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2013 Annual Report
TRUST
RESPECT
EQUALITY
FAMILY
RESPONSIBILITY
AGNICO EAGLE’S FIVE PILLARS
At Agnico Eagle, our efforts are supported by our Five Pillars: Trust,
Respect, Equality, Family and Responsibility. These pillars define who we
are and guide us in everything we do. They are a vital link to our history,
central to our culture and an essential element to our success.
Agnico Eagle Mines Limited
145 King Street East, Suite 400
Toronto, Ontario, Canada M5C 2Y7
agnicoeagle.com
Targets and Achievements
Officers
2013 TARGETS
WHAT WE DELIVERED
2014 TARGETS
Sean Boyd
President and Chief Executive Officer
Marc Legault
Senior Vice-President, Project Evaluations
Paul Cousin
Vice-President, Metallurgy
970,000 to 1,010,000 ounces of gold
Achieved.
1,175,000 to 1,205,000 ounces of gold
production
Record annual gold production of
production
1,099,335 ounces, largely due to strong
operating results from all mines
Meet or exceed production guidance
Achieved.
Meet or exceed 2014 production guidance
Gold production of 6.4 ounces per
1,000 shares
Maintain gold reserves between 15 and
Achieved.
Maintain gold reserves at approximately
20 times annual gold production rate
Maintained gold reserves at 16.9 million
15 times annual gold production rate
ounces, a decrease of 1.8 million ounces
(including 2013 production of
approximately 1.1 million ounces)
Total cash costs of $700 to $750 per ounce
Achieved.
Total cash costs of $670 to $690 per ounce
Total cash costs of $672 per ounce,
primarily due to cost optimization
programs at all assets
All-in sustaining costs of approximately
Achieved.
All-in sustaining costs of approximately
$1,075 per ounce
All-in sustaining costs of $952 per ounce
$990 per ounce
Increase operating cash flow per share
Annual cash flow from operations of
Increase operating cash flow per share
$438.3 million or $2.53 per share as
compared to $696 million or $4.06
per share in 2012
Search out acquisition opportunities in
We continue to seek acquisition
Search out acquisition opportunities in
low-risk regions that are well matched to
our skills and abilities
opportunities in low-risk regions that are
well matched to our skills and abilities
low-risk regions that are well matched to
our skills and abilities
Lost-time accident frequency below a rate
Achieved 1.70 lost-time accident
Lost-time accident frequency below a rate
of 2.8 for the Agnico Eagle workforce;
frequency
shifting to aspirational Zero Harm safety
targets and developing “leading”
performance indicators
of 2.07 for the Agnico Eagle workforce;
shifting to aspirational Zero Harm safety
targets and developing “leading”
performance indicators
No fines or penalties for environmental
Achieved
No fines or penalties for environmental
failures
failures
Zero category 3, 4 or 5 environmental
One category 3 incident was reported*
Zero category 3, 4 or 5 environmental
incidents
incidents
* A category 3 event occurred at one of our exploration projects in Finland as a result of an act of vandalism during a theft of fuel from storage tanks. Approximately
700 litres of fuel were spilled in the event. The area was subsequently cleaned up. A category 3 incident causes moderate, reversible environmental impact, with
short-term effect, and requires moderate remediation.
Patrice Gilbert
Vice-President, Health, Safety
and Community
Guy Gosselin
Vice-President, Exploration
Ingmar E. Haga
Vice-President, Europe
Michel Leclerc
Vice-President, Project Evaluations
Christian Provencher
Vice-President, Canada
David Smith
Senior Vice-President, Finance,
and Chief Financial Officer
Donald G. Allan
Senior Vice-President,
Corporate Development
Alain Blackburn
Senior Vice-President, Exploration
Jean Luk Pellerin
Senior Vice-President, Human Resources
Jean Robitaille
Senior Vice-President, Business Strategy
and Technical Services
Yvon Sylvestre
Senior Vice-President, Operations – Canada
and Europe
Picklu Datta
Senior Vice-President, Treasury and Finance
Luis Felipe Medina Aguirre
Vice-President, Mexico
Louise Grondin
Senior Vice-President, Environment
and Sustainable Development
Tim Haldane
Senior Vice-President, Operations – USA
and Latin America
R. Gregory Laing
General Counsel, Senior Vice-President,
Legal, and Corporate Secretary
Lino Cafazzo
Vice-President, Information Technology
Brian Christie
Vice-President, Investor Relations
Mathew Cook
Vice-President, Controller
Shareholder Information
AUDITORS
Ernst & Young LLP
SOLICITORS
Davies Ward Phillips & Vineberg LLP
(Toronto and New York)
LISTINGS
The New York Stock Exchange and
the Toronto Stock Exchange
Stock Symbol: AEM
TRANSFER AGENT
Computershare Trust Company of Canada
1-800-564-6253
INVESTOR RELATIONS
CORPORATE HEAD OFFICE
(416) 947-1212
ANNUAL MEETING
OF SHAREHOLDERS
Friday, May 2, 2014, at 11:00 a.m.
Sheraton Centre Toronto Hotel
(Dominion Ballroom)
123 Queen Street West
Toronto, Ontario, Canada
M5H 2M9
Agnico Eagle Mines Limited
145 King Street East, Suite 400
Toronto, Ontario, Canada
M5C 2Y7
(416) 947-1212
facebook.com/agnicoeagle
twitter.com/agnicoeagle
info@agnicoeagle.com
agnicoeagle.com
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1,450
1,350
June
July
August
September
Gold implied volatility
Gold (US$/oz)
Financial Summary
Annualized dividend
(per share)
$0.88
$0.80
$0.64
$0.18
$0.32
’10
’11
’12
’13
’14*
1.0
0.8
0.6
0.4
0.2
0.0
*Assuming the Board of Directors continues to declare dividends of $0.08 per quarter.
All dollar amounts in this report are in US$ unless otherwise indicated
2013
2012
2011
OPERATING
Payable gold production (ounces)
Total cash costs per ounce of gold produced1
Average realized gold price per ounce
FINANCIAL
(millions, except per share amounts)
Revenue from mining operations
Net income (loss) for the year attributed to common shareholders
Net income (loss) per share – basic
Annualized dividend paid per share
$
$
1,099,335
1,043,811
985,460
672
1,366
$
640
1,667
$
580
1,573
1,638.4
(406.5)3
(2.35)3
0.88
$
1,917.7
$
1,821.8
310.9
1.82
0.80
(568.9)2
(3.36)2
0.64
1 Total cash costs per ounce of gold produced is a non-GAAP financial performance measure. For a reconciliation of total cash costs per ounce of gold produced to the
figures presented in the annual audited consolidated financial statements prepared in accordance with US GAAP, see Results of Operations – Production Costs in the
Management’s Discussion and Analysis.
2 The Company’s 2011 results were impacted by impairment losses recorded at the Meadowbank and Goldex mines of $648.0 million and $197.3 million
(after tax), respectively.
3 The Company’s 2013 results were impacted by impairment losses recorded at the Meliadine project, Meadowbank mine and Lapa mine of $200.1 million,
$194.5 million and $41.7 million (after tax), respectively.
Note:
This document uses the terms “measured resources,” “indicated resources” and “inferred resources.” We advise investors that while those terms are recognized and
required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. See “Mineral Reserves and Resources” in the Company’s
Annual Information Form filed on SEDAR at www.sedar.com for additional information.
AGNICO EAGLE
2013 ANNUAL REPORT
1
Letter from the President and CEO
Fellow shareholders,
In a cyclical business like gold mining, it is the quality of your assets, the soundness
of your business strategy, and the depth of your team that enable you to come through
challenging times stronger than before and ultimately help you achieve your business goals.
This past year, all of us at Agnico Eagle worked to make the Company
It is our employees’ dedication to Agnico Eagle that has enabled us
stronger in the face of uncertain markets, and I am pleased to report
to achieve our safety and production goals. We view the depth and
that we achieved and, in a few instances, exceeded our 2013 goals.
experience of our team as one of our key competitive advantages,
We surpassed our production targets. We achieved our best safety
performance ever. We restarted the Goldex mine and commissioned
the new La India mine – with both projects proceeding on time and
on budget. We adjusted to the lower gold price environment,
focusing on what we could control, and for the last eight consecutive
quarters we have delivered the results we promised to our
shareholders and stakeholders. We remained focused on growing
production and lowering our costs, which has positioned us well to
take advantage of new business opportunities in the coming years.
2013 financial performance and
operational highlights
and in 2014, we will be expanding and enhancing our talent
development program in order to maintain that advantage.
Market outlook
While the fundamentals and outlook for gold remain strong, there has
definitely been a shift in market thinking about this precious metal.
The first shift is that the physical demand for gold is moving from West
to East, with the most growth in demand coming from China and
India. With their increasing populations and growing wealth, there is
not enough physical material to supply these Asian markets, which
will ultimately be what sustains the gold price over time. Secondly,
investing sentiment is shifting from using gold as “a safe haven
against a financial calamity” to more of a “store of wealth and
Despite the big drop in the gold price and decline in our share price,
portfolio diversifier” now and in the future. This should support the
Agnico Eagle had a good year from an operating perspective, which
long-term gold price and it is not inconceivable that gold prices could
allowed us to increase our production guidance and lower our cost
reach $1,500 an ounce in the next 18 months.
guidance during the third quarter of the year.
In addition to bringing Goldex and La India on-stream, our
Meadowbank operation had an outstanding year and we continued to
increase production from the deeper portion of the LaRonde mine.
2014 business focus
We will continue to focus on building a high-quality, manageable
business that generates superior long-term returns for our
We instituted several cost-saving measures in 2013 in order to
shareholders.
preserve our financial flexibility. We reduced our capital and operating
costs by $50 million and our exploration spending by $20 million.
Over the years our employees have helped us build and create a
valuable business. This past year was no different. Not only did
employees work with us to identify key cost-saving measures, they
made personal sacrifices which improved both our current and future
financial flexibility.
In 2014, we will maintain our focus on growing production in order to
achieve our future production targets. The successful ramp-up of
La India and Goldex – along with continued strong performance from
our other five mines – is expected to drive production to almost
1.2 million ounces of gold in 2014, with our all-in costs expected to
be in the area of $1,000 per ounce of gold.
Our employees were also instrumental in helping us achieve another
record safety performance in 2013. What’s more remarkable is that we
are operating in a much safer fashion than ever before – all while
operating more mines, with more people, and producing more ounces
than we’ve ever produced in our 57-year history.
Given the volatile gold price environment in 2013, we have worked
hard to reduce our future capital spending. We estimate our capital
expenditures in 2014 will be about $416 million, down significantly
from the $578 million spent in 2013. Our goal is to manage our capital
expenditures so that we ultimately generate more free cash flow.
2
AGNICO EAGLE
2013 ANNUAL REPORT
We will continue to organize our mining operations into two distinct
CORPORATE STRATEGY
business units reflecting the northern and southern focus of our
activities. This global approach allows us to play to our strengths and
manage our risks better in each region, as well as to take advantage of
Build a high-quality, manageable business that generates
superior long-term returns per share by:
new business opportunities. It also provides both businesses with
more autonomy and resources to achieve the Company’s long-term
Increasing gold production in lower risk jurisdictions: We expect
production growth of approximately 16% to over 1.25 million
business goals.
ounces by 2016 from existing mines.
Sadly, Douglas Beaumont, a member of Agnico Eagle’s Board of
Directors, passed away in 2013. Doug had a long and distinguished
Growing operating and free cash flows: Our goal is to increase
net free cash flow through higher production, controlling
career in the Canadian mining industry and was one of our most
operating costs and disciplined capital spending.
recognized experts in gold mining and processing. He was also a
great technical resource to our people on many of our development
projects. Doug’s experience, knowledge and, above all, his friendship
will be missed by everyone at Agnico Eagle.
Finally, we view 2014 as a time of great potential opportunity for our
Company. It is not a time to sit back. Agnico Eagle is well positioned
to make selective strategic investments should the right opportunities
present themselves. We will also maintain our position as a fiscally,
socially and environmentally responsible company in order to achieve
our mission of running a high-quality, manageable business, which
generates superior long-term per share returns for our shareholders,
creates a great place to work for our employees, and is a leading
contributor to the well-being of the communities in which we operate.
Providing meaningful dividends: We have a history of paying
dividends for 32 consecutive years, and our goal is to increase
the dividend over time.
Minimizing share dilution: Traditionally, acquisitions and
construction have been completed with minimal share dilution.
Operating in a socially responsible manner: Our strategy is
to create economic value by operating in a safe, socially and
environmentally responsible manner while contributing to the
prosperity of our employees and the communities in which
we operate.
SEAN BOYD
President and Chief Executive Officer
March 21, 2014
15-year share price performance
1,800%
1,600%
1,400%
1,200%
1,000%
800%
600%
400%
200%
’98
’99
’00
’01
’02
’03
’04
’05
’06
’07
’08
’09
’10
’11
’12
’13
AEM – NYSE
AEM – NYSE
XAU
XAU
Spot Gold
Spot Gold
“ We will continue to focus on building a high-quality, manageable
business that generates superior long-term returns for our shareholders.”
AGNICO EAGLE
2013 ANNUAL REPORT
3
Northern Business
Our northern business base includes our assets in Canada and Finland, mainly centred around
our large mines at Meadowbank, Kittila, LaRonde and our large gold reserve and resource at
Meliadine. In 2013, our operations introduced several productivity and cost-saving initiatives
which helped them deliver solid results.
LaRonde’s new cooling
plant reduces congestion
and improves flexibility
Lapa’s production remains
steady as operations begin
winding down
LaRonde produced 181,781 ounces of gold in
The team at Lapa introduced several
2013 at a total cash cost per ounce of $763,
successful cost containment measures in
as compared to 160,875 ounces at $569 per
2013, which helped steady the mine’s overall
ounce in 2012. The higher production is a
performance. The mine produced 100,730
result of improved grades from the deeper
ounces of gold at a total cash cost of $678
mine area where more production is now
per ounce, which was in line with 2012
sourced. The increase in cash costs is
results. Based on the current life-of-mine
primarily due to lower byproduct production
plan, we anticipate that 2014 and 2015 will
and related revenues. In 2014, approximately
be the last two years of full production at
80% of the production will come from the
Lapa, with the mine operating only for a
lower mine area.
portion of 2016. However, exploration results
from the parallel Zulapa Z8 zone could
extend the mine life through 2016.
The commissioning of the cooling plant in late
2013 helped reduce heat in the lower part of
the mine and provided additional mining plan
flexibility which reduced congestion. In
2015, a new ore conveyor system, which is
scheduled to be installed in the deeper
portion of the mine, should help lower costs
and reduce congestion further. Production
from the deeper areas of the mine is expected
to ramp up substantially through 2016.
Goldex achieves
commercial production
The Goldex mine successfully started
operations at the M and E zones in the
fourth quarter of 2013. The mine produced
20,810 ounces of gold, including 1,505
preproduction ounces, during 2013.
Of that amount, 19,305 ounces of gold
were produced during the fourth quarter
at a total cash cost per ounce of $782.
Over the next three years, Goldex is expected
to produce approximately 80,000 ounces
of gold annually at a total cash cost of
approximately $900 per ounce over a mine life
of three to four years. In 2014, development
activities will begin on the MX and E2 satellite
zones. Exploration is continuing on several
other satellite zones, including the deeper
D zone, which could potentially extend the
mine’s life. Economies of scale may be
available if additional zones are developed,
as the mill has the ability to operate at over
8,000 tonnes per day (tpd) as compared with
the currently planned 6,000 tpd.
4
AGNICO EAGLE
2013 ANNUAL REPORT
production levels versus prior guidance due
The mill’s performance improved significantly
to the higher than expected reserve grades
after the maintenance shutdown, with the
and our improved throughput levels.
mill recording its highest ever recoveries –
Kittila achieves record mill
recoveries; 2015 mill
expansion on track
at 90.2%. Kittila’s 750 tpd mill expansion,
which will increase its daily throughput
capacity to 3,750 tonnes, is on schedule
for start-up in mid-2015. It is expected to
improve Kittila’s unit costs and offset an
expected decline to reserve grade over the
In 2013, the Kittila mine in northern Finland
next several years. A study is underway to
operated as an underground mine only,
consider the construction of a production
following the completion of open pit mining
shaft at Kittila, which would be expected to
in late 2012. The mine produced 146,421
provide operating costs savings and sustain
ounces of gold in 2013 at a total cash cost
long-term production at higher throughput
per ounce of $601, as compared to 175,878
levels; while another study is evaluating the
ounces at $565 per ounce in 2012. The
feasibility of developing the Rimpi zone as a
lower production was due to an extended
potential ore source.
maintenance shutdown in the second quarter
of the year, while the higher costs are
attributable to the lower production and
the transition to underground mining.
Meadowbank sets
new production record
as reserve grades
improve 16%
Meadowbank’s performance in 2013 was
excellent, with the operation posting a new
production record, achieving its lowest
minesite costs, and improving the overall
quality of its reserves.
Gold production was a record 430,613
ounces at a total cash cost per ounce of
$774, as compared to 366,030 ounces at
$913 per ounce in 2012. The production
increase and improved cash costs are
primarily due to better tonnage and grade
than predicted, consistently high crusher
throughput levels, slightly better recoveries
and strong cost containment programs.
Overall, the reserve grade at Meadowbank
improved 16% to 3.24 g/t gold, largely
due to the reinterpretation of the Goose
and Portage block models. In 2014 and
succeeding years, we anticipate increased
In 2013, our northern business had
record gold output that exceeded
not only our budget, but also the
guidance, both in terms of production
and cost.
AGNICO EAGLE
2013 ANNUAL REPORT
5
Southern Business
Our southern business, based in Mexico, has demonstrated its ability to grow quickly and
generate strong net free cash flow. It is from here that we expect to add new operating
platforms for future growth.
Pinos Altos posts strong
performance as focus
shifts underground
Our Pinos Altos operation performed well in
2013 – continuing to generate strong cash
flow and excellent mill recoveries, while
maintaining its low cost profile.
Production resumes at
Creston Mascota
Creston Mascota, a satellite operation to
Pinos Altos, resumed operation in April 2013
after a four-month suspension for leach pad
modifications. In 2013, it produced 34,027
ounces at a total cash cost per ounce of
$485, as compared to 51,175 ounces at $326
We began mining at La India in September
and we poured first gold there in November
2013. We anticipate that La India will
produce 50,000 ounces of gold in 2014,
90,000 ounces in 2015, and average 90,000
ounces of gold per year over its reserve life.
In 2013, pre-commercial production totalled
3,180 ounces of gold. We anticipate total
cash costs per ounce of $743 in 2014.
The mine produced 181,773 ounces of gold
per ounce in 2012, reflecting the impact of
in 2013 at a total cash cost per ounce of
the temporary shutdown. Creston Mascota’s
$412, as compared to 183,662 ounces at
annual production is expected to be
$276 per ounce in 2012. The increased cash
lower from 2014 through 2016, reflecting
costs were largely due to a lower realized
anticipated lower ore grades going forward.
price for silver. The mine’s shaft sinking
project remains on schedule for start-up in
2015; the shaft will increase the maximum
capacity of the underground mine from the
current 3,000 tpd to 4,500 tpd. The new
production forecast for 2014–2016 is higher
than previously estimated as a result of
expectations that the strong operating
performance in 2013 will continue and
support higher mill throughput.
La India – our newest mine
In 2013, we commissioned La India – Agnico
Eagle’s seventh and newest mine. The mine
has been built ahead of schedule and on
budget, and we anticipate achieving
commercial production in the first quarter
of 2014. La India is located approximately
70 kilometres from our Pinos Altos mine in
Sonora State, Mexico.
Our southern business continues
to grow as we are expecting about
a 36% increase in output coming
from our Mexican operations over the
2013 level.
6
AGNICO EAGLE
2013 ANNUAL REPORT
Gold Reserves
Gold reserves remain robust
Despite using a $1,200 per ounce gold price, Agnico Eagle’s reserve quality improved at most of our mining assets. Our year-end 2013 gold
reserves, net of production, now stand at 16.9 million ounces in 149 million tonnes of ore, with an 11% improvement in the average grade to
3.51 grams per tonne (g/t).
In addition, Agnico Eagle’s reserve life remains strong at approximately 15 years (based on the 2014 production rate) with several of our key
properties reporting meaningful increases in their average reserve gold grade: LaRonde from 4.54 g/t to 5.00 g/t, Meadowbank from 2.82 g/t to
3.24 g/t, Pinos Altos from 2.21 g/t to 2.46 g/t and Meliadine from 6.98 g/t to 7.38 g/t. Our 2014 exploration program – budgeted at $54 million,
a significant reduction from historical levels – will focus primarily on our minesites and regional exploration in Nunavut, Quebec, Mexico and Finland.
Proven and Probable Gold Reserves by Mine
(thousands of ounces)
NORTHERN BUSINESS
LaRonde
Lapa
Goldex
Kittila
Meadowbank
Meliadine
Bousquet
Northern subtotal reserves
SOUTHERN BUSINESS
Pinos Altos
La India
Southern subtotal reserves
Total reserves
2013
2012
3,880
281
372
4,714
1,751
2,841
–
4,206
395
349
4,783
2,294
2,987
178
13,841
15,191
2,266
758
3,024
2,714
776
3,489
16,865
18,681
Amounts presented in this table have been rounded to the nearest thousand. In addition to Agnico Eagle’s proven and probable reserves, the Company’s measured and
indicated resources now total approximately 9.7 million ounces of gold (157 million tonnes grading 1.91 g/t), while inferred resources now stand at approximately 10.1 million
ounces of gold (169 million tonnes grading 1.86 g/t). Further details on the Company’s reserves are set out under “Mineral Reserve Data” in Management’s Discussion and
Analysis and under “Mineral Reserves and Mineral Resources” in the Company’s Annual Information Form filed on SEDAR and available at www.sedar.com.
Agnico Eagle’s byproduct proven and probable reserves include approximately 75 million ounces of silver, 161,000 tonnes of zinc and 60,000 tonnes of copper.
The byproduct reserves and resources for zinc, copper and lead in the LaRonde orebody and for silver in the LaRonde and Pinos Altos orebodies are presented on our
website. These byproduct reserves are not included in Agnico Eagle’s gold reserve and resource totals.
The assumptions used for the December 2013 mineral reserves and resources estimate at all mines and advanced projects reported by the Company were $1,200 per ounce
of gold, $18.00 per ounce of silver, $0.82 per pound of zinc, $3.00 per pound of copper, $0.91 per pound of lead and exchange rates of C$1.03 per $1.00, 12.75 Mexican
pesos per $1.00 and €1.00 per $1.32. The assumptions used for the 2012 mineral reserves and resources estimates for the Lapa, Goldex, Meadowbank, Meliadine and
Creston Mascota properties reported by the Company were based on three-year average prices for the period ending December 31, 2012 of $1,490 per ounce of gold,
$29.00 per ounce of silver, $0.95 per pound of zinc, $3.67 per pound of copper, $1.00 per pound of lead and exchange rates of C$1.00 per $1.00, 12.75 Mexican pesos per
$1.00 and €1.00 per $1.34. The assumptions used for the 2012 mineral reserves and resources estimates for the LaRonde, Kittila, Pinos Altos, La India and Tarachi properties
reported by the Company in 2012 used more conservative metal price assumptions of $1,345 per ounce of gold, $25.00 per ounce of silver, $0.95 per pound of zinc, $3.49
per pound of copper, $0.99 per pound of lead and exchange rates of C$1.00 per $1.00, 13.00 Mexican pesos per $1.00 and €1.00 per $1.30.
AGNICO EAGLE
2013 ANNUAL REPORT
7
Responsible Mining
Agnico Eagle has created a culture based on five pillars: trust, respect, equality, family and
responsibility. These pillars define who we are and guide us in everything we do. Our
responsibility for our employees’ health, safety and professional development, as well as for
the well-being of our communities and the environment, is carried out through our shared
1.7
vision of responsible mining.
2.65
3.21
3.32
2.44
2
3
4
1
0
A good place to work
health and safety culture through more
‘09
‘10
‘11
‘12
‘13
work ethic, the system is there to help them
individual accountability and leadership.
move forward. Meadowbank’s turnover rates
We are also responsible for developing our
workers to become more proficient and for
providing them with a clear career path in
which to grow.
4
have decreased since the establishment of
the Career Path program. In 2012, only 58%
of haul truck operators that we had trained
were still employed; in 2013, 92% of these
operators have been retained.
100
Agnico Eagle is responsible for providing
our employees with a good place to work.
In turn, our employees help ensure
we operate in a safe, socially and
environmentally responsible manner.
In a year when we set new production
records, we also achieved the lowest
accident frequency in our Company’s history.
In 2013, our combined lost-time accident
(LTA) frequency was 1.70 – a 30% reduction
from the previous year’s performance – and
substantially below our target rate of 2.8.
This is the second year in a row we have
posted our lowest ever combined LTA
rate. As we move closer to our goal of
a workplace with zero accidents, we will
continue to focus on strengthening our
3
2
1
This is a particular challenge at our
Meadowbank mine in the Kivalliq region of
3.32
3.21
Nunavut, northern Canada, where we have
2.65
had difficulty attracting and retaining
2.44
a skilled Inuit workforce. In 2013, we
1.7
implemented the Meadowbank Career Path
which is designed for people who have little
to no mining-related work experience. It
allows everyone to follow the same path and
0
experience the same opportunities, and
‘13
when an employee demonstrates a sound
‘12
‘10
‘09
‘11
skill set, a willingness to learn and a strong
Combined lost-time and light
duty accident frequency
(per 200,000 person hours)
Local hiring
78%
83%
81%
82%
67%
68%
71%
71%
3.32
3.21
2.65
2.44
1.7
100
80
60
40
20
0
78%
In 2013, Agnico Eagle Mexico was
83%
82%
81%
recognized as a socially responsible company
80
68%
for the sixth consecutive year by Centro
67%
71%
71%
60
Mexicano para la Filantropia (CEMEFI). We
were also recognized by the Chihuahuan
40
business foundation Fundación del
Empresariado Chihuahuense with an award
20
of distinction for being a Socially Responsible
Company. Our Pinos Altos site was once
0
again identified in Mexico’s Great Place to
‘10
‘11
‘12
‘13
Work rankings.
GHG emissions intensity
(CO2 equivalent per tonne)
0.047
0.026
0.016
0.013
0.013
0.006
0.05
0.04
0.03
0.02
0.01
0.00
‘09
‘10
‘11
‘12
‘13
‘10
‘11
‘12
‘13
We achieved a 30%
reduction in combined
lost-time and light duty
accident frequency in 2013.
Average percentage of workforce
hired from the local community
Average percentage of mine
management hired from the
local community
LaRonde
Goldex
Lapa
Kittila
Pinos Altos
Meadowbank
8%
1%
2%
4%
30%
55%
83%
81%
AGNICO EAGLE
2013 ANNUAL REPORT
68%
71%
82%
71%
78%
67%
0.05
0.04
0.03
0.02
0.047
0.026
0.016
4
3
2
1
0
100
8
80
60
40
Managing our risks
In 2013, as part of the development of our
in-house Responsible Mining Management
System, we assessed the impact of our
activities and associated levels of risk on
health, safety, the environment and social
acceptability. Our responsibility is to manage
these impacts to eliminate, minimize or
mitigate risk around our minesites in order
to continuously improve our sustainability
performance.
Managing our impacts also means measuring
them. Each of our mines is required to
identify, analyze and manage its
environmental risks – they each follow key
performance indicators to optimize their
control efforts.
Specifically, we monitor direct and indirect
greenhouse gas (GHG) emissions and in
2013, Agnico Eagle’s total overall GHG
emissions were 357,387 tonnes, a 1%
decrease from 360,938 tonnes in 2012.
In 2013, our average direct GHG emission
intensity (the tonnes of CO2 equivalent per
tonne of ore processed) for all of our
operating mines was 0.0285 tonnes,
compared to 0.0293 tonnes in 2012, despite
more mines and higher production levels.
Contributing to
community well-being
Agnico Eagle is determined to make a
significant and positive difference in the
lives of our employees and surrounding
communities. We believe the biggest
contribution we can make is the creation of
long-term employment opportunities and
the provision of economic development
opportunities. At each of our operations
worldwide, our goal is to hire 100% of the
workforce – including our management
team – directly from the local region in
which the operation is located. In 2013, the
proportion of Agnico Eagle’s mine workforce
hired locally was 81%, while the proportion
of the mine management team hired locally
was 71%.
Generating employment
and economic benefits
In 2013, Agnico Eagle paid $372 million
in global employee compensation (up
from $363 million in 2012). Through
the payment of wages and benefits, we
contributed approximately $164 million
to the economy of the Abitibi region
of Quebec, Canada; $33 million to the
economy of Finland; approximately
$91 million to the economy of Nunavut,
Canada; and approximately $39 million to
the economy of Chihuahua State in Mexico.
Tax and royalty payments
As part of our corporate commitment to
sustainable development and corporate
governance, in 2013 we increased our
level of disclosure on tax payments to
governments. We have provided details
of Agnico Eagle’s tax payments by type,
country and business unit in order to
highlight our economic contribution to
public finances. Although we do not measure
the direct and indirect economic impact of
employee wage spending on local goods
and services, it is an important factor in our
overall contribution to host economies.
In 2013, Agnico Eagle made various
payments in taxes and royalties to
governments at all levels totalling
$279 million. We contributed
approximately $122 million in taxes
and royalties in Quebec, Canada;
approximately $69 million in taxes and
royalties to the economy of Nunavut,
Canada; approximately $18 million in
taxes to Ontario, Canada; approximately
$26 million in taxes and royalties to the
economy of Finland; and approximately
$44 million in taxes and royalties to the
economy of Mexico. Tax contributions to
governments comprised 17% of our gross
revenue in 2013.
Our employees were instrumental in
helping us achieve another record
safety performance in 2013, all while
operating more mines, with more
people, and producing more ounces.
AGNICO EAGLE
2013 ANNUAL REPORT
9
Corporate Governance
We strive to earn and retain the trust of shareholders through a steadfast commitment to
sound and effective corporate governance. Our governance practices reflect the structure and
processes we believe are necessary to improve company performance and enhance
shareholder value.
Board of Directors
The Health, Safety, Environment and Sustainable Development
(HSESD) Committee advises and makes recommendations to the
Our Board consists of 13 directors. All but one director are
Board with respect to monitoring and reviewing HSESD policies,
independent of management and free from any interest or
principles, practices and processes; HSESD performance; and
business that could materially interfere with their ability to act
regulatory issues relating to health, safety and the environment.
in the Company’s best interests.
The Board is ultimately responsible for overseeing the management
of the business and affairs of the Company and, in doing so, is
required to act in the best interests of the Company. It discharges
It also supports the Company’s commitment to adopt best practices
in mining operations, promotion of a healthy and safe work
environment, and environmentally sound and socially responsible
resource development.
its responsibilities either directly or through four committees.
All of the Board committees are composed entirely of outside
Board committees
directors who are unrelated to and independent from Agnico Eagle.
Committee charters are posted on the corporate website.
The Corporate Governance Committee advises and makes
recommendations to the Board on corporate governance matters,
Ethical business conduct
the effectiveness of the Board and its committees, the contributions
Agnico Eagle has adopted a Code of Business Conduct and Ethics
of individual directors and the identification and selection of
as well as an Anti-Corruption and Anti-Bribery policy which provide
director nominees.
The Audit Committee assists the Board in its oversight responsibilities
with respect to the integrity of the Company’s financial statements,
compliance with legal and regulatory requirements, external auditor
qualifications, and the independence and performance of the
Company’s internal and external audit functions.
The Compensation Committee advises and makes recommendations
to the Board on the Company’s strategy, policies and programs for
compensating and developing senior management and officers and
for compensating directors.
frameworks for directors, officers and employees on the conduct and
ethical decision-making integral to their work. We have also adopted
a Code of Business Ethics for consultants and contractors. The Audit
Committee is responsible for monitoring compliance with these codes
and policy. In conjunction with the codes and policy, we have
established a toll-free compliance hotline to allow for anonymous
reporting of suspected violations. More information is posted on the
corporate website.
10
AGNICO EAGLE
2013 ANNUAL REPORT
Forward-Looking Statements
The information in this annual report has been prepared as at March 20, 2014. Certain statements contained in this annual report 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 and are referred to herein as “forward-looking statements”. When
used in this report, words such as “anticipate”, “expect”, “estimate”, “forecast”, “planned”, “possible”, “will”, “likely”, “schedule” and similar
expressions are intended to identify forward-looking statements.
Such statements include without limitation: the Company’s forward-looking production guidance, including estimated ore grades, project
timelines, drilling results, orebody configurations, metal production, life-of-mine estimates, production estimates, total cash costs per ounce,
minesite costs per tonne and all-in sustaining costs estimates, cash flows, the estimated timing of scoping and other studies, the methods
by which ore will be extracted or processed, expansion projects, recovery rates, mill throughput, and projected exploration and capital
expenditures, including costs and other estimates upon which such projections are based and estimates of depreciation expense, general and
administrative expense and tax rates; the Company’s ability to fund its current pipeline of projects; the impact of maintenance shutdowns;
the Company’s goal to build a mine at Meliadine; the Company’s ability to bring into commercial production the La India mine; and other
statements and information regarding anticipated trends with respect to the Company’s operations, exploration and the funding thereof.
Such statements reflect the Company’s views as at the date of this annual report and are subject to certain risks, uncertainties and assumptions.
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 contained in this annual report, which may prove to be incorrect, include, but are
not limited to, the assumptions set forth herein and in management’s discussion and analysis and the Company’s Annual Information Form for
the year ended December 31, 2013 (AIF) as well as: that there are no significant disruptions affecting operations, whether due to labour
disruptions, supply disruptions, damage to equipment, natural occurrences, equipment failures, accidents, political changes, title issues or
otherwise; that permitting, production and expansion at each of Agnico Eagle’s mines and growth projects proceed on a basis consistent with
current expectations, and that Agnico Eagle does not change its plans relating to such projects; that the exchange rate between the Canadian
dollar, European Union euro, Mexican peso and the United States dollar will be approximately consistent with Agnico Eagle’s expectations;
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 Agnico Eagle’s current estimates of mineral
reserves, mineral resources, mineral grades and metal recovery are accurate; that there are no material delays in the timing for completion of
ongoing growth projects; that the Company’s current plans to optimize production are successful; and that there are no material variations in
the current tax and regulatory environment. Many factors, known and unknown, could cause the actual results to be materially different from
those expressed or implied by such forward-looking statements. Such risks include, but are not limited to: the volatility of prices of gold and
other metals; uncertainty of mineral reserves, mineral resources, mineral grades and metal recovery estimates; uncertainty of future production,
capital expenditures, and other costs; currency fluctuations; financing of additional capital requirements; cost of exploration and development
programs; mining risks; risks associated with foreign operations; governmental and environmental regulation; the volatility of the Company’s
stock price; and risks associated with the Company’s byproduct metal derivative strategies. For a more detailed discussion of such risks and
other factors, see the AIF as well as the Company’s other filings with the Canadian Securities Administrators and the U.S. Securities and
Exchange Commission (the SEC). The Company does not intend, and does not assume any obligation, to update these forward-looking
statements and information, except as required by law. Accordingly, readers are advised not to place undue reliance on forward-looking
statements. Actual results and final decisions may be materially different from those currently anticipated.
TECHNICAL INFORMATION
Please refer to the Company press release dated February 12, 2014 for further details on the mineral reserves and resources. The technical
information has been approved by Alain Blackburn, P.Eng., Senior Vice-President, Exploration, and a “Qualified Person” for the purposes of
National Instrument 43-101.
AGNICO EAGLE
2013 ANNUAL REPORT
11
Board of Directors
James D. Nasso, ICD.D 1,3,4
Martine A. Celej 2
Howard Stockford, P.Eng. 2,4
(Director since 2005)
Mr. Stockford is a retired mining
executive with almost 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).
Pertti Voutilainen, M.Sc., M.Eng. 3,4
(Director since 2005)
Mr. Voutilainen is a mining industry
veteran. He was the Chairman of the
board of directors of Riddarhyttan
Resources AB until 2005. 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.).
(Director since 2011)
Ms. Celej is a 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).
Clifford J. Davis 2,4
(Director since 2008)
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).
Robert J. Gemmell 2
(Director since 2011)
Mr. Gemmell, now retired, 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 (MBA).
Mel Leiderman,
FCPA, FCA, TEP, ICD.D 1,2
(Director since 2003)
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).
Deborah McCombe, P.Geo 4
(Director appointed in 2014)
Ms. McCombe is the President and
CEO of RPA Inc. (Roscoe Postle
Associates). She has over 30 years of
experience in exploration project
management, feasibility studies,
reserve estimation, due diligence and
evaluation studies. Prior to joining
RPA, Ms. McCombe was Chief
Mining Consultant for the Ontario
Securities Commission. She is a
graduate of the University of Western
Ontario (P.Geo).
Dr. Sean Riley
(Director since 2011)
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).
Bernard Kraft, CA 1,3
(Director since 1992)
J. Merfyn Roberts, CA 1,3
(Director since 2008)
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 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. Roberts has been a fund manager
and investment advisor for more
than 25 years and has been closely
associated with the mining industry.
He serves as a director of Eastern
Platinum, Newport Exploration and
Blackheath Resources. 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.
Chairman of the Board
(Director since 1986)
Mr. Nasso is now retired and is
a graduate of St. Francis Xavier
University (B.Comm.).
Sean Boyd, CA
Vice-Chairman
(Director since 1998)
Mr. Boyd 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.).
Dr. Leanne M. Baker 1,2
(Director since 2003)
Since 2002, Dr. Baker has been a
consultant and board member to
the metals and mining industry. She
is a director of Sutter Gold, Reunion
Gold and McEwen Mining. 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.Sc.
and Ph.D. in Mineral Economics).
1 Audit Committee
2 Compensation Committee
3 Corporate Governance
Committee
4 Health, Safety, Environment
and Sustainable Development
(HSESD) Committee
12
AGNICO EAGLE
2013 ANNUAL REPORT
14MAR201303391049
Management’s Discussion and Analysis
(Prepared in accordance with United States GAAP)
for the year ended December 31, 2013
AGNICO EAGLE MINES LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS
Table of Contents
Executive Summary
Strategy
Portfolio Overview
Key Performance Drivers
Balance Sheet Review
Results of Operations
Revenues from Mining Operations
Production Costs
Exploration and Corporate Development Expense
Amortization of Property, Plant and Mine Development
General and Administrative Expense
Impairment Loss on Available-for-sale Securities
Provincial Capital Tax
Interest Expense
Impairment Loss
Foreign Currency Translation (Gain) Loss
Income and Mining Taxes Expense (Recovery)
Liquidity and Capital Resources
Operating Activities
Investing Activities
Financing Activities
Off-Balance Sheet Arrangements
2014 Liquidity and Capital Resources Analysis
Quarterly Results Review
Outlook
Gold Production Growth
Financial Outlook
Risk Profile
Metal Prices and Foreign Currencies
Cost Inputs
Interest Rates
i
Page
1
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11
13
13
13
13
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15
16
16
17
17
19
20
21
22
22
Table of Contents (Continued)
Financial Instruments
Operational Risk
Regulatory Risk
Controls Evaluation
Outstanding Securities
Governance
Sustainable Development Management
Employee Health and Safety
Community
Environment
Critical Accounting Estimates
Mining Properties, Plant and Equipment and Mine Development Costs
Goodwill
Revenue Recognition
Reclamation Costs
Income and Mining Taxes
Financial Instruments
Stock-Based Compensation
Commercial Production
Stripping Costs
Recently Issued Accounting Pronouncements and Developments
International Financial Reporting Standards
Mineral Reserve Data
Non-US GAAP Financial Performance Measures
Summarized Quarterly Data
Five Year Financial and Operating Summary
Page
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43
48
This Management’s Discussion and Analysis (‘‘MD&A’’) dated March 21, 2014 of Agnico Eagle Mines Limited (‘‘Agnico
Eagle’’ or the ‘‘Company’’) should be read in conjunction with the Company’s annual consolidated financial statements for
the year ended December 31, 2013, prepared in accordance with United States generally accepted accounting principles
(‘‘US GAAP’’). The annual consolidated financial statements and MD&A are presented in United States dollars
(‘‘US dollars’’, ‘‘$’’ or ‘‘US$’’), unless otherwise specified. Certain information in this MD&A is presented in Canadian dollars
(‘‘C$’’) or European Union euros (‘‘Euro’’ or ‘‘c’’). Additional information relating to the Company, including the Company’s
Annual Information Form for the year ended December 31, 2013 (the ‘‘AIF’’), is available on the Canadian Securities
Administrators’ (the ‘‘CSA’’) SEDAR website at www.sedar.com.
ii
NOTE TO INVESTORS CONCERNING FORWARD-LOOKING INFORMATION
Certain statements in this MD&A, 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 2014 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 of gold
produced, all-in sustaining costs per ounce of gold produced, 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 MD&A are based, and which may prove to be incorrect, include, but are not limited to, the
assumptions set out elsewhere in this MD&A and in the AIF 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, political changes, mining or milling issues, title issues or otherwise; that permitting, development
and 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 US dollar will be approximately consistent
with current levels or as detailed in this MD&A and in the AIF; 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 MD&A reflect the Company’s views as at the date of this MD&A 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 described in the AIF
and in the Company’s other documents filed with the Canadian securities commissions and the U.S. Securities and
Exchange Commission (the ‘‘SEC’’). 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 MD&A contains information regarding anticipated total cash costs per ounce of gold
produced, all-in sustaining costs per ounce of gold produced and minesite costs per tonne in respect of the Company or 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.
iii
NOTE TO INVESTORS CONCERNING ESTIMATES OF MINERAL RESOURCES
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 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.
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.
NOTE TO INVESTORS CONCERNING NON-US GAAP FINANCIAL PERFORMANCE
MEASURES
This MD&A presents certain financial performance measures, including ‘‘total cash costs per ounce of gold produced’’,
‘‘minesite costs per tonne’’, ‘‘adjusted net income’’ and ‘‘all-in sustaining costs per ounce of gold produced’’, 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 financial performance measures to the figures presented in the consolidated financial statements
prepared in accordance with US GAAP and a discussion of management’s use of this data see ‘‘Non-US GAAP Financial
Performance Measures’’. The Company believes that these generally accepted industry measures are realistic indicators
of operating performance and are useful in allowing comparisons between periods. Non-US GAAP financial performance
measures should be considered together with other data prepared in accordance with US GAAP. This MD&A also contains
non-US GAAP financial performance measure information for projects under development incorporating information that
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 performance measures to the most comparable US GAAP measure.
iv
Executive Summary
Agnico Eagle is a gold mining company with mining operations in Canada, Mexico and Finland and exploration activities in
Canada, Europe, Latin America and the United States. Agnico Eagle earns a significant proportion of its revenue and cash
flow 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, primarily silver, zinc and copper.
In 2013, Agnico Eagle recorded total cash costs per ounce of gold produced of $672 on payable gold production of
1,099,335 ounces. The average realized price of gold decreased by 18.1% from $1,667 per ounce in 2012 to $1,366 per
ounce in 2013. Throughout its 42-year history, Agnico Eagle’s policy has been not to sell forward its future gold production.
Over the past five years, Agnico Eagle has evolved from operating two gold mines in Canada to being an international gold
mining company operating six gold mines at the end of 2013. Each mine is located in what the Company believes to be a
politically stable country that is supportive of the mining industry. The political stability of the regions in which Agnico Eagle
operates helps to provide confidence in its current and future prospects and profitability. This is important for Agnico Eagle
as it believes that many of its new mines and recently acquired mining projects have long-term mining potential.
Key Results
(cid:127) Record annual payable gold production of 1,099,335 ounces during 2013, an increase of 5.3% compared with
2012 payable gold production of 1,043,811 ounces.
(cid:127) Total cash costs per ounce of gold produced of $672 and all-in sustaining costs per ounce of gold produced of
$952 in 2013.
(cid:127) Proven and probable gold reserves totaled 16.9 million ounces at December 31, 2013 compared with 18.7 million
ounces at December 31, 2012. Average gold grade of proven and probable gold reserves increased by 11.1% to
3.51 grams per tonne at December 31, 2013 compared with December 31, 2012.
(cid:127) An impairment loss totaling $436.3 million (net of tax) was recorded as at December 31, 2013 relating to the
Meadowbank Mine, Meliadine project and Lapa mine.
(cid:127) Commercial production was achieved at the Goldex mine’s M and E Zones on October 1, 2013.
(cid:127) Commercial production is expected at the La India project in the first quarter of 2014 with 3,180 ounces of
pre-commercial gold production recorded during 2013.
(cid:127) The Company’s operations are located in mining-friendly regions that the Company believes have low political risk
and long-term mining potential.
(cid:127) The Company maintains a solid financial position and forecasts being fully funded for its currently planned growth.
(cid:127) The Company has strong senior management continuity as its chief executive officer has 29 years of service with
the Company.
(cid:127) In February 2014, the Company declared a quarterly cash dividend of $0.08 per share. The Company has now
declared a cash dividend for 32 consecutive years.
Strategy
Agnico Eagle’s strategy is to build a high quality, manageable business that generates superior long-term returns per
share by:
1.
Increasing gold production in lower risk jurisdictions
(cid:127) The Company expects gold production growth of approximately 16% to over 1.25 million ounces by 2016 from
current operating regions.
2. Growing operating and free cash flows
(cid:127) The Company’s strategy is to increase net free cash flow through higher production, controlled operating costs
and disciplined capital spending.
3. Providing meaningful dividends
(cid:127) History of paying cash dividends for 32 consecutive years, with a goal to increase dividends over time.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
1
4. Minimizing share dilution
(cid:127) Historically, acquisitions have been completed with minimal share dilution and the Company expects that its
planned capital spending program will be internally funded.
5. Operating in a socially responsible manner
(cid:127) The Company strives to create economic value by operating in a safe and socially responsible manner while
contributing to the prosperity of its employees and the communities in which it operates.
Portfolio Overview
Northern Business
Canada
The LaRonde mine extension achieved commercial production in December 2011 and is expected to extend the life of the
mine through 2025. The infrastructure and knowledge base gained from building and operating the LaRonde mine, the
Company’s first mine, has been leveraged by the Company in building and operating the Lapa and Goldex mines, both of
which are within 60 kilometres of the LaRonde mine. Commercial production was achieved at the Lapa mine in May 2009
and at the Goldex mine’s M and E Zones in October 2013. The Company’s Quebec mines, with a total of 4.5 million ounces
of proven and probable mineral reserves as at December 31, 2013, have benefited from common infrastructure and
mining teams.
On October 19, 2011, the Company suspended mining operations and gold production at the Goldex mine due to
geotechnical concerns with the rock above the mining horizon. As of September 30, 2011, Agnico Eagle wrote down its
investment in the Goldex mine (net of expected residual value) and its underground ore stockpile, for a pre-tax loss on the
Goldex mine of $302.9 million. All of the remaining 1.6 million ounces of proven and probable mineral reserves at the
Goldex mine, other than ore stockpiled on the surface, were reclassified as mineral resources. An environmental
remediation liability was recorded as of September 30, 2011 reflecting anticipated costs of remediation. The Goldex mill
completed processing feed from the remaining Goldex Extension Zone (‘‘GEZ’’) surface stockpile in October of 2011.
Operations in the GEZ remain suspended indefinitely.
Exploration drilling continued on several mineralized zones on the Goldex mine property near the GEZ after mining
operations were suspended in October of 2011. A team of independent consultants and Agnico Eagle staff performed a
thorough review, including a preliminary economic assessment, to determine whether future mining operations on the
property, including the M and E Zones, would be viable. After a review of the assessment, Agnico Eagle’s Board of
Directors (the ‘‘Board’’) approved the M and E Zones for development using existing Goldex mine infrastructure such as
the shaft and mill. Commercial production was achieved at the Goldex mine’s M and E Zones in October 2013.
In 2007, the Company acquired Cumberland Resources Ltd., which held the Meadowbank gold project in Nunavut,
Canada. Commercial production was achieved in March 2011. As a result of consistently high operating costs, a revised
life-of-mine plan was developed for the Meadowbank mine as at December 31, 2011, resulting in a shorter mine life and a
pre-tax impairment in the carrying value of the mine of $907.7 million. The new mine plan, combined with the extraction of
ore in 2011, resulted in a reduction of mineral reserves by 1.3 million ounces of gold at December 31, 2011. The
Meadowbank mine’s proven and probable mineral reserves were approximately 1.8 million ounces at December 31,
2013, a decrease of approximately 0.5 million ounces compared with December 31, 2012 due primarily to record 2013
payable gold production of 430,613 ounces and to a higher cut-off grade applied in 2013.
On July 6, 2010, Agnico Eagle acquired the Meliadine project in Nunavut, Canada through its acquisition of Comaplex
Minerals Corp. (‘‘Comaplex’’) by way of a plan of arrangement. The Meliadine project had proven and probable mineral
reserves of 2.8 million ounces at December 31, 2013. Activities at the Meliadine project during 2013 included infill and
step-out diamond drilling, road construction, ramp development, permitting, camp operation and work on an updated
technical study. Budgeted 2014 Meliadine project capital expenditures of $42.0 million are focused on further ramp
development, allowing for cost-effective exploration and conversion drilling and the potential for a late 2018 start up if the
Company determines to build a mine at the Meliadine project.
Finland
The Kittila mine in northern Finland, which is geologically similar to the Abitibi region of Quebec, was added to the
Company’s portfolio through the acquisition of Riddarhyttan Resources AB in 2005. Applying the Company’s technical
experience gained from its operations in Quebec, the team designed a drilling program at Kittila that led to the conversion
2
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
of mineral resources to mineral reserves at the beginning of 2006. A positive feasibility study was completed in mid-2006
and the Company decided to build the Kittila mine. Construction at the Kittila mine was completed in 2008 and
commercial production was achieved in May 2009. Proven and probable mineral reserves at the Kittila mine amounted to
4.7 million ounces at December 31, 2013.
In 2012, a 750 tonne per day expansion was approved that is expected to increase the throughput capacity at the Kittila
mine by 25% to 3,750 tonnes per day commencing in mid-2015. The Kittila mine throughput expansion project is
expected to improve unit costs and to offset a gradual reduction in realized grade towards the mineral reserve grade over
the next several years.
A study is underway that considers the construction of a production shaft at the Kittila mine. It is expected that a
production shaft would provide operating cost savings and sustain long-term production at higher throughput levels from
multiple zones, particularly at depths below 700 meters. In addition, a study is underway to evaluate the feasibility of
developing the Rimpi Zone as a potential source of ore.
Southern Business
Mexico
In 2006, the Company completed the acquisition of the Pinos Altos property, then an advanced stage exploration property
in northern Mexico, after the Company’s extensive drilling campaign had doubled the contained gold and silver mineral
resources. In August 2007, a favourable feasibility study led to the decision to build the Pinos Altos mine. Commercial
production was achieved at the Pinos Altos mine in November 2009.
The Creston Mascota deposit at Pinos Altos is located approximately seven kilometers northwest of the main deposit at the
Pinos Altos mine. Commercial production was achieved at the Creston Mascota deposit at Pinos Altos in March 2011.
On September 30, 2012, the Creston Mascota deposit at Pinos Altos experienced a movement of leached ore from the
upper lifts of the Phase One leach pad, resulting in a temporary suspension of active leaching. On March 13, 2013,
production resumed at the Creston Mascota deposit at Pinos Altos from the Phase Two leach pad. The ramp up of
production in 2013 was in line with expectations.
On November 18, 2011, Agnico Eagle acquired control of Grayd Resource Corporation (‘‘Grayd’’) by way of a take-over bid
and on January 23, 2012, the Company completed a compulsory acquisition of the remaining outstanding shares of Grayd
that it did not already own. Grayd owned the La India project, which is located approximately 70 kilometers northwest of
the Pinos Altos mine. In September 2012, development and construction of the La India mine was approved by the Board.
The La India project is expected to achieve commercial production in the first quarter of 2014 with forecast 2014 gold
production of approximately 50,000 ounces at total cash costs per ounce of gold produced of $743.
The Company’s Mexican properties, including the Pinos Altos mine, the Creston Mascota deposit at Pinos Altos and the
La India project had total proven and probable mineral reserves of 3.0 million ounces at December 31, 2013.
Key Performance Drivers
The key drivers of financial performance for Agnico Eagle include:
(cid:127) The spot price of gold, silver, zinc and copper;
(cid:127) Production volumes;
(cid:127) Production costs; and
(cid:127) Canadian dollar/US dollar, Euro/US dollar and Mexican peso/US dollar exchange rates.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
3
Spot Price of Gold, Silver, Zinc and Copper
The Company has never sold gold forward, which allows the Company to take full advantage of rising gold prices.
Management believes that low-cost production is the best protection against a decrease in gold prices.
Gold P.M. Fix ($ per ounce)
1,800
1,700
1,600
1,500
1,400
1,300
1,200
1,100
,
1,000
Jan-13
Feb-13
M ar-13
A pr-13
M ay-13
Jun-13
Jul-13
A ug-13
Sep-13
N ov-13
D ec-13
O ct-13
26FEB201412010259
High price
Low price
Average price
Average price realized
2013
2012 % Change
$1,696
$1,181
$1,411
$1,366
$1,796
$1,527
$1,668
$1,667
(5.6%)
(22.7%)
(15.4%)
(18.1%)
In 2013, the market price for gold per ounce was on average 15.4% lower than in 2012. The Company’s average realized
price per ounce of gold in 2013 was 18.1% lower than in 2012.
SILVER ($ per ounce)
ZINC ($ per tonne)
COPPER ($ per tonne)
35
33
31
29
27
25
23
21
19
17
15
Jan-13
Feb-13
M ar-13
A pr-13
M ay-13
Jun-13
Jul-13
2,300
2,200
2,100
2,000
1,900
1,800
1,700
1,600
1,500
A ug-13
Sep-13
O ct-13
D ec-13
N ov-13
26FEB201412010758
Jan-13
Feb-13
M ar-13
A pr-13
M ay-13
Jun-13
Jul-13
8,500
8,000
7,500
7,000
6,500
6,000
A ug-13
D ec-13
N ov-13
Sep-13
O ct-13
26FEB201412010922
Jan-13
Feb-13
M ar-13
A pr-13
M ay-13
Jun-13
Jul-13
A ug-13
Sep-13
O ct-13
D ec-13
N ov-13
26FEB201412005838
Net byproduct (primarily silver, zinc and copper) revenue is treated as a reduction of production costs in calculating total
cash costs per ounce of gold produced. Agnico Eagle’s realized sales price for silver decreased by 29.2% in 2013
compared with 2012 while realized sales prices for zinc and copper decreased by 2.5% and 11.4%, respectively, over the
same period. Significant quantities of byproduct metals are produced by the LaRonde mine (silver, zinc, and copper) and
the Pinos Altos mine (silver).
4
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
Production Volumes and Costs
Changes in production volumes have a direct impact on the Company’s financial results. Total payable gold production
was 1,099,335 ounces in 2013, up 5.3% from 1,043,811 ounces in 2012. This increase in production volumes was due
primarily to increases in ore milled and gold grade at the Meadowbank mine, an increase in gold grade at the LaRonde
mine in 2013 compared with 2012 and the achievement of commercial production on the M and E Zones at the Goldex
mine on October 1, 2013. Partially offsetting the overall increase in production volumes, Kittila’s payable gold production
decreased by 16.7% between 2012 and 2013 due to an extended mill maintenance shutdown in the second quarter of
2013.
Production costs are discussed in detail in the Results of Operations section below.
Foreign Exchange Rates (Ratio to US$)
The exchange rate of the Canadian dollar, Euro and Mexican peso relative to the US dollar is an important financial driver
for the Company for the following reasons:
(cid:127) All revenues are earned in US dollars;
(cid:127) A significant portion of operating costs at the LaRonde, Lapa, Goldex and Meadowbank mines are incurred in
Canadian dollars;
(cid:127) A significant portion of operating costs at the Pinos Altos mine and the Creston Mascota deposit at Pinos Altos are
incurred in Mexican pesos; and
(cid:127) A significant portion of operating costs at the Kittila mine are incurred in Euros.
The Company mitigates a portion of the impact of fluctuating exchange rates on its financial results by using currency
hedging strategies.
CANADIAN DOLLAR
EURO
MEXICAN PESO
1.08
1.06
1.04
1.02
1.00
0.98
0.96
0.94
0.92
Jan-13
Feb-13
M ar-13
A pr-13
M ay-13
Jun-13
Jul-13
0.79
0.78
0.77
0.76
0.75
0.74
0.73
0.72
0.71
0.70
0.69
A ug-13
Sep-13
O ct-13
D ec-13
N ov-13
26FEB201412005657
Jan-13
Feb-13
M ar-13
A pr-13
M ay-13
Jun-13
Jul-13
13.50
13.00
12.50
12.00
11.50
11.00
A ug-13
D ec-13
N ov-13
Sep-13
O ct-13
26FEB201412010061
Jan-13
Feb-13
M ar-13
A pr-13
M ay-13
Jun-13
Jul-13
A ug-13
Sep-13
O ct-13
D ec-13
N ov-13
26FEB201412010440
On average, the Canadian dollar weakened relative to the US dollar in 2013 compared with 2012, decreasing costs
denominated in Canadian dollars when translated into US dollars for reporting purposes. Conversely, the Euro and
Mexican peso strengthened relative to the US dollar on average in 2013 compared with 2012, increasing costs
denominated in local currencies when translated into US dollars for reporting purposes.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
5
Balance Sheet Review
Total assets at December 31, 2013 of $4,959.4 million decreased by 5.6% compared with December 31, 2012 total
assets of $5,256.1 million. Cash and cash equivalents were $139.1 million at December 31, 2013, down from
$298.1 million at December 31, 2012 due primarily to lower average realized gold prices, which resulted in lower revenue,
and increased capital expenditures during the period. Available-for-sale securities increased from $44.7 million at
December 31, 2012 to $74.6 million at December 31, 2013 due primarily to $52.6 million in new investments, partially
offset by $34.3 million in impairments recorded during the period. Long-term ore in stockpile increased by 41.2% to
$46.2 million at December 31, 2013 compared with December 31, 2012 due primarily to an updated mine plan that
required the reclassification of ore stockpiles at the Kittila mine from short-term to long-term. Goodwill decreased by
$190.3 million between December 31, 2012 and December 31, 2013 due primarily to a $200.1 million goodwill
impairment loss relating to the Meliadine project recorded as at December 31, 2013, partially offset by goodwill recorded
on the acquisition of Urastar Gold Corp. on May 16, 2013. Property, plant and mine development decreased by
$18.3 million to $4,049.1 million at December 31, 2013 compared with December 31, 2012 due primarily to impairment
losses of $269.3 million and $67.9 million relating to the Meadowbank and Lapa mines, respectively, recorded as at
December 31, 2013. Impairment losses recorded to mining properties in 2013 were offset partially by increases in
construction in progress at the La India and Meliadine projects during the year and capital expenditures at the Goldex
mine’s M and E Zones, which achieved commercial production in October 2013.
Total liabilities increased to $1,982.2 million at December 31, 2013 from $1,845.9 million at December 31, 2012 due
primarily to an increase in the outstanding balance under the Credit Facility from $30.0 million at December 31, 2012 to
$200.0 million at December 31, 2013 and a $49.1 million reclamation provision increase, partially offset by the payment
of $37.9 million recorded as dividends payable at December 31, 2012.
Fair Value of Derivative Financial Instruments
The Company occasionally 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 fair value of the Company’s derivative financial instruments is outlined in the financial
instruments note to the annual consolidated financial statements.
Results of Operations
Revenues from Mining Operations
Revenues from mining operations decreased by 14.6% to $1,638.4 million in 2013 from $1,917.7 million in 2012,
attributable primarily to lower sales prices realized on gold and silver and lower sales volumes realized on zinc in 2013
compared with 2012. Revenues from mining operations were $1,821.8 million in 2011.
In 2013, sales of precious metals (gold and silver) accounted for 97.7% of revenues from mining operations, up from
96.6% in 2012 and 95.3% in 2011. The increase in the percentage of revenues from precious metals compared with
2012 is due primarily to lower sales volumes realized on zinc and higher sales volumes realized on gold and silver, offset
partially by decreases in sales prices realized on gold and silver. Revenues from mining operations are accounted for net of
related smelting, refining, transportation and other charges.
6
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
The table below sets out revenues from mining operations, production volumes and sales volumes by metal:
Revenues from mining operations:
Gold
Silver
Zinc
Copper
Lead(i)
Payable production(ii):
Gold (ounces)
Silver (thousands of ounces)
Zinc (tonnes)
Copper (tonnes)
Payable metal sold:
Gold (ounces)
Silver (thousands of ounces)
Zinc (tonnes)
Copper (tonnes)
Note:
2013
2012
2011
(thousands of United States dollars)
$1,500,354
$1,712,665
$1,563,760
100,895
140,221
171,725
16,685
20,653
(181)
45,797
19,019
12
70,522
14,451
1,341
$1,638,406
$1,917,714
$1,821,799
1,099,335
1,043,811
985,460
4,623
19,814
4,835
4,646
38,637
4,126
5,080
54,894
3,216
1,098,382
1,028,062
996,090
4,694
20,432
4,838
4,556
42,604
4,115
5,089
54,499
3,194
(i) Other revenues in 2013 related to lead concentrate include gold revenue of $7.9 million (2012 – $25.1 million) and silver revenue of $2.8 million (2012 – $7.4 million). The gold
and silver revenues from lead concentrate are included in their respective categories in the above table with the total lead concentrate direct fees of $1.1 million (2012 –
$2.7 million) netted against lead revenues of $0.9 million (2012 – $2.7 million).
(ii) Payable production is 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.
Revenues from gold sales decreased by 12.4% to $212.3 million in 2013 compared with 2012. Gold production increased
by 5.3% to 1,099,335 ounces in 2013 from 1,043,811 ounces in 2012. A 17.6% increase in gold production at the
Meadowbank mine due to higher tonnes of ore milled and higher gold grades, increased gold grades at the LaRonde mine
and the achievement of commercial production on the M and E Zones at the Goldex mine were the primary contributors to
the Company’s overall gold production increase in 2013 compared with 2012. Partially offsetting the overall increase in
gold production, the Kittila mine only operated for 14 days during the second quarter of 2013 due to an extended
maintenance shutdown and the Creston Mascota deposit at Pinos Altos temporarily suspended active leaching between
October 1, 2012 and March 13, 2013. Average realized gold price decreased 18.1% to $1,366 per ounce in 2013 from
$1,667 per ounce in 2012.
Revenues from silver sales decreased by $39.3 million, or 28.0% in 2013 compared with 2012 due primarily to a lower
realized silver price and lower silver grade at the LaRonde mine. Revenues from zinc sales decreased by $29.1 million, or
63.6% to $16.7 million in 2013 compared with 2012 due primarily to lower zinc grades and mill recoveries at the LaRonde
mine. Revenues from copper sales increased by $1.6 million or 8.6% in 2013 compared with 2012 due primarily to higher
copper grades at the LaRonde mine which were partially offset by lower realized copper sales prices between periods.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
7
Production Costs
In 2013, total production costs were $924.9 million compared with $897.7 million in 2012, due primarily to an 8.4%
increase in throughput at the Meadowbank mine between periods and the achievement of commercial production on the
M and E Zones at the Goldex mine in October 2013. The overall increase in production costs was partially offset by the
temporary suspension of active leaching the Creston Mascota deposit at Pinos Altos between October 1, 2012 and
March 13, 2013.
The table below sets out production costs by mine:
Production Costs
LaRonde mine
Lapa mine
Goldex mine(i)
Meadowbank mine
Kittila mine
Pinos Altos mine (including the Creston Mascota deposit at Pinos Altos)
Production costs per consolidated statements of income (loss) and comprehensive
income (loss)
2013
2012
2011
(thousands of United States dollars)
$229,911
$225,647
$209,947
69,532
13,172
73,376
–
363,894
347,710
98,446
98,037
149,972
152,942
68,599
56,939
284,502
110,477
145,614
$924,927
$897,712
$876,078
Note:
(i)
2013 production costs relate to the Goldex mine’s M and E Zones which achieved commercial production in October 2013. 2011 production costs relate to the Company’s mining
operations at the GEZ, which were indefinitely suspended on October 19, 2011.
The discussion of production costs below refers to ‘‘total cash costs per ounce of gold produced’’ and ‘‘minesite costs per
tonne’’, neither of which are recognized measures under US GAAP. For a reconciliation of these measures to production
costs and a discussion of the Company’s use of these measures, see Non-US GAAP Financial Performance Measures in
this MD&A.
Production costs at the LaRonde mine were $229.9 million in 2013, an increase of 1.9% compared with 2012 production
costs of $225.6 million. During 2013, the LaRonde mine processed an average of 6,354 tonnes of ore per day compared
with 6,444 tonnes of ore per day during 2012. The decrease in throughput between periods was due primarily to 16 days
of unplanned shutdown in 2013 related to issues with the mine’s hoist drive. Minesite costs per tonne increased to C$99 in
2013 compared with C$95 in 2012 due primarily to general cost increases and lower throughput.
Production costs at the Lapa mine were $69.5 million in 2013, a 5.2% decrease compared with 2012 production costs of
$73.4 million. During 2013, the Lapa mine processed an average of 1,755 tonnes of ore per day, comparable to the
1,749 tonnes of ore per day processed during 2012. Minesite costs per tonne decreased to C$110 in 2013 compared with
C$115 in 2012 due primarily to improved cost controls related to consumables, development costs and energy between
periods.
Production costs at the Goldex mine were $13.2 million in 2013 compared with nil in 2012. Production costs were nil in
2012 due to the suspension of operations in the GEZ on October 19, 2011. However, commercial production was
achieved in October 2013 on the M and E Zones at the Goldex mine. Minesite costs per tonne were C$32 in 2013
compared with nil in 2012.
Production costs at the Meadowbank mine were $363.9 million in 2013, an increase of 4.7% compared with 2012
production costs of $347.7 million due primarily to increased throughput and higher plant maintenance expenditures.
During 2013, the Meadowbank mine processed an average of 11,350 tonnes of ore per day, an increase of 8.7% over the
10,440 tonnes of ore per day processed during 2012 due primarily to improvements in equipment availability and
equipment maintenance. Minesite costs per tonne decreased to C$83 in 2013 compared with C$88 in 2012 due primarily
to higher throughput, overall productivity gains and improved cost controls.
Production costs at the Kittila mine were $98.4 million in 2013, an increase of 0.4% compared with 2012 production costs
of $98.0 million as higher costs associated with underground mining more than offset reduced throughput due to an
8
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
extended 2013 maintenance shutdown. During 2013, the Kittila mine processed an average of 2,559 tonnes of ore per
day, a decrease of 14.1% compared with the 2,979 tonnes of ore per day processed during 2012 due primarily to an
extended maintenance shutdown in the second quarter of 2013. Minesite costs per tonne increased to c73 in 2013
compared with c69 in 2012 due primarily to lower throughput and the transition to higher cost underground mining from
lower cost open pit mining in 2013.
Production costs at the Pinos Altos mine were $130.1 million in 2013, an increase of 1.2% compared with 2012
production costs of $128.6 million. During 2013, the Pinos Altos mine mill processed an average of 5,262 tonnes of ore
per day, an increase of 4.8% compared with the 5,020 tonnes of ore per day processed during 2012 due primarily to an
improved mill liner design and increased mechanical availability. In 2013, approximately 805,200 tonnes of ore were
stacked on the Pinos Altos mine leach pad, a decrease of 21.4% compared with the approximate 1,025,000 tonnes of ore
stacked in 2012. Minesite costs per tonne increased to $45 in 2013 compared with $41 in 2012 due primarily to an
increase in the proportion of milled ore relative to ore stacked on the leach pad in 2013.
Production costs at the Creston Mascota deposit at Pinos Altos were $19.8 million in 2013, a decrease of 18.4%
compared with 2012 production costs of $24.3 million due primarily to the temporary suspension of active leaching
described below. During 2013, approximately 1,276,200 tonnes of ore were stacked on the leach pad at the Creston
Mascota deposit at Pinos Altos, a decrease of 16.7% compared with the approximate 1,532,400 tonnes of ore stacked in
2012. Minesite costs per tonne increased to $16 in 2013 compared with $12 in 2012 due primarily to the temporary
suspension of active leaching at the Creston Mascota deposit at Pinos Altos between October 1, 2012 and
March 13, 2013.
Total Production Costs by Category
Consumables/
Other
37%
Labour
33%
Chemicals
6%
Energy
14%
Contractors
10%
20MAR201406563866
Total cash costs per ounce of gold produced, representing the weighted average of all of the Company’s producing mines,
increased to $672 in 2013 compared with $640 in 2012 and $580 in 2011. At the LaRonde mine, total cash costs per
ounce of gold produced increased from $569 in 2012 to $763 in 2013 due primarily to significantly lower net byproduct
revenue as the mine transitions to ore sourced from lower levels, partially offset by a 13.0% increase in gold production. At
the Lapa mine, total cash costs per ounce of gold produced decreased from $697 in 2012 to $678 in 2013 due to
decreases in mining, underground service and mill expenses, partially offset by a 5.1% decrease in gold production. Total
cash costs per ounce of gold produced at the Goldex mine were $782 in 2013 during the period of commercial production
at the M and E Zones. Mining operations in the GEZ were suspended indefinitely on October 19, 2011. At the
Meadowbank mine, total cash costs per ounce of gold produced decreased from $913 in 2012 to $774 in 2013 due
primarily to a 17.6% increase in gold production, process plant and mining cost reductions and an increase in deferred
stripping credits. At the Kittila mine, total cash costs per ounce of gold produced increased from $565 in 2012 to $601 in
2013 due primarily to a 16.7% decrease in gold production and higher costs associated with the transition to underground
mining in 2013. Total cash costs per ounce of gold produced at the Pinos Altos mine increased from $276 in 2012 to $412
in 2013 due primarily to significantly lower net byproduct revenue and deferred stripping credits. Total cash costs per
ounce of gold produced at the Creston Mascota deposit at Pinos Altos increased from $326 in 2012 to $485 in 2013 due
primarily to a 33.5% decrease in gold production between periods resulting from the temporary suspension of active
leaching between October 1, 2012 and March 13, 2013.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
9
Exploration and Corporate Development Expense
A summary of the Company’s significant 2013 exploration and corporate development activities is set out below:
(cid:127) Canadian regional exploration expenses, excluding the Goldex mine, of $20.3 million in 2013 were comparable
with expenses of $22.7 million in 2012.
(cid:127) In 2013, all drilling expenditures to further delineate the ore body associated with the Goldex mine’s M and E Zones
were capitalized. The Goldex mine’s M and E Zones were approved for development in late 2012. In 2012,
exploration and drilling expenditures were $37.7 million at the Goldex mine with a focus on the M and E Zones. In
2011, investigative exploration 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, as the previous mining operations associated with the GEZ were indefinitely suspended on
October 19, 2011 as a result of geotechnical concerns with the rock above the mining horizon.
(cid:127) Latin American regional exploration expenses decreased to $7.3 million in 2013 compared with $28.4 million in
2012 due primarily to the approval of the La India project for development in September 2012. Exploration
expenses at the La India project decreased by $13.3 million between 2012 and 2013 as drilling expenditures to
further delineate the ore body were capitalized in 2013.
(cid:127) Exploration expenditures in the United States and Europe decreased by 52.7% to $3.5 million and 38.0% to
$4.6 million, respectively, in 2013 compared with 2012.
(cid:127) The Company’s corporate development team remained active in 2013, evaluating new properties and potential
acquisition opportunities.
The table below sets out exploration expense by region and total corporate development expense:
Canada
Latin America
United States
Europe
Corporate development expense
2013
2012
2011
(thousands of United States dollars)
$ 20,339
$ 60,360
$ 49,541
7,311
3,501
4,624
8,461
28,419
7,397
7,458
5,866
8,263
7,520
6,332
4,065
Total exploration and corporate development expense
$ 44,236
$109,500
$ 75,721
Amortization of Property, Plant and Mine Development
Amortization of property, plant and mine development expense increased to $296.1 million in 2013 compared with
$271.9 million in 2012 and $261.8 million in 2011. The increase in amortization of property, plant and mine development
between 2012 and 2013 was due primarily to the impact of a 2.1% increase in tonnes of ore processed between periods
on unit-of-production method amortization and the achievement of commercial production at the Goldex mine’s M and
E Zones on October 1, 2013. Amortization expense commences once operations are in commercial production.
General and Administrative Expense
General and administrative expense decreased to $115.8 million in 2013 from $119.1 million in 2012 due primarily to a
decrease in retirement costs and targeted reductions to salaries and benefits. General and administrative expense
amounted to $107.9 million in 2011.
Impairment Loss on Available-for-sale Securities
Impairment loss on available-for-sale securities increased to $34.3 million in 2013 compared with $12.7 million in 2012
and $8.6 million in 2011. The Company’s investments in available-for-sale securities consist primarily of investments in
common shares of entities in the mining industry. At the end of each reporting period, the Company evaluates the
near-term prospects of the issuers of available-for-sale securities that have fallen into an unrealized loss position in relation
10 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
to the severity and duration of the impairment. Impairment losses are recorded on available-for-sale securities that are
determined to be other-than-temporarily impaired.
Provincial Capital Tax
Prior to 2011, provincial capital tax was 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. A provincial capital tax recovery of $1.5 million was recorded in
2013, while provincial capital tax expenses of $4.0 million and $9.2 million were recorded in 2012 and 2011, respectively,
all of which were based on government audit assessments received relating to prior years. Provincial capital tax is
expected to be nil going forward.
Interest Expense
Interest expense of $58.0 million in 2013 was comparable with $57.9 million in 2012 and $55.0 million in 2011. The table
below sets out the components of interest expense:
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
2013
2012
2011
(thousands of United States dollars)
$
4,946
$
3,734
$ 7,345
3,192
1,966
1,999
3,432
4,869
3,460
4,810
3,078
1,764
49,414
43,886
39,067
(3,518)
(1,494)
(1,025)
$ 57,999
$ 57,887
$ 55,039
See Liquidity and Capital Resources – Financing Activities in this MD&A for a discussion of underlying credit facilities and
Notes.
Impairment Loss
An impairment loss of $537.2 million was recorded in 2013 compared with nil in 2012 and $907.7 million in 2011.
As at December 31, 2013, the Company identified the continued decline in the market price of gold as an indicator of
potential impairment for the Company’s long-lived assets and goodwill. As a result of the identification of this indicator, the
Company evaluated its long-lived assets and goodwill for impairment on an asset group and reporting unit basis,
respectively, using updated assumptions and estimates.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
11
The following impairment losses were recorded as at December 31, 2013 as a result of the impairment evaluation:
Property, plant and mine development:
Meadowbank mine
Lapa mine
Goodwill:
Meliadine project
As at December 31, 2013
Pre-impairment
Carrying Value
Impairment
Loss
Post-impairment
Carrying Value
Impairment Loss
(net of tax)
$732,499
$(269,269)
136,766
(67,894)
$869,265
$(337,163)
$463,230
68,872
$532,102
$200,064
$(200,064)
$–
(537,227)
$(194,511)
(41,687)
$(236,198)
$(200,064)
(436,262)
Estimated fair values for the Meadowbank mine and Lapa mine were calculated by discounting the estimated future net
cash flows using discount rates of 6.5% and 5.5% (in nominal terms), respectively, commensurate with their individual
estimated levels of risk. These calculations were based on estimates of future production levels applying gold prices of
$1,238 to $1,300 per ounce (in real terms), foreign exchange rates of US$0.90:C$1.00 to US$0.93:C$1.00, inflation rates
of 2.0% and capital, operating and reclamation costs based on updated life-of-mine plans. Average gold recovery rates
applied were 92.3% and 78.3% for the Meadowbank mine and Lapa mine, respectively.
Estimated after-tax discounted future net cash flows of reporting units with goodwill were calculated as at December 31,
2013. These calculations were based on estimates of future production levels applying long-term gold prices of $1,238 to
$1,300 per ounce (in real terms), foreign exchange rates of US$0.90:C$1.00 to US$0.93:C$1.00, inflation rates of 2.0%
and capital, operating and reclamation costs based on updated life-of-mine plans. The average gold recovery rate applied
to the Meliadine project was 95.1%. A discount rate of 8.0% was used to calculate the estimated after-tax discounted
future net cash flows of the Meliadine project reporting unit, commensurate with its individual estimated level of risk.
In 2012, the Company did not identify any potential indicators of impairment for its long-lived assets and concluded that it
did not have any reporting units that were at risk of failing the goodwill impairment test.
As at 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 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 life was developed and cash flows calculated,
resulting in the following impairment losses being recorded as at December 31, 2011:
As at December 31, 2011
Pre-impairment
Carrying Value
Impairment
Loss
Post-impairment
Carrying Value
Impairment Loss
(net of tax)
Property, plant and mine development:
Meadowbank mine
$1,670,838
$(907,681)
$763,157
$(644,903)
The estimated fair value of the Meadowbank mine was calculated as at December 31, 2011 by discounting the estimated
future net cash flows using a 7.0% discount rate (in nominal terms), commensurate with the estimated level of risk. This
calculation was based on estimates of future gold production applying long-term gold prices of $1,250 to $1,553 per
ounce (in real terms), foreign exchange rates of US$0.92:C$1.00 to US$0.97:C$1.00, an inflation rate of 2.0%, increased
cost estimates based on revised operating levels and an average gold recovery of 92.9%. Future expected operating costs,
capital expenditures and asset retirement obligations were based on the updated life-of-mine plan.
12 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 consolidated financial statements.
Foreign Currency Translation (Gain) Loss
The Company’s operating results and cash flow are significantly impacted by changes in the exchange rate between the
US dollar and the Canadian dollar, Euro and Mexican peso as all of the Company’s revenues are earned in US dollars while
a substantial portion of its operating and capital costs are incurred in Canadian dollars, Euros and Mexican pesos. During
the period from January 1, 2011 through December 31, 2013, the daily US dollar (noon) exchange rate as reported by the
Bank of Canada has fluctuated between C$0.94 and C$1.07, c0.67 and c0.83 and 11.51 Mexican pesos and
14.37 Mexican pesos per US$1.00.
A foreign currency translation gain of $7.2 million was recorded in 2013 compared with a foreign currency translation loss
of $16.3 million in 2012 and a foreign currency translation gain of $1.1 million in 2011. On average, the US dollar
strengthened against the Canadian dollar and weakened against the Euro and the Mexican peso in 2013 compared with
2012. The US dollar strengthened against the Canadian dollar and Mexican peso and weakened against the Euro between
December 31, 2012 and December 31, 2013. The net foreign currency translation gain in 2013 is due primarily to the
translation impact of liabilities denominated in Canadian dollars, offset partially by the translation impact of current assets
denominated in Canadian dollars and liabilities denominated in Euros and Mexican pesos.
Income and Mining Taxes Expense (Recovery)
In 2013, the Company recorded income and mining taxes expense of $35.8 million on a loss before income and mining
taxes of $370.7 million due primarily to non-deductible permanent differences and a deferred tax charge relating to the
enactment of the Special Mining Duty in Mexico, offset partially by the impact of impairment losses on the Meadowbank
and Lapa mines. Effective tax rates were 28.5% in 2012 and 26.9% in 2011. In 2012, the effective tax rate of 28.5% was
higher than the statutory tax rate of 26.3% due to permanent differences, principally stock-based compensation that is not
deductible for tax purposes in Canada. In 2011, an income and mining taxes recovery was recorded due to impairment
losses on the Meadowbank and Goldex mines.
Liquidity and Capital Resources
At December 31, 2013, the Company’s cash and cash equivalents, short-term investments and restricted cash totaled
$170.0 million, compared with $332.0 million at December 31, 2012. The Company’s policy is to invest excess cash in
highly liquid investments of the highest credit quality to eliminate risks associated with these investments. Such
investments with remaining maturities at time of purchase greater than three months are classified as short-term
investments. Decisions regarding the length of maturities are based on cash flow requirements, rates of return and various
other factors.
Working capital (current assets less current liabilities) decreased to $594.2 million at December 31, 2013 from
$626.6 million at December 31, 2012.
Operating Activities
Cash provided by operating activities decreased by $257.7 million to $438.3 million in 2013 compared with 2012 due
primarily to an 18.1% decrease in the average realized price of gold and a $27.2 million increase in production costs. The
decrease in cash provided by operating activities was partially offset by a 5.3% increase in gold production and a
$65.3 million decrease in exploration and corporate development expenses between 2012 and 2013. Cash provided by
operating activities was $667.2 million in 2011 at an average realized price of gold of $1,573.
Investing Activities
Cash used in investing activities increased to $644.5 million in 2013 from $376.2 million in 2012 due primarily to a
$132.2 million increase in capital expenditures, a $73.2 million reduction in net proceeds from the sale of
available-for-sale securities and a $57.1 million increase in purchases of available-for-sale securities and warrants
between periods. Cash used in investing activities was $760.5 million in 2011, including $163.0 million relating to the
November 2011 acquisition of Grayd Resource Corporation.
In 2013, the Company invested cash of $577.8 million in projects and sustaining capital expenditures. Capital
expenditures in 2013 included $116.8 million at the La India project, $84.3 million at the LaRonde mine, $83.8 million at
the Kittila mine, $76.8 million at the Meadowbank mine, $65.1 million at the Goldex mine, $61.4 million at the Meliadine
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
13
project, $42.8 million at the Pinos Altos mine and $46.8 million at the Lapa mine, the Creston Mascota deposit at Pinos
Altos and other projects. The $132.2 million increase in capital expenditures between 2012 and 2013 is mainly
attributable to significant construction expenditures incurred in 2013 relating to the La India project and the Goldex mine’s
M and E Zones. Capitalization of expenditures for the La India project and the Goldex mine’s M and E Zones commenced
in September 2012 and October 2012, respectively. Capital expenditures to complete the Company’s growth initiatives are
expected to be funded by cash provided by operating activities and cash on hand.
On May 16, 2013, the Company completed the acquisition of all of the issued and outstanding common shares of Urastar
Gold Corporation (‘‘Urastar’’) pursuant to a court-approved plan of arrangement under the Business Corporations Act
(British Columbia) for cash consideration of $10.1 million. The Urastar acquisition was accounted for as a business
combination and goodwill of $9.8 million was recognized on the Company’s consolidated balance sheets.
On November 18, 2011, the Company acquired 94.77% of the outstanding shares of Grayd Resource Corporation
(‘‘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 acquisition was
accounted for as a business combination and goodwill of $29.2 million was recognized on the Company’s consolidated
balance sheets. 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.
In 2013, the Company purchased $59.8 million in available-for-sale securities and warrants compared with $2.7 million in
2012 and $91.1 million in 2011. In 2013, the Company received net proceeds of $0.2 million from the sale of
available-for-sale securities compared with $73.4 million in 2012 and $9.4 million in 2011. The Company’s investments in
available-for-sale securities consist primarily of investments in common shares of entities in the mining industry.
Financing Activities
Cash provided by financing activities was $48.7 million in 2013 compared with cash used in financing activities of
$202.6 million in 2012. The primary driver of the change between periods was a net $170.0 million drawdown on the
Credit Facility during 2013, while a net $290.0 million repayment of the Credit Facility during 2012 was partially offset by a
$200.0 million Notes issuance.
On October 23, 2013, the Company declared a cash dividend payable on December 16, 2013, marking the
31st consecutive year that the Company has paid a cash dividend. During 2013, the Company paid dividends of
$126.3 million compared with $118.1 million in 2012 and $98.4 million in 2011. 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.
On July 24, 2012, the Company closed a private placement consisting of $200.0 million of guaranteed senior unsecured
notes (the ‘‘2012 Notes’’). The 2012 Notes mature in 2022 and 2024 and at issuance had a weighted average maturity of
11.0 years and weighted average yield of 4.95%. Proceeds from the 2012 Notes were used to repay amounts outstanding
under the Company’s $1.2 billion unsecured revolving bank credit facility (the ‘‘Credit Facility’’).
On July 20, 2012, the Company amended and restated its Credit Facility. The total amount available under the Credit
Facility remained unchanged at $1.2 billion; however, the maturity date was extended from June 22, 2016 to June 22,
2017 and pricing terms were amended. As at December 31, 2013, the Company’s outstanding balance under the Credit
Facility was $200.0 million. Credit Facility availability is reduced by outstanding letters of credit, amounting to $1.1 million
at December 31, 2013. As at December 31, 2013, $998.9 million was available for future drawdown under the Credit
Facility.
On November 5, 2013, the Company amended its credit agreement with a financial institution relating to its uncommitted
letter of credit facility (the ‘‘Letter of Credit Facility’’). The amount available under the Letter of Credit Facility increased
from C$150.0 million to C$175.0 million. The obligations of the Company under the Letter of Credit Facility are guaranteed
by certain of its subsidiaries. The Letter of Credit Facility may be used to support the reclamation obligations or
non-financial or performance obligations of the Company or its subsidiaries. As at December 31, 2013, $153.7 million had
been drawn under the Letter of Credit Facility.
On April 7, 2010, the Company closed a private placement consisting of $600.0 million of guaranteed senior unsecured
notes due in 2017, 2020 and 2022 (the ‘‘2010 Notes’’) with a weighted average maturity of 9.84 years and weighted
average yield of 6.59%. Proceeds from the offering of the 2010 Notes were used to repay amounts under the Company’s
then outstanding credit facilities.
14 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 2013, there were no letters of
credit drawn under the EDC Facility.
The Company was in compliance with all covenants contained within the Credit Facility, Letter of Credit Facility, 2012
Notes and 2010 Notes as at December 31, 2013.
The Company issued common shares for gross proceeds of $23.7 million in 2013 attributable to the Company’s incentive
share purchase plan, employee stock option plan exercises and the dividend re-investment plan. In 2012 and 2011, the
Company issued common shares for gross proceeds of $32.7 million and $26.5 million, respectively, attributable primarily
to stock option exercises and issuances under the Company’s employee share purchase plan.
Agnico Eagle’s contractual obligations as at December 31, 2013 are set out below:
Contractual Obligations
Total
2014
2015-2016
2017-2018
Thereafter
Letter of credit obligations
Reclamation obligations(i)
Purchase commitments
Pension obligations(ii)
Capital and operating leases
Long-term debt repayment obligations(iii)
Total(iv)
(millions of United States dollars)
$
2.3
$ 2.1
$
–
$
–
$
302.2
43.1
5.8
33.0
1,000.0
3.5
13.0
0.1
14.5
–
3.1
14.2
0.2
9.8
–
13.8
8.6
0.2
6.2
315.0
$ 1,386.4
$ 33.2
$
27.3
$
343.8
$
0.2
281.8
7.3
5.3
2.5
685.0
982.1
(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 ASC 410-30 – Environmental Obligations. See Note 6(a) to the consolidated financial
statements for details.
(ii) The Company provides a non-registered supplementary executive retirement defined benefit plan for certain senior officers (the ‘‘Executives Plan’’). The Executives Plan
provides pension benefits to certain senior officers equal to 2% of their 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 pension plan. Payments under the Executives Plan 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 its
current expiry date.
(iv) The Company’s estimated future cash flows are expected to be sufficient to satisfy the obligations detailed above.
Off-Balance Sheet Arrangements
The Company’s off-balance sheet arrangements as at December 31, 2013 include operating leases of $7.8 million
(see Note 13(b) to the consolidated financial statements) and outstanding letters of credit for environmental and site
restoration costs, custom credits, government grants and other general corporate purposes of $174.3 million of
(see Note 12 to the 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.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
15
2014 Liquidity and Capital Resources Analysis
The Company believes that it has sufficient capital resources to satisfy its 2014 mandatory expenditure commitments
(including the contractual obligations set out above) and discretionary expenditure commitments. The following table sets
out expected capital requirements and resources for 2014:
2014 Mandatory Commitments:
Contractual obligations (from table above)
Accounts payable and accrued liabilities (as at December 31, 2013)
Interest payable (as at December 31, 2013)
Income taxes payable (as at December 31, 2013)
Total 2014 mandatory expenditure commitments
2014 Discretionary Commitments:
Budgeted 2014 capital expenditures
Total 2014 discretionary expenditure commitments
Total 2014 mandatory and discretionary expenditure commitments
2014 Capital Resources:
Cash, cash equivalents and short term investments (as at December 31, 2013)
Budgeted 2014 cash provided by operating activities
Working capital, excluding cash, cash equivalents and short-term investments (as at December 31, 2013)
Available under the Credit Facility
Total 2014 Capital Resources
Amount
(millions of
United States
dollars)
$
$
$
$
$
$
33.2
173.4
13.8
7.5
227.9
416.2
416.2
644.1
141.3
330.8
452.9
998.9
$
1,923.9
While the Company believes its capital resources will be sufficient to satisfy all 2014 commitments (mandatory and
discretionary), the Company may choose to decrease certain of its discretionary expenditure commitments, which
includes certain capital expenditures, should unexpected financial circumstances arise in the future. The Company
believes that it will continue to generate sufficient capital resources to satisfy its planned development and growth
activities.
Quarterly Results Review
For the Company’s detailed 2013 and 2012 quarterly financial and operating results see Summarized Quarterly Data in
this MD&A.
Revenues from mining operations decreased by 2.7% to $437.2 million in the fourth quarter of 2013 compared with
$449.4 million in the fourth quarter of 2012 due primarily to lower sales prices realized on gold and silver, partially offset by
a 36.3% increase in payable gold production between periods. Despite the increase in payable gold production between
periods, production costs decreased by 2.1% to $237.4 million in the fourth quarter of 2013 compared with
$242.4 million in the fourth quarter of 2012 due primarily to operational efficiencies realized at the Meadowbank,
LaRonde and Lapa mines. An impairment loss of $537.2 million was recorded in the fourth quarter of 2013 compared with
nil in the fourth quarter of 2012. Based on an impairment evaluation of the Company’s long-lived assets and goodwill at
December 31, 2013, pre-tax impairment losses of $269.2 million, $200.1 million and $67.9 million were recorded relating
to the Meadowbank mine, Meliadine project and Lapa mines, respectively. As a result, a net loss of $453.3 million was
recorded in the fourth quarter of 2013 compared with net income of $82.8 million in the fourth quarter of 2012.
16 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
Cash provided by operating activities of $135.9 million in the fourth quarter of 2013 compared with $106.0 million in the
fourth quarter of 2012 due primarily to a 36.3% increase in gold production, a $7.3 million decrease in exploration and
corporate development expenses and a $5.0 million decrease in production costs, partially offset by decreases in the
average realized price of gold and silver between periods.
Outlook
The following section contains ‘‘forward-looking statements’’ and ‘‘forward-looking information’’ within the meaning of
applicable securities laws. Please see ‘‘Note to Investors Concerning Forward-Looking Information’’ for a discussion of
assumptions and risks relating to such statements and information.
Gold Production Growth
LaRonde Mine
In 2014, payable gold production at the LaRonde mine is expected to be approximately 215,000 ounces. Over the 2014 to
2016 period, annual average payable gold production at the LaRonde mine is expected to be approximately
248,000 ounces. The commissioning of a cooling plant at the LaRonde mine in the fourth quarter of 2013 is expected to
reduce heat and congestion in the lower section of the mine and provides additional flexibility in the mining plan. As a
result, production from the deeper areas of the mine is expected to ramp up substantially through 2016. Total cash costs
per ounce of gold produced at the LaRonde mine are expected to be approximately $671 in 2014 compared with $763 in
2013, reflecting expectations of higher grades and increased production.
Lapa Mine
In 2014, payable gold production at the Lapa mine is expected to be approximately 80,000 ounces. Over the 2014 to 2016
period, annual average payable gold production at the Lapa mine is expected to be approximately 67,000 ounces. 2014
and 2015 are the final two years of full production based on the Lapa mine’s current life of mine plan with production
expected to decline due to lower grades. The Company expects that the Lapa mine will only operate for a portion of 2016.
Additional exploration results from the Zulapa Z8 Zone could potentially extend the mine life through 2016. Total cash
costs per ounce of gold produced at the Lapa mine are expected to be approximately $850 in 2014 compared with $678 in
2013, reflecting expectations of lower grades and decreased production.
Goldex Mine
In 2014, payable gold production at the Goldex mine is expected to be approximately 80,000 ounces. Over the 2014 to
2016 period, annual average payable gold production at the Goldex mine is expected to be approximately 90,000 ounces.
The Goldex mine achieved commercial production from the M and E Zones in October 2013. Production expectations
reflect an expected increase in throughput from 5,500 tonnes per day in the fourth quarter of 2014 to 6,000 tonnes per
day in 2015. A portion of the additional throughput is expected to be derived from the proposed development of the
satellite MX and E2 Zones. Exploration continues on several other satellite zones, including the deeper D Zone, which has
the potential to extend the Goldex mine’s life. Total cash costs per ounce of gold produced at the Goldex mine are expected
to be approximately $799 in 2014 compared with $782 in 2013.
Meadowbank Mine
In 2014, payable gold production at the Meadowbank mine is expected to be approximately 430,000 ounces. Over the
2014 to 2016 period, annual average payable gold production at the Meadowbank mine is expected to be approximately
397,000 ounces. In the second half of 2013, higher than expected grades were mined in the Portage and Goose pits,
resulting in higher than expected production. A re-interpretation of the Meadowbank mine’s block models has resulted in
a 16% improvement in expected reserve gold grade to 3.27 grams per tonne. The Company expects to continue to
encounter higher grade mineralization in the first half of 2014, which it believes will be a key driver of production for the
year. After 2014, production is expected to be driven by higher reserve grades and the ability to maintain throughput levels
in excess of 11,000 tonnes per day. Total cash costs per ounce of gold produced at the Meadowbank mine are expected to
be approximately $629 in 2014 compared with $774 in 2013.
Kittila Mine
In 2014, payable gold production at the Kittila mine is expected to be approximately 150,000 ounces. Over the 2014 to
2016 period, annual average payable gold production at the Kittila mine is expected to be approximately 160,000 ounces.
Steady production growth is expected at the Kittila mine over the next three years. In 2014, a gradual return to reserve
grade is expected once the remaining higher grade portions of the Suuri pit pillar are extracted. The 750 tonnes per day
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
17
mill expansion is expected to increase throughput capacity at the mine to 3,750 tonnes per day and is expected to be
completed in mid-2015. Increased mill throughput is expected to offset declines in reserve grade over the next three
years. Total cash costs per ounce of gold produced at the Kittila mine are expected to be approximately $759 in 2014
compared with $601 in 2013.
Pinos Altos Mine
In 2014, payable gold production at the Pinos Altos mine is expected to be approximately 145,000 ounces. Over the 2014
to 2016 period, annual average payable gold production at the Pinos Altos mine is expected to be approximately
160,000 ounces. The Company expects that strong operating performance in 2013 will continue over the next three years,
supporting higher mill throughput. The $106.0 million Pinos Altos shaft sinking project remains on schedule for
completion in 2015. Total cash costs per ounce of gold produced at the Pinos Altos mine are expected to be approximately
$532 in 2014 compared with $412 in 2013, reflecting expectations of decreased production and lower metal prices for the
mine’s byproducts.
Creston Mascota deposit at Pinos Altos
In 2014, payable gold production at the Creston Mascota deposit at Pinos Altos is expected to be approximately
40,000 ounces. Over the 2014 to 2016 period, annual average payable gold production at the Creston Mascota deposit at
Pinos Altos is expected to be approximately 40,000 ounces. Active leaching at the Creston Mascota deposit at Pinos Altos
resumed in March 2013 after a temporary suspension, with production subsequently meeting Company expectations.
Lower production is expected over the next three years due to lower anticipated ore grades. Construction on the Phase 3
leach pad is expected to be completed in March 2014. Production is expected to increase in the second half of 2014 as
the planned installation of a new agglomerator is expected to increase crushed ore processing capabilities. Total cash
costs per ounce of gold produced at the Creston Mascota deposit at Pinos Altos are expected to be approximately $754 in
2014 compared with $485 in 2013, reflecting expectations of lower metal prices for the mine’s byproducts.
La India Project
The La India project in Sonora, Mexico, located approximately 79 kilometres from the Company’s Pinos Altos mine, was
acquired in November 2011 through the purchase of Grayd Resource Corporation, which included a 56,000 hectare land
position in the Mulatos Gold belt. Commissioning of the mine commenced ahead of schedule in the third quarter of 2013.
Commercial production is expected to be achieved at the La India project in the first quarter of 2014. Pre-commercial
production at the La India project in 2013 was 3,180 ounces of gold. In 2014, payable gold production at the La India mine
is expected to be approximately 50,000 ounces. Over the 2014 to 2016 period, annual average payable gold production at
the La India mine is expected to be approximately 77,000 ounces. Total cash costs per ounce of gold produced at the
La India mine are expected to be approximately $743 in 2014.
Growth Summary
With the achievement of commercial production at the Kittila, Lapa and Pinos Altos mines in 2009, the Meadowbank mine
in 2010, the Creston Mascota deposit at Pinos Altos and LaRonde mine extension in 2011, and the Goldex mine M and
E Zones in October 2013, Agnico Eagle has transformed from a one mine operation to a six mine company over the last
six years, culminating in record annual payable gold production of 1,099,335 ounces in 2013. As the Company continues
its next growth phase from this expanded production platform, it expects to continue to deliver on its vision and strategy.
Annual payable gold production is expected to increase to approximately 1,275,000 ounces in 2016, representing a
16.0% increase compared with 2013. The Company expects that the main contributors to targeted increases in payable
gold production, mineral reserves and mineral resources will include:
(cid:127) Continued conversion of Agnico Eagle’s current mineral resources to mineral reserves
(cid:127) Increased production from the higher grade orebody in the LaRonde mine extension
(cid:127) The anticipated achievement of commercial production at the La India project in the first quarter of 2014
(cid:127) The ramp up of operations at the Goldex mine’s M and E Zones, which achieved commercial production on
October 1, 2013
18 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
Financial Outlook
Revenue from Mining Operations and Production Costs
In 2014, the Company expects to continue to generate solid cash flow with payable gold production between 1,175,000
and 1,205,000 ounces, up from 1,099,335 ounces in 2013 due primarily to a full year of operations for the Goldex mine’s
M and E Zones which achieved commercial production on October 1, 2013, the anticipated achievement of commercial
production at the La India project in the first quarter of 2014 and increased production from deeper areas of the LaRonde
mine facilitated by the commissioning of a cooling plant in the fourth quarter of 2013.
The table below sets out actual payable production in 2013 and estimated payable production in 2014:
Gold (ounces)
Silver (thousands of ounces)
Zinc (tonnes)
Copper (tonnes)
2014 Estimate
2013 Actual
1,175,000 - 1,205,000
1,099,335
3,200
7,830
5,126
4,623
19,814
4,835
In 2014, the Company is expecting total cash costs per ounce of gold produced at the LaRonde mine to be $671
compared with $763 in 2013. In calculating estimates of total cash costs per ounce of gold produced for the LaRonde
mine, net silver, zinc and copper byproduct revenue is treated as a reduction to production costs. Therefore, production
and price assumptions for byproduct metals play an important role in the LaRonde mine’s total cash costs per ounce of
gold produced estimate due to its significant byproduct production. In addition, the Pinos Altos mine generates significant
silver byproduct production. An increase in byproduct metal prices above forecast levels would result in improved total
cash costs per ounce of gold produced at these mines.
As production costs at the LaRonde, Lapa, Goldex, and Meadowbank mines are denominated primarily in Canadian
dollars, production costs at the Kittila mine are denominated primarily in Euros and a portion of production costs at the
Pinos Altos mine, the Creston Mascota deposit at Pinos Altos and the La India mine are denominated in Mexican pesos,
the Canadian dollar/US dollar, Euro/US dollar and Mexican peso/US dollar exchange rates also impact the total cash costs
per ounce of gold produced estimates.
The table below sets out the metal price and exchange rate assumptions used in deriving the estimated 2014 total cash
costs per ounce of gold produced (production estimates for each metal are shown in the table above) as well as the market
average closing prices for each variable for the period of January 1, 2014 through March 12, 2014:
Silver (per ounce)
Zinc (per tonne)
Copper (per tonne)
C$/US$ exchange rate (C$)
Euro/US$ exchange rate (Euros)
Mexican peso/US$ exchange rate (Mexican pesos)
2014
Assumptions
Actual Market Average
(January 1, 2014 —
March 12, 2014)
$20.00
$2,000
$7,100
$1.11
e0.74
13.25
$20.48
$2,043
$7,162
$1.10
e0.73
13.25
See ‘‘Risk Profile — Metal Prices and Foreign Currencies’’ below in this MD&A for the estimated impact on 2014 total cash
costs per ounce of gold produced of a 10% change in assumed metal prices and exchange rates.
Exploration and Corporate Development Expense
In 2014, Agnico Eagle expects to incur expenditures of $53.0 million on minesite, advanced project and greenfield
exploration. Exploration expenditures are expected to be focused on Nunavut, Canada (the Meliadine project and IVR
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
19
property, located approximately 50 kilometers northwest of the Meadowbank mine), Quebec, Canada (the Akasaba West
Property acquired on January 13, 2014), Mexico (the Tarachi property and La India project) and Finland. These
exploration programs are designed to further evaluate deposits that could ultimately supplement the Company’s existing
production profile. Exploration is success driven and thus these estimates could change materially based on the success
of the various exploration programs. When it is determined that a mining property can be economically developed as a
result of established mineral reserves, the costs of drilling and development to further delineate the ore body on such a
property are capitalized. In 2014, the Company expects to capitalize $23.0 million on drilling and development related to
further delineating ore bodies and converting mineral resources into mineral reserves.
Other Expenses
General and administrative expenses are expected to decrease to about $92.5 million in 2014 compared with
$115.8 million in 2013 due primarily to a lower non-cash Black-Scholes pricing of stock options granted by the Company
in 2014. Provincial capital tax expense is expected to be nil in 2014 due to the elimination of the Ontario and Quebec
provincial capital taxes in 2010. Amortization of property, plant and mine development is expected to increase to
approximately $365.0 million in 2014 compared with $296.1 million in 2013. Interest expense is expected to increase to
approximately $59.5 million in 2014 compared with $58.0 million in 2013 due primarily to increased amounts drawn
under the Credit Facility. The Company’s effective tax rate is expected to be approximately 42.5% in 2014.
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 $416.0 million in 2014. The
Company expects to fund its 2014 capital expenditures through operating cash flow from the sale of its gold production
and the associated byproduct metals. Significant components of the expected 2014 capital expenditures program include
the following:
(cid:127) $166.0 million in capitalized development expenditures relating to the Kittila mine ($65.0 million), Meliadine
project ($42.0 million), Pinos Altos mine ($29.0 million), LaRonde mine ($13.0 million), Goldex mine
($13.0 million) and the La India mine ($4.0 million);
(cid:127) $227.0 million in sustaining capital expenditures relating to the LaRonde mine ($68.0 million), Kittila mine
($56.0 million), Meadowbank mine ($34.0 million), Pinos Altos mine ($29.0 million), Lapa mine ($16.0 million),
Goldex mine ($16.0 million), the Creston Mascota deposit at Pinos Altos ($6.0 million) and the La India mine
($2.0 million); and
(cid:127) $23.0 million in capitalized drilling expenditures.
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 to fund acquisitions,
Agnico Eagle may be required to issue debt or securities to satisfy cash requirements.
All-in Sustaining Costs per Ounce of Gold Produced
In 2013, all-in sustaining costs per ounce of gold produced was calculated as the aggregate of total cash costs per ounce
of gold produced and sustaining capital expenditures, exploration and corporate development expenses (excluding
greenfield exploration) and general and administrative expenses (net of stock options) per ounce of gold produced.
Based on the recommendations of the World Gold Council in 2013, the Company has modified its calculation of all-in
sustaining costs per ounce of gold produced for 2014 as the aggregate of total cash costs per ounce of gold produced and
sustaining capital expenditures (including capitalized exploration), general and administrative expenses (including stock
options) and reclamation expenses per ounce of gold produced. All-in sustaining costs per ounce of gold produced are
expected to be approximately $990 in 2014.
Risk Profile
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 its mining facilities. Emphasis is
placed on hiring and retaining competent personnel and developing their skills through training, including safety and loss
control training. 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 received safety and development awards. Nevertheless,
the Company and its employees continue efforts to improve workplace safety with an emphasis on safety procedure
training for both mining and supervisory employees.
20 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Company also mitigates some of its 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 restricts coverage to
insurance companies of the highest credit quality. For a more complete list of the risk factors affecting the Company,
please see ‘‘Risk Factors’’ in the AIF.
Metal Prices and Foreign Currencies
Agnico Eagle’s net income is most sensitive to metal prices and the Canadian dollar/US dollar, Euro/US dollar and Mexican
peso/US dollar exchange rates. For the purpose of the sensitivities detailed in the table below, Agnico Eagle used the
following metal price and exchange rate assumptions:
(cid:127) Gold — $1,200 per ounce;
(cid:127) Silver — $20 per ounce;
(cid:127) Zinc — $2,000 per tonne;
(cid:127) Copper — $7,100 per tonne;
(cid:127) Canadian dollar/US dollar — C$1.11 per $1.00;
(cid:127) Euro/US dollar — c0.74 per $1.00; and
(cid:127) Mexican peso/US dollar — 13.25 Mexican pesos per $1.00.
Changes in the market price of gold can be attributed to numerous factors such as demand, global mine production levels,
central bank purchases and sales and investor sentiment. Changes in the market prices of other metals can be attributed
to factors such as demand and global mine production levels. Changes in exchange rates can be attributed to factors such
as supply and demand for currencies and economic conditions in each country or currency area. In 2013, the ranges of
metal prices and exchange rates were as follows:
(cid:127) Gold: $1,181 — $1,696 per ounce, averaging $1,411 per ounce;
(cid:127) Silver: $18 — $32 per ounce, averaging $24 per ounce;
(cid:127) Zinc: $1,784 — $2,187 per tonne, averaging $1,909 per tonne;
(cid:127) Copper: $6,637 — $8,267 per tonne, averaging $7,325 per tonne;
(cid:127) Canadian dollar/US dollar: C$0.98 — C$1.07 per $1.00, averaging C$1.03 per $1.00;
(cid:127) Euro/US dollar: c0.72 — c0.78 per $1.00, averaging c0.75 per $1.00; and
(cid:127) Mexican peso/US dollar: 11.94 — 13.47 Mexican pesos per $1.00, averaging 12.77 Mexican pesos per $1.00.
The following table sets out the estimated impact on 2014 total cash costs per ounce of gold produced 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 the 2013 price ranges shown above, a 10% change in
assumed metal prices and exchange rates is reasonably likely in 2014.
Changes in variable
10% Silver
10% Zinc
10% Copper
10% Canadian dollar/US dollar
10% Euro/US dollar
10% Mexican peso/US dollar
Impact on
Total Cash Costs
per Ounce of
Gold Produced
$ 6
$ 1
$ 3
$56
$14
$ 5
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
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
21
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 the price of gold. 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. The Company enters 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 it does 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, diesel fuel. 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 drawdowns 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,
2013, the Company had drawn down $200.0 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, 2013, short-term
investments amounted to $2.2 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.
Financial Instruments
The Company occasionally 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. Because derivative contracts are primarily used as economic hedges, changes in mark-to-market
value may impact income. For a description of the accounting treatment of derivative contracts, please see ‘‘Critical
Accounting Estimates – Financial Instruments’’ in this MD&A.
Operational Risk
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, ground conditions, pit wall failures, flooding and gold bullion losses. The occurrence of such events and
circumstances may 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
22 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 be required to incur significant costs that could have a material adverse
effect on its financial performance and results of operations.
The Company’s gold production and operating margin has diversified over the last six years, reflecting the transition from
one mine to six mines at the end of 2013. However, the Meadowbank mine accounted for approximately 39.2% of the
Company’s payable gold production in 2013, and is expected to continue to account for a significant portion of payable
gold production in future years.
The following table sets out estimated 2014 payable gold production by mine:
LaRonde mine
Lapa mine
Goldex mine
Meadowbank mine
Kittila mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
La India mine
Total
Estimated
Payable Gold
Production
(Ounces)
Estimated
Payable Gold
Production (%)
215,000
80,000
80,000
430,000
150,000
145,000
40,000
50,000
18
7
7
36
13
12
3
4
1,190,000
100
Mining is a complex and unpredictable business and, therefore, actual payable gold production may differ from estimates.
Adverse conditions affecting mining or milling may have a material adverse impact on the Company’s financial
performance and results of operations. The Company anticipates using revenue generated by its operations to finance the
capital expenditures required at its mine projects.
The Company’s payable gold production may fall below estimated levels as a result of occurrences 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, an autoclave, a filter press or a grinding mill. Payable gold production may also be reduced if, during the
course of mining or processing, unfavorable 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 or dilution increases, electrical power is interrupted or heap leach processing results in
containment discharge. The Company has failed to meet payable gold production forecasts in the past due to adverse
conditions such as rock falls, production drilling challenges, lower than planned mill recoveries and grades, higher than
expected dilution, mine structural issues and delays in the commencement of production and ramp up at new mines. In
2011, payable gold production was 985,460 ounces, significantly below estimates due primarily to the unexpected
suspension of mining operations and payable gold production at the Goldex mine on October 19, 2011, a temporary
production disruption at the Meadowbank mine due to a fire in its kitchen facilities, and lower than expected grades and
throughput at the LaRonde mine. Although actual payable gold production of 1,043,811 ounces exceeded estimates in
2012, a movement of leached ore from the upper lifts of the Creston Mascota deposit at Pinos Altos phase one leach pad
suggested that the integrity of the phase one leach pad liner had been compromised and caused the suspension of active
leaching in the fourth quarter of 2012. Although actual payable gold production of 1,099,335 ounces exceeded the
estimate of 1,060,000 ounces in 2013, the temporary suspension of active leaching at the Creston Mascota deposit at
Pinos Altos continued through March 13, 2013 before operations resumed. 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.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
23
The LaRonde mine extension is one of the deepest operations in the Western Hemisphere, with an expected maximum
depth of over 3 kilometers. The operations of the LaRonde mine extension 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. In 2012, challenges associated with heat and congestion in
the LaRonde mine extension caused a delay in the expected ramp up in gold production. Although a new cooling plant
began operating in December 2013, the depth of the operations could continue to 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 continued sustaining development of the LaRonde mine extension is subject to a number of risks and challenges,
including unforeseen geological formations, the implementation of new mining processes, and engineering and mine
design adjustments. These occurrences may result in operational delays and in additional costs being incurred by the
Company beyond those budgeted.
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. 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, among
other things, assumed metal prices, foreign exchange rates and operating costs. 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 record a material impairment loss on its investment in mining
properties or delay or discontinue production or the development of new projects, resulting in 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 reporting 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’s operations include a mine in Finland and a mine in northern Mexico. A second project in northern Mexico,
known as the La India project, is expected to achieve commercial production in the first quarter of 2014. These operations
are exposed 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 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, licenses, 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.
The Company’s Meadowbank mine is located in the Kivalliq District of Nunavut in northern Canada, approximately
70 kilometers north of Baker Lake. Though the Company built 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 are 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 port of Baker Lake during this shipping season, which may be further truncated due to weather conditions. If the
Company is not able 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, any items necessary to replace or
repair such equipment may have to be shipped through Baker Lake during this window. Failure to have 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.
24 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
Regulatory Risk
The Company’s mining and mineral processing operations, exploration activities and properties 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.
Controls Evaluation
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting (‘‘ICFR’’) and disclosure controls and procedures (‘‘DC&P’’). The Company’s management, under the
supervision of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of its
ICFR and DC&P as at December 31, 2013. Based on this evaluation, management concluded that the Company’s ICFR
and DC&P were effective.
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, 2014 were exercised:
Common shares outstanding at March 12, 2014
Employee stock options
Governance
174,233,738
12,576,810
186,810,548
Agnico Eagle’s Sustainable Development Policy, approved by the Board of Directors in 2012, formally outlines the guiding
principles and commitments to be upheld by the Company. The Sustainable Development Policy is based on four
fundamental values of sustainable development at Agnico Eagle: respect for our employees; protection of the
environment; safe operations; and respect for our communities.
Sustainable Development Management
In 2013, the Company continued the process of introducing sustainability into all aspects and stages of its business, from
the corporate objectives and executive responsibility of ‘maintaining high standards in sustainability’ to exploration and
acquisition activities, day to day operating and site closure plans. This integration will lead to employees taking greater
ownership towards the achievement of responsible mining practices.
This process will be completed through the development and implementation of a formal Health, Safety and
Environmental Management System, termed the Responsible Mining Management System (‘‘RMMS’’). The aim of the
RMMS is to further promote a culture of accountability and leadership in managing health, safety, environmental and
social acceptability matters. RMMS documentation will be supported by the software Intelex, which is widely used in the
Canadian mining industry and is consistent with the ISO 14001 Environmental Management System and the OHSAS
18001 Health and Safety Management System.
The RMMS will incorporate the Company’s commitments as a signatory to the International Cyanide Management Code
(the ‘‘Cyanide Code’’). Agnico Eagle became a signatory to the Cyanide Code in September 2011 and is seeking to have the
Kittila, Pinos Altos and Meadowbank mines audited and certified under the Cyanide Code by an independent third party
within the three year deadline. Internal audits have been performed at each of these mines and action plans to resolve
identified gaps in procedures are being implemented prior to the external audit.
The RMMS will also integrate the requirements of the Mining Association of Canada’s industry leading Towards
Sustainable Mining Initiative (the ‘‘TSM Initiative’’), as well as the Global Reporting Initiative’s sustainability reporting
guidelines for the mining industry. In December 2010, Agnico Eagle became a member of the Mining Association of
Canada and endorsed the TSM Initiative. The TSM Initiative was developed to help mining companies evaluate the quality,
comprehensiveness and robustness of their management systems under six performance elements: crisis management;
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
25
energy and greenhouse gas emissions management; tailings management; biodiversity conservation management; health
and safety; and aboriginal relations and community outreach. In 2013, the Company conducted an internal TSM Initiative
analysis and program implementation at all of its divisions and will undergo a program internal audit in 2014.
Employee Health and Safety
Agnico Eagle’s overall health and safety performance improved during 2013. A combined lost-time accident frequency
rate of 1.7 was achieved, a 30% reduction from 2012 and substantially below the target rate of 2.8. This is the best
lost-time accident frequency rate ever recorded by the Company. Extensive health and safety training was also provided to
all employees during 2013.
One of the measures implemented by the Company to improve safety performance is the workplace safety card system.
This system was implemented across the Company to strengthen the risk-based training program. Developed by the
Quebec Mining Association, the safety card system teaches workers and supervisors to use risk-based thinking in their
duties. Workers and their supervisors must meet every day to discuss on-the-job health and safety matters. The safety
card system also allows the Company’s workers and supervisors to document daily inspections and record observations on
conditions in the workplace, as well as the nature of risks, issues and other relevant information. In addition, it allows
supervisors to exchange and analyze all relevant information between shifts and various technical services to improve
efficiency and safety.
In 2013, the Quebec Mining Association (‘‘AMQ’’) acknowledged Agnico Eagle’s strong performance in this area,
recognizing 24 Agnico Eagle supervisors from the LaRonde, Lapa and Goldex mines for keeping their workers safe. The
supervisors received AMQ security trophy awards for 50,000, 100,000 and 150,000 hours supervised without a lost-time
accident.
Each of the Company’s mining operations has its own Emergency Response Plan and has personnel trained to respond to
safety, fire and environmental emergencies. Each mine also maintains the appropriate response equipment. In Mexico,
the Company’s emergency response team was called by local authorities on several occasions to help in emergency
situations outside the minesite. In 2013, the corporate crisis management plan was updated to align with industry best
practices and the TSM Initiative requirements.
The Pinos Altos mine won the Silver Helmet award at the 2013 Annual Safety Contest of the Mexican Chamber of Mines,
for maintaining the best safety statistics for underground mines in Mexico with more than 500 workers during 2012. In
2013 the Pinos Altos Mine Rescue Team won the ‘‘Underground Mine Rescue’’ and the ‘‘BG-4 Breathing Apparatus’’
events during the 2013 National Mexican Mine Rescue Competition.
In May 2013, personnel from five of Quebec mines competed in mine rescue competitions. The Goldex Mine Rescue team
won for their second time the Provincial Mine Rescue competition. They also took home trophies for ‘‘Best operating team’’
and ‘‘Best performance during the mission’’.
Community
The Company’s ultimate goal, at each of its operations worldwide, is to hire as much as possible of its workforce, including
management teams, directly from the local region in which the operation is located. In 2013 the overall company average
for local hiring was 81%. The Company believes that providing employment is one of its most significant contributions it
can make to the communities in which it operates.
Agnico Eagle also works closely with neighboring communities to develop alternative employment and business
opportunities to help diversify local economies. For example, at the Pinos Altos mine in Mexico, the Company helped a
group of local women start up a sewing cooperative to help fill the demand for clothing manufacturing from both the local
mining industry and surrounding communities. The success of the clothing cooperative in Mexico led to the development
of a similar program in Arviat, Nunavut. The Meadowbank mine has teamed up with the Arviat Kiluk sewing workshop,
which will provide the Meadowbank mine with a range of commercial sewing services, including sewing repairs and
work-wear. The Arviat Kiluk will also design and produce new promotional products with Agnico Eagle’s logo, including
sealskin vests, mitts and computer bags.
In 2012, the Company began a substantial three-year investment in an educational program known as Mining Matters’
Aboriginal Education and Outreach Programs in the Kivalliq region of Nunavut. The goal of the program is to show young
people that there are interesting jobs and careers for them in the north, and that the mining industry can be a key source of
these opportunities.
In 2013, with the support of the Kivalliq Mine Training Society, the Meadowbank team has developed a unique upward
mobility training program for Inuit employees. This program provides training and career path opportunities for Inuit with
26 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
limited education and work experience in the area of heavy equipment operators, mill operators and site services. Skills
acquired through the program are easily transferable to other sectors of the Nunavut economy.
For the sixth year in a row, the Pinos Altos mine was certified as a Socially Responsible Company by the Mexican Centre for
Philanthropy (Centro Mexicano para la Filantrop´ıa) and the Alliance for Social Responsibility of Enterprises (Alianza por la
Responsabilidad Social Empresarial en M ´exico). This certification recognizes the excellence of the social responsibility
practices at the Pinos Altos mine. Agnico Eagle Mexico was also recognized by the Canadian Chamber of Commerce in
Mexico with the 2013 Outstanding Business Award (COBA) for Corporate Social Responsibility.
The Company continues to support a number of community health and educational initiatives in the region surrounding
the Pinos Altos mine, including the establishment of a local sewing cooperative and donating material for the construction
of new classrooms or for the repair of existing classrooms.
Environment
In 2013, three notices of infraction were received by the Company. Two of the notices of infraction were of an
administrative nature, while the third involves an ongoing investigation relating to a seepage event from a waste rock pile.
The Kittila mine received an updated environmental permit in July 2013 and is appealing some of the requirements
included in the permit. In 2013, construction was completed on the road between the community of Rankin Inlet and the
Meliadine project. A Draft Environmental Impact Statement for the Meliadine project was prepared and submitted to the
Nunavut Impact Review Board in January 2013.
The Creston Mascota deposit at Pinos Altos was audited in 2013 to obtain certification as an Industria Limpia (Clean
Industry) by La Procuradur´ıa Federal de Protecci ´on al Ambiente (the federal environmental protection agency in Mexico).
This certification recognizes excellence in environmental management and has previously also been received by the Pinos
Altos mine.
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, goodwill and asset retirement obligations. In making judgments about the carrying value of
assets and liabilities, the Company uses estimates based on historical experience and 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 consolidated financial statements. Management has discussed the development and
selection of the following critical accounting policies with the Audit Committee which has reviewed the Company’s
disclosure in this MD&A.
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
units-of-production method, based on estimated proven and probable mineral 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 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 mining of 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 mine development costs used in commercial production on a units-of-production
basis based on the estimated tonnage of proven and probable mineral reserves of the mine. The units-of-production
method defines the denominator as the total tonnage of proven and probable mineral reserves. Plant and equipment is
amortized on a straight-line basis over its specifically identified useful life.
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 appropriate category of plant and equipment.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
27
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 mineral reserves, the costs of
drilling and development to further delineate the ore body on such property are capitalized. The establishment of proven
and probable mineral reserves is based on results of final feasibility studies that 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 methodology described 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 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
operating mines 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 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 acquired and liabilities assumed
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. 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 each reporting unit’s carrying
amount. 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.
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 the Company’s concentrate sales contracts with third-party smelters, final prices for the metals
contained in the concentrate are determined based on the prevailing spot market metal prices on a specified future date,
which is established as of 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.
Reclamation Costs
On an annual basis, the Company assesses cost estimates and other assumptions used in the valuation of asset retirement
obligations (‘‘AROs’’) at each of its mineral properties to reflect events, changes in circumstances and new information
28 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
available. Changes in these cost estimates and assumptions have a corresponding impact on the fair value of the AROs.
For closed mines, any change in the fair value of AROs results in a corresponding charge or credit to income, 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 operation of mining properties and 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 and rehabilitation,
demolition of buildings and 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 proven and probable mineral 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 income.
Environmental remediation liabilities (‘‘ERLs’’) 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 ERLs arising from past acts. ERL fair value is measured by discounting the expected
related 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 ERL is incurred. On an annual basis, the Company
assesses cost estimates and other assumptions used in the valuation of ERLs 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 ERL. Any change in the fair value of ERLs results in a corresponding charge or credit to income. Upon
settlement of an ERL, Agnico Eagle records a gain or loss if the actual cost differs from the carrying amount of the ERL.
Settlement gains/losses are recorded in income.
Other environmental remediation costs that are not AROs or ERLs as defined by the Financial Accounting Standards
Board’s Accounting Standards Codification (‘‘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 assets and liabilities are measured using the enacted tax rates and laws
expected to be in effect when the temporary 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 greater than fifty 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.
The Company adjusts these mineral 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 estimate of the tax liabilities. If the Company’s estimate of tax liabilities proves to be less than the ultimate
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
29
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.
Financial Instruments
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 and may use such means to
manage exposure to certain input costs. 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 statements of income (loss) and comprehensive income (loss) or in
shareholders’ equity as a component of accumulated other comprehensive 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 Employee 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 statements of income (loss) and
comprehensive 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 the
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 (loss) 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 inventories or expensed, except for sustaining capital costs related to mining properties,
plant and equipment or mine 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 (iii) and (vi) of the ‘‘Reconciliation of Production Costs to Total Cash Costs per Ounce of Gold Produced by Mine’’
section of this MD&A for a discussion of stripping costs with regards to ‘‘total cash costs per ounce of gold produced’’.
Recently Issued Accounting Pronouncements and Developments
Under Securities and Exchange Commission (‘‘SEC’’) Staff Accounting Bulletin 74, the Company is required to disclose
information related to new accounting standards that have not yet been adopted. Agnico Eagle has evaluated newly issued
accounting standards that have not yet been adopted and does not expect them to significantly impact the Company’s
consolidated financial statements.
30 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
International Financial Reporting Standards
As permitted by both the SEC in the United States and the Canadian Securities Administrators (‘‘CSA’’) in Canada, Agnico
Eagle currently prepares and files its consolidated financial statements in accordance with US GAAP. Generally accepted
accounting principles for Canadian publicly accountable enterprises became International Financial Reporting Standards
(‘‘IFRS’’) in 2011 and the SEC now accepts financial statements prepared in accordance with IFRS without reconciliation
to US GAAP from foreign private issuers. Accordingly, Agnico Eagle has decided to convert its basis of accounting to IFRS
to enhance the comparability of its financial statements to the Company’s peers in the mining industry.
The Company has commenced the process of converting its basis of accounting from US GAAP to IFRS with a transition
date of January 1, 2013. Agnico Eagle anticipates reporting under IFRS for interim and annual periods beginning in the
third quarter of 2014, with comparative information restated under IFRS.
The adoption of IFRS may require the Company to make changes in accounting policies that may have an impact on its
reported financial position and results of operations. Where accounting policy alternatives are available, Agnico Eagle’s
primary objective will be the selection of IFRS accounting policies that provide meaningful and transparent information to
shareholders.
The Company has developed a detailed IFRS conversion plan which includes the following three phases and the key
activities to be performed in each phase:
(cid:127) Assessment phase: During this now completed phase, the Company established a steering committee and IFRS
working group, developed a detailed project plan, designed and implemented internal controls over the IFRS
conversion plan and evaluated the high level differences between US GAAP and IFRS that may have an impact on
the Company.
(cid:127) Impact analysis and design phase: This phase involves the detailed analysis and quantification of the differences
between Agnico Eagle’s accounting policies under US GAAP and IFRS, the selection of IFRS accounting policies,
the assessment of the impact on financial information systems and the development of a strategy for capturing
IFRS comparative financial information, the incorporation of IFRS accounting policy and process changes into the
Company’s internal controls, the assessment of contractual arrangements and budgeting processes for IFRS
conversion impacts and the provision of technical training to key finance and other personnel. This phase is in
process and is expected to be completed during the second quarter of 2014.
(cid:127) Implementation phase: This phase involves the implementation of changes to the Company’s accounting policies
and business processes as identified through the impact analysis and design phase and the revision of the
Company’s Accounting Policies and Procedures Manual to reflect these changes. The implementation phase will
culminate in the preparation of IFRS consolidated financial statements including first-time adoption reconciliations
from US GAAP in the third quarter of 2014.
Significant identified differences between US GAAP and IFRS and available IFRS accounting policy choices that may have
an impact on the Company’s consolidated financial statements are outlined below. These differences should not be
regarded as a complete list of changes that will result from the transition to IFRS, rather they encompass management’s
high level evaluation of significant differences between US GAAP and IFRS and available IFRS accounting policy choices
as they currently exist. At this stage in the IFRS conversion plan, the Company has not quantified the anticipated impact of
these differences on our consolidated financial statements nor has the Company selected the IFRS accounting policies it
will adopt.
First-time adoption of IFRS
IFRS 1 First-time Adoption of International Financial Reporting Standards (‘‘IFRS 1’’) provides guidance for an entity’s
initial adoption of IFRS. IFRS 1 generally requires that IFRS effective at the end of an entity’s first IFRS reporting period be
applied retrospectively, with specific mandatory exceptions and certain optional exemptions. In accordance with its IFRS
conversion plan, Agnico Eagle’s first IFRS reporting period will be the third quarter of 2014.
Impairment
Under US GAAP, a two-step approach is used for long-lived asset impairment testing whereby long-lived assets are first
tested for recoverability based on their expected undiscounted cash flows. If a long-lived asset’s expected undiscounted
cash flow exceeds the recorded carrying amount, no impairment charge is required. If the expected undiscounted cash
flow is lower than the recorded carrying amount, the long-lived assets are written down to their estimated fair value. US
GAAP does not permit the reversal of impairment losses.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
31
Under IFRS, IAS 36 Impairment of Assets (‘‘IAS 36’’) prescribes a one-step approach for asset impairment testing and
measurement whereby an asset’s recoverable amount is compared directly against its recorded carrying amount. Under
IAS 36, an asset’s recoverable amount is determined as the higher of the estimated fair value less costs to sell or value in
use (which is measured using discounted cash flows). If an asset’s recoverable amount is less than the recorded carrying
amount, an impairment charge is required. IAS 36 also requires the reversal of previously recorded impairment losses
where circumstances have changed such that the impairments have been reduced.
The difference in the approach to asset impairment testing and measurement may result in more frequent impairment
charges under IFRS, where asset carrying values previously supported under US GAAP on an undiscounted cash flow
basis cannot be supported on a discounted cash flow basis. However, the impact of any additional asset impairments
recorded under IFRS may be partially offset by the requirement to reverse previously recorded impairment losses where
circumstances have changed.
Production stripping costs
Under US GAAP, the cost of removing overburden and waste materials to expose ore and access mineral deposits for
extraction during the production phase of a surface mine (‘‘production stripping costs’’) are accounted for as production
costs and are included in the cost of the inventory produced during the period in which the stripping costs are incurred.
Under IFRS, IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine (‘‘IFRIC 20’’) requires that
production stripping costs relating to improved access to ore be capitalized as part of a non-current stripping activity asset
if probable future economic benefits will be realized, the costs can be reliably measured and the component of an ore body
for which access has been improved can be identified. To the extent that ore is extracted and inventory is produced in the
current period, IFRIC 20 instead prescribes that production stripping costs be accounted for as part of the cost of the
inventory produced.
The difference in approach to accounting for production stripping costs will result in a decrease in direct production costs
and an increase in amortization expense relating to the recognition of non-current stripping activity assets under IFRS.
Exploration and evaluation
Under US GAAP, the Company accounts for exploration and evaluation (‘‘E&E’’) expenditures as current period operating
expenses until it is determined that a mining property can be economically developed as a result of established proven and
probable reserves. Once proven and probable reserves are established based on the results of a final feasibility study, the
costs of drilling and development to further delineate the ore body are capitalized.
IFRS 6 Exploration for and Evaluation of Mineral Resources (‘‘IFRS 6’’) provides guidance related to expenditures incurred
during the E&E phase. IFRS 6 requires entities to select and consistently apply an accounting policy that specifies which
expenditures are capitalized as E&E assets. However, IFRS 6 provides no specific guidance as to when E&E expenditures
are to be capitalized.
Agnico Eagle is in the process of defining the E&E phase within the context of IFRS 6 and developing an accounting policy
that outlines the point at which specific types of E&E expenditures will be capitalized.
Revenue Recognition
Revenue recognition criteria under IAS 18 Revenue (‘‘IAS 18’’) include the probability that economic benefits associated
with the transaction will flow to the entity and that the revenue can be measured reliably. The Company does not expect
that the point at which it recognizes revenue will change under IFRS.
Property, Plant and Equipment
Under IFRS, IAS 16 Property, Plant and Equipment requires the separate identification and measurement of significant
individual components of property, plant and equipment, with individual components depreciated based on their
individual useful lives. The Company identified significant individual components of property, plant and equipment under
US GAAP in 2013 and will assess whether an adjustment relating to the retrospective application and depreciation of these
components is required to its opening January 1, 2013 balance sheet under IFRS.
Mineral Reserve Data
Information with respect to the Company’s mineral reserves has been approved by Daniel Doucet, P.Eng., Corporate
Director, Reserve Development, a ‘‘qualified person’’ under the CSA’s National Instrument 43-101 Standards of Disclosure
for Mineral Properties. The Company’s mineral reserve estimate was derived from internally generated data or audited
reports.
32 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
The assumptions used for the mineral reserve estimates at all mines and projects reported in this MD&A as at
December 31, 2013 are $1,200 per ounce gold, $18.00 per ounce silver, $0.82 per pound zinc, $3.00 per pound copper,
$0.91 per pound lead and exchange rates of C$1.03 per US$1.00, c0.76 per US$1.00 and 12.75 Mexican pesos per
$1.00. The assumptions used for mineral reserve estimates as at December 31, 2012 were based on three-year average
prices. The Company applied assumptions below the preceding three-year average for its December 31, 2013 mineral
reserve estimates to reflect a lower commodity price environment.
Proven and Probable Mineral Reserves by Property(i)
Grade
(Grams per
Tonne)
Contained
Gold
(Ounces)(ii)
Tonnes
Proven Reserves
LaRonde mine
Lapa mine
Goldex mine
Meadowbank mine
Meliadine project
Kittila mine
Pinos Altos mine (includes the Creston Mascota deposit at Pinos Altos)
La India project
Total Proven Reserves
Probable Reserves
LaRonde mine
Lapa mine
Goldex mine
Meadowbank mine
Meliadine project
Kittila mine
Pinos Altos mine (includes the Creston Mascota deposit at Pinos Altos)
La India project
Total Probable Reserves
Total Proven and Probable Mineral Reserves
5,978,000
1,011,000
119,000
1,128,000
34,000
1,104,000
1,966,000
228,000
11,568,000
18,149,000
456,000
7,485,000
15,692,000
11,943,000
30,520,000
26,738,000
26,868,000
137,850,000
149,418,000
3.48
5.99
1.52
2.88
7.31
4.27
2.54
0.64
3.49
5.50
5.92
1.52
3.26
7.38
4.65
2.45
0.87
3.51
3.51
668,000
195,000
6,000
104,000
8,000
151,000
161,000
5,000
1,298,000
3,212,000
87,000
367,000
1,647,000
2,833,000
4,563,000
2,105,000
753,000
15,567,000
16,865,000
Notes:
(i) Complete information on the verification procedures, the quality assurance program, quality control procedures, operating and capital cost assumptions, parameters and methods
and other factors that may materially affect scientific and technical information presented in this MD&A and definition of certain terms used herein may be found in: the AIF under
the caption ‘‘Information on Mineral Reserves and Mineral Resources of the Company’’; the 2005 LaRonde Mineral Resource & Mineral Reserve Estimate filed with Canadian
securities regulatory authorities on SEDAR on March 23, 2005; the Technical Report on the Lapa Gold Project filed with Canadian securities regulatory authorities on SEDAR on June 8,
2006; the Technical Report on the December 31, 2009 Mineral Reserve and Mineral Resource Estimate and the Suuri Extension Project, Kittila Mine, Finland filed with the Canadian
securities regulatory authorities on SEDAR on March 4, 2010; the Technical Report on the Mineral Resources and Mineral Reserves at Meadowbank Gold Mine, Nunavut, Canada as at
December 31, 2011 filed with Canadian securities regulatory authorities on SEDAR on March 23, 2012; the Pinos Altos Gold-Silver Mining Project, Chihuahua State, Mexico, Technical
Report on Mineral Resources and Reserves as of December 31, 2008 filed with Canadian securities regulatory authorities on March 25, 2009; the Technical Report on the
December 31, 2010 Mineral Resource and Mineral Reserve Estimate, Meliadine Gold Project, Nunavut, Canada filed with Canadian securities regulatory authorities on SEDAR on
March 8, 2011; the Technical Report on the June 30, 2012 Update of the Mineral Resources and Mineral Reserves, La India Gold Project, Municipality of Sahuaripa, Sonora, Mexico
dated August 31, 2012 filed with Canadian securities regulatory authorities on SEDAR on October 12, 2012; the Technical Report on Restatement of the Mineral Resources at Goldex
Mine, Quebec, Canada as at October 19, 2011 filed with Canadian securities regulatory authorities on SEDAR on December 5, 2011 and the Technical Report on Production of the M
and E Zones at Goldex Mine dated October 14, 2012 filed with the Canadian securities regulatory authorities on SEDAR on November 1, 2012.
(ii) Total contained gold ounces does not include equivalent gold ounces for the byproduct metals contained in the mineral reserves.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
33
Non-US GAAP Financial Performance Measures
This MD&A presents certain financial performance measures, including adjusted net income, total cash costs per ounce
of gold produced, minesite costs per tonne and all-in sustaining costs per ounce of gold produced, that are not recognized
measures under US GAAP. This data may not be comparable to data presented by other gold producers. Non-US GAAP
financial performance measures should be considered together with other data prepared in accordance with US GAAP.
Adjusted Net Income
Adjusted net income 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 net income as recorded in the consolidated statements of
income (loss) and comprehensive income (loss) for non-recurring, unusual and other items. The Company believes that
this generally accepted industry measure allows the evaluation of the results of continuing operations and is useful in
making comparisons between periods. Adjusted net income is intended to provide investors with information about the
Company’s continuing income generating capabilities. Management uses this measure to monitor and plan for the
operating performance of the Company in conjunction with other data prepared in accordance with US GAAP.
Years Ended December 31,
2013
2012
2011
Net income (loss) for the year attributed to common shareholders
$(406,526)
$310,916
$(568,895)
Impairment loss on available-for-sale securities
Foreign currency translation (gain) loss
Stock options expense
Impairment loss (net of tax)
Loss on Goldex mine (net of tax)
Deferred tax charges (net)
Other
34,272
12,732
8,569
(7,188)
16,320
(1,082)
25,008
33,792
42,594
436,262
–
47,194
24,707
–
–
–
648,003
197,285
(2,064)
(2,077)
9,711
Adjusted net income for the year attributed to common shareholders
$ 153,729
$371,683
$ 334,121
Net income (loss) per share – basic
Net income (loss) per share – diluted
Adjusted net income per share – basic
Adjusted net income per share – diluted
$
$
$
$
(2.35)
(2.35)
0.89
0.89
$
$
$
$
1.82
1.81
2.17
2.17
$
$
$
$
(3.36)
(3.36)
1.97
1.97
Total Cash Costs per Ounce of Gold Produced and Minesite Costs per Tonne
The Company believes that total cash costs per ounce of gold produced and minesite costs per tonne are realistic
indicators of operating performance and are useful in allowing year over year comparisons. However, both of these non-US
GAAP generally accepted industry measures should be considered together with other data prepared in accordance with
US GAAP. These measures, taken by themselves, are not necessarily indicative of operating costs or cash flow measures
prepared in accordance with US GAAP.
Total cash costs per ounce of gold produced is calculated by adjusting production costs as recorded in the consolidated
statements of income (loss) and comprehensive income (loss) for byproduct revenues, unsold concentrate inventory
production costs, non-cash reclamation provisions, deferred stripping costs and other adjustments, and then dividing by
the number of ounces of gold produced. Total cash costs per ounce of gold produced is intended to provide investors with
information about the cash generating capabilities of the Company’s mining operations. Management also uses this
measure to monitor the performance of the Company’s mining operations. As 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 can be impacted by fluctuations in
34 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
byproduct metal prices and exchange rates. Management compensates for these inherent limitations by using this
measure 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 calculated by adjusting production costs as shown in the consolidated statements of income
(loss) and comprehensive income (loss) for unsold concentrate inventory production costs, non-cash reclamation
provisions, deferred stripping costs and other adjustments, and then dividing by tonnes of ore processed. As the total cash
costs per ounce of gold produced measure can be impacted by fluctuations in byproduct metal prices and exchange
rates, management believes that the minesite costs per tonne measure provides additional information regarding the
performance of mining operations. Management is aware that this per tonne measure of performance can be impacted by
fluctuations in production levels and compensates for this inherent limitation by using this measure in conjunction with
production costs prepared in accordance with US GAAP.
The Company reports total cash costs per ounce of gold produced and minesite costs per tonne using a common industry
practice of deferring certain stripping costs that can be attributed to future production. The purpose of adjusting for these
stripping costs is to enhance the comparability of total cash costs per ounce of gold produced and minesite costs per tonne
to the Company’s peers within the mining industry.
The following tables provide a reconciliation of total cash costs per ounce of gold produced and minesite costs per tonne to
production costs as presented in the consolidated statements of income (loss) and comprehensive income (loss) in
accordance with US GAAP.
Total Production Costs by Mine
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
(thousands of United States dollars)
Production costs per the consolidated statements of income (loss)
$ 924,927
$ 897,712
$ 876,078
LaRonde mine
Lapa mine
Goldex mine
Meadowbank mine
Kittila mine(i)
Pinos Altos mine
Creston Mascota deposit at Pinos Altos(ii)
Total
229,911
69,532
13,172
363,894
80,287
130,129
16,726
225,647
73,376
–
347,710
98,037
128,618
17,885
209,947
68,599
56,939
284,502
110,477
131,044
14,570
$ 903,651
$ 891,273
$ 876,078
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
35
Reconciliation of Production Costs to Total Cash Costs per Ounce of Gold Produced(iii) by Mine
LaRonde Mine – Total Cash Costs per Ounce of
Gold Produced(iii)
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining and
marketing charges
Inventory and other adjustments(iv)
Non-cash reclamation provision
Cash operating costs
Gold production (ounces)
Total cash costs per ounce of gold produced ($ per ounce)(iii)
(thousands of United States dollars, except as noted)
$ 229,911
$ 225,647
$ 209,947
(82,057)
(7,123)
(2,122)
$ 138,609
181,781
$
763
(131,750)
(194,000)
107
(2,422)
$ 91,582
160,875
$
569
(2,309)
(4,062)
$
9,576
124,173
$
77
Lapa Mine – Total Cash Costs per Ounce of
Gold Produced(iii)
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining and
marketing charges
Inventory and other adjustments(iv)
Non-cash reclamation provision
Cash operating costs
Gold production (ounces)
Total cash costs per ounce of gold produced ($ per ounce)(iii)
(thousands of United States dollars, except as noted)
$ 69,532
$ 73,376
$ 68,599
376
(1,504)
(67)
$ 68,337
100,730
$
678
513
(71)
191
$ 74,009
106,191
$
697
663
631
(348)
$ 69,545
107,068
$
650
Goldex Mine – Total Cash Costs per Ounce of
Gold Produced(iii)(v)
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
(thousands of United States dollars, except as noted)
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining and
marketing charges
Inventory and other adjustments(iv)
Non-cash reclamation provision
Cash operating costs
Gold production (ounces)
Total cash costs per ounce of gold produced ($ per ounce)(iii)
$ 13,172
26
1,896
–
$ 15,094
19,305
$
782
$
$
$
–
–
–
–
–
–
–
$ 56,939
395
(2,778)
(173)
$ 54,383
135,478
$
401
36 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
Meadowbank Mine – Total Cash Costs per Ounce of
Gold Produced(iii)
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining and
marketing charges
Inventory and other adjustments(iv)
Non-cash reclamation provision
Stripping costs(vi)
Cash operating costs
Gold production (ounces)
Total cash costs per ounce of gold produced ($ per ounce)(iii)
(thousands of United States dollars, except as noted)
$363,894
$347,710
$284,502
(1,471)
(5,471)
(1,538)
(22,305)
$333,109
430,613
$
774
(1,651)
4,582
(1,611)
(14,806)
$334,224
366,030
$
913
(546)
(1,670)
(1,679)
(9,746)
$270,861
270,801
$ 1,000
Kittila Mine – Total Cash Costs per Ounce of
Gold Produced(i)(iii)
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining and
marketing charges
Inventory and other adjustments(iv)
Non-cash reclamation provision
Stripping costs(vi)
Cash operating costs
Gold production (ounces)
Total cash costs per ounce of gold produced ($ per ounce)(iii)
(thousands of United States dollars, except as noted)
$ 80,287
$ 98,037
$110,477
281
4,561
(435)
–
$ 84,694
141,032
$
601
391
1,564
(551)
–
$ 99,441
175,878
$
565
152
(1,267)
(206)
(3,018)
$106,138
143,560
$
739
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
37
Pinos Altos Mine – Total Cash Costs per Ounce of
Gold Produced(iii)
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining and
marketing charges
Inventory and other adjustments(iv)
Non-cash reclamation provision
Stripping costs(vi)
Cash operating costs
Gold production (ounces)
Total cash costs per ounce of gold produced ($ per ounce)(iii)
(thousands of United States dollars, except as noted)
$130,129
$128,618
$131,044
(48,417)
(884)
(297)
(5,581)
$ 74,950
181,773
$
412
(67,720)
2,718
(205)
(12,762)
$ 50,649
183,662
$
276
(60,091)
1,420
(907)
(24,260)
$ 47,206
166,158
$
284
Creston Mascota deposit at Pinos Altos – Total Cash Costs per
Ounce of Gold Produced(ii)(iii)
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining and
marketing charges
Inventory and other adjustments(iv)
Non-cash reclamation provision
Stripping costs(vi)
Cash operating costs
Gold production (ounces)
Total cash costs per ounce of gold produced ($ per ounce)(iii)
(thousands of United States dollars, except as noted)
$ 16,726
$ 17,885
$ 14,570
(520)
517
(108)
(1,052)
$ 15,563
32,120
$
485
(1,758)
(60)
(559)
–
$ 15,508
47,615
$
326
(562)
451
(465)
–
$ 13,994
38,222
$
366
38 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
Reconciliation of Production Costs to Minesite Costs per Tonne(vii) by Mine
LaRonde Mine – Minesite Costs per Tonne(vii)
Production costs
Adjustments:
Inventory adjustment(viii)
Non-cash reclamation provision
Minesite operating costs
Minesite operating costs (thousands of C$)
Tonnes of ore milled (thousands of tonnes)
Minesite costs per tonne (C$)(vii)
Lapa Mine – Minesite Costs per Tonne(vii)
Production costs
Adjustments:
Inventory adjustment(viii)
Non-cash reclamation provision
Minesite operating costs
Minesite operating costs (thousands of C$)
Tonnes of ore milled (thousands of tonnes)
Minesite costs per tonne (C$)(vii)
Goldex Mine – Minesite Costs per Tonne(vii)
Production costs
Adjustments:
Inventory adjustment(viii)
Non-cash reclamation provision
Minesite operating costs
Minesite operating costs (thousands of C$)
Tonnes of ore milled (thousands of tonnes)
Minesite costs per tonne (C$)(vii)
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
(thousands of United States dollars, except as noted)
$229,911
$225,647
$209,947
(6,259)
(2,122)
$221,530
C$228,654
2,319
984
(2,421)
$224,210
C$225,159
2,359
(22)
(4,062)
$205,863
C$202,957
2,406
C$
99
C$
95
C$
84
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
(thousands of United States dollars, except as noted)
$ 69,532
$ 73,376
$ 68,599
(1,217)
(67)
$ 68,248
C$ 70,621
641
110
C$
54
191
$ 73,621
C$ 73,813
641
115
C$
1,071
(348)
$ 69,322
C$ 68,403
621
110
C$
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
(thousands of United States dollars, except as noted)
$ 13,172
$
1,896
–
$ 15,068
C$ 15,798
492
32
C$
$
C$
C$
–
–
–
–
–
–
–
$ 56,939
(2,407)
(173)
$ 54,359
C$ 53,208
2,477
C$
21
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
39
Meadowbank Mine – Minesite Costs per Tonne(vii)
Production costs
Adjustments:
Inventory adjustment(viii)
Non-cash reclamation provision
Stripping costs(vi)
Minesite operating costs
Minesite operating costs (thousands of C$)
Tonnes of ore milled (thousands of tonnes)
Minesite costs per tonne (C$)(vii)
Kittila Mine – Minesite Costs per Tonne(i)(vii)
Production costs
Adjustments:
Inventory adjustment(viii)
Non-cash reclamation provision
Stripping costs(vi)
Minesite operating costs
Minesite operating costs (thousands of e)
Tonnes of ore milled (thousands of tonnes)
Minesite costs per tonne (e)(vii)
Pinos Altos Mine – Minesite Costs per Tonne(vii)
Production costs
Adjustments:
Inventory adjustment(viii)
Non-cash reclamation provision
Stripping costs(vi)
Minesite operating costs
Tonnes of ore processed (thousands of tonnes)
Minesite costs per tonne (US$)(vii)
40 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
(thousands of United States dollars, except as noted)
$363,894
$347,710
$284,502
(5,220)
(1,538)
(22,305)
$334,831
C$343,147
4,143
4,407
(1,610)
(14,806)
$335,701
C$336,431
3,821
253
(1,679)
(9,746)
$273,330
C$272,157
2,978
C$
83
C$
88
C$
91
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
(thousands of United States dollars, except as noted)
$ 80,287
$ 98,037
$110,477
4,561
(435)
–
$ 84,413
e 64,102
882
73
e
1,569
(551)
–
$ 99,055
e 75,305
1,090
e
69
(1,324)
(206)
(3,018)
$105,929
e 76,817
1,031
e
75
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
(thousands of United States dollars, except as noted)
$130,129
$128,618
$131,044
(821)
(297)
(5,581)
$123,430
2,725
$
45
2,815
(205)
(12,762)
$118,466
2,862
$
41
146
(907)
(24,260)
$106,023
2,956
$
36
Creston Mascota deposit at Pinos Altos – Minesite Costs
per Tonne(ii)(vii)
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Year Ended
December 31, 2011
Production costs
Adjustments:
Inventory adjustment(viii)
Non-cash reclamation provision
Stripping costs(vi)
Minesite operating costs
Tonnes of ore processed (thousands of tonnes)
Minesite costs per tonne (US$)(vii)
Notes:
(thousands of United States dollars, except as noted)
$ 16,726
$ 17,885
$ 14,570
515
(108)
(1,052)
$ 16,081
1,024
$
16
(60)
(559)
–
$ 17,266
1,454
$
12
(315)
(465)
–
$ 13,790
1,553
$
9
(i)
(ii)
(iii)
Excludes the Kittila mine’s results for the second quarter of 2013. Due to an extended maintenance shutdown, the Kittila mine only operated for 14 days during the second
quarter of 2013. The Kittila mine incurred $18,159,000 in production costs during the second quarter of 2013, which were excluded from the calculation of total cash costs per
ounce of gold produced and minesite costs per tonne.
Excludes results from the Creston Mascota deposit at Pinos Altos for the first quarter of 2013 and the fourth quarter of 2012 due to an unexpected movement of leached ore at
the Phase One leach pad, resulting in the temporary suspension of active leaching between October 1, 2012 and March 13, 2013. The Creston Mascota deposit at Pinos Altos
incurred $3,117,000 and $6,439,000 in production costs during the first quarter of 2013 and the fourth quarter of 2012, respectively, which were excluded from the calculation
of total cash costs per ounce of gold produced and minesite costs per tonne.
Total cash costs per ounce of gold produced 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 recorded in the consolidated statements of income (loss) for byproduct revenues, unsold concentrate inventory production costs, non-cash
reclamation provisions, deferred stripping costs and other adjustments, and then dividing by the number of ounces of gold produced. The Company believes that this generally accepted
industry measure is a realistic indication of operating performance and is a useful comparison point between periods. Total cash costs per ounce of gold produced is intended to provide
investors with information about the cash generating capabilities of the Company’s mining operations. Management also uses this measure to monitor the performance of the
Company’s mining operations. As 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 can be impacted by fluctuations in byproduct metal prices and exchange rates.
Management compensates for these inherent limitations by using this measure 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.
(iv) Under the Company’s revenue recognition policy, revenue is recognized on concentrates when legal title and risk is transferred. As total cash costs per ounce of gold produced
are calculated on a production basis, this inventory adjustment reflects the sales margin on the portion of concentrate production not yet recognized as revenue.
(v)
(vi)
Excludes the Goldex mine’s results for the third quarter of 2013. Initial non-commercial payable gold production of 1,505 ounces was achieved at the Goldex mine’s M and E
Zones during the third quarter of 2013. 2011 results relate to the Goldex mine’s GEZ prior to the indefinite suspension of operations there on October 19, 2011 due to
geotechnical concerns.
The Company reports total cash costs per ounce of gold produced and minesite costs per tonne using a common industry practice of deferring certain stripping costs that can
be attributed to future production. The purpose of adjusting for these stripping costs is to enhance the comparability of total cash costs per ounce of gold produced and
minesite costs per tonne to the Company’s peers within the mining industry.
(vii) 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 statements of income (loss) for unsold concentrate inventory production costs, non-cash reclamation provisions, deferred
stripping costs and other adjustments, and then dividing by tonnes of ore milled. As the total cash costs per ounce of gold produced measure can be impacted by fluctuations in
byproduct metal prices and exchange rates, management believes that the minesite costs per tonne measure provides additional information regarding the performance of mining
operations, eliminating the impact of 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 of performance can be impacted by fluctuations in processing levels and compensates for this inherent limitation by using
this measure in conjunction with production costs prepared in accordance with US GAAP.
(viii) This inventory adjustment reflects production costs associated with unsold concentrates.
All-in Sustaining Costs per Ounce of Gold Produced
All-in sustaining costs per ounce of gold produced, calculated beginning in 2013, 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
measure provides a realistic indicator of operating performance. However, this non-US GAAP measure should be
considered together with other data prepared in accordance with US GAAP as it is not necessarily indicative of operating
costs or cash flow measures prepared in accordance with US GAAP.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
41
The following table provides a reconciliation of production costs to all-in sustaining costs per ounce of gold produced
for 2013.
(United States dollars per ounce of gold produced, except where noted)
Production costs per the consolidated statements of income (loss) (thousands of United States dollars)
Adjusted production costs (thousands of United States dollars)(i)(ii)
Adjusted gold production (ounces)(i)(ii)(iii)
Adjusted production costs(i)(ii)(iii)
Adjustments:
Byproduct metal revenues, net of smelting, refining and marketing charges
Inventory and other adjustments(iv)
Non-cash reclamation provision
Stripping costs(v)
Total cash costs per ounce of gold produced(vi)
Adjustments:
Sustaining capital expenditures
Exploration and corporate development expenses (excluding greenfield exploration)
General and administrative expenses (net of stock options)
All-in sustaining costs per ounce of gold produced
Notes:
Year Ended
December 31, 2013
$924,927
$903,651
1,087,354
$831
(121)
(7)
(4)
(27)
672
184
14
82
$952
(i) Excludes the Kittila mine’s results for the second quarter of 2013. Due to an extended maintenance shutdown, the Kittila mine only operated for 14 days during the second
quarter of 2013. The Kittila mine incurred $18,159,000 in production costs and produced 5,389 ounces of gold during the second quarter of 2013, which was excluded from the
calculation of total cash costs per ounce of gold produced.
(ii) Excludes results from the Creston Mascota deposit at Pinos Altos for the first quarter of 2013 due to the temporary suspension of active leaching between October 1, 2012 and
March 13, 2013 as a result of an unexpected movement of leached ore at the Phase One leach pad. The Creston Mascota deposit at Pinos Altos incurred $3,117,000 in production
costs and produced 1,907 ounces of gold during the first quarter of 2013, which was excluded from the calculation of total cash costs per ounce of gold produced.
(iii) Excludes the Goldex mine’s results for the third quarter of 2013 and the La India project’s results for the fourth quarter of 2013. Initial non-commercial payable gold production of
1,505 ounces was achieved at the Goldex mine’s M and E Zones during the third quarter of 2013. Initial non-commercial payable gold production of 3,180 ounces was achieved
at the La India project during the fourth quarter of 2013.
(iv) Under the Company’s revenue recognition policy, revenue is recognized on concentrates when legal title and risk is transferred. As total cash costs per ounce of gold produced are
calculated on a production basis, this inventory adjustment reflects the sales margin on the portion of concentrate production not yet recognized as revenue.
(v) The Company reports total cash costs per ounce of gold produced using a common industry practice of deferring certain stripping costs that can be attributed to future
production. The purpose of adjusting for these stripping costs is to enhance the comparability of total cash costs per ounce of gold produced to the Company’s peers within the
mining industry.
(vi) Total cash costs per ounce of gold produced 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 recorded in the consolidated statements of income (loss) for byproduct revenues, unsold concentrate inventory production
costs, non-cash reclamation provisions, deferred stripping costs and other adjustments, and then dividing by the number of ounces of gold produced. The Company believes that
this generally accepted industry measure is a realistic indication of operating performance and is a useful comparison point between periods. Total cash costs per ounce of gold
produced is intended to provide investors with information about the cash generating capabilities of the Company’s mining operations. Management also uses this measure to
monitor the performance of the Company’s mining operations. As 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 can be impacted by fluctuations in
byproduct metal prices and exchange rates. Management compensates for these inherent limitations by using this measure in conjunction with minesite costs per tonne 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.
42 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
924,927
713,479
99,989
71,635
8,246
227,579
111,277
173,074
21,679
713,479
296,078
537,227
250,856
SUMMARIZED QUARTERLY DATA
(thousands of United States dollars, except where noted)
Three Months Ended
March 31,
2013
June 30,
2013
September 30,
2013
December 31,
2013
Total
2013
Operating margin(i):
Revenues from mining operations
$ 420,422
$ 336,424
$ 444,320
$ 437,240
$1,638,406
Production costs
Total operating margin(i)
Operating margin(i) by mine:
LaRonde mine
Lapa mine
Goldex mine(ii)
Meadowbank mine
Kittila mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
230,053
190,369
225,951
110,473
231,535
212,785
237,388
199,852
33,295
21,788
–
36,503
44,956
56,038
(2,211)
14,372
16,643
–
32,382
(112)
41,708
5,480
26,136
15,859
–
82,906
39,019
38,464
10,401
26,186
17,345
8,246
75,788
27,414
36,864
8,009
Total operating margin(i)
190,369
110,473
212,785
199,852
Amortization of property, plant and mine
development
Impairment loss
Exploration, corporate and other
Income (loss) before income and mining taxes
Income and mining taxes expense (recovery)
70,071
–
71,690
48,608
24,749
70,128
–
63,805
(23,460)
920
76,054
–
57,940
78,791
31,480
79,825
537,227
57,421
(474,621)
(370,682)
(21,305)
35,844
Net income (loss) for the period
$ 23,859
$ (24,380)
$ 47,311
$(453,316)
$ (406,526)
Net income (loss) per share – basic (US$)
Net income (loss) per share – diluted (US$)
$
$
0.14
0.14
$
$
(0.14)
(0.14)
$
$
0.27
0.27
$
$
(2.61)
(2.61)
$
$
(2.35)
(2.35)
Cash flows:
Cash provided by operating activities
$ 146,072
$
75,298
$ 80,982
$ 135,944
$ 438,296
Cash used in investing activities
$(141,479)
$ (218,282)
$(145,629)
$(139,083)
$ (644,473)
Cash (used in) provided by financing activities
$ (69,504)
$ 18,677
$ 68,745
$ 30,811
$
48,729
Realized prices (US$):
Gold (per ounce)
Silver (per ounce)
Zinc (per tonne)
Copper (per tonne)
$
$
$
$
1,611
29
2,002
7,570
$
$
$
$
1,336
19
1,753
6,551
$
$
$
$
1,333
22
1,874
7,330
$
$
$
$
1,244
20
1,958
7,275
$
$
$
$
1,366
22
1,907
7,160
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
43
SUMMARIZED QUARTERLY DATA
(thousands of United States dollars, except where noted)
Three Months Ended
March 31,
2013
June 30,
2013
September 30,
2013
December 31,
2013
Total
2013
39,073
26,868
–
81,818
43,145
44,164
1,907
–
46,119
23,178
–
91,873
5,389
47,383
10,147
–
45,253
24,361
1,505
51,336
26,323
19,305
133,489
123,433
56,177
43,736
11,307
–
41,710
46,490
10,666
3,180
181,781
100,730
20,810
430,613
146,421
181,773
34,027
3,180
236,975
224,089
315,828
322,443
1,099,335
611
22
2
613
3
–
1,251
8,239
1,082
39,588
23,939
–
80,012
44,340
44,523
587
424
23
–
605
14
–
1,066
3,455
1,280
46,953
25,644
–
87,798
12,752
48,770
8,112
571
26
2
600
14
–
1,213
3,648
1,241
47,185
24,306
–
496
29
2
548
15
3
1,093
4,472
1,232
50,763
28,784
16,991
132,010
130,928
48,027
44,554
12,761
43,442
45,117
10,496
2,102
100
6
2,366
46
3
4,623
19,814
4,835
184,489
102,673
16,991
430,748
148,561
182,964
31,956
Payable production(iii):
Gold (ounces):
LaRonde mine
Lapa mine
Goldex mine(ii)
Meadowbank mine
Kittila mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
La India project(iv)
Total gold (ounces)
Silver (thousands of ounces):
LaRonde mine
Meadowbank mine
Kittila mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
La India project(iv)
Total silver (thousands of ounces)
Zinc (tonnes)
Copper (tonnes)
Payable metal sold:
Gold (ounces):
LaRonde mine
Lapa mine
Goldex mine(ii)
Meadowbank mine
Kittila mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total gold (ounces)
232,989
230,029
308,843
326,521
1,098,382
44 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
SUMMARIZED QUARTERLY DATA
(thousands of United States dollars, except where noted)
Three Months Ended
March 31,
2013
June 30,
2013
September 30,
2013
December 31,
2013
Total
2013
Silver (thousands of ounces):
LaRonde mine
Meadowbank mine
Kittila mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total silver (thousands of ounces)
Zinc (tonnes)
Copper (tonnes)
583
22
1
586
–
1,192
6,999
1,067
487
23
2
640
14
1,166
5,280
1,291
584
26
1
588
16
1,215
3,030
1,253
525
28
1
553
14
1,121
5,123
1,227
2,179
99
5
2,367
44
4,694
20,432
4,838
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
45
SUMMARIZED QUARTERLY DATA
(thousands of United States dollars, except where noted)
Three Months Ended
March 31,
2012
June 30,
2012
September 30,
2012
December 31,
2012
Total
2012
Operating margin(i):
Revenues from mining operations
$ 472,934
$ 459,561
$ 535,836
$ 449,383
$1,917,714
Production costs
Total operating margin(i)
Operating margin(i) by mine:
LaRonde mine
Lapa mine
Meadowbank mine
Kittila mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total operating margin(i)
Amortization of property, plant and mine development
Exploration, corporate and other
Income before income and mining taxes
Income and mining taxes expense
Net income for the period
Net income per share – basic (US$)
Net income per share – diluted (US$)
Cash flows:
215,035
257,899
219,906
239,655
63,266
27,677
48,772
49,049
55,978
13,157
29,342
26,222
72,715
31,489
53,623
26,264
220,408
315,428
45,625
25,723
104,258
52,655
63,802
23,365
242,363
207,020
897,712
1,020,002
35,363
20,755
36,170
53,199
61,092
441
173,596
100,377
261,915
186,392
234,495
63,227
257,899
239,655
315,428
207,020
1,020,002
64,553
85,836
107,510
28,962
$ 78,548
$
$
0.46
0.46
66,310
96,169
77,176
33,904
43,272
0.25
0.25
$
$
$
68,318
94,763
152,347
46,021
72,680
36,232
98,108
15,338
271,861
313,000
435,141
124,225
$ 106,326
$ 82,770
$ 310,916
$
$
0.62
0.62
$
$
0.48
0.48
$
$
1.82
1.81
Cash provided by operating activities
$ 196,497
$ 194,082
$ 199,464
$ 105,964
$ 696,007
Cash used in investing activities
$ (88,908)
$ (68,619)
$(121,837)
$ (96,792)
$ (376,156)
Cash (used in) provided by financing activities
$(132,078)
$ (29,258)
$ (55,406)
$ 14,136
$ (202,606)
Realized prices (US$):
Gold (per ounce)
Silver (per ounce)
Zinc (per tonne)
Copper (per tonne)
$
$
$
$
1,684
34
2,125
9,006
$
$
$
$
1,602
26
1,901
6,455
$
$
$
$
1,695
34
1,836
9,046
$
$
$
$
1,684
31
1,906
7,668
$
$
$
$
1,667
32
1,955
8,083
46 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
SUMMARIZED QUARTERLY DATA
(thousands of United States dollars, except where noted)
Three Months Ended
March 31,
2012
June 30,
2012
September 30,
2012
December 31,
2012
Total
2012
43,281
28,499
79,401
46,758
43,292
13,724
40,206
28,157
98,403
35,228
45,307
18,049
40,477
24,914
110,988
48,619
46,131
15,842
36,911
24,621
77,238
45,273
48,932
3,560
160,875
106,191
366,030
175,878
183,662
51,175
254,955
265,350
286,971
236,535
1,043,811
690
18
494
13
1,215
12,978
1,326
43,745
27,897
74,614
44,227
41,857
10,288
532
26
513
24
1,095
9,558
1,004
39,886
27,793
93,299
34,476
45,446
20,927
475
26
608
31
1,140
7,379
982
37,466
24,772
116,341
45,155
44,882
16,383
547
21
622
6
1,196
8,722
814
37,726
24,309
79,752
46,620
46,149
4,052
2,244
91
2,237
74
4,646
38,637
4,126
158,823
104,771
364,006
170,478
178,334
51,650
242,628
261,827
284,999
238,608
1,028,062
718
18
482
11
1,229
13,032
1,293
482
24
502
23
1,031
10,379
1,085
467
26
603
32
1,128
10,120
937
566
19
575
8
1,168
9,073
800
2,233
87
2,162
74
4,556
42,604
4,115
Payable production(iii):
Gold (ounces):
LaRonde mine
Lapa mine
Meadowbank mine
Kittila mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total gold (ounces)
Silver (thousands of ounces):
LaRonde mine
Meadowbank mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total silver (thousand of ounces)
Zinc (tonnes)
Copper (tonnes)
Payable metal sold:
Gold (ounces):
LaRonde mine
Lapa mine
Meadowbank mine
Kittila mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total gold (ounces)
Silver (thousands of ounces):
LaRonde mine
Meadowbank mine
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total silver (thousand of ounces)
Zinc (tonnes)
Copper (tonnes)
Notes:
(i) Operating margin is calculated as revenues from mining operations less production costs.
(ii) The Goldex mine’s M and E Zones achieved commercial production on October 1, 2013.
(iii) Payable production is 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.
(iv) The La India project is expected to achieve commercial production in the first quarter of 2014.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
47
FIVE YEAR FINANCIAL AND OPERATING SUMMARY
(thousands of United States dollars, except where noted)
2013
2012
2011
2010
2009
Revenues from mining operations
$1,638,406
$1,917,714
$1,821,799
$1,422,521
$ 613,762
Production costs
Operating margin
Amortization of property, plant and mine development
Impairment loss
Loss on Goldex mine
Exploration, corporate and other
Income (loss) before income and mining taxes
Income and mining taxes expense (recovery)
924,927
897,712
713,479
1,020,002
296,078
537,227
–
250,856
(370,682)
35,844
271,861
–
–
313,000
435,141
124,225
876,078
945,721
261,781
907,681
302,893
251,994
(778,628)
(209,673)
677,472
745,049
192,486
–
–
117,360
435,203
103,087
Net income (loss) for the year
$ (406,526)
$ 310,916
$ (568,955)
$ 332,116
Attributed to non-controlling interest
$
–
$
–
$
(60)
$
–
Attributed to common shareholders
$ (406,526)
$ 310,916
$ (568,895)
$ 332,116
Net income (loss) per share – basic (US$)
Net income (loss) per share – diluted (US$)
$
$
(2.35)
(2.35)
$
$
1.82
1.81
$
$
(3.36)
(3.36)
$
$
2.05
2.00
306,318
307,444
72,461
–
–
126,945
108,038
21,500
86,538
–
86,538
0.55
0.55
$
$
$
$
$
Cash provided by operating activities
438,296
$ 696,007
$ 667,185
$ 487,507
$ 118,139
Cash used in investing activities
(644,473)
$ (376,156)
$ (760,484)
$ (523,306)
$ (587,611)
Cash provided by (used in) financing activities
48,729
$ (202,606)
$ 178,822
$ (25,982)
$ 556,785
Dividends declared per common share
$
0.66
$
1.02
$
–
$
0.64
$
0.18
Capital expenditures
$ 577,789
$ 445,550
$ 482,831
$ 511,641
$ 657,175
Average gold price realized ($ per ounce)
$
1,366
$
1,667
$
1,573
$
1,250
$
1,024
Average exchange rate (C$ per $)
C$
1.0301
C$
0.9994
C$
0.9893
C$
1.0301
C$
1.1415
Weighted average number of common shares
outstanding – basic (thousands)
172,893
171,250
169,353
162,343
155,942
Working capital and credit facility drawdown availability
$1,593,071
$1,795,495
$1,472,300
$1,491,471
$ 598,581
Total assets
Long-term debt
Shareholders’ equity
$4,959,359
$5,256,119
$5,034,262
$5,500,351
$4,427,357
$1,000,000
$ 830,000
$ 920,095
$ 650,000
$ 715,000
$2,977,149
$3,410,212
$3,215,163
$3,665,450
$2,751,761
48 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
FIVE YEAR FINANCIAL AND OPERATING SUMMARY
(thousands of United States dollars, except where noted)
2013
2012
2011
2010
2009
Operating Summary
LaRonde mine
Revenues from mining operations
$ 329,900
$ 399,243
$ 398,609
$ 392,386
$ 352,221
Production costs
Operating margin
229,911
225,647
209,947
189,146
164,221
$
99,989
$ 173,596
$ 188,662
$ 203,240
$ 188,000
Amortization of property, plant and mine development
60,595
47,912
31,089
30,404
28,392
Gross profit
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
Silver production – thousands of ounces
Zinc production – tonnes
Copper production – tonnes
Total cash costs per ounce of gold produced ($ per ounce
basis):
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining
and marketing charges
Inventory and other adjustments(i)
Non-cash reclamation provision
Total cash cost per ounce of gold produced(ii)
Minesite costs per tonne(iii)
Lapa mine
$
39,394
$ 125,684
$ 157,573
$ 172,836
$ 159,608
2,319,132
2,358,499
2,406,342
2,592,252
2,545,831
2.63
2.36
1.79
2.17
2.75
181,781
160,875
124,173
162,806
203,494
2,102
19,814
4,835
2,244
38,637
4,126
3,169
54,894
3,216
3,581
62,544
4,224
3,919
56,186
6,671
$
1,265
$
1,403
$
1,691
$
1,162
$
807
(451)
(39)
(12)
(819)
1
(16)
$
C$
763
$
569
$
99
C$
95
C$
(1,562)
(1,180)
(699)
(19)
(33)
77
84
$
C$
19
(8)
(7)
$
75
C$
1
(6)
103
72
Revenues from mining operations
$ 141,167
$ 173,753
$ 167,536
$ 150,917
$
43,409
Production costs
Operating margin
69,532
73,376
68,599
66,199
33,472
$
71,635
$ 100,377
$
98,937
$
84,718
Amortization of property, plant and mine development
44,031
42,216
37,954
31,986
$
$
9,937
9,906
31
Gross profit
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
Total cash costs per ounce of gold produced ($ per ounce
basis):
$
27,604
$
58,161
$
60,983
$
52,732
640,422
640,306
620,712
551,739
299,430
6.06
6.48
6.62
8.26
100,730
106,191
107,068
117,456
7.29
52,602
Production costs
$
690
$
691
$
641
$
564
$
636
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
49
FIVE YEAR FINANCIAL AND OPERATING SUMMARY
(thousands of United States dollars, except where noted)
2013
2012
2011
2010
2009
Adjustments:
Byproduct metal revenues, net of smelting, refining
and marketing charges
Inventory and other adjustments(i)
Non-cash reclamation provision
Total cash costs per ounce of gold produced(ii)
Minesite costs per tonne(iii)
Goldex mine
4
(15)
(1)
678
110
$
C$
5
(1)
2
6
6
(3)
$
C$
697
115
$
C$
650
110
$
C$
5
(40)
–
529
114
$
C$
–
115
–
751
140
Revenues from mining operations
$
21,418
Production costs
Operating margin
Amortization of property, plant and mine development
Gross profit
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
Total cash cost per ounce of gold produced ($ per ounce
basis)(iv):
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining
and marketing charges
Inventory and other adjustments(i)
Non-cash reclamation provision
Total cash costs per ounce of gold produced(ii)
Minesite costs per tonne(iii)(iv)
Meadowbank mine
$
$
13,172
8,246
1,208
7,038
527,654
1.35
20,810
–
–
–
–
–
–
–
–
$ 217,662
$ 225,090
$ 142,493
56,939
61,561
54,342
$ 160,723
$ 163,529
$
88,151
16,910
21,428
21,716
$ 143,813
$ 142,101
$
66,435
2,476,515
2,781,564
2,614,645
1.79
2.21
1.98
135,478
184,386
148,849
$
682
–
$
420
$
333
$
365
2
98
–
782
32
C$
$
C$
–
–
–
–
–
3
(21)
(1)
4
(1)
(1)
$
C$
401
$
335
$
21
C$
22
C$
Revenues from mining operations
$ 591,473
$ 609,625
$ 434,051
$ 318,351
Production costs
Operating margin
363,894
347,710
284,502
182,533
$ 227,579
$ 261,915
$ 149,549
$ 135,818
Amortization of property, plant and mine development
120,348
114,114
112,624
55,604
Gross profit
$ 107,231
$ 147,801
$
36,925
$
80,214
$
$
$
50 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
–
3
(1)
367
23
–
–
–
–
–
FIVE YEAR FINANCIAL AND OPERATING SUMMARY
(thousands of United States dollars, except where noted)
2013
2012
2011
2010
2009
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
4,142,840
3,820,911
2,977,722
2,000,792
3.43
3.17
3.02
4.34
430,613
366,030
270,801
265,659
Silver production – thousands of ounces
100
91
60
46
Total cash costs per ounce of gold produced ($ per ounce
basis):
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining
and marketing charges
Inventory and other adjustments(i)
Non-cash reclamation provision
Stripping costs(v)
Total cash costs per ounce of gold produced(ii)
Minesite costs per tonne(iii)(v)
Kittila mine
$
845
$
950
$
1,051
$
690
$
(2)
(13)
(4)
(52)
(5)
13
(4)
(41)
(2)
(6)
(7)
(36)
(2)
26
(5)
(16)
$
C$
774
$
913
$
1,000
$
693
$
83
C$
88
C$
91
C$
95
C$
–
–
–
–
–
–
–
–
–
–
–
Revenues from mining operations
$ 209,723
$ 284,429
$ 225,612
$ 160,140
$
61,457
Production costs
Operating margin
98,446
98,037
110,477
87,740
42,464
$ 111,277
$ 186,392
$ 115,135
$
72,400
$
18,993
Amortization of property, plant and mine development
27,410
30,091
26,574
31,488
10,909
Gross profit
Tonnes of ore milled
Gold – grams per tonne
Gold production – ounces
$
83,867
$ 156,301
$
88,561
$
40,912
$
8,084
934,224
1,090,365
1,030,764
960,365
563,238
5.40
5.68
5.11
5.41
146,421
175,878
143,560
126,205
5.02
71,838
–
Silver production – thousands of ounces
6
–
–
–
Total cash costs per ounce of gold produced ($ per ounce
basis)(vi):
Production costs
$
569
$
557
$
770
$
695
$
648
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
51
FIVE YEAR FINANCIAL AND OPERATING SUMMARY
(thousands of United States dollars, except where noted)
2013
2012
2011
2010
2009
Adjustments:
Byproduct metal revenues, net of smelting, refining
and marketing charges
Inventory and other adjustments(i)
Non-cash reclamation provision
Stripping costs(v)
Total cash costs per ounce of gold produced(ii)
Minesite costs per tonne(iii)(v)(vi)
Pinos Altos mine
3
32
(3)
–
2
9
(3)
–
$
e
601
73
$
e
565
69
$
e
1
(10)
(1)
(21)
739
75
$
e
2
(38)
(2)
–
657
66
$
e
–
24
(4)
–
668
54
Revenues from mining operations
$ 303,203
$ 363,113
$ 321,074
$ 175,637
$
14,182
Amortization of property, plant and mine development
35,268
31,051
31,387
21,577
Production costs
Operating margin
Gross profit
Tonnes of ore processed
Gold – grams per tonne
Gold production – ounces
130,129
128,618
131,044
90,293
11,819
$ 173,074
$ 234,495
$ 190,030
$
85,344
$ 137,806
$ 203,444
$ 158,643
$
63,767
2,725,703
2,862,309
2,955,844
2,318,266
227,394
2.20
2.17
1.95
1.95
181,773
183,662
166,158
130,431
$
$
2,363
1,524
839
1.08
16,189
116
$
716
$
700
$
789
$
692
$
1,227
Silver production – thousands of ounces
2,366
2,237
1,824
1,185
Total cash costs per ounce of gold produced ($ per ounce
basis):
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining
and marketing charges
Inventory and other adjustments(i)
Non-cash reclamation provision
Stripping costs(v)
Total cash costs per ounce of gold produced(ii)
Minesite costs per tonne(iii)(v)
Creston Mascota deposit at Pinos Altos
(266)
(5)
(2)
(31)
412
45
$
$
(369)
15
(1)
(69)
276
41
$
$
(362)
8
(5)
(146)
284
36
$
$
Revenues from mining operations
$
41,522
$
87,551
$
57,255
Production costs
Operating margin
19,843
24,324
14,570
$
21,679
$
63,227
$
42,685
Amortization of property, plant and mine development
7,218
6,477
5,602
Gross profit
$
14,461
$
56,750
$
37,083
52 AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
(192)
22
(6)
(91)
425
35
–
–
–
–
–
$
$
$
$
$
(65)
(556)
(10)
–
596
28
–
–
–
–
–
$
$
$
$
$
FIVE YEAR FINANCIAL AND OPERATING SUMMARY
(thousands of United States dollars, except where noted)
2013
2012
2011
2010
2009
Tonnes of ore processed
Gold – grams per tonne
Gold production – ounces
Silver production – thousands of ounces
Total cash costs per ounce of gold produced ($ per ounce
basis)(vii):
Production costs
Adjustments:
Byproduct metal revenues, net of smelting, refining
and marketing charges
Inventory and other adjustments(i)
Non-cash reclamation provision
Stripping costs(v)
Total cash costs per ounce of gold produced(ii)
Minesite costs per tonne(iii)(v)(vii)
Notes:
1,276,159
1,532,364
1,553,563
1.43
34,027
46
1.74
51,175
74
1.51
38,222
27
–
–
–
–
$
521
$
376
$
381
$
–
$
(16)
16
(3)
(33)
485
16
$
$
(37)
(1)
(12)
–
326
12
$
$
(15)
12
(12)
–
366
9
$
$
$
$
–
–
–
–
–
–
$
$
–
–
–
–
–
–
–
–
–
–
–
(i) Under the Company’s revenue recognition policy, revenue is recognized on concentrates when legal title and risk is transferred. As total cash costs per ounce of gold produced are
calculated on a production basis, this inventory adjustment reflects the sales margin on the portion of concentrate production not yet recognized as revenue.
(ii) Total cash costs per ounce of gold produced 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 recorded in the consolidated statements of income (loss) for byproduct revenues, unsold concentrate inventory production
costs, non-cash reclamation provisions, deferred stripping costs and other adjustments, and then dividing by the number of ounces of gold produced. The Company believes that
this generally accepted industry measure is a realistic indication of operating performance and is a useful comparison point between periods. Total cash costs per ounce of gold
produced is intended to provide investors with information about the cash generating capabilities of the Company’s mining operations. Management also uses this measure to
monitor the performance of the Company’s mining operations. As 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 can be impacted by fluctuations in
byproduct metal prices and exchange rates. Management compensates for these inherent limitations by using this measure 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.
(iii) 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 statements of income (loss) for unsold concentrate inventory production costs, non-cash reclamation provisions,
deferred stripping costs and other adjustments, and then dividing by tonnes of ore milled. As the total cash costs per ounce of gold produced measure can be impacted by
fluctuations in byproduct metal prices and exchange rates, management believes that the minesite costs per tonne measure provides additional information regarding the
performance of mining operations, eliminating the impact of 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 of performance can be impacted by fluctuations in processing levels and
compensates for this inherent limitation by using this measure in conjunction with production costs prepared in accordance with US GAAP.
(iv) Excludes the Goldex mine’s results for the third quarter of 2013. Initial non-commercial payable gold production of 1,505 ounces was achieved at the Goldex mine’s M and E
Zones during the third quarter of 2013. Results for 2009 through 2011 relate to the Goldex mine’s GEZ prior to the indefinite suspension of operations there on October 19, 2011
due to geotechnical concerns.
(v) The Company reports total cash costs per ounce of gold produced and minesite costs per tonne using a common industry practice of deferring certain stripping costs that can be
attributed to future production. The purpose of adjusting for these stripping costs is to enhance the comparability of total cash costs per ounce of gold produced and minesite
costs per tonne to the Company’s peers within the mining industry.
(vi) Excludes the Kittila mine’s results for the second quarter of 2013. Due to an extended maintenance shutdown, the Kittila mine only operated for 14 days during the second
quarter of 2013. The Kittila mine incurred $18,159,000 in production costs during the second quarter of 2013, which were excluded from the calculation of total cash costs per
ounce of gold produced and minesite costs per tonne.
(vii) Excludes results from the Creston Mascota deposit at Pinos Altos for the first quarter of 2013 and the fourth quarter of 2012 due to an unexpected movement of leached ore at
the Phase One leach pad, resulting in the temporary suspension of active leaching between October 1, 2012 and March 13, 2013. The Creston Mascota deposit at Pinos Altos
incurred $3,117,000 and $6,439,000 in production costs during the first quarter of 2013 and the fourth quarter of 2012, respectively, which were excluded from the calculation
of total cash costs per ounce of gold produced and minesite costs per tonne.
AGNICO EAGLE
MANAGEMENT’S DISCUSSION AND ANALYSIS
53
14MAR201303391049
Annual Audited Consolidated Financial Statements
(Prepared in accordance with United States GAAP)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Board of Directors (the ‘‘Board’’) and Shareholders of Agnico Eagle Mines Limited:
We have audited Agnico Eagle Mines Limited’s internal control over financial reporting as of December 31, 2013, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission in 1992 (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 certification report on internal control over financial
reporting. Our responsibility is to express an opinion on Agnico Eagle Mines Limited’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 revenues 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, 2013 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, 2013 and
December 31, 2012, and the consolidated statements of income (loss) and comprehensive income (loss), shareholders’
equity and cash flows for each of the years in the three-year period ended December 31, 2013, and our report dated
March 21, 2014 expressed an unqualified opinion thereon.
Toronto, Canada
March 21, 2014
/s/ ERNST & YOUNG LLP
Chartered Accountants
Licensed Public Accountants
2
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
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,
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 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.
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, 2013. In making this
assessment, the Company’s management used the criteria outlined by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control – Integrated Framework issued in 1992. Based on its assessment, management
concluded that, as of December 31, 2013, 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, 2013 has been audited by
Ernst & Young LLP, an independent registered public accounting firm, as stated in their report that appears herein.
Toronto, Canada
March 21, 2014
By /s/ SEAN BOYD
Sean Boyd
Vice Chairman, President and
Chief Executive Officer
By /s/ DAVID SMITH
David Smith
Senior Vice-President, Finance and
Chief Financial Officer
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board and Shareholders of Agnico Eagle Mines Limited:
We have audited the accompanying consolidated balance sheets of Agnico Eagle Mines Limited as of December 31, 2013
and December 31, 2012, and the related consolidated statements of income (loss) and comprehensive income (loss),
shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2013. 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 consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Agnico Eagle Mines Limited at December 31, 2013 and December 31, 2012 and the
consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31,
2013 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), Agnico Eagle Mines Limited’s internal control over financial reporting as of December 31, 2013, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission in 1992 and our report dated March 21, 2014 expressed an unqualified opinion thereon.
Toronto, Canada
March 21, 2014
/s/ ERNST & YOUNG LLP
Chartered Accountants
Licensed Public Accountants
4
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements of Agnico Eagle Mines Limited (‘‘Agnico Eagle’’ or the ‘‘Company’’) are expressed
in thousands of United States dollars (‘‘US dollars’’, ‘‘US$’’ or ‘‘$’’), except where noted, and have been prepared in
accordance with United States generally accepted accounting principles (‘‘US GAAP’’). Certain information in the
consolidated financial statements is presented in Canadian dollars (‘‘C$’’). As 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. Inventory amounts are reduced based on
average cost or in the case of supplies, the lower of average cost and replacement 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
twelve months. Stockpiles, ore on leach pads and inventories not expected to be processed or used within the next
twelve months are classified as long term.
Ore 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 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 calculated by
subtracting the estimated future processing and selling costs from the estimated revenue from the ore, which is based on
the estimated tonnage 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 certain exceptions. Due to the structure of certain ore bodies, a significant amount of drilling
and blasting may be undertaken in the early years of a mine’s life, which can result 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.
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
5
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.
Major development expenditures, including stripping costs to prepare unique and identifiable areas outside the current
mining area for future production that are considered to be pre-production mine development, are capitalized.
Concentrates and dore bars
Concentrate and dore bar inventories consist of concentrates and dore bars for which legal title has not yet passed to third-
party smelters. Concentrate 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
units-of-production method, based on estimated proven and probable mineral 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 mining of 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 mine development costs used in commercial production on a units-of-production
basis based on the estimated tonnage of proven and probable mineral reserves of the mine. The units-of-production
method defines the denominator as the total tonnage of proven and probable mineral reserves. Plant and equipment is
amortized on a straight-line basis over its specifically identified useful life.
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 appropriate category 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 mineral reserves, the costs of
drilling and development to further delineate the ore body on such property are capitalized. The establishment of proven
and probable mineral reserves is based on results of final feasibility studies that 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 methodology described 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 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
operating mines and development properties include estimates of recoverable ounces of gold based on 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
6
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 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 acquired and liabilities assumed
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. 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 each reporting unit’s carrying
amount. 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
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 and may use such means to
manage exposure to certain input costs. 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 statements of income (loss) and comprehensive income (loss) or in
shareholders’ equity as a component of accumulated other comprehensive 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 determined based on the prevailing spot market metal prices on a specified future date,
which is established as of 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.
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
7
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 period 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 period, 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
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 asset retirement
obligations (‘‘AROs’’) 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 AROs.
For closed mines, any change in the fair value of AROs results in a corresponding charge or credit to income, 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 operation of mining properties and 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 and rehabilitation,
demolition of buildings and 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 proven and probable mineral 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 income.
Environmental remediation liabilities (‘‘ERLs’’) 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 ERLs arising from past acts. ERL fair value is measured by discounting the expected
related 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 ERL is incurred. On an annual basis, the Company
assesses cost estimates and other assumptions used in the valuation of ERLs 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 ERL. Any change in the fair value of ERLs results in a corresponding charge or credit to income. Upon
settlement of an ERL, Agnico Eagle records a gain or loss if the actual cost differs from the carrying amount of the ERL.
Settlement gains/losses are recorded in income.
Other environmental remediation costs that are not AROs or ERLs as defined by the Financial Accounting Standards
Board’s Accounting Standards Codification (‘‘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 in accounting for income taxes. Under this method of tax
allocation, deferred income and mining tax assets and liabilities are measured using the enacted tax rates and laws
expected to be in effect when the temporary differences are expected to reverse.
8
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 fifty 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.
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
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.
Stock-based compensation
The Company’s Employee 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) and
comprehensive 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 (loss) 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 (loss) per share includes an adjustment, using the treasury stock method, for stock options outstanding and
warrants outstanding. Under the treasury stock method:
(cid:127) the exercise of options or warrants is assumed to occur at the beginning of the period (or date of issuance, if later);
(cid:127) the proceeds from the exercise of options or warrants plus the future period compensation expense on options
granted are assumed to be used to purchase common shares at the average market price during the period; and
(cid:127) the incremental number of common shares is (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 (loss) per
share calculation.
Pension costs and obligations and post-retirement benefits
In Canada, Agnico Eagle maintains a defined contribution plan covering all of its employees (the ‘‘Basic Plan’’). The Basic
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
(the ‘‘Supplemental Plan’’). Under the Supplemental Plan, an additional 10% of the designated executives’ income is
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.
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
9
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 inventories or expensed, except for sustaining capital costs related to mining properties,
plant and equipment or mine development.
OTHER ACCOUNTING DEVELOPMENTS
Recently adopted accounting pronouncements
Disclosures about Offsetting Assets and Liabilities
In November 2011, ASC guidance was issued relating to disclosure on offsetting financial instrument and derivative
financial instrument assets and liabilities. Under the updated guidance, entities are required to disclose gross information
and net information about both instruments and transactions eligible for offset in the consolidated balance sheets and
instruments and transactions subject to an agreement similar to a master netting arrangement. The Company adopted this
updated guidance, effective for the fiscal year beginning January 1, 2013. See notes 4 and 15 for disclosure on offsetting
financial instrument and derivative financial instrument assets and liabilities.
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Loss
In February 2013, ASC guidance was issued relating to the reporting of amounts reclassified out of accumulated other
comprehensive loss. Under the updated guidance, entities are required to provide information about the amounts
reclassified out of accumulated other comprehensive loss by component and by consolidated statement of income (loss)
line item, as required under US GAAP. The Company adopted this updated guidance, effective for the fiscal year
beginning January 1, 2013. See the Company’s consolidated statements of income (loss) and comprehensive income
(loss) for reporting of amounts reclassified out of accumulated other comprehensive loss.
Recently Issued Accounting Pronouncements and Developments
Under Securities and Exchange Commission (‘‘SEC’’) Staff Accounting Bulletin 74, the Company is required to disclose
information related to new accounting standards that have not yet been adopted. Agnico Eagle has evaluated newly issued
accounting standards that have not yet been adopted and does not expect them to significantly impact the Company’s
consolidated financial statements.
International Financial Reporting Standards
As permitted by both the SEC in the United States and the Canadian Securities Administrators (‘‘CSA’’) in Canada, Agnico
Eagle currently prepares and files its consolidated financial statements in accordance with US GAAP. Generally accepted
accounting principles for Canadian publicly accountable enterprises became International Financial Reporting Standards
(‘‘IFRS’’) in 2011 and the SEC now accepts financial statements prepared in accordance with IFRS without reconciliation
to US GAAP from foreign private issuers. Accordingly, Agnico Eagle has decided to convert its basis of accounting to IFRS
to enhance the comparability of its financial statements to the Company’s peers in the mining industry.
The Company has commenced the process of converting its basis of accounting from US GAAP to IFRS with a transition
date of January 1, 2013. Agnico Eagle anticipates reporting under IFRS for interim and annual periods beginning in the
third quarter of 2014, with comparative information restated under IFRS.
The adoption of IFRS may require the Company to make changes in accounting policies that may have an impact on its
reported financial position and results of operations. Where accounting policy alternatives are available, Agnico Eagle’s
primary objective will be the selection of IFRS accounting policies that provide meaningful and transparent information to
shareholders.
10 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company has developed a detailed IFRS conversion plan which includes the following three phases and the key
activities to be performed in each phase:
(cid:127) Assessment phase: During this now completed phase, the Company established a steering committee and IFRS
working group, developed a detailed project plan, designed and implemented internal controls over the IFRS
conversion plan and evaluated the high level differences between US GAAP and IFRS that may have an impact on
the Company.
(cid:127) Impact analysis and design phase: This phase involves the detailed analysis and quantification of the differences
between Agnico Eagle’s accounting policies under US GAAP and IFRS, the selection of IFRS accounting policies,
the assessment of the impact on financial information systems and the development of a strategy for capturing
IFRS comparative financial information, the incorporation of IFRS accounting policy and process changes into the
Company’s internal controls, the assessment of contractual arrangements and budgeting processes for IFRS
conversion impacts and the provision of technical training to key finance and other personnel. This phase is in
process and is expected to be completed during the second quarter of 2014.
(cid:127) Implementation phase: This phase involves the implementation of changes to the Company’s accounting policies
and business processes as identified through the impact analysis and design phase and the revision of the
Company’s Accounting Policies and Procedures Manual to reflect these changes. The implementation phase will
culminate in the preparation of IFRS consolidated financial statements including first-time adoption reconciliations
from US GAAP in the third quarter of 2014.
Significant identified differences between US GAAP and IFRS and available IFRS accounting policy choices that may have
an impact on the Company’s consolidated financial statements are outlined below. These differences should not be
regarded as a complete list of changes that will result from the transition to IFRS, rather they encompass management’s
high level evaluation of significant differences between US GAAP and IFRS and available IFRS accounting policy choices
as they currently exist. At this stage in the IFRS conversion plan, the Company has not quantified the anticipated impact of
these differences on our consolidated financial statements nor has the Company selected the IFRS accounting policies it
will adopt.
First-time adoption of IFRS
IFRS 1 First-time Adoption of International Financial Reporting Standards (‘‘IFRS 1’’) provides guidance for an entity’s
initial adoption of IFRS. IFRS 1 generally requires that IFRS effective at the end of an entity’s first IFRS reporting period be
applied retrospectively, with specific mandatory exceptions and certain optional exemptions. In accordance with its IFRS
conversion plan, Agnico Eagle’s first IFRS reporting period will be the third quarter of 2014.
Impairment
Under US GAAP, a two-step approach is used for long-lived asset impairment testing whereby long-lived assets are first
tested for recoverability based on their expected undiscounted cash flows. If a long-lived asset’s expected undiscounted
cash flow exceeds the recorded carrying amount, no impairment charge is required. If the expected undiscounted cash
flow is lower than the recorded carrying amount, the long-lived assets are written down to their estimated fair value. US
GAAP does not permit the reversal of impairment losses.
Under IFRS, IAS 36 Impairment of Assets (‘‘IAS 36’’) prescribes a one-step approach for asset impairment testing and
measurement whereby an asset’s recoverable amount is compared directly against its recorded carrying amount. Under
IAS 36, an asset’s recoverable amount is determined as the higher of the estimated fair value less costs to sell or value in
use (which is measured using discounted cash flows). If an asset’s recoverable amount is less than the recorded carrying
amount, an impairment charge is required. IAS 36 also requires the reversal of previously recorded impairment losses
where circumstances have changed such that the impairments have been reduced.
The difference in the approach to asset impairment testing and measurement may result in more frequent impairment
charges under IFRS, where asset carrying values previously supported under US GAAP on an undiscounted cash flow
basis cannot be supported on a discounted cash flow basis. However, the impact of any additional asset impairments
recorded under IFRS may be partially offset by the requirement to reverse previously recorded impairment losses where
circumstances have changed.
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
11
Production stripping costs
Under US GAAP, the cost of removing overburden and waste materials to expose ore and access mineral deposits for
extraction during the production phase of a surface mine (‘‘production stripping costs’’) are accounted for as production
costs and are included in the cost of the inventory produced during the period in which the stripping costs are incurred.
Under IFRS, IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine (‘‘IFRIC 20’’) requires that
production stripping costs relating to improved access to ore be capitalized as part of a non-current stripping activity asset
if probable future economic benefits will be realized, the costs can be reliably measured and the component of an ore body
for which access has been improved can be identified. To the extent that ore is extracted and inventory is produced in the
current period, IFRIC 20 instead prescribes that production stripping costs be accounted for as part of the cost of the
inventory produced.
The difference in approach to accounting for production stripping costs will result in a decrease in direct production costs
and an increase in amortization expense relating to the recognition of non-current stripping activity assets under IFRS.
Exploration and evaluation
Under US GAAP, the Company accounts for exploration and evaluation (‘‘E&E’’) expenditures as current period operating
expenses until it is determined that a mining property can be economically developed as a result of established proven and
probable reserves. Once proven and probable reserves are established based on the results of a final feasibility study, the
costs of drilling and development to further delineate the ore body are capitalized.
IFRS 6 Exploration for and Evaluation of Mineral Resources (‘‘IFRS 6’’) provides guidance related to expenditures incurred
during the E&E phase. IFRS 6 requires entities to select and consistently apply an accounting policy that specifies which
expenditures are capitalized as E&E assets. However, IFRS 6 provides no specific guidance as to when E&E expenditures
are to be capitalized.
Agnico Eagle is in the process of defining the E&E phase within the context of IFRS 6 and developing an accounting policy
that outlines the point at which specific types of E&E expenditures will be capitalized.
Revenue Recognition
Revenue recognition criteria under IAS 18 Revenue (‘‘IAS 18’’) include the probability that economic benefits associated
with the transaction will flow to the entity and that the revenue can be measured reliably. The Company does not expect
that the point at which it recognizes revenue will change under IFRS.
Property, Plant and Equipment
Under IFRS, IAS 16 Property, Plant and Equipment requires the separate identification and measurement of significant
individual components of property, plant and equipment, with individual components depreciated based on their
individual useful lives. The Company identified significant individual components of property, plant and equipment under
US GAAP in 2013 and will assess whether an adjustment relating to the retrospective application and depreciation of these
components is required to its opening January 1, 2013 balance sheet under 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 2013 consolidated financial statements.
12 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
CONSOLIDATED BALANCE SHEETS
(thousands of United States dollars, except share amounts, US GAAP basis)
ASSETS
Current
Cash and cash equivalents
Short-term investments
Restricted cash (note 14)
Trade receivables (notes 1 and 4)
Inventories:
Ore stockpiles
Concentrates and dore bars
Supplies
Income taxes recoverable (note 9)
Available-for-sale securities (notes 2(b) and 4)
Fair value of derivative financial instruments (notes 4 and 15)
Other current assets (note 2(a))
Total current assets
Other assets (note 2(c))
Goodwill (notes 10 and 19)
Property, plant and mine development (note 3)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities (note 11)
Reclamation provision (note 6(a))
Dividends payable
Interest payable (note 5)
Income taxes payable (note 9)
Capital lease obligations (note 13(a))
Fair value of derivative financial instruments (notes 4 and 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), 7(b) and 7(c)):
Outstanding – 174,181,163 common shares issued, less 227,188 shares held in trust
Stock options (note 8(a))
Warrants (note 7(b))
Contributed surplus
Retained earnings (deficit)
Accumulated other comprehensive loss (note 7(d))
Total shareholders’ equity
Contingencies and commitments (notes 6, 9, 12, 13(b) and 21)
On behalf of the Board:
As at December 31,
2013
2012
$ 139,101
2,217
28,723
67,300
39,941
58,543
253,160
18,682
74,581
5,590
116,993
804,831
66,394
39,017
4,049,117
$4,959,359
$ 173,374
3,452
–
13,803
7,523
12,035
467
210,654
1,000,000
178,236
593,320
$ 298,068
8,490
25,450
67,750
52,342
69,695
222,630
19,313
44,719
2,112
92,977
903,546
55,838
229,279
4,067,456
$5,256,119
$ 185,329
16,816
37,905
13,602
10,061
12,955
277
276,945
830,000
127,735
611,227
3,294,007
174,470
–
37,254
(513,441)
(15,141)
2,977,149
$4,959,359
3,241,922
148,032
24,858
15,665
7,046
(27,311)
3,410,212
$5,256,119
11JAN200511295811
Sean Boyd CPA, CA, Director
Mel Leiderman CPA, CA, Director
20MAR200616471143
See accompanying notes
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
13
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)
REVENUES
Revenues from mining operations (note 1)
COSTS, EXPENSES AND OTHER INCOME
Production(i)
Exploration and corporate development
Amortization of property, plant and mine development (note 3)
General and administrative (note 16)
Impairment loss on available-for-sale securities (notes 2(b) and 4)
Provincial capital tax
Interest expense (note 5)
Interest and sundry expense
(Gain) loss on derivative financial instruments (note 15)
Gain on sale of available-for-sale securities (note 2(b))
Impairment loss (note 18)
Loss on Goldex mine (note 17)
Foreign currency translation (gain) loss
Income (loss) before income and mining taxes
Income and mining taxes expense (recovery) (note 9)
Net income (loss) for the year
Attributed to non-controlling interest
Attributed to common shareholders
Net income (loss) per share – basic (note 7(e))
Net income (loss) per share – diluted (note 7(e))
Cash dividends declared per common share (note 7(a))
COMPREHENSIVE INCOME (LOSS)
Net income (loss) for the year
Other comprehensive income (loss):
Available-for-sale securities and other investments:
Unrealized loss
Reclassification to impairment loss on available-for-sale securities (notes 2(b) and 4)
Reclassification to realized gain on sale of available-for-sale securities (note 2(b))
Derivative financial instruments (note 15):
Unrealized (loss) gain
Reclassification to production costs
Pension benefits (note 6(b)):
Unrealized gain (loss)
Reclassification to general and administrative expense
Income tax expense (recovery) impact of reclassification items (note 9)
Income tax expense (recovery) impact of other comprehensive income (loss) items (note 9)
Other comprehensive income (loss) for the year
Comprehensive income (loss) for the year
Attributed to non-controlling interest
Attributed to common shareholders
Note:
(i) Exclusive of amortization, which is shown separately.
14 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
See accompanying notes
Year ended December 31,
2013
2012
2011
$1,638,406
$1,917,714
$1,821,799
924,927
44,236
296,078
115,800
34,272
(1,504)
57,999
8,824
(1,509)
(74)
537,227
–
(7,188)
(370,682)
35,844
$ (406,526)
897,712
109,500
271,861
119,085
12,732
4,001
57,887
2,389
819
(9,733)
–
–
16,320
435,141
124,225
$ 310,916
876,078
75,721
261,781
107,926
8,569
9,223
55,039
5,188
(3,683)
(4,907)
907,681
302,893
(1,082)
(778,628)
(209,673)
$ (568,955)
$
–
$
–
$
(60)
$ (406,526)
$ 310,916
$ (568,895)
$
$
$
(2.35)
(2.35)
0.66
$
$
$
1.82
1.81
1.02
$
$
$
(3.36)
(3.36)
–
$ (406,526)
$ 310,916
$ (568,955)
(22,553)
34,272
(74)
(284)
(117)
(27,029)
12,732
(9,733)
6,882
(2,738)
(35,444)
8,569
(4,907)
(5,863)
1,459
375
637
(137)
51
12,170
$ (394,356)
531
617
558
(2,025)
(20,205)
$ 290,711
(1,595)
540
(556)
2,301
(35,496)
$ (604,451)
$
–
$
–
$
(60)
$ (394,356)
$ 290,711
$ (604,391)
AGNICO EAGLE MINES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(thousands of United States dollars, except share and per share amounts, US GAAP basis)
Common Shares
Outstanding
Shares
Amount
Options Warrants
Stock
Accumulated
Other
Non-
Retained
Earnings Comprehensive Controlling
Interest
Income (Loss)
(Deficit)
Contributed
Surplus
Balance December 31, 2010
168,720,355 $3,078,217 $ 78,554
$ 24,858
$ 15,166 $ 440,265
$ 28,390
$
Shares issued under employee stock option plan (note 8(a))
308,688
18,094
(4,396)
Stock options (note 8(a))
–
–
43,536
Shares issued under the incentive share purchase plan
(note 8(b))
Shares issued under dividend reinvestment plan
Shares issued for purchase of mining property
(notes 7(c) and 10)
Non-controlling interest addition upon acquisition (note 10)
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
360,833
176,110
19,229
10,130
1,250,477
56,146
–
–
–
–
–
–
–
–
–
–
(2,727)
(435)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(568,895)
–
(391)
–
–
–
–
–
–
–
–
–
–
–
(35,496)
–
170,813,736 $3,181,381 $117,694
$ 24,858
$ 15,166 $(129,021)
$ (7,106)
$ 12,191
Shares issued under employee stock option plan (note 8(a))
416,275 $
22,968 $ (4,759) $
Stock options (note 8(a))
–
–
35,097
$
– $
Shares issued under the incentive share purchase plan
(note 8(b))
Shares issued under dividend reinvestment plan
Shares issued for purchase of mining property
(notes 7(c) and 10)
Non-controlling interest eliminated upon acquisition (note 10)
Net income for the year
Dividends declared ($1.02 per share) (note 7(a))
Other comprehensive loss for the year
Restricted share unit plan (note 8(c))
Balance December 31, 2012
507,235
444,555
21,671
18,907
68,941
2,447
–
–
–
–
–
–
–
–
(147,872)
(5,452)
–
–
–
–
–
–
–
–
Shares issued under employee stock option plan (note 8(a))
213,500 $
9,765 $ (3,292) $
Stock options (note 8(a))
Shares issued under incentive share purchase plan (note 8(b))
Shares issued under dividend reinvestment plan
Warrant expiry (note 7(b))
Net loss for the year
Dividends declared ($0.66 per share) (note 7(a))
Other comprehensive income for the year
Restricted share unit plan (note 8(c))
Balance December 31, 2013
–
29,730
–
812,946
858,107
–
–
–
–
23,379
25,837
–
–
–
–
–
–
–
–
–
–
–
(33,448)
(6,896)
173,953,975 $3,294,007 $174,470
$
See accompanying notes
–
–
–
499
–
–
–
–
–
310,916
(174,849)
–
–
(20,205)
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
12,170
–
–
–
–
–
$
– $
–
–
–
(24,858)
21,589
–
–
–
–
(406,526)
(114,118)
–
157
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$ 37,254 $(513,441)
$(15,141)
$
–
–
–
–
–
–
12,251
–
(60)
–
–
–
$
–
–
–
–
–
(12,191)
$
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
172,102,870 $3,241,922 $148,032
$ 24,858
$ 15,665 $
7,046
$(27,311)
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
15
AGNICO EAGLE MINES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of United States dollars, US GAAP basis)
Operating activities
Net income (loss) for the year
Add (deduct) items not affecting cash:
Amortization of property, plant and mine development (note 3)
Deferred income and mining taxes (note 9)
Gain on sale of available-for-sale securities (note 2(b))
Stock-based compensation (note 8)
Impairment loss on available-for-sale securities (note 2(b))
Impairment loss (note 18)
Loss on Goldex mine (note 17)
Foreign currency translation (gain) loss
Other
Adjustment for settlement of environmental remediation
Changes in non-cash working capital balances:
Trade receivables
Income taxes
Inventories
Other current assets
Accounts payable and accrued liabilities
Interest payable
Cash provided by operating activities
Investing activities
Additions to property, plant and mine development (note 3)
Acquisition of Urastar Gold Corporation, net (note 10)
Acquisition of Grayd Resource Corporation (note 10)
Decrease (increase) in short-term investments
Net proceeds from sale of available-for-sale securities (note 2(b))
Purchase of available-for-sale securities and warrants (note 2(b))
(Increase) decrease in restricted cash (note 14)
Cash used in investing activities
Financing activities
Dividends paid
Repayment of capital lease obligations (note 13(a))
Sale-leaseback financing (note 13(a))
Proceeds from long-term debt (note 5)
Repayment of long-term debt (note 5)
Notes issuance (note 5)
Long-term debt financing costs (note 5)
Repurchase of common shares for restricted share unit plan (note 8(c))
Common shares issued
Cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase 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
16 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
See accompanying notes
Year Ended December 31,
2013
2012
2011
$(406,526)
$ 310,916
$(568,955)
296,078
(16,550)
(74)
44,904
34,272
537,227
–
(7,188)
23,817
(9,081)
450
717
(23,232)
(23,447)
(12,695)
(376)
438,296
(577,789)
(10,051)
–
6,273
171
(59,804)
(3,273)
(644,473)
(126,266)
(10,605)
10,928
290,000
(120,000)
–
–
(19,000)
23,672
48,729
(1,519)
(158,967)
298,068
$ 139,101
271,861
72,145
(9,733)
47,632
12,732
–
–
16,320
16,048
(21,449)
8,149
13,304
(44,145)
18,909
(20,928)
4,246
696,007
(445,550)
–
(9,322)
(1,920)
73,358
(2,713)
9,991
(376,156)
(118,121)
(12,063)
–
315,000
(605,000)
200,000
(3,133)
(12,031)
32,742
(202,606)
1,376
118,621
179,447
$ 298,068
261,781
(275,773)
(4,907)
51,873
8,569
907,681
302,893
(1,082)
22,992
(7,616)
37,050
(29,867)
(43,066)
(25,838)
31,837
(387)
667,185
(482,831)
–
(163,047)
5
9,435
(91,115)
(32,931)
(760,484)
(98,354)
(13,092)
–
475,000
(205,000)
–
(2,545)
(3,723)
26,536
178,822
(1,636)
83,887
95,560
$ 179,447
$ 58,152
$ 56,478
$ 52,213
$ 56,962
$ 52,833
$ 110,889
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
1. TRADE RECEIVABLES AND REVENUES FROM MINING OPERATIONS
Agnico Eagle is a gold mining company with mining operations in Canada, Mexico and Finland. 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 primarily generated by production at the LaRonde mine in Canada (silver, zinc and copper) and the
Pinos Altos mine in Mexico (silver).
Revenues are generated from operations in Canada, Mexico and Finland. 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 significantly 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.
Revenues from mining operations:
Gold
Silver
Zinc
Copper
Lead(i)
Note:
Year Ended December 31,
2013
2012
2011
$1,500,354
100,895
16,685
20,653
(181)
$1,712,665
140,221
45,797
19,019
12
$1,563,760
171,725
70,522
14,451
1,341
$1,638,406
$1,917,714
$1,821,799
(i)
In 2013, lead revenues of $0.9 million were nettled against lead concentrate direct fees of $1.1 million. Revenues from other metals contained in lead concentrate are included in
their respective categories in the above table.
In 2013, precious metals (gold and silver) accounted for 98% of Agnico Eagle’s revenues from mining operations (2012 –
97%; 2011 – 95%). The remaining revenues from mining operations consisted of net byproduct metals revenues. In
2013, these net byproduct metals revenues as a percentage of total revenues from mining operations were 1% from zinc
(2012 – 2%; 2011 – 4%) and 1% from copper (2012 – 1%; 2011 – 1%).
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
17
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
2. OTHER ASSETS
(a) Other current assets
Federal, provincial and other sales taxes receivable
Prepaid expenses
Insurance receivable
Receivables from employees
Retirement compensation arrangement plan refundable tax receivable
Other
As at December 31,
2013
2012
$ 71,053
35,396
1,369
780
–
8,395
$ 36,400
36,119
6,553
1,800
4,044
8,061
$116,993
$ 92,977
(b) Available-for-sale securities
The Company’s investments in available-for-sale securities consist primarily of investments in common shares of
entities in the mining industry. The cost basis of available-for-sale securities is determined using the average cost
method and they are carried at fair value. Detail on the Company’s available-for-sale securities holdings is set out
below:
Available-for-sale securities in an unrealized gain position:
Cost (net of impairments)
Unrealized gains in accumulated other comprehensive loss
Estimated fair value
Available-for-sale securities in an unrealized loss position:
Cost (net of impairments)
Unrealized losses in accumulated other comprehensive loss
Estimated fair value
Total estimated fair value of available-for-sale securities
As at December 31,
2013
2012
$30,583
11,530
42,113
39,933
(7,465)
32,468
$74,581
$ 4,352
1,902
6,254
48,047
(9,582)
38,465
$44,719
In 2013, the Company received proceeds of $0.2 million (2012 – $73.4 million; 2011 – $9.4 million) and
recognized a gain before income taxes of $0.1 million (2012 – $9.7 million; 2011 – $4.9 million) on the sale of
certain available-for-sale securities.
18 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
2. OTHER ASSETS (Continued)
During the course of the year, certain available-for-sale securities 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. During the year ended December 31, 2013, the Company recorded a $34.3 million (2012 –
$12.7 million; 2011 – $8.6 million) impairment loss on certain available-for-sale securities that were determined
to be other-than-temporarily impaired.
At December 31, 2013, the fair value of available-for-sale securities in an unrealized loss position was
$32.5 million (December 31, 2012 – $38.5 million) with total unrealized losses in accumulated other
comprehensive loss of $7.5 million (December 31, 2012 – $9.6 million). Based on an evaluation of the severity
and duration of the impairment of these available-for-sale securities (less than three months) and on the
Company’s intent to hold the investments for a period of time sufficient for a recovery of fair value, the Company
does not consider
impaired as at
December 31, 2013.
these available-for-sale securities
to be other-than-temporarily
(c) Other assets
Deferred financing costs, less accumulated amortization of $11,420
(December 31, 2012 – $8,888)
Long-term ore in stockpile(i)
Other
As at December 31,
2013
2012
$12,644
46,191
7,559
$66,394
$15,836
32,711
7,291
$55,838
Note:
(i) Due to the ore body structures at the Pinos Altos, Kittila and Meadowbank mines, the Creston Mascota deposit at Pinos Altos and the La India project, a significant
amount of drilling and blasting was undertaken early in their mine lives, resulting in long-term ore in stockpile. At December 31, 2013, long-term ore in stockpile
was valued at $2.5 million (December 31, 2012 – $4.1 million) at the Pinos Altos mine, $26.7 million (December 31, 2012 – $7.7 million) at the Kittila mine,
$7.8 million (December 31, 2012 – $10.2 million) at the Meadowbank mine, $8.2 million (December 31, 2012 – $10.7 million) at the Creston Mascota deposit at
Pinos Altos and $1.0 million (December 31, 2012 – nil) at the La India project.
3. PROPERTY, PLANT AND MINE DEVELOPMENT
Mining properties
Plant and equipment
Mine development costs
Construction in progress:
Meliadine project
La India project
Goldex mine M and E Zones(i)
As at December 31, 2013
As at December 31, 2012
Accumulated
Amortization
Net Book
Value
Cost
Accumulated
Amortization
Net Book
Value
Cost
$1,361,867
$
89,700
$1,272,167
$1,356,227
$ 86,839
$1,269,388
2,286,887
1,038,564
192,413
161,378
–
662,394
1,624,493
2,538,328
617,826
1,920,502
239,898
798,666
918,482
237,967
680,515
–
–
–
192,413
161,378
–
133,840
32,553
30,658
–
–
–
133,840
32,553
30,658
Note:
(i) Upon achieving commercial production at the Goldex mine M and E Zones in October 2013, related costs accumulated in construction in progress were reclassified to mine
development costs within property, plant and mine development.
$5,041,109
$ 991,992
$4,049,117
$5,010,088
$942,632
$4,067,456
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
19
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
3. PROPERTY, PLANT AND MINE DEVELOPMENT (Continued)
Geographic Information:
Northern Business:
Canada
Finland
Southern Business:
Mexico
United States
Total
As at December 31,
2013
2012
$2,312,166
763,711
$2,543,171
704,031
962,971
10,269
809,556
10,698
$4,049,117
$4,067,456
In 2013, Agnico Eagle capitalized $2.5 million (2012 – $1.3 million) and expensed $1.4 million (2012 – $1.2 million) of
computer software expenditures. The unamortized capitalized cost for computer software at December 31, 2013 was
$6.8 million (December 31, 2012 – $5.7 million).
The unamortized capitalized cost for leasehold improvements at December 31, 2013 was $3.3 million (December 31,
2012 – $3.4 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 line item of the consolidated statements of income (loss) and comprehensive income (loss).
4. FAIR VALUE MEASUREMENT
ASC 820 – Fair Value Measurement and Disclosure defines fair value, establishes a framework for measuring fair value
under US GAAP, and requires expanded disclosures about fair value measurements including the following three fair
value hierarchy levels:
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.
20 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
4. FAIR VALUE MEASUREMENT (Continued)
The following table sets out the Company’s financial assets and liabilities measured at fair value as at December 31, 2013
using the fair value hierarchy:
Financial assets:
Trade receivables(i)
Available-for-sale securities(ii)
Fair value of derivative financial instruments(iii)
Financial liabilities:
Level 1
Level 2
Level 3
Total
$
–
$67,300
$
74,581
–
–
5,590
$74,581
$72,890
$
–
–
–
–
$ 67,300
74,581
5,590
$147,471
Fair value of derivative financial instruments(iii)
$
–
$
467
$
–
$
467
The following table sets out the Company’s financial assets and liabilities measured at fair value as at December 31, 2012
using the fair value hierarchy:
Financial assets:
Trade receivables(i)
Available-for-sale securities(ii)
Fair value of derivative financial instruments(iii)
Financial liabilities:
Level 1
Level 2
Level 3
Total
$
–
$67,750
$
44,719
–
–
2,112
$44,719
$69,862
$
–
–
–
–
$ 67,750
44,719
2,112
$114,581
Fair value of derivative financial instruments(iii)
$
–
$
277
$
–
$
277
Notes:
(i) Trade receivables from provisional invoices for concentrate sales are valued using quoted forward rates derived from observable market data based on the month of expected
settlement (classified within Level 2 of the fair value hierarchy).
(ii) Available-for-sale securities are recorded at fair value using quoted market prices (classified within Level 1 of the fair value hierarchy).
(iii) Derivative financial instruments are recorded at fair value using external broker-dealer quotations (classified within Level 2 of the fair value hierarchy).
In the event that a decline in the fair value of an investment in available-for-sale securities 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 investee data, the length of time and the extent to which the fair value
has been less than cost, the financial condition of the investee and the near-term prospects of the individual investment.
New evidence may become available in future periods which would affect this assessment and thus could result in
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
21
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
4. FAIR VALUE MEASUREMENT (Continued)
material impairment charges with respect to those investments in available-for-sale securities for which the cost basis
exceeds its fair value.
As at December 31, 2013, the Company recorded impairment losses related to property, plant and mine development and
goodwill (see note 18 for details). The estimated fair values of property, plant and mine development and goodwill used in
determining the impairment losses followed the discounted cash flow approach. The total impairment loss recorded
during 2013 was $436.3 million, net of tax (2012 – nil; 2011 – $644.9 million). The discounted cash flow approach uses
significant unobservable inputs and is therefore considered a Level 3 fair value measurement under the fair value
hierarchy.
5. LONG-TERM DEBT
Credit Facility
On June 22, 2010, the Company amended and restated one of its two unsecured revolving bank credit facilities (the
‘‘Credit Facility’’) and terminated its other unsecured revolving bank credit facility, increasing the amount available from an
aggregate of $900.0 million to $1,200.0 million.
On July 20, 2012, the Company further amended the Credit Facility, extending the maturity date from June 22, 2016 to
June 22, 2017 and amending pricing terms.
At December 31, 2013, the Credit Facility was drawn down by $200.0 million (December 31, 2012 – $30.0 million).
Amounts drawn down, together with outstanding letters of credit under the Credit Facility, resulted in Credit Facility
availability of $998.9 million at December 31, 2013.
2012 Notes
On July 24, 2012, the Company closed a $200.0 million private placement of guaranteed senior unsecured notes
(the ‘‘2012 Notes’’) which, on issuance, had a weighted average maturity of 11.0 years and a weighted average yield
of 4.95%.
The following table sets out details of the individual series of the 2012 Notes:
Series A
Series B
2010 Notes
Principal
Interest Rate Maturity Date
$100,000
100,000
$200,000
4.87%
5.02%
7/23/2022
7/23/2024
On April 7, 2010, the Company closed a $600.0 million private placement of guaranteed senior unsecured notes
(the ‘‘2010 Notes’’) which, on issuance, had a weighted average maturity of 9.84 years and a weighted average yield
of 6.59%.
22 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
5. LONG-TERM DEBT (Continued)
The following table sets out details of the individual series of the 2010 Notes:
Series A
Series B
Series C
Covenants
Principal
Interest Rate Maturity Date
$115,000
360,000
125,000
$600,000
6.13%
6.67%
6.77%
4/7/2017
4/7/2020
4/7/2022
Payment and performance of Agnico Eagle’s obligations under the Credit Facility, 2012 Notes and 2010 Notes is
guaranteed by each of its significant subsidiaries and certain of its other subsidiaries (the ‘‘Guarantors’’).
The Credit Facility contains covenants that limit, among other things, the ability of the Company to incur additional
indebtedness, make distributions in certain circumstances and sell material assets.
The 2012 Notes and 2010 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 mining
and the ability of the Guarantors to incur indebtedness.
The Credit Facility, 2012 Notes and 2010 Notes also require the Company to maintain a total net debt to EBITDA ratio
below a specified maximum value as well as a minimum tangible net worth.
The Company was in compliance with all covenants contained in the Credit Facility, 2012 Notes and 2010 Notes as at
December 31, 2013.
Interest on long-term debt
For the year ended December 31, 2013, total interest expense was $58.0 million (2012 – $57.9 million; 2011 –
$55.0 million) and total cash interest payments were $58.2 million (2012 – $52.2 million; 2011 – $52.8 million). In 2013,
cash interest on the Credit Facility was $1.8 million (2012 – $3.6 million; 2011 – $1.7 million), cash standby fees on the
Credit Facility were $4.8 million (2012 – $4.2 million; 2011 – $8.6 million) and cash interest on the 2010 Notes and 2012
Notes was $49.4 million (2012 – $39.5 million; 2011 – $39.5 million). In 2013, interest expenditures of $3.5 million
(2012 – $1.5 million; 2011 – $1.0 million) were capitalized to construction in progress.
The Company’s weighted average interest rate on all of its long-term debt as at December 31, 2013 was 5.37%
(December 31, 2012 – 6.02%; December 31, 2011 – 5.02%).
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
23
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
6. RECLAMATION PROVISION AND OTHER LIABILITIES
Reclamation provision and other liabilities consist of the following:
Reclamation provision (note 6(a))
Long-term portion of capital lease obligations (note 13(a))
Pension benefits (note 6(b))
Other
Total
(a) Reclamation provision
As at December 31,
2013
2012
$150,849
$101,753
11,843
15,278
266
12,108
13,734
140
$178,236
$127,735
Agnico Eagle’s reclamation provision includes both asset retirement obligations and environmental remediation
liabilities. Reclamation provision estimates are based on current legislation, third party estimates, management’s
estimates and feasibility study calculations.
The following table reconciles the beginning and ending carrying amounts of the Company’s asset retirement
obligations:
Asset retirement obligations – long-term, beginning of year
Asset retirement obligations – current, beginning of year
Current year additions and changes in estimate, net
Current year accretion
Liabilities settled
Foreign exchange revaluation
Reclassification from long-term to current, end of year
Asset retirement obligations – long-term, end of year
2013
2012
$ 89,720
$86,386
4,630
44,898
4,624
–
1,495
5,068
(853)
(254)
(3,678)
1,655
(1,029)
(4,630)
$138,312
$89,720
Due to the suspension of mining operations on the Goldex Extension Zone (‘‘GEZ’’) at the Goldex mine on
October 19, 2011 (see note 17 for details), Agnico Eagle recognized an environmental remediation liability. The
24 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
6. RECLAMATION PROVISION AND OTHER LIABILITIES (Continued)
following table reconciles the beginning and ending carrying amounts of the Goldex mine’s environmental
remediation liability:
Environmental remediation liability – long-term, beginning of year
Environmental remediation liability – current, beginning of year
Current year additions and changes in estimate, net
Liabilities settled
Foreign exchange revaluation
Reclassification from long-term to current, end of year
Environmental remediation liability – long-term, end of year
(b) Pension benefits
2013
2012
$12,033
$ 19,057
12,186
26,069
1,005
(36)
(9,045)
(21,450)
(1,219)
579
(2,423)
(12,186)
$12,537
$ 12,033
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, 2013, projected to December 31, 2013 and covering the
period through June 30, 2014.
The components of Agnico Eagle’s net pension benefits expense relating to the Executives Plan are as follows:
Service cost – benefits earned during the year
Interest cost on projected benefit obligation
Amortization of net transition asset
Prior service cost
Loss due to settlement
Recognized net actuarial loss
Net pension benefits expense
Year Ended
December 31,
2013
2012
2011
$ 457
$ 650
$ 996
431
164
25
–
379
489
169
26
2,921
340
663
171
26
–
245
$1,456
$4,595
$2,101
Assets for the Executives Plan consist of deposits on hand with regulatory authorities that are refundable when
benefit payments are made or on the ultimate wind-up of the plan. The accumulated benefit obligation for the
Executives Plan at December 31, 2013 was $9.6 million (December 31, 2012 – $9.7 million).
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
25
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
6. RECLAMATION PROVISION AND OTHER LIABILITIES (Continued)
The funded status of the Executives Plan for 2013 and 2012 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
Settlements
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
Net actuarial loss
Benefit payments
Settlements
Effect of exchange rate changes
Projected benefit obligation, end of year
Deficiency of plan assets compared with projected benefit obligation
2013
2012
$ 2,373
$ 2,952
374
(244)
–
(157)
839
(520)
(961)
63
2,346
2,373
10,818
14,370
456
431
573
650
489
675
(244)
(520)
–
(5,148)
(736)
302
11,298
10,818
$ (8,952)
$ (8,445)
26 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
6. RECLAMATION PROVISION AND OTHER LIABILITIES (Continued)
The Executives Plan is comprised of the following net amounts recognized in the consolidated balance sheets:
Accrued employee benefit liability
Accumulated other comprehensive loss:
Transition obligation
Prior service cost
Net actuarial loss
Net liability
Assumptions:
Weighted average discount rate – net periodic pension cost
Weighted average discount rate – projected benefit obligation
Weighted average rate of compensation increase
Estimated average remaining service life for the plan (in years)(i)
As at
December 31,
2013
2012
$5,733
$5,008
159
24
341
52
3,036
3,044
$8,952
$8,445
4.00% 4.45%
4.90% 4.00%
3.00% 3.00%
5.0
6.0
Note:
(i) Estimated average remaining service life for the Executives Plan was developed for individual senior officers.
Executives Plan components expected to be recognized in accumulated other comprehensive loss in 2014:
Transition obligation
Prior service cost
Net actuarial loss
$159
24
476
$659
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
27
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
6. RECLAMATION PROVISION AND OTHER LIABILITIES (Continued)
Estimated benefit payments from the Executives Plan over the next ten years are set out below:
Year ended December 31,:
Estimated Executives Plan
Benefit Payments
2014
2015
2016
2017
2018
2019 – 2023
$ 109
$ 107
$ 105
$ 103
$ 102
$5,295
In addition to the Executives Plan, the Company maintains the Basic Plan and the Supplemental Plan. Under the
Basic Plan, Agnico Eagle contributes 5% of certain employees’ base employment compensation to a defined
contribution plan. In 2013, $12.5 million (2012 – $11.9 million; 2011 – $10.7 million) was contributed to the
Basic Plan. Effective January 1, 2008, the Company adopted the Supplemental Plan for designated executives
at the level of Vice-President or above. The Supplemental Plan is funded by the Company through notional
contributions equal to 10% of the designated executive’s earnings for the year (including salary and short-term
bonus). In 2013, the Company made $1.2 million (2012 – $0.8 million; 2011 – $0.9 million) in notional
contributions 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. As at December 31,
2013, Agnico Eagle’s issued common shares totaled 174,181,163 (December 31, 2012 – 172,296,610), less
227,188 common shares held by a trust in connection with the Company’s restricted share unit (‘‘RSU’’) plan
(December 31, 2012 – 193,740 common shares held in trust). 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 its consolidated financial
statements (see note 8(c) for details).
In 2013, the Company declared dividends on its common shares of $0.66 per share (2012 – $1.02 per share;
2011 – nil per share).
(b) Private placements and warrants
On December 3, 2008, the Company closed a private placement of 9.2 million units, with each unit consisting of
one common share and one-half of one common share purchase warrant. Each whole warrant entitled 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 4.0 million warrants. The net proceeds of the private placement were approximately
$281.0 million, after deducting share issue costs of $8.8 million. The warrants expired unexercised on
December 3, 2013.
28 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
7. SHAREHOLDERS’ EQUITY (Continued)
(c)
Issuance of common shares on take-over bid
On November 18, 2011, the Company issued 1,250,477 common shares with a market value of $56.1 million in
connection with the acquisition of 94.77% of the outstanding shares of Grayd Resource Corporation (‘‘Grayd’’)
under a take-over bid. On January 23, 2012, the Company issued an additional 68,941 common shares with a
market value of $2.4 million in connection with the compulsory acquisition of the remaining outstanding shares
of Grayd it did not already own (see note 10 for details).
(d) Accumulated other comprehensive loss
The following table sets out the changes in accumulated other comprehensive loss by component for the year
ended December 31, 2013:
Cumulative
Translation
Adjustment
Available-for-sale
Securities and Other
Investments
Derivative
Financial
Instruments
Pension
Benefits
Total
Accumulated other comprehensive (loss)
income, December 31, 2012
Unrealized other comprehensive (loss) gain
Income tax expense (recovery) impact
Reclassifications from accumulated other
comprehensive (loss) income to the
Consolidated Statements of Income (Loss)
Income tax expense (recovery) impact
Other comprehensive income (loss) for the year
Accumulated other comprehensive (loss)
income, December 31, 2013
$
(16,206)
$
(7,680)
$
72
$ (3,497)
$(27,311)
–
–
–
–
–
(22,553)
–
34,198
–
11,645
(284)
150
(117)
31
(220)
375
(22,462)
(99)
51
637
34,718
(168)
(137)
745
12,170
$
(16,206)
$
3,965
$
(148)
$ (2,752)
$(15,141)
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
29
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
7. SHAREHOLDERS’ EQUITY (Continued)
The following table sets out the changes in accumulated other comprehensive loss by component for the year
ended December 31, 2012:
Cumulative
Translation
Adjustment
Available-for-sale
Securities and Other
Investments
Derivative
Financial
Instruments
Pension
Benefits
Total
Accumulated other comprehensive (loss)
income, December 31, 2011
Unrealized other comprehensive (loss) gain
Income tax recovery impact
Reclassifications from accumulated other
comprehensive (loss) income to the
Consolidated Statements of Income (Loss)
Income tax expense (recovery) impact
Other comprehensive income (loss) for the year
Accumulated other comprehensive (loss)
income, December 31, 2012
$
(16,206)
$
16,350
$
(2,913)
$ (4,337)
$ (7,106)
–
–
–
–
–
(27,029)
6,882
531
(19,616)
–
(1,885)
(140)
(2,025)
2,999
–
(24,030)
(2,738)
721
2,985
617
(163)
878
558
840
(20,205)
$
(16,206)
$
(7,680)
$
72
$ (3,497)
$(27,311)
(e) Net income (loss) per share
The following table sets out the weighted average number of common shares used in the calculation of basic and
diluted net income (loss) per share:
Year Ended December 31,
2013
2012
2011
Weighted average number of common shares outstanding – basic
172,892,654
171,250,179
169,352,896
Dilutive impact of shares related to RSU plan
–
235,436
–
Weighted average number of common shares outstanding – diluted
172,892,654
171,485,615
169,352,896
Diluted net income (loss) per share has been calculated using the treasury stock method. In applying the
treasury stock method, employee stock 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 impact is 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 have been anti-dilutive as a result of the net loss recorded for the year. Consequently, diluted net loss per
share was calculated in the same manner as basic net loss per share in 2011. In 2012, 7,742,151 employee
stock options and all warrants were excluded from the calculation of diluted net income per share as their impact
would have been anti-dilutive. In 2013, the impact of any additional shares issued under the employee stock
option plan or related to the RSU plan would have been anti-dilutive as a result of the net loss recorded for the
30 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
7. SHAREHOLDERS’ EQUITY (Continued)
year. Consequently, diluted net loss per share was calculated in the same manner as basic net loss per share
in 2013.
8. STOCK-BASED COMPENSATION
(a) Employee Stock Option Plan (‘‘ESOP’’)
The Company’s ESOP provides for the granting of stock options to directors, officers, employees and service
providers to purchase common shares. Under the ESOP, stock options are granted at the fair market value of the
underlying shares on the day prior to the date of grant. The number of common shares that may be reserved for
issuance to any one person pursuant to stock options (under the ESOP or otherwise), warrants, share purchase
plans or other arrangements may not exceed 5% of the Company’s common shares issued and outstanding at
the date of grant.
On April 24, 2001, the Compensation Committee of the Board of Directors adopted a policy pursuant to which
stock options granted after that date have a maximum term of five years. In 2011, the shareholders approved a
resolution to increase the number of common shares reserved for issuance under the ESOP by 3,000,000 to
23,300,000. In 2012 and 2013 the shareholders approved a further 2,500,000 and 2,000,000 common shares
for issuance under the ESOP, respectively.
Of the 2,803,000 stock options granted under the ESOP in 2013, 700,750 stock options vested immediately.
The remaining stock options, all of which expire in 2018, vest in equal installments on each anniversary date of
the grant over a three year period. Of the 3,257,000 stock options granted under the ESOP in 2012,
814,250 stock options vested immediately. The remaining stock options, all of which expire in 2017, vest in
equal installments on each anniversary date of the grant over a three year period. Of the 2,630,785 stock options
granted under the ESOP in 2011, 657,696 stock options vested immediately. The remaining stock options, all of
which expire in 2016, vest in equal installments on each anniversary date of the grant over a three year period.
Upon the exercise of stock options under the ESOP, the Company issues new common shares to settle
the obligation.
The following summary sets out activity with respect to Agnico Eagle’s outstanding stock options:
2013
2012
2011
Number of
Stock
Options
Weighted
Average
Exercise
Price
Number of
Stock
Options
Weighted
Average
Exercise
Price
Number of
Stock
Options
Weighted
Average
Exercise
Price
Outstanding, beginning of year
10,587,126
C$ 56.60
8,959,051
C$ 62.88
6,762,704
C$ 56.94
Granted
Exercised
Forfeited
Expired
2,803,000
(213,500)
(540,206)
(1,352,885)
52.13
37.06
58.15
54.67
3,257,000
(416,275)
(731,000)
(481,650)
36.99
43.51
59.72
47.49
2,630,785
(308,688)
(125,750)
–
76.12
43.62
67.47
–
Outstanding, end of year
11,283,535
C$ 56.02
10,587,126
C$ 56.60
8,959,051
C$ 62.88
Options exercisable at end of year
7,248,295
6,510,464
5,178,172
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
31
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
8. STOCK-BASED COMPENSATION (Continued)
The following table sets out 2013 activity with respect to Agnico Eagle’s non-vested stock options:
Non-vested, beginning of year
Granted
Vested
Forfeited (non-vested)
Non-vested, end of year
2013
Number of
Stock Options
Weighted
Average Grant
Date Fair Value
4,076,662
2,803,000
(2,661,216)
(183,206)
4,035,240
C$13.33
11.21
12.84
11.38
C$11.44
Cash received for stock options exercised in 2013 was $8.0 million (2012 – $18.2 million; 2011 –
$13.6 million).
The total intrinsic value of stock options exercised in 2013 was C$3.1 million (2012 – C$3.6 million; 2011 –
C$8.0 million).
The weighted average grant date fair value of stock options granted in 2013 was C$11.21 (2012 – C$8.29;
2011 – C$17.05). The total grant date fair value of stock options vested during 2013 was $34.2 million (2012 –
$41.0 million; 2011 – $46.7 million).
The following table summarizes information about Agnico Eagle’s stock options outstanding and exercisable at
December 31, 2013:
Range of Exercise Prices
C$33.39 – C$59.71
C$60.72 – C$83.08
C$33.39 – C$83.08
Stock Options Outstanding
Stock Options Exercisable
Weighted
Average
Remaining
Contractual Life
Weighted
Average
Exercise Price
Number
Exercisable
Weighted
Average
Exercise Price
2.81 years
1.14 years
2.23 years
C$48.28
3,851,056
70.43
3,397,239
C$56.02
7,248,295
C$50.50
69.46
C$59.39
Number
Outstanding
7,341,556
3,941,979
11,283,535
The weighted average remaining contractual term of stock options exercisable at December 31, 2013 was
1.6 years.
The Company has reserved for issuance 11,283,535 common shares in the event that these stock options
are exercised.
The number of common shares available for the granting of stock options under the ESOP as at December 31,
2013, December 31, 2012 and December 31, 2011 was 4,807,876, 3,717,785, and 3,262,135, respectively.
32 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
8. STOCK-BASED COMPENSATION (Continued)
Subsequent to the year ended December 31, 2013, on January 2, 2014, 3,177,500 stock options were granted
under the ESOP, of which 794,375 stock options vested immediately. The remaining stock options, all of which
expire in 2019, vest in equal installments on each anniversary date of the grant over a three year period.
Agnico Eagle estimated the fair value of stock options under the Black-Scholes option pricing model using the
following weighted average assumptions:
Risk-free interest rate
Expected life of stock options (in years)
Expected volatility of Agnico Eagle’s share price
Expected dividend yield
2013
2012
2011
1.50% 1.26%
1.95%
2.6
2.8
2.5
35.0% 37.5% 34.70%
1.82% 2.14%
0.89%
The Company uses historical volatility to estimate the expected volatility of Agnico Eagle’s share price. The
expected term of stock options granted is derived from historical data on employee exercise and post-vesting
employment termination experience.
The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2013 was nil.
The total compensation expense for the ESOP recorded in the general and administrative line item of the
consolidated statements of income (loss) and comprehensive income (loss) for 2013 was $26.4 million (2012 –
$33.8 million; 2011 – $42.2 million). The total compensation cost related to non-vested stock options not yet
recognized is $21.2 million as at December 31, 2013 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, $3.3 million was capitalized as part of
the property, plant and mine development line item of the consolidated balance sheets in 2013 (2012 –
$1.3 million; 2011 – $1.4 million).
(b)
Incentive Share Purchase Plan
On June 26, 1997, the Company’s 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.
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 common shares
subscribed for under the Purchase Plan are issued by the Company. The total compensation cost recognized in
2013 related to the Purchase Plan was $7.8 million (2012 – $7.2 million; 2011 – $6.4 million).
In 2013, 812,946 common shares were subscribed for under the Purchase Plan (2012 – 507,235; 2011 –
360,833) for a value of $23.4 million (2012 – $21.7 million; 2011 – $19.2 million). In May 2008, the Company’s
shareholders approved an increase in the maximum number of common shares reserved for issuance under the
Purchase Plan to 5,000,000 from 2,500,000. As at December 31, 2013, Agnico Eagle has reserved for issuance
829,907 common shares (2012 – 1,642,853; 2011 – 2,150,088) under the Purchase Plan.
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
33
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
8. STOCK-BASED COMPENSATION (Continued)
(c) Restricted Share Unit Plan
In 2009, the Company implemented the RSU plan for certain employees. Effective January 1, 2012, the RSU
plan was amended to include directors and senior executives of the Company.
A deferred compensation balance is recorded for the total grant date value on the date of each RSU plan grant.
The deferred compensation balance is recorded as a reduction of shareholders’ equity and is amortized as
compensation expense over the applicable vesting period.
In 2013, the Company funded the RSU plan by transferring $19.0 million (2012 – $12.0 million; 2011 –
$3.7 million) to an employee benefit trust (the ‘‘Trust’’) that then purchased shares of the Company in the open
market. The Trust is funded once per year during the first quarter of each year. For accounting purposes, the
Trust is treated as a variable interest entity and consolidated in the accounts of the Company. The common
shares purchased and held by the Trust are treated as not outstanding for the basic earnings per share (‘‘EPS’’)
calculations but are included in the basic EPS calculations once they have vested. All of the non-vested common
shares held by the Trust are included in the diluted EPS calculations, unless the impact is anti-dilutive.
Compensation expense related to the RSU plan was $12.1 million in 2013 (2012 – $6.6 million; 2011 –
$3.3 million). Compensation expense related to the RSU plan is included as part of the production, general and
administrative and exploration and corporate development line items of the consolidated statements of income
(loss) and comprehensive income (loss), consistent with the classification of other elements of compensation
expense for those employees who held RSUs.
Subsequent to the year ended December 31, 2013, 293,041 RSUs were granted under the RSU plan which vest
in 2017.
9.
INCOME AND MINING TAXES
Income and mining taxes expense (recovery) is comprised of the following geographic components:
Current income and mining taxes:
Canada
Mexico
Finland
Deferred income and mining taxes:
Canada
Mexico
Finland
Income and mining taxes
34 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
2013
2012
2011
$ 7,934
$
8,750
$ 62,382
29,968
14,492
52,394
33,531
9,799
3,496
222
52,080
66,100
(95,344)
26,041
(341,038)
93,665
25,284
(14,871)
20,820
54,996
10,269
(16,550)
72,145
(275,773)
$ 35,844
$124,225
$(209,673)
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
9.
INCOME AND MINING TAXES (Continued)
Cash income and mining taxes paid in 2013 were $56.5 million (2012 – $57.0 million; 2011 – $110.9 million).
The income and mining taxes expense (recovery) is different from the amount that would have been calculated by
applying the Canadian statutory income tax rate as a result of the following:
Combined federal and composite provincial tax rates
Increase (decrease) in tax rates resulting from:
Provincial mining duties
Tax law changes
Impact of foreign tax rates
Permanent differences
Valuation allowances
Impact of changes in income tax rates
Actual rate as a percentage of pre-tax income
2013
2012
2011
26.3%
26.3%
27.8%
1.4
(13.6)
2.4
(25.1)
(0.9)
(0.2)
3.6
–
(1.5)
1.0
1.2
(2.1)
5.9
(2.7)
(0.2)
(1.6)
(0.3)
(2.0)
(9.7)%
28.5%
26.9%
The following table sets out the components of Agnico Eagle’s deferred income and mining tax liabilities (assets):
Mining properties
Net operating and capital loss carryforwards
Mining duties
Reclamation provisions
Valuation allowance
Deferred income and mining tax liabilities
Liabilities (Assets)
as at December 31,
2013
2012
$ 808,449
$ 761,508
(129,019)
(102,005)
(68,728)
(36,158)
(44,242)
(42,688)
26,860
30,570
$ 593,320
$ 611,227
All of Agnico Eagle’s deferred income and mining tax assets and liabilities are 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 applicable 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 complex and
subject to interpretation. The Company may be subject in the future to a review of its historic income and other tax filings
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
35
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
9.
INCOME AND MINING TAXES (Continued)
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 set out below:
Unrecognized tax benefits, beginning of year
Additions (reductions)
Unrecognized tax benefit, end of year
2013
2012
2011
$10,867
$ 1,200
$1,630
–
9,667
(430)
$10,867
$10,867
$1,200
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 year.
The Company is subject to taxes in Canada, Mexico and Finland, each with varying statutes of limitations. The 2007
through 2013 taxation years generally remain subject to examination.
10. ACQUISITIONS
Urastar Gold Corporation
On May 16, 2013, the Company completed the acquisition of all of the issued and outstanding common shares of Urastar
Gold Corporation (‘‘Urastar’’) pursuant to a court-approved plan of arrangement under the Business Corporations Act
(British Columbia) for cash consideration of $10.1 million. The Urastar acquisition was accounted for as a business
combination and goodwill of $9.8 million was recognized on the Company’s consolidated balance sheets.
The transaction costs associated with the acquisition totaling $0.7 million were expensed through the general and
administrative line item of the consolidated statements of income (loss) and comprehensive income (loss) during the year
ended December 31, 2013.
36 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
10. ACQUISITIONS (Continued)
The following table sets out 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
Fair value of assets acquired and liabilities assumed:
Mining properties
Goodwill
Cash and cash equivalents
Trade receivables
Other current assets
Plant and equipment
Accounts payable and accrued liabilities
Other liabilities
Deferred tax liability
Net assets acquired
$10,127
$ 1,994
9,802
76
731
12
2
(791)
(1,573)
(126)
$10,127
The Company believes that goodwill for the Urastar 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 mineral reserves
and mineral 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 the Company assuming the acquisition of Urastar described above had occurred as of
January 1, 2012 are detailed below. On a pro forma basis, there would have been no effect on the Company’s consolidated
revenues.
Pro forma net income (loss) for the period
Pro forma net income (loss) per share – basic
Grayd Resource Corporation
Year Ended
December 31,
2013
Year Ended
December 31,
2012
Unaudited
$(409,020)
$307,274
$
(2.37)
$
1.79
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
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
37
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
10. ACQUISITIONS (Continued)
issued and outstanding common shares of Grayd. 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, under
the 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 Agnico Eagle common shares issued from treasury.
Transaction costs associated with the acquisition totalling $3.8 million were expensed through the interest and sundry
expense (income) line item of the consolidated statements of income (loss) and comprehensive income (loss) during the
fourth quarter of 2011. The Company has accounted for the purchase of Grayd as a business combination.
The following table sets out 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 common 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 mineral reserves
and mineral 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.
38 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
10. ACQUISITIONS (Continued)
Pro forma results of operations for Agnico Eagle assuming the acquisition of Grayd described above had occurred as of
January 1, 2011 are set out below. On a pro forma basis, there would have been no effect on Agnico Eagle’s consolidated
revenues:
Pro forma net loss attributed to common shareholders
Pro forma net loss per share – basic
Year Ended
December 31,
2011
Unaudited
$(582,762)
$
(3.42)
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 common 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.
11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade payables
Wages payable
Accrued liabilities
Other liabilities
As at December 31,
2013
2012
$ 80,242
$ 89,289
35,881
16,366
40,885
35,752
27,372
32,916
$173,374
$185,329
In 2013 and 2012, the other liabilities balance consisted primarily 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, 2013, the total amount of these guarantees was $174.3 million.
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
39
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
12. COMMITMENTS AND CONTINGENCIES (Continued)
Certain of the Company’s properties are subject to royalty arrangements. The following are the most significant royalty
arrangements:
The Company has a royalty agreement with the Finnish government relating to the Kittila mine. Starting 12 months after
Kittila mine operations commenced, the Company is required to pay 2.0% 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 certain properties in the Abitibi area. The type of royalty
agreements include, but are not limited to, net profits interest royalties and net smelter return royalties, with percentages
ranging from 2.5% to 5.0%.
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 royalties and net smelter return royalties, with
percentages ranging from 2.5% to 3.5%.
The Company regularly enters into various earn-in and shareholder agreements, often with commitments to pay net
smelter return and other royalties.
The Company had the following purchase commitments as at December 31, 2013:
2014
2015
2016
2017
2018
Thereafter
Total
13. LEASES
(a) Capital leases
Purchase
Commitments
$13,023
8,373
5,832
4,290
4,290
7,272
$43,080
The Company has entered into 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 5.9% and the average length of the contracts is 4.7 years.
All of the sale-leaseback agreements have end of lease clauses that qualify as bargain purchase options that the
Company expects to execute. As at December 31, 2013, the total gross amount of assets recorded under
sale-leaseback capital leases amounted to $37.6 million (2012 – $33.9 million).
The Company has agreements with third party providers of mobile equipment that are used at the Meadowbank
mine. These arrangements represent capital leases in accordance with the guidance in ASC 840-30 – Capital
Leases. The leases for mobile equipment at the Meadowbank mine are for five years and the effective annual
interest rate on these leases is 5.5%.
40 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
13. LEASES (Continued)
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, 2013:
2014
2015
2016
2017
2018
Thereafter
Total minimum lease payments
Less amount representing interest
Present value of net minimum lease payments
The Company’s capital lease obligations are comprised of the following:
Total future lease payments
Less: interest
Less: current portion
Long-term portion of capital lease obligations
Minimum
Capital Lease
Payments
$12,776
5,678
2,268
2,268
2,268
–
25,258
1,380
$23,878
As at December 31,
2013
2012
$25,258
$26,668
1,380
1,605
23,878
25,063
12,035
12,955
$11,843
$12,108
At December 31, 2013, the gross amount of assets recorded under capital leases, including sale-leaseback
capital leases was $51.8 million (2012 – $51.0 million; 2011 – $56.9 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 line item of the consolidated statements of income (loss) and comprehensive
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
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
41
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
13. LEASES (Continued)
payments required to meet obligations that have initial or remaining non-cancellable lease terms in excess of one
year as at December 31, 2013 are as follows:
2014
2015
2016
2017
2018
Thereafter
Total
Minimum Operating
Lease Payments
$1,783
1,032
822
816
836
2,470
$7,759
The portion of operating leases relating to rental expense was $1.6 million in 2013 (2012 – $1.1 million; 2011 –
$0.9 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 $6.9 million be restricted as at December 31,
2013 (December 31, 2012 – $4.7 million).
As part of the Company’s tax planning, $32.0 million was contributed to a qualified environmental trust (‘‘QET’’) in
December 2011 to fulfill the requirement of financial security for costs related to the environmental remediation of the
Goldex mine. During the year ended December 31, 2013, $2.8 million (2012 – $12.0 million) was withdrawn from the
QET to fund the environmental remediation expenditures. As at December 31, 2013, $16.8 million (December 31, 2012 –
$20.7 million) remained in the QET.
On December 30, 2013, the Company deposited $5.0 million into a restricted account in connection with a Subscription
Agreement to acquire 5,000 shares of Tocqueville Bullion Reserve, Ltd. at a price of $1,000 per share. The acquisition was
completed subsequent to year end on January 2, 2014.
15. FINANCIAL INSTRUMENTS
From time to time, Agnico Eagle has entered into financial instruments with financial institutions in order to hedge
underlying cash flow and fair value exposure arising from changes in commodity prices, interest rates, equity prices or
foreign currency exchange rates.
Currency risk management
In 2013 and 2012, 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.
42 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
15. FINANCIAL INSTRUMENTS (Continued)
Agnico Eagle generates almost all of its revenues in US dollars. The Company’s Canadian operations, which include the
LaRonde, Goldex, Lapa and Meadowbank mines and the Meliadine project have Canadian dollar requirements for capital,
operating and exploration expenditures.
The Company uses foreign exchange hedges to reduce the variability in expected future cash flows arising from changes
in foreign currency exchange rates. The hedged items represent a portion of the Canadian dollar denominated cash
outflows arising from Canadian dollar denominated expenditures in 2013.
As at December 31, 2013, the Company had outstanding foreign exchange zero cost collars with a cash flow hedging
relationship that did qualify for hedge accounting under ASC 815 – Derivatives and Hedging. The purchase of US dollar
put options was financed through selling US dollar call options at a higher level such that the net premium payable to the
different counterparties by the Company was nil. At December 31, 2013, the zero cost collars hedged $60.0 million of
2014 expenditures and the Company recognized mark-to-market adjustments in accumulated other comprehensive loss.
Amounts deferred in accumulated other comprehensive loss are reclassified to the production costs line item on the
consolidated statements of income (loss) and comprehensive income (loss), as applicable, when the hedged transaction
has occurred. Mark-to-market gains (losses) related to foreign exchange derivative financial instruments are 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 2013 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 at December 31, 2013. The call option premiums were recognized in the loss (gain) on
derivative financial instruments line item of the consolidated statements of income (loss) and comprehensive
income (loss).
Commodity price risk management
The Company uses intra-quarter zinc, copper and silver derivative financial instruments associated with the timing of sales
of the related products that were recognized in the (gain) loss on derivative financial instruments line item of the
consolidated statements of income (loss) and comprehensive income (loss). There were no zinc, copper or silver intra-
quarter derivative financial instruments outstanding at December 31, 2013 or December 31, 2012.
To mitigate the risks associated with fluctuating diesel fuel prices, the Company uses derivative financial instrument
contracts to hedge the price on a portion of diesel fuel costs associated with the Meadowbank mine’s diesel fuel exposure
as it relates to operating costs. Financial contracts that expired in 2013 and totaled 10.5 million gallons of heating oil were
entered into at an average price of $2.99 per gallon, which is approximately 55.0% of the Meadowbank mine’s expected
2013 diesel fuel operating costs. These contracts did qualify for hedge accounting and the related market-to-market
adjustments prior to settlement were recognized in accumulated other comprehensive loss. All heating oil derivative
financial instrument contracts settled in 2013.
Amounts deferred in accumulated other comprehensive loss are reclassified to the production costs line item on the
consolidated statements of income (loss) and comprehensive income (loss), as applicable, when the derivative financial
instrument has settled. Mark-to-market gains (losses) related to heating oil derivative financial instruments are based on
broker-dealer quotations that utilize period end forward pricing to calculate fair value.
As at December 31, 2013 and 2012, 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(d), accumulated other comprehensive loss.
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
43
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
15. FINANCIAL INSTRUMENTS (Continued)
The following table provides a summary of the amounts recognized in the (gain) loss on derivative financial instruments
line item of the consolidated statements of income (loss) and comprehensive income (loss):
Year Ended December 31,
2013
2012
2011
Premiums realized on written foreign exchange call options
$3,375
$1,505
Realized loss on foreign exchange forwards
Realized gain on zinc derivative financial instruments
Realized gain on copper derivative financial instruments
Realized loss on silver derivative financial instruments
Mark-to-market gain on derivative equity contracts(i)
Mark-to-market loss on warrants(i)
Realized loss on warrants
Realized loss on heating oil derivative financial instruments
Gain (loss) on derivative financial instruments
Note:
–
60
–
–
1,389
(488)
(2,827)
–
$1,509
–
430
63
–
–
(1,294)
–
(1,523)
$(819)
$4,995
(1,407)
3,419
79
(3,403)
–
–
–
–
$3,683
(i) Mark-to-market gains and losses on financial instruments that did not qualify for hedge accounting are recognized through the (gain) loss on derivative financial instruments
line item of the consolidated statements of income (loss) and comprehensive income (loss) and through the other line item of the consolidated statements of cash flow.
Agnico Eagle’s exposure to interest rate risk at December 31, 2013 relates to its cash and cash equivalents, short-term
investments and restricted cash totaling $170.0 million (2012 – $332.0 million) and the Credit Facility. The Company’s
short-term investments and cash equivalents have a fixed weighted average interest rate of 0.53% (2012 – 0.47%).
The fair values of Agnico Eagle’s current financial assets and liabilities approximate their carrying values as at
December 31, 2013.
16. GENERAL AND ADMINISTRATIVE
As a result of 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 recognized an insurance receivable of $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) in the first quarter of 2011.
During the subsequent months of 2011, the Company received $2.4 million of insurance proceeds and had a remaining
insurance receivable of $8.8 million recorded in the other current assets line item of the consolidated balance sheets as at
December 31, 2011. During the year ended December 31, 2012, the Company received $2.2 million of insurance
proceeds and had a remaining insurance receivable of $6.6 million as at December 31, 2012. During the year ended
December 31, 2013, the Company received $5.2 million of insurance proceeds and had a remaining insurance receivable
of $0.7 million as at December 31, 2013.
44 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
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 above the GEZ of the Goldex mine deposit had failed. This rock failure was
thought to extend between the top of the deposit and surface. As a result, this structure allowed an increase in ground
water to flow into the mine.
As at September 30, 2011, Agnico Eagle had 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 mineral reserves at the Goldex mine, other than the ore stockpiled on surface, were reclassified as mineral
resources effective September 30, 2011.
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
Loss on Goldex mine (before income and mining taxes) for the year ended December 31, 2011
$237,110
16,641
1,915
47,227
$302,893
The environmental remediation liability for the anticipated costs of remediation associated with the suspension of
operations at the Goldex mine has required 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.
In July 2012, the Company’s Board approved the development of the M and E Zones at the Goldex mine. The operations in
the GEZ remain suspended indefinitely.
18. IMPAIRMENT LOSS
As at December 31, 2013
As at December 31, 2013, the Company identified the continued decline in the market price of gold as an indicator of
potential impairment for the Company’s long-lived assets and goodwill. As a result of the identification of this indicator, the
Company evaluated its long-lived assets and goodwill for impairment on an asset group and reporting unit basis,
respectively, using updated assumptions and estimates.
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
45
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
18. IMPAIRMENT LOSS (Continued)
The following impairment losses were recorded as at December 31, 2013 as a result of the impairment evaluation:
Property, plant and mine development:
Meadowbank mine
Lapa mine
Goodwill:
Meliadine project
As at December 31, 2013
Pre-impairment
Carrying Value
Impairment
Loss
Post-impairment
Carrying Value
Impairment Loss
(net of tax)
$732,499
$(269,269)
136,766
(67,894)
$869,265
$(337,163)
$463,230
68,872
$532,102
$200,064
$(200,064)
$–
$(537,227)
$(194,511)
(41,687)
$(236,198)
$(200,064)
$(436,262)
Estimated fair values for the Meadowbank mine and Lapa mine were calculated by discounting the estimated future net
cash flows using discount rates of 6.5% and 5.5% (in nominal terms), respectively, commensurate with their individual
estimated levels of risk. These calculations were based on estimates of future production levels applying gold prices of
$1,238 to $1,300 per ounce (in real terms), foreign exchange rates of US$0.90:C$1.00 to US$0.93:C$1.00, inflation rates
of 2.0% and capital, operating and reclamation costs based on updated life-of-mine plans. Average gold recovery rates
applied were 92.3% and 78.3% for the Meadowbank mine and Lapa mine, respectively.
Estimated after-tax discounted future net cash flows of reporting units with goodwill were calculated as at December 31,
2013. These calculations were based on estimates of future production levels applying long-term gold prices of $1,238 to
$1,300 per ounce (in real terms), foreign exchange rates of US$0.90:C$1.00 to US$0.93:C$1.00, inflation rates of 2.0%
and capital, operating and reclamation costs based on updated life-of-mine plans. The average gold recovery rate applied
to the Meliadine project was 95.1%. A discount rate of 8.0% was used to calculate the estimated after-tax discounted
future net cash flows of the Meliadine project reporting unit, commensurate with its individual estimated level of risk.
Discount rates were based on each asset group’s weighted average cost of capital, of which the two main components are
the cost of equity and the after-tax cost of debt. Cost of equity was calculated based on the capital asset pricing model,
incorporating the risk-free rate of return based on Government of Canada marketable bond yields as at the valuation date,
the Company’s beta coefficient adjustment to the market equity risk premium based on the volatility of the Company’s
return in relation to that of a comparable market portfolio, plus a size premium and Company-specific risk factor. Cost of
debt was determined by applying an appropriate market indication of the Company’s borrowing capabilities and the
corporate income tax rate applicable to each asset group’s jurisdiction.
Management’s estimate of future net 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 goodwill. This may
have a material effect on the Company’s consolidated financial statements.
As at December 31, 2011
As at 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 mineral reserves and resources,
46 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
18. IMPAIRMENT LOSS (Continued)
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 life was developed and cash flows calculated,
resulting in the following impairment losses being recorded as at December 31, 2011:
As at December 31, 2011
Pre-impairment
Carrying Value
Impairment
Loss
Post-impairment
Carrying Value
Impairment Loss
(net of tax)
Property, plant and mine development:
Meadowbank mine
$1,670,838
$(907,681)
$763,157
$(644,903)
The estimated fair value of the Meadowbank mine was calculated as at December 31, 2011 by discounting the estimated
future net cash flows using a 7.0% discount rate (in nominal terms), commensurate with the estimated level of risk. This
calculation was based on estimates of future gold production applying long-term gold prices of $1,250 to $1,553 per
ounce (in real terms), foreign exchange rates of US$0.92:C$1.00 to US$0.97:C$1.00, an inflation rate of 2.0%, increased
cost estimates based on revised operating levels and an average gold recovery of 92.9%. Future expected operating costs,
capital expenditures and asset retirement obligations were based on the updated life-of-mine plan.
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 consolidated financial statements.
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 that represent more than 10% of the combined revenue,
profit or loss or total assets of all operating segments. Each of the Company’s significant operating mines and projects are
considered to be separate segments. Certain operating segments that do not meet the quantitative thresholds are still
disclosed when the Company believes that the information is useful. Segment results for 2012 and 2011 have been
retrospectively revised to reflect organizational changes in 2013 that created three business units consisting of the
Northern business unit, the Southern business unit, and the Exploration business unit. However, under this revised
organizational structure the Chief Executive Officer also reviews segment income (defined as revenues from mining
operations less production costs, exploration and corporate development and impairment losses) on a mine-by-mine
basis. The following are the Company’s reportable segments organized according to their relationship with the Company’s
three business units and reflect how the Company manages its business and how it classifies its operations for planning
and measuring performance:
Northern Business:
LaRonde mine, Lapa mine, Goldex mine, Meadowbank mine, Meliadine project and Kittila mine
Southern Business:
Pinos Altos mine, Creston Mascota deposit at Pinos Altos and La India project
Exploration:
United States Exploration office, Europe Exploration office, Canada Exploration offices and Latin America
Exploration office
The accounting policies of the reportable segments are the same as those described in the accounting policies note. There
are no transactions between the reportable segments affecting revenue. Production costs for the reportable segments are
net of intercompany transactions.
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
47
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
19. SEGMENTED INFORMATION (Continued)
Corporate and other (including Urastar) assets and specific income and expense items are set out separately below.
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. The Goldex mine achieved commercial production on
October 1, 2013.
Year ended
December 31, 2013
Northern Business:
LaRonde mine
Lapa mine
Goldex mine
Meadowbank mine
Meliadine project
Kittila mine
Revenues
from Mining
Operations
Production
Costs
Exploration
and Corporate
Development
Impairment
Loss
Segment
Income
(Loss)
$ 329,900
141,167
21,418
591,473
—
209,723
$(229,911)
(69,532)
(13,172)
(363,894)
—
(98,446)
$ — $
—
—
—
—
—
(67,894)
—
(269,269)
(200,064)
— $ 99,989
3,741
8,246
(41,690)
(200,064)
— 111,277
Total Northern Business
$1,293,681
$(774,955)
$ — $(537,227)
$ (18,501)
Southern Business:
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total Southern Business
Exploration
Segment income (loss)
Segment income
Corporate and other:
Foreign currency translation gain
Amortization of property, plant and mine development
Interest and sundry expense
Gain on sale of available-for-sale securities
Gain on derivative financial instruments
General and administrative
Impairment loss on available-for-sale securities
Provincial capital tax
Interest expense
Loss before income and mining taxes
48 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
$ 303,203
41,522
$(130,129)
(19,843)
$ — $
—
— $ 173,074
21,679
—
$ 344,725
$(149,972)
$ — $
— $ 194,753
$
— $
—
$(44,236)
$
— $ (44,236)
$1,638,406
$(924,927)
$(44,236)
$(537,227)
$ 132,016
$ 132,016
7,188
(296,078)
(8,824)
74
1,509
(115,800)
(34,272)
1,504
(57,999)
$(370,682)
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
19. SEGMENTED INFORMATION (Continued)
Year ended
December 31, 2012
Northern Business:
LaRonde mine
Lapa mine
Goldex mine
Meadowbank mine
Kittila mine
Total Northern Business
Southern Business:
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total Southern Business
Exploration
Segment income (loss)
Segment income
Corporate and other:
Foreign currency translation loss
Amortization of property, plant and mine development
Interest and sundry expense
Gain on sale of available-for-sale securities
Loss on derivative financial instruments
General and administrative
Impairment loss on available-for-sale securities
Provincial capital tax
Interest expense
Income before income and mining taxes
Revenues
from Mining
Operations
Production
Costs
Exploration
and Corporate
Development
Segment
Income
(Loss)
$ 399,243
173,753
—
609,625
284,429
$(225,647)
(73,376)
—
(347,710)
(98,037)
$
(37,627)
— $173,596
— 100,377
(37,627)
— 261,915
— 186,392
$1,467,050
$(744,770)
$ (37,627)
$684,653
$ 363,113
87,551
$(128,618)
(24,324)
$ 450,664
$(152,942)
$
$
— $234,495
63,227
—
— $297,722
$
— $
—
$ (71,873)
$ (71,873)
$1,917,714
$(897,712)
$(109,500)
$910,502
$ 910,502
(16,320)
(271,861)
(2,389)
9,733
(819)
(119,085)
(12,732)
(4,001)
(57,887)
$ 435,141
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
49
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
19. SEGMENTED INFORMATION (Continued)
Year ended
December 31, 2011
Northern Business:
LaRonde mine
Lapa mine
Goldex mine
Meadowbank mine
Kittila mine
Revenues
Exploration
from Mining Production and Corporate
Development
Operations
Costs
Loss on
Goldex
Mine
Impairment
Loss
Segment
(Loss)
Income
$ 398,609
167,536
217,662
434,051
225,612
$(209,947)
(68,599)
(56,939)
(284,502)
(110,477)
— $
$ — $
—
—
— (302,893)
—
—
— (907,681)
—
— $ 188,662
— 98,937
— (142,170)
(758,132)
— 115,135
Total Northern Business
$1,443,470
$(730,464)
$ — $(302,893)
$(907,681) $(497,568)
$ 321,074
57,255
$(131,044)
(14,570)
$ — $
—
— $
— $ 190,030
42,685
$ 378,329
$(145,614)
$ — $
— $
— $ 232,715
$
— $
—
$(75,721) $
— $
— $ (75,721)
$1,821,799
$(876,078)
$(75,721) $(302,893)
$(907,681) $(340,574)
$(340,574)
1,082
(261,781)
(5,188)
4,907
3,683
(107,926)
(8,569)
(9,223)
(55,039)
$(778,628)
Southern Business:
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
Total Southern Business
Exploration
Segment income (loss)
Segment loss
Corporate and other:
Foreign currency translation gain
Amortization of property, plant and mine development
Interest and sundry expense
Gain on sale of available-for-sale securities
Gain on derivative financial instruments
General and administrative
Impairment loss on available-for-sale securities
Provincial capital tax
Interest expense
Loss before income and mining taxes
50 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
19. SEGMENTED INFORMATION (Continued)
Northern Business:
LaRonde mine
Lapa mine
Goldex mine
Meadowbank mine
Meliadine project
Kittila mine
Total Northern Business
Southern Business:
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
La India project
Total Southern Business
Exploration
Corporate and other
Total
Total Assets as at
December 31,
2013
2012
$ 878,719
$ 849,304
78,293
168,712
120,601
56,819
711,387
1,005,890
877,923
1,015,485
870,332
837,002
$3,537,255
$3,933,212
$ 537,560
$ 610,217
86,185
68,735
512,450
377,049
1,136,195
1,056,001
19,838
19,225
266,071
247,681
$4,959,359
$5,256,119
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
51
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
19. SEGMENTED INFORMATION (Continued)
Capital Expenditures
Year Ended December 31,
2013
2012
2011
$ 84,292
$ 75,214
$ 90,735
22,738
65,063
18,475
26,822
18,397
42,232
76,811
105,095
116,860
61,412
83,770
83,343
60,036
73,944
86,514
$394,086
$368,985
$428,682
$ 42,835
$ 24,212
$ 32,407
17,582
5,777
7,559
116,786
39,236
—
$177,203
$ 69,225
$ 39,966
$ — $
55
$ 8,561
$
6,500
$
7,285
$ 5,622
$577,789
$445,550
$482,831
Northern Business:
LaRonde mine
Lapa mine
Goldex mine
Meadowbank mine
Meliadine project
Kittila mine
Total Northern Business
Southern Business:
Pinos Altos mine
Creston Mascota deposit at Pinos Altos
La India project
Total Southern Business
Exploration
Corporate and other
Total
52 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
19. SEGMENTED INFORMATION (Continued)
The following table sets out the changes in the carrying amount of goodwill by segment:
Cost
Balance at January 1, 2013
Meliadine project
La India project
Corporate
and other
Total
$ 200,064
$ 29,215
$
–
$ 229,279
Purchase of Urastar Gold Corporation (note 10)
–
–
9,802
9,802
Balance at December 31, 2013
Accumulated impairment
Balance at January 1, 2013
Impairment loss
Balance at December 31, 2013
$ 200,064
$ 29,215
$
9,802
$ 239,081
$
–
(200,064)
$(200,064)
$
$
–
–
–
$
$
–
–
–
$
–
(200,064)
$(200,064)
Carrying amount
$
–
$ 29,215
$
9,802
$ 39,017
20. SUBSEQUENT EVENTS
On January 13, 2014, the Company executed an Asset Purchase Agreement with Alexandria Minerals Corporation
(‘‘AMC’’) to purchase the Akasaba West Property in Quebec, Canada for cash consideration of C$5.0 million. Agnico Eagle
assumes pre-existing underlying royalty obligations under the Asset Purchase Agreement relating to specific Akasaba
West Property mining claims ranging from a 2% net smelter returns production royalty to a 20% net proceeds of
production royalty. The Company also entered into a 2% Net Smelter Return Royalty (‘‘Royalty’’) Agreement with AMC on
January 13, 2014 relating to all Akasaba West Property mineral and metal production after 210,000 ounces of gold has
been produced. The Company has the right to purchase one-half of the Royalty from AMC at any time for cash
consideration of C$7.0 million.
On January 28, 2014, the Company purchased common shares and warrants in a mining industry entity for total
consideration of C$9.3 million.
On February 12, 2014, Agnico Eagle announced that the Board approved the payment of a quarterly cash dividend of
$0.08 per common share, payable on March 17, 2014 to holders of record of the common shares of the Company on
March 3, 2014.
21. SECURITIES CLASS ACTION LAWSUITS
On November 7, 2011 and November 22, 2011, the Company and certain current and former senior officers, some of
whom also are or were directors of the Company, 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., respectively,
which were filed in the United States District Court for the Southern District of New York. On February 6, 2012, the Court
ordered that the two complaints be consolidated under the caption In re Agnico-Eagle Mines Ltd. Securities Litigation, and
lead counsel was appointed. On April 6, 2012, a Consolidated Complaint was issued against the Company and certain of
its current and former senior officers and directors. The Consolidated Complaint alleges that the Company had violated
AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
53
AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(thousands of United States dollars, except share and per share amounts, unless otherwise indicated)
December 31, 2013
21. SECURITIES CLASS ACTION LAWSUITS (Continued)
federal securities law in connection with its disclosure related to the Goldex mine. The Consolidated Complaint seeks,
among other things, damages on behalf of persons who purchased or acquired securities of the Company during the
period July 28, 2010 to October 19, 2011. The Consolidated Complaint has not been certified as a class action, and the
Company intends to vigorously defend it. On January 14, 2013, Judge Oetken granted the Company’s motion to dismiss
the Consolidated Complaint and all claims therein and denied the plaintiffs’ request for leave to amend the Consolidated
Complaint. On February 12, 2013, the plaintiffs filed a Notice of Appeal to the United States Court for Appeals for the
Second Circuit. The appeal was heard on September 23, 2013, and on October 3, 2013 the Court of Appeals for the
Second Circuit affirmed the decision below dismissing the Consolidated Complaint. The time for the plaintiffs to file a
petition for a writ of certiorari, requesting a review by the United States Supreme Court, has expired and the judgment
dismissing the plaintiffs’ Consolidated Complaint is now final and no longer appealable.
On March 8, 2012 and April 10, 2012, a Notice of Action and Statement of Claim (collectively, the ‘‘Ontario Claim’’) were
issued by William Leslie, AFA Livforsakringsaktiebolag and certain other entities against the Company and certain of its
current and former officers, some of whom also are or were directors of the Company. On September 27, 2012, the
plaintiffs issued a Fresh as Amended Statement of Claim. The Fresh as Amended Statement of Claim alleges that the
Company’s public disclosure concerning water flow issues at its Goldex mine was misleading. The Ontario Claim was
issued by the plaintiffs on behalf of all persons and entities who acquired securities of the Company during the period
March 26, 2010 to October 19, 2011, excluding persons resident or domiciled in the Province of Quebec at the time they
purchased or acquired such securities. The plaintiffs seek, among other things, damages of C$250.0 million and to certify
the Ontario Claim as a class action. On April 17, 2013 an Order was granted on consent certifying a class action
proceeding and granting leave for the claims under Section 138 of the Securities Act (Ontario) to proceed. The Company
intends to vigorously defend the action on the merits.
On April 12, 2012, two senior officers of the Company, who also are or were directors of the Company, were served with a
Motion for Leave to Institute a Class Action and for the Appointment of a Representative Plaintiff (the ‘‘Quebec Motion’’).
The action is on behalf of all persons and entities with fewer than 50 employees resident in Quebec who acquired
securities of the Company between March 26, 2010 and October 19, 2011. The proposed class action is for damages of
C$100.0 million arising as a result of allegedly misleading disclosure by the Company concerning its operations at the
Goldex mine. On October 15, 2012, the plaintiffs served an amended Quebec Motion seeking leave to commence an
action under the Securities Act (Quebec) in addition to seeking authorization to institute a class action. On October 1,
2013, the Quebec court certified the class action on terms identical to those set out in the consent Order granted in Ontario
on April 17, 2013. No date has been set for the hearing to argue the class action on the merits. The Company intends to
vigorously defend the action on the merits.
54 AGNICO EAGLE
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Targets and Achievements
Officers
2013 TARGETS
WHAT WE DELIVERED
2014 TARGETS
Sean Boyd
President and Chief Executive Officer
Marc Legault
Senior Vice-President, Project Evaluations
Paul Cousin
Vice-President, Metallurgy
970,000 to 1,010,000 ounces of gold
Achieved.
1,175,000 to 1,205,000 ounces of gold
production
Record annual gold production of
production
1,099,335 ounces, largely due to strong
operating results from all mines
Meet or exceed production guidance
Achieved.
Meet or exceed 2014 production guidance
Gold production of 6.4 ounces per
1,000 shares
Maintain gold reserves between 15 and
Achieved.
Maintain gold reserves at approximately
20 times annual gold production rate
Maintained gold reserves at 16.9 million
15 times annual gold production rate
ounces, a decrease of 1.8 million ounces
(including 2013 production of
approximately 1.1 million ounces)
Total cash costs of $700 to $750 per ounce
Achieved.
Total cash costs of $670 to $690 per ounce
Total cash costs of $672 per ounce,
primarily due to cost optimization
programs at all assets
All-in sustaining costs of approximately
Achieved.
All-in sustaining costs of approximately
$1,075 per ounce
All-in sustaining costs of $952 per ounce
$990 per ounce
Increase operating cash flow per share
Annual cash flow from operations of
Increase operating cash flow per share
$438.3 million or $2.53 per share as
compared to $696 million or $4.06
per share in 2012
Search out acquisition opportunities in
We continue to seek acquisition
Search out acquisition opportunities in
low-risk regions that are well matched to
our skills and abilities
opportunities in low-risk regions that are
well matched to our skills and abilities
low-risk regions that are well matched to
our skills and abilities
Lost-time accident frequency below a rate
Achieved 1.70 lost-time accident
Lost-time accident frequency below a rate
of 2.8 for the Agnico Eagle workforce;
frequency
shifting to aspirational Zero Harm safety
targets and developing “leading”
performance indicators
of 2.07 for the Agnico Eagle workforce;
shifting to aspirational Zero Harm safety
targets and developing “leading”
performance indicators
No fines or penalties for environmental
Achieved
No fines or penalties for environmental
failures
failures
Zero category 3, 4 or 5 environmental
One category 3 incident was reported*
Zero category 3, 4 or 5 environmental
incidents
incidents
* A category 3 event occurred at one of our exploration projects in Finland as a result of an act of vandalism during a theft of fuel from storage tanks. Approximately
700 litres of fuel were spilled in the event. The area was subsequently cleaned up. A category 3 incident causes moderate, reversible environmental impact, with
short-term effect, and requires moderate remediation.
Patrice Gilbert
Vice-President, Health, Safety
and Community
Guy Gosselin
Vice-President, Exploration
Ingmar E. Haga
Vice-President, Europe
Michel Leclerc
Vice-President, Project Evaluations
Christian Provencher
Vice-President, Canada
David Smith
Senior Vice-President, Finance,
and Chief Financial Officer
Donald G. Allan
Senior Vice-President,
Corporate Development
Alain Blackburn
Senior Vice-President, Exploration
Jean Luk Pellerin
Senior Vice-President, Human Resources
Jean Robitaille
Senior Vice-President, Business Strategy
and Technical Services
Yvon Sylvestre
Senior Vice-President, Operations – Canada
and Europe
Picklu Datta
Senior Vice-President, Treasury and Finance
Luis Felipe Medina Aguirre
Vice-President, Mexico
Louise Grondin
Senior Vice-President, Environment
and Sustainable Development
Tim Haldane
Senior Vice-President, Operations – USA
and Latin America
R. Gregory Laing
General Counsel, Senior Vice-President,
Legal, and Corporate Secretary
Lino Cafazzo
Vice-President, Information Technology
Brian Christie
Vice-President, Investor Relations
Mathew Cook
Vice-President, Controller
Shareholder Information
AUDITORS
Ernst & Young LLP
SOLICITORS
Davies Ward Phillips & Vineberg LLP
(Toronto and New York)
LISTINGS
The New York Stock Exchange and
the Toronto Stock Exchange
Stock Symbol: AEM
TRANSFER AGENT
Computershare Trust Company of Canada
1-800-564-6253
INVESTOR RELATIONS
CORPORATE HEAD OFFICE
(416) 947-1212
ANNUAL MEETING
OF SHAREHOLDERS
Friday, May 2, 2014, at 11:00 a.m.
Sheraton Centre Toronto Hotel
(Dominion Ballroom)
123 Queen Street West
Toronto, Ontario, Canada
M5H 2M9
Agnico Eagle Mines Limited
145 King Street East, Suite 400
Toronto, Ontario, Canada
M5C 2Y7
(416) 947-1212
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twitter.com/agnicoeagle
info@agnicoeagle.com
agnicoeagle.com
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2013 Annual Report
TRUST
RESPECT
EQUALITY
FAMILY
RESPONSIBILITY
AGNICO EAGLE’S FIVE PILLARS
At Agnico Eagle, our efforts are supported by our Five Pillars: Trust,
Respect, Equality, Family and Responsibility. These pillars define who we
are and guide us in everything we do. They are a vital link to our history,
central to our culture and an essential element to our success.
Agnico Eagle Mines Limited
145 King Street East, Suite 400
Toronto, Ontario, Canada M5C 2Y7
agnicoeagle.com