Agnico-Eagle Mines Limited (AEM)

Q2 2010 Earnings Conference Call

July 29, 2010 11:00 AM ET

Executives

Sean Boyd – Vice Chairman and CEO

Ebe Scherkus – President and COO

Dave Garofalo – SVP, Finance and CFO

Analysts

Haytham Hodaly – Salman Partners Inc.

Anita Soni – Credit Suisse

David Haughton – BMO Capital Markets

Richard Sherman – Private Investor

David Christy (ph) – Cortia Capital

Presentation

Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Agnico-Eagle second quarter 2010 results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. Anyone has any difficulties during the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this conference is being recorded today, Thursday, July 29, 2010 at 11:00 Eastern Time. I will now turn the conference over to Mr. Sean Boyd, Vice Chairman, and Chief Executive Officer. Please go ahead, sir.

Sean Boyd

Thank you, operator, and good morning, everyone. Thanks for joining our Q2 conference call. We’ve got our full team here in Toronto. We’ve got a short presentation, and then we will open it up for questions.

Just in terms of an overall summary, we had record gold production, record earnings and cash flow as a result of us ramping up our newly built mines and we are beginning to see that production growth translate into positive impacts on both the bottom line, profitability and cash flow.

The solid quarter from a production standpoint keeps us on track for our production guidance between 1 million and 1.1 million ounces. We still got some work to do on the cost side, particular at Kittila and Meadowbank, as we continue to optimize these two mines.

Full-year cost guidance is $425 to $450 an ounce which is an increase from $399. Part of that increased guidance is due to changes in some of the FX and by-product revenue assumptions in addition to the higher cost during the commissioning phase at both Kittila and Meadowbank.

I’ll talk a bit about some of the technical issues now, and then we can get into them in more detail in the question-and-answer session. At Kittila, the recent efforts have been focused on reducing the chloride content of the concentrate. We’ve seen some very good results. Although still early, we’ve seen some results over the last several weeks at 80% recovery. So, we are still on track to achieve our recovery target of 83% by the end of the year.

At Meadowbank, we are just in the midst of upgrading the portable crushing facility that’s in place now. That will allow us to ramp up throughput in the second half of this year. We’ll have a permanent secondary crushing unit in place in the third quarter of next year, which will permanently resolve that situation.

On the cost side, we are getting delivery on the barges this summer of new mining equipment. And that will also improve our efficiencies in the open pit which will help us to reduce those costs.

At Pinos Altos, we are still on track to commission the first of the new filters this quarter, and that will allow us to increase our throughput in the fourth quarter of this year. So, as we look out to the second half, we’ll see continued growth in our gold production. We’ll see our unit cost decline, which will have a positive impact on profitability and on cash flow in the second half. We expect that second half run rate to carry through into 2011.

As we move in to 2012 and 2013, our expansions at Goldex, at Pinos Altos, and LaRonde will start to take hold, adding more growth to our production profile. Beyond that, as we said, we continue to work on output expansions at Kittila and at Meadowbank and further expansions at Pinos Altos.

And in early July, we closed the transaction bringing in 100% of the Meliadine project. And we now have $130 million program over the next two-and-a-half years that will result in extensive drilling of the deposit. It will allow us to take a bulk sample. It calls for construction of the road from (inaudible) to the site as well as a feasibility study. So, we are moving forward very sharply on that project.

I will move through the slides. I am not going to go through all of them, because we will leave more time for question-and-answers, and I know it’s a busy day on the earnings front.

But just quickly talking about the financial results, I think what we are happy to see is the cash flow that’s been generated as these mines ramp up, cash provided by operating activities of over $160 million in the quarter. We expect that to grow as we move through the second half with the increases in output and declining unit cost to produce an ounce of gold.

Looking at some of the results in more detail, we see a strong a production quarter at over 250,000 ounces. So, for the first half, a little under 450,000 ounces. So, we are anticipating over 600,000 ounces in the second half at cash cost in the low 400s. So, that will allow us to grow not only output but reduce cost and improve our cash flow as we go forward.

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