40
75.39
70.96
66.17
65.84
64.66
63.90
68.68
72.51
64.14
48.48
46.01
66.78
67.07
62.93
60.53
58.82
59.00
53.14
53.05
60.51
42.04
41.73
35.35
897,886
766,727
734,800
886,100
673,700
750,900
745,400
1,232,100
960,600
1,388,700
814,800
791,000
77.00
76.49
72.91
70.00
69.44
66.60
66.60
70.25
73.09
61.17
47.68
45.30
66.79
68.36
63.53
62.61
60.42
59.78
55.68
54.19
58.60
42.21
40.39
34.50
3,091,655
2,521,990
2,164,700
2,700,100
2,042,200
1,739,900
2,269,100
2,862,300
2,016,600
3,243,700
1,988,000
1,798,100
39.68
38.03
36.64
34.51
31.50
34.84
754,100
1,356,500
838,600
39.64
38.14
37.24
34.03
34.42
34.76
1,914,300
2,884,400
2,578,800
On March 12, 2012 the closing price of the common shares was C$35.02 on the TSX and $35.24 on the NYSE. The registrar and
transfer agent for the common shares is Computershare Trust Company of Canada, Toronto, Ontario.
144
AGNICO-EAGLE MINES LIMITED
Table of Contents
The following table sets forth the high and low sale prices and average daily trading volume for the Company's common share
purchase warrants (the "Warrants") on the TSX since January 1, 2011.
TSX ($)
2011
January
February
March
April
May
June
July
August
September
October
November
December
2012
January
February
March (to March 12)
High
Low
Average Daily
Volume
30.15
31.48
26.76
24.49
21.89
22.31
22.11
26.67
27.67
20.33
12.43
9.69
25.21
25.00
20.86
20.21
18.99
18.87
15.16
15.26
18.42
9.54
9.02
5.36
5,038
9,753
17,209
14,740
9,655
9,070
6,584
12,777
3,993
6,245
8,825
6,355
6.72
6.03
5.24
6.38
5.70
5.16
3,194
5,750
1,278
On March 12, 2012, the closing price of the Warrants was $4.90 on the TSX. The registrar and transfer agent for the Warrants is
Computershare Trust Company of Canada, Toronto, Ontario.
ITEM 10 ADDITIONAL INFORMATION
Memorandum and Articles of Incorporation
Articles of Amendment
The Company's articles of incorporation do not place any restrictions on the Company's objects and purposes. For more
information, see the Articles of Amalgamation filed as Exhibit 1.01 to this Form 20-F.
Certain Powers of Directors
The Business Corporations Act (Ontario) (the "OBCA") requires that every director who is a party to, or who is a director or officer
of, or has a material interest in, any person who is a party to, a material contract or transaction or a proposed material contract or
transaction with the Company, must disclose in writing to the Company or request to have entered in the minutes of the meetings
of directors the nature and extent of his or her interest, and must refrain from attending any part of a meeting of directors during
which the contract or transaction is discussed and from voting in respect of the contract or transaction unless the contract or
transaction is: (a) one relating primarily to his or her remuneration as a director of the corporation or an affiliate; (b) one for
indemnity of or insurance for directors as contemplated under the OBCA; or (c) one with an affiliate. However, a director who is
prohibited by the OBCA from voting on a material contract or proposed material contract may be counted in determining whether a
quorum is present for the purpose of the resolution,
2011 ANNUAL REPORT
Table of Contents
145
if the director disclosed his or her interest in accordance with the OBCA and the contract or transaction was reasonable and fair to
the corporation at the time it was approved.
The Company's by-laws provide that the Board will from time to time determine the remuneration to be paid to the directors, which
will be in addition to the salary paid to any officer or employee of the Company who is also a director. The directors may also, by
resolution, award special remuneration to any director for undertaking any special services on the Company's behalf, other than
the normal work ordinarily required of a director of the Company. The by-laws provide that confirmation of any such resolution by
the Company's shareholders is not required.
The Company's by-laws also provide that the directors may: (a) borrow money upon the credit of the Company; (b) issue, reissue,
sell or pledge bonds, debentures, notes or other evidences of indebtedness or guarantee of the Company, whether secured or
unsecured; (c) to the extent permitted by the OBCA, give directly or indirectly financial assistance to any person by means of a
loan, a guarantee on behalf of the Company to secure performance of any present or future indebtedness, liability or other
obligation of any person, or otherwise; and (d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any
currently owned or subsequently acquired real or personal, movable or immovable, tangible or intangible property of the Company
to secure any such bonds, debentures, notes or other evidences of indebtedness or guarantee or any other present or future
indebtedness, liability or other obligation of the Company.
The directors may, by resolution, amend or repeal any by-laws that regulate the business or affairs of the Company. The OBCA
requires the directors to submit any such amendment or repeal to the Company's shareholders at the next meeting of
shareholders, and the shareholders may confirm, reject or amend the amendment or repeal.
Retirement of Directors
The Board does not have a mandatory retirement policy for directors based solely on age. Due in part to the Company's practice
of conducting annual Board, Committee and individual director evaluations, the Board approved and adopted a resignation policy
primarily based on directors' performance, commitment, skills and experience. As set out in greater detail under "Item 6 Directors,
Senior Management and Employees – Board Practices – Assessment of Directors", each director's performance is evaluated
annually.
Directors' Share Ownership
Directors, other than Mr. Boyd, are required to own a minimum of 10,000 RSUs or common shares of the Company. Directors
have a period of the later of (i) August 24, 2013 and (ii) five years from the date they first became directors, to achieve this
ownership level.
Meetings of Shareholders
The OBCA requires the Company to call an annual shareholders' meeting not later than 15 months after holding the last
preceding annual meeting and permits the Company to call a special shareholders' meeting at any time. In addition, in accordance
with the OBCA, the holders of not less than 5% of the Company's shares carrying the right to vote at a meeting sought to be held
may requisition the directors to call a special shareholders' meeting for the purposes stated in the requisition. The Company is
required to mail a notice of meeting and management information circular to registered shareholders not less than 21 days and
not more than 50 days prior to the date of any annual or special shareholders' meeting. These materials are also filed with
Canadian securities regulatory authorities and furnished to the SEC. The Company's by-laws provide that a quorum of two
shareholders in person or represented by proxy holding or representing by proxy at least 25% of the Company's issued shares
carrying the right to vote at the meeting is required to transact business at a shareholders' meeting. Shareholders, and their duly
appointed proxies and corporate representatives, as well as the Company's auditors, are entitled to be admitted to the Company's
annual and special shareholders' meetings.
Authorized Capital
The Company's authorized capital consists of an unlimited number of shares of one class designated as common shares. All
outstanding common shares of the Company are fully paid and non-assessable. The holders of the common shares are entitled to
one vote per share at meetings of shareholders and to receive dividends if, as and when declared by the directors of the
Company. In the event of voluntary or involuntary liquidation, dissolution or winding-up of the Company, after payment of all
outstanding debts, the remaining assets of the Company available for distribution would be distributed rateably to the holders of
the common shares. Holders of the common shares of the Company have no pre-emptive, redemption, exchange or conversion
rights. The Company may not create any class or series of shares or make any
146
AGNICO-EAGLE MINES LIMITED
Table of Contents
modification to the provisions attaching to the Company's common shares without the affirmative vote of two-thirds of the votes
cast by the holders of the common shares.
Majority Voting Policy
As part of its ongoing review of corporate governance practices, on February 20, 2008, the Board adopted a policy providing that
in an uncontested election of directors, any nominee who receives a greater number of votes "withheld" than votes "for" will tender
his or her resignation to the Chairman of the Board promptly following the shareholders' meeting. The Corporate Governance
Committee will consider the offer of resignation and will make a recommendation to the Board on whether to accept it. In
considering whether or not to accept the resignation, the Corporate Governance Committee will consider all factors deemed
relevant by members of such Committee. The Corporate Governance Committee will be expected to accept the resignation except
in situations where the considerations would warrant the applicable director continuing to serve on the Board. The Board will make
its final decision and announce it in a news release within 90 days following the shareholders' meeting. A director who tenders his
or her resignation pursuant to this policy will not participate in any meeting of the Board or the Corporate Governance Committee
at which the resignation is considered.
Disclosure of Share Ownership
The Securities Act (Ontario) currently provides that the directors and certain officers of an issuer and its subsidiaries and any
person or company that beneficially owns, directly or indirectly, voting securities of an issuer or that exercises control or direction
over voting securities of an issuer or a combination of both, carrying more than 10% of the voting rights attached to all the issuer's
outstanding voting securities (a "significant shareholder"), as well as the directors and officers of any significant shareholder,
(each an "insider") must, within 10 days of becoming an insider, file a report in the required form effective the date on which the
person became an insider, disclosing any direct or indirect beneficial ownership of, or control or direction over, securities of the
reporting issuer. The Securities Act (Ontario) also provides for the filing of a report by an insider of a reporting issuer who acquires
or transfers securities of the issuer or who enters into, materially amends or terminates an arrangement the effect of which is to
alter the insider's economic interest in a security of the issuer or the insider's economic exposure to the issuer. These reports must
be filed within five days after the reportable event. The Securities Act (Ontario) also requires these reports to be filed by reporting
insiders within five days after the applicable event, though are only required by the Chief Executive Officer, Chief Financial Officer,
Chief Operating Officer, directors, any person or company responsible for a principal business unit and significant shareholders of
the Company.
The Securities Act (Ontario) also provides that a person or company that acquires (whether or not by way of a take-over bid, offer
to acquire or subscription from treasury) beneficial ownership of voting or equity securities or securities convertible into voting or
equity securities of a reporting issuer that, together with previously held securities brings the total holdings of such holder to 10%
or more of the outstanding securities of that class, must (a) issue and file forthwith a news release containing certain prescribed
information and (b) file a report within two business days containing the same information set out in the news release. The
acquiring person or company must also issue a news release and file a report each time it acquires, in the aggregate, an
additional 2% or more of the outstanding securities of the same class and every time there is a change to any material fact in the
news release and report previously issued and filed.
The rules in the United States governing the ownership threshold above which shareholder ownership must be disclosed are more
stringent than those discussed above. Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
imposes reporting requirements on persons who acquire beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act) of more than 5% of a class of an equity security registered under Section 12 of the Exchange Act. In general, such
persons must file, within ten days after such acquisition, a report of beneficial ownership with the SEC containing the information
prescribed by the regulations under Section 13(d) of the Exchange Act and promptly file an amendment to such report to disclose
any material change to the information reported, including any acquisition or disposition of 1% or more of the outstanding
securities of the registered class. Certain institutional investors that acquire shares in the ordinary course of business and not with
the purpose or with the effect of changing or influencing the control of the issuer, are subject to lesser disclosure obligations.
Material Contracts
The Company believes the following contracts constitute the only material contracts to which it is a party.
2011 ANNUAL REPORT
Table of Contents
147
Credit Agreement
The Company entered into an amended and restated bank credit facility (the "Credit Facility") on August 4, 2011 with a group of
financial institutions providing for a $1.2 billion unsecured revolving bank credit facility that replaced the Company's previous
unsecured revolving bank credit facility. The Credit Facility matures and all indebtedness thereunder is due and payable on
June 22, 2016. The Company, with the consent of lenders representing at least 66 2 / 3 % of the aggregate commitments under
the facility, has the option to extend the term of the facility for additional one-year terms. The Credit Facility is available in multiple
currencies through prime rate and base rate advances, priced at the applicable rate plus a margin that ranges from 0.50% to
1.75% depending on certain financial ratios and through LIBOR advances, bankers' acceptances and letters of credit, priced at
the applicable rate plus a margin that ranges from 1.50% to 2.50% depending on certain financial ratios. The lenders under the
Credit Facility are each paid a standby fee at a rate that ranges from 0.375% to 0.6875% of the undrawn portion of the facility,
depending on certain financial ratios. Where credit exposure for all lenders is in the aggregate equal to or greater than 50% of the
aggregate commitments, the standby fee and letter of credit fee shall be increased by 0.125%, provided that, if and so long as the
Company has a credit rating by S&P of at least BBB, DBRS of at least BBB or Moody's of at least Baa2, such increase shall not
apply. Payment and performance of the Company's obligations under the Credit Facility are guaranteed by each of its significant
subsidiaries and certain of its other subsidiaries (the "Guarantors" and, together with the Company, each an "Obligor").
The Credit Facility contains covenants that limit, among other things, the ability of an Obligor to:
•
incur additional indebtedness;
•
pay or declare dividends or make other restricted distributions or payments in respect of any shares of the Company's
equity securities after a default or an event of default that is continuing or if a default would occur as a result of such
distribution;
•
make sales or other dispositions of material assets;
•
create liens on its existing or future assets, other than permitted liens;
•
enter into transactions with affiliates other than the Obligors, except on a commercially reasonable basis as if it were
dealing with such person at arm's length;
•
make any loans to or investments in businesses other than: those related to mining or a business ancillary or
complementary to mining; investments in cash equivalents; or inter-company investments;
•
enter into or maintain certain derivative instruments; and
•
amalgamate or otherwise transfer its assets.
The Company is also required to maintain a total net debt to EBITDA ratio below a specified maximum value as well as a
minimum tangible net worth. Events of default under the Credit Facility include, among other things:
•
the failure to pay principal when due and payable or interest, fees or other amounts payable within five business days
of such amounts becoming due and payable;
•
the breach by the Company of any financial covenant;
•
the breach by any Obligor of any other term, covenant or other agreement that is not cured within 30 business days
after written notice of the breach has been given to the Company;
•
a default under any other indebtedness of the Obligors if the effect of such default is to accelerate, or to permit the
acceleration of, the due date of such indebtedness in an aggregate amount of $50 million or more;
•
a change in control of the Company which is defined to occur upon (a) the acquisition, directly or indirectly, by any
means whatsoever, by any person, or group of persons acting jointly or in concert, (collectively, an "offeror") of
beneficial ownership of, or the power to exercise control or direction over, or securities convertible or exchangeable
into, any securities of the Company carrying in aggregate (assuming the exercise of all such conversion or exchange
rights in favour of the offeror) more than 50% of the aggregate votes represented by the voting stock then issued and
outstanding or otherwise entitling the offeror to elect a majority of the board of directors of the Company, or (b) the
replacement by way of election or appointment at any time of one-half or more of the total number of the then
incumbent members of the board of directors of the Company, or the election or appointment of new directors
comprising one-half or more of the total number of members of the board of directors in office immediately following
such election or appointment; unless, in any such case, the nomination of such directors for election or
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their appointment is approved by the board of directors of the Company in office immediately preceding such nomination
or appointment in circumstances where such nomination or appointment is made other than as a result of a dissident
public proxy solicitation, whether actual or threatened; and
•
various events relating to the bankruptcy or insolvency or winding-up, liquidation or dissolution or cessation of business
of any Obligor.
As at March 12, 2012 there was approximately $355.6 million in the aggregate drawn under the Credit Facility, including
$35.6 million in letters of credit.
Note Purchase Agreement
On April 7, 2010 the Company entered into a note purchase agreement (the "Note Purchase Agreement") with certain institutional
investors, providing for the issuance of $115,000,000 6.13% guaranteed senior unsecured notes due 2017, $360,000,000 6.67%
guaranteed senior unsecured notes due 2020 and $125,000,000 6.77% guaranteed senior unsecured notes due 2022. Payment
and performance of the Company's obligations under the Note Purchase Agreement, the notes issued pursuant thereto and the
obligations of the Guarantors under the guarantees are guaranteed by the Guarantors.
The Note Purchase Agreement contains restrictive covenants that limit, among other things, the ability of an Obligor to:
•
enter into transactions with affiliates other than the Obligors, except on a commercially reasonable basis upon terms
no less favourable to the Obligor than would be obtainable in a comparable arm's length transaction;
•
amalgamate or otherwise transfer its assets;
•
carry on business other than those related to mining or a business ancillary or complementary to mining;
•
engage in any dealings or transactions with any person or entity identified under certain anti-terrorism regulations;
•
create liens on its existing or future assets, other than permitted liens;
•
incur subsidiary indebtedness where the Obligor is a subsidiary of the Company; and
•
make sales or other dispositions of material assets.
The Company is also required to maintain the same financial ratios and the same minimum tangible net worth under the Note
Purchase Agreement as under the Credit Facility. Events of default under the Note Purchase Agreement include, among
other things:
•
the failure to pay principal or make whole amounts when due and payable or interest, fees or other amounts payable
within five business days of such amounts becoming due and payable;
•
the breach by any Obligor of any other term or covenant that is not cured within 30 business days after the earlier of
written notice of the breach having been given to the Company or actual knowledge of the breach is obtained;
•
the finding that any representation or warranty made by an Obligor was false or incorrect in any material respect on the
date as of which it was made;
•
a default under any other indebtedness of the Obligors if the effect of such default is to accelerate, or to permit the
acceleration of, the due date of such indebtedness in an aggregate amount of $50 million or more; and
•
various events relating to the bankruptcy or insolvency or winding-up, liquidation or dissolution or cessation of business
of any Obligor.
The Note Purchase Agreement provides that, upon certain events of default, the notes automatically become due and payable
without any further action. In addition, the Note Purchase Agreement contains a "Most Favored Lender" clause which acts to
incorporate into the Note Purchase Agreement any grace periods upon an event of default that are shorter in the Credit Facility
than in the Note Purchase Agreement. A copy of the Note Purchase Agreement is filed as Exhibit 4.05 to this Form 20-F.
Warrant Indenture
The Company issued common share purchase warrants (the "Warrants") as part of a private placement on December 3, 2008.
Effective April 4, 2009, the Warrants were amended and are governed by a warrant indenture (the "Indenture") between the
Company and Computershare Trust Company of Canada (the "Trustee").
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Each whole Warrant entitles the holder to purchase one common share of the Company at a price of $47.25, subject to
adjustment as summarized below. The Warrants are exercisable at any time prior to 4:30 p.m. (Eastern Standard Time) on
December 2, 2013, after which the Warrants will expire and become void and of no effect. Warrants may be surrendered for
exercise or transfer at the principal office of the Trustee in Toronto.
The Indenture provides for adjustment in the number of common shares issuable on the exercise of the Warrants and/or the
exercise price per Warrant on the occurrence of certain events, including:
•
the declaration of a dividend or making of a distribution on the common shares payable in common shares or securities
exchangeable for or convertible into common shares to the holders of the common shares in proportion to their
respective ownership of common shares;
•
the subdivision, consolidation or change of the outstanding common shares into a different number of common shares;
•
the fixing of a record date for the issuance of rights, options or warrants to all or substantially all of the holders of the
common shares under which such holders are entitled, during a period expiring not more than 45 days after such
record date, to subscribe for or purchase common shares, or securities exchangeable for or convertible into common
shares, at a price per share to the holder (or at a conversion or exchange price per share) of less than 95% of the
Current Market Price (as defined in the Indenture) on such record date; and
•
the fixing of a record date for the issue or distribution to all or substantially all of the holders of the common shares of
securities of the Company (including rights, options or warrants to purchase any securities of the Company), evidence
of the Company's indebtedness or any property or assets (including cash or shares of any other corporation but
excluding any dividends paid in accordance with a dividend policy established by the board of directors of the
Company) and such issue or distribution does not constitute an event listed in (a) to (c) above.
The Indenture also provides for adjustment in the class and/or number of securities issuable on the exercise of the Warrants
and/or exercise price per security in the event of the following additional events: (i) reorganization, reclassification or other change
of the common shares into other securities; (ii) consolidation, amalgamation, arrangement or merger of the Company with or into
another entity (other than consolidations, amalgamations, arrangements or mergers which do not result in any reclassification of
the common shares or a change of the common shares into other shares); (iii) exchange of common shares for other shares or
other securities or property, including cash, pursuant to the exercise of a statutory compulsory acquisition right; or (iv) sale,
conveyance or transfer of the Company's undertakings or assets as an entirety or substantially as an entirety to another
corporation or other entity or the completion of a take-over bid (as such term is defined under the Securities Act (Ontario))
resulting in the offeror, together with any persons acting jointly or in concert with the offeror, holding at least two-thirds of the then
outstanding common shares in which the holders of common shares are entitled to receive shares, other securities or property,
including cash.
No adjustment in the exercise price or the number of common shares purchasable on the exercise of the Warrants will be required
to be made unless the cumulative effect of such adjustment or adjustments would change the exercise price by at least one
percent or the number of common shares purchasable on exercise by at least one one-hundredth of a share; provided however,
that any such adjustment that is not made will be carried forward and taken into account in any subsequent adjustment.
The Company covenanted in the Indenture that, during the period in which the Warrants are exercisable, it will give notice to
holders of Warrants of any event that requires or may require an adjustment in any of the exercise rights pursuant to any of the
Warrants at least ten days prior to the record date or effective date, as the case may be, of such event.
No fractional common shares will be issuable on the exercise of any Warrants. The Company will not pay cash or other
consideration to the holder of a Warrant in lieu of fractional common shares. Holders of Warrants will not have any voting rights or
any other rights which a holder of common shares would have (including, without limitation, the right to receive notice of or to
attend meetings of shareholders or any right to receive dividends or other distributions). Holders of Warrants will have no
pre-emptive rights to acquire securities of the Company.
From time to time, the Company and the Trustee, without the consent of the holders of Warrants, may amend or supplement the
Indenture for certain purposes, including curing defects or inconsistencies or making any change that, in the opinion of the
Trustee, does not prejudice the rights of the Trustee or the holders of the Warrants. Any amendment or supplement to the
Indenture that prejudices the interests of the holders of the Warrants may only be made by "extraordinary resolution", which is
defined in the Indenture as a resolution either (i) passed at a meeting of the holders of Warrants at which there are holders of
Warrants present in person or represented by proxy representing at least 25% of the
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then outstanding Warrants (at least 50% for any amendment that would increase the exercise price per security, decrease the
number of securities issuable upon the exercise of Warrants or shorten the term of the Warrants), or such lesser percentage
constituting a quorum for this purpose under the Indenture, and passed by the affirmative vote of holders of Warrants representing
not less than 66 2 / 3 % of the then outstanding Warrants represented at the meeting and voted on the poll on such resolution; or
(ii) adopted by an instrument in writing signed by the holders of Warrants representing not less than 66 2 / 3 % of the then
outstanding Warrants.
The Warrants may not be exercised by or on behalf of a U.S. person (a "U.S. Person"), as defined in Rule 902(k) of Regulation S
under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), a person in the United States or for the
account or benefit of a U.S. Person or a person in the United States (each a "Restricted Person") unless registered under the
U.S. Securities Act and the securities laws of all applicable states of the United States or an exemption from such registration
requirements is available. The Company does not intend to register the Warrants, or the common shares issuable upon exercise
of the Warrants, in the United States. The Company and Trustee will not accept subscriptions for common shares pursuant to the
exercise of Warrants from any holder of Warrants who does not certify that it is not a Restricted Person.
Notwithstanding the foregoing, a Warrant may be exercised by or on behalf of Restricted Person if:
(a)
the Warrant is a U.S. Warrant (as defined in the Indenture) and is exercised by an Initial U.S. Holder (as defined in
the Indenture);
(b)
the Warrant is a U.S. Warrant and the holder delivers a letter in the form of Schedule B to the Indenture to the Trustee; or
(c)
the holder delivers to the Trustee a written opinion of United States counsel reasonably acceptable to the Company to the
effect that either the Warrants and the common shares have been registered under the U.S. Securities Act or, that upon
exercise of the Warrant, the common shares may be issued to the holder without registration under the U.S. Securities Act
and any applicable securities laws of any state of the United States.
Warrants may not be transferred except under circumstances that will not result in a violation of the U.S. Securities Act, any
applicable state securities laws or any applicable Canadian securities laws. Warrants may only be transferred:
(a)
outside the United States in accordance with Regulation S under the U.S. Securities Act; or
(b)
in the United States in compliance with the exemption from registration provided by Rule 144 under the U.S. Securities Act,
if available, or in another transaction that does not require registration under the U.S. Securities Act.
Stock Option Plan
The Company has a Stock Option Plan for directors, officers, employees and service providers to the Company. See "Item 6
Directors, Senior Management and Employees – Compensation of Executive Officers – Stock Option Plan". A copy of the Stock
Option Plan is filed as Exhibit 4.02 to this Form 20-F.
Employee Share Purchase Plan
The Company has an Employee Share Purchase Plan for officers and full-time employees of the Company. See "Item 6 Directors,
Senior Management and Employees – Compensation of Executive Officers – Employee Share Purchase Plan". A copy of the
Employee Share Purchase Plan is filed as Exhibit 4.03 to this Form 20-F.
Exchange Controls
Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a
Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the
remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Company's securities, except
as discussed in "– Canadian Federal Income Tax Considerations" below.
Restrictions on Share Ownership by Non-Canadians
There are no limitations under the laws of Canada or in the constating documents of the Company on the right of foreigners to
hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of
Industry (Canada) of certain acquisitions of "control" of the Company by a "non-Canadian". The threshold for
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acquisitions of "control" is generally defined as being one-third or more of the voting shares of the Company. "Non-Canadian"
generally means an individual who is not a Canadian citizen or a permanent resident of Canada, or a corporation, partnership,
trust or joint venture that is ultimately controlled by non-Canadians.
Corporate Governance
The Company is subject to a variety of corporate governance guidelines and requirements enacted by the TSX, the CSA, the
NYSE and the SEC. Today, the Company believes that it meets and often exceeds not only corporate governance legal
requirements in Canada and the United States, but also the best practices recommended by securities regulators. The Company
is listed on the NYSE and, although the Company is not required to comply with most of the NYSE corporate governance
requirements to which the Company would be subject if it were a U.S. corporation, the Company's governance practices differ
from those required of U.S. domestic issuers in only the following respects. The NYSE rules for U.S. domestic issuers require
shareholder approval of all equity compensation plans (as defined in the NYSE rules) regardless of whether new issuances,
treasury shares or shares that the Company has purchased in the open market are used. The TSX rules require shareholder
approval of share compensation arrangements involving new issuances of shares, and of certain amendments to such
arrangements, but do not require such approval if the compensation arrangements involve only shares purchased by the company
in the open market. The NYSE rules for U.S. domestic issuers also require shareholder approval of certain transactions or series
of related transactions that result in the issuance of common shares, or securities convertible into or exercisable for common
shares, that has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding prior to
the transaction or if the issuance of common shares, or securities convertible into or exercisable for common shares, is, or will be
upon issuance, equal to or in excess of 20% of the number of common shares outstanding prior to the transaction. The TSX rules
require shareholder approval of acquisition transactions resulting in dilution in excess of 25%. The TSX also has broad general
discretion to require shareholder approval in connection with any issuances of listed securities. The Company complies with the
TSX rules.
Canadian Federal Income Tax Considerations
The following is a brief summary of some of the principal Canadian federal income tax consequences generally applicable to a
holder of common shares of the Company (a "U.S. holder") who deals at arm's length with the Company, holds the shares as
capital property and who, for the purposes of the Income Tax Act (Canada) (the "Act") and the Canada-United States Income Tax
Convention (1980) (the "Treaty"), is at all relevant times resident in the United States, is not and is not deemed to be resident in
Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules,
which are not discussed below, may apply to a U.S. holder which is an insurer that carries on business in Canada and elsewhere.
This summary is of a general nature only and is not, and should not be interpreted as, legal or tax advice to any particular
U.S. holder and no representation is made with respect to the Canadian federal income tax consequences to any particular
person. Accordingly, U.S. holders are advised to consult their own tax advisors with respect to their particular circumstances.
Under the Act and the Treaty, a U.S. holder of common shares (including an individual or estate) who is entitled to benefits under
the Treaty will generally be subject to a 15% withholding tax on dividends paid or credited or deemed by the Act to have been paid
or credited on such shares. The dividends may be exempt from such withholding in the case of some U.S. holders such as
qualifying pension funds and charities. A U.S. holder who is not entitled to benefits under the Treaty (or to the benefits of the
Dividends Article of the Treaty) will generally be subject to Canadian withholding tax at the rate of 25% on such dividends.
In general, a U.S. holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the
Company unless, at the time of disposition, the shares are "taxable Canadian property" (as defined in the Act) and such gains are
not exempted from such income tax by virtue of the Treaty. Where the shares are listed on a designated stock exchange (which
includes the TSX and the NYSE) at the time of disposition, the shares will not generally be taxable Canadian property, unless at
any time in the 60-month period immediately preceding the disposition (i) 25% or more of the shares of any class or series of the
capital stock of the Company was owned by or belonged to one or more of the U.S. holder and persons with whom the U.S. holder
did not deal at arm's length, and (ii) more than 50% of the fair market value of the shares was derived directly or indirectly from
one or more of real or immovable property situated in Canada, Canadian resource properties, timber resource properties or
options in respect of the foregoing or interests therein. In certain circumstances, the shares may be deemed to be taxable
Canadian property of a U.S. holder. A U.S. holder who is entitled to benefits under the Treaty will be so exempted under the
Treaty where the value of the shares of the Company at
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the time of disposition is not derived principally from real property (as defined in the Treaty) situated in Canada. For this purpose,
the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral deposits and other natural
resources situated in Canada, rights to amounts computed by reference to the amount or value of production from such resources
and certain other rights in respect of natural resources situated in Canada.
United States Federal Income Tax Considerations
The following is a brief summary of some of the principal U.S. federal income tax consequences to a holder of common shares of
the Company, who deals at arm's length with the Company, holds the shares as a capital asset and who, for the purposes of the
Internal Revenue Code of 1986, as amended (the "Code") and the Treaty, is at all relevant times a U.S Stockholder
(as defined below).
As used herein, the term "U.S. Stockholder" means a holder of common shares of the Company who (for United States federal
income tax purposes): (a) is a citizen or resident of the United States; (b) is a corporation created or organized in or under the
laws of the United States or of any state therein; (c) is an estate the income of which is subject to United States federal income
taxation regardless of its source; or (d) is a trust that either (i) has validly elected to be treated as a U.S. person or (ii) is subject to
both the primary supervision of a U.S. court and the control of one or more U.S. persons with respect to all substantial trust
decisions.
This summary is based on the Code, final and temporary Treasury Regulations promulgated thereunder, United States court
decisions, published rulings and administrative positions of the U.S. Internal Revenue Service (the "IRS") interpreting the Code,
and the Treaty, as applicable and, in each case, as in effect and available as of the date of this Form 20-F. Any of the authorities
on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be
applied on a retroactive basis and could affect the United States federal income tax consequences described in this summary.
This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted,
could be applied on a retroactive basis.
This summary does not describe United States federal estate and gift tax considerations, nor does it describe regional, state and
local tax considerations within the United States. The following summary does not purport to be a comprehensive description of all
of the possible tax considerations that may be relevant to a decision to purchase, hold or dispose of the common shares. In
particular, this summary only deals with a holder who will hold the common shares as a capital asset and who does not own,
directly or indirectly, 10% or more of our voting shares or of any of our direct or indirect subsidiaries. This summary does not
address all of the tax consequences that may be relevant to holders in light of their particular circumstances, including but not
limited to application of alternative minimum tax or rules applicable to taxpayers in special circumstances. Special rules may
apply, for instance, to tax-exempt entities, banks, insurance companies, S corporations, dealers in securities or currencies,
persons who will hold common shares as a position in a "straddle", hedge, constructive sale or "conversion transaction" for
U.S. tax purposes, persons who have a "functional currency" other than the U.S. dollar or persons subject to U.S. taxation as
expatriates. Furthermore, in general, this discussion does not address the tax consequences applicable to holders that are treated
as partnerships or other pass-through entities for United States federal income tax purposes.
This summary is of a general nature only and is not, and should not be interpreted as, legal or tax advice to any particular
U.S. Stockholder and no representation is made with respect to the U.S. income tax consequences to any particular person.
Accordingly, U.S. Stockholders are advised to consult their own tax advisors with respect to their particular circumstances.
Dividends
For United States federal income tax purposes, the gross amount of all distributions, if any, paid with respect to the common
shares out of current or accumulated earnings and profits ("E&P") to a U.S. Stockholder generally will be treated as foreign source
dividend income to such holder, even though the U.S. Stockholder generally receives only a portion of the gross amount (after
giving effect to the Canadian withholding tax as potentially reduced by the Treaty). United States corporations that hold the
common shares generally will not be entitled to the dividends received deduction that applies to dividends received from
United States corporations. To the extent a distribution exceeds E&P, it will be treated first as a return of capital to the extent of
the U.S. Stockholder's adjusted basis and then as gain from the sale of a capital asset.
In the case of certain non-corporate U.S. Stockholders, including individuals and certain estates and trusts, gains recognized prior
to 2013 from the sale of a capital asset held for longer than 12 months are taxable at a maximum federal income tax rate of 15%,
while gains from the sale of a capital asset that do not meet such holding period are taxable at the rates applicable to ordinary
income. Certain dividends paid prior to 2013 to certain non-corporate U.S. Stockholders,
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including individuals and certain estates and trusts, generally are also subject to the 15% maximum rate. The reduced tax rates
generally are available only with respect to dividends received from U.S. corporations, and from non-U.S. corporations (a) that are
eligible for the benefits of a comprehensive income tax treaty with the United States that the U.S. Treasury Department
determines to be satisfactory and that contains an exchange of information program, or (b) whose stock is readily tradeable on an
established securities market in the United States. In addition, the reduced tax rates are not available with respect to dividends
received from a foreign corporation that was a passive foreign investment company in either the taxable year of the distribution or
the preceding taxable year. Special rules may apply, however, to cause such dividends to be taxable at the higher rates applicable
to ordinary income. For example, the reduced tax rates are not available with respect to a dividend on shares where the
U.S. Stockholder does not continuously own such shares for more than 60 days during the 120-day period beginning 60 days
before the ex-dividend date. Many other complex and special rules may apply as a condition to, or as a result of, the application of
the reduced tax rate on dividends. U.S. Stockholders are advised to consult their own tax advisors.
For United States federal income tax purposes, the amount of any dividend paid in Canadian dollars will be the United States
dollar value of the Canadian dollars at the exchange rate in effect on the date the dividend is properly included in income, whether
or not the Canadian dollars are converted into United States dollars at that time. Gain or loss recognized by a U.S. Stockholder on
a sale or exchange of the Canadian dollars will generally be United States source ordinary income or loss.
The withholding tax imposed by Canada generally is a creditable foreign tax for United States federal income tax purposes.
Therefore, the U.S. Stockholder generally will be entitled to include the amount withheld as a foreign tax paid in computing a
foreign tax credit (or in computing a deduction for foreign income taxes paid, if the holder does not elect to use the foreign tax
credit provisions of the Code). The Code, however, imposes a number of limitations on the use of foreign tax credits, based on the
particular facts and circumstances of each taxpayer. Investors should consult their tax advisors regarding the availability of the
foreign tax credit. U.S. Stockholders that do not elect to claim foreign tax credit for a taxable year may be eligible to deduct such
withholding tax imposed by Canada.
Capital Gains
Subject to the discussion below under the heading "– Passive Foreign Investment Company Considerations", gain or loss
recognized by a U.S. Stockholder on the sale or other disposition of the common shares will be subject to United States federal
income taxation as capital gain or loss in an amount equal to the difference between such U.S. Stockholder's adjusted basis in the
common shares and the amount realized upon its disposition.
Gain on the sale of common shares held for more than one year by certain non-corporate U.S. Stockholders, including individuals
and certain estates and trusts, will be taxable at a maximum rate of 15%. A reduced rate does not apply to capital gains realized
by a U.S. Stockholder that is a corporation. Capital losses are generally deductible only against capital gains and not against
ordinary income. In the case of an individual, however, unused capital losses in excess of capital gains may offset up to $3,000
annually of ordinary income.
Capital gain or loss recognized by a U.S. Stockholder on the sale or other disposition of common shares will generally be sourced
in the United States.
Passive Foreign Investment Company Considerations
The Company will be classified as a passive foreign investment company (a "PFIC") for United States federal income tax
purposes if either (i) 75% or more of its gross income is passive income or (ii) on average for the taxable year, 50% or more of its
assets (by value) produce or are held for the production of passive income. Based on projections of the Company's income and
assets and the manner in which the Company intends to manage its business, the Company expects that the Company will not be
a PFIC. However, there can be no assurance that this will actually be the case.
If the Company were to be classified as a PFIC, the consequences to a U.S. Stockholder will depend in part on whether the
U.S. Stockholder has made a "Mark-to-Market Election" or a "QEF Election" with respect to the Company. If the Company is a
PFIC during a U.S. Stockholder's holding period and the U.S. Stockholder does not make a Mark-to-Market Election or a QEF
Election, the U.S. Stockholder will generally be subject to special rules including interest charges.
If a U.S. Stockholder makes a Mark-to-Market Election, the U.S. Stockholder would generally be required to include in its income
the excess of the fair market value of the common shares as of the close of each taxable year over the U.S. Stockholder's
adjusted basis therein. If the U.S. Stockholder's adjusted basis in the common shares is greater than the fair market value of the
common shares as of the close of the taxable year, the U.S. Stockholder may deduct such
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excess, but only up to the aggregate amount of ordinary income previously included as a result of the Mark-to-Market Election,
reduced by any previous deduction taken. The U.S. Stockholder's adjusted basis in its common shares will be increased by the
amount of income or reduced by the amount of deductions resulting from the Mark-to-Market Election.
A U.S. Stockholder who makes a QEF Election would generally be currently taxable on its pro rata share of the Company's
ordinary earnings and net capital gain (at ordinary income and capital gains rates, respectively) for each taxable year that the
Company is classified as a PFIC, even if no dividend distributions were received.
If for any year the Company determines that it is properly classified as a PFIC, it will comply with all reporting requirements
necessary for a U.S. Stockholder to make a QEF Election and will, promptly following the end of such year and each year
thereafter for which the Company is properly classified as a PFIC, provide to U.S. Stockholders the information required by the
QEF Election.
Under current U.S. law, if the Company is a PFIC in any year, a U.S. Stockholder must file an annual return on IRS Form 8621,
which describes the income received (or deemed to be received pursuant to a QEF Election) from the Company, any gain realized
on a disposition of common shares and certain other information.
Information Reporting; Backup Withholding Tax
Dividends on and proceeds arising from a sale of common shares generally will be subject to information reporting and backup
withholding tax, currently at the rate of 28%, if (a) a U.S. Stockholder fails to furnish the U.S. Stockholder's correct United States
taxpayer identification number (generally on Form W-9), (b) the withholding agent is advised the U.S. Stockholder furnished an
incorrect United States taxpayer identification number, (c) the withholding agent is notified by the IRS that the U.S. Stockholder
has previously failed to properly report items subject to backup withholding tax, or (d) the U.S. Stockholder fails to certify, under
penalty of perjury, that the U.S. Stockholder has furnished its correct U.S. taxpayer identification number and that the IRS has not
notified the U.S. Stockholder that it is subject to backup withholding tax. However, U.S. Stockholders that are corporations
generally are excluded from these information reporting and backup withholding tax rules. Amounts withheld as backup
withholding may be credited against a U.S. Stockholder's United States federal income tax liability, and a U.S. Stockholder may
obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with
the IRS and furnishing any required information.
Recently enacted legislation requires U.S. individuals to report an interest in any "specified foreign financial asset" if the aggregate
value of such assets owned by the U.S. individual exceeds $50,000 (or such higher amount as the IRS may prescribe in future
guidance). Stock issued by a foreign corporation is treated as a specified foreign financial asset for this purpose.
Audit Fees
Fees paid to Ernst & Young LLP for 2011 and 2010 are set out below.
Year Ended
December 31,
2011
2010
(C$ thousands)
Audit fees
Audit-related fees
Tax fees
All other fees
2,655
21
72
76
2,264
18
103
97
Total
2,824
2,482
Audit fees were paid for professional services rendered by the auditors for the audit of Agnico-Eagle's annual financial statements
and related statutory and regulatory filings and for the quarterly review of Agnico-Eagle's interim financial statements. Audit fees
also include prospectus-related fees for professional services rendered by the auditors in connection with corporate financing
activities. These services consisted of the audit or review, as required, of financial statements included in the prospectuses, the
review of documents filed with securities regulatory authorities,
2011 ANNUAL REPORT
155
Table of Contents
correspondence with securities regulatory authorities and all other services required by regulatory authorities in connection with
the filing of these documents.
Audit-related fees consist of fees paid for assurance and related services performed by the auditors that are reasonably related to
the performance of the audit of the Company's financial statements. This includes consultation with respect to financial reporting,
accounting standards and compliance with Section 404 of SOX.
Tax fees were paid for professional services relating to tax compliance, tax advice and tax planning. These services included the
review of tax returns and tax planning and advisory services in connection with international and domestic taxation issues.
All other fees were paid for services other than the fees listed above and include fees for professional services rendered by the
auditors in connection with the translation of securities regulatory filings required to comply with securities laws in certain
Canadian jurisdictions.
No other fees were paid to auditors in the previous two years.
The Audit Committee has adopted a policy that requires the pre-approval of all fees paid to Ernst & Young LLP prior to the
commencement of the specific engagement, and all fees referred to above were pre-approved in accordance with such policy.
Available Documents
The Company's filings with the SEC, including exhibits and schedules filed with this Form 20-F, may be reviewed and copied at
prescribed rates at the SEC's public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Further information
on the public reference rooms may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a web site
(www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file
electronically with the SEC. Agnico- Eagle began to file electronically with the SEC in August 2002.
Any reports, statements or other information that the Company files with the SEC may be read at the addresses indicated above
and may also be accessed electronically at the web site set forth above. These SEC filings are also available to the public from
commercial document retrieval services.
The Company also files reports, statements and other information with the CSA and these can be accessed electronically at the
CSA's System for Electronic Document Analysis and Retrieval web site at www.sedar.com.
The Company's filings with the SEC and CSA may also be accessed electronically from the Company's website at
www.agnico-eagle.com.
ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Metal Price and Foreign Currency
Agnico-Eagle's net income is most sensitive to metal prices and the Canadian dollar/US dollar and Euro/US dollar exchange
rates. For the purpose of the sensitivities set out in the table below, Agnico-Eagle used the following metal price and exchange
rate assumptions:
•
Gold – $1,500 per ounce;
•
Silver – $30.00 per ounce;
•
Zinc – $1,800 per tonne;
•
Copper – $7,000 per tonne;
•
Canadian dollar/US dollar – C$1.00 per $1.00; and
•
Euro/US dollar – €0.74 per $1.00.
Changes in the market price of gold are due to numerous factors such as demand, global mine production levels, forward selling
by producers, central bank sales and investor sentiment. Changes in the market prices of other metals are due to factors such as
demand and global mine production levels. Changes in the exchange rates are due to factors such as
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AGNICO-EAGLE MINES LIMITED
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supply and demand for currencies and economic conditions in each country or currency area. In 2011, the ranges of metal prices
and exchange rates were as follows:
•
Gold: $1,308 – $1,921 per ounce, averaging $1,571 per ounce;
•
Silver: $26 – $50 per ounce, averaging $35 per ounce;
•
Zinc: $1,720 – $2,569 per tonne, averaging $2,189 per tonne;
•
Copper: $6,722 – $10,180 per tonne, averaging $8,813 per tonne;
•
Canadian dollar/US dollar: C$0.9407 – C$1.0658 per $1, averaging C$0.9893 per $1; and
•
Euro/US dollar: €0.6693 – €0.7777 per $1, averaging €0.7183 per $1.
The following table sets out the estimated impact on 2012 total cash costs per ounce of a 10% change in assumed metal prices
and exchange rates. A 10% change in each variable was considered in isolation while holding all other assumptions constant.
Based on historical market data and 2011 price ranges shown above, a 10% change in assumed metal prices and exchange rates
is reasonably likely in 2012.
Impact
on total
cash
costs
per
ounce
Changes in variable
Silver
Zinc
Copper
Canadian dollar/US dollar
Euro/US dollar
$
$
$
$
$
14
6
4
74
10
In order to mitigate the impact of fluctuating byproduct metal prices, the Company occasionally enters into derivative transactions
under its Metal Price Risk Management Policy, approved by the Board. The Company's policy and practice is not to sell forward
its gold production. However, the policy does allow the Company to use other hedging strategies where appropriate to mitigate
foreign exchange and byproduct metal pricing risks. The Company occasionally buys put options, enters into price collars and
enters into forward contracts to protect minimum byproduct metal prices while maintaining full exposure to gold price. The Risk
Management Committee has approved the strategy of using short-term call options in an attempt to enhance the realized
byproduct metal prices. The Company's policy does not allow speculative trading.
The Company receives payment for all of its metal sales in US dollars and pays most of its operating and capital costs in
Canadian dollars, Euros or Mexican pesos. This gives rise to significant currency risk exposure. From time to time the Company
has entered into currency hedging transactions under the Company's Foreign Exchange Risk Management Policy, approved by
the Board, to hedge part of its foreign currency exposure. The policy does not permit the hedging of translation exposure (that is,
the gains and losses that arise from the accounting translation of Canadian dollar, Euro or Mexican peso denominated assets and
liabilities into US dollars), as these do not give rise to cash exposure. The Company's foreign currency derivative strategy includes
the use of purchased puts, sold calls, collars and forwards. The Company's policy does not allow speculative trading.
Cost Inputs
The Company also considers and may enter into risk management strategies to mitigate price risk on certain consumables
(including, but not limited to, energy). These strategies have largely been confined to longer term purchasing contracts but may
include financial and derivative instruments.
Interest Rates
The Company's current exposure to market risk for changes in interest rates relates primarily to the drawdown on its credit facility
and its investment portfolio. Drawdowns on the credit facility are used, primarily, to fund a portion of the capital expenditures
related to the Company's development projects and working capital requirements. As at December 31,
2011 ANNUAL REPORT
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157
2011, the Company had drawn down $320.0 million on the credit facility. In addition, the Company invests its cash in investments
with short maturities or with frequent interest reset terms and a credit rating of R1-High or better. As a result, the Company's
interest income fluctuates with short-term market conditions. As at December 31, 2011, short-term investments amounted to
$6.6 million.
Amounts drawn under the credit facility are subject to floating interest rates based on benchmark rates available in the
United States and Canada or on LIBOR. In the past, the Company has entered into derivative instruments to hedge against
unfavorable changes in interest rates. The Company will continue to monitor its interest rate exposure and may enter into such
agreements to manage its exposure to fluctuating interest rates. In 2011, there were no interest rate derivative instruments
in place.
Financial Instruments
The Company, from time to time, enters into contracts to limit the risk associated with decreased byproduct metal prices,
increased foreign currency costs (including capital expenditures) and input costs. The contracts act as economic hedges of
underlying exposures and are not held for speculative purposes. Agnico-Eagle does not use complex derivative contracts to
hedge exposures. The Company uses simple contracts, such as puts and calls, collars and forwards.
Using financial instruments creates various financial risks. Credit risk is the risk that the counterparties to financial contracts will
fail to perform on an obligation to the Company. Credit risk is partially mitigated by dealing with high quality counterparties such as
major banks. Market liquidity risk is the risk that a financial position cannot be liquidated quickly. The Company primarily mitigates
market liquidity risk by spreading out the maturity of financial contracts over time, usually based on projected production levels for
the specific metal being hedged, such that the relevant markets will be able to absorb the contracts. Mark-to-market risk is the risk
that an adverse change in market prices for metals will affect financial condition. Since derivative contracts are used as economic
hedges, for most of the contracts, changes in the mark-to-market value will affect income. For a description of the accounting
treatment of derivative contracts, please see "Item 5 Operating and Financial Review and Prospects – Critical Accounting
Estimates – Financial Instruments".
ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
None/not applicable.
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PART II
ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS
None.
ITEM 15 CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the Company's disclosure controls and procedures as of December 31, 2011 pursuant to
Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that
there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible
controls and procedures relative to their costs.
Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, as of December 31,
2011, the Company's disclosure controls and procedures are designed at a reasonable assurance level and are effective to
provide reasonable assurance that information the Company is required to disclose in reports that the Company files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and
forms, and that such information is accumulated and communicated to the Company's management, including the Company's
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management's report on internal control over financial reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed by, or under the supervision of, the Company's Chief Executive
Officer and Chief Financial Officer and effected by the Company's Board, management and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
The Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of the Company's internal control over financial reporting as of December 31, 2011. In making this assessment, the
Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
in Internal Control – Integrated Framework . Based upon its assessment, management concluded that, as of December 31, 2011,
the Company's internal control over financial reporting was effective.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2011 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their report which appears herein.
The Company will continue to periodically review its disclosure controls and procedures and internal control over financial
reporting and may make modifications from time to time as considered necessary or desirable.
Attestation report of the registered public accounting firm
Please see "Item 18 Financial Statements – Report of Independent Registered Public Accounting Firm" included in the Company's
Consolidated Financial Statements which is incorporated by reference to this Item 15.
2011 ANNUAL REPORT
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Changes in internal control over financial reporting
Management regularly reviews its system of internal control over financial reporting and makes changes to the Company's
processes and systems to improve controls and increase efficiency, while ensuring that the Company maintains an effective
internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating
activities, and migrating processes.
There was no change in the Company's internal control over financial reporting that occurred during the period covered by this
Annual Report on Form 20-F that has materially affected, or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
ITEM 15T CONTROLS AND PROCEDURES
Not applicable.
ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that the Company shall have at least one "audit committee financial expert" (as defined in Item 16A of
Form 20-F) and that Messrs. Bernard Kraft and Mel Leiderman are the Company's "audit committee financial experts" serving on
the Audit Committee of the Board. Each of the Audit Committee financial experts is "independent" under applicable listing
standards.
ITEM 16B CODE OF ETHICS
The Company has adopted a "code of ethics" (as defined in Item 16B of Form 20-F) that applies to its Chief Executive Officer,
Chief Financial Officer, principal accounting officer, controller and persons performing similar functions. A copy of this code of
ethics was filed as Exhibit 2 to the Form 6-K filed on December 13, 2005 and is incorporated by reference hereto. The code of
ethics is available on the Company's website at www.agnico-eagle.com or, without charge, upon request from the Corporate
Secretary, Agnico-Eagle Mines Limited, Suite 400, 145 King Street East, Toronto, Ontario M5C 2Y7 (telephone 416-947-1212).
There were no amendments to our waivers, express or implicit, of the code of ethics during the year ended December 31, 2011.
ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Audit Committee establishes the independent auditors' compensation. In 2003, the Audit Committee established a policy to
pre-approve all services provided by the Company's independent public accountant, Ernst & Young LLP. The Audit Committee
determines which non-audit services the independent auditors are prohibited from providing and authorizes permitted non-audit
services to be performed by the independent auditors to the extent those services are permitted by SOX and other applicable
legislation. A summary of all fees paid to Ernst & Young LLP for the fiscal years ended December 31, 2011 and 2010 can be
found under "Item 10 Additional Information – Audit Fees" which is incorporated by reference into this Item 16C. All fees paid to
Ernst & Young LLP in 2011 were pre-approved by the Audit Committee. Ernst & Young LLP has served as the Company's
independent public accountant for each of the fiscal years in the three-year period ended December 31, 2011 for which audited
financial statements appear in this Annual Report on Form 20-F.
ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
None/Not applicable.
ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None/Not applicable.
ITEM 16F CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
None/Not applicable.
ITEM 16G CORPORATE GOVERNANCE
See "Item 10 Additional Information – Corporate Governance" which is incorporated by reference into this Item 16G.
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ITEM 16H MINE SAFETY DISCLOSURE
Not applicable.
PART III
ITEM 17 FINANCIAL STATEMENTS
The Company has elected to provide financial statements and related information pursuant to Item 18.
ITEM 18 FINANCIAL STATEMENTS
Pursuant to General Instruction E(c) of Form 20-F, the registrant has elected to provide the financial statements and related
information specified in Item 18.
2011 ANNUAL REPORT
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161
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Agnico-Eagle Mines Limited:
We have audited the effectiveness of Agnico-Eagle Mines Limited's internal control over financial reporting as of December 31,
2011, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Agnico-Eagle Mines Limited's management is responsible for
maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting included in the accompanying Management's report on internal control over financial reporting. Our
responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Agnico-Eagle Mines Limited maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2011, based on the COSO criteria.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Agnico-Eagle Mines Limited as of December 31, 2011 and 2010, and the related consolidated
statements of income and comprehensive income, shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 2011 and our report dated March 28, 2012, expressed an unqualified opinion thereon.
Toronto, Canada
March 28, 2012
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AGNICO-EAGLE MINES LIMITED
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/s/ ERNST & YOUNG LLP
Chartered Accountants
Licensed Public Accountants
MANAGEMENT CERTIFICATION
Management of Agnico-Eagle Mines Limited (the "Company") is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the
Company's Chief Executive Officer and Chief Financial Officer and effected by the Company's Board of Directors, management
and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
The Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of the Company's internal control over financial reporting as of December 31, 2011. In making this assessment, the
Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
in Internal Control – Integrated Framework . Based upon its assessment, management concluded that, as of December 31, 2011,
the Company's internal control over financial reporting was effective.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2011 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Toronto, Canada
March 28, 2012
By: /s/
SEAN BOYD
Sean Boyd
Vice Chairman, President and Chief Executive Officer
By: /s/
AMMAR AL-JOUNDI
Ammar Al-Joundi
Senior Vice-President, Finance and
Chief Financial Officer
2011 ANNUAL REPORT
Table of Contents
163
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Agnico-Eagle Mines Limited:
We have audited the accompanying consolidated balance sheets of Agnico-Eagle Mines Limited as of December 31, 2011 and
2010, and the related consolidated statements of income and comprehensive income, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 2011. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Agnico-Eagle Mines Limited at December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 2011, in conformity with United States generally accepted
accounting principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
effectiveness of Agnico-Eagle Mines Limited's internal control over financial reporting as of December 31, 2011, based on criteria
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 28, 2012 expressed an unqualified opinion thereon.
Toronto, Canada
March 28, 2012
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/s/ ERNST & YOUNG LLP
Chartered Accountants
Licensed Public Accountants
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements of Agnico-Eagle are expressed in thousands of United States dollars ("US dollars", "US$"
or "$"), except where noted, and have been prepared in accordance with US GAAP. Certain information in the consolidated
financial statements is presented in Canadian dollars ("C$"). Since a precise determination of assets and liabilities depends on
future events, the preparation of consolidated financial statements for a period necessarily involves the use of estimates and
approximations. Actual results may differ from such estimates and approximations. The consolidated financial statements have, in
management's opinion, been prepared within reasonable limits of materiality and within the framework of the significant
accounting policies referred to below.
Basis of consolidation
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and entities in
which it has a controlling financial interest after the elimination of intercompany accounts and transactions. The Company has a
controlling financial interest if it owns a majority of the outstanding voting common stock or has significant control over an entity
through contractual arrangements or economic interests of which the Company is the primary beneficiary.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and short-term investments in money market instruments with remaining
maturities of three months or less at the date of purchase. Short-term investments are designated as held to maturity for
accounting purposes and are carried at amortized cost, which approximates market value given the short-term nature of these
investments. Agnico-Eagle places its cash and cash equivalents and short-term investments in high quality securities issued by
government agencies, financial institutions and major corporations and limits the amount of credit exposure by diversifying
its holdings.
Inventories
Inventories consist of ore stockpiles, concentrates, dore bars and supplies. Amounts are removed from inventory based on
average cost. The current portion of stockpiles, ore on leach pads and inventories are determined based on the expected amounts
to be processed within the next 12 months. Stockpiles, ore on leach pads and inventories not expected to be processed within the
next 12 months are classified as long term.
Stockpiles
Stockpiles consist of coarse ore that has been mined and hoisted from underground or delivered from an open pit that is available
for further processing and in-stope ore inventory in the form of drilled and blasted stopes ready to be mucked and hoisted to the
surface. The stockpiles are measured by estimating the tonnage, contained ounces (based on assays) and recovery percentages
(based on actual recovery rates achieved for processing similar ore). Specific tonnages are verified and compared to original
estimates once the stockpile is milled. Ore stockpiles are valued at the lower of net realizable value and mining costs incurred up
to the point of stockpiling the ore. The net realizable value of stockpiled ore is assessed by comparing the sum of the carrying
value plus future processing and selling costs to the expected revenue to be earned, which is based on the estimated volume and
grade of stockpiled ore.
Mining costs include all costs associated with mining operations and are allocated to each tonne of stockpiled ore. Costs fully
absorbed into inventory values include direct and indirect materials and consumables, direct labour, utilities and amortization of
mining assets incurred up to the point of stockpiling the ore. Royalty expenses and production taxes are included in production
costs, but are not capitalized into inventory. Stockpiles are generally processed within twelve months of extraction, with the
exception of certain amounts of the Pinos Altos mine's, Kittila mine's and Meadowbank mine's ore stockpiles. Due to the structure
of these ore bodies, a significant amount of drilling and blasting is incurred in the early years of its mine life, which results in a
long-term stockpile. The decision to process stockpiled ore is based on a net smelter return analysis. The Company processes its
stockpiled ore if its estimated revenue, on a per tonne basis and net of estimated smelting and refining costs, is greater than the
related mining and milling costs. The Company has never elected to not process stockpiled ore and does not anticipate departing
from this practice in the future. Stockpiled ore on the surface is exposed to the elements, but the Company does not expect its
condition to deteriorate significantly as a result.
2011 ANNUAL REPORT
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165
Pre-production stripping costs are capitalized until an "other than de minimis " level of mineral is produced, after which time such
costs are either capitalized to inventory or expensed. The Company considers various relevant criteria to assess when an "other
than de minimis " level of mineral is produced. The criteria considered include: (1) the number of ounces mined compared to total
ounces in mineral reserves; (2) the quantity of ore mined compared to the total quantity of ore expected to be mined over the life
of the mine; (3) the current stripping ratio compared to the expected stripping ratio over the life of the mine; and (4) the ore grade
compared to the expected ore grade over the life of the mine.
Concentrates and dore bars
Concentrates and dore bar inventories consist of concentrates and dore bars for which legal title has not yet passed to third-party
smelters. Concentrates and dore bar inventories are measured based on assays of the processed concentrates and are valued
based on the lower of net realizable value and the fully absorbed mining and milling costs associated with extracting and
processing the ore.
Supplies
Supplies, consisting of mine stores inventory, are valued at the lower of average cost and replacement cost.
Mining properties, plant and equipment and mine development costs
Significant payments related to the acquisition of land and mineral rights are capitalized as mining properties at cost. If a mineable
ore body is discovered, such costs are amortized to income when production begins, using the unit-of-production method, based
on estimated proven and probable reserves. If no mineable ore body is discovered, such costs are expensed in the period in
which it is determined that the property has no future economic value.
Expenditures for new facilities and improvements that can extend the useful lives of existing facilities are capitalized as plant and
equipment at cost. Interest costs incurred for the construction of significant projects are capitalized.
Mine development costs incurred after the commencement of production are capitalized or deferred to the extent that these costs
benefit the entire ore body. Costs incurred to access single ore blocks are expensed as incurred; otherwise, such vertical and
horizontal developments are classified as mine development costs.
Agnico-Eagle records amortization on both plant and equipment and mine development costs used in commercial production on a
unit-of-production basis based on the estimated tonnage of proven and probable mineral reserves of the mine. The
unit-of-production method defines the denominator as the total proven and probable tonnes of reserves.
Repairs and maintenance expenditures are charged to income as production costs. Assets under construction are not depreciated
until the end of the construction period. Upon achieving commercial production, the capitalized construction costs are transferred
to the various categories of plant and equipment.
Mineral exploration costs are charged to income in the year in which they are incurred. When it is determined that a mining
property can be economically developed as a result of established proven and probable reserves, the costs of drilling and
development to further delineate the ore body on such property are capitalized. The establishment of proven and probable
reserves is based on results of final feasibility studies, which indicate whether a property is economically feasible. Upon
commencement of the commercial production of a development project, these costs are transferred to the appropriate asset
category and are amortized to income using the unit-of-production method mentioned above. Mine development costs, net of
salvage values, relating to a property that is abandoned or considered uneconomic for the foreseeable future are written off.
The carrying values of mining properties, plant and equipment and mine development costs are reviewed periodically, when
impairment factors exist, for possible impairment, based on the future undiscounted net cash flows of the operating mine or
development property. If it is determined that the estimated net recoverable amount is less than the carrying value, then a write
down to the estimated fair value amount is made with a charge to income. Estimated future cash flows of an operating mine or
development property include estimates of recoverable ounces of gold based on proven and probable reserves. To the extent that
economic value exists beyond the proven and probable reserves of an operating mine or development property, this value is
included as part of the estimated future cash flows. Estimated future cash flows also involve estimates regarding metal prices
(considering current and historical prices, price trends and related factors), production levels, capital and reclamation costs, and
related income and mining taxes, all based on detailed engineering life-of-mine plans. Cash flows are subject to risks and
uncertainties and changes in the estimates of the cash flows may affect the recoverability of long-lived assets.
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Goodwill
Business combinations are accounted for using the purchase method whereby assets and liabilities acquired are recorded at their
fair values as of the date of acquisition and any excess of the purchase price over such fair values is recorded as goodwill. As of
the date of acquisition, goodwill is allocated to reporting units by determining estimates of the fair value allocated to each reporting
unit and comparing this amount to the fair values of identifiable assets and liabilities allocated to each reporting unit. Goodwill is
not amortized.
The Company performs goodwill impairment tests on an annual basis as well as when events and circumstances indicate that the
carrying amounts may no longer be recoverable. In performing the impairment tests, the Company estimates the fair values of its
reporting units that include goodwill and compares those fair values to the reporting units' carrying amounts. If a reporting unit's
carrying amount exceeds its fair value, the Company compares the implied fair value of the reporting unit's goodwill to the carrying
amount and any excess of the carrying amount of goodwill over the implied fair value is charged to income.
Financial instruments
From time to time, Agnico-Eagle uses derivative financial instruments, primarily option and forward contracts, to manage exposure
to fluctuations in byproduct metal prices, interest rates and foreign currency exchange rates. Agnico-Eagle does not hold financial
instruments or derivative financial instruments for trading purposes.
The Company recognizes all derivative financial instruments in the consolidated financial statements at fair value regardless of the
purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized
periodically in the consolidated statement of income (loss) or in shareholders' equity as a component of accumulated other
comprehensive income (loss), depending on the nature of the derivative financial instrument and whether it qualifies for hedge
accounting. Financial instruments designated as hedges are tested for effectiveness on a quarterly basis. Gains and losses on
those contracts that are proven to be effective are reported as a component of the related transaction.
Revenue recognition
Revenue is recognized when the following conditions are met:
(a)
persuasive evidence of an arrangement to purchase exists;
(b)
the price is determinable;
(c)
the product has been delivered; and
(d)
collection of the sales price is reasonably assured.
Revenue from gold and silver in the form of dore bars is recorded when the refined gold or silver is sold and delivered to the
customer. Generally, all the gold and silver in the form of dore bars recovered in the Company's milling process is sold in the
period in which it is produced.
Under the terms of the Company's concentrate sales contracts with third-party smelters, final prices for the metals contained in the
concentrate are set based on the prevailing spot market metal prices on a specified future date, which is based on the date that
the concentrate is delivered to the smelter. The Company records revenues under these contracts based on forward prices at the
time of delivery, which is when transfer of legal title to concentrate passes to the third-party smelters. The terms of the contracts
result in differences between the recorded estimated price at delivery and the final settlement price. These differences are
adjusted through revenue at each subsequent financial statement date.
Revenues from mining operations consist of gold revenues, net of smelting, refining, transportation and other marketing charges.
Revenues from byproduct metals sales are shown, net of smelter charges, as part of revenues from mining operations.
Foreign currency translation
The functional currency for each of the Company's operations is the US dollar. Monetary assets and liabilities of Agnico-Eagle's
operations denominated in a currency other than the US dollar are translated into US dollars using the exchange rate in effect at
year end. Non-monetary assets and liabilities are translated at historical exchange rates while revenues and expenses are
translated at the average exchange rate during the year, with the exception of amortization, which is translated at historical
exchange rates. Exchange gains and losses are included in income except for gains and losses on
2011 ANNUAL REPORT
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167
foreign currency contracts used to hedge specific future commitments in foreign currencies. Gains and losses on these contracts
are accounted for as a component of the related hedge transactions.
Reclamation costs
On an annual basis, the Company assesses cost estimates and other assumptions used in the valuation of ARO at each of its
mineral properties to reflect events, changes in circumstances and new information available. Changes in these cost estimates
and assumptions have a corresponding impact on the fair value of the ARO. For closed mines, any change in the fair value of
AROs results in a corresponding charge or credit within other expenses, whereas at operating mines the charge is recorded as an
adjustment to the carrying amount of the corresponding asset. AROs arise from the acquisition, development, construction and
normal operation of mining property, plant and equipment due to government controls and regulations that protect the
environment on the closure and reclamation of mining properties. The major parts of the carrying amount of AROs relate to
tailings and heap leach pad closure/rehabilitation; demolition of buildings/mine facilities; ongoing water treatment; and ongoing
care and maintenance of closed mines. The fair values of AROs are measured by discounting the expected cash flows using a
discount factor that reflects the credit-adjusted risk-free rate of interest. The Company prepares estimates of the timing and
amount of expected cash flows when an ARO is incurred. Expected cash flows are updated to reflect changes in facts and
circumstances. The principal factors that can cause expected cash flows to change are: the construction of new processing
facilities; changes in the quantities of material in reserves and a corresponding change in the life of mine plan; changing ore
characteristics that have an impact on required environmental protection measures and related costs; changes in water quality
that have an impact on the extent of water treatment required; and changes in laws and regulations governing the protection of the
environment. When expected cash flows increase, the revised cash flows are discounted using a current discount factor; whereas
when expected cash flows decrease, the reduced cash flows are discounted using the historical discount factor used in the
original estimation of the expected cash flows, and then in both cases any change in the fair value of the ARO is recorded.
Agnico-Eagle records the fair value of an ARO when it is incurred. AROs are adjusted to reflect the passage of time (accretion),
which is calculated by applying the discount factor implicit in the initial fair value measurement to the beginning of period carrying
amount of the ARO. For producing mines, accretion expense is recorded in the cost of goods sold each period. Upon settlement
of an ARO, Agnico-Eagle records a gain or loss if the actual cost differs from the carrying amount of the ARO. Settlement
gains/losses are recorded in other (income) expenses.
Environmental remediation liabilities are differentiated from AROs in that they do not arise from environmental contamination in
the normal operation of a long-lived asset or from a legal obligation to treat environmental contamination resulting from the
acquisition, construction, or development of a long-lived asset. The Company is required to recognize a liability for obligations
associated with environmental remediation liabilities arising from past acts.
Other environmental remediation costs that are not AROs or environmental remediation liabilities as defined by the FASB
ASC 410-20 – Asset Retirement Obligations and 410-30 – Environmental Obligations, respectively, are expensed as incurred.
Income and mining taxes
Agnico-Eagle follows the liability method of tax allocation for accounting for income taxes. Under this method of tax allocation,
deferred income and mining tax bases of assets and liabilities are measured using the enacted tax rates and laws expected to be
in effect when the differences are expected to reverse.
The Company's operations involve dealing with uncertainties and judgments in the application of complex tax regulations in
multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxation authorities in
various jurisdictions and resolution of disputes arising from federal, provincial, state and international tax audits. The Company
recognizes the effect of uncertain tax positions and records tax liabilities for anticipated tax audit issues in Canada and other tax
jurisdictions where it is more likely than not based on technical merits that the position would not be sustained. The Company
recognizes the amount of any tax benefits that have a greater than 50 percent likelihood of being ultimately realized upon
settlement.
Changes in judgment related to the expected ultimate resolution of uncertain tax positions are recognized in the year of such
changes. Accrued interest and penalties related to unrecognized tax benefits are recorded in income tax expense when incurred.
The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some of
these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current
estimate of the tax liabilities. If the Company's estimate of tax liabilities proves to be less than the
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AGNICO-EAGLE MINES LIMITED
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ultimate assessment, an additional charge to expenses would result. If the estimate of tax liabilities proves to be greater than the
ultimate assessment, a tax benefit would result.
Stock-based compensation
Agnico-Eagle has two stock-based compensation plans. The Stock Option Plan and the Incentive Share Purchase Plan are
described in note 8(a) and note 8(b), respectively, to the consolidated financial statements. The Company issues common shares
to settle its obligations under both plans.
The Stock Option Plan provides for the granting of options to directors, officers, employees and service providers to purchase
common shares. Options have exercise prices equal to the market price on the day prior to the date of grant. The fair value of
these options is recognized in the consolidated statements of income (loss) or in the consolidated balance sheets if capitalized as
part of property, plant and mine development over the applicable vesting period as a compensation cost. Any consideration paid
by employees on exercise of options or purchase of common shares is credited to share capital.
Fair value is determined using the Black-Scholes option valuation model which requires the Company to estimate the expected
volatility of the Company's share price and the expected life of the stock options. Limitations with existing option valuation models
and the inherent difficulties associated with estimating these variables create difficulties in determining a reliable single measure
of the fair value of stock option grants. The dilutive impact of stock option grants is factored into the Company's reported diluted
net income per share.
Net income (loss) per share
Basic net income (loss) per share is calculated on net income (loss) for the year using the weighted average number of common
shares outstanding during the year. The weighted average number of common shares used to determine diluted net income per
share includes an adjustment, using the treasury stock method, for stock options outstanding and warrants outstanding. Under the
treasury stock method:
•
the exercise of options or warrants is assumed to be at the beginning of the period (or date of issuance, if later);
•
the proceeds from the exercise of options or warrants, plus, in the case of options, the future period compensation
expense on options granted on or after January 1, 2003, are assumed to be used to purchase common shares at the
average market price during the period; and
•
the incremental number of common shares (the difference between the number of shares assumed issued and the
number of shares assumed purchased) is included in the denominator of the diluted net income per share
computation.
Pension costs and obligations and post-retirement benefits
In Canada, Agnico-Eagle maintains a defined contribution plan covering all of its employees. The plan is funded by Company
contributions based on a percentage of income for services rendered by employees. In addition, the Company has a supplemental
plan for designated executives at the level of Vice-President or above. Under this plan an additional 10% of the designated
executives' income are contributed by the Company. The Company does not offer any other post-retirement benefits to
its employees.
Agnico-Eagle also provides a non-registered supplementary executive retirement defined benefit plan for certain senior officers
(the "Executives Plan"). The Executives Plan benefits are generally based on the employee's years of service and level of
compensation. Pension expense related to the Executives Plan is the net of the cost of benefits provided, the interest cost of
projected benefits, return on plan assets and amortization of experience gains and losses. Pension fund assets are measured at
current fair values. Actuarially determined plan surpluses or deficits, experience gains or losses and the cost of pension plan
improvements are amortized on a straight-line basis over the expected average remaining service life of the employee group.
Commercial production
The Company assesses each mine construction project to determine when a mine moves into the production stage. The criteria
used to assess the start date are determined based on the nature of each mine construction project, such as the complexity of a
plant and its location. The Company considers various relevant criteria to assess when the mine is substantially complete and
ready for its intended use and moved into the production stage. The criteria considered
2011 ANNUAL REPORT
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169
include: (1) the completion of a reasonable period of testing of mine plant and equipment; (2) the ability to produce minerals in
saleable form (within specifications); and (3) the ability to sustain ongoing production of minerals. When a mine construction
project moves into the production stage, the capitalization of certain mine construction costs ceases and costs are either
capitalized to inventory or expensed, except for sustaining capital costs related to property, plant and equipment and underground
mine development or reserve development.
Other accounting developments
Recently adopted accounting pronouncements
Fair Value Accounting
In January 2010, the ASC guidance for fair value measurements and disclosure was updated to require additional disclosures.
The updated guidance was effective for the Company's fiscal year beginning on January 1, 2010, with the exception of the level 3
disaggregation which was effective for the Company's fiscal year beginning January 1, 2011. Adoption of this updated guidance
had no impact on the Company's consolidated financial position, results of operations or cash flows. See Note 4 for details
regarding the Company's financial assets and liabilities measured at fair value.
Business Combinations
In December 2010, the ASC guidance for business combinations was updated to clarify existing guidance which requires a public
entity to disclose pro forma revenue and earnings of the combined entity as though the business combination(s) that occurred
during the current year had occurred as of the beginning of the comparable prior year. The update also expands the supplemental
pro forma disclosures required to include a description of the nature and amount of material, non-recurring pro forma adjustments
directly attributable to the business combination included in the reported pro forma revenue and earnings. The updated guidance
was effective for the Company's fiscal year beginning January 1, 2011. See Note 10 for the application of this updated guidance to
business combinations that occurred during the year ended December 31, 2011.
Revenue Recognition – Multiple-Deliverable Revenue Arrangements
In October 2009, the FASB issued an amendment to its guidance on multiple-deliverable revenue arrangements which is effective
for fiscal years beginning on or after June 15, 2010. This updated guidance addresses accounting and reporting for arrangements
under which the vendor will perform multiple revenue-generating activities, including how to separate deliverables and measure
and allocate the arrangement consideration. This amendment also significantly expands the disclosure requirements related to a
vendor's multiple-deliverable revenue arrangement. Based on the Company's assessment, these changes do not have an impact
on its current accounting for revenue or required disclosures.
Recently issued accounting pronouncements and developments
Under the SEC Staff Accounting Bulletin 74, the Company is required to disclose information related to new accounting standards
that have not yet been adopted. The Company is currently evaluating the impact that the adoption of these standards will have on
the Company's consolidated financial position, results of operations and disclosures.
Comprehensive Income
In June 2011, ASC guidance was issued related to comprehensive income. Under the updated guidance, an entity will have the
option to present the total of comprehensive income either in a single continuous statement of comprehensive income or in two
separate but consecutive statements. In addition, the update requires certain disclosure requirements when reporting other
comprehensive income. The update does not change the items reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to income. In December 2011, updated guidance was issued to defer the effective
date pertaining to reclassification adjustments out of accumulated other comprehensive income until the FASB is able to
reconsider those paragraphs. The Company does not expect the updated guidance to have an impact on its consolidated financial
position, results of operations or cash flows.
Fair Value Accounting
In May 2011, ASC guidance was issued related to disclosures around fair value accounting. The updated guidance clarifies
different components of fair value accounting including the application of the highest and best use and valuation premise
concepts, measuring the fair value of an instrument classified in a reporting entity's shareholders' equity and
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AGNICO-EAGLE MINES LIMITED
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disclosing quantitative information about the unobservable inputs used in fair value measurements that are categorized in Level 3
of the fair value hierarchy. The update is effective for the Company's fiscal year beginning on January 1, 2012. The Company
does not expect the updated guidance to have a significant impact on its consolidated financial position, results of operations or
cash flows.
Goodwill Impairment
In September 2011, ASC guidance was issued related to testing goodwill for impairment. Under the updated guidance, entities are
permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is
less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test
per Topic 350. Previous guidance required an entity to test goodwill for impairment, on at least an annual basis, by comparing the
fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit is less than its carrying
amount, then the second step of the test would be performed to measure the amount of the impairment loss, if any. An entity is no
longer required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair
value is less than its carrying amount. The update is effective for the Company's fiscal year beginning on January 1, 2012, with
earlier application permitted. The Company does not expect the updated guidance to have a significant impact on its consolidated
financial position, results of operations or cash flows.
Disclosures about Offsetting Assets and Liabilities
In November 2011, ASC guidance was issued related to disclosures around offsetting financial instrument and derivative
instrument assets and liabilities. Under the updated guidance, entities are required to disclose both gross information and net
information about both instruments and transactions eligible for offset in the statements of financial position and instruments and
transactions subject to an agreement similar to a master netting arrangement. The update is effective for the Company's fiscal
year beginning on January 1, 2013. The Company is evaluating the potential impact of adopting this guidance on the Company's
consolidated financial position, results of operations and cash flows.
International Financial Reporting Standards
Based on recent guidance from the CSA and the SEC, as a Canadian issuer and existing US GAAP filer, the Company will
continue to be permitted to use US GAAP as its principal basis of accounting. The SEC has not yet committed to a timeline which
would require the Company to adopt IFRS. A decision to voluntarily adopt IFRS has not been made.
An IFRS project group and a steering committee have been established by the Company and a high level project plan has been
formulated. The implementation of IFRS would be done through three distinct phases:
(i)
diagnostics;
(ii)
detailed IFRS analysis and conversion; and
(iii)
implementation of IFRS in daily business.
The initial diagnostics phase has been completed and the detailed IFRS analysis has commenced. A report has been prepared
with the primary objective to understand, identify and assess the overall effort required by the Company to produce financial
information in accordance with IFRS. The key areas for the diagnostics work were to review the consolidated financial statements
of the Company and obtain a detailed understanding of the differences between IFRS and US GAAP to be able to identify
potential system and process changes required as a result of converting to IFRS.
Comparative figures
Certain figures in the comparative consolidated financial statements have been reclassified from statements previously presented
to conform to the presentation of the 2011 consolidated financial statements.
2011 ANNUAL REPORT
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171
AGNICO-EAGLE MINES LIMITED
CONSOLIDATED BALANCE SHEETS
(thousands of United States dollars, US GAAP basis)
As at December 31,
2011
ASSETS
Current
Cash and cash equivalents
Short-term investments
Restricted cash (note 14)
Trade receivables (note 1)
Inventories:
Ore stockpiles
Concentrates and dore bars
Supplies
Income taxes recoverable
Available-for-sale securities (note 2(b))
Other current assets (note 2(a))
Total current assets
Other assets (note 2(c))
Goodwill (note 10)
Property, plant and mine development (note 3)
$
$
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AGNICO-EAGLE MINES LIMITED
Table of Contents
179,447
6,570
35,441
75,899
28,155
57,528
182,389
371
145,411
110,369
821,580
88,048
229,279
3,895,355
5,034,262
2010
$
$
95,560
6,575
2,510
112,949
67,764
50,332
149,647
–
99,109
89,776
674,222
61,502
200,064
4,564,563
5,500,351
AGNICO-EAGLE MINES LIMITED
CONSOLIDATED BALANCE SHEETS (Continued)
(thousands of United States dollars, US GAAP basis)
As at December 31,
2011
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities (note 11)
Environmental remediation liability (note 6(a))
Dividends payable
Interest payable
Income taxes payable
Capital lease obligations (note 13)
Fair value of derivative financial instruments (note 15)
Total current liabilities
Long-term debt (note 5)
Reclamation provision and other liabilities (note 6)
Deferred income and mining tax liabilities (note 9)
SHAREHOLDERS' EQUITY
Common shares (notes 7(a), (b), (c) and (d)):
Issued – 170,859,604 common shares, less 45,868 shares held in trust
Stock options (note 8(a))
Warrants (note 7(c))
Contributed surplus
Retained earnings (deficit)
Accumulated other comprehensive income (loss) (note 7(e))
$
Non-controlling interest
Total shareholders' equity
$
203,547
26,069
–
9,356
–
11,068
4,404
254,444
920,095
145,988
498,572
2010
$
160,375
–
108,009
9,743
14,450
10,592
142
303,311
650,000
145,536
736,054
3,181,381
117,694
24,858
15,166
(129,021 )
(7,106 )
3,202,972
12,191
3,215,163
5,034,262 $
3,078,217
78,554
24,858
15,166
440,265
28,390
3,665,450
–
3,665,450
5,500,351
Contingencies and commitments (notes 6, 9, 12 and 13(b))
On behalf of the Board:
Sean Boyd C.A., Director
Mel Leiderman C.A., Director
See accompanying notes
2011 ANNUAL REPORT
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173
AGNICO-EAGLE MINES LIMITED
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME
(LOSS)
(thousands of United States dollars, except per share amounts, US GAAP basis)
Year Ended December 31,
2011
REVENUES
Revenues from mining operations (note 1)
COSTS, EXPENSES AND OTHER INCOME
Production
Exploration and corporate development
Amortization of property, plant and mine development (note 13)
General and administrative (note 16)
Write-down of available-for-sale securities
Provincial capital tax
Interest expense (note 5)
Interest and sundry expense (income)
Impairment loss on Meadowbank mine (note 18)
Loss on Goldex mine (note 17)
Gain on acquisition of Comaplex Minerals Corp., net of transaction costs
(note 10)
Gain on derivative financial instruments (note 15)
Gain on sale of available-for-sale securities (note 2(b))
Foreign currency translation loss (gain)
Income (loss) before income and mining taxes
Income and mining taxes (note 9)
Net income (loss) for the year
$
1,821,799
2010
$
876,078
75,721
261,781
107,926
8,569
9,223
55,039
5,188
907,681
302,893
$
–
(3,683 )
(4,907 )
(1,082 )
(778,628 )
(209,673 )
(568,955 ) $
1,422,521
2009
$
613,762
677,472
54,958
192,486
94,327
–
(6,075 )
49,493
(10,254 )
–
–
306,318
36,279
72,461
63,687
–
5,014
8,448
(12,580 )
–
–
(57,526 )
(7,612 )
(19,487 )
19,536
435,203
103,087
332,116 $
–
(3,592 )
(10,142 )
39,831
108,038
21,500
86,538
Attributed to non-controlling interest
$
(60 ) $
–
$
–
Attributed to common shareholders
$
(568,895 ) $
332,116
$
86,538
Net income (loss) per share – basic (note 7(f))
$
(3.36 ) $
2.05
$
0.55
Net income (loss) per share – diluted (note 7(f))
$
(3.36 ) $
2.00
$
0.55
Cash dividends declared per common share
174
AGNICO-EAGLE MINES LIMITED
$
–
0.64
$
0.18
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$
AGNICO-EAGLE MINES LIMITED
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME
(LOSS) (Continued)
(thousands of United States dollars, except per share amounts, US GAAP basis)
Year Ended December 31,
2011
COMPREHENSIVE INCOME (LOSS)
Net income (loss) for the year
Other comprehensive income (loss):
Unrealized gain (loss) on hedging activities
Adjustments for derivative instruments maturing during the year
Unrealized gain (loss) on available-for-sale securities
Adjustments for realized gain on available-for-sale securities due to
dispositions and write-downs during the year
Net amount reclassified to net income due to acquisition of business
(note 10)
Change in unrealized loss on pension liability
Tax effect of other comprehensive income (loss) items
Other comprehensive income (loss) for the year
Comprehensive income (loss) for the year
$
(568,955 ) $
2010
332,116
2009
$
86,538
(5,863 )
1,459
(26,874 )
–
–
64,649
16,287
(7,399 )
76,037
(4,907 )
(19,487 )
(10,142 )
(64,508 )
(4,093 )
780
(22,659 )
309,457 $
–
(727 )
(2,399 )
71,657
158,195
$
–
(1,055 )
1,744
(35,496 )
(604,451 ) $
Attributed to non-controlling interest
$
(60 ) $
–
$
–
Attributed to common shareholders
$
(604,391 ) $
309,457
$
158,195
See accompanying notes
2011 ANNUAL REPORT
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175
AGNICO-EAGLE MINES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(thousands of United States dollars, US GAAP basis)
Common Shares
Shares
Amount
Stock
Options
Warrants
Contributed
Surplus
Retained
Earnings
(Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Balance December 31,
2008
Shares issued under
Employee Stock Option
Plan (note 8(a))
Stock options
Shares issued under the
Incentive Share
Purchase Plan
(note 8(b))
Shares issued under
flow-through share
private placement
(note 7(b))
Shares issued under the
Company's dividend
reinvestment plan
Shares issued for
purchase of mining
property (note 7(c))
Net income for the year
Dividends declared
($0.18 per share)
(note 7(a))
Other comprehensive
income for the year
Restricted share unit plan
(note 8(c))
Balance December 31,
2009
154,808,918 $
2,299,747 $
1,238,000
48,313
(11,683 )
–
–
–
–
–
196,649
–
11,290
36,402
–
–
–
–
–
–
–
–
–
358,900
19,153
–
–
–
–
–
18,764
912
–
–
–
–
–
33,825
894
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
71,657
–
–
–
–
–
156,625,174 $
2,378,759 $
Shares issued under
Employee Stock Option
Plan (note 8(a))
Stock options
Shares issued under the
Incentive Share
Purchase Plan
(note 8(b))
Shares issued under the
Company's dividend
reinvestment plan
Shares issued for
purchase of mining
property
(note 7(c) and (d))
Net income for the year
Dividends declared
($0.64 per share)
(note 7(a))
Other comprehensive
loss for the year
Restricted share unit plan
(note 8(c))
Balance December 31,
2010
1,627,766
104,111
(29,447 )
–
–
–
–
–
229,583
–
14,963
42,230
–
–
–
–
–
–
–
–
–
25,243
1,404
–
–
–
–
–
10,225,848
579,800
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
176
24,858 $
15,166 $
157,541 $
(20,608 )
$
–
–
–
–
–
–
86,538
(27,921 )
–
–
–
–
–
–
(29,882 )
(1,550 )
–
65,771 $
24,858 $
15,166 $
216,158 $
51,049
$
–
–
–
–
–
332,116
(108,009 )
–
–
–
–
–
(22,659 )
–
(13,259 )
(820 )
–
–
168,720,355 $
3,078,217 $
AGNICO-EAGLE MINES LIMITED
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41,052 $
Noncontrolling
Interest
78,554 $
24,858 $
15,166 $
440,265 $
28,390
$
–
AGNICO-EAGLE MINES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
(thousands of United States dollars, US GAAP basis)
Common Shares
Shares issued
under Employee
Stock Option Plan
(note 8(a))
Stock options
Shares issued
under the Incentive
Share Purchase
Plan (note 8(b))
Shares issued
under the
Company's
dividend
reinvestment plan
Shares issued for
purchase of mining
property (note 7(d))
Non-controlling
interest addition
upon acquisition
Net loss for the
year attributed to
common
shareholders
Net loss for the
year attributed to
non-controlling
interest
Dividends declared
(nil per share)
(note 7(a))
Other
comprehensive
loss for the year
Restricted share
unit plan (note 8(c))
Balance
December 31,
2011
Stock
Options
Retained
Earnings
(Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Shares
Amount
Warrants
Contributed
Surplus
308,688
18,094
(4,396 )
–
–
–
–
–
360,833
–
19,229
43,536
–
–
–
–
–
–
–
–
–
176,110
10,130
–
–
–
–
–
1,250,477
56,146
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Noncontrolling
Interest
–
–
–
–
–
12,251
(568,895 )
–
–
–
–
(60 )
(391 )
–
–
(35,496 )
–
(2,727 )
(435 )
–
–
–
170,813,736 $ 3,181,381 $ 117,694 $
24,858 $
15,166 $
(129,021 ) $
(7,106 )
$
12,191
See accompanying notes
2011 ANNUAL REPORT
Table of Contents
177
AGNICO-EAGLE MINES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of United States dollars, US GAAP basis)
Years ended December 31,
2011
Operating activities
Net income (loss) for the year
Add (deduct) items not affecting cash
Impairment loss on Meadowbank mine
Amortization of propery, plant and mine development
Deferred income and mining taxes
Loss on Goldex mine
Environmental remediation
Gain on sale of available-for-sale securities
Stock-based compensation
Gain on acquisition of Comaplex Minerals Corp. (note 10)
Foreign currency translation loss (gain)
Other
Changes in non-cash working capital balances
Trade receivables
Income taxes (payable) recoverable
Inventories
Other current assets
Accounts payable and accrued liabilities
Prepaid royalty
Interest payable
Cash provided by operating activities
Investing activities
Additions to property, plant and mine development
Acquisition of Grayd Resource Corporation, net of cash acquired (note 10)
Decrease (increase) in short-term investments
Net proceeds on available-for-sale securities
Purchase of available-for-sale securities
Decrease (increase) in restricted cash
Cash used in investing activities
178
AGNICO-EAGLE MINES LIMITED
Table of Contents
$
2010
2009
(568,955 ) $
332,116
$
86,538
907,681
261,781
(275,773 )
302,893
(7,616 )
(4,907 )
48,150
–
(1,082 )
31,561
–
192,486
66,928
–
–
(19,487 )
41,635
(64,508 )
19,536
13,015
–
72,461
20,309
–
–
(10,142 )
28,753
–
39,831
(5,214 )
37,050
(29,867 )
(43,066 )
(25,838 )
31,837
–
(387 )
663,462
(19,378 )
9,949
(91,306 )
(28,729 )
23,136
–
8,077
483,470
(47,930 )
(313 )
(90,772 )
4,834
28,552
(13,321 )
1,520
115,106
(482,831 )
(163,047 )
5
9,435
(91,115 )
(32,931 )
(760,484 )
(511,641 )
–
(3,262 )
36,586
(42,479 )
(2,510 )
(523,306 )
(657,175 )
–
(3,313 )
48,258
(6,380 )
30,999
(587,611 )
AGNICO-EAGLE MINES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(thousands of United States dollars, US GAAP basis)
Years ended December 31,
2011
Financing activities
Dividends paid
Repayment of capital lease obligations
Sale-leaseback financing
Proceeds from long-term debt
Repayment of long-term debt
Credit facility financing costs
Common shares issued
Cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents during the
year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
Supplemental cash flow information
Interest paid
$
Income and mining taxes paid
2010
(98,354 )
(13,092 )
–
475,000
(205,000 )
(2,545 )
26,536
182,545
(1,636 )
$
See accompanying notes
2009
(26,830 )
(16,019 )
14,017
1,311,000
(1,376,000 )
(12,772 )
84,659
(21,945 )
(2,939 )
(27,132 )
(13,177 )
21,389
625,000
(110,000 )
(4,784 )
68,522
559,818
4,585
83,887
95,560
179,447
(64,720 )
160,280
95,560 $
$
52,833
$
41,429
$
17,189
110,889
$
25,199
$
8,792
2011 ANNUAL REPORT
Table of Contents
91,898
68,382
160,280
179
AGNICO-EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except per share amounts, unless otherwise indicated)
December 31, 2011
1. TRADE RECEIVABLES AND REVENUES FROM MINING OPERATIONS
Agnico-Eagle is a gold mining company with mining operations in Canada, Finland and Mexico. The Company earns a
significant proportion of its revenues from the production and sale of gold in both dore bar and concentrate form. The
remainder of revenue and cash flow is generated by the production and sale of byproduct metals. The revenue from
byproduct metals is mainly generated by production at the LaRonde mine in Canada (silver, zinc, copper and lead) and the
Pinos Altos mine in Mexico (silver).
Revenues are generated from operations in Canada, Finland and Mexico. The cash flow and profitability of the Company's
operations are significantly affected by the market price of gold and, to a lesser extent, silver, zinc, copper and lead. The
prices of these metals can fluctuate widely and are affected by numerous factors beyond the Company's control.
As gold can be sold through numerous gold market traders worldwide, the Company is not economically dependent on a
limited number of customers for the sale of its product.
Trade receivables are recognized once the transfer of ownership for the metals sold has occurred and reflect the amounts
owing to the Company in respect of its sales of dore bars or concentrates to third parties prior to the satisfaction in full of the
payment obligations of the third parties.
2011
Dore bars awaiting settlement
Concentrates awaiting settlement
2011
Revenues from mining operations:
Gold
Silver
Zinc
Copper
Lead
2010
$
–
75,899
$
24,281
88,668
$
75,899
$
112,949
2010
2009
$
1,563,760
171,725
70,522
14,451
1,341
$
1,216,249
104,544
77,544
22,219
1,965
$
474,875
59,155
57,034
22,571
127
$
1,821,799
$
1,422,521
$
613,762
In 2011, precious metals (gold and silver) accounted for 95% of Agnico-Eagle's revenues from mining operations
(2010 – 93%; 2009 – 87%). The remaining revenues from mining operations consisted of net byproduct metals revenues. In
2011, these net byproduct metals revenues as a percentage of total revenues from mining operations were 4% from zinc
(2010 – 5%; 2009 – 9%) and 1% from copper (2010 – 2%; 2009 – 4%).
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AGNICO-EAGLE MINES LIMITED
Table of Contents
2. OTHER ASSETS
(a) Other current assets
2011
Federal, provincial and other sales taxes receivable
Prepaid expenses
Meadowbank insurance receivable
Prepaid royalty (i)
Employee loans receivable
Other
Government refundables for local community improvements
2010
$
51,603
25,540
8,765
7,684
5,567
11,210
–
$
63,553
10,449
–
5,282
4,498
5,191
803
$
110,369
$
89,776
(i)
The prepaid royalty relates to the Pinos Altos mine in Mexico.
(b) Available-for-sale securities
In 2011, the Company realized proceeds of $9.4 million (2010 – $36.6 million; 2009 – $41.0 million) and recognized a gain
before income taxes of $4.9 million (2010 – $19.5 million; 2009 – $10.1 million) on the sale of certain available-for-sale
securities. Available-for-sale securities consist of equity securities whose cost basis is determined using the average cost
method. Available-for-sale securities are carried at fair value and comprise the following:
2011
Available-for-sale securities in an unrealized gain position
Cost (net of impairments)
Unrealized gains in accumulated other comprehensive income
Estimated fair value
Available-for-sale securities in an unrealized loss position
Cost (net of impairments)
Unrealized losses in accumulated other comprehensive income
Estimated fair value
Total estimated fair value of available-for-sale securities
$
127,344
16,408
143,752
2010
$
–
–
–
1,717
(58 )
1,659
$
145,411
50,958
48,151
99,109
$
99,109
The Company's investments in available-for-sale securities consist primarily of investments in common shares of entities in
the mining industry. During the course of the year, certain investments fell into an unrealized loss position. In each case, the
Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. As a
result of these evaluations, the Company wrote down certain available-for-sale securities by $8.6 million during the year
ended December 31, 2011 that were considered other-than-temporarily impaired.
2011 ANNUAL REPORT
Table of Contents
181
For the remainder of the investments after the other-than-temporary impairment write-downs approximately 1.1% of the total
fair value of investments are in an unrealized loss position. At December 31, 2011, the fair value of investments in an
unrealized loss position was $1.7 million with a total unrealized loss of $0.1 million. The Company also evaluated these
securities in relation to the severity and duration (less than six months in all cases) of the impairment. Based on that
evaluation and the Company's ability and intent to hold those investments for a reasonable period of time sufficient for a
forecasted recovery of fair value, the Company does not consider those investments to be other-than-temporarily impaired as
at December 31, 2011.
(c) Other assets
2011
Deferred financing costs, less accumulated amortization of $5,809 (2010 – $2,249)
Long-term ore in stockpile (i)
Prepaid royalty (ii)
Other
2010
$
15,777
64,392
–
7,879
$
16,780
27,409
8,777
8,536
$
88,048
$
61,502
(i)
Due to the structure of the Goldex mine, Pinos Altos mine, Kittila mine, and Meadowbank mine ore bodies, a significant amount of drilling and blasting is
incurred in the early years of its mine life resulting in a long-term stockpile. The value of the stockpile at December 31, 2011 is nil (2010 – $15.0 million) for
the Goldex mine, $7.1 million (2010 – $12.4 million) for the Pinos Altos mine, $8.0 million (2010 – nil) for the Kittila mine and $49.3 million (2010 – nil) for
the Meadowbank mine.
(ii)
The prepaid royalty relates to the Pinos Altos mine in Mexico.
3. PROPERTY, PLANT AND MINE DEVELOPMENT
2011
$
$
1,228,523 (i)
2,467,300
869,746
Net
Book
Value
Accumulated
Amortization
Cost
Mining properties
Plant and equipment
Mine development
costs
Construction in
Progress:
LaRonde mine
extension
Creston Mascota
deposit at Pinos
Altos
Meliadine project
2010
$
111,567
437,706
190,399
$
1,116,956 $
2,029,594
679,347
Cost
1,885,476 (i)
2,123,191
853,927
Net
Book
Value
Accumulated
Amortization
$
44,823 $
321,907
171,869
1,840,653
1,801,284
682,058
–
–
–
185,905
–
185,905
–
–
–
54,663
–
54,663
69,458
–
69,458
–
–
–
4,635,027
$
739,672
$
3,895,355 $
5,103,162
$
538,599
$
4,564,563
(i)
The decline in mining properties' cost between 2010 and 2011 is primarily attributed to the loss on Goldex mine (note 17) and the impairment loss on
Meadowbank mine (note 18) recorded during 2011.
182
AGNICO-EAGLE MINES LIMITED
Table of Contents
Geographic Information
2011
2010
Canada
Europe
Latin America
USA
$
2,433,527
674,258
776,892
10,678
$
3,456,809
605,283
500,211
2,260
Total
$
3,895,355
$
4,564,563
In 2011, Agnico-Eagle capitalized $0.1 million of costs (2010 – $0.3 million) and recognized $0.8 million of amortization
expense (2010 – $0.8 million) related to computer software. The unamortized capitalized cost for computer software at the
end of 2011 was $4.4 million (2010 – $5.0 million).
The unamortized capitalized cost for leasehold improvements at the end of 2011 was $3.2 million (2010 – $3.3 million), which
is being amortized on a straight-line basis over the life term of the lease plus one renewal period.
The amortization of assets recorded under capital leases is included in the "Amortization of property, plant and mine
development" component in the consolidated statements of income (loss).
4. FAIR VALUE MEASUREMENT
ASC 820 – Fair Value Measurement and Disclosure defines fair value, establishes a framework for measuring fair value
under GAAP, and requires expanded disclosures about fair value measurements. The three levels of the fair value hierarchy
under the Fair Value Measurements and Disclosure Topic of the FASB Accounting Standards Codification are as follows:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical,
unrestricted assets or liabilities;
Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for
substantially the full term of the asset or liability; and
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and
unobservable (supported by little or no market activity).
Fair value is the value at which a financial instrument could be closed out or sold in a transaction with a willing and
knowledgeable counterparty over a period of time consistent with the Company's investment strategy. Fair value is based on
quoted market prices, where available. If market quotes are not available, fair value is based on internally developed models
that use market-based or independent information as inputs. These models could produce a fair value that may not be
reflective of future fair value.
2011 ANNUAL REPORT
Table of Contents
183
The following table sets out the Company's financial assets and liabilities measured at fair value within the fair value
hierarchy:
Total
Financial assets:
Cash equivalents and short-term investments
Available-for-sale securities
Trade receivables
Financial liabilities:
Fair value of derivative financial instruments
(iii)
$
Level 1
$
$
7,645
145,411
75,899
228,955
$
4,404
$
$
–
142,490 (ii)
–
142,490
–
Level 2
Level 3
$
$
7,645 (i)
2,921 (iii)
75,899 (iv)
86,465
$
–
–
–
–
$
4,404
$
–
$
(i)
Fair value approximates the carrying value due to short-term nature.
(ii)
Recorded at fair value using quoted market prices.
(iii)
Recorded at fair value based on broker-dealer quotations.
(iv)
Trade receivables from provisional invoices for concentrate sales are included within Level 2 as they are valued using quoted forward rates derived from
observable market data based on the month of expected settlement.
Both the Company's cash equivalents and short-term investments are classified within Level 2 of the fair value hierarchy
because they are held to maturity and are valued using interest rates observable at commonly quoted intervals. Cash
equivalents are marketable securities with remaining maturities of three months or less at the date of purchase. The
short-term investments are marketable securities with remaining maturities of over three months at the date of purchase.
The Company's available-for-sale securities are recorded at fair value using quoted market prices or broker-dealer
quotations. The Company's available-for-sale securities that are valued using quoted market prices are classified as Level 1
of the fair value hierarchy. The Company's available-for-sale securities classified as Level 2 of the fair value hierarchy consist
of equity warrants, which are recorded at fair value based on broker-dealer quotations.
In the event that a decline in the fair value of an investment occurs and the decline in value is considered to be
other-than-temporary, an impairment charge is recorded in the consolidated statements of income (loss) and comprehensive
income (loss) and a new cost basis for the investment is established. The Company assesses whether a decline in value is
considered to be other-than-temporary by considering available evidence, including changes in general market conditions,
specific industry and individual company data, the length of time and the extent to which the fair value has been less than
cost, the financial condition and the near-term prospects of the individual investment. New evidence could become available
in future periods which would affect this assessment and thus could result in material impairment charges with respect to
those investments for which the cost basis exceeds its fair value.
5. LONG-TERM DEBT
The Company entered into a credit agreement on January 10, 2008 with a group of financial institutions relating to a new
$300 million unsecured revolving credit facility (the "First Credit Facility"). The Company's previous $300 million secured
revolving credit facility was terminated. The First Credit Facility was scheduled to mature on January 10,
184
AGNICO-EAGLE MINES LIMITED
Table of Contents
2013. However, the Company, with the consent of lenders representing 66 2 / 3 % of the aggregate commitments under the
facility, had the option to extend the term of this facility for additional one-year terms.
On September 4, 2008, the Company entered into a further credit agreement with a separate group of financial institutions
relating to an additional $300 million unsecured revolving credit facility (the "Second Credit Facility"). The Second Credit
Facility was scheduled to mature on September 4, 2010.
On June 15, 2009, the Company amended and restated the First Credit Facility and the Second Credit Facility. The amount
available under the Second Credit Facility was increased by $300 million to $600 million, and the scheduled maturity date
was extended to June 2012.
On June 22, 2010, the Company terminated the First Credit Facility and amended and restated the Second Credit Facility to
increase the amount available to $1.2 billion and extend the scheduled maturity date to June 22, 2014 (as so amended and
restated, the "Amended Second Credit Facility").
On August 4, 2011, the Company entered into the Credit Facility, which amended and restated the Amended Second Credit
Facility. The total amount available under the Credit Facility is $1.2 billion; however, the maturity date was extended from
June 22, 2014 to June 22, 2016.
Payment and performance of the Company's obligations under the Credit Facility is guaranteed by the Guarantors. The Credit
Facility contains covenants that restrict, among other things, the ability of the Company to incur additional indebtedness,
make distributions in certain circumstances, sell material assets and carry on a business other than one related to the mining
business. The Company is also required to maintain a total net debt to EBITDA ratio below a specified minimum value as well
as a minimum tangible net worth. At December 31, 2011, the Credit Facility was drawn down by $320 million
(2010 – $50 million). This drawdown, together with outstanding letters of credit under the Credit Facility, decrease the
amounts available under the Credit Facility such that $849.4 million was available for future drawdowns at
December 31, 2011.
In addition, on June 2, 2009, Agnico-Eagle entered into the EDC Facility with Export Development Canada. This agreement
matures in June 2014 and is used to provide letters of credit for environmental obligations or in relation to licence or permit
bonds relating to the Meadowbank mine. As at December 31, 2011, outstanding letters of credit drawn against this agreement
totalled C$79.6 million (2010 – C$75.6 million).
On April 7, 2010, the Company closed the offering of the Notes. Net proceeds from the offering of the Notes were used to
repay amounts owed under the Company's then existing credit facilities. Payment and performance of the Company's
obligations under the Notes is guaranteed by the Guarantors. The Notes contain covenants that restrict, among other things,
the ability of the Company to amalgamate or otherwise transfer its assets, sell material assets and carry on a business other
than one related to the mining business and the ability of the Guarantors to incur indebtedness. The Notes also require the
Company to maintain the same financial ratios and same minimum tangible net worth as under the Credit Facility. The Notes
and the Credit Facility rank equally in seniority.
2011 ANNUAL REPORT
Table of Contents
185
The following are the individual series of the issued Notes:
Series A
Series B
Series C
Principal
Interest Rate
Maturity
Date
$
115,000
360,000
125,000
6.13%
6.67%
6.77%
7/4/2017
7/4/2020
7/4/2022
$
600,000
For the year ended December 31, 2011, total interest expense was $55.0 million (2010 – $49.5 million; 2009 – $8.4 million)
and total cash interest payments were $52.8 million (2010 – $41.4 million; 2009 – $17.2 million). In 2011, cash interest on the
Credit Facility was $1.7 million (2010 – $12.3 million; 2009 – $14.0 million), cash standby fees on the Credit Facility was
$8.6 million (2010 – $6.7 million; 2009 – $2.4 million), and cash interest on the Notes was $39.5 million (2010 – $19.8 million,
2009 – n/a). In 2011, $1.0 million (2010 – $4.6 million; 2009 – $15.5 million) of the total interest expense was capitalized to
construction in progress.
The Company's weighted average interest rate on all of its long-term debt as at December 31, 2011 was 5.02%
(2010 – 5.43%).
6. RECLAMATION PROVISION AND OTHER LIABILITIES
Reclamation provision and other liabilities consist of the following:
2011
2010
Reclamation and closure costs (note 6(a))
Long-term portion of capital lease obligations (note 13(a))
Pension benefits (note 6(c))
Goldex mine government grant and other (note 6(b))
$
105,443
26,184
13,991
370
$
91,641
38,019
11,307
4,569
Total
(a) Reclamation and closure costs
$
145,988
$
145,536
Reclamation estimates are based on current legislation, third party estimates, management's estimates and feasibility study
calculations.
Due to the suspension of mining operations at the Goldex mine on October 19, 2011, an environmental remediation liability
was recognized (note 17), of which $26.1 million was classified as a current liability. The remainder of the Goldex mine
environmental remediation liability along with the Company's other accrued reclamation and closure costs are long-term in
nature and thus no portion of these costs has been reclassified to current liabilities.
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AGNICO-EAGLE MINES LIMITED
Table of Contents
The following table reconciles the beginning and ending carrying amounts of asset retirement obligations and environmental
remediation liabilities:
2011
Asset retirement obligations, beginning of year
Current year additions and changes in estimate, net
Current year accretion
Liabilities settled
Foreign exchange revaluation
$
Asset retirement obligations and environmental remediation liabilities, end of year
(b) Goldex mine government grant and other
$
2010
91,641 $
9,653
4,953
–
(804 )
105,443
$
62,847
23,058
3,176
(277 )
2,837
91,641
The Company has received funds (the "Grant") from the Quebec government in respect of the construction of the Goldex
mine. The Company has agreed to repay a portion of the Grant to the Quebec government, to a maximum amount of 50% of
the Grant. The repayment amount is calculated and paid annually for fiscal years 2010, 2011 and 2012 if the agreed criteria
are met. For each of these three years, if the yearly average gold price is higher than $620 per ounce, 50% of the Grant must
be repaid.
For fiscal year 2010, the agreed criteria had been met and the Company recorded a current liability of $1.5 million as of
December 31, 2010. This amount was paid to the Quebec government in 2011.
For fiscal year 2011, the agreed criteria had also been met and the Company recorded a current liability of $1.5 million as of
December 31, 2011. This amount is to be paid to the Quebec government in 2012 at which time the Grant will have been
repaid in full.
(c) Pension benefits
Agnico-Eagle provides the Executives Plan for certain senior officers. The funded status of the Executives Plan is based on
actuarial valuations performed as of July 1, 2011 and projected to December 31, 2013.
2011 ANNUAL REPORT
Table of Contents
187
The components of Agnico-Eagle's net pension plan expense are as follows:
2011
Service cost – benefits earned during the year
Interest cost on projected benefit obligation
Amortization of net transition asset, past service liability and net experience
gains
Prior service cost
Recognized net actuarial loss (gain)
$
Net pension plan expense
$
996
663
2010
$
171
26
245
2,101
981
613
2009
$
509
448
164
25
–
$
1,783
148
23
(142 )
$
986
Assets for the Executives Plan consist of deposits on hand with regulatory authorities which are refundable when benefit
payments are made or on the ultimate wind-up of the plan. The accumulated benefit obligation for this plan at December 31,
2011 was $11.4 million (2010 – $9.6 million). At the end of 2011, the remaining unamortized net transition obligation was
$0.5 million (2010 – $0.7 million) for the Executives Plan.
The following table provides the net amounts recognized in the consolidated balance sheets as at December 31 relating to
the Executives Plan:
2011
Accrued employee benefit liability
Accumulated other comprehensive income:
Initial transition obligation
Past service liability
Net experience losses
$
Net liability
$
7,292
2010
$
500
76
3,550
11,418
6,634
681
104
2,179
$
9,598
The following table provides the components of the expected recognition in 2012 of amounts in accumulated other
comprehensive income relating to the Executives Plan:
Transition obligation
Past service cost
Net actuarial loss
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AGNICO-EAGLE MINES LIMITED
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$
166
25
704
$
895
The funded status of the Executives Plan for 2011 and 2010 is as follows:
Reconciliation of the market value of plan assets
Fair value of plan assets, beginning of year
Agnico-Eagle's contribution
Benefit payments
Effect of exchange rate changes
Fair value of plan assets, end of year
Reconciliation of projected benefit obligation
Projected benefit obligation, beginning of year
Service cost
Interest cost
Actuarial losses
Benefit payments
Effect of exchange rate changes
Projected benefit obligation, end of year
Deficiency of plan assets compared with projected benefit obligation
$
$
Comprised of:
Unamortized transition liability
Unamortized net experience loss
Accrued liabilities
$
$
Weighted average discount rate – net periodic pension cost
Weighted average discount rate – projected benefit obligation
Weighted average expected long-term rate of return
Weighted average rate of compensation increase
Estimated average remaining service life for the plan (in years) (i)
2011
2010
2,443 $
1,156
(578 )
(69 )
2,952
1,635
1,397
(699 )
110
2,443
12,041
996
663
1,704
(696 )
(338 )
14,370
(11,418 ) $
7,998
981
613
2,718
(812 )
543
12,041
(9,598 )
(500 ) $
(3,626 )
(7,292 )
(11,418 ) $
(681 )
(2,283 )
(6,634 )
(9,598 )
5.20 %
4.45 %
n/a
3.00 %
3.0
7.00 %
5.20 %
n/a
3.00 %
4.0
(i)
Estimated average remaining service life for the Executives Plan was developed for individual senior officers.
2011 ANNUAL REPORT
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189
The estimated benefits to be paid from the Executives Plan in the next ten years are presented below:
2012
2013
2014
2015
2016
2017 – 2021
$
$
$
$
$
$
415
472
469
465
461
2,229
In addition to the Executives Plan, the Company also has the Basic Plan and the Supplemental Plan. Under the Basic Plan,
Agnico-Eagle contributes 5% of certain employee's base employment compensation to a defined contribution plan. The
expense in 2011 was $10.7 million (2010 – $8.8 million; 2009 – $6.5 million). Effective January 1, 2008 the Company adopted
the Supplemental Plan for designated executives at the level of Vice-President or above. Under this plan, an additional 10%
of the designated executive's earnings for the year (including salary and short-term bonus) is contributed by the Company. In
2011, $0.9 million (2010 – $1.1 million; 2009 – $0.9 million) was contributed to the Supplemental Plan. The Supplemental
Plan is accounted for as a cash balance plan.
7. SHAREHOLDERS' EQUITY
(a) Common shares
The Company's authorized share capital includes an unlimited number of common shares with issued common shares of
170,859,604 (2010 – 168,763,496), less 45,868 common shares held by a trust in connection with the Company's restricted
share unit ("RSU") plan (2010 – less 43,141 common shares). The trust is treated as a variable interest entity and, as a result,
its holdings of shares are offset against the Company's issued shares in the consolidation (note 7(c)).
In 2011, the Company declared dividends on its common shares of nil per share (2010 – $0.64 per share;
2009 – $0.18 per share).
(b) Flow-through common share private placements
In 2011, Agnico-Eagle issued nil (2010 – nil; 2009 – 358,900) common shares under flow-through share private placements,
which increased share capital by nil (2010 – nil; 2009 – $19.2 million), net of share issue costs. Effective December 31, 2011,
the Company renounced to its investors nil (2010 – nil; 2009 – C$30.6 million) of such expenses for income tax purposes.
The Company does not have an obligation to incur any exploration expenditures related to the expenditures previously
renounced.
The difference between the flow-through share issuance price and the market price of Agnico-Eagle's shares at the time of
purchase is recorded as a liability at the time the flow-through shares are issued. This liability terminates when the exploration
expenditures are renounced to investors. The difference between the flow-through share issuance price and market price
reduces the deferred tax expense charged to income as this difference represents proceeds received by the Company for the
sale of deferred tax deductions to investors in the flow-through shares.
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(c) Private placements and warrants
On December 3, 2008, the Company closed a private placement of 9.2 million units. Each unit consisted of one common
share and one-half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common
share of the Company at a price of $47.25 per share at any time during the five-year term of the warrant. As consideration for
the lead purchaser's commitment, the Company issued to the lead purchaser an additional 4 million warrants. The net
proceeds of the private placement were approximately $281 million, after deducting share issue costs of $8.8 million. If all
outstanding warrants are exercised, the Company would issue an additional 8.6 million common shares. No warrants have
been exercised as of December 31, 2011.
On May 26, 2009, the Company issued 15,825 shares with a market value of $0.9 million in connection with the acquisition of
a 100% participating interest in 52 mining claims, located in the Abitibi region of Quebec.
On July 24, 2009, the Company issued 18,000 shares upon payment of the exercise price of $500 in connection with the
exercise of an option granted by a predecessor to the Company relating to the acquisition of certain properties related to the
Goldex mine.
On July 26, 2010, the Company issued 15,000 shares with a market value of $0.8 million in connection with the purchase of
mining property.
(d) Public issuance of common shares
There were no public issuances of common shares in 2009.
On July 6, 2010, the Company issued 10,210,848 shares with a market value of $579.0 million in connection with the
acquisition of Comaplex (note 10).
On November 18, 2011, the Company issued 1,250,477 shares with a market value of $56.1 million in connection with the
acquisition of Grayd (note 10).
(e) Accumulated other comprehensive income (loss)
The cumulative translation adjustment in accumulated other comprehensive income (loss) in 2011 and 2010 of $(16.2) million
resulted from Agnico-Eagle changing to the US dollar as its principal currency of measurement. Prior to this change, the
Canadian dollar had been used as the reporting currency. Prior periods' consolidated financial statements were translated
into US dollars by the current rate method using the year end or the annual average exchange rate where appropriate. This
translation approach was applied from January 1, 1994. This translation gave rise to a deficit in the cumulative translation
adjustment account within accumulated other comprehensive income (loss) as at December 31, 2011 and
December 31, 2010.
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191
The following table sets out the components of accumulated other comprehensive income (loss), net of related tax effects:
2011
Cumulative translation adjustment from electing US dollar as principal reporting currency
Unrealized net gain on available-for-sale securities
Unrealized loss on derivative contracts
Unrealized loss on pension liability
Tax effect of unrealized loss on derivative contracts
Tax effect of unrealized loss on pension liability
2010
$
(16,206 ) $
16,350
(4,404 )
(5,219 )
1,491
882
(16,206 )
48,151
–
(4,420 )
–
865
$
(7,106 ) $
28,390
In 2011, a $4.9 million gain (2010 – $19.5 million gain; 2009 – $10.1 million gain) was reclassified from accumulated other
comprehensive income (loss) to net income (loss) to reflect the realization of gains on available-for-sale securities due to the
disposition of those securities.
(f) Net income (loss) per share
The following table provides the weighted average number of common shares used in the calculation of basic and diluted net
income (loss) per share:
2011
2010
2009
Weighted average number of common shares outstanding – basic
Add: Dilutive impact of employee stock options
Dilutive impact of warrants
Dilutive impact of shares related to RSU plan
169,352,896
–
–
–
162,342,686
1,192,530
2,263,902
43,141
155,942,151
1,256,103
1,392,752
29,882
Weighted average number of common shares outstanding – diluted
169,352,896
165,842,259
158,620,888
The calculation of diluted net income (loss) per share has been computed using the treasury stock method. In applying the
treasury stock method, options and warrants with an exercise price greater than the average quoted market price of the
common shares, for the period outstanding, are not included in the calculation of diluted net income (loss) per share, as the
effect is anti-dilutive. In 2010 and 2009, a total of 58,750 and 42,500 options, respectively, were excluded from the calculation
as the effect was anti-dilutive. In 2011, the impact of any additional shares issued under the employee stock option plan, as a
result of the conversion of warrants, or related to the RSU plan would be anti-dilutive as a result of the net loss position.
Consequently, diluted net loss per share would be computed in the same manner as basic net loss per share.
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8. STOCK-BASED COMPENSATION
(a) Employee Stock Option Plan ("ESOP")
The Company's ESOP provides for the granting of options to directors, officers, employees and service providers to purchase
common shares. Under this plan, options are granted at the fair market value of the underlying shares on the day prior to the
date of grant. The number of shares subject to option for any one person may not exceed 5% of the Company's common
shares issued and outstanding at the date of grant.
Up to May 31, 2001, the number of common shares reserved for issuance under the ESOP was 6,000,000 and options
granted under the ESOP had a maximum term of ten years. On April 24, 2001, the Compensation Committee of the Board of
Directors adopted a policy pursuant to which options granted after that date have a maximum term of five years. In 2001, the
shareholders approved a resolution to increase the number of common shares reserved for issuance under the ESOP by
2,000,000 to 8,000,000. In 2004, 2006, 2008, 2010 and 2011, the shareholders approved a further 2,000,000, 3,000,000,
6,000,000, 1,300,000 and 3,000,000 common shares for issuance under the ESOP, respectively.
Of the 2,630,785 options granted under the ESOP in 2011, 657,696 options vested immediately and expire in 2016. The
remaining options expire in 2016 and vest in equal installments, on each anniversary date of the grant, over a three-year
period. Of the 2,926,080 options granted under the ESOP in 2010, 731,520 options vested immediately and expire in 2015.
The remaining options expire in 2015 and vest in equal installments, on each anniversary date of the grant, over a three-year
period. Of the 2,276,000 options granted under the ESOP in 2009, 569,000 options vested immediately and expire in 2014.
The remaining options expire in 2014 and vest in equal installments, on each anniversary date of the grant, over a three-year
period.
Upon the exercise of options under the ESOP, the Company issues new common shares to settle the obligation.
The following summary sets out the activity with respect to Agnico-Eagle's outstanding stock options:
2011
Number of
Options
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Options exercisable at end of
year
6,762,704 C
$
2,630,785
(308,688 )
(125,750 )
8,959,051 C
$
5,178,172
2010
Weighted
Average
Exercise
Price
56.94
76.12
43.62
67.47
62.88
Number of
Options
5,707,940 C
$
2,926,080
(1,627,766 )
(243,550 )
6,762,704 C
$
2,972,857
2009
Weighted
Average
Exercise
Price
53.85
57.55
47.02
58.03
56.94
Number of
Options
4,752,440 C
$
2,276,000
(1,238,000 )
(82,500 )
5,707,940 C
$
44.57
62.65
34.28
55.99
53.85
2,445,615
2011 ANNUAL REPORT
Table of Contents
Weighted
Average
Exercise
Price
193
The following table sets out the activity with respect to Agnico-Eagle's nonvested stock options:
2011
Nonvested, beginning of year
Number of
Options
Weighted
Average
Grant Date
Fair Value
3,789,847
18.71
C
$
2,630,785 C
$
(2,537,253 ) C
$
(102,500 ) C
$
Granted
Vested
Forfeited (unvested)
Nonvested, end of year
3,780,879
17.05
18.40
17.77
C
$
17.79
Cash received for options exercised in 2011 was $13.6 million (2010 – $74.7 million; 2009 – $36.6 million).
The total intrinsic value of options exercised in 2011 was C$8.0 million (2010 – C$46.5 million; 2009 – C$43.8 million).
The weighted average grant date fair value of options granted in 2011 was C$17.05 (2010 – C$16.31; 2009 – C$24.52). The
total fair value of options vested during 2011 was $46.7 million (2010 – $36.7 million; 2009 – $27.4 million). The following
table summarizes information about Agnico-Eagle's stock options outstanding and exercised at December 31, 2011:
Options Outstandingp
Options Exercisable
Number
Outstanding
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise Price
Number
Exercisable
Weighted
Average
Exercise Price
Range of Exercise Prices
C$23.02 – C$36.23
C$39.18 – C$59.71
C$60.72 – C$83.08
16,000
4,361,866
4,581,185
1.84 years
2.00 years
3.16 years
C$33.26
54.94
70.55
16,000
3,070,576
2,091,596
C$33.26
54.17
67.22
C$23.02 – C$83.08
8,959,051
2.59 years
C$62.88
5,178,172
C$59.38
The weighted average remaining contractual term of options exercisable at December 31, 2011 was 2.6 years.
The Company has reserved for issuance 8,959,051 common shares in the event that these options are exercised.
The number of shares available for the granting of options as at December 31, 2011, 2010 and 2009 was 3,262,135,
2,771,420 and 4,155,750, respectively.
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Subsequent to the year ended December 31, 2011 and on January 3, 2012, 3,072,000 options were granted under the
ESOP, of which 768,000 options vested immediately and expire in the year 2017. The remaining options expire in 2017 and
vest in equal installments on each anniversary date of the grant, over a three-year period.
Agnico-Eagle estimated the fair value of options under the Black-Scholes option pricing model using the following weighted
average assumptions:
Risk-free interest rate
Expected life of options (in years)
Expected volatility of Agnico-Eagle's share price
Expected dividend yield
2011
2010
2009
1.95%
2.5
34.70%
1.86%
2.5
43.80%
1.27%
2.5
64.00%
0.89%
0.42%
0.42%
The Company uses historical volatility in estimating the expected volatility of Agnico-Eagle's share price. The expected term
of options granted is derived from historical data on employee exercise and post-vesting employment termination experience.
The aggregate intrinsic value of options outstanding at December 31, 2011 was C$(231.4) million. The aggregate intrinsic
value of options exercisable at December 31, 2011 was C$(115.6) million.
The total compensation expense for the ESOP recognized in the general and administrative line item of the consolidated
statements of income (loss) for the current year was $42.2 million (2010 – $37.8 million; 2009 – $27.7 million). The total
compensation cost related to non-vested options not yet recognized is $32.8 million as of December 31, 2011 and the
weighted average period over which it is expected to be recognized is 1.7 years. Of the total compensation cost for the
ESOP, $1.4 million was capitalized as part of property, plant and mine development in 2011 (2010 – $1.3 million;
2009 – $8.7 million).
(b) Incentive Share Purchase Plan
On June 26, 1997, the shareholders approved an incentive share purchase plan (the "Purchase Plan") to encourage
directors, officers and employees ("Participants") to purchase Agnico-Eagle's common shares at market value. In 2009, the
Purchase Plan was amended to remove non-executive directors as eligible Participants in the plan.
Under the Purchase Plan, Participants may contribute up to 10% of their basic annual salaries, and the Company contributes
an amount equal to 50% of each Participant's contribution. All shares subscribed for under the Purchase Plan are newly
issued by the Company. The total compensation cost recognized in 2011 related to the Purchase Plan was $6.4 million
(2010 – $5.0 million; 2009 – $3.8 million).
In 2011, 360,833 common shares were subscribed for under the Purchase Plan (2010 – 229,583; 2009 – 196,649) for a value
of $19.2 million (2010 – $15.0 million; 2009 – $11.3 million). In May 2008, shareholders approved an increase in the
maximum number of shares reserved for issuance under the Purchase Plan to 5,000,000 from 2,500,000. As at
December 31, 2011, Agnico-Eagle has reserved for issuance 2,150,088 common shares (2010 – 2,510,921;
2009 – 2,740,504) under the Purchase Plan.
2011 ANNUAL REPORT
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195
(c) Restricted Share Unit Plan
In 2009, the Company implemented the RSU plan for certain employees. A deferred compensation balance was recorded for
the total grant date value on the date of grant. The deferred compensation balance was recorded as a reduction of
shareholders' equity and is being amortized as compensation expense (or capitalized to construction in progress) over the
applicable vesting period of two years.
The Company funded the plan by transferring $3.7 million (2010 – $4.0 million; 2009 – $3.0 million) to an employee benefit
trust (the "Trust") that then purchased shares of the Company in the open market. Compensation cost for RSUs incorporates
an expected forfeiture rate. The forfeiture rate is estimated based on the Company's historical employee turnover rates and
expectations of future forfeiture rates that incorporate various factors that include historical ESOP forfeiture rates. For 2009
through 2011, the impact of forfeitures was not material. For accounting purposes, the Trust is treated as a variable interest
entity and consolidated in the accounts of the Company. On consolidation, the dividends paid on the shares held by the Trust
are eliminated. The shares purchased and held by the Trust are treated as not being outstanding for the basic earnings per
share ("EPS") calculations. They are amortized back into basic EPS over the vesting period. All of the shares held by the
Trust were excluded from the diluted EPS calculations as they were anti-dilutive for 2011 due to the net loss position. The
shares held by the trust were included in previous period diluted EPS calculations.
Compensation cost related to the RSU plan was $3.3 million in 2011 (2010 – $3.0 million), with nil (2010 – $0.1 million) being
capitalized to the "Property, plant and mine development" line item in the consolidated balance sheets. The $3.3 million
(2010 – $2.9 million) of compensation expense is included as components of the Production, General and administrative, and
Exploration and corporate development line items of the consolidated statements of income (loss), consistent with the
classification of other elements of compensation expense for those employees who held RSUs.
9. INCOME AND MINING TAXES
Income and mining taxes expense (recovery) is made up of the following geographic components:
2011
Current provision
Canada
Mexico
Finland
$
Deferred provision (recovery)
Canada
Mexico
Finland
AGNICO-EAGLE MINES LIMITED
Table of Contents
$
(337,408 )
54,996
10,269
(272,143 )
$
196
58,752
3,496
222
62,470
2010
(209,673 ) $
34,217
1,942
–
36,159
2009
$
47,083
18,759
1,086
66,928
103,087
1,171
–
–
1,171
27,083
–
(6,754 )
20,329
$
21,500
Cash income and mining taxes paid in 2011 were $110.9 million (2010 – $25.2 million; 2009 – $8.8 million).
The income and mining taxes expense (recovery) is different from the amount that would have been computed by applying
the Canadian statutory income tax rate as a result of the following:
2011
2010
2009
Combined federal and composite provincial tax rates
Increase (decrease) in tax rates resulting from:
Provincial mining duties
Tax law change
Impact of foreign tax rates
Permanent differences
Valuation allowance
Effect of changes in income tax rates
27.8%
29.6%
30.9%
5.9
(2.7)
(0.2)
(1.6)
(0.3)
(2.0)
6.8
(5.1)
(0.5)
(4.2)
(0.2)
(2.7)
16.1
(24.4)
(4.9)
2.2
–
–
Actual rate as a percentage of pre-tax income
26.9%
23.7%
19.9%
As at December 31, 2011 and December 31, 2010, Agnico-Eagle's deferred income and mining tax assets and liabilities were
as follows:
Mining properties
Net operating and capital loss carry forwards
Mining duties
Reclamation provisions
Valuation allowance
$
Deferred income and mining tax liabilities
$
2011
2010
(Assets)/
Liabilities
(Assets)/
Liabilities
704,379 $
(104,332 )
(88,670 )
(51,926 )
39,121
498,572
$
966,485
(133,042 )
(71,492 )
(30,752 )
4,855
736,054
All of Agnico-Eagle's deferred income tax assets and liabilities were denominated in the local currency based on the
jurisdiction in which the Company paid taxes, except for Canada, and were translated into US dollars using the exchange rate
in effect at the consolidated balance sheet dates. For Canadian income tax purposes, for December 31, 2008 and
subsequent years, the Company elected to use the US dollar as its functional currency.
The Company operates in different jurisdictions and, accordingly, it is subject to income and other taxes under the various tax
regimes in the countries in which it operates. The tax rules and regulations in many countries are highly
2011 ANNUAL REPORT
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197
complex and subject to interpretation. The Company may be subject in the future to a review of its historic income and other
tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or
application of certain tax rules and regulations to the Company's business conducted within the country involved.
A reconciliation of the beginning and ending amounts of the unrecognized tax benefits is as follows:
2011
2010
Unrecognized tax benefits, beginning of year
Reductions
$
1,630 $
(430 )
Unrecognized tax benefit, end of year
$
1,200
$
5,608
(3,978 )
1,630
The full amount of unrecognized tax benefits, if recognized, would reduce the Company's annual effective tax rate. The
Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.
The Company is subject to taxes in the following significant jurisdictions: Canada, Mexico, Sweden and Finland, each with
varying statutes of limitations. The 2007 through 2011 taxation years generally remain subject to examination.
10. ACQUISITIONS
Grayd Resource Corporation
In September 2011, Agnico-Eagle entered into an acquisition agreement with Grayd, a Canadian-based natural resource
company listed on the TSX Venture Exchange, pursuant to which the Company agreed to make an offer to acquire all of the
issued and outstanding common shares of Grayd. At the time, Grayd held a 100% interest in the La India project located in
the Mulatos Gold Belt of Sonora, Mexico (approximately 70 kilometers northwest of Agnico-Eagle's Pinos Altos gold mine)
and had recently discovered the Tarachi exploration property located approximately ten kilometres north of the La India
project. On October 13, 2011, the Company made the offer by way of a take-over bid circular, as amended and supplemented
on October 21, 2011.
On November 18, 2011, Agnico-Eagle acquired 94.77% of the outstanding shares of Grayd, on a fully-diluted basis, by way of
a take-over bid. The November 18, 2011 purchase price of $222.1 million was comprised of $166.0 million in cash and
1,250,477 newly issued Agnico-Eagle shares.
The related transaction costs associated with the acquisition totaling $3.8 million were expensed through the Interest and
sundry expense (income) line of the consolidated statements of income (loss) during the fourth quarter of 2011. The
Company has accounted for the purchase of Grayd as a business combination.
Grayd owns a 100% interest in the La India project located in the Mulatos Gold Belt of Sonora, Mexico (approximately
70 kilometers northwest of Agnico-Eagle's Pinos Altos gold mine). Grayd also owns a 100% interest in the Tarachi exploration
property located approximately 10 kilometers north of the La India project. The La India project hosts a National
Instrument 43-101 compliant measured and indicated gold resource. This acquisition has the potential to contribute to the
ongoing growth in Agnico-Eagle's gold production and cash flows.
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The following table sets forth the allocation of the purchase price to assets acquired and liabilities assumed, based on
management's estimates of fair value.
Total purchase price:
Cash paid for acquisition
Agnico-Eagle shares issued for acquisition
Total purchase price to allocate
Fair value of assets acquired and liabilities assumed:
Mining properties
Goodwill
Cash and cash equivalents
Trade receivables
Other current assets
Equipment
Accounts payable and accrued liabilities
Deferred tax liability
Non-controlling interest
$
$
Net assets acquired
165,954
56,146
222,100
$
282,000
29,215
2,907
469
1,700
56
(9,767 )
(72,229 )
(12,251 )
$
222,100
The Company believes that goodwill for the Grayd acquisition arose principally because of the following factors: (1) the going
concern value implicit in the Company's ability to sustain and/or grow its business by increasing reserves and resources
through new discoveries; and (2) the requirement to record a deferred tax liability for the difference between the assigned
values and the tax bases of assets acquired and liabilities assumed in a business combination at amounts that do not reflect
fair value.
Pro forma results of operations for Agnico-Eagle assuming the acquisition of Grayd described above had occurred as of
January 1, 2010 are shown below. On a pro forma basis, there would have been no effect on Agnico-Eagle's consolidated
revenues:
2011
2010
Unaudited
Pro forma net income (loss) attributed to common shareholders
$
(582,762 ) $
324,708
Pro forma net income (loss) per share – basic
$
(3.42 ) $
1.98
Subsequent to the year ended December 31, 2011 and on January 23, 2012, the Company acquired the remaining
outstanding shares of Grayd it did not already own, pursuant to a previously announced compulsory acquisition
2011 ANNUAL REPORT
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199
carried out under the provisions of the Business Corporations Act (British Columbia). The January 23, 2012 purchase price of
$11.8 million was comprised of $9.3 million in cash and 68,941 newly issued Agnico-Eagle shares.
Summit Gold Project
On December 20, 2011, the Company completed the acquisition of 100% of the Summit Gold project from Columbus Gold
Corporation, subject to a 2% net smelter returns mineral production royalty reserved by Cordilleran Exploration Company.
The Nevada-based project's purchase price of $8.5 million, including transaction costs, was comprised entirely of cash. This
transaction was accounted for as an asset acquisition.
Comaplex Minerals Corp.
On April 1, 2010, Agnico-Eagle and Comaplex jointly announced that they reached an agreement in principle whereby
Agnico-Eagle would acquire all of the shares of Comaplex (the "Comaplex Shares") that it did not already own. The
transaction was completed under a plan of arrangement under the Business Corporations Act (Alberta). Under the terms of
the transaction, each shareholder of Comaplex, other than Agnico-Eagle, received 0.1576 of an Agnico-Eagle share per
Comaplex share. Additionally, at closing, each Comaplex shareholder, other than Agnico-Eagle and Perfora Investments
S.a.r.l. ("Perfora"), received one common share of a newly formed, wholly-owned, subsidiary of Comaplex, Geomark
Exploration Ltd. ("Geomark"), in respect of each Comaplex Share and Comaplex transferred to Geomark all of the assets and
related liabilities of Comaplex other than those relating to the Meliadine gold exploration properties in Nunavut, Canada. The
Geomark assets included all of Comaplex's net working capital, the non-Meliadine mineral properties, all oil and gas
properties and investments. Under the plan of arrangement, Comaplex changed its name to Meliadine Holdings Inc.
Prior to the announcement of the transaction, Perfora and Agnico-Eagle had entered into a support agreement pursuant to
which Perfora agreed to, among other things, support the transaction and vote all of the shares it held in Comaplex in favour
of the plan of arrangement. Perfora held approximately 17.3% and Agnico-Eagle held approximately 12.3%, on a fully diluted
basis, of the outstanding shares of Comaplex prior to the announcement of the acquisition.
On July 6, 2010, the transactions relating to the plan of arrangement closed and Agnico-Eagle issued a total of
10,210,848 shares to the shareholders of Comaplex, other than Agnico-Eagle, for a total value of $579.0 million. The related
transaction costs associated with the acquisition totalling $7.0 million were expensed through the Interest and sundry
expense (income) line of the consolidated statements of income (loss) during the third quarter of 2010. The Company has
accounted for the purchase of Comaplex as a business combination.
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The following table sets forth the allocation of the purchase price to assets acquired and liabilities assumed, based on
management's estimates of fair value.
Total purchase price:
Comaplex shares previously purchased
Agnico-Eagle shares issued for acquisition
Total purchase price to allocate
Fair value of assets acquired and liabilities assumed:
Property
Goodwill
Supplies
Equipment
Asset retirement obligation
Deferred tax liability
$
88,683
578,955
667,638
$
Net assets acquired
$
642,610
200,064
542
2,381
(3,400 )
(174,559 )
$
667,638
The Comaplex shares purchased prior to the April 1, 2010 announcement of the acquisition had a cost base of $24.1 million
and a fair value at July 6, 2010 of $88.6 million. Upon the acquisition of Comaplex, the non-cash gain of $64.5 million on
those shares within accumulated other comprehensive income (loss) was reversed into the consolidated statements of
income (loss) as a gain during the third quarter of 2010.
The Company believes that goodwill for the Comaplex acquisition arose principally because of the following factors: (1) the
going concern value implicit in the Company's ability to sustain and/or grow its business by increasing reserves and
resources through new discoveries; and (2) the requirement to record a deferred tax liability for the difference between the
assigned values and the tax basis of assets acquired and liabilities assumed in a business combination at amounts that do
not reflect fair value.
Pro forma results of operations for Agnico-Eagle assuming the acquisition of Comaplex described above had occurred as of
January 1, 2009 are shown below. On a pro forma basis, there would have been no effect on Agnico-Eagle's consolidated
revenues:
2010
2009
Unaudited
Pro forma net income attributed to common shareholders
$
Pro forma net income per share – basic
$
2.04 $
2011 ANNUAL REPORT
Table of Contents
331,516
$
85,371
0.55
201
11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
2011
Trade payables
Wages payable
Accrued liabilities
Goldex mine government grant (note 6(b))
Other liabilities
2010
$
104,699
27,247
47,462
1,452
22,687
$
91,974
21,583
33,390
1,485
11,943
$
203,547
$
160,375
In 2011 and 2010, the other liabilities balance mainly consisted of various employee payroll tax withholdings and other
payroll taxes.
12. COMMITMENTS AND CONTINGENCIES
As part of its ongoing business and operations, the Company has been required to provide assurance in the form of letters of
credit for environmental and site restoration costs, custom credits, government grants and other general corporate purposes.
As at December 31, 2011, the total amount of these guarantees was $119.0 million.
Certain of the Company's properties are subject to royalty arrangements. The following are the most significant royalties:
The Company has a royalty agreement with the Finnish government relating to the Kittila mine. Starting 12 months after the
mining operations commenced, the Company is required to pay 2% on net smelter returns, defined as revenue less
processing costs. The royalty is paid on a yearly basis the following year.
The Company is committed to pay a royalty on production from the Meadowbank mine. The Nunavut Tunngavik-administered
mineral claims are subject to production leases including a 12% net profits interest royalty from which annual deductions are
limited to 85% of gross revenue. Production from Crown mining leases is subject to a royalty of up to 14% of adjusted net
profits, as defined in the Northwest Territories and Nunavut Mining Regulations under the Territorial Lands Act (Canada).
The Company is committed to pay a royalty on production from certain properties in the Abitibi area. The type of royalty
agreements include but are not limited to net profits interest royalty and net smelter return royalty, with percentages ranging
from 0.5% to 5%.
The Company is committed to pay a royalty on production from certain properties in the Pinos Altos mine area. The type of
royalty agreements include but are not limited to net profits interest royalty and net smelter return royalty, with percentages
ranging from 2.5% to 3.5%.
The Company is committed to pay a 2% royalty on future net smelter returns on the production of minerals from the Summit
Gold project, acquired on December 20, 2011.
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In addition, the Company has the following purchase commitments:
Purchase
Commitments
2012
2013
2014
2015
2016
Subsequent years
$
11,481
7,141
7,853
4,671
4,716
26,452
Total
$
62,314
13. LEASES
(a) Capital Leases
In each of 2010 and 2009, the Company entered into five sale-leaseback agreements with third parties for various fixed and
mobile equipment within Canada. These arrangements represent sale-leaseback transactions in accordance with ASC
840-40 – Sale-Leaseback Transactions. The sale-leaseback agreements have an average effective annual interest rate of
6.18% and the average length of the contracts is 4.5 years.
All of the sale-leaseback agreements have end of lease clauses that qualify as bargain purchase options that the Company
expects to execute. The total gross amount of assets recorded under sale-leaseback capital leases amounts to $33.6 million
(2010 – $33.6 million).
The Company has agreements with third party providers of mobile equipment that are used at the Meadowbank and Kittila
mines. These arrangements represent capital leases in accordance with the guidance in ASC 840-30 – Capital Leases. The
leases for mobile equipment at the Kittila mine are for 5 years and the leases for mobile equipment at the Meadowbank mine
are for 5 years. The effective annual interest rate on the lease for mobile equipment at the Meadowbank mine is 5.64%. The
effective annual interest rate on the lease for mobile equipment at the Kittila mine is 4.99%.
2011 ANNUAL REPORT
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203
The following is a schedule of future minimum lease payments under capital leases together with the present value of the net
minimum lease payments as at December 31, 2011:
Year ending December 31:
2012
2013
2014
2015
2016
Thereafter
Total minimum lease payments
Less amount representing interest
$
12,714
15,520
8,829
3,567
–
–
40,630
3,378
Present value of net minimum lease payments
$
37,252
The Company's capital lease obligations at December 31 are comprised of the following:
2011
Total future lease payments
Less: interest
$
40,630
3,378
37,252
11,068
$
54,476
5,865
48,611
10,592
$
26,184
$
38,019
Less: current portion
Long-term portion of capital lease obligations
2010
At the end of 2011, the gross amount of assets recorded under capital leases, including sale-leaseback capital leases was
$56.9 million (2010 – $56.9 million; 2009 – $51.7 million). The charge to income resulting from the amortization of assets
recorded under capital leases is included in the "Amortization of property, plant and mine development" component of the
consolidated statements of income (loss).
(b) Operating Leases
The Company has a number of operating lease agreements involving office space. Some of the leases for office facilities
contain escalation clauses for increases in operating costs and property taxes. Future minimum lease
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AGNICO-EAGLE MINES LIMITED
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payments required to meet obligations that have initial or remaining non-cancellable lease terms in excess of one year as at
December 31, 2011 are as follows:
Minimum
Lease
Payments
2012
2013
2014
2015
2016
Thereafter
$
1,676
946
755
696
696
3,822
Total
$
8,591
The portion of operating leases relating to rental expense was $0.9 million in 2011 (2010 – $4.1 million; 2009 – $3.7 million).
14. RESTRICTED CASH
As part of the Company's insurance programs fronted by a third party provider and reinsured through the Company's internal
insurance program, the third party provider requires that cash of $3.4 million be restricted (2010 – $2.5 million).
As part of the Company's tax planning, $32.0 million was contributed to a qualified environmental trust ("QET") in
December 2011 to fulfil the requirement of financial security for costs related to the environmental remediation of the Goldex
mine. Agnico-Eagle expects to incur the majority of these expenses in 2012.
15. FINANCIAL INSTRUMENTS
From time to time, Agnico-Eagle has entered into financial instruments with several financial institutions in order to hedge
underlying cash flow and fair value exposures arising from changes in commodity prices, interest rates, equity prices or
foreign currency exchange rates.
In 2010 and 2011, financial instruments that subjected Agnico-Eagle to market risk and concentration of credit risk consisted
primarily of cash and cash equivalents and short-term investments. Agnico-Eagle places its cash and cash equivalents and
short-term investments in high quality securities issued by government agencies, financial institutions and major corporations
and limits the amount of credit exposure by diversifying its holdings.
Agnico-Eagle generates almost all of its revenues in US dollars. The Company's Canadian operations, which include the
LaRonde, Lapa and Meadowbank mines, and the Meliadine project have Canadian dollar requirements for capital, operating
and exploration expenditures. In addition, the Company's Goldex mine, which suspended operations on October 19, 2011,
has Canadian dollar requirements.
The Company utilizes foreign exchange hedges to reduce the variability in expected future cash flows arising from changes in
foreign currency exchange. The hedged items represent a portion of the Canadian dollar denominated cash outflows arising
from Canadian dollar denominated expenditures in 2011 and 2012.
2011 ANNUAL REPORT
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205
During the year, the Company entered into forward contracts with an ineffective cash flow hedging relationship that did not
qualify for hedge accounting. The forward contracts hedged $150 million of 2011 expenditures and nil of 2012 expenditures at
an average rate of US$1.00 = C$0.99. There were no similar foreign exchange forward contracts in 2010. The hedges that
expired during the year resulted in a realized loss of $1.4 million. As of December 31, 2011 all ineffective cash flow hedges
had expired.
The forward contracts with a cash flow hedging relationship that did qualify for hedge accounting, hedged $60 million of 2011
expenditures at an average rate of US$1.00 = C$0.99 and $300 million of 2012 expenditures. $25 million will expire each
month during 2012 at an average rate of US$1.00 = C$1.01. There were no similar effective foreign exchange forward
contracts in 2010. The $60 million of hedges that expired during the year resulted in a realized loss of $1.5 million. As of
December 31, 2011, the Company recognized a mark-to-market loss of $4.4 million in accumulated other comprehensive
income (loss). Amounts deferred in accumulated other comprehensive income (loss) are reclassified to Production costs on
the statements of income (loss) and comprehensive income (loss), as applicable, when the hedged transaction has occurred.
The mark-to-market loss is recorded at fair value based on broker-dealer quotations that utilize period end forward pricing of
the currency hedged.
The Company's other foreign currency derivative strategies in 2011 consisted mainly of writing US dollar call options with
short maturities to generate premiums that would, in essence, enhance the spot transaction rate received when exchanging
US dollars to Canadian dollars. All of these derivative transactions expired prior to year-end such that no derivatives were
outstanding as of December 31, 2011. The Company's foreign currency derivative strategy generated $5.0 million in call
option premiums for the year ended December 31, 2011 (2010 – $4.9 million) that were recognized in the "Gain on derivative
financial instruments" line item of the consolidated statements of income (loss) and comprehensive income (loss).
In addition, the Company recognized a loss of $3.4 million (2010 – $3.1 million) on intra-quarter silver financial instruments
associated with timing of sales of silver products during 2011 that were recognized in the "Gain on derivative financial
instruments" line item of the consolidated statements of income (loss) and comprehensive income (loss). There were no silver
financial instruments outstanding at December 31, 2011 or December 31, 2010.
In the first quarter of 2011, to mitigate the risks associated with fluctuating zinc prices, the Company entered into a zero-cost
collar to hedge the price on a portion of zinc associated with the LaRonde mine's 2011 production. The purchase of zinc put
options was financed through selling zinc call options at a higher level such that the net premium payable to the counterparty
by the Company is nil.
A total of 20,000 metric tonnes (2010 – 15,000 metric tonnes) of zinc call options were written at a strike price of $2,500
(2010 – $2,500) per metric tonne with 2,000 metric tonnes (2010 – 1,500 metric tonnes) expiring each month beginning
February 28, 2011 (2010 – March 31, 2010). A total of 20,000 metric tonnes (2010 – 15,000 metric tonnes) of zinc put options
were purchased at a strike price of $2,200 (2010 – $2,200) per metric tonne with 2,000 metric tonnes (2010 – 1,500 metric
tonnes) expiring each month beginning February 28, 2011 (2010 – March 31, 2010). While setting a minimum price, the
zero-cost collar strategy also limits participation to zinc prices above $2,500 (2010 – $2,500) per metric tonne. These
contracts did not qualify for hedge accounting under ASC 815 – Derivatives and Hedging. Gains or losses, along with
mark-to-market adjustments, were recognized in the "Gain on derivative financial instruments" line item of the consolidated
statements of income (loss) and comprehensive income (loss). All options entered into during the year expired during the
year resulting in a realized gain of $3.4 million (2010 – $3.7 million).
The following table sets out the changes in the Accumulated other comprehensive income (loss) ("AOCI") balances recorded
in the consolidated financial statements pertaining to the foreign exchange hedging activities. The fair
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AGNICO-EAGLE MINES LIMITED
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values, based on calculated mark-to-market valuations, of recorded derivative related assets and liabilities and their
corresponding entries to AOCI reflect the netting of the fair values of individual derivative financial instruments.
2011
2010
AOCI, beginning of year
Loss reclassified from AOCI into production cost
Loss recognized in OCI
$
– $
1,459
(5,863 )
–
–
–
AOCI, end of year
$
(4,404 ) $
–
As at December 31, 2011 and 2010, there were no metal derivative positions. The Company may from time to time utilize
short-term (including intra-quarter) financial instruments as part of its strategy to minimize risks and optimize returns on its
byproduct metal sales.
Other required derivative disclosures can be found in note 7(e), Accumulated other comprehensive income (loss).
The following table provides a summary of the amounts recognized in the "Gain on derivative financial instruments" line item
of the consolidated statements of income (loss) and comprehensive income (loss):
2011
Premiums realized on written foreign exchange call options
Realized gain on foreign exchange extendible flat forward
Realized loss on foreign exchange forwards
Realized gain on foreign exchange collar
Mark-to-market gain on foreign exchange extendible flat forward
Realized gain (loss) on zinc financial instruments
Realized gain (loss) on copper financial instruments
Realized loss on silver financial instruments
$
$
2010
4,995 $
–
(1,407 )
–
–
3,419
79
(3,403 )
3,683
$
2009
4,845 $
1,797
–
711
142
3,733
(558 )
(3,058 )
7,612
$
4,494
–
–
–
–
(752 )
(150 )
–
3,592
Agnico-Eagle's exposure to interest rate risk at December 31, 2011 relates to its cash and cash equivalents, short-term
investments and restricted cash totaling $221.5 million (2010 – $104.6 million) and the Credit Facility. The Company's
short-term investments and cash equivalents have a fixed weighted average interest rate of 0.61% (2010 – 0.56%).
The fair values of Agnico-Eagle's current financial assets and liabilities approximate their carrying values as at
December 31, 2011.
2011 ANNUAL REPORT
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207
16. GENERAL AND ADMINISTRATIVE
Due to a kitchen fire at the Meadowbank mine in March 2011, the Company recognized a loss on disposal of the kitchen of
$6.9 million, incurred related costs of $7.4 million, and also recognized an insurance receivable for $11.2 million. The
difference of $3.1 million was recognized in the "General and administrative" line item of the consolidated statements of
income (loss) and comprehensive income (loss) during the year. The Company's exposure to insurance losses related to this
claim is limited to the $3.1 million exposure through its captive insurance company.
During the year, $2.4 million of insurance proceeds were received and as at December 31, 2011 the Company had a
remaining insurance receivable of $8.8 million (note 2(a)).
17. LOSS ON GOLDEX MINE
On October 19, 2011, the Company announced that it was suspending mining operations and gold production at the Goldex
mine in Quebec, Canada effective immediately. This decision followed the receipt of an opinion from a second rock
mechanics consulting firm which recommended that underground mining operations be halted. It appeared that a weak
volcanic rock unit in the hanging wall of the Goldex mine deposit had failed. This rock failure is thought to extend between the
top of the deposit and surface. As a result, this structure has allowed an increase in ground water to flow into the mine. This
water flow has likely contributed to further weakening and movement of the rock mass.
Agnico-Eagle has written off its investment in the Goldex mine (net of expected residual value), written off the underground
ore stockpile, and recorded a provision for the anticipated costs of environmental remediation. Given the amount of
uncertainty in estimating the fair value of the Goldex mine property, plant, and mine development, the Company determined
that the fair value was equal to the residual value. All of the remaining 1.6 million ounces of proven and probable gold
reserves at the Goldex mine, other than the ore stockpiled on surface, have been reclassified as mineral resources. The
Goldex mine is part of the "Canada" segment as shown in Note 19.
The mill processed feed from the remaining surface stockpile at the Goldex mine in October 2011.
Impairment loss on Goldex mine property, plant, and mine development
Loss on underground ore stockpile
Supplies inventory obsolescence provision
Increase in environmental remediation liability
$
237,110
16,641
1,915
47,227
Loss on Goldex mine (before income and mining taxes)
$
302,893
The environmental remediation liability for the anticipated costs of remediation associated with the Company's Goldex mine
requires management to make estimates and judgments that affect the reported amount. In making judgments in accordance
with US GAAP, the Company uses estimates based on historical experience and various assumptions that are considered
reasonable in the circumstances. Actual results may differ from these estimates.
18. IMPAIRMENT LOSS ON MEADOWBANK MINE
For the year ended December 31, 2011 the Company performed a full review of the Meadowbank mine operations and
updated the related life of mine plan. This review considered the exploration potential of the area, the current mineral
reserves and resources, the projected operating costs in light of the persistently high operating costs experienced since
commencement of commercial operations, metallurgical performance and gold price. These served as inputs into pit
optimizations to determine which reserves and resources could be economically mined and be considered as mineable
mineral reserves. As a result of these factors, an updated mine plan with a shorter mine
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AGNICO-EAGLE MINES LIMITED
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life was developed and cash flows calculated, resulting in an impairment charge to the Meadowbank mine carrying value of
$907.7 million. The Meadowbank mine previously had a property, plant and mine development book value of approximately
$1.7 billion.
Net estimated future cash flows from the Meadowbank mine were calculated, on an undiscounted basis, based on best
estimates of future gold production, which were based on long-term gold prices from $1,250 to $1,553 per ounce (in real
terms), foreign exchange rates from US$0.92:C$1 to US$0.97:C$1, increased cost estimates based on revised operating
levels, average gold recovery of 92.9% and expected continuation of operations to 2017, including the processing of
stockpiled ore. Future expected operating costs, capital expenditures, and asset retirement obligations were based on the
updated life of mine plan. The fair value was calculated by discounting the estimated future net cash flows using a 5% interest
rate (in real terms), commensurate with the estimated level of risk. Management's estimate of future cash flows is subject to
risk and uncertainties. Therefore, it is reasonably possible that changes could occur which may affect the recoverability of the
Company's long-lived assets and may have a material effect on the Company's results of operations and financial position.
The Meadowbank mine is a part of the "Canada" segment as shown in Note 19.
19. SEGMENTED INFORMATION
Agnico-Eagle operates in a single industry, namely exploration for and production of gold. The Company's primary operations
are in Canada, Mexico, and Finland. The Company identifies its reportable segments as those operations whose operating
results are reviewed by the Chief Executive Officer and Chief Operating Officer, and that represent more than 10% of the
combined revenue, profit or loss or total assets of all reported operating segments. The following are the reporting segments
of the Company and reflect how the Company manages its business and how it classifies its operations for planning and
measuring performance:
Canada:
LaRonde mine, Lapa mine, Goldex mine, Meadowbank mine, Meliadine project and the Regional Office
Europe:
Kittila mine
Latin America:
Pinos Altos mine, Creston Mascota deposit at Pinos Altos and the La India project
Exploration:
USA Exploration office, Europe Exploration office, Canada Exploration offices, and the Latin America
Exploration office
The accounting policies of the reporting segments are the same as those described in the summary of significant accounting
policies. There are no transactions between the reported segments affecting revenue. Production costs for the reported
segments are net of intercompany transactions. Of the $229.3 million of goodwill reflected on the consolidated balance sheets
at December 31, 2011, $200.1 million relates to the Meliadine project that is a component of the Canada segment and
$29.2 million relates to the La India project that is a component of the Latin America segment.
Corporate Head Office assets are included in the "Canada" segment and specific corporate income and expense items are
noted separately below.
Certain items in the comparative segmented information relating to the Meliadine project have been reclassified from the
"Exploration" segment to the "Canada" segment.
On May 1, 2009, both the Lapa mine and the Kittila mine achieved commercial production. The Pinos Altos mine achieved
commercial production on November 1, 2009. The Meadowbank mine achieved commercial production on
2011 ANNUAL REPORT
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209
March 1, 2010. The Creston Mascota deposit at Pinos Altos achieved commercial production on March 1, 2011. The
LaRonde mine extension achieved commercial production on December 1, 2011.
Revenues
from
Mining
Operations
Year Ended
December 31,
2011
Canada
Europe
Latin America
Exploration
$
$
Production
Costs
1,217,858 $
225,612
378,329
–
1,821,799 $
619,987 $
110,477
145,614
–
876,078 $
Amortization
198,219 $
26,574
36,988
–
261,781 $
Exploration
and
Corporate
Development
– $
–
–
75,721
75,721 $
Foreign
Currency
Translation
Loss
(Gain)
Loss on
Goldex
Mine
2,825 $ 302,893 $
1,063
–
(4,955 )
–
(15 )
–
(1,082 ) $ 302,893 $
Impairment
Loss on
Meadowban
k
Mine
Segment
Income
(Loss)
907,681 $ (813,747 )
–
87,498
–
200,682
–
(75,706 )
907,681 $ (601,273 )
Segment loss
Corporate and Other
Interest and sundry expense
Net loss on sale and write-down of available-for-sale securities
Gain on derivative financial instruments
General and administrative
Provincial capital tax
Interest expense
$ (601,273 )
Loss before income and mining taxes
$ (778,628 )
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AGNICO-EAGLE MINES LIMITED
Table of Contents
(5,188 )
(3,662 )
3,683
(107,926 )
(9,223 )
(55,039 )
Revenues
from
Mining
Operations
Year Ended
December 31,
2010
Canada
Europe
Latin America
Exploration
$
$
1,086,744 $
160,140
175,637
–
1,422,521 $
Production
Costs
499,621 $
87,735
90,116
–
677,472 $
Segment income
Corporate and Other
Interest and sundry income
Gain on acquisition of Comaplex, net
Gain on sale of available-for-sale securities
Gain on derivative financial instruments
General and administrative
Provincial capital tax
Interest expense
Income before income and mining taxes
Amortization
140,024 $
31,231
21,134
97
192,486 $
Exploration
& Corporate
Development
– $
–
–
54,958
54,958 $
Foreign
Currency
Translation
Loss
(Gain)
Segment
Income
(Loss)
22,815 $
(2,780 )
(2,126 )
1,627
19,536 $
$
478,069
10,254
57,526
19,487
7,612
(94,327 )
6,075
(49,493 )
$
2011 ANNUAL REPORT
Table of Contents
424,284
43,954
66,513
(56,682 )
478,069
435,203
211
Revenues
from
Mining
Operations
Year Ended
December 31,
2009
Canada
Europe
Latin America
Exploration
Production
Costs
538,123 $
61,457
14,182
–
252,035 $
42,464
11,819
–
60,028 $
10,909
1,524
–
– $
–
–
36,279
36,499 $
3,582
(250 )
–
189,561
4,502
1,089
(36,279 )
$
613,762 $
306,318 $
72,461 $
36,279 $
39,831 $
158,873
$
158,873
AGNICO-EAGLE MINES LIMITED
Table of Contents
Segment
Income
(Loss)
$
Segment income
Corporate and Other
Interest and sundry income
Gain on sale of available-for-sale securities
Gain on derivative financial instruments
General and administrative
Provincial capital tax
Interest expense
Income before income and mining taxes
212
Amortization
Exploration
& Corporate
Development
Foreign
Currency
Translation
Loss
(Gain)
12,580
10,142
3,592
(63,687 )
(5,014 )
(8,448 )
$
108,038
Total Assets as at
December 31,
2011
Canada
Europe
Latin America
Exploration
December 31,
2010
$
3,205,158
771,714
1,020,078
37,312
$
4,179,446
679,258
619,263
22,384
$
5,034,262
$
5,500,351
Capital Expenditures
2011
Canada
Europe
Latin America
Exploration
2010
2009
$
319,728
95,549
313,669
8,418
$
1,004,129
67,894
103,131
97
$
435,098
84,955
136,706
–
$
737,364
$
1,175,251
$
656,759
20. SUBSEQUENT EVENTS
On January 23, 2012, the Company acquired the remaining outstanding shares of Grayd it did not already own, pursuant to a
previously announced compulsory acquisition carried out under the provisions of the Business Corporations Act (British
Columbia). The January 23, 2012 purchase price of $11.8 million was comprised of $9.3 million in cash and 68,941 newly
issued Agnico-Eagle shares.
On February 16, 2012, Agnico-Eagle announced that the Board of Directors approved the payment of a quarterly cash
dividend of $0.20 per common share, payable on March 15, 2012 to holders of record of the common shares of the Company
on March 1, 2012.
21. ALLEGED SECURITIES CLASS ACTION LAWSUITS
On November 7 and 22, 2011, the Company, three of its senior executive officers and two also being directors, and one of its
former senior executive officers and directors were named as defendants in two putative class action lawsuits, styled Jerome
Stone v. Agnico-Eagle Mines Ltd., et al. , and Chris Hastings v. Agnico-Eagle Mines Limited, et al. , which were filed in the
United States District Court for the Southern District of New York. These actions purport to be brought on behalf of all persons
who purchased the Company's securities during the period March 26, 2010 through October 19, 2011 (the "Class Period").
The lawsuits allege, among other things, that the Company violated the U.S. securities laws by making a series of material
misrepresentations and/or omitting to disclose material information during the Class Period, thereby artificially inflating the
price of the Company's securities. The original complaints seek, among other things, (i) a determination that the action is a
proper class action, and (ii) awards for
2011 ANNUAL REPORT
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213
unspecified damages and interest, costs and expenses. On February 6, 2012, the court entered an order consolidating the
Stone and Hastings actions under the caption In re Agnico-Eagle Mines Ltd. Securities Litigation and appointing a lead
plaintiff (not one of the plaintiffs who filed the original complaints). The lead plaintiff has until April 6, 2012 to file a
consolidated amended complaint. Defendants will then respond to the consolidated amended complaint, including filing a
motion to dismiss for failure to state a claim under the U.S. securities laws, if they deem it appropriate. Eberhard Scherkus,
one of the three executives employed by Agnico-Eagle at the time the case was filed and named as a defendant in the
lawsuits, resigned as a director and officer of the company effective February 15, 2012.
On March 8, 2012, a Notice of Action was issued by AF A Livforsakringsaktiebolag, AF A Sjukforsakringsaktiebolag, AF A
Trygg Hetsforsakrfngsaktiebolag, Kollektiv a Vtalsstfftelsen Trygghetsfonden TSL, and William Leslie against the Company
and certain of its current and former officers and directors. The Notice alleges, among other things, that the Company failed to
disclose the specific risks regarding ongoing water inflow at the Goldex mine. The Notice was issued by the plaintiffs as a
proposed class action on behalf of all persons who acquired securities of the Company during the period March 26, 2010 to
October 19, 2011. The plaintiffs seek to certify the action as a class action and seek damages of $250 million.
214
AGNICO-EAGLE MINES LIMITED
Table of Contents
ITEM 19 EXHIBITS
Exhibits and Exhibit Index.
the extent applicable.
The following Exhibits are filed as part of this Annual Report and incorporated herein by reference to
EXHIBIT INDEX
Exhibit No.
1.01
1.02
4.01
4.02
4.03
4.04
4.05
8.01
11.01
12.01
12.02
13.01
13.02
15.01
15.02
15.03
101
Description
Articles of Amalgamation of the Company.
Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 99.1 to the
Company's Form 6-K (File No. 001-13422) furnished to the SEC on March 28, 2008).
Amended and Restated Credit Agreement, dated as of August 4, 2011, between the Company, the
guarantors party thereto, the lenders party thereto and The Bank of Nova Scotia.
Amended and Restated Stock Option Plan (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-8 (File No. 333-152004), filed with the SEC on
August 19, 2008).**
Amended and Restated Incentive Share Purchase Plan (incorporated by reference to Exhibit 4.2
to the Company's Registration Statement on Form S-8 (File No. 333-152004) filed with the SEC on
August 19, 2008).**
Warrant Indenture, dated as of April 4, 2009, between the Company and Computershare Trust
Company of Canada (incorporated by reference to Exhibit 4.05 to the Company's Annual Report
on Form 20-F (File No. 001-13422) for the fiscal year ended December 31, 2009, filed with the
SEC on March 26, 2010).
Note Purchase Agreement, dated as of April 7, 2010, between the Company and the purchasers
party thereto (incorporated by reference to Exhibit 4.05 to the Company's Annual Report on
Form 20-F (File No. 001-13422) for the fiscal year ended December 31, 2010, filed with the SEC
on March 28, 2011).
List of subsidiaries of the Company.
Code of Ethics (incorporated by reference to Exhibit 2 to the Company's Form 6-K (File
No. 001-13422) furnished to the SEC on December 21, 2005).
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Subsections (A) and (B)
of Section 1350, Chapter 63 of Title 18, United States Code) (Sean Boyd).
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Subsections (A) and (B)
of Section 1350, Chapter 63 of Title 18, United States Code) (Ammar Al-Joundi).
Certification pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (Sean Boyd).***
Certification pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (Ammar Al-Joundi).***
Consent of Independent Registered Public Accounting Firm.
Audit Committee Charter (incorporated by reference to Exhibit 15.04 to the Company's Annual
Report on Form 20-F (File No. 001-13422) for the fiscal year ended December 31, 2005 filed with
the SEC on March 28, 2006).
Consent of Marc Legault
The following financial information from Agnico-Eagle Mines Limited's Comparative Audited
Consolidated Financial Statements, formatted in XBRL (Extensible Business Reporting Language)
and furnished electronically herewith: (i) the Consolidated Statements of Income; (ii) the
Consolidated Statements of Cash Flow; (iii) the Consolidated Balance Sheets; (iv) the
Consolidated Statements of Shareholders' Equity; (v) the Consolidated Statements of
Comprehensive Income; and (vi) the Notes to Consolidated Financial Statements, tagged as
blocks of text.
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Such exhibits and other information filed by the Company with the SEC are available to shareholders upon request at the SEC's public reference section,
may be inspected and copied at prescribed rates at the public reference room maintained by the SEC located at 110 F Street, N.E., Room 1580,
Washington, D.C. 20549, U.S.A. or may be accessed electronically at the SEC's website (www.sec.gov).
**
Management contracts or compensatory plan, contract or arrangements required to be filed and herein incorporated as an exhibit.
***
Pursuant to the SEC Release No. 33-8212 and 34-47551, this certification will be treated as "accompanying" this Annual Report on Form 20-F and not
"filed" as part of such report for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act, and
this certification will not be incorporated by reference into any filing under the U.S. Securities Act or the Exchange Act, except to the extent that the
Company specifically incorporates it by reference.
2011 ANNUAL REPORT
Table of Contents
215
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this Annual Report on its behalf.
AGNICO-EAGLE MINES LIMITED
Toronto, Canada
March 28, 2012
By: /s/ AMMAR AL-JOUNDI
Ammar Al-Joundi
Senior Vice-President, Finance and
Chief Financial Officer
216
AGNICO-EAGLE MINES LIMITED
Table of Contents
Exhibit 1.01
5. Method of
amalgamation, check A or
B Méthode choisie pour la
fusion — Cocher A ou B :
A - Amalgamation
Agreement / Convention
de fusion : or ou The
amalgamation agreement
has been duly adopted by
the shareholders of each of
the amalgamating
corporations as required
by subsection 176 (4) of
the Business Corporations
Act on the date set out
below. Les actionnaires de
cheque société qui
fusionnne ont dûment
adopte la convention de
fusion conforrnement au
paragraphe 176(4) de la
Loi sur les sociêtês par
actions a la date
mentionnee ci-dessous. B Amalgamation of a
holding corporation and
one or more of its
subsidiaries or
amalgamation of
subsidiaries / Fusion d’une
societe mere avec une ou
plusieurs de ses filiales ou
fusion de filiales : The
amalgamation has been
approved by the directors
of each amalgamating
corporation by a resolution
as required by section 177
of the Business
Corporations Act on the
date set out below. Les
administrateurs de cheque
societe qui fusionne ont
approuve la fusion par
voie de resolution
conformement à l’article
177 de la Loi sur les
societès par actions a la
date mentionnee
ci-dessous. The articles of
amalgamation in substance
contain the provisions of
the articles of
incorporation of Les
statuts de fusion
reprennent essentiellement
les dispositions des statuts
constitutifs de
Agnico-Eagle Mines
Limited/Mines
Agnico-Eagle Limitée and
are more particularly set
out in these articles. et
sont enonces textuellement
aux presents statuts.
Names of amalgamating
corporations
Denomination sociale des
societes qui fusionnent
Ontario Corporation
Number Numero de la
societe en Ontario Date of
Adoption/Approval Date
d’adoption ou
d’approbation Year Month
Day année mois jour
Agnico-Eagle Mines
Limited/Mines
Agnico-Eagle Limitée
1816276 Ontario Inc.
1742273 1816276
2010-12-29 2010-12-29
07121F (07/2007)
6. Restrictions, if
any, on business the
corporation may
carry on or on
powers the
corporation may
exercise. Limites,
s’ll y a lieu,
imposees aux
activites
commerciales ou aux
pouvoirs de la
société. None. 7. The
classes and any
maximum number of
shares that the
corporation is
authorized to issue:
Categories et nombre
maximal, s’il y a
lieu, d’actions que la
société est autorisée
à émettre : The
Corporation is
authorized to issue
an unlimited number
of shares of one class
designated as
common shares.
07121F (07/2007)
8. Rights, privileges,
restrictions and
conditions (if any)
attaching to each class
of shares and directors
authority with respect
to any class of shares
which may be issued in
series: Droits,
priviléges, restrictions
et conditions, s’il y a
lieu, rattachés à chaque
catégorie d’actions et
pouvoirs des
administrateurs relatifs
à chaque catégorie
d’actions qui peut étre
émise en série : The
holders of the common
shares are entitled: (a)
to vote at all meetings
of shareholders; and (b)
to receive the remaining
property of the
Corporation upon
dissolution. 07121F
(07/2007)
9. The issue, transfer or
ownership of shares is/is not
restricted and the restrictions (if
any) are as follows: L’émission,
le transfert ou la propriété
d’actions est/n’est pas restreint.
Les restrictions, s’il y a lieu,
sont les suivantes : not
applicable 10. Other provisions,
(if any): Autres dispositions, s’il
y a lieu : The board of directors
may from time to time, in such
amounts and on such terms as it
deems expedient: (a) borrow
money on the credit of the
Corporation; (b) issue, sell or
pledge debt obligations
(including bonds, debentures,
notes or other similar
obligations, secured on
unsecured) of the Corporation;
(c) charge, mortgage,
hypothecate or pledge all or any
of the currently-owned or
subsequently-acquired real or
personal, movable or
immovable, property of the
Corporation, including book
debts, rights, powers, franchises
and undertaking to secure any
debt obligations or any money
borrowed, or other debt or
liability of the Corporation. The
board of directors may from
time to time delegate to such
one or more of the directors and
officers of the Corporation as
may be designated by the board
all or any of the powers
conferred on the board above to
such extent and in such manner
as the board shall determine at
the time of each such
delegation. The English form
“Agnico-Eagle Mines Limited”
and the French form “Mines
Agnico-Eagle Limitée” of the
name of the Corporation are
equivalent and are used
separately. 11. The statements
required by subsection 178(2) of
the Business Corporations Act
are attached as Schedule “A”.
Les déclarations exigees aux
termes du paragraphe 178(2) de
la Loi sur les sociétés par
actions constituent l’annexe A.
12. A copy of the amalgamation
agreement or directors’
resolutions (as the case may be)
is/are attached as Schedule “B”.
Une copie de la convention de
fusion ou les résolutions des
administrateurs (selon le cas)
constitue(nt) l’annexe B.
07121F (07/2007)
These articles are
signed in duplicate.
Les présents statuts
sont signés en double
exemplaire. Name and
original signature of a
director or authorized
signing officer of each
of the amalgamating
corporations. Include
the name of each
corporation, the
signatories name and
description of office
(e.g. president,
secretary). Only a
director or authorized
signing officer can
sign on behalf of the
corporation. / Nom et
signature originale
d’un administrateur ou
d’un signataire
autorisé de chaque
société qui fusionne.
lndiquer la
dénomination sociale
de chaque société, le
nom du signataire et
sa fonction (p. ex. :
président, secrétaire).
Seul un administrateur
ou un dirigeant
habilite peut signer au
nom de la société.
AGNICO-EAGLE
MINES
LIMITED/MINES
AGNICO-EAGLE
LIMITÉE Names of
Corporations /
Dénomination sociale
des sociétés By / Par
CORPORATE
SECRETARY
Signature / Signature
R. GREGORY
LAING Print name of
signatory / Description
of Office / Fonction
Nom du signataire en
lettres moulées
1816276 ONTARIO
INC. Names of
Corporations /
Dénomination sociale
des sociétés By / Par
R. GREGORY
LAING DIRECTOR
Signature / Signature
Print name of
signatory / Description
of Office / Fonction
Nom du signataire en
lettres moulées Names
of Corporations /
Dénomination sociale
des sociétés By / Par
Signature / Signature
Print name of
signatory / Description
of Office / Fonction
Nom du signataire en
lettres moulées Names
of Corporations /
Denomination sociale
des sociétés By / Par
Signature / Signature
Print name of
signatory / Description
of Office / Fonction
Nom du signataire en
lettres moulées Names
of Corporations /
Denomination sociale
des sociétés By / Par
Signature / Signature
Print name of
signatory / Description
of Office / Fonction
Nom du signataire en
lettres moulées
07121E (05/2007)
STATEMENT OF
DIRECTOR OR
OFFICER PURSUANT
TO SUBSECTION
178(2) OF THE
BUSINESS
CORPORATIONS
ACT (ONTARIO) I, R.
Gregory Laing, of the
Town of Oakville, in
the Province of Ontario,
hereby state as follows:
1. This Statement is
made pursuant to
subsection 178(2) of the
Business Corporations
Act (the “Act”). 2. I am
the General Counsel,
Senior Vice President,
Legal and Corporate
Secretary of
AGNICO-EAGLE
MINES LIMITED (the
“Corporation”) and as
such have knowledge of
its affairs. 3. I have
conducted such
examinations of the
books and records of
the Corporation as are
necessary to enable me
to make the statements
set forth below. 4.
There are reasonable
grounds for believing
that: (a) the Corporation
is and the corporation to
be formed by the
amalgamation (the
“Amalgamation”) of the
Corporation and
1816276 Ontario Inc.
will be able to pay its
liabilities as they
become due; and (b) the
realizable value of such
amalgamated
corporation’s assets will
not be less than the
aggregate of its
liabilities and stated
capital of all classes. 5.
There are reasonable
grounds for believing
that no creditor of the
Corporation will be
prejudiced by the
Amalgamation. 6. The
Corporation has not
been notified by any
creditor that it objects
to the Amalgamation.
29 This Statement is
made this day of
December, 2010. R.
Gregory Laing General
Counsel, Senior Vice
President, Legal and
Corporate Secretary
STATEMENT OF
DIRECTOR OR
OFFICER PURSUANT
TO SUBSECTION
178(2) OF THE
BUSINESS
CORPORATIONS
ACT (ONTARIO) I, R.
Gregory Laing, of the
Town of Oakville, in
the Province of Ontario,
hereby state as follows:
1. This Statement is
made pursuant to
subsection 178(2) of the
Business Corporations
Act (the “Act”). 2. I am
the sole director of
1816276 ONTARIO
INC. (the
“Corporation”) and as
such have knowledge of
its affairs. 3. I have
conducted such
examinations of the
books and records of
the Corporation as are
necessary to enable me
to make the statements
set forth below. 4.
There are reasonable
grounds for believing
that: (a) the Corporation
is and the corporation to
be formed by the
amalgamation (the
“Amalgamation”) of the
Corporation and
Agnico-Eagle Mines
Limited will be able to
pay its liabilities as they
become due; and (b) the
realizable value of such
amalgamated
corporation’s assets will
not be less than the
aggregate of its
liabilities and stated
capital of all classes. 5.
There are reasonable
grounds for believing
that no creditor of the
Corporation will be
prejudiced by the
Amalgamation. 6. The
Corporation has not
been notified by any
creditor that it objects
to the Amalgamation.
This Statement is made
this 29 day of
December, 2010. R.
Gregory Laing Director
Schedule B
RESOLUTION OF
THE DIRECTORS OF
AGNICO-EAGLE
MINES
LIMITED/MINES
AGNICO-EAGLE
LIMITEE
“AMALGAMATION
WITH 1816276
ONTARIO INC.
WHEREAS subsection
177(1) of the Business
Corporations Act
(Ontario) (the “Act”)
provides that a holding
corporation and one or
more of its
wholly-owned
subsidiary corporations
may amalgamate and
continue as one
corporation in the
manner therein
provided without
complying with
sections 175 and 176 of
the Act; AND
WHEREAS 1816276
Ontario Inc. (the
“Subsidiary”) is a
wholly-owned
subsidiary corporation
of AGNICO-EAGLE
MINES
LIMITED/MINES
AGNICO-EAGLE
LIMITEE (the
“Corporation”); AND
WHEREAS it is
considered desirable
and in the best interests
of the Corporation that
the Corporation and the
Subsidiary amalgamate
(the “Amalgamation”)
and continue as one
corporation (the
“Amalgamated
Corporation”) pursuant
to subsection 177(1) of
the Act; AND
WHEREAS R. Gregory
Laing, being an officer
of the Corporation, has
disclosed, pursuant to
subsection 132(6) of the
Act, the nature and
extent of his interest in
the Amalgamation by
virtue of his also being
the sole director and
officer of the
Subsidiary; AND
WHEREAS subsection
132(5) of the Act
provides that a director
having an interest in a
contract or transaction
with the corporation
within the meaning of
subsection 132(1) of the
Act shall not attend any
part of a meeting of
directors during which
the contract or
transaction is discussed
and shall not vote on
any resolution to
approve the contract or
transaction, unless the
contract or transaction
is, among other things,
one with an affiliate;
AND WHEREAS the
Corporation and the
Subsidiary are affiliated
within the meaning of
the Act;
AND WHEREAS
subsection 132(7) of the
Act provides that where
a material contract is
made or a material
transaction is entered
into between a
corporation and another
person of which a
director or officer of the
corporation is a director
or officer or in which
he or she has a material
interest, the director or
officer is not
accountable to the
corporation or to its
shareholders for any
profit or gain realized
from the contract or
transaction and the
contract or transaction
is neither void nor
voidable, by reason
only of that relationship
or by reason only that
the director is present at
or is counted to
determine the presence
of a quorum at the
meeting of directors
that authorized the
contract or transaction,
if the director or officer
disclosed his or her
interest in accordance
with the applicable
provisions of section
132 and the contract or
transaction was
reasonable and fair to
the corporation at the
time it was so
approved; IT IS
RESOLVED THAT: 1.
the Amalgamation of
the Corporation and the
Subsidiary, to be
effective as of the first
moment on January 1,
2011 pursuant to the
provisions of subsection
177(1) of the Act, is
approved; 2. the
directors determine that
the Amalgamation is
reasonable and fair to
the Corporation; 3.
upon the Amalgamation
becoming effective, all
the shares (whether
issued or unissued) of
the Subsidiary shall be
cancelled without any
repayment of capital in
respect thereof; 4. upon
the Amalgamation
becoming effective, the
by-laws of the
Corporation as in effect
immediately prior to the
Amalgamation shall be
the by-laws of the
Amalgamated
Corporation; 5. no
securities shall be
issued and no assets
shall be distributed by
the Amalgamated
Corporation in
connection with the
Amalgamation; and 6.
any one director or
officer is authorized
and directed, for and in
the name of and on
behalf of the
Corporation, to execute
(whether under the
corporate seal of the
Corporation or
otherwise) and deliver
all such agreements,
instruments, certificates
and other documents
and to do all such other
acts and things as they
may determine to be
necessary or advisable
in connection with the
Amalgamation,
including the execution
and delivery to the
Director appointed
under the Act of articles
of amalgamation in the
prescribed form in
respect of the
Amalgamation, the
execution of any such
The undersigned, being
the General Counsel,
Senior Vice-President,
Legal and Corporate
Secretary of
AGNICO-EAGLE
MINES
LIMITED/MINES
AGNICO-EAGLE
LIMITÉE (the
“Corporation”) hereby
certifies that the
foregoing is a true and
correct copy of a
resolution passed by the
directors of the
Corporation on
December 29, 2010,
which resolution is in
full force and effect as
of the date hereof,
unamended. DATED
December 30, 2010. R.
Gregory Laing General
Counsel, Senior
Vice-President and
Corporate Secretary
Schedule B
RESOLUTION OF
THE DIRECTORS OF
1816276 ONTARIO
INC.
“AMALGAMATION
WITH
AGNICO-EAGLE
MINES LIMITED
WHEREAS subsection
177(1) of the Business
Corporations Act
(Ontario) (the “Act”)
provides that a holding
corporation and one or
more of its
wholly-owned
subsidiary corporations
may amalgamate and
continue as one
corporation in the
manner therein
provided without
complying with
sections 175 and 176 of
the Act; AND
WHEREAS 1816276
ONTARIO INC. (the
“Corporation”) is a
wholly-owned
subsidiary of
Agnico-Eagle Mines
Limited/Mines
Agnico-Eagle
LIMITÉE &
(“Parentco”); AND
WHEREAS it is
considered desirable
and in the best interests
of the Corporation that
the Corporation and
Parentco amalgamate
(the “Amalgamation”)
and continue as one
corporation (the
“Amalgamated
Corporation”) pursuant
to subsection 177(1) of
the Act; AND
WHEREAS R. Gregory
Laing, being the sole
director and officer of
the Corporation, has
disclosed, pursuant to
subsection 132(6) of the
Act, the nature and
extent of his interest in
the Amalgamation by
virtue of his also being
an officer of Parentco;
AND WHEREAS
subsection 132(5) of the
Act provides that a
director having an
interest in a contract or
transaction with the
corporation within the
meaning of subsection
132(1) of the Act shall
not attend any part of a
meeting of directors
during which the
contract or transaction
is discussed and shall
not vote on any
resolution to approve
the contract or
transaction, unless the
contract or transaction
is, among other things,
one with an affiliate;
AND WHEREAS the
Corporation and
Parentco are affiliated
within the meaning of
the Act; AND
WHEREAS subsection
132(7) of the Act
provides that where a
material contract is
made or a material
transaction is entered
into between a
corporation and another
person of which a
director or officer of the
corporation is a director
or officer or in which
he or she has a material
interest, the director or
officer is not
accountable to the
corporation or to its
shareholders for any
profit or gain realized
from the contract or
transaction and the
contract or transaction
is neither void nor
voidable, by reason
only of that relationship
or by reason only that
the director is present at
or is counted to
determine the presence
of a quorum at the
meeting of directors
that authorized the
contract or transaction,
if the director or officer
disclosed his or her
interest in accordance
with the applicable
provisions of section
132 and the contract or
transaction was
reasonable and fair to
the corporation at the
time it was so
approved; IT IS
RESOLVED THAT: 1.
the Amalgamation of
the Corporation and the
Subsidiary, to be
effective as of the first
moment on January 1,
2011 pursuant to the
provisions of subsection
177(1) of the Act, is
approved; 2. the
director determines that
the Amalgamation is
reasonable and fair to
the Corporation; 3.
upon the Amalgamation
becoming effective, all
the shares (whether
issued or unissued) of
the Corporation shall be
cancelled without any
repayment of capital in
respect thereof; 4. upon
the Amalgamation
becoming effective, the
by-laws of Parentco as
in effect immediately
prior to the
Amalgamation shall be
the by-laws of the
Amalgamated
Corporation; 5. no
securities shall be
issued and no assets
shall be distributed by
the Amalgamated
Corporation in
connection with the
Amalgamation; and 6.
any director or officer
of the Corporation is
authorized and directed,
for and in the name of
and on behalf of the
Corporation, to execute
(whether under the
corporate seal of the
Corporation or
otherwise) and deliver
all such agreements,
instruments, certificates
and other documents
and to do all such other
acts and things as they
may determine to be
necessary or advisable
in connection with the
Amalgamation,
including the execution
and delivery to the
Director appointed
under the Act of articles
of amalgamation in the
prescribed form in
respect of the
Amalgamation, the
execution of any such
document or the doing
of any such other act or
thing being conclusive
evidence of such
determination.”
The undersigned,
being the sole director
and Secretary of
1816276 ONTARIO
INC. (the
“Corporation”) hereby
certifies that the
foregoing is a true and
correct copy of a
resolution passed by
the sole director of the
Corporation on
December 29, 2010,
which resolution is in
full force and effect as
of the date hereof,
unamended. DATED
December 30, 2010.
R. Gregory Laing Sole
Director and Secretary
Exhibit 4.01
Execution Version
AGNICO-EAGLE
MINES LIMITED as
Borrower - and - THE
GUARANTORS FROM
TIME TO TIME PARTY
TO THIS AGREEMENT
as Guarantors - and THE LENDERS FROM
TIME TO TIME PARTY
TO THIS AGREEMENT
- and - THE BANK OF
NOVA SCOTIA as Joint
Lead Arranger, Joint
Bookrunner and
Administrative Agent and - THE
TORONTO-DOMINION
BANK as Joint Lead
Arranger, Joint
Bookrunner and
Syndication Agent - and
- BANK OF
MONTREAL, ROYAL
BANK OF CANADA
AND CANADIAN
IMPERIAL BANK OF
COMMERCE as
Co-Documentation
Agents SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT DATED
AS OF AUGUST 4,
2011 US$1,200,000,000
CREDIT FACILITIES
BORDEN LADNER
GERVAIS LLP DAVIES
WARD PHILLIPS &
VINEBERG LLP
- i - TABLE OF
CONTENTS 1.
INTERPRETATION
2 1.1 Definitions 2 1.2
Interpretation 35 1.3
Currency 35 1.4
Generally Accepted
Accounting Principles
36 1.5 Division and
Titles 36 1.6
Calculations 36 1.7
Assignment and
Assumption 36 1.8
Amendment and
Restatement 37 2.
THE CREDIT 37 2.1
Amounts of Credit
Facility 37 2.2
Availment Options
under Credit Facility
37 2.3 Revolving
Credit Facility 38 2.4
Purpose/Use of the
Credit Facility 38 2.5
Term and Repayment
38 2.6 Voluntary
Prepayments and
Voluntary
Cancellations 40 2.7
Interest Rates 41 2.8
Annual Agency Fees
43 2.9 Exchange Rate
Fluctuations 43 3.
ADVANCES,
CONVERSIONS
AND OPERATION
OF ACCOUNTS 44
3.1 Notice of
Borrowing - Direct
Advances 44 3.2
Canadian Dollar-Libor
Funded Advances 44
3.3 LIBOR Advances
and Conversions 44
3.4 Letters of Credit
45 3.5 Swing Line
Advances 51 3.6
Defaulting Lenders 54
3.7 Evidence of
Indebtedness 55 3.8
Apportionment of
Advances 55 3.9
Notices Irrevocable 55
3.10 Limits on BA
Advances and Libor
Advances 55 4.
CALCULATION OF
INTEREST AND
FEES 56 4.1
Calculation of Interest
on Prime Rate
Advances and US
Base Rate Advances
56 4.2 Payment of
Interest on Prime Rate
Advances and US
Base Rate Advances
56 4.3 Calculation of
Interest on Libor Basis
56 4.4 Payment of
Interest on Libor Basis
56 4.5 Fixing of
LIBOR 56 4.6 Interest
on Miscellaneous
Amounts 57 4.7
Default Interest 57 4.8
Maximum Interest
Rate 57 4.9 Interest
Act 57 5. BANKERS'
ACCEPTANCES 58
5.1 Advances by
Bankers' Acceptances
and Conversions into
Bankers' Acceptances
58 5.2 Acceptance
Procedure 59 5.3
Purchase of Bankers'
Acceptances and
Discount Notes 60
- ii - 5.4 Maturity Date
of Bankers'
Acceptances 60 5.5
Deemed Conversions
on the Maturity Date of
Bankers' Acceptances
61 5.6 Conversion and
Extension Mechanism
61 5.7 No Prepayment
of Bankers'
Acceptances 61 5.8
Apportionment
Amongst the Lenders
61 5.9 Days of Grace
62 5.10 Obligations
Absolute 62 5.11
Depository Bills and
Notes Act 62 6.
ILLEGALITY,
INCREASED COSTS,
INDEMNIFICATION
AND MARKET
DISRUPTIONS 63 6.1
Illegality 63 6.2
Increased Costs 63 6.3
Taxes 65 6.4 Breakage
Costs, Failure to
Borrow or Repay After
Notice 67 6.5
Mitigation Obligations:
Replacement of
Lenders 68 6.6 Market
for Bankers'
Acceptances and Libor
Advances 70 7.
PROVISIONS
RELATING TO
PAYMENTS 70 7.1
Payment of Losses
Resulting From a
Prepayment 70 7.2
Imputation of
Prepayments 70 7.3
Currency of Payments
71 7.4 Payments by the
Borrower to the Agent
71 7.5 Payment on a
Business Day 71 7.6
Payments by the
Lenders to the Agent 71
7.7 Netting 71 7.8
Application of
Payments 72 7.9 No
Set-Off or
Counterclaim by
Borrower 72 7.10 Debit
Authorization 72 8.
GUARANTEES 72 8.1
Guarantees 72 8.2
Additional Guarantors;
Release 73 8.3
Obligations Supported
by the Guarantees 73
8.4 Other Supported
Obligations 74 8.5
Limitation 74 9.
CONDITIONS
PRECEDENT 74 9.1
Conditions to
Effectiveness 74 9.2
Conditions Precedent to
each Advance 76 9.3
Waiver of Conditions
Precedent 76 10.
REPRESENTATIONS
AND WARRANTIES
76 10.1 Existence,
Power and Authority 76
10.2 Loan Documents
77 10.3 Conduct of
Business 77 10.4
Litigation 78 10.5
Financial Statements
and Information 78 10.6
Subsidiaries, etc. 79
10.7 Title to Property
79
- iii - 10.8 Taxes 80
10.9 Insurance 80 10.10
No Material Adverse
Effect 80 10.11 Pension
Matters 80 10.12
Ranking and Priority 81
10.13 Absence of
Default 81 10.14
Environment 81 10.15
Mines 82 10.16
Complete and Accurate
Information 82 10.17
Survival of
Representations and
Warranties 82 11.
FINANCIAL
COVENANTS 83 11.1
Total Net Debt to
EBITDA Ratio 83 11.2
Tangible Net Worth 83
12. AFFIRMATIVE
COVENANTS 83 12.1
Existence and Good
Standing 83 12.2
Permits 83 12.3 Books
and Records 84 12.4
Property 84 12.5
Material Contracts 84
12.6 Financial
Information 84 12.7
Compliance with
Applicable Law 85 12.8
Insurance 85 12.9
Payment of Taxes 85
12.10 Access and
Inspection 85 12.11
Maintenance of
Accounts 86 12.12
Performance of
Obligations 86 12.13
Litigation 86 12.14
Payment of Fees and
Other Expenses 86
12.15 Priority of
Obligations 87 12.16
Post-Closing
Documentation 87
12.17 Barbados Joinder
Agreement 88 13.
REPORTING AND
NOTICE
REQUIREMENTS 88
13.1 Financial and
Other Reporting 88
13.2 Requirements for
Notice 90 14.
NEGATIVE
COVENANTS 90 14.1
Debt 91 14.2 Liens 91
14.3 Investments 91
14.4 Distributions 91
14.5 Asset Dispositions
92 14.6 Derivative
Instruments 92 14.7
Affiliate Transactions
92 14.8 Subordinated
Debt 93 14.9 Business
Combination,
Reorganization, etc. 93
- iv - 15. EVENTS OF
DEFAULT AND
ENFORCEMENT 94
15.1 Events of Default
94 15.2 Remedies 97
15.3 Notice 97 15.4
Escrowed Funds for
Letters of Credit and
Bankers' Acceptances
98 15.5 Costs 99 15.6
Relations with the
Obligors 99 15.7
Application of Proceeds
99 16. THE AGENT
AND THE LENDERS
99 16.1 Authorization
of Agent 99 16.2
Agent's Responsibility
100 16.3 Rights of
Agent as Lender 102
16.4 Indemnity by
Lenders 102 16.5
Notice by Agent to
Lenders 102 16.6
Protection of Agent Advances and
Payments 103 16.7
Notice by Lenders to
Agent 103 16.8 Sharing
Among the Lenders 103
16.9 Procedure With
Respect to Advances
105 16.10
Non-Payment by
Lenders 105 16.11
Accounts Kept by Each
Lender 105 16.12
Binding Determinations
106 16.13 Amendment
of Article 16 106 16.14
Decisions,
Amendments and
Waivers of the Lenders
106 16.15 Authorized
Waivers, Variations and
Omissions 106 16.16
Provisions for the
Benefit of Lenders
Only 107 16.17
Assignment by Agent
to an Affiliate 107
16.18 Collective Action
of the Lenders 107
16.19 Resignation of
Agent 107 17.
CURRENCY
CONVERSION, ETC.
108 17.1 Rules of
Conversion 108 17.2
Determination of
Equivalent Amount in
another Currencies 109
18. ASSIGNMENT 109
18.1 Assignment by the
Borrower 109 18.2
Assignments and
Transfers by the
Lenders 110 18.3
Register 112 18.4
Electronic Execution of
Assignments 112 18.5
Participations 112 18.6
Limitations Upon
Participant Rights 113
18.7 Promissory Notes
113 19.
MISCELLANEOUS
113 19.1 Notices 113
19.2 Amendment and
Waiver 114 19.3
Lender Replacement
115 19.4 Independent
Engineer and Other
Consultants 118 19.5
Entire Agreement 118
19.6 Indemnification
and Set-Off 118
- v - 19.7 Benefit of
Agreement 119 19.8
Counterparts 119 19.9
This Agreement to
Govern 119 19.10
Applicable Law 119
19.11 Severability 119
19.12 Further
Assurances 119 19.13
Good Faith and Fair
Consideration 120
19.14 Responsibility of
the Lenders 120 19.15
Indemnity 120 19.16
Confidentiality 121
19.17 Reinstatement
122 19.18 Submission
to Jurisdiction 122
19.19 Waiver of Venue
123 19.20 Waiver of
Jury Trial 123 19.21
Language 123 19.22
Third Party
Beneficiaries 123 19.23
Formal Date 124 19.24
Swedish Companies
Act 124 19.25 Finnish
Companies Act 124
EXHIBIT A COMMITMENTS
EXHIBIT B ASSIGNMENT AND
ASSUMPTION
AGREEMENT
EXHIBIT C - LOAN
MARKET DATA
TEMPLATE EXHIBIT
D - NOTICE OF
BORROWING AND
CERTIFICATE
EXHIBIT E COMPLIANCE
CERTIFICATE
EXHIBIT F ADDITIONAL
GUARANTOR
AGREEMENT
SCHEDULE A PERMITTED LIENS
SCHEDULE B OTHER SUPPORTED
OBLIGATIONS
SCHEDULE C LITIGATION
SCHEDULE D EQUITY INTERESTS
AND
ORGANIZATION
STRUCTURE
SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
entered into as of the
4th day of August,
2011 B E T W E E N:
AGNICO-EAGLE
MINES LIMITED as
Borrower - and 1715495 ONTARIO
INC. 1641315
ONTARIO INC.
AGNICO-EAGLE
SWEDEN AB
AGNICO-EAGLE
FINLAND OY
AGNICO EAGLE
MEXICO S.A. DE
C.V. TENEDORA
AGNICO EAGLE
MEXICO S.A. DE
C.V.
AGNICO-EAGLE
MINES MEXICO
COOPERATIE U.A.
AGNICO-EAGLE
MINES SWEDEN
COOPERATIE U.A.
as Guarantors - and THE LENDERS
LISTED ON
EXHIBIT A TO THIS
AGREEMENT
FROM TIME TO
TIME as Lenders and - THE BANK OF
NOVA SCOTIA as
Administrative Agent
WHEREAS certain of
the parties entered into
a credit agreement
dated as of September
4, 2008, which credit
agreement was
amended and restated
as of June 15, 2009,
further amended by
notice and amendment
no. 1 to amended and
restated credit
agreement dated as of
April 6, 2010, and
further amended and
restated by amended
and restated credit
agreement dated as of
June 22, 2010 (the
"Existing Credit
Agreement"); AND
WHEREAS the
Borrower has
requested certain
amendments to the
credit facilities
available under the
Existing Credit
Agreement, as set
forth herein; AND
WHEREAS the
parties hereto are
entering into this
Agreement to provide
for the terms of such
amended credit
facilities by amending
and restating the
Existing Credit
Agreement.
- 2 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT NOW
THEREFORE for
valuable consideration
and intending to be
legally bound by this
Agreement, the parties
agree that the Existing
Credit Agreement is
amended and restated
as follows: 1.
INTERPRETATION
1.1 Definitions The
following words and
expressions, when used
in this Agreement,
unless the contrary is
stipulated, have the
following meaning:
1.1.1 "Acceptance
Date" has the meaning
defined in Section
5.1.1; 1.1.2 "Accepting
Lender Notice" has the
meaning defined in
Section 19.3.2; 1.1.3
"Acquisition Deadline"
has the meaning
defined in Section
19.3.3.1; 1.1.4
"Acquisition Notice"
has the meaning
defined in Section
19.3.3.1; 1.1.5
"Acquisition Request
Notice" has the
meaning defined in
Section 19.3.3; 1.1.6
"Advance" means any
advance by the Lenders
under this Agreement
including (a) direct
advances of funds by
way of Prime Rate
Advances, Swing Line
Advances, US Base
Rate Advances and
Libor Advances, (b)
indirect advances by
way of BA Advances
and the issuance of
Letters of Credit, (c)
any deemed "Advance"
hereunder and (d) any
renewal, extension,
rollover or conversion
of any "Advance"; and
any reference relating
to the amount of
"Advances" outstanding
under this Agreement
means the sum (without
duplication) of all
outstanding Prime Rate
Advances, Swing Line
Advances, US Base
Rate Advances and
Libor Advances, plus
the face amount of all
outstanding Bankers'
Acceptances and
Letters of Credit; 1.1.7
"Affiliate" means, with
respect to a specified
Person, another Person
that directly, or
indirectly through one
or more intermediaries,
Controls or is
Controlled by or is
under common Control
with the Person
specified; 1.1.8
"Agency Fee Letter"
means the confidential
letter agreement dated
June 22, 2010 between
the Agent and the
Borrower, providing for
the payment of certain
agency fees in relation
to the Credit Facility;
1.1.9 "Agent" means
The Bank of Nova
Scotia, in its capacity as
administrative agent for
the Lenders; 1.1.10
"Agreement", "herein",
"hereby", "hereto"
"hereunder" or similar
expressions mean this
agreement, the recitals
hereto and any
schedules
- 3 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT hereto,
as amended,
supplemented, restated
and replaced from
time to time in
accordance with the
provisions hereof, and
not any particular
article, section,
subsection, paragraph
or clause or other
portion hereof; 1.1.11
"Applicable Law"
means (a) any
domestic or foreign
statute, law (including
common and civil
law), treaty, code,
ordinance, rule,
regulation, restriction
or by-law (zoning or
otherwise), (b) any
judgment, order, writ,
injunction, decision,
ruling, decree or
award or (c) any
regulatory policy,
practice, guideline or
directive; in each case,
applicable to and
binding on the Person
referred to in the
context in which the
term is used or the
Property of such
Person as a legally
enforceable
requirement; 1.1.12
"Applicable Margin"
means the relevant
percentage set forth in
the relevant row of the
table in Section 2.7.1;
1.1.13 "Applicable
Percentage" means,
with respect to any
Lender, the percentage
of the total
Commitments
represented by such
Lender's
Commitment;
provided however,
that if the
Commitments have
terminated or expired,
the "Applicable
Percentage" shall be,
with respect to any
Lender, the percentage
of total Credit
Exposure of all
Lenders represented
by such Lender’s
Credit Exposure;
1.1.14 "Approved
Fund" means any
Person (other than a
natural Person) that
(a) is or will be
engaged in making,
purchasing, holding or
otherwise investing in
commercial loans and
similar extensions of
credit in the Ordinary
Course and (b) is
administered or
managed by a Lender,
an Affiliate of a
Lender or an entity or
an Affiliate of an
entity that administers
or manages a Lender;
1.1.15 "Approving
Lenders" has the
meaning defined in
Section 19.3.2; 1.1.16
"Arm's Length" has
the meaning given to
that term for the
purposes of the
Income Tax Act
(Canada) on the date
hereof; 1.1.17 "Asset
Disposition" means,
with respect to any
Obligor, the sale,
lease, transfer,
assignment or other
disposition or
alienation of all or any
part of the Property
now held or
subsequently acquired
by it (including Equity
Interests), or the
- 4 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
1.1.20 "Assignment
and Assumption
Agreement" means
an agreement
substantially in the
form of Exhibit B;
1.1.21 "Associate"
has the meaning
given to that term in
the Business
Corporations Act
(Ontario) on the date
hereof; 1.1.22
"Available Amount"
has the meaning
defined in Section
19.3.3.1; 1.1.23
"Available Proceeds"
has the meaning
defined in Section
5.2.3.4; 1.1.24 "BA
Advance" means an
Advance in
Canadian Dollars
which the Borrower
has elected to borrow
by way of Bankers'
Acceptances; 1.1.25
"BA Lender" means
a Lender which is a
bank that accepts
bankers' acceptances
issued in Canada;
1.1.26 "BA
Proceeds" means (a)
for a Bankers'
Acceptance, an
amount calculated on
the applicable
Drawdown Date by
multiplying: (i) the
face amount of the
Bankers' Acceptance
by (ii) the following
fraction: 1 (1 +
(Bankers'
Acceptance Discount
Rate × Designated
Period (in days) ÷
365)) with such
fraction being
rounded up or down
to the fourth decimal
place and .00005
being rounded up,
and (b) with respect
to Non-BA Lenders,
the face amount of
Discount Notes
issued to them, less a
discount established
in the same manner
as provided in clause
(a) above (with
references to
"Bankers'
Acceptances" being
replaced by
references to
"Discount Notes");
1.1.27 "BA Request"
has the meaning
defined in subsection
5.1.1; 1.1.28
"Bankers'
Acceptance" means a
non-interest bearing
draft or bill of
exchange in
Canadian Dollars
drawn by the
Borrower and
accepted by a Lender
in accordance with
the provisions of
Article 5 and
includes a Discount
Note where the
context permits. In
cases where the
Lenders elect to use
a clearinghouse as
contemplated by the
Depository Bills and
Notes Act (Canada),
"Bankers'
Acceptance" shall
mean a depository
bill (as defined in
such Act) in
Canadian Dollars
signed by the
Borrower and
accepted by a
Lender. Drafts or
- 5 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT or six
months quoted on
Thomson Reuters
Service, page CDOR
"Canadian Interbank
Bid BA Rates" (the
"CDOR Rate"),
having an identical
Designated Period to
that of the Bankers'
Acceptances to be
issued on such day
and (b) in respect of
Bankers' Acceptances
to be purchased by the
Lenders which are
Schedule II banks
under the Bank Act
(Canada) or Schedule
III banks under the
Bank Act (Canada)
which are not subject
to the restrictions and
requirements referred
to in Section 524(2)
thereof, and in respect
of Discount Notes, the
average of the rates
for Canadian Dollar
bankers' acceptances
quoted by the
Schedule II Reference
Lenders (rounded up
to the nearest 1/100 of
1%), provided that
such average rate may
not exceed the rate
determined under
clause (a) by more
than 0.10% per annum
(in each of cases (a)
and (b), the "Discount
Rates"). In all cases,
the Discount Rates
shall be quoted at
approximately 10:00
a.m. on the Drawdown
Date calculated on the
basis of a year of 365
days. In the absence of
any such
determination, the
"Bankers' Acceptance
Discount Rate" which
would have been
determined in
accordance with
clause (a) or clause (b)
above, respectively,
shall be equal to the
average of the
discount rates for
bankers' acceptances
(rounded up to the
nearest 1/100 of 1%)
of: (i) in the case of
clause (a), the
Schedule I Reference
Lenders; and (ii) in the
case of clause (b), the
Schedule II Reference
Lenders; calculated on
the basis of a year of
365 days, established
in accordance with
their normal practices
at 10:00 a.m. on the
Drawdown Date, for
bankers' acceptances
accepted by the
Schedule I Reference
Lenders or the
Schedule II Reference
Lenders, as the case
may be, in amounts
equal to the amount of
the BA Advances to
be made that day by
the Schedule I
Reference Lenders or
the Schedule II
Reference Lenders, as
the case may be,
having an identical
Designated Period to
that of the proposed
Bankers' Acceptances
to be issued on such
day, provided that the
"Bankers' Acceptance
Discount Rate"
replacing the rate
which would have
been determined under
clause (b) above shall
not exceed the
"Bankers' Acceptance
- 6 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.31
"Borrower" means
Agnico-Eagle Mines
Limited, an Ontario
corporation; 1.1.32
"Branch" means the
Global Wholesale
Services – Loan
Operations department of
The Bank of Nova Scotia
at 720 King Street West,
Third Floor, Toronto,
Ontario, M5V 2T3 or
such other branch as is
designated from time to
time by the Agent,
provided that notice of
such designation has
been received or deemed
to have been received in
accordance with the
Agreement; 1.1.33
"Business Combination"
has the meaning defined
in Section 14.9.1.4.
1.1.34 "Business Day"
means any day, except
Saturdays, Sundays and
any other day which in
Toronto, Ontario or
Montreal, Quebec is a
holiday or a day upon
which banks are
authorized or required by
Applicable Law or by
local proclamation to be
closed in Toronto,
Ontario or Montreal,
Quebec; 1.1.35
"Canadian Dollar-Libor
Funded Lenders" means
any Lender that funds its
Canadian dollars from
the London interbank
market and which the
Borrower has accepted in
writing as a "Canadian
Dollar- Libor Funded
Lender", and "Canadian
Dollar-Libor Funded
Lender" means any of
the "Canadian
Dollar-Libor Funded
Lenders"; 1.1.36
"Canadian Dollar-Libor
Term" means the interest
period equal to the
shortest interest period
displayed on the Libor01
page of Reuters Service
for C$1,000,000 at or
about 11:00 a.m.
(London time) on the
date of determination;
1.1.37 "Canadian
Dollars" or "C$" means
the lawful currency of
Canada; 1.1.38 "Capital
Lease" means any lease
which is required to be
capitalized on a balance
sheet of the lessee in
accordance with GAAP;
1.1.39 "Capital Lease
Obligations" means, as to
any Person, an obligation
of such Person to pay
rent or other amounts
under a Capital Lease
and the amount of such
obligation shall be the
capitalized amount
thereof, determined in
accordance with GAAP;
1.1.40 "Capital
Reorganization" means
any change in the issued
and outstanding Equity
Interests of a Person
involving the
reclassification of such
Equity Interests or the
conversion of such
Equity Interests into, or
exchange of such Equity
Interests for, cash,
securities or other
property;
- 7 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.41
"Cash Equivalents"
means, as of the date of
any determination
thereof, instruments of
the following types:
1.1.41.1 obligations of,
or unconditionally
guaranteed by, the
governments of Canada
or the USA, or any
agency of either of
them backed by the full
faith and credit of the
governments of Canada
or the USA,
respectively, maturing
not more than one year
from the date of
acquisition; 1.1.41.2
marketable direct
obligations of the
governments of one of
the provinces of
Canada, one of the
states of the USA, or
any agency thereof, or
of any county,
department,
municipality or other
political subdivision of
Canada or the USA, the
payment or guarantee
of which constitutes a
full faith and credit
obligation of such
province, state,
municipality or other
political subdivision,
which matures not more
than one year from the
date of acquisition and
which, at the time of
acquisition, is accorded
a short-term credit
rating of at least A-1 by
S&P, at least P-1 by
Moody's or at least
R-1(middle) by DBRS;
1.1.41.3 commercial
paper, bonds, notes,
debentures and bankers'
acceptances issued by a
Person residing in
Canada or the USA and
not referred to in
subsections 1.1.41.1,
1.1.41.2 or 1.1.41.4,
and maturing not more
than one year from the
date of issuance which,
at the time of
acquisition, is accorded
a short-term credit
rating of at least A-1 by
S&P, at least P-1 by
Moody's or at least
R-1(middle) by DBRS,
and, in respect of
Canadian asset-backed
commercial paper that
is based on a DBRS
rating, provided further
that such asset-backed
commercial paper is
issued by a Person
appearing on the list of
"Global Liquidity
Standard for ABCP
Issuers" published and
maintained by DBRS
(for so long as such list
is in existence and is
continually being
updated); 1.1.41.4 (a)
certificates of deposit
maturing not more than
one year from the date
of issuance thereof,
issued by a bank or
trust company
organized under the
laws of the USA, any
state thereof, or Canada
or any province thereof
or (b) Principal
Currency certificates of
deposit maturing not
more than one year
from the date of
acquisition and issued
by a bank in a Principal
Jurisdiction; in all cases
having capital, surplus
and undivided profits
aggregating at least
US$500,000,000 (or the
- 8 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
short-term credit rating
of at least A-1 by S&P,
at least P-1 by Moody's
or at least R-1(middle)
by DBRS; 1.1.41.5 any
repurchase agreement
having a term of 30
days or less entered into
with any Lender or any
Person satisfying the
criteria set forth in
subsection 1.1.41.4
which is secured by a
fully perfected security
interest in any
obligation of the type
described in subsection
1.1.41.1 or 1.1.41.2 and
has a market value at
the time such
repurchase agreement is
entered into of not less
than 100% of the
repurchase obligation of
such commercial
banking institution
thereunder; and
1.1.41.6 investments in
any security issued by
an investment company
registered under section
8 of the Investment
Company Act of 1940
(15 U.S.C. 80a-8) that
is a money market fund
in compliance with all
applicable requirements
of SEC Rule 2a-7 (17
CFR 270.2a-7); 1.1.42
"CDS" has the meaning
defined in Section 5.11;
1.1.43 "CDS & Co."
has the meaning
defined in Section 5.11;
1.1.44 "Change in Law"
means the occurrence,
after the date of this
Agreement, of any of
the following: (a) the
adoption or taking
effect of any Applicable
Law, (b) any change in
any Applicable Law or
in the administration,
interpretation or
application thereof by
any Governmental
Authority, including
any such change
resulting from any
quashing by a
Governmental
Authority of an
interpretation of any
Applicable Law or (c)
the making or issuance
of any Applicable Law
by any Governmental
Authority; 1.1.45
"Change of Control"
means: (a) the
acquisition, directly or
indirectly, by any
means whatsoever, by
any Person, or group of
Persons acting jointly
or in concert,
(collectively, an
"offeror") of beneficial
ownership of, or the
power to exercise
control or direction
over, or securities
convertible or
exchangeable into, any
securities of the
Borrower carrying in
aggregate (assuming the
exercise of all such
conversion or exchange
rights in favour of the
offeror) more than 50%
of the aggregate votes
represented by the
voting stock then issued
and outstanding or
otherwise entitling the
offeror to elect a
majority of the board of
directors of the
Borrower; or (b) the
replacement by way of
election or appointment
at any time of one-half
or more of the total
number of the then
- 9 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
members of the board
of directors of the
Borrower, or the
election or
appointment of new
directors comprising
one-half or more of
the total number of
members of the board
of directors in office
immediately following
such election or
appointment; unless,
in any such case, the
nomination of such
directors for election
or their appointment is
approved by the board
of directors of the
Borrower in office
immediately
preceding such
nomination or
appointment in
circumstances where
such nomination or
appointment is made
other than as a result
of a dissident public
proxy solicitation,
whether actual or
threatened; 1.1.46
"Claim" has the
meaning defined in
Section 19.15; 1.1.47
"Commitment" means
the portion of the
Credit Facility which
a Lender has agreed to
Advance to the
Borrower as set out in
Exhibit A and, where
the context requires,
the maximum amount
of Advances which
such Lender has
covenanted to make,
which Exhibit shall be
amended and
distributed to all
parties by the Agent
from time to time as
such commitments
change in accordance
with this Agreement;
1.1.48 "Compliance
Certificate" means a
certificate in the form
of Exhibit E executed
by the chief financial
officer or another
senior officer of the
Borrower; 1.1.49
"Consolidated
Hedging Exposure"
means the aggregate
of all amounts that
would be payable to
all Persons by the
Borrower and its
Subsidiaries or to the
Borrower and its
Subsidiaries, on the
date of determination,
taking into account all
legally enforceable
netting arrangements,
pursuant to each ISDA
Master Agreement
between the Borrower
and each such Person
and each Subsidiary
and each such Person,
as if all Derivative
Instruments under
such ISDA Master
Agreements were
being terminated on
that day; 1.1.50
"Constating
Documents" means,
with respect to any
Person, its articles or
certificate of
incorporation,
amendment,
amalgamation,
continuance or
association,
memorandum of
association,
declaration of trust,
partnership agreement,
limited liability
company agreement or
other similar
- 10 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.52
"Continuing Lenders"
means the Lenders
which were party to
the Existing Credit
Agreement; 1.1.53
"Contract" means any
agreement, contract,
indenture, lease, deed
of trust, licence,
option, undertaking,
promise or any other
commitment or
obligation, whether
oral or written,
express or implied,
other than a Permit;
1.1.54 "Control"
means the possession,
directly or indirectly,
of the power to direct
or cause the direction
of the management or
policies of a Person,
whether through the
ability to exercise
voting power, by
Contract or otherwise
and "Controlling" and
"Controlled" have
corresponding
meanings; 1.1.55
"Core Business"
means the
development,
construction and
operation of mining
properties and any
operation relating to
mining, including the
manufacturing,
processing or refining
of products produced
from mining
operations and
properties, and the
sale of products
produced from or in
connection with
mining operations and
properties, and the
financing related
thereto; 1.1.56 “Credit
Exposure” means with
respect to any Lender
at any time, the sum of
(a) the outstanding
Advances (excluding,
as applicable, Swing
Line Loans and
Letters of Credit) of
such Lender, plus (b)
such Lender’s
Applicable Percentage
of all Letter of Credit
Obligations, plus (c)
such Lender’s
Applicable Percentage
of the outstanding
Swing Line Loans at
such time; 1.1.57
"Credit Facility" has
the meaning defined
in Section 2.1; 1.1.58
"DBRS" means DBRS
Limited; 1.1.59
"Debt" means, with
respect to a Person,
without duplication,
the aggregate of the
following amounts,
each calculated in
accordance with
GAAP, unless the
context otherwise
requires: 1.1.59.1 all
obligations that would
be considered to be
indebtedness for
borrowed money
(including, without
limitation, by way of
overdraft and drafts or
orders accepted
representing
extensions of credit),
and all obligations
(whether or not with
respect to the
borrowing of money)
that are evidenced by
bonds, debentures,
notes or other similar
instruments; 1.1.59.2
reimbursement
obligations under
bankers' acceptances
- 11 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
1.1.59.3 all liabilities
upon which interest
charges are paid or are
customarily paid by
that Person; 1.1.59.4
any Equity Interests of
that Person (or of any
Subsidiary of that
Person) which Equity
Interests, by their
terms (or by the terms
of any security into
which it is convertible
or for which it is
exchangeable at the
option of the holder),
or upon the happening
of any event, matures
or is mandatorily
redeemable, pursuant
to a sinking fund
obligation or
otherwise, or is
redeemable at the
option of the holder
thereof, in whole or in
part, prior to the
Maturity Date, for
cash or securities
constituting Debt
(read without
reference to this
subsection 1.1.59.4)
unless the issuer of
such Equity Interests
has by the terms of
such Equity Interests
the option of repaying
such amounts or
retiring or exchanging
such Equity Interests
with Equity Interests
not convertible or
exchangeable or
redeemable for Debt
(read without
reference to this
subsection 1.1.59.4);
1.1.59.5 all Capital
Lease Obligations,
obligations under
Synthetic Leases,
obligations under sale
and leaseback
transactions (unless
the lease component
of the sale and
leaseback transaction
is an operating lease)
and indebtedness
under arrangements
relating to purchase
money liens and other
obligations in respect
of the deferred
purchase price of
property and services;
and 1.1.59.6 the
amount of the
contingent obligations
under any guarantee
(other than by
endorsement of
negotiable instruments
for collection or
deposit in the
Ordinary Course) or
other agreement
assuring payment or
performance of any
obligation in any
manner of any part or
all of an obligation of
another Person of the
type included in
subsections 1.1.59.1
through 1.1.59.5
above; other than
trade payables
incurred in the
Ordinary Course and
payable in accordance
with customary
practices; 1.1.60
"Declining Lenders"
has the meaning
defined in Section
19.3.2; 1.1.61
"deemed interest
period" has the
meaning defined in
Section 4.9.1; 1.1.62
"Default" means an
event or circumstance,
the occurrence or
non-occurrence of
- 12 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.63
"Defaulting Lender"
means any Lender that
(a) has failed to fund
any portion of the
Advances or fund its
participating interests
in Swing Line
Advances required to
be funded by it
hereunder within three
Business Days of the
date required to be
funded by it hereunder
unless such failure has
been cured, (b) has
otherwise failed to pay
over to the Agent or
any other Lender any
other amount required
to be paid by it
hereunder within three
Business Days of the
date when due, unless
the subject of a good
faith dispute or unless
such failure has been
cured, (c) has been
determined by a court
of competent
jurisdiction or
regulator to be
insolvent or is unable
to meet its obligations
or pay its debts as they
generally become due,
(d) is the subject of a
bankruptcy or
insolvency proceeding
or (e) is subject to or
is seeking the
appointment of an
administrator,
regulator, conservator,
liquidator, receiver,
trustee, custodian or
other similar official
over any portion of its
assets or business;
1.1.64 "depository
bills" has the meaning
defined in Section
5.11; 1.1.65
"Derivative
Instrument" means an
agreement entered into
from time to time by a
Person in order to
control, fix or regulate
currency exchange,
commodity price or
interest rate
fluctuations, including
a rate swap
transaction, basis
swap, forward rate
transaction,
commodity swap,
commodity option,
interest rate option,
foreign exchange
transaction, cap
transaction, floor
transaction, collar
transaction, currency
swap transaction,
cross-currency rate
swap transaction,
currency option or any
other similar
transaction (including
any option with
respect to any of these
transactions and any
combination of these
transactions); 1.1.66
"Derivative
Obligations" means
the Obligor Hedging
Exposure owed to one
or more Lenders or
Affiliates of a Lender
under Derivative
Instruments; 1.1.67
"Designated Period"
means, with respect to
a Libor Advance or a
BA Advance, a period
designated by the
Borrower in
accordance with, as
applicable, Sections
3.3, 5.1 and 5.4;
1.1.68 "Desired
Acquisition Amount"
has the meaning
defined in Section
- 13 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.70
"Distribution" means:
1.1.70.1 the
retirement,
redemption, retraction,
purchase, or other
acquisition of any
Equity Interests of an
Obligor or Related
Party Debt of an
Obligor, except where
the consideration for
retirement,
redemption, retraction,
purchase or other
acquisition is made in
Equity Interests of an
Obligor, so long as no
Change of Control
occurs as a result;
1.1.70.2 the
declaration or
payment of any
dividend, return of
capital or other
distribution (in cash,
securities or other
Property or otherwise)
of, on or in respect of,
any Equity Interests of
an Obligor; 1.1.70.3
any payment or
repayment of or on
account of Related
Party Debt of an
Obligor, including in
respect of principal,
interest, bonus,
premium or otherwise;
1.1.70.4 any payment
of management or
similar fees to any
Related Party which is
not an Obligor, except
on a commercially
reasonable basis as if
the payor were dealing
with such Related
Party at Arm's Length,
provided that such
payment constitutes
direct or indirect
funding of payroll
obligations of such
Related Party; and
1.1.70.5 any other
payment or
distribution (in cash,
securities or other
Property, or
otherwise) of, on or in
respect of any Equity
Interests of an Obligor
or Related Party Debt
of an Obligor; 1.1.71
"Draft" means any
draft, bill of exchange,
receipt, acceptance,
demand or other
request for payment
drawn or issued under
or in respect of a
Letter of Credit;
1.1.72 "Drawdown
Date" means the date,
which shall be a
Business Day, of any
Advance and includes,
for avoidance of
doubt, the date of any
rollover, conversion,
renewal or extension
of any existing
Advance; 1.1.73
"EBITDA" means, for
any period, on a
consolidated basis, an
amount equal to the
Borrower's revenue
from the sale of
product from mines,
less: 1.1.73.1 onsite
and offsite cash
operating costs for
such period; 1.1.73.2
cash general and
administrative
expenses for such
period; 1.1.73.3 cash
capital taxes for such
period; and
- 14 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.73.4
cash reclamation
expenditures for such
period; each component
of which is to be
calculated in
accordance with GAAP
consistently applied;
1.1.74 "Effective Date"
means the date on
which all of the
conditions specified in
Section 9.1 are satisfied
or waived in
accordance with
Section 9.3, as
confirmed in a written
notice from the Agent
to the Borrower; 1.1.75
"Eligible Assignee"
means (a) a Lender, (b)
an Affiliate of a Lender,
(c) an Approved Fund,
and (d) any other
Person (other than a
natural person) in
respect of each of
which the consent of
any party whose
consent is required
under subsection 18.2.2
has been obtained;
provided that
notwithstanding the
foregoing, "Eligible
Assignee" shall not
include any Obligor or
any Affiliate of an
Obligor; 1.1.76
"Environmental
Claims" means any
claims (including,
without limitation, third
party claims, whether
for personal injury or
real or personal
property damage or
otherwise), actions,
administrative
proceedings (including
informal proceedings),
judgments, Liens,
damages, punitive
damages, penalties,
fines, costs, liabilities
(including sums paid in
settlement of claims),
interest or losses,
including reasonable
legal fees and expenses
(including any such
fees and expenses
incurred in enforcing
the Loan Documents or
collecting any sums due
under same), consultant
fees, and expert fees,
together with all other
costs and expenses of
any kind or nature that
arise directly or
indirectly from or in
connection with any
Environmental Laws, or
any failure or breach in
respect thereof, that is
or allegedly is
applicable to any
Obligor, its respective
Properties, operations
or actions to the extent
the same arose out of
the relationships and
arrangements created
and contemplated
hereby; 1.1.77
"Environmental Laws"
means all Applicable
Laws, now or hereafter
in effect, to the extent
relating to pollution or
protection of the
environment or
property and public
health and relating to
(a) emissions,
discharges, releases or
threatened releases of
any Hazardous
Substance into the
environment (including
ambient air, surface
water, ground water,
land surface or
subsurface strata), (b)
the manufacture,
processing, distribution,
- 15 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.78
"Equity Interests"
means, with respect to
any Person, all shares,
interests, units, trust
units, partnership,
membership or other
interests,
participations or other
equivalent rights in
the Person's equity or
capital, however
designated, whether
voting or non voting,
whether now
outstanding or issued
after the Effective
Date, together with
warrants, options or
other rights to acquire
any such equity
interests of such
Person and securities
convertible into or
exchangeable for any
such equity interests
of such Person; 1.1.79
"Euro" or "€" means
the single currency,
denominated in Euro
units, of certain
member states of the
European Union that
adopt such single
currency as its
currency in
accordance with
legislation of the
European Union
relating to European
Economic and
Monetary Union;
1.1.80 "Event of
Default" means an
event or circumstance
described in Section
15.1; 1.1.81
"Excluded Taxes"
means, with respect to
the Agent, any
Lender, the Issuing
Lender or any other
recipient of any
payment to be made
by or on account of
any obligation under
the Loan Documents,
(a) taxes imposed on
or measured by its
overall net income or
capital, and franchise
taxes imposed on it (in
lieu of net income
taxes) by the
jurisdiction (or any
political subdivision
thereof) under the
laws of which such
recipient is organized
or in which its
principal office is
located, or in the case
of any Lender, in
which its applicable
lending office is
located, (b) any
branch profits taxes or
any similar tax
imposed by the
jurisdiction in which
the applicable lending
office of the Lender is
located and (c) in the
case of any payment
made by the Borrower
to a Foreign Lender
(other than (i) an
Assignee pursuant to a
request by the
Borrower under
subsection 6.5.2, (ii)
an Assignee pursuant
to an Assignment
made when an Event
of Default has
occurred which is
continuing or (iii) any
other Assignee to the
extent that the
Borrower has
expressly agreed that
any withholding tax
shall be an
Indemnified Tax), any
withholding tax that is
imposed during the
time such Foreign
- 16 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
1.1.83 "Federal
Funds Effective
Rate" means, for any
period, a fluctuating
interest rate per
annum equal, for
each day during such
period, to the
weighted average of
the rates on
overnight federal
funds transactions
with members of the
Federal Reserve
System arranged by
USA federal funds
brokers as published
for such day (or, if
such day is not a
Banking Day, for the
immediately
preceding Banking
Day) by the Federal
Reserve Bank of
New York or, for
any day on which
such rate is not so
published for such
day by the Federal
Reserve Bank of
New York, the
average of the
quotations for such
day for such
transactions received
by the Agent from
three Federal Funds
brokers of
recognized standing
selected by the
Agent. If for any
reason the Agent
shall have
determined, acting
reasonably, that it is
unable to ascertain
the Federal Funds
Effective Rate for
any reason, including
without limitation,
the inability or
failure of the Agent
to obtain sufficient
bids or publications
in accordance with
the terms hereof, The
Bank of Nova
Scotia's announced
US Base Rate will
apply; 1.1.84 "First
Currency" has the
meaning defined in
Section 17.1; 1.1.85
"Foreign Lender"
means any Lender
that is not organized
under the laws of
Canada, or a
province or territory
thereof, and that is
not otherwise
considered or
deemed to be
resident in Canada
for income tax or
withholding tax
purposes; 1.1.86
"Former Swing Line
Lender" has the
meaning defined in
Section 3.5.6; 1.1.87
"Fronting Fee"
means the fee
payable to the
Issuing Lender in
connection with the
issuance or renewal
of a Letter of Credit
by the Issuing
Lender, based on the
percentage per
annum set out in the
Fronting Fee Letter;
1.1.88 "Fronting Fee
Letter" means the
confidential letter
agreement dated
June 22, 2010
between The Bank of
Nova Scotia, as
Issuing Lender, and
the Borrower, and
any other
confidential letter
agreement between
- 17 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT titles or
interests of every kind
and description which
the Borrower has rights
to, or otherwise owns or
controls, relating to or
acquired in connection
with such operations,
properties and claims;
1.1.92 "Governmental
Authority" means the
government of Canada or
any other nation, or of
any political subdivision
thereof, whether
provincial, state or local,
and any agency,
authority,
instrumentality,
regulatory body, court,
central bank or other
entity exercising
executive, legislative,
judicial, taxing,
regulatory or
administrative powers or
functions of or pertaining
to government, including
any supra-national bodies
such as the European
Union or the European
Central Bank and
including a Minister of
the Crown,
Superintendent of
Financial Institutions or
other comparable
authority or agency;
1.1.93 "Guaranteed
Obligations" means the
Loan Obligations, the
Other Supported
Obligations and all other
indebtedness, liabilities
and obligations of the
Obligors under the Loan
Documents; 1.1.94
"Guarantees" means the
guarantees delivered or
required to be delivered
under Article 8; 1.1.95
"Guarantor" means each
Subsidiary of the
Borrower that has
executed and delivered a
Guarantee and has
complied with the other
applicable requirements
of Article 8, and has not
ceased to be a Guarantor
pursuant to Article 8;
1.1.96 "Hazardous
Substances" shall mean
any (a) substance, waste,
liquid, gaseous or solid
matter, fuel,
micro-organism, sound,
vibration, ray, heat,
odour, radiation, energy
vector, plasma and
organic or inorganic
matter which is, alone or
in any combination,
hazardous, hazardous
waste, hazardous
material, toxic, a
pollutant, a deleterious
substance, a contaminant
or a source of pollution
or contamination and (b)
any other chemical,
material or substance, the
exposure to which is
prohibited, limited or
regulated by any
Governmental Authority;
1.1.97 "Impacted
Lender" means any
Lender as to which (a)
the Agent, the Issuing
Lender or the Swing Line
Lender has a good faith
belief that such Lender
has defaulted in fulfilling
its obligations under one
or more other syndicated
credit facilities, (b) an
entity that controls the
Lender has been
determined by a court of
competent jurisdiction or
regulator to be insolvent
or is unable to meet its
obligations or pay its
debts as they generally
become due or (c) an
entity that controls the
- 18 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.100
"Information" has the
meaning defined in
Section 19.16.2;
1.1.101 "Insolvency
Proceeding" has the
meaning defined in
Section 15.1.11;
1.1.102 "Intellectual
Property" means
patents, trademarks,
service marks, trade
names, copyrights,
trade secrets, industrial
designs and other
similar rights; 1.1.103
"Intercreditor
Agreement" means an
intercreditor agreement
between the Agent and
any holder of
Subordinated Debt, in
form and substance
acceptable to the
Lenders, acting
reasonably; 1.1.104
"Interest Payment Date"
means the last Business
Day of each month or,
in relation to any Libor
Advance, a day on
which interest is
required to be paid in
accordance with
Section 4.4; 1.1.105
"Investments" means
(a) any investment in or
purchase of or other
acquisition of any
Equity Interests of any
Person, (b) any
purchase or other
acquisition of a
business or undertaking
or division of any
Person, including
Property comprising the
business, undertaking
or division of any
Person or (c) any loan
or advance to, or
guarantee of, or the
provision of any other
financial assistance of
any kind to, or
otherwise becoming
liable for, any debts,
liabilities or obligations
of, any Person; 1.1.106
"ISDA Master
Agreement" means the
1992 ISDA Master
Agreement
(Multi-Currency - Cross
Border) or the 2002
ISDA Master
Agreement, each as
published by the
International Swaps and
Derivatives
Association, Inc. and,
where the context
permits or requires,
includes all schedules,
supplements, annexes
and confirmations
attached thereto or
incorporated therein, as
such agreement may be
amended, supplemented
or replaced from time to
time; 1.1.107 "Issuing
Lender" means The
Bank of Nova Scotia
and any other Lender
appointed by the
Borrower and accepted
by such Lender, or any
successor issuer of
Letters of Credit
appointed by the
Borrower in accordance
with Section 3.4.6.5;
1.1.108 "Kittila Mine"
means the Kittila
mining operations and
property located in or
around Kittila, Finland,
as presently constituted
and as the same may be
developed or expanded
from time to time, and
any replacements,
substitutions and
modifications thereof
permitted hereunder,
together with all
- 19 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT Mine,
as presently
constituted and as the
same may be
developed or
expanded from time to
time, and any
replacements,
substitutions and
modifications thereof
permitted hereunder,
together with all
easements, rights of
way, rights, titles or
interests of every kind
and description which
the Borrower has
rights to, or otherwise
owns or controls,
relating to or acquired
in connection with
such operations,
properties and claims;
1.1.110 "LaRonde
Mine" means the
Borrower's LaRonde
mining operations and
property located in or
around Cadillac and
Bousquet, Quebec, as
presently constituted
and as the same may
be developed or
expanded from time to
time, and any
replacements,
substitutions and
modifications thereof
permitted hereunder,
together with all
easements, rights of
way, rights, titles or
interests of every kind
and description which
the Borrower has
rights to, or otherwise
owns or controls,
relating to or acquired
in connection with
such operations,
properties and claims;
1.1.111 "LC
Indemnitees" has the
meaning defined in
Section 3.4.6.1;
1.1.112 "Lender
Swing Line
Repayments" has the
meaning defined in
Section 3.5.6; 1.1.113
"Lenders" means the
Lenders listed on
Exhibit A, together
with each Eligible
Assignee who enters
into an Assignment
and Assumption
Agreement, and
includes the Issuing
Lender and the Swing
Line Lender and
"Lender" means any
one of them; 1.1.114
"Letter of Credit"
means any
documentary letter of
credit, stand-by letter
of credit and letter of
guarantee issued by
the Issuing Lender in
accordance with the
provisions hereof;
1.1.115 "Letter of
Credit Fee" means the
fee payable to the
Agent for the account
of the Lenders in
connection with the
issuance or renewal of
each Letter of Credit
issued by the Issuing
Lender hereunder
calculated in
accordance with
Section 3.4.2; 1.1.116
"Letter of Credit
Obligations" means,
as at any date of
determination, the
aggregate undrawn
amount of all
outstanding Letters of
Credit plus the
aggregate of all
unreimbursed
drawings under
Letters of Credit
- 20 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
Bankers Association
Libor Rates Telerate
(page 3750 or other
applicable page), in
either case at or about
11:00 a.m. (London
time), determined two
Banking Days prior to
the applicable
Drawdown Date in
accordance with
Section 4.5; if neither
of such quotes is
available, then LIBOR
shall be determined by
the Agent as the
average of the rates at
which deposits in
US$ for a period
similar to the
Designated Period and
in amounts
comparable to the
amount of such Libor
Advance are offered
by the Schedule 1
Reference Lenders to
prime banks in the
London inter-bank
market at or about
11:00 a.m. (London
time) on the date of
such determination;
1.1.118 "Libor
Advance" means, at
any time, an Advance
in US Dollars with
respect to which the
Borrower has elected
to pay interest on the
Libor Basis; 1.1.119
"Libor Basis" means
the basis of
calculation of interest
on each Advance
made at LIBOR, in
accordance with the
provisions of Sections
2.7, 4.3 and 4.4;
1.1.120 "Lien" means:
1.1.120.1 with respect
to any Property, any
mortgage, deed of
trust, lien, pledge,
hypothec,
hypothecation,
encumbrance, charge,
assignment,
consignment, security
interest, royalty
interest, adverse
claim, on or otherwise
affecting the Property;
1.1.120.2 the interest
of a vendor or lessor
under any conditional
sale agreement,
Capital Lease or title
retention agreement
relating to any
Property; 1.1.120.3
any purchase option,
call or similar right of
a third party in respect
of any Property
having the effect of
security for the
payment or
performance of any
debt, liability or
obligation; 1.1.120.4
any netting
arrangement or set-off
arrangement (other
than netting or set-off
arising by operation of
law in the Ordinary
Course), defeasance
arrangement or other
similar arrangement
having the effect of
security for the
payment or
performance of any
debt, liability or
obligation; and
1.1.120.5 any other
Contract, trust or
arrangement that
secures payment or
performance of any
debt, liability or
obligation; and
"Liens" shall have
corresponding
meaning; 1.1.121
- 21 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT party
delivered under or in
relation to the Credit
Facility from time to
time; 1.1.122 "Loan
Obligations" means
all obligations of the
Borrower to the
Agent and Lenders
under or in
connection with this
Agreement,
including but not
limited to the
aggregate of
Advances
outstanding under
this Agreement,
together with interest
thereon and all other
debts and liabilities,
present or future,
direct or indirect,
absolute or
contingent, matured
or not, at any time
owing by the
Borrower to the
Agent and Lenders
in any currency or
remaining unpaid by
the Borrower to the
Agent and Lenders
in any currency, in
each case, under or
in connection with
this Agreement,
whether arising from
dealings between the
Agent and Lenders
and the Borrower or
from any other
dealings or
proceedings by
which the Agent and
Lenders may be or
become in any
manner whatsoever
creditors of the
Borrower under or in
connection with this
Agreement, and
wherever incurred,
and whether incurred
by the Borrower
alone or with another
or others and
whether as principal
or surety, and all
interest, fees,
commissions, legal
and other costs,
charges and
expenses incurred
under or in
connection with this
Agreement;
provided, however,
that "Loan
Obligations" shall
not include "Other
Supported
Obligations". In this
definition, "the
Agent and Lenders"
shall be interpreted
as "the Agent and
Lenders, or any of
them"; 1.1.123
"Majority Lenders"
means Lenders that
represent at least 66
2/3% of the
Commitments or, if
the Commitments
have expired or
terminated,
"Majority Lenders"
shall mean Lenders
to whom are owed at
least 66 2/3% of
outstanding
Advances; provided
that, the unfunded
Commitments of,
and the outstanding
Advances held or
deemed to be held
by, any Defaulting
Lender shall be
excluded for
purposes of making a
determination of
Majority Lenders;
1.1.124 "Mandate
Letter" means the
- 22 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT Mines or
any other operating mine,
development stage mine
project or facility for the
extraction or processing
of ore (including all
corresponding
underground and surface
facilities and
infrastructure and all
related plant, buildings,
fixtures, equipment,
chattels and machinery),
whether situate on or off
such mine, development
stage mine project or
facility, and all
replacements,
substitutions and
additions thereto, (b) the
Material Subsidiaries,
and (c) Related Party
Debt; 1.1.127 "Material
Contracts" means any
Contract (other than any
Loan Document) to
which an Obligor is or
becomes a party at any
time that, if terminated,
would reasonably be
expected to have a
Material Adverse Effect;
1.1.128 "Material
Permit" means each
Permit issued at any time
to an Obligor that, if
terminated, would
reasonably be expected
to have a Material
Adverse Effect; 1.1.129
"Material Subsidiary"
means any Subsidiary of
the Borrower (whether or
not wholly-owned) (a)
that, as of the end of any
fiscal quarter of the
Borrower, has total
consolidated or
unconsolidated assets
having a book value of
US$40,000,000 (or the
equivalent amount in any
other applicable currency
at the applicable FX
Rate) or more, or (b)
that, as of the end of any
fiscal quarter of the
Borrower, has total
consolidated or
unconsolidated revenue
for the last 12 months of
US$20,000,000 (or the
equivalent amount in any
other applicable currency
at the applicable FX
Rate) or more; 1.1.130
"Maturity Date" means
June 22, 2016, or if such
date has been extended in
accordance with the
terms of Section 2.5,
such extended date;
1.1.131 "Meadowbank
Mine" means the
Borrower's Meadowbank
mining operations and
property located in or
around the Kivalliq
district of Nunavut, as
presently constituted and
as the same may be
developed or expanded
from time to time, and
any replacements,
substitutions and
modifications thereof
permitted hereunder,
together with all
easements, rights of way,
rights, titles or interests
of every kind and
description which the
Borrower has rights to,
or otherwise owns or
controls, relating to or
acquired in connection
with such operations,
properties and claims;
1.1.132 "Mexican
Pledge" means the
pledge by Tenedora
Agnico Eagle Mexico
S.A. de C.V. of the
common shares of
Agnico Eagle Mexico,
S.A. de C.V. to
Agnico-Eagle Mines
- 23 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
1.1.133 "Mines"
means the Goldex
Mine, the Kittila
Mine, the LaRonde
Mine, the Lapa Mine,
the Meadowbank
Mine and the Pinos
Altos Mine; 1.1.134
"Moody's" means
Moody's Investors
Service, Inc.; 1.1.135
"Net Cash Proceeds"
means, with respect to
any Asset Disposition,
the gross amount of
proceeds payable in
cash or Cash
Equivalents to the
Obligors, or any one
or more of them,
arising from such
Asset Disposition,
less: 1.1.135.1
amounts paid to
discharge Permitted
Liens on the Property
being disposed of or
indebtedness
(excluding
intercompany
indebtedness) relating
to or incurred in
connection with such
Property; 1.1.135.2
the amount of Taxes
arising from in
connection with or as
a result of such Asset
Disposition which
cannot be offset
against losses,
depreciation or
otherwise in the same
taxation period such
that same must
actually be paid or
payable in cash in
respect of the
then-current fiscal
year; and 1.1.135.3
reasonable
out-of-pocket costs,
fees and expenses
incurred in connection
with such Asset
Disposition, including
commissions, but
excluding any such
amounts paid to
Affiliates of any
Obligor unless such
amounts are in respect
of services rendered at
arm's length terms;
1.1.136 "New Lender"
means the Lenders
which were not party
to the Existing Credit
Agreement; 1.1.137
"Non-BA Lender"
means a Lender which
does not accept
bankers' acceptances
issued in Canada;
1.1.138 "Note
Purchase Agreement"
means the note
purchase agreement
entered into by the
Borrower with the
purchasers party
thereto on April 7,
2010; 1.1.139 "Notes"
means notes issued
pursuant to the Note
Purchase Agreement;
1.1.140 "Notice of
Borrowing" means a
notice substantially in
the form of Exhibit D
transmitted to the
Agent by the
Borrower in
accordance with, as
applicable, Sections
3.1, 3.3 or subsection
5.1.1; 1.1.141
"Obligor Hedging
Exposure" means the
aggregate of all
amounts that would be
payable to all Persons
by the Obligors or to
the Obligors by other
Persons, on the date of
determination, taking
- 24 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
Master Agreement
between each Obligor
and any such Person,
as if all Derivative
Instruments under
such ISDA Master
Agreements were
being terminated on
that day; 1.1.142
"Obligors" means the
Borrower and the
Guarantors; 1.1.143
"Ordinary Course"
means, with respect to
an action taken by a
Person, that the action
is taken in the usual
course of the normal
day-today operations
of the Person; 1.1.144
"Other Derivative
Counterparty" means,
at any time, a Person
which is not a Lender
or an Affiliate of a
Lender and which is
party to a Derivative
Instrument with an
Obligor; 1.1.145
"Other Supported
Agreements" means
all agreements or
arrangements
(including guarantees)
entered into or made
from time to time by
any Obligor (unless
otherwise specified) in
connection with (a)
cash consolidation,
cash management and
electronic funds
transfer arrangements
between an Obligor
and any Lender or
Affiliate of a Lender
and (b) doré purchase
agreements between
an Obligor and any
Lender or Affiliate of
a Lender; 1.1.146
"Other Supported
Obligations" means all
obligations of the
Obligors to the Other
Supported Parties
under or in connection
with the Other
Supported
Agreements and all
debts and liabilities,
present or future,
direct or indirect,
absolute or contingent,
matured or not, at any
time owing by the
Obligors to the Other
Supported Parties in
any currency or
remaining unpaid by
the Obligors to the
Other Supported
Parties in any
currency under or in
connection with the
Other Supported
Agreements, whether
arising from dealings
between the Other
Supported Parties and
the Obligors or from
any other dealings or
proceedings by which
the Other Supported
Parties may be or
become in any manner
whatever creditors of
the Obligors under or
in connection with the
Other Supported
Agreements, and
wherever incurred,
and whether incurred
by an Obligor alone or
with another or others
and whether as
principal or surety,
and all interest, fees,
commissions, legal
and other costs,
charges and expenses;
provided, however,
that "Other Supported
Obligations" shall not
include Loan
Obligations. In this
- 25 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.148
"Other Taxes" means all
present or future stamp
or documentary taxes or
any other excise or
property taxes, charges
or similar levies arising
from any payment made
hereunder or under any
other Loan Document or
from the execution,
delivery or enforcement
of, or otherwise with
respect to, this
Agreement or any other
Loan Document; 1.1.149
"Participant" has the
meaning defined in
Section 18.5; 1.1.150
"Pension Plan" means (a)
a "pension plan" or
"plan" which is a
"registered pension plan"
as defined in the Income
Tax Act (Canada) or
pension benefits
standards legislation in
any jurisdiction of
Canada and is applicable
to employees or former
employees resident in
Canada of any Obligor
and (b) any other defined
benefit, supplemental
pension benefit plan or
similar arrangement
applicable to any
employee or former
employee of any
Obligor; 1.1.151
"Permits" means
licences, certificates,
authorizations, consents,
registrations,
exemptions, permits,
attestations, approvals,
characterization or
restoration plans,
depollution program and
any other approvals
required by or issued
pursuant to any
Applicable Law, in each
case, with respect to a
Person or its Property,
which are made, issued
or approved by a
Governmental Authority;
1.1.152 "Permitted Debt"
means, with respect to
any Person: 1.1.152.1 the
Loan Obligations;
1.1.152.2 the Other
Supported Obligations to
the extent they constitute
Debt; 1.1.152.3 the
Guarantees; 1.1.152.4
guarantees or other
unsecured agreements to
assure payment or
performance granted to
Lenders or Affiliates of
Lenders in respect of
obligations under
Derivative Instruments
entered into between any
Obligor and any Lender
or Affiliate of any
Lender; 1.1.152.5
guarantees or other
unsecured agreements to
assure payment or
performance granted to
Lenders or Affiliates of
Lenders by any Obligor
in respect of obligations
under Other Supported
Agreements entered into
between any other
Obligor and any Lender
or any Affiliate of any
Lender; 1.1.152.6 Debt
secured by Permitted
Liens (except Permitted
Liens under subsection
1.1.153.16);
- 26 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
1.1.152.7 Debt owed
by one or more
Obligors to one or
more other Obligors;
1.1.152.8 unsecured
Debt so long as (a)
no Event of Default
has occurred and is
continuing
immediately prior to
the incurrence of
such Debt or would
occur as a result of
the incurrence or
assumption of such
Debt, (b) such Debt
does not require
principal payments
until at least 12
months following the
then existing
Maturity Date at the
time such Debt is
incurred and (c)
either (i) the terms
and conditions of
any such Debt is Not
More Onerous than
this Agreement, or
(ii) the Borrower
undertakes to amend
the terms of this
Agreement (this
Agreement, as
modified by such
undertaking to
amend, the "Offered
Agreement")
incorporating the
exact same
provisions of such
Debt to the extent
necessary such that
the terms and
conditions of any
such Debt is Not
More Onerous than
the Offered
Agreement. The
terms of any Debt
other than Debt
under the Loan
Documents (the
"Other Debt") will
be "Not More
Onerous" than this
Agreement or the
Offered Agreement,
as the case may be, if
(i) each financial
ratio (each, an
"Other Financing
Ratio") to be
maintained by the
Borrower in any
agreement (an
"Other Financing
Document")
governing the Other
Debt (A) is
calculated in the
same manner as a
financial ratio in this
Agreement or the
Offered Agreement,
as applicable, and
the numerical
threshold to be
satisfied or complied
with is the same or
less onerous or (B) is
the same or similar
to a financial ratio
(the "Credit
Agreement Ratio")
in this Agreement or
the Offered
Agreement, as
applicable, and is
calculated in a
manner that would
prevent the Borrower
from being in
compliance with the
Credit Agreement
Ratio and not the
Other Financing
Ratio; (ii) the cure
period for a payment
default in respect of
obligations under an
Other Financing
Document of the
same type (principal,
interest or interest
- 27 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
Document that, if
triggered, would not be
similarly triggered
under Section 15.1.6 of
this Agreement or
similar provision of the
Offered Agreement, as
applicable. "General
Covenant Cure Period"
means, at any particular
time, 30 days or such
other cure period as
may be identified in
Section 15.1.3 of this
Agreement or similar
provision of the Offered
Agreement, as
applicable. "Monetary
Threshold" means, at
any particular time,
US$50,000,000 (or
such other monetary
threshold as may be
identified in Section
15.1.6 of this
Agreement or similar
provision of the Offered
Agreement, as
applicable) or the
equivalent thereof in
any other currency;
1.1.152.9 Subordinated
Debt; 1.1.152.10 Debt
acquired as a result of a
purchase or acquisition
described in subsections
(a) or (b) of the
definition of
Investments which
purchase or acquisition
is permitted hereunder,
so long as the principal
amount of such Debt
does not increase;
1.1.152.11 Debt under
the agreement dated
January 7, 2007
between Agnico-Eagle
AB and Nordea Bank
Finland Plc, in an
amount not to exceed
€10,000,000;
1.1.152.12 unsecured
Debt incurred at a time
when no Default or
Event of Default has
occurred and is
continuing in respect of
letters of credit, letters
of guarantee, surety
bonds, performance
bonds or guarantees and
similar types of
instruments issued in
the Ordinary Course or
in connection with an
Obligor’s Core
Business; but excluding
any of the foregoing
incurred to secure or
support indebtedness
for borrowed money
(including, without
limitation, by way of
overdraft and drafts or
orders accepted
representing extensions
of credit in respect of
borrowed money) or
under Derivative
Instruments with Other
Derivative
Counterparties;
1.1.152.13 all
indebtedness, liabilities
and obligations of the
Borrower and its
Subsidiaries under and
in respect of the Note
Purchase Agreement
and the Notes;
1.1.152.14 any Debt in
addition to that
described in subsections
1.1.152.1 through
1.1.152.13 above in an
aggregate amount at
any particular time of
not more than
US$50,000,000, so long
as no Default or Event
of Default has occurred
and is continuing
immediately prior to the
incurrence of such
- 28 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT Debt or
would occur as a result
of the incurrence or
assumption of such
Debt; 1.1.153
"Permitted Liens"
means, with respect to
any Person: 1.1.153.1
Liens for taxes, duties
or other governmental
charges not yet due or
which are being
contested in good faith
by appropriate
proceedings, provided
that adequate reserves
with respect thereto are
maintained on the
books of such Person,
in conformity with
GAAP; 1.1.153.2
carriers',
warehousemen's,
mechanics',
materialmen's,
repairmen's, or other
like Liens arising in the
Ordinary Course and
not overdue for a period
of more than 60 days or
which are being
contested in good faith
by appropriate
proceedings, provided
that adequate reserves
with respect thereto are
maintained on the
books of such Person,
in conformity with
GAAP; 1.1.153.3
pledges or deposits in
connection with
workers' compensation,
employment insurance
and other social
security legislation and
other obligations of a
like nature incurred in
the Ordinary Course;
1.1.153.4 deposits to
secure the performance
of bids, trade contracts
(other than for
borrowed money),
leases, statutory
obligations, surety and
appeal bonds,
performance bonds and
other obligations of a
like nature incurred in
the Ordinary Course;
1.1.153.5 easements,
servitudes,
rights-of-way,
restrictions, exceptions,
minor title defects and
other similar
encumbrances
(including for public
utilities) which, in the
aggregate, do not
materially interfere with
such Person or its
business or the use of
the affected property by
such Person; 1.1.153.6
reservations,
limitations, provisos
and conditions in any
original grant from the
Crown, or any state,
government or any
freehold lessor, of any
of the real properties of
such Person and
statutory exceptions to
title or reservations of
rights which do not in
the aggregate materially
interfere with such
Person or its business or
the use of the affected
real property by such
Person; 1.1.153.7 any
obligations or duties
affecting any of the
Property of such Person
or its Subsidiaries to
any municipality or
other Governmental
Authority with respect
to any franchise,
- 29 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
grant, licence or
permit which do
not materially
impair the use of
such Property for
the purposes for
which it is held;
1.1.153.8 Liens
created in
connection with
Capital Leases or
securing Capital
Lease Obligations;
1.1.153.9 any Liens
for unpaid royalties
or duties not yet
due pursuant to
mining leases,
claims or other
mining rights
running in favour
of any
Governmental
Authority;
1.1.153.10 without
duplicating
subsections
1.1.153.8 and
1.1.153.11, Liens
on equipment and
the proceeds
thereof (and on no
other Property)
created or assumed
to finance the
acquisition thereof
or secure the
unpaid purchase
price of such
equipment;
1.1.153.11 Liens
that (i) exist at the
time such Person is,
or the assets subject
to such Liens are,
acquired by an
Obligor and (ii)
extend only to the
assets acquired or
the assets of the
Person acquired, as
applicable;
1.1.153.12 royalty
agreements or other
rights or claims to
royalties on or
affecting any
Property owned on
the Effective Date
by an Obligor or
acquired by the
Obligor, whether or
not in existence at
the time of such
acquisition;
1.1.153.13 pledges
or deposits of cash
or cash equivalent
instruments made at
a time when no
Default or Event of
Default has
occurred and is
continuing for
purposes of
securing
obligations to (i)
financial
institutions issuing
letters of credit to
secure obligations
under Pension
Plans, retirement
plans or for
government
reclamation costs,
or (ii) issuers of
letters of credit,
letters of guarantee,
surety bonds,
performance bonds
or guarantees and
similar types of
instruments issued
in the Ordinary
Course or in
connection with an
Obligor’s Core
Business; but
excluding any of
the foregoing
incurred to secure
or support
indebtedness for
borrowed money
- 30 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
replacement is
limited to the
property originally
encumbered thereby;
1.1.153.15 Liens
granted by a
Guarantor in favour
of an Obligor for tax
planning purposes;
and 1.1.153.16 any
Lien in addition to
those described in
subsection 1.1.153.1
to 1.1.153.15 above,
which secures Debt
under subsection
1.1.153.14; 1.1.154
"Person" or "person"
means any natural
person, corporation,
company, limited
liability company,
trust, joint venture,
association,
company,
partnership, limited
partnership,
Governmental
Authority, unlimited
liability company or
other entity; 1.1.155
"Pinos Altos Mine"
means the Pinos
Altos mining
operations and
property located in
or around the
municipality of
Ocampo in the state
of Chihuahua,
Republic of Mexico,
as presently
constituted and as
the same may be
developed or
expanded from time
to time, and any
replacements,
substitutions and
modifications thereof
permitted hereunder,
together with all
easements, rights of
way, rights, titles or
interests of every
kind and description
which an Obligor has
rights to, or
otherwise owns or
controls, relating to
or acquired in
connection with such
operations,
properties and
claims; 1.1.156
"Predecessor
Obligor" has the
meaning defined in
Section 14.9.1.4;
1.1.157 "Prime Rate"
means, on any day,
the greater of (a) the
reference rate of
interest, expressed as
an annual rate,
publicly announced
or posted from time
to time by the Agent
as being its reference
rate then in effect for
determining interest
rates on commercial
loans made in
Canada in Canadian
Dollars, and (b) the
average one month
Bankers' Acceptance
rate quoted on
Reuters Service,
page CDOR, as at
approximately 10:00
a.m. on such day,
plus 0.50% per
annum; 1.1.158
"Prime Rate
Advance" means an
Advance in
Canadian Dollars
with respect to which
the Borrower has
elected (or is deemed
to have elected) to
pay interest on the
Prime Rate Basis;
1.1.159 "Prime Rate
- 31 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT Norway,
Portugal, Spain, Sweden,
Switzerland and the
United Kingdom; 1.1.162
"Prior Fee Letters"
means the confidential
letter agreement dated
September 4, 2008
between the Borrower
and The Bank of Nova
Scotia, as lead arranger
and as agent, the
confidential letter
agreement dated June 15,
2009 between the
Borrower, on the one
hand, and The Bank of
Nova Scotia and The
Toronto-Dominion Bank,
as joint lead arrangers,
on the other hand, and
the confidential letter
agreement dated June 22,
2010 between The Bank
of Nova Scotia and The
Toronto- Dominion
Bank, as joint lead
arrangers, on the one
hand, and the Borrower,
on the other hand, in
each case, providing for
the payment of certain
fees; 1.1.163 "Property"
means, with respect to
any Person, any or all of
its present and future
undertaking, property
and assets, tangible and
intangible, and, for
avoidance of doubt, in
relation to any Property
which is leased or
co-owned or which is
property of a partnership
or joint venture, the
Property of the Person
means the interest of the
Person in such Property;
1.1.164 "Register" has
the meaning defined in
Section 18.3; 1.1.165
"Related Party" means,
with respect to any
Person, such Person's
Affiliates and the
directors, officers and
employees of such
Person and such Person's
Affiliates; 1.1.166
"Related Party Debt"
means Debt of an
Obligor owed to an
Affiliate (which is not an
Obligor) or a Related
Party (which is not an
Obligor); 1.1.167
"Reporting Effective
Date" has the meaning
defined in subsection
2.7.3; 1.1.168 "Reporting
Date" means the last day
on which financial
statements and
Compliance Certificate
can be delivered in
compliance with, as
applicable, subsections
13.1.1, 13.1.2 and 13.1.3;
1.1.169 "Resigning
Issuing Lender" has the
meaning defined in
Section 3.4.6.5; 1.1.170
"Retiring Swing Line
Lender" has the meaning
defined in Section 3.5.5;
1.1.171 "S&P" means
Standard & Poor's Rating
Services, a division of
The McGraw-Hill
Companies, Inc.; 1.1.172
"Schedule I Reference
Lender" means each of
The Bank of Nova Scotia
and The
Toronto-Dominion Bank
or any other Lender
which is a
- 32 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
Schedule I bank under
the Bank Act (Canada)
with equity in excess of
C$5,000,000,000
appointed by the Agent
from time to time with
the consent of the
Borrower in
replacement of any
such Lender; 1.1.173
"Schedule II Reference
Lender" means any
bank which is a
Schedule II or Schedule
III bank under the Bank
Act (Canada) and
which is not subject to
the restrictions and
requirements referred to
in Section 524(2)
thereof, designated by
the Agent from time to
time with the consent of
the Borrower; 1.1.174
"Second Currency" has
the meaning defined in
Section17.1; 1.1.175
"Seizure Proceeding"
has the meaning
defined in Section
15.1.10; 1.1.176
"Selected Amount"
means: 1.1.176.1 with
respect to a BA
Advance, the amount of
the Advance which the
Borrower has requested
be advanced by way of
the issuance of Bankers'
Acceptances in
accordance with
Section 5.1; and
1.1.176.2 with respect
to a Libor Advance, the
amount that the
Borrower has requested
be advanced in
accordance with
Section 3.3; 1.1.177
"Stamping Fee" means
the fee payable upon
the acceptance of a
Bankers' Acceptance at
the applicable rate set
out in Section 2.7.1 and
otherwise calculated in
accordance with
Section 5.2.3; 1.1.178
"Standby Fee" has the
meaning defined in
subsection 2.7.4;
1.1.179 "Subordinated
Debt" means Debt
owing to a Person other
than an Obligor which
is contractually
subordinated to the
Loan Obligations so
long as (a) no Event of
Default has occurred
and is continuing
immediately prior to the
incurrence of such Debt
or would occur as a
result of the incurrence
or assumption of such
Debt, (b) such Debt
does not require
principal payments until
at least 12 months
following the Maturity
Date in effect at the
time such Debt is
incurred, (c) the terms
and conditions of such
Debt are no more
onerous to the debtor(s)
thereunder than any
terms and conditions
hereunder (with the
exception of pricing
and fees) and (d) such
Debt is expressly
subordinated to the
Loan Obligations and
otherwise subject to an
Intercreditor
Agreement; 1.1.180
"Subsidiary" means,
with respect to a
Person, a subsidiary of
such Person as defined
in the Business
Corporations Act
(Ontario) as of the date
of this Agreement
- 33 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.181
"Substitute Lenders" has
the meaning defined in
Section19.3.3.3; 1.1.182
"Successor Entity" has
the meaning defined in
Section 14.9.1.4(a);
1.1.183 "Successor
Issuing Lender" has the
meaning defined in
Section 3.4.6.5; 1.1.184
"Supported Obligations"
means the Loan
Obligations, the
obligations of the
Obligors under the Loan
Documents and the Other
Supported Obligations;
1.1.185 "Supported
Parties" means, at any
time, the Lenders and the
Agent in respect of the
Loan Obligations and the
Guaranteed Obligations
and the Other Supported
Parties at such time in
respect of the Other
Supported Obligations;
and, for greater certainty,
does not include the
Other Derivative
Counterparties; 1.1.186
"Swing Line Advances"
means overdrafts
incurred in the Canadian
Dollar and US Dollar
accounts of the Borrower
with the Swing Line
Lender, each of which
shall be deemed to be, as
applicable, a Prime Rate
Advance or a US Base
Rate Advance made by
the Swing Line Lender to
the Borrower and the
aggregate of which shall
at no time exceed the
Swing Line Limit;
1.1.187 "Swing Line
Lender" means The Bank
of Nova Scotia, and any
successor thereof
appointed pursuant to
Section 3.5; 1.1.188
"Swing Line Limit"
means US$30,000,000 or
the equivalent thereof in
Canadian Dollars;
1.1.189 "Swing Line
Loan" means, at any
time, the aggregate of the
Swing Line Advances
outstanding at any time
in accordance with the
provisions hereof,
together with any amount
of interest payable to the
Swing Line Lender by
the Borrower pursuant
thereto 1.1.190
"Synthetic Lease" means
any synthetic lease or
similar off-balance sheet
financing product where
such transaction is
considered borrowed
money for tax purposes
but is classified as an
operating lease in
accordance with GAAP;
1.1.191 "Tangible Net
Worth" means, at the
date of determination, the
aggregate value of the
Borrower's then stated
share capital, other
paidin capital and
contributed surplus (but
excluding any deficit or
shares of the Borrower
held by any of its
Subsidiaries) less the
aggregate value of all
intangibles (including,
without limitation,
goodwill) all as
determined on a
consolidated basis in
accordance with GAAP
consistently applied;
- 34 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.1.192
"Taxes" means all
present or future taxes,
levies, imposts, duties,
deductions,
withholdings,
assessments, fees or
charges imposed by any
Governmental
Authority, including
any interest, additions
to tax or penalties
applicable thereto;
1.1.193 "Test Date" has
the meaning defined in
Section 8.1.1; 1.1.194
"Total Debt" means, at
any time, all Debt of the
Borrower on a
consolidated basis
(which shall, for
purposes of this
definition, include the
Consolidated Hedging
Exposure owed by the
Borrower and its
Subsidiaries); 1.1.195
"Total Net Debt" means
Total Debt less
Unencumbered Cash;
1.1.196 "Total Net Debt
to EBITDA Ratio"
means, for any period,
the ratio of Total Net
Debt to EBITDA;
1.1.197 "Trade Date"
has the meaning
defined in Section
18.2.2.1; 1.1.198
"Transaction Date" has
the meaning defined in
Section 7.7; 1.1.199
"Unanimous Lender
Request" has the
meaning defined in
Section 19.3.1; 1.1.200
"Unanimous Lender
Response Notice" has
the meaning defined in
Section 19.3.1; 1.1.201
"Unanimous Lender
Response Period" has
the meaning defined in
Section 19.3.1; 1.1.202
"Unencumbered Cash"
means all cash and
Cash Equivalents held
by the Obligors in the
Principal Jurisdictions
that are not subject to
any Lien by any Person,
other than inchoate
Liens which arise by
statute or operation of
law, in each case, on an
involuntary basis. For
the avoidance of doubt,
any cash or Cash
Equivalents held by any
joint ventures that is
proportionately
consolidated into the
Borrower's balance
sheet shall not
constitute
Unencumbered Cash;
1.1.203 "US Base Rate"
means, on any day, the
rate of interest,
expressed as an annual
rate, publicly
announced or posted
from time to time by
the Agent as being its
reference rate then in
effect for determining
interest rates on
commercial loans
granted in Canada in
US Dollars to its
customers (whether or
not any such loans are
actually made);
provided that if the US
Base Rate is, for any
period, less than the
Federal Funds Effective
Rate plus 0.50% per
annum, the US Base
Rate shall be deemed to
be equal to the Federal
Funds Effective Rate
plus 0.50% per annum;
- 35 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
1.1.204 "US Base
Rate Advance" means
an Advance in US
Dollars with respect to
which the Borrower
has elected (or is
deemed to have
elected) to pay interest
on the US Base Rate
Basis; 1.1.205 "US
Base Rate Basis"
means the basis of
calculation of interest
on each Advance
made at the US Base
Rate, in accordance
with the provisions of
Sections 2.7, 4.1 and
4.2; 1.1.206 "US
Dollars" or "US$"
means the lawful
currency of the USA
in same day
immediately available
funds or, if such funds
are not available, the
currency of the USA
which is ordinarily
used in the settlement
of international
banking operations on
the day on which any
payment or any
calculation must be
made pursuant to this
Agreement; 1.1.207
"USA" means the
United States of
America. 1.2
Interpretation In this
Agreement, unless
stipulated to the
contrary or the context
otherwise requires:
1.2.1 words used
herein which indicate
the singular include
the plural and vice
versa and words used
herein which indicate
one gender include all
genders; 1.2.2
references to
Contracts, unless
otherwise specified,
are deemed to include
all present and future
amendments,
supplements,
restatements or
replacements to or of
such Contracts; 1.2.3
references to any
legislation, statutory
instrument or
regulation or a section
or other provision
thereof, unless
otherwise specified, is
a reference to the
legislation, statutory
instrument, regulation,
section or other
provision as amended,
restated or re-enacted
from time to time;
1.2.4 references to any
thing includes the
whole or any part of
that thing and a
reference to a group of
things or Persons
includes each thing or
Person in that group;
1.2.5 references to a
Person includes that
Person's successors
and permitted assigns;
and 1.2.6 any
reference to a time
shall mean local time
in the City of Toronto,
Ontario. 1.3 Currency
Unless the contrary is
indicated, all amounts
referred to herein are
expressed in US
Dollars.
- 36 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.4
Generally Accepted
Accounting Principles
Unless the Lenders
shall otherwise
expressly agree or
unless otherwise
expressly provided
herein, all of the terms
of this Agreement
which are defined
under the rules
constituting GAAP
shall be interpreted,
and all financial
statements and reports
to be prepared
hereunder shall be
prepared, in
accordance with
GAAP; provided that
if there occurs after
the date hereof any
change in GAAP from
that used in the
preparation of the
financial statements of
the Borrower most
recently delivered to
the "Agent" under the
Existing Credit
Agreement or that
affects in any respect
the calculation of any
covenants contained in
Article 11, the
Lenders and the
Borrower shall
negotiate in good faith
amendments to the
provisions of this
Agreement that relate
to the calculation of
such covenant with
the intent of having
the respective
positions of the
Lenders and the
Borrower after such
change in GAAP
conform as nearly as
possible to their
respective positions as
of the date of this
Agreement. 1.5
Division and Titles
The division of this
Agreement into
Articles, Sections,
subsections,
paragraphs, clauses
and other subdivisions
and the insertion of
titles are for
convenience of
reference only and
shall not affect the
meaning or
interpretation of this
Agreement. 1.6
Calculations Amounts
in respect of interest,
fees and other
amounts payable to or
for the account of the
Agent and the Lenders
shall be calculated (i)
in accordance with the
provisions of the
Existing Credit
Agreement with
respect to any period
prior to the Effective
Date and (ii) in
accordance with the
provisions of this
Agreement with
respect to any period
on or after the
Effective Date. 1.7
Assignment and
Assumption Upon the
effectiveness of this
Agreement, the
Continuing Lenders
hereby irrevocably sell
and assign to each of
the Continuing
Lenders and the New
Lenders, as applicable,
and each of the
Continuing Lenders
and the New Lenders,
as applicable, hereby
irrevocably purchases
and assumes from the
Continuing Lenders, a
- 37 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 1.8
Amendment and
Restatement This
Agreement is and shall
for all purposes be a
further amendment and a
restatement of the
provisions of the
Existing Credit
Agreement. This
Agreement supersedes
the Existing Credit
Agreement insofar as it
constitutes the entire
agreement between the
parties concerning the
subject matter of this
Agreement, but does not
constitute a novation of
the Existing Credit
Agreement, the
Guarantees (as defined in
the Existing Credit
Agreement) or any of the
indebtedness, liabilities
or obligations of the
Borrower under the
Existing Credit
Agreement.
Notwithstanding any
other provision hereof,
all Advances (as defined
in the Existing Credit
Agreement) are
Advances under this
Agreement, and all of the
indebtedness, liabilities
and obligations under the
Existing Credit
Agreement constitutes
indebtedness, liabilities
and obligations under
this Agreement.
Notwithstanding any
other provision hereof,
the Borrower and the
Guarantors confirm that
the existing Guarantees
continue to support, inter
alia, all of such
indebtedness, liabilities
and obligations,
including but not limited
to that arising under this
Agreement. Section
references to the Existing
Credit Agreement in the
Guarantees granted in
connection with the
Existing Credit
Agreement shall be
deemed to be amended,
as applicable, to refer to
the corresponding section
references of this
Agreement. 2. THE
CREDIT 2.1 Amounts of
Credit Facility Subject to
the applicable provisions
hereof, each Lender
agrees to make available
to the Borrower,
severally (not jointly and
not jointly and severally),
a revolving credit facility
for the use of the
Borrower in the amount
of up to its Applicable
Percentage of
US$1,200,000,000 or the
equivalent thereof in
Canadian Dollars, as the
same may be reduced in
accordance with the
terms hereof (the "Credit
Facility"), provided that,
after giving effect to any
Advance, the Credit
Exposure of each Lender
shall not exceed such
Lender’s Commitment.
2.2 Availment Options
under Credit Facility At
the option of the
Borrower: 2.2.1 the
Credit Facility may be
utilized by the Borrower
by requesting that Prime
Rate Advances, US Base
Rate Advances or Libor
Advances be made by the
Lenders or by presenting
drafts, orders or Discount
Notes to a Lender for
acceptance as Bankers'
Acceptances; 2.2.2 the
Credit Facility may be
- 38 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
US$200,000,000 or
the equivalent thereof
in Canadian Dollars or
Euros; or 2.2.2.2 by
incurring overdrafts,
by way of Swing Line
Loans, in its Canadian
Dollar and US Dollar
accounts with the
Swing Line Lender to
an aggregate
maximum, at any
time, not to exceed the
Swing Line Limit or
the equivalent thereof
in Canadian Dollars.
2.3 Revolving Credit
Facility The Credit
Facility is a revolving
credit facility. The
principal amount of
any Advance under
the Credit Facility
which is repaid from
time to time may,
subject to the
applicable provisions
of this Agreement, be
reborrowed. 2.4
Purpose/Use of the
Credit Facility The
Borrower may use the
Credit Facility for its
general corporate
purposes or the
general corporate
purposes of the other
Obligors, including
acquisitions as
permitted under this
Agreement. 2.5 Term
and Repayment 2.5.1
Unless due and
payable sooner in
accordance with this
Agreement, all Loan
Obligations shall be
due and payable on
June 22, 2016, unless
this Agreement is
extended, upon the
irrevocable request of
the Borrower (which
request may be made
at its option), with the
consent of the
Majority Lenders, in
their sole discretion,
for additional one year
terms in accordance
with this Section 2.5.
2.5.2 Each request for
an extension of this
Agreement must be
made by the Borrower
(if it wishes to
exercise its option to
make such request)
providing the Agent
with irrevocable
written notice of such
request at least 60, but
not more than 90, days
before the applicable
anniversary date of the
Effective Date. If the
Majority Lenders
consent to a request
for any such extension
in accordance with
this Section 2.5, the
Maturity Date shall be
extended by one year
and, unless due and
payable sooner in
accordance with this
Agreement, all Loan
Obligations shall be
due and payable on
the Maturity Date, as
so extended, and all
Commitments shall be
cancelled at such
extended time. 2.5.3
Upon receipt by the
Agent of any such
request by the
Borrower for an
extension of this
Agreement, the Agent
shall provide prompt
written notice of such
request to each
Lender. Each Lender's
determination of
whether or not it
- 39 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
provided by the
Agent to such
Lender, such
Lender shall be
irrevocably deemed
to have not
consented to such
extension. 2.5.4 If
the Majority
Lenders consent to
any extension
requested by the
Borrower pursuant
to this Section 2.5,
but any Lender
does not so consent,
that dissenting
Lender (if it is still
a Lender at the
relevant time) shall
not be entitled to
vote on any
extensions
subsequently
requested by the
Borrower pursuant
to this Section 2.5
(and the
denominator in the
definition of
Majority Lender
shall, for such
purpose, be reduced
by such Lender's
Commitment).
2.5.5 If the
Majority Lenders
consent to any
requested extension
of this Agreement
pursuant to this
Section 2.5, but any
Lender does not so
consent, the
Borrower shall
require that one of
the following
occur: 2.5.5.1 any
such dissenting
Lender assign its
Commitment in
accordance with
Section 18.2;
2.5.5.2 the
Commitment of any
such dissenting
Lender shall
terminate at the end
of the then current
term of this
Agreement (with
the maximum
amount of the
Credit Facility
reducing by the
amount of such
Lender's
Commitment at that
time); or 2.5.5.3
such dissenting
Lender's
Commitments
immediately
terminate. 2.5.6 In
the case of
subsection 2.5.5.2,
the Borrower shall,
at the end of the
then current term of
this Agreement,
repay such Lender
its pro rata share of
all outstanding
Advances (other
than Letters of
Credit and Swing
Line Loans),
together with all
other amounts
owing by the
Borrower to that
Lender under
Section 7.1, and
upon receipt by
such Lender of
such amount such
Lender's
Commitment shall
be cancelled (and
the maximum
amount of the
Credit Facility shall
be reduced by the
amount of such
Lender's
- 40 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
prepayment made by
the Borrower under
Section 2.6.1, the
outstanding Advances
exceed the aggregate
Commitments, the
Borrower shall be and
become unconditionally
obligated to deposit
forthwith with the
Agent for the benefit of
the Issuing Lender cash
or Cash Equivalents
equal to the Letter of
Credit Obligations
which are in excess of
the aggregate
Commitments, such
amount to be held by
the Issuing Lender
subject to Section15.4.
2.5.7 Any assigning
Lender (in the case of
subsection 2.5.5.1) or
any Lender whose
Commitments terminate
before the Maturity
Date (in the case of
subsections 2.5.5.2 or
2.5.5.3) shall, upon
such assignment or
termination, if such
assigning Lender, or its
applicable Affiliate, is a
party to a Derivative
Instrument with an
Obligor, either (i)
terminate each
guarantee provided by
any Obligor in
connection therewith, in
which case, such
assigning Lenders or its
applicable Affiliate
shall be deemed to be
an Other Derivative
Counterparty or (ii)
assign, at a price
determined in a
reasonable manner from
market quotations in
accordance with
customary market
practices, all Derivative
Instruments it or they
hold with each Obligor
to the applicable
Eligible Assignee or to
another Lender or its
Affiliate or to an Other
Derivative
Counterparty, and if,
upon such assignment,
any guarantee provided
by any Obligor in
connection therewith
would not constitute
Permitted Debt, such
assigning Lender shall,
or shall cause its
Affiliate to, terminate
such guarantee. 2.5.8 If
the Majority Lenders do
not consent to any
extension requested by
the Borrower pursuant
to the foregoing
procedures, all Loan
Obligations shall,
unless due and payable
sooner in accordance
with this Agreement, be
due and payable on the
Maturity Date then in
effect and all remaining
Commitments shall be
cancelled at such time.
2.6 Voluntary
Prepayments and
Voluntary
Cancellations 2.6.1 The
Borrower may prepay
Prime Rate Advances
and US Base Rate
Advances under the
Credit Facility upon
one Business Day's
prior written notice in
the form of Exhibit D
and, subject to Sections
6.4 and 7.1, may prepay
Libor Advances under
the Credit Facility upon
three Business Days
prior written notice in
the form of Exhibit D,
- 41 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT 2.6.2
The Borrower may,
upon three Business
Days prior written
notice in the form of
Exhibit D, cancel
undrawn portions of
the Credit Facility in
minimum amounts
of US$1,000,000 and
multiples thereof, or
if less, the remaining
undrawn portion of
the Credit Facility.
No Standby Fees
shall be payable in
respect of the portion
of the Credit Facility
so cancelled as and
from the effective
date of its
cancellation. No
portion of the Credit
Facility which has
been so cancelled
may be reinstated by
the Borrower. 2.7
Interest Rates 2.7.1
Interest rates,
Stamping Fees, the
Letter of Credit Fee
rate and the Standby
Fee rate shall vary
and be calculated
based on the Total
Net Debt to EBITDA
Ratio as follows:
Total Net Debt to
EBITDA Ratio Libor
/ Stamping Fees/
Letter of Credit Fee
Base Rate or Prime
Rate Standby Fee
<1.00:1 1.50%
0.50% 0.3750%
=1.00:1 and < 1.50:1
1.75% 0.75%
0.4375% =1.50:1
and < 2.00:1 2.00%
1.00% 0.5000%
=2.00:1 and < 2.50:1
2.25% 1.25%
0.5625% =2.50:1
2.75% 1.75%
0.6875% Provided
that, the interest
rates, Stamping Fees
and Letter of Credit
Fee rate shall be
increased by 0.125%
(the “Utilization
Fee”) when the
Credit Exposure for
all Lenders is in the
aggregate equal to or
greater than fifty
percent (50%) of the
Commitments for all
Lenders (assuming
no Event of Default
has occurred and is
continuing);
provided further that,
if and so long as the
Borrower has a
credit rating by (a)
S&P of at least BBB,
(b) DBRS of at least
BBB or (c) Moody’s
of at least Baa2, the
Utilization Fee shall
not apply. 2.7.2 All
interest rates set
forth in subsection
2.7.1 are rates per
annum. Interest on
Libor Advances shall
accrue and be
payable at LIBOR
for the applicable
Designated Period
plus the Applicable
Margin shown in the
second column of the
table in subsection
2.7.1. The rate for
Stamping Fees shall
be the Applicable
Margin shown in the
second column of the
table in subsection
2.7.1. The Letter of
Credit Fee shall be
the Applicable
Margin shown in the
second column of the
- 42 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT 2.7.3
Increases or
decreases in the
Applicable Margin
resulting from a
change in the Total
Net Debt to EBITDA
Ratio shall be based
on the Total Net
Debt to EBITDA
Ratio reported in the
applicable
Compliance
Certificate delivered
by the Borrower
pursuant to Section
13.1.3; provided that,
from the Effective
Date to the
Reporting Effective
Date in respect of the
first full fiscal
quarter of the
Borrower
immediately
following the
Effective Date, the
Applicable Margin
shall be based on the
Total Net Debt to
EBITDA Ratio
reported in the
Compliance
Certificate delivered
by the Borrower on
the Effective Date.
Changes in the
Applicable Margin
shall be effective as
of two Business
Days following the
earlier of the day
upon which such
Compliance
Certificate is
delivered to the
Agent and the day
upon which such
Compliance
Certificate could be
delivered on time
pursuant to Section
13.1.3 (the
"Reporting Effective
Date"). Without
waiving the
requirement of the
Borrower to deliver
the Compliance
Certificate by no
later than the
Reporting Date, if
any Compliance
Certificate required
to be delivered by
the Borrower is
delivered after the
Reporting Date, the
then prevailing
Applicable Margin
shall continue until
such Compliance
Certificate is, in fact,
delivered. Upon
receipt of any
Compliance
Certificate which is
delivered after the
relevant Reporting
Date, the Agent shall
determine the
amount of any
overpayment or
underpayment of
interest or fees
during the period
from the Reporting
Date to and
including the date of
actual delivery
thereof by the
Borrower and notify
the Borrower and the
Lenders of such
amounts. Such
determination by the
Agent shall
constitute prima
facie evidence of the
amount of such
overpayment or
underpayment, as the
case may be. In the
event of an
underpayment, the
Borrower shall, upon
- 43 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 2.7.4
The Borrower shall pay
a standby fee (the
"Standby Fee") on the
daily unadvanced
portion of the Credit
Facility at a rate per
annum which shall vary
and be calculated based
on the Applicable
Margin shown in the
fourth column of the
table in subsection
2.7.1, calculated on the
basis of a year of 365
days. The Standby Fee
shall be calculated daily
and shall be payable
quarterly in arrears on
the first Business Day
following completion of
each fiscal quarter of
the Borrower; provided
that, from the Effective
Date to the first
Business Day following
the first full fiscal
quarter of the Borrower
immediately following
the Effective Date, the
Standby Fee shall be
based on the Total Net
Debt to EBITDA Ratio
reported in the
Compliance Certificate
delivered by the
Borrower on the
Effective Date. Upon
final payment of the
Loan Obligations, the
Borrower shall also pay
any accrued but unpaid
Standby Fees on the
Credit Facility.
Notwithstanding the
foregoing, Standby
Fees shall cease to
accrue on the unfunded
portion of the
Commitment of a
Lender while it is a
Defaulting Lender.
2.7.5 Interest on Prime
Rate Advances, US
Base Rate Advances,
Libor Advances and
Stamping Fees, Letter
of Credit Fees and
Standby Fees received
by the Agent shall be
promptly distributed by
the Agent to the
Lenders in accordance
with their respective
Applicable Percentages.
2.8 Annual Agency
Fees The Borrower
shall pay to the Agent,
inter alia, the annual
agency fee provided in
the Agency Fee Letter.
2.9 Exchange Rate
Fluctuations If, at any
time, fluctuations in
rates of exchange in
effect between
currencies cause the
aggregate amount of
Advances (expressed in
US Dollars using the
FX Rate) outstanding
under the Credit
Facility to exceed the
maximum amount of
the Credit Facility
permitted herein by 3%,
the Borrower shall pay
to the Lenders on
demand such amount as
is necessary to repay
the excess. If the
Borrower is unable to
immediately pay that
amount because
Designated Periods
have not ended or
Bankers' Acceptances
have not matured, the
Borrower shall, on
demand, cause to be
deposited with the
Agent escrowed funds
in the amount of the
excess, which shall be
held by the Agent until
the amount of the
excess is paid in full.
- 44 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT 3.
ADVANCES,
CONVERSIONS
AND OPERATION
OF ACCOUNTS 3.1
Notice of Borrowing
- Direct Advances
Subject to the
applicable provisions
of this Agreement,
on any Business
Day, the Borrower
shall be entitled to
draw upon the Credit
Facility, on one or
more occasions by
way of Prime Rate
Advances and US
Base Rate Advances
in minimum amounts
of, as applicable,
C$1,000,000 or
US$1,000,000 and in
whole multiples
thereof, provided
that on any Business
Day that is at least
two Business Days
prior to the day on
which any Prime
Rate Advance or US
Base Rate Advance
(other than the
Swing Line
Advance, which
shall be made in
accordance with the
provisions of Section
3.5) is required, the
Borrower shall have
provided to the
Agent a Notice of
Borrowing at or
before 10:00 a.m.
Notices of
Borrowing in respect
of Libor Advances,
Letters of Credit,
Swing Line
Advances and BA
Advances shall be
given in accordance
with the provisions
of Sections 3.3, 3.4,
3.5 and 5.1,
respectively. 3.2
Canadian
Dollar-Libor Funded
Advances Subject to
the applicable
provisions of this
Agreement, if the
Borrower requests an
Advance by way of
Prime Rate Advance,
each Canadian
Dollar-Libor Funded
Lender shall make
available to the
Agent pursuant to
Section 16.9 when
required hereunder
an Advance as a
Prime Rate Advance
in the principal
amount equal to such
Lender’s Applicable
Percentage of the
total Advance to be
extended by way of
Prime Rate
Advances. Such
Prime Rate Advance
made by such
Canadian
Dollar-Libor Funded
Lender shall initially
have a term equal to
the Canadian
Dollar-Libor Term
which is effective on
the day such
Advance is made,
and thereafter, shall,
until such Advance
is repaid, have a term
equal to the
Canadian
Dollar-Libor Term
which is effective on
the day the last
Canadian
Dollar-Libor Term
for such Advance
matures. Upon
request by the
- 45 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
Borrower has not
delivered a notice of
conversion or rollover
to the Agent in a
timely manner in
accordance with the
provisions of this
Section 3.3, the
Borrower shall be
deemed to have given
notice for a US Base
Rate Advance. 3.4
Letters of Credit 3.4.1
Issuance. Subject to
the applicable
provisions of this
Agreement, on any
Business Day, as part
of the credit available
under the Credit
Facility, upon delivery
of a Notice of
Borrowing to the
Agent three Business
Days' prior to the
requested issuance of
a Letter of Credit (or
such longer period of
time as the Issuing
Lender may
reasonably require to
settle the form of the
proposed Letter of
Credit), the Borrower
may request to be
issued by the Issuing
Lender on behalf of
the Lenders one or
more Letters of Credit
in a maximum
aggregate amount
outstanding at any
time not exceeding
US$200,000,000 or
the equivalent thereof
in Canadian Dollars or
Euros. Each Letter of
Credit shall be issued
in Canadian Dollars,
US Dollars or Euros.
Concurrently with the
delivery of a Notice of
Borrowing requesting
a Letter of Credit, the
Borrower shall
execute and deliver to
the Issuing Lender the
documents required by
the Issuing Lender in
respect of the
requested type of
Letter of Credit,
including a Letter of
Credit application and
indemnity on the
Issuing Lender's
standard forms or as is
otherwise required by
the Issuing Lender. In
the event of any
conflict between the
provisions of this
Agreement and the
provisions of any
document relating to a
Letter of Credit, the
provisions of this
Agreement shall
govern and prevail.
Each Letter of Credit
shall have a term of
not more than one
year and shall
otherwise be in form
and substance
satisfactory to the
Issuing Lender, acting
reasonably, provided
however, that each
Letter of Credit
having a term which
expires after the
Maturity Date shall be
escrowed in
accordance with
Section15.4.2 not
more than five
Business Days prior to
the Maturity Date. The
Issuing Lender shall
not be required to
issue any Letter of
Credit if such issuance
would breach any
Applicable Law or
any internal policy of
- 46 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 3.4.2.2
to the Issuing Lender
for its own account, the
Fronting Fee, based on
the percentage per
annum set out in the
Fronting Fee Letter, on
the portion of the
undrawn face amount
of each outstanding
Letter of Credit issued
by the Issuing Lender
which is attributable to
Lenders other than the
Issuing Lender, for the
actual number of days
to elapse from and
including the date of
issuance or renewal, as
applicable, of the Letter
of Credit to but
excluding the expiry
date of such Letter of
Credit, calculated on
the basis of a year of
365 or 366 days, as
applicable, which fee
shall be non-refundable
in whole or in part;
provided that, from the
Effective Date to the
first Business Day
following the first full
fiscal quarter of the
Borrower immediately
following the Effective
Date, such fees shall be
based on the Total Net
Debt to EBITDA Ratio
reported in the
Compliance Certificate
delivered by the
Borrower on the
Effective Date. 3.4.3
Additional Fees. The
Borrower shall also pay
or reimburse the Issuing
Lender for all
customary
administrative,
issuance, amendment,
payment and
negotiation fees paid,
payable or charged by
the Issuing Lender in
connection with any
Letter of Credit issued
by it. 3.4.4 General
Provisions Relating to
Letters of Credit.
3.4.4.1 The Issuing
Lender shall not be
liable for the
consequences arising
from any mutilation,
error, omission,
interruption or delay or
loss in transmission,
dispatch or delivery of
any message or advice,
however transmitted, in
connection with any
Letter of Credit. Subject
to the immediately
preceding sentence, in
furtherance and
extension and not in
limitation of the
specific provisions of
this Section 3.4 (a) any
action taken or omitted
by the Issuing Lender
or any of its respective
correspondents under or
in connection with any
of the Letters of Credit,
if taken or omitted in
good faith and in
conformity with
Applicable Law or
customs applicable
thereto, shall be binding
upon the Borrower and
shall not put the Issuing
Lender or its respective
correspondents under
any resulting liability to
the Borrower and (b)
the Issuing Lender may
accept documents in
good faith and in
conformity with
Applicable Law or
customs applicable
thereto relating to
Letters of Credit,
without responsibility
- 47 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT to make
such payment if such
documents are not in
strict compliance with
the terms of such Letter
of Credit. Without
limiting the generality
of the foregoing, the
Issuing Lender may
receive, accept, or pay
as complying with the
terms of any Letter of
Credit, any demand in
relation thereto
otherwise in order
which may be signed
by, or issued to, any
administrator, executor,
trustee in bankruptcy,
receiver or other Person
or entity acting as the
representative or in
place of, the
beneficiary. 3.4.4.2 The
Borrower
acknowledges and
confirms to the Issuing
Lender that the Issuing
Lender shall not be
obliged to make any
inquiry or investigation
as to the right of any
beneficiary to make any
claim or Draft or
request any payment
under a Letter of Credit
and payment by the
Issuing Lender pursuant
to a Letter of Credit
shall not be withheld by
the Issuing Lender by
reason of any matters in
dispute between the
beneficiary thereof and
the Borrower. The sole
obligation of the
Issuing Lender with
respect to Letters of
Credit is to cause to be
paid a Draft drawn or
purporting to be drawn
in accordance with the
terms of the applicable
Letter of Credit and for
such purpose the
Issuing Lender is only
obliged to determine
that the Draft purports
to comply with the
terms and conditions of
the relevant Letter of
Credit. 3.4.4.3 The
Issuing Lender shall not
have any responsibility
or liability for or any
duty to inquire into the
form, sufficiency (other
than to the extent
provided in subsection
3.4.4.2), authorization,
execution, signature,
endorsement,
correctness (other than
to the extent provided
in subsection 3.4.4.2),
genuineness or legal
effect of any Draft,
certificate or other
document presented to
it pursuant to a Letter of
Credit and the
Borrower
unconditionally
assumes all risks with
respect to the same. The
Borrower agrees that it
assumes all risk of the
acts or omissions of the
beneficiary of any
Letter of Credit with
respect to the use by the
beneficiary of the
relevant Letter of
Credit. 3.4.4.4 The
Borrower agrees that
the Issuing Lender, the
Lenders and the Agent
shall have no liability to
it for any reason in
respect of or in
connection with any
Letter of Credit, the
issuance thereof, any
payment thereunder, or
any other action by any
such Person or any
other Person in
- 48 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 3.4.5
Reimbursement
Obligations. In the
event of any drawing
under a Letter of
Credit, the Issuing
Lender shall promptly
notify the Borrower
who shall immediately
reimburse the amount
drawn to the Issuing
Lender in same day
funds. In the event
that the Borrower fails
to reimburse the
Issuing Lender after
such notification and
fails to provide a
Notice of Borrowing
with a different
option, the Borrower
shall be deemed to
have requested from,
and given notice to,
the Agent of a Prime
Rate Advance, if the
Letter of Credit is
payable in Canadian
Dollars, or a US Base
Rate Advance, if the
Letter of Credit is
payable in US Dollars
or Euros (with any
drawing under a Letter
of Credit payable in
Euros being converted
into US Dollars in
accordance with the
provisions hereof), on
the date and in the
amount of the
drawing, the proceeds
of which will be used
to satisfy the
reimbursement
obligations of the
Borrower to the
Issuing Lender in
respect of the drawing
under such Letter of
Credit. The
reimbursement
obligations of the
Borrower hereunder
shall be absolute,
unconditional and
irrevocable and shall
be performed strictly
in accordance with the
terms of this
Agreement under any
and all circumstances
whatsoever and
irrespective of: 3.4.5.1
any lack of validity or
enforceability of any
Letter of Credit or this
Agreement or any
term or provision
therein or herein;
3.4.5.2 the existence
of any claim, set-off,
compensation, defence
or other right that the
Borrower, any other
Obligor or any other
Person may at any
time have against the
beneficiary under any
Letter of Credit, the
Issuing Lender, the
Agent, any Lender or
any other Person,
whether in connection
with this Agreement
or any other related or
unrelated agreement
or transaction; 3.4.5.3
any draft or other
document presented
under a Letter of
Credit proving to be
forged, fraudulent or
invalid in any respect
or any statement
therein being untrue or
inaccurate in any
respect; 3.4.5.4 any
dispute between or
among the Obligors
and any beneficiary of
any Letter of Credit or
any other party to
which such Letter of
Credit may be
transferred or any
claims whatsoever of
- 49 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT proceeds
thereof in whole or in
part, which may prove to
be invalid or ineffective
for any reason; and
3.4.5.6 the occurrence of
any event including the
commencement of legal
proceedings to prohibit
payment by the Issuing
Lender of a Letter of
Credit. The obligations
of the Borrower
hereunder with respect to
Letters of Credit shall
remain in full force and
effect and shall apply to
any amendment to or
extension of the
expiration date of any
Letter of Credit. Each
Lender’s obligation to
fund a Prime Rate
Advance or US Base
Rate Advance as
aforesaid shall be
absolute and
unconditional and shall
not be affected by any
circumstance, including
(a) any set-off,
compensation,
counterclaim,
recoupment, defence or
other right which such
Lender may have against
the Issuing Lender, the
Borrower, any other
Obligor or any other
Person for any reason
whatsoever, (b) the
occurrence or
continuance of any
Default or Event of
Default, (c) any adverse
change in the condition
(financial or otherwise)
of the Borrower, any
other Obligor or any
other Person, (d) any
breach of this Agreement
by the Borrower or any
other Person, (e) any
inability of the Borrower
to satisfy the conditions
precedent to borrowing
set forth in this
Agreement on any
applicable Drawdown
Date for such Prime Rate
Advance or US Base
Rate Advance, or (f) any
other circumstances,
happening or event
whatsoever, whether or
not similar to any of the
foregoing. 3.4.6
Indemnification. 3.4.6.1
The Borrower agrees to
indemnify and hold
harmless the Issuing
Lender and its Related
Parties (collectively, the
"LC Indemnitees") from
and against any and all
losses, claims, damages
and liabilities which the
LC Indemnitees may
incur (or which may be
claimed against any
Indemnitee) by any
Person by reason of or in
connection with the
issuance or transfer of or
payment or failure to pay
under any Letter of
Credit, provided that the
foregoing indemnity will
not, as to any
Indemnitee, apply to
losses, claims, damages,
liabilities or related
expenses to the extent
they are found by a final,
non-appealable judgment
of a court to arise from
the gross negligence or
wilful misconduct of
such Indemnitee or the
failure of such
Indemnitee to comply
with the terms and
conditions of such Letter
of Credit (subject to
minor variations or
discrepancies in the
documents presented in
- 50 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
3.4.6.2 The
Borrower agrees, as
between the
Borrower and the
Issuing Lender, that
the Borrower shall
assume all risks of
the acts, omissions
or misuse by the
beneficiary of any
Letter of Credit.
3.4.6.3 None of the
Issuing Lender, the
Agent or any other
Lender shall, in any
way, be liable for
any failure by the
Issuing Lender or
anyone else to pay
any drawing under
any Letter of Credit
as a result of any
action by any
Governmental
Authority or any
other cause beyond
the control of the
Issuing Lender.
3.4.6.4 The
obligations of the
Borrower under
this Section 3.4
shall survive the
termination of this
Agreement. No acts
or omissions of any
current or prior
beneficiary of a
Letter of Credit
shall in any way
affect or impair the
rights of the Issuing
Lender to enforce
any right, power or
benefit under this
Agreement. 3.4.6.5
The Issuing Lender
may resign as such
(a "Resigning
Issuing Lender")
upon 15 days' prior
written notice to the
Agent and the
Borrower, in which
event the Agent, in
consultation with
the Borrower, shall
designate another
Lender as the
Issuing Lender.
Upon acceptance
by another Lender
of the appointment
as the Issuing
Lender (the
"Successor Issuing
Lender"), the
Successor Issuing
Lender shall
succeed to the
rights, powers and
duties of the
Resigning Issuing
Lender and shall
have all the rights
and obligations of
the Resigning
Issuing Lender
under this
Agreement and the
other Loan
Documents. Unless
otherwise agreed
among the
Successor Issuing
Lender, the Agent
and the Borrower,
the Successor
Issuing Lender
shall be paid the
same fees, in such
capacity, as the
Resigning Issuing
Lender. Following
the resignation of
the Resigning
Issuing Lender, the
Resigning Issuing
Lender shall
continue to have all
the rights and
obligations of the
Issuing Lender
under this
Agreement and the
- 51 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 3.5
Swing Line Advances
3.5.1 Subject to the
applicable provisions of
this Agreement, the
Swing Line Lender
agrees to make Swing
Line Advances to the
Borrower on any
Business Day from time
to time prior to the
Maturity Date. Swing
Line Advances are
available by way of
incurring overdrafts in
the Borrower's
Canadian Dollar and
US Dollar accounts
with the Swing Line
Lender, with overdrafts
in Canadian Dollars
being deemed to be
Prime Rate Advances
and overdrafts in US
Dollars being deemed
to be US Base Rate
Advances. 3.5.2 The
Swing Line Lender
shall ascertain the net
position of the
Borrower's accounts at
the close of business
daily. If the net
Canadian Dollar
position is a debit in
favour of the Swing
Line Lender, the debit
will be deemed to be a
Prime Rate Advance in
the amount of the debit
under the Swing Line
Loan. If the net US
Dollar position is a
debit in favour of the
Swing Line Lender, the
debit will be deemed to
be a US Base Rate
Advance in the amount
of the debit under the
Swing Line Loan. If a
net position is a credit
in favour of the
Borrower, the credit
will be deemed to be a
repayment of the Swing
Line Advance by a
Prime Rate Advance or
US Base Rate Advance
under the Swing Line
Loan, as the case may
be, in the amount of the
credit to the extent of
any principal amounts
owing in respect
thereof. If, at any time,
the aggregate of the
Swing Line Advances
exceeds US$30,000,000
or the equivalent in
Canadian Dollars, such
excess shall be
immediately repaid by
the Borrower. No
repayments of any
Swing Line Advance
shall be deemed to be a
permanent reduction in
the Credit Facility.
3.5.3 All interest
payments and principal
repayments of or in
respect of the Swing
Line Loan shall be
solely for the account of
the Swing Line Lender.
3.5.4 Notwithstanding
anything to the contrary
herein contained or
contrary to the
provisions of
Applicable Law, if a
Default or Event of
Default has occurred
and is continuing or if
any Swing Line Loan is
outstanding on the last
day of each month, the
Borrower shall be
deemed to have made a
request for, as
applicable, a Prime
Rate Advance and/or a
US Base Rate Advance,
and each Lender shall
make, as applicable, a
Prime Rate Advance
and/or a US Base Rate
- 52 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT other
right which such
Lender may have
against any Swing
Line Lender, the
Borrower, any other
Obligor or any other
Person for any reason
whatsoever, (b) the
occurrence or
continuance of any
Default or Event of
Default, (c) any
adverse change in the
condition (financial or
otherwise) of the
Borrower, any other
Obligor or any other
Person, (d) any breach
of this Agreement by
the Borrower or any
other Person, (e) any
inability of the
Borrower to satisfy
the conditions
precedent to
borrowing set forth in
this Agreement on any
applicable Drawdown
Date for such Prime
Rate Advance or US
Base Rate Advance or
participating interest
to be purchased, or (f)
any other
circumstances,
happening or event
whatsoever, whether
or not similar to any
of the foregoing. 3.5.5
If the Swing Line
Lender no longer
wishes to act as such,
it shall notify the
Borrower, the other
Lenders and the Agent
not less than 15 days
prior to the date on
which it proposes to
cease acting as the
Swing Line Lender. In
such event, the Agent,
in consultation with
the Borrower, may
designate another
Lender as the Swing
Line Lender by
sending a notice to (a)
the Swing Line
Lender who will no
longer act as such (the
"Retiring Swing Line
Lender") and (b) the
proposed new Swing
Line Lender who has
agreed to act as such,
not less than five days
prior to the date on
which the replacement
is to occur. The new
Swing Line Lender
shall make, as
necessary, a Prime
Rate Advance and/or a
US Base Rate
Advance available to
the Agent for the
purpose of repaying
the portion of the
Swing Line Loan
owed to the Retiring
Swing Line Lender.
3.5.6 If, following the
sending of such notice
by the Agent, an
Event of Default has
occurred, other than
an Event of Default
under subsection
15.1.11, or if no
Lender has agreed to
act as a replacement
for the Retiring Swing
Line Lender (in such
case, the Swing Line
Lender is herein
referred to as the
"Former Swing Line
Lender"), the
Borrower shall be
deemed to have made
a request for, as
necessary, a Prime
Rate Advance and/or a
US Base Rate
Advance, and each
Lender shall make, as
- 53 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT such
Lender Swing Line
Repayments and the
provisions of
subsection 3.5.7 shall
apply. 3.5.7 If, before
the making of a
Lender Swing Line
Repayment under
subsection 3.5.6, a
Default under
subsection 15.1.11
shall have occurred
and be continuing or
an Event of Default
under subsection
15.1.11 shall have
occurred, each Lender
shall, on the date such
Lender Swing Line
Repayment was to
have been made,
purchase from the
Former Swing Line
Lender an undivided
participating interest
in the principal of the
Swing Line Loans to
be repaid, in an
amount equal to its
Applicable Percentage
multiplied by the
amount of the
outstanding principal
of the Swing Line
Loan, and
immediately transfer
such amount to the
Agent for the benefit
of the Former Swing
Line Lender, in
immediately available
funds. In such event,
the Borrower's right to
obtain Swing Line
Advances will cease
and the amounts
outstanding
thereunder will
continue to form part
of the Loan
Obligations. If at any
time after any Lender
Swing Line
Repayment has been
made or any
participation in any
existing Swing Line
Loan has been
purchased in
accordance with this
Section 3.5.7, the
Former Swing Line
Lender receives any
payment on account of
the principal of the
Swing Line Loan in
respect of which such
Lender Swing Line
Repayment has been
made or any
participation in any
existing Swing Line
Loan has been
purchased in
accordance with this
Section 3.5.7, the
Former Swing Line
Lender will distribute
to the Agent for the
benefit of each Lender
an amount equal to its
percentage
Commitment
multiplied by such
amount (appropriately
adjusted, in the case of
interest payments, to
reflect the period of
time during which
such Lender's portion
was outstanding and
funded) in like funds
as received; provided,
however, that if such
payment received by
the Former Swing
Line Lender is
required to be
returned, such Lender
will return to the
Agent for the benefit
of the Former Swing
Line Lender any
portion thereof
previously distributed
by the Former Swing
- 54 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT this
Agreement on any
applicable Drawdown
Date for such Prime
Rate Advance or US
Base Rate Advance or
participating interest to
be purchased, or (f) any
other circumstances,
happening or event
whatsoever, whether or
not similar to any of the
foregoing. If any
Lender does not make
available the amount
required under
subsection 3.5.6 or
3.5.7, as the case may
be, the Former Swing
Line Lender shall be
entitled to recover such
amount on demand
from such Lender,
together with interest
thereon, as applicable,
at the Prime Rate Basis
or US Base Rate Basis,
as applicable, at such
time from the date of
nonpayment until such
amount is paid in full.
3.6 Defaulting Lenders
3.6.1 The Issuing
Lender shall not be
obligated to issue
Letters of Credit to the
extent of any
Defaulting Lender's or
Impacted Lender's
Applicable Percentage
thereof, unless
arrangements
satisfactory to the
Issuing Lender have
been entered into with
the Borrower or with
the Defaulting Lender
or Impacted Lender to
eliminate the Issuing
Lender's risk with
respect to such
Defaulting Lender or
Impacted Lender (such
as depositing Cash
Equivalents with the
Agent for the benefit of
the Issuing Lender).
3.6.2 If the available
amount of Letters of
Credit is reduced
pursuant to Section
3.6.1, the Letter of
Credit Fee payable by
the Borrower under
Section 3.4.2.1 shall be
reduced by a
proportional amount.
While it is a Defaulting
Lender or Impacted
Lender, a Lender shall
not be entitled to share
in a Letters of Credit
Fee in respect of any
Letters of Credit, (i) the
amount of which is
reduced pursuant to
Section 3.6.1, or (ii) to
the extent that the
Borrower has entered
into arrangements with
the Issuing Lender to
eliminate the Issuing
Lender's risk with
respect to such
Defaulting Lender or
Impacted Lender.
Notwithstanding
subsection 3.4.2.1, in
the case of clause (ii)
above, no Letters of
Credit Fee shall be
payable on the portion
of the Letters of Credit
for which the Borrower
has entered into those
arrangements with the
Issuing Lender, with the
result that the Letters of
Credit Fee shall, in such
case, be reduced by that
amount. 3.6.3 The
Swing Line Lender
shall not be obligated to
make Swing Line
Loans to the extent of
any Defaulting Lender's
or Impacted Lender's
- 55 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 3.6.4
Section 3.6.3 shall not
apply to Swing Line
Loans that are
outstanding at the time
a Lender becomes a
Defaulting Lender or
an Impacted Lender.
3.7 Evidence of
Indebtedness The
Loan Obligations
resulting from Prime
Rate Advances, US
Base Rate Advances
and Libor Advances
made by the Lenders
shall be evidenced by
records maintained by
the Agent and by each
Lender concerning
those Advances it has
made. The Agent shall
also maintain records
of the Loan
Obligations resulting
from BA Advances
and Advances made
by way of issuance of
Letters of Credit, and
each Lender shall also
maintain records
relating to Bankers'
Acceptances that it
has accepted and the
Issuing Lender shall
maintain records
relating to Letters of
Credit it has issued.
The Loan Obligations
resulting from Swing
Line Loans shall be
evidenced by records
maintained by the
Swing Line Lender.
The records
maintained by the
Agent and the Swing
Line Lender shall
constitute prima facie
evidence of the Loan
Obligations and all
details relating
thereto. After a
request by the
Borrower, the Agent
or the Lender to whom
the request is made
will promptly advise
the Borrower of the
entries in such
records. The failure of
the Agent or any
Lender to correctly
record any such
amount or date shall
not, however,
adversely affect the
obligation of the
Borrower to pay any
Loan Obligations in
accordance with this
Agreement. The
Agent shall, upon the
reasonable request of
a Lender or the
Borrower, provide any
information contained
in its records of
Advances by such
Lender or to the
Borrower, and the
Agent, each Lender
and the Borrower shall
cooperate in providing
all information
reasonably required to
keep all accounts
accurate and
up-to-date. 3.8
Apportionment of
Advances The amount
of each Advance will
be apportioned among
the Lenders by the
Agent by reference to
the Applicable
Percentage of each
Lender immediately
prior to the making of
any Advance, subject
to the provisions of
Section 5.8 with
respect to BA
Advances. If any
amount is not in fact
made available to the
Agent by a Lender,
- 56 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT 4.
CALCULATION
OF INTEREST
AND FEES 4.1
Calculation of
Interest on Prime
Rate Advances and
US Base Rate
Advances The
principal amount of
each Prime Rate
Advance and each
US Base Rate
Advance shall bear
interest, calculated
daily, on the daily
balance of each such
Advance, from and
including the
Drawdown Date of,
as applicable, such
Prime Rate Advance
or US Base Rate
Advance, up to but
excluding the day of
repayment thereof in
full at the annual rate
(calculated based on
a 365 or 366 day
year, as applicable)
applicable to each of
such days which
corresponds to, as
applicable, the Prime
Rate or the US Base
Rate, at the close of
business on each of
such days, plus the
Applicable Margin
determined in
accordance with
subsection 2.7.1. 4.2
Payment of Interest
on Prime Rate
Advances and US
Base Rate Advances
Interest on Prime
Rate Advances and
US Base Rate
Advances calculated
and payable in
accordance with
Section 4.1 shall be
payable to the Agent
for the account of the
Lenders on the last
Business Day of
each month. 4.3
Calculation of
Interest on Libor
Basis The principal
amount of each
Libor Advance shall
bear interest,
calculated daily, on
the daily balance of
such Advances, from
and including the
Drawdown Date up
to but excluding the
last day of the
Designated Period of
such Libor Advance,
at the annual rate
(calculated based on
a 360-day year)
applicable to each of
such days which
corresponds to the
LIBOR applicable to
each Selected
Amount, plus the
Applicable Margin
determined in
accordance with
subsection 2.7.1, and
shall be effective as
and from and
including the
Drawdown Date. 4.4
Payment of Interest
on Libor Basis
Interest on Libor
Advances calculated
and payable in
accordance with
Section 4.3 shall be
payable to the Agent
for the account of the
Lenders, in arrears,
4.4.1 on the last day
of the applicable
Designated Period
when the Designated
Period is one, two or
three months; or
- 57 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT 4.5.2
the relevant rollover
date of a Libor
Advance. 4.6 Interest
on Miscellaneous
Amounts Where this
Agreement does not
specifically provide
for a rate of interest
applicable to an
outstanding portion
of the Loan
Obligations, the
interest on such
portion of the Loan
Obligations shall be
calculated and
payable on the Prime
Rate Basis, in the
case of amounts
payable in Canadian
Dollars, and on the
US Base Rate Basis,
in the case of
amounts payable in
US Dollars and
Euros (with any
amounts in Euros
having been
converted to US
Dollars in
accordance with the
procedures set out
herein), in each case
payable on the last
Business Day of
each month. 4.7
Default Interest If
the Borrower fails to
pay any principal
amount of any Loan
Obligations, any
interest thereon, any
fees payable
hereunder or any
other amount
payable hereunder
on the date when
such amount is due
(whether at the stated
maturity, by
acceleration or
otherwise), such
overdue amount
shall bear interest, to
the extent permitted
by Applicable Law,
from and including
such due date up to
but excluding the
date of actual
payment, both before
and after demand,
Default or judgment,
at a rate of interest
per annum equal to
2% greater than the
interest rate which is
otherwise applicable
(which, in the case of
LIBOR Advances,
shall be based on the
existing Libor Basis,
until the expiry of
the then applicable
Designated Period
and thereafter based
on successive
Designated Periods
of one month) from
the date of such
non-payment until
paid in full (as well
after, as before
Default, maturity or
judgment), with
interest on overdue
interest bearing
interest at the same
rate. All interest
payable pursuant to
this Section 4.7 shall
be payable upon
demand. 4.8
Maximum Interest
Rate The amount of
the interest or fees
payable in applying
this Agreement shall
not exceed the
maximum rate
permitted by
Applicable Law.
Where the amount of
such interest or such
fees is greater than
- 58 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT that
the deemed
re-investment
principle shall not
apply to such
calculations. In
addition, the parties
acknowledge that
there is a material
distinction between
the nominal and
effective rates of
interest and that they
are capable of
making the
calculations
necessary to
compare such rates.
5. BANKERS'
ACCEPTANCES
5.1 Advances by
Bankers'
Acceptances and
Conversions into
Bankers'
Acceptances 5.1.1
Subject to the
applicable provisions
of this Agreement
(including Section
6.6), the Borrower
may request that a
BA Advance be
made, that one or
more Advances not
borrowed as BA
Advances be
converted into one or
more BA Advances
or that a BA
Advance or any part
thereof be extended,
as the case may be
(the "BA Request")
by written Notice of
Borrowing to the
Agent given at least
four Business Days,
before 10:00 a.m.,
prior to the date of
the proposed
Advance (for the
purposes of this
Article 5 called the
"Acceptance Date").
BA Advances shall
be in a minimum
amount of
C$1,000,000 or
C$100,000 multiples
thereof. Each
Bankers' Acceptance
issued shall have a
Designated Period of
one, two, three or six
months (or such
other period as may
be available and
acceptable to the
Lenders), and shall
in no event mature
on a date that is after
the Maturity Date.
5.1.2 Prior to making
any BA Request, the
Borrower shall
deliver: 5.1.2.1 to the
Lenders, in the name
of each BA Lender,
drafts in form and
substance acceptable
to the Agent and the
Lenders, acting
reasonably; and
5.1.2.2 to the
Lenders, in the name
of each Lender
which is a Non- BA
Lender, Discount
Notes; completed
and executed by its
authorized
signatories in
sufficient quantity
for the Advance
requested and in
appropriate
denominations to
facilitate the sale of
the Bankers'
Acceptances in the
financial markets.
No Lender shall be
responsible or liable
for its failure to
accept a Bankers'
- 59 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
Lender its lawful
attorney, to
complete and sign
Bankers'
Acceptances on
behalf of the
Borrower, in
handwritten,
facsimile,
mechanical or
electronic signature
or otherwise, and
once so completed,
signed and
endorsed, and
following
acceptance of them
as Bankers'
Acceptances, to
purchase, discount
or negotiate such
Bankers'
Acceptances in
accordance with the
provisions of this
Article 5, and to
provide the
Available Proceeds
to the Agent in
accordance with the
provisions hereof.
Drafts so
completed, signed,
endorsed and
negotiated on
behalf of the
Borrower by any
Lender shall bind
the Borrower as
fully and
effectively as if so
performed by an
authorized officer
of the Borrower.
Each Lender shall
maintain a record
with respect to such
instruments (a)
received by it
hereunder, (b)
voided by it for any
reason, (c) accepted
by it hereunder and
(d) cancelled at
their respective
maturities. Each
Lender agrees to
provide such
records to the
Borrower upon
request. 5.2
Acceptance
Procedure With
respect to each BA
Advance: 5.2.1 The
Agent shall
promptly notify in
writing each Lender
of the details of the
proposed BA
Advance,
specifying: 5.2.1.1
for each BA Lender
(a) the principal
amount of the
Bankers'
Acceptances to be
accepted by such
Lender, and (b) the
Designated Period
of such Bankers'
Acceptances; and
5.2.1.2 for each
Non-BA Lender (a)
the principal
amount of the
Discount Notes to
be issued to such
Lender and (b) the
Designated Period
of such Discount
Notes. 5.2.2 The
Agent shall
establish the
Bankers'
Acceptance
Discount Rate at or
about 10:00 a.m. on
the Acceptance
Date, and the Agent
shall promptly
determine the
amount of the BA
Proceeds. 5.2.3
Forthwith, and in
- 60 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
deduct such
Lender's Stamping
Fee out of the BA
Proceeds of the
Bankers'
Acceptances
accepted by it;
5.2.3.3 the BA
Proceeds of the
Bankers'
Acceptances to be
purchased by such
Lender on such
Acceptance Date;
and 5.2.3.4 the
amount obtained
(the "Available
Proceeds") by
deducting the
Stamping Fee
referred to in
subsection 5.2.3.2
from the BA
Proceeds
mentioned in
subsection 5.2.3.3.
5.2.4 Not later than
1:00 p.m. on the
Acceptance Date,
each Lender shall
make available to
the Agent its
Available Proceeds.
5.2.5 Not later than
3:00 p.m. on the
Acceptance Date,
subject to the
applicable
provisions of this
Agreement, the
Agent shall transfer
the Available
Proceeds to the
Borrower and shall
notify the Borrower
of the details of the
issue. 5.3 Purchase
of Bankers'
Acceptances and
Discount Notes
Before giving value
to the Borrower,
the Lenders which
are: 5.3.1 BA
Lenders shall, on
the Acceptance
Date, accept the
Bankers'
Acceptances by
inserting the
appropriate
principal amount,
Acceptance Date
and maturity date in
accordance with the
BA Request
relating thereto and
affixing their
acceptance stamps
thereto, and shall
purchase or sell
same; and 5.3.2
Non-BA Lenders
shall, on the
Acceptance Date,
complete the
Discount Notes by
inserting the
appropriate
principal amount,
Acceptance Date
and maturity date in
accordance with the
BA Request
relating thereto and
shall purchase the
same. 5.4 Maturity
Date of Bankers'
Acceptances
Subject to the
applicable notice
provisions, at or
prior to the
maturity date of
each Bankers'
Acceptance, the
Borrower may:
5.4.1 give to the
Agent a notice in
the form of Exhibit
D requesting that
the Lenders convert
all or any part of
the BA Advance
then outstanding
- 61 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 5.4.3 by no
later than 10:00 a.m., two
Business Days prior to the
maturity date of each
Bankers' Acceptance then
outstanding and reaching
maturity, notify the Agent
that it intends to deposit in
its account for the account
of the Lenders on the
maturity date thereof an
amount equal to the
principal amount of each
such Bankers' Acceptance.
5.5 Deemed Conversions on
the Maturity Date of
Bankers' Acceptances If the
Borrower does not deliver
to the Agent one or more of
the notices contemplated by
subsections 5.4.1 or 5.4.2 or
does not give the notice
contemplated by subsection
5.4.3, the Borrower shall be
deemed to have requested
and given notice that the
part of the BA Advance
then outstanding which is
reaching maturity be
converted into a Prime Rate
Advance. 5.6 Conversion
and ExtensionMechanism If
under the conditions: 5.6.1
of subsection 5.4.1 and of
Section 5.5, the Borrower
requests or is deemed to
have requested, as the case
may be, that the Agent
convert the portion of the
BA Advance which is
maturing into a Prime Rate
Advance, the Lenders shall
pay the Bankers'
Acceptances which are
outstanding and maturing.
Such payments by the
Lenders will constitute an
Advance within the
meaning of this Agreement
and the interest thereon
shall be calculated and
payable as such; or 5.6.2 of
subsection 5.4.3, the
Borrower makes a deposit
in its account to repay a
maturing Bankers'
Acceptance, without
limiting in any way the
generality of Section 7.10
or19.6, the Borrower hereby
expressly and irrevocably
authorizes the Agent to
make any debits necessary
in its account in order to
pay the Bankers'
Acceptances which are
outstanding and maturing,
provided that no such debit
will constitute a prepayment
under subsection 2.6.1 or
cancellation under Section
2.6.2. 5.7 No Prepayment of
Bankers' Acceptances
Notwithstanding any
provision hereof, the
Borrower may not repay
any Bankers' Acceptance
other than on its maturity
date; however, this
provision shall not prevent
the Borrower from
providing escrowed funds
for any Bankers'
Acceptance in accordance
with Section 15.4. 5.8
Apportionment Amongst
the Lenders In relation to
each BA Advance, the
Agent is authorized by the
Borrower and each Lender
to allocate between the
Lenders the Bankers'
Acceptances to be issued by
the Borrower and accepted
and purchased by the
Lenders, in such manner
and amounts as the Agent
may, in its sole discretion,
consider necessary, so as to
ensure that no Lender is
required to accept and
purchase a Bankers'
Acceptance for a fraction of
C$100,000. In
- 62 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT the event
of any such allocation by
the Agent, the Lenders'
respective Commitments
in any such Bankers'
Acceptances and
repayments thereof shall
be adjusted accordingly.
Further, the Agent is
authorized by the
Borrower and each Lender
to cause the Applicable
Percentage of one or more
Lender's Advances with
respect to Bankers'
Acceptances to be
exceeded by no more than
C$100,000 each as a result
of such allocations,
provided that the principal
amount of all outstanding
Advances of each Lender
shall not thereby exceed
the maximum amount of
the respective
Commitment of each
Lender. Any resulting
amount by which the
requested face amount of
any such Bankers'
Acceptance shall have
been so reduced shall be
advanced, converted or
continued, as the case may
be, as a Prime Rate
Advance, to be made
contemporaneously with
the BA Advance. 5.9 Days
of Grace The Borrower
shall not claim from the
Lenders any days of grace
for the payment at
maturity of any Bankers'
Acceptances presented and
accepted by the Lenders
pursuant to the provisions
of this Agreement.
Further, the Borrower
waives any defence to
payment which might
otherwise exist if for any
reason a Bankers'
Acceptance shall be held
by any Lender in its own
right at the maturity
thereof. 5.10 Obligations
Absolute The obligations
of the Borrower with
respect to Bankers'
Acceptances shall be
unconditional and
irrevocable (other than in
respect of a loss or the
improper use of any
Bankers' Acceptance
arising by reason of the
gross negligence or wilful
misconduct of the Agent,
the Lenders or their
respective employees) and
shall be paid strictly in
accordance with the
provisions of this
Agreement under all
circumstances, including
the following
circumstances: 5.10.1 any
lack of validity or
enforceability of any draft
accepted by any Lender as
a Bankers' Acceptance; or
5.10.2 the existence of any
claim, set-off, defence or
other right which the
Borrower may have at any
time against the holder of
a Bankers' Acceptance, the
Lenders, or any other
person or entity, whether
in connection with this
Agreement or otherwise.
5.11 Depository Bills and
Notes Act In the discretion
of a BA Lender, Bankers'
Acceptances to be
accepted by such Lender
may be issued in the form
of "depository bills"
within the meaning of the
Depository Bills and
Notes Act (Canada) and
deposited with the CDS
Clearing and Depository
Services Inc. or any
successor or other
clearinghouse within the
meaning of the said Act
- 63 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT terms as
those replaced, and
deposit them with CDS
against cancellation of
the previously issued
Bankers' Acceptances.
6. ILLEGALITY,
INCREASED COSTS,
INDEMNIFICATION
AND MARKET
DISRUPTIONS 6.1
Illegality If any Lender
determines that any
Change in Law has
made it unlawful, or
that any Governmental
Authority has asserted
that it is unlawful, for
any Lender or its
applicable lending
office to (a) make any
Advance or maintain
any Advance (or to
maintain its obligation
to make any Advance)
or (b) determine or
charge interest rates
based upon any
particular rate other
than as a result of any
breach of the Criminal
Code (Canada), then,
on notice thereof by
such Lender to the
Borrower through the
Agent, any obligation
of such Lender with
respect to the activity
that is unlawful shall be
suspended until such
Lender notifies the
Agent and the Borrower
that the circumstances
giving rise to such
determination no longer
exist. Upon receipt of
such notice, the
Borrower shall, upon
demand from such
Lender (with a copy to
the Agent), take any
necessary steps with
respect to any Letter of
Credit, and otherwise
have the option of
prepaying or, if
conversion would avoid
the unlawful activity,
convert any Advances,
in order to avoid the
activity that is unlawful.
Upon any such
prepayment or
conversion, the
Borrower shall also pay
accrued interest and
accrued Letter of Credit
Fees on the amount so
prepaid or converted.
Each Lender agrees to
designate a different
lending office for
funding or booking its
Advances hereunder or
to assign its rights and
obligations hereunder to
another of its offices,
branches or affiliates if
such designation will
avoid the need for such
notice and will not, in
the good faith judgment
of such Lender,
otherwise be materially
disadvantageous to such
Lender. No payment
hereunder by the
Borrower shall give rise
to any additional
obligations under
Section 19.6 or be
considered a payment
under Section 2.6.1 or
any cancellation of the
Credit Facility under
Section 2.6.2. Any
Lender affected under
this Section 6.1 shall
give the Agent and
Borrower prompt
written notice of any
change in
circumstances that
make it no longer
subject to the
circumstances that
require any termination
- 64 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT Lender
in respect thereof,
except for Indemnified
Taxes or Other Taxes
covered by Section 6.3
and the imposition, or
any change in the rate,
manner of application
or administration, of
any Excluded Tax
payable by such
Lender; or 6.2.1.3
impose on any Lender
or the applicable
interbank market any
other condition, cost or
expense affecting this
Agreement or Advances
by or owed to such
Lender or any Letter of
Credit or participation
therein; and the result
of any of the foregoing
shall be to increase the
cost to such Lender of
making any Advance or
maintaining any
Advance (or of
maintaining its
obligation to make any
such Advance), or to
increase the cost to such
Lender or the Issuing
Lender of participating
in, issuing or
maintaining any Letter
of Credit (or of
maintaining its
obligation to participate
in or to issue any Letter
of Credit), or to reduce
the amount of any sum
received or receivable
by such Lender or the
Issuing Lender
hereunder (whether of
principal, interest or
any other amount), then
upon request of such
Lender and the delivery
by such Lender to the
Borrower and the Agent
of the certificate
referred to in Section
6.2.3, the Borrower will
pay to such Lender
within 30 days of the
receipt of such request
and certificate such
additional amount or
amounts as will
compensate such
Lender for such
additional costs
incurred or reduction
suffered. 6.2.2 Capital
Requirements. If any
Lender determines that
any Change in Law
affecting such Lender
or any lending office of
such Lender or such
Lender's holding
company, if any,
regarding capital
requirements has or
would have the effect of
reducing the rate of
return on such Lender's
capital or on the capital
of such Lender's
holding company, if
any, as a consequence
of this Agreement, the
Commitments of such
Lender or the Advances
made, or the Letters of
Credit issued or
participated in, by such
Lender, to a level below
that which such Lender
or its holding company
could have achieved but
for such Change in Law
(taking into
consideration such
Lender's policies and
the policies of its
holding company with
respect to capital
adequacy), then from
time to time the
Borrower will pay to
such Lender such
additional amount or
amounts as will
compensate such
- 65 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT prima
facie evidence of such
amount or amounts
owed. The Borrower
shall pay such Lender
the amount shown as
due on any such
certificate within ten
days after receipt
thereof. 6.2.4 Delay in
Requests. Failure or
delay on the part of any
Lender to demand
compensation pursuant
to this Section shall not
constitute a waiver of
such Lender's right to
demand such
compensation, except
that the Borrower shall
not be required to
compensate a Lender
pursuant to this Section
for any increased costs
incurred or reductions
suffered more than six
months prior to the date
that such Lender
notifies the Borrower of
the Change in Law
giving rise to such
increased costs or
reductions and of such
Lender's intention to
claim compensation
therefor, unless the
Change in Law giving
rise to such increased
costs or reductions is
retroactive, in which
case the six month
period referred to above
shall be extended to
include the period of
retroactive effect
thereof. 6.2.5
Notwithstanding the
foregoing, the Borrower
shall only be obligated
to pay such additional
amount or amounts
under Section 6.2 if the
affected Lender, as a
general practice, also
requires compensation
therefor from its other
customers, where such
other customers are
bound by similar
provisions to the
foregoing provisions of
this Section and where,
due to the type of credit
facility or other
arrangements such
other customers have
with such Lender or the
industry or jurisdiction
where such other
customers carry on
business, such Lender
would be similarly
affected (and because
of such Lender's
confidentiality
obligations to its other
customers, such
conditions, if
applicable, shall be
confirmed as having
been satisfied by such
Lender in the certificate
referred to in Section
6.2.3, which certificate
shall be conclusive
absent manifest error).
6.3 Taxes 6.3.1
Payments Free of
Taxes. Any and all
payments by or on
account of any
obligation of each
Obligor hereunder or
under any other Loan
Document shall be
made free and clear of
and without deduction
or withholding for any
Indemnified Taxes or
Other Taxes. If any
Obligor, the Agent, or
any Lender is required
by Applicable Law to
deduct or pay any
Indemnified Taxes
(including any Other
Taxes) in respect of
- 66 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT any
such deductions and
withholdings required
to be made by it under
Applicable Law and (c)
the Obligor shall timely
pay the full amount
required to be deducted
or withheld to the
relevant Governmental
Authority in accordance
with Applicable Law.
6.3.2 Payment of Other
Taxes by the Borrower.
Without limiting the
provisions of Section
6.3.1, the Obligors shall
timely pay any Other
Taxes to the relevant
Governmental
Authority in accordance
with Applicable Law.
6.3.3 Indemnification
by the Borrower. Each
Obligor shall indemnify
the Agent and each
Lender, within thirty
days after demand
therefor, for the full
amount of any
Indemnified Taxes or
Other Taxes (including
Indemnified Taxes or
Other Taxes imposed or
asserted on or
attributable to amounts
payable under this
Section) paid by the
Agent or such Lender
and any penalties,
interest and reasonable
expenses arising
therefrom or with
respect thereto, whether
or not such Indemnified
Taxes or Other Taxes
were correctly or
legally imposed or
asserted by the relevant
Governmental
Authority. A certificate
as to the amount of
such payment or
liability delivered to the
Borrower by a Lender
(with a copy to the
Agent), or by the Agent
on its own behalf or on
behalf of a Lender,
shall be prime facie
evidence of such
amount or payment.
6.3.4 Evidence of
Payments. As soon as
practicable after any
payment of Indemnified
Taxes or Other Taxes
by an Obligor to a
Governmental
Authority, the Obligor
shall deliver to the
Agent the original or a
certified copy of a
receipt issued by such
Governmental
Authority evidencing
such payment, a copy
of the return reporting
such payment or other
evidence of such
payment reasonably
satisfactory to the
Agent. 6.3.5 Status of
Lenders. Any Foreign
Lender that is entitled
to an exemption from or
reduction of
withholding tax under
the law of the
jurisdiction in which
the applicable Obligor
is resident for tax
purposes, or under any
treaty to which such
jurisdiction is a party,
with respect to
payments hereunder or
under any other Loan
Document by such
Obligor shall, at the
request of the
Borrower, deliver to
such Obligor (with a
copy to the Agent), at
the time or times
prescribed by
Applicable Law or
- 67 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT be,
or to be deemed to
be, resident in
Canada for the
purposes of Part XIII
of the Income Tax
Act (Canada) or any
successor provision
thereto shall, within
five Business Days
thereof, notify the
Borrower and the
Agent in writing.
6.3.6 Treatment of
Certain Refunds. If
the Agent or a
Lender determines,
in its sole discretion,
that it has received a
refund of any Taxes
or Other Taxes as to
which it has been
indemnified by an
Obligor or with
respect to which an
Obligor has paid
additional amounts
pursuant to this
Section or that,
because of the
payment of such
Taxes or Other
Taxes, it has
benefitted from a
reduction in
Excluded Taxes
otherwise payable by
it, it shall pay to the
Borrower or other
Obligor, as
applicable, an
amount equal to such
refund (but only to
the extent of
indemnity payments
made, or additional
amounts paid, by the
Borrower or other
Obligor under this
Section with respect
to the Taxes or Other
Taxes giving rise to
such refund or
reduction), net of all
out-of-pocket
expenses of the
Agent or such
Lender, as the case
may be, and without
interest (other than
an amount equal to
the net after-Tax
amount of any
interest paid by the
relevant
Governmental
Authority, if any,
with respect to such
refund). The
Borrower or the
other Obligor, as
applicable, upon the
request of the Agent
or such Lender, shall
repay the amount
paid over to the
Borrower or other
Obligor (plus any
penalties, interest or
other Liens imposed
by the relevant
Governmental
Authority) to the
Agent or such
Lender if the Agent
or such Lender is
required to repay
such refund or
reduction to such
Governmental
Authority. This
subsection shall not
be construed to
require the Agent or
any Lender to make
available its tax
returns (or any other
information relating
to its taxes that it
deems confidential)
to the Obligors or
any other Person, to
arrange its affairs in
any particular
manner or to claim
any available refund
- 68 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
limitation any such
payment required
pursuant to Section 2.6
or upon acceleration
pursuant to Section
15.2) and (f) the
payment of any Prime
Rate Advance to any
Canadian Dollar-Libor
Funded Lender
otherwise than on the
maturity date of the
Canadian Dollar-Libor
Term thereof (including
without limitation any
such payment required
pursuant to Section 2.6
or upon acceleration
pursuant to Section
15.2); provided that, the
Borrower shall not be
required to indemnify a
Lender for any such
cost or expense if such
cost or expense is
sustained or incurred by
such Lender while it is
a Defaulting Lender . A
certificate of the Agent
providing reasonable
particulars of the
calculation of any such
loss or expense shall be
prima facie evidence of
such amount owed. If
any Lender becomes
entitled to claim any
amount pursuant to this
Section 6.4, it shall
promptly notify the
Borrower, through the
Agent, of the event by
reason of which it has
become so entitled and
reasonable particulars
of the related loss or
expense, provided that
the failure to do so
promptly shall not
prejudice the Lenders'
right to claim
hereunder. 6.5
Mitigation Obligations:
Replacement of
Lenders 6.5.1
Designation of a
Different Lending
Office. If any Lender
requests compensation
under Section 6.2,
requires the Borrower
to pay any additional
amount to any Lender
or any Governmental
Authority for the
account of any Lender
pursuant to Section 6.3
or suspend its funding
obligations hereunder
pursuant to Section 6.1,
then such Lender shall
use reasonable efforts
to designate a different
lending office for
funding or booking its
Advances hereunder or
to assign its rights and
obligations hereunder to
another of its offices,
branches or affiliates,
if, in the judgment of
such Lender, such
designation or
assignment (a) would
eliminate or reduce
amounts payable
pursuant to Section 6.2
or 6.3 or eliminate the
illegal event giving rise
to the suspension of
such Lender’s
obligations, as the case
may be, in the future
and (b) would not
subject such Lender to
any unreimbursed cost
or expense and would
not otherwise be
disadvantageous to such
Lender. The Borrower
hereby agrees to pay all
reasonable costs and
expenses incurred by
any Lender in
connection with any
such designation or
- 69 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
obligations (which
Eligible Assignee
may be another
Lender, if a Lender
accepts such
Assignment),
provided that: 6.5.2.1
the Borrower pays
the Agent the
assignment fee
specified in
subsection 18.2.2.5;
6.5.2.2 the assigning
Lender receives
payment of an
amount equal to the
outstanding principal
of Advances made
by it, accrued
interest thereon,
accrued fees and all
other amounts
payable to it
hereunder and under
the other Loan
Documents
(including any
breakage costs and
amounts required to
be paid under this
Agreement as a
result of prepayment
to a Lender) from the
Assignee (to the
extent of such
outstanding principal
and accrued interest
and fees) or the
Borrower (in the
case of all other
amounts); provided,
however, that the
Borrower shall not
be required to pay an
assigning Lender
that is a Defaulting
Lender in respect of
breakage costs or
other amounts
required to be paid
as a result of
prepayment to such
Lender; 6.5.2.3 in
the case of any such
Assignment resulting
from a claim for
compensation under
Section 6.2 or
payments required to
be made pursuant to
Section 6.3, such
Assignment will
result in a reduction
in such
compensation or
payments thereafter;
6.5.2.4 such
Assignment does not
conflict with
Applicable Law; and
6.5.2.5 if an
assigning Lender or
an Affiliate of an
assigning Lender is a
party to a Derivative
Instrument with an
Obligor, upon the
completion of the
acquisition of such
assigning Lender’s
interests, rights and
obligations under
this Agreement and
the related Loan
Documents, such
assigning Lender
shall, upon
completion of such
assignment, either (i)
terminate each
guarantee provided
by any Obligor in
connection
therewith, in which
case, such assigning
Lender or its
applicable Affiliate
shall be deemed to
be an Other
Derivative
Counterparty or (ii)
assign, at a price
determined in a
reasonable manner
from market
- 70 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
Permitted Debt, such
assigning Lender
shall, or shall cause its
Affiliate to, terminate
such guarantee. A
Lender shall not be
required to make any
such Assignment or
delegation if, prior
thereto, as a result of a
waiver by such Lender
or otherwise, the
circumstances
entitling the Borrower
to require such
Assignment and
delegation cease to
apply. 6.6 Market for
Bankers' Acceptances
and Libor Advances If
the Lenders
determine, after
reasonable efforts, at
any time or from time
to time that: (a) there
no longer exists a
market for Bankers'
Acceptances, or (b) as
a result of market
conditions, (i) there
exists no appropriate
or reasonable method
to establish LIBOR
for a Selected Amount
or a Designated Period
or (ii) US Dollar
deposits are not
available to the
Lenders in such
market in the Ordinary
Course in amounts
sufficient to permit
them to make a Libor
Advance for a
Selected Amount or a
Designated Period,
such Lenders shall so
advise the Agent, and
the Agent shall so
notify the Borrower,
and any such Lenders
shall not be obliged to
accept drafts of the
Borrower presented to
such Lenders pursuant
to the provisions of
this Agreement nor to
honour any Notices of
Borrowing in
connection with any
Libor Advances, and
the Borrower's option
to request BA
Advances or Libor
Advances, as the case
may be, shall
thereupon be
suspended upon notice
by the Agent to the
Borrower until the
circumstances giving
rise to such
suspension no longer
exist. Thereafter, the
Lenders shall
promptly notify the
Agent, which shall
promptly notify the
Borrower, of any
change in
circumstances of
which they become
aware which results in
the existence of such
market for Bankers'
Acceptances or a
reasonable method of
establishing LIBOR or
availability of US
Dollar deposits. 7.
PROVISIONS
RELATING TO
PAYMENTS 7.1
Payment of Losses
Resulting From a
Prepayment If a
prepayment in respect
of a Libor Advance is
made on a date other
than the final day of
the Designated Period
applicable to such
Libor Advance
contrary to the
provisions of this
Agreement,
- 71 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT 7.3
Currency of
Payments All
payments,
repayments or
prepayments, as the
case may be: 7.3.1
of principal under
the Loan
Obligations or any
part thereof, shall
be made in the
same currency as
that in which they
are outstanding;
7.3.2 of interest,
shall be made in the
same currency as
the principal
amount outstanding
to which they
relate; 7.3.3 of fees,
shall be made in US
Dollars alone; and
7.3.4 of the
amounts referred to
in Section 6.4, shall
be made in the
same currency as
the losses, costs and
expenses suffered
or incurred by the
Lenders. 7.4
Payments by the
Borrower to the
Agent All payments
to be made by the
Borrower in
connection with
this Agreement
shall be made to the
Agent, at the
Branch (or at any
other office or
account in Toronto
designated by the
Agent) in funds
having same day
value no later than
2:00 p.m. on the
day any such
payment is due. 7.5
Payment on a
Business Day Each
time a payment,
repayment or
prepayment is due
on a day that is not
a Business Day, it
shall be made on
the next Business
Day together with
applicable interest
during such
extension. 7.6
Payments by the
Lenders to the
Agent Any amounts
payable to the
Agent by a Lender
shall be paid in
funds having same
day value to the
Agent by the
Lenders on a
Business Day at the
Branch. 7.7 Netting
On any Drawdown
Date (a
"Transaction
Date"), the Agent
shall be entitled to
net amounts
payable on such
date by the Agent
to a Lender under
this Agreement
against amounts
payable in the same
currency on such
date by such
Lender to the Agent
under this
Agreement, for the
account of the
Borrower.
Similarly, on any
Transaction Date,
the Borrower
hereby authorizes
each Lender to net
amounts payable
under this
Agreement in one
currency on such
date by such
- 72 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 7.8
Application of
Payments Except as
otherwise indicated
herein, all payments
made to the Agent by
the Borrower for the
account of the Lenders
shall be distributed the
same day by the Agent,
in accordance with its
normal practice, in
funds having same day
value, among the
Lenders to the accounts
last designated in
writing by each Lender
to the Agent, pro rata in
accordance with their
respective Applicable
Percentage, subject to
adjustment, if
necessary, as a result of
any disproportion in
Loan Obligations that
may be owing to a
Lender, whether as a
result of the Swing Line
Loan, netting pursuant
to subsection 7.7 or
otherwise. 7.9 No
Set-Off or
Counterclaim by
Borrower All payments
by the Borrower shall
be made free and clear
of and without any
deduction or
withholding for or on
account of any set-off
or counterclaim. 7.10
Debit Authorization
The Agent is hereby
authorized to debit each
of the Obligor's account
or accounts maintained
from time to time at the
Branch or elsewhere,
for the amount of any
interest or any other
amounts due and owing
hereunder from time to
time payable by the
Obligors, in order to
obtain payment thereof.
8. GUARANTEES 8.1
Guarantees 8.1.1 The
Borrower covenants
and agrees that at all
times the Obligors will
account for at least (x)
95% of the consolidated
total assets of the
Borrower and its
Subsidiaries as of the
last day of the most
recently ended quarterly
or annual fiscal period
of the Borrower (such
last day, the "Test
Date") and (y) 90% of
the consolidated total
revenues of the
Borrower and its
Subsidiaries for the
twelve-month period
ending on such Test
Date; provided that to
the extent the
application of Section
8.1.2 below renders
compliance with this
Section 8.1.1
impossible, this Section
8.1.1 will be deemed to
be satisfied if each of
the Borrower's
Subsidiaries not subject
to the prohibitions in
Section 8.1.2 below
provides a Guarantee.
8.1.2 Notwithstanding
Section 8.1.1, no
Subsidiary of the
Borrower shall be
required to grant to the
Agent, for and on
behalf of and for the
benefit of the Supported
Parties, such a
Guarantee under
Section 8.1.1 if (a) it is
prohibited from doing
so under its Constating
Documents and its
Constating Documents
cannot be amended to
- 73 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
maximum extent
permitted by its
Constating Documents,
(b) it is prohibited from
doing so under
Applicable Law,
provided that, if it is
prohibited from
granting an unlimited
guarantee of the
Guaranteed
Obligations, but not a
limited guarantee of the
Guaranteed
Obligations, it shall
grant a limited
guarantee of the
Guaranteed Obligations
to the maximum extent
permitted by Applicable
Law, (c) the Agent, in
consultation with the
Borrower, determines,
acting reasonably, that
the cost of obtaining
such a guarantee of the
Guaranteed Obligations
are excessive in relation
to the value of the
guarantee to the
Lenders or (d) it has
been designated by the
Borrower as a
"non-recourse
Subsidiary" and such
designation has been
accepted by each
Lender. 8.2 Additional
Guarantors; Release
8.2.1 After the
Effective Date, the
Borrower may, in its
sole discretion, cause
any Subsidiary of the
Borrower which is not a
Guarantor to become a
Guarantor by causing
such Subsidiary to
deliver to the Agent an
agreement substantially
in the form of Exhibit F
and to deliver to the
Agent, for and on
behalf of and for the
benefit of the Supported
Parties, an
unconditional and
unlimited guarantee of
the Guaranteed
Obligations (or to the
extent provided under
Sections 8.1.2(a) and
8.1.2(b), mutatis
mutandis, a limited
guarantee of the
Guaranteed
Obligations), in form
and substance
satisfactory to the
Lenders, acting
reasonably, together
with all other items
contemplated by
Sections 12.16 and
12.17, which relate to
such Subsidiary. 8.2.2
Notwithstanding
anything in this
Agreement or in any
Guarantee to the
contrary, upon notice
by the Borrower to the
Agent (which notice
shall contain a
certification by the
Borrower as to the
matters specified in
clauses (x) and (y)
below) each of the
Guarantors specified in
such notice shall cease
to be a Guarantor and
shall be automatically
released from its
obligations under its
Guarantee (without the
need for the execution
or delivery of any other
document by the Agent,
any Lender or any other
Person) if, as at the date
of such notice, after
giving effect to such
release (x) the
Borrower will be in
compliance with the
- 74 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 8.4
Other Supported
Obligations As of the
date of this Agreement,
the Other Supported
Obligations are those
listed in Schedule B.
Upon request by a
Lender, the Agent shall,
from time to time,
prepare and provide the
Lenders and the
Borrower with a
revision of Schedule B
to reflect changes in the
Other Supported
Obligations to the
extent notified in
writing by the Borrower
to the Agent, but any
failure to do so shall not
affect the guarantees of
any Other Supported
Obligations in favour of
any Other Supported
Parties. Other
Supported Obligations
in favour of the Other
Supported Parties listed
on Schedule B from
time to time shall be
conclusively deemed to
be guaranteed by the
Guarantees (in the
absence of manifest
error) and shall not
cease to be guaranteed
without the prior
written consent of the
respective Other
Supported Parties to
whom the Other
Supported Obligations
are owed unless such
Other Supported Party
ceases (or, in the case
of an Affiliate of a
Lender which is an
Other Supported Party,
such Lender ceases) to
be a Lender. Each
Other Supported Party,
by its acceptance of the
benefit of any
Guarantees, shall be
deemed to have
accepted and be bound
by the provisions of this
Agreement applicable
to Other Supported
Parties and regarding
the terms upon which
the Other Supported
Obligations are
supported by the
Guarantees, and
authorizes and directs
the Agent to act
accordingly. 8.5
Limitation
Notwithstanding the
rights of Other
Supported Parties to
benefit from the
Guarantees in respect of
the Other Supported
Obligations, all
decisions concerning
the Guarantees and the
enforcement thereof
shall be made by the
Lenders or the Majority
Lenders, as applicable,
in accordance with this
Agreement. No Other
Supported Party
holding Other
Supported Obligations
from time to time shall
have any additional
right to influence the
Guarantees or the
enforcement thereof as
a result of holding
Other Supported
Obligations as long as
this Agreement remains
in force. 9.
CONDITIONS
PRECEDENT 9.1
Conditions to
Effectiveness The
amendments to the
Existing Credit
Agreement set out
herein shall not become
effective until the date
x
- 75 - SECOND
AMENDED AND
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AGREEMENT
agreement or an
affirmation and
consent in
substantially the same
form as the
reaffirmation
agreement or
affirmation and
consent which such
Guarantor executed
and delivered in
connection with the
Existing Credit
Agreement (unless
any modifications are
required as a result of
any changes in
Applicable Law).
9.1.3 Joinder
Agreement.
Agnico-Eagle
(Barbados) Limited
shall have executed
and delivered a
joinder agreement,
whereby
Agnico-Eagle
(Barbados) Limited
agrees to be a party to
this Agreement as if
an original signatory
hereto and to be bound
by all obligations
applicable to it as an
Obligor hereunder
(and, upon such
execution and
delivery,
Agnico-Eagle
(Barbados) Limited
shall be deemed to be
a party hereto). 9.1.4
Compliance
Certificate. A
Compliance
Certificate dated as of
the Effective Date in
respect of the fiscal
quarter of the
Borrower immediately
preceding the
Effective Date which
demonstrates
compliance with the
financial covenants set
out in Section 11 as of
the end of the March
31, 2011 fiscal
quarter. 9.1.5 Other
Matters. The
following conditions
must also be satisfied:
9.1.5.1 there shall not
have occurred or be
existing any event or
circumstance which
has, or would
reasonably be
expected to have, a
material adverse effect
on the business,
property, assets,
liabilities, conditions
(financial or
otherwise) of the
Borrower and its
Subsidiaries taken as a
whole, or prospects of
the Borrower and its
Subsidiaries taken as a
whole, since March
31, 2011; 9.1.5.2 all
reasonably
documented fees and
expenses payable
under the Loan
Documents, the
Mandate Letter and
the Agency Fee Letter
(including upfront
fees, extension fees,
and legal fees and
expenses of the
Lenders' counsel
invoiced prior to the
Effective Date) shall
have been paid;
9.1.5.3 as of the
Effective Date, there
are and will be no
actions, suits,
arbitration or
administrative
proceedings or
industrial or labour
disputes outstanding,
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Conditions Precedent to
each Advance The
obligation of the
Lenders to make any
Advance is subject to
the conditions
precedent that: 9.2.1 the
representations and
warranties contained in
this Agreement, other
than those expressly
stated to be made as of
a specific other date or
otherwise expressly
modified in accordance
with Section 10.17, are
true and correct in all
material respects on the
date of the Advance as
if made on and as of the
date of the Advance;
9.2.2 except in the case
of Swing Line
Advances, the Agent
shall have received a
timely, completed
Notice of Borrowing;
9.2.3 no Default or
Event of Default shall
have occurred and be
continuing; provided
that, a rollover,
conversion or extension
of an existing Advance
shall not be subject to
the conditions
precedent set out in
subsections 9.2.1 and
9.2.2. 9.3 Waiver of
Conditions Precedent
The conditions set out
in Sections 9.1 and 9.2
are solely for the
benefit of the Lenders.
The conditions set out
in Section 9.1 may be
waived by the Agent
with the consent of each
Lender. The conditions
set out in Section 9.2
may be waived in
respect of a particular
Advance by the
Majority Lenders,
without prejudice to the
right of the Agent and
the Lenders to assert
any such condition in
connection with any
subsequently requested
Advance. 10.
REPRESENTATIONS
AND WARRANTIES
For so long as any Loan
Obligations remain
outstanding and unpaid
(other than those Loan
Obligations which
survive the termination
of this Agreement), or
the Borrower is entitled
to borrow or obtain
credit hereunder
(whether or not the
conditions precedent to
such borrowing or
obtaining of credit have
been or may be
satisfied), the Borrower
hereby represents and
warrants with respect to
itself and each other
Obligor, and each other
Obligor hereby
represents and warrants
with respect to itself,
that: 10.1 Existence,
Power and Authority It
has the corporate (or
other equivalent) power
and authority to enter
into and perform its
obligations under each
Loan Document to
which it is a party, and
except as permitted
under Section 14.9 after
the Effective Date, it is
duly organized, validly
existing and in good
standing under the laws
of the jurisdiction of its
incorporation,
amalgamation or
organization. It has the
corporate power and
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AGREEMENT 10.2 Loan
Documents 10.2.1 It is not
required to obtain any
Permit or to effect any
filing or registration with
any Governmental
Authority in connection
with the execution,
delivery or performance of
this Agreement or the
other Loan Documents to
which it is a party. 10.2.2
The entering into and the
performance by it of the
Loan Documents to which
it is a party (a) have been
or will be duly authorized
or ratified by all necessary
corporate or other action
on its part, (b) do not and
will not violate its
Constating Documents or
any Applicable Law, (c)
do not and will not result
in a breach of or constitute
(with the giving of notice,
the lapse of time or both) a
default under or require a
consent under any
Material Permit or any
Material Contract to which
it is a party or by which it
or its Property is bound,
and (d) do not and will not
result in the creation of
any Lien on any of its
Property and will not
require it to create any
Lien on any of its Property
and will not result in the
forfeiture of any of its
Property. 10.2.3 Its
Constating Documents do
not restrict the power of its
directors, trustees or
partners, as the case may
be, to borrow money or to
give financial assistance
by way of loan, guarantee
or otherwise, except for
restrictions under any
Constating Document with
which have been
complied. 10.2.4 The Loan
Documents to which it is
or will be a party have
been or will be (after
ratification thereof, if
necessary) duly executed
and delivered by it (or on
its behalf) and, when
executed and delivered
(and, if necessary ratified),
will constitute legal, valid
and binding obligations
enforceable against it in
accordance with their
respective terms, subject
to the availability of
equitable remedies and the
effect of bankruptcy,
insolvency and other laws
of general application
limiting the enforceability
of creditors' rights
generally, and equitable
principles, and to the fact
that equitable remedies,
including specific
performance and
injunctive relief, are
discretionary and may not
be ordered in respect of
certain defaults. 10.3
Conduct of Business
10.3.1 It is qualified to
carry on business in all
jurisdictions in which the
Property owned or leased
by it or the nature of the
activities carried on by it
makes such qualification
necessary, except to the
extent that the
non-qualification would
not reasonably be expected
to have a Material Adverse
Effect. 10.3.2 It has all
Permits required to own its
Property and to carry on
the business in which it is
engaged (at the time this
representation and
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warranty is given)
and all such
Permits are in good
standing, except to
the extent that the
absence of Permits
or lack of good
standing of Permits
would not
reasonably be
expected to have a
Material Adverse
Effect. 10.3.3 It is
not in violation of
any Applicable
Law or Contract,
the violation of
which would
reasonably be
expected to have a
Material Adverse
Effect. 10.3.4 As at
the Effective Date,
the only business
carried on by it is
the Core Business.
10.4 Litigation
There are no
actions, suits or
legal proceedings
instituted or
pending nor, to its
knowledge,
threatened, against
it or its Property
before any
arbitrator or any
other Governmental
Authority or
instituted by any
Governmental
Authority which, if
decided against it,
would reasonably,
considered on a
consolidated basis
with the other
Obligors, be
expected to have a
Material Adverse
Effect. As at the
Effective Date, the
only material
litigation against it
is described in
Schedule C. 10.5
Financial
Statements and
Information 10.5.1
The historical
financial statements
which have been
furnished to the
Agent and the
Lenders, or any of
them, in connection
with this
Agreement, taken
as a whole, are
complete and fairly
present the
financial position of
the Borrower on a
consolidated basis
as of the dates
referred to therein
and have been
prepared in
accordance with
GAAP. 10.5.2 All
projections,
including forecasts,
budgets, pro formas
and business plans
of the Borrower on
a consolidated basis
provided by the
Borrower to the
Agent and the
Lenders, or any of
them, under or in
connection with
this Agreement
were prepared in
good faith based on
assumptions which,
at the time of
preparation thereof,
were believed to be
reasonable and are
believed to be
reasonable
estimates of the
prospects of the
businesses referred
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incurred in the
Ordinary Course
since the date of
such financial
statements. 10.6
Subsidiaries, etc.
10.6.1 Schedule D
fully and fairly
describes, as of the
Effective Date, the
ownership of all of
its issued and
outstanding Equity
Interests and of
Equity Interests that
it owns in
Subsidiaries. Except
as set out in
Schedule D, as of the
Effective Date, it
does not have any
Subsidiaries, direct
or indirect, is not a
partner in any
partnership (general
or limited) and is not
a co-venturer in any
joint venture, as of
the date hereof, and,
as of the Effective
Date, Schedule D
contains (except as
noted therein)
complete and correct
lists (i) of the
Borrower's
Subsidiaries,
showing, as to each
Subsidiary, the
correct name thereof,
the jurisdiction of its
organization, the
percentage of its
Equity Interests
outstanding owned
by the Borrower and
each other
Subsidiary and
whether such
Subsidiary will on
the Effective Date be
a Guarantor, (ii) of
the Borrower's
Affiliates, other than
Subsidiaries, and (iii)
of the Borrower's
directors and senior
officers. 10.6.2 The
complete and
accurate organization
structure of the
Obligors as of the
Effective Date is set
forth on Schedule D.
10.6.3 As of the
Effective Date, all of
the outstanding
Equity Interests of
each Subsidiary
shown in Schedule D
as being owned by
the Borrower and its
Subsidiaries have
been validly issued,
are fully paid and
nonassessable and
are owned by the
Borrower or another
Subsidiary free and
clear of any Lien
(other than any Lien
created by statute or
by operation of law,
the Mexican Pledge
or as permitted by
subsection
1.1.153.15), and
except as otherwise
disclosed in
Schedule D. 10.6.4
As of the Effective
Date, no Subsidiary
is a party to, or
otherwise subject to
any legal, regulatory,
contractual or other
restriction (other
than this Agreement,
and the Note
Purchase Agreement,
and customary
limitations imposed
by corporate law or
similar statutes)
restricting the ability
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Taxes It has filed
within the prescribed
time periods all
federal, provincial or
other tax returns
which it is required by
Applicable Law to
file, and all material
taxes, assessments and
other duties levied by
each applicable
Governmental
Authority with respect
to each of the Obligors
or their properties,
assets, income or
franchises, have been
paid when due, except
to the extent that
payment thereof is
being contested in
good faith by it in
accordance with the
appropriate
procedures, for which
adequate reserves
have been established
in its books. 10.9
Insurance It has
contracted for the
insurance coverage
described in Section
12.8, which insurance
is in full force and
effect. 10.10 No
Material Adverse
Effect No event has
occurred and no
circumstance exists
which would
reasonably be
expected to have a
Material Adverse
Effect. 10.11 Pension
Matters 10.11.1 No
steps have been taken
to terminate any
Pension Plan (wholly
or in part), which
would result in an
Obligor being required
to make an additional
contribution to the
Pension Plan; no
contribution failure
has occurred with
respect to any Pension
Plan sufficient to give
rise to a Lien or
charge under any
Applicable Laws of
any jurisdiction
governing pension
benefits; no condition
exists and no event or
transaction has
occurred with respect
to any Pension Plan
which might result in
the incurrence by any
Obligor of any
liability, fine or
penalty; and no
Obligor has any
contingent liability
with respect to any
postretirement
non-pension benefit;
in each case, that
would reasonably be
expected to have a
Material Adverse
Effect. 10.11.2 Each
Pension Plan is in
compliance in all
material respects with
all Applicable Laws
governing pension
benefits and Taxes, (i)
all contributions
(including employee
contributions made by
authorized payroll
deductions or other
withholdings) required
to be made to the
appropriate funding
agency in accordance
with all Applicable
Laws and the terms of
each Pension Plan
have been made in
accordance with all
Applicable Laws and
the terms of each
Pension Plan, (ii) all
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having its registration
revoked or refused for
the purposes of any
Applicable Laws
governing pension
benefits or Taxes or
being placed under the
administration of any
relevant pension
benefits Governmental
Authority or being
required to pay any
Taxes or penalties
under any Applicable
Laws governing
pension benefits or
Taxes, except for any
exceptions to clauses
(i) through (iii) above
that would not
reasonably be
expected to have a
Material Adverse
Effect. 10.12 Ranking
and Priority The Loan
Obligations are
unsecured
unsubordinated
obligations of the
Borrower ranking pari
passu with all other
unsecured
unsubordinated Debt
of the Borrower,
except for any such
Debt preferred by
operation of law. The
Guaranteed
Obligations are
unsecured
unsubordinated
obligations of each
Guarantor ranking pari
passu with all other
unsecured
unsubordinated Debt
of such Guarantor,
except for any such
Debt preferred by
operation of law.
10.13 Absence of
Default There exists
no Default or Event of
Default hereunder.
10.14 Environment
10.14.1 Other than as
disclosed in Schedule
C, there are no
existing claims,
demands, damages,
suits, proceedings,
actions, negotiations
or causes of action of
any nature
whatsoever, whether
pending or, to its
knowledge,
threatened, arising out
of the presence on any
Property owned or
controlled by it, either
past or present, of any
Hazardous
Substances, or out of
any past or present
activity conducted on
any Property now
owned by it, whether
or not conducted by
such or any other
Obligor, involving
Hazardous
Substances, which
would reasonably be
expected to have a
Material Adverse
Effect. 10.14.2 To its
knowledge, after due
enquiry: 10.14.2.1
there are no
Hazardous Substances
existing on or under
any Property of any
Obligor which
constitutes a violation
of any Environmental
Law for which an
owner, operator or
person in control of a
Property may be held
liable other than such
as would not
reasonably be
expected to have a
Material Adverse
Effect; 10.14.2.2 the
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10.14.2.3 no Hazardous
Substance has been
spilled or emitted into
the environment
contrary to
Environmental Laws
from any Property
owned, operated or
controlled by any
Obligor other than such
as would not reasonably
be expected to have a
Material Adverse
Effect. 10.15 Mines As
of the Effective Date,
the Goldex Mine, the
Lapa Mine, the
LaRonde Mine and the
Meadowbank Mine are
each owned by the
Borrower. As of the
Effective Date, the
Kittila Mine is owned
by Agnico-Eagle
Finland OY, a Finnish
corporation, which is an
indirect, wholly-owned
Subsidiary of the
Borrower, or by another
Obligor, and the Pinos
Altos Mine is owned by
Agnico-Eagle Mexico
S.A. de C.V., a
Mexican corporation
which is an indirect,
wholly-owned
Subsidiary of the
Borrower, or by another
Obligor. 10.16
Complete and Accurate
Information All written
information, reports and
other papers and data
with respect to the
Obligors or their
Properties which have
been furnished by the
Borrower to the Agent
or the Lenders were, at
the time the same were
so furnished, complete
and correct in all
material respects. No
document furnished or
statement made in
writing to the Agent or
the Lenders by the
Borrower in connection
with the negotiation,
preparation or
execution of the Loan
Documents at the time
the same were
furnished or made
contains any untrue
statement of a material
fact or omits to state a
material fact which is
necessary to make the
statements contained in
such documents true
and accurate in all
material respects. 10.17
Survival of
Representations and
Warranties All of the
representations and
warranties made
hereunder are true and
correct at the Effective
Date, shall be true and
correct (and shall be
deemed to be repeated
and made) as of the
date of each Advance
hereunder (except for
rollovers and
conversions of existing
Advances and where
qualified in this Article
10 as being made at a
particular other date, for
which such
representations and
warranties shall be true
and correct as at that
particular other date,
and subject to such
modifications permitted
herein which are
communicated by the
Borrower to the Agent
in writing), and shall
survive the execution
and delivery of this
Agreement, any
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FINANCIAL
COVENANTS For so
long as any Loan
Obligations remain
outstanding (other than
those Loan Obligations
that survive termination of
this Agreement), or the
Borrower is entitled to
borrow or obtain credit
hereunder (whether or not
the conditions precedent to
such borrowing or
obtaining of credit have
been or may be satisfied):
11.1 Total Net Debt to
EBITDA Ratio The
Borrower shall, at all
times, maintain a Total
Net Debt to EBITDA
Ratio of not more than
3.50:1.00, on a rolling
four-quarter basis. 11.2
Tangible Net Worth The
Borrower shall, at all
times, maintain a Tangible
Net Worth in an amount of
not less than
US$1,650,000,000, plus
50% of the Borrower's
consolidated net income
for each of its fiscal
quarters, on a cumulative
basis, commencing with
its fiscal quarter ending
March 31, 2010
(excluding any fiscal
quarters in which the
Borrower incurs a net loss)
(all as determined on a
consolidated basis in
accordance with GAAP
consistently applied), plus
50% of the net proceeds of
any public offerings of
Equity Interests (other
than convertible Debt) of
the Borrower received
during such fiscal quarters,
on a cumulative basis. 12.
AFFIRMATIVE
COVENANTS For so
long as any Loan
Obligations remain
outstanding (other than
those Loan Obligations
that survive termination of
this Agreement), or the
Borrower is entitled to
borrow or obtain credit
hereunder (whether or not
the conditions precedent to
such borrowing or
obtaining of credit have
been or may be satisfied),
each Obligor agrees as
follows: 12.1 Existence
and Good Standing It shall
(a) except as may be
permitted by Section 14.9,
preserve and maintain, as
applicable, its corporate or
other form of existence,
(b) operate its affairs in
compliance with its
Constating Documents and
(c) except as may be
permitted by Section 14.9,
remain in good standing in
all applicable jurisdictions
except to the extent that a
failure to remain in good
standing would not
reasonably be expected to
have a Material Adverse
Effect. 12.2 Permits It
shall at all times maintain
in effect and obtain all
Permits required by it to
carry on its business,
except to the extent that a
failure to do so would not
reasonably be expected to
have a Material Adverse
Effect.
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12.3 Books and
Records It shall
keep or cause to be
kept appropriate
books and records
of account and
record or cause to
be recorded
faithfully and
accurately all
transactions with
respect to its
business in
accordance with
GAAP. 12.4
Property It shall
maintain all of its
Property necessary
for the proper
conduct of its
business in good
condition (ordinary
wear and tear
excepted) and make
all necessary
repairs, renewals,
replacements and
improvements
thereof, except
where the failure to
do same would not
reasonably be
expected to have a
Material Adverse
Effect. 12.5
Material Contracts
It shall maintain in
good standing and
shall obtain, as and
when required, all
Material Contracts
which it requires to
permit it to acquire,
own, operate and
maintain its
business and
Property, except to
the extent that a
failure to do so
would not
reasonably be
expected to have a
Material Adverse
Effect, and perform
its obligations
under any Loan
Document to which
it is or will be a
party. It shall cause
to be faithfully
observed,
performed and
discharged the
covenants,
conditions and
obligations
imposed on it under
each Material
Contract to which it
is a party, and shall
do all other things
necessary in order
to protect its
interests
thereunder, except
to the extent and for
so long as any such
obligation is
contested in good
faith by appropriate
proceedings being
diligently pursued,
or except where the
failure to do same
would not
reasonably be
expected to have a
Material Adverse
Effect. 12.6
Financial
Information It shall
ensure that: 12.6.1
all of the historical
financial statements
which are furnished
to the Agent and
the Lenders, or any
of them, in
connection with
this Agreement
from time to time
are complete and
fairly present the
financial position of
the Borrower on a
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Compliance with
Applicable Law It shall
operate its business in
compliance with
Applicable Laws
(including
Environmental Laws)
except to the extent that a
failure to do so would
not reasonably be
expected to have a
Material Adverse Effect.
12.8 Insurance It shall
maintain, with
financially sound and
reputable insurers,
insurance with respect to
its properties and
business against such
casualties and
contingencies, of such
types, on such terms and
in such amounts
(including deductibles,
co-insurance and
self-insurance, if
adequate reserves are
maintained with respect
thereto) as is customary
in the case of entities of
established reputations
engaged in the same or a
similar business and
similarly situated. 12.9
Payment of Taxes It shall
pay all Taxes which are
due and payable by it;
withhold from each
payment made to any of
its past or present
employees, officers or
directors, and to any
non-resident of the
country in which it is
resident, the amount of
all Taxes and other
deductions required to be
withheld therefrom and
pay the same to the
proper tax or other
receiving officers within
the time required under
any Applicable Law; and
collect from all Persons
the amount of all Taxes
required to be collected
from them and remit the
same to the proper tax or
other receiving officers
within the time required
under any Applicable
Law; in each case, unless
any such Taxes are (a)
being contested in good
faith by appropriate
proceedings promptly
initiated and diligently
conducted and (b)
reserves or other
appropriate provision, if
any, as shall be required
by GAAP shall have
been made therefor.
12.10 Access and
Inspection It shall allow
the employees and
representatives of the
Agent and/or the
Lenders, at any time
during normal business
hours and on reasonable
notice, to have access to
and inspect the Property
of the Obligors (without
any invasive or intrusive
testing), to inspect and
take extracts from or
copies of the books and
records of the Obligors
and to discuss the
business, Property,
liabilities, financial
position, operating
results or business
prospects of the Obligors
with the officers and
auditors of the Obligors,
all at the cost of the
Agent and/or the
Lenders, as the case may
be; provided that, the
employees and
representatives of the
Lenders shall only have
such access and rights of
inspection and discussion
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Obligors with the
officers and auditors of
the Obligors, all at the
cost of the Borrower;
provided that, the
employees and
representatives of the
Lenders shall only have
such access and rights
of inspection and
discussion at the same
time or times as the
employees and
representatives of the
Agent have such access
and rights of inspection
and discussion. 12.11
Maintenance of
Accounts It shall
maintain one or more
operating accounts at
the Branch or other
branches of the Agent
at all times during the
term of this Agreement,
as well as one or more
accounts with the
Swing Line Lender.
12.12 Performance of
Obligations It shall duly
and punctually pay and
perform its
indebtedness, liabilities
and obligations
hereunder and under the
other Loan Documents
at the times and places
and in the manner
required by the terms
hereof and thereof.
12.13 Litigation It shall
diligently and in good
faith contest any
actions, suits or legal
proceedings instituted
and outstanding or
pending against it, the
outcome of which
would reasonably be
expected to have a
Material Adverse
Effect, and shall make
such reserves or other
appropriate provision
therefor, if any, as shall
be required by GAAP.
12.14 Payment of Fees
and Other Expenses
Whether the
transactions
contemplated by this
Agreement are
concluded or not and
whether or not any part
of the Credit Facility is
actually advanced, in
whole or in part, the
Borrower shall pay:
12.14.1 the reasonable,
documented costs of
syndicating, as well as
the legal fees and costs
incurred by the Agent,
acting on behalf of the
Lenders, for the
preparation,
negotiation, execution,
delivery,
administration,
registration, publication
and/or service of the
term sheet and related
documentation, this
Agreement and the
other Loan Documents,
as well as any
amendments,
modifications, waivers,
consents or
examinations pertaining
to this Agreement and
the other Loan
Documents; and
12.14.2 all reasonable,
documented fees and
out-of-pocket costs and
expenses, including the
legal fees and costs,
incurred by the Agent,
any Lender or the
Issuing Lender to
preserve, enforce,
protect or exercise its
rights hereunder or
under the other Loan
Documents, including
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counsel in as many
jurisdictions as that
collective unit requires,
acting together; provided
that, the Borrower shall not
be responsible for the fees
and expenses of any
independent engineer or
independent consultants
appointed or consulted
pursuant to Section 19.4
except to the extent that
such appointment or
consultation occurred upon
and during the continuance
of an Event of Default. All
amounts due to the Agent
and the Lenders pursuant to
this Section 12.14 shall bear
interest on the Prime Rate
Basis from the date that is
30 days following demand
(together with the delivery
of any relevant invoice) by
the Agent until the
Borrower has paid the same
in full, with interest on
unpaid interest. The
obligations of the Borrower
under this Section 12.14 as
such obligations relate to
costs and expenses incurred
prior to the repayment of
the Loan Obligations and
termination of the Credit
Agreement shall survive the
repayment of the Loan
Obligations and the
termination of the
Commitments. 12.15
Priority of Obligations. The
Borrower will ensure that
its payment obligations
under this Agreement will
at all times rank at least pari
passu, without preference or
priority, with all other
unsecured and
unsubordinated Debt of the
Borrower, except for any
such Debt preferred by
operation of law. 12.16
Post-Closing
Documentation. The
Borrower shall cause the
following documents and
instruments to be delivered
to the Agent for and on
behalf of the Lenders within
sixty (60) days of the
Effective Date, which
documents and instruments
shall, when so delivered, be
in substantially the same
form as those delivered
under the Existing Credit
Agreement, or to the extent
any changes to Applicable
Law do not so permit,
otherwise in form and
substance satisfactory to the
Lenders: 12.16.1 Corporate
and Other Information. A
certificate from each
Obligor with copies of its
Constating Documents, a
list of its officers, directors,
trustees and/or partners, as
the case may be, who are
executing or who have
executed Loan Documents
on its behalf with specimens
of the signatures of those
persons, and copies of the
corporate (or other
equivalent) proceedings
taken to authorize it to
execute, deliver and
perform its obligations or
ratify the execution,
delivery and performance of
obligations under the Loan
Documents and all internal
approvals, authorizations or
ratifications of each Obligor
to permit it to enter into and
to perform its obligations in
relation thereto. 12.16.2
Certificates of
Status/Compliance. Where
available, a certificate of
status, certificate of
compliance or an equivalent
certificate issued by the
relevant Governmental
Authority in respect of each
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12.16.3 Opinions.
The following
favourable legal
opinions: 12.16.3.1
the opinion of
Davies Ward Phillips
& Vineberg LLP,
counsel to the
Borrower, 1715495
Ontario Inc. and
1641315 Ontario
Inc., addressed to the
Agent and the
Lenders, in relation
to, among other
things, the Borrower,
1715495 Ontario Inc.
and 1641315 Ontario
Inc., and the Loan
Documents to which
they are a party and
such other matters as
the Lenders may
reasonably require;
and 12.16.3.2 the
opinion of counsel to
each other
Guarantor, addressed
to the Agent and the
Lenders, in relation
to, among other
things, such other
Guarantor, and the
Loan Documents to
which it is a party
and such other
matters as the
Lenders may
reasonably require;
provided that, if any
such document or
item or the document
referred to in Section
12.17 below is not so
delivered to the
Agent for and on
behalf of the Lenders
within sixty (60)
days of the Effective
Date, an Event of
Default shall not
occur as a result, and
the Agreement shall
automatically be
deemed to be
amended so that it is
in all respects on the
same terms and
conditions as the
Existing Credit
Agreement as in
effect immediately
before the Effective
Date, except for the
Schedules and
Exhibits hereto, until
such time as such
documents or items
or the document
referred to in Section
12.17 below are so
delivered, at which
time the terms and
conditions of this
Agreement shall
again take effect.
12.17 Barbados
Joinder Agreement
The Borrower shall
cause each of (i) the
joinder agreement
executed and
delivered by
Agnico-Eagle
(Barbados) Limited
pursuant to Section
9.1.3 and (ii) the
reaffirmation
agreement executed
and delivered by
Agnico-Eagle
(Barbados) Limited
pursuant to Section
9.1.2, to be duly
notarized under
Applicable Law of
Barbados within
sixty (60) days of the
Effective Date. 13.
REPORTING AND
NOTICE
REQUIREMENTS
During the term of
this Agreement
(excluding the
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retained earnings,
statement of changes
in financial position
and management's
discussion and
analysis. 13.1.2 The
Borrower shall, as
soon as practicable
and in any event
within 120 days after
the end of each of its
fiscal years, prepare
and deliver to the
Agent its
consolidated annual
financial statements,
including, without
limitation, balance
sheet, statement of
income and retained
earnings, statement
of changes in
financial position for
such fiscal year and
management's
discussion and
analysis, together
with the notes
thereto, which shall
be audited by a
nationally
recognized
accounting firm.
13.1.3 The Borrower
shall, concurrently
with the delivery of
the quarterly and
annual financial
statements referred
to in subsections
13.1.1 and 13.1.2,
provide the Agent
with a Compliance
Certificate. 13.1.4
The Borrower shall,
concurrently with the
delivery of the
quarterly and annual
financial statements
referred to in
subsections 13.1.1
and 13.1.2, provide
the Agent with a
report setting forth
each Derivative
Instrument to which
it or any other
Obligor is a party,
together with the
counterparty thereto
and the Obligor
Hedging Exposure
thereunder. 13.1.5
The Borrower shall,
concurrently with the
delivery of the
quarterly and annual
financial statements
referred to in
subsections 13.1.1
and 13.1.2, provide
the Agent with an
operating report on
the mines owned and
controlled by it and
its Subsidiaries
(being the "Chief
Operating Officer's
Quarterly Report to
the Board of
Directors") in
reasonable detail as
required by the
Lenders. 13.1.6 The
Borrower shall,
concurrently with the
delivery of the
annual financial
statements referred
to in subsection
13.1.2, provide the
Agent with a copy of
its mineral reserve
statements in
reasonable detail.
13.1.7 The Borrower
shall, as soon as
practicable and in
any event prior to
270 days after the
end of each of its
fiscal years, provide
the Agent with
copies of either (i) its
annual life of mine
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AGREEMENT to
any regulatory
authority, provide a
copy of each such
release, report,
statement or
document to the
Agent except in
circumstances where
such filing is made
on a confidential
basis, in which case
it shall deliver a
copy thereof when
such filing is no
longer confidential.
13.1.9 The Borrower
shall promptly
provide the Agent
with all other
information, reports
and certificates
reasonably requested
by the Agent from
time to time
concerning the
business, financial
condition and
Property of the
Borrower and each
other Obligor. If
there is any change
in a fiscal year from
the accounting
policies, practices
and calculation
methods used by the
Borrower in
preparing its
financial statements,
or components
thereof, the
Borrower shall
provide the Lenders
with all information
that the Lenders
require to ensure that
reports provided to
the Lenders, after
any such change, are
comparable to
previous reports. In
addition, all
calculations made
for the purposes of
this Agreement shall,
unless and until
modified in
accordance with
Section 1.4, continue
to be made based on
the accounting
policies, practices
and calculation
methods that were
used in preparing the
financial statements
immediately before
this Agreement came
into effect if the
changed policies,
practices and
methods would
affect the results of
those calculations.
13.2 Requirements
for Notice The
Borrower shall,
promptly after it
becomes aware
thereof, notify the
Agent of: 13.2.1 any
Default or Event of
Default; 13.2.2 the
occurrence of any
action, suit, dispute,
arbitration,
proceeding, labour or
industrial dispute or
other circumstance
affecting it, the result
of which if
determined adversely
would reasonably be
expected to have a
Material Adverse
Effect, and shall
from time to time
provide the Agent
with all reasonable
information
requested by any of
the Lenders
concerning the status
thereof; 13.2.3 any
violation, alleged
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AGREEMENT been or
may be satisfied), no
Obligor shall, without
the prior written
consent of the Majority
Lenders: 14.1 Debt
Incur, assume or permit
to exist any Debt other
than Permitted Debt.
No Subsidiary of the
Borrower shall
guarantee, or otherwise
enter into any
arrangement to assure
the payment or
performance of, any
obligations of any
Obligor (other than
itself, as applicable) to
any Other Derivative
Counterparty, and the
Borrower shall not
guarantee, or otherwise
enter into any
arrangement to assure
the payment or
performance of, any
obligations of any other
Obligor to any Other
Derivative
Counterparty.
Notwithstanding the
foregoing,
Agnico-Eagle Mines
Mexico Cooperatie
U.A. shall not incur,
assume or permit to
exist any Debt other
than Debt incurred by it
under this Agreement,
under its Guarantee,
from another Obligor,
under guarantees
granted to Lenders or
Affiliates of Lenders of
the obligations under
Derivative Instruments
entered into between
any Obligor and any
Lender or any Affiliate
of any Lender, and
under a guarantee by it
of the obligations of the
Borrower under the
Note Purchase
Agreement and the
Notes; and
Agnico-Eagle Mines
Sweden Cooperatie
U.A. shall not incur,
assume or permit to
exist any Debt other
than Debt incurred by it
under this Agreement,
under its Guarantee,
from another Obligor,
under guarantees
granted to Lenders or
Affiliates of Lenders of
the obligations under
Derivative Instruments
entered into between
any Obligor and any
Lender or any Affiliate
of any Lender, and
under a guarantee by it
of the obligations of the
Borrower under the
Note Purchase
Agreement and the
Notes. 14.2 Liens
Create, assume, enter
into, or permit to exist,
any Lien on its Property
other than Permitted
Liens. 14.3 Investments
Make any Investment
other than: 14.3.1
Investments in the Core
Business or in a
business ancillary to or
complementary to the
Core Business which
are made at a time
when no Default or
Event of Default has
occurred which is
continuing and no
Default or Event of
Default would result
from such Investment;
14.3.2 Investments in
Cash Equivalents; or
14.3.3 Investments by
an Obligor in another
Obligor. 14.4
Distributions Make any
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14.5 Asset
Dispositions Make
any Asset
Disposition of any
Material Assets
except: 14.5.1 for
sales of inventory;
14.5.2 as permitted
under Section 14.9;
14.5.3 for sales in
the Ordinary
Course of obsolete
or redundant
equipment or
equipment of no
further use in an
Obligor's business,
unless a Default or
an Event of Default
has occurred and is
continuing or
would result
therefrom; 14.5.4
where the aggregate
Net Cash Proceeds
of Asset
Dispositions made
on Arm's Length
terms by the
Obligors in any
fiscal year of the
Borrower does not
exceed five percent
(5%) of
consolidated total
assets of the
Borrower (as
calculated in
accordance with
GAAP) for such
fiscal year, unless a
Default or an Event
of Default has
occurred and is
continuing or
would result
therefrom; or 14.5.5
from an Obligor to
another Obligor
other than, subject
to Section 14.5.4,
any Asset
Disposition of the
Goldex Mine, the
Lapa Mine, the
LaRonde Mine or
the Meadowbank
Mine, or any part
thereof. 14.6
Derivative
Instruments 14.6.1
Enter into or
maintain any
Derivative
Instrument:
14.6.1.1 for any
purpose other than
hedging or
mitigating of
interest rate,
commodity or
foreign exchange
risks to which any
Obligor is exposed
in the conduct of its
business or the
management of its
liabilities, and not
for the purpose of
speculation; or
14.6.1.2 on a
margin call basis or
where the
applicable Obligor
has granted the
applicable
counterparty
security for any
obligations under
the Derivative
Instrument. 14.6.2
Make commitments
to deliver gold or
any other
commodity that it
produces that in the
aggregate exceed
75% of the
Borrower's
scheduled
production (on a
consolidated basis)
of such commodity
in any three month
period. 14.7
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AGREEMENT of any
service) with any
Affiliate or Associate
(except any Obligor), or
Person of which it is an
Associate (except any
Obligor), except on a
commercially
reasonable basis as if it
were dealing with such
Person at Arm's Length.
14.8 Subordinated Debt
Pay any amount in
relation to any
Subordinated Debt
other than as expressly
permitted under any
applicable Intercreditor
Agreement. 14.9
Business Combination,
Reorganization, etc.
14.9.1 Enter into any
merger, consolidation,
amalgamation, statutory
arrangement (involving
a business combination)
or other reorganization,
or liquidate, wind-up or
dissolve itself (or suffer
any liquidation,
wind-up or dissolution),
or any Capital
Reorganization, other
than: 14.9.1.1 any
Capital Reorganization
of a Guarantor; 14.9.1.2
any Capital
Reorganization of the
Borrower in which the
holders of the Equity
Interests of the
Borrower immediately
prior to the Capital
Reorganization
continue to have,
directly or indirectly,
more than 50% of the
Equity Interests of the
Borrower or applicable
Successor Entity
immediately after such
Capital Reorganization
and no Default or Event
of Default would result
from such Capital
Reorganization;
14.9.1.3 any Subsidiary
of an Obligor that is not
an Obligor may enter
into any merger,
consolidation,
amalgamation, statutory
arrangement (involving
a business combination)
or other reorganization
with, or liquidate,
wind-up or dissolve
itself (or suffer any
liquidation, wind-up or
dissolution) into, an
Obligor so long as no
Default or Event of
Default is then existing
and no Default or Event
of Default would result
from the consummation
of such merger,
amalgamation or
consolidation; 14.9.1.4
an Obligor (the
"Predecessor Obligor")
may enter into any
merger, consolidation,
amalgamation, statutory
arrangement (involving
a business combination)
or other reorganization
with, or liquidate,
wind-up or dissolve
itself (or suffer any
liquidation, wind-up or
dissolution) into, any
other Person (which
may be an Obligor)
(any such transaction, a
"Business
Combination")
provided that: (a) the
successor entity formed
as a result of such
Business Combination
or the entity surviving
such
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AGREEMENT
Business
Combination, as
applicable (each, a
"Successor Entity")
shall (i) have the
corporate (or
analogous) power and
authority to perform
the obligations of the
Predecessor Obligor
under the Loan
Documents to which
the Predecessor
Obligor is party, and
(ii) as soon as
practicable, and in any
event, within five (5)
Business Days,
following such
Business
Combination,
expressly confirm and,
if the Successor Entity
is not the surviving
Predecessor Obligor,
assume all the
obligations of the
Predecessor Obligor
under this Agreement
and the other Loan
Documents to which
the Predecessor
Obligor is a party
pursuant to such
documentation as may
be reasonably
satisfactory to the
Agent; (b) such
Business Combination
does not materially
impair the ability of
any Obligor to
perform its obligations
under any Loan
Document to which it
is a party; (c) no
Default or Event of
Default is then
existing and no
Default or Event of
Default would result
from the
consummation of such
Business
Combination; and (d)
in the case of a
Business Combination
involving the
Borrower, (x) the
Successor Entity shall
be existing under the
laws of the United
States or any State
thereof (including the
District of Columbia),
Canada or any
Province thereof or
any other country that
on April 30, 2004 was
a member of the
European Union
(other than Greece,
Italy, Portugal or
Spain) and (y) each
Guarantor shall
acknowledge that its
Guarantee shall
continue in full force
and effect. 15.
EVENTS OF
DEFAULT AND
ENFORCEMENT
15.1 Events of Default
The occurrence of any
of the following
events shall constitute
an Event of Default:
15.1.1 If the Borrower
fails to pay any
principal amount of
any Advance when
due and payable; or
15.1.2 If the Borrower
fails to pay any
amount of interest,
fees, commissions or
other Loan
Obligations (other
than amounts on
account of principal)
when due, and such
failure continues for 5
Business Days after
such amount becomes
due; or 15.1.3 If any
representation or
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AGREEMENT Loan
Document or in any
certificate, agreement,
instrument or written
statement delivered by any
Obligor or by an officer of
any Obligor pursuant
thereto was, at the time the
same was made, incorrect
in any material respect,
and if the circumstances
giving rise to such
incorrect representation or
warranty are capable of
being corrected (such that
thereafter such
representation or warranty
would be correct), such
representation or warranty
remains uncorrected for a
period of 30 days after the
Obligor becomes aware
that such representation or
warranty was incorrect,
whether on its own or by
notice from the Agent; or
15.1.4 If any Obligor
breaches or fails to
perform any of its
obligations or
undertakings hereunder or
under any other Loan
Document not otherwise
contemplated by this
Section 15.1 and has not
remedied the Default
within 30 days following
the date on which the
Agent has given written
notice to the Borrower; or
15.1.5 If any of the
financial covenants set out
in Article 11 are not
complied with; or 15.1.6 If
a default occurs under one
or more agreements or
instruments relating to
Debt of the Borrower or
any Material Subsidiary
other than the Loan
Obligations, if the effect of
such default is to
accelerate, or to permit the
acceleration of the due
date of such Debt (whether
or not acceleration actually
occurs), or if the Borrower
or any Material Subsidiary
fails to pay any amount
under any Derivative
Instrument when due,
whether at maturity, upon
acceleration, demand or
otherwise; in an aggregate
amount of US$50,000,000
or more (or the equivalent
thereof in any other
currency); or 15.1.7 If the
Borrower or any Material
Subsidiary ceases or
threatens to cease to carry
on its business (except as
otherwise permitted by
Section 14.9) or admits its
inability or fails to pay its
Debt generally; or 15.1.8
If an Obligor denies its
obligations under the Loan
Documents or claims any
of the Loan Documents to
be invalid or
unenforceable, in whole or
in part; or any of the Loan
Documents is invalidated
or determined to be
unenforceable by any act,
regulation or action of any
Governmental Authority
or is determined to be
invalid or unenforceable
by a court or other judicial
entity of competent
jurisdiction and such
determination has not been
stayed pending appeal,
unless such invalidity or
unenforceability can be
cured and such invalidity
or unenforceability is
cured within 30
consecutive days of notice
thereof being given by the
Agent to the Borrower of
the occurrence of such
invalidity or
unenforceability, unless
such invalidity or
- 96 - SECOND AMENDED
AND RESTATED CREDIT
AGREEMENT 15.1.9 If one or
more judgments are rendered by a
court of competent jurisdiction
against the Borrower or any
Material Subsidiary in an
aggregate amount in excess of
US$20,000,000 (or, if applicable,
the equivalent thereof in other
currencies) and (a) the same are
not released, bonded, satisfied,
discharged, vacated, stayed or
accepted for payment by an
insurer within 45 consecutive
days after their entry,
commencement or levy or (b)
such Person is not contesting
such judgments or decrees in
good faith and by appropriate
proceedings and adequate
reserves in accordance with
GAAP have not been set aside on
its books; or 15.1.10 If Property
of the Borrower or any Material
Subsidiary having an aggregate
value of more than
US$20,000,000 (or, if applicable,
the equivalent thereof in other
currencies) is seized or taken
possession of (or subject to other
similar legal proceedings by a
creditor for seizure or possession
of Property) (the "Seizure
Proceeding"), except to the extent
that the applicable Person is
diligently and in good faith
contesting any such Seizure
Proceeding by appropriate
proceedings and such Seizure
Proceeding remains undismissed
or unstayed for a period of 60
consecutive days; or the
Borrower or any Material
Subsidiary takes any action in
furtherance of, or indicates its
consent to, approval of, or
acquiescence in, any such Seizure
Proceeding; or 15.1.11 If (a) the
Borrower or any Material
Subsidiary commits an act of
bankruptcy within the meaning of
the Bankruptcy and Insolvency
Act (Canada) or any other
applicable legislation in any
applicable jurisdiction, makes an
assignment in favour of its
creditors, consents to the filing of
an application for a bankruptcy
order against it, files a notice of
intention to make a proposal or a
proposal within the meaning of
the Bankruptcy and Insolvency
Act (Canada) or the Companies'
Creditors Arrangement Act
(Canada) or takes such action or
any other action for the relief of
debtors under any other
applicable legislation in any
applicable jurisdiction, or makes
a motion to a tribunal to name, or
consents to, approves or accepts
the appointment of a
trustee-in-bankruptcy, receiver,
liquidator, sequestrator or other
similar official with respect to
itself or its Property, commences
any other proceeding with respect
to itself or its Property under the
provisions of any Applicable Law
contemplating reorganizations,
proposals, rectifications,
compromises or liquidations in
connection with insolvent
Persons, in any jurisdiction
whatsoever, (b) a
trustee-in-bankruptcy, receiver,
liquidator or sequestrator is
named with respect to the
Borrower, any Material
Subsidiary or any of their
respective Property or the
Borrower or any Material
Subsidiary is judged insolvent or
bankrupt or (c) a proceeding
seeking to name a
trustee-in-bankruptcy, receiver,
liquidator, sequestrator or other
similar official, or to force the
Borrower or any Material
Subsidiary into bankruptcy, is
commenced against the Borrower
or such Material Subsidiary (an
"Insolvency
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Proceeding") unless the
applicable Person is
diligently and in good
faith contesting such
Insolvency Proceeding
by appropriate
proceedings and such
Insolvency Proceeding
is not settled or
withdrawn within 60
consecutive days of its
commencement; or
15.1.12 If there occurs
any Change of Control
of the Borrower. 15.2
Remedies Upon the
occurrence of any
Event of Default which
is continuing, the Agent
may, at its option, and
shall, if required to do
so by the Majority
Lenders, declare
immediately due and
payable, without
presentation, demand,
protest or other notice
of any nature, which the
Borrower hereby
expressly waives,
notwithstanding any
provision to the
contrary effect in this
Agreement or in the
other Loan Documents:
15.2.1 the entire
amount of the Loan
Obligations, including
(subject to Section
15.4) the amount
corresponding to the
face amount of all
Letters of Credit then
outstanding, the
principal amount of the
BA Advances then
outstanding, in
principal and interest,
notwithstanding the fact
that one or more of the
holders of the Bankers'
Acceptances have not
demanded payment in
whole or in part or have
demanded only partial
payment from the
Lenders, and the
amount of the Other
Supported Obligations.
The Borrower shall not
have the right to invoke
against the Agent or the
Lenders (or any
Affiliate of any Lender)
any defence or right of
action, indemnification
or compensation of any
nature or kind
whatsoever that the
Borrower may at any
time have or have had
with respect to any
holder of one or more
of the Letters of Credit,
Derivative Instruments
or Bankers'
Acceptances issued in
accordance with the
provisions hereof; and
15.2.2 an amount equal
to the amount of losses,
costs and expenses
assumed by the Lenders
and referred to in
Sections 6.4 and 19.15;
and the Credit Facility
shall cease and as and
from such time shall be
cancelled, and the
Lenders may exercise
all of their rights and
recourses under the
provisions of this
Agreement and of the
other Loan Documents.
For greater certainty, (i)
from and after the
occurrence and during
the continuance of any
Default or Event of
Default, the Lenders
shall not be obliged to
make any further
Advances under the
Credit Facility and (ii)
after the Agent makes a
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AMENDED AND
RESTATED CREDIT
AGREEMENT 15.4
Escrowed Funds for
Letters of Credit and
Bankers' Acceptances
15.4.1 Immediately
upon any Loan
Obligations becoming
due and payable under
Section 15.2, the
Borrower shall, without
necessity of further act
or evidence, be and
become thereby
unconditionally
obligated to deposit
forthwith with the
Agent for the benefit of,
as applicable, the
Issuing Lender and
each other Lender cash
or Cash Equivalents
equal to the full face
amount at maturity of
all Bankers'
Acceptances then
outstanding for its
account and all Letter
of Credit Obligations.
15.4.2 On that day
which is 5 Business
Days prior to the
Maturity Date, the
Borrower shall, without
necessity of further act
or evidence, be and
become unconditionally
obligated to deposit
forthwith with the
Agent for the benefit of
the Issuing Lender cash
or Cash Equivalents
equal to all Letter of
Credit Obligations.
15.4.3 In the event of
any purported
prepayment of a
Bankers' Acceptance or
if the Borrower
otherwise requests that
it be permitted to cash
collateralize a Bankers'
Acceptance, it shall,
without necessity of
further act or evidence,
be and become thereby
unconditionally
obligated to deposit
forthwith with the
Agent for the benefit of
the Lenders cash or
Cash Equivalents equal
to the full face amount
at maturity of all
applicable Bankers'
Acceptances. 15.4.4
The Borrower hereby
unconditionally
promises and agrees to
deposit with the Agent
immediately upon
demand cash or Cash
Equivalents in the
amount so demanded.
15.4.5 The Borrower
authorizes the Lenders,
or any of them, to debit
its accounts with the
amount required to pay
such Letters of Credit
and to pay such
Bankers' Acceptances,
notwithstanding that
such Bankers'
Acceptances may be
held by the Lenders, or
any of them, in their
own right at maturity.
Such amounts paid to,
or obtained by, the
Agent in respect of
Bankers' Acceptances
and Letters of Credit
shall be applied against,
and shall reduce, pro
rata among the Lenders,
to the extent of the
amounts paid to, or
obtained by, the Agent
in respect of Bankers'
Acceptances and
Letters of Credit,
respectively, the
obligations of the
Borrower to pay
amounts then or
thereafter payable under
Bankers' Acceptances
- 99 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
Obligations at the
Maturity Date, such cash
and Cash Equivalents
shall be the property of
the Lenders to be applied
as set out in Section
15.4.5, and except for
any obligations herein
which by their terms
survive termination of
this Agreement and
which may relate to such
outstanding Letters of
Credit and Bankers’
Acceptances, the
Borrower shall have no
further obligations under
or in connection with
such Letters of Credit or
Bankers' Acceptance.
15.5 Costs If an Event of
Default occurs, and
within the limits
contemplated by Section
12.14, the Agent may
impute to the account of
the Lenders and pay to
other Persons reasonable
sums for services
rendered with respect to
obtaining payment
hereunder and may
deduct the amount of
such costs and payments
from the proceeds which
it receives therefrom.
The balance of such
proceeds may be held by
the Agent and, when the
Agent decides it is
opportune, may be
applied to the account of
the part of the Loan
Obligations of the
Borrower to the Lenders
which the Agent deems
preferable, without
prejudice to the rights of
the Lenders against the
Borrower for any loss of
profit. 15.6 Relations
with the Obligors As
between the Agent and
the Obligors, the Agent
may grant extensions,
renounce security (if any
security has, at the time
been granted to the
Agent), accept
compromises, grant
acquittances and releases
and otherwise negotiate
with the Obligors, as it
deems advisable in
accordance with the
terms of this Agreement,
without in any way
diminishing the liability
of the Obligors nor
prejudicing the rights of
the Lenders hereunder.
15.7 Application of
Proceeds
Notwithstanding any
other provision of this
Agreement or any other
Loan Document, the
Agent shall apply the
proceeds of realization
arising from the
enforcement of this
Agreement or any other
Loan Document and of
any credit or
compensating balance in
reduction of the Loan
Obligations and the
Other Supported
Obligations on a pro rata
basis. 16. THE AGENT
AND THE LENDERS
16.1 Authorization of
Agent Each Lender
hereby irrevocably
appoints and authorizes
the Agent to act for all
purposes as its agent
hereunder and under the
other Loan Documents
with such powers as are
expressly delegated to
the Agent by the terms of
this Agreement, together
with such other powers
as are reasonably
incidental thereto. The
- 100 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT shall
not be obliged to) act as
it shall deem fit in the
best interests of the
Lenders, and any such
instructions and any
action taken by the
Agent in accordance
herewith shall be
binding upon each
Lender. The Agent and
its Related Parties shall
not, by reason of this
Agreement, be deemed
to be a trustee or
fiduciary for the benefit
of any Lender, any
Obligor or any other
Person, irrespective of
whether a Default or
Event of Default may
have occurred. Neither
the Agent nor any of its
Related Parties shall be
responsible to the
Lenders for (a) any
recitals, statements,
representations or
warranties contained in
this Agreement or any
other Loan Document
or in any certificate or
other document referred
to, or provided for in, or
received by any of them
under, this Agreement,
(b) the value, validity,
effectiveness,
genuineness,
enforceability or
sufficiency of this
Agreement or any other
Loan Document or any
collateral provided for
thereby, (c) the
satisfaction of any
condition specified in
this Agreement, other
than to confirm receipt
of items expressly
required to be delivered
to the Agent or (d) any
failure by the Borrower
or any other Obligor to
perform its obligations
hereunder or under any
other Loan Documents.
The Agent may perform
any and all of its duties
and exercise its rights
and powers hereunder
or under any other Loan
Document by or
through any one or
more sub-agents
appointed by the Agent
from among the
Lenders (including the
Person serving as
Agent) and their
respective Affiliates.
The Lenders agree that
the Agent may employ
agents and attorneys
and shall not be
responsible for the
negligence or
misconduct of any such
agents or attorneys
selected by it with
reasonable care. Neither
the Agent nor any of its
Related Parties shall be
responsible to the
Lenders for any action
taken or omitted to be
taken by it or its
Related Parties under or
in connection herewith,
except for its or their
own gross negligence
or wilful misconduct.
Notwithstanding the
foregoing, the Agent
may, without the
consent of the Lenders,
but for greater certainty
only, with the consent
of the other parties
hereto, make
amendments to the
Loan Documents that
are for the sole purpose
of curing any
immaterial or
administrative
ambiguity, defect or
- 101 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT by it
in accordance with the
advice of any such
counsel, accountants
or experts. The Agent
may deem and treat
each Lender as the
holder of the
Commitment made by
such Lender for all
purposes hereof unless
and until an
Assignment has been
completed in
accordance with
Section 18.2. 16.2.2
The Agent shall not be
deemed to have
knowledge of the
occurrence of a
Default or Event of
Default unless the
Agent has received
notice from a Lender
or the Borrower
describing such a
Default or Event of
Default and stating
that such notice is a
"Notice of Default". In
the event that the
Agent receives such a
notice of the
occurrence of a
Default or Event of
Default or otherwise
becomes aware that a
Default or Event of
Default has occurred,
the Agent shall
promptly give notice
thereof to the Lenders.
The Agent shall take
such action with
respect to such
Default or Event of
Default as shall be
reasonably directed by
the Lenders in
accordance with the
provisions of this
Article provided that,
unless and until the
Agent shall have
received such
directions, the Agent
may (but shall not be
obliged to) take such
action, or refrain from
taking such action,
with respect to such a
Default or Event of
Default as it shall
deem advisable in the
best interest of the
Lenders. The Agent
shall not be required
to take any action that,
in its opinion or in the
opinion of its counsel,
may expose the Agent
to liability or that is
contrary to any Loan
Document or
Applicable Law.
16.2.3 Except (in the
case of the Agent) for
notices, reports and
other documents and
information expressly
required to be
furnished to the
Lenders by the Agent
hereunder, the Agent
shall have no duty or
responsibility to
provide any Lender
with any credit or
other information
concerning the affairs
or financial condition
of the Obligors which
may come to the
attention of the Agent,
except where provided
to the Agent for the
Lenders as set out
herein. Nothing in this
Agreement shall
oblige the Agent to
disclose any
information relating to
the Obligors if such
disclosure would or
might, in the opinion
of the Agent,
constitute a breach of
- 102 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
represents and warrants
to the Agent that it shall
continue to make its own
independent appraisal of
the creditworthiness of
the Obligors while any
Loan Obligations are
outstanding or the
Lenders have any
obligations hereunder.
16.3 Rights of Agent as
Lender With respect to
its Commitment, the
Agent in its capacity as a
Lender shall have the
same rights and powers
hereunder as any other
Lender and may exercise
the same as though it
were not acting as the
Agent. The Agent may
(without having to
account therefor to any
Lender) accept deposits
from, lend money to and
generally engage in any
kind of banking or other
business with the
Obligors as if it were not
acting as the Agent and
may accept fees and
other consideration from
the Obligors for
customary services in
connection with this
Agreement and the Loan
Obligations and
otherwise without having
to account for the same
to the Lenders. Any
reference in this
Agreement to the Agent
means, where the Agent
is also a Lender, the
agency department of
such Lender specifically
responsible for acting as
Agent under and in
connection with this
Agreement. In acting as
Agent, the agency
department will be
treated as a separate
entity from any other
department or division of
the Lender in question.
Without limiting the
foregoing, the Agent
shall not be deemed to
have notice of a
document or information
received by any other
department or division of
that Lender, nor will the
Lender concerned be
deemed to have notice of
a document or
information received by
the Agent. 16.4
Indemnity by Lenders
Each Lender shall
indemnify the Agent and
hold it harmless, to the
extent not otherwise
reimbursed by the
Borrower or another
Obligor, rateably in
accordance with its
Applicable Percentage
and not jointly or jointly
and severally, for any
and all liabilities,
obligations, losses,
damages, penalties,
actions, judgments, suits,
costs, expenses or
disbursements of any
kind and nature
whatsoever (including
the fees, charges and
disbursements of
counsel) which may be
imposed on, incurred by
or asserted against the
Agent in any way
relating to or arising out
of this Agreement or any
other Loan Documents or
the transactions
contemplated hereby or
thereby (excluding,
unless a Default or Event
of Default is
apprehended or has
occurred and is
continuing, normal
- 103 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT 16.6
Protection of Agent Advances and
Payments 16.6.1
Unless the Agent shall
have been notified in
writing by any Lender
prior to a Drawdown
Date that such Lender
does not intend to
make available to the
Agent such Lender's
Applicable Percentage
of such Advance, the
Agent may assume
that such Lender has
made such Lender's
Applicable Percentage
of such Advance
available to the Agent
on the Drawdown
Date and the Agent
may, in reliance upon
such assumption,
make available to the
Borrower a
corresponding
amount. If such
corresponding amount
is not in fact made
available to the Agent
by such Lender, the
Agent shall be entitled
to recover such
amount (together with
interest thereon at the
rate determined by the
Agent as being its
applicable rate for
interbank
compensation based
on prevailing banking
industry standards) on
demand from such
Lender or, if such
Lender fails to
reimburse the Agent
for such amount on
demand, from the
Borrower. 16.6.2
Unless the Agent shall
have been notified in
writing by the
Borrower prior to the
date on which any
payment is due
hereunder that the
Borrower does not
intend to make such
payment, the Agent
may assume that the
Borrower will make
such payment when
due and the Agent
may, in reliance upon
such assumption,
make available to each
Lender on such
payment date an
amount equal to such
Lender's pro rata share
of such assumed
payment. If it is
established that the
Borrower has not in
fact made such
payment to the Agent,
each Lender shall
forthwith on demand
repay to the Agent the
amount made
available to such
Lender (together with
interest thereon at the
rate determined by the
Agent as being its
applicable rate for
interbank
compensation based
on prevailing banking
industry standards).
16.7 Notice by
Lenders to Agent
Each Lender shall
endeavour to use its
best efforts to notify
the Agent of the
occurrence of any
Default or Event of
Default forthwith
upon becoming aware
of such event, but no
Lender shall be liable
if it fails to give such
notice to the Agent.
16.8 Sharing Among
the Lenders Each
- 104 - SECOND
AMENDED AND
RESTATED
CREDIT
AGREEMENT
16.8.1 prior to any
Loan Obligations
becoming due and
payable under
Section 15.2, shall be
shared by each
Lender pro rata,
determined in
accordance with the
Applicable
Percentages of each
Lender; and 16.8.2
following any Loan
Obligations
becoming due and
payable under
Section 15.2, shall be
shared by each
Supported Party, pro
rata, based on its
percentage of the
aggregate Supported
Obligations; and
each Lender
undertakes to do all
such things as may
be reasonably
required to give full
effect to this Section
16.8. If any amount
so shared is later
recovered from the
Lender who
originally received it,
each other Lender
shall restore its
proportionate share
of such amount to
such Lender, without
interest. As a
necessary
consequence of the
foregoing, each
Lender shall share,
in a percentage equal
to its Applicable
Percentage, any
losses incurred as a
result of any Event
of Default, and shall
pay to the Agent,
within 2 Business
Days following a
request by the Agent,
any amount required
to ensure that such
Lender bears its
Applicable
Percentage of such
losses, if any,
including any
amounts required to
be paid to any
Lender in respect of
any Bankers'
Acceptances and
Letters of Credit.
Such obligation to
share losses shall be
absolute and
unconditional and
shall not be affected
by any circumstance,
including, without
limitation, (a) any
set-off,
compensation,
counterclaim,
recoupment, defence
or other right which
such Lender may
have against the
Agent, any Obligor
or any other Person
for any reason
whatsoever, (b) the
occurrence or
continuance of any
Default or Event of
Default, (c) any
adverse change in
the condition
(financial or
otherwise) of the
Borrower or any
other Person, (d) any
breach of this
Agreement by the
Borrower or any
other Person, or (e)
any other
circumstance,
happening or event
whatsoever, whether
or not similar to any
- 105 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT or (e)
any payment to which
such Lender is entitled
as a result of any form
of credit insurance
obtained by such
Lender. 16.9 Procedure
With Respect to
Advances Subject to the
applicable provisions of
this Agreement, upon
receipt of a Notice of
Borrowing from the
Borrower, the Agent
shall, without delay,
advise each Lender of
the receipt of such
notice, of the
Drawdown Date, of its
Applicable Percentage
of the amount of such
Advance and of the
relevant details of the
Agent's account(s).
Subject to the
applicable provisions of
this Agreement, each
Lender shall disburse
its Applicable
Percentage of each
Advance, and shall
make it available to the
Agent (no later than
10:00 a.m.) on the
Drawdown Date, by
depositing its
Applicable Percentage
of the Advance in the
Agent's account in the
applicable currency, as
the case may be. The
Agent will make such
amounts available to
the Borrower on the
Drawdown Date, at the
Branch, and, in the
absence of other
arrangements made in
writing between the
Agent and the
Borrower, by
transferring or causing
to be transferred an
equivalent amount in
the case of a Prime Rate
Advance, US Base Rate
Advance, Libor
Advance and the
Available Proceeds in
the case of Bankers'
Acceptances, in
accordance with the
instructions of the
Borrower which appear
in the Notice of
Borrowing with respect
to each Advance;
however, the obligation
of the Agent with
respect hereto is limited
to taking the steps
judged commercially
reasonable in order to
follow such
instructions, and once
undertaken, such steps
shall constitute prima
facie evidence that the
amounts have been
disbursed in accordance
with the applicable
provisions. Subject to
the foregoing sentence,
the Agent shall not be
liable for damages,
claims or costs imputed
to the Borrower and
resulting from the fact
that the amount of an
Advance did not arrive
at its agreed-upon
destination. 16.10
Non-Payment by
Lenders If any Lender
shall fail to make any
payment required to be
made by it hereunder to
the Agent, the Issuing
Lender or the Swing
Line Lender, then the
Agent may, in its
discretion and
notwithstanding any
contrary provision
hereof, (i) apply any
amounts thereafter
received by the Agent
- 106 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT amount
due to such Lender
pursuant hereto and, as
credits, each payment
or repayment of
principal and interest
made in respect of such
Debt as well as any
other amount paid to
such Lender pursuant
hereto. These accounts
shall constitute (in the
absence of
contradictory entries in
the accounts of the
Agent referred to in
Section 3.7) prima facie
evidence of their
content against the
Borrower. 16.12
Binding Determinations
The Agent shall in good
faith to make any
determination that is
required in order to
apply this Agreement
and, once made, such
determination shall be
final and binding upon
all Lenders, except in
the case of manifest
error. 16.13
Amendment of Article
16 The provisions of
this Article 16 relating
to the rights and
obligations of the
Lenders and the Agent
inter se, other than
under Sections 16.14 or
16.15, may be amended
or added to, from time
to time, by the
execution by the Agent
and the Lenders of an
instrument in writing
and such instrument in
writing shall validly
and effectively amend
or add to any or all of
the provisions of this
Article affecting the
Lenders without
requiring the execution
of such instrument in
writing by the
Borrower. 16.14
Decisions,
Amendments and
Waivers of the Lenders
Subject to the
provisions of Section
16.15, all decisions
taken by the Lenders
shall be taken as
follows: (a) if there are
two Lenders, by
unanimous consent, or
(b) if there are three or
more Lenders, by the
Majority Lenders. The
Agent shall confirm
such consent to each
Lender and to the
Borrower.
Notwithstanding the
foregoing, no
amendment,
modification or waiver
of any provision of any
Loan Document dealing
with the rights and
duties of the Agent
shall be taken without
the written consent of
the Agent, no
amendment,
modification or waiver
of any provision of any
Loan Document dealing
with the rights and
duties of the Issuing
Lender shall be taken
without the written
consent of the Issuing
Lender, and no
amendment,
modification or waiver
of any provision of any
Loan Document dealing
with the rights and
duties of the Swing
Line Lender shall be
taken without the
written consent of the
Swing Line Lender.
Notwithstanding any
- 107 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
principal or interest,
fees or other amounts,
that any such principal,
interest, fees or other
amounts would be
reduced, (b) any
reduction in the interest
rate applicable to the
payment of principal,
fees or other amounts,
(c) any increase in the
Commitment of a
Lender, (d) any
extension of any
Maturity Date (other
than as set out in
Section 2.5), (e) any
change in the terms of
this Article 16, (f) any
change in the manner of
making decisions
among the Lenders,
including the definition
of Majority Lenders, (g)
the release of the
obligations of any
Obligor except to the
extent permitted by
Section 8.2.2 or Section
14.9, (h) the release, in
whole or in part, of any
of the Loan Documents
or of any of the
Guarantees, (i) any
change in or any waiver
of the conditions
precedent provided for
in Section 9.1 or (j) any
amendment to this
Section 16.15. 16.16
Provisions for the
Benefit of Lenders
Only The provisions of
this Article 16 relating
to the rights and
obligations of the
Lenders and Agent inter
se shall be operative as
between the Lenders
and Agent only, and the
Obligors shall not have
any rights under or be
entitled to rely for any
purposes upon such
provisions. 16.17
Assignment by Agent
to an Affiliate The
Agent may, at any time
and from time to time,
assign its rights and
transfer its obligations
hereunder, in whole or
in part, to an Affiliate
acceptable to the
Borrower, acting
reasonably, upon notice
to the Lenders,
provided that such
assignment does not
result in an increase in
the amounts payable by
any Obligor hereunder.
16.18 Collective Action
of the Lenders Each of
the Lenders hereby
acknowledges that to
the extent permitted by
Applicable Law, any
Guarantees and the
remedies provided
under the Loan
Documents to the
Lenders are for the
benefit of the Lenders
(and Other Supported
Parties) collectively and
acting together and not
severally and further
acknowledges that its
rights hereunder and
under any Guarantees
are to be exercised not
severally, but by the
Agent upon the
decision of the requisite
majority of Lenders as
contemplated in the
relevant Loan
Document.
Accordingly,
notwithstanding any
provision of any Loan
Document, each of the
Lenders covenants and
agrees that it shall not
be entitled to take any
- 108 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT with
an office in Toronto.
The Agent may also
be removed at any
time by the Majority
Lenders upon 30 days'
notice to the Agent
and the Borrower as
long as the Majority
Lenders, in
consultation with the
Borrower, appoint and
obtain the acceptance
of a successor within
such 30 days, which
shall be a Lender
having an office in
Toronto, or an
Affiliate of any such
Lender with an office
in Toronto. 16.19.2 If
no such successor
shall have been so
appointed by the
Majority Lenders and
shall have accepted
such appointment
within 30 days after
the retiring Agent
gives notice of its
resignation, then the
retiring Agent may on
behalf of the Lenders,
appoint a successor
Agent meeting the
qualifications
specified in subsection
16.19.1, provided that
if the Agent shall
notify the Borrower
and the Lenders that
no qualifying Person
has accepted such
appointment, then
such resignation shall
nonetheless become
effective in
accordance with such
notice and (a) the
retiring Agent shall be
discharged from its
duties and obligations
hereunder and under
the other Loan
Documents (except
that in the case of any
collateral security held
or cash or Cash
Equivalents held in
escrow by the Agent
on behalf of the
Lenders under any of
the Loan Documents,
the retiring Agent
shall continue to hold
such collateral
security or cash or
Cash Equivalents until
such time as a
successor Agent is
appointed) and (b) all
payments,
communications and
determinations
provided to be made
by, to or through the
Agent shall instead be
made by or to each
Lender directly, until
such time as the
Majority Lenders
appoint a successor
Agent as provided for
above in Section
16.19.1. 16.19.3 Upon
a successor's
appointment as Agent
hereunder, such
successor shall
succeed to and
become vested with
all of the rights,
powers, privileges and
duties of the former
Agent, and the former
Agent shall be
discharged from all of
its duties and
obligations hereunder
or under the other
Loan Documents (if
not already discharged
therefrom as provided
in the preceding
paragraph). The fees
payable by the
Borrower to a
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AMENDED AND
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currency in which it is
due (the "First
Currency") into another
currency (the "Second
Currency") the rate of
exchange used shall be
that at which, in
accordance with normal
banking procedures, the
Agent could purchase,
in the Canadian money
market or the Canadian
exchange market, as the
case may be, the First
Currency with the
Second Currency on the
date on which the
judgment is rendered,
the sum is payable or
advanced or to be
advanced, as the case
may be. The Borrower
agrees that its
obligations in respect of
any First Currency due
from it to the Agent or
the Lenders in
accordance with the
provisions hereof shall,
notwithstanding any
judgment rendered or
payment made in the
Second Currency, be
discharged by a
payment made to the
Agent on account
thereof in the Second
Currency only to the
extent that, on the
Business Day following
receipt of such payment
in the Second Currency,
the Agent may, in
accordance with normal
banking procedures,
purchase on the
Canadian money
market or the Canadian
foreign exchange
market, as the case may
be, the First Currency
with the amount of the
Second Currency so
paid or which a
judgment rendered
payable (the rate
applicable to such
purchase being in this
Section called the ("FX
Rate")); and if the
amount of the First
Currency which may be
so purchased is less
than the amount
originally due in the
First Currency, the
Borrower agrees as a
separate and
independent obligation
and notwithstanding
any such payment or
judgment to indemnify
the Lenders against
such deficiency. The
agreements in this
Section shall survive
the termination of the
Commitments and the
repayment of all other
amounts outstanding
hereunder and under the
other Loan Documents.
17.2 Determination of
Equivalent Amount in
another Currencies If,
in their discretion, the
Lenders or the Agent
choose or, pursuant to
the terms of this
Agreement, are obliged
to choose, calculate or
determine the
equivalent in one
currency of the amount
in another currency the
Agent, in accordance
with the conversion
rules stipulated in
Section 17.1: 17.2.1 on
any Drawdown Date; or
17.2.2 at any other time
when such a calculation
or determination under
this Agreement
(including Section 2.9)
or any other Loan
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AGREEMENT
rendering any balance
outstanding of the
Loan Obligations
immediately due and
payable at the option
of the Lenders and
further releasing the
Lenders from any
obligation to make
any further Advances
under the provisions
hereof. 18.2
Assignments and
Transfers by the
Lenders 18.2.1 No
Lender may assign or
otherwise transfer any
of its rights or
obligations hereunder
except (a) to an
Eligible Assignee in
accordance with the
provisions of
subsection 18.2.2, or
(b) by way of a sale of
a participation in
accordance with the
provisions of Section
18.5 (and any other
attempted assignment
or transfer by any
party hereto shall be
null and void). 18.2.2
Each Lender may
assign or transfer to an
Eligible Assignee in
accordance with this
Article 18 up to 100%
of its rights, benefits
and obligations
hereunder; provided
that: 18.2.2.1 except
(a) if an Event of
Default has occurred
that is continuing, (b)
in the case of an
assignment of the
entire remaining
amount of the
assigning Lender's
Commitment and the
Loan Obligations at
the time owing to it or
(c) in the case of an
assignment to a
Lender or an Affiliate
of a Lender or an
Approved Fund with
respect to a Lender,
the aggregate amount
of the Commitment
being assigned (which
for this purpose
includes Advances
outstanding
thereunder) or, if the
applicable
Commitment is not
then in effect, the
principal outstanding
balance of the
Advances of the
applicable assigning
Lender subject to each
such assignment
(determined as of the
date the Assignment
and Assumption
Agreement with
respect to such
assignment is
delivered to the Agent
or, if "Trade Date" is
specified in the
Assignment and
Assumption
Agreement, as of the
Trade Date) shall not
be less than
US$10,000,000,
unless each of the
Agent and, so long as
no Default or Event of
Default has occurred
and is continuing, the
Borrower, otherwise
consent to a lower
amount (each such
consent not to be
unreasonably withheld
or delayed); 18.2.2.2
any assignment must
be approved by the
Agent (such approval
not to be unreasonably
withheld or delayed)
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discretion), unless the
Person that is the
proposed assignee is
itself already a Lender
with a Commitment
under this Agreement;
18.2.2.4 any
assignment must be
approved by the
Borrower (such
approval not to be
unreasonably withheld
or delayed, provided
that it shall be
reasonable for the
Borrower to withhold
its consent if such
assignment would
give rise to a direct
claim against an
Obligor under Article
6 or Section 19.15)
unless (i) the proposed
Assignee is itself
already a Lender, or
(ii) a Default has
occurred that is
continuing, or (iii) an
Event of Default has
occurred that is
continuing; and
18.2.2.5 the parties to
each Assignment shall
execute and deliver to
the Agent an
Assignment and
Assumption
Agreement, together
with a processing and
recordation fee in an
amount of US$5,000,
and the Eligible
Assignee, if it is not a
Lender, shall deliver
to the Agent an
administrative
questionnaire. Subject
to acceptance and
recording thereof by
the Agent pursuant to
Section 18.3, from and
after the effective date
specified in each
Assignment and
Assumption
Agreement, the
Eligible Assignee
thereunder shall be a
party to this
Agreement and, to the
extent of the interest
assigned by such
Assignment and
Assumption
Agreement, have the
rights and obligations
of a Lender under this
Agreement and the
other Loan
Documents, and the
assigning Lender
thereunder shall, to the
extent of the interest
assigned by such
Assignment and
Assumption
Agreement, be
released from its
obligations under this
Agreement (and, in
the case of an
Assignment and
Assumption
Agreement covering
all of the assigning
Lender's rights and
obligations under this
Agreement, such
Lender shall cease to
be a party hereto) with
respect to matters and
circumstances from
and after the effective
date of such
Assignment but shall
continue to be entitled
to the benefits of
Article 6 and Section
19.15 with respect to
facts and
circumstances
occurring prior to the
effective date of such
Assignment. For
greater certainty,
subject to the second
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AGREEMENT 18.3
Register The Agent
shall maintain at one of
its offices in Toronto,
Ontario, a copy of each
Assignment and
Assumption Agreement
delivered to it and a
register for the
recordation of the
names and addresses of
the Lenders, and the
Commitments of, and
principal amounts of
the Advances owing to,
each Lender pursuant to
the terms hereof from
time to time (the
"Register"). The entries
in the Register shall be
prima facie evidence of
each of the foregoing
items, and the
Borrower, the Agent
and the Lenders may
treat each Person whose
name is recorded in the
Register pursuant to the
terms hereof as a
Lender hereunder for
all purposes of this
Agreement,
notwithstanding any
notice to the contrary.
The Register shall be
available for inspection
by the Borrower and
any Lender, at any
reasonable time and
from time to time upon
reasonable prior notice.
18.4 Electronic
Execution of
Assignments The words
"execution," "signed,"
"signature," and words
of like import in any
Assignment and
Assumption Agreement
shall be deemed to
include electronic
signatures or the
keeping of records in
electronic form, each of
which shall be of the
same legal effect,
validity or
enforceability as a
manually executed
signature or the use of a
paperbased
recordkeeping system,
as the case may be, to
the extent and as
provided for in any
Applicable Law,
including Parts 2 and 3
of the Personal
Information Protection
and Electronic
Documents Act
(Canada), the
Electronic Commerce
Act, 2000 (Ontario) and
other similar federal or
provincial laws based
on the Uniform
Electronic Commerce
Act of the Uniform Law
Conference of Canada
or its Uniform
Electronic Evidence
Act, as the case may be.
18.5 Participations Any
Lender may at any
time, without the
consent of, the
Borrower or the Agent,
sell participations to
any Person (other than a
natural person, an
Obligor or any Affiliate
of an Obligor) (each, a
"Participant") in all or a
portion of such Lender's
rights and/or
obligations under this
Agreement (including
all or a portion of its
Commitment and/or the
Advances owing to it);
provided that (a) such
Lender's obligations
under this Agreement
shall remain
unchanged, (b) such
Lender shall remain
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AGREEMENT 18.6
Limitations Upon
Participant Rights A
Participant shall not be
entitled to receive any
greater payment under
Sections 6.2 and 6.3
than the applicable
Lender would have
been entitled to receive
with respect to the
participation sold to
such Participant. A
Participant that would
be a Foreign Lender if
it were a Lender to the
Borrower shall not be
entitled to the benefits
of Section 6.3 unless
the Borrower is notified
of the participation sold
to such Participant and
such Participant agrees,
for the benefit of the
Borrower, to comply
with subsection 6.3.5 as
though it were a Lender
to the Borrower. 18.7
Promissory Notes Upon
the request of any
Lender, the Borrower
will execute and deliver
one or more promissory
notes in form and
substance acceptable to
such Lender, acting
reasonably, evidencing
the Commitment under
this Agreement and any
Advances hereunder.
19.
MISCELLANEOUS
19.1 Notices 19.1.1
General. Except where
otherwise expressly
specified herein, all
notices, requests,
demands or other
communications
between the parties
hereto shall be in
writing and shall be
made by prepaid
registered mail, prepaid
overnight courier, fax
or physical delivery to
the address or fax
number of such party
and to the attention
indicated on the
signature page of this
Agreement of such
party or to any other
address, attention or fax
number which such
party hereto may
subsequently
communicate to each in
writing in such manner.
Any notice, request,
demand or other
communication shall be
deemed to have been
received by the party to
whom it is addressed
(a) upon receipt by the
addressee (or refusal
thereof), in the case of
prepaid overnight
courier or physical
delivery, (b) three days
after delivery in the
mail, if sent by prepaid
registered mail, and (c)
on the day of
transmission, if faxed
before 5:00 p.m. (local
time) on a Business
Day, and on the next
Business Day following
transmission, if faxed
after 5:00 p.m. (local
time) on a Business
Day; provided that, any
notice to the Borrower
shall be deemed to be
notice to all Obligors. If
normal postal or fax
service is interrupted by
strike, work slow-down
or other cause, the party
sending the notice shall
use such services which
have not been
interrupted or shall
deliver such notice by
messenger in order to
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AMENDED AND
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AGREEMENT 19.1.2
Electronic
Communications. Notices
and other communications
by the Agent to the
Lenders and the Issuing
Lender hereunder may be
delivered or furnished by
electronic communication
(including email and
Internet or intranet
websites) pursuant to
procedures approved by
the Agent, provided that
the foregoing shall not
apply to notices by the
Agent to any Lender of
Advances to be made or
Letters of Credit to be
issued if such Lender has
notified the Agent that it is
incapable of receiving
notices by electronic
communication. The
Agent or the Borrower
may, in their discretion,
agree to accept notices and
other communications to
each other hereunder by
electronic communications
pursuant to procedures
approved by them,
provided that approval of
such procedures may be
limited to particular
notices or
communications. Unless
the Agent otherwise
prescribes, (a) notices and
other communications sent
to an email address shall
be deemed received upon
the sender's receipt of an
acknowledgement from
the intended recipient
(such as by the "return
receipt requested"
function, as available,
return email or other
written
acknowledgement),
provided that if such
notice or other
communication is not sent
during the normal business
hours of the recipient, such
notice or communication
shall be deemed to have
been sent at the opening of
business on the next
Business Day for the
recipient, and (b) notices
or communications posted
to an Internet or intranet
website shall be deemed
received upon the deemed
receipt by the intended
recipient at its e-mail
address as described in the
foregoing clause (a) of
notification that such
notice or communication
is available and identifying
the website address
therefor. 19.2 Amendment
andWaiver The rights,
remedies and recourses of
the Agent and the Lenders
under this Agreement and
the other Loan Documents
are cumulative and do not
exclude any other rights,
remedies and recourses
which the Agent or the
Lenders might have, and
no omission or delay on
the part of the Agent or the
Lenders in the exercise of
any right shall have the
effect of operating as a
waiver of any such right,
remedy or recourse, and
the partial or sole exercise
of a right, remedy,
recourse or power will not
prevent the Agent or the
Lenders from exercising
thereafter any other right,
remedy, recourse or
power. Without limiting
the generality of the
foregoing sentence, in the
event that the Agent does
not immediately make a
declaration accelerating
the Loan Obligations
under Section 15.2
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19.3 Lender
Replacement 19.3.1
The Borrower may,
at any time, by
written request to
the Agent (each, a
"Unanimous
Lender Request"),
request an
amendment or
waiver that requires
the prior written
consent of each
Lender pursuant to
Section 16.15. A
copy of the
Unanimous Lender
Request shall be
provided by the
Agent to each
Lender. Each
Lender may, in its
sole discretion, by
written notice to the
Agent (the
"Unanimous
Lender Response
Notice"), within ten
Business Days of
the Agent’s receipt
of the Unanimous
Lender Request
(the "Unanimous
Lender Response
Period"), approve
or decline the
Unanimous Lender
Request. If any
Lender does not
provide a
Unanimous Lender
Response Notice
within the
Unanimous Lender
Response Period,
such Lender shall
be deemed to have
declined the
Unanimous Lender
Request. 19.3.2 On
or before the
second Business
Day after the
Unanimous Lender
Response Period,
the Agent shall give
written notice (the
"Accepting Lender
Notice") to the
Borrower and each
Lender, identifying
each Lender that
approved the
Unanimous Lender
Request within the
Unanimous Lender
Response Period
(the "Approving
Lenders") and each
Lender that
declined or was
deemed to have
declined the
Unanimous Lender
Request (the
"Declining
Lenders") and their
respective
Commitments, and
if Lenders with
Commitments that
in the aggregate are
greater than 30% of
the aggregate
Commitments of all
Lenders do not
approve the
Unanimous Lender
Request, the notice
shall state that the
Unanimous Lender
Request has been
declined. In such
case, the
Unanimous Lender
Request will be
declined. 19.3.3 If
the aggregate
Commitments of
the Approving
Lenders are equal
to or greater than
70% but less than
100% of the
aggregate
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AGREEMENT
Notice by the
Borrower to the
Agent (such deadline
being herein called
the "Acquisition
Deadline"). If only
one Approving
Lender gives an
Acquisition Notice
to the Agent or if
more than one
Approving Lender
gives an Acquisition
Notice to the Agent
but the aggregate of
their Desired
Acquisition Amounts
is less than or equal
to the Available
Amount, then each
such Approving
Lender shall be
entitled to acquire its
Desired Acquisition
Amount of the rights
and obligations of
the Declining
Lenders under the
Loan Documents. If
more than one
Approving Lender
gives an Acquisition
Notice to the Agent
and the aggregate of
the Desired
Acquisition Amounts
is greater than the
Available Amount,
then each such
Approving Lender
shall be entitled to
acquire a pro rata
share of the rights
and obligations of
the Declining
Lenders under the
Loan Documents,
such pro rata share
being determined
based on the relative
Desired Acquisition
Amount of each such
Approving Lender.
19.3.3.2 On or
before the second
Business Day
following the
Acquisition
Deadline, the Agent
shall give to the
Borrower and each
Lender a written
notice identifying the
Available Amount of
each Declining
Lender and the
portion thereof to be
acquired by each
Approving Lender.
Each of such
acquisitions shall be
completed on the
date which is ten
Business Days
following the
Acquisition
Deadline, in
accordance with the
procedures set out in
Section 18.2. If a
Declining Lender or
an Affiliate of such
Declining Lender is
a party to a
Derivative
Instrument with an
Obligor, upon the
completion of the
acquisition of such
Declining Lender’s
portion of the
Available Amount,
such Declining
Lender shall either
(i) terminate each
guarantee provided
by any Obligor in
connection
therewith, in which
case, such assigning
Lenders or its
applicable Affiliate
shall be deemed to
be an Other
Derivative
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CREDIT
AGREEMENT
(subject to Section
18.2.2.2) and the
Issuing Lender
(subject to Section
18.2.2.3), and who
acquire all or a
portion of the
balance of the
rights and
obligations of the
Declining Lenders
under the Loan
Documents on the
date which is ten
Business Days
following the
Acquisition
Deadline, in
accordance with the
procedures set out
in Section 18.2.
19.3.3.4 Any
outstanding credit
extended by the
Declining Lenders
to the Borrower
under the Credit
Facility which is
not acquired by
Approving Lenders
or Substitute
Lenders under
Sections 19.3.3.2 or
19.3.3.3 shall be
repaid by the
Borrower, and the
Commitments of
the Declining
Lenders not so
acquired shall be
cancelled on the
date which is ten
Business Days
following the
Acquisition
Deadline and the
amount of the
Credit Facilities
shall thereupon be
reduced by the
aggregate of the
Commitments so
cancelled, if any.
The Borrower shall
comply with
Section 6.4 in
connection with
any such
prepayment. As
concerns any BA
Advances that
otherwise would be
subject to
prepayment
pursuant to this
Section 19.3.3.4,
the Borrower shall
forthwith pay to the
Agent an amount
equal to the
aggregate of the
face amount of
such BA Advances,
such amount to be
held by the Agent
against any amount
owing by the
Borrower to such
Declining Lenders
in respect of such
BA Advances. Any
such amount paid
to the Agent shall
be held on deposit
by the Agent until
the maturity date of
such BA Advances,
at which time it
shall be applied
against the
indebtedness of the
Borrower to such
Declining Lenders
thereunder. The
Borrower shall be
entitled to receive
interest on cash or
Cash Equivalents
held by the Agent
under this Section
if no Event of
Default has
occurred and is
continuing, but
neither the Agent
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AGREEMENT 19.3.3.5
For greater certainty,
once there are no
Declining Lenders that
hold any Commitments,
the relevant Unanimous
Lender Request shall be
deemed to have been
approved. 19.3.3.6 The
Borrower may at any
time prior to the
commencement of the
transactions
contemplated by Sections
19.3.3.2, 19.3.3.3 or
19.3.3.4, by written
notice to the Agent (a
copy of which shall be
promptly provided to
each Lender), terminate
and cancel any
assignment or repayment
contemplated thereby,
whereupon the
Acquisition Request
Notice shall be deemed
to have been withdrawn
and Section 19.3.3 shall
not apply in respect of
the Unanimous Lender
Request. 19.4
Independent Engineer
and Other Consultants
Subject to Sections 12.10
and 12.14, the Agent
and/or the Majority
Lenders shall have the
right at any time and
from time to time to
appoint an independent
engineer to act on behalf
of the Agent and the
Lenders for such
purposes as the Agent or
the Majority Lenders
may determine to carry
out such duties as may be
set forth in this
Agreement or as may be
required by the Agent or
the Majority Lenders
from time to time.
Subject to Sections 12.10
and 12.14, the Agent
and/or the Lenders may
also, from time to time,
consult and retain any
other independent
consultants determined
by them to be appropriate
for the same purpose.
19.5 Entire Agreement
The entire agreement
between the parties is
expressed herein, and no
variation or modification
of its terms shall be valid
unless expressed in
writing and signed by the
parties. All previous
agreements, promises,
proposals,
representations,
understandings and
negotiations between the
parties hereto which
relate in any way to the
subject matter of this
Agreement are hereby
deemed to be null and
void. 19.6
Indemnification and
Set-Off In addition to the
other rights now or
hereafter conferred by
Applicable Law and
those described in
subsection 5.6.2 and
Section 7.10, and without
limiting such rights,
following the occurrence
of an Event of Default
which is continuing, each
Lender and the Agent is
hereby authorized by
each Obligor, at any time
and from time to time,
subject to the obligation
to give notice to the
Borrower subsequently
and within a reasonable
time, to set off,
indemnify, compensate,
use and allocate any
deposit (general or
special, term or demand,
including any debt
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AMENDED AND
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AGREEMENT amounts
referred to in Section
15.2 as payable in
accordance with the
provisions of that Section
and even if such
obligation and Debt or
either of them is a future
or unmatured Debt. 19.7
Benefit of Agreement
This Agreement shall be
binding upon and enure
to the benefit of each
party hereto and its
successors and permitted
assigns. 19.8
Counterparts This
Agreement may be
signed in any number of
counterparts, each of
which shall be deemed to
constitute an original,
and all of the separate
counterparts shall
constitute one single
document. Delivery of an
executed counterpart of a
signature page of this
Agreement by fax or by
sending a scanned copy
by electronic mail shall
be as effective as
delivery of a manually
executed counterpart of
this Agreement. 19.9
This Agreement to
Govern In the event of
any conflict or
inconsistency between
the terms of this
Agreement and the terms
of any other Loan
Document, the
provisions of this
Agreement shall govern
to the extent necessary to
remove the conflict or
inconsistency. 19.10
Applicable Law This
Agreement, its
interpretation and its
application shall be
governed by the laws of
the Province of Ontario
and the laws of Canada
applicable therein. 19.11
Severability Each
provision of this
Agreement is separate
and distinct from the
others, such that any
decision of a court or
tribunal to the effect that
any provision of this
Agreement is null or
unenforceable shall in no
way affect the validity of
the other provisions of
this Agreement or the
enforceability thereof.
Any provision of this
Agreement which is
prohibited or
unenforceable in any
jurisdiction shall, as to
such jurisdiction, be
ineffective to the extent
of such prohibition or
unenforceability without
invalidating the
remaining provisions
hereof, and any such
prohibition or
unenforceability in any
jurisdiction shall not
invalidate or render
unenforceable such
provision in any other
jurisdiction. To the
extent permitted by
Applicable Law, each
Obligor hereby waives
any provision of any
Applicable Law that
renders any provision
hereof prohibited or
unenforceable in any
respect. 19.12 Further
Assurances Each Obligor
covenants and agrees
that, at the request of the
Agent, it will at any time
and from time to time
execute and deliver such
further and other
documents and
instruments and do all
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Guarantee or to
further implement or
evidence any
provision hereof or of
the other Loan
Documents. 19.13
Good Faith and Fair
Consideration Each
party hereto
acknowledges and
declares that it has
entered into this
Agreement freely and
of its own will. In
particular, each party
hereto acknowledges
that this Agreement
was freely negotiated
by it in good faith,
there was no
exploitation of the
Obligors by the
Lenders and there is
no serious
disproportion between
the consideration
provided by the
Lenders and that
provided by the
Obligors. 19.14
Responsibility of the
Lenders Each Lender
shall be solely
responsible for the
performance of its
own obligations
hereunder.
Accordingly, no
Lender is in any way
or jointly or jointly
and severally
responsible for the
performance of the
obligations of any
other Lender. 19.15
Indemnity The
Borrower shall
indemnify and hold
harmless each
Supported Party and
their agents,
consultants and
advisors (other than
agents, consultants
and advisors to the
extent that their costs
and expenses are not,
pursuant to Section
12.14, to be borne by
the Borrower), and
each of their Related
Parties and each of
their agents,
consultants and
advisors (other than
agents, consultants
and advisors to the
extent that their costs
and expenses are not,
pursuant to Section
12.14, to be borne by
the Borrower), (each,
an "Indemnified
Party") from and
against any and all
claims, damages,
losses, liabilities, costs
and expenses
(including, without
limitation, reasonable
fees and expenses of
counsel), including
Environmental
Claims, (each, a
"Claim") that may be
incurred by, or
asserted or awarded
against, any
Indemnified Party, in
each case arising out
of, or in connection
with, or by reason of,
any investigation,
litigation or
proceeding (or the
preparation for the
defence of any
investigation,
litigation or
proceeding), brought
by Persons other than
an Indemnified Party
arising out of, related
to or in connection
with (a) this
Agreement, (b) the
- 121 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT against
any Obligor, its officers,
directors, employees,
agents or advisors, on
any theory of liability for
special, indirect,
consequential or punitive
damages arising out of or
otherwise relating to this
Agreement and the other
Loan Documents and any
of the transactions
contemplated herein or
therein or the actual or
proposed use of the
proceeds of the
Advances. The
agreements in this
Section shall survive the
termination of the
Commitments and the
repayment of all other
amounts outstanding
hereunder and under the
other Loan Documents.
19.16 Confidentiality
19.16.1 Each of the
Agent and the Lenders
agrees to maintain the
confidentiality of the
Information (as defined
below), except that
Information may be
disclosed (a) to it, its
Affiliates and its and its
Affiliates' respective
partners, directors,
officers, employees,
agents, advisors and
representatives (it being
understood that the
Persons to whom such
disclosure is made will
be informed of the
confidential nature of
such Information and
instructed to keep such
Information
confidential), (b) to the
extent requested by any
regulatory authority
purporting having
jurisdiction over it
(including any
self-regulatory
authority), (c) to the
extent required by
Applicable Law or by
any subpoena or similar
legal process, (d) to any
other party hereto, (e) in
connection with the
exercise of any remedies
hereunder or under any
other Loan Document or
any action or proceeding
relating to this
Agreement or any other
Loan Document or the
enforcement of rights
hereunder or thereunder,
(f) subject to an
agreement containing
provisions substantially
the same as those of this
Section, to (i) any
Assignee of or
Participant in, or any
prospective Assignee of
or Participant in, any of
its rights or obligations
under this Agreement, or
(ii) any actual or
prospective counterparty
(or its advisors) to any
Derivative Instrument,
credit-linked note or
similar transaction
relating to the Obligors
and their obligations, (g)
with the consent of the
Borrower, or (h) to the
extent such Information
(x) becomes publicly
available other than as a
result of a breach of this
Section or (y) becomes
available to the Agent or
any Lender on a
non-confidential basis
from a source other than
an Obligor. 19.16.2 For
purposes of this Section,
"Information" means all
information received in
connection with this
Agreement from any
- 122 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT
addition, the Agent may
disclose to any agency
or organization that
assigns standard
identification numbers
to loan facilities such
basic information
describing the facilities
provided hereunder as
is necessary to assign
unique identifiers (and,
if requested, supply a
copy of this
Agreement), it being
understood that the
Person to whom such
disclosure is made will
be informed of the
confidential nature of
such Information and
instructed to make
available to the public
only such Information
as such person normally
makes available in the
course of its business of
assigning identification
numbers. 19.16.3 In
addition, and
notwithstanding
anything herein to the
contrary, the Agent may
provide the information
described on Exhibit C
concerning the
Borrower and the credit
facilities established
herein to Loan Pricing
Corporation and/or
other recognized trade
publishers of
information for general
circulation in the loan
market. 19.16.4 Each
Obligor agrees that
Export Development
Canada may disclose
Information (i) to the
Minister of Finance, the
Treasury Board or the
Auditor General, (ii) as
required by the
disclosure policy of
Export Development
Canada or (iii) under
the international
commitments of the
Government of Canada
or Export Development
Canada. 19.17
Reinstatement This
Agreement shall remain
in full force and effect
and continue to be
effective if any petition
or other proceeding is
filed by or against the
Borrower or any other
Obligor for liquidation
or reorganization, or if
the Borrower or any
other Obligor becomes
insolvent or makes an
assignment for the
benefit of any creditor
or creditors, or if an
interim receiver,
receiver, receiver and
manager or trustee be
appointed for all or any
significant part of the
Property of the
Borrower or any other
Obligor, and shall
continue to be effective
or to be reinstated, as
the case may be, if at
any time payment and
performance of the
obligations hereunder
or under the other Loan
Documents, or any part
thereof, is, pursuant to
Applicable Law,
rescinded or reduced in
amount, or must
otherwise be restored or
returned by any obligee
of such obligations,
whether as a fraudulent
preference, a
reviewable transaction,
or otherwise, all as
though such payment or
performance had not
been made. In the event
- 123 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT claims
in respect of any such
action or proceeding
may be heard and
determined in such
court. Each of the
parties hereto agrees
that a final judgment in
any such action or
proceeding shall be
conclusive and may be
enforced in other
jurisdictions by suit on
the judgment or in any
other manner provided
by law. Nothing in this
Agreement or in any
other Loan Document
shall affect any right
that the Agent or any
Lender may otherwise
have to bring any action
or proceeding relating
to this Agreement or
any other Loan
Document against any
Obligor or its Property
in the courts of any
jurisdiction. 19.19
Waiver of Venue Each
Obligor irrevocably and
unconditionally waives,
to the fullest extent
permitted by Applicable
Law, any objection that
it may now or hereafter
have to the laying of
venue of any action or
proceeding arising out
of or relating to this
Agreement or any other
Loan Document in any
court referred to in
Section 19.18. Each of
the parties hereto
hereby irrevocably
waives, to the fullest
extent permitted by
Applicable Law, the
defence of an
inconvenient forum to
the maintenance of such
action or proceeding in
any such court. 19.20
Waiver of Jury Trial
EACH PARTY
HERETO HEREBY
IRREVOCABLY
WAIVES, TO THE
FULLEST EXTENT
PERMITTED BY
APPLICABLE LAW,
ANY RIGHT IT MAY
HAVE TO A TRIAL
BY JURY IN ANY
LEGAL
PROCEEDING
DIRECTLY OR
INDIRECTLY
ARISING OUT OF OR
RELATING TO THIS
AGREEMENT OR
ANY OTHER LOAN
DOCUMENT OR THE
TRANSACTIONS
CONTEMPLATED
HEREBY OR
THEREBY
(WHETHER BASED
ON CONTRACT,
TORT OR ANY
OTHER THEORY).
EACH PARTY
HERETO (A)
CERTIFIES THAT NO
REPRESENTATIVE,
AGENT OR
ATTORNEY OF ANY
OTHER PERSON HAS
REPRESENTED,
EXPRESSLY OR
OTHERWISE, THAT
SUCH OTHER
PERSON WOULD
NOT, IN THE EVENT
OF LITIGATION,
SEEK TO ENFORCE
THE FOREGOING
WAIVER, AND (B)
ACKNOWLEDGES
THAT IT AND THE
OTHER PARTIES
HERETO HAVE
BEEN INDUCED TO
ENTER INTO THIS
AGREEMENT AND
THE OTHER LOAN
- 124 - SECOND
AMENDED AND
RESTATED CREDIT
AGREEMENT hereby,
the Related Parties of
each of the Agent and the
Lenders) any legal or
equitable right, remedy
or claim under or by
reason of this
Agreement. 19.23
Formal Date For the
purposes of convenience,
this Agreement may be
referred to as bearing the
formal date of August 4,
2011, notwithstanding its
actual date of signature.
19.24 Swedish
Companies Act
Notwithstanding
anything to the contrary
herein, the obligations
and liabilities of any
Obligor incorporated
under the laws of
Sweden (each, a
“Swedish Obligor”)
under this Agreement
and the scope of this
Agreement as it relates to
any such Swedish
Obligor shall be limited
if (and only if) required
by an application of the
provisions of the
Swedish Companies Act
(in Swedish:
Aktiebolagslagen
(2005:551)) regulating
prohibited loans and
guarantees and the
distribution of assets, and
it is understood that the
obligations of the
Swedish Obligor for its
obligations and liabilities
hereunder shall apply
only to the extent
permitted by the
above-mentioned
provisions as applied,
together with other
applicable provisions of
the said Companies Act,
and the Agreement shall
be limited in accordance
with this Section 19.24.
For greater certainty,
nothing in this Section
19.24 shall affect the
obligations and liabilities
of any other Obligor or
any other aspect of this
Agreement. 19.25
Finnish Companies Act
Notwithstanding
anything to the contrary
herein, the obligations
and liabilities of any
Obligor incorporated
under the laws of Finland
(each a "Finnish
Obligor") under this
Agreement and the scope
of this Agreement as it
relates to any such
Finnish Obligor shall be
limited if (and only if)
required by an
application of the
provisions of the Finnish
Companies Act (in
Finnish: Osakeyhtiölaki
– 624/2006) regulating
prohibited loans and
guarantees and the
distribution of assets, and
it is understood that the
obligations of the Finnish
Obligor for its
obligations and liabilities
hereunder shall apply
only to the extent
permitted by the
above-mentioned
provisions as applied,
together with other
applicable provisions of
the said Companies Act,
and the Agreement shall
be limited in accordance
with this Section 19.25.
For greater certainty,
nothing in this Section
19.25 shall affect the
obligations and liabilities
of any other Obligor or
any other aspect of this
Agreement.
SECOND AMENDED
AND RESTATED
CREDIT AGREEMENT
EXHIBIT A
COMMITMENTS
Lender Commitment The
Bank of Nova Scotia
$210,000,000 The
Toronto-Dominion Bank
$185,000,000 Bank of
Montreal $115,000,000
Royal Bank of Canada
$115,000,000 Canadian
Imperial Bank of
Commerce $115,000,000
Export Development
Canada $65,000,000
Bank of America, N.A.,
Canada Branch
$65,000,000
Commonwealth Bank of
Australia $65,000,000
Barclays Bank PLC
$65,000,000 National
Bank of Canada
$65,000,000 HSBC Bank
Canada $45,000,000
Citibank, N.A. Canadian
Branch $45,000,000
Credit Suisse AG,
Toronto Branch
$45,000,000
SECOND AMENDED
AND RESTATED
CREDIT AGREEMENT
EXHIBIT A
COMMITMENTS
Lender Commitment The
Bank of Nova Scotia
$210,000,000 The
Toronto-Dominion Bank
$185,000,000 Bank of
Montreal $115,000,000
Royal Bank of Canada
$115,000,000 Canadian
Imperial Bank of
Commerce $115,000,000
Export Development
Canada $65,000,000
Bank of America, N.A.,
Canada Branch
$65,000,000
Commonwealth Bank of
Australia $65,000,000
Barclays Bank PLC
$65,000,000 National
Bank of Canada
$65,000,000 HSBC Bank
Canada $45,000,000
Citibank, N.A. Canadian
Branch $45,000,000
Credit Suisse AG,
Toronto Branch
$45,000,000
EXHIBIT B
ASSIGNMENT AND
ASSUMPTION
AGREEMENT This
Assignment and
Assumption (the
"Assignment and
Assumption") is dated as of
the Effective Date set forth
below and is entered into by
and between [Insert name of
Assignor] (the "Assignor")
and [Insert name of
Assignee] (the "Assignee").
Capitalized terms used but
not defined herein shall
have the meanings given to
them in the Credit
Agreement identified below
(as amended, the "Credit
Agreement"), receipt of a
copy of which is hereby
acknowledged by the
Assignee. The Standard
Terms and Conditions set
forth in Annex 1 attached
hereto are hereby agreed to
and incorporated herein by
reference and made a part of
this Assignment and
Assumption as if set forth
herein in full. For an agreed
consideration, the Assignor
hereby irrevocably sells and
assigns to the Assignee, and
the Assignee hereby
irrevocably purchases and
assumes from the Assignor,
subject to and in accordance
with the Standard Terms
and Conditions and the
Credit Agreement, as of the
Effective Date inserted by
the Agent as contemplated
below (a) all of the
Assignor’s rights and
obligations in its capacity as
a Lender under the Credit
Agreement and any other
documents or instruments
delivered pursuant thereto
to the extent related to the
amount and percentage
interest identified below of
all of such outstanding
rights and obligations of the
Assignor under the
respective facilities
identified below (including
without limitation any
letters of credit, guarantees,
and swingline loans
included in such facilities),
and (b) to the extent
permitted to be assigned
under Applicable Law, all
claims, suits, causes of
action and any other right of
the Assignor (in its capacity
as a Lender) against any
Person, whether known or
unknown, arising under or
in connection with the
Credit Agreement, any
other documents or
instruments delivered
pursuant thereto or the
loan-transactions governed
thereby or in any way based
on or related to any of the
foregoing, including, but
not limited to, contract
claims, tort claims,
malpractice claims,
statutory claims and all
other claims at law or in
equity related to the rights
and obligations sold and
assigned pursuant to clause
(a) above (the rights and
obligations sold and
assigned pursuant to clauses
(a) and (b) above being
referred to herein
collectively as, the
"Assigned Interest"). Such
sale and assignment is
without recourse to the
Assignor and, except as
expressly provided in this
Assignment and
Assumption, without
representation or warranty
by the Assignor. Assignor:
Assignee: [and is an
Affiliate/Approved Fund of
[identify Lender]1 ]
Borrower(s): Agent: , as the
administrative agent under
the Credit Agreement 1
2 Credit Agreement: [The
[amount] Credit
Agreement dated as of
among [name of
Borrower], the Lenders
parties thereto, [name of
administrative agent], as
Agent, and the other
agents parties thereto]
Assigned Interest:
Aggregate Amount of
Commitment/Loans for all
Lenders2 Amount of
Commitment/Loans
Assigned Percentage
Assigned of
Commitment/Loans3
CUSIP Number $ $ %
[Trade Date: ]4 2 Amount
to be adjusted by the
counterparties to take into
account any payments or
prepayments made
between the Trade Date
and the Effective Date. 3
Set forth, to at least 9
decimals, as a percentage
of the Commitment/Loans
of all Lenders thereunder.
4 To be completed if the
Assignor and the Assignee
intend that the minimum
assignment amount is to
be determined as of the
Trade Date.
3 Effective Date:
___________, 20___
[TO BE INSERTED
BY AGENT AND
WHICH SHALL BE
THE EFFECTIVE
DATE OF
RECORDATION OF
TRANSFER IN THE
REGISTER
THEREFOR.] The
terms set forth in this
Assignment and
Assumption are
hereby agreed to:
ASSIGNOR [NAME
OF ASSIGNOR] By:
Name: Title:
ASSIGNEE [NAME
OF ASSIGNEE] By:
Name: Title:
[Consented to and]5
Accepted: [NAME OF
AGENT], as
Administrative Agent
By: Name: Title:
[Consented to:]6
[NAME OF
RELEVANT PARTY]
By: Name: Title: 5 To
be added only if the
consent of the Agent
is required by the
terms of the Credit
Agreement. 6 To be
added only if the
consent of the
Borrower and/or other
parties (e.g., Issuing
Lender) is required by
the terms of the Credit
Agreement.
ANNEX 1 to Assignment and Assumption
[______________________________]1
STANDARD TERMS AND CONDITIONS
FOR ASSIGNMENT AND ASSUMPTION
Representations and Warranties. Assignor. The
Assignor (a) represents and warrants that (i) it is
the legal and beneficial owner of the Assigned
Interest, (ii) the Assigned Interest is free and
clear of any lien, encumbrance or other adverse
claim, and (iii) it has full power and authority,
and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to
consummate the transactions contemplated
hereby; and (b) assumes no responsibility with
respect to (i) any statements, warranties or
representations made in or in connection with the
Credit Agreement or any other Loan Document2,
(ii) the execution, legality, validity,
enforceability, genuineness, sufficiency or value
of the Loan Documents or any collateral
thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or
any other Person obligated in respect of any
Loan Document, or (iv) the performance or
observance by the Borrower, any of its
Subsidiaries or Affiliates or any other Person of
any of their respective obligations under any
Loan Document. Assignee. The Assignee (a)
represents and warrants that (i) it has full power
and authority, and has taken all action necessary,
to execute and deliver this Assignment and
Assumption and to consummate the transactions
contemplated hereby and to become a Lender
under the Credit Agreement, (ii) it meets all
requirements of an Eligible Assignee under the
Credit Agreement (subject to receipt of such
consents as may be required under the Credit
Agreement), (iii) from and after the Effective
Date, it shall be bound by the provisions of the
Credit Agreement as a Lender thereunder and, to
the extent of the Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement,
together with copies of the most recent financial
statements delivered pursuant to Section thereof,
as applicable, and such other documents and
information as it has deemed appropriate to make
its own credit analysis and decision to enter into
this Assignment and Assumption and to purchase
the Assigned Interest on the basis of which it has
made such analysis and decision independently
and without reliance on the Agent or any other
Lender, and (v) if it is a Foreign Lender3,
attached to the Assignment and Assumption is
any documentation required to be delivered by it
pursuant to the terms of the Credit Agreement,
duly completed and executed by the Assignee;
and (b) agrees that (i) it will, independently and
without reliance on the Agent, the Assignor or
any other Lender, and based on such documents
and information as it shall deem appropriate at
the time, continue to make its own credit
decisions in taking or not taking action under the
Loan 1 Describe Credit Agreement at option of
Agent. 2 The term "Loan Document" should be
conformed to the term used in the Credit
Agreement. 3 The concept of "Foreign Lender"
should be conformed to the section in the Credit
Agreement governing withholding taxes and
gross-up.
2 Documents, and
(ii) it will perform in
accordance with
their terms all of the
obligations which by
the terms of the Loan
Documents are
required to be
performed by it as a
Lender. Payments.
From and after the
Effective Date, the
Agent shall make all
payments in respect
of the Assigned
Interest (including
payments of
principal, interest,
fees and other
amounts) to the
Assignee whether
such amounts have
accrued prior to, on
or after the Effective
Date. The Assignor
and the Assignee
shall make all
appropriate
adjustments in
payments by the
Agent for periods
prior to the Effective
Date or with respect
to the making of this
assignment directly
between themselves.
General Provisions.
This Assignment and
Assumption shall be
binding upon, and
inure to the benefit
of, the parties hereto
and their respective
successors and
permitted assigns.
This Assignment and
Assumption may be
executed in any
number of
counterparts, which
together shall
constitute one
instrument. Delivery
of an executed
counterpart of a
signature page of this
Assignment and
Assumption by
telecopy or by
sending a scanned
copy by electronic
mail shall be
effective as delivery
of a manually
executed counterpart
of this Assignment
and Assumption.
This Assignment and
Assumption shall be
governed by, and
construed in
accordance with, the
law governing the
Credit Agreement.
EXHIBIT C LOAN MARKET DATA
TEMPLATE Recommended Data
Fields – At Close The items
highlighted in bold are those that Loan
Pricing Corporation (LPC) deem
essential. The remaining items are
those that LPC has seen become more
prominent over time as transparency
has increased in the U.S. Loan Market.
Company Level Deal Specific Facility
Specific Issuer Name
Currency/Amount Currency/Amount
Location Date Type SIC (Cdn) Purpose
Purpose Identification Number(s)
Sponsor Tenor Revenue Financial
Covenants Term Out Option Expiration
Date Target Company Facility Signing
Date *Measurement of Risk
Assignment Language Pricing S&P Sr.
Debt Law Firms Base
Rate(s)/Spread(s)/BA/LIBOR S&P
Issuer MAC Clause Initial Pricing
Level Moody's Sr. Debt Springing lien
Pricing Grid (tied to, levels) Moody's
Issuer Cash Dominion Grid Effective
Date Fitch Sr. Debt Mandatory Prepays
Fees Fitch Issuer Restrct'd Payments
(Neg Covs) S&P Implied (internal
assessment) Other Restrictions
Commitment Fee DBRS Other Ratings
*Industry Classification Moody's
Industry S&P Industry Parent
Prepayment Fee Financial Ratios Other
Fees to Market Security
Secured/Unsecured Collateral and
Seniority of Claim Collateral Value
Guarantors Lenders Names/Titles
Lender Commitment ($)
Commited/Uncommited Distribution
method Amortization Schedule
Borrowing Base/Advance Rates New
Money Amount Country of
Syndication Facility Rating (Loss
given default) S&P Bank Loan
Moody's Bank Loan Fitch Bank Loan
DBRS Other Ratings * These items
would be considered useful to capture
from an analytical perspective
EXHIBIT D NOTICE OF
BORROWING AND
CERTIFICATE [See Sections
3.1, 3.3 and 5.1] TO: The
Bank of Nova Scotia Global
Wholesale Services – Loan
Operations department 720
King Street West Third Floor
Toronto, Ontario M5V 2T3
Reference is made to the
second amended and restated
credit agreement dated as of
August 4, 2011 between
Agnico-Eagle Mines Limited,
as borrower, the guarantors
from time to time party
thereto, The Bank of Nova
Scotia, as administrative agent
and joint lead arranger, The
Toronto-Dominion Bank, as
joint lead arranger, and the
Lenders from time to time
party thereto, as amended,
supplemented, restated or
replaced from time to time (the
"Credit Agreement"). All
terms used in this certificate
and that are defined in the
Credit Agreement will have
the meanings defined in the
Credit Agreement. A. Request
for Advance Notice is hereby
given pursuant to the Credit
Agreement that the
undersigned hereby
irrevocably requests as
follows: 1. that an Advance be
made under the Credit Facility;
2. the aggregate principal
amount of the Advance shall
be [choose one] [Cdn. . dollars
(C$.)/ US . dollars (US$.)];
and 3. the Drawdown Date
shall be ________________.
4. the Advance shall be in the
form of [check one or more
and complete details]: Prime
Rate Advance ( ) Amount
C$ Banker's Acceptances ( )
Selected Amount:
C$ Designated Period US Base
Rate Advance ( ) Amount
US$ Libor Advance ( )
Selected Amount
US$ Designated Period Letter
of Credit ( ) Nominal amount
and currency
____________________ Issue
date: ____________________
Expiry date:
____________________
2 Name and Address of
Beneficiary:
____________________
Purpose:
____________________
[Note: attach proposed form or
details] 5. the proceeds of the
Advance shall be deposited in
[specify designated account].
The undersigned hereby
confirms as follows: (a) the
representations and warranties
contained in Article 10 of the
Credit Agreement, other than
those expressly stated to be
made as of a specific date or
otherwise expressly modified
in accordance with Section
10.17 of the Credit Agreement,
are true and correct in all
material respects on and as of
the date hereof with the same
force and effect as if such
representations and warranties
had been made on and as of
the date hereof; (b) no Default
or Event of Default has
occurred and is continuing on
the date hereof or will result
from the Advance(s) requested
herein; and (c) the undersigned
will immediately notify you if
it becomes aware of the
occurrence of any event which
would mean that the
statements in the immediately
preceding paragraphs (a) and
(b) would not be true if made
on the Drawdown Date. B.
Notice of Conversion or
Rollover Notice is hereby
given pursuant to the Credit
Agreement that the
undersigned hereby
irrevocably requests as
follows: 1. that
_________________ [Note:
describe outstanding Advance]
be converted or rolled over
into or extended as [check one
or more and complete details]:
Banker's Acceptances ( )
Selected Amount:
C$ Designated Period Libor
Advance ( ) Selected Amount
US$ Designated Period 2. the
date of the conversion, rollover
or extension shall be
_______________. C. Notice
of Prepayment Pursuant to
Article 2.6.1 of the Credit
Agreement, the undersigned
hereby irrevocably notifies you
of the following: (a) that a
prepayment will be made
under the Credit Facility; (b)
the prepayment represents the
following [check one or more]:
3 prepayment in Prime Rate
Advances under the Credit
Facility ( ) prepayment in US
Base Rate Advances under
the Credit Facility ( )
prepayment in Libor
Advances under the Credit
Facility ( ) (c) the
prepayment date shall be
________________. (d) the
Advance to be paid shall be
in the form of [check one or
more and complete details]:
Prime Rate Advance ( )
Amount C$ US Base Rate
Advance ( ) Amount
US$ Libor Advance ( )
Amount US$ Maturity Date
D. Notice of Cancellation
Pursuant to Article 2.6.2 of
the Credit Agreement, the
undersigned hereby
irrevocably notifies you of
the following cancellation of
undrawn portions of the
Credit Facility: (a) the
amount of the Credit Facility
to be cancelled is
______________; and (b) the
cancellation date shall be
________________. DATED
___________________
AGNICO-EAGLE MINES
LIMITED By: Name: Title:
EXHIBIT E
COMPLIANCE
CERTIFICATE [See
Section 8.2, Article 11 and
Sections 13.1.3, 13.1.4,
13.1.5, 13.1.6, 13.1.7 and
13.2.2] TO: THE BANK
OF NOVA SCOTIA, as
Administrative Agent
AND TO: THE
LENDERS (as defined in
the Credit Agreement
referred to below)
Reference is made to the
second amended and
restated credit agreement
dated as of August 4, 2011
between Agnico-Eagle
Mines Limited, as
borrower, the guarantors
from time to time party
thereto, The Bank of Nova
Scotia, as administrative
agent and joint lead
arranger, The
Toronto-Dominion Bank,
as joint lead arranger, and
the Lenders from time to
time party thereto, as
amended, supplemented,
restated or replaced from
time to time (the "Credit
Agreement"). All terms
used in this certificate that
are defined in the Credit
Agreement have the
meanings defined in the
Credit Agreement. The
undersigned hereby
certifies that: (a) No
Default or Event of
Default has occurred and
is continuing on the date
hereof [or if a Default or
Event of Default has
occurred and is continuing
on the date hereof, a
detailed description of the
same and the steps the
Borrower is taking or
proposes to take to cure
the same are described on
the schedule dealing with
the same which is attached
hereto]. (b) The
undersigned hereby
certifies that, as of the end
of its most recently
completed fiscal quarter,
which ended on
________________: (i)
the Total Net Debt to
EBITDA Ratio was
__________: 1; and (ii)
the Tangible Net Worth
for such fiscal quarter was
$______________. (c) Set
forth on Schedule A hereto
are the calculations of the
financial covenants
referred to in clause (b)
above. (d) Attached hereto
is a report setting forth
each Derivative
Instrument to which the
Borrower or any other
Obligor is a party, together
with the counterparty
thereto and the Obligor
Hedging Exposure
thereunder. (e) Attached
hereto is an operating
report on the mines owned
and controlled by the
Borrower and its
Subsidiaries (being the
"Chief Operating Officer’s
Quarterly Report to the
Board of Directors"). (f)
Attached hereto is a copy
of the Borrower’s mineral
reserve statements. [Note:
only required to be
delivered with the
Borrower’s annual
financial statements.]
2 (g) Attached hereto is a
copy of either the
Borrower’s (i) annual life of
mine plans or (ii) five year
plan for production, the
contents of which are
customarily announced by
the Borrower on an annual
basis (specifically
including, estimates of gold
production, cashflow and
capital expenditures, and
the following, by mine:
tonnes milled per year,
average grade through mill,
ounces of gold (and silver,
and tonnes of zinc and
copper, if applicable)
produced in the year, and
approximate expected cash
cost per ounce). [Note: only
required to be delivered as
soon as practicable and in
any event prior to 270 days
after the end of each fiscal
year of the Borrower.] (h)
The following Persons,
which have not previously
been reported to the Agent
pursuant to Section 8.2 of
the Credit Agreement, have
become Material
Subsidiaries since the
Effective Date:
_________________. (i)
Additional Debt incurred
pursuant to Section
1.1.152.14 is as follows:
_____________. DATED
_________________
AGNICO-EAGLE MINES
LIMITED By: Name: Title:
EXHIBIT F
ADDITIONAL
GUARANTOR
AGREEMENT [See
Section 8.2] THIS
AGREEMENT
supplements the second
amended and restated
credit agreement dated as
of August 4, 2011
between Agnico-Eagle
Mines Limited, as
borrower, the guarantors
from time to time party
thereto, The Bank of
Nova Scotia, as
administrative agent and
joint lead arranger, The
Toronto-Dominion Bank,
as joint lead arranger,
and the Lenders from
time to time party
thereto, as amended,
supplemented, restated or
replaced from time to
time (the "Credit
Agreement").
RECITALS: A. All terms
used in this Agreement
that are defined in the
Credit Agreement have
the meanings defined in
the Credit Agreement. B.
The Credit Agreement
contemplates that further
Subsidiaries of the
Borrower shall become
Guarantors in certain
circumstances. C. [.] (the
"New Subsidiary") is
required or permitted by
the Credit Agreement to
become a Guarantor. D.
The New Subsidiary has
delivered an opinion of
its counsel and other
resolutions and ancillary
documents required by
the Credit Agreement.
THEREFORE, for value
received, and intending
to be legally bound by
this Agreement, the
parties agree as follows:
1. The New Subsidiary
hereby acknowledges
and agrees to the terms
of the Credit Agreement
and agrees to be bound
by all obligations of a
Guarantor, and therefore
an Obligor, under the
Credit Agreement as if it
had been an original
signatory thereto.
[Except as set out on
Schedule A hereto,]
[t/T]he New Subsidiary
represents and warrants
to the Agent and the
Lenders that each of the
representations and
warranties in Article 10
of the Credit Agreement
is true and correct in
relation to it. 2. The
Agent, on behalf of the
Lenders, acknowledges
that the New Subsidiary
is a Guarantor, and
therefore an Obligor, as
of the date of this
Agreement. 3. This
Agreement shall be
governed by the laws of
the Province of Ontario
and the laws of Canada
applicable therein. 4.
This Agreement and the
other Loan Documents
have been prepared and
signed in English and the
parties hereto agree that
the English version
hereof and thereof (to the
maximum extent
permitted by applicable
law) shall be the only
version valid for the
purpose of the
interpretation and
construction hereof and
thereof notwithstanding
the preparation of any
translation into another
language hereof or
thereof, whether official
or otherwise or whether
prepared in relation to
any proceedings which
2 5. This
Agreement may be
signed in
counterparts and
transmitted by
facsimile or "PDF",
each of which shall
be considered an
original and all of
such counterparts
taken together shall
constitute one and
the same
agreement. [Note:
additional foreign
law provisions, if
any, to be included,
as applicable.]
3 IN WITNESS
OF WHICH, the
undersigned have
executed this
Agreement as of
[.]. THE BANK
OF NOVA
SCOTIA, as
Agent By: Name:
Title: By: Name:
Title: [NEW
MATERIAL
SUBSIDIARY]
By: Name: Title:
By: Name: Title:
SCHEDULE A
PERMITTED
LIENS Registrations
Against
Agnico-Eagle Mines
Limited Under the
Personal Property
Security Act
(Ontario) Secured
Party Registration
Details Collateral
Xerox Canada Ltd.
33 Bloor St. E., 3rd
Floor Toronto, ON
M4W 3H1
Registration No.
20110315 1424 1462
7562 (6 years) (Ref.
File No. 668291949)
Photocopy
equipment Xerox
Canada Ltd. 33
Bloor St. E., 3rd
Floor Toronto, ON
M4W 3H1
Registration No.
20101018 1706 1462
2947 (6 years) (Ref.
File No. 665236278)
Photocopy
equipment Xerox
Canada Ltd. 33
Bloor St. E., 3rd
Floor Toronto, ON
M4W 3H1
Registration No.
20101018 1706 1462
2959 (6 years) (Ref.
File No. 665236395)
Photocopy
equipment HSBC
Bank Canada
350-407 8 Avenue
SW Calgary, AB
T2P 1E5
Registration No.
20091019 1951 1531
7037 (5 years) (Ref.
File No. 657033903)
Amendment
Registration No.
20091020 1451 1530
4377 Equipment
HSBC Bank Canada
350-407 8 Avenue
SW Calgary, AB
T2P 1E5
Registration No.
20091014 1947 1531
5276 (5 years) (Ref.
File No. 656949384
Amendment
Registration No.
20091019 1951 1531
7429 Amendment
Registration No.
20091019 1951 1531
7430 Amendment
Registration No.
20091020 1451 1530
4378 Equipment The
Bank of Nova Scotia
20 Queen Street
West – 4th Floor
Toronto, ON M5H
1H1 Registration No.
20090629 1834 1532
3470 (5 years)
(Reference File No.
654546492
Equipment The Bank
of Nova Scotia 20
Queen St West, 4th
Floor Toronto, ON
M5H 3R3
Registration No.
20090520 1610 1532
8529(4 years) (Ref.
File No. 653561217)
Equipment Xerox
Canada Ltd 33 Bloor
St. E. 3rd Floor
Toronto, Ontario
M4W3H1
Registration No.
20080306 1405 1462
7757 (6 years) (Ref.
File No. 643180194)
Photocopy
equipment
2 Secured Party
Registration Details
Collateral Xerox
Canada Ltd 33 Bloor
St. E. 3rd Floor
Toronto, Ontario
M4W3H1
Registration No.
20071219 1404 1462
2799 (6 years) (Ref.
File No. 641510037)
Photocopy
equipment Xerox
Canada Ltd 33 Bloor
St. E. 3rd Floor
Toronto, Ontario
M4W3H1
Registration No.
20061214 1009 1462
9962 (6 years) (Ref.
File No. 631424124)
Photocopy
equipment Canadian
Imperial Bank of
Commerce Oil &
Gas Group, 9th
Floor, Bankers Hall
East Tower, 855 –
2nd Street S.W.
Calgary, Alberta T2P
2P2 Registration No.
20061017 1314 1862
1538 (10 years) (Ref.
File No. 631424124)
Equipment
Registrations
Against
Agnico-Eagle Mines
Limited Under the
British Columbia
Personal Property
Registry Secured
Party Registration
Details Collateral
Caterpillar Financial
Services Limited
Registered
November 4, 2008
(expiry November 4,
2011) under
Registration No.
678095E Caterpillar
980H plus
attachments
Caterpillar Financial
Services Limited
Registered May 28,
2009 (expiry May
28, 2013) under
Registration No.
991292E Caterpillar
14M HSBC Bank
Canada Registered
October 19, 2009
(expiry October 19,
2014) under
Registration No.
232144F O&K
Orenstein &
Kopmodel Excavator
and related
equipment HSBC
Bank Canada
Registered October
19, 2009 (expiry
October 14, 2014)
under Registration
No. 232146F O&K
Orenstein &
Kopmodel Excavator
and related
equipment
Caterpillar Financial
Services Limited
Registered June 30,
2010 (expiry June
30, 2016) under
Registration No.
639580F 2010 Terex
RH120 plus
attachments
Caterpillar Financial
Services Limited
Registered July 6,
2010 (expiry July 6,
2016) under
Registration No.
645354F Three 2010
Caterpillar 785D
Rock Trucks Xerox
Canada Ltd.
Registered June 2,
2011 (expiry June 2,
2016) under
Registration No.
178140G Equipment
and software
supplied by the
secured party
3 Registrations
Against
Agnico-Eagle Mines
Limited Under the
Nunavut Territory
Personal Property
Registry Secured
Party Registration
Details Collateral
Caterpillar Financial
Services Limited
Registered July 11,
2008 (expiry July 11,
2011) under
Registration No.
122010 Two
Caterpillar motor
vehicles Caterpillar
Financial Services
Limited Registered
July 11, 2008 (expiry
July 11, 2011) under
Registration No.
122028 Eight
Caterpillar motor
vehicles Caterpillar
Financial Services
Limited Registered
July 14, 2008 (expiry
July 14, 2011) under
Registration No.
122069; Amendment
No. 122135 Four
Caterpillar motor
vehicles Caterpillar
Financial Services
Limited Registered
July 14, 2008 (expiry
July 14, 2011) under
Registration No.
122077 One
Caterpillar motor
vehicle Caterpillar
Financial Services
Limited Registered
July 14, 2008 (expiry
July 14, 2011) under
Registration No.
122085 One
Caterpillar motor
vehicle Caterpillar
Financial Services
Limited Registered
July 14, 2008 (expiry
July 14, 2011) under
Registration No.
122093 One
Caterpillar motor
vehicle Caterpillar
Financial Services
Limited Registered
November 5, 2008
(expiry November 5,
2011) under
Registration No.
128090 One
Caterpillar motor
vehicle Caterpillar
Financial Services
Limited Registered
December 16, 2008
(expiry December
16, 2011) under
Registration No.
130468 Three
Caterpillar motor
vehicles Caterpillar
Financial Services
Limited Registered
May 28, 2009
(expiry May 28,
2013) under
Registration No.
139329 2009
Caterpillar 14M
HSBC Bank Canada
Registered October
14, 2009 (expiry
October 14, 2014)
under Registration
No. 148031 Two
Toro Loaders and
one Toro Truck
HSBC Bank Canada
Registered October
14, 2009 (expiry
October 1