Form 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For the Month of August 2003
------------------------
Agnico-Eagle Mines Limited
------------------------------------------------------------------
(Translation of registrant's name into English)
145 King Street East, Suite 500, Toronto, Ontario M5C 2Y7
---------------------------------------------------------------------------
[Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20F or Form 40-F.]
Form 20-F X Form 40-F
------- -------
[Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
------- -------
[If "YES" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82-____________
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AGNICO-EAGLE MINES LIMITED
Date: August 8, 2003 By: (Signed) David Garofalo
-------------- -------------------------------------
Vice-President, Finance and
Chief Financial Officer
SECOND QUARTER REPORT 2003
AGNICO-EAGLE MINES LIMITED reported a net loss of $3.8 million, or $0.05 per
share in the second quarter of 2003 compared to net income of $3.4 million, or
$0.05 per share last year. For the year to date, the net loss was $10.0 million,
or $0.12 per share compared to net income of $3.8 million, or $0.06 per share in
the first six months of 2002. Included in the year to date 2003 results is a
one-time net of tax non-cash charge of $1.7 million, or $0.02 per share,
representing the cumulative effect of the adoption of a new US GAAP accounting
standard, FAS 143, relating to future reclamation obligations.
AGNICO-EAGLE CONTINUES TO ADD TO DOMINANT LAND POSITION ON CADILLAC GOLD BELT
In the second quarter, the Company signed an asset purchase agreement with
Barrick Gold Corporation to purchase a 100% interest in Barrick's Bousquet
Property, immediately to the west and south of Agnico-Eagle's 100% owned LaRonde
Mine in northwestern Quebec. Agnico-Eagle is also acquiring used machinery and
equipment from the now closed Bousquet Mines including underground rolling stock
and the headframe at Bousquet 2. In addition to the Bousquet Mine assets,
Agnico-Eagle will increase its interest in the Bruce Property, located one mile
east of LaRonde, to 100%. The purchase and sale agreement also contemplates the
purchase of certain of Barrick's regional exploration properties including Orion
B-1, Orion B-2, Joannes North, Orion South and Norgold, all located to the south
and west of Cambior's Doyon Property.
The purchase consideration to be paid by Agnico-Eagle on closing is C$5 million
in cash and C$2 million in common shares of Agnico-Eagle, and the assumption of
specified reclamation obligations relating to the Bousquet Property, excluding
certain employment-related liabilities. In addition Barrick will retain a 2% net
smelter return royalty on all the properties acquired by Agnico-Eagle.
Agnico-Eagle now controls 100% of over 14 miles of contiguous favourable geology
along the prolific Cadillac-Bousquet Gold Belt and has the dominant land
position on the Cadillac-Larder Lake Break immediately to the south. Upon
completion of the acquisition, Agnico-Eagle will integrate the 25 years of
Bousquet geological information into the LaRonde Mine database. This information
and the underground access provided by the Penna and Bousquet 2 Shafts will
allow the Company to better evaluate its regional exploration and development
options.
Closing of the acquisition is expected to occur on or before September 30, 2003
and is conditional upon customary regulatory approvals, including a Certificate
of Liberation from the Quebec Ministry of Natural Resources releasing Barrick
from remediation obligations on the Bousquet Property.
1
CHIBEX SOUTH ACQUISITION SOLIDIFIES HOLD ON LAPA TREND
Earlier in the second quarter, the Company also closed the previously announced
acquisition of Breakwater Resources Ltd.'s 66 2/3% interest in the Chibex South
Property for $75,000 and a 0.66% net smelter royalty. Chibex South is located
south of and adjacent to the Company's Chibex North Property, which in turn is
located immediately south of and adjacent to Agnico-Eagle's 100% owned Lapa
Property. Agnico-Eagle now controls properties covering 12 miles of the same
geological contact that hosts the Lapa Contact Zone.
NEGATIVE EFFECTS OF ROCK FALL NOW WORKED THROUGH AS EXPECTED
In the second quarter of 2003, the Company produced 60,157 ounces compared to
74,617 ounces produced in the second quarter of 2002. Year to date, the Company
has produced 115,162 ounces of gold compared to 134,876 ounces produced in the
first six months of 2002. The decline in second quarter and year to date
production is due to the first quarter rock fall at the Company's LaRonde Mine.
This event delayed the extraction of gold/copper mining blocks in March and
caused higher than planned dilution in the mining blocks affected by the rock
fall. As expected, the effects of this rock fall lingered into the second
quarter as the Company continued to take steps to back-fill the affected area
which resulted in a resequencing of production to the upper, zinc-rich areas of
the mine.
GOLD PRODUCTION FOR 2003 ON TRACK FOR 300,000 OUNCES
As previously disclosed, the Company's 2003 gold production estimate is
approximately 300,000 ounces. The previous projection of 2003 full year total
cash costs of $180 per ounce was estimated assuming an average US$/C$ exchange
of 1.47 and $4.60 per ounce silver, $0.75 per pound copper and $0.36 per pound
zinc. Assuming the recent average US$/C$ exchange rate of 1.37 for the balance
of 2003 and the same byproduct prices, cash costs would be approximately $200
per ounce.
LARONDE OPERATING PERFORMANCE STEADILY IMPROVING
LaRonde continued its steady improvement in operating performance with the mill
processing a quarterly record of 648,000 tons of ore, averaging over 7,100 tons
per day, as over 643,000 tons of ore was hoisted from underground. In addition,
the lower level crusher and ore handling facility was completed and placed into
operation in June. Tonnage continued to increase from the lower part of the mine
as over 290,000 tons or 43% of the ore was hoisted from the lower level loading
pocket in the quarter. At maximum production, the lower mine is scheduled to
produce a total of 510,000 tons per quarter, a rate scheduled to be reached in
the fourth quarter of this year. Second quarter onsite operating costs improved
to C$48 per ton from C$52 per ton in the same quarter last year. For the year to
date, onsite operating costs improved to C$50 per ton from C$52 per ton in the
first half of 2002.
2
LARONDE CONTINUES AGGRESSIVE DRILLING PROGRAM
Eight drill rigs were in operation during the quarter, completing nearly 32,000
feet of diamond drilling on the following target areas:
o Delineation drilling on the upper part of the mine and on Levels 194
and 215.
o Testing Zone 7 between Levels 170 and 215.
o Exploration drilling on Zone 20 North at depth from the Level 215
drift.
The focus during the quarter was further definition of Zone 7 in light of the
encouraging results returned the previous quarter. A second drill was also added
to the Level 215 exploration drift as further advances in the drift will allow
both drills to complete the systematic definition of Zone 20 North at depth.
Definition and delineation drilling started on ZONE 7 from Levels 170, 194 and
212. Drilling was started on the upper lens with the results to date on both the
upper and lower lens better than originally expected. Level development has been
completed on Level 215 confirming the recent drilling results and development in
ore on Level 212 has also commenced. Summary results follow:
--------------------------------------------------------------------------------------------------------------
TRUE GOLD(OZ/TON)
DRILL HOLE THICKNESS(FT) FROM TO CUT(1.0 OZ) SILVER(OZ/TON) COPPER(%) ZINC(%)
--------------------------------------------------------------------------------------------------------------
3170-42 11.8 309.1 322.8 0.14 1.63 0.24 3.06
--------------------------------------------------------------------------------------------------------------
3170-43 10.2 373.7 394.7 0.19 1.03 0.22 2.65
--------------------------------------------------------------------------------------------------------------
3170-44 14.1 488.2 516.1 0.19 2.19 0.19 1.73
--------------------------------------------------------------------------------------------------------------
3170-46 10.2 401.9 424.2 0.26 1.96 0.42 4.01
--------------------------------------------------------------------------------------------------------------
3212-10 10.2 331.4 342.2 0.15 1.16 1.22 1.20
--------------------------------------------------------------------------------------------------------------
3212-12 12.8 451.4 469.8 0.24 0.99 0.52 4.04
--------------------------------------------------------------------------------------------------------------
3212-13 9.2 511.8 527.6 0.20 1.19 0.48 2.42
--------------------------------------------------------------------------------------------------------------
Delineation drilling also continued on the lower gold-copper rich part of ZONE
20 NORTH. The drilling was focused on the further delineation of production
areas that will be mined in the second half of this year. The most recent
results have been summarized below:
--------------------------------------------------------------------------------------------------------------
TRUE GOLD(OZ/TON)
DRILL HOLE THICKNESS(FT) FROM TO CUT(1.0 OZ) SILVER(OZ/TON) COPPER(%) ZINC(%)
--------------------------------------------------------------------------------------------------------------
18520461 15.7 90.2 106.0 0.180 0.214 0.10 0.07
--------------------------------------------------------------------------------------------------------------
18520471 17.1 90.2 107.3 0.158 0.633 0.22 0.97
--------------------------------------------------------------------------------------------------------------
18820401 10.8 115.5 128.9 0.283 0.577 0.73 0.34
--------------------------------------------------------------------------------------------------------------
18820411 11.8 93.5 105.3 0.165 0.264 0.12 0.24
--------------------------------------------------------------------------------------------------------------
18820421 13.1 94.8 107.9 0.138 0.642 0.79 0.63
--------------------------------------------------------------------------------------------------------------
19420381 19.0 101.7 124.3 0.250 1.476 1.37 0.46
--------------------------------------------------------------------------------------------------------------
19420382 11.2 131.6 148.3 0.068 0.439 0.98 0.72
--------------------------------------------------------------------------------------------------------------
20320441 51.5 104.7 156.2 0.183 0.711 0.41 0.44
--------------------------------------------------------------------------------------------------------------
20320442 49.2 111.5 161.4 0.186 0.775 0.59 0.22
--------------------------------------------------------------------------------------------------------------
20320451 54.5 109.6 164.0 0.180 0.830 0.51 0.66
--------------------------------------------------------------------------------------------------------------
20620497 34.8 120.4 164.0 0.220 4.731 1.84 1.00
--------------------------------------------------------------------------------------------------------------
20620501 28.5 132.5 161.1 0.256 5.964 1.29 1.82
--------------------------------------------------------------------------------------------------------------
21520371 49.1 81.4 130.9 0.212 2.529 0.72 1.11
--------------------------------------------------------------------------------------------------------------
3
Exploration drilling on LARONDE II from the Level 215 exploration drift is
following up the results obtained in the previously announced drill hole
3215-60A which returned 0.29 ounces of gold per tone over 65.6 feet. The Company
is conducting an 87,000 foot diamond drilling program in 2003 on LaRonde II from
the Level 215 exploration drift, designed to convert the existing mineral
resource into mineral reserves and to expand the known mineral resource
envelope. The confirmation of this higher grade core could have a significant
impact on the LaRonde II mining sequence and economics.
LAPA PROGRESSING TOWARDS PRE-FEASIBILITY STUDY BY YEAR END
On the 100% owned Lapa Property, located 7 miles east of LaRonde, five diamond
drills are continuing to drill the Contact Zone with the most recent results
highlighted below:
-----------------------------------------------------------------------------------------
TRUE GOLD(OZ/TON) GOLD(OZ/TON)
DRILL HOLE THICKNESS(FT) FROM TO CUT(1.5 OZ) UNCUT
-----------------------------------------------------------------------------------------
118-03-25 13.8 4354.7 4372.7 0.24 0.24
-----------------------------------------------------------------------------------------
118-03-25A 9.5 3857.6 3868.4 0.14 0.14
-----------------------------------------------------------------------------------------
118-03-27 40.4 2291.0 2372.0 0.17 0.17
-----------------------------------------------------------------------------------------
118-03-19B 11.2 2779.5 2799.2 0.05 0.05
-----------------------------------------------------------------------------------------
PRELIMINARY RESULTS
Drill hole 118-03-25 is located 215 feet east of drill hole 118-03-16 which
returned 0.39 oz/t of gold over 12.1 feet. This drill hole, located at a depth
3,815 feet below surface, is the deepest intersection on the Contact Zone and
confirms that the mineralization remains open to the east. Drill hole 118-03-27,
60 feet west of previously disclosed drill hole 118-02-02B, is located at a
depth of 2,132 feet and confirms the western margin of the envelope with a
similar thickness that was used in the June 2003 resource estimate.
Over the next three months, three drill rigs will continue to drill both east
and west of drill holes 118-03-25 and previously disclosed 118-03-16 to confirm
the continuity of the mineralization at depth. Two other rigs will continue to
drill in-fill holes and further define the upper block of mineralization on the
extreme eastern margin of the Contact Zone. This aggressive drilling program
will continue until the end of the year in order to provide results for a
pre-feasibility study also expected to be completed by year-end.
In addition, a sample of over 880 pounds was collected from Lapa drill core.
Sample preparation was initiated in May and has since been completed. A
metallurgical definition test-work program is in progress to both validate
results from the exploratory work carried out last fall and to further define
the actual process and optimize achievable results. The metallurgical test-work
is being conducted at LaRonde and results are expected early in the fourth
quarter of this year.
4
The longitudinal illustrations that detail the drill results and a map of the
properties discussed in this news release can be viewed and downloaded from the
Company's website www.agnico-eagle.com (PRESS RELEASE) OR:
--------------------
http://files.newswire.ca/3/0730lapa.pdf
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http://files.newswire.ca/3/0730long20n.pdf
------------------------------------------
http://files.newswire.ca/3/0730long7lower.pdf
---------------------------------------------
http://files.newswire.ca/3/0730long7upper.pdf
---------------------------------------------
http://files.newswire.ca/3/0730propertyplan.pdf
-----------------------------------------------
SCIENTIFIC AND TECHNICAL DATA
All Lapa drill core has been logged and the results have been verified by Dino
Lombardi, P.Geo., Senior Geologist for the Company's Exploration Division and
who is fully qualified per the standards outlined in National Instrument 43-101.
The drill core is sawed in half with one half sent to a commercial laboratory
and the other half retained for future reference. Upon reception of the assay
results, the pulps and rejects are recovered and submitted to a second
laboratory for check-assay purposes. The gold assaying method uses a 30-gram
sample by Fire Assays or Metallic Sieve finish as requested by the project
geologist. The laboratories used are Bourlamaque Assay Laboratories Ltd., Val
d'Or, Quebec, and Expert Laboratories Inc., Rouyn-Noranda, Quebec.
A qualified person, Guy Gosselin, P.Eng., P.Geo., LaRonde Division's Chief
Geologist, has verified the LaRonde data disclosed in this news release. The
verification procedures, the quality assurance program, quality control
procedures may be found in the 2003 Ore Reserve Report, Agnico-Eagle Mines
Limited, LaRonde Division, dated May 12, 2003, filed on SEDAR.
FORWARD LOOKING STATEMENTS
This news release contains certain "forward-looking statements" (within the
meaning of the United States Private Securities Litigation Reform Act of 1995)
that involve a number of risks and uncertainties. There can be no assurance that
such statements will prove to be accurate; actual results and future events
could differ materially from those anticipated in such statements. Risks and
uncertainties are disclosed under the heading "Risk Factors" in the Company's
Annual Information Form (AIF) filed with certain Canadian securities regulators
(including the Ontario and Quebec Securities Commissions) and with the United
States Securities and Exchange Commission (as Form 20-F).
5
ABOUT AGNICO-EAGLE
Agnico-Eagle is a long established Canadian gold producer with operations
located in northwestern Quebec and exploration and development activities in
eastern Canada and the southwestern United States. Agnico-Eagle's operating
history includes over three decades of continuous gold production, primarily
from underground mining operations. Agnico-Eagle's LaRonde Mine in Quebec is
Canada's largest gold deposit. The Company has full exposure to higher gold
prices consistent with its policy of no forward gold sales. It has paid a cash
dividend for 23 consecutive years.
July 30, 2003
[SIGNATURE]
Sean Boyd
President & Chief Executive Officer
6
QUARTERLY MANAGEMENT DISCUSSION AND ANALYSIS - UNITED STATES GAAP
(ALL FIGURES ARE EXPRESSED IN US DOLLARS UNLESS OTHERWISE NOTED)
RESULTS OF OPERATIONS
Agnico-Eagle reported a second quarter net loss of $3.8 million, or $0.05 cents
per share, compared to net income of $3.4 million, or $0.05 cents per share, in
the second quarter of 2002. For the year to date, Agnico-Eagle reported a net
loss of $10.0 million, or $0.12 cents per share, compared to net income of $3.8
million, or $0.06 cents per share, in the first six months of 2002. The year to
date figures include a non-cash charge of $1.7 million (net of tax), or $0.02
per share, representing the cumulative effect of adopting Financial Accounting
Standards Board Statement No. 143, "Accounting for Asset Retirement Obligations"
("FAS 143"). For a full description of the accounting change, please see the
Company's 2002 Management Discussion and Analysis of Operations and Financial
Condition under the caption "Critical Accounting Policies - Reclamation Costs."
In the second quarter of 2003, the Company produced 60,157 ounces compared to
74,617 ounces produced in the second quarter of 2002. Year to date, the Company
has produced 115,162 ounces of gold compared to 134,876 ounces produced in the
first six months of 2002. The decline in second quarter and year to date
production is due to the first quarter rock fall at the Company's LaRonde Mine.
This event delayed the extraction of gold/copper mining blocks in March and
caused higher than planned dilution in the mining blocks affected by the rock
fall. As expected, the effects of this rock fall lingered into the second
quarter as the Company continued to take steps to back-fill the affected area
which resulted in a resequencing of production to the upper, zinc-rich areas of
the mine. The production outlook for 2003 remains at 300,000 ounces of gold as
the affected area has been back-filled and production from the affected areas of
the mine is meeting the Company's expectations.
The table below summarizes the key variances in net loss for the first quarter
of 2003 from the net income reported for the same period in 2002.
(MILLIONS OF DOLLARS) SECOND QUARTER YEAR TO DATE
----------------------------------------------------------------------------------------------
Increase in gold price $2.3 $4.6
Increase in copper production 2.0 4.2
Increase in silver production and price 1.5 3.0
Increase in operating costs (3.8) (7.8)
Decrease in gold production (4.4) (6.2)
Stronger Canadian dollar (2.0) (2.8)
Increase in El Coco royalty - (2.2)
Cumulative effect of adopting FAS 143 - (1.7)
Increase in depreciation & amortization (1.1) (2.4)
Increase (decrease) in zinc production 0.5 (2.0)
Other (2.2) (0.5)
------- -------
Net negative variance $(7.2) $(13.8)
======= =======
7
The increase in operating costs was attributable to the LaRonde Mine operating
at 7,000 tons of ore treated per day compared to the 5,000 ton per day rate in
2002. Operating at the expanded rate, the mill processed 282,000 more tons of
ore in the first half of 2003 achieving onsite operating costs of C$50 per ton
compared to C$52 per ton in the first half of 2002. In the second quarter of
2003, onsite operating costs per ton improved C$4 per ton to C$48 per ton from
C$52 per ton in the second quarter of 2002.
In the second quarter of 2003 cash operating costs per ounce, excluding the El
Coco royalty, increased to $208 per ounce from $124 per ounce in 2002. In the
second quarter of 2003, total cash operating costs to produce an ounce of gold
were $258 compared to $164 in the same quarter of 2002. For the year to date
2003, cash operating costs increased to $190 from $126 excluding the El Coco
royalty and total cash operating costs increased to $251 from $162 in the first
six months of 2002. Despite the improvement in onsite operating costs, total
cash operating costs increased over 2002 due to lower gold production, a higher
El Coco royalty, lower byproduct zinc production and a stronger Canadian dollar.
As illustrated by the table above, these negative impacts on total cash
operating costs were only partially offset by increases in byproduct copper and
silver production.
The following table provides a reconciliation of the total cash operating costs
per ounce of gold produced to the financial statements:
(THOUSANDS OF DOLLARS,
EXCEPT WHERE NOTED) Q2 2003 Q2 2002 YTD 2003 YTD 2002
--------------------------------------------------------------------------------------------------------------------
Cost of production per Consolidated
Statements of Income (Loss) $24,581 $19,613 $48,928 $37,216
Adjustments:
Byproduct revenues (9,488) (6,813) (20,867) (14,248)
El-Coco royalty (3,000) (3,050) (7,074) (4,959)
Revenue recognition adjustment(i) 531 (117) 1,111 (339)
Non cash reclamation provision (112) (375) (217) (675)
-------- ------- ------- --------
Cash operating costs $12,512 $9,258 $21,881 $16,995
Gold production (ounces) 60,157 74,617 115,162 134,876
-------- ------- ------- --------
Cash operating cost (per ounce) $208 $124 $190 $126
El-Coco royalty (per ounce) 50 40 61 36
-------- ------- ------- --------
Total cash operating costs (per ounce) (ii) $258 $164 $251 $162
-------- ------- ------- --------
-------- ------- ------- --------
Notes:
(i) Under the Company's revenue recognition policy, revenue is recognized on
concentrates when legal title passes. Since cash costs are calculated on a
production basis, this adjustment reflects the portion of concentrate
production for which revenue has not been recognized in the year.
(ii) Total cash operating cost data is prepared in accordance with The Gold
Institute Production Cost Standard and is not a recognized measure under US
GAAP. Adoption of the standard is voluntary and this data may not be
comparable to data presented by other gold producers. Management uses this
generally accepted industry measure in evaluating operating performance and
believes it to be a realistic indication of such performance. The data also
indicates the Company's ability to generate cash flow and operating
earnings at various gold prices. This additional information should be
considered together with other data prepared in accordance with US GAAP.
8
Amortization expense increased 30% to $4.8 million in the second quarter of 2003
from $3.7 million in the second quarter of 2002 and increased 35% to $9.3
million in the first half of 2003 from $6.9 million in the first half of 2002.
The increase in amortization is attributable to the increased mill throughput of
approximately 30% and an increased capital base resulting from the Company's
expansion of the LaRonde Mine to 7,000 tons of ore treated per day.
Income and mining taxes increased to $0.4 million and $1.0 million respectively
in the second quarter and six months ended June 30, 2003 compared to nil in both
comparable periods in 2002. The Company does not expect to pay cash income and
mining taxes in 2003 however accrues deferred income and mining taxes to reflect
the drawdown of tax pools.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2003, Agnico-Eagle's consolidated cash and cash equivalents were
$121 million while working capital was $156 million. At December 31, 2002, the
Company had $153 million in cash and cash equivalents and $185 million in
working capital. Including the undrawn portion of its bank credit facility, the
Company had $221 million of available cash resources at June 30, 2003 compared
to $253 million at December 31, 2002. The Company currently has $100 million in
undrawn credit and expects to have an additional $25 million available in the
fourth quarter of 2003 once certain completion tests are satisfied in connection
with the LaRonde expansion to 7,000 tons per day.
Cash flow from operating activities, before working capital changes, was $0.6
million and $0.1 million, respectively in the quarter and six months ended June
30, 2003 compared to $7.6 million and $12.6 million, respectively in the quarter
and six months ended June 30, 2002. Operating cash flow was impacted by lower
gold production, a higher El Coco royalty, lower byproduct zinc production and a
stronger Canadian dollar offset partially by higher byproduct copper and silver
production.
For the three and six months ended June 30, 2003, capital expenditures and
investments were $18.4 million and $29.4 million respectively compared to $15.5
million and $29.8 million in the three and six months ended June 30, 2002.
Capital expenditures at the Company's LaRonde mine decreased to $10.7 million
and $21.5 million in the three and six months ended June 30, 2003 from $15.2
million and $29.5 million in the three and six months ended June 30, 2002. The
decrease is due to the Company having substantially completed the expansion of
the LaRonde Mine to 7,000 tons per day. In the second quarter of 2003, the
Company invested approximately $9.0 million to acquire Breakwater Resources
Ltd.'s interest in the Lapa property. This cash outflow is netted in
"Acquisitions, investments and other" in the Company's Consolidated Statements
of Cash Flows.
9
SUMMARIZED QUARTERLY DATA (UNAUDITED) AGNICO-EAGLE MINES LIMITED
---------------------------------------------------------------------------------------------------------------------------
(thousands of United States dollars, Three months ended June 30, Six months ended June 30,
except where noted, US GAAP basis) 2003 2002 2003 2002
---------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL DATA
INCOME AND CASH FLOW
LARONDE DIVISION
Revenues from mining operations $ 30,014 $ 30,616 $ 60,126 $ 56,163
Mine operating costs 24,581 19,613 48,928 37,216
-------------------------------------------------------------------------------------------------------------------------
Mine operating profit $ 5,433 $ 11,003 $ 11,198 $ 18,947
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Net income (loss) for period $ (3,779) $ 3,360 $ (10,016) $ 3,837
Net income (loss) per share $ (0.05) $ 0.05 $ (0.12) $ 0.06
Operating cash flow (before non-cash working capital) $ 632 $ 7,633 $ 55 $ 12,605
Weighted average number of shares - basic (in thousands) 83,836 69,050 83,781 68,524
Tons of ore milled 648,292 491,083 1,250,925 968,416
Head grades:
Gold 0.10 0.17 0.10 0.16
Silver 2.24 2.28 2.34 2.39
Zinc 3.14% 3.64% 3.34% 4.43%
Copper 0.52% 0.30% 0.48% 0.26%
Recovery rates:
Gold 90.62% 92.92% 91.11% 93.73%
Silver 80.80% 80.10% 82.65% 81.92%
Zinc 77.80% 81.40% 78.00% 83.35%
Copper 79.20% 74.40% 79.20% 65.23%
Payable production:
Gold (ounces) 60,157 74,617 115,162 134,876
Silver (ounces in thousands) 1,049 709 2,085 1,433
Zinc (pounds in thousands) 27,080 24,740 55,044 60,737
Copper (pounds in thousands) 5,015 2,084 8,971 3,215
Realized prices per unit of production:
Gold (per ounce) $ 349 $ 310 $ 350 $ 306
Silver (per ounce) $ 4.57 $ 4.67 $ 4.61 $ 4.59
Zinc (per pound) $ 0.35 $ 0.36 $ 0.35 $ 0.35
Copper (per pound) $ 0.73 $ 0.78 $ 0.74 $ 0.77
Onsite operating costs per ton milled (Canadian dollars) $ 48 $ 52 $ 50 $ 52
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS PER GOLD OUNCE PRODUCED:
Onsite operating costs (including asset retirement expenses)$ 371 $ 219 $ 373 $ 237
Less: Non-cash asset retirement expenses (2) (5) (2) (5)
Net byproduct revenues (161) (90) (181) (106)
---------------------------------------------------------------------------------------------------------------------------
CASH OPERATING COSTS $ 208 $ 124 190 $ 126
Accrued El Coco royalties 50 40 61 36
---------------------------------------------------------------------------------------------------------------------------
TOTAL CASH COSTS $ 258 $ 164 $ 251 $ 162
Non-cash costs:
Asset retirement expenses 2 5 2 5
Amortization 80 49 81 51
---------------------------------------------------------------------------------------------------------------------------
Total operating costs $ 340 $ 218 $ 334 $ 218
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
10
CONSOLIDATED BALANCE SHEETS AGNICO-EAGLE MINES LIMITED
----------------------------------------------------------------------------------------------------------------------
(thousands of United States dollars, US GAAP basis) June 30, December 31,
2003 2002
----------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current
Cash and cash equivalents $ 121,078 $ 152,934
Metals awaiting settlement 29,236 29,749
Income taxes recoverable 2,817 2,900
Inventories:
Ore stockpiles 5,599 4,604
In-process concentrates 2,272 1,008
Supplies 5,105 5,008
Prepaid expenses and other 6.599 10,025
----------------------------------------------------------------------------------------------------------------------
Total current assets 172,706 206,228
Fair value of derivative financial instruments 6,908 1,835
Investments and other assets 9,147 8,795
Future income and mining tax assets 23,759 23,890
Mining properties 376,204 353,059
----------------------------------------------------------------------------------------------------------------------
$ 588,724 $ 593,807
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 13,753 $ 15,246
Dividends payable 756 3,013
Income and mining taxes payable - 954
Interest payable 1,946 1,873
----------------------------------------------------------------------------------------------------------------------
Total current liabilities 16,455 21,086
----------------------------------------------------------------------------------------------------------------------
Long-term debt 143,750 143,750
----------------------------------------------------------------------------------------------------------------------
Fair value of derivative financial instruments - 5,346
----------------------------------------------------------------------------------------------------------------------
Asset retirement obligation and other liabilities 9,018 5,043
----------------------------------------------------------------------------------------------------------------------
Future income and mining tax liabilities 22,953 20,889
----------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares
Authorized - unlimited
Issued - 83,902,863 (2002 - 83,636,861) 594,341 591,969
Warrants 15,732 15,732
Contributed surplus 7,181 7,181
Deficit (206,039) (196,023)
Accumulated other comprehensive loss (14,667) (21,166)
----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 396,548 397,693
----------------------------------------------------------------------------------------------------------------------
$ 588,724 $ 593,807
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
11
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) (UNAUDITED) AGNICO-EAGLE MINES LIMITED
-------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
(thousands of United States dollars, June 30, June 30,
except per share amounts, US GAAP basis) 2003 2002 2003 2002
---------------------------------------------------------------------------------------------------------------------------
REVENUES
Revenues from mining operations $ 30,014 $ 30,616 $ 60,126 $ 56,163
Interest and sundry income 2,122 577 2,763 613
---------------------------------------------------------------------------------------------------------------------------
32,136 31,193 62,889 56,776
COSTS AND EXPENSES
Production 24,581 19,613 48,928 37,216
Exploration and corporate development 966 894 2,438 1,643
Amortization 4,787 3,678 9,304 6,929
General and administrative 2,240 1,498 3,707 2,499
Provincial capital tax 285 612 774 992
Interest 2,241 1,737 4,458 3,653
Foreign currency (gain) loss 193 (501) (24) (501)
---------------------------------------------------------------------------------------------------------------------------
Income (loss) before income, mining and federal capital taxes (3,157) 3,662 (6,696) 4,345
Federal capital tax 264 302 589 508
Income and mining tax expense 358 - 988 -
---------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative catch-up adjustment (3,779) 3,360 (8,273) 3,837
Cumulative catch-up adjustment relating to FAS 143 - - (1,743) -
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) for the period $ (3,779) $ 3,360 $ (10,016) $ 3,837
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) before cumulative catch-up adjustment per
share - basic and diluted $ (0.05) $ 0.05 $ (0.10) $ 0.06
Cumulative catch-up adjustment per share - basic and diluted - - (0.02) -
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share - basic and diluted $ (0.05) $ 0.05 $ (0.12) $ 0.06
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares (in thousands) (note 3)
basic 83,636 69,050 83,781 68,524
diluted 83,636 80,546 83,781 80,021
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS):
NET INCOME (LOSS) FOR THE PERIOD $ (3,779) $ 3,360 $ (10,016) $ 3,837
OTHER COMPREHENSIVE INCOME (LOSS):
UNREALIZED GAIN (LOSS) ON HEDGING ACTIVITIES, NET OF TAX 4,773 (1,455) 8,000 (3,288)
UNREALIZED GAIN (LOSS) ON AVAILABLE FOR SALE SECURITIES, NET OF TAX (151) - (16) -
REALIZED GAIN ON AVAILABLE FOR SALE SECURITIES, NET OF TAX (1,485) - (1,485) -
---------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS) $ 3,137 $ (1,455) $ 6,499 $ (3,288)
---------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD $ (642) $ 1,905 $ (3,517) $ 549
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
12
CONSOLIDATED STATEMENTS OF DEFICIT AND ACCUMULATED
OTHER COMPREHENSIVE LOSS (UNAUDITED) AGNICO-EAGLE MINES LIMITED
----------------------------------------------------------------------------------------------------------------------
(thousands of United States dollars, Three months ended June 30, Six Months ended June 30,
except per share amounts, US GAAP basis) 2003 2002 2003 2002
----------------------------------------------------------------------------------------------------------------------
DEFICIT
Balance, beginning of period $ (202,260) $ (196,743) $ (196,023) $ (197,220)
Net income (loss) for the period (3,779) 3,360 (10,016) 3,837
----------------------------------------------------------------------------------------------------------------------
Balance, end of period $ (206,039) $ (193,383) $ (206,039) $ (193,383)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance, beginning of period $ (17,804) $ (17,409) $ (21,166) $ (15,576)
Other comprehensive income (loss) for the period 3,137 (1,455) 6,499 (3,288)
----------------------------------------------------------------------------------------------------------------------
Balance, end of period $ (14,667) $ (18,864) $ (14,667) $ (18,864)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
13
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) AGNICO-EAGLE MINES LIMITED
-----------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
(thousands of united states dollars, US GAAP basis) 2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) for the period $ (3,779) $ 3,360 $ (10,016) $ 3,837
Add (deduct) items not affecting cash from operating activities:
Amortization 4,787 3,678 9,304 6,929
Provision for future income and mining taxes 738 - 2,064 -
Unrealized (gain) loss on derivative contracts (236) - (2,506) -
Cumulative catch-up adjustment relating to FAS 143 - - 1,743 -
Amortization of deferred costs and other (878) 595 (534) 1,839
-----------------------------------------------------------------------------------------------------------------------------
Cash flow from operations, before working capital changes 632 7,633 55 12,605
Change in non-cash working capital balances
Metals awaiting settlement (3,606) (334) 513 (9,487)
Income taxes recoverable (476) 54 (871) (540)
Inventories (1,533) (52) (2,356) 177
Prepaid expenses and other 1,122 2,487 1,693 313
Accounts payable and accrued liabilities (648) 4,398 (1,318) 5,728
Interest payable 1,686 1,681 73 14
-----------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) operating activities (2,823) 15,867 (2,211) 8,810
-----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to mining properties (10,671) (15,202) (21,508) (29,454)
Acquisitions, investments and other (7,699) (295) (7,887) (304)
-----------------------------------------------------------------------------------------------------------------------------
Cash flows used in investing activities (18,370) (15,497) (29,395) (29,758)
-----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Dividends paid - (30) (2,431) (1,319)
Common shares issued 1,125 7,338 2,320 12,564
Proceeds from long-term debt - - - 143,750
Financing costs - - - (5,266)
Repayment of the Company's senior convertible notes - (198) - (122,169)
-----------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) financing activities 1,125 7,110 (111) 27,560
-----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (92) 536 (139) 519
Net increase (decrease) in cash and cash equivalents (20,160) 8,016 (31,856) 7,131
Cash and cash equivalents, beginning of period 141,238 20,295 152,934 21,180
-----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 121,078 $ 28,311 $ 121,078 $ 28,311
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
OTHER OPERATING CASH FLOW INFORMATION:
Interest paid during the period $ 322 $ 530 $ 3,924 $ 19,242
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Taxes paid (recovered) during the period $ 1,169 $ (690) $ 1,169 $ 2,639
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
14
--------------------------------------------------------------------------------
AGNICO-EAGLE MINES LIMITED
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
US GAAP BASIS (UNAUDITED)
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The Company's primary basis of financial reporting is United States
generally accepted accounting principles. Financial statements under
Canadian generally accepted accounting principles are also prepared for
statutory reporting purposes in Canada and sent to shareholders.
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with US GAAP in US dollars. They do
not include all of the disclosures required by generally accepted
accounting principles for annual financial statements. In the opinion
of management, the unaudited interim consolidated financial statements
reflect all adjustments, which consist only of normal and recurring
adjustments, necessary to present fairly the financial position at June
30, 2003 and the results of operations and cash flows for the three and
six month periods ended June 30, 2003 and 2002.
Operating results for the three and six month periods ended June 30,
2003 are not necessarily indicative of the results that may be expected
for the full year ending December 31, 2003. Accordingly, these
unaudited interim financial statements should be read in conjunction
with the fiscal 2002 annual consolidated financial statements,
including the accounting policies and notes thereto, included in the
Annual Report and Annual Information Form/Form 20-F for the year ended
December 31, 2002.
2. USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Management
believes that the estimates used in the preparation of the consolidated
financial statements are reasonable and prudent; however, actual
results could differ from these estimates.
3. CHANGE IN ACCOUNTING POLICIES
Except for the items outlined below, these interim consolidated
financial statements follow the same accounting policies and methods of
their application as the December 31, 2002 audited annual financial
statements.
(a) RECLAMATION COSTS
Estimated reclamation costs are based on legal, environmental and
regulatory requirements. Prior to January 1, 2003, reclamation costs
were accrued on an undiscounted unit-of-production basis, using proven
and probable reserves as the base. Effective January 1, 2003, the
Company adopted the provisions of Financial Accounting Standards Board
Statement No. 143 relating to asset retirement obligations, which
applies to long-lived assets such as mines. The new standard requires
companies to recognize the present value of mine reclamation costs as a
liability in the period the obligation is incurred and then to
periodically re-evaluate the liability. At inception, an amount equal
to the liability is recorded as an increase to the carrying value of
the related long-lived asset. Each period, an accretion amount is
charged to income to adjust the liability to the estimated future
value. The initial liability, which is included in the carrying value
of the asset, is also depreciated each period based on the depreciation
method used for that asset.
In order to calculate the initial liability on January 1, 2003, the
Company made estimates of the final reclamation costs based on
mine-closure plans approved by environmental agencies. The Company
periodically reviews these cost estimates and updates them if
assumptions change, such as life-of-mine.
The adoption of FAS 143 negatively impacted income in the first quarter
of 2003 as the Company recorded a non-cash charge of approximately $1.7
million, or $0.02 per share, representing the past cumulative effect of
adopting this standard.
15
(b) STOCK-BASED COMPENSATION
The Company has an Employee Stock Option Plan ("ESOP") which is
described fully in note 7 to the Company's December 31, 2002 annual
audited consolidated financial statements. Prior to 2003, the company
accounted for those plans under the recognition and measurement
provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations. No
stock-based employee compensation cost is reflected in income prior to
January 31, 2003 as all options granted under the ESOP had an exercise
price equal to the market value of the underlying common stock on the
date of grant. Effective January 1, 2003, the company adopted the fair
value recognition provisions of FASB Statement No. 123, "Accounting for
Stock-Based Compensation,"("FAS 123") as amended by FASB Statement No.
148 "Accounting for Stock-Based Compensation Transition and
Disclosure." The Company has adopted the provisions of FAS 123
prospectively to all employee awards granted, modified, or settled
after January 1, 2003. No options were granted in the first quarter
ended March 31, 2003 and accordingly no compensation expense has been
recognized in the interim consolidated financial statements.
4. CAPITAL STOCK
For the three and six month periods ended June 30, 2003, the Company's
2012 convertible debentures, warrants and employee stock options were
all anti-dilutive and thus were excluded from the calculation of
diluted net loss per share.
The following table presents the maximum number of common shares that
would be outstanding if all dilutive instruments outstanding at June
30, 2003 were exercised:
Common shares outstanding at June 30, 2003 83,902,863
Convertible debenture [based on debenture holders' option] 10,267,919
Employees' stock options 2,906,100
Warrants 6,900,000
----------------------------------------------------------------------------------------
103,976,882
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
During the six month period ended June 30, 2003, 153,050 (2002 -
1,628,500) employee stock options were exercised for cash of $1.0
million (2002 - $11.6 million).
16
5. FINANCIAL INSTRUMENTS
As at June 30, 2003, Agnico-Eagle's derivative financial instruments
relating to metals consisted of the following:
Expected Maturity
----------------------------------------------------
2003 2004 2005 2006 2007
-----------------------------------------------------------------------------------------------------------
GOLD
PUT OPTIONS PURCHASED
Amount hedged (ounces) - 136,644 190,020 152,340 131,280
Average price ($/ounce) - $260 $260 $260 $260
SILVER
CALL OPTIONS SOLD
Amount hedged (ounces in 000's) 978 - - - -
Average price ($/ounce) $5.50 - - - -
COPPER
CALL OPTIONS SOLD
Amount hedged (lbs. in 000's) 6,825 - - - -
Average price ($/lb.) $0.81 - - - -
At June 30, 2003, Agnico-Eagle's consolidated foreign-currency hedging
program consisted of the following:
Expected Maturity
-------------------------------------------
2003 2004 2005 2006
-----------------------------------------------------------------------------------------------------------
US$ CALL OPTIONS SOLD
Amount (thousands) $ 30,000 $ 24,000 $ 12,000 $ 12,000
US$/C$ weighted average exchange rate 1.5958 1.639 1.6050 1.6475
US$ PUT OPTIONS PURCHASED
Amount (thousands) $ - $ 24,000 $ 12,000 $ 12,000
US$/C$ weighted average exchange rate - 1.5900 1.5000 1.5600
US$ PUT OPTIONS SOLD
Amount (thousands) $ - $ - $ 12,000 $ -
US$/C$ weighted average exchange rate - - 1.3700 -
At June 30, 2003, the aggregate net market value of Agnico-Eagle's
metals derivative position amounted to $0.7 million. The Company's
aggregate net market value of its foreign exchange hedge position at
June 30, 2003 was $5.9 million. Since the Company uses only
over-the-counter instruments, the fair value of individual hedging
instruments is based on readily available market values.
17
QUARTERLY MANAGEMENT DISCUSSION AND ANALYSIS - CANADIAN GAAP
(ALL FIGURES ARE EXPRESSED IN US DOLLARS UNLESS OTHERWISE NOTED)
RESULTS OF OPERATIONS
Agnico-Eagle reported a second quarter net loss of $3.4 million, or $0.06 cents
per share, compared to net income of $3.9 million, or $0.03 cents per share, in
the second quarter of 2002. For the year to date, Agnico-Eagle reported a net
loss of $7.0 million, or $0.12 cents per share, compared to net income of $9.7
million, or $0.10 cents per share, in the first six months of 2002.
In the second quarter of 2003, the Company produced 60,157 ounces compared to
74,617 ounces produced in the second quarter of 2002. Year to date, the Company
has produced 115,162 ounces of gold compared to 134,876 ounces produced in the
first six months of 2002. The decline in second quarter and year to date
production is due to the first quarter rock fall at the Company's LaRonde Mine.
This event delayed the extraction of gold/copper mining blocks in March and
caused higher than planned dilution in the mining blocks affected by the rock
fall. As expected, the effects of this rock fall lingered into the second
quarter as the Company continued to take steps to back-fill the affected area
which resulted in a resequencing of production to the upper, zinc-rich areas of
the mine. The production outlook for 2003 remains at 300,000 ounces of gold as
the affected area has been back-filled and production from the affected areas of
the mine is meeting the Company's expectations.
The table below summarizes the key variances in net loss for the first quarter
of 2003 from the net income reported for the same period in 2002.
(MILLIONS OF DOLLARS) SECOND QUARTER YEAR TO DATE
--------------------------------------------------------------------------------------------------------------------
Increase in gold price $2.3 $4.6
Increase in copper production 2.0 4.2
Increase in silver production and price 1.5 3.0
Increase in operating costs (3.8) (7.8)
Decrease in gold production (4.4) (6.2)
Stronger Canadian dollar (2.0) (2.8)
Increase in El Coco royalty - (2.2)
Increase in depreciation & amortization (1.1) (2.4)
Increase (decrease) in zinc production 0.5 (2.0)
Gain on settlement of convertible notes in Q1 2002 - (6.2)
Other (2.3) 1.1
------- -------
Net negative variance $(7.3) $(16.7)
======= =======
The increase in operating costs was attributable to the LaRonde Mine operating
at 7,000 tons of ore treated per day compared to the 5,000 ton per day rate in
2002. Operating at the expanded rate, the mill processed 282,000 more tons of
ore in the first half of 2003 achieving onsite operating costs of C$50 per ton
compared to C$52 per ton in the first half of 2002. In the second quarter of
2003, onsite operating costs per ton improved C$4 per ton to C$48 per ton from
C$52 per ton in the second quarter of 2002.
18
In the second quarter of 2003 cash operating costs per ounce, excluding the El
Coco royalty, increased to $208 per ounce from $124 per ounce in 2002. In the
second quarter of 2003, total cash operating costs to produce an ounce of gold
were $258 compared to $164 in the same quarter of 2002. For the year to date
2003, cash operating costs increased to $190 from $126 excluding the El Coco
royalty and total cash operating costs increased to $251 from $162 in the first
six months of 2002. Despite the improvement in onsite operating costs, total
cash operating costs increased over 2002 due to lower gold production, a higher
El Coco royalty, lower byproduct zinc production and a stronger Canadian dollar.
As illustrated by the table above, these negative impacts on total cash
operating costs were only partially offset by increases in byproduct copper and
silver production.
The following table provides a reconciliation of the total cash operating costs
per ounce of gold produced to the financial statements:
(THOUSANDS OF DOLLARS,
EXCEPT WHERE NOTED) Q2 2003 Q2 2002 YTD 2003 YTD 2002
--------------------------------------------------------------------------------------------------------------------
Cost of production per Consolidated
Statements of Income (Loss) $24,769 $19,181 $49,286 $36,533
Adjustments:
Byproduct revenues (9,488) (6,813) (20,867) (14,248)
El-Coco royalty (3,000) (3,050) (7,074) (4,959)
Revenue recognition adjustment(i) 531 315 1,111 304
Non cash reclamation provision (300) (375) (575) (675)
-------- ------- -------- --------
Cash operating costs $12,512 $9,258 $21,881 $16,995
Gold production (ounces) 60,157 74,617 115,162 134,876
-------- ------- -------- --------
Cash operating cost (per ounce) $208 $124 $190 $126
El-Coco royalty (per ounce) 50 40 61 36
-------- ------- -------- --------
Total cash operating costs (per ounce)(ii) $258 $164 $251 $162
-------- ------- -------- --------
-------- ------- -------- --------
Notes:
(i) Under the Company's revenue recognition policy, revenue is recognized on
concentrates when legal title passes. Since cash costs are calculated on a
production basis, this adjustment reflects the portion of concentrate
production for which revenue has not been recognized in the year.
(ii) Total cash operating cost data is prepared in accordance with The Gold
Institute Production Cost Standard and is not a recognized measure under
US GAAP. Adoption of the standard is voluntary and this data may not be
comparable to data presented by other gold producers. Management uses this
generally accepted industry measure in evaluating operating performance
and believes it to be a realistic indication of such performance. The data
also indicates the Company's ability to generate cash flow and operating
earnings at various gold prices. This additional information should be
considered together with other data prepared in accordance with US GAAP.
Amortization expense increased 30% to $4.8 million in the second quarter of 2003
from $3.7 million in the second quarter of 2002 and increased 43% to $9.3
million in the first half of 2003 from $6.5 million in the first half of 2002.
The increase in amortization is attributable to the increased mill throughput of
approximately 30% and an increased capital base resulting from the Company's
expansion of the LaRonde Mine to 7,000 tons of ore treated per day.
19
Income and mining taxes increased to $0.4 million and $1.0 million respectively
in the second quarter and six months ended June 30, 2003 compared to nil and
$1.3 million in both comparable periods in 2002. The $1.3 million provision in
2002 represents the future tax liability on the gain on settlement of the
Company's senior convertible notes. The Company does not expect to pay cash
income and mining taxes in 2003 however accrues deferred income and mining taxes
to reflect the drawdown of tax pools.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2003, Agnico-Eagle's consolidated cash and cash equivalents were
$121 million while working capital was $156 million. At December 31, 2002, the
Company had $153 million in cash and cash equivalents and $185 million in
working capital. Including the undrawn portion of its bank credit facility, the
Company had $221 million of available cash resources at June 30, 2003 compared
to $253 million at December 31, 2002. The Company currently has $100 million in
undrawn credit and expects to have an additional $25 million available in the
fourth quarter of 2003 once certain completion tests are satisfied in connection
with the LaRonde expansion to 7,000 tons per day.
Cash flow from operating activities, before working capital changes, was $2.5
million and $3.7 million, respectively in the quarter and six months ended June
30, 2003 compared to $10.1 million and $15.2 million, respectively in the
quarter and six months ended June 30, 2002. Operating cash flow was impacted by
lower gold production, a higher El Coco royalty, lower byproduct zinc production
and a stronger Canadian dollar offset partially by higher byproduct copper and
silver production.
For the three and six months ended June 30, 2003, capital expenditures and
investments were $18.4 million and $29.4 million respectively compared to $15.5
million and $29.8 million in the three and six months ended June 30, 2002.
Capital expenditures at the Company's LaRonde mine decreased to $10.7 million
and $21.5 million in the three and six months ended June 30, 2003 from $15.2
million and $29.5 million in the three and six months ended June 30, 2002. The
decrease is due to the Company having substantially completed the expansion of
the LaRonde Mine to 7,000 tons per day. In the second quarter of 2003, the
Company invested approximately $9.0 million to acquire Breakwater Resources
Ltd.'s interest in the Lapa property. This cash outflow is netted in
"Acquisitions, investments and other" in the Company's Consolidated Statements
of Cash Flows.
20
SUMMARIZED QUARTERLY DATA (UNAUDITED) AGNICO-EAGLE MINES LIMITED
---------------------------------------------------------------------------------------------------------------------------
(thousands of United States dollars, Three months ended June 30, Six months ended June 30,
except where noted, CDN GAAP basis) 2003 2002 2003 2002
---------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL DATA
INCOME AND CASH FLOW
LARONDE DIVISION
Revenues from mining operations $ 30,014 $ 29,342 $ 60,126 $ 54,434
Mine operating costs 24,769 19,181 49,286 36,533
---------------------------------------------------------------------------------------------------------------------------
Mine operating profit $ 5,245 $ 10,161 $ 10,840 $ 17,901
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) for period $ (3,423) $ 3,893 $ (6,987) $ 9,671
Net income (loss) per share $ (0.06) $ 0.03 $ (0.12) $ 0.10
Operating cash flow (before non-cash working capital) $ 2,575 $ 10,099 $ 3,734 $ 15,188
Weighted average number of shares - basic (in thousands) 83,836 69,050 83,781 68,524
Tons of ore milled 648,292 491,083 1,250,925 968,416
Head grades:
Gold 0.10 0.17 0.10 0.16
Silver 2.24 2.28 2.34 2.39
Zinc 3.14% 3.64% 3.34% 4.43%
Copper 0.52% 0.30% 0.48% 0.26%
Recovery rates:
Gold 90.62% 92.92% 91.11% 93.73%
Silver 80.80% 80.10% 82.65% 81.92%
Zinc 77.80% 81.40% 78.00% 83.35%
Copper 79.20% 74.40% 79.20% 65.23%
Payable production:
Gold (ounces) 60,157 74,617 115,162 134,876
Silver (ounces in thousands) 1,049 709 2,085 1,433
Zinc (pounds in thousands) 27,080 24,740 55,044 60,737
Copper (pounds in thousands) 5,015 2,084 8,971 3,215
Realized prices per unit of production:
Gold (per ounce) $ 349 $ 310 $ 350 $ 306
Silver (per ounce) $ 4.57 $ 4.67 $ 4.61 $ 4.59
Zinc (per pound) $ 0.35 $ 0.36 $ 0.35 $ 0.35
Copper (per pound) $ 0.73 $ 0.78 $ 0.74 $ 0.77
Onsite operating costs per ton milled (Canadian dollars) $ 48 $ 52 $ 50 $ 52
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS PER GOLD OUNCE PRODUCED:
Onsite operating costs (including asset retirement expenses)$ 371 $ 219 $ 373 $ 237
Less: Non-cash asset retirement expenses (2) (5) (2) (5)
Net byproduct revenues (161) (90) (181) (106)
---------------------------------------------------------------------------------------------------------------------------
CASH OPERATING COSTS $ 208 $ 124 190 $ 126
Accrued El Coco royalties 50 40 61 36
---------------------------------------------------------------------------------------------------------------------------
TOTAL CASH COSTS $ 258 $ 164 $ 251 $ 162
Non-cash costs:
Asset retirement expenses 2 5 2 5
Amortization 80 49 81 51
---------------------------------------------------------------------------------------------------------------------------
Total operating costs $ 340 $ 218 $ 334 $ 218
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
21
CONSOLIDATED BALANCE SHEETS AGNICO-EAGLE MINES LIMITED
----------------------------------------------------------------------------------------------------------------------
(thousands of United States dollars, CDN GAAP basis) June 30, December 31,
2003 2002
----------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current
Cash and cash equivalents $ 121,078 $ 152,934
Metals awaiting settlement 29,236 29,749
Income taxes recoverable 2,817 2,900
Inventories:
Ore stockpiles 5,599 4,604
In-process concentrates 2,272 1,008
Supplies 5,105 5,008
Prepaid Expenses and Other 6.542 7,576
----------------------------------------------------------------------------------------------------------------------
Total current assets 172,649 203,779
Investments and other assets 9,193 8,951
Future income and mining tax assets 22,929 22,929
Mining Properties 377,686 356,409
----------------------------------------------------------------------------------------------------------------------
$ 582,457 $ 592,068
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 13,753 $ 15,246
Dividends payable 756 3,013
Income and mining taxes payable - 954
INterest Payable 1,946 1,873
----------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 16,455 21,086
----------------------------------------------------------------------------------------------------------------------
Reclamation Provision and Other Liabilities 5,088 4,314
----------------------------------------------------------------------------------------------------------------------
Future Income and Mining Tax Liabilities 25,883 23,819
----------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares
Authorized - unlimited
Issued - 83,902,863 (2002 - 83,636,861) 443,741 441,363
Convertible debenture 93,246 91,465
Other paid-in capital 55,028 55,028
Warrants 15,732 15,732
Contributed surplus 5,560 5,560
Deficit (78,276) (66,299)
----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 535,031 542,849
-------------------------------------------------------------------------------------------------------------------
$ 582,457 $ 592,068
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
22
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) (UNAUDITED) AGNICO-EAGLE MINES LIMITED
-------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
(thousands of United States dollars, June 30, June 30,
except per share amounts, CDN GAAP basis) 2003 2002 2003 2002
-------------------------------------------------------------------------------------------------------------------------------
REVENUES
Revenues from mining operations $ 30,014 $ 29,342 $ 60,126 $ 54,434
Interest and sundry income 920 524 1,066 752
-------------------------------------------------------------------------------------------------------------------------------
30,934 29,866 61,192 55,186
COSTS AND EXPENSES
Production 24,769 19,181 49,286 36,533
Exploration and corporate development 966 894 2,438 1,643
Amortization 4,787 3,677 9,304 6,489
General and administrative 2,240 1,498 3,707 2,499
Provincial capital tax 285 612 774 992
Interest 495 65 1,117 1,990
Foreign currency (gain) loss 193 (176) (24) (176)
-------------------------------------------------------------------------------------------------------------------------------
Income (loss) before undernoted (2,801) 4,115 (5,411) 5,216
Gain on settlement of Company's senior convertible notes - - - 6,184
-------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income, mining and federal capital taxes (2,801) 4,115 (5,410) 11,400
Federal capital tax 264 222 589 429
Income and mining tax expense 358 - 988 1,300
-------------------------------------------------------------------------------------------------------------------------------
Net income (loss) for the period $ (3,423) $ 3,893 $ (6,987) $ 9,671
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share - basic and diluted (note 3) $ (0.06) $ 0.03 $ (0.12) $ 0.10
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares (in thousands) (note 3)
basic 83,836 69,050 83,781 68,524
diluted 83,836 80,546 83,781 80,021
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
23
CONSOLIDATED STATEMENTS OF DEFICIT AND ACCUMULATED
OTHER COMPREHENSIVE LOSS (UNAUDITED) AGNICO-EAGLE MINES LIMITED
----------------------------------------------------------------------------------------------------------------------
(thousands of United States dollars, Three months ended June 30, Six Months ended June 30,
except per share amounts, CDN GAAP basis) 2003 2002 2003 2002
----------------------------------------------------------------------------------------------------------------------
DEFICIT
Balance, beginning of period $ (72,344) $ (52,860) $ (66,299) $ (56,731)
Net income (loss) for the period (3,423) 3,893 (6,987) 9,671
----------------------------------------------------------------------------------------------------------------------
(75,767) (48,967) (73,286) (47,060)
Interest costs associated with the Company's
convertible debentures (2,509) (2,359) (4,990) (2,833)
Gain on settlement of the conversion option
related to the Company's senior convertible
notes, net of related taxes - - - 3,833
Financing costs - - - (5,266)
----------------------------------------------------------------------------------------------------------------------
Balance, end of period $ (78,276) $ (51,326) $ (78,276) $ (51,326)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
24
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) AGNICO-EAGLE MINES LIMITED
-----------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
(Thousands of United States dollars, CDN GAAP basis) 2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) for the period $ (3,423) $ 3,893 $ (6,987) $ 9,671
Add (deduct) items not affecting cash from operating activities:
Amortization 4,787 3,677 9,304 6,489
Provision for future income and mining taxes 738 - 2,064 1,300
Unrealized (gain) loss on derivative contracts 1,013 - (848) -
Gain on settlement of the Company's senior convertible notes - - - (6,184)
Amortization of deferred costs and other (540) 2,529 201 3,912
-----------------------------------------------------------------------------------------------------------------------------
Cash flow from operations, before working capital changes 2,575 10,099 3,734 15,188
Change in non-cash working capital balances
Metals awaiting settlement (3,606) 540 513 (8,558)
Income taxes recoverable (476) 54 (871) (540)
Inventories (1,533) (485) (2,356) (506)
Prepaid expenses and other 792 2,489 1,222 353
Accounts payable and accrued liabilities (648) 4,391 (1,318) 5,721
Interest payable 1,686 1,681 73 14
-----------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) operating activities (1,210) 18,769 997 11,672
-----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to mining properties (10,671) (15,202) (21,508) (29,454)
Acquisitions, investments and other (7,699) (324) (7,887) (333)
-----------------------------------------------------------------------------------------------------------------------------
Cash flows used in investing activities (18,370) (15,526) (29,395) (29,787)
-----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Dividends paid - (30) (2,431) (1,319)
Common shares issued 1,125 7,338 2,320 12,564
Proceeds from long-term debt - - - 143,750
Financing costs - (514) - (5,266)
Interest on convertible debentures (1,613) (2,359) (3,208) (2,833)
Repayment of the Company's senior convertible notes - (198) - (122,169)
-----------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) financing activities (488) 4,237 (3,319) 24,727
-----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (92) 536 (139) 519
Net increase (decrease) in cash and cash equivalents (20,160) 8,016 (31,856) 7,131
Cash and cash equivalents, beginning of period 141,238 20,295 152,934 21,180
-----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 121,078 $ 28,311 $ 121,078 $ 28,311
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
OTHER OPERATING CASH FLOW INFORMATION:
Interest paid during the period $ 322 $ 530 $ 3,924 $ 19,242
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Taxes paid (recovered) during the period $ 1,169 $ (690) $ 1,169 $ 2,639
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
25
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared by the Company in US dollars in accordance with Canadian
GAAP with respect to the preparation of interim financial information.
Accordingly, they do not include all information and footnotes as
required in the preparation of annual financial statements and should be
read in conjunction with the audited financial statements and notes
included in the Audited Annual Consolidated Financial Statements (CDN
GAAP basis) for the year ended December 31, 2002.
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Management
believes that the estimates used in the preparation of the consolidated
financial statements are reasonable and prudent; however, actual results
could differ from these estimates.
Operating results for the three and six month periods ended June 30, 2003
are not necessarily indicative of the results that may be expected for
the full year ending December 31, 2003. Accordingly, these unaudited
interim financial statements should be read in conjunction with the
fiscal 2002 Audited Annual Consolidated Financial Statements (CDN GAAP
basis), including the accounting policies and notes thereto. These
interim consolidated financial statements follow the same accounting
policies and methods of their application as the December 31, 2002
Audited Annual Consolidated Financial Statements (CDN GAAP basis).
2. USE OF ESTIMATES
The preparation of the interim consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the interim consolidated financial statements and
accompanying notes. Management believes that the estimates used in the
preparation of the interim consolidated financial statements are
reasonable and prudent; however, actual results could differ from these
estimates.
3. NET INCOME PER SHARE
For the purposes of calculating earnings per share, the Company uses net
income after deducting interest charges on the Company's 2012 convertible
debentures. The 2012 convertible debenture issued in 2002 is presented,
in its entirety, as an equity instrument and as such the interest is
recorded as a direct charge to retained earnings. Below is a
reconciliation of net income per financial statements to the net income
used in computing net income per share.
------------------------------------------------------------------------------------------------------------
Three months ended June 30, Six Months ended June 30,
2003 2002 2003 2002
------------------------------------------------------------------------------------------------------------
Net income (loss), per financial statements $ (3,423) $ 3,893 $ (6,987) $ 9,671
Less: Interest on 2012 convertible
debenture charged directly to
retained earnings (1,613) (2,359) (3,208) (2,833)
------------------------------------------------------------------------------------------------------------
Net income (loss) used to compute
net income (loss) per share $ (5,036) $ 1,534 $ (10,195) $ 6,838
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
The Company's 2012 convertible debentures are anti-dilutive and thus have
not been included in the computation of fully-diluted net income per
share.
26
4. CAPITAL STOCK
For the three and six month periods ended June 30, 2003, the Company's 2012
convertible debentures, warrants and employee stock options were all
anti-dilutive and thus were excluded from the calculation of diluted net
loss per share.
The following table presents the maximum number of common shares that would
be outstanding if all dilutive instruments outstanding at June 30, 2003
were exercised:
Common shares outstanding at June 30, 2003 83,902,863
Convertible debenture [based on debenture holders' option] 10,267,919
Employees' stock options 2,906,100
Warrants 6,900,000
-----------------------------------------------------------------------------------------------
103,976,882
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
During the six month period ended June 30, 2003, 153,050 (2002 -
1,628,500) employee stock options were exercised for cash of $1.0 million
(2002 - $11.6 million).
27
QUARTERLY MANAGEMENT DISCUSSION AND ANALYSIS - CANADIAN GAAP
(ALL FIGURES ARE EXPRESSED IN US DOLLARS UNLESS OTHERWISE NOTED)
RESULTS OF OPERATIONS
Agnico-Eagle reported a second quarter net loss of $3.4 million, or $0.06 cents
per share, compared to net income of $3.9 million, or $0.03 cents per share, in
the second quarter of 2002. For the year to date, Agnico-Eagle reported a net
loss of $7.0 million, or $0.12 cents per share, compared to net income of $9.7
million, or $0.10 cents per share, in the first six months of 2002.
In the second quarter of 2003, the Company produced 60,157 ounces compared to
74,617 ounces produced in the second quarter of 2002. Year to date, the Company
has produced 115,162 ounces of gold compared to 134,876 ounces produced in the
first six months of 2002. The decline in second quarter and year to date
production is due to the first quarter rock fall at the Company's LaRonde Mine.
This event delayed the extraction of gold/copper mining blocks in March and
caused higher than planned dilution in the mining blocks affected by the rock
fall. As expected, the effects of this rock fall lingered into the second
quarter as the Company continued to take steps to back-fill the affected area
which resulted in a resequencing of production to the upper, zinc-rich areas of
the mine. The production outlook for 2003 remains at 300,000 ounces of gold as
the affected area has been back-filled and production from the affected areas of
the mine is meeting the Company's expectations.
The table below summarizes the key variances in net loss for the first quarter
of 2003 from the net income reported for the same period in 2002.
(MILLIONS OF DOLLARS) SECOND QUARTER YEAR TO DATE
--------------------------------------------------------------------------------------------------------------------
Increase in gold price $2.3 $4.6
Increase in copper production 2.0 4.2
Increase in silver production and price 1.5 3.0
Increase in operating costs (3.8) (7.8)
Decrease in gold production (4.4) (6.2)
Stronger Canadian dollar (2.0) (2.8)
Increase in El Coco royalty - (2.2)
Increase in depreciation & amortization (1.1) (2.4)
Increase (decrease) in zinc production 0.5 (2.0)
Gain on settlement of convertible notes in Q1 2002 - (6.2)
Other (2.3) 1.1
------- ------
Net negative variance $(7.3) $(16.7)
------- ------
------- ------
The increase in operating costs was attributable to the LaRonde Mine operating
at 7,000 tons of ore treated per day compared to the 5,000 ton per day rate in
2002. Operating at the expanded rate, the mill processed 282,000 more tons of
ore in the first half of 2003 achieving onsite operating costs of C$50 per ton
compared to C$52 per ton in the first half of 2002. In the second quarter of
2003, onsite operating costs per ton improved C$4 per ton to C$48 per ton from
C$52 per ton in the second quarter of 2002.
In the second quarter of 2003 cash operating costs per ounce, excluding the El
Coco royalty, increased to $208 per ounce from $124 per ounce in 2002. In the
second quarter of 2003, total cash operating costs to produce an ounce of gold
were $258 compared to $164 in the same quarter of 2002. For the year to date
2003, cash operating costs increased to $190 from $126 excluding the El Coco
royalty and total cash operating costs increased to $251 from $162 in the first
six months of 2002. Despite the improvement in onsite operating costs, total
cash operating costs increased over 2002 due to lower gold production, a higher
El Coco royalty, lower byproduct zinc production and a stronger Canadian dollar.
As illustrated by the table above, these negative impacts on total cash
operating costs were only partially offset by increases in byproduct copper and
silver production.
The following table provides a reconciliation of the total cash operating costs
per ounce of gold produced to the financial statements:
(THOUSANDS OF DOLLARS,
EXCEPT WHERE NOTED) Q2 2003 Q2 2002 YTD 2003 YTD 2002
-------------------------------------------------------------------------------------------------------------------
Cost of production per Consolidated
Statements of Income (Loss) $24,769 $19,181 $49,286 $36,533
Adjustments:
Byproduct revenues (9,488) (6,813) (20,867) (14,248)
El-Coco royalty (3,000) (3,050) (7,074) (4,959)
Revenue recognition adjustment (i) 531 315 1,111 304
Non cash reclamation provision (300) (375) (575) (675)
------- ------- -------- --------
Cash operating costs $12,512 $9,258 $21,881 $16,995
Gold production (ounces) 60,157 74,617 115,162 134,876
------- ------- -------- --------
Cash operating cost (per ounce) $208 $124 $190 $126
El-Coco royalty (per ounce) 50 40 61 36
------- ------- -------- --------
Total cash operating costs (per ounce) (ii) $258 $164 $251 $162
------- ------- -------- --------
------- ------- -------- --------
Notes:
(i) Under the Company's revenue recognition policy, revenue is recognized on
concentrates when legal title passes. Since cash costs are calculated on a
production basis, this adjustment reflects the portion of concentrate
production for which revenue has not been recognized in the year.
(ii) Total cash operating cost data is prepared in accordance with The Gold
Institute Production Cost Standard and is not a recognized measure under
US GAAP. Adoption of the standard is voluntary and this data may not be
comparable to data presented by other gold producers. Management uses this
generally accepted industry measure in evaluating operating performance
and believes it to be a realistic indication of such performance. The data
also indicates the Company's ability to generate cash flow and operating
earnings at various gold prices. This additional information should be
considered together with other data prepared in accordance with US GAAP.
Amortization expense increased 30% to $4.8 million in the second quarter of 2003
from $3.7 million in the second quarter of 2002 and increased 43% to $9.3
million in the first half of 2003 from $6.5 million in the first half of 2002.
The increase in amortization is attributable to the increased mill throughput of
approximately 30% and an increased capital base resulting from the Company's
expansion of the LaRonde Mine to 7,000 tons of ore treated per day.
2
Income and mining taxes increased to $0.4 million and $1.0 million respectively
in the second quarter and six months ended June 30, 2003 compared to nil and
$1.3 million in both comparable periods in 2002. The $1.3 million provision in
2002 represents the future tax liability on the gain on settlement of the
Company's senior convertible notes. The Company does not expect to pay cash
income and mining taxes in 2003 however accrues deferred income and mining taxes
to reflect the drawdown of tax pools.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2003, Agnico-Eagle's consolidated cash and cash equivalents were
$121 million while working capital was $156 million. At December 31, 2002, the
Company had $153 million in cash and cash equivalents and $185 million in
working capital. Including the undrawn portion of its bank credit facility, the
Company had $221 million of available cash resources at June 30, 2003 compared
to $253 million at December 31, 2002. The Company currently has $100 million in
undrawn credit and expects to have an additional $25 million available in the
fourth quarter of 2003 once certain completion tests are satisfied in connection
with the LaRonde expansion to 7,000 tons per day.
Cash flow from operating activities, before working capital changes, was $2.5
million and $3.7 million, respectively in the quarter and six months ended June
30, 2003 compared to $10.1 million and $15.2 million, respectively in the
quarter and six months ended June 30, 2002. Operating cash flow was impacted by
lower gold production, a higher El Coco royalty, lower byproduct zinc production
and a stronger Canadian dollar offset partially by higher byproduct copper and
silver production.
For the three and six months ended June 30, 2003, capital expenditures and
investments were $18.4 million and $29.4 million respectively compared to $15.5
million and $29.8 million in the three and six months ended June 30, 2002.
Capital expenditures at the Company's LaRonde mine decreased to $10.7 million
and $21.5 million in the three and six months ended June 30, 2003 from $15.2
million and $29.5 million in the three and six months ended June 30, 2002. The
decrease is due to the Company having substantially completed the expansion of
the LaRonde Mine to 7,000 tons per day. In the second quarter of 2003, the
Company invested approximately $9.0 million to acquire Breakwater Resources
Ltd.'s interest in the Lapa property. This cash outflow is netted in
"Acquisitions, investments and other" in the Company's Consolidated Statements
of Cash Flows.
3
SUMMARIZED QUARTERLY DATA (UNAUDITED) AGNICO-EAGLE MINES LIMITED
---------------------------------------------------------------------------------------------------------------------------
(thousands of United States dollars, Three months ended June 30, Six months ended June 30,
except where noted, CDN GAAP basis) 2003 2002 2003 2002
---------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL DATA
INCOME AND CASH FLOW
LARONDE DIVISION
Revenues from mining operations $ 30,014 $ 29,342 $ 60,126 $ 54,434
Mine operating costs 24,769 19,181 49,286 36,533
---------------------------------------------------------------------------------------------------------------------------
Mine operating profit $ 5,245 $ 10,161 $ 10,840 $ 17,901
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) for period $ (3,423) $ 3,893 $ (6,987) $ 9,671
Net income (loss) per share $ (0.06) $ 0.03 $ (0.12) $ 0.10
Operating cash flow (before non-cash working capital) $ 2,575 $ 10,099 $ 3,734 $ 15,188
Weighted average number of shares - basic (in thousands) 83,836 69,050 83,781 68,524
Tons of ore milled 648,292 491,083 1,250,925 968,416
Head grades:
Gold 0.10 0.17 0.10 0.16
Silver 2.24 2.28 2.34 2.39
Zinc 3.14% 3.64% 3.34% 4.43%
Copper 0.52% 0.30% 0.48% 0.26%
Recovery rates:
Gold 90.62% 92.92% 91.11% 93.73%
Silver 80.80% 80.10% 82.65% 81.92%
Zinc 77.80% 81.40% 78.00% 83.35%
Copper 79.20% 74.40% 79.20% 65.23%
Payable production:
Gold (ounces) 60,157 74,617 115,162 134,876
Silver (ounces in thousands) 1,049 709 2,085 1,433
Zinc (pounds in thousands) 27,080 24,740 55,044 60,737
Copper (pounds in thousands) 5,015 2,084 8,971 3,215
Realized prices per unit of production:
Gold (per ounce) $ 349 $ 310 $ 350 $ 306
Silver (per ounce) $ 4.57 $ 4.67 $ 4.61 $ 4.59
Zinc (per pound) $ 0.35 $ 0.36 $ 0.35 $ 0.35
Copper (per pound) $ 0.73 $ 0.78 $ 0.74 $ 0.77
Onsite operating costs per ton milled (Canadian dollars) $ 48 $ 52 $ 50 $ 52
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS PER GOLD OUNCE PRODUCED:
Onsite operating costs (including asset retirement expenses)$ 371 $ 219 $ 373 $ 237
Less: Non-cash asset retirement expenses (2) (5) (2) (5)
Net byproduct revenues (161) (90) (181) (106)
---------------------------------------------------------------------------------------------------------------------------
CASH OPERATING COSTS $ 208 $ 124 190 $ 126
Accrued El Coco royalties 50 40 61 36
---------------------------------------------------------------------------------------------------------------------------
TOTAL CASH COSTS $ 258 $ 164 $ 251 $ 162
Non-cash costs:
Asset retirement expenses 2 5 2 5
Amortization 80 49 81 51
---------------------------------------------------------------------------------------------------------------------------
Total operating costs $ 340 $ 218 $ 334 $ 218
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
4
CONSOLIDATED BALANCE SHEETS AGNICO-EAGLE MINES LIMITED
----------------------------------------------------------------------------------------------------------------------
(thousands of United States dollars, CDN GAAP basis) June 30, December 31,
2003 2002
---------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current
Cash and cash equivalents $ 121,078 $ 152,934
Metals awaiting settlement 29,236 29,749
Income taxes recoverable 2,817 2,900
Inventories:
Ore stockpiles 5,599 4,604
In-process concentrates 2,272 1,008
Supplies 5,105 5,008
Prepaid expenses and other 6.542 7,576
---------------------------------------------------------------------------------------------------------------------------
Total current assets 172,649 203,779
Investments and other assets 9,193 8,951
Future income and mining tax assets 22,929 22,929
Mining properties 377,686 356,409
---------------------------------------------------------------------------------------------------------------------------
$ 582,457 $ 592,068
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 13,753 $ 15,246
Dividends payable 756 3,013
Income and mining taxes payable - 954
Interest payable 1,946 1,873
---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 16,455 21,086
---------------------------------------------------------------------------------------------------------------------------
Reclamation provision and other liabilities 5,088 4,314
---------------------------------------------------------------------------------------------------------------------------
Future income and mining tax liabilities 25,883 23,819
---------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares
Authorized - unlimited
Issued - 83,902,863 (2002 - 83,636,861) 443,741 441,363
Convertible debenture 93,246 91,465
Other paid-in capital 55,028 55,028
Warrants 15,732 15,732
Contributed surplus 5,560 5,560
Deficit (78,276) (66,299)
---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 535,031 542,849
---------------------------------------------------------------------------------------------------------------------------
$ 582,457 $ 592,068
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
1
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) (UNAUDITED) AGNICO-EAGLE MINES LIMITED
-------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
(thousands of United States dollars, June 30, June 30,
except per share amounts, CDN GAAP basis) 2003 2002 2003 2002
-------------------------------------------------------------------------------------------------------------------------------
REVENUES
Revenues from mining operations $ 30,014 $ 29,342 $ 60,126 $ 54,434
Interest and sundry income 920 524 1,066 752
-------------------------------------------------------------------------------------------------------------------------------
30,934 29,866 61,192 55,186
COSTS AND EXPENSES
Production 24,769 19,181 49,286 36,533
Exploration and corporate development 966 894 2,438 1,643
Amortization 4,787 3,677 9,304 6,489
General and administrative 2,240 1,498 3,707 2,499
Provincial capital tax 285 612 774 992
Interest 495 65 1,117 1,990
Foreign currency (gain) loss 193 (176) (24) (176)
-------------------------------------------------------------------------------------------------------------------------------
Income (loss) before undernoted (2,801) 4,115 (5,411) 5,216
Gain on settlement of Company's senior convertible notes - - - 6,184
-------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income, mining and federal capital taxes (2,801) 4,115 (5,410) 11,400
Federal capital tax 264 222 589 429
Income and mining tax expense 358 - 988 1,300
-------------------------------------------------------------------------------------------------------------------------------
Net income (loss) for the period $ (3,423) $ 3,893 $ (6,987) $ 9,671
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share - basic and diluted (note 3) $ (0.06) $ 0.03 $ (0.12) $ 0.10
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares (in thousands) (note 3)
basic 83,836 69,050 83,781 68,524
diluted 83,836 80,546 83,781 80,021
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
2
CONSOLIDATED STATEMENTS OF DEFICIT AND ACCUMULATED
OTHER COMPREHENSIVE LOSS (UNAUDITED) AGNICO-EAGLE MINES LIMITED
----------------------------------------------------------------------------------------------------------------------
(thousands of United States dollars, Three months ended June 30, Six Months ended June 30,
except per share amounts, CDN GAAP basis) 2003 2002 2003 2002
----------------------------------------------------------------------------------------------------------------------
DEFICIT
Balance, beginning of period $ (72,344) $ (52,860) $ (66,299) $ (56,731)
Net income (loss) for the period (3,423) 3,893 (6,987) 9,671
----------------------------------------------------------------------------------------------------------------------
(75,767) (48,967) (73,286) (47,060)
Interest costs associated with the Company's
convertible debentures (2,509) (2,359) (4,990) (2,833)
Gain on settlement of the conversion option
related to the Company's senior convertible
notes, net of related taxes - - - 3,833
Financing costs - - - (5,266)
----------------------------------------------------------------------------------------------------------------------
Balance, end of period $ (78,276) $ (51,326) $ (78,276) $ (51,326)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
3
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) AGNICO-EAGLE MINES LIMITED
----------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
(thousands of united states dollars, CDN GAAP basis) 2003 2002 2003 2002
----------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) for the period $ (3,423) $ 3,893 $ (6,987) $ 9,671
Add (deduct) items not affecting cash from operating activities:
Amortization 4,787 3,677 9,304 6,489
Provision for future income and mining taxes 738 - 2,064 1,300
Unrealized (gain) loss on derivative contracts 1,013 - (848) -
Gain on settlement of the Company's senior convertible notes - - - (6,184)
Amortization of deferred costs and other (540) 2,529 201 3,912
----------------------------------------------------------------------------------------------------------------------------
Cash flow from operations, before working capital changes 2,575 10,099 3,734 15,188
Change in non-cash working capital balances
Metals awaiting settlement (3,606) 540 513 (8,558)
Income taxes recoverable (476) 54 (871) (540)
Inventories (1,533) (485) (2,356) (506)
Prepaid expenses and other 792 2,489 1,222 353
Accounts payable and accrued liabilities (648) 4,391 (1,318) 5,721
Interest payable 1,686 1,681 73 14
----------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) operating activities (1,210) 18,769 997 11,672
----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to mining properties (10,671) (15,202) (21,508) (29,454)
Acquisitions, investments and other (7,699) (324) (7,887) (333)
----------------------------------------------------------------------------------------------------------------------------
Cash flows used in investing activities (18,370) (15,526) (29,395) (29,787)
----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Dividends paid - (30) (2,431) (1,319)
Common shares issued 1,125 7,338 2,320 12,564
Proceeds from long-term debt - - - 143,750
Financing costs - (514) - (5,266)
Interest on convertible debentures (1,613) (2,359) (3,208) (2,833)
Repayment of the Company's senior convertible notes - (198) - (122,169)
----------------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) financing activities (488) 4,237 (3,319) 24,727
----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (92) 536 (139) 519
Net increase (decrease) in cash and cash equivalents (20,160) 8,016 (31,856) 7,131
Cash and cash equivalents, beginning of period 141,238 20,295 152,934 21,180
----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 121,078 $ 28,311 $ 121,078 $ 28,311
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
OTHER OPERATING CASH FLOW INFORMATION:
Interest paid during the period $ 322 $ 530 $ 3,924 $ 19,242
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
Taxes paid (recovered) during the period $ 1,169 $ (690) $ 1,169 $ 2,639
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
NOTE: CERTAIN ITEMS HAVE BEEN RECLASSIFIED FROM FINANCIAL STATEMENTS PREVIOUSLY
PRESENTED TO CONFORM TO THE CURRENT PRESENTATION.
4
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared by the Company in US dollars in accordance with Canadian
GAAP with respect to the preparation of interim financial information.
Accordingly, they do not include all information and footnotes as
required in the preparation of annual financial statements and should be
read in conjunction with the audited financial statements and notes
included in the Audited Annual Consolidated Financial Statements (CDN
GAAP basis) for the year ended December 31, 2002.
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Management
believes that the estimates used in the preparation of the consolidated
financial statements are reasonable and prudent; however, actual results
could differ from these estimates.
Operating results for the three and six month periods ended June 30, 2003
are not necessarily indicative of the results that may be expected for
the full year ending December 31, 2003. Accordingly, these unaudited
interim financial statements should be read in conjunction with the
fiscal 2002 Audited Annual Consolidated Financial Statements (CDN GAAP
basis), including the accounting policies and notes thereto. These
interim consolidated financial statements follow the same accounting
policies and methods of their application as the December 31, 2002
Audited Annual Consolidated Financial Statements (CDN GAAP basis).
2. USE OF ESTIMATES
The preparation of the interim consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the interim consolidated financial statements and
accompanying notes. Management believes that the estimates used in the
preparation of the interim consolidated financial statements are
reasonable and prudent; however, actual results could differ from these
estimates.
3. NET INCOME PER SHARE
For the purposes of calculating earnings per share, the Company uses net
income after deducting interest charges on the Company's 2012 convertible
debentures. The 2012 convertible debenture issued in 2002 is presented,
in its entirety, as an equity instrument and as such the interest is
recorded as a direct charge to retained earnings. Below is a
reconciliation of net income per financial statements to the net income
used in computing net income per share.
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Three months ended June 30, Six Months ended June 30,
2003 2002 2003 2002
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Net income (loss), per financial statements $ (3,423) $ 3,893 $ (6,987) $ 9,671
Less: Interest on 2012 convertible
debenture charged directly to
retained earnings (1,613) (2,359) (3,208) (2,833)
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Net income (loss) used to compute
net income (loss) per share $ (5,036) $ 1,534 $ (10,195) $ 6,838
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The Company's 2012 convertible debentures are anti-dilutive and thus have
not been included in the computation of fully-diluted net income per
share.
5
5. CAPITAL STOCK
For the three and six month periods ended June 30, 2003, the Company's 2012
convertible debentures, warrants and employee stock options were all
anti-dilutive and thus were excluded from the calculation of diluted net
loss per share.
The following table presents the maximum number of common shares that would
be outstanding if all dilutive instruments outstanding at June 30, 2003
were exercised:
Common shares outstanding at June 30, 2003 83,902,863
Convertible debenture [based on debenture holders' option] 10,267,919
Employees' stock options 2,906,100
Warrants 6,900,000
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103,976,882
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During the six month period ended June 30, 2003, 153,050 (2002 -
1,628,500) employee stock options were exercised for cash of $1.0 million
(2002 - $11.6 million).