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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 20-F

o    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ý    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
OR
o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report                           
For the transition period from                             to                            

Commission file number: 1-13422


AGNICO-EAGLE MINES LIMITED
(Exact name of Registrant as Specified in its Charter)

Not Applicable
(Translation of Registrant's Name into English)

Ontario, Canada
(Jurisdiction of Incorporation or Organization)

145 King Street East, Suite 400
Toronto, Ontario, Canada M5C 2Y7
(Address of Principal Executive Offices)

R. Gregory Laing
145 King Street East, Suite 400
Toronto, Ontario, Canada M5C 2Y7
Telephone: 416-947-1212 Fax: 416-367-4681
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)


Securities registered or to be registered pursuant to Section 12(b) of the Act:

Common Shares, without par value
(Title of Class)
  The Toronto Stock Exchange and
the New York Stock Exchange
(Name of exchange on which registered)

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

170,859,604 Common Shares as of December 31, 2011

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes    ý            No        o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act.

Yes    o            No    ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes    ý            No    o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    ý            No    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer ý        Accelerated Filer o        Non-Accelerated Filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ý        International Financial Reporting Standards as issued        Other o
        by the International Accounting Standards Board o

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17    o            Item 18    o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes    o            No    ý





TABLE OF CONTENTS

   
 
    Page  
   
 
PRELIMINARY NOTE   1  

 
NOTE TO INVESTORS CONCERNING ESTIMATES OF MINERAL RESOURCES   2  

 
    Cautionary Note to Investors Concerning Estimates of Measured and Indicated Mineral Resources   2  

 
    Cautionary Note to Investors Concerning Estimates of Inferred Mineral Resources   2  

 
NOTE TO INVESTORS CONCERNING CERTAIN MEASURES OF PERFORMANCE   3  

 
PART I   4  

 
  ITEM 1      IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS   4 *

 
  ITEM 2      OFFER STATISTICS AND EXPECTED TIMETABLE   4 *

 
  ITEM 3      KEY INFORMATION   4  

 
    Selected Financial Data   4  

 
    Currency Exchange Rates   5  

 
    Risk Factors   6  

 
  ITEM 4      INFORMATION ON THE COMPANY   16  

 
    History and Development of the Company   16  

 
    Business Overview   19  

 
    Mining Legislation and Regulation   20  

 
    Organizational Structure   23  

 
    Property, Plant and Equipment   25  

 
  ITEM 4A    UNRESOLVED STAFF COMMENTS   84  

 
  ITEM 5      OPERATING AND FINANCIAL REVIEW AND PROSPECTS   84  

 
  ITEM 6      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES   116  

 
  ITEM 7      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS   142  

 
    Major Shareholders   142  

 
    Related Party Transactions   142  

 
  ITEM 8      FINANCIAL INFORMATION   142  

 
    Dividend Policy   142  

 
  ITEM 9      THE OFFER AND LISTING   143  

 
    Market and Listing Details   143  

 
  ITEM 10    ADDITIONAL INFORMATION   145  

 
    Memorandum and Articles of Incorporation   145  

 
    Disclosure of Share Ownership   147  

 
    Material Contracts   147  

 
    Exchange Controls   151  

 
    Restrictions on Share Ownership by Non-Canadians   151  

 

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    Corporate Governance   152  

 
    Canadian Federal Income Tax Considerations   152  

 
    United States Federal Income Tax Considerations   153  

 
    Audit Fees   155  

 
    Available Documents   156  

 
  ITEM 11    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   156  

 
  ITEM 12    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES   158  

 
PART II   159  

 
  ITEM 13    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES   159  

 
  ITEM 14    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS   159  

 
  ITEM 15    CONTROLS AND PROCEDURES   159  

 
  ITEM 15T  CONTROLS AND PROCEDURES   160  

 
  ITEM 16A  AUDIT COMMITTEE FINANCIAL EXPERT   160  

 
  ITEM 16B  CODE OF ETHICS   160  

 
  ITEM 16C  PRINCIPAL ACCOUNTANT FEES AND SERVICES   160  

 
  ITEM 16D  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES   160  

 
  ITEM 16E  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS   160  

 
  ITEM 16F  CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT   160  

 
  ITEM 16G  CORPORATE GOVERNANCE   160  

 
PART III   161  

 
  ITEM 17    FINANCIAL STATEMENTS   161 **

 
  ITEM 18    FINANCIAL STATEMENTS   161  

 
  ITEM 19    EXHIBITS   215  

 
  SIGNATURES   216  

 
*
Omitted pursuant to General Instruction E(b) of Form 20-F.

**
Pursuant to General Instruction E(c) of Form 20-F, the registrant has elected to provide the financial statements and related information specified in Item 18.

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PRELIMINARY NOTE

Currencies:    Agnico-Eagle Mines Limited ("Agnico-Eagle" or the "Company") presents its consolidated financial statements in United States dollars. All dollar amounts in this Annual Report on Form 20-F ("Form 20-F") are stated in United States dollars ("U.S. dollars", "$" or "US$"), except where otherwise indicated. Certain information in this Form 20-F is presented in Canadian dollars ("C$") or European Union euros ("Euro" or "€"). See "Item 3 Key Information – Currency Exchange Rates" for a history of exchange rates of Canadian dollars into U.S. dollars.

Generally Accepted Accounting Principles:    Agnico-Eagle reports its financial results using United States generally accepted accounting principles ("US GAAP") due to its substantial U.S. shareholder base and to maintain comparability with other gold mining companies. Unless otherwise specified, all references to financial results herein are to those calculated under US GAAP.

Forward-Looking Information:    Certain statements in this Form 20-F, referred to herein as "forward-looking statements", constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" under the provisions of Canadian provincial securities laws. These statements relate to, among other things, the Company's plans, objectives, expectations, estimates, beliefs, strategies and intentions and can generally be identified by the use of words such as "anticipate", "believe", "budget", "could", "estimate", "expect", "forecast", "intend", "likely", "may", "plan", "project", "schedule", "should", "target", "will", "would" or other variations of these terms or similar words. Forward-looking statements in this report include, but are not limited to, the following:

    the Company's outlook for 2012 and future periods;

    statements regarding future earnings, and the sensitivity of earnings to gold and other metal prices;

    anticipated levels or trends for prices of gold and byproduct metals mined by the Company or for exchange rates between currencies in which capital is raised, revenue is generated or expenses are incurred by the Company;

    estimates of future mineral production and sales;

    estimates of future costs, including mining costs, total cash costs per ounce, minesite costs per tonne and other expenses;

    estimates of future capital expenditure, exploration expenditure and other cash needs, and expectations as to the funding thereof;

    statements regarding the projected exploration, development and exploitation of certain ore deposits, including estimates of exploration, development and production and other capital costs and estimates of the timing of such exploration, development and production or decisions with respect thereto;

    estimates of mineral reserves, mineral resources and ore grades and statements regarding anticipated future exploration results;

    estimates of cash flow;

    estimates of mine life;

    anticipated timing of events with respect to the Company's minesites, mine construction projects and exploration projects;

    estimates of future costs and other liabilities for environmental remediation;

    statements regarding anticipated legislation and regulation regarding climate change and estimates of the impact on the Company; and

    other anticipated trends with respect to the Company's capital resources and results of operations.

Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by Agnico-Eagle as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions of Agnico-Eagle upon which the forward-looking statements in this Form 20-F are based, and which may prove to be incorrect, include, but are not limited to, the assumptions set out elsewhere in this Form 20-F as well as: that there are no significant disruptions affecting Agnico-Eagle's operations, whether due to labour disruptions, supply disruptions, damage to equipment, natural or man-made occurrences, mining or milling issues, political changes, title issues or otherwise; that permitting, development and

2011 ANNUAL REPORT            1

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expansion at each of Agnico-Eagle's mines and mine development projects proceed on a basis consistent with current expectations, and that Agnico-Eagle does not change its exploration or development plans relating to such projects; that the exchange rates between the Canadian dollar, Euro, Mexican peso and the U.S. dollar will be approximately consistent with current levels or as set out in this Form 20-F; that prices for gold, silver, zinc, copper and lead will be consistent with Agnico-Eagle's expectations; that prices for key mining and construction supplies, including labour costs, remain consistent with Agnico-Eagle's current expectations; that production meets expectations; that Agnico-Eagle's current estimates of mineral reserves, mineral resources, mineral grades and mineral recovery are accurate; that there are no material delays in the timing for completion of development projects; and that there are no material variations in the current tax and regulatory environment that affect Agnico-Eagle.

The forward-looking statements in this Form 20-F reflect the Company's views as at the date of this Form 20-F and involve known and unknown risks, uncertainties and other factors which could cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the Risk Factors set forth in "Item 3 Key Information – Risk Factors". Given these uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as otherwise required by law, the Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which any such statement is based. This Form 20-F contains information regarding anticipated total cash costs per ounce and minesite costs per tonne at certain of the Company's mines and mine development projects. The Company believes that these generally accepted industry measures are realistic indicators of operating performance and are useful in allowing year over year comparisons. Investors are cautioned that this information may not be suitable for other purposes.

NOTE TO INVESTORS CONCERNING ESTIMATES OF MINERAL RESOURCES

The mineral reserve and mineral resource estimates contained in this Form 20-F have been prepared in accordance with the Canadian securities regulatory authorities' (the "CSA") National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). These standards are similar to those used by the United States Securities and Exchange Commission's (the "SEC") Industry Guide No. 7, as interpreted by Staff at the SEC ("Guide 7"). However, the definitions in NI 43-101 differ in certain respects from those under Guide 7. Accordingly, mineral reserve information contained or incorporated by reference herein may not be comparable to similar information disclosed by U.S. companies. Under the requirements of the SEC, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SEC does not recognize measures of "mineral resource".

The metal grades reported in the mineral reserve and mineral resource estimates represent in-place grades and do not reflect losses in the recovery process, that is, the metallurgical losses associated with processing the extracted ore. The mineral reserve figures presented herein are estimates, and no assurance can be given that the anticipated tonnages and grades will be achieved or that the indicated level of recovery will be realized. The Company does not include equivalent gold ounces for byproduct metals contained in mineral reserves in its calculation of contained ounces.

Cautionary Note to Investors Concerning Estimates of Measured and Indicated Mineral Resources

This document uses the terms "measured mineral resources" and "indicated mineral resources". Investors are advised that while those terms are recognized and required by Canadian regulations, the SEC does not recognize them. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into mineral reserves.

Cautionary Note to Investors Concerning Estimates of Inferred Mineral Resources

This document uses the term "inferred mineral resources". Investors are advised that while this term is recognized and required by Canadian regulations, the SEC does not recognize it. "Inferred mineral resources" have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that any part or all of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that any part or all of an inferred mineral resource exists, or is economically or legally mineable.

2            AGNICO-EAGLE MINES LIMITED

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NOTE TO INVESTORS CONCERNING CERTAIN MEASURES OF PERFORMANCE

This Form 20-F presents certain measures, including "total cash costs per ounce" and "minesite costs per tonne", that are not recognized measures under US GAAP. This data may not be comparable to data presented by other gold producers. For a reconciliation of these measures to the figures presented in the consolidated financial statements prepared in accordance with US GAAP, see "Item 5 Operating and Financial Review and Prospects – Results of Operations – Production Costs". The Company believes that these generally accepted industry measures are realistic indicators of operating performance and are useful in allowing year over year comparisons. However, both of these non-US GAAP measures should be considered together with other data prepared in accordance with US GAAP, and these measures, taken by themselves, are not necessarily indicative of operating costs or cash flow measures prepared in accordance with US GAAP. This Form 20-F also contains information as to estimated future total cash costs per ounce and minesite costs per tonne for projects under development. These estimates are based upon the total cash costs per ounce and minesite costs per tonne that the Company expects to incur to mine gold at those projects and, consistent with the reconciliation provided, do not include production costs attributable to accretion expense and other asset retirement costs, which will vary over time as each project is developed and mined. It is therefore not practicable to reconcile these forward-looking non-US GAAP financial measures to the most comparable US GAAP measure.

2011 ANNUAL REPORT            3

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PART I

ITEM 1   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Pursuant to the instructions to Item 1 of Form 20-F, this information has not been provided.

ITEM 2   OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3   KEY INFORMATION

Selected Financial Data

The following selected financial data for each of the years in the five-year period ended December 31, 2011 are derived from the consolidated financial statements of Agnico-Eagle audited by Ernst & Young LLP. The selected financial data should be read in conjunction with the Company's operating and financial review and prospects set out in Item 5 of this Form 20-F, the consolidated financial statements and the notes thereto set out in Item 18 of this Form 20-F and other financial information included elsewhere in this Form 20-F.

    Year Ended December 31,
   
    2011   2010   2009   2008   2007    
   
    (in thousands of U.S. dollars, US GAAP basis,
other than share and per share information)
   
Income Statement Data                        

Revenues from mining operations   1,821,799   1,422,521   613,762   368,938   432,205    

Production costs   876,078   677,472   306,318   186,862   166,104    

Exploration and corporate development   75,721   54,958   36,279   34,704   25,507    

Equity loss in junior exploration company              

Amortization   261,781   192,486   72,461   36,133   27,757    

General and administrative   107,926   94,327   63,687   47,187   38,167    

Write-down of available-for-sale securities   8,569       74,812      

Loss (Gain) on derivative financial instruments   (3,683 ) (7,612 )     5,829    

Provincial capital tax   9,223   (6,075 ) 5,014   5,332   3,202    

Interest   55,039   49,493   8,448   2,952   3,294    

Interest and sundry income   5,188   (10,254 ) (16,172 ) (11,721 ) (25,142 )  

Loss on Goldex mine   302,893            

Impairment loss on Meadowbank mine   907,681            

Gain on acquisition of Comaplex, net of transaction costs     (57,526 )        

Gain on sale of available-for-sale-securities   (4,907 ) (19,487 ) (10,142 ) (25,626 ) (4,088 )  

Foreign exchange (gain) loss   (1,082 ) 19,536   39,831   (77,688 ) 32,297    

Income before income and mining taxes   (778,628 ) 435,203   108,038   95,991   159,278    

Income and mining taxes (recoveries)   (209,673 ) 103,087   21,500   22,824   19,933    

Net income   (568,955 ) 332,116   86,538   73,167   139,345    

Attributed to non-controlling interest   (60 )          

Attributed to common shareholders   (568,895 )          

Net income per share – basic   (3.36 ) 2.05   0.55   0.51   1.05    

Net income per share – diluted   (3.36 ) 2.00   0.55   0.50   1.04    

Weighted average number of shares outstanding – basic   170,275,475   162,342,686   155,942,151   144,740,658   132,768,049    

Weighted average number of shares outstanding – diluted   170,275,475   165,842,259   158,620,888   145,888,728   133,957,869    

Dividends declared per common share   0.00   0.64   0.18   0.18   0.18    

4            AGNICO-EAGLE MINES LIMITED

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Balance Sheet Data (at end of period)                        

Mining properties (net)   3,895,355   4,564,563   3,581,798   2,997,500   2,123,397    

Total assets   5,034,262   5,500,351   4,247,357   3,378,824   2,735,498    

Long-term debt   920,095   650,000   715,000   200,000      

Reclamation provision and other liabilities   145,988   145,536   96,255   71,770   57,941    

Net assets   3,215,163   3,665,450   2,751,761   2,517,756   2,058,934    

Common shares   3,181,381   3,078,217   2,378,759   2,299,747   1,931,667    

Shareholders' equity   3,215,163   3,665,450   2,751,761   2,517,756   2,058,934    

Total common shares outstanding   170,859,604   168,720,355   156,625,174   154,808,918   142,403,379    


Currency Exchange Rates

All dollar amounts in this Form 20-F are in U.S. dollars, except where otherwise indicated. The following tables set out, in Canadian dollars, the exchange rates for the U.S. dollar, based on the noon buying rate as reported by the Bank of Canada (the "Noon Buying Rate"). On March 12, 2012, the Noon Buying Rate was US$1.00 equals C$0.9935.

    Year Ended December 31,
   
    2011   2010   2009   2008   2007
   
High   1.0604   1.0778   1.3000   1.2969   1.1853

Low   0.9449   0.9946   1.0292   0.9719   0.9170

End of Period   1.0170   0.9946   1.0466   1.2246   0.9881

Average   0.9891   1.0299   1.1420   1.0660   1.0748

 
    2012   2011
   
 
    March
(to March 12

)
February   January   December   November   October   September
   
High   1.0015   1.10016   1.0272   1.0406   1.0487   1.0604   1.0389

Low   0.9849   0.9866   0.9986   1.0105   1.0126   0.9935   0.9752

End of Period   0.9935   0.9866   1.0052   1.0170   1.0197   0.9935   1.0389

Average   0.9929   0.9965   1.0134   1.0238   1.0258   1.0207   1.0026

On December 31, 2011 and March 12, 2012, US$1.00 equalled €0.7729 and €0.7623, respectively, as reported by the European Central Bank.

2011 ANNUAL REPORT            5

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Risk Factors

The Company's financial performance and results may fluctuate widely due to volatile and unpredictable commodity prices.

The Company's earnings are directly related to commodity prices, as revenues are derived from the sale of precious metals (gold and silver), zinc and copper. Gold prices, which have the greatest impact on the Company's financial performance, fluctuate widely and are affected by numerous factors beyond the Company's control, including central bank purchases and sales, producer hedging and de-hedging activities, expectations of inflation, investment demand, the relative exchange rate of the U.S. dollar with other major currencies, interest rates, global and regional demand, political and economic conditions, production costs in major gold-producing regions, speculative positions taken by investors or traders in gold and changes in supply, including worldwide production levels. The aggregate effect of these factors is impossible to predict with accuracy. In addition, the price of gold has on occasion been subject to very rapid short-term changes because of speculative activities. Fluctuations in gold prices may materially adversely affect the Company's financial performance or results of operations. If the market price of gold falls below the Company's total cash costs per ounce of production at one or more of its projects at that time and remains so for any sustained period, the Company may experience losses and/or may curtail or suspend some or all of its exploration, development and mining activities at such projects or at other projects. In addition, such fluctuations may require changes to the mine plan. Also, the Company's decisions to proceed with the operations at its current mines were based on a market price of gold between $400 and $450 per ounce. If the market price of gold falls below these levels, the mines may be rendered uneconomic and production may be suspended. Also, the Company's evaluation of the Meliadine project acquisition was based on an assumption of a market price of gold of $950 per ounce and the evaluation of the La India project acquisition was based on an assumption of a market price of gold of $1,150 per ounce. If the market price of gold falls below these respective levels, future activity at the Meliadine project or the La India project may be rendered uneconomic and activities may be suspended. In addition, the Company's current mine plans are all based on a gold price of $1,500 per ounce and reserve and resource estimates are based on a gold price of $1,255 per ounce; if the price of gold falls below these levels the mine plans may have to be changed, which may result in reduced production, higher costs than anticipated or both and estimates of reserves and resources may have to be reduced. Further, the prices received from the sale of the Company's byproduct metals produced at its LaRonde mine (zinc, silver, lead and copper) and its Pinos Altos mine (silver) affect the Company's ability to meet its targets for total cash costs per ounce of gold produced. These byproduct metal prices fluctuate widely and are also affected by numerous factors beyond the Company's control. The Company's policy and practice is not to sell forward its future gold production; however, under the Company's price risk management policy, approved by the Company's board of directors (the "Board"), the Company may review this practice on a project by project basis. See "Item 11 Quantitative and Qualitative Disclosures about Market Risk – Derivatives" for more details on the Company's use of derivative instruments. The Company occasionally uses derivative instruments to mitigate the effects of fluctuating byproduct metal prices; however, these measures may not be successful.

The volatility of gold prices is illustrated in the following table which sets out, for the periods indicated, the high, low and average afternoon fixing prices for gold on the London Bullion Market (the "London P.M. Fix").

   
    2012
(to March 12

)
2011   2010   2009   2008   2007
   
High price ($ per ounce)   1,781   1,895   1,421   1,212   1,011   841

Low price ($ per ounce)   1,598   1,319   1,058   810   712   608

Average price ($ per ounce)   1,698   1,572   1,125   972   872   695

On March 12, 2012, the London P.M. Fix was $1,698 per ounce of gold.

The assumptions that underlie the estimate of future operating results and the strategies used to mitigate the effects of risks of metal prices are set out herein and in "Item 5 Operating and Financial Review and Prospects – Outlook – Gold Production Growth" of this Form 20-F.

6            AGNICO-EAGLE MINES LIMITED

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Based on 2012 production estimates, the approximate sensitivities of the Company's after-tax income to a 10% change in certain metal prices from 2011 market average prices are as follows:

   
      Income
per share
   
Gold   $ 0.64

Silver   $ 0.06

Zinc   $ 0.02

Copper   $ 0.01

Sensitivities of the Company's after-tax income to changes in metal prices will increase with increased production.

The Company is largely dependent upon its mining and milling operations at its Meadowbank mine in Nunavut and at its LaRonde mine in Quebec, and any adverse condition affecting those operations may have a material adverse effect on the Company.

The Company's operations at the Meadowbank mine accounted for approximately 27% of the Company's gold production and are expected to account for approximately 30% of the Company's gold production in 2012 (using 912,500 ounces, being the midpoint of the Company's production guidance range of 875,000-950,000 ounces). The LaRonde mine in the Abitibi region of northern Quebec accounted for approximately 12.6% of the Company's gold production in 2011 and is expected to account for approximately 17% of the Company's gold production in 2012. In 2011, gold production at the Meadowbank mine was approximately 90,000 ounces below the Company's expectation as a result of issues that included a fire that destroyed the minesite's kitchen facilities and above anticipated dilution. For the year ended December 31, 2011, the Company performed a full review of the Meadowbank mine's operation and updated the related life of mine plan. The review considered the exploration potential of the area, the current mineral reserves and resources, the projected operating costs in light of persistently high operating costs experienced since the commencement of commercial operations, metallurgical performance and gold price. The updated life of mine plan contemplates a shorter mine life and reduced reserves and resources and required the Company to incur a pre-tax asset impairment charge of $907.7 million. At the LaRonde mine, the Company is now extracting ore from below Level 245, which was previously referred to as the LaRonde mine extension. The depth of these operations, as well as the new infrastructure required to extract this deeper ore, could pose significant challenges to the Company such as geomechanical risks and ventilation and air conditioning requirements, which could result in difficulties and delays in achieving gold production objectives. Any adverse condition affecting mining or milling conditions at the Meadowbank or LaRonde mines could be expected to have a material adverse effect on the Company's financial performance and results of operations. The Company also anticipates using revenue generated by its operations at these mines to finance a substantial portion of its capital expenditures in 2012, including new projects at the Pinos Altos mine and the Meliadine and La India projects.

The Kittila, Pinos Altos and Lapa mines commenced commercial production in 2009 and commercial production at the Creston Mascota deposit at Pinos Altos was achieved in the first quarter of 2011. However, unless the Company otherwise acquires significant gold-producing assets in other regions, the Company will continue to be dependent on its operations at the Meadowbank and LaRonde mines for a substantial portion of its gold production. Further, there can be no assurance that the Company's current exploration and development programs at the LaRonde or Meadowbank mines will result in any new economically viable mining operations or yield new mineral reserves to replace and expand current mineral reserves.

The Company may experience difficulties operating its Meadowbank mine and developing the Meliadine project as a result of their remote location.

The Company's Meadowbank mine is located in the Kivalliq District of Nunavut in northern Canada, approximately 70 kilometres north of Baker Lake. The closest major city is Winnipeg, Manitoba, approximately 1,500 kilometres to the south. Though the Company constructed a 110-kilometre all-weather road from Baker Lake, which provides summer shipping access via Hudson Bay to the Meadowbank mine, the Company's operations will be constrained by the remoteness of the mine, particularly as the port of Baker Lake is only accessible approximately 2.5 months per year. Most of the materials that the Company requires for the operation of the Meadowbank mine must be transported through the

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port of Baker Lake during this shipping season, which may be further truncated due to weather conditions. If the Company is unable to acquire and transport necessary supplies during this time, this may result in a slowdown or stoppage of operations at the Meadowbank mine. Furthermore, if major equipment fails, items necessary to replace or repair such equipment may have to be shipped through Baker Lake during this window. Failure to have available the necessary materials required for operations or to repair or replace malfunctioning equipment at the Meadowbank mine may require the slowdown or stoppage of operations. For example, the February 2011 fire at the Meadowbank Mine's kitchen facilities required the mine to be on reduced operations which resulted in reduced gold production at the mine.

The Company's Meliadine project, 290 kilometres southeast of the Meadowbank mine, is also located in the Kivalliq District of Nunavut, approximately 25 kilometres northwest of the hamlet of Rankin Inlet on the west coast of Hudson Bay. Access to the property is by helicopter from Rankin Inlet year-round and by tracked vehicles overland on a winter road from approximately late December to mid-May. An all-weather access road between the project and Rankin Inlet is at the permitting stage. The Company's operations at the Meliadine project may be constrained by its remoteness and, prior to the completion of the all weather access road, lack of access if the winter road season is shortened by permit delays or unusually warm weather, or if construction of the all-weather road is delayed. Most of the materials that the Company requires to operate the advanced exploration program, and may require if it determines to build a mine in the future, must be transported through the port of Rankin Inlet during its six-week shipping season. If the Company cannot identify and procure suitable equipment and materials within a timeframe that permits transporting them to the project within this shipping season, this could result in delays and/or cost increases in the exploration program and, if the Company determines to build a mine, any construction or development on the property.

The remoteness of the Meadowbank mine and Meliadine project also necessitates the use of fly-in/fly-out camps for the accommodation of site employees and contractors, which may have an impact on the Company's ability to attract and retain qualified mining, exploration and construction personnel. If the Company is unable to attract and retain sufficient personnel or sub-contractors on a timely basis, the Company's operations at the Meadowbank mine and future development plans at the Meliadine project may be adversely affected.

The Company's recently opened mines, mine construction projects and expansion projects are subject to risks associated with new mine development, which may result in delays in the start-up of mining operations, delays in existing operations and unanticipated costs.

The Company's production forecasts are based on full production being achieved at all of its mines, and the Company's ability to achieve and maintain full production rates at these mines is subject to a number of risks and uncertainties. Production from these mines in 2012 may be lower than anticipated if the anticipated full production rate cannot be achieved.

The LaRonde mine extension, which commenced operation in late 2011, will be one of the deepest operations in the Western Hemisphere with an expected maximum depth of 3,110 metres. The operations of the LaRonde mine extension will rely on new infrastructure for hauling ore and materials to the surface, including a winze (or internal shaft) and a series of ramps linking mining deposits to the Penna Shaft that services current operations at the LaRonde mine. The depth of the operations could pose significant challenges to the Company such as geomechanical risks and ventilation and air conditioning requirements, which may result in difficulties and delays in achieving gold production objectives.

The development of the Kittila and Pinos Altos mines requires the construction and operation of significant new underground mining operations. The construction and operation of underground mining facilities is subject to a number of risks, including unforeseen geological formations, implementation of new mining processes, delays in obtaining required construction, environmental or operating permits and engineering and mine design adjustments.

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If the Company experiences mining accidents or other adverse conditions, the Company's mining operations may yield less gold than indicated by its estimated gold production.

The Company's gold production may fall below estimated levels as a result of mining accidents such as cave-ins, rock falls, rock bursts, pit wall failures, fires or flooding or as a result of other operational problems such as a failure of a production hoist, autoclave, filter press or semi-autogenous grinding ("SAG") mill. In addition, production may be reduced if, during the course of mining or processing, unfavourable weather conditions, ground conditions or seismic activity are encountered, ore grades are lower than expected, the physical or metallurgical characteristics of the ore are less amenable than expected to mining or treatment, dilution increases, electrical power is interrupted or heap leach processing results in containment discharge. In seven of the last nine years, as a result of such adverse conditions, the Company has failed to meet production forecasts due to: a rock fall, production drilling challenges and lower than planned mill recoveries in 2003; higher than expected dilution in 2004; increased stress levels in a sill pillar requiring the temporary closure of production sublevels in 2005; and delays in the commissioning of the Goldex production hoist and the Kittila autoclave in 2008. In 2009, gold production was 492,972 ounces, down from the Company's initial estimate of 590,000 ounces, primarily as a result of delays in the commencement of production at the Kittila mine due to issues with the autoclave, at the Pinos Altos mine resulting from problems in commissioning the dry tailings filter presses and at the Lapa mine resulting from dilution issues. In 2010, gold production of 987,607 ounces was below the initial anticipated range of 1 million to 1.1 million ounces primarily as a result of lower throughput at the Meadowbank mine mill due to a bottleneck in the crushing circuit and because there were autoclave issues at the Kittila mine in the first half of the year. In 2011, gold production of 985,460 ounces was below the initial anticipated range of 1.13 to 1.23 million ounces primarily as a result of suspension of mining operations at the Goldex mine due to suspected rock subsidence in the hanging wall above the main orebody, a fire in the Meadowbank mine kitchen complex which negatively impacted production and lower than expected grades at the Meadowbank and LaRonde mines. Occurrences of this nature and other accidents, adverse conditions or operational problems in future years may result in the Company's failure to achieve current or future production estimates.

The Company's total cash costs per ounce of gold production depend, in part, on external factors that are subject to fluctuation and, if such costs increase, some or all of the Company's activities may become unprofitable.

The Company's total cash costs per ounce of gold are dependent on a number of factors, including the exchange rate between the U.S. dollar and the Canadian dollar, Euro or Mexican peso, smelting and refining charges, production royalties, the price of gold and byproduct metals and the cost of inputs used in mining operations. At the LaRonde mine, the Company's total cash costs per ounce of production are primarily affected by the prices and production levels of byproduct zinc, silver and copper, the revenue from which is offset against the cost of gold production. Total cash costs per ounce from the Company's operations at the Pinos Altos mine are affected by the exchange rate between the U.S. dollar and the Mexican peso and the price and production level of byproduct silver, the revenue from which is offset against the cost of gold production. Total cash costs per ounce from the Company's operations at its mines in Canada and the Kittila mine are affected by changes in the exchange rates between the U.S. dollar and the Canadian dollar and the Euro, respectively. Total cash costs per ounce at all of the Company's mines are also affected by the costs of inputs used in mining operations, including labour (including contractors), steel, chemical reagents and energy. All of these factors are beyond the Company's control. If the Company's total cash costs per ounce of gold rise above the market price of gold and remain so for any sustained period, the Company may experience losses and may curtail or suspend some or all of its exploration, development and mining activities.

Total cash costs per ounce is not a recognized measure under US GAAP, and this data may not be comparable to data presented by other gold producers. Management uses this generally accepted industry measure in evaluating operating performance and believes it to be a realistic indicator of such performance and useful in allowing year over year comparisons. The data also reflects the Company's ability to generate cash flow and operating income at various gold prices. This additional information should be considered together with other data prepared in accordance with US GAAP and is not necessarily indicative of operating costs or cash flow measures prepared in accordance with US GAAP. See "Item 5 Operating and Financial Review and Prospects – Results of Operations – Production Costs" for reconciliation of total cash costs per ounce and minesite costs per tonne to their closest US GAAP measure and "Note to Investors Concerning Certain Measures of Performance" for a discussion of these non-US GAAP measures.

The Company may experience operational difficulties at its mines in Finland and Mexico.

The Company's operations include a mine in Finland and a mine in northern Mexico. These operations are subject to various levels of political, economic and other risks and uncertainties that are different from those encountered at the Company's Canadian properties. These risks and uncertainties vary from country to country and may include: extreme

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fluctuations in currency exchange rates; high rates of inflation; labour unrest; risks of war or civil unrest; expropriation and nationalization; renegotiation or nullification of existing concessions, licences, permits and contracts; illegal mining; corruption; restrictions on foreign exchange and repatriation; hostage taking; and changing political conditions and currency controls. In addition, the Company must comply with multiple and potentially conflicting regulations in Canada, the United States, Europe and Mexico, including export requirements, taxes, tariffs, import duties and other trade barriers, as well as health, safety and environmental requirements.

Changes, if any, in mining or investment policies or shifts in political attitude in Finland or Mexico may adversely affect the Company's operations or profitability. Operations may be affected in varying degrees by government regulations with respect to matters including restrictions on production, price controls, export controls, currency controls or restrictions, currency remittance, income and other taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral rights applications and tenure could result in loss, reduction or expropriation of entitlements or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.

In addition, Finland and Mexico have significantly different laws and regulations than Canada and there exist cultural and language differences between these countries and Canada. Also, the Company faces challenges inherent in efficiently managing an increased number of employees over large geographical distances, including the challenges of staffing and managing operations in several international locations and implementing appropriate systems, policies, benefits and compliance programs. These challenges may divert management's attention to the detriment of the Company's operations in Canada. There can be no assurance that difficulties associated with the Company's foreign operations can be successfully managed.

Mineral reserve and mineral resource estimates are only estimates and such estimates may not accurately reflect future mineral recovery.

The figures for mineral reserves and mineral resources published by the Company are estimates and no assurance can be given that the anticipated tonnages and grades will be achieved or that the indicated level of recovery of gold will be realized. Mineral reserve and resource estimates are based on gold recoveries in small scale laboratory tests and may not be indicative of the mineralization in the entire orebody and the Company may not be able to achieve similar results in larger scale tests under on-site conditions or during production. The ore grade actually recovered by the Company may differ from the estimated grades of the mineral reserves and mineral resources. The estimates of mineral reserves and mineral resources have been determined based on assumed metal prices, foreign exchange rates and operating costs. For example, the Company has estimated proven and probable mineral reserves on all of its properties based on, among other things, a $1,255 per ounce gold price. Monthly average gold prices have been above $1,255 per ounce since September 2010; however, prior to that time, monthly average gold prices were below $1,255 per ounce. Prolonged declines in the market price of gold (or applicable byproduct metal prices) may render mineral reserves containing relatively lower grades of mineralization uneconomical to recover and could materially reduce the Company's mineral reserves. Should such reductions occur, the Company may be required to take a material write-down of its investment in mining properties or delay or discontinue production or the development of new projects, resulting in increased net losses and reduced cash flow. Market price fluctuations of gold (or applicable byproduct metal prices), as well as increased production costs or reduced recovery rates, may render mineral reserves containing relatively lower grades of mineralization uneconomical to recover and may ultimately result in a restatement of mineral resources. Short-term factors relating to the mineral reserve, such as the need for orderly development of orebodies or the processing of new or different grades, may impair the profitability of a mine in any particular accounting period.

Mineral resource estimates for properties that have not commenced production or at deposits that have not yet been exploited are based, in most instances, on very limited and widely spaced drill hole information, which is not necessarily indicative of conditions between and around the drill holes. Accordingly, such mineral resource estimates may require revision as more drilling information becomes available or as actual production experience is gained.

The Company may experience problems in executing acquisitions or managing and integrating any completed acquisitions with its existing operations.

The Company regularly evaluates opportunities to acquire securities or assets of other mining businesses. Such acquisitions may be significant in size, may change the scale of the Company's business and may expose the Company to new geographic, political, operating, financial or geological risks. The Company's success in its acquisition activities depends on its ability to identify suitable acquisition candidates, acquire them on acceptable terms and integrate their

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operations successfully with those of the Company. Any acquisition would be accompanied by risks, such as the difficulty of assimilating the operations and personnel of any acquired businesses; the potential disruption of the Company's ongoing business; the inability of management to maximize the financial and strategic position of the Company through the successful integration of acquired assets and businesses; the maintenance of uniform standards, controls, procedures and policies; the impairment of relationships with employees, customers and contractors as a result of any integration of new management personnel; and the potential unknown liabilities associated with acquired assets and businesses. In addition, the Company may need additional capital to finance an acquisition. Debt financing related to any acquisition may expose the Company to the risks related to increased leverage, while equity financing may cause existing shareholders to suffer dilution. The Company is permitted under the terms of its unsecured revolving bank credit facility and its $600 million of guaranteed senior unsecured notes referred to under the heading "Item 4 Information on the Company – History and Development of the Company" to incur additional unsecured indebtedness, provided that it maintains certain financial ratios and meets financial condition covenants and, in the case of the bank credit facility, that it complies with certain covenants, including that no default under the bank credit facility has occurred and is continuing, or would occur as a result of the incurrence or assumption of such indebtedness, the terms of such indebtedness are no more onerous to the Company than those under the bank credit facility and such indebtedness does not require principal payments until at least 12 months following the then existing maturity date of the bank credit facility. There can be no assurance that the Company would be successful in overcoming these or any other problems encountered in connection with such acquisitions.

Fluctuations in foreign currency exchange rates in relation to the U.S. dollar may adversely affect the Company's results of operations.

The Company's operating results and cash flow are significantly affected by changes in the U.S. dollar/Canadian dollar exchange rate. All of the Company's revenues are earned in U.S. dollars but the majority of its operating costs at the LaRonde, Goldex, Lapa and Meadowbank mines, as well as the Meliadine project, are incurred in Canadian dollars. The U.S. dollar/Canadian dollar exchange rate has fluctuated significantly over the last several years. From January 1, 2007 to January 1, 2012, the Noon Buying Rate fluctuated from a high of C$1.3000 per $1.00 to a low of C$0.9170 per $1.00. Historical fluctuations in the U.S. dollar/Canadian dollar exchange rate are not necessarily indicative of future exchange rate fluctuations. Based on the Company's anticipated 2012 after-tax operating results, a 10% change in the U.S. dollar/Canadian dollar exchange rate from the 2011 market average exchange rate would affect net income by approximately $0.30 per share. To attempt to mitigate its foreign exchange risk and minimize the impact of exchange rate movements on operating results and cash flow, the Company has periodically used foreign currency options and forward foreign exchange contracts to purchase Canadian dollars; however, there can be no assurance that these strategies will be effective. See "Item 5 Operating and Financial Review and Prospects – Outlook – Gold Production Growth" for a description of the assumptions underlying the sensitivity and the strategies used to mitigate the effects of risks. In addition, the majority of the Company's operating costs at the Kittila mine are incurred in Euros and a portion of operating costs at the Pinos Altos mine and exploration and development costs at the La India project are incurred in Mexican pesos. Each of these currencies has fluctuated significantly against the U.S. dollar over the past several years. There can be no assurance that the Company's foreign exchange derivatives strategies will be successful or that foreign exchange fluctuations will not materially adversely affect the Company's financial performance and results of operations.

If the Company fails to comply with restrictive covenants in its debt instruments, the Company's ability to borrow under its unsecured revolving bank credit facility could be limited and the Company may then default under other debt agreements, which could harm the Company's business.

The Company's unsecured revolving $1.2 billion bank credit facility limits, among other things, the Company's ability to permit the creation of certain liens, make investments in a business or carry on business unrelated to mining, dispose of the Company's material assets or, in certain circumstances, pay dividends. In addition, the Company's $600 million guaranteed senior unsecured notes limit, among other things, the Company's ability to permit the creation of certain liens, carry on business unrelated to mining or dispose of the Company's material assets. The bank credit facility and the guaranteed senior unsecured notes also require the Company to maintain specified financial ratios and meet financial condition covenants. Events beyond the Company's control, including changes in general economic and business conditions, may affect the Company's ability to satisfy these covenants, which could result in a default under one of the bank credit facility or the notes. At March 12, 2012 there was approximately $320 million drawn under the bank credit facility, and the Company anticipates that it will continue to draw on the bank credit facility to fund part of the capital expenditures required in connection with its current development projects. If an event of default under the bank credit facility or the notes occurs, the Company would be unable to draw down further on the bank credit facility and the lenders

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could elect to declare all principal amounts outstanding thereunder at such time, together with accrued interest, to be immediately due and it could cause an event of default under the notes. An event of default under either the bank credit facility or the notes may also give rise to an event of default under existing and future debt agreements and, in such event, the Company may not have sufficient funds to repay amounts owing under such agreements.

The exploration of mineral properties is highly speculative, involves substantial expenditures and is frequently unsuccessful.

The Company's profitability is significantly affected by the costs and results of its exploration and development programs. As mines have limited lives based on proven and probable mineral reserves, the Company actively seeks to replace and expand its mineral reserves, primarily through exploration and development as well as through strategic acquisitions. Exploration for minerals is highly speculative in nature, involves many risks and is frequently unsuccessful. Among the many uncertainties inherent in any gold exploration and development program are the location of economic orebodies, the development of appropriate metallurgical processes, the receipt of necessary governmental permits and the construction of mining and processing facilities. Substantial expenditures are required to pursue such exploration and development activities. Assuming discovery of an economic orebody, depending on the type of mining operation involved, several years may elapse from the initial phases of drilling until commercial operations are commenced and during such time the economic feasibility of production may change. Accordingly, there can be no assurance that the Company's current or future exploration and development programs will result in any new economically viable mining operations or yield new mineral reserves to replace and expand current mineral reserves.

The mining industry is highly competitive, and the Company may not be successful in competing for new mining properties.

There is a limited supply of desirable mineral lands available for claim staking, leasing or other acquisitions in the areas where the Company contemplates conducting exploration activities. Many companies and individuals are engaged in the mining business, including large, established mining companies with substantial capabilities and long earnings records. The Company may be at a competitive disadvantage in acquiring mining properties, as it must compete with these companies and individuals, some of which have greater financial resources and larger technical staff than the Company. Accordingly, there can be no assurance that the Company will be able to compete successfully for new mining properties.

The success of the Company is dependent on good relations with its employees and on its ability to attract and retain employees and key personnel.

Production at the Company's mines and mine projects is dependent on the efforts of the Company's employees and contractors. The Company competes with mining and other companies on a global basis to attract and retain employees at all levels with appropriate technical skills and operating experience necessary to operate its mines. Relationships between the Company and its employees may be affected by changes in the scheme of labour relations that may be introduced by relevant government authorities in the jurisdictions that the Company operates. Changes in applicable legislation or in the relationship between the Company and its employees or contractors may have a material adverse effect on the Company's business, results of operations and financial condition.

The Company is also dependent on a number of key management personnel. The loss of the services of one or more of such key management personnel could have a material adverse effect on the Company. The Company's ability to manage its operating, development, exploration and financing activities will depend in large part on the efforts of these individuals.

The Company faces significant competition to attract and retain qualified personnel and there can be no assurance that the Company will be able to attract and retain such personnel.

The Company may have difficulty financing its additional capital requirements for its planned mine construction, exploration and development.

The sustaining capital required for operations (including potential expansions) and the development of the Meliadine and La India projects, and the exploration and development of the Company's properties, including continuing exploration and development projects in Quebec, Nunavut, Finland, Mexico and Nevada, will require substantial capital expenditures. The Company estimates that capital expenditures will be approximately $382.3 million in 2012 and $277.4 million in 2013. As at March 12, 2012, the Company had approximately $844.4 million available to be borrowed under its bank credit facility. Based on current funding available to the Company and expected cash from operations, the Company believes it has sufficient funds available to fund its projected capital expenditures for all of its current properties. However, if cash from

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operations is lower than expected or capital costs at these mines or projects exceed current estimates, or if the Company incurs major unanticipated expenses related to exploration, development or maintenance of its properties, or if advances from the bank credit facility are unavailable, the Company may be required to seek additional financing to maintain its capital expenditures at planned levels. In addition, the Company will have additional capital requirements to the extent that it decides to expand its present operations and exploration activities, construct additional mining and processing operations at any of its properties or take advantage of opportunities for acquisitions, joint ventures or other business opportunities that may arise. Additional financing may not be available when needed or, if available, the terms of such financing may not be favourable to the Company and, if raised by offering equity securities, or securities convertible into equity securities, any additional financing may involve substantial dilution to existing shareholders. Failure to obtain any financing necessary for the Company's capital expenditure plans may result in a delay or indefinite postponement of exploration, development or production on any or all of the Company's properties, which may have a material adverse effect on the Company's business, financial condition and results of operations.

The continuing weakness in the global credit and capital markets could have a material adverse impact on the Company's liquidity and capital resources.

The credit and capital markets experienced significant deterioration in 2008, including the failure of significant and established financial institutions in the United States and abroad, and continues to show weakness and volatility. These unprecedented disruptions in the credit and capital markets have negatively impacted the availability and terms of credit and capital. If uncertainties in these markets continue, or these markets deteriorate further, it could have a material adverse effect on the Company's liquidity, ability to raise capital and costs of capital. Failure to raise capital when needed or on reasonable terms may have a material adverse effect on the Company's business, financial condition and results of operations.

Due to the nature of the Company's mining operations, the Company may face liability, delays and increased production costs from environmental and industrial accidents and pollution, and the Company's insurance coverage may prove inadequate to satisfy future claims against the Company.

The business of gold mining is generally subject to risks and hazards, including environmental hazards, industrial accidents, unusual or unexpected rock formations, changes in the regulatory environment, cave-ins, rock bursts, rock falls, pit wall failures and flooding and gold bullion losses. Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. The Company carries insurance to protect itself against certain risks of mining and processing in amounts that it considers to be adequate but which may not provide adequate coverage in certain unforeseen circumstances. The Company may also become subject to liability for pollution, cave-ins or other hazards against which it cannot insure or against which it has elected not to insure because of high premium costs or other reasons, or the Company may become subject to liabilities which exceed policy limits. In these circumstances, the Company may incur significant costs that could have a material adverse effect on its financial performance and results of operations.

The Company's operations are subject to numerous laws and extensive government regulations which may cause a reduction in levels of production, delay or the prevention of the development of new mining properties or otherwise cause the Company to incur costs that adversely affect the Company's results of operations.

The Company's mining and mineral processing operations and exploration activities are subject to the laws and regulations of federal, provincial, state and local governments in the jurisdictions in which the Company operates. These laws and regulations are extensive and govern prospecting, exploration, development, production, exports, taxes, labour standards, occupational health and safety, waste disposal, toxic substances, environmental protection, mine safety and other matters. Compliance with such laws and regulations increases the costs of planning, designing, drilling, developing, constructing, operating, closing, reclaiming and rehabilitating mines and other facilities. New laws or regulations, amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation or interpretation thereof could have a material adverse impact on the Company, cause a reduction in levels of production and delay or prevent the development of new mining properties.

Title to the Company's properties may be uncertain and subject to risks.

The acquisition of title to mineral properties is a very detailed and time-consuming process. Title to, and the area of, mineral concessions may be disputed. Although the Company believes it has taken reasonable measures to ensure proper

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title to its properties, there is no guarantee that title to any of its properties will not be challenged or impaired. Third parties may have valid claims on underlying portions of the Company's interests, including prior unregistered liens, agreements, transfers or claims, including native land claims, and title may be affected by, among other things, undetected defects. In addition, although the Company believes that it has sufficient surface rights for its operations, the Company may be unable to operate its properties as permitted or to enforce its rights in respect of its properties.

Increased regulation of greenhouse gas emissions and climate change issues may adversely affect the Company's operations.

The Company operates in a number of jurisdictions in which regulatory requirements have been introduced or are being contemplated to monitor, report and/or reduce greenhouse gas emissions. Under the Copenhagen Accord, Canada has committed to reducing greenhouse gas emissions by 17%, relative to 2005 levels, by 2020, but this commitment is subject to future alignment with reduction targets and regulatory requirements in the United States. Canada is also considering new regulatory requirements to address greenhouse gas emissions. Similarly, the Province of Quebec is a member of the Western Climate Initiative and has passed legislation enabling the establishment of a greenhouse gas emissions registry, greenhouse gas reduction targets and a cap-and-trade system to achieve Quebec's commitment to reduce greenhouse gas emissions by 20%, relative to 1990 levels, by 2020. The Company's operations in Quebec use primarily hydroelectric power and as a consequence are not large producers of greenhouse gases. The Meadowbank mine produces approximately 165,110 tonnes of carbon dioxide equivalent per year from its own production of electricity from diesel-power generation and it is expected that any mining operation at the Meliadine project would also produce some of its power from diesel-power generation. The Pinos Altos mine purchases electricity that is largely fossil-fuel generated. The Pinos Altos mine also generates electricity locally with a diesel-powered genset during "peak" periods. As a result, it is the Company's second highest greenhouse gas producer at 109,483 tonnes of carbon dioxide equivalent per year. None of the Company's other operations emit more than 30,400 tonnes of carbon dioxide equivalent per year. As a result, notwithstanding the ongoing uncertainty around the regulation of greenhouse gas emissions, new regulatory requirements in respect of greenhouse gasses and the additional costs required to comply are not expected to have a material effect on the Company's operations and financial condition.

The Company is subject to the risk of litigation, the causes and costs of which cannot be known.

The Company is subject to litigation arising in the normal course of business and may be involved in disputes with other parties in the future which may result in litigation. The causes of potential future litigation cannot be known and may arise from, among other things, business activities, environmental laws, volatility in stock price or failure to comply with disclosure obligations, such as in the litigation referred to in note 21 to the Financial Statements contained in Item 18 hereof. The results of litigation cannot be predicted with certainty. If the Company is unable to resolve these disputes favourably, it may have a material adverse impact on the Company's financial performance, cash flow and results of operations.

In the event of a dispute involving the foreign operations of the Company, the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada. The Company's ability to enforce its rights could have an adverse effect on its future cash flows, earnings, results of operations and financial condition.

The use of derivative instruments for the Company's byproduct metal production may prevent gains from being realized from subsequent byproduct metal price increases.

While the Company's general policy is not to sell forward its future gold production, the Company has used, and may in the future use, various byproduct metal derivative strategies, such as selling future contracts or purchasing put options. The Company continually evaluates the potential short- and long-term benefits of engaging in such derivative strategies based upon current market conditions. No assurance can be given, however, that the use of byproduct metal derivative strategies will benefit the Company in the future. There is a possibility that the Company could lock in forward deliveries at prices lower than the market price at the time of delivery. In addition, the Company could fail to produce enough byproduct metals to offset its forward delivery obligations, causing the Company to purchase the metal in the spot market at higher prices to fulfill its delivery obligations or, for cash settled contracts, make cash payments to counterparties in excess of byproduct revenue. If the Company is locked into a lower than market price forward contract or has to buy additional quantities at higher prices, its net income could be adversely affected. None of the current contracts establishing the byproduct metal derivatives positions qualified for hedge accounting treatment under US GAAP and therefore any year-end mark-to-market adjustments are recognized in the "Gain on derivative financial instruments" line item of the

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consolidated statements of income and comprehensive income. See "Item 11 Quantitative and Qualitative Disclosures about Market Risk – Derivatives".

The trading price for the Company's securities is volatile.

The trading price of the Company's common shares and, consequently, the trading price of securities convertible into or exchangeable for the Company's common shares, have been and may continue to be subject to large fluctuations which may result in losses to investors. The trading price of the Company's common shares and securities convertible into or exchangeable for common shares may increase or decrease in response to a number of events and factors, including:

    changes in the market price of gold or other byproduct metals the Company sells;

    events affecting the economic situation in Canada, the United States and elsewhere;

    trends in the mining industry and the markets in which the Company operates;

    changes in financial estimates and recommendations by securities analysts;

    acquisitions and financings;

    quarterly variations in operating results;

    the operating and share price performance of other companies that investors may deem comparable; and

    purchases or sales of large blocks of the Company's common shares or securities convertible into or exchangeable for the Company's common shares.

Wide price swings are currently common in the markets on which the Company's securities trade. This volatility may adversely affect the prices of the Company's common shares and the securities convertible into or exchangeable for the Company's common shares regardless of the Company's operating performance.

The Company may not be able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act.

Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX") requires an annual assessment by management of the effectiveness of the Company's internal control over financial reporting. Section 404 of SOX also requires an annual attestation report by the Company's independent auditors addressing the effectiveness of the Company's internal control over financial reporting. The Company has completed its Section 404 assessment and received the auditors' attestation as of December 31, 2011.

If the Company fails to maintain the adequacy of its internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, the Company may not be able to conclude that it has effective internal control over financial reporting in accordance with Section 404 of SOX. The Company's failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm the Company's business and negatively impact the trading price of its common shares and securities convertible or exchangeable for common shares. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company's operating results or cause it to fail to meet its reporting obligations. Future acquisitions of companies may provide the Company with challenges in implementing the required processes, procedures and controls in its acquired operations. Acquired companies may not have disclosure controls and procedures or internal control over financial reporting that are as thorough or effective as those required by securities laws currently applicable to the Company.

No evaluation can provide complete assurance that the Company's internal control over financial reporting will prevent misstatement due to error or fraud or will detect or uncover all control issues or instances of fraud, if any. The effectiveness of the Company's controls and procedures could also be limited by simple errors or faulty judgments. In addition, as the Company continues to expand, the challenges involved in maintaining adequate internal control over financial reporting will increase and will require that the Company continue to improve its internal control over financial reporting. Although the Company intends to devote substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, the Company cannot be certain that it will be successful in continuing to comply with Section 404 of SOX.

Potential unenforceability of civil liabilities and judgments.

The Company is incorporated under the laws of the Province of Ontario, Canada. A majority of the Company's directors and officers as well as the experts named in this Form 20-F are residents of Canada. Also, almost all of the Company's

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assets and the assets of these persons are located outside of the United States. As a result, it may be difficult for shareholders to initiate a lawsuit within the United States against these non-U.S. residents, or to enforce U.S. judgments against the Company or these persons. The Company's Canadian counsel has advised the Company that a monetary judgment of a U.S. court predicated solely upon the civil liability provisions of U.S. federal securities laws would likely be enforceable in Canada if the U.S. court in which the judgment was obtained had a basis for jurisdiction in the matter that was recognized by a Canadian court for such purposes. The Company cannot provide assurance that this will be the case. It is less certain that an action could be brought in Canada in the first instance on the basis of liability predicated solely upon such laws.

ITEM 4   INFORMATION ON THE COMPANY

History and Development of the Company

The Company is an established Canadian-based international gold producer with mining operations in northwestern Quebec, northern Mexico, northern Finland and Nunavut and exploration activities in Canada, Europe, Latin America and the United States. The Company's operating history includes over three decades of continuous gold production primarily from underground operations. Since its formation on June 1, 1972, the Company has produced almost 7.5 million ounces of gold. For definitions of certain technical terms used in the following discussion, see "– Property, Plant and Equipment – Glossary of Selected Mining Terms".

The Company's strategy is to focus on the continued exploration, development and expansion of its properties, all of which are located in politically stable jurisdictions. The Company has spent approximately $2.7 billion on mine development over the last five years. Through this development program, the Company transformed itself from a regionally focused, single mine producer to a multi-mine international gold producer with five operating, 100% owned mines.

Since 1988, the LaRonde mine, in the Abitibi region of Quebec, has been the Company's flagship operation, producing approximately 4.3 million ounces of gold as well as valuable byproducts. The Lapa mine, the Company's highest grade metals mine, is 11 kilometres east of the LaRonde mine. The synergies between these sites contribute to the Company's efforts to reduce costs. The Kittila mine, in Finland, achieved commercial production in May 2009, has a long reserve life and has significant production expansion potential. The Pinos Altos mine, in Mexico, achieved commercial production in November 2009 and also has significant production expansion potential. The Company's fifth mine, Meadowbank, in Nunavut, achieved commercial production in March 2010 and is expected to produce the most gold (295,000 ounces) in 2012. In addition, the Company plans to pursue opportunities for growth in gold production and gold reserves through the prudent acquisition or development of exploration properties, development properties, producing properties and other mining businesses in the Americas and Europe.

In 2011, the Company produced 985,460 ounces of gold at total cash costs per ounce of $580 net of revenues from byproduct metals. For 2012, the Company expects to produce between 875,000 and 950,000 ounces of gold at a total cash costs per ounce of gold produced between $690 and $750 net of byproduct revenue. These expected higher total cash costs compared to 2011 reflect the closure of the Goldex mine, the Company's second lowest cost mine, in October 2011 due to suspected rock subsidence issues; the higher proportion of production coming from the Meadowbank mine, which is expected to have higher total cash costs per ounce compared to the Company's average; higher costs associated with the transition to underground mining operations at the Pinos Altos mine and the Kittila mine; and increased production from the Company's mines and mine projects that do not contain byproduct metals, revenue from which reduces total cash costs per ounce. In addition, the higher total cash costs per ounce also reflect the Canadian dollar strengthening against the U.S. dollar and continued escalations in labour, shipping and transportation costs. See "Note to Investors Concerning Certain Measures of Performance" for a discussion of the use of the non-US GAAP measure total cash costs per ounce. The Company has traditionally sold all of its production at the spot price of gold due to its general policy not to sell forward its future gold production.

The Company operates through four segments: Canada, Europe, Latin America and Exploration.

The Canadian Segment is comprised of the Province of Quebec and the Territory of Nunavut. The Company's Quebec properties include the LaRonde mine, the Goldex mine (mining operations suspended in October 2011) and the Lapa mine, each of which is held directly by the Company. In 2011, the Quebec properties accounted for 37.2% of the Company's gold production, comprised of 12.6% from the LaRonde mine, 13.7% from the Goldex mine and 10.9% from the Lapa mine. In 2012, the Company anticipates that its Quebec properties will account for 26.4% of the Company's gold production, of which 17.3% and 9.1% of the Company's gold production will come from the LaRonde mine and the Lapa mine, respectively.

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The Company's Nunavut properties are comprised of the Meadowbank mine and the Meliadine project, which are both held directly by the Company. In 2011, the Meadowbank mine accounted for 27.5% of the Company's gold production and the Company anticipates that in 2012 the Meadowbank mine will account for approximately 32.3% of the Company's gold production.

The Company's operations in the European Segment are conducted through its indirect subsidiary, Agnico Eagle Finland Oy, which indirectly owns the Kittila mine in Finland. In 2011, the Kittila mine accounted for 14.6% of the Company's gold production and the Company anticipates that in 2012 the Kittila mine will account for approximately 16.9% of the Company's gold production.

The Company's mining operations in the Latin American Region are conducted through its subsidiary, Agnico Eagle Mexico S.A. de C.V., which owns the Pinos Altos mine, including the Creston Mascota deposit at Pinos Altos. The La India project is owned by the Company's indirect subsidiary, Resource Grayd De Mexico, S.A. de C.V.. In 2011, the Pinos Altos mine accounted for 20.7% of the Company's gold production and the Company anticipates that in 2012 the Pinos Altos mine will account for approximately 22.5% of the Company's gold production.

The Exploration Segment includes the Company's grassroots exploration operations in the United States, the European exploration office, the Canadian exploration offices and the Latin American exploration office. In addition, the Company has an international exploration office in Reno, Nevada.

Agnico-Eagle's expertise in acquiring mine projects and developing mines is shown through the launch of five operating mines. The following table sets out the date of acquisition, the date of commencement of construction and the date of achieving commercial production for the Company's mines and mine projects.

   
    Date of Acquisition   Date of Commencement
of Construction
  Date of achieving
Commercial Production
 
   

 

 

 

 

 

 

 

 
LaRonde mine   1992 (1) 1985   1988  

Goldex mine (suspended in October, 2011)   December 1993 (1) July 2005   August 2008  

Kittila mine   November 2005   June 2006   May 2009  

Lapa mine   June 2003 (1) June 2006   May 2009  

Pinos Altos mine   March 2006   August 2007   November 2009  

Meadowbank mine   April 2007   Pre-April 2007   March 2010  

Meliadine project   July 2010   2014 (2) 2017 (2)  

La India project   January 2012      

Notes:

(1)
Date when 100% ownership was acquired.

(2)
Anticipated.

The Company's exploration program focuses primarily on the identification of new mineral reserves and resources and new development opportunities in proven gold producing regions. Current exploration activities are concentrated in Canada, Europe, Latin America and the United States. Several projects were evaluated during the year in other countries where the Company believes the potential for gold occurrences is excellent and which the Company believes to be politically stable and supportive of the mining industry. The Company currently manages 77 properties in Canada, 6 properties in the United States, three groups of properties in Finland, one property in Sweden, six projects in Mexico and one project in Argentina. Exploration activities are managed from offices in Val d'Or, Quebec; Reno, Nevada; Chihuahua, Mexico; Kittila, Finland; and Vancouver, British Columbia.

In addition, the Company continuously evaluates opportunities to make strategic acquisitions, such as the acquisition of Grayd Resource Corporation ("Grayd") completed in January 2012 that resulted in 100% ownership of the La India project. Five of the Company's new mines or projects came from relatively recent acquisitions.

In the second quarter of 2004, the Company acquired an approximate 14% ownership interest in Riddarhyttan Resources AB ("Riddarhyttan"), a Swedish precious and base metals exploration and development company that was at the time

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listed on the Stockholm Stock Exchange. In November 2005, the Company completed a tender offer (the "Riddarhyttan Offer") for all of the issued and outstanding shares of Riddarhyttan that it did not own. The Company issued 10,023,882 of its common shares and paid and committed an aggregate of $5.1 million cash as consideration to Riddarhyttan shareholders in connection with the Riddarhyttan Offer. On March 28, 2011, Riddarhyttan was merged with Agnico-Eagle AB and Agnico-Eagle Sweden AB, with Agnico-Eagle Sweden AB as the continuing entity. The Kittila mine, located approximately 900 kilometres north of Helsinki near the town of Kittila in Finnish Lapland, is currently 100% owned by Agnico-Eagle Finland Oy, which is owned by Agnico-Eagle Sweden AB.

In the first quarter of 2005, the Company entered into an exploration and option agreement with Industrias Penoles S.A. de C.V. ("Penoles") to acquire the Pinos Altos property in northern Mexico. The Pinos Altos property is comprised of approximately 11,000 hectares in the Sierra Madre gold belt, approximately 225 kilometres west of the city of Chihuahua in the state of Chihuahua in northern Mexico. In February 2006, the Company exercised its option and acquired the Pinos Altos property on March 15, 2006. Under the terms of the exploration and option agreement, the purchase price of $66.8 million was comprised of $32.5 million in cash and 2,063,635 common shares of the Company.

In February 2007, the Company made an exchange offer for all of the outstanding shares of Cumberland Resources Ltd. ("Cumberland") not already owned by the Company. At the time, Cumberland was a pre-production development stage company listed on the Toronto Stock Exchange (the "TSX") and American Stock Exchange whose primary asset was the Meadowbank property. In May 2007, the Company acquired approximately 92% of the issued and outstanding shares of Cumberland that it did not previously own and, in July 2007, the Company completed the acquisition of all Cumberland shares by way of a compulsory acquisition. The Company issued 13,768,510 of its common shares and paid $9.6 million in cash as consideration to Cumberland shareholders in connection with its acquisition of Cumberland.

In April 2010, the Company entered into an agreement in principle with Comaplex Minerals Corp. ("Comaplex") whereby the Company would acquire all of the outstanding shares of Comaplex that it did not already own. At the time, Comaplex owned a 100% interest in the advanced stage Meliadine gold property, which is located approximately 300 kilometres southeast of the Company's Meadowbank mine. In May 2010, the Company executed the definitive agreements with Comaplex and, in July 2010 by plan of arrangement, the Company acquired 100% of the Meliadine gold property through the acquisition of Comaplex, which was renamed Meliadine Holdings Inc. ("Meliadine"). Pursuant to the arrangement, Comaplex transferred to Geomark Exploration Ltd. all assets and related liabilities other than those relating to the Meliadine project. In connection with the arrangement, the Company issued 10,210,848 of its common shares as consideration to Comaplex shareholders. On January 1, 2011, the Company amalgamated with Meliadine.

In September 2011, the Company entered into an acquisition agreement with Grayd, a Canadian-based natural resource company listed on the TSX Venture Exchange, pursuant to which the Company agreed to make an offer to acquire all of the issued and outstanding common shares of Grayd. At the time, Grayd held a 100% interest in the La India project located in the Mulatos Gold Belt of Sonora, Mexico and had recently discovered the Tarachi gold porphyry prospect located approximately ten kilometres north of the La India project. In October 2011, the Company made the offer by way of a take-over bid circular, as amended and supplemented, and, in November 2011, acquired approximately 95% of the outstanding common shares of Grayd. In January 2012, the Company completed a compulsory acquisition of the remaining outstanding common shares of Grayd and Grayd became a wholly-owned subsidiary of the Company. In aggregate, the Company issued 1,319,418 of its common shares and paid C$179.7 million in cash as consideration to Grayd shareholders in connection with the transaction.

In 2011, the Company's capital expenditures were $482.8 million. The 2011 capital expenditures included $90.7 million at the LaRonde mine (which included approximately $49.5 million of expenditures relating to the LaRonde mine extension), $42.2 million at the Goldex mine, $86.5 million at the Kittila mine, $18.4 million at the Lapa mine, $40.0 million at the Pinos Altos mine (which included approximately $7.6 million related to the Creston Mascota deposit), $116.9 million at the Meadowbank mine and $73.9 million at the Meliadine project and $14.2 million at other minor projects. In addition, the Company spent $11.0 million on mine site exploration and $64.7 million on exploration activities at the Company's grassroots exploration properties, including corporate development expenses.

Budgeted 2012 capital expenditures of $382.3 million include $74.8 million at the LaRonde mine, $10.2 million at the Lapa mine, $31.5 million at the Pinos Altos mine, $51.9 million at the Kittila mine, $88.5 million at the Meadowbank mine and $44.5 million in capitalized exploration expenditures. In addition, the Company plans exploration expenditures on grassroots exploration projects of approximately $80.4 million, including $52.0 million at the Meliadine project and $3.5 million at the La India project. Depending on the success of the exploration programs at these and other properties, the Company may be required to make additional capital expenditures for exploration, development and pre-production.

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The financing for the expenditures set out above is expected to be from internally generated cash flow from operations, from the Company's existing cash balances and from drawdowns of the Company's bank credit facility. Please see "Item 10 Additional Information – Material Contracts – Credit Agreement". Based on current funding available to the Company and expected cash flows from operations, the Company believes it has sufficient funds available to fund its projected capital expenditures for all its properties.

Capital expenditures by the Company in 2010 and 2009 were $512 million and $657 million, respectively. The 2010 capital expenditures included $97 million at the LaRonde mine (which included approximately $62 million of expenditures relating to the LaRonde mine extension), $24 million at the Goldex mine, $72 million at the Kittila mine, $33 million at the Lapa mine, $104 million at the Pinos Altos mine (which included approximately $43 million related to the Creston Mascota deposit at Pinos Altos) and $174 million at the Meadowbank mine and $8 million at the Meliadine project and other minor properties. In addition, the Company spent $35 million on exploration activities at the Company's grassroots exploration properties. The 2009 capital expenditures included $76 million at the LaRonde mine (which included approximately $39 million of expenditures relating to the LaRonde mine extension), $22 million at the Goldex mine, $90 million at the Kittila mine (which included $36 million of expenditures on construction of the underground mine), $47 million at the Lapa mine (which included $22 million on construction of the mine), $133 million at the Pinos Altos mine and $288 million at the Meadowbank mine. In addition, the Company spent $55 million on exploration activities at the Company's grassroots exploration properties.

The Company was formed by articles of amalgamation under the laws of the Province of Ontario on June 1, 1972, as a result of the amalgamation of Agnico Mines Limited ("Agnico Mines") and Eagle Gold Mines Limited ("Eagle"). Agnico Mines was incorporated under the laws of the Province of Ontario on January 21, 1953 under the name "Cobalt Consolidated Mining Corporation Limited". Eagle was incorporated under the laws of the Province of Ontario on August 14, 1945.

On December 19, 1989, Agnico-Eagle acquired the remaining 57% interest in Dumagami Mines Limited not already owned by it, as a consequence of the amalgamation of Dumagami Mines Limited with a wholly-owned subsidiary of Agnico- Eagle, to continue as one company under the name Dumagami Mines Inc. ("Dumagami"). On December 29, 1992, Dumagami transferred all of its property and assets, including the LaRonde mine, to Agnico-Eagle and was subsequently dissolved.

On December 8, 1993, the Company acquired the remaining 46.3% interest in Goldex Mines Limited not already owned by it, as a consequence of the amalgamation of Goldex Mines Limited with a wholly-owned subsidiary of the Company, to continue as one company under the name Goldex Mines Limited. On January 1, 1996, the Company amalgamated with two wholly-owned subsidiaries, including Goldex Mines Limited.

In October 2001, under a plan of arrangement, the Company amalgamated with an associated corporation, Mentor Exploration and Development Co., Limited ("Mentor"). In connection with the arrangement, the Company issued 369,348 of its common shares in consideration for the acquisition of all of the issued and outstanding shares of Mentor that it did not already own.

On August 1, 2007, the Company, Agnico-Eagle Acquisition Corporation, Cumberland and a wholly-owned subsidiary of Cumberland, Meadowbank Mining Corporation, amalgamated under the laws of the Province of Ontario and continued under the name of Agnico-Eagle Mines Limited.

On January 1, 2011, the Company and 1816276 Ontario Inc. (the successor corporation to Meliadine, which in turn was the successor corporation to Comaplex) amalgamated under the laws of the Province of Ontario and continued under the name of Agnico-Eagle Mines Limited.

The Company's executive and registered office is located at Suite 400, 145 King Street East, Toronto, Ontario, Canada M5C 2Y7; telephone number (416) 947-1212; website: http://www.agnico-eagle.com. The information contained on the website is not part of this Form 20-F. The Company's principal place of business in the United States is located at 8725 Technology Way, Suite B, Reno, Nevada 89521.

Business Overview

The Company believes that it has a number of key operating strengths that provide distinct competitive advantages.

Growth Profile.    The Company has a proven track record of increasing production capacity at existing operations through a combination of acquisitions, operational improvements, expansions and development. The closure of the Goldex mine in October 2011 was an unanticipated event and has negatively impacted the growth profile. However, the Company

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anticipates production of between 875,000 and 950,000 ounces of gold in 2012 with continued growth to 2014. In 2012, the Company expects production increases at the LaRonde, Meadowbank and Kittila mines. The Company's production growth in 2012 is expected to come principally from the Meadowbank Mine, as well as from the continued operational improvements at the Kittila and LaRonde mines. Over the last five years, the Company has spent over $2.7 billion on the development of five new mines, and its significant extension of the LaRonde mine at depth. With the large majority of mine development projects complete and with five mines having achieved steady state operational status, capital expenditures are expected to decline from 2011 onward, significantly increasing free cash flow. Future capital expenditures are expected to be primarily for incremental expansion projects and exploration and development of the Meliadine project.

Operations in Politically Stable, Mining-Friendly Regions.    The Company and its predecessors have over three decades of continuous gold production experience and expertise in metals mining. The Company's operations and exploration and development projects are located in regions that the Company believes are supportive of the mining industry. Two of the Company's producing mines are located in northwestern Quebec, one of North America's principal gold-producing regions. The Company's Kittila mine in northern Finland, Pinos Altos mine in northern Mexico and Meadowbank mine in Nunavut are also located in regions which the Company believes are also supportive of the mining industry.

Strong Operating Base.    Through its acquisition, exploration and development program, the Company has been transformed from a regionally focused, single mine producer to a multi-mine international gold producer with five operating, 100% owned mines. The Company's existing operations at the LaRonde mine provide a strong base for additional mineral reserve and production development at the property and in the Abitibi region of northwestern Quebec and for the development of its mines and projects in Nunavut, Finland and Mexico. The experience gained through building and operating the LaRonde mine has assisted with the Company's development of its other mine projects. In addition, the extensive infrastructure associated with the LaRonde mine supports the nearby Lapa mine.

Highly Experienced Management Team.    The members of the Company's senior management team have an average of over 22 years of experience in the mining industry. Management's significant experience has underpinned the Company's historical growth and provides a solid base upon which to expand the Company's operations.

Based on these strengths, the Company's corporate strategy is to grow production and reserves in mining-friendly regions.

Optimize and Further Expand Operations.    The Company continues to focus its resources and efforts on the exploration and development of its properties in Quebec, Nunavut, Finland and Mexico with a view to increasing annual gold production and gold mineral reserves.

Leverage Mining Experience.    The Company believes it can benefit not only from the existing infrastructure at its mines but also from the geological knowledge that it has gained in mining and developing its properties. The Company's strategy is to capitalize on its mining expertise to exploit fully the potential of its properties.

Expand Gold Reserves.    The Company is conducting drilling programs at all of its properties with a goal of further increasing its gold reserves. In 2011, on a contained gold ounces basis, the gold reserves of the Company decreased to 18.75 million ounces (157 million tonnes grading 3.71 grams of gold per tonne), a decrease from the 21.3 million ounces reported as at December 31, 2010, primarily as a result of the reclassification of reserves to resources at the Goldex mine due to the suspension of operations and a reduction of reserves at the Meadowbank mine due to a new mine plan.

Growth Through Primary Exploration and Acquisitions.    The Company's growth strategy has been to pursue the expansion of its development base through the acquisition of additional properties in the Americas and Europe. Historically, the Company's producing properties have resulted from a combination of investments in advanced exploration companies and primary exploration activities. By investing in pre-development stage companies, the Company believes that it has been able to acquire control of projects at favourable prices and reasonable valuations.


Mining Legislation and Regulation

Canada

The mining industry in Canada operates under both federal and provincial or territorial legislation governing prospecting and the exploration, development, operation and decommissioning of mines and mineral processing facilities. Such legislation relates to the method of acquisition and ownership of mining rights, labour, occupational or worker health and safety standards, royalties, mining, exports, reclamation, closure and rehabilitation of mines and other matters.

The mining industry in Canada is also subject to extensive laws and regulations at both the federal and provincial or territorial levels concerning the protection of the environment. The primary federal regulatory authorities with jurisdiction

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over the Company's mining operations in respect of environmental matters are the Department of Fisheries and Oceans (Canada) and Environment Canada. The construction, development and operation of a mine, mill or refinery requires compliance with applicable environmental laws and regulations and/or review processes, including obtaining land use permits, water permits, air emissions certifications, industrial depollution attestations, hazardous substances management and similar authorizations from various governmental agencies. Environmental laws and regulations impose high standards on the mining industry to reduce or eliminate the effects of waste generated by mining and processing operations and subsequently deposited on the ground or affecting the air or water. Laws and regulations regarding the decommissioning, reclamation and rehabilitation of mines may require approval of reclamation plans, provision of financial guarantees and long-term management of closed mines.

Quebec

In Quebec, mining rights are governed by the Mining Act (Quebec) and, subject to limited exceptions, are owned by the province. A mining claim entitles its holder to explore for minerals on the subject land. It remains in force for a term of two years from the date it is registered and may be renewed indefinitely subject to continued exploration works in relation thereto. In order to retain title to mining claims, in addition to paying a small bi-annual rental fee currently ranging from C$27 to C$123 per claim depending on its location and area (as set by Quebec government regulations), exploration work (or an equivalent value cash payment) has to be completed in advance (either on the claim or on adjacent mining claims, concessions or leases) and filed with the Ministry of Natural Resources and Wildlife (Quebec) prior to the date of expiry of the claim. The amount of exploration work required bi-annually currently ranges from C$48 to C$3,600 per claim depending on its location, area and period of validity (as set by Quebec government regulations). In 1966, the mining concession system set out for lands containing mineralized zones in the Mining Act (Quebec) was replaced by a system of mining leases, but the mining concessions sold prior to such replacement remain in force. A mining lease entitles its holder to mine and remove valuable mineral substances from the subject land, provided it pays the annual rent set by Quebec government regulations, which currently ranges from C$21 per hectare (on privately held land) to C$44 per hectare (on land owned by the province). Leases are granted initially for a term of 20 years and are renewable up to three times, each for a duration of ten years. After the third renewal, the Minister of Natural Resources and Wildlife (Quebec) may grant an extension thereof on the conditions, for the rental and for the term he or she determines.

Bill 14, An Act respecting the development of mineral resources in keeping with the principles of sustainable development, was introduced in the Quebec National Assembly in May 2011 and is currently being studied by a parliamentary commission. If adopted, Bill 14 will amend a number of rules relating to the mining regime in Quebec, including measures to stimulate exploration work on claims, to enhance the protection of the environment and to promote social acceptability of mining activities, all of which will likely impact the Company's activities in Quebec. Among other provisions of Bill 14, obligations respecting exploration work expenditures on claims will become more stringent; mine operators will be required to provide a financial guarantee respecting a broader scope of rehabilitation and restoration work and such financial guarantee will need to be provided within a shorter timeframe; public consultations will be required before commencing mining operations; in certain urban, residential, vacationing or recreational areas, exploration and mining activities may be restricted; and the Minister of Natural Resources and Wildlife will have an increased ability to withdraw land from mining activity or otherwise limit mining activities to avoid conflicts with other land uses. Bill 14 will also increase penalties for contraventions of the Mining Act (Quebec).

In Quebec, the primary provincial regulatory authorities with jurisdiction over the Company's mining operations in respect of environmental matters are the Ministry of Sustainable Development, Environment and Parks (Quebec) and the Ministry of Natural Resources and Wildlife (Quebec).

Nunavut

As a result of the Nunavut Land Claims Agreement (the "Land Claims Agreement") of July 1993, ownership of large tracts of land was granted to the Inuit. These Inuit-owned lands include areas with high mineral potential. Further, as a result of other rights granted to the Inuit in the Land Claims Agreement, Inuit organizations play an important role in the management of natural resources and the environment in Nunavut. These duties are shared among the federal and territorial governments and Inuit organizations. Under the Land Claims Agreement, the Inuit own surface rights to certain lands representing approximately 16% of Nunavut. For a portion of the Inuit-owned lands representing approximately 2% of Nunavut, the Inuit own mineral (subsurface) rights in addition to the surface rights.

In Nunavut, the Crown's mineral rights are administered by the Aboriginal Affairs and Northern Development Canada in accordance with the Northwest Territories and Nunavut Mining Regulations (the "Territorial Mining Regulations") under

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the Territorial Lands Act (Canada). The Inuit mineral rights in subsurface Inuit-owned lands are owned and administered by Nunavut Tunngavik Incorporated ("Nunavut Tunngavik"), a corporation representing the Inuit people of Nunavut.

Future production from Nunavut Tunngavik-administered mineral claims is subject to production leases which include a 12% net profits interest royalty from which annual deductions are limited to 85% of gross revenue. Production from Crown mining leases is subject to a royalty of up to 14% of adjusted net profits, as defined in the Territorial Mining Regulations. Before the operation of a Major Development Project, as defined in the Land Claims Agreement, can begin, developers must also negotiate an Inuit impact benefits agreement with the regional Inuit Association.

The Kivalliq Inuit Association (the "KIA") is the Inuit organization that holds surface title to the Inuit-owned lands in the Kivalliq region and is responsible for administering surface rights on these lands on behalf of the Inuit of the region. In order to conduct exploration work on Inuit-owned lands, the Company is required to submit a project proposal or work plan. This proposal is subject to approval by the KIA for surface land tenure and to review by other boards established by the Land Claims Agreement to determine environmental effects and, if needed, to grant water rights. Federal and territorial government departments participate in the reviews conducted by these boards. For mine development, the Company requires a surface lease and water compensation agreement with the KIA and a licence under federal legislation for the use of water, including the deposit of waste.

During mine construction and operations, the Company is subject to additional Nunavut and federal government regulations related to environmental, safety, fire and other operational matters.

Finland

Mining legislation in Finland consists of the Mining Act, the Mining Safety Decree and the Mining Hoisting Equipment Decree. The new Mining Act was implemented on July 1, 2011 and replaced the previous Mining Act (503/1965) as a result of overall reform of mining legislation in Finland.

In Finland, subject to certain area restrictions, anyone has a right irrespective of land ownership to conduct survey work and take geological measurements and observations, with the right to take small samples from the soil provided that these measures do not cause other than only minor damage or inconvenience. However, before sampling, notice must be given to the owner of the respective land.

A prospecting permit is required for more comprehensive survey work and it entitles its holder to conduct necessary research and explorations in certain areas defined in the prospecting permit in order to discover the quality and extent of the deposit and to build or move temporary facilities and machinery onto the prospecting area. The prospecting permit does not grant a right to exploit a deposit, for which purpose a mining permit is required, but it grants its holder a priority to receive the mining permit on the prospecting area.

A mining permit entitles its holder to exploit all minerals found on the mining area defined in the permit as well as all organic and non-organic surface material and the soil and bedrock as considered necessary for the purposes of the mining work. In addition to the mining permit a mining safety permit regarding safety measures of the contemplated mining operations is required in order to build and operate a mine.

The mining area must either be owned or leased by voluntary agreements by the permit holder for mining work to commence in accordance with the terms of the permit. In certain cases, if the mining operator and the owner of the land cannot come to a voluntary agreement on the use of the land for mining purposes, the Council of State of Finland may grant a mining area redemption permit which entitles its holder the right to establish a mining area on the area owned by another landowner without consent, provided that the mining project is required by public interest.

The Finnish Safety and Chemicals Agency is responsible for granting prospecting permits, mining permits and mining safety permits upon an application provided that statutory requirements are fulfilled. Prospecting permits are issued for fixed periods of time (a maximum period of four years at a time which can be extended for three-year periods, up to a maximum of 15 years). Mining permits are generally granted without an expiry date. However, the Safety and Chemicals Agency investigates grounds for the continued existence of the permit at least once every ten years. In some cases, depending on the prevailing circumstances and the deposit, mining permits may only be granted for a fixed period of time (to a maximum period of ten years at a time).

Prospecting permits and mining permits may be cancelled if the holder of the permit does not perform mining operations in accordance with the permit and its terms or violates rules of the Mining Act.

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Without specific permission of the National Board of Patents and Registrations of Finland a right to apply for and acquire a prospecting permit and mining permit is limited to Finnish corporations and individuals and foreign individuals and corporations domiciled in a state belonging to the European Economic Area.

All mining operations must be carried out in accordance with the permit terms and with laws and regulations concerning conservation and environmental protection issues. Under the Environmental Protection Act, mining activities require an environmental permit which may be issued either for a definite or indefinite period of time. The Environmental Protection Act is based on the principles of prevention and minimization of damages and hazards, application of the best available technology, application of the best environmental practice and the "polluter pays" principle.

The Act on Compensation for Environmental Damage includes provisions on the compensation for damage to a person or a property resulting from pollution of water, air, soil, noise, vibration, radiation, light, heat, smell or other similar nuisances, caused by an activity carried out at a fixed location. This act is based on the principle of strict liability.

In addition to the permits listed above, mining operators may require several other permits and may be subject to other obligations under Finnish legislation.

According to the Act on Environmental Impact Assessment Procedure, certain projects require compliance with an environmental impact assessment procedure. These include major projects with a considerable impact on the environment, such as the excavation, enrichment and handling of metals and other minerals in cases where the excavated material is estimated to exceed 550,000 tonnes annually. A permit authority may not give its approval to an activity covered by the scope of the Act on the Environmental Impact Assessment Procedure without having taken an environmental impact assessment report into consideration.

Mexico

Mining in Mexico is subject to the Mining Law, a federal law. Under the Mexican Constitution, all minerals belong to the Mexican Nation. Private parties may explore and extract minerals pursuant to mining concessions granted by the executive branch of the Mexican government, as a general rule to whoever first claims them. While the Mining Law touches briefly upon labour, occupational and worker health and safety standards, these are primarily dealt with by the Federal Labour Law. The Mining Law also briefly addresses environmental matters, which are primarily regulated by the General Law of Ecological Balance and Protection of the Environment, also of federal jurisdiction.

The primary agencies with jurisdiction over mining activities are the Ministry of the Economy, the Ministry of Labor and Social Welfare and the Ministry of the Environment and Natural Resources. The National Water Commission has jurisdiction regarding the granting of water rights and the Ministry of Defense with respect to the use of explosives.

Concessions are granted for 50 years, renewable once. The main obligations to keep concessions current are the semi-annual payment of mining duties (taxes), based on the surface area of the concession, and the performance of work in the areas covered by the concessions, which is evidenced by minimum expenditures or by the extraction of ore.


Organizational Structure

The Company's significant subsidiaries (all of which are directly or indirectly wholly-owned by the Company, unless otherwise indicated) are 1715495 Ontario Inc., Agnico-Eagle Mines Sweden Cooperatie U.A., which owns all of the shares of Agnico-Eagle Sweden AB, a Swedish company through which the Company holds its interest in Oijarvi Resources Oy, and Agnico-Eagle Finland Oy, a Finnish company through which the Kittila mine is held. In addition, the Company's interest in the Pinos Altos mine in northern Mexico is held through its indirect wholly-owned Mexican subsidiary, Agnico Eagle Mexico S.A. de C.V., which is owned, in part, by 1641315 Ontario Inc. and Tenedora Agnico Eagle Mexico S.A. de C.V., which is owned in part by Agnico-Eagle Mines Mexico Cooperatie U.A. and the Company's interest in the La India project in Mexico is held through its indirect wholly-owned Mexican subsidiary, Resource Grayd De Mexico, S.A. de C.V., which is owned by Grayd, which is directly wholly owned by the Company, and Tenedora Agnico Eagle Mexico S.A. de C.V. The LaRonde mine, the Lapa mine, the Goldex mine, the Meadowbank mine and the Meliadine project are owned directly by the Company.

The Company's wholly-owned subsidiaries, Servicios Agnico Eagle Mexico, S.A. de C.V., Servicios Pinos Altos, S.A. de C.V. and Minera Agave, S.A. de C.V. provide services in connection with the Company's operations in Mexico. The Company's operations in the United States are conducted through Agnico-Eagle (USA) Limited.

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The following chart sets out the corporate structure of the Company, each of its significant subsidiaries and certain other subsidiaries, together with the jurisdiction of organization of the Company and each such subsidiary as at March 12, 2012:

Agnico-Eagle Organizational Chart

GRAPHIC

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Property, Plant and Equipment

Location Map of the Abitibi Region

GRAPHIC

LaRonde Mine

The LaRonde mine is situated approximately halfway between the City of Rouyn-Noranda and the City of Val d'Or in northwestern Quebec (approximately 470 kilometres northwest of Montreal, Quebec) in the municipalities of Preissac and Cadillac. At December 31, 2011, the LaRonde mine was estimated to contain proven and probable mineral reserves of approximately 4.7 million ounces of gold comprised of 33.2 million tonnes of ore grading 4.40 grams per tonne. The Company's LaRonde mine consists of the LaRonde property and the adjacent El Coco and Terrex properties, each of which is 100% owned and operated by the Company. The LaRonde mine can be accessed either from Val d'Or in the east or from Rouyn-Noranda in the west, which are located approximately 60 kilometres from the LaRonde mine via Quebec provincial highway No. 117. The LaRonde mine is situated approximately two kilometres north of highway No. 117 on Quebec regional highway No. 395. The Company has access to the Canadian National Railway at Cadillac, Quebec, approximately six kilometres from the LaRonde mine.

The LaRonde mine operates under mining leases obtained from the Ministry of Natural Resources and Wildlife (Quebec) and under certificates of approval granted by the Ministry of Sustainable Development, Environment and Parks (Quebec). The LaRonde property consists of 35 contiguous mining claims and one provincial mining lease and covers in total 1,044.9 hectares. The El Coco property consists of 22 contiguous mining claims and one provincial mining lease and covers in total 356.7 hectares. The Terrex property consists of 21 mining claims that cover in total 424.4 hectares. The mining leases on the LaRonde and El Coco properties expire in 2018 and 2021, respectively, and are automatically renewable for three further ten-year terms upon payment of a small fee. The Company also has three surface rights leases that cover in total approximately 301.5 hectares that relate to the water pipeline right of way from Lake Preissac and the eastern extension of the LaRonde tailings pond #7 on the El Coco property. The surface rights leases are renewable annually.

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Location Map of the LaRonde Mine

GRAPHIC

The LaRonde mine includes underground operations at the LaRonde and El Coco properties that can both be accessed from the Penna Shaft, a mill, a treatment plant, a secondary crusher building and related facilities. The El Coco property is subject to a 50% net profits interest in favour of Barrick Gold Corporation ("Barrick") on future production from approximately 500 metres east of the LaRonde property boundary. The remaining 1,500 metres is subject to a 4% net smelter return royalty. This area of the property is now substantially mined out and the Company has not paid royalties since 2004 and does not expect to pay royalties in 2012. In 2003, exploration work started to extend outside of the LaRonde property onto the Terrex property where a down-plunge extension of Zone 20 North was discovered. The Terrex property is subject to a 5% net profits royalty to Delfer Gold Mines Inc. and a 2% net smelter return royalty to Barrick. The Company does not expect to pay royalties on this part of the property in 2012. In addition, the Company owns 100% of the Sphinx property immediately to the east of the El Coco property.

In 2012, payable gold production at the LaRonde mine is expected to increase to approximately 157,500 ounces, and total cash costs per ounce are expected to be approximately $570.

The Abitibi region has a continental climate with average annual rainfall of 64 centimetres and average annual snowfall of 318 centimetres. The average monthly temperatures range from a minimum of -23 degrees Celsius in January to a maximum of 23 degrees Celsius in July. Under normal circumstances, mining operations are conducted year-round without interruption due to weather conditions. The Company believes that the Abitibi region of northwestern Quebec has sufficient experienced mining personnel to staff its operations in the Abitibi region. The elevation is 337 metres above sea level. The LaRonde property is relatively flat with a maximum relief of approximately 40 metres. The topography gently slopes down from north to south and is characterized by boreal-type forest at LaRonde and the nearby properties. All of the LaRonde mine's power requirements are supplied by Hydro-Quebec through connections to its main power transmission grid. Water used in the LaRonde mine's operations is sourced from Lake Preissac and is transported approximately four kilometres to the minesite through a surface pipeline.

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Mining and Milling Facilities

Surface Plan of the LaRonde Mine

GRAPHIC

The LaRonde mine was originally developed utilizing a 1,207-metre shaft (Shaft #1) and an underground ramp access system. The ramp access system is available down to Level 25 of Shaft #1 and continues down to Level 248 at the Penna Shaft. The mineral reserve accessible from Shaft #1 was depleted in September 2000 and Shaft #1 is no longer in use. A second production shaft (Shaft #2), located approximately 1.2 kilometres to the east of Shaft #1, was completed in 1994 to a depth of 525 metres and was used to mine Zones 6 and 7. Both ore zones were depleted in March 2000 and the workings were allowed to flood up to Level 6 (approximately 280 metres). A third shaft (the Penna Shaft), located approximately 800 metres to the east of Shaft #1, was completed down to a depth of 2,250 metres in March 2000. The Penna Shaft is used to mine Zones 20 North, 20 South, 6 and 7. In 2009, as part of the LaRonde mine extension, the Company completed construction of an 823-metre internal shaft from Level 203 to access the ore below Level 245, approximately 2,858 metres below surface.

Mining Methods

Four mining methods have historically been used at the LaRonde mine: open pit for the three surface deposits; sublevel retreat; longitudinal retreat with cemented rock backfill or paste backfill; and transverse open stoping with paste, cemented rock backfill or unconsolidated backfill. The primary source of ore at the LaRonde mine continues to be from underground mining methods. During 2011, two mining methods were used: longitudinal retreat with cemented rock backfill or paste backfill and transverse open stoping with cemented rock backfill, paste or unconsolidated backfill. In the underground mine, sublevels are driven at between 30-metre and 40-metre vertical intervals, depending on the depth. Stopes are undercut in 15-metre wide panels. In the longitudinal method, panels are mined in 15-metre sections and backfilled with 100% cemented rock backfill or paste backfill. The paste backfill plant was completed in 2000 and is

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located on the surface at the processing facility. In the transverse open stoping method, approximately 50% of the ore is mined in the first pass and filled with cemented rock backfill or paste backfill. On the second pass, the remainder of the ore is mined and filled with unconsolidated waste rock backfill or cemented paste backfill.

Surface Facilities

Surface facilities at the LaRonde mine include a processing plant with a daily capacity of 7,200 tonnes of ore, which has been expanded four times since 1987 from the original rate of 1,630 tonnes per day. Beginning in 1999, transition to the LaRonde mine poly-metallic massive sulphide orebody required several modifications to the processing plant which consisted of a new coarse ore handling system, new SAG and ball mill, the addition of a zinc flotation circuit and capacity increases to the existing copper flotation and precious metals circuits. In 2008, the installation of a limited copper/lead separation flotation circuit, following the copper flotation circuit, was completed. Also in 2008, operation of a small cyanidation plant, for the treatment of sulphide concentrate from the Goldex mine, began. A new carbon-in-leach circuit is under construction and will replace the existing LaRonde precious metal Merrill Crowe circuit by year end. The LaRonde mine is also the site for the Lapa mine ore processing plant (1,500 tonnes per day), which the Company commissioned in the second quarter of 2009.

The ore requires a series of grinding, copper/lead flotation and separation, zinc flotation and zinc tails precious metals leaching circuits, followed by a counter-current decantation circuit and Merrill Crowe precipitation. Paste backfill and cyanide destruction plants operate intermittently. The tailings area has a dedicated cyanide destruction and metals precipitation plant that water passes through prior to recirculating to the mill. A biological water treatment plant was commissioned in 2005 to address the build-up of thiocyanate in the tailings ponds at the LaRonde mine. This build-up was the result of the high sulphide content of the LaRonde mine ore and 90% recirculation of the process water. The plant uses bacteria to oxidize and destroy thiocyanate and removes phosphate from the water before it is released to the environment.

The Goldex concentrate circuit consists of pulp received from the Goldex mill via truck and subsequent leaching of the pulp with cyanide. The leached material is sent to the Lapa cyanide leach with carbon circuit ("CIL") for gold recovery with Lapa residual pulp. The Goldex circuit ceased to operate in November 2011 following the suspension of mining operations at Goldex on October 19, 2011. This circuit is currently on standby pending a decision regarding future production from the Goldex operations.

The Lapa process consists of a two-stage grinding circuit to reduce the granularity of the ore. A gravity recovery circuit that is incorporated into the grinding circuit recovers up to 45% of the available gold, depending on feed grades. The residual pulp is leached in a conventional CIL circuit to dissolve the balance of the precious metal. Prior to November 2011, when the Goldex circuit ceased operations, the leached slurry from the Goldex concentrate circuit was mixed with the Lapa pulp for carbon contact. A carbon strip circuit recovers the gold from the carbon which is recycled to the leach circuit.

2012 annual production at the LaRonde mill is expected to consist of approximately 2,100,000 ounces of silver, 4,800 tonnes of copper, up to 570 tonnes of lead and 33,000 tonnes of zinc. Gold recovery at the LaRonde mine is distributed approximately 73% in the copper concentrate, 1.5% in the lead concentrate, 4.25% in the zinc concentrate and 12.4% via leaching.

Mineral Recoveries

During 2011, gold and silver recovery averaged 89.6% and 88.3%, respectively. Zinc recovery averaged 86.9% with a concentrate quality of 56% zinc. Copper recovery averaged 77.1% with a concentrate quality of 8.66% copper. Approximately 2.4 million tonnes of ore were processed averaging 7,027 tonnes of ore per day at 93.8% of available time.

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The following table sets out the metal recoveries, concentrate grades and contained metals for the 2.4 million tonnes of ore extracted by the Company at the LaRonde mine in 2011.

        Copper
Concentrate
(41,970 tonnes
produced)
  Zinc
Concentrate
(115,717 tonnes
produced)
  Lead
Concentrate
(4,006 tonnes
produced)
         
       
 
 
         
    Head
Grades
  Grade   Recovery   Grade   Recovery   Grade   Recovery   Overall
Metal
Recoveries
  Payable
Production
 

Gold   1.79 g/t   54.8 g/t   53.35%   1.7 g/t   4.68%   108.2 g/t   10.29%   89.64%   124,173 oz  

Silver   54.42 g/t   1,226 g/t   39.30%   175 g/t   15.40%   3,319 g/t   10.39%   88.28%   3,196,496 oz  

Copper   0.20%   8.66%   77.12%           77.10%   3,216 t  

Lead   0.36%           60.33%   28.33%   28.33%   2,342 t  

Zinc   3.09%       55.9%   86.87%       86.87%   54,894 t  

Environmental Matters

Currently, water is treated at various facilities at the LaRonde mine operations. Water contained in the tailings to be used as underground backfill is treated to degrade cyanide using a sulphur dioxide and air process. The tailings entering the tailings pond are first decanted and the clear water subjected to natural cyanide degradation. This water is then transferred to sedimentation pond #1 to undergo a secondary treatment at a plant located between sedimentation ponds #1 and #2 that uses a peroxy-silicate process to destroy cyanide, lime and coagulant to precipitate metals. The tailings pond occupies an area of about 175 hectares. Waste rock that is not used underground for backfill is brought up to the surface and stored in close proximity to the tailings pond to be used to build coffer dams inside the pond. A waste rock pile containing approximately 500,000 tonnes of waste and occupying about nine hectares is located west of the mill.

Due to the high sulphur content of the LaRonde mine ore, the Company has had to address toxicity issues in the tailings ponds since the 1990s. Since introducing and optimizing a biological treatment plant in 2004, the treatment process is now stable and the effluent has remained non-toxic since 2006. In 2006, the Company commenced an ammonia stripping operation involving an effluent partially treated by the biological treatment plant which allowed an increase in treatment flow rate, while keeping the final effluent toxicity-free. In 2009, to further increase the treatment flow rate of the biological plant, the Company commenced construction of ammonia stripping towers, which became operational in June 2010. In addition, water from mine dewatering and drainage water are treated to remove metals prior to discharge at a lime treatment plant located at the LaRonde mill.

Capital Expenditures

In 2006, the Company initiated construction to extend the infrastructure at the LaRonde mine to access the ore below Level 245, referred to as the LaRonde mine extension. Hoisting from the LaRonde mine extension began in the fourth quarter of 2011 and commercial production was achieved in November 2011. The LaRonde mine extension infrastructure includes a 823-metre internal shaft (completed in November 2009) starting from Level 203, which provides a total depth of 2,858 metres. A ramp is used to access the lower part of the orebody up to 3,110 metres in depth. The internal winze system is used to hoist ore from depth to facilities on Level 215, approximately 2,150 metres below surface, where it is transferred to the Penna Shaft hoist.

Capital expenditures at the LaRonde mine during 2011 were approximately $93 million, which included $41 million on sustaining capital expenditures and $52 million comprised primarily of expenditures on the LaRonde mine extension. Budgeted 2012 capital expenditures at the LaRonde mine are $74 million, including $21 million on sustaining capital expenditures and capitalized exploration and $43 million on the LaRonde mine extension. Another $10 million will be added to the carbon-in-pulp ("CIP") / high density sludge ("HDS") project. Total capital expenditures for the LaRonde mine and the LaRonde mine extension are estimated at $366 million from 2012 to 2024 (including the CIP/HDS project).

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Development

In 2011, a total of 14,116 metres of lateral development was completed. Development was focused on stope preparation of mining blocks for production in 2011 and 2012, especially the preparation of the lower mine production horizon. A total of 4,925 metres of development work was completed for the LaRonde mine extension infrastructure and the ramp to access the LaRonde mine extension.

A total of 14,500 metres of lateral development is planned for 2012. The main focus of development work continues to be stope preparation. The Company plans to develop and prepare the access to Zone 20 South down to Level 245. For the LaRonde mine extension, a total of 6,370 metres of development is planned, mainly to develop the ramp access to the orebody and for future ventilation infrastructure. At the same time, development work will continue to prepare for mining below Level 245.

As the LaRonde mine extension has substantially been completed and will be the primary location of mining going forward, the "extension" designation will be dropped and the entire complex will be referred to as the LaRonde mine.

Geology, Mineralization and Exploration

Geology

The LaRonde property is located near the southern boundary of the Archean-age (2.7 billion years old) Abitibi Subprovince and the Pontiac Subprovince within the Superior Geological Province of the Canadian Shield. The most important regional structure is the Cadillac-Larder Lake ("CLL") fault zone marking the contact between the Abitibi and Pontiac Subprovinces, located approximately two kilometres to the south of the LaRonde property.

The geology that underlies the LaRonde mine consists of three east-west-trending, steeply south-dipping and generally south-facing regional groups of rock formations. From north to south, they are: (i) 400 metres (approximate true thickness) of the Kewagama Group, which is made up of a thick band of interbedded wacke; (ii) 1,500 metres of the Blake River Group, a volcanic assemblage that hosts all the known economic mineralization on the property; and (iii) 500 metres of the Cadillac Group, made up of a thick band of wacke interbedded with pelitic schist and minor iron formation.

Zones of strong sericite and chlorite alteration that enclose massive to disseminated sulphide mineralization (including the ore that is mined for gold, silver, zinc, copper and lead at the LaRonde mine) follow steeply dipping, east-west-trending, anastomosing shear zone structures within the Blake River Group volcanic units across the property. These shear zones are part of the larger Doyon-Dumagami Structural Zone that hosts several important gold occurrences (including the Doyon gold mine, the Westwood project and the former Bousquet mines) and has been traced for over ten kilometres within the Blake River Group, from the LaRonde mine westward to the Mouska gold mine.

Mineralization

The gold-bearing zones at the LaRonde mine are lenses of disseminated stringers through to massive, aggregates of coarse pyrite with zinc, copper and silver content. Ten zones that vary in size from 50,000 to 40,000,000 tonnes have been identified, of which four are (or are believed to be) economic. Gold content is not proportional to the total sulphide content but does increase with copper content. Gold values are also higher in areas where the pyrite lenses are crosscut by tightly spaced north-south fractures.

These historical relationships, which were noted at LaRonde Shaft #1's Main Zone, are maintained at the Penna Shaft zones. The zinc-silver (i.e., Zone 20 North) mineralization with lower gold values, common in the upper mine, grades into gold-copper mineralization within the lower mine. Gold value enhancement associated with crosscutting north-south fractures also occurs within the LaRonde mine. The predominant base metal sulphides within the LaRonde mine are chalcopyrite (copper) and sphalerite (zinc).

The Company believes that Zone 20 North is one of the largest gold-bearing massive sulphide mineralized zones known in the world and one of the largest mineralized zones known in the Abitibi region of Ontario and Quebec. Zone 20 North contains the majority of the mineral reserves and resources at the LaRonde mine, including 33,113,000 tonnes of proven and probable mineral reserves grading 4.51 grams of gold per tonne, representing 94% of the total proven and probable mineral reserves at the LaRonde mine, 5,419,000 tonnes of indicated mineral resources grading 1.61 grams of gold per tonne, representing 75% of the total measured and indicated mineral resources at the LaRonde mine, and 9,297,000 tonnes of inferred mineral resources grading 4.00 grams of gold per tonne, representing 82% of the total inferred mineral resources at LaRonde.

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The depth of Zone 20 North extends between 700 metres below surface and 3,500 metres below surface, and possibly lower. With increased access on the lower levels of the mine (i.e. from Level 215 to Level 255), the transformation from a "zinc/silver" orebody to a "gold/copper" deposit is expected to continue during 2012.

Zone 20 North can be divided into an upper zinc/silver-enriched gold-poor zone and a lower gold/copper-enriched gold-rich zone. The zinc zone has been traced over a vertical distance of 1,700 metres and a horizontal distance of 570 metres, with thicknesses approaching 40 metres. The gold zone has been traced over a vertical distance of over 2,200 metres and a horizontal distance of 900 metres, with thicknesses varying from three to 40 metres. The zinc zone consists of massive zinc/silver mineralization containing 50% to 90% massive pyrite and 10% to 50% massive light brown sphalerite. The gold zone mineralization consists of 30% to 70% finely disseminated to massive pyrite containing 1% to 10% chalcopyrite veinlets, minor disseminated sphalerite and rare specks of visible gold. Gold grades are generally related to the chalcopyrite or copper content. At depth, the massive sulphide lens becomes richer in gold and copper. During 2011, 2.2 million tonnes of ore grading 1.72 grams of gold per tonne, 57.18 grams of silver per tonne, 3.27% zinc, 0.20% copper and 0.39% lead were mined from Zone 20 North.

Exploration

The combined tonnage of proven and probable mineral reserves at the LaRonde mine for year-end 2011 is 33.2 million tonnes which represents a 4% decrease in the amount compared to year-end 2010 (34.7 million tonnes). This mineral reserve includes the replacement of 2.4 million tonnes of ore that were mined in 2011. The reduction in reserves is principally associated with the tonnes mined during 2011.

Diamond drilling is used for exploration on the LaRonde property. In 2011, a total of 181 holes were drilled on the LaRonde property for a total length of 16,190 metres, compared to 212 holes for a total length of 19,188 metres in 2010. Of the drilling in 2011, 165 holes (8,181 metres) were for production stope delineation, 12 holes (2,614 metres) were for definition drilling and 4 holes (5,396 metres) were for exploration. In 2010, 187 holes (5,397 metres) were for production stope delineation, 21 holes (6,016 metres) were for definition drilling and 4 holes (5,403 metres) were for exploration. Expenditures on diamond drilling at the LaRonde mine during 2011 were approximately $2.41 million, including $0.97 million in definition and delineation drilling expenses charged to operating costs at the LaRonde mine. Expenditures on exploration in 2011 were $1.44 million, and are expected to be $1.15 million in 2012.

The main focus of the 2011 exploration program was continuing the investigation of Zone 20 North at depth. This program was conducted from the Level 215 exploration drift, approximately 2,150 metres below the surface. The first hole of the program was completed at the end of 2009 to a final length of 1,852 metres. This hole intersected Zone 20 North at a depth of 3,520 metres below surface, which is approximately 410 metres below the current reserve envelope. The intersection returned 14.3 metres (true width) grading 3.03 grams of gold per tonne. In 2010, a second branch was drilled from this mother hole and returned 4.1 metres grading 1.77 grams of gold per tonne at a depth of 3,595 metres below surface. Another hole was initiated in 2011 and drilling was still in progress at the end of the year. The drilling will continue in 2012. Another important focus of 2011 drilling was to start the deep exploration campaign to the east of the current reserves from the 086 level exploration drift. The purpose of this campaign is to explore stratigraphy to the east at a depth of 2,000 to 2,500 metres below surface which is similar to structures at the LaRonde mine that often contain mineralisation. In 2011, two holes were completed with no significant values and another hole was in progress at year end.

In addition, definition and delineation drilling was undertaken in the 20 North and 20 South Zones to assist in finalizing mining stope designs. Zone 20 North was the main focus of the definition drilling in 2011. Infill drilling from Level 260 to Level 236 confirmed the previous Zone 20 North reserves with a significant gain of 16,000 ounces mainly located in the western edge of the orebody.

Bousquet and Ellison Properties

The Bousquet property is located immediately west of the LaRonde mine and consists of two mining leases covering 80.0 hectares and 31 claims covering 384.9 hectares. The property, along with various equipment and other mining properties, was acquired from Barrick in September 2003 for $2.9 million in cash, $1.1 million in common shares of the Company and the assumption of specific reclamation and other obligations related to the Bousquet property. The property is subject to a 2% net smelter return royalty interest in favour of Barrick.

From 2004 to 2007, the Company recovered 108,407 tonnes of ore grading 2.33 grams of gold per tonne from Zone 4 in a small open pit. In 2006 and 2007, the Company recovered 99,342 tonnes of ore grading 7.02 grams of gold per tonne from two small ore blocks underground at Bousquet. There has been no mining of this property since 2007.

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In 2011, the Company completed a diamond drilling program consisting primarily of twinning and resampling historic holes to evaluate the production potential of an open pit at Bousquet Zone 5. This work led to a new resource estimate for Zone 5 and an internal feasibility study has been conducted for a resumption of production in the Zone 5 open pit. This study led to a positive scenario and a final estimate of new probable reserves of approximately 0.2 million ounces of gold comprised of 3.2 million tonnes of ore grading 1.88 grams per tonne. For the whole Bousquet property, including Zone 5, the December 31, 2011 indicated mineral resource is approximately 9.8 million tonnes grading 2.44 grams of gold per tonne. The inferred mineral resource is 4.6 million tonnes grading 4.04 grams of gold per tonne. Expenditures on exploration in 2011 were $2.40 million, which includes the cost of drilling 18,616 metres in 70 holes. In 2012, the Company expects to spend $1.5 million in exploration including $0.3 million in drilling of 3,000 metres at Bousquet and continue optimisation of the feasibility study.

The Ellison property is located immediately west of the Bousquet property and consists of eight claims covering 101.0 hectares. The property was acquired in August 2002 for $0.32 million in cash and a commitment to spend $0.49 million in exploration over four years. The commitment was fulfilled in 2004 and the property is 100% owned by the Company. The property is subject to a net smelter return royalty interest in favour of Yorbeau Resources Inc. that varies between 1.5% and 2.5% depending on the price of gold. Should commercial production from the Ellison property commence, the Company will be required to pay Yorbeau Resources Inc. an additional C$0.5 million in cash.

From 2009 to 2011, the Company conducted drilling for a total of 12,465 metres on the deep exploration program on the Ellison property, at a cost of $7.4 million in order to better define the mineralization at depth, interpreted to be in the Westwood horizon. The potential exists for a large gold resource with similar geology to the LaRonde mine extension.

The December 31, 2011 indicated mineral resource at Ellison is approximately 0.4 million tonnes grading 5.68 grams of gold per tonne, and the inferred resource is 0.8 million tonnes grading 5.81 grams of gold per tonne. A follow-up exploration program was approved for Ellison in 2012, including 3,600 metres of drilling at a budget of $1.0 million.

Goldex Mine

The Goldex mine, which achieved commercial production in August 2008, is located in the City of Val d'Or, Quebec, approximately 60 kilometres east of the LaRonde mine. On October 19, 2011, the Company suspended mining operations and gold production at Goldex, following the receipt of recommendations from independent consultants to halt underground mining operations during the investigation into ground stability issues. As a result, the Company wrote off substantially all of its investment in the Goldex mine (approximately $254 million), took a closure provision of approximately $44 million and reclassified all of the remaining 1.6 million ounces of proven and probable gold reserves (approximately 0.9 million ounces of gold in proven reserves (14.8 million tonnes grading 1.87 grams of gold per tonne) and approximately 0.7 million ounces of gold in probable reserves (13.0 million tonnes grading 1.6 grams of gold per tonne) estimated as of December 31, 2010), other than the ore stockpiled on surface, as mineral resources in the third quarter of 2011. The surface stockpile was processed in the Goldex mill by October 30, 2011. The Goldex property is now considered an advanced exploration project with significant measured, indicated and inferred mineral resources in several zones, but no mineral reserves.

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At the present time, development work continues underground on the M-Zone (as defined below) and the exploration ramp into the D-Zone (as defined below), and exploration continues, with diamond drilling from surface and underground.

Location Map of the Goldex Mine

GRAPHIC

The Goldex property is accessible by provincial highway. The elevation is approximately 302 metres above sea level. All of the Goldex mine's power requirements were supplied by Hydro-Quebec through connections to its main power transmission grid. All of the water that was required at the Goldex mine was sourced directly by aqueduct from the Thompson River immediately adjacent to the minesite or through recirculation of water from the surface pond and the auxiliary tailings pond. For additional information regarding the Abitibi region in which the Goldex mine is located, including information with respect to climate, topography, vegetation and mining personnel, see "– Property, Plant and Equipment – LaRonde Mine".

The Goldex mine operated under a mining lease obtained from the Ministry of Natural Resources and Wildlife (Quebec) and under certificates of approval granted by the Ministry of Sustainable Development, Environment and Parks (Quebec). The Goldex property, in which the Company has a 100% working interest, consists of 22 contiguous mining claims and, since April 2006, one provincial mining lease (98.6 hectares), covering an aggregate of 331.2 hectares. The property is made up of three blocks: the Probe block (130.7 hectares); the Dalton block (10.4 hectares); and the Goldex Extension block (190.1 hectares). The claims are renewable every second year upon payment of a small fee. The mining lease expires in 2028 and is automatically renewable for three further ten-year terms upon payment of a small fee. The Company also has one lease covering 418.5 hectares of surface rights that are used for the auxiliary tailings pond. This lease is renewable annually upon payment of a small fee.

The Goldex mine includes underground operations that can be accessed from two shafts, a processing plant, an ore storage facility and other related facilities. The Goldex Extension Zone ("GEZ"), which was the gold deposit on which the Company was focusing its production efforts before production was suspended indefinitely on October 19, 2011, was discovered in 1989 on the Goldex Extension block (although the Company believes a small portion of the GEZ occurs on the Probe block). Probe Mines Ltd. holds a 5% net smelter return royalty interest on the Probe block. In 2011, exploration and development work continued on the zone located on the Probe block 150 metres above the western end of the GEZ (the "M-Zone").

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In late 1997, the Company completed a mining study that indicated the deposit was not economically viable to mine at the then-prevailing gold price (approximately $323 per ounce of gold) using the mining approach chosen and drill-hole-indicated grade. The property was placed on care and maintenance and the workings were allowed to flood. In February 2005, a new mineral reserve and resource estimate was completed for the GEZ which, coupled with a feasibility study, led to a probable mineral reserve estimate of 1.6 million ounces of gold contained in 20.1 million tonnes of ore grading 2.54 grams of gold per tonne. The GEZ resource model was revised and, in March 2005, the Company approved a feasibility study and the construction of the Goldex mine. The mine achieved commercial production on August 1, 2008 and consistently operated at or above the designed rate of 6,900 tonnes per day until its operations were suspended in October 2011.

Based on the results of a scoping study completed in July 2009, the Company determined to expand the mine and mill operations at the Goldex mine to 8,000 tonnes per day. This project was completed in 2010. Capital costs in connection with the expansion totalled $10 million. The crusher for the expansion was commissioned at the end of the first quarter of 2010 at a rate of 7,811 tonnes per day.

The Goldex mine produced 135,478 ounces of gold in 2011 at total cash costs of $472 per ounce. The Goldex mine is not expected to produce more gold until the suspected rock stability issues are resolved.

Mining and Milling Facilities

Surface Plan of the Goldex Mine

GRAPHIC

At the time the Company commenced construction of the Goldex mine, the surface facilities included a headframe, a hoistroom, a surface building containing a mechanical shop, a warehouse and an office. In addition, the Goldex property had a 790-metre deep shaft (Shaft #1), which provided access to underground workings. Shaft #1 is predominantly used to hoist waste rock from development activities.

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The sinking of a new production shaft was completed in 2007. This shaft (Shaft #2) is a 5.5-metre diameter shaft with a 50-centimetre thick concrete lining and is used for ventilation as well as hoisting services. Shaft #2 is 865 metres deep and includes five stations. A refurbished friction hoist was installed for production and service duties, and an auxiliary hoist was installed for emergency and personnel service. The production hoist is equipped with one cageskip. Each skip has a 21.5-tonne capacity and the shaft can hoist an average of 7,000 to 8,000 tonnes of ore per day.

Mining Method

Prior to the suspension of mining operations on October 19, 2011, the Goldex mine used a high volume bulk mining method, which was made possible through the use of large mining stopes. Drilling and blasting of 165-millimetre production holes was used to obtain a muck size large enough to be economically efficient. Using this method required a percentage of the broken ore to be kept in the stope to reduce the backfilling cost and to reduce sloughing on the walls. Little ore and waste development was necessary to mine out the deposit. Following the suspension of mining on October 19, 2011, future mining methods, if any, are under evaluation.

Surface Facilities

Plant construction at the Goldex mine commenced in the second quarter of 2006 and was completed in the first quarter of 2008. The plant reached design capacity in the second quarter of 2009. Grinding at the Goldex mill was done through a two-stage circuit comprised of a SAG mill and a ball mill. As part of the expansion project commenced in 2009, a surface crusher was added to reduce the size of ore transferred to the surface from 150 millimetres to 50 millimetres. A lamellar decanter was also added to recover small particles present in the water overflow of the concentrate thickener. The underflow pump of this thickener was upgraded following flotation circuit modification to increase the pull rate of the small particles. Approximately two-thirds of the gold was recovered through a gravity circuit, passed over shaking tables and smelted on site. The remainder of the gold and pyrite was recovered by a flotation process. The concentrate was then thickened and trucked to the mill at the LaRonde mine where it was further treated by cyanidation. Gold recovered was consolidated with precious metals from the LaRonde and Lapa mines. The Company reached an average gold recovery of 93.38% in 2011, prior to the suspension of mining.

In addition, surface facilities at the Goldex property include an electrical sub-station, a compressor building, a service building for administration and changing rooms, a warehouse building, a concrete headframe above Shaft #2, a hazardous waste storage facility and a dome covering the ore stockpile.

Mineral Recoveries

Prior to the suspension of mining operations on October 19, 2011, the Goldex mill processed approximately 2.48 million tonnes of ore, averaging approximately 8,173 tonnes of ore treated per day and operating at approximately 95% of available time. The following table sets out the metal recoveries at the Goldex mine in 2011.

  Head
Grades
  Gravity Recovery   Flotation-Cyanidation
Recovery
  Global Recovery   Payable
Production

Gold 1.82 g/t     67.76%     25.63%     93.38%   135,478 oz

Environmental Matters

Environmental permits for the construction and operation of an ore extracting infrastructure at the Goldex mine were received from the Ministry of Sustainable Development, Environment and Parks (Quebec) in October 2005. The permits also covered the construction and operation of a sedimentation pond for mine water treatment and sewage facilities, and these facilities have been built at the Goldex mine site. In June 2009, the permits were revised to allow the expansion of the mine and mill operations to 8,500 tonnes per day.

In November 2006, the Company and the Quebec government signed an agreement permitting the Company to dispose of the Goldex tailings at the Manitou minesite, a tailings site formerly used by an unrelated third party and abandoned to the Quebec government. The Manitou tailings site has issues relating to acid drainage and the construction of tailings facilities by the Company and the deposit of tailings from the Goldex plant on the Manitou tailings site was accepted by the Ministry of Sustainable Development, Environment and Parks (Quebec) as a valid rehabilitation plan to address the acid generation problem at Manitou. Under the agreement, the Company managed the construction and operation of the tailings facilities and the Quebec government paid all additional costs above the Company's budget for tailings facilities set

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out in the Goldex feasibility study. The Quebec government retains responsibility for all environmental contamination at the Manitou tailings site and for final closure of the facilities. In addition, the Company has built a separate tailings deposit area (auxiliary tailings pond) near the Goldex mine. Environmental permits for the construction and operation of the auxiliary tailings pond at the Goldex mine were received in March 2007. In 2011, 237,615 tonnes of Goldex tailings were discharged to the auxiliary pond for a total to date of 764,077 tonnes. At the Manitou site, 2.20 million tonnes of Goldex tailings were discharged for a total to date of 8.095 million tonnes.

A new dyke was built in the summer of 2011 in the auxiliary tailings pond to create a second polishing basin to reduce total suspended solids in the discharged water during spring time. Construction of this dyke was necessary following a notice of infraction received in 2011 from the Quebec Ministry of Environment for exceeding of the permitted total suspended solids.

Following suspension of mining operations at the Goldex property, the mine closure costs were revised to account for the change in conditions at the site. The estimated total for the closure costs of the Goldex mine is approximately $51.4 million, comprised of the following: $1.2 million for demolition, $1 million for engineering, $0.45 million for site preliminary works, $5.4 million for mining site rehabilitation (primarily for backfilling of the zone with high subsidence), $23.2 million for rock grouting and soil improvement, $0.26 million for revegetation of the site, $0.06 million to rehabilitate the sedimentation pond, $0.2 million to rehabilitate the waste rock pile, $1.03 million to rehabilitate the South Tailings basin area, $0.7 million for geotechnical and environmental monitoring; $17.6 million for property purchases and $0.3 million for Baie-Dorée road rehabilitation. In addition, a separate provision of approximately $4.6 million exists for the remaining participation of the Company in the rehabilitation of the Manitou site.

Capital Expenditures

Prior to the suspension of mining operations on October 19, 2011, capital expenditures at the Goldex mine in 2011 were approximately $48.4 million, which included $7.8 million on sustaining capital expenditures, $7.1 million on the construction of facilities in the M-Zone and water management, $10.7 million in deferred development expenses, $16.3 million for remediation work at the surface and $5.3 million in exploration expense. For 2012, an interim budget of $69.8 million has been approved to further develop the M-Zone, complete remediation work, perform crown pillar investigations and explore the D-Zone.

Development

During 2011, approximately 4,256 metres of lateral and vertical development were completed at a cost of $15.3 million, including development following the suspension of mining operations on October 19, 2011. At the present time, development work continues underground on the M-Zone and the exploration ramp into the D-Zone, and exploration continues with diamond drilling. For 2012, 900 metres of development at a cost of $6.1 million is planned to develop the M-Zone and for exploration of the D-Zone.

Geology, Mineralization and Exploration

Geology

Geologically, the Goldex property is similar to the LaRonde property and is located near the southern boundary of the Archean-age (2.7 billion years old) Abitibi Subprovince, a typical granite-greenstone terrane located within the Superior Province of the Canadian Shield. The southern contact of the Abitibi Subprovince with the Pontiac Subprovince is marked by the east-southeast trending CLL Fault Zone, the most important regional structural feature. The Goldex deposit is hosted within a quartz diorite sill, the "Goldex Granodiorite", located in a succession of mafic to ultramafic volcanic rocks that are all generally oriented west-northwest.

The GEZ extends from 500 to 800 metres below the surface and is entirely hosted by the Goldex Granodiorite. The limits of the zone are defined by the intensity of the quartz vein stockwork envelope and by gold assays. The zone is almost egg-shaped; it is over 300 metres tall by 450 metres long (in a west-northwest direction) and its thickness increases rapidly from 25 metres along the east-west edges to almost 150 metres in the centre.

In 2011, exploration efforts at Goldex were focused on the satellite M-Zone and D-Zone. These satellite zones are defined by quartz tourmaline veins and gold assays that are similar to the GEZ. The M-Zone has been defined as having a length of 160 metres, a height of 120 metres and a thickness of 115 metres. The D-Zone is approximately 150 metres below the GEZ and close to 1,350 metres below the surface. It appears to have an approximate length of 500 metres.

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Mineralization

Gold mineralization at Goldex corresponds to the quartz-tourmaline vein deposit type. The Goldex gold-bearing quartz-tourmaline-pyrite veins and veinlets have strong structural control. The most significant structure directly related to mineralization is a discrete shear zone, the Goldex Mylonite, that is up to five metres wide and occurs within the Goldex Granodiorite, just south of the GEZ and most other gold occurrences. The quartz-tourmaline-pyrite vein mineralization is controlled by minor fracture zones that are oriented west-northwest and dip steeply north or south. The fractures are parallel to, but north of, the Goldex Mylonite. Within the GEZ are three vein sets, the most important of which are extensional-shear veins dipping 30 degrees south and usually less than 10 centimetres thick. The vein sets and associated alteration combine to form stacked envelopes up to 30 metres thick.

Strong albite-sericite alteration of the host-rock quartz diorite surrounds the quartz-tourmaline-pyrite veins and covers almost 80% of the mineralized zone; outside of the envelopes, prior chlorite alteration affects the quartz diorite and gives it a darker grey-green colour. Occasionally, enclaves of relatively unaltered medium grey-green-coloured quartz diorite (with no veining or gold) are found within the GEZ; they are included exceptionally as internal waste to allow for a smooth shape, required for mining purposes.

Most of the gold occurs as microscopic particles that are almost always associated with pyrite, generally adjacent to grains and crystals but also 20% included within the pyrite. The gold-bearing pyrite occurs in the quartz-tourmaline veins and in narrow fractures in the sericite-albite-altered quartz diorite (generally immediately adjacent to the veins). Less than 1.5% of the gold occurs as the mineral calaverite, a gold telluride.

Exploration

In 2011, $7.8 million was spent on exploration at Goldex. A total of 107 holes were drilled using diamond drilling methods at the Goldex mine for a total length of approximately 47 kilometres, compared to 122 holes for a total length of 44 kilometres in 2010. The expenses include an exploration ramp drifted on a length of 475 metres from Level 86 to explore the D-Zone at depth. Three different zones in the Goldex Granodiorite intrusive were drilled in 2011. The main exploration focus (83%) with 38.8 kilometres of drilling was for the D-Zone, the remaining 7.4 kilometres (16%) were drilled for the top of the M-Zone and 750m (1%) for the sector to the East of the GEZ.

The 2012 exploration program is budgeted to include 8,000 metres of diamond drilling at a cost of $1.2 million. The primary target is the D-Zone.

Kittila Mine

The Kittila mine, which commenced commercial production in May 2009, is located approximately 900 kilometres north of Helsinki and 50 kilometres northeast of the town of Kittila in northern Finland. At December 31, 2011, the Kittila mine was estimated to contain proven and probable mineral reserves of 5.2 million ounces of gold comprised of 34.6 million tonnes of ore grading 4.66 grams per tonne. The Kittila mine is accessible by paved road from the village of Kiistala, which is located on the southern portion of the main claim block. The gold deposit is located near the small village of Rouravaara, approximately ten kilometres north of the village of Kiistala, accessible via a paved road. The property is close to infrastructure, including hydro power, an airport and the town of Kittila. The project also has access to a qualified labour force, including mining and construction contractors.

The total landholdings surrounding and including the Kittila mine comprise one mining licence covering an area of approximately 847 hectares, 120 individual tenements (prospecting permits) covering approximately 10,652 hectares and 168 prospecting permit applications covering approximately 14,910 hectares. The mineral titles form a continuous block around the Kittila mining licence. The block has been divided into the Suurikuusikko area, the Suurikuusikko West area and the Kittila mining licence centred at 25.4110 degrees longitude east and 67.9683 degrees latitude north.

The boundary of the mining licence is determined by ground-surveyed points whereas the boundaries of the other tenements are not required to be surveyed. All of the tenements in the Kittila mine are registered in the name of Agnico-Eagle Finland Oy, an indirect, wholly-owned subsidiary of the Company. According to the Finnish government's land tenure records, all tenements are in good standing. The expiry dates of the tenements vary from May 2012 up to June 2015. Tenements are initially valid for four years, provided exploration work in the area is reported annually and a small annual fee is paid to maintain title; extensions for titles can be granted for 11 additional years on payment of a slightly higher fee and active exploration in the area. Agnico-Eagle Finland Oy also holds the mining licence in respect of the Kittila mine. The mine is subject to a 2.0% net smelter return royalty payable to the Republic of Finland.

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The Kittila mine area is sparsely populated and is situated between 200 and 245 metres above sea level. The topography is characterized by low rolling forested hills separated by marshes, lakes and interconnected rivers. The gold deposit is situated on an area of land that has no special use at present and there is sufficient land available for tailings facilities. Water requirements for the Kittila mine are sourced from the nearby Seurujoki River, recirculation of water from pit dewatering and tailings pond water. The Kittila region is located within the South-West Lapland zone of the northern boreal vegetation zone characterized by spruce forests, marshes and bogs.

The mine is located within the Arctic Circle but the climate is moderated by the Gulf Stream off the coast of Norway such that northern Finland's climate is comparable to that of eastern Canada. Winter temperatures range from -10 to -30 degrees Celsius, whereas summer temperatures range from 10 degrees Celsius to the mid-20s. Exploration and mining work can be carried out year-round. Because of its northern latitude, winter days are extremely short with a brief period of 24-hour darkness around the winter solstice. Conversely, summer days are very long with a brief period of 24-hour daylight in early summer around the summer solstice. Annual precipitation varies between five and 50 centimetres, one-third of which falls as snow. Snow accumulation usually begins in November and remains until March or April.

Location Map of the Kittila Mine

GRAPHIC

The Company acquired its 100%, indirect interest in the Kittila mine through the acquisition of Riddarhyttan completed in November 2005. See "– History and Development of the Company". In June 2006, on the basis of an independently reviewed feasibility study, the Company approved construction of the Kittila mine. The Kittila mine is currently an open pit mining operation with underground mining via ramp access. The current open pits will be mined out by the end of 2012 and from 2013 onward all mining will be from the underground portion of the mine. The initial underground stope was

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mined in early 2010. Ore is processed in a 3,000-tonne per day surface processing plant that was commissioned in late 2008. Limited gold concentrate production started in September 2008 and gold dore bar production commenced in January 2009. During 2010 throughput at the Kittila mine approached design levels and gold recoveries continued to improve. The Kittila mine is anticipated to produce approximately 155,000 ounces of gold in 2012 at estimated total cash costs per ounce of approximately $650. Over the period of 2012 to 2038, total annual average gold production of approximately 150,000 ounces is anticipated. A scoping study is underway to assess the feasibility of significantly increasing the annual gold production.

Mining and Milling Facilities

Surface Plan of the Kittila Mine

GRAPHIC

The orebodies at Kittila are being mined initially from two open pits, followed by underground operations to mine the deposits at depth. Additional, smaller open pits will be used to mine any remaining mineral reserves close to the surface in the future. Open pit mining started in May 2008 and the extracted ore was stockpiled. As of December 2011, a total of 2.8 million tonnes of ore have been processed, 0.4 million tonnes of ore have been stockpiled and 31.5 million tonnes of waste rock have been excavated. Work on the ramp to access the underground reserves continued throughout 2011 and total underground development to date is approximately 14,521 metres. Underground mining commenced in the fourth

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quarter of 2010 and, as of December 2011, a total of 0.45 million tonnes of ore have been mined from the underground portions of the mine.

Mining Methods

The Kittila mine currently mines the Suurikuusikko orebody with a 160-metre deep open pit. Ore is mined in 7.5-metre benches together with waste rock using buffer blasting techniques and is loaded selectively to minimize dilution and maximize ore recovery. Hydraulic excavators load ore into 100-tonne trucks that haul the ore to the crusher and the waste rock to the waste disposal area. Approximately 3,000 tonnes of ore per day are fed to the concentrator. Surface mining is expected to continue through 2012. Underground development continued throughout the year and ore production from the underground started at a steady rate in the fourth quarter of 2011.

The underground mining method is open stoping with delayed backfill. Stopes are between 25 and 40 metres high and yield approximately 10,000 tonnes of ore per stope. To ensure sufficient ore production is available to supply the mill, approximately 6,000 metres of tunnels will be developed each year. After extraction, stopes will be filled with cemented backfill or paste backfill to enable the safe extraction of ore in adjacent stopes. Ore will be trucked to the surface crusher via the ramp access system.

Surface Facilities

Construction of the processing plant and associated equipment was completed in 2008 and facilities on site include an office building, a maintenance facility for the open pit equipment, a warehouse, a maintenance shop, an oxygen plant, a processing plant, a tank farm, a crusher, conveyor housings and an ore bin. In addition, some temporary structures house contractor offices and work areas.

The ore at Kittila is treated by grinding, flotation, pressure oxidation and carbon-in-leach circuits. Gold is recovered from the carbon in a Zadra elution circuit and is recovered from the solution using electrowinning and then poured into dore bars using an electric induction furnace.

Mineral Recoveries

In 2011, the Kittila mill processed 1.1 million tonnes of ore with an availability of 84% for an average throughput of 2,824 tonnes per day. Low mill availability was caused by maintenance issues associated with the autoclave and scrubber, mainly related to leaking mechanical seals, brick lining failures in the autoclave and blocked pipelines on the autoclave and the scrubber.

The following table sets out the gold production at the Kittila mine in 2011:

    Head
Grade
  Overall
Metal
Recovery
  Payable
Production

Gold   5.11 g/t   84.6%   143,560 oz

Ore processing at Kittila consists of two stages. In the first stage, ore is enriched by flotation and in the second stage the gold is extracted by pressure oxidation and cyanide-in-leach processes. Flotation recoveries were stable during 2011 and flotation recovery averaged 93% during the year. Trials are still in progress with the aim to try to further increase the flotation recovery. An in-house metallurgical laboratory was built in 2011 and will allow further flotation test work to be undertaken to attempt to optimize flotation recoveries.

Recoveries in the second stage of the process were also relatively stable in 2011. Lower recoveries in the second quarter of 2011 were related to mechanical failures and operating difficulties in the autocalve. Modifications inside the autoclave allowed for better oxygen distribution management, which resulted in better sludge flow and oxidation within the autoclave, leading to better recovery availability. Also, further optimizing and improved control of the process enabled continuous improvement in recoveries.

A large amount of test work was done in 2011 and the testing and optimization of the process will continue in 2012. Large-scale test-work is ongoing to find optimized pressure oxidation and results are expected in 2012.

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Environmental Matters

The Company currently holds a mining licence, an environmental permit and operational permits in respect of the Kittila mine. All permits necessary to begin production were received during 2008.

The construction of the first phase of the tailings dam and waterproof bottom layer was completed in the fall of 2008. This first phase is sufficient to hold tailings from three years of production. Work began on the second phase in 2009 and continues according to plans and permit requirements. Water from dewatering the mine and water used in the mine and mill is collected and treated by sedimentation. Emissions and environmental impact are monitored in accordance with the comprehensive monitoring program that has been approved by the Finnish environmental authorities. To further improve environmental performance, scrubbing of mill-off gas will be enhanced and this work was initiated in the fourth quarter of 2011. There are no material environmental liabilities related to the Kittila mine.

Capital Expenditures

Capital expenditures at the Kittila mine during 2011 were approximately $92 million, which included paste backfill plant construction, mill modification costs, underground mine development costs, exploration and conversion drilling costs within the mining licence area and sustaining capital costs. The Company expects capital expenditures at the Kittila mine to be approximately $67 million in 2012, most of which will be used for mill scrubber improvements, mining equipment for underground mining, development and construction of underground mining infrastructure, construction of the paste backfill plant and exploration and conversion drilling.

Development

Mining at the Suurikuusikko and Roura open pits progressed throughout 2011 with a total of 650,000 tonnes of ore and 5.7 million tonnes of waste mined from the open pit. The Company expects that 600,000 tonnes of ore and 1.6 million tonnes of waste will be mined from the Suurikuusikko and Roura pits during 2012. Total costs for open pit development in 2011 were $2.8 million.

In 2011, underground development progressed in both the Rouravaara and Suurikuusikko zones with 6,440 metres of ramp and sublevel access development completed during the year. A total of 103,000 tonnes of ore from development and 280,000 tonnes of stope ore were mined in 2011. The Company expects to complete 6,000 metres of lateral development and 400 metres of vertical development during 2012.

Geology, Mineralization and Exploration

Geology

The Kittila mine is situated within the Kittila Greenstone belt, part of the Lapland Greenstone belt in the Proterozoic-age Svecofennian geologic province. The appearance and geology of the area is similar to that of the Abitibi region of the Canadian Shield. In northern Finland, the bedrock is typically covered by a thin but uniform blanket of unconsolidated glacial till. Bedrock exposures are scarce and irregularly distributed.

The mine area is underlain by mafic volcanic and sedimentary rocks metamorphosed to greenschist assemblages and assigned to the Kittila group. The major rock units trend north to north-northeast and are near-vertical. The volcanics are further sub-divided into iron-rich tholeiitic basalts (Kautoselka Formation) located to the west and magnesium-rich tholeiitic basalt, coarse volcaniclastic units, graphitic schist and minor chemical sedimentary rocks (Vesmajarvi Formation) located to the east. The contact between these two rock units consists of a transitional zone (the Porkonen Formation) varying between 50 and 200 metres in thickness. This zone is strongly sheared, brecciated and characterized by intense hydrothermal alteration and gold mineralization, features consistent with major brittle-ductile deformation zones. It includes the north-northeast-oriented Suurikuusikko Trend.

Mineralization

The Porkonen Formation hosts the Kittila gold deposit, which contains multiple mineralized zones stretching over a strike length of more than 25 kilometres. Most of the work has been focused on the 4.5-kilometre stretch that hosts the known gold reserves and resources. From north to south, the zones are Rimminvuoma ("Rimpi-S"), North Rouravaara ("Roura-N"), Central Rouravaara ("Roura-C"), depth extension of Rouravaara and Suurikuusikko ("Suuri/Roura Deep"), Suurikuusikko ("Suuri"), Etela and Ketola. The Suuri and Suuri/Roura Deep zones include several parallel sub-zones that have previously been referred to as Main East, Main Central and Main West. The Suuri zone hosts approximately 34% of the current probable gold reserve estimate on a contained-gold basis, while Suuri Deep has approximately 20%, Roura-C

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approximately 11%, Roura Deep approximately 25%, Roura-N approximately 2%, Rimpi-S approximately 6%, Ketola approximately 1% and Etela approximately 0.1%.

Gold mineralization in these zones is associated with intense hydrothermal alteration (carbonate-albite-sulphide), and is almost exclusively refractory, locked inside fine-grained sulphide minerals: arsenopyrite (approximately 73%) or pyrite (approximately 23%). The rest is "free gold", which is manifested as extremely small grains of gold in pyrite.

Exploration

In 1986, the discovery of coarse visible gold in quartz-carbonate veining along a road cut near the village of Kiistala alerted the Geological Survey of Finland ("GTK") to the gold exploration potential of the area. Following this discovery, GTK initiated regional exploration over the area and deployed a wide range of indirect exploration tools to explore this relatively unexplored area. Over the period from 1987 to 2005, GTK and later Riddarhyttan undertook drilling programs and other testing on the property. After it acquired the property in 1998, Riddarhyttan continued to investigate the metallurgical properties of the refractory gold mineralization with the objective of demonstrating its recoverability and assessing suitable processing scenarios and initiated engineering and environmental studies to assess the feasibility of a mining project.

Diamond drilling is used for exploration on the Kittila property. Most of the work on the mining licence area has focused on the Suuri and Roura zones. Up to the end of December 2011, a total of 2,315 drill holes, totalling 639,774 metres, have been completed on the property. In 2011, between six and eight drill machines worked on the Kittila property: two drills on underground infill drilling; three to six drills on mine exploration; and one to two drills on resource-to-reserve conversion drilling. A total of 445 holes were completed for a length of 82,377 metres. Of these drill holes, 353 drill holes (30,197 metres) were for definition drilling, 44 drill holes (20,535 metres) were for conversion drilling and 48 drill holes (31,645 metres) were related to mine exploration. Total expenditures for diamond drilling in 2011 were $17.5 million, including $3.7 million for definition and delineation drilling.

Exploration during 2011 increased proven and probable gold reserves to 5.2 million ounces (34.6 million tonnes of ore grading 4.66 grams per tonne). Most of the increase came from the Roura Deep zone (239,002 ounces) and the Rimpi zone (119,753 ounces). Indicated mineral resources decreased by 2.4 million tonnes to 13.0 million tonnes of ore grading 2.46 grams per tonne. Inferred mineral resources tonnage decreased by 0.4 million tonnes to 8.0 million tonnes of ore grading 4.55 grams per tonne, but because of higher gold grades the contained gold ounces in this category increased by 74%.

The decrease in indicated mineral resources reflects the successful conversion of resources to reserves, especially in the Roura Deep and Rimpi zones.

The successful deep drilling program in 2011 at the Roura Deep zone, which is located immediately below the Roura zone and north of the Suuri Deep zone, has confirmed that most of the Roura ore lenses are present in the Roura Deep zone and most of the ore lenses in the Suuri Deep zone continue north to the Roura Deep zone. The gold mineralization is open at depth and to the north.

A resource-to-reserve conversion drilling campaign was carried out at Suuri, Roura and Roura-N in 2011. As a result of this work, probable reserves increased by 119,753 ounces from Rimpi, but drilling at Suuri did not increase reserves significantly. Suuri will be the main target for resource-to-reserve conversion drilling in 2012.

Outside of the Kittila mining licence area, systematic geochemical sampling and diamond drilling continued on targets along the Suurikuusikko Trend, and a number of new targets were tested by diamond drilling. Encouraging results were received from a new gold zone in the Kuotko area located approximately ten kilometres north of the mine construction site. A total of 68 diamond drill holes totalling 19,948 metres were drilled on exploration targets outside of the mining licence area in 2011.

The 2012 exploration budget for the Kittila mine is approximately $13.5 million ($10.3 million for minesite exploration, $1.2 million for resource-to-reserve conversion and $2.0 million for 400 metres of development in an exploration ramp at the 600-metre mine level), and includes over 39,700 metres in diamond drilling (32,200 metres for minesite exploration and 7,500 metres for resource-to-reserve conversion), using up to five drills throughout the year to help further identify the gold reserve and resource potential of the Kittila property. In addition, $2.9 million of exploration expenditures, including an estimated 10,900 metres of diamond drilling, is planned for exploration along the 25-kilometre Suurikuusikko Trend.

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Lapa Mine

The Lapa mine, which achieved commercial production in May 2009, is located approximately 11 kilometres east of the LaRonde mine near Cadillac, Quebec. At December 31, 2011, the Lapa mine was estimated to contain proven and probable mineral reserves of 0.5 million ounces of gold comprised of 2.38 million tonnes of ore grading 6.54 grams per tonne. The Lapa property is made up of the Tonawanda property, which consists of 43 contiguous mining claims and one provincial mining lease covering an aggregate of 702.4 hectares, and the Zulapa property, which consists of one mining concession of 93.5 hectares.

Location Map of the Lapa Mine

GRAPHIC

The Company's initial interest in the Lapa property was acquired in 2002 through an option agreement with Breakwater Resources Ltd. ("Breakwater"). The Company undertook an aggressive exploration program and discovered a new gold deposit almost 300 metres below the surface. In 2003, the Company purchased the Lapa property from Breakwater for a payment of $8.9 million, a 1% net smelter return royalty on the Tonawanda property and a 0.5% net smelter return royalty on the Zulapa property. In 2008, the Company purchased all royalties from Breakwater for C$6.35 million. In addition, both the Zulapa and Tonawanda properties are subject to a 5% net profit royalty payable to Alfer Inc. and René Amyot. In 2004, an additional claim of 9.4 hectares was added to the Company's holdings at the Lapa mine. In January 2009, a mining lease covering 66.8 hectares was entered into with the Ministry of Natural Resources and Wildlife (Quebec).

The Lapa mine is accessible by provincial highway. The elevation varies between approximately 320 and 390 metres above sea level. All of the Lapa mine's power requirements are supplied by Hydro-Quebec through connections to its main power transmission grid. All of the water required at the Lapa mine is sourced from the Heva river located 3.5 kilometres to the south of the mine. The water is pumped into an existing open pit nearby the property that has been allowed to flood and from which the mine is supplied. The topography slopes relatively gently from north to south. The property is generally covered by a boreal-type forest consisting mainly of black spruce and white pine with minor amounts of birch and poplar.

For additional information regarding the Abitibi region in which the Lapa mine is located, see "– Property, Plant and Equipment – LaRonde Mine".

Gold production during 2012 at the Lapa mine is expected to be approximately 100,000 ounces at estimated total cash costs per ounce of approximately $750.

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Mining and Milling Facilities

Surface Plan of the Lapa Mine

GRAPHIC

The Lapa site hosts an underground mining operation and the ore is trucked to the processing facility at the LaRonde mine, which has been modified to treat the ore, recover the gold and store the residues. Tailings from the Lapa mine are deposited in the tailings pond at the LaRonde mine.

In July 2004, the Company initiated the sinking of an 825-metre deep shaft at the Lapa property. In April 2006, 2,800 tonnes of ore development was extracted at Lapa and was estimated to contain on average 10.65 grams of gold per tonne. These results and results from other sampling methods were incorporated into a feasibility study and in June 2006, the Company accelerated construction of the Lapa mine. This construction included extending the shaft to a depth of 1,369 metres, which was completed in October 2007. Significant additional construction was required in order for the Lapa mine to achieve commercial production in May 2009, including the construction of the mill.

Mining Methods

Two underground mining methods are used at the Lapa mine: longitudinal retreat with cemented backfill and locally transverse open stoping with cemented backfill. Sublevels are driven at 30-metre vertical intervals. Stopes are mined in 12-metre sections and backfilled with 100% cemented rock backfill. Excavated ore from the Lapa site is trucked via provincial highway to the processing facility at the LaRonde mine.

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Surface Facilities

The infrastructure on the Lapa property includes the refurbished former LaRonde Shaft #1 headframe and shafthouse, service buildings, offices, a settling pond for waste water, dry facilities, an ore bin, a diesel reservoir and a water treatment plant. In November 2007, lateral development began on three horizons. A backfill plant was commissioned in December 2008 and the sedimentation pond was extended in 2007 to control suspended solids from underground dewatering discharge.

Ore at the Lapa mine is processed through grinding, gravity and leaching circuits. Dedicated milling facilities have been integrated into the mill at the LaRonde mine. Based on an average ore head grade of 6.63 grams per tonne, gold recovery averaged 81% in 2011. With an average production in excess of 1,700 tonnes per day in 2011, the mine operated consistently above its design rate of 1,500 tonnes per day. The Company is attempting to reduce the mining dilution caused by weaker than expected rock conditions in the south wall, which is mainly composed of talc chlorite schist.

Mineral Recoveries

In 2011, the Lapa mine produced 598,464 tonnes of ore grading 6.63 grams of gold per tonne. The Lapa processing facility treated 620,712 tonnes of ore in 2011 (approximately 1,700 tonnes per day) and operated at about 96% of available time.

   
    Head
Grades
  Overall
Metal
Recoveries
  Payable
Production
   
Gold   6.63 g/t   81.04%   107,068 oz

Environmental Matters

Water used underground at the Lapa mine was initially re-circulated from mine dewatering after settling in the sedimentation pond. The re-circulation led to ammonia concentration in the water, and the Company experienced occasional toxicity problems in the water pond in 2008 and 2009. To address the ammonia content in the water, the Company built a 3.5-kilometre pipeline to obtain fresh water from the Heva River. The pipeline was commissioned in November 2009. The Company also commissioned a water treatment plant on site in 2010, which was completed in the fourth quarter of 2010, to reduce the ammonia from mine dewatering. Output is currently within the target range at approximately eight parts per million of ammonia and average efficiency is at approximately 70%. Optimization of the plant is ongoing.

A sedimentation pond is used to remove suspended solids from the dewatering water before either release to the environment or re-use in the underground mining operation. The waste rock pile naturally drains towards the sedimentation pond. A waste rock sampling program implemented during the shaft sinking phase verified the non-acid generating nature of the waste rock. Water effluent from the sedimentation pond is being sampled as required under the Quebec mining effluent guidelines, and is expected to comply with the water quality criteria. The mill residues will be sent to the LaRonde mine tailings area.

There are no known environmental liabilities associated with the Lapa site. The Certificates of Authorization to proceed with mine production and with mill construction were issued by the Ministry of Sustainable Development, Environment and Parks (Quebec) in October and December 2007, respectively. The Certificate of Authorization for mill and tailings production was received in 2008.

Capital Expenditures

The Company incurred approximately $18.0 million in capital expenditures at the Lapa mine in 2011 and expects to incur approximately $13.8 million in 2012, of which $8.9 million relates to deferred development, $2.8 million to sustaining capital expenditures (including underground construction and mining equipment) and $3.0 million for exploration.

Development

In 2011, a total of 5,685 metres of lateral development was completed. Development focused on permanent drifts (ramps and haulage way), stope preparation of mining blocks set for production in 2011 and 2012, and access to the newly

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discovered East Zone, which is expected to begin production in early 2012. Since mid-2010, all three main mining horizons are linked via a ramp.

Geology, Mineralization and Exploration

Geology

The Lapa property is geologically similar to the LaRonde property and is also located near the southern boundary of the Archean-age (2.7 billion years old) Abitibi Subprovince and the Pontiac Subprovince within the Superior Province of the Canadian Shield. The most important regional structure is the CLL fault zone marking the contact between the Abitibi and Pontiac Subprovinces. The fault zone passes through the property from west to east, and is marked by schists and mafic to ultramafic volcanic flows that comprise the Piché group (up to approximately 300 metres thick in the mine area). On the Lapa property, the fault zone displays a "Z" shaped fold to which all of the lithologic groups in the region conform. Feldspathic dykes cut the Piché group, especially near the fold. North of the Piché group lies the Cadillac sedimentary group, which consists of 500 metres or more of well-banded wacke, conglomerate and siltstone with intercalations of iron formation. The Pontiac group sedimentary rocks (up to approximately 300 metres thick) that occur to the south of the Piché group are similar to the Cadillac group but do not contain conglomerate nor iron formation.

Mineralization

All of the known gold mineralization along the CLL fault zone is epigenetic (late) vein type, controlled by the structure. The mineralization is associated with the fault zone and occurs within or immediately adjacent to the Piché group rocks.

The Lapa deposit is comprised of the Contact zone and five satellite zones. The Contact zone accounts for approximately 82% of the mineral reserves.

The ore zones are made up of multiple quartz veins and veinlets, often smoky and anastomosing, within a sheared and altered envelope containing minor sulphides and visible gold. The Contact zone is generally located at the contact between the Piché group and the Cadillac group. The satellite zones are located within the Piché group at a distance varying from ten to 50 metres from the contact with the Cadillac group, except for the Contact North zone, which is located approximately ten metres north of the Contact zone within the Cadillac group. The sheared envelope consists of millimetre-thick foliation bands of biotite or sericite with silica and, in places, cuts across rock units. Quartz veins and millimetre-sized veinlets parallel to the foliation account for 5% to 25% of the mineralization. Visible gold is common in the veins and veinlets but can also be found in the altered host rock. Sulphides account for 1% to 3% of the mineralization; the most common sulphides, in order of decreasing importance, are arsenopyrite, pyrite, pyrrhotite and stibnite. Graphite is also rarely observed as inclusions in smoky quartz veins.

The Contact and satellite zones are tabular mineralized envelopes oriented east-west and dipping very steeply to the north, turning south at depth. The economic portion of the zone has been traced from depths of approximately 450 metres to more than 1,300 metres below surface. The Contact zone has an average strike length of 300 metres, varies in thickness from 2.8 to 5.0 metres and is open at depth. Locally some thicker intervals have been intersected but their continuity has not been demonstrated. The satellite zones have thicknesses similar to the Contact zone.

Exploration

Two exploration diamond drilling programs occurred at the Lapa mine during 2011. The first program concentrated on confirming and expanding the known orebodies (Contact zone and the other satellite zones) in the immediate vicinity of the ore zones. The drilling tested the eastern area of the Contact zone reserve at roughly 1,000 metres depth below the surface and 300 metres east of the Contact zone reserve limit. Good results, including visible gold, were returned and additional resources were identified. This area was added in the mine plan in March 2011. The 2012 program will focus on expanding mineral resources in this area. Additional drilling was done below Level 128 (the deepest producing level). Technical services will evaluate the economics of this area during 2012. The second program was executed from the newly excavated exploration track drift on Level 101 (one kilometre deep) toward the east. This program will continue through 2013.

Overall, there was a reduction of approximately 175,000 ounces of gold in reserves at Lapa from 2010 to 2011 after mining 129,000 ounces of gold. The net reduction of 46,000 ounces in reserves was a result of a lower-than-expected grade from 2011 delineation diamond drilling. Mineral underground resources at the Lapa mine remained mostly unchanged. Approximately 0.5 million tonnes of inferred resources were added on surface following surface drilling in 2010 and 2011. Drilling and evaluation will continue in 2012. In 2011, a total of 231 holes were drilled on the Lapa property for a total

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length of 28,386 metres, compared to 264 holes for a total length of 25,660 metres in 2010. Of the drilling in 2011, 165 holes (9,257 metres) were for production stope delineation and 66 holes (19,129 metres) were for exploration. In 2010, 207 holes (13,263 metres) were for production stope delineation, 8 holes (1,477 metres) were for definition drilling and 49 holes (10,920 metres) were for exploration. Expenditure on diamond drilling at the Lapa mine during 2011 was approximately $2.39 million, including $0.76 million in definition and delineation drilling expenses charged to operating costs.

In 2012, the Company expects to spend $3.0 million on exploration, including $0.76 million on the excavation of a track drift toward the east. In 2012, 18% of the exploration drilling budget will be used for exploration in close vicinity of the mine infrastructure and 82% will be used for drilling from the exploration drift.

Pinos Altos Mine

The Pinos Altos mine achieved commercial production in November 2009. It is located on an 11,000-hectare property in the Sierra Madre gold belt, 285 kilometres west of the City of Chihuahua in the State of Chihuahua in northern Mexico. At December 31, 2011, the Pinos Altos mine was estimated to contain proven and probable mineral reserves of 3.1 million ounces of gold and 88.5 million ounces of silver comprised of 46.8 million tonnes of ore grading 2.06 grams of gold per tonne and 58.85 grams of silver per tonne. The Pinos Altos property is made up of two blocks: the Agnico Eagle Mexico Concessions (22 concessions, 26,810.2 hectares), and the Minerales El-Madroño Concessions (18 concessions, 5,053.1 hectares).

Location Map of the Pinos Altos Mine

LOGO

The Madrono Concessions (which cover approximately 74% of the current mineral resources) are subject to a net smelter royalty of 3.5% payable to Minerales El Madrono S.A. de C.V. ("Madrono"). The Pinos Altos Concession (which covers approximately 26% of the current mineral resources) is subject to a 2.5% net smelter return royalty payable to the Consejo de Recursos Minerales, a Mexican Federal Government agency. After 2029, this portion of the property will also be subject to a 3.5% net smelter return royalty payable to Madrono. The assets at Pinos Altos acquired by the Company in 2006 included an assignment of rights under contracts to explore and exploit the Madrono Concessions and the Pinos Altos Concession, the right to use up to 400 hectares of land owned by Madrono for mining installations for a period of 20 years after formal mining operations have been initiated and sole ownership of the Parrena Concessions. During 2008, the Company and Madrono entered an agreement under which the Company acquired further surface rights for open pit

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mining operations and additional facilities. Infrastructure payments, surface rights payments and advance royalty payments totalling $35.5 million were made to Madrono in 2009 in respect of this agreement.

In 2006, the Company concluded negotiations with communal land owners (ejidos) and others for the purchase of 5,745 hectares of land contained within the Parrena and Pinos Altos Concessions. In addition, a temporary occupation agreement with a 30-year term expiring in 2036 was negotiated with ejido Jesus del Monte for 1,470 hectares of land covered by these same concession blocks. The acquisition of these surface rights for the geologically prospective lands within the district surrounding Pinos Altos will facilitate future exploration and mining development in these areas.

The Pinos Altos mine is directly accessible by a paved interstate highway that links the cities of Chihuahua and Hermosillo and is within ten kilometres of an extension of the state power grid. Existing and planned underground mine workings will intercept water resources sufficient to sustain the requirements for future operation. The land position is sufficient for construction of all planned surface, infrastructure and mining facilities at the Pinos Altos mine, including its tailings impoundment area. The Company further believes that a sufficient local and trained workforce is available in northern Mexico to support the operation of the mine.

The Pinos Altos property is characterized by moderate to rough terrain with mixed forest (pine and oak) and altitudes that vary from 1,770 metres to 2,490 metres above sea level. The climate is sub-humid, with about one metre of annual precipitation. The average annual temperature is 18.3 degrees Celsius. Exploration and mining work can be carried out year-round.

In August 2007, on the basis of an independently reviewed feasibility study, the Company approved construction of a mine at Pinos Altos. The mine achieved commercial production in November 2009.

Combined production from the Pinos Altos mine and the Creston Mascota deposit at Pinos Altos was 204,380 ounces of gold and 1.85 million ounces of silver in 2011 at total cash costs per ounce of gold of $299. In 2012, combined gold production from the Pinos Altos mine and the Creston Mascota deposit at Pinos Altos is expected to be approximately 205,000 ounces and silver production is expected to be approximately 2.0 million ounces. Total cash costs per ounce of gold are forecast at approximately $415. From 2012 to 2026, combined gold production from the Pinos Altos mine, including the Creston Mascota deposit at Pinos Altos, is expected to average approximately 170,000 ounces of gold per year.

Based on a feasibility study prepared in 2009, the Company determined to build a stand-alone heap leach operation at the satellite open pit Creston Mascota deposit at Pinos Altos. Creston Mascota is expected to produce approximately 50,000 ounces of gold per year during its five-year mine life. Capital costs in connection with the project were approximately $65 million, of which approximately $12 million was incurred in 2011. The first gold pour from the Creston Mascota deposit at Pinos Altos occurred on December 28, 2010 and commercial production from the Creston Mascota deposit at Pinos Altos was achieved in the first quarter of 2011.

The Company has engaged the local communities in the project area with hiring, local contracts, education support and medical support programs to ensure that the project provides long-term benefits to the residents living and working in the region. Approximately two-thirds of the operating workforce at Pinos Altos are locally hired and more than 99% of the permanent workforce are Mexican nationals.

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Mining and Milling Facilities

Surface Plan of the Pinos Altos Mine

LOGO

In 2011, the Creston Mascota deposit at Pinos Altos achieved commercial production and the optimization of the Pinos Altos mine continued. Milling operations at Pinos Altos averaged 4,770 tonnes processed per day as compared to the design expectation of 4,000 tonnes per day. In its first full year of operation, the underground mine at Pinos Altos produced an average 2,983 tonnes of ore per day as compared to the design expectation of 3,000 tonnes per day. The open pit mines at Pinos Altos and the Creston Mascota deposit at Pinos Altos produced 28.5 million tonnes of ore, overburden and waste in 2011, which met the expectation of the mine plan for the year.

Mining Methods

The surface operations at the Pinos Altos mine use traditional open pit mining techniques with bench heights of seven metres and double benches on the footwall and single benching on the hanging wall. Mining is accomplished with front end loaders, trucks, track drills and various support equipment. Based upon geotechnical evaluations, the final pit slopes will vary between 45 degrees and 50 degrees. Performance at the open pit mining operation at Pinos Altos during 2011 continues to indicate that the equipment, mining methods and personnel selected for the project are satisfactory for future production phases. Approximately 28.5 million tonnes of ore, overburden and waste were mined during 2011, meeting the expected production for the year. During the first ten years of the project's life, it is expected that approximately half of the ore volume processed will be derived from open pit operations, principally at Santo Niño, Oberon de Weber and the Creston Mascota at Pinos Altos. Underground mine production will produce the balance of the ore for the processing plant.

The underground mine, which commenced operations in the second quarter of 2010, uses the long hole sublevel stoping method to extract the ore. The Company has considerable expertise with this mining method, having used the same method at the LaRonde mine in Quebec. This method has also been used at various other Mexican mining operations. The stope height is planned at 30 metres and the stope width at 15 metres. Ore is hauled to the surface utilizing underground trucks via a ramp system. The paste backfill system and ventilation system were commissioned in the fourth quarter of 2010 and are now fully operational. During 2011, approximately 1,090,000 tonnes of ore were produced from the underground portion of the mine, averaging 2,984 tonnes per day. At full capacity, the underground mine is expected to produce an average of 3,000 tonnes of ore per day. Performance of the underground mine continues to indicate that the equipment, mining methods, ground control and personnel selected are satisfactory for future production phases. A

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scoping study is expected to be completed in the second quarter of 2012 to evaluate the potential benefit of building a shaft installation to improve the capacity and increase the efficiency of the underground mine. Total lateral development completed as of December 31, 2011 was approximately 22.6 kilometres.

Surface Facilities

The principal mineral processing facilities at the Pinos Altos mine are designed to process 4,000 tonnes of ore per day in a conventional process plant circuit which includes single stage crushing, grinding in a SAG and ball mill in closed loop, gravity separation followed by agitated leaching, counter current decantation and metals recovery in the Merrill Crowe process. Tailings are detoxified and filtered and then used for paste backfill in the underground mine or deposited as dry tailings in an engineered tailings impoundment area. The Pinos Altos mill processed an average of 4,770 tonnes of ore per day during 2011. Low grade ore at Pinos Altos is processed in a heap leach system designed to accommodate approximately five million tonnes of mineralized material over the life of the project. The production from heap leach operations is expected to be relatively minor, contributing about 5% of total metal production planned for the life of the mine.

A separate heap leach operation and ancillary support facilities were built at the Creston Mascota deposit at Pinos Altos, which is designed to process approximately 4,000 tonnes of ore per day in a three stage crushing, agglomeration and heap leach circuit with carbon adsorption. This project began commissioning in the latter part of 2010, with commercial production achieved in the first quarter of 2011. During 2011, a total of 1,452,708 tonnes of ore were produced at the Creston Mascota deposit at Pinos Altos, averaging 3,980 tonnes per day. Based on early performance of the mine and process facilities at the Creston Mascota deposit at Pinos Altos, the equipment, mining methods and personnel are satisfactory for completion of the planned production phases. The Creston Mascota deposit at Pinos Altos is expected to produce approximately 50,000 ounces of gold per year during a five-year remaining mine life.

Surface facilities at the Pinos Altos mine include a heap leach pad, pond, liner and pumping system; administrative support offices and change room facilities; camp facilities; a laboratory; a process plant shop; a maintenance shop; a generated power station; surface power transmission lines and substations; the engineered tailings management system; and a warehouse.

Over the life of the mine, recoveries of gold and silver in the milling circuit at Pinos Altos (other than from the Creston Mascota deposit at Pinos Altos operation) are expected to average approximately 93% and 49%, respectively. Precious metals recovery from low grade ore processed in the Pinos Altos heap leach facility will average about 68% for gold and 12% for silver. Heap leach recoveries for Creston Mascota ore are expected to average 71% for gold and 16% for silver.

Mineral Recoveries

During 2011, the Pinos Altos mill processed 1.74 million tonnes of ore, averaging approximately 4,770 tonnes of ore treated per day and operating at approximately 93.3% of available time. The following table sets out the metal recoveries at the Pinos Altos mill in 2011.

   
    Head
Grade
  Overall
Metal
Recovery
  Payable
Production
   
Gold   2.86 g/t   93.7%   149,867 oz

Silver   65.73 g/t   43.1%   1,545,773 oz

An additional 992,992 tonnes of ore were processed and placed on the heap leach pad at Pinos Altos, with an average grade of 0.65 grams of gold per tonne and 17.45 grams of silver per tonne. Cumulative metals recovery on the heap leach pad at Pinos Altos are 57.5% gold and 11.7% silver. Heap leach recovery is following the expected cumulative recovery curve and it is anticipated that the ultimate recovery of 68% for gold and 12% for silver will be achieved when leaching is completed.

An additional 1,452,708 tonnes of ore were processed and placed on the heap leach pad at the Creston Mascota deposit at Pinos Altos, with an average grade of 1.52 grams of gold per tonne and 7.5 grams of silver per tonne. Cumulative metals recovery on the heap leach pad at the Creston Mascota deposit at Pinos Altos are 48.0% gold and 4.8% silver. Heap leach

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recovery is following the expected cumulative recovery curve and it is anticipated that the ultimate recovery of 71% for gold and 16% for silver will be achieved when leaching is completed.

Total metal production (from mill and heap leach) at Pinos Altos, including the Creston Mascota deposit, during 2011 was 204,380 ounces of gold and approximately 1.85 million ounces of silver.

Environmental Matters

The Pinos Altos mine has received the necessary permit authorizations for construction and operation of a mine, including a Change of Land Use permit and an Environmental Impact Study approval from the Mexican environmental agency ("SEMARNAT"). As of December 31, 2011, all permits necessary for the operation of the Pinos Altos mine, including the operations at the Creston Mascota deposit at Pinos Altos, had been received and requests for modifications to allow for future expansion of facilities, including at the Creston Mascota deposit at Pinos Altos, had been approved or were under review by SEMARNAT. Pinos Altos uses the dry stack tailings technology to minimize the geotechnical and environmental risk that can be associated with the rainfall intensities and topographic relief in the Sierra Madre region of Mexico. All of the Mexican environmental regulatory requirements are expected to be met or exceeded by the Pinos Altos mine (including operations at the Creston Mascota deposit at Pinos Altos). Operations at Pinos Altos and the Creston Mascota deposit at Pinos Altos were deemed to qualify for the "Industria Limpia" (clean industry) designation by SEMARNAT in 2011.

Capital Expenditures

Capital expenditures at the Pinos Altos mine during 2011 were approximately $24 million. Capital expenditures relating to operations at the Creston Mascota deposit at Pinos Altos during 2011 were approximately $12 million.

The Company expects sustaining and deferred capital expenditures at Pinos Altos to be approximately $31 million in 2012 with average sustaining and deferred capital of approximately $15.7 million per year for a projected mine life of approximately 17 years. Approximately $0.5 million in development capital is forecast at the Creston Mascota deposit at Pinos Altos in 2012 with sustaining capital expenditures of $10 million during its anticipated five-year mine life.

Development

At December 31, 2011 more than 71.7 million tonnes of overburden and waste had been removed from the open pit mine at Pinos Altos and more than 22.6 kilometres of lateral development had been completed in the underground mine. At the Creston Mascota deposit at Pinos Altos, approximately 10.6 million tonnes of ore and overburden had been removed from the open pit mine as of December 31, 2011.

Geology, Mineralization and Exploration

Geology

The Pinos Altos mine is in the northern part of the Sierra Madre geologic province, on the northeast margin of the Ocampo Caldera, which hosts many epithermal gold and silver occurrences including the nearby Ocampo mining operation and Moris mine.

The property is underlain by Tertiary-age (less than 45 million years old) volcanic and intrusive rocks that have been disturbed by faulting. The volcanic rocks belong to the lower volcanic complex and the discordantly-overlying upper volcanic supergroup. The lower volcanic complex is represented on the property by the Navosaigame conglomerates (including thinly-bedded sandstone and siltstone) and the El Madrono volcanics (felsic tuffs and lavas intercalated with rhyolitic tuffs, sandy volcanoclastics and sediments). The upper volcanic group is made up of the Victoria ignimbrites (explosive felsic volcanics), the Frijolar andesites (massive to flow-banded, porphyritic flows) and the Buenavista ignimbrites (dacitic to rhyolitic pyroclastics).

Intermediate and felsic dykes as well as rhyolitic domes intrude all of these units. The Santo Nino andesite is a dyke that intrudes along the Santo Nino fault zone.

Structure on the property is dominated by a 10-kilometre by 3-kilometre horst, a fault-uplifted block structure oriented west-northwest, that is bounded on the south by the south-dipping Santo Nino fault and on the north by the north-dipping Reyna de Plata fault. Quartz-gold vein deposits are emplaced along these faults and along transfer faults that splay from the Santo Nino fault.

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Mineralization

Gold and silver mineralization at the Pinos Altos mine consists of low sulphidation epithermal type hydrothermal veins and breccias. The Santo Nino structure outcrops over a distance of roughly six kilometres. It strikes at 060 degrees azimuth on its eastern portion and turns to strike roughly 090 degrees azimuth on its western fringe. The structure dips at 70 degrees towards the south. The four mineralized sectors hosted by the Santo Nino structure consist of discontinuous quartz rich lenses named from east to west: El Apache, Oberon de Weber, Santo Nino and Cerro Colorado.

The El Apache lens is the most weakly mineralized. The area hosts a weakly developed white quartz dominated breccia. Gold values are low and erratic over its roughly 750 metre strike length. Past drilling suggests that this zone is of limited extent at depth.

The Oberon de Weber lens has been followed on surface and by diamond drilling over an extent of roughly 500 metres. Shallow holes drilled by the Company show good continuity both in grade and thickness over roughly 550 metres. From previous drilling done by Penoles, continuity at depth appears to be erratic with a weakly defined western rake.

The Santo Nino lens is the most vertically extensive of these lenses. It has been traced to a depth of approximately 750 metres below surface. The vein is followed on surface over a distance of 550 metres and discontinuously up to 650 metres. Beyond its western and eastern extents, the Santo Nino andesite is massive and only weakly altered. Gold grades found are systematically associated with green quartz brecciated andesite.

The Cerro Colorado lens is structurally more complex than the three described above. Near the surface, it is marked by a complex superposition of brittle faults with mineralized zones which are difficult to correlate from hole to hole. Its relation to the Santo Nino fault zone is not clearly defined. Two deeper holes drilled by the Company suggest better grade continuity is possible at depth.

The San Eligio zone is located approximately 250 metres north of Santo Nino. The host rock is brecciated Victoria Ignimbrite, occasionally with stockworks. There is no andesite in this sector. Unlike the other lenses, the San Eligio lens dips towards the north. The lateral extent seems to be continuous for 950 metres. Its average width is five metres and never exceeds 15 metres. Surface mapping and prospecting has suggested good potential for additional mineralization on strike and at depths below 150 metres. Visible gold has been seen in the drill core.

Several other promising zones are associated with the horst feature in the northwest part of the property. The Creston Mascota deposit at Pinos Altos is 7 kilometres northwest of the Santo Nino deposit, and is similar, but dips shallowly to the west. The Creston Mascota deposit at Pinos Altos is about 1,000 metres long and 4 to 40 metres wide, and extends from surface to more than 200 metres depth. Ore production from the Creston Mascota deposit at Pinos Altos began in July 2010, with the first gold poured in December 2010 and commercial productions commencing in February 2011.

Exploration

In 2011, minesite exploration activities were primarily focused on definition and delineation of the resources at Santo Nino, Oberon de Weber, San Eligio and Creston Mascota. A total of 15 kilometres of minesite exploration drilling, 10.1 kilometres of definition drilling and 4.4 kilometres of delineation drilling were completed during the year. Regional exploration in 2011 focused on the El Cubiro prospect. Diamond drilling consisted of 30.6 kilometres in 84 drill holes. More than 6,000 core samples and 1,250 rock samples were sent to a certified laboratory and assayed mainly for gold and silver.

The recently discovered Cubiro mineralization is two kilometres west of the Creston Mascota deposit at Pinos Altos. Cubiro is a surface deposit that strikes northwest, has a steep dip and has been followed along strike for approximately 850 metres. Drilling has intersected significant gold and silver mineralization up to 30 metres wide. The Cubiro deposit is split by a fault that caused 200 metres of displacement to the west, which has been traced by drilling. The zone is still open to the southeast and possibly at depth.

The Sinter zone is 1,500 metres north northeast of the Santo Nino zone and is part of the Reyna de Plata gold structure. The steeply dipping mineralization is four to 35 metres wide and almost 900 metres long, with over 350 metres of vertical depth. Sinter is being evaluated for its open pit mining and heap leach potential.

Other identified mineral resources in the Pinos Altos region include the Bravo and Carola zones adjacent to the Creston Mascota deposit at Pinos Altos and the Reyna de la Plata prospect further to the east. Exploration efforts will be allocated to these zones as the development continues at Pinos Altos and the Creston Mascota deposit at Pinos Altos.

In 2012 the Company expects to spend $4.7 million on exploration at the Pinos Altos mine, including $3.2 million on 11,800 metres of conversion drilling and $1.5 million on 5,000 metres of exploration drilling. In addition, $1.1 million is expected to be spent on regional exploration on the Pinos Altos property, including 3,000 metres of drilling at the Cubiro, Escalon and Penasco deposits.

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Meadowbank Mine

The Meadowbank mine, which achieved commercial production in March 2010, is located in the Third Portage Lake area in the Kivalliq District of Nunavut in northern Canada, approximately 70 kilometres north of Baker Lake. At December 31, 2011, the Meadowbank mine was estimated to contain proven and probable mineral reserves of 2.2 million ounces of gold comprised of 24.5 million tonnes of ore grading 2.79 grams of gold per tonne. The Company acquired its 100% interest in the Meadowbank mine in 2007 as the result of the acquisition of Cumberland (see "– History and Development of the Company").

The fresh water required for domestic camp use, mining and milling is obtained from the intake barge at Third Portage Lake. Power is supplied by a 29-megawatt diesel electric power generation plant with heat recovery.

Location Map of the Meadowbank Mine

GRAPHIC

The Meadowbank mine is held under ten Crown mining leases, three exploration concessions and 40 Crown mineral claims. The Crown mining leases, which cover the Portage, Goose Island and Goose South deposits, are administered under federal legislation. The mining leases, which have renewable ten-year terms, have no annual work commitments but are subject to annual rent fees that vary according to their renewal date. The mining leases cover approximately 7,400 hectares and expire in either 2016 or 2019. The production lease with the KIA is a surface lease covering 1,354 hectares and requires payment of C$124,530 annually. Production from subsurface lease areas is subject to a royalty of up to 14% of the adjusted net profits, as defined in the Territorial Mining Regulations. In order to conduct exploration on the Inuit-owned lands at Meadowbank, the Company must receive approval for an annual work proposal from the KIA, the body that holds the surface rights in the Kivalliq District and administers land use in the region through various boards. The Nunavut Water Board, one such board, provided the recommendation to the Ministry of Indian Affairs and Northern Development (Canada) to grant the Meadowbank mine's construction and operating licences in July 2008. The Company has obtained all of the approvals and licences required to build and operate the Meadowbank mine.

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The three Meadowbank exploration concessions comprise approximately 23,100 hectares and are granted by Nunavut Tunngavik, the corporation responsible for administering subsurface mineral rights on Inuit-owned lands in Nunavut. Exploration concessions cover the Vault deposit at Meadowbank and in 2012 will require annual rental fees of approximately C$92,504 and exploration expenditures of approximately C$693,780. During the exploration phase, the concessions can be held for up to 20 years and the concessions can be converted into production leases with annual fees of C$1 per hectare, but no annual work commitments. Production from the concessions is subject to a 12% net profits interest royalty from which annual deductions are limited to 85% of the gross revenue.

The 40 Crown mineral claims cover approximately 36,433 hectares at Meadowbank and are subject to land fees and work commitments. Land fees are payable only when work is filed. The most recent filing was in 2011, when approximately C$8,998 in land fees were paid and approximately C$2,266,670 in assessment work was submitted.

The Kivalliq region in which the Meadowbank mine is located has an arid arctic climate. The Meadowbank property is situated in an area characterized by low, rolling hills that are covered predominantly in heath tundra with numerous lakes and ponds. Elevation ranges from approximately 130 metres at lakeshores up to 200 metres on ridge crests. Operations at the Meadowbank mine are expected to be year-round with only minor weather-related interruptions to mining operations; however, these interruptions are not expected to affect ore availability for milling operations or other operating activities.

The Meadowbank mine is accessible from Baker Lake, located 70 kilometres to the south, over a 110-kilometre all-weather road completed in March 2008. Baker Lake provides 2.5 months of summer shipping access via Hudson Bay and year-round airport facilities. The Meadowbank mine also has a 1,100-metre long gravel airstrip, permitting access by air. The Company uses ocean transportation for fuel, equipment, bulk materials and supplies from Montreal, Quebec, (or Hudson Bay port facilities) via barges and ships into Baker Lake during the summer port access period that starts at the end of July in each year. Fuel and supplies are transported year-round to the site from Baker Lake by conventional tractor trailer units using an all-weather private access road. Transportation for personnel and air cargo are provided on scheduled or chartered flights. The permanent bases for employees from which to service the Meadowbank mine are Val D'Or and Montreal in Quebec and the Kivalliq communities. Since February 2009, all chartered flights have landed directly at Meadowbank.

The Meadowbank mine achieved commercial production in March 2010 and produced 270,801 ounces of gold in 2011 at total cash costs per ounce of $1,000. In 2012, total cash costs at Meadowbank are expected to be approximately $1,040 per ounce.

In 2012, payable gold production at Meadowbank is expected to be approximately 295,000 ounces, reflecting a slower than expected ramp-up to design rates as a result of a number of issues during startup over the past two years. While the mill throughput is now exceeding the original design rate, the grades to the mill continue to be lower than expected. This, combined with the unexpected rise in minesite costs has resulted in a new mine plan which forecasts lower gold production over a shorter mine life. The mine life now extends to 2017 rather than 2020.

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Mining and Milling Facilities

Surface Plan of the Meadowbank Mine

GRAPHIC

Meadowbank has three major deposits that have sufficient drilling definition to sustain reserves; Portage, Goose and Vault. By the end of 2009, all of the camp infrastructure (dormitories and kitchen), a mill, a service building shop and generator buildings were built. All required aggregates used in the mining process are produced from waste material taken from the north end of the Portage pit. In 2008, a dewatering dyke was constructed in order to access the north half of the Portage pit in preparation for production in 2010. Construction of the Bay-Goose dyke, a major dewatering dike required to access the southern portion of the Portage and the Goose Island pits, commenced in the summer of 2009 and was completed in the spring of 2011. Three tailings impoundment dykes, Saddle Dam 1, Saddle Dam 2 and Stormwater Dykes, were built in 2009 and 2010. Also, the first phase of the main tailings impoundment dyke, Central Dyke, was started in 2011 and will be in construction for the duration of the mine life. The eight-kilometer long access road to the Vault pit was started in 2011 and will be completed in 2012.

Mining Methods

Mining at the Meadowbank mine is done by open pit with trucks and excavators. The ore is extracted conventionally using drilling and blasting, then hauled by trucks to a primary gyratory crusher adjacent to the mill. The marginal-grade material (material grading under the cut-off grade at a gold price of $1,255 per ounce but which has the potential to increase the reserves at the end of the mine life if the metal prices justify its processing) is stockpiled separately. Also, a sub-grade material stockpile (material for which extraction has already been paid but currently is lower than the mill feed grade) has

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been created for potential processing at the end of the mine life. Waste rock is hauled to one of two waste storages on the property, used for dyke construction or construction material or backfilled into the mined out area.

Mining first commenced in the Portage pit in 2010 and was the only mine in production in 2011. Mining is scheduled to commence in March 2012 in the Goose pit and in 2014 in the Vault pit.

Surface Facilities

The accommodations complex at the Meadowbank mine consists of a permanent camp and a temporary camp to accommodate extra workers. The camp is supported with a sewage treatment, solid waste disposal and potable water plant. In 2008, the exploration group was relocated eight kilometres south of the minesite location to a separate camp with an 80-person capacity.

Plant site facilities include a mill building, a maintenance mechanical shop building, a generator building, an assay lab and a heavy vehicle maintenance shop. A structure comprised of two separate crushers flank the main process complex. Power is supplied by an 29-megawatt diesel electric power generation plant with heat recovery and an onsite fuel storage (5.6 million litres) and distribution system. The mill-service-power complex is connected to the accommodations complex by enclosed corridors. In addition, the Company will build peripheral infrastructure including tailings and waste impoundment areas.

Facilities constructed at Baker Lake include a barge landing site located three kilometres east of the community and a storage compound. A fuel storage and distribution complex with a 60-million litre capacity has been built next to the barge landing facility.

The process design is based on a conventional gold plant flowsheet consisting of two-stage crushing, grinding, gravity concentration, cyanide leaching and gold recovery in a CIP circuit. The mill is designed for year-round operations with a design capacity of 9,800 tonnes per day. The overall gold recovery is projected to be approximately 92.9%, based on projections from metallurgical test work, with approximately 15% typically recovered in the gravity circuit.

The run-of-mine ore is transported to the crusher using an off-road truck. The ore is dumped into the gyratory crusher or into designated ore-type stockpiles. The product from the primary crusher is conveyed to the cone crusher in closed circuit with a vibrating screen. The crushed ore is delivered to the coarse ore stockpile and ore from the stockpile is conveyed to the mill. The grinding circuit is comprised of a primary SAG mill operated in open circuit and a secondary ball mill operated in closed circuit with cyclones. A portion of the cyclone underflow stream is sent to the concentrator, which separates the heavy minerals from the ore. The grinding circuit incorporates a gravity process to recover free gold and the free gold concentrate is leached in an intensive cyanide leach-direct electrowinning recovery process.

The cyclone overflow is sent to the grinding thickener. The clarified overflow is recycled to the grinding circuit and thickened underflow is pumped to a pre-aeration and leach circuit. The cyanide circuit consists of seven tanks providing approximately 42 hours retention time. The leached slurry flows to a train of six CIP tanks. Gold in the solution flowing from the leaching circuit is adsorbed into the activated carbon. Gold is recovered from the carbon in a Zadra elution circuit and is recovered from the solution using an electrowinning recovery process. The gold sludge is then poured into dore bars using an electric induction furnace.

The CIP tailings are treated for the destruction of cyanide using the standard sulphur-dioxide-air process. The detoxified tailings are then pumped to the permanent tailings facility. The tailings storage is designed for zero discharge, with all process water being reclaimed for re-use in the mill to minimize water requirements.

Mineral Recoveries

Gold recoveries are expected to average 92.9% for all deposits. The different ore zones have slightly different grind sensitivities to gold recovery and, as such, different particle size distributions are recommended as target grinds in the process. The use of a slightly coarser grind for the Vault ores will allow all three of the ore zones to be processed at a consistent process throughput.

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During 2011, gold recovery averaged 93.8%. Approximately 2,977,723 tonnes of ore were processed, averaging 8,158 tonnes of ore per day with the mill operating 87.19% of available time. The following table sets out the metal recoveries contained for the 2,977,723 tonnes of ore extracted at the Meadowbank mine in 2011.

   
    Head
Grade
  Overall
Metal
Recovery
  Payable
Production
 
   

 

 

 

 

 

 

 

 
Gold   3.01 g/t   93.82%   270,801 oz  

Environmental Matters (including Inuit Impact and Benefit Agreement)

The development of the Meadowbank mine was subject to an extensive environmental review process under the Nunavut Land Claims Agreement administered by the Nunavut Impact Review Board (the "NIRB"). On December 30, 2006, a predecessor to the Company received the Project Certificate from the NIRB, which includes the terms and conditions to ensure the integrity of the development process. The Nunavut Water Board provided the recommendation to the Ministry of Aboriginal Affairs and Northern Development Canada to grant the Meadowbank mine's construction and operation under a water licence in July 2008.

In February 2007, a predecessor to the Company and the Nunavut government signed a Development Partnership Agreement (the "DPA") with respect to the Meadowbank mine. The DPA provides a framework for stakeholders including the federal and municipal governments and the KIA, to maximize the long-term socio-economic benefits of the Meadowbank mine to Nunavut.

An Inuit Impact Benefit Agreement for the Meadowbank mine (the "IIBA") was signed with the KIA in March 2006. This agreement was renegotiated and a revised IIBA was signed October 18, 2011. The IIBA ensures that local employment, training and business opportunities arising from all phases of the project are accessible to the Kivalliq Inuit. The IIBA also outlines the special considerations and compensation that Cumberland agreed to provide to the Inuit regarding traditional, social and cultural matters.

The Company currently holds a renewable exploration lease from the KIA that expires December 31, 2015. In July 2008, the Company signed a production lease for the construction and the operation of the mine, the mill and all related activities. In April 2008, the Company and KIA signed a water compensation agreement for the Meadowbank mine addressing Inuit rights under the Land Claims Agreement respecting compensation for water use and water impacts associated with the project.

The Meadowbank mine consists of several gold-bearing deposits: Portage, Goose and Vault. A series of six dykes have been built to isolate the mining activities at the Portage and Goose deposits from neighbouring lakes. An additional dyke will be built in 2013 to isolate the mining activities at the Vault deposit. Waste rock from the Portage, Goose Island and Vault pits will primarily be stored in the Portage and Vault rock storage facility, and a portion of the waste will be stored in the Portage Pit. The control strategy to minimize the onset of oxidation and the subsequent generation of acid mine drainage includes freeze control of the waste rock through permafrost encapsulation and capping with an insulating convective layer of neutralizing rock (ultramafic and non-acid generating volcanic rocks). Because the site is underlain by about 450 metres of permafrost, the waste rock below the capping layer is expected to freeze, resulting in low rates of acid rock drainage generation in the long term.

Tailings are stored in the Second Portage arm. Initially the tailings will be deposited in a subaqueous environment, but the majority of tailings will be deposited on tailings beaches. A reclamation pond will be operated within the tailings storage facility. The control strategy to minimize water infiltration into the tailings storage facility and the migration of constituents out of the facility includes freeze control of the tailings through permafrost encapsulation. A four-metre-thick dry cover of acid neutralizing ultramafic rock backfill will be placed over the tailings as an insulating convective layer to confine the permafrost active layer within relatively inert materials.

The water management objective for the project is to minimize the potential impact on the quality of surface water and groundwater resources at the site. Diversion ditches will be constructed in 2012 to avoid the contact of clean runoff water with areas affected by the mine or mining activities. Contact water originating from affected areas is intercepted, collected, conveyed to the tailings storage facility for re-use in process or decanted to treatment (if needed) prior to release to receiving lakes.

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Capital Expenditures/Development

A total of $86.1 million has been budgeted to be spent at the Meadowbank mine (excluding exploration) in 2012, including $55 million on dyke construction, $29.1 million on sustaining capital and equipment and $4 million on construction projects carried over from 2011. As well, $1.6 million has been budgeted for 5,000 metres of diamond drilling to convert resources to reserves in the Vault deposit area. Regional exploration in the Meadowbank area has been budgeted at $5.1 million and will include 13,000 metres of exploration diamond drilling.

The Meadowbank mine started production in 2010. Total capital costs of construction incurred since the date of acquisition by the Company amounted to $838 million. The mine life is expected to be six years.

Geology, Mineralization and Exploration

Geology

The Meadowbank mine comprises a number of Archean-age gold deposits hosted within polydeformed volcanic and sedimentary rocks of the Woodburn Lake Group, part of the Western Churchill supergroup in northern Canada.

Three minable gold deposits – Goose, Portage and Vault – have been discovered along the 25-kilometre long Meadowbank gold trend, and the PDF deposit (a fourth deposit) has been outlined on the northeast gold trend. These known gold resources are within 225 metres of the surface, making the project amenable to open pit mining.

Mineralization

The predominant gold mineralization found in the Portage and Goose deposits is associated with iron sulfides, mainly pyrite and pyrrhotite, which occur as a replacement of magnetite in the oxide facies iron formation host rock. To a lesser extent, pyrite and chalcopyrite may be found and, on rare occasions, arsenopyrite may be associated with the other sulphides. Gold is mainly observed in native form (electrum), occurring in isolated specs or as plating around sulfide grains. The ore zones are typically 6-7 metres wide, following the contacts between the iron formation units and the surrounding host rock. Zones extend up to several hundred metres along strike and at depth. The sulphides primarily occur as replacement of the primary magnetite layers, as well as narrow stringers or bands of disseminated sulphides that almost always crosscut the main foliation and/or bedding which would imply an epigenetic mode of emplacement. The percentage of sulphides is quite variable and may range from trace to semi-massive amounts over several centimetres to several metres in length. The higher gold grades and the occasional occurrence of visible gold are almost always associated with greater than 20% sulphide content.

The main mineralized banded iron formation unit is bounded by an ultramafic unit to the west which locally occurs interlayered with the banded iron formation and to the east by an intermediate to felsic metavolcaniclastic unit.

In the Vault deposit, pyrite is the principal ore bearing sulphide. The disseminated sulphides occur along sheared horizons that have been sericitized and silicified. These zones are several metres wide and may continue for hundreds of metres along strike and down dip.

Three of the four known gold deposits are currently planned to be mined. The Goose Island and Portage deposits are hosted within highly deformed, magnetite-rich iron formation rocks, while intermediate volcanic rock assemblages host the majority of the mineralization at the more northerly Vault deposit. The fourth deposit, PDF, shows the same characteristics as Vault, though it is not currently anticipated to be a mineable deposit.

Defined over a 1.85-kilometre strike length and across lateral extents ranging from 100 to 230 metres, the geometry of the Portage deposit consists of general north-northwest-striking ore zones that are highly folded. The mineralization in the lower limb of the fold is typically six to eight metres in true thickness, reaching up to 20 metres in the hinge area.

The Goose Island deposit is located just south of the Portage deposit and is also associated with iron formation but exhibits different geometry, with a north-south trend and a steep westerly dip. Mineralized zones typically occur as a single unit near surface, splaying into several limbs at depth. The deposit is currently defined over a 750-metre strike length and down to 500 metres at depth (mainly in the southern end), with true thicknesses of three to 12 metres (reaching up to 20 metres locally). The Goose underground resource (100 to 500 metres at depth) extends 700 metres to the south of the Goose pit. The ore zones show the same characteristics as the Goose pit, which is two to five main zones sub-parallel and undulating. The average thickness rarely exceeds three to five metres.

The Vault deposit is located seven kilometres northeast of the Portage and Goose deposits. It is planar and shallow-dipping with a defined strike of 1,100 metres. The deposit has been disturbed by two sets of normal faults striking east-west and

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north-south and dipping moderately to the southeast and steeply to the east, respectively. The main lens has an average true thickness of eight to 12 metres, reaching as high as 18 metres locally. The hanging wall lenses are typically three to five metres, and up to seven metres, in true thickness.

Exploration

Grass roots exploration in the project area began as early as 1980. As some interesting targets arose, several companies conducted various types of work between 1980 and 2007. Throughout these years, six deposits were the main focus of exploration: Portage, Cannu, Bay Zone, Goose, Vault and PDF. Over time, the Cannu, Bay Zone and Portage deposits were combined into one mineable deposit referred to as Portage. Exploration has extended the Goose Island deposit southward, adding the Goose South and Gosling zones.

In 2009, the mine exploration group took over the pit and adjacent areas. Three goals were targeted: exploration drilling, resource conversion and waste pad condemnation.

In 2010, 102 holes totalling 37,928 metres were drilled. The focus of the exploration campaign was testing the underground potential of the Goose deposit, resource conversions at the Vault deposit and on the south continuity of the Portage and Goose deposits. On the Goose underground deposit, a total of 23 holes for 11,145 metres were drilled from 200 to 750 metres in depth. These holes contributed to increase the continuity and understanding of the mineralization. The drilling was predominantly to expand the Goose deposit at depth and towards the south, as well as to conduct infill drilling in areas where large gaps occurred between auriferous intersections. The program was successful in expanding the Goose deposit at depth and towards the south.

On the Vault deposit, a total of 39 holes for 5,943 metres were drilled from 25 to 200 metres in depth. These holes were aimed at converting resources close to the pit shell and also to extending resources to the south-west continuity towards the Tern Lake porphyry.

On the southern portion of the Portage deposit, a total of 18 holes for 8,070 metres were drilled from 50 to 250 metres in depth with the aim of converting resources directly south of the Portage pit and other inferred occurrences within a close proximity to the pit.

On the Goose south trend, a total of 13 holes for 7,320 metres were drilled from 150 to 250 metres in depth. These holes were aimed at following the south trend of the Portage-Goose iron formation.

In 2011, 284 diamond drill holes totalling 24,229 metres were drilled. The exploration program had four goals: exploring the southern trend of the Goose deposit at depth; following-up on the regional results of testing on the Farwest Iron Formation and the geophysics of the Tern Lake porphyry completed in 2010; continuing resource conversion work initiated on the Vault deposit in 2010 and extending resources on the south west part of deposit; and a resources conversion with a definition program in Portage pit.

The definition program on the Portage pit was conducted in phases from May to December 2011 and represented 165 holes totalling 11,431 metres of diamond drilling. In addition, a new method was tried in the Portage pit for definition drilling, a reverse circulation drill was used to drill over 42 holes totalling 1,074 metres. This method will reduce the cost of drilling.

On the Goose South trend, 6 holes totalling 2,382 metres were drilled. On the Farwest Iron Formation, 7 holes for a total of 2,721 metres were drilled along the trend and verified the potential of the west contact with the granitic mass. On the Tern Lake porphyry, 19 holes totalling 931 metres were drilled.

At the Vault pit, 19 holes were drilled for a total of 1,250 metres, 43 holes totalling 3,545 metres were drilled in Vault South and 25 holes totalling 1,969 metres were drilled in Vault East.

Drilling carried out during the period of 2009 to 2011 returned significant results on the Goose underground and Vault deposits. At the Goose underground deposit, the increase in indicated mineral resources comes from a confirmation of continuity towards the south and at depth. At the Vault deposit, the increase in mineral reserves is the result of converting resources to reserves along the east pit wall. Positive drill results show continuity of mineralization toward the southwest, indicating that the pit can be expanded in that direction.

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Meliadine Project

The Meliadine project is an advanced exploration property located near the western shore of Hudson Bay in the Kivalliq region of Nunavut, about 25 kilometres north of the hamlet of Rankin Inlet and 290 kilometres southeast of the Meadowbank mine. The closest major city is Winnipeg, Manitoba, about 1,500 kilometres to the south.

Agnico-Eagle acquired its 100% interest in the Meliadine project through its acquisition of Comaplex in July 2010 (see "– History and Development of the Company").

The mineral reserves and resources of the Meliadine project are estimated at December 31, 2011, to contain proven and probable mineral reserves of 2.9 million ounces of gold in 12.5 million tonnes of ore grading 7.18 grams per tonne. In addition, the project has 12.6 million tonnes of indicated mineral resources grading 4.09 grams of gold per tonne, and 12.7 million tonnes of inferred mineral resources grading 5.98 grams of gold per tonne.

The Meliadine property is a large, almost entirely contiguous land package that is nearly 80 kilometres long. It consists of 55,603 hectares of mineral rights, of which 52,173 hectares are held under the Canada Mining Regulations and administered by the Department of Indian Affairs and Northern Development and referred to as Crown Land. The Crown Land is made up of mining claims covering 887 hectares and mineral leases covering 51,285 hectares. There are also 3,430 hectares of subsurface Nunavut Tunngavik Inc. concessions administered by a division of the Nunavut Territorial government.

The Kivalliq region has an arid arctic climate. The Meliadine property is mainly covered by glacial overburden with the presence of deep-seated permafrost. The property is about 60 metres above sea level in low-lying topography with numerous lakes. Surface waters are usually frozen by early October and remain frozen until early June. Surface geological work can be carried out from mid-May to mid-October, while exploration drilling can take place throughout the year, though is reduced in January and February due to cold and darkness.

Equipment, fuel and dry goods are transported on the annual warm-weather sealift by barge to Rankin Inlet via Hudson Bay. Ocean-going barges from Churchill, Manitoba or eastern Canadian ports can access the community from late June to early October. Churchill, which is approximately 470 kilometres south of Rankin Inlet, has a deep-water port facility and a year-round rail link to locations to the south.

Personnel, perishables and lighter goods arrive at the Rankin Inlet regional airport by commercial or charter airline, from which they can be flown to the property by chartered helicopter. An all-weather gravel road extends from Rankin Inlet to within two kilometres of the Meliadine River, which is approximately 15 kilometres away from the property, but there is winter-road access for tracked vehicles from Rankin Inlet directly to the Meliadine project exploration camp from January to mid-May. The Company has proposed the building of a 23.8-kilometre long all-weather gravel road linking Rankin Inlet with the project site to support ongoing exploration activities at the Meliadine project property. An application to construct this road was submitted to the NIRB and other regulatory agencies in 2011. A positive decision from the NIRB on the application was received in February, 2012 and approvals from other regulatory agencies are pending. A positive decision will allow construction to begin in 2012, in which case the road is expected to be completed by the summer of 2013.

Exploration personnel for the Meliadine project are mainly sourced from other parts of Canada on a fly-in/fly-out rotation from Val d'Or, Quebec, and Winnipeg, Manitoba, approximately 1,500 kilometres south of the Meliadine project property, respectively, although there is preferential employment of qualified people from the Kivalliq region. The hamlet of Rankin Inlet has developed a strong taskforce of entrepreneurs that provide a wide variety of services, such as freight expediting, equipment supply and outfitting.

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Location Map of the Meliadine Project

GRAPHIC

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Facilities

Surface Plan of the Meliadine Project

GRAPHIC

Current facilities at the Meliadine project include the Meliadine project exploration camp located on the shore of Meliadine Lake, approximately 2.3 kilometres north of the Tiriganiaq deposit. The camp is constructed of Weatherhaven tents and can accommodate up to 150 personnel. Covered wooden walkways connect all tents to the washrooms and kitchen facilities. A 100-person, self-contained trailer camp, complete with two diesel generators, was installed adjacent to the existing exploration camp in early 2011. A second 100-person, self-contained trailer camp is expected to be installed in the first half of 2012.

Power is currently generated using diesel generators for the Meliadine exploration camp on an as-required basis. Potable water for the Meliadine project camp is pumped from Meliadine Lake and water for the previous underground operations and surface drill programmes is pumped from Pump Lake. The current water licence allows for a maximum daily water use of 290 cubic metres (Meliadine West), while a request for an amendment to the water licence was filed in October 2010 with the Nunavut Water Board (Meliadine East) to increase water use to 299 cubic metres per day.

The Meliadine project exploration camp has an incinerator on site to burn all flammable materials, such as camp and food wastes. Plastics and metal objects, along with incinerator ash, are set aside for transport to be disposed of in the Rankin Inlet landfill. All hazardous and liquid wastes are held at the Meliadine project site for transport to a waste management company in southern Canada.

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Sewage has been treated through a Biodisk treatment system since the summer of 2010. Run-off water is contained in the primary water containment area and released only when sampling results meet acceptable water quality standards. Routine water sampling has been conducted since the mid-1990s and reported on a monthly basis to the authorities.

The Meliadine East camp on Atulik Lake was decommissioned during the summer of 2010, with completion in the winter of 2010 and 2011. The core shack and storage building remain at the former camp site.

An underground portal allowing access to an exploration decline was built at the Tiriganiaq deposit in 2007 and 2008 in order to extract a bulk sample for study purposes. A waste rock and ore storage pad was generated during excavation of the decline and a sampling tower was installed for processing the bulk sample. There is a two-kilometre road between the Meliadine project exploration camp and the portal site. Another bulk sample was taken from underground via this portal in 2011 and results are expected to be available in early 2012.

Environmental Matters (including Inuit Impact Benefit Agreement)

Land and environmental management in the region of the Meliadine project is generally governed by the provisions of the Nunavut Land Claims Agreement ("NLCA"). Pursuant to the NLCA, land use leases must be obtained from the KIA. The Meliadine project has been granted a commercial lease for exploration and underground development activity, a prospecting and land use lease for exploration and development activities, an exploration land use lease for exploration and drilling on the Inuit-owned lands of Meliadine East and a parcel drilling permit for drilling activity on Inuit-owned lands. A number of right-of-way leases covering road access to the Meliadine project property and esker quarrying on the Inuit-owned lands were also granted by the KIA.

Pursuant to the NLCA, an exploration water licence and a bulk sample water licence were granted by the Nunavut Water Board (the "NWB"). An application was made to the NIRB and the NWB for the construction of an access road to the Meliadine project camp to be able to carry out the exploration program year-round.

A Project Certificate from the NIRB is the next approval required by the Meliadine project. Other operating permits and licences can only be issued after such Project Certificate is received. An Inuit Impact Benefit Agreement and an Inuit Water Compensation Agreement will also need to be negotiated with the KIA.

Geology, Mineralization and Exploration

Geology and Mineralization

Archean volcanic and sedimentary rocks of the Meliadine greenstone belt underlie the property, which is mainly covered by glacial overburden with deep-seated permafrost and is part of the Western Churchill supergroup in northern Canada. The rock layers have been folded, sheared and metamorphosed, and have been truncated by the Pyke Fault, a regional structure that extends the entire 80-kilometre length of the large property.

The Pyke Fault appears to control gold mineralization on the Meliadine project property. At the southern edge of the fault is a series of oxide iron formations that host all six Meliadine project deposits currently known. The deposits consist of multiple lodes of mesothermal quartz-vein stockworks, laminated veins and sulphidized iron formation mineralization with strike lengths of up to three kilometres. The Upper Oxide iron formation hosts the Tiriganiaq and Wolf North zones. The two Lower Lean iron formations contain the F Zone, Pump, Wolf Main and Wesmeg deposits, which are all within five kilometres of Tiriganiaq. The Discovery deposit is 17 kilometres east southeast of Tiriganiaq and is hosted by the Upper Oxide iron formation. Each of these deposits has mineralization within 120 metres of surface, making them potentially mineable by open pit methods. They also have deeper ore that could potentially be mined with underground methods.

Exploration

The Meliadine property has been explored for gold from 1987 through 2010 at a cost of C$166.8 million by former owners Asamera Inc., Rio Algom Limited, Comaplex, Cumberland and Western Mining International, as well as the Company and numerous reputable consultants. For many years the property was divided into two halves – Meliadine East and Meliadine West – which were consolidated into the Meliadine property in December 2009. A detailed history of exploration on the property is given in a technical report by the Company posted on SEDAR on March 8, 2011.

Lack of outcropping bedrock in the area resulted in the use of high-density magnetic surveying followed by diamond drilling as the most common and successful exploration strategy on the property. This has included 193,318 metres of drilling in 682 holes from 1993 through 2010, as well as geophysical surveying, prospecting and sampling. In 2007 and 2008, there was an underground exploration and bulk sample program on the Tiriganiaq deposit. This was followed by a

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Preliminary Assessment for the property in 2009, which indicated the potential of the project to support a mining operation.

In 2010, there were 128 exploration drill holes (32,000 metres) at the Meliadine project, of which 53% were drilled by the Company after acquiring the property in July 2010. Agnico-Eagle spent $10 million on exploration from July through December 2010.

The Company initiated a $129.6 million exploration program in the summer of 2010. Approximately 200,000 metres of drilling is planned through early 2013, mainly to convert mineral resources to reserves at Tiriganiaq. At the end of 2011, the Company spent $74.7 million, principally in diamond drilling (105,000 metres), bulk sample, updated feasibility study, permitting, all-weather road and camp expansion. Another $54.9 million has been budgeted through early 2013 to complete the exploration program (diamond drilling, feasibility study, permitting and the construction of an all-weather road linking the project to Rankin Inlet). The Company spent an additional $12 million in 2011 for the ramp project and has budgeted $16.1 million for this purpose in 2012.

La India Project

Location Map of the La India Project

GRAPHIC

The La India project is located in the Mulatos Gold Belt in the municipality of Sahuaripa, southeast Sonora State in northern Mexico. The Mulatos Gold Belt is part of the Sierra Madre gold and silver belt that also hosts the operating Mulatos gold mine immediately southeast of the La India project property and the Pinos Altos mine and Creston Mascota at Pinos Altos deposit 70 kilometres to the southeast.

The La India project includes the La India feasibility-stage heap leach gold project as well as the recently discovered Tarachi gold zone and several other prospective targets in the belt. The property consists of 43 mining concessions totalling approximately 56,000 hectares, making the Company the largest mineral title holder by area in the Mulatos Gold

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Belt. The climate is semi-arid with seasonal temperatures ranging from 35 degrees Celsius to –2 degrees Celsius, and torrential rainfall from July to September. Exploration activities may be conducted year-round.

The project is located between the small rural towns of Tarachi and Matarachi, which offer basic infrastructure in the form of roads, rural telephone service, small grocery stores and unpaved air strips. More services are available in the town of Sahuaripa located 60 kilometres by gravel road (about 2.5 hours) northwest of the La India project. The population of the district is estimated to be a few thousand, with most of the inhabitants involved in cattle ranching, farming, forestry and mining and exploration. An adequate supply of labour for mining operations can be drawn from the region. Trained exploration personnel for the La India project are mainly sourced from northern Mexico including Hermosillo, Sonora.

The closest major city with an international airport is Hermosillo, the capital of Sonora, located 210 kilometres west-northwest of the La India project. Road travel from Hermosillo to the site takes approximately seven hours. Alternatively, the project can be accessed by small aircraft. The federally owned and operated electric transmission grid extends to within approximately 60 kilometres of the project.

Grayd began to actively explore the project in 2004, and began preliminary metallurgical test work in 2006. Grayd produced NI-43-101 compliant technical reports as of 2004, 2006, 2008, 2009 and May 2010. A Preliminary Economic Assessment ("PEA") was completed on behalf of Grayd on December 6, 2010 by independent consultants, based on only the oxide portion of the La India project resources (as reported in May 2010). The PEA envisioned an open pit mine with gold recovery of 80% by heap leach with an overall average annual production of 92,000 ounces over its nine-year life. According to the PEA, annual production could range from a low of 66,000 ounces in year six to a high of 108,000 ounces in year seven.

As of December 31, 2011, the La India project consisting of the La India feasibility-stage heap leach gold project and Tarachi gold zone had a measured resource of 3.7 million tonnes of ore grading 1.06 grams of gold per tonne, and an indicated resource of 44.5 million tonnes of ore grading 0.72 grams of gold per tonne and inferred resources of 32.1 million tonnes grading 0.69 grams of gold per tonne, using a cut-off of 0.40 grams of gold per tonne. These resources are in the North and Main zones of the La India project and the Tarachi gold zone.

The defined mineral resources and all lands required for infrastructure as proposed by the PEA for the La India project are wholly contained within three privately held properties.

At the Tarachi gold zone, the surface rights in the project area are owned by the Matarachi Ejido (agrarian community) and private parties. All measured, indicated and inferred project resources lie within privately owned or ejido possessed land. Surface access lease agreements have been executed with the property owners or possessors for all identified target areas. The existing agreements permit exploration activities only; if mining activity is contemplated in this exploration area the Company will require further negotiations to acquire the surface rights needed for project development.

Mining and Milling Facilities

Surface Facilities

Current facilities at the La India project include an exploration camp, which consists of former ranch house buildings that have been modified for housing requirements. The power for the exploration camp is supplied by diesel generators, water is supplied by a local spring and septic discharges are managed in a leach field. Non-organic waste from the camp is disposed in the Matarachi Ejido landfill. The camp will be modified and expanded as the Company develops the La India project in 2012.

Environmental Matters

Baseline environmental information has been collected at the La India project since late 2008. This information includes surface water sampling, archeological assessment and soil, fauna and flora assessments.

The La India project is not located in an area with a special Federal environmental protection designation. Therefore, basic exploration activities are regulated under Norma Oficial Mexicana NOM-120-ECOL-1997, which allows for most exploration activities including mapping, geochemical sampling, geophysical surveys, mechanized trenching, road building and drilling. Mine construction and operation activities generally require the preparation of a Manifesto de Impacto Ambiental (MIA, an environmental impact statement), and a Cambio de Uso de Suelo (CUS, a land use change) permit.

No factors have been identified that would be expected to hinder authorization of Federal and State environmental permits required for construction and operation of a mine at the La India project. Some historic mining has been observed in the

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area but the remaining waste dumps and tailings are small and are not considered to present significant environmental issues. No obstacles to obtaining the permits are anticipated providing Agnico-Eagle obtains the necessary surface rights and meets the design and mitigation criteria required by the Mexican permitting authorities. The Company has considerable permitting experience in Mexico and is familiar with the regulatory requirements as a result of its ongoing operations at the Pinos Altos mine and the Creston Mascota deposit at Pinos Altos.

Agreements & Licences

The mining concessions for the La India project and Tarachi are controlled by the Company by means of direct ownership and by 11 separate agreements whereby Agnico-Eagle can earn a 100% interest in certain concessions by making cash and share payments. For the La India project, should the Company elect to acquire all currently optioned concessions, an additional $2.3 million in payments would be required. Payment has been made in full for the claims that host most of the measured, indicated and inferred resources. Some concessions are subject to underlying net smelter royalties varying between 1% and 3%, some of which may be purchased by the Company which would result in net smelter royalties between 0% and 0.5%.

For the Tarachi gold zone, payments totalling $3.3 million and shares with value equivalent to $967,500 over an eight year period are required for the Company to earn a 100% interest in the relevant concessions. To date $1 million has been paid toward these concessions. Should the Company elect to acquire all currently optioned concessions, an additional $2.3 million in payments would be required. Some concessions are subject to underlying net smelter royalties varying between 1% and 3%, some of which may be purchased by the Company, which would result in net smelter royalties between 0% and 0.5%.

The defined mineral reserve and resource and all lands required for infrastructure as proposed by the PEA are wholly contained within three privately-held properties. Agnico-Eagle has acquired the surface rights for the Bronces y Bajios and la Armagosa ranches and negotiations are underway with the owner of the el Duraznito ranch. The current land agreements are sufficient to permit exploration activities that are conducted under environmental regulation NOM-120. Construction and mine development could begin on the Bronces y Bajios and la Armagosa ranches subject to receipt of necessary permits, and the development of mining activity on the el Duraznito ranch is pending a final surface agreement.

At the Tarachi gold zone, the surface rights in the project area are owned by the Matarachi Ejido and private parties. All measured, indicated and inferred project resources lie within privately owned or ejido possessed land. Surface access lease agreements have been executed with the property owners or possessors for all identified target areas. The existing agreements permit exploration activities only, further negotiation would be required for any future mine development at the Tarachi gold zone.

Geology, Mineralization and Exploration

Geology and Mineralization

The La India project lies within the Sierra Madre Occidental ("SMO") province, an extensive Eocene to Miocene volcanic field from the United States-Mexico border to central Mexico. The La India project lies within the western limits of the SMO in an area dominated by outcrops of andesite and dacitic tuffs, overlain by rhyolites and rhyolitic tuffs that were affected by large-scale north-northwest-striking normal faults and intruded by granodiorite and diorite stocks. Incised fluvial canyons cut the uppermost strata and expose the Lower Series volcanic strata.

The project area is predominantly underlain by a volcanic sequence comprised of andesitic and felsic extrusive volcanic strata with interbedded epiclastic volcaniclastic strata of similar composition. The mineral occurrences present in the project area, and the deposit type being sought, are volcanic-hosted epithermal, high-sulphidation gold-silver deposits. Such deposits may be present as veins and/or disseminated deposits. The La India project deposit area is one of several high-sulphidation epithermal mineralization centres recognized in the region.

Epithermal high-sulphidation mineralization at the La India project developed as a cluster of gold zones (Main and North) aligned north-south within a genetically related zone of hydrothermal alteration in excess of 20 square kilometres in area. Gold mineralization is confined to the Late Eocene rocks within zones of intermediate and advanced argillitic alteration originally containing sulphides, and subsequently oxidized by supergene processes. The North and Main zones are within two kilometres of each other.

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Surface outcrop mapping and drill-hole data so far indicate that the gold system at the Tarachi gold zone is likely best classified as a gold porphyry deposit.

Exploration

Gold was discovered at the Mulatos deposit by the Spanish colonials in 1806, but indigenous peoples likely exploited the native-gold-bearing oxidized zone of the deposit prior to this. Small underground mines and prospects are present throughout the La Cruz and La Viruela areas, where modern exploration was conducted by New Golden Sceptre Minerals Ltd. and New Goliath Minerals Ltd. (late 1980s), Noranda Inc. (early 1990s) and San Fernando Mining Co. Ltd. (from 1993).

Grayd began to actively explore the project in 2004, including geologic mapping, geochemical rock chip sampling, airborne and ground geophysical surveys, photogrammetric topographic mapping, diamond drilling, reverse circulation drilling, baseline environmental studies and metallurgical testing. Newmont Mining Corp. funded the work between July 2005 and July 2006 and then declined to continue, retaining no interest in the property. The Tarachi gold zone, located approximately 10 kilometres north of the La India project on the same property, was discovered in 2010.

From 2004 through February 7, 2011, Grayd completed 129 diamond drill holes (13,834 metres) and 560 reverse circulation drill holes (49,552 metres) at the La India project. In 2011, 13 diamond drill holes (1,119 metres) and 30 reverse circulation drill holes (2,728 metres) were drilled at the La India project and 25 diamond drill holes (5,400 metres) and 67 reverse circulation drill holes (16,144 metres) were drilled at the Tarachi gold zone.

The La India feasibility-stage heap leach gold project deposit and the Tarachi gold zone will continue to be actively explored by Agnico-Eagle. The Company has initiated an $18.6 million exploration and development program at the La India feasibility-stage heap leach gold project deposit for 2012 that will include infill drilling, technical studies, land acquisition, water acquisition, infrastructure and permitting efforts. At the Tarachi gold zone, the Company has planned a $5 million exploration program with approximately 9,850 metres of diamond drilling and 10,000 metres of reverse circulation drilling planned in 2012.

Regional Exploration Activities

During 2011, the Company continued to actively explore in Quebec, Ontario, Nunavut, Nevada, Finland, Sweden, Mexico and Argentina. The Canadian exploration activities were focused on the Ellison/Bousquet and Maritime/Lapa properties in Quebec, as well as on the Meadowbank property in Nunavut where activities were conducted both within and outside the mining lease and the Meliadine project, also in Nunavut. In the United States, exploration activities during 2011 were concentrated on the West Pequop project located in northeast Nevada and the Rattlesnake project located in Wyoming. At the LaRonde, Goldex, Lapa, Pinos Altos and Kittila mines, the Company continued exploration programs around the mines. Most of the exploration budget was spent on drilling programs near the mine infrastructure, along previously recognized gold trends.

At the end of 2011, the Company's land holdings in Canada consisted of 77 projects comprised of 2,879 mineral titles covering an aggregate of 270,513 hectares. Land holdings in the United States consisted of 6 properties comprised of 3,486 mineral titles covering an aggregate of 30,552 hectares. Land holdings in Finland consisted of three groups of properties comprised of 133 mineral titles covering an aggregate of 11,757 hectares. Land holdings in Sweden consisted of one project comprised of four mineral titles covering an aggregate of 2,830 hectares. Land holdings in Mexico consisted of six projects comprised of 111 mining concession titles covering an aggregate of 125,820 hectares. Land holdings in Argentina consisted of one project with two mineral titles covering an aggregate of 2,691 hectares.

The total amount spent on regional exploration in 2011 was $76.1 million, which included drilling 775 holes for an aggregate of approximately 216 kilometres. The budget for regional exploration expenditures in 2012 is approximately $67.4 million, including approximately 212 kilometres of drilling.

Mineral Reserves and Mineral Resources

Cautionary Note to Investors Concerning Estimates of Measured and Indicated Mineral Resources

This section uses the terms "measured mineral resources" and "indicated mineral resources". Investors are advised that while these terms are recognized and required by Canadian regulations, the SEC does not recognize them. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into mineral reserves.

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Cautionary Note to Investors Concerning Estimates of Inferred Mineral Resources

This section uses the term "inferred mineral resources". Investors are advised that while this term is recognized and required by Canadian regulations, the SEC does not recognize it. "Inferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that any part or all of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that any part or all of an inferred mineral resource exists, or is economically or legally mineable.

The preparation of the information set forth below with respect to the mineral reserves at the LaRonde mine (which includes mineral reserves at the LaRonde mine extension), the Lapa, Kittila, Pinos Altos and Meadowbank mines and the Meliadine and Bousquet projects has been supervised by the Company's Vice-President, Project Development, Marc Legault, P.Eng, a "qualified person" as that term is defined in NI 43-101. The Company's mineral reserves estimate was derived from internally generated data or geology reports.

The criteria set forth in NI 43-101 for reserve definitions and guidelines for classification of mineral reserve are similar to those used by Guide 7. However, the definitions in NI 43-101 differ in certain respects from those under Guide 7. Under Guide 7, among other things, a mineral reserve estimate must have a "final" or "bankable" feasibility study. Guide 7 also requires the use of commodity prices that reflect current economic conditions at the time of reserve determination which Staff of the SEC has interpreted to mean historic three-year average prices. In addition to the differences noted above, Guide 7 does not recognize mineral resources.

The assumptions used for the 2011 mineral reserves and resources estimate reported by the Company in this Form 20-F were based on three-year average prices for the period ending December 31, 2011 of $1,255 per ounce gold, $23.00 per ounce silver, $0.91 per pound zinc, $3.25 per pound copper, $0.95 per pound lead and exchange rates of C$1.05 per $1.00, 12.86 Mexican pesos per $1.00 and $1.37 per €1.00. The assumptions used for the 2010 mineral reserves and resources estimate reported by the Company in this Form 20-F were based on three-year average prices for the period ending December 31, 2010 of $1,024 per ounce gold, $16.62 per ounce silver, $0.86 per pound zinc, $2.97 per pound copper, $0.90 per pound lead and exchange rates of C$1.08 per $1.00, 12.43 Mexican pesos per $1.00 and $1.40 per €1.00. The assumptions used for the 2009 mineral reserves and resources estimate used by the Company in this Form 20-F were based on three-year average prices for the period ending December 31, 2009 of $848 per ounce gold, $14.35 per ounce silver, $1.03 per pound zinc, $3.15 per pound copper, $0.97 per pound lead and exchange rates of C$1.09 per $1.00, 11.00 Mexican pesos per $1.00 and $1.37 per €1.00. Other assumptions used for estimating 2010 and 2009 mineral reserve and resource information may be found in the Company's annual filings in respect of the years ended December 31, 2010 and December 31, 2009, respectively.

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Set out below are the reserve estimates as of December 31, 2011, as calculated in accordance with NI 43-101 and Guide 7, respectively (tonnages and contained gold quantities are rounded to the nearest thousand):

    National Instrument 43-101   Industry Guide No. 7  
   
 
Property   Tonnes   Gold
Grade
(g/t)
  Contained
Gold (oz)
  Tonnes   Gold
Grade
(g/t)
  Contained
Gold (oz)
 


 

 

 

 

 

 

 

 

 

 

 

 

 

 
Proven Reserves                          

LaRonde mine (underground)

 

5,331,000

 

2.60

 

445,000

 

5,331,000

 

2.60

 

445,000

 

Kittila mine (open pit)   319,000   3.86   40,000   319,000   3.86   40,000  

Kittila mine (underground)   383,000   6.11   75,000   383,000   6.11   75,000  

Kittila mine total proven   702,000   5.09   115,000   702,000   5.09   115,000  

Lapa mine (underground)   1,044,000   6.45   217,000   1,044,000   6.45   217,000  

Meliadine project (open pit)   34,000   7.31   8,000   34,000   7.31   8,000  

Pinos Altos mine (open pit)   848,000   0.80   22,000   848,000   0.80   22,000  

Pinos Altos mine (underground)   1,139,000   2.59   95,000   1,139,000   2.59   95,000  

Pinos Altos mine total proven   1,987,000   1.83   117,000   1,987,000   1.83   117,000  

Meadowbank mine (open pit)   1,931,000   1.49   92,000   1,931,000   1.49   92,000  

Total Proven Reserves   11,029,000   2.80   994,000   11,029,000   2.80   994,000  

Probable Reserves                          

LaRonde mine (underground)   27,901,000   4.74   4,255,000   27,901,000   4.74   4,255,000  

Bousquet (open pit)   3,165,000   1.88   191,000   3,165,000   1.88   191,000  

Kittila mine (open pit)   802,000   5.66   146,000   802,000   5.66   146,000  

Kittila mine (underground)   33,060,000   4.63   4,916,000   33,060,000   4.63   4,916,000  

Kittila mine total probable   33,862,000   4.65   5,062,000   33,862,000   4.65   5,062,000  

Lapa mine (underground)   1,340,000   6.61   285,000   1,340,000   6.61   285,000  

Meliadine project (open pit)   5,292,000   5.80   987,000   5,292,000   5.80   987,000  

Meliadine project (underground)   7,142,000   8.20   1,882,000   7,142,000   8.20   1,882,000  

Meliadine project total probable   12,434,000   7.18   2,869,000   12,434,000   7.18   2,869,000  

Pinos Altos mine (open pit)   19,599,000   1.68   1,059,000   19,599,000   1.68   1,059,000  

Pinos Altos mine (underground)   25,193,000   2.38   1,927,000   25,193,000   2.38   1,927,000  

Pinos Altos mine total probable   44,792,000   2.07   2,986,000   44,792,000   2.07   2,986,000  

Meadowbank mine (open pit)   22,563,000   2.91   2,109,000   22,563,000   2.91   2,109,000  

Total Probable Reserves   146,057,000   3.78   17,757,000   146,057,000   3.78   17,757,000  

Total Proven and Probable Reserves   157,086,000   3.71   18,750,000   157,086,000   3.71   18,750,000  

In the following tables setting out mineral reserve information about the Company's mineral projects, tonnage information is rounded to the nearest thousand tonnes, the total contained gold ounces stated do not include equivalent gold ounces for byproduct metals contained in the mineral reserve, and the reported metal grades in the estimates represent in-place grades and do not reflect losses in the recovery process, that is, the metallurgical losses associated with processing the extracted ore. The mineral reserve and mineral resource figures presented in this Form 20-F are estimates, and no assurance can be given that the anticipated tonnages and grades will be achieved or that the indicated level of recovery will be realized.

2011 ANNUAL REPORT            69

Table of Contents


LaRonde Mine Mineral Reserves and Mineral Resources

    As at December 31,  
   
    2011   2010   2009  
   

 

 

 

 

 

 

 

 

Gold-Rich Orebody              
 
Proven mineral reserves – tonnes

 

4,100,000

 

3,200,000

 

2,700,000

 

  Average grade – gold grams per tonne   3.10   3.07   3.37  

  Probable mineral reserves – tonnes   26,700,000   27,900,000   26,500,000  

  Average grade – gold grams per tonne   4.91   4.90   5.16  

Gold-Poor Orebody              

  Proven mineral reserves – tonnes   1,200,000   1,600,000   2,100,000  

  Average grade – gold grams per tonne   0.97   0.95   1.03  

  Probable mineral reserves – tonnes   1,200,000   2,000,000   3,100,000  

  Average grade – gold grams per tonne   1.22   1.01   0.99  

Total proven and probable mineral reserves – tonnes   33,200,000   34,700,000   34,400,000  

Average grade – gold grams per tonne   4.40   4.32   4.39  

Total contained gold ounces   4,700,000   4,818,000   4,849,000  

Notes:

(1)
The 2011 proven and probable mineral reserves set forth in the table above are based on a net smelter return cut-off value of the ore that varies between C$82.00 per tonne and C$103.00 per tonne depending on the deposit. The Company's historical metallurgical recovery rates at the LaRonde mine from January 1, 2004 to December 31, 2011 averaged 90.8% for gold, 87.0% for silver, 86.3% for zinc and 81.8% for copper. The historical metallurgical recovery rate for lead from January 1, 2008 to December 31, 2011 was 14.8%. The Company estimates that a 10% change in the gold price would result in an approximate 0.9% change in mineral reserves.

(2)
In addition to the mineral reserves set out above, at December 31, 2011, the LaRonde mine contained indicated mineral resources of 7,225,000 tonnes grading 1.79 grams of gold per tonne and inferred mineral resources of 11,400,000 tonnes grading 3.68 grams of gold per tonne.

(3)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the LaRonde mine by category at December 31, 2011 with those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves and mineral reserves added from exploration activities during 2011.
 
   
    Proven   Probable   Total  
   

 

 

 

 

 

 

 

 

December 31, 2010   4,838   29,892   34,729  

Mined in 2011   2,406   0   2,406  

Revision   2,899   (1,991 ) 909  

December 31, 2011   5,331   27,901   33,232  

(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other factors that may materially affect scientific and technical information presented in this Form 20-F relating to the LaRonde mine may be found in the Technical Report on the 2005 LaRonde Mineral Resource & Mineral Reserve Estimate filed with Canadian securities regulatory authorities on SEDAR on March 23, 2005.

(5)
At December 31, 2011, the Bousquet project contained probable mineral reserves of 3,165,000 tonnes grading 1.88 grams of gold per tonne. In addition, the Bousquet project contained indicated mineral resources of 9,805,000 tonnes grading 2.44 grams of gold per tonne and inferred mineral resources of 4,567,000 tonnes grading 4.04 grams of gold per tonne.

70            AGNICO-EAGLE MINES LIMITED

Table of Contents


Goldex Mine Mineral Reserves and Mineral Resources

    As at December 31,  
   
    2011   2010   2009  
   

 

 

 

 

 

 

 

 
Gold              
 
Proven mineral reserves – tonnes

 


 

14,804,000

 

5,217,000

 

  Average grade – gold grams per tonne     1.87   2.02  

  Probable mineral reserves – tonnes     12,990,000   19,524,000  

  Average grade – gold grams per tonne     1.62   2.06  

Total proven and probable mineral reserves – tonnes     27,794,000   24,741,000  

Average grade – gold grams per tonne     1.75   2.05  

Total contained gold ounces     1,566,000   1,630,000  

Notes:

(1)
The suspension of mining operations at the Goldex mine on October 19, 2011 resulted in a restatement, as of that date, of all Goldex proven or probable reserves (as stated on December 31, 2010), that had not already been mined, as indicated resources, except stockpiled ore on surface that was reclassified as measured resources.

(2)
As at December 31, 2011, the Goldex mine contained measured mineral resources of 12,360,000 tonnes grading 1.86 grams of gold per tonne, indicated mineral resources of 24,448,000 tonnes grading 1.72 grams of gold per tonne and inferred mineral resources of 31,081,000 tonnes grading 1.59 grams of gold per tonne.

(3)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Goldex mine by category at December 31, 2011 with those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves and the restatement of mineral reserves to another category.
 
   
    Proven   Probable   Total    
   

 

 

 

 

 

 

 

 

 
December 31, 2010   14,804   12,990   27,794    

Mined in 2011   2,477   0   2,477    

Revision   (12,327 ) (12,990 ) (25,317 )  

December 31, 2011          

(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Goldex mine may be found in the Technical Report on Restatement of the Mineral Resources at Goldex Mine, Quebec, Canada as at October 19, 2011 filed with the Canadian securities regulatory authorities on SEDAR on December 5, 2011.

2011 ANNUAL REPORT            71

Table of Contents


Kittila Mine Mineral Reserves and Mineral Resources

    As at December 31,  
   
    2011   2010   2009  
   

 

 

 

 

 

 

 

 
Gold              
 
Proven mineral reserves – tonnes

 

702,000

 

403,000

 

257,000

 

  Average grade – gold grams per tonne   5.09   4.23   3.71  

  Probable mineral reserves – tonnes   33,862,000   32,329,000   25,704,000  

  Average grade – gold grams per tonne   4.65   4.64   4.83  

Total proven and probable mineral reserves – tonnes   34,564,000   32,732,000   25,961,000  

Average grade – gold grams per tonne   4.66   4.64   4.82  

Total contained gold ounces   5,177,000   4,880,000   4,025,000  

Notes:

(1)
The 2011 proven and probable mineral reserve and mineral resource estimates were calculated using a metallurgical gold recovery of 89%. Gold cut-off grades used were 1.90 grams per tonne, undiluted (1.69 grams per tonne, diluted) for open pit reserves and between 2.97 grams per tonne and 3.24 grams per tonne, undiluted (between 2.52 grams per tonne and 2.80 grams per tonne, diluted), depending on the deposit, for underground reserves. The open pit operating cost was estimated to be €43.28 per tonne in 2011, while the underground cost averaged €68.30 per tonne. The Company estimates that a 10% change in the gold price would result in an approximate 6% change in mineral reserves.

(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Kittila mine contained indicated mineral resources of 12,978,000 tonnes grading 2.46 grams of gold per tonne and inferred mineral resources of 7,953,000 tonnes grading 4.55 grams of gold per tonne.

(3)
The breakdown of proven and probable mineral reserves between planned open pit operations and underground operations at the Kittila mine (with tonnage and contained ounces rounded to the nearest thousand) at December 31, 2011 is:
 
   
Category   Mining Method   Tonnes   Gold Grade (g/t)   Contained
Gold (oz)
 


 

 

 

 

 

 

 

 

 

 

Proven mineral reserves   Open pit   319,000   3.86   40,000  

Proven mineral reserves   Underground   383,000   6.11   75,000  

Total proven mineral reserves       702,000   5.09   115,000  

Probable mineral reserves   Open pit   802,000   5.66   146,000  

Probable mineral reserves   Underground   33,060,000   4.63   4,916,000  

Total probable mineral reserves       33,862,000   4.65   5,062,000  

(4)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Kittila mine by category at December 31, 2011 with those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves and mineral reserves added from exploration activities during 2011.
 
   
    Proven   Probable   Total  
   

 

 

 

 

 

 

 

 
December 31, 2010   403   32,329   32,732  

Mined in 2011   1,031   0   1,031  

Revision   1,330   1,533   2,863  

December 31, 2011   702   33,862   34,564  

(5)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Kittila mine may be found in the Technical Report on the December 31, 2009, Mineral Resource and Mineral Reserve Estimate and the Suuri Extension Project, Kittila Mine, Finland, filed with the Canadian securities regulatory authorities on SEDAR on March 4, 2010.

72            AGNICO-EAGLE MINES LIMITED

Table of Contents


Lapa Mine Mineral Reserves and Mineral Resources

    As at December 31,  
   
    2011   2010   2009  


 

 

 

 

 

 

 

 
Gold              
 
Proven mineral reserves – tonnes

 

1,044,000

 

1,122,000

 

897,000

 

  Average grade – gold grams per tonne   6.45   7.24   8.33  

  Probable mineral reserves – tonnes   1,340,000   1,709,000   2,319,000  

  Average grade – gold grams per tonne   6.61   7.56   8.09  

Total proven and probable mineral reserves – tonnes   2,384,000   2,831,000   3,216,000  

Average grade – gold grams per tonne   6.54   7.43   8.16  

Total contained gold ounces   501,000   677,000   843,000  

Notes:

(1)
The 2011 mineral reserve and mineral resource estimates were calculated using an assumed metallurgical gold recovery of 74.7% and a cut-off grade of 3.80 grams of gold per tonne. The operating cost per tonne estimate for the Lapa mine in 2011 was C$119.41. The Company estimates that a 10% change in the gold price would result in an approximate 4% change in mineral reserves.

(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Lapa mine contained indicated mineral resources of 1,964,000 tonnes grading 4.08 grams of gold per tonne and inferred mineral resources of 719,000 tonnes grading 4.74 grams of gold per tonne.

(3)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Lapa mine by category at December 31, 2011 with those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves and mineral reserves added from exploration activities during 2011.
 
   
    Proven   Probable   Total  
   

 

 

 

 

 

 

 

 
December 31, 2010   1,122   1,709   2,831  

Mined in 2011   621   0   621  

Revision   543   (369 ) 174  

December 31, 2011   1,044   1,340   2,384  

(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Lapa mine may be found in the Technical Report on the Lapa Gold Project, Cadillac Township, Quebec, Canada filed with Canadian securities regulatory authorities on SEDAR on June 8, 2006.

2011 ANNUAL REPORT            73

Table of Contents


Pinos Altos Mine Mineral Reserves and Mineral Resources

    As at December 31,  
   
    2011   2010   2009  


 

 

 

 

 

 

 

 
Gold and Silver              

 
Proven mineral reserves – tonnes

 

1,987,000

 

2,864,000

 

880,000

 

  Average gold grade – grams per tonne   1.83   1.90   1.51  

  Average silver grade – grams per tonne   51.59   54.06   26.53  

  Probable mineral reserves – tonnes   44,792,000   41,298,000   41,080,000  

  Average gold grade – grams per tonne   2.07   2.33   2.54  

  Average silver grade – grams per tonne   59.17   65.53   70.31  

Total proven and probable mineral reserves – tonnes   46,779,000   44,162,000   41,960,000  

Average gold grade – grams per tonne   2.06   2.30   2.52  

Average silver grade – grams per tonne   58.85   64.78   69.39  

Total contained gold ounces   3,103,000   3,271,000   3,396,000  

Total contained silver ounces   88,508,000   91,982,000   93,613,000  

Notes:

(1)
The 2011 proven and probable mineral reserve estimates are based on a net smelter return cut-off value of the open pit ore between $7.96 per tonne and $26.39 per tonne, depending on the deposit, and a net smelter return cut-off value of the underground ore of $52.93 per tonne. The operating cost per tonne estimate for the Pinos Altos mine in 2011 was $32.03 without deferred stripping ($27.00 with deferred stripping). The metallurgical gold recovery used in the reserve estimates varied between 59% and 96.5%, depending on the deposit. The metallurgical silver recovery used in the reserve estimates varied between 10% and 47.4%, depending on the deposit. The Company estimates that a 10% change in the gold price would result in an approximate 2% change in mineral reserves.

(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Pinos Altos mine contained indicated mineral resources of 20,576,000 tonnes grading 1.27 grams of gold per tonne and 28.13 grams of silver per tonne and inferred mineral resources of 23,113,000 tonnes grading 1.05 grams of gold per tonne and 22.65 grams of silver per tonne.

(3)
The proven and probable mineral reserves of the Pinos Altos mine set forth in the table above include proven mineral reserves from the Creston Mascota deposit of 278,000 tonnes grading 0.84 grams of gold per tonne and 1.95 grams of silver per tonne and probable mineral reserves from the Creston Mascota deposit of 12,039,000 tonnes grading 1.12 grams of gold per tonne and 12.00 grams of silver per tonne. The indicated mineral resource at the Pinos Altos mine also includes indicated mineral resources from the Creston Mascota deposit of 1,947,000 tonnes grading 0.57 grams of gold per tonne and 3.58 grams of silver per tonne. The inferred mineral resource at the Pinos Altos mine also includes inferred mineral resources from the Creston Mascota deposit of 1,687,000 tonnes grading 0.88 grams of gold per tonne and 7.18 grams of silver per tonne.

(4)
The breakdown of mineral reserves between planned open pit operations and underground operations at the Pinos Altos mine (with tonnage and contained ounces rounded to the nearest thousand) at December 31, 2011 is:
 
   
Category   Mining Method   Tonnes   Gold
Grade
(g/t)
  Silver
Grade
(g/t)
  Contained
Gold (oz)
  Contained
Silver (oz)
 


 

 

 

 

 

 

 

 

 

 

 

 

 

 
Proven mineral reserves   Open pit stock pile   848,000   0.80   13.82   22,000   377,000  

Proven mineral reserves   Underground   1,139,000   2.59   79.73   95,000   2,919,000  

Total proven mineral reserves       1,987,000   1.83   51.59   117,000   3,296,000  

Probable mineral reserves   Open pit   19,599,000   1.68   37.51   1,059,000   23,634,000  

Probable mineral reserves   Underground   25,193,000   2.38   76.02   1,927,000   61,578,000  

Total probable mineral reserves       44,792,000   2.07   59.17   2,986,000   85,212,000  

74            AGNICO-EAGLE MINES LIMITED

Table of Contents


(5)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Pinos Altos mine by category at December 31, 2011 with those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves and mineral reserves added from exploration activities during 2011.
 
   
    Proven   Probable   Total  
   

 

 

 

 

 

 

 

 
December 31, 2010   2,864   41,298   44,162  

Mined in 2011   4,509   0   4,509  

Revision   3,632   3,494   7,126  

December 31, 2011   1,987   44,792   46,779  

(6)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Pinos Altos mine may be found in the Pinos Altos Gold-Silver Mining Project, Chihuahua State, Mexico, Technical Report on the Mineral Resources and Reserves as of December 31, 2008 filed with the Canadian securities regulatory authorities on SEDAR on March 25, 2009.

Meadowbank Mine Mineral Reserves and Mineral Resources

    As at December 31,  
   
    2011   2010   2009  


 

 

 

 

 

 

 

 
Gold              
 
Proven mineral reserves – tonnes

 

1,931,000

 

839,000

 

600,000

 

  Average grade – gold grams per tonne   1.49   3.13   4.57  

  Probable mineral reserves – tonnes   22,563,000   33,259,000   31,600,000  

  Average grade – gold grams per tonne   2.91   3.18   3.51  

Total proven and probable mineral reserves – tonnes   24,494,000   34,098,000   32,200,000  

Average grade – gold grams per tonne   2.79   3.18   3.53  

Total contained gold ounces   2,201,000   3,486,000   3,655,000  

Notes:

(1)
The 2011 mineral reserve and mineral resource estimates were calculated using a metallurgical gold recovery of 91.0% or 94.0% depending on the deposit. The economic cut-off grade used to determine the open pit reserves varied from 1.40 grams of gold per tonne to 1.47 grams of gold per tonne, depending on the deposit, and is 1.02 grams of gold per tonne as a marginal cut-off grade. The estimated ore-based operating costs used for the 2011 mineral reserve estimate varied between C$52.84 per tonne and C$53.63 per tonne, depending on the deposit, with an additional haulage cost of C$4.95 for Vault deposit reserves. The Company estimates that a 10% change in the gold price would result in an approximate 2% change in mineral reserves.

(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Meadowbank mine contained indicated mineral resources of 17,213,000 tonnes grading 2.38 grams of gold per tonne and inferred mineral resources of 3,745,000 tonnes of ore grading 3.81 grams of gold per tonne.

(3)
The following table shows the reconciliation of mineral reserves (in nearest thousand tonnes) at the Meadowbank mine by category at December 31, 2011 with those at December 31, 2010. Revision means additional mineral reserves converted from mineral resources or other categories of mineral reserves, an update to mineral reserves based on changed mine plans, and mineral reserves added from exploration activities during 2011.
 
   
    Proven   Probable   Total    
   
December 31, 2010   839   33,259   34,098    

Mined in 2011   2,978   0   2,978    

Revision   4,070   (10,696 ) (6,626 )  

December 31, 2011   1,931   22,563   24,494    

(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Meadowbank mine may be found in the Technical Report on the Mineral Resources and Mineral Reserves dated February 15, 2012, Meadowbank Gold Project, Nunavut, Canada filed with Canadian securities regulatory authorities on SEDAR on March 23, 2012.

2011 ANNUAL REPORT            75

Table of Contents


Meliadine Project Mineral Reserves and Mineral Resources

    As at December 31,  
   
    2011   2010   2009  


 

 

 

 

 

 

 

 
Gold              
 
Proven mineral reserves – tonnes

 

34,000

 

0

 


 

  Average grade – gold grams per tonne   7.31      

  Probable mineral reserves – tonnes   12,434,000   9,467,000    

  Average grade – gold grams per tonne   7.18   8.54    

Total proven and probable mineral reserves – tonnes   12,468,000   9,467,000    

Average grade – gold grams per tonne   7.18   8.54    

Total contained gold ounces   2,877,000   2,600,000    

Notes:

(1)
The 2011 mineral reserve and mineral resource estimates were calculated using metallurgical gold recovery curves for Tiriganiaq and F-Zone. The curves give a maximum recovery of 96% for Tiriganiaq and 93% for F-Zone. The 2011 mineral resource estimates for all others were calculated using a metallurgical gold recovery of 92%. The cut-off grade used to determine the open pit reserves was 2.19 grams of gold per tonne, undiluted (1.91 grams of gold per tonne, diluted), and the cut-off grade used to determine the underground reserves was 5.29 grams of gold per tonne, undiluted (4.10 grams of gold per tonne, diluted). The estimated operating cost used for the 2011 mineral reserve estimate was C$74.71 per tonne for open pit and C$165.65 per tonne for underground. The Company estimates that a 10% change in the gold price would result in an approximate 3.4% change in mineral reserves.

(2)
In addition to the mineral reserves set out above, at December 31, 2011, the Meliadine project contained indicated mineral resources of 12,621,000 tonnes grading 4.09 grams of gold per tonne and inferred mineral resources of 12,687,000 tonnes of ore grading 5.98 grams of gold per tonne.

(3)
The breakdown of mineral reserves between planned open pit operations and underground operations at the Meliadine project (with tonnage and contained ounces rounded to the nearest thousand) at December 31, 2011 is:
 
   
Category   Mining Method   Tonnes   Gold Grade (g/t)   Contained
Gold (oz)
 

Proven mineral reserves   Open pit stockpile   34,000   7.31   8,000  

Probable mineral reserves   Open pit   5,292,000   5.80   987,000  

Probable mineral reserves   Underground   7,142,000   8.20   1,882,000  

Total proven and probable mineral reserves       12,468,000   7.18   2,877,000  

(4)
Complete information on the verification procedures, the quality assurance program, quality control procedures, parameters and methods and other factors that may materially affect scientific and technical information presented in this Form 20-F relating to the Meliadine project may be found in the Technical Report on the December 31, 2010 Mineral Resource and Mineral Reserve Estimate, Meliadine Gold Project, Nunavut, Canada, dated February 16, 2011, filed with the Canadian securities regulatory authorities on SEDAR on March 8, 2011.

La India Project Mineral Reserves and Mineral Resources

At December 31, 2011, the La India project, consisting of the La India feasibility-stage heap leach gold project and the Tarachi gold zone, contained no proven or probable mineral reserves, but contained measured mineral resources of 3,730,000 tonnes grading 1.06 grams of gold per tonne, indicated mineral resources of 44,496,000 tonnes grading 0.72 grams of gold per tonne and inferred mineral resources of 32,125,000 tonnes grading 0.69 grams of gold per tonne.

Risk Mitigation

The Company mitigates the likelihood and potential severity of the various risks it encounters in its day-to-day operations through the application of high standards in the planning, construction and operation of mining facilities. In addition, emphasis is placed on hiring and retaining competent personnel and developing their skills through training in safety and loss control. The Company's operating and technical personnel have a solid track record of developing and operating precious metal mines and several of the Company's mines have been recognized for excellence in this regard with various safety and development awards. Nevertheless, the Company and its employees continue with a focused effort to improve workplace safety and the Company has placed additional emphasis on safety procedure training for both mining and supervisory employees.

The Company also mitigates some of the Company's normal business risk through the purchase of insurance coverage. An Insurable Risk Management Policy, approved by the Board, governs the purchase of insurance coverage and only permits the purchase of coverage from insurance companies of the highest credit quality. For a more complete list of the risk factors affecting the Company, please see "Item 3 Key Information – Risk Factors".

76            AGNICO-EAGLE MINES LIMITED

Table of Contents


Glossary of Selected Mining Terms


 

 

 

"alteration"

 

Any physical or chemical change in a rock or mineral subsequent to formation. Milder and more localized than metamorphism.

"anastomosing"

 

A network of branching and rejoining fault or vein surfaces or surface traces.

"andesite"

 

A dark-coloured igneous, calc-alkaline volcanic rock, of intermediate composition (containing between 52-63% silica).

"assay"

 

An analysis to determine the presence, absence or concentration of one or more chemical components.

"bedrock"

 

The solid rock underlying surface deposits.

"breccia"

 

Said of rock formations consisting mostly of angular fragments hosted by a fine-grained matrix.

"brittle"

 

Of minerals, proneness to fracture under low stress. A quality affecting behaviour during comminution of ore, whereby one species fractures more readily than others in the material being crushed.

"bulk mining"

 

A mining method in which large quantities of low-grade ore are mined without an attempt to segregate the high-grade portions.

"byproduct metal"

 

A secondary or additional metal recovered from the processing of rock.

"carbon-in-leach process"

 

A process step in which granular activated carbon particles much larger than the ground ore particles are introduced into the ore pulp. Cyanide leaching and precious metal adsorption onto the activated carbon occur simultaneously. The loaded activated carbon is mechanically screened to separate it from the barren ore pulp and processed to remove the precious metals and prepare it for reuse.

"carbon-in-pulp (CIP) circuit"

 

A process by which soluble gold within a finely ground slurry is recovered by adsorption onto coarser activated carbon. A CIP circuit comprises a series of tanks through which leached slurry flows. Gold is captured onto captive activated carbon that will periodically be moved counter-currently from tank to tank. Head tank carbon is extracted periodically to further recover adsorbed gold before being returned to the circuit tails tank.

"clast"

 

A fragment of mineral, rock or organic structure that has been moved individually from its place of origin.

"concentrate"

 

The clean product recovered in froth flotation.

"conglomerate"

 

A sedimentary rock consisting of rounded, water-worn pebbles or boulders cemented into a solid mass.

"counter-current decantation"

 

Clarifying wash water and concentrating tailings by use of several thickeners in series. The water flows in the opposite direction from the solids. The final products are slurry that is removed as fluid mud and clear water that is reused in the circuit.

"crosscut"

 

A horizontal opening driven from a shaft at or near right angles to the strike of a vein or other orebody.

"cut-off grade"

 

(A) In respect of mineral resources, the lowest grade below which the mineralized rock currently cannot reasonably be expected to be economically extracted.

 

 

(B) In respect of mineral reserves, the lowest grade below which the mineralized rock currently cannot be economically extracted as demonstrated by either a preliminary feasibility study or a feasibility study.

 

 

Cut-off grades vary between deposits depending upon the amenability of ore to gold extraction and upon costs of production and metal prices.

2011 ANNUAL REPORT            77

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"deposit"

 

A mineralized body that has been physically delineated by sufficient drilling, trenching and/or underground work and found to be of sufficient average grade of metal or metals to warrant further exploration and/or development expenditures; such a deposit does not qualify as a commercially mineable orebody or as containing mineral reserves, until final legal, technical and economic factors have been resolved.

"development"

 

The preparation of a mining property or area so that an orebody can be analyzed and its tonnage and quality estimated. Development is an intermediate stage between exploration and mining.

"diamond drill hole"

 

A borehole drilled using a bit inset with diamonds as the rock-cutting tool. The bit cuts a circular channel around a core of rock that can be recovered to provide a more-or-less continuous and complete columnar sample of the rock penetrated.

"dilution"

 

The effect of waste rock or low-grade ore being included in mined ore, increasing tonnage mined and lowering the overall ore grade.

"dip"

 

The angle at which a surface is inclined from the horizontal.

"discordant"

 

Said of a contact between an igneous intrusion and the country rock that is not parallel to the foliation or the bedding planes of the latter.

"disseminated"

 

Said of a mineral deposit (especially of metals) in which the desired minerals occur as scattered particles in the rock, but in sufficient quantity to make the deposit an ore. Some disseminated deposits are very large.

"drift"

 

A horizontal underground opening that follows along the length of a vein or rock formation, as opposed to a crosscut that crosses the rock formation.

"ductile"

 

Of rock, able to sustain, under a given set of conditions, 5% to 10% deformation before fracturing or faulting.

"dyke"

 

An earthen embankment, as around a drill sump or tank, or to impound a body of water or mill tailings. Also, a tabular body of igneous rock that cuts across the structure of adjacent rocks.

"electrowinning"

 

An electrochemical process in which a metal dissolved within an electrolyte is plated onto an electrode. Used to recover metals such as copper and gold from solution in the leaching of concentrates, etc.

"envelope"

 

1. The outer or covering part of a fold, especially of a folded structure that includes some sort of structural break.

 

 

2. A metamorphic rock surrounding an igneous intrusion.

 

 

3. In a mineral, an outer part different in origin from an inner part.

"epigenetic"

 

An orebody formed by hydrothermal fluids and gases that were introduced into the host rocks from elsewhere, filling cavities in the host rock.

"epithermal"

 

A hydrothermal mineral deposit formed within one kilometre of the Earth's surface and in the temperature range of 50 to 200 degrees Celsius, occurring mainly as veins. Also, said of that depositional environment.

"extensional-shear vein"

 

A vein put in place in an extension fracture caused by the deformation of a rock.

"fault"

 

A fracture or a fracture zone in crustal rocks along which there has been displacement of the two sides relative to one another parallel to the fracture. The displacement may be a few inches or many kilometres long.

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"feasibility study"

 

A comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution about whether to finance the development of the deposit for mineral production.

 

 

A "
preliminary feasibility study" or "pre-feasibility study" is a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method (in the case of underground mining) or the pit configuration (in the case of an open pit) has been established, and an effective method of mineral processing has been determined. It includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, economic, social and environmental factors and the evaluation of other relevant factors that are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve.

"flotation"

 

A process for concentrating minerals based on the selective adhesion of certain minerals to air bubbles in a mixture of water and ground ore. When the right chemicals are added to a frothy water bath of ore that has been ground to the consistency of talcum powder, the minerals will float to the surface. The metal-rich flotation concentrate is then skimmed off the surface.

"foliation"

 

A general term for a planar arrangement of textural or structural features in any type of rock, especially the planar structure that results from flattening of the constituent grains of a metamorphic rock.

"fracture"

 

A general term for any break in a rock, whether or not it causes displacement, due to mechanical failure by stress. Fractures include cracks, joints and faults.

"free gold"

 

Gold not combined with other substances.

"glacial till"

 

Dominantly unsorted and unstratified drift, generally unconsolidated, deposited directly by and underneath a glacier without subsequent reworking by meltwater, and consisting of a heterogeneous mixture of clay, silt, sand, gravel and boulders ranging widely in size and shape. Also referred to as "till" and ice-laid drift.

"grade"

 

The relative quality of the percentage of metal content in a mineralized body, i.e., grams of gold per tonne of rock.

"head grade"

 

The average grade of ore fed into a mill.

"hectare"

 

A metric measurement of area. 1 hectare = 10,000 square metres = 2.47 acres.

"horst"

 

An up-faulted block of rock.

"hydrothermal alteration"

 

Alteration of rocks or minerals by reaction with hydrothermal fluids.

"indicated mineral resource"

 

The part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters and to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

 

 

While this term is recognized and required by Canadian regulations, the SEC does not recognize it.
Investors are cautioned not to assume that any part or all of the mineral deposits in this category will ever be converted into mineral reserves.

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"inferred mineral resource"

 

The part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

 

 

While this term is recognized and required by Canadian regulations, the SEC does not recognize it.
Investors are cautioned not to assume that any part or all of the mineral deposits in this category will ever be converted into mineral reserves. Investors are cautioned not to assume that part of or all of an inferred mineral resource exists, or is economically or legally mineable.

"infill drilling"

 

Drilling within a defined mineralized area to improve the definition of known mineralization.

"intrusive"

 

A body of igneous rock formed by the consolidation of magma intruded below surface into other rocks, in contrast to lavas, which are extruded upon the Earth's surface.

"iron formation"

 

A chemical sedimentary rock, typically thin-bedded or finely laminated, containing at least 15% iron of sedimentary origin and commonly containing layers of chert.

"kilometre"

 

A metric measurement of distance. 1.0 kilometre = 0.62 miles.

"lens"

 

Generally used to describe a body of ore that is thick in the middle and tapers towards the ends, resembling a convex lens.

"lithologic groups"

 

Geological groups.

"lode"

 

A mineral deposit consisting of a zone of veins, veinlets or disseminations.

"longitudinal retreat"

 

An underground mining method where the ore is excavated in horizontal slices along the orebody and the stoping starts below and advances upwards. The ore is recovered underneath in the stope.

"massive"

 

Said of a mineral deposit, especially of sulphides, characterized by a great concentration of ore in one place, as opposed to a disseminated or vein-like deposit. Said of any rock that has a homogeneous texture or fabric over a large area, with an absence of layering or any similar directional structure.

"matrix"

 

The non-valuable minerals in an ore, i.e., gangue.

"measured mineral resource"

 

The part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters and to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.

 

 

While this term is recognized and required by Canadian regulations, the SEC does not recognize it.
Investors are cautioned not to assume that any part or all of the mineral deposits in this category will ever be converted into mineral reserves.

"Merrill-Crowe process"

 

A separation technique for removing gold from a cyanide solution. The solution is separated from the ore by methods such as filtration and counter-current decantation, and then the gold is precipitated onto zinc dust. Silver and copper may also precipitate. The precipitate is filtered to capture the gold slimes, which are further refined, e.g., by smelting, to remove the zinc and by treating with nitric acid to dissolve the silver.

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"mesothermal deposit"

 

A mineral deposit formed at moderate temperature and pressure by deposition from hydrothermal fluids along a fissure or other opening in rock at an intermediate depth.

"metallurgical properties"

 

Properties characterizing metals and minerals behaviour under various processing techniques.

"metamorphism"

 

The process by which the form or structure of sedimentary or igneous rocks is changed by heat and pressure.

"mill"

 

A mineral treatment plant in which crushing, wet grinding and further treatment of ore is conducted.

"mineral reserve"

 

The economically mineable part of a mineral resource. The economics of the mineral reserve should be demonstrated by a feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined.

"mineral resource"

 

A concentration or occurrence of natural solid inorganic material or natural solid fossilized organic material in or on the Earth's crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. Investors are cautioned not to assume that any or all of a mineral resource will ever be converted into a mineral reserve.

"muck"

 

Finely blasted rock (ore or waste) underground.

"net smelter return royalty"

 

A phrase used to describe a royalty payment made by a producer of metals based on gross metal production from the property, less deduction of certain limited costs including smelting, refining, transportation and insurance costs.

"ounce"

 

A measurement of mass. 1 troy ounce = 31.1035 grams.

"outcrop"

 

An exposure of bedrock at the surface.

"oxidation"

 

A chemical reaction caused by exposure to oxygen, which results in a change in the chemical composition of a mineral.

"oxidative"

 

Descriptive of an oxidation reaction.

"phenocryst"

 

A term for large crystals or mineral grains occurring in the matrix or groundmass of a porphyry.

"plunge"

 

The inclination of a fold axis or other linear structure from a horizontal plane, measured in the vertical plane.

"polydeformed"

 

A rock that has been subjected to more than one instance of folding, faulting, shearing, compression or extension as a result of various tectonic forces.

"porphyritic"

 

Rock texture in which one or more minerals has a larger grain size than the accompanying minerals.

"porphyry"

 

Any igneous rock in which relatively large crystals, called phenocrysts, are set in a fine-grained groundmass.

"pressure oxidation process"

 

A process by which sulphide minerals are oxidized in order to expose gold that is encapsulated in the mineral lattice. The main component of a pressure oxidation circuit consists of one or more pressurized vessels (autoclaves). Oxygen level, process temperature and acidity are the primary control parameters of such units.

"probable mineral reserve"

 

The economically mineable part of an indicated mineral resource demonstrated by a feasibility study.

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"proven mineral reserve"

 

The economically mineable part of a measured mineral resource demonstrated by a feasibility study.

"pyroclastic"

 

Produced by explosive or aerial ejection of ash, fragments and glassy material from a volcanic vent. Term applicable to the rocks and rock layers as well as to the textures so formed.

"recovery"

 

A term used in process metallurgy to indicate the proportion of valuable material obtained in the processing of an ore. It is generally stated as a percentage of valuable metal in the ore that is recovered compared to the total valuable metal present in the ore before processing.

"reverse circulation drilling"

 

A type of drilling into rock using a solid bit to produce a hole and deliver rock chips (rather than core) to surface for analysis. Less expensive and faster than diamond drilling but not as accurate.

"run-of-mine ore"

 

The mined ore as it is delivered, prior to sorting, stockpiling or treatment.

"schist"

 

A strongly foliated crystalline rock that can be readily split into think flakes or slabs due to the well developed parallelism of more than 50% of the minerals present in it.

"scrubber"

 

A device for separating particulate material from a waste gas stream.

"semi-autogenous grinding" or "SAG"

 

A method of grinding rock whereby larger chunks of the rock itself and steel balls form the grinding media.

"shear" or "shearing"

 

The deformation of rocks by lateral movement along innumerable parallel planes, generally resulting from pressure and producing such metamorphic structures as cleavage and schistosity.

"sill"

 

An intrusive sheet of igneous rock of roughly uniform thickness that has been forced between the bedding planes of existing rock.

"slurry"

 

Fine rock particles in circulating water.

"stope development"

 

Driving subsidiary openings to prepare blocks of ore for extraction by stoping.

"strike"

 

The bearing of the outcrop of an inclined bed, vein or fault plane on a horizontal surface; the direction of a horizontal line perpendicular to the direction of the dip.

"stringers"

 

Mineral veinlets or filaments occurring in a discontinuous subparallel pattern in a host rock.

"sublevel retreat"

 

An underground mining method in which the ore is excavated in horizontal slices along the orebody, starting below and advancing upwards. The ore is recovered underneath in the stope.

"tabular"

 

Said of a feature having two dimensions that are much larger or longer than the third, such as a dyke.

"tailings"

 

Material rejected from the mill after most of the recoverable valuable minerals have been extracted.

"tailings dam"

 

A natural or man-made confined area suitable for depositing tailings.

"tailings pond"

 

A low-lying depression used to confine tailings, the prime function of which is to allow enough time for metals to settle out or for cyanide to be naturally destroyed before the water is discharged into the local watershed.

"tenement"

 

A synonym of mineral title.

"thickness"

 

The distance at right angles between the hanging wall and the footwall of a lode or lens.

"tonne"

 

A metric measurement of mass. 1 tonne = 1,000 kilograms = 2,204.6 pounds.

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"transfer fault"

 

A structure that can accommodate lateral variations of deformation and strain.

"transverse open stoping"

 

An underground mining method in which the ore is excavated in horizontal slices perpendicular to the orebody length and the stoping starts below and advances upwards. The ore is recovered underneath the stope through a drawpoint system.

"twinned drill hole"

 

A borehole drilled very close to an original hole in the same direction and dip in order to verify the results from the original drill hole.

"vein"

 

Minerals filling a fissure, fault or crack in rock.

"wacke"

 

A "dirty" sandstone that consists of a mixture of poorly sorted mineral and rock fragments in an abundant matrix of clay and fine silt.

"winze"

 

An internal mine shaft.

"Zadra elution circuit"

 

The process in this part of a gold mill strips gold and silver from carbon granules and puts them into solution.

"zone"

 

An area of distinct mineralization, i.e., a deposit.

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ITEM 4A   UNRESOLVED STAFF COMMENTS

None.

ITEM 5   OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Results of Operations

Revenues from Mining Operations

In 2011, revenue from mining operations increased 28% to $1,822 million from $1,423 million in 2010. The increase in revenue was mainly attributable to higher sales prices realized on gold and silver in 2011 compared with 2010.

In 2011, sales of precious metals (gold and silver) accounted for 95% of revenues, up from 93% in 2010 and 87% in 2009. The increase in the percentage of revenues from precious metals when compared to 2010 is due to an increase in gold and silver prices, offset partially by decreases in both zinc and copper sales volumes and average realized prices. Revenue from mining operations are accounted for net of related smelting, refining, transportation and other charges. The table below sets out net revenue, production volumes and sales volumes by metal:

      2011     2010     2009  
   
      (thousands)  

 

 

 

 

 

 

 

 

 

 

 
Revenues from mining operations:                    

Gold   $ 1,563,760   $ 1,216,249   $ 474,875  

Silver     171,725     104,544     59,155  

Zinc     70,522     77,544     57,034  

Copper     14,451     22,219     22,571  

Lead     1,341     1,965     127  

    $ 1,821,799   $ 1,422,521   $ 613,762  


Production volumes:

 

 

 

 

 

 

 

 

 

 

Gold (ounces)     985,460     987,609     492,972  

Silver (000s ounces)     5,080     4,812     4,035  

Zinc (tonnes)     54,894     62,544     56,186  

Copper (tonnes)     3,216     4,224     6,671  


Sales volumes:

 

 

 

 

 

 

 

 

 

 

Gold (ounces)     996,090     973,057     463,660  

Silver (000s ounces)     5,089     4,722     3,871  

Zinc (tonnes)     54,499     59,566     58,391  

Copper (tonnes)     3,194     4,223     6,689  

Revenue from gold sales increased by $347.5 million, or 29%, in 2011. Gold production decreased to 985,460 ounces in 2011 from 987,609 ounces in 2010. The decrease in gold production levels between 2010 and 2011 was due primarily to the suspension of production at the Goldex mine on October 19, 2011 and to lower grades and throughput at the LaRonde mine, offset partially by the achievement of commercial production at the Creston Mascota deposit at Pinos Altos on March 1, 2011. Average realized gold price increased 26% in 2011 to $1,573 per ounce from $1,250 per ounce in 2010.

Silver revenue increased by $67.2 million, or 64%, in 2011 when compared to 2010 due to an increase in the realized sales price and increased production. Revenue from zinc sales decreased by $7.0 million, or 9%, in 2011 when compared to 2010. The decrease in zinc revenue was due to decreases in realized zinc sales prices and production. Revenue from copper sales decreased by $7.8 million, or 35%, in 2011 when compared to the previous year due to decreases in realized zinc sales prices and production.

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Interest and Sundry Income (Expense)

Interest and sundry income (expense) consists mainly of acquisition costs of $(3.8) million related to the acquisition of Grayd during 2011 and a net loss recorded on asset disposals, partially offset by interest earned on cash balances. Interest and sundry expense was $(5.2) million in 2011 compared with interest and sundry income of $10.3 million in 2010.

Available-for-sale Securities

From time to time, the Company takes minority equity positions in other mining and exploration companies. As part of the Company's procedures to assess whether the value of its available-for-sale securities portfolio is reasonable for accounting purposes, it was determined (in accordance with the requirements of Accounting Standards Codification ("ASC") 320 Investments – Debt and Equity Securities) that a non-cash write-down of $8.6 million was required in 2011. These write-downs do not necessarily reflect management's long-term outlook on the value of the securities, but rather an "other-than-temporary" impairment as defined in ASC 320. In 2010 and 2009, this determination resulted in no write-downs relating to the Company's various investments.

In 2011, the sale of various available-for-sale securities resulted in a gain before taxes of $4.9 million compared with $19.5 million in 2010. During 2010, there was a net gain on the acquisition of Comaplex of $57.5 million. The gain was driven by the mark-to-market gain on the shares of Comaplex purchased prior to the announcement of the acquisition that were accumulated within other comprehensive income and were reversed through the Consolidated Statements of Income upon acquisition of control, partially offset by the costs of the acquisition.

Production Costs

In 2011, total production costs were $876.1 million compared to $677.5 million in 2010. This increase is mainly due to a full year of production and persistently high costs at the Meadowbank mine in 2011 which achieved commercial production on March 1, 2010, and the achievement of commercial production at the Creston Mascota deposit at Pinos Altos on March 1, 2011. The increase in production costs from these factors was partially offset by the suspension of operations at the Goldex mine on October 19, 2011. The table below sets out the components of production costs:

Production Costs     2011     2010     2009  
   
      (thousands)  

 

 

 

 

 

 

 

 

 

 

 
LaRonde   $ 209,947   $ 189,146   $ 164,221  

Goldex     56,939     61,561     54,342  

Kittila     110,477     87,740     42,464  

Lapa     68,599     66,199     33,472  

Pinos Altos     145,614     90,293     11,819  

Meadowbank     284,502     182,533      

Production costs per Consolidated Statement of Income   $ 876,078   $ 677,472   $ 306,318  

Production costs at the LaRonde mine during 2011 were $209.9 million, an increase of approximately 11% as compared to 2010. During 2011, LaRonde processed an average of 6,592 tonnes of ore per day, compared to 7,102 tonnes of ore per day during 2010. Minesite costs per tonne were C$79 in the fourth quarter of 2011, compared with C$79 in the fourth quarter of 2010. For the full year 2011, minesite costs per tonne were C$84 compared with C$75 per tonne in 2010. The increase in minesite costs per tonne during 2011 is attributable to lower throughput due to issues with sequencing and dilution, and the achievement of commercial production at the LaRonde mine extension on December 1, 2011, meaning that many costs began to be expensed.

Production costs at the Goldex mine were $56.9 million compared with $61.6 million in 2010. The decrease is due to the suspension of Goldex mine operations on October 19, 2011. Minesite costs per tonne were C$21 in the fourth quarter of 2011 when the remaining surface stockpile was milled compared to C$21 in the fourth quarter of 2010. For the full year, minesite costs per tonne were C$21 compared with C$22 per tonne in 2010.

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Production costs at the Kittila mine during 2011 were $110.5 million compared with $87.7 million in 2010. The increase is mainly due to a full year of commercial production in the underground mine where costs are higher as compared to the open pit and to unbudgeted tonnes being mined during the remediation of a slip in the Suuri pit east wall. The mine also experienced higher costs for energy and chemical reagents in 2011 as compared to 2010. During 2011, Kittila processed an average of 2,824 tonnes of ore per day, above the 2010 average production of 2,631 tonnes of ore per day. The processing design capacity of the Kittila mill is approximately 3,000 tonnes per day. The underachievement in actual processing versus capacity was mainly due to several unplanned shutdowns during 2011. Minesite costs per tonne were €80 in the fourth quarter of 2011 compared to €79 in the fourth quarter of 2010. For the full year, the minesite costs per tonne were €75, compared with €66 per tonne in 2010.

Production costs at the Lapa mine during 2011 were $68.6 million compared with $66.2 million in 2010. During 2011, Lapa processed an average of 1,701 tonnes of ore per day, above the 2010 average production of 1,512 tonnes of ore per day due to the realization of design efficiencies. The processing design capacity of the Lapa mill is approximately 1,500 tonnes per day. Minesite costs per tonne were C$117 in the fourth quarter of 2011 compared to C$115 in the fourth quarter of 2010. For the full year, the minesite costs per tonne were C$110, compared with C$114 per tonne in 2010. With total production costs essentially unchanged and a decrease in minesite costs per tonne between 2010 and 2011, the overall improved operating performance is attributable to realized efficiencies as the Company gained experience with the orebody.

Production costs at the Pinos Altos mine during 2011 were $145.6 million compared with $90.3 million in 2010. The increase is mainly due to the achievement of commercial production at the Creston Mascota deposit at Pinos Altos on March 1, 2011. During 2011, Pinos Altos processed an average of 12,355 tonnes of ore per day, significantly higher than the 2010 average production of 3,638 tonnes of ore per day due primarily to the addition of the Creston Mascota deposit at Pinos Altos. Minesite costs per tonne were $24 in the fourth quarter of 2011, compared to $35 in the fourth quarter of 2010. For the full year, the minesite costs per tonne were $27 compared with $35 per tonne in 2010. The decrease in minesite costs per tonne between 2010 and 2011 is mainly attributable to a greater proportion of lower cost heap leach tonnes processed from the Creston Mascota deposit at Pinos Altos.

Production costs at the Meadowbank mine during 2011 were $284.5 million compared with $182.5 million in 2010. The increase is due primarily to a full year of production in 2011 versus 10 months of production in 2010 as the Meadowbank mine achieved commercial production on March 1, 2010 and to higher costs realized in nearly all aspects of operating the mine in 2011. During 2011, the Meadowbank mine processed an average of 8,158 tonnes of ore per day, above the 2010 average production of 6,653 tonnes of ore per day due primarily to the June 2011 addition of the permanent secondary crusher, but below design capacity of 8,500 tonnes per day. Minesite costs per tonne were $98 in the fourth quarter of 2011, compared to $91 in the fourth quarter of 2010. For the full year, the minesite costs per tonne were $91 compared with $95 per tonne in 2010. The decrease in minesite costs per tonne between 2010 and 2011 is mainly attributable to increased throughput.


Total Production Costs by Category

LOGO

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In 2011, total cash costs per ounce of gold increased to $580 from $451 in 2010 and $346 in 2009, representing a weighted average over all the Company's producing mines. In 2011, the LaRonde mine total cash costs per ounce were $77, the Goldex mine total cash costs per ounce were $401, the Kittila mine total cash costs per ounce were $739, the Lapa mine total cash costs per ounce were $650, the Pinos Altos mine total cash costs per ounce were $299 and the Meadowbank mine total cash costs per ounce were $1,000. Total cash costs per ounce are comprised of minesite costs incurred during the period and, for the LaRonde and Pinos Altos mines, reduced by their related net byproduct revenue. Total cash costs per ounce are affected by various factors such as the quantity of gold produced, operating costs, exchange rates and, at the LaRonde and Pinos Altos mines, the quantity of byproduct metals produced and byproduct metal prices. The Company has decided to report total cash costs using the more common industry practice of deferring certain stripping costs that can be attributed to future production. The methodology is in line with the Gold Institute Production Cost Standard. The purpose of adjusting for these stripping costs is to enhance the comparability of cash costs to the majority of the Company's peers within the mining industry.

Total cash costs per ounce is not a recognized measure under US GAAP and this data may not be comparable to data presented by other gold producers. Management believes that this generally accepted industry measure is a realistic indication of operating performance and is useful in allowing year-over-year comparisons. This measure is calculated by adjusting production costs as shown in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for net byproduct revenues, royalties, inventory adjustments, certain stripping costs that can be attributed to future production and asset retirement provisions and then dividing by the number of ounces of gold produced. Total cash costs per ounce is intended to provide investors with information about the cash generating capabilities of mining operations. Management uses this measure to monitor the performance of mining operations. Since market prices for gold are quoted on a per ounce basis, using this per ounce measure allows management to assess a mine's cash generating capabilities at various gold prices. Management is aware that this per ounce measure of performance is affected by fluctuations in byproduct metal prices and exchange rates. Management compensates for the limitations inherent in this measure by using it in conjunction with minesite costs per tonne (discussed below) as well as other data prepared in accordance with US GAAP. Management also performs sensitivity analyses in order to quantify the effects of fluctuating metal prices and exchange rates.

Minesite costs per tonne is not a recognized measure under US GAAP and this data may not be comparable to data presented by other gold producers. This measure is calculated by adjusting production costs as shown in the Consolidated Statement of Income (Loss) and Comprehensive Income (Loss) for inventory adjustments, certain stripping costs that can be attributed to future production and asset retirement provisions and then dividing by tonnes of ore processed through the mill. Since total cash costs per ounce data can be affected by fluctuations in byproduct metals prices, exchange rates and other adjusting items, management believes this measure provides additional information regarding the performance of mining operations and allows management to monitor operating costs on a more consistent basis as the per tonne measure eliminates the cost variability associated with varying production levels. Management also uses this measure to determine the economic viability of mining blocks. As each mining block is evaluated based on the net realizable value of each tonne mined, in order to be economically viable the estimated revenue on a per tonne basis must be in excess of the minesite costs per tonne. Management is aware that this per tonne measure is affected by fluctuations in production levels and thus uses this measure as an evaluation tool in conjunction with production costs prepared in accordance with US GAAP. This measure supplements production cost information prepared in accordance with US GAAP and allows investors to distinguish between changes in production costs resulting from changes in level of production versus changes in operating performance.

Both of these non-US GAAP measures used should be considered together with other data prepared in accordance with US GAAP, and none of the measures taken by themselves is necessarily indicative of production costs or cash flow measures prepared in accordance with US GAAP. The tables below reconcile total cash costs per ounce and minesite costs per tonne to the production costs presented in the consolidated financial statements prepared in accordance with US GAAP.

2011 ANNUAL REPORT            87

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Total Production Costs by Mine

      2011     2010     2009  
   
      (thousands, except as noted)  

 

 

 

 

 

 

 

 

 

 

 
Total production costs per Consolidated Statements of Income and Comprehensive Income   $ 876,078   $ 677,472   $ 306,318  

Attributable to LaRonde     209,947     189,146     164,221  

Attributable to Goldex     56,939     61,561     54,342  

Attributable to Lapa     68,599     66,199     33,472  

Attributable to Kittila     110,477     87,740     42,464  

Attributable to Pinos Altos     145,614     90,293     11,819  

Attributable to Meadowbank     284,502     182,533      

Total   $ 876,078   $ 677,472   $ 306,318  

Reconciliation of Production Costs to Total Cash Costs per Ounce of Gold by Mine

LaRonde Total Cash Costs per Ounce     2011     2010     2009    

      (thousands, except as noted)    

 

 

 

 

 

 

 

 

 

 

 

 
Production costs per Consolidated Statements of Income and Comprehensive Income   $ 209,947   $ 189,146   $ 164,221    

Adjustments:                      

Byproduct metal revenues, net of smelting, refining and marketing charges     (194,000 )   (192,155 )   (138,262 )  

Inventory and other adjustments(i)     (2,309 )   3,287     (3,809 )  

Non-cash reclamation provision     (4,062 )   (1,344 )   (1,198 )  

Cash operating costs   $ 9,576   $ (1,066 ) $ 20,952    

Gold production (ounces)     124,173     162,806     203,494    

Total cash costs (per ounce)(ii)   $ 77   $ (7 ) $ 103    

 
Goldex Total Cash Costs per Ounce     2011     2010     2009    

      (thousands, except as noted)    

 

 

 

 

 

 

 

 

 

 

 

 
Production costs per Consolidated Statements of Income and Comprehensive Income   $ 56,939   $ 61,561   $ 54,342    

Adjustments:                      

Byproduct metal revenues, net of smelting, refining and marketing charges     395     727        

Inventory and other adjustments(i)     (2,778 )   (253 )   383    

Non-cash reclamation provision     (173 )   (216 )   (196 )  

Cash operating costs   $ 54,383   $ 61,819   $ 54,529    

Gold production (ounces)     135,478     184,386     148,849    

Total cash costs (per ounce)(ii)   $ 401   $ 335   $ 366    

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Lapa Total Cash Costs per Ounce     2011     2010     2009    

      (thousands, except as noted)    

 

 

 

 

 

 

 

 

 

 

 

 
Production costs per Consolidated Statements of Income and Comprehensive Income   $ 68,599   $ 66,199   $ 33,472    

Adjustments:                      

Byproduct metal revenues, net of smelting, refining and marketing charges     663     644        

Inventory and other adjustments(i)     631     (4,683 )   6,072    

Non-cash reclamation provision     (348 )   (57 )   (25 )  

Cash operating costs   $ 69,545   $ 62,103   $ 39,519    

Gold production (ounces)     107,068     117,456     52,602    

Total cash costs (per ounce)(ii)   $ 650   $ 529   $ 751    

 
Kittila Total Cash Costs per Ounce     2011     2010     2009    

      (thousands, except as noted)    

 

 

 

 

 

 

 

 

 

 

 

 
Production costs per Consolidated Statements of Income and Comprehensive Income   $ 110,477   $ 87,740   $ 42,464    

Adjustments:                      

Byproduct metal revenues, net of smelting, refining and marketing charges     152     252        

Inventory and other adjustments(i)     (1,267 )   (4,774 )   1,565    

Non-cash reclamation provision     (206 )   (334 )   (254 )  

Stripping costs (capitalized vs expensed)(iii)     (3,018 )          

Cash operating costs   $ 106,138   $ 82,884   $ 43,775    

Gold production (ounces)     143,560     126,205     65,547    

Total cash costs (per ounce)(ii)   $ 739   $ 657   $ 668    

 
Pinos Altos Total Cash Costs per Ounce     2011     2010     2009    

      (thousands, except as noted)    

 

 

 

 

 

 

 

 

 

 

 

 
Production costs per Consolidated Statements of Income and Comprehensive Income   $ 145,614   $ 90,293   $ 11,819    

Adjustments:                      

Byproduct metal revenues, net of smelting, refining and marketing charges     (60,653 )   (25,052 )   (625 )  

Inventory adjustments(i)     1,871     2,925     (5,356 )  

Non-cash reclamation provision     (1,372 )   (858 )   (100 )  

Stripping costs (capitalized vs expensed)(iii)     (24,260 )   (11,857 )   (253 )  

Cash operating costs   $ 61,200   $ 55,451   $ 5,485    

Gold production (ounces)     204,380     130,431     9,634    

Total cash costs (per ounce)(ii)   $ 299   $ 425   $ 570    

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Meadowbank Total Cash Costs per Ounce     2011     2010     2009  

      (thousands, except as noted)  

 

 

 

 

 

 

 

 

 

 

 
Production costs per Consolidated Statements of Income and Comprehensive Income   $ 284,502   $ 182,533   $  

Adjustments:                    

Byproduct metal revenues, net of smelting, refining and marketing charges     (546 )   (584 )    

Inventory adjustments(i)     (1,670 )   6,911      

Non-cash reclamation provision     (1,679 )   (1,315 )    

Stripping costs (capitalized vs expensed)(iii)     (9,746 )   (4,321 )    

Cash operating costs   $ 270,861   $ 183,224   $  

Gold production (ounces)     270,801     264,576      

Total cash costs (per ounce)(ii)   $ 1,000   $ 693   $  

Reconciliation of Production Costs to Minesite Costs per Tonne by Mine

LaRonde Minesite Costs per Tonne     2011     2010     2009    

      (thousands, except as noted)    

 

 

 

 

 

 

 

 

 

 

 

 
Production costs   $ 209,947   $ 189,146   $ 164,221    

Adjustments:                      

Inventory and other adjustments(iv)     (22 )   3,287     234    

Non-cash reclamation provision     (4,062 )   (1,344 )   (1,198 )  

Minesite operating costs (US$)   $ 205,863   $ 191,089   $ 163,257    

Minesite operating costs (C$)   $ 202,957   $ 194,993   $ 184,233    

Tonnes of ore milled (000s tonnes)     2,406     2,592     2,546    

Minesite costs per tonne (C$)(v)   $ 84   $ 75   $ 72    

 
Goldex Minesite Costs per Tonne     2011     2010     2009    


 

 

 

 

 

 

 

 

 

 

 

 
Production costs   $ 56,939   $ 61,561   $ 54,342    

Adjustments:                      

Inventory and other adjustments(iv)     (2,407 )   (253 )   383    

Non-cash reclamation provision     (173 )   (216 )   (196 )  

Minesite operating costs (US$)   $ 54,359   $ 61,092   $ 54,529    

Minesite operating costs (C$)   $ 53,208   $ 62,545   $ 60,986    

Tonnes of ore milled (000s tonnes)     2,477     2,782     2,615    

Minesite costs per tonne (C$)(v)   $ 21   $ 22   $ 23    

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Lapa Minesite Costs per Tonne     2011     2010     2009    


 

 

 

 

 

 

 

 

 

 

 

 
Production costs   $ 68,599   $ 66,199   $ 33,472    

Adjustments:                      

Inventory and other adjustments(iv)     1,071     (4,683 )   6,072    

Non-cash reclamation provision     (348 )   (57 )   (26 )  

Minesite operating costs (US$)   $ 69,322   $ 61,459   $ 39,518    

Minesite operating costs (C$)   $ 68,403   $ 62,771   $ 42,055    

Tonnes of ore milled (000s tonnes)     621     552     299    

Minesite costs per tonne (C$)(v)   $ 110   $ 114   $ 140    

 
Kittila Minesite Costs per Tonne     2011     2010     2009    


 

 

 

 

 

 

 

 

 

 

 

 
Production costs   $ 110,477   $ 87,740   $ 42,464    

Adjustments:                      

Inventory and other adjustments(iv)     (1,324 )   (4,774 )   1,565    

Non-cash reclamation provision     (206 )   (334 )   (254 )  

Stripping costs (capitalized vs expensed)(iii)     (3,018 )          

Minesite operating costs (US$)   $ 105,929   $ 82,632   $ 43,775    

Minesite operating costs (€)   76,817   63,464   30,568    

Tonnes of ore milled (000s tonnes)     1,031     960     563    

Minesite costs per tonne (€)(v)   75   66   54    

 
Pinos Altos Minesite Costs per Tonne     2011     2010     2009    


 

 

 

 

 

 

 

 

 

 

 

 
Production costs   $ 145,614   $ 90,293   $ 11,819    

Adjustments:                      

Inventory and other adjustments(iv)     (169 )   2,925     (5,356 )  

Non-cash reclamation provision     (1,372 )   (858 )   (100 )  

Stripping costs (capitalized vs expensed)(iii)     (24,260 )   (11,857 )   (253 )  

Minesite operating costs (US$)   $ 119,813   $ 80,503   $ 6,110    

Tonnes of ore milled (000s tonnes)     4,509     2,318     227    

Minesite costs per tonne (US$)(v)   $ 27   $ 35   $ 27    

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Meadowbank Minesite Costs per Tonne     2011     2010     2009  


 

 

 

 

 

 

 

 

 

 

 
Production costs   $ 284,502   $ 182,533   $  

Adjustments:                    

Inventory and other adjustments(iv)     253     6,911      

Non-cash reclamation provision     (1,679 )   (1,315 )    

Stripping costs (capitalized vs expensed)(iii)     (9,746 )   (4,321 )    

Minesite operating costs (US$)   $ 273,330   $ 183,808   $  

Minesite operating costs (C$)   $ 272,157   $ 190,980   $  

Tonnes of ore milled (000s tonnes)     2,978     2,001      

Minesite costs per tonne (C$)(v)   $ 91   $ 95   $  

Notes:

(i)
Under the Company's revenue recognition policy, revenue is recognized on concentrates when legal title passes. Since total cash costs are calculated on a production basis, this inventory adjustment reflects the sales margin on the portion of concentrate production for which revenue has not been recognized in the period.

(ii)
Total cash cost per ounce is not a recognized measure under US GAAP and this data may not be comparable to data presented by other gold producers. The Company believes that this generally accepted industry measure is a realistic indication of operating performance and is useful in allowing year over year comparisons. As illustrated in the tables above, this measure is calculated by adjusting production costs as shown in the Consolidated Statements of Income and Comprehensive Income for net byproduct revenues, royalties, inventory adjustments and asset retirement provisions. This measure is intended to provide investors with information about the cash generating capabilities of the Company's mining operations. Management uses this measure to monitor the performance of the Company's mining operations. Since market prices for gold are quoted on a per ounce basis, using this per ounce measure allows management to assess the mine's cash generating capabilities at various gold prices. Management is aware that this per ounce measure of performance can be impacted by fluctuations in byproduct metal prices and exchange rates. Management compensates for the limitation inherent with this measure by using it in conjunction with the minesite costs per tonne measure (discussed below) as well as other data prepared in accordance with US GAAP. Management also performs sensitivity analyses in order to quantify the effects of fluctuating metal prices and exchange rates.

(iii)
The Company has decided to report total cash costs per ounce and minesite costs per tonne using the more common industry practice of deferring certain stripping costs that can be attributed to future production. The methodology is in line with the Gold Institute Production Cost Standard. The purpose of adjusting for these stripping costs is to enhance the comparability of cash costs to the majority of the Company's peers within the mining industry.

(iv)
This inventory adjustment reflects production costs associated with unsold concentrates.

(v)
Minesite costs per tonne is not a recognized measure under US GAAP and this data may not be comparable to data presented by other gold producers. As illustrated in the tables above, this measure is calculated by adjusting production costs as shown in the Consolidated Statements of Income and Comprehensive Income for inventory, asset retirement provisions and deferred stripping costs, and then dividing by tonnes processed through the mill. Since total cash costs data can be affected by fluctuations in byproduct metal prices and exchange rates, management believes minesite costs per tonne provides additional information regarding the performance of mining operations and allows management to monitor operating costs on a more consistent basis as the per tonne measure eliminates the cost variability associated with varying production levels. Management also uses this measure to determine the economic viability of mining blocks. As each mining block is evaluated based on the net realizable value of each tonne mined, in order to be economically viable the estimated revenue on a per tonne basis must be in excess of the minesite costs per tonne. Management is aware that this per tonne measure is impacted by fluctuations in production levels and thus uses this evaluation tool in conjunction with production costs prepared in accordance with US GAAP. This measure supplements production cost information prepared in accordance with US GAAP and allows investors to distinguish between changes in production costs resulting from changes in production versus changes in operating performance.

The Company's operating results and cash flow are significantly affected by changes in the US dollar/Canadian dollar exchange rate due to its operating mines located in Canada. Exchange rate movements can have a significant impact as all of the Company's revenues are earned in US dollars but most of its operating costs and a substantial portion of its capital costs are in Canadian dollars. The US dollar/Canadian dollar exchange rate has varied significantly over the past several years. During the period from January 1, 2005 to December 31, 2011, the noon buying rate, as reported by the Bank of Canada has fluctuated between C$0.92 per US$1.00 and C$1.30 per US$1.00. In addition, a significant portion of the Company's expenditures at the Kittila mine and the Pinos Altos mine are denominated in Euros and Mexican pesos, respectively. Each of these currencies has varied significantly against the US dollar over the past several years as well.

Exploration and Corporate Development Expense

Proven and probable gold reserves decreased to 18.8 million ounces in 2011 from 21.3 million ounces in 2010. The decrease is attributed to 2011 gold production, the October 19, 2011 suspension of mining operations at the Goldex mine and the associated reclassification of its reserves to resources and the new mine plan at the Meadowbank mine that resulted in lower reserves.

Set out below is a summary of the significant exploration and corporate development activities undertaken in 2011:

    Canadian regional exploration expenditures were $29.9 million in 2011, an increase of $1.6 million compared with 2010.

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    Approximately $8.3 million of regional exploration expenses were incurred on the Pinos Altos mine in Mexico. The most concentrated drill programs in 2011 focused on the potential at satellite deposits including Cubiro, Sinter and San Eligio.

    The Company incurred exploration expenditures of $7.5 million during 2011 in Nevada and Wyoming, an increase of $0.5 million compared with 2010. Exploration activities during 2011 were concentrated on the West Pequop property located in the northeastern region of Nevada and on the Rattlesnake Hills property located in the southwestern region of Wyoming.

    During 2011, regional exploration expenditures in Finland amounted to $6.3 million, an increase of $1.8 million compared with 2010. The Company continued its exploration program at the Suurikuusikko structures around the Kittila mine.

    During 2011, mining operations at the Goldex mine were suspended as a result of rock subsidence above the northeastern limit of the deposit. Investigation expenditures of $19.7 million were incurred which included rock mechanic and mining studies, drilling and development exploration of the deeper D zone and care and maintenance of general infrastructure.

    The Company's corporate development team was active in 2011 in evaluating new properties and possible acquisition opportunities. During 2011, the team's accomplishments included the Grayd acquisition.

The table below sets out exploration expense by region and total corporate development expense:

      2011     2010     2009  
   
      (thousands)  

 

 

 

 

 

 

 

 

 

 

 
Canada   $ 29,885   $ 28,346   $ 11,194  

Latin America     8,263     8,268     9,212  

United States     7,520     7,042     7,176  

Europe     6,332     4,569     5,325  

Goldex mine     19,656          

Corporate development expense     4,065     6,733     3,372  

    $ 75,721   $ 54,958   $ 36,279  

General and Administrative Expenses

General and administrative expenses increased to $107.9 million in 2011 from $94.3 million in 2010, attributable primarily to increases in salaries, benefits, insurance, and office and information technology costs. There was an increase in stock option expense due to an increase in the number of stock options granted and an increase in the Black-Scholes calculated value of the options granted. Of the total general and administrative expenses, stock-based compensation was $42.2 million and $38.1 million in 2011 and 2010, respectively.

Provincial Capital Taxes

These taxes are assessed on the Company's capitalization (paid-up capital and debt) less certain allowances and tax credits for exploration expenses incurred. Ontario capital tax was eliminated on July 1, 2010, while Quebec capital tax was eliminated at the end of 2010. There was however, a government audit assessment related to prior years concluded in 2011 that resulted in a $9.2 million expense. In 2010, the Company had a recovery of $6.1 million due to non-recurring items relating to prior years. The provincial capital tax expense is expected to be nil going forward.

Amortization Expense

The consolidated amortization expense for the year increased to $261.8 million in 2011, compared to $192.5 million in 2010, largely as a result of a full year of production at the Meadowbank mine and the underground operations at the Kittila and Pinos Altos mines in 2011. Additionally, commercial production commenced at the Creston Mascota deposit at Pinos

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Altos and the LaRonde mine extension in 2011. Amortization expense commences once a mine achieves commercial production.

Interest Expense

In 2011, interest expense increased to $55.0 million from $49.5 million in 2010 and $8.4 million in 2009. The table below shows the components of interest expense:

      2011     2010     2009    
   
      (thousands)    

 

 

 

 

 

 

 

 

 

 

 

 
Stand-by fees on credit facilities   $ 7,345   $ 8,159   $ 2,730    

Amortization of credit facilities, financing and note issuance costs     4,810     3,507     2,392    

Government interest, penalties and other     3,078     2,165     3,326    

Interest on credit facilities     1,764     10,795     15,470    

Interest on notes     39,067     29,423        

Interest capitalized to construction in progress     (1,025 )   (4,556 )   (15,470 )  

    $ 55,039   $ 49,493   $ 8,448    

Foreign Currency Translation Gain (Loss)

The foreign currency translation gain was $1.1 million in 2011 compared with a loss of $19.5 million in 2010 as the US dollar strengthened against the Canadian dollar, Euro and the Mexican peso during 2011. The gain in 2011 is due primarily to the impact of translation on liabilities denominated in Euros, Canadian dollars and Mexican pesos, offset partially by the impact of translation on cash balances denominated in Canadian dollars.

Income and Mining Taxes

In 2011, the Company had an effective tax rate of 26.9% compared with 23.7% in 2010 and 19.9% in 2009. The tax provision for 2011 was a recovery due to the write-downs of the Goldex and Meadowbank mines. The effective tax rate of 26.9% was lower than the statutory tax rate of 27.8% due to permanent differences, principally stock-based compensation that is not deductible for tax purposes in Canada, and various other minor adjustments.

Supplies Inventory

The supplies inventory balance as of December 31, 2011 increased to $182.4 million, compared to the December 31, 2010 balance of $149.6 million. This increase is mainly attributable to the build-up of supplies inventory at the Meadowbank mine to facilitate operations, including the June 2011 startup of the permanent secondary crusher, and increased maintenance requirements. In addition, supplies inventory at the Pinos Altos mine increased to support underground mining operations and operations at the Creston Mascota deposit at Pinos Altos, which achieved commercial production on March 1, 2011.

Liquidity and Capital Resources

At the end of 2011, the Company's cash and cash equivalents, short-term investments and restricted cash totalled $221.5 million, compared to $104.6 million at the end of 2010. This increase, which resulted from financing and operating activities, was partially offset by investing activities. Cash provided by financing activities of $182.5 million in 2011 compared with cash used in financing activities of $21.9 million in 2010 due primarily to a change from net repayments of long-term debt in 2010 to net proceeds from long-term debt of $270.0 million in 2011. Cash flow provided by operating activities increased significantly to $663.5 million in 2011 from $483.5 million in 2010 mainly due to an increase in gold prices realized. The increase in cash flow provided by operating activities was offset to some degree by the suspension of production at the Goldex mine on October 19, 2011 and by lower grades and throughput realized at the LaRonde mine as it transitions into the LaRonde mine extension. In 2011, cash used in investing activities increased to $760.5 million from $523.3 million in 2010, due primarily to the November 2011 acquisition of Grayd, an increase in

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available-for-sale securities investments, and an increase in restricted cash relating to the environmental remediation of the Goldex mine.

In 2011, the Company invested $482.8 million of cash in new projects and sustaining capital expenditures. Major expenditures in 2011 included $116.9 million on construction at the Meadowbank mine, $73.9 million on construction at the Meliadine project, $49.5 million on construction at the LaRonde mine extension, and $220.8 million for sustaining capital expenditures at the Kittila, Goldex, LaRonde, Pinos Altos and Lapa mines. Capital expenditures to complete the Company's growth initiatives are expected to be funded by cash provided by operating activities and cash on hand. A significant portion of the Company's cash and cash equivalents are denominated in US dollars.

During 2011, the Company received net proceeds on available-for-sale securities equal to $9.4 million compared to $36.6 million during 2010. Also during 2011, the Company purchased available-for-sale securities amounting to $91.1 million compared to $42.5 million in 2010. On July 27, 2011, the Company made a strategic investment in Rubicon Metals Corporation in a non-brokered private placement for cash consideration of approximately $73.8 million.

Subsequent to year end on February 16, 2012, the Company declared a dividend, its 30th consecutive year paying a cash dividend. During 2011, the Company paid dividends of $98.4 million. Although the Company expects to continue paying dividends, future dividends will be at the discretion of the Board and will be subject to factors such as income, financial condition and capital requirements. Also in 2011, the Company issued common shares for gross proceeds of $26.5 million. This was mainly due to stock option exercises and issuances under the Company's employee share purchase plan.

In 2010, the Company increased amounts available from the syndicate of banks that comprised its lenders from an aggregate of $900 million to $1.2 billion in a transaction under which the Company also terminated one of its bank credit facilities. In 2011, the maturity date of the remaining credit facility was extended two years from June 22, 2014 to June 22, 2016 (see note 5 to the Company's audited consolidated financial statements).

As at December 31, 2011, the Company had drawn $320.0 million from its bank credit facility. In addition, the amounts available under the credit facility are reduced by letters of credit drawn under the facility. Letters of credit outstanding under the credit facility at December 31, 2011 totaled $30.6 million. Accordingly, the amount available for future drawdowns as at December 31, 2011, was approximately $849.4 million. The credit facility requires the Company to maintain specified financial ratios and meet financial condition covenants. These financial condition covenants were met as of December 31, 2011.

In June 2009, the Company entered into a C$95 million financial security guarantee issuance agreement with Export Development Canada (the "EDC Facility"). Under the agreement, which matures in June 2014, Export Development Canada agreed to provide guarantees in respect of letters of credit issued on behalf of the Company in favour of certain beneficiaries in respect of obligations relating to the Meadowbank mine. As at December 31, 2011, outstanding letters of credit drawn under the EDC Facility totaled C$79.6 million.

On April 7, 2010, the Company closed a note offering with institutional investors in the United States and Canada of a private placement of $600 million of guaranteed senior unsecured notes due in 2017, 2020 and 2022 (the "Notes"). At issuance, the Notes had a weighted average maturity of 9.84 years and weighted average yield of 6.59%. Proceeds from the offering of Notes were used to repay amounts under the Company's then outstanding credit facilities.

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Agnico-Eagle's contractual obligations as at December 31, 2011 are set out below:

Contractual Obligations     Total     Less than
1 Year
    1-3 Years     4-5 Years     More than 5 Years  

      (millions)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Letter of credit obligations   $ 2.2   $   $ 2.2   $   $  

Reclamation obligations(i)     336.2     26.1     16.5     2.9     290.7  

Purchase commitments     62.3     11.5     15.0     9.4     26.4  

Pension obligations(ii)     4.5     0.4     1.0     0.9     2.2  

Capital and operating leases     49.2     14.4     26.1     4.9     3.8  

Long-term debt repayment obligations(iii)     920.1         0.1     320.0     600.0  

Total(iv)   $ 1,374.5   $ 52.4   $ 60.9   $ 338.1   $ 923.1  

Notes:

(i)
Mining operations are subject to environmental regulations that require companies to reclaim and remediate land disturbed by mining operations. The Company has submitted closure plans to the appropriate governmental agencies which estimate the nature, extent and costs of reclamation for each of its mining properties. The estimated undiscounted cash outflows of these reclamation obligations are presented here. These estimated costs are recorded in the Company's consolidated financial statements on a discounted basis in accordance with ASC 410-20 – Asset Retirement Obligations and on an undiscounted basis in accordance with ASC 410-30 – Environmental Obligations. See Note 6(a) to the audited consolidated financial statements.

(ii)
The Company has retirement compensation arrangement plans (the "RCA Plans") with certain executives. The RCA Plans provide pension benefits to each of these executives equal to 2% of the executive's final three-year average pensionable earnings for each year of service with the Company, less the annual pension payable under the Company's basic defined contribution plan. Payments under the RCA Plans are secured by letter of credit from a Canadian chartered bank. The figures presented in this table have been actuarially determined.

(iii)
For the purposes of the Company's obligations to repay amounts outstanding under its credit facility, the Company has assumed that the indebtedness will be repaid at the current expiry date of the credit facility.

(iv)
The Company's estimated future positive cash flows are expected to be sufficient to satisfy the obligations set out above.

96            AGNICO-EAGLE MINES LIMITED

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