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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 40-FooREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR ýýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016 Commission file number: 1-13422
AGNICO EAGLE MINES LIMITED (ExactnameofRegistrantasspecifiedinitscharter)
Ontario, Canada 1040 98-0357066(Provinceofotherjurisdictionofincorporationor
organization) (PrimaryStandardIndustrialClassificationCodeNumber) (I.R.S.EmployerIdentificationNumber)
145 King Street East, Suite 400 Toronto, Ontario, Canada M5C 2Y7
(416) 947-1212 (AddressandtelephonenumberofRegistrant'sprincipalexecutiveoffices)
Davies Ward Phillips & Vineberg LLP 900 Third Avenue, 24th Floor, New York, New York 10022
Attention: Scott D. Fisher (212) 588-5500
(Name,address(includingzipcode)andtelephonenumber(includingareacode)ofagentforserviceintheUnitedStates)
SecuritiesregisteredortoberegisteredpursuanttoSection12(b)oftheAct:
Common Shares, without parvalue
New York Stock Exchange
(TitleofClass) (Nameofexchangeonwhichregistered)
SecuritiesregisteredortoberegisteredpursuanttoSection12(g)oftheAct:None
(TitleofClass)
SecuritiesforwhichthereisareportingobligationpursuanttoSection15(d)oftheAct:None
(TitleofClass)
Forannualreports,indicatebycheckmarktheinformationfiledwiththisForm:
ýAnnualinformationformýAuditedannualfinancialstatements
Indicatethenumberofoutstandingsharesofeachoftheissuer'sclassesofcapitalorcommonstockasofthecloseoftheperiodcoveredbytheannualreport.
225,465,654CommonSharesasofDecember31,2016
Indicateby check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding12months(orforsuchshorterperiodthattheRegistrantwasrequiredtofilesuchreports)and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.
YesýNoo
IndicatebycheckmarkwhethertheRegistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredtobesubmittedand 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 theRegistrantwasrequiredtosubmitandpostsuchfiles).
YesoNoo
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EXPLANATORY NOTE
AgnicoEagleMinesLimited("AgnicoEagle"orthe"Company")isaCanadianissuereligibletofileitsannualreportpursuanttoSection13oftheSecuritiesExchangeActof1934,asamended(the"ExchangeAct"),onForm40-Fpursuanttothemulti-jurisdictionaldisclosuresystemoftheExchangeAct.TheCompanyisa"foreignprivateissuer"asdefinedinRule405undertheSecuritiesActof1933,asamended.EquitysecuritiesoftheCompanyareaccordinglyexemptfromSections14(a),14(b),14(c),14(f)and16oftheExchangeActpursuanttoRule3a12-3.
FORWARD-LOOKING INFORMATION
This Annual Report on Form 40-F and the exhibits attached hereto (the "Form 40-F") contain "forward-looking statements" within the meaning of theUnited States Private Securities Litigation ReformAct of 1995. 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"orothervariationsofthesetermsorsimilarwords.Forward-lookingstatementsinthisForm40-Finclude,butarenotlimitedto,thefollowing:
• theCompany'soutlookfor2017andfutureperiods;
• statementsregardingfutureearnings,andthesensitivityofearningstogoldandothermetalprices;
• anticipated levels or trends for prices of gold and by-product metals mined by the Companyor for exchange rates betweencurrenciesinwhichcapitalisraised,revenueisgeneratedorexpensesareincurredbytheCompany;
• estimatesoffuturemineralproductionandsales;
• estimates of future costs, including mining costs, total cash costs per ounce, all-in sustaining costs per ounce, minesite costs per tonne andothercosts;
• estimatesoffuturecapitalexpenditures,explorationexpendituresandothercashneeds,andexpectationsastothefundingthereof;
• statementsregardingtheprojectedexploration,developmentandexploitationoforedeposits,includingestimatesofexploration,developmentandproductionandothercapitalcostsandestimatesofthetimingofsuchexploration,developmentandproductionordecisionswithrespectthereto;
• estimatesofmineralreserves,mineralresources,oregradesandmineralrecoveriesandstatementsregardinganticipatedfutureexplorationresults;
• estimatesofcashflow;
• estimatesofminelife;
• anticipatedtimingofeventsattheCompany'smines,minedevelopmentprojectsandexplorationprojects;
• estimatesoffuturecostsandotherliabilitiesforenvironmentalremediation;
• statements regarding anticipated legislation and regulations, including with respect to climate change, and estimates of the impact on theCompany;and
• otheranticipatedtrendswithrespecttotheCompany'scapitalresourcesandresultsofoperations.
Forward-lookingstatementsarenecessarilybaseduponanumberoffactorsandassumptionsthat,whileconsideredreasonablebyAgnicoEagleasofthedateofsuchstatements,areinherentlysubjecttosignificantbusiness,economicandcompetitiveuncertaintiesandcontingencies.ThefactorsandassumptionsofAgnicoEagleuponwhichtheforward-lookingstatementsinthisForm40-Farebased,andwhichmayprovetobeincorrect,include,butarenotlimitedto,theassumptionsset out elsewhere in this Form40-Fas well as: that there are nosignificantdisruptions affecting AgnicoEagle's operations, whether dueto labour disruptions,supplydisruptions,damagetoequipment,naturalorman-madeoccurrences,miningormillingissues,politicalchanges,titleissuesorotherwise;thatpermitting,developmentandexpansionateachofAgnicoEagle'smines,minedevelopmentprojectsandexplorationprojectsproceedonabasisconsistentwithexpectations,andthat
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AgnicoEagledoesnotchangeitsexplorationordevelopmentplansrelatingtosuchprojects;thattheexchangeratesbetweentheCanadiandollar,Euro,MexicanpesoandtheU.S.dollarwillbeapproximatelyconsistentwithcurrentlevelsorassetoutinthisForm40-F;thatpricesforgold,silver,zincandcopperwillbeconsistentwithAgnicoEagle'sexpectations;thatpricesforkeyminingandconstructionsupplies,includinglabourcosts,remainconsistentwithAgnicoEagle'sexpectations; that production meets expectations; that Agnico Eagle's current estimates of mineral reserves, mineral resources, mineral grades and mineralrecoveries are accurate; that there are no material delays in the timing for completion of development projects; and that there are no materialvariationsinthecurrenttaxandregulatoryenvironmentsthataffectAgnicoEagle.
Theforward-lookingstatementsintheForm40-FreflecttheCompany'sviewsasatthedatehereofandinvolveknownandunknownrisks,uncertaintiesandother factors which could cause the actual results, performance or achievements of the Company or industry results to be materially different fromany futureresults,performanceorachievementsexpressedorimpliedbysuchforward-lookingstatements.Suchfactorsinclude,amongothers,theriskfactorssetoutunder"RiskFactors" onpage89of the Company's annual information formfor the year endedDecember 31, 2016, whichis filed as Exhibit 99.1 to this Form40-Fandincorporatedbyreferenceherein(the"AIF").Giventheseuncertainties,readersarecautionednottoplaceunduerelianceontheseforward-lookingstatements,whichspeakonlyasofthedatemade.Exceptasotherwiserequiredbylaw,theCompanyexpresslydisclaimsanyobligationorundertakingtoreleasepubliclyanyupdatesorrevisionstoanysuchstatementstoreflectanychangeintheCompany'sexpectationsoranychangeinevents,conditionsorcircumstancesonwhichanysuchstatementisbased.ThisForm40-Fcontainsinformationregardinganticipatedtotalcashcostsperounce,all-insustainingcostsperounceandminesitecostspertonneinrespectoftheCompanyoratcertainoftheCompany'sminesandminedevelopmentprojects. TheCompanybelievesthatthesegenerallyacceptedindustry measures are realistic indicators of operating performance and are useful in allowing year over year comparisons. Investors are cautioned that thisinformationmaynotbesuitableforotherpurposes.
CURRENCY
AgnicoEaglepresentsitsconsolidatedfinancialstatementsinUnitedStatesdollars.AlldollaramountsinthisForm40-FarestatedinUnitedStatesdollars("U.S.dollars","$"or"US$"),exceptwhereotherwiseindicated.OnMarch22,2017,thenoonexchangerate(asreportedbytheBankofCanada)ofUnitedStatesdollarsintoCanadiandollars("C$")wasUS$1.00equalsC$1.3347.
NOTE TO INVESTORS CONCERNING ESTIMATES OF MINERAL RESERVES AND MINERAL RESOURCES
ThemineralreserveandmineralresourceestimatescontainedinthisForm40-FhavebeenpreparedinaccordancewiththeCanadiansecuritiesregulatoryauthorities'(the"CSA")NationalInstrument43-101StandardsofDisclosureforMineralProjects("NI43-101").ThesestandardsaresimilartothoseusedbytheUnitedStatesSecuritiesandExchangeCommission's(the"SEC")IndustryGuideNo.7,asinterpretedbyStaffattheSEC("Guide7").However,thedefinitionsinNI43-101differincertainrespectsfromthoseunderGuide7.Accordingly,mineralreserveinformationcontainedorincorporatedbyreferencehereinmaynotbecomparabletosimilarinformationdisclosedbyU.S.companies.UndertherequirementsoftheSEC,mineralizationmaynotbeclassifiedasa"reserve"unlessthedeterminationhasbeenmadethatthemineralizationcouldbeeconomicallyandlegallyproducedorextractedatthetimethereservedeterminationismade.TheSECdoesnotrecognizemeasuresof"mineralresource".
Themineralreservefigurespresentedhereinareestimates,andnoassurancecanbegiventhattheanticipatedtonnagesandgradeswillbeachievedorthattheindicated level of recovery will be realized. The Company does not include equivalent gold ounces for byproduct metals contained in mineral reserves in itscalculationofcontainedounces.
Cautionary Note to Investors Concerning Estimates of Measured and Indicated Mineral Resources
TheForm40-Fusestheterms"measuredmineralresources"and"indicatedmineralresources".Investorsareadvisedthatwhile thosetermsarerecognizedandrequiredbyCanadianregulations,theSECdoesnotrecognizethem.Investors are cautioned not to assume that any part or all of mineral deposits in thesecategories will ever be converted into mineral reserves .
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Cautionary Note to Investors Concerning Estimates of Inferred Mineral Resources
TheForm40-Fusestheterm"inferredmineralresources".InvestorsareadvisedthatwhilethistermisrecognizedandrequiredbyCanadianregulations,theSECdoesnotrecognizeit."Inferredmineralresources"haveagreatamountofuncertaintyastotheirexistenceandastotheireconomicandlegalfeasibility.Itcannotbe assumedthat any part or all of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferredmineralresourcesmaynotformthebasisoffeasibilityorpre-feasibilitystudies,exceptinrarecases.Investors are cautioned not to assume that any part or allof an inferred mineral resource exists, or is economically or legally mineable .
NOTE TO INVESTORS CONCERNING CERTAIN MEASURES OF PERFORMANCE
TheForm40-Fpresentscertainmeasures,including"totalcashcostsperounce","all-insustainingcostsperounce""minesitecostspertonne"and"netdebt",thatarenotrecognizedmeasuresunderInternationalFinancialReportingStandards("IFRS").Thesemeasuresmaynotbecomparabletomeasurespresentedbyother gold producers. For a reconciliation of these measures to the most directly comparable financial information presented in the consolidated financialstatementspreparedinaccordancewithIFRS,andforanexplanationofhowmanagementusesthesemeasures,pleaseseetheCompany'smanagement'sdiscussionandanalysisfortheyearendedDecember31,2016,whichisfiledasExhibit99.3tothisForm40-Fandincorporatedbyreferenceherein(the"AnnualMD&A").TheCompanybelievesthatthesegenerallyacceptedindustrymeasuresarerealisticindicatorsofoperatingperformanceandareusefulinallowingyearoveryearcomparisons.However,thesenon-IFRSmeasuresshouldbeconsideredtogetherwithotherdatapreparedinaccordancewithIFRS,andthesemeasures,takenbythemselves,arenotnecessarilyindicativeofoperatingcostsorcashflowmeasurespreparedinaccordancewithIFRS.ThisForm40-Falsocontainsinformationasto estimatedfuture total cashcosts per ounce, all-in sustainingcosts per ounceandminesite costs per tonne. Theestimates of total cashcostsperounce,all-insustainingcostsperounceandminesitecostspertonnearebaseduponthetotalcashcostsperounce,all-insustainingcostsperounceandminesitecostspertonnethat theCompany expects to incur to mine gold at its projects and, consistent with the reconciliation provided, do not include production costs attributable toaccretionexpenseandotherassetretirementcosts,whichwillvaryovertimeaseachprojectisdevelopedandmined.Itisthereforenotpracticabletoreconciletheseforward-lookingnon-IFRSfinancialmeasurestothemostcomparableIFRSmeasure.
DISCLOSURE CONTROLS AND PROCEDURES
TheCompany'smanagement,withtheparticipationoftheCompany'sChiefExecutiveOfficerandChiefFinancialOfficer,evaluatedtheeffectivenessoftheCompany's disclosure controls and procedures as of December 31, 2016 pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating thedisclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide onlyreasonableassuranceofachievingthedesiredcontrolobjectives.Inaddition,thedesignofdisclosurecontrolsandproceduresmustreflectthefactthatthereareresourceconstraintsandthatmanagementisrequiredtoapplyitsjudgmentinevaluatingthebenefitsofpossiblecontrolsandproceduresrelativetotheircosts.
Basedonsuchevaluation, theCompany's Chief Executive Officer andChief Financial Officer concludedthat, as of December 31, 2016, the Company'sdisclosurecontrolsandproceduresweredesignedatareasonableassurancelevelandwereeffectivetoprovidereasonableassurancethatinformationtheCompanyis required to disclose in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the timeperiodsspecifiedinSECrulesandforms,andthatsuchinformationisaccumulatedandcommunicatedtotheCompany'smanagement,includingtheCompany'sChiefExecutiveOfficerandChiefFinancialOfficer,asappropriate,toallowtimelydecisionsregardingrequireddisclosure.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
ManagementoftheCompanyisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreporting.Internalcontroloverfinancialreportingisaprocessdesignedby,orunderthesupervisionof,theCompany'sChiefExecutiveOfficerandChiefFinancialOfficerandeffectedbytheCompany'sboard of directors (the "Board"), management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and thepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples.Becauseofitsinherentlimitations,internalcontroloverfinancial
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reportingmay not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls maybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.
TheCompany'smanagement, includingtheCompany'sChiefExecutiveOfficerandChiefFinancial Officer, assessedtheeffectiveness oftheCompany'sinternal control over financial reporting as of December 31, 2016. In making this assessment, the Company's management used the criteria set out by theCommittee of Sponsoring Organizations of the Treadway Commission in InternalControl —IntegratedFramework . Based uponits assessment, managementconcludedthat,asofDecember31,2016,theCompany'sinternalcontroloverfinancialreportingwaseffective.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2016 has been audited by Ernst & Young LLP, anindependentregisteredpublicaccountingfirm,asstatedinitsattestationreportonpage2oftheCompany'sAnnualAuditedConsolidatedFinancialStatements,whicharefiledasExhibit99.2tothisForm40-Fandincorporatedbyreferenceherein(the"AnnualFinancialStatements").
The Company will continue to periodically review its disclosure controls and procedures and internal control over financial reporting and may makemodificationsfromtimetotimeasconsiderednecessaryordesirable.
ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM
Ernst&YoungLLP'sattestationreportonmanagement's assessmentoftheCompany'sinternalcontroloverfinancial reportingisfoundonpage2oftheAnnualFinancialStatements.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
ManagementregularlyreviewsitssystemofinternalcontroloverfinancialreportingandmakeschangestotheCompany'sprocessesandsystemstoimprovecontrols and increase efficiency, while ensuring that the Company maintains an effective internal control environment. Changes may include such activities asimplementingnew,moreefficientsystems,consolidatingactivities,andmigratingprocesses.
ForadiscussionofchangesintheCompany'sinternalcontroloverfinancialreportingthatoccurredduringtheperiodcoveredbythisForm40-Fthathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theCompany'sinternalcontroloverfinancialreportingpleaseseepage30oftheAnnualMD&Aundertheheading"ControlsEvaluation".
IDENTIFICATION OF THE AUDIT COMMITTEE
The Board has a separately-designated standing Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act. The AuditCommittee is composed of Dr. Leanne Baker (Chair), Mr. Mel Leiderman, Dr. Sean Riley and Mr. Jamie Sokalsky, as described under "AuditCommittee—CompositionoftheAuditCommittee"onpage107oftheAIF.
AUDIT COMMITTEE FINANCIAL EXPERT
TheBoardhasdeterminedthattheCompanyshallhaveatleastone"auditcommitteefinancialexpert"(asdefinedinparagraph(8)ofGeneralInstructionBtoForm40-F)andthatMr.LeidermanandMr.SokalskyaretheCompany's"auditcommitteefinancialexperts"servingontheAuditCommitteeoftheBoard.EachoftheAuditCommitteefinancialexpertsis"independent"underapplicablelistingstandards.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Ernst&YoungLLPservedastheCompany'sindependentpublicaccountantforeachofthefiscalyearsinthetwo-yearperiodendedDecember31,2016.ForadescriptionofthetotalamountbilledtotheCompanybyErnst&YoungLLPforservicesperformedinthelasttwofiscalyearsbycategoryofservice(auditfees,audit-relatedfees,taxfeesandallotherfees),see"AuditCommittee—ExternalAuditorServiceFees"onpage108oftheAIF.Noaudit-relatedfees,taxfeesorothernon-auditfeeswereapprovedbytheAuditCommitteepursuanttoparagraph(c)(7)(i)(C)ofRule2-01ofRegulationS-X.
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AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
For a description of the pre-approval policies and procedures of the Company's Audit Committee, see "Audit Committee —Pre-Approval Policies andProcedures"onpage107oftheAIF.
CODE OF ETHICS
TheCompanyhasa"codeofethics"(asdefinedinparagraph(9)ofGeneralInstructionBtoForm40-F)that appliestoitsChiefExecutiveOfficer,ChiefFinancialOfficer,principalaccountingofficer,controllerandpersonsperformingsimilarfunctions.TheCompany'scodeofethicsisavailableontheCompany'swebsiteatwww.agnicoeagle.comor,withoutcharge,uponrequestfromtheCorporateSecretary,AgnicoEagleMinesLimited,Suite400,145KingStreetEast,Toronto,OntarioM5C2Y7(telephone416-947-1212).
OFF-BALANCE SHEET ARRANGEMENTS
Notapplicable.
CONTRACTUAL OBLIGATIONS
For tabular disclosure of the Company's contractual obligations, see page 15 of the Annual MD&A under the heading "Liquidity and CapitalResources—ContractualObligations".
MINE SAFETY DISCLOSURE
Notapplicable.
CORPORATE GOVERNANCE
TheCompanyissubjecttoavarietyofcorporategovernanceguidelinesandrequirementsenactedbytheTorontoStockExchange(the"TSX"),theCanadiansecuritiesregulatoryauthorities,theNewYorkStockExchange(the"NYSE")andtheSEC.TheCompanyislistedontheNYSEand,althoughtheCompanyisnotrequired to comply with most of the NYSE corporate governance requirements to which the Company would be subject if it were a U.S. corporation, theCompany's governancepractices differ fromthose required of U.S. domestic issuers in only the following respects. The NYSErules for U.S. domestic issuersrequireshareholderapprovalofallequitycompensationplans(asdefinedintheNYSErules)regardlessofwhethernewissuances,treasurysharesorsharesthattheCompanyhaspurchasedintheopenmarketareused.TheTSXrulesrequireshareholderapprovalofsharecompensationarrangementsinvolvingnewissuancesofshares,andofcertainamendmentstosucharrangements,butdonotrequiresuchapprovalifthecompensationarrangementsinvolveonlysharespurchasedintheopenmarket.TheNYSErulesforU.S.domesticissuersalsorequireshareholderapprovalofcertaintransactionsorseriesofrelatedtransactionsthatresultintheissuanceofcommonshares, or securities convertible intoor exercisable for commonshares, that have, or will haveuponissuance, votingpowerequal toor inexcessof20%ofthevotingpoweroutstandingpriortothetransactionoriftheissuanceofcommonshares,orsecuritiesconvertibleintoorexercisableforcommonshares,are,orwillbeuponissuance,equaltoorinexcessof20%ofthenumberofcommonsharesoutstandingpriortothetransaction.TheTSXrulesrequireshareholderapprovalofacquisitiontransactionsresultingindilutioninexcessof25%.TheTSXalsohasbroadgeneraldiscretiontorequireshareholderapprovalinconnectionwithanyissuancesoflistedsecurities.TheCompanycomplieswiththeTSXrulesdescribedinthisparagraph.
UNDERTAKING
AgnicoEagleundertakestomakeavailable,inpersonorbytelephone,representativestorespondtoinquiriesmadebytheSECstaff,andtofurnishpromptly,whenrequestedtodosobytheSECstaff,informationrelatingto:thesecuritiesinrelationtowhichtheobligationtofileanannualreportonForm40-Farises;ortransactionsinsaidsecurities.
CONSENT TO SERVICE OF PROCESS
Any change to the name or address of the Company's agent for service shall be communicated promptly to the SEC by amendment to the FormF-XreferencingthefilenumberoftheCompany.
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INCORPORATION BY REFERENCE
This Form40-F, which includes the exhibits filed herewith (other than the section of the AIF entitled "Ratings"), is incorporated by reference into theCompany'sRegistrationStatementsonFormF-3D(registrationno.333-215096)andFormS-8(registrationnos.333-130339and333-152004).EachoftheAIF(otherthanthesectionentitled"Ratings"),theAnnualFinancialStatementsandtheAnnualMD&AisincorporatedbyreferenceasanexhibittotheCompany'sRegistrationStatementonFormF-10(registrationno.333-206498).
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EXHIBIT INDEX
Exhibit Description99.1
AnnualInformationFormoftheCompanyfortheyearendedDecember31,2016.
99.2
AnnualAuditedConsolidatedFinancialStatementsoftheCompany,includingthenotesthereto,asatDecember31,2016and2015andforeachoftheyearsinthethree-yearperiodendedDecember31,2016,togetherwiththeauditors'reportthereonandtheauditors'reportoninternalcontroloverfinancialreporting.
99.3
Management'sDiscussionandAnalysisfortheyearendedDecember31,2016.
99.4
CertificationoftheChiefExecutiveOfficerrequiredbyRule13a-14(a)orRule15d-14(a),pursuanttoSection302oftheSarbanes-OxleyActof2002.
99.5
CertificationoftheChiefFinancialOfficerrequiredbyRule13a-14(a)orRule15d-14(a),pursuanttoSection302oftheSarbanes-OxleyActof2002.
99.6
CertificationoftheChiefExecutiveOfficerpursuanttoTitle18,UnitedStatesCode,Section1350asadoptedpursuanttoSection906oftheSarbanes-OxleyActof2002.
99.7
CertificationoftheChiefFinancialOfficerpursuanttoTitle18,UnitedStatesCode,Section1350asadoptedpursuanttoSection906oftheSarbanes-OxleyActof2002.
99.8
ConsentofIndependentRegisteredPublicAccountingFirm.
99.9
ConsentofDanielDoucet.
99.10
ConsentofDonaldGervais.
99.11
ConsentofSylvieLampron.
99.12
ConsentofGuyGosselin.
99.13
ConsentofLouiseGrondin.
99.14
ConsentofCarolPlummer.
99.15
ConsentofPaulCousin.
99.16
ConsentofFrancisBrunet.
99.17
ConsentofDominiqueGirard.
99.18
ConsentofChristianProvencher.
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SIGNATURES
PursuanttotherequirementsoftheExchangeAct,theCompanycertifiesthatitmeetsalloftherequirementsforfilingonForm40-Fandhasdulycausedthisannualreporttobesignedonitsbehalfbytheundersigned,theretodulyauthorized.
Toronto,CanadaMarch27,2017
AGNICO EAGLE MINES LIMITED
by /s/DAVIDSMITH
DavidSmithSeniorVice-President,FinanceandChiefFinancialOfficer
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EXPLANATORYNOTEFORWARD-LOOKINGINFORMATIONCURRENCYNOTETOINVESTORSCONCERNINGESTIMATESOFMINERALRESERVESANDMINERALRESOURCESNOTETOINVESTORSCONCERNINGCERTAINMEASURESOFPERFORMANCEDISCLOSURECONTROLSANDPROCEDURESMANAGEMENT'SANNUALREPORTONINTERNALCONTROLOVERFINANCIALREPORTINGATTESTATIONREPORTOFTHEREGISTEREDPUBLICACCOUNTINGFIRMCHANGESININTERNALCONTROLOVERFINANCIALREPORTINGIDENTIFICATIONOFTHEAUDITCOMMITTEEAUDITCOMMITTEEFINANCIALEXPERTPRINCIPALACCOUNTANTFEESANDSERVICESAUDITCOMMITTEEPRE-APPROVALPOLICIESANDPROCEDURESCODEOFETHICSOFF-BALANCESHEETARRANGEMENTSCONTRACTUALOBLIGATIONSMINESAFETYDISCLOSURECORPORATEGOVERNANCEUNDERTAKINGCONSENTTOSERVICEOFPROCESSINCORPORATIONBYREFERENCEEXHIBITINDEXSIGNATURES
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Exhibit 99.1
Annual Information Form for the year ended December 31, 2016
Dated as of March 27, 2017
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AGNICO EAGLE MINES LIMITED
ANNUAL INFORMATION FORM
Table of Contents
Page INTRODUCTORYNOTES ii
CurrencyandExchangeRates ii
Forward-LookingStatements ii
PresentationofFinancialInformation iv
NotetoInvestorsConcerningEstimatesofMineralReservesandMineralResources iv
NotetoInvestorsConcerningCertainMeasuresofPerformance iv
SELECTEDFINANCIALDATA 1
GLOSSARYOFSELECTEDMININGTERMS 2
CORPORATESTRUCTURE 9
DESCRIPTIONOFTHEBUSINESS 11
GENERALDEVELOPMENTOFTHEBUSINESS 12
OPERATIONSANDPRODUCTION 17
BusinessUnitsandForeignOperations 17
NorthernBusiness 17
SouthernBusiness 59
RegionalExplorationActivities 71
MineralReservesandMineralResources 71
PrincipalProductsandDistribution 85
Employees 86
CompetitiveConditions 86
SustainableDevelopment 86
EmployeeHealthandSafety 87
Community 87
EnvironmentalProtection 88
RISKFACTORS 89
DIVIDENDS 101
DESCRIPTIONOFCAPITALSTRUCTURE 101
RATINGS 101
MARKETFORSECURITIES 102
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DIRECTORSANDOFFICERSOFTHECOMPANY 103
Directors 103
Committees 104
Officers 105
ShareholdingsofDirectorsandOfficers 106
CeaseTradeOrders,Bankruptcies,PenaltiesorSanctions 106
ConflictsofInterest 107
AUDITCOMMITTEE 107
CompositionoftheAuditCommittee 107
RelevantEducationandExperience 107
Pre-ApprovalPoliciesandProcedures 107
ExternalAuditorServiceFees 108
LEGALPROCEEDINGSANDREGULATORYACTIONS 108
INTERESTOFMANAGEMENTANDOTHERSINMATERIALTRANSACTIONS 109
TRANSFERAGENTANDREGISTRAR 109
MATERIALCONTRACTS 109
INTERESTSOFEXPERTS 112
ADDITIONALINFORMATION 113
SCHEDULE"A"AUDITCOMMITTEECHARTEROFTHECOMPANY A-1
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INTRODUCTORY NOTES Currency and Exchange Rates
Currencies:AgnicoEagleMinesLimited("AgnicoEagle"orthe"Company")presentsitsconsolidatedfinancialstatementsinUnitedStatesdollars.AlldollaramountsinthisAnnualInformationForm("AIF")arestatedinUnitedStatesdollars("U.S.dollars","$"or"US$"),exceptwhereotherwiseindicated.CertaininformationinthisAIFispresentedinCanadiandollars("C$")orEuropeanUnioneuros("Euro"or"€").
ExchangeRates:Thefollowingtablessetout,inCanadiandollars,theexchangeratesfortheU.S.dollar,basedonthenoonbuyingrateasreportedbytheBankofCanada(the"NoonBuyingRate").OnMarch22,2017,theNoonBuyingRatewasUS$1.00equalsC$1.3347.
Year Ended December 31, 2016 2015 2014 2013 2012
High 1.4589 1.3990 1.1643 1.0697 1.0418
Low 1.2544 1.1728 1.0614 0.9839 0.9710
EndofPeriod 1.3427 1.3840 1.1601 1.0636 0.9949
Average 1.3248 1.2787 1.1045 1.0299 0.9996
2017 2016
March
(to March 22) February January December November October September
High 1.3505 1.3248 1.3438 1.3556 1.3582 1.3403 1.3248
Low 1.3316 1.3004 1.3030 1.3120 1.3337 1.3104 1.2843
EndofPeriod 1.3347 1.3248 1.3030 1.3427 1.3426 1.3403 1.3117
Average 1.3406 1.3110 1.3191 1.3329 1.3438 1.3251 1.3109
OnDecember30,2016andMarch22,2017,US$1.00equaled€1.0541and€1.0807,respectively,asreportedbytheEuropeanCentralBank.
Forward-Looking Statements
Forward-LookingStatements:CertainstatementsinthisAIF,referredtohereinas"forward-lookingstatements",constitute"forward-lookinginformation"undertheprovisionsofCanadianprovincialsecuritieslawsandconstitute"forward-lookingstatements"withinthemeaningoftheUnitedStatesPrivateSecuritiesLitigationReformActof1995.Thesestatementsrelateto,amongotherthings,theCompany'splans,objectives,expectations,estimates,beliefs,strategiesandintentionsandcangenerallybeidentifiedbytheuseofwordssuchas"anticipate","believe","budget","could","estimate","expect","forecast","likely","may","plan","project","schedule","should","target","will","would"orothervariationsofthesetermsorsimilarwords.Forward-lookingstatementsinthisAIFinclude,butarenotlimitedto,thefollowing:
• theCompany'soutlookfor2017andfutureperiods;
• statementsregardingfutureearnings,andthesensitivityofearningstogoldandothermetalprices;
• anticipatedlevelsortrendsforpricesofgoldandby-productmetalsminedbytheCompanyorforexchangeratesbetweencurrenciesinwhichcapitalisraised,revenueisgeneratedorexpensesareincurredbytheCompany;
• estimatesoffuturemineralproductionandsales;
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• estimatesoffuturecosts,includingminingcosts,totalcashcostsperounce,all-insustainingcostsperounce,minesitecostspertonneandothercosts;
• estimatesoffuturecapitalexpenditures,explorationexpendituresandothercashneeds,andexpectationsastothefundingthereof;
• statementsregardingtheprojectedexploration,developmentandexploitationoforedeposits,includingestimatesofexploration,developmentandproductionandothercapitalcostsandestimatesofthetimingofsuchexploration,developmentandproductionordecisionswithrespectthereto;
• estimatesofmineralreservesandmineralresourcesandtheirsensitivitiestogoldpricesandotherfactors,oregradesandmineralrecoveriesandstatementsregardinganticipatedfutureexplorationresults;
• estimatesofcashflow;
• estimatesofminelife;
• anticipatedtimingofeventsattheCompany'smines,minedevelopmentprojectsandexplorationprojects;
• estimatesoffuturecostsandotherliabilitiesforenvironmentalremediation;
• statementsregardinganticipatedlegislationandregulations,includingwithrespecttoclimatechange,andestimatesoftheimpactontheCompany;and
• otheranticipatedtrendswithrespecttotheCompany'scapitalresourcesandresultsofoperations.
Forward-lookingstatementsarenecessarilybaseduponanumberoffactorsandassumptionsthat,whileconsideredreasonablebyAgnicoEagleasofthedateofsuchstatements,areinherentlysubjecttosignificantbusiness,economicandcompetitiveuncertaintiesandcontingencies.ThefactorsandassumptionsofAgnicoEagleuponwhichtheforward-lookingstatementsinthisAIFarebased,andwhichmayprovetobeincorrect,includetheassumptionssetoutelsewhereinthisAIFaswellas:thattherearenosignificantdisruptionsaffectingAgnicoEagle'soperations,whetherduetolabourdisruptions,supplydisruptions,damagetoequipment,naturalorman-madeoccurrences,miningormillingissues,politicalchanges,titleissuesorotherwise;thatpermitting,developmentandexpansionateachofAgnicoEagle'smines,minedevelopmentprojectsandexplorationprojectsproceedonabasisconsistentwithexpectations,andthatAgnicoEagledoesnotchangeitsexplorationordevelopmentplansrelatingtosuchprojects;thattheexchangeratesbetweentheCanadiandollar,Euro,MexicanpesoandtheU.S.dollarwillbeapproximatelyconsistentwithcurrentlevelsorassetoutinthisAIF;thatpricesforgold,silver,zincandcopperwillbeconsistentwithAgnicoEagle'sexpectations;thatpricesforkeyminingandconstructionsupplies,includinglabourcosts,remainconsistentwithAgnicoEagle'sexpectations;thatproductionmeetsexpectations;thatAgnicoEagle'scurrentestimatesofmineralreserves,mineralresources,mineralgradesandmineralrecoveriesareaccurate;thattherearenomaterialdelaysinthetimingforcompletionofdevelopmentprojects;andthattherearenomaterialvariationsinthecurrenttaxandregulatoryenvironmentsthataffectAgnicoEagle.
Theforward-lookingstatementsinthisAIFreflecttheCompany'sviewsasatthedateofthisAIFandinvolveknownandunknownrisks,uncertaintiesandotherfactorswhichcouldcausetheactualresults,performanceorachievementsoftheCompanyorindustryresultstobemateriallydifferentfromanyfutureresults,performanceorachievementsexpressedorimpliedbysuchforward-lookingstatements.Suchfactorsinclude,amongothers,theriskfactorssetoutin"RiskFactors"below.Giventheseuncertainties,readersarecautionednottoplaceunduerelianceontheseforward-lookingstatements,whichspeakonlyasofthedatemade.Exceptasotherwiserequiredbylaw,theCompanyexpresslydisclaimsanyobligationorundertakingtoreleasepubliclyanyupdatesorrevisionstoanysuchstatementstoreflectanychangeintheCompany'sexpectationsoranychangeinevents,conditionsorcircumstancesonwhichanysuchstatementisbased.ThisAIFcontainsinformationregardingestimatedtotalcashcostsperounce,all-insustainingcostsperounceandminesitecostspertonneinrespectoftheCompanyoratcertainoftheCompany'sminesandminedevelopmentprojects.TheCompanybelievesthatthesegenerallyacceptedindustrymeasuresarerealisticindicatorsofoperatingperformanceandareusefulinallowingyearoveryearcomparisons.Investorsarecautionedthatthisinformationmaynotbesuitableforotherpurposes.
Meaningof"including"and"suchas":WhenusedinthisAIF,theterms"including"and"suchas"meanincludingandsuchas,withoutlimitation.
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Presentation of Financial Information
InternationalFinancialReportingStandards:TheCompanyreportsitsfinancialresultsusingInternationalFinancialReportingStandards("IFRS").TheCompanyadoptedIFRSasitsbasisofaccounting,replacingUnitedStatesgenerallyacceptedaccountingprinciples("USGAAP")effectiveJuly1,2014.Asaresult,AgnicoEagle'sconsolidatedfinancialstatementsfor2015and2016arereportedinaccordancewithIFRS,withcomparativeinformationforpriorperiodsrestatedunderIFRSandatransitiondateofJanuary1,2013.TheCompany'stransitiontoIFRSreportinghadnosignificantimpactonthedesignoreffectivenessoftheCompany'sinternalcontrolsoverfinancialreporting.TheCompanyadoptedIFRSasitsbasisofaccountingtomaintaincomparabilitywithothergoldminingcompanies.Unlessotherwisespecified,allreferencestofinancialresultshereinaretothosecalculatedunderIFRS.
Note to Investors Concerning Estimates of Mineral Reserves and Mineral Resources ThemineralreserveandmineralresourceestimatescontainedinthisAIFhavebeenpreparedinaccordancewiththeCanadiansecuritiesregulatoryauthorities'(the"CSA")NationalInstrument43-101Standards of Disclosure for Mineral Projects ("NI43-101").ThesestandardsaresimilartothoseusedbytheUnitedStatesSecuritiesandExchangeCommission's(the"SEC")IndustryGuideNo.7,asinterpretedbyStaffattheSEC("Guide7").However,thedefinitionsinNI43-101differincertainrespectsfromthoseunderGuide7.Accordingly,mineralreserveinformationcontainedorincorporatedbyreferencehereinmaynotbecomparabletosimilarinformationdisclosedbyU.S.companies.UndertherequirementsoftheSEC,mineralizationmaynotbeclassifiedasa"reserve"unlessthedeterminationhasbeenmadethatthemineralizationcouldbeeconomicallyandlegallyproducedorextractedatthetimethereservedeterminationismade.TheSECdoesnotrecognizemeasuresof"mineralresource".
Themineralreserveandmineralresourcedatapresentedhereinareestimates,andnoassurancecanbegiventhattheanticipatedtonnagesandgradeswillbeachievedorthattheindicatedlevelofrecoverywillberealized.TheCompanydoesnotincludeequivalentgoldouncesforby-productmetalscontainedinmineralreservesinitscalculationofcontainedounces.
Cautionary Note to Investors Concerning Estimates of Measured and Indicated Mineral Resources
Thisdocumentusestheterms"measuredmineralresources"and"indicatedmineralresources".InvestorsareadvisedthatwhilethosetermsarerecognizedandrequiredbyCanadianregulations,theSECdoesnotrecognizethem.Investors are cautioned not to assume that any part or allof mineral deposits in these categories will ever be converted into mineral reserves.
Cautionary Note to Investors Concerning Estimates of Inferred Mineral Resources
Thisdocumentusestheterm"inferredmineralresources".InvestorsareadvisedthatwhilethistermisrecognizedandrequiredbyCanadianregulations,theSECdoesnotrecognizeit."Inferredmineralresources"haveagreatamountofuncertaintyastotheirexistenceandastotheireconomicandlegalfeasibility.Itcannotbeassumedthatanypartorallofaninferredmineralresourcewilleverbeupgradedtoahighercategory.UnderCanadianregulations,estimatesofinferredmineralresourcesmaynotformthebasisoffeasibilityorpre-feasibilitystudies,exceptinrarecases.Investors are cautioned not to assume that any part or all of an inferred mineral resource exists, or is economically or legallymineable.
Note to Investors Concerning Certain Measures of Performance ThisAIFdisclosescertainmeasures,including"totalcashcostsperounce","all-insustainingcostsperounce"and"minesitecostspertonne"thatarenotrecognizedmeasuresunderIFRS.Thesemeasuresmaynotbecomparabletosimilarmeasuresreportedbyothergoldproducers.ForareconciliationofthesemeasurestothemostdirectlycomparablefinancialinformationpresentedintheAnnualFinancialStatements(asdefinedbelow)preparedinaccordancewithIFRS,andforanexplanationofhowmanagementusesthesemeasures,pleaseseetheCompany'smanagementdiscussionandanalysisfortheperiodendedDecember31,2016(the"AnnualMD&A").
Thetotalcashcostsperounceofgoldproducedisreportedonbothaby-productbasis(deductingby-productmetalrevenuesfromproductioncosts)andco-productbasis(beforedeductingby-productmetalrevenues).Thetotalcashcostsperounceofgoldproducedonaby-productbasisiscalculatedbyadjustingproductioncostsasrecordedintheconsolidatedstatementsofincome(loss)forby-productrevenues,unsoldconcentrateinventoryproductioncosts,smelting,refiningandmarketingchargesandotheradjustments,andthendividingbythenumberofouncesofgold
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produced.Thetotalcashcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerasthetotalcashcostsperounceofgoldproducedonaby-productbasis,exceptthatnoadjustmentismadeforby-productmetalrevenues.Accordingly,thecalculationoftotalcashcostsperounceofgoldproducedonaco-productbasisdoesnotreflectareductioninproductioncostsorsmelting,refiningandmarketingchargesassociatedwiththeproductionandsaleofby-productmetals.Thetotalcashcostsperounceofgoldproducedisintendedtoprovideinformationaboutthecash-generatingcapabilitiesoftheCompany'sminingoperations.ManagementalsousesthesemeasurestomonitortheperformanceoftheCompany'sminingoperations.Asmarketpricesforgoldarequotedonaperouncebasis,usingthetotalcashcostsperounceofgoldproducedonaby-productbasismeasureallowsmanagementtoassessamine'scash-generatingcapabilitiesatvariousgoldprices.
All-insustainingcostsperounceisusedtoshowthefullcostofgoldproductionfromcurrentoperations.TheCompanycalculatesall-insustainingcostsperounceofgoldproducedonaby-productbasisastheaggregateoftotalcashcostsperounceonaby-productbasis,sustainingcapitalexpenditures(includingcapitalizedexploration),generalandadministrativeexpenses(includingstockoptions)andreclamationexpenses,andthendividingbythenumberofouncesofgoldproduced.Theall-insustainingcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerastheall-insustainingcostsperounceofgoldproducedonaby-productbasis,exceptthatthetotalcashcostsperounceonaco-productbasisisused,meaningnoadjustmentismadeforby-productmetalrevenues.TheCompany'smethodologyforcalculatingall-insustainingcostsperouncemaydifferfromthemethodologyusedbyotherproducersthatdiscloseall-insustainingcostsperounce.TheCompanymaychangethemethodologyitusestocalculateall-insustainingcostsperounceinthefuture,includinginresponsetotheadoptionofformalindustryguidanceregardingthismeasurebytheWorldGoldCouncil.
Managementisawarethattheseperouncemeasuresofperformancecanbeaffectedbyfluctuationsinexchangeratesand,inthecaseoftotalcashcostsperounceofgoldproducedonaby-productbasis,by-productmetalprices.ManagementcompensatesfortheseinherentlimitationsbyusingthesemeasuresinconjunctionwithminesitecostspertonneaswellasotherdatapreparedinaccordancewithIFRS.
Managementalsoperformssensitivityanalysesinordertoquantifytheeffectsoffluctuatingexchangeratesandmetalprices.ThisAIFalsocontainsinformationastoestimatedfuturetotalcashcostsperounce,all-insustainingcostsperounceandminesitecostspertonne.Theestimatesarebaseduponthetotalcashcostsperounce,all-insustainingcostsperounceandminesitecostspertonnethattheCompanyexpectstoincurtominegoldatitsminesandprojectsand,consistentwiththereconciliationoftheseactualcostsreferredtoabove,donotincludeproductioncostsattributabletoaccretionexpenseandotherassetretirementcosts,whichwillvaryovertimeaseachprojectisdevelopedandmined.Itisthereforenotpracticabletoreconciletheseforward-lookingnon-GAAPfinancialmeasurestothemostcomparableIFRSmeasure.
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SELECTED FINANCIAL DATA Thefollowingselectedfinancialdataforeachoftheyearsinthefive-yearperiodendedDecember31,2016arederivedfromtheconsolidatedfinancialstatementsofAgnicoEagleauditedbyErnst&YoungLLP.TheselectedfinancialdatashouldbereadinconjunctionwiththeCompany'soperatingandfinancialreviewandprospectssetoutinAgnicoEagle'sannualauditedconsolidatedfinancialstatementsasofandfortheperiodendedDecember31,2016,includingthenotesthereto(the"AnnualFinancialStatements")andtheAnnualMD&A.
Year Ended December 31,
2016 (1) 2015 (1) 2014 (1)(2) 2013 (1) 2012 (3) (in thousands of U.S. dollars, other than share and per share information) Income Statement Data Revenuesfromminingoperations 2,138,232 1,985,432 1,896,766 1,638,406 1,917,714
Production 1,031,892 995,295 1,004,559 866,082 897,712
Explorationandcorporatedevelopment 146,978 110,353 56,002 44,236 109,500
Amortizationofproperty,plantandminedevelopment 613,160 608,609 433,628 313,890 271,861
Generalandadministrative 102,781 96,973 118,771 113,809 119,085
Impairmentlossonavailable-for-salesecurities – 12,035 15,763 32,476 12,732
Loss(gain)onderivativefinancialinstruments (9,468) 19,608 6,156 268 819
Provincialcapitaltax – – – – 4,001
Financecosts 74,641 75,228 73,393 62,455 57,887
Otherexpenses(income) 16,233 12,028 (7,004) 3,396 2,389
Environmentalremediation 4,058 2,003 8,214 3,698 –
Impairment(reversal)loss (120,161) – – 1,014,688 –
Gainonsaleofavailable-for-salesecurities (3,500) (24,600) (5,635) (74) (9,733)
Foreigncurrencytranslation(gain)loss 13,157 (4,728) 3,781 1,769 16,320
Income(loss)beforeincomeandminingtaxes 268,461 82,628 189,138 (818,287) 435,141
Incomeandminingtaxesexpense(recovery) 109,637 58,045 106,168 (131,582) 124,225
Netincome(loss)fortheyear 158,824 24,583 82,970 (686,705) 310,916
Netincome(loss)pershare–basic 0.71 0.11 0.43 (3.97) 1.82
Netincome(loss)pershare–diluted 0.70 0.11 0.39 (3.97) 1.81
Weightedaveragenumberofcommonsharesoutstanding–basic 223,736,595 216,167,950 195,222,905 172,892,654 171,250,179
Weightedaveragenumberofcommonsharesoutstanding–diluted 225,753,589 217,101,431 196,201,626 172,892,654 171,485,615
Cashdividendsdeclaredpercommonshare 0.36 0.32 0.32 0.66 1.02
Balance Sheet Data (at end of period) Property,plantandminedevelopment 5,106,036 5,088,967 5,155,865 3,694,461 4,067,456
Totalassets 7,107,951 6,683,180 6,809,255 4,580,081 5,256,119
Long-termdebt 1,072,790 1,118,187 1,322,461 987,356 830,000
Reclamationprovision 265,308 276,299 249,917 184,009 101,753
Netassets 4,492,474 4,141,020 4,068,490 2,717,406 3,410,212
Commonshares 4,987,694 4,707,940 4,599,788 3,294,007 3,241,922
Shareholders'equity 4,492,474 4,140,020 4,068,490 2,717,406 3,410,212
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Totalcommonsharesoutstanding 224,965,140 217,650,795 214,236,234 173,953,975 172,102,870
(1) Figuresreportedfor2016,2015,2014and2013arepresentedinaccordancewithIFRS.
(2) Assetoutinnote5oftheannualauditedconsolidatedfinancialstatementsasofandfortheperiodendedDecember31,2015,certainpreviouslyreportedDecember31,2014consolidatedbalancesheetlineitemswereupdatedtoreflectadjustedfinalestimatesoffairvaluerelatedtotheJune16,2014jointacquisitionofOsiskoMiningCorporation("Osisko")bytheCompanyandYamanaGoldInc.("Yamana").
(3) Figuresreportedfor2012havenotbeenrestatedtoconformtoIFRSandarepresentedinaccordancewithUSGAAP.
AGNICO EAGLE 1 ANNUAL INFORMATION FORM
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GLOSSARY OF SELECTED MINING TERMS
"alteration" Anyphysicalorchemicalchangeinthemineralcompositionofarocksubsequenttoitsformation,generallyproducedbyweatheringorhydrothermalsolutions.Milderandmorelocalizedthanmetamorphism.
"anastomosing" Anetworkofbranchingandrejoiningfaultorveinsurfacesorsurfacetraces.
"andesite" Adark-coloured,fine-grainedcalc-alkalinevolcanicrockofintermediatecomposition.
"assay" Toanalyzetheproportionsofmetalsinanore;totestanoreormineralforcomposition,purity,weightorotherpropertiesofcommercialinterest.
"banded iron formation" Anironformationthatshowsmarkedbanding,generallyofiron-richmineralsandchertorfine-grainedquartz.
"bedrock" SolidrockexposedatthesurfaceoftheEarthoroverlainbyunconsolidatedmaterial,weatheredrockorsoil.
"bench" Aledgeinanopenpitminethatformsasinglelevelofoperationabovewhichmineralsorwasterockareexcavated.Theoreorwasteisremovedinsuccessivelayers(benches),severalofwhichmaybeinoperationsimultaneously.
"breccia" Arockinwhichangularrockfragmentsaresurroundedbyamassoffine-grainedminerals.
"brittle" Ofminerals,pronenesstofractureunderlowstress.Aqualityaffectingbehaviourduringcomminutionofore,wherebyonespeciesfracturesmorereadilythanothersinthematerialbeingcrushed.
"bulk emulsion" Waterresistantexplosivematerialpumpedintoadrilledblastholeandignitedremotelyinordertofracturerockintheminingcycle.Emulsionproductsareparticularlywellsuitedtowetconditions.
"by-product" Asecondarymetalormineralproductrecoveredfromtheprocessingofrock.
"carbon-in-leach" or "CIL" Apreciousmetalsrecoverystepinthemill.Goldandsilverareleachedfromthegroundoreandatthesametimeadsorbedontogranulesofactivatedcarbon,whichisthenseparatedbyscreeningandprocessedtoremovethepreciousmetals.
"carbon-in-pulp" or "CIP" Apreciousmetalsrecoverystepinthemill.Aftergoldandsilverhavebeenleachedfromgroundore,theyareadsorbedontogranulesofactivatedcarbon,whichisthenseparatedbyscreeningandprocessedtoremovethepreciousmetals.ACIPcircuitcomprisesaseriesoftanksthroughwhichleachedslurryflows.Goldiscapturedontocaptiveactivatedcarbonthatwillperiodicallybemovedcounter-currentlyfromtanktotank.Headtankcarbonisextractedperiodicallytofurtherrecoveradsorbedgoldbeforebeingreturnedtothecircuittailstank.
"chalcopyrite" Asulphidemineralofcopperandiron.
"concentrate" Thecleanproductrecoveredbyfrothflotationintheplant.
"conglomerate" Acoarse-grainedsedimentaryrockcomposedofroundedfragmentssetinafine-grainedcementedmatrix.
"contact" Aplaneorirregularsurfacebetweentwotypesoragesofrock.
"counter-current decantation" Theclarificationofwasherywaterandtheconcentrationoftailingsbytheuseofseveralthickenersinseries.Thewaterflowsintheoppositedirectionfromthesolids.Thefinalproductsareslurrythatisremovedandclearwaterthatisreusedinthecircuit.
2 AGNICO EAGLE ANNUAL INFORMATION FORM
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"crosscut" Anundergroundpassagedrivenfromashafttowardstheore,at(ornear)rightanglestothestrikeofaveinorotherorebody.
"cut-off grade" Theminimummetalgradeinanorethatcanbeminedeconomically.
"cyanidation" Amethodofextractingexposedgoldorsilvergrainsfromcrushedorgroundorebydissolving(leaching)itinaweakcyanidesolution.Maybecarriedoutintanksinsideamillorinheapsoforeoutofdoors(heapleach).
"deposit" Anaturaloccurrenceofmineralormineralaggregate,insuchquantityandqualitytoinviteexploitation.
"development" Thepreparationofaminingpropertyorareasothatanorebodycanbeanalyzedanditstonnageandqualityestimated.Developmentisanintermediatestagebetweenexplorationandmining.
"diamond drill" Adrillingmachinewitharotating,hollow,diamond-studdedbitthatcutsacircularchannelaroundacore,whichcanberecoveredtoprovideamore-or-lesscontinuousandcompletecolumnarsampleoftherockpenetrated.
"dilution" Thecontaminationoforewithbarrenwallrockinstoping,increasingtonnageminedandloweringtheoveralloregrade.
"dip" Theangleatwhichavein,structureorrockbedisinclinedfromthehorizontalasmeasuredatrightanglestothestrike.
"disseminated" Saidofamineraldeposit(especiallyofmetals)inwhichthedesiredmineralsoccurasscatteredparticlesintherock,butinsufficientquantitytomakethedepositanore.Somedisseminateddepositsareverylarge.
"dore" Unrefinedgoldandsilverbullionbars,whichwillbefurtherrefinedtoalmostpuremetal.
"drift" Ahorizontalopeninginornearanorebodyandparalleltothelongdimensionoftheorebody,asopposedtoacrosscutthatcrossestheorebody.
"ductile" Ofrock,abletosustain,underagivensetofconditions,5%to10%deformationbeforefracturingorfaulting.
"dyke" Anearthenembankment,asaroundadrillsumportank,ortoimpoundabodyofwaterormilltailings.Also,atabularbodyofigneousrockthatcutsacrossthestructureofadjacentrocks.
"electrowinning" Anelectrochemicalprocessinwhichametaldissolvedwithinanelectrolyteisplatedontoanelectrode.Usedtorecovermetalssuchascopperandgoldfromsolutionintheleachingofconcentrates.
"envelope" 1.Theouterorcoveringpartofafold,especiallyofafoldedstructurethatincludessomesortofstructuralbreak.
2.Ametamorphicrocksurroundinganigneousintrusion.
3.Inamineral,anouterpartdifferentinoriginfromaninnerpart.
"epigenetic" Orebodiesformedbyhydrothermalfluidsandgasesthatwereintroducedintothehostrocksfromelsewhere,fillingcavitiesinthehostrock.
"epithermal" Referringtoamineraldepositthatformedlaterthantheenclosingrocksconsistingofveinsandreplacementbodies,containingpreciousmetalsor,morerarely,basemetals.
"extensional-shear vein" Aveinputinplaceinanextensionfracturecausedbythedeformationofarock.
"fault" Afractureorafracturezoneincrustalrocksalongwhichtherehasbeendisplacementofthetwosidesrelativetooneanotherparalleltothefracture.Thedisplacementmaybeafewinchesormanykilometreslong.
AGNICO EAGLE 3 ANNUAL INFORMATION FORM
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"feasibility study" Acomprehensivetechnicalandeconomicstudyoftheselecteddevelopmentoptionforamineralprojectthatincludesappropriatelydetailedassessmentsofrealisticallyassumedmining,processing,metallurgical,economic,marketing,legal,environmental,socialandgovernmentalconsiderations,togetherwithanyotherrelevantoperationalfactorsandadetailedfinancialanalysis,thatarenecessarytodemonstrateatthetimeofreportingthatextractionisreasonablyjustified(economicallymineable).Theresultsofthestudymayreasonablyserveasthebasisforafinaldecisionbyaproponentorfinancialinstitutiontoproceedwith,orfinance,thedevelopmentoftheproject.Theconfidencelevelofthestudywillbehigherthanthatofapre-feasibilitystudy.
"felsic" Atermusedtodescribelight-colouredrockscontainingfeldspar,feldspathoidsandsilica.
"flotation" Themethodofmineralseparationinwhichafrothcreatedbyavarietyofreagentsfloatssomefinelycrushedminerals,whereasothermineralssink.Themetal-richflotationconcentrateisthenskimmedoffthesurface.
"flowsheet" Adiagramshowingtheprogressofmaterialthroughatreatmentplant.
"foliation" Ageneraltermforaplanararrangementoffeaturesinanytypeofrock,especiallytheplanarstructurethatresultsinametamorphicrock.
"footwall" Therockbeneathaninclinedveinororedeposit(oppositeofahangingwall).
"fracture" Anybreakinarock,whetherornotitcausesdisplacement,duetomechanicalfailurebystress;includescracks,jointsandfaults.
"free gold" Goldnotcombinedwithothersubstances.
"glacial till" Dominantlyunsortedandunstratified,unconsolidatedrockdebris,depositeddirectlybyandunderneathaglacier.
"grade" Therelativequantityorthepercentageofmetalcontentofanorebody(e.g. ,gramsofgoldpertonneofrockorpercentcopper).
"greenstone belt" Anareaunderlainbymetamorphosedvolcanicandsedimentaryrocks,usuallyinacontinentalshield.
"grouting" Theprocessofsealingoffawaterflowinrocksbyforcingathinslurryofcementorotherchemicalsintothecrevices,usuallydonethroughadiamonddrillhole.
"hanging wall" Therockontheuppersideofaveinororedeposit.
"head grade" Theaveragegradeoforefedintoamill.
"horst" Anup-faultedblockofrock.
"hydrothermal alteration" Alterationofrocksormineralsbyreactionwithhydrothermal(magmatic)fluids.
"igneous rock" RockformedbythesolidificationofmoltenmaterialthatoriginatedwithintheEarth.
"indicated mineral resource" Thatpartofamineralresourceforwhichquantity,gradeorquality,densities,shapeandphysicalcharacteristicscanbeestimatedwithalevelofconfidencesufficienttoallowtheappropriateapplicationoftechnicalandeconomicparameterstosupportmineplanningandevaluationoftheeconomicviabilityofthedeposit.Theestimateisbasedondetailedandreliableexplorationandtestinginformationgatheredthroughappropriatetechniquesfromlocationssuchasoutcrops,trenches,pits,workingsanddrillholesthatarespacedcloselyenoughforgeologicalandgradecontinuitytobereasonablyassumed.
WhilethistermisrecognizedandrequiredbyCanadianregulations,theSECdoesnotrecognizeit.Investorsarecautionednottoassumethatanypartorallofthemineraldepositsinthiscategorywilleverbeconvertedintomineralreserves.
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"inferred mineral resource" Thatpartofamineralresourceforwhichquantityandgradeorqualitycanbeestimatedonthebasisofgeologicalevidenceandlimitedsamplingandreasonablyassumed,butnotverified,geologicalandgradecontinuity.Theestimateisbasedonlimitedinformationandsamplinggatheredthroughappropriatetechniquesfromlocationssuchasoutcrops,trenches,pits,workingsanddrillholes.
WhilethistermisrecognizedandrequiredbyCanadianregulations,theSECdoesnotrecognizeit.Investorsarecautionednottoassumethatanypartorallofthemineraldepositsinthiscategorywilleverbeupgradedtoahighercategory.Investorsarecautionednottoassumethatpartoforallofaninferredmineralresourceexists,oriseconomicallyorlegallymineable.
"infill drilling" Drillingwithinadefinedmineralizedareatoimprovethedefinitionofknownmineralization.
"intrusive" Abodyofigneousrockformedbytheconsolidationofmagmaintrudedbelowsurfaceintootherrocks,incontrasttolavas,whichareextrudedupontheEarth'ssurface.
"iron formation" Achemicalsedimentaryrock,typicallythin-beddedorfinelylaminated,containingatleast15%ironofsedimentaryoriginandcommonlycontaininglayersofchert.
"ITH drill" Atypeofrockdrillinwhichahammerismountedinthehole,applyingpercussiveforcedirectlytothedrillbit.
"leaching" Achemicalprocessfortheextractionofvaluablemineralsfromore;also,anaturalprocessbywhichgroundwatersdissolveminerals.
"lens" Ageologicaldepositthatisthickinthemiddleandtaperstowardstheends,resemblingaconvexlens.
"lithologic groups" Groupsofrockformations.
"lode" Amineraldepositconsistingofazoneofveins,veinletsordisseminations.
"longitudinal retreat" Anundergroundminingmethodwheretheoreisexcavatedinhorizontalslicesalongtheorebodyandthestopingstartsbelowandadvancesupwards.Theoreisrecoveredunderneathinthestope.
"mafic" Igneousrockscomposedmostlyofdark,iron-andmagnesium-richsilicateminerals.
"massive" Saidofamineraldeposit,especiallyofsulphides,characterizedbyagreatconcentrationoforeinoneplace,asopposedtoadisseminatedorvein-likedeposit.Saidofanyrockthathasahomogeneoustextureorfabricoveralargearea,withanabsenceoflayeringoranysimilardirectionalstructure.
"matrix" Thefine-grainedrockmaterialinwhichalargermineralisembedded.
"measured mineral resource" Thatpartofamineralresourceforwhichquantity,gradeorquality,densities,shapeandphysicalcharacteristicsaresowellestablishedthattheycanbeestimatedwithconfidencesufficienttoallowtheappropriateapplicationoftechnicalandeconomicparameterstosupportproductionplanningandevaluationoftheeconomicviabilityofthedeposit.Theestimateisbasedondetailedandreliableexploration,samplingandtestinginformationgatheredthroughappropriatetechniquesfromlocationssuchasoutcrops,trenches,pits,workingsanddrillholesthatarespacedcloselyenoughtoconfirmbothgeologicalandgradecontinuity.
WhilethistermisrecognizedandrequiredbyCanadianregulations,theSECdoesnotrecognizeit.Investorsarecautionednottoassumethatanypartorallofthemineraldepositsinthiscategorywilleverbeconvertedintomineralreserves.
AGNICO EAGLE 5 ANNUAL INFORMATION FORM
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"Merrill-Crowe process" Aseparationtechniqueforremovinggoldfromacyanidesolution.Thesolutionisseparatedfromtheorebymethodssuchasfiltrationandcounter-currentdecantation,andthenthegoldisprecipitatedontozincdust.Silverandcoppermayalsoprecipitate.Theprecipitateisfilteredtocapturethegoldslimes,whicharefurtherrefined(e.g. ,bysmelting,toremovethezincandbytreatingwithnitricacidtodissolvethesilver).
"metamorphism" Theprocessbywhichtheformorstructureofsedimentaryorigneousrocksischangedbyheatandpressure.
"mill" Amineraltreatmentplantinwhichcrushing,wetgrindingandfurthertreatmentoforeisconducted;alsoarevolvingdrumusedforthegrindingoforeinpreparationfortreatment.
"mineral reserve" Theeconomicallymineablepartofameasuredorindicatedmineralresourcedemonstratedbyatleastapreliminaryfeasibilitystudy.Thisstudymustincludeadequateinformationonmining,processing,metallurgical,economicandotherrelevantfactorsthatdemonstrate,atthetimeofreporting,thateconomicextractioncanbejustified.Amineralreserveincludesdilutingmaterialsandallowancesforlossesthatmayoccurwhenthematerialismined.
"mineral resource" Aconcentrationoroccurrenceofdiamonds,naturalsolidinorganicmaterialornaturalsolidfossilizedorganicmaterialincludingbaseandpreciousmetals,coalandindustrialmineralsinorontheEarth'scrustinsuchformandquantityandofsuchagradeorqualitythatithasreasonableprospectsforeconomicextraction.Thelocation,quantity,grade,geologicalcharacteristicsandcontinuityofamineralresourceareknown,estimatedorinterpretedfromspecificgeologicalevidenceandknowledge.Investorsarecautionednottoassumethatanypartorallofthemineraldepositsinanycategoryofresourceswilleverbeconvertedintomineralreserves.
"muck" Finelyblastedrock(oreorwaste)underground.
"net smelter return royalty" Aroyaltypaymentmadebyaproducerofmetalsbasedontheproceedsfromthesaleofmineralproductsafterdeductingoff-siteprocessinganddistributioncostsincludingsmelting,refining,transportationandinsurancecosts.
"ounce" Ameasurementofweight,especiallyusedforgold,silverandplatinumgroupmetals.1troyounce=31.1035grams.
"outcrop" ThepartofarockformationthatappearsatthesurfaceoftheEarth.
"oxidation" Achemicalreactioncausedbyexposuretooxygen,whichresultsinachangeinthechemicalcompositionofamineral.
"pillar" Ablockoforeorotherrockentirelysurroundedbystoping,leftintentionallyforpurposesofgroundcontroloronaccountoflowvalue.
"plunge" Theinclinationofafoldaxisorotherlinearstructurefromahorizontalplane,measuredintheverticalplane.
"polydeformed" Arockthathasbeensubjectedtomorethanoneinstanceoffolding,faulting,shearing,compressionorextensionasaresultofvarioustectonicforces.
"porphyritic" Rocktextureinwhichoneormoremineralshasalargergrainsizethantheaccompanyingminerals.
"porphyry" Anyigneousrockinwhichrelativelylargecrystalsaresetinafine-grainedgroundmass.
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"preliminary feasibility study"or "pre-feasibility study"
Acomprehensivestudyofarangeofoptionsforthetechnicalandeconomicviabilityofamineralprojectthathasadvancedtoastagewhereapreferredminingmethod(inthecaseofundergroundmining)orthepitconfiguration(inthecaseofanopenpit)isestablished,andaneffectivemethodofmineralprocessingisdetermined.Itincludesafinancialanalysisbasedonreasonableassumptionsonmining,processing,metallurgical,economic,marketing,legal,environmental,socialandgovernmentalconsiderationsandtheevaluationofanyotherrelevantfactorswhicharesufficientforaqualifiedperson,actingreasonably,todetermineifallorpartofthemineralresourcemaybeclassifiedasamineralreserve.
"pressure oxidation" Aprocessbywhichsulphidemineralsareoxidizedinordertoexposegoldthatisencapsulatedintheminerallattice.Themaincomponentofapressureoxidationcircuitconsistsofapressurizedvessel(autoclave)wheretheoxygenlevel,processtemperatureandacidityaretheprimarycontrolparameters.
"probable mineral reserve" Theeconomicallymineablepartofanindicatedand,insomecircumstances,ameasuredmineralresourcedemonstratedbyatleastapreliminaryfeasibilitystudy.
"proven mineral reserve" Theeconomicallymineablepartofameasuredmineralresourcedemonstratedbyatleastapreliminaryfeasibilitystudy.
"pyrite" Ayellowironsulphidemineral,FeS2,normallyoflittlevalue.Itissometimesreferredtoas"fool'sgold".
"pyroclastic" Rocksproducedbyexplosiveoraerialejectionofash,fragmentsandglassymaterialfromavolcanicvent.
"recovery" Thepercentageofvaluablemetalintheorethatisrecoveredbymetallurgicaltreatment.
"rock burst" Asuddenandoftenviolentbreakingofamassofrockfromthewallsofamine,causedbyfailureofhighlystressedrockandtherapidreleaseofaccumulatedstrainenergy.
"run-of-mine ore" Theraw,minedmaterialasitisdelivered,priortosorting,stockpilingortreatment.
"sandstone" Asedimentaryrockconsistingofgrainsofsandcementedtogether.
"schist" Astronglyfoliatedcrystallinerockthatcanbereadilysplitintothinflakesorslabsduetothewell-developedparallelismofmorethan50%ofthemineralspresentinit,suchasmicaorhornblende.
"sedimentary rocks" Rocksresultingfromtheconsolidationofloosesedimentthathasaccumulatedinlayers.Examplesarelimestone,shaleandsandstone.
"semi-autogenous grinding"or "SAG"
Amethodofgrindingrockwherebylargerchunksoftherockitselfandsteelballsformthegrindingmedia.
"shear" or "shearing" Thedeformationofrocksbylateralmovementalonginnumerableparallelplanes,generallyresultingfrompressureandproducingmetamorphicstructuressuchascleavageandschistosity.
"shear zone" Atabularzoneofrockthathasbeencrushedandbrecciatedbymanyparallelfracturesduetoshearstress.Suchanareaisoftenmineralizedbyore-formingsolutions.
"sill" Anintrusivesheetofigneousrockofroughlyuniformthicknessthathasbeenforcedbetweenthebeddingplanesofexistingrock.
"slurry" Finerockparticlesincirculatingwaterinatreatmentplant.
"stope" 1.Anyexcavationinamine,otherthandevelopmentworkings,madeforthepurposeofextractingore.
2.Toexcavateoreinanundergroundmine.
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"strike" Thedirection,orbearingfromtruenorth,ofahorizontallineonaveinorrockformationatrightanglestothedip.
"stringers" Mineralveinletsorfilamentsoccurringinadiscontinuoussubparallelpatterninahostrock.
"sulphide" Amineralcharacterizedbythelinkageofsulphurwithametal,suchaspyrite,FeS2.
"tabular" Saidofafeaturehavingtwodimensionsthataremuchlargerorlongerthanthethird,suchasadyke.
"tailings" Materialdischargedfromamillaftertheeconomicallyandtechnicallyrecoverablevaluablemineralshavebeenextracted.
"tailings dam" or "tailingsimpoundment" or "tailingspond"
Areaclosedatthelowerendbyaconstrainingwallordamtowhichmilleffluentsaresent,theprimefunctionofwhichistoallowenoughtimeformetalstosettleoutorforcyanidetobenaturallydestroyedbeforethewaterisreturnedtothemillordischargedintothelocalwatershed.
"tenement" Therighttoenter,developandworkamineraldeposit.Includesaminingclaimoramininglease.Asynonymofmineraltitle.
"thickener" Avesselforreducingtheproportionofwaterinapulpbymeansofsedimentation.
"thickness" Thedistanceatrightanglesbetweenthehangingwallandthefootwallofalodeorlens.
"tonne" Ametricmeasurementofmass.1tonne=1,000kilograms=2,204.6pounds=1.1tons.
"transfer fault" Astructurethatcanaccommodatelateralvariationsofdeformationandstrain.
"transverse open stoping" Anundergroundminingmethodinwhichtheoreisexcavatedinhorizontalslicesperpendiculartotheorebodylengthandthestopingstartsbelowandadvancesupwards.Theoreisrecoveredunderneaththestopethroughadrawpointsystem.
"trench" Anarrowexcavationdugthroughoverburden,orblastedoutofrock,toexposeaveinororestructureforsamplingorobservation.
"vein" Amineralfillingofafaultorotherfractureinahostrock.
"wacke" A"dirty"sandstonethatconsistsofamixtureofpoorlysortedmineralandrockfragmentsinanabundantmatrixofclayandfinesilt.
"winze" Aninternalmineshaft.
"Zadra elution circuit" Theprocessinthispartofagoldmillstripsgoldandsilverfromcarbongranulesandputsthemintosolution.
"zone" Anareaofdistinctmineralization(i.e. ,adeposit).
8 AGNICO EAGLE ANNUAL INFORMATION FORM
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CORPORATE STRUCTURE AgnicoEagleMinesLimitedisacorporationorganizedundertheBusiness Corporations Act (Ontario).TheCompanywasformedbyarticlesofamalgamationunderthelawsoftheProvinceofOntarioonJune1,1972,asaresultoftheamalgamationofAgnicoMinesLimited("AgnicoMines")andEagleGoldMinesLimited("Eagle").AgnicoMineswasincorporatedunderthelawsoftheProvinceofOntarioonJanuary21,1953underthename"CobaltConsolidatedMiningCorporationLimited"andchangeditsnametoAgnicoMinesLimitedonOctober25,1957.EaglewasincorporatedunderthelawsoftheProvinceofOntarioonAugust14,1945.
Since1972,severalcorporatealterationshavetakenplace.OnAugust22,1972,theCompany'sarticleswereamendedtopermittheCompanyto:(i)borrowmoneyonthecreditoftheCompany,(ii)issue,sellorpledgedebtobligationsand(iii)charge,mortgageorpledgetheCompany'sproperty.OnJune27,1980,ArticlesofAmendmentwerefiledtoallowtheCompanytousethename"MinesAgnico-EagleLimitée".OnJuly5,1984,theCompany'sarticleswereamendedtodeletealloftheobjectsoftheCompanylistedandspecifythatnorestrictionsapplytothebusinessorpowersthattheCompanymayexercise.OnJuly3,1986,ArticlesofAmendmentwerefiledtosettheminimumnumberofdirectorsoftheCompanyatfiveandthemaximumatnine.OnJuly29,1988,theCompany'sarticleswereamendedtoprovidethattheCompanyisauthorizedtoissueanunlimitednumberofshares.
OnDecember31,1992,theCompanyamalgamatedwithLuckyEagleMinesLimited.OnJune30,1993,themaximumnumberofdirectorsoftheCompanywasincreasedfromnineto12.OnJanuary1,1996,theCompanyamalgamatedwithGoldexMinesLimitedand1159885OntarioLimited.OnOctober17,2001,theCompanyfiledArticlesofArrangementwhichprovidedfortheamalgamationoftheCompanyandMentorExplorationandDevelopmentCo.OnJuly12,2002,thenameoftheCompanywaschangedto"Agnico-EagleMinesLimited/MinesAgnico-EagleLimitee".OnAugust1,2007,theCompanyamalgamatedwithCumberlandResourcesLtd.,Agnico-EagleAcquisitionCorporationandMeadowbankMiningCorporation.OnMay4,2010,themaximumnumberofdirectorsoftheCompanywasincreasedfrom12to15.
OnJanuary1,2011,theCompanyamalgamatedwith1816276OntarioInc.(theultimatesuccessorentitytoComaplexMineralsCorp.).OnJanuary1,2013,theCompanyamalgamatedwith1886120OntarioInc.(thesuccessorcorporationto9237-4925QuébecInc.).OnApril26,2013,ArticlesofAmendmentwerefiledtoeliminatethehyphenbetween"Agnico"and"Eagle"andtheofficialnameoftheCompanybecame"AgnicoEagleMinesLimited/MinesAgnicoEagleLimitée".
TheCompany'sheadandregisteredofficeislocatedatSuite400,145KingStreetEast,Toronto,Ontario,CanadaM5C2Y7;telephonenumber(416)947-1212;website:www.agnicoeagle.com .TheinformationcontainedontheCompany'swebsiteisnotpartofthisAIF.TheCompany'sprincipalplaceofbusinessintheUnitedStatesislocatedat1675E.PraterWay,Suite102,Sparks,Nevada89434.
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ThefollowingchartsetsoutthecorporatestructureoftheCompany,eachofitssignificantsubsidiariesandcertainotherentities,togetherwiththejurisdictionoforganizationoftheCompanyandeachsuchsubsidiaryorentityasatMarch22,2017(allofwhicharedirectlyorindirectlywholly-ownedbytheCompany,unlessotherwiseindicated).
10 AGNICO EAGLE ANNUAL INFORMATION FORM
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DESCRIPTION OF THE BUSINESS TheCompanyisanestablishedCanadian-basedinternationalgoldproducerwithminingoperationsinnorthwesternQuebec,northernMexico,northernFinlandandNunavutandexplorationactivitiesinCanada,Europe,LatinAmericaandtheUnitedStates.TheCompany'soperatinghistoryincludesoverthreedecadesofcontinuousgoldproduction,primarilyfromundergroundoperations.SinceitsformationonJune1,1972,theCompanyhasproducedapproximately14.4millionouncesofgold.
TheCompany'sstrategyistodeliverhighqualitygrowthwhilemaintaininghighperformancestandardsinhealth,safety,environmentalmattersandsocialacceptability;buildastrongpipelineofprojectstodrivefutureproduction;andemploythebestpeopleandmotivatethemtoreachtheirpotential.Overthepasteightyears,theCompanytransformeditselffromaregionallyfocused,singlemineproducertoamulti-mineinternationalgoldproducerwithsevenoperating,100%ownedmines,oneoperating50%ownedmine,andtheMeliadineadvanceddevelopmentproject.
TheCompanyannouncedonFebruary15,2017thatitintendstobuildminingoperationsattheAmaruqsatellitedepositatMeadowbankandtheMeliadineproject,bothofwhichareexpectedtocommenceminingoperationsinthethirdquarterof2019.
Thefollowingtablesetsoutthedateofacquisition,thedateofcommencementofconstruction,thedateofachievingcommercialproductionandtheestimatedminelifefortheCompany'smines.
Date of Acquisition (1)Date of Commencement
of ConstructionDate of achieving
Commercial ProductionEstimated
Mine Life (2)
LaRonde mine 1992 1985 1988 2024
Lapa mine June2003 June2006 May2009 2017
Goldex mine (3) December1993 July2012 October2013 2025
Canadian Malartic mine June2014 n/a May2011 2026
Kittila mine November2005 June2006 May2009 2034
Meadowbank mine April2007 Pre-April2007 March2010 2025
Pinos Altos mine March2006 August2007 November2009 2023
La India mine November2011 September2012 February2014 2022
Notes:
(1) Datewhen100%ownershipwasacquired,otherthantheCanadianMalarticmine,whichisthedatewhen50%ownershipwasacquired.
(2) EstimatedenddateforgoldproductionbasedontheCompany'scurrentlifeofmineplans.TheestimatedminelifeatMeadowbankincludesproductionfromtheAmaruqsatellitedepositatMeadowbank.
(3) ConstructionofinfrastructureforpurposesofminingtheGoldexExtensionZone(the"GEZ")commencedinJuly2005andtheGEZachievedcommercialproductioninAugust2008.MiningoperationsontheGEZhavebeensuspendedsinceOctober2011.Inlate2013,miningandproductionbeganfromtheMandEZonesoftheGoldexmine.
Since1988,theLaRondemine,intheAbitibiregionofQuebec,hasbeentheCompany'sflagshipoperation,producingapproximately5.3millionouncesofgoldaswellasvaluableby-products.TheLapamineis11kilometreseastoftheLaRondemine,andtheGoldexmine,whichachievedcommercialproductionfromtheMandEZonesinOctober2013,is60kilometreseastoftheLaRondemine.ThesynergiesbetweenthesesitescontributetotheCompany'seffortstoreducecosts.TheCompany's50%ownedCanadianMalarticmine,alsointheAbitibiregionofQuebec,wasacquiredinJune2014.TheKittilamineinFinland,hasalongreservelifeandhassignificantproductionexpansionpotential.TheCompany'sMeadowbankmine,inNunavut,isexpectedtoproducethemostgold(approximately320,000ounces)ofanyoftheCompany'sminesin2017.ThePinosAltosmine,inMexico,hassignificantproductionexpansionpotential.Inaddition,theCompanyplanstopursueopportunitiesforgrowthingoldproductionandgoldreservesthroughtheprudentacquisitionordevelopmentofexplorationproperties,developmentproperties,producingpropertiesandotherminingbusinessesintheAmericasandEurope.
In2016,theCompanyproduced1,662,888ouncesofgoldatproductioncostsperounceofgoldof$621andtotalcashcostsperounceofgoldonaby-productbasisof$573andatall-insustainingcostsperounceof$824onaby-productbasis.For2017,theCompanyexpectstoproduceapproximately1,555,000ouncesofgoldattotalcashcostsperounce
AGNICO EAGLE 11 ANNUAL INFORMATION FORM
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ofgoldonaby-productbasisbetween$595and$625andatall-insustainingcostsperouncebetween$850and$900onaby-productbasis.See"IntroductoryNotes–NotetoInvestorsConcerningCertainMeasuresofPerformance"foradiscussionoftheuseofthenon-GAAPmeasurestotalcashcostsperounceandall-insustainingcostsperounce.TheCompanyhastraditionallysoldallofitsproductionatthespotpriceofgoldduetoitsgeneralpolicynottosellforwarditsfuturegoldproduction.
GENERAL DEVELOPMENT OF THE BUSINESS Three-Year History
2014
AsofFebruary1,2014,commercialproductionwasachievedattheLaIndiamine.
OnJune16,2014,theCompanyandYamanajointlyacquired100%oftheoutstandingsharesofOsiskopursuanttoacourt-approvedplanofarrangementundertheCanada Business Corporations Act (the"OsiskoArrangement")forconsiderationofapproximatelyC$3.9billion,consistingofapproximatelyC$1.0billionincashandacombinationofcommonsharesoftheCompany,commonsharesofYamanaandsharesofanewcompanythatwasspun-offundertheOsiskoArrangement.OsiskowasaCanadianbasedproducinggoldminingcompanythatwas,atthetime,listedontheTorontoStockExchange(the"TSX").Osiskowas100%owneroftheCanadianMalarticmineintheAbitibiregionofQuebec.UndertheOsiskoArrangement,eachOsiskosharewasexchangedfor:(i)C$2.09incash(C$1.045persharefromeachoftheCompanyandYamana);(ii)0.07264ofacommonshareoftheCompany;(iii)0.26471ofacommonshareofYamana;and(iv)0.1ofonecommonshareofOsiskoGoldRoyaltiesLtd("NewOsisko"),thenewlyformedspun-offcompanythatcommencedtradingontheTSXimmediatelyfollowingtheOsiskoArrangement.
InconnectionwiththeOsiskoArrangement,substantiallyalloftheassetsandobligationsrelatingtotheCanadianMalarticmineinQuebecweretransferredtoCanadianMalarticGP(the"Partnership"),anewlyformedgeneralpartnershipinwhichtheCompanyandYamanaeachownanindirect50%interest.TheCompanyandYamanaformedajointmanagementcommitteetooperatetheCanadianMalarticmine.OnJune17,2014,OsiskoandtheacquisitioncorporationformedbytheCompanyandYamanatoacquireOsiskoamalgamatedtoform"CanadianMalarticCorporation"inwhichAgnicoandYamanaeachholdanindirect50%interest.CanadianMalarticCorporationcontinuestohold,amongotherthings,Osisko'sKirklandLake,HammondReef,PandoraandWood-Pandora(50%interest)assetsandproperties.TheCompanyandYamanaarejointlyexploringandmaypotentiallydeveloptheKirklandLakeassets,andcontinueexplorationattheHammondReefprojectandthePandoraandWood-Pandoraproperties,ineachcasethroughCanadianMalarticCorporation.
PursuanttotheOsiskoArrangement,thefollowingassetsofOsiskoweretransferredtoNewOsisko:(i)a5.0%netsmelterroyaltyontheCanadianMalarticmine;(ii)C$157.0millionincash;(iii)a2.0%netsmelterroyaltyontheKirklandLakeassets,theHammondReefproject,andcertainotherexplorationpropertiesretainedbyCanadianMalarticCorporation;(iv)allassetsandliabilitiesofOsiskorelatingtotheGuerrerocampinMexico;and(v)certainotherinvestmentsandassets.
TheCompany'sandYamana'srelationshipwithrespecttotheCanadianMalarticmineisgovernedbyaunanimousshareholdersagreementwithrespecttoCanadianMalarticCorporationandageneralpartnershipagreementwithrespecttothePartnership.
DirecttransactioncoststotalingC$16.7millionwereincludedinthecostoftheinvestmentinOsisko.TheCompany'sshareofOsisko'sJune16,2014purchasepricewascomprisedof33,923,212oftheCompany'scommonsharesissuedtoformerholdersofOsiskoshares,C$502,059,784.01incashand871,680oftheCompany'scommonsharesissuedandheldbythedepositaryinrespectofunsecuredconvertibledebenturespreviouslyissuedbyOsiskothatremainedoutstandingfollowingtheOsiskoArrangement.OnJune30,2015,thenegotiatedearlysettlementofalloftheoutstandingunsecuredconvertibledebentureswascompleted.Asaresultofthissettlement,871,680commonsharesoftheCompanywithafairvalueofapproximately$24.8millionwerereleasedbythedepositarytothedebentureholders,alongwithacashpaymentofapproximately$10.1million.Additionalcashconsiderationof$3.2millionwaspaidtotheholdersoftheconvertibledebenturesuponsettlement.
AbusinessacquisitionreportinrespectoftheOsiskoArrangementwasfiledbytheCompanyontheSystemforElectronicDocumentAnalysisandRetrieval("SEDAR")onAugust22,2014.
OnNovember28,2014,theCompanycompleteditsacquisitionofalloftheissuedandoutstandingcommonsharesofCaydenResourcesInc.("Cayden"),aCanadianbasedgoldexplorationcompanythatwas,atthetime,listedontheTSX
12 AGNICO EAGLE ANNUAL INFORMATION FORM
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VentureExchange(the"TSX-V"),pursuanttoacourt-approvedplanofarrangementundertheBusiness Corporations Act (BritishColumbia).Caydenindirectlyhelda100%interest,oranoptiontoearna100%interest,incertainminingpropertiesinJaliscoandGuerrero,Mexico,includingtheElBarquenoproperty.Underthetermsofthearrangement,eachshareholderofCaydenreceived0.09ofacommonshareoftheCompanyandC$0.01incash.
CapitalexpendituresbytheCompanyin2014were$475.4million.Thisincluded$76.6millionattheLaRondemine,$20.2millionattheLapamine,$34.3millionattheGoldexmine,$36.1millionattheCanadianMalarticmine,$106.2millionattheKittilamine,$48.4millionatthePinosAltosmine,$10.9millionattheCrestonMascotadepositatPinosAltos,$22.7millionattheLaIndiamine,$65.9millionattheMeadowbankmine,$48.3millionattheMeliadineprojectand$5.9millionatotherproperties.Inaddition,theCompanyincurred$25.9millionofexpendituresonminesiteexplorationand$56.0milliononexplorationactivitiesattheCompany'sexplorationpropertiesandoncorporatedevelopmentactivities.
2015
OnFebruary23,2015,AgnicoEagleenteredintoabindingletterofintent(the"LOI")withCanadianMalarticGP,YamanaandAbitibiRoyaltiesInc.("AbitibiRoyalties")regardingtheMalarticCHLprospectwhichabutstheCanadianMalarticmineandinwhichCanadianMalarticCorporationhelda70%interest,withtheremaining30%interestheldbyAbitibiRoyalties.OnMarch19,2015,AbitibiRoyaltiessoldits30%interestintheMalarticCHLprospecttoCanadianMalarticGP(the"CHLTransaction")inexchangefor459,197commonsharesoftheCompanyand3,549,685Yamanacommonshares,withavalueofapproximatelyC$35million(basedontherespectiveclosingpricesofsuchsharesontheTSXonFebruary20,2015,thedateimmediatelypriortothepublicannouncementbyAbitibiRoyaltiesofenteringintotheLOI),and3%netsmelterreturnroyaltiestoAbitibiRoyaltiesandNewOsiskoontheprospect.Inaddition,aspartoftheCHLTransactionallprioragreements,claimsandproceedingsrelatingtotheMalarticCHLprospect,includingthosepreviouslyinstitutedbyAbitibiRoyaltiesagainstOsiskopriortotheCompanyandYamanacompletingtheOsiskoArrangement,wereterminated,settledandreleased.
PriortocompletionoftheOsiskoArrangementonJune6,2014,CliftonStarResourcesInc.("Clifton")institutedproceedingsagainstOsisko(nowCanadianMalarticCorporation)seeking,amongotherthings,anorderthatOsiskopayCliftonC$22.5millionindamages.Intheproceedings,Cliftonalleged,amongotherthings,thatOsiskowasobligatedtolendCliftonC$22.5milliononoraroundDecember1,2012pursuanttoaDecember10,2009commitmentletterandaDecember10,2009optionandjointventureagreement,eachbetweenCliftonandOsisko,andthatOsisko'sfailuretoadvancesuchloanresultedindamagestoClifton.CliftonfurtherallegedthatsuchloanwasintendedtobeusedtomakepaymentsundercertainoptionagreementsbetweenCliftonandthirdpartieswhichentitledCliftontoacquiresharesofsuchthirdpartiesthatownedinterestsintheconcessionscomprisingthe"DuparquetProject".FollowingthejointacquisitionofOsiskobytheCompanyandYamanaonJune16,2014,theCompanyandYamanaengagedindiscussionswithCliftontoadvancethesettlementofsuchclaims.EffectiveMarch2,2015,CanadianMalarticCorporation(asthesuccessortoOsisko)enteredintoasettlementagreementwithClifton,pursuanttowhichCanadianMalarticCorporationpaidCliftonapproximatelyC$5.27millioninconsiderationforafullandfinalreleaseofallclaimsarisingfromthefactsdescribedintheCliftonproceedings.Concurrently,undertwoseparatenon-brokeredprivateplacements,eachoftheCompanyandYamanasubscribedfor4,772,786commonsharesofCliftonatapriceofC$0.60pershare,fortotalproceedstoCliftonofapproximatelyC$5.73million.
OnJune9,2015,theCompanycompleteditsacquisitionofalloftheissuedandoutstandingcommonsharesofSoltoroLtd.("Soltoro"),aCanadianbasedgoldexplorationcompanythatwas,atthetime,listedontheTSX-V,pursuanttoacourt-approvedplanofarrangementundertheCanadaBusiness Corporations Act .Soltoroindirectlyhelda100%interest,oranoptiontoearna100%interest,incertainminingpropertiesinJalisco,Mexico,includingtheElRayopropertywhichiscontiguouswiththeCompany'sElBarquenoproperty.Underthetermsofthearrangement,eachshareholderofSoltororeceived0.00793ofacommonshareoftheCompany,C$0.01incashandonecommonshareofanewlyformedOntariocompanynamedPalaminaCorp.valuedatC$0.02pershare.
OnJune11,2015,theCompanyacquiredfromOrexMineralsInc.("Orex")55.0%oftheissuedandoutstandingcommonsharesofGunnarnMiningAB("Gunnarn"),whichholdstheBarseleprojectinnorthernSweden.Considerationfortheacquisitionwascomprisedof$6millionpaidtoOrexatclosingandadditionalpaymentsof$2millionincashorAgnicoEaglecommonshares(attheCompany'ssolediscretion)duetoOrexoneachofthefirstandsecondanniversariesoftheclosing.TheCompanyhasalsocommittedtoincurring$7.0millioninexplorationexpendituresassociatedwiththeBarseleprojectbyJune11,2018,andmayearnanadditional15.0%interestinGunnarniftheCompanycompletesapre-feasibilitystudyrelatedtotheBarseleproject.TheCompanyholdsamajorityoftheseatsontheboardofdirectorsofGunnarnandisthesoleoperatoroftheBarseleproject.
AGNICO EAGLE 13 ANNUAL INFORMATION FORM
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OnSeptember30,2015,theCompanyenteredintoanotepurchaseagreementwithRessourcesQuébecInc.,asubsidiaryofInvestissementQuébec,providingfortheissuanceof$50millionprincipalamountof4.15%seniorunsecurednotesdue2025(the"2015NotePurchaseAgreement").TheCompanyagreedtoapplyanamountequaltoorgreaterthanthenetproceedsfromtheissuanceofthenotestowardstheexpansion,development,upgradeormaintenanceofminingprojectsintheProvinceofQuébec.Foradditionaldetailssee"MaterialContracts–NotePurchaseAgreements"below.
CapitalexpendituresbytheCompanyin2015were$449.8million.Thisincluded$67.3millionattheLaRondemine,$6.5millionattheLapamine,$48.8millionattheGoldexmine,$43.4millionattheCanadianMalarticmine,$56.4millionattheKittilamine,$61.8millionatthePinosAltosmine,$4.2millionattheCrestonMascotadepositatPinosAltos,$23.4millionattheLaIndiamine,$65.2millionattheMeadowbankmine,$66.7millionattheMeliadineprojectand$6.0millionatotherproperties.Inaddition,theCompanyincurred$10.2millionofexpendituresonminesiteexplorationand$100.2milliononexplorationactivitiesattheCompany'sexplorationpropertiesandoncorporatedevelopmentactivities.
2016
OnJune30,2016,theCompanyenteredintoanotepurchaseagreementwithcertaininstitutionalinvestors,providingfortheissuanceofnotesconsistingof$100million4.54%SeriesAseniornotesdue2023,$200million4.84%SeriesBseniornotesdue2026and$50million4.94%SeriesCseniornotesdue2028.Foradditionaldetailssee"MaterialContracts–NotePurchaseAgreements"below.
ThefollowingtablesetsouttheCompany'scapitalexpendituresin2016.
2016 Capital Expenditures
(thousands of $)
Sustaining Development
LaRonde 64,288 –CanadianMalartic 58,174 2,260Meadowbank 38,248 503Kittila 62,008 13,896Goldex 22,030 59,237Lapa – –PinosAltos 47,410 12,162CrestonMascotadepositPinosAltos 9,287 –LaIndia 10,021 486Meliadine – 130,942Other – 4,361Total Expenditures 311,466 223,847
2017
TheCompanyannouncedonFebruary15,2017thatitintendstobuildminingoperationsattheAmaruqsatellitedepositatMeadowbankandtheMeliadineproject,bothofwhichareexpectedtocommenceminingoperationsinthethirdquarterof2019.
TheCompanyiscurrentlymarketingnotestoinstitutionalinvestorsonaprivateplacementbasisandexpectstoreceivebidsfromprospectivepurchaserspriortotheendofMarch2017.Atthistime,theprincipalamountoftheoffering,interestratesandtenorofthenoteshavenotbeendetermined,thoughtheCompanycurrentlyanticipatesthatthenoteswillbeissuedintrancheswithmaturitiesofapproximately8,10and12yearsfromissuance.AllothertermsofthenotesareexpectedtobesubstantiallythesameasthetermsoftheexistingnotesoftheCompanyissuedundernotepurchaseagreementsin2010,2012,2015and2016.See"MaterialContracts—NotePurchaseAgreements"below.TheCompanyexpectsthattheissuanceofthenoteswouldclosewithinthenextsixmonthsandtheproceedswouldbeusedforworkingcapitalandgeneralcorporatepurposes.However,untiltheCompanyreceivesbidsfrom,andentersintoadefinitiveagreementwith,investors,therecanbenoassurancethattheofferingwillbecompleted.
14 AGNICO EAGLE ANNUAL INFORMATION FORM
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ThefollowingtablesetsouttheCompany'sexpectedcapitalexpendituresfor2017.
Estimated 2017 Capital Expenditures
(thousands of $)
Sustaining DevelopmentCapitalized Exploration
LaRonde 67,700 – 1,700LaRondeZone5 – 35,000 400CanadianMalartic 65,900 1,700 2,300Meadowbank 20,300 – –Amaruq – 73,100 5,100Kittila 52,700 24,100 3,200Goldex 17,000 55,800 3,800Lapa – – –PinosAltos 48,400 5,800 500CrestonMascotadepositPinosAltos 5,500 – –LaIndia 6,900 – 800Meliadine – 355,800 3,900Other – 2,000 – Total Expenditures 284,400 553,300 21,700
Pre-2014
Inthesecondquarterof2004,theCompanyacquiredanapproximate14%ownershipinterestinRiddarhyttanResourcesAB("Riddarhyttan"),aSwedishpreciousandbasemetalsexplorationanddevelopmentcompanythatwasatthetimelistedontheStockholmStockExchange.InNovember2005,theCompanycompletedatenderoffer(the"RiddarhyttanOffer")foralloftheissuedandoutstandingsharesofRiddarhyttanthatitdidnotown.TheCompanyissued10,023,882ofitscommonsharesandpaidandcommittedanaggregateof$5.1millioncashasconsiderationtoRiddarhyttanshareholdersinconnectionwiththeRiddarhyttanOffer.OnMarch28,2011,RiddarhyttanwasmergedwithAgnicoEagleABandAgnicoEagleSwedenAB,withAgnicoEagleSwedenABasthecontinuingentity.TheKittilamineiscurrently100%ownedbyAgnicoEagleFinlandOy,whichiswholly-ownedbyAgnicoEagleSwedenAB,anindirectsubsidiaryoftheCompany.
Inthefirstquarterof2005,theCompanyenteredintoanexplorationandoptionagreementwithIndustriasPenolesS.A.deC.V.("Penoles")toacquirethePinosAltospropertyinnorthernMexico.ThePinosAltospropertyiscomprisedofapproximately11,000hectaresintheSierraMadregoldbelt,approximately225kilometreswestofthecityofChihuahuainthestateofChihuahuainnorthernMexico.InFebruary2006,theCompanyexerciseditsoptionandacquiredthePinosAltospropertyonMarch15,2006.Underthetermsoftheexplorationandoptionagreement,thepurchasepriceof$66.8millionwascomprisedof$32.5millionincashand2,063,635commonsharesoftheCompany.
InFebruary2007,theCompanymadeanexchangeofferforalloftheoutstandingsharesofCumberlandResourcesLtd.("Cumberland")notalreadyownedbytheCompany.Atthetime,Cumberlandwasapre-productiondevelopmentstagecompanylistedontheTSXandAmericanStockExchangewhoseprimaryassetwastheMeadowbankproperty.InMay2007,theCompanyacquiredapproximately92%oftheissuedandoutstandingsharesofCumberlandthatitdidnotpreviouslyownand,inJuly2007,theCompanycompletedtheacquisitionofallCumberlandsharesbywayofacompulsoryacquisition.TheCompanyissued13,768,510ofitscommonsharesandpaid$9.6millionincashasconsiderationtoCumberlandshareholdersinconnectionwithitsacquisitionofCumberland.
InApril2010,theCompanyenteredintoanagreementinprinciplewithComaplexMineralsCorp.("Comaplex")toacquirealloftheoutstandingsharesofComaplexthatitdidnotalreadyown.Atthetime,Comaplexowneda100%interestintheadvancedstageMeliadinegoldproperty,whichislocatedapproximately300kilometressoutheastoftheCompany'sMeadowbankmine.InMay2010,theCompanyexecutedthedefinitiveagreementswithComaplexand,inJuly2010byplanofarrangement,theCompanyacquired100%oftheMeliadinegoldpropertythroughtheacquisitionofComaplex,whichwasrenamedMeliadineHoldingsInc.Pursuanttothearrangement,ComaplextransferredtoGeomark
AGNICO EAGLE 15 ANNUAL INFORMATION FORM
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ExplorationLtd.allassetsandrelatedliabilitiesotherthanthoserelatingtotheMeliadineproject.Inconnectionwiththearrangement,theCompanyissued10,210,848ofitscommonsharesasconsiderationtoComaplexshareholders.
InSeptember2011,theCompanyenteredintoanacquisitionagreementwithGraydResourceCorporation("Grayd"),aCanadian-basednaturalresourcecompanythatwas,atthetime,listedontheTSX-V,pursuanttowhichtheCompanyagreedtomakeanoffertoacquirealloftheissuedandoutstandingcommonsharesofGrayd.Atthetime,Graydhelda100%interestintheLaIndiapropertylocatedintheMulatosGoldBeltofSonora,MexicoandhadrecentlydiscoveredtheTarachigoldporphyryprospectlocatedapproximatelytenkilometresnorthoftheLaIndiaproperty.InOctober2011,theCompanymadetheofferbywayofatake-overbidcircular,asamendedandsupplemented,and,inNovember2011,acquiredapproximately95%oftheoutstandingcommonsharesofGrayd.InJanuary2012,theCompanycompletedacompulsoryacquisitionoftheremainingoutstandingcommonsharesofGraydandGraydbecameawholly-ownedsubsidiaryoftheCompany.Inaggregate,theCompanyissued1,319,418ofitscommonsharesandpaidC$179.7millionincashasconsiderationtoGraydshareholdersinconnectionwiththetransaction.
InMay2013,theCompanycompleteditsacquisitionofalloftheissuedandoutstandingcommonsharesofUrastarGoldCorp.("Urastar"),aCanadian-basedgoldexplorationcompanythatwas,atthetime,listedontheTSX-V,pursuanttoacourt-approvedplanofarrangementundertheBusiness Corporations Act (BritishColumbia).Urastarhelda100%interestincertainminingpropertiesinSonora,Mexico.Underthetermsofthearrangement,eachshareholderofUrastarreceivedC$0.25percommonshareandholdersofunexercisedin-the-moneywarrantsofUrastarreceivedC$0.15perwarrant.Inaggregate,theCompanypaid$10.1millionincashtoUrastarshareholdersandwarrantholdersinconnectionwiththetransaction.
16 AGNICO EAGLE ANNUAL INFORMATION FORM
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OPERATIONS AND PRODUCTION Business Units and Foreign Operations
TheCompanyoperatesthroughthreebusinessunits:NorthernBusiness,SouthernBusinessandExploration.
TheCompany'sNorthernBusinessiscomprisedoftheCompany'soperationsinCanadaandFinland.TheCompany'sCanadianpropertiesincludetheLaRondemine,theLapamine,theGoldexmine,theMeadowbankmine(includingtheAmaruqsatellitedeposit)andtheMeliadineproject,eachofwhichisa100%interesthelddirectlybytheCompany,anda50%interestintheCanadianMalarticMine,whichisheldindirectlythroughawholly-ownedsubsidiaryoftheCompanyandCanadianMalarticCorporation.TheCompany'soperationsinFinlandareconductedthroughitsindirectsubsidiary,AgnicoEagleFinlandOy,whichownstheKittilamine.In2016,theNorthernBusinessaccountedforapproximately79%oftheCompany'sgoldproduction.In2017,theCompanyanticipatesthattheNorthernBusinesswillaccountforapproximately80%oftheCompany'sgoldproduction.
TheCompany'sSouthernBusinessiscomprisedoftheCompany'soperationsinMexico.TheCompany'sPinosAltosmine,includingtheCrestonMascotadeposit,isheldthroughitsindirectsubsidiary,AgnicoEagleMexico,S.A.deC.V.TheLaIndiamineisownedbytheCompany'sindirectsubsidiary,AgnicoSonora,S.A.deC.V.In2016,theSouthernBusinessaccountedforapproximately21%oftheCompany'sgoldproduction.In2017,theCompanyanticipatesthattheSouthernBusinesswillaccountforapproximately20%oftheCompany'sgoldproduction.
TheCompany'sExplorationgroupfocusesprimarilyontheidentificationofnewmineralreservesandmineralresourcesandnewdevelopmentopportunitiesinpoliticallystableandprovengoldproducingregions.CurrentexplorationactivitiesareconcentratedinCanada,Europe,LatinAmericaandtheUnitedStates.Severalprojectswereevaluatedduring2016intheseregionswheretheCompanybelievesthepotentialforgoldoccurrencesisexcellentandwhichtheCompanybelievestobepoliticallystableandsupportiveoftheminingindustry.TheCompanycurrentlymanages79propertiesinCanada,fourpropertiesintheUnitedStates,fourgroupsofpropertiesinFinland,twopropertiesinSwedenand18propertiesinMexico.Explorationactivitiesaremanagedfromofficesin:Vald'Or,Quebec;Reno,Nevada;Chihuahua,HermosilloandJalisco,Mexico;Kittila,Finland;Storuman,Sweden;andVancouver,BritishColumbia.
Northern Business
LaRondeMine
TheLaRondemineissituatedapproximatelyhalfwaybetweenRouyn-NorandaandVald'OrinnorthwesternQuebec(approximately470kilometresnorthwestofMontreal,Quebec)inthemunicipalitiesofPreissacandCadillac.AtDecember31,2016,theLaRondeminewasestimatedtohaveprovenandprobablemineralreservescontainingapproximately3.05millionouncesofgoldcomprisedof17.6milliontonnesoforegrading5.40gramspertonne.TheLaRondemineconsistsoftheLaRondepropertyandtheadjacentElCocoandTerrexproperties,eachofwhichis100%ownedandoperatedbytheCompany.TheLaRondeminecanbeaccessedeitherfromVald'OrintheeastorfromRouyn-Norandainthewest,eachofwhicharelocatedapproximately60kilometresfromtheLaRondemineviaQuebecprovincialhighwayNo.117.TheLaRondemineissituatedapproximatelytwokilometresnorthofhighwayNo.117onQuebecregionalhighwayNo.395.TheCompanyhasaccesstotheCanadianNationalRailwayatCadillac,Quebec,approximatelysixkilometresfromtheLaRondemine.
TheCompanyfirstacquiredaninterestintheLaRondepropertyin1974throughanindirectinvestmentinDumagamiMinesLimited("Dumagami").TheCompanyacquired100%oftheoutstandingsharesofDumagamionDecember19,1989and,onDecember29,1992,Dumagamitransferredallofitspropertyandassets,includingtheLaRondemine,totheCompanyandsubsequentlydissolved.
TheLaRondemineoperatesunderminingleasesobtainedfromtheMinistryofEnergyandNaturalResources(Quebec)andundercertificatesofapprovalgrantedbytheMinistryofSustainableDevelopment,EnvironmentandtheFightAgainstClimateChange(Quebec).TheLaRondepropertyconsistsof36contiguousminingclaimsandoneprovincialmininglease.TheElCocopropertyconsistsof22contiguousminingclaimsandoneprovincialmininglease.TheTerrexpropertyconsistsof21miningclaimsandoneprovincialminingleasethatwasacquiredinJuly2014.TheminingleasesontheLaRonde,ElCocoandTerrexpropertiesexpirein2018,2021and2034,respectively,andareautomaticallyrenewableforthreefurtherten-yeartermsuponpaymentofasmallfee.TheCompanyalsohasthreesurfacerightsleasesthatrelatetothewaterpipelinerightofwayfromLakePreissacandtheeasternextensionoftheLaRondetailingspond#7ontheElCocoproperty.Thesurfacerightsleasesarerenewableannually.
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LocationMapoftheLaRondeMine(asatDecember31,2016)
TheLaRondemineincludesundergroundoperationsattheLaRondeandElCocopropertiesthatcanbothbeaccessedfromthePennaShaft,amill,atreatmentplant,asecondarycrusherbuildingandrelatedfacilities.In2003,explorationworkstartedtoextendoutsideoftheLaRondepropertyontotheTerrexpropertywhereadown-plungeextensionofZone20Northwasdiscovered.TheTerrexpropertyissubjecttoa5%netprofitsroyaltyinfavourofDelferGoldMinesInc.TheCompanydoesnotexpecttopayroyaltiesinrespectofthispartofthepropertyin2017.Inaddition,theCompanyowns100%oftheSphinxpropertyimmediatelytotheeastoftheElCocoproperty.In2016,86%oftheoreprocessedfromtheLaRondeminewasextractedfromthedeeperportionoftheLaRondemine(thatis,belowLevel245)orthe"LaRondemineextension".In2017,theCompanyanticipatesthatapproximately87%oftheoreprocessedwillbefromthisdeeperpartofthemine.
TheCompanyexpectsfutureby-productmetalproductionattheLaRondeminetodeclineasoperationscontinuetoshifttowardsdeepersectionsoftheminewheregoldgradesarehigherandby-productmetalsarelessprevalent.Theassociateddecreaseinby-productrevenuesisexpectedtoresultinhighertotalcashcostsperounceonaby-productbasisattributabletooreextractedfromthesepartsofthemine.
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MapoftheAbitibiregionshowingthelocationoftheLaRonde,Lapa,GoldexandCanadianMalarticMines
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Mining and Milling Facilities
SurfacePlanoftheLaRondeMine(asatDecember31,2016)
TheLaRondeminewasoriginallydevelopedwitha1,207-metreshaft(Shaft#1)andanundergroundrampaccesssystem.TherampaccesssystemisavailabledowntoLevel25ofShaft#1andcontinuesdowntoLevel299atthePennaShaft.ThemineralreserveaccessiblefromShaft#1wasdepletedinSeptember2000andShaft#1isnolongerinuse.Asecondproductionshaft(Shaft#2),locatedapproximately1.2kilometrestotheeastofShaft#1,wascompletedin1994toadepthof525metresandwasusedtomineZones6and7.BothorezonesweredepletedinMarch2000andtheworkingswereallowedtoflooduptoLevel6(approximately280metres).Athirdshaft(thePennaShaft),locatedapproximately800metrestotheeastofShaft#1,wascompleteddowntoadepthof2,250metresinMarch2000.ThePennaShaftisusedtomineZones20North,20South,6and7.
In2006,theCompanyinitiatedconstructionoftheLaRondemineextension.HoistingfromthisdeeperpartoftheLaRondeminebeganinthefourthquarterof2011andcommercialproductionwasachievedinNovember2011.AccesstothedeeperpartoftheLaRondemineisprovidedthrougha823-metreinternalshaft(Shaft#4)startingfromLevel203,foratotaldepthof2,858metresbelowthesurfacewhichwascompletedinNovember2009.Arampisusedtoaccessthelowerpartoftheorebodydownto3,110metresbelowthesurface.AninternalwinzesystemisusedtohoistorefromdepthtofacilitiesonLevel215,approximately2,150metresbelowthesurface,whereitistransferredtothePennaShafthoist.
ProductionfromtheLaRondemineextensioncontinuestomovetowardsanticipatedsteady-statelevels.Mostofthedelaysencounteredduring2016wererelatedtoseismicity,assomeareasoftheminewereunderperiodicclosuretomitigateseismicityrisk.TheCompanyexpectsthelevelsofseismicitytocontinuetoevolveandtheCompanyadjuststheminingmethods,groundsupport,protocolsandmonitoringtoadapttotheevolvinglevels.
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In2016,thedevelopmentofthewesternportionoftheminecontinuedtoadvanceandtwosilos(excavationandconstruction)weredeliveredandarecurrentlyincommissioning.ThesesilosareexpectedtoincreasetheflexibilitysurroundingthecoarseoreconveyorsystemthatextendsfromLevel292tothecrusheronLevel280.In2017,theCompanyexpectstoreachLevel311intheeasternpartofthemine.TheCompanyexpectstominethefirststopesinthewesternportionoftheminein2017,followingthecommissioningofthecoarseoreconveyor.
Mining Methods
TheprimarysourceoforeattheLaRondeminecontinuestobefromundergroundminingmethods.During2016,twominingmethodswereused:longitudinalretreatwithpastebackfillandtransverseopenstopingwithpasteorunconsolidatedbackfill.Inaddition,toaddressconcernsregardingthefrequencyandintensityofseismiceventsencounteredatthelowerlevelsoftheLaRondemine,ahybridofthesetwomethodshasbeenused.Intheundergroundmine,sublevelsaredrivenatbetween30-metreand40-metreverticalintervals,dependingonthedepth.Stopesareundercutin15-metrewidepanels.Inthelongitudinalmethod,panelsareminedin15-metresectionsandbackfilledwith100%cementedrockbackfillorcementedpastebackfill.Thepastebackfillplantwascompletedin2000andislocatedonthesurfaceattheprocessingfacility.Inthetransverseopenstopingmethod,approximately50%oftheoreisminedinthefirstpassandfilledwithcementedpastebackfill.Onthesecondpass,theremainderoftheoreisminedandfilledwithunconsolidatedwasterockbackfillorcementedpastebackfill.
ThethroughputatLaRondein2016averaged6,171tonnesperday,comparedwith6,141tonnesperdayin2015.Theincreasedthroughputin2016wasduetothematurityofthenewmininghorizoninthedeepestportionofthemine.
TheCompany'soperationsattheLaRondeminereachmorethanthreekilometresbelowthesurface.Thereareveryfewresourcesavailabletomodelthegeomechanicalconditionsatthisdepth,whereoperationsaresubjecttohighstresslevels.TheCompanyconductsperiodictechnicalreviewsofitsoperationsattheselevelsusingconsultantswithexperienceindeepmining.TheCompanyusestheresultsofthesetechnicalreviewstoadaptbestminingpracticesandadjusttheminingsequenceforitsoperationsattheselevels.TheCompanybelievesthattheexperienceithasgainedminingatthoselevelshasprovidedasuccessfulmodelforfutureminingatdepth.
Surface Facilities
SurfacefacilitiesattheLaRondemineincludeaprocessingplantwithadailycapacityof7,200tonnesofore,whichhasbeenexpandedfourtimessince1987fromtheoriginalrateof1,630tonnesperday.Beginningin1999,transitiontotheLaRondemine'spolymetallicmassivesulphideorebodyrequiredseveralmodificationstotheprocessingplant.In2008,theinstallationofalimitedcopper/leadseparationflotationcircuit,followingthecopperflotationcircuit,wascompleted.Alsoin2008,acyanidationplantbeganoperationforthetreatmentofsulphideconcentratefromtheGoldexmine.ACILcircuitwascompletedandbeganoperationinApril2013toreplacetheexistingLaRondepreciousmetalMerrill-Crowecircuit.TheLaRondemineisalsothesitefortheLapamineoreprocessingplant(1,500tonnesperday),whichwascommissionedinthesecondquarterof2009.
Theorerequiresaseriesofgrinding,copper/leadflotationandseparation,zincflotationandzinctailspreciousmetalsleachingcircuits,nowfollowedbyCIPrecovery.Pastebackfillandcyanidedestructionplantsoperateintermittently.Thetailingsareahasadedicatedcyanidedestructionandmetalsprecipitationplantthatwaterpassesthroughpriortorecirculatingtothemill.AbiologicalwatertreatmentplantaddressesthepresenceofthiocyanateinthetailingspondsattheLaRondemine.Theplantusesbacteriatooxidizeanddestroythiocyanateinthewaterandremovesphosphatepriortoitsreleasetotheenvironment.
TheGoldexconcentratecircuitconsistsofpulpreceivedfromtheGoldexmillviatruck.ThematerialissenttotheLaRondeleaching/CIPcircuitforgoldrecoveryalongwithLaRonderesidualpulp.
TheLapamineoreprocessingplantconsistsofatwo-stagegrindingcircuittoreducethegranularityoftheore.Agravityrecoverycircuitthatisincorporatedintothegrindingcircuitrecoversupto45%oftheavailablegold,dependingonfeedgrades.TheresidualpulpisleachedinaconventionalCILcircuittodissolvethebalanceofthepreciousmetal.Acarbonstripcircuitrecoversthegoldfromthecarbonwhichisrecycledtotheleachcircuit.
Production and Mineral Recoveries
During2016,theLaRondeminehadpayableproductionof305,788ouncesofgold,987,918ouncesofsilver,4,687tonnesofzincand4,416tonnesofcopperfrom2.24milliontonnesoforegrading4.44gramsofgoldpertonneand17.75gramsofsilverpertonne,0.37%zincand0.24%copper.Theproductioncostsperounceofgoldproducedat
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LaRondein2016were$587.ThetotalcashcostsperounceofgoldproducedatLaRondein2016were$501onaby-productbasisandwere$668onaco-productbasis.TheLaRondeprocessingfacilityaveraged6,137tonnesoforeperdayandoperated92%ofavailabletime.Goldandsilverrecoveryaveraged95.60%and85.39%,respectively.Zincrecoveryaveraged66.85%withaconcentratequalityof53.61%zinc.Copperrecoveryaveraged86.50%withaconcentratequalityof20.01%copper.TheproductioncostspertonneatLaRondewereC$106andtheminesitecostspertonnewereC$106in2016.
ThefollowingtablesetsoutthemetalrecoveriesandconcentrategradesattheLaRondeminein2016.
Copper Concentrate (23,350 tonnes
produced)
Zinc Concentrate (10,303 tonnes
produced)
Head
Grades Grade Recovery Grade Recovery
Overall Metal
RecoveriesPayable
Production
Gold 4.44g/t 297.90g/t 69.91% 12.40g/t 1.29% 95.60% 305,788oz
Silver 17.75g/t 816.55g/t 47.95% 243.37g/t 6.40% 85.39% 987,918oz
Copper 0.24% 20.01% 86.50% –% –% 86.50% 4,687t
Zinc 0.37% 0.98% 5.53% 53.61% 66.85% 66.85% 4,416t
AnnualproductionattheLaRondeminein2017isexpectedtobeapproximately315,000ouncesofgold,1,072,000ouncesofsilver,4,482tonnesofcopperand7,286tonnesofzincfrom2.2milliontonnesoforegrading4.77gramspertonneofgold,20.03gramspertonneofsilver,0.25%copperand0.51%zinc.Thetotalcashcostsperounceofgoldproducedin2017onaby-productbasisareexpectedtobe$510,withestimatedgoldrecoveryat95.6%,silverrecoveryof77.5%,copperrecoveryof82.0%andzincrecoveryof66.9%.GoldrecoveryattheLaRondemineisdistributedapproximatelyasfollows:72%inthecopperconcentrate,2%inthezincconcentrateand22%vialeaching.MinesitecostspertonneofC$115areexpectedin2017.
Environmental, Permitting and Social Matters
Currently,wateristreatedatvariousfacilitiesattheLaRondemine.Watercontainedinthetailingsthatistobeusedasundergroundbackfillistreatedtodegradecyanideusingasulphurdioxideandairprocess.Thetailingsenteringthetailingspondarefirstdecantedandtheclearwatersubjectedtonaturalcyanidedegradation.Thiswateristhentransferredtopolishingpond#1toundergoasecondarytreatmentataplantlocatedbetweenpolishingponds#1and#2thatusesaperoxysilicateprocesstodestroycyanide,andlimeandcoagulant(ferricsulfate)areusedtoprecipitatemetals.Thetailingspondoccupiesanareaofapproximately175hectares.Wasterockthatisnotusedundergroundforbackfillisbroughtuptothesurfaceandstoredincloseproximitytothetailingspondtobeusedtobuildcofferdamsandbermsinsidethepondtoincreasestoragecapacity.Awasterockpilecontaininglessthan100,000tonnesofwasteandoccupyingapproximatelyninehectaresislocatednorthofthemill.
DuetothehighsulphurcontentoftheLaRondemineore,theCompanyhastoaddresstoxicityissuesinthetailingsponds.Thisproblemwasresolvedbythecommissioningofabiologicaltreatmentplantin2004,andtheeffluenthasremainednon-toxicsince2006.In2006,theCompanycommencedanammoniastrippingoperationinvolvinganeffluentpartiallytreatedbythebiologicaltreatmentplantwhichallowedanincreaseintreatmentflowrate,whilekeepingthefinaleffluentfreeoftoxicity.Anincreaseinbiologicaltreatmentefficiencyallowedtheammoniatreatmentplanttobeplacedoutofservicein2015.In2016,finaleffluentwasfullycompliantandtreatmentofthebacklogofwaterinthetailingspondthathadbeenaccumulatingbetween2000and2004,whentheeffluentwasshutdownwhiledeterminingatreatmentsolution,wascompleted.In2017,theCompanyexpectstomaintaininthetailingspondtheminimumquantityofwaterrequiredtofeedthemillwithrecirculationwater.Inaddition,waterfromacidrockdrainagearoundthemillsandthewastestockpilearetreatedtoremovemetalspriortodischargeatahighdensitysludgelimetreatmentplantlocatedattheLaRondemill.
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Capital Expenditures
CapitalexpendituresattheLaRondemineduring2016wereapproximately$64.3million,whichincludedsustainingcapitalexpenditures,deferredexpenseandincludedcapitalizeddrilling.Budgeted2017capitalexpendituresattheLaRondemineare$102.7million,excludingcapitalizeddrilling.
Development
In2016,atotalof13.9kilometresoflateraldevelopmentwascompleted.Developmentwasfocusedonthepreparationofthelowermineproductionhorizon.Morethan90%ofthedevelopmentworkhasbeencompletedfortheLaRondemineextensioninfrastructureandtheramptoaccesstheLaRondemineextension.
Followingthecompletionofapositiveinternaltechnicalstudy,LaRondeZone5(formerlyreferredtoasBousquetZone5)hasbeenapprovedfordevelopment(subjecttopermittingapproval).TheminingmethodwillbesimilartothatcurrentlyemployedattheGoldexandLaRondemines(long-holestoping,withcementedpastebackfill),andprocessingwilluseexcesscapacityfromtheLapacircuitatLaRonde.Permitsareexpectedtobereceivedbymid-2018,withminingexpectedtocommenceshortlythereafter.
Atotalof12.4kilometresoflateraldevelopmentisplannedfor2017.Themainfocusofdevelopmentremainsthelowermine(LaRondeextensionarea),thedevelopmenttowardthelowestlevelsandtheWestmineportion.
Geology, Mineralization, Exploration and Drilling
Geology
TheLaRondepropertyislocatednearthesouthernboundaryoftheArchean-age(2.7billionyearsold)AbitibiSubprovinceandthePontiacSubprovincewithintheSuperiorGeologicalProvinceoftheCanadianShield.ThemostimportantregionalstructureistheCadillac-LarderLake("CLL")faultzone,markingthecontactbetweentheAbitibiandPontiacSubprovinces,locatedapproximatelytwokilometrestothesouthoftheLaRondeproperty.
ThegeologythatunderliestheLaRondemineconsistsofthreeeast-west-trending,steeplysouth-dippingandgenerallysouth-facingregionalgroupsofrockformations.Fromnorthtosouth,theyare:(i)400metres(approximatetruethickness)oftheKewagamaGroup,whichismadeupofathickbandofinterbeddedwacke;(ii)1,500metresoftheBlakeRiverGroup,avolcanicassemblagethathostsalltheknowneconomicmineralizationontheproperty;and(iii)500metresoftheCadillacGroup,madeupofathickbandofwackeinterbeddedwithpeliticschistandminorironformation.
Zonesofstrongsericiteandchloritealterationthatenclosemassivetodisseminatedsulphidemineralization(includingtheorethatisminedforgold,silver,zincandcopperattheLaRondemine)followsteeplydipping,east-west-trending,anastomosingshearzonestructureswithintheBlakeRiverGroupvolcanicunitsacrosstheproperty.TheseshearzonesarepartofthelargerDoyon-DumagamiStructuralZonethathostsseveralimportantgoldoccurrences(includingtheDoyongoldmine,theWestwoodprojectandtheformerBousquetmines)andhasbeentracedforovertenkilometreswithintheBlakeRiverGroup,fromtheLaRondeminewestwardtotheMouskagoldmine.
Mineralization
TheLaRondedepositisagold-richvolcanogenicmassivesulphide(VMS)deposit.LaRondelenseswereformedmainlybysulphideprecipitationfromhydrothermalfluidsontheseafloorandbyreplacementbelowlenses.ThestackingoftheLaRondelensesistheresultofsuccessivevolcanicevents,intercalatedbycyclesofhydrothermatactivityassociatedwithreactivationofsynvolcanicfaults.
Thegold-bearingzonesattheLaRondeminearelensesofdisseminatedstringersthroughtomassiveaggregatesofcoarsepyritewithzinc,copperandsilvercontent.Tenzonesthatvaryinsizefrom50,000to40,000,000tonneshavebeenidentified,ofwhichfourare(orarebelievedtobe)economic.Goldcontentisnotproportionaltothetotalsulphidecontentbutdoesincreasewithcoppercontent.Goldvaluesarealsohigherinareaswherethepyritelensesarecrosscutbytightlyspacednorth-southfractures.
Thesehistoricalrelationships,whichwerenotedatLaRondeShaft#1'sMainZone,aremaintainedatthePennaShaftzones.Thezinc-silver(i.e.Zone20North)mineralizationwithlowergoldvalues,commonintheuppermine,gradesintogold-coppermineralizationwithinthelowermine.ThepredominantbasemetalsulphideswithintheLaRondeminearechalcopyrite(copper)andsphalerite(zinc).
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TheCompanybelievesthatZone20Northisoneofthelargestgold-bearingmassivesulphidemineralizedzonesintheworldandoneofthelargestknownmineralizedzonesintheAbitibiregionofOntarioandQuebec.Zone20NorthcontainsthemajorityofthemineralreservesandmineralresourcesattheLaRondemine,including17.3milliontonnesofprovenandprobablemineralreservesgrading5.44gramsofgoldpertonne,representing98%ofthetotalprovenandprobablemineralreservesattheLaRondemine,5.1milliontonnesofindicatedmineralresourcesgrading3.32gramsofgoldpertonne,representing90%ofthetotalmeasuredandindicatedmineralresourcesattheLaRondemine,and6.5milliontonnesofinferredmineralresourcesgrading7.4gramsofgoldpertonne,representing84%ofthetotalinferredmineralresourcesattheLaRondemine.
Zone20Northextendsbetween700metresbelowthesurfaceandatleast3,700metresbelowthesurface,andremainsopenatdepth.Withincreasedaccessonthelowerlevelsofthemine(i.e. ,belowLevel215andfromtheinternalshaftonlevels257and278),thetransformationfromazinc/silverorebodytoagold/copperdepositisexpectedtocontinueduring2017.Thedevelopmentofthewesternpartofthemine,betweenLevels278and314,isexpectedtogiveaccesstoanewzinc/silverrichsector.
Zone20Northcanbedividedintoanupperzinc/silverenrichedgoldpoorzoneandalowergold/copperenrichedzone.Thezinc/silverzonehasbeentracedoveraverticaldistanceof1,700metresandahorizontaldistanceof570metres,withthicknessesapproaching40metres.Thegold/copperzonehasbeentracedoveraverticaldistanceofover2,200metresandahorizontaldistanceof900metres,withthicknessesvaryingfromthreeto40metres.Thezinc/silverzoneconsistsofmassivezinc/silvermineralizationcontaining50%to90%massivepyriteand10%to50%massivelightbrownsphalerite.Thegold/copperzonemineralizationconsistsof30%to70%finelydisseminatedtomassivepyritecontaining1%to10%chalcopyriteveinlets,minordisseminatedsphaleriteandrarespecksofvisiblegold.Goldgradesaregenerallyrelatedtothechalcopyriteorcoppercontent.Atdepth,themassivesulphidelensbecomesricheringoldandcopper.
Exploration and Drilling
ThecombinedamountofgoldinprovenandprobablemineralreservesattheLaRondemineattheendof2016was3.05millionounces(17.6milliontonnesoforegrading5.40gramsofgoldpertonne,19.14gramsofsilverpertonne,0.24%copperand0.87%zinc),whichrepresentsareductionof55,759containedouncesofgoldfromtheendof2015,afterproducing305,788ouncesofgold(319,887ouncesinsitugoldminedin2016).Thereductioninmineralreservesisprincipallyassociatedwithoreminedduring2016anddelineationanddefinitiondrillingdoneattheedgesandinthedeepestpartoftheorebody,butwaspartlyoffsetbytheconversionofmineralresourcesintomineralreserveslocatedonthreelevelsbelow3.1kmdepthintheeasternpartofthemine,referredtoasLaRonde3.UndergroundindicatedmineralresourcesattheLaRondeminedecreasedby1.2milliontonnesoforetoatotalof5.7milliontonnesoforegrading3.27gramsofgoldpertonne,20.51gramsofsilverpertonne,0.21%copperand0.93%zinc,primarilyduetotheconversionofmineralresourcesintomineralreservesintheeasternportionofthemine,asdescribedabove.UndergroundinferredmineralresourcesattheLaRondeminedecreasedby1.4milliontonnesoforetoatotalof7.7milliontonnesoforegrading6.68gramsofgoldpertonne,14.48gramsofsilverpertonne,0.25%copperand0.60%zinc.
DiamonddrillingisusedforexplorationontheLaRondeproperty.In2016,35holes(13,327metres)weredrilledfordefinition(conversion)drillingand15holes(10,011metres)wereforexploration.ExpendituresondiamonddrillingattheLaRondemineduring2016wereapproximatelyC$4.9million,includingC$1.7millionindrillingexpenseschargedtocapitalcostsattheLaRondemine,andC$3.2millionexpensedasexplorationdrilling.
Themainfocusofthe2016explorationprogramwascontinuingtheinvestigationandconversionofZone20NorthatdepthandexplorationoftheZone6and7horizonsatdepthfromthenewaccessesdevelopedtowardthewestonLevels290and293.The2016conversionprogramonZone20NorthwasfocusedonconversionfrominferredtoindicatedmineralresourcesbelowLevel311atdepth,inthecentreandwesternportionsofthedeposit(belowtheactuallimitofmineralreserves).Thepositiveresultsobtainedinthisprogramallowedtheadditionofindicatedmineralresourcesbelow3.1kilometresontheeasternportionandcontinuedtoconfirmtheextensionoftheorebodyto3.4kilometresbelowthesurface,or300metresbelowthecurrentmaximumdepthofmineralreserves,inthewesternportion,andalsoconfirmedsomehighgradeintersectionsandtheextensionofamassivelensthathadbeenpreviouslyidentified.Theconversionprogramwillcontinuein2017through2018,andwillinvestigatethecontinuityoftheorebodyto3.7kilometresbelowthesurfaceandtothewest.AnotherdrillingaccessiscurrentlybeingdevelopedtoprovidebetterpositioningforanextensivediamonddrillingprogramonZone6toadepthof3.7kilometres.
In2017,theCompanyexpectstospendC$2.1millionon15,200metresofdefinition(conversion)drillingandC$2.4millionon12,850metresofexplorationdrilling,foratotalofC$4.5millionattheLaRondemine.
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LapaMine
AtDecember31,2016,theLapaminewasestimatedtocontainprovenandprobablemineralreservesof38,000ouncesofgoldcomprisedof259,000tonnesoforegrading4.58gramspertonne.TheLapapropertyismadeupoftheTonawandaproperty,whichconsistsof44contiguousminingclaimsandoneprovincialmininglease,andtheZulapaproperty,whichconsistsofoneminingconcession.TheminingleaseatLapaexpiresin2029.Basedonthelifeofmineplan,productionisexpectedtoceasein2017.
LocationMapoftheLapaMine(asatDecember31,2016)
During2016,theLapaminehadpayableproductionof73,930ouncesofgoldfrom0.59milliontonnesoforegrading4.64gramsofgoldpertonne.TheproductioncostsperounceofgoldproducedatLapain2016were$717.ThetotalcashcostsperounceofgoldproducedatLapain2016were$732onaby-productbasisandonaco-productbasis.TheLapaprocessingfacilityaveraged1,619tonnesperdayandoperatedapproximately89.5%ofavailabletime.Goldrecoveryaveraged83.82%.TheproductioncostspertonneatLapawereC$118andtheminesitecostspertonnewereC$121in2016.In2016,theCompanyincurrednocapitalexpendituresattheLapamine.NocapitalexpendituresattheLapamineareexpectedin2017.
ThefollowingtablesetsoutthemetalrecoveriesattheLapaminein2016.
Head Grade
Overall Metal
RecoveryPayable
Production
Gold 4.64g/t 83.82% 73,930oz
Goldproductionduring2017attheLapamineisexpectedtobeapproximately15,000ouncesfrom0.14milliontonnesoforegrading4.0gramsofgoldpertonneatestimatedtotalcashcostsperounceofapproximately$1,002onaby-productbasis,andestimatedgoldrecoveryof82.5%.MinesitecostspertonneofapproximatelyC$134areexpectedin2017.
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GoldexMine
TheGoldexmineislocatedintheCityofVald'Or,Quebec,approximately60kilometreseastoftheLaRondemine,andisaccessiblebyQuebecprovincialhighwayNo.117.TheprovenandprobablemineralreservesatGoldexasatDecember31,2016wereestimatedatapproximately0.89millionouncesofgoldcomprisedof16.8milliontonnesoforegrading1.64gramspertonne.
TheGoldexmineoperatesunderaminingleaseobtainedfromtheMinistryofEnergyandNaturalResources(Quebec)andundercertificatesofapprovalgrantedbytheMinistryofSustainableDevelopment,EnvironmentandtheFightAgainstClimateChange(Quebec).TheGoldexpropertyconsistsof22contiguousminingclaimsand,sinceApril2008,oneprovincialmininglease.Thepropertyismadeupofthreeblocks:theProbeblock;theDaltonblock;andtheGoldexExtensionblock.Theclaimsarerenewableeverysecondyearuponpaymentofasmallfee.Theminingleaseexpiresin2028andisautomaticallyrenewableforthreefurtherten-yeartermsuponpaymentofasmallfee.TheCompanyalsohasonesurfaceleasethatisusedfortheauxiliarytailingspond.Thisleaseisrenewableannuallyuponpaymentofafee.
LocationMapoftheGoldexMine(asatDecember31,2016)
AgnicoEaglehashelda100%interestintheGoldexpropertysinceDecember1993,whentheCompanyacquiredtheremaining46.3%interestinGoldexMinesLimitedthatitdidnotalreadyown.InFebruary2005,amineralreserveandmineralresourceestimatewascompletedfortheGEZ(whichwasthedepositonwhichtheCompanywasfocusingitsproductioneffortsbeforeproductionwassuspendedonOctober19,2011)which,coupledwithafeasibilitystudy,ledtoaprobablemineralreserveestimateof1.6millionouncesofgoldcontainedin20.1milliontonnesoforegrading2.54gramsofgoldpertonne.TheGEZresourcemodelwasrevisedand,inMarch2005,theCompanyapprovedafeasibilitystudyandtheconstructionoftheGoldexmine.ThemineachievedcommercialproductiononAugust1,2008.
BasedontheresultsofascopingstudycompletedinJuly2009,theCompanydecidedtoexpandthemineandmilloperationsatGoldexto8,000tonnesperday.Thisprojectwascompletedin2010.Capitalcostsinconnectionwiththeexpansiontotaled$10million.Thecrusherfortheexpansionwascommissionedattheendofthefirstquarterof2010atarateof7,811tonnesperday.
OnOctober19,2011,theCompanysuspendedminingoperationsandgoldproductionfromtheGEZ,followingthereceiptofrecommendationsfromindependentconsultantstohaltundergroundminingoperationsduringtheinvestigationinto
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geotechnicalconcernswiththerockabovethemininghorizon.TheCompanydoesnotexpecttoproducemoregoldfromtheGEZuntilthegeotechnicalconcernswiththerockabovethemininghorizonareresolved,whichmayneveroccur.
InJuly2012,theCompanyapprovedthedevelopmentoftheMandEZonesoftheGoldexmine.Productionfromthesezonesbeganinthefourthquarterof2013andcommercialproductionwasachievedinOctober2013.DevelopmentworkiscontinuingundergroundontheMandEZones.
In2015,followingthecompletionofapositiveinternaltechnicalstudy,theGoldexDeep1projectwasapprovedforproductionbyAgnicoEagle'sboardofdirectors(the"Board"or"BoardofDirectors")andisonscheduleforcommissioninginearly2018.ThestudyfocusedonminingthelowerpartoftheDxZoneandthetoppartoftheDZone,fromadepthof850metresto1,200metres.TheCompanyplanstoundertakedevelopmentfromthecurrentGoldexinfrastructure,withexistingequipmentandpersonnel.Theplannedminingmethodislong-holestopingwithcementedpastebackfill,whichisthesamemethodascurrentlyusedattheMandEZones.
Mining and Milling Facilities
SurfacePlanoftheGoldexMine(asatDecember31,2016)
ThesurfacefacilitiesatGoldexincludeaheadframe,ahoistroom,anorestoragefacility,aprocessingplant,apastebackfillplantandasurfacebuildingcontainingamechanicalshop,awarehouseandanoffice.Inaddition,theGoldexpropertyhasa790-metredeepshaft(Shaft#1),whichhistoricallywasusedtoprovideaccesstoundergroundworkings.Shaft#1isnowpredominantlyusedforgettingmaterialintothemineandservesasanemergencyexitfromthemine.
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Thesinkingofanewproductionshaftwascompletedin2007.Thisshaft(Shaft#2)isa5.5-metrediametershaftwitha50-centimetrethickconcreteliningandisusedforventilationaswellashoistingpurposes.Shaft#2is865metresdeepandincludesfivestations.Arefurbishedfrictionhoistwasinstalledforproductionandserviceduties,andanauxiliaryhoistwasinstalledforemergencyandpersonnelservice.
RehabilitationoftheoldrampnearShaft#1wascompletedin2015toaccesstheupperportionoftheMZone.Therampwillbeusedforgettingmaterialintothemineandasanemergencyexit.Inaddition,anewheatingsystematsurfacewasinstalledinearly2015.
Mining Method
TheCompanyminestheMandEZonesusingprimaryandsecondarystopemethods.DrillingiscarriedoutwithITHdrills.Productionholesareeither4.5or6.5inchesindiameter.Bulkemulsionisusedastheprimaryexplosiveforstopeblasting.Forbothzones,stopesareapproximately55metreshigh.Thewidthandlengthofindividualstopesvarybasedonlocalrockmassquality,butanaveragestopeisexpectedtorangebetween60,000and120,000tonnes.OrehandlingintheMZoneisdonewith15yardload-haul-dumpmachines.Thisequipmentunloadsintoanorepassaccessiblefromeachlevel.IntheEZone,locatedbelowthebottomofShaft#2,orehandlingisdonewith15yardload-haul-dumpmachinesand45tonnetrucks.
Allstopesaresupportedwith10-15metrecablebolts.Inaddition,thestabilityofcertainstopesisremotelymonitoredinrealtime.TheCompanyalsousespastebackfilltoallowforahighextractionratioandtoincreaselongtermstability.
ThesameminingmethodwillbeusedintheDeep1ZoneasisusedintheMandEZones,exceptthataRail-VeyorsystemwillbeusedfororehandlingbetweenthelowermostlevelofDeep1(Level120)andthecurrentorehandlingfacilities(Level76).TheRail-VeyorloadingsystemonLevel120willbefedviaarockbreakerroomatLevel115.ForLevels85to115,15yardloadhauldumpmachineswillunloadintoanorepassreportingtotherockbreakerroomonLevel115.ForthestopesonLevel120,45tonnetruckswillbeusedfororehandlingtoLevel115.
Surface Facilities
PlantconstructionatGoldexcommencedinthesecondquarterof2006andwascompletedinthefirstquarterof2008.Theplantreacheddesigncapacityinthesecondquarterof2009.GrindingattheGoldexmillwasinitiallydonethroughatwo-stagecircuitcomprisedofaSAGmillandaballmill.In2009,asurfacecrusherwasaddedtoreducethesizeoforetransferredtothesurfacefrom150millimetresto50millimetres.Alamellardecanterwasalsoaddedtorecoversmallparticlespresentinthewateroverflowoftheconcentratethickener.Theunderflowpumpforthisthickenerwasupgradedfollowingflotationcircuitmodificationtoincreasethepullrateofthesmallparticles.Approximatelytwo-thirdsofthegoldisrecoveredthroughagravitycircuit,passedovershakingtablesandsmeltedonsite.Theremainderofthegoldandpyriteisrecoveredthroughaflotationprocess.TheconcentrateisthenthickenedandtruckedtothemillattheLaRondeminewhereitisfurthertreatedbycyanidation.GoldrecoveredisconsolidatedwithpreciousmetalsfromtheLaRondeandLapamines.
In2013,anewbackfillplantwasbuiltonthesite.Thetailingthickenerunderflowfeedsthebackfillplantandtwodiskfiltersincreasethedensitybeforethecontinuousmixerwherebinderisaddedataratioofapproximately3.6%beforebeingsenttotheundergroundminewithapositivedisplacementpump.Currently,thecapacityofthebackfillplantisapproximately6,200tonnesperday.
In2013,metallurgicaltestingonorefromtheMandEZonesshowedthatthecementinthebackfillwouldhaveanegativeimpactontheefficiencyoftheflotationcircuit.Asaresult,apHcontrol(usingcarbondioxide),areservoirandcontrolvalveswereaddedtothemill.
Production and Mineral Recoveries
During2016,theGoldexminehadpayableproductionof120,704ouncesofgoldfrom2.55milliontonnesoforegrading1.60gramsofgoldpertonne.TheproductioncostsperounceofgoldproducedatGoldexin2016were$525.ThetotalcashcostsperounceofgoldproducedatGoldexin2016were$532onaby-productbasisandonaco-productbasisandtheprocessingfacilityaveraged6,954tonnesoforeperdayandoperated95.8%ofavailabletime.During2016,goldrecoveryaveraged92.36%.TheproductioncostspertonneatGoldexwereC$33andtheminesitecostspertonnewereC$33in2016.
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ThefollowingtablesetsoutthemetalrecoveriesattheGoldexminein2016.
Head Grade
Overall Metal
RecoveryPayable
Production
Gold 1.60g/t 92.36% 120,704oz
Goldproductionduring2017attheGoldexmineisexpectedtobeapproximately105,000ouncesfrom2.36milliontonnesoforegrading1.51gramsofgoldpertonneatestimatedtotalcashcostsperounceofapproximately$667onaby-productbasis,withestimatedgoldrecoveryof92.0%.MinesitecostspertonneofapproximatelyC$38areexpectedin2017.
Environmental, Permitting and Social Matters
EnvironmentalpermitsfortheconstructionandoperationoftheGoldexminewerereceivedfromtheMinistryofSustainableDevelopment,EnvironmentandtheFightAgainstClimateChange(Quebec)inOctober2005.Thepermitsalsocoveredtheconstructionandoperationofasedimentationpondforminewatertreatmentandsewagefacilities.InJune2011,thepermitswererevisedtoallowfortheexpansionofthemineandmilloperationsto9,500tonnesperday.InJune2012,environmentalpermitswerereceivedfortheconstructionandoperationofapastebackfillplantinconnectionwiththedevelopmentoftheMandEZones.
InNovember2006,theCompanyandtheQuebecgovernmentsignedanagreementpermittingtheCompanytodisposeGoldextailingsattheManitousite,atailingssiteformerlyusedbyanunrelatedthirdpartyandabandonedtotheQuebecgovernment.TheManitoutailingssitehasissuesrelatingtoaciddrainage,andtheconstructionoftailingsfacilitiesbytheCompanyandthedepositionoftailingsfromGoldexontheManitoutailingssitewasacceptedbytheMinistryofSustainableDevelopment,EnvironmentandtheFightAgainstClimateChange(Quebec)asavalidrehabilitationmethodtoaddresstheacidgenerationproblematManitou.Undertheagreement,theCompanymanagestheconstructionandoperationofthetailingsfacilitiesandcontributesanamountequivalenttotheCompany'sbudgetfortailingsfacilitiessetoutintheGoldexfeasibilitystudy.TheQuebecgovernmentpaysforallcostsinexcessofthisamountandretainsresponsibilityforallenvironmentalcontaminationattheManitoutailingssiteandforfinalclosureofthefacilities.TheCompanyhasalsobuiltaseparatetailingsdepositarea(auxiliarytailingspond)neartheGoldexminetobeusedduringtailingspipelinework.EnvironmentalpermitsfortheconstructionandoperationoftheauxiliarytailingspondwerereceivedinMarch2007.TherehabilitationoftheManitoutailingssiteisexpectedtocontinueduringtheminingoftheMandEZonesandadditionalminingzones,includingtheDeep1Zone.
InternaldykesareusedattheManitoutailingssitetomakeoptimaluseoftheavailabletailingsforrehabilitationoftheManitousite.
AsatDecember31,2016,theestimatedremainingreclamationcostsrelatingtotheGoldexmineareapproximately$6.1million.
Capital Expenditures
CapitalexpendituresattheGoldexmineduring2016wereapproximately$81.3million,whichincludedsustainingcapitalexpenditures,expansionconstructionanddeferredexpenses,butexcludedcapitalizeddrilling.Totalestimatedcapitalexpendituresfor2017are$72.8million,excludingcapitalizeddrilling.
Development
During2016,approximately12,421metresoflateraldevelopmentwerecompletedattheGoldexmine.Atotalof806metresofverticaldevelopmentwasalsocompletedinordertoestablishboththeorepasssystemservicingtheMZoneandtheventilationnetworkservicingtheMandDeep1Zones.
Atotalof8,660metresoflateraldevelopmentisplannedforallzonesin2017,while555metresofverticaldevelopmentwillbenecessarytoextendtheorepasssystemandtoensureproperventilationoftheDeep1Zone.In2017,2,500metresofadditionaldrillingisplannedfortheDeep1Zone.
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Geology, Mineralization, Exploration and Drilling
Geology
TheGoldexpropertyislocatednearthesouthernboundaryoftheArchean-age(2.7billionyearsold)AbitibiSubprovince,atypicalgranite-greenstoneterranelocatedwithintheSuperiorProvinceoftheCanadianShield.ThesoutherncontactoftheAbitibiSubprovincewiththePontiacSubprovinceismarkedbytheeast-southeasttrendingCLLfaultzone,themostimportantregionalstructuralfeature.TheGoldexdepositishostedwithinaquartzdioritesill,the"GoldexGranodiorite",locatedinasuccessionofmafictoultramaficvolcanicrocksthatareallgenerallyorientedwest-northwest.
TheMZonehasanapproximatelengthof440metres,aheightof350metresandathicknessof130metres.TheEZone,adjacenttotheeasternendoftheGEZ,hasanapproximatelengthof250metres,aheightof290metresandathicknessof130metres.TheDeep1Zoneisapproximately90metresbelowtheGEZandextendsto1,500metresbelowthesurface.Itappearstohaveanapproximatestrikelengthof350metres,aheightof600metresandthicknessof120metres.
Mineralization
GoldmineralizationatGoldexcorrespondstotheclassicalquartz-tourmalineveinlode-golddeposittype.Thegold-bearingquartz-tourmalinepyriteveinsandveinstockwork,hostedwithinaquartz-dioritedyke,aretheresultofastrongstructuralcontrol,relatedtoductileshearingandbrittlefaulting.Themostsignificantstructuredirectlyrelatedtomineralizationisadiscreteshearzone,theGoldexMylonite,whichisuptofivemetreswideandoccurswithintheGoldexGranodiorite,justsouthoftheDeep1ZoneandnorthoftheMZone.
AcoupleofveinsetsexistwithintheM,E,Deep1andPZones,ofwhichthemainsetconsistsofextensional-shearveinsdippingapproximately30degreessouth.Theveinsetsandassociatedalterationhaloscombinetoformstackedenvelopesupto30metresthick.
Moderatetostrongalbite-carbonatealterationofthehost-rockquartzdioritesurroundsthequartz-tourmaline-pyriteveinsandcoversalmost80%ofthemineralizedzone;outsideoftheenvelopes,priorchloritealterationaffectsthequartzdioriteandgivesitadarkergrey-greencolour.Occasionally,enclavesofrelativelyunalteredmediumgrey-green-colouredquartzdiorite(withnoveiningorgold)arefoundwithintheM,EandDeep1Zones.Theyareremovedwiththerestofthestope'soretoallowforasmoothstopeshape,requiredforminingpurposes.
Mostofthegoldoccursasmicroscopicparticlesthatarealmostalwaysassociatedwithpyrite,generallyadjacenttograinsandcrystalsbutalso20%includedwithinthepyrite.Thegold-bearingpyriteoccursinthequartz-tourmalineveinsandinnarrowfracturesinthealbite-carbonate-alteredquartzdiorite(generallyimmediatelyadjacenttotheveins).
Exploration and Drilling
ExplorationontheGoldexpropertywasconcentratedinthreeperiodsfrom1963to1996.Duringtheperiodfrom1985to1996,Shaft#1wassunkto457metres,followedby3,810metresoflateraldevelopmentand520metresofslashing,abulksampleofroughly55,886tonnesandapproximately32,000metresofdiamonddrillingintheMainZone.Concurrently,widelyspaceddrilling,comprisedofapproximately50diamonddrillholes,ledtothediscoveryandbeginningofthedevelopmentoftheGEZ.In1996,Shaft#1wasdeepenedto790metres,followedby853metresoflateraldevelopment,cross-cutsandslashing,twobulksamplesfor136,200tonnesand23,000metresofundergrounddrillinginGEZ.
ThecombinedamountofgoldinprovenandprobablemineralreservesattheGoldexmineattheendof2016was0.89millionounces(16.8milliontonnesoforegrading1.64gramsofgoldpertonne),whichrepresentsanincreaseofapproximately0.2millionouncesofgoldinreservesfromtheendof2015,afterproducing120,704ouncesofgold(130,687ouncesinsitugoldmined).Theincreaseislargelyduetothesuccessfulconversionofmineralresourcestomineralreserves,mainlyintheDZoneaswellasintheMandEZones.Themineralreservegradeincreasedfrom1.61gramsofgoldpertonneattheendof2015to1.64gramsofgoldpertonneattheendof2016.UndergroundmeasuredandindicatedmineralresourcesattheGoldexminedecreasedby4.12milliontonnesoforeto30.3milliontonnesoforegrading1.82gramsofgoldpertonne,primarilyduetoconversionofindicatedtomeasuredmineralresources,positivedrillingresultsintheDeep1Zoneandtheremovalofnon-recoverableresourcesintheMandEZones,primarilyduetominingsequencing.In2016,therewasadecreaseininferredmineralresourcesofapproximately2.75milliontonnesoforeto21.88milliontonnesoforegrading1.60gramsofgoldpertonne.Thisdecreaseintheinferredmineralresourceswasprimarilyduetotheconversionofinferredtoindicatedmineralresourcesandpositive
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drillingresultsintheE,M,DxandDeep1Zonesandtheremovalofnon-recoverableresourcesintheMandEZonesprimarilyduetominingsequencing.
DiamonddrillingatGoldexin2016totaled373holesforatotallengthof62,210metres.Ofthistotal,84holes(17,438metres)wereforexplorationoftheM,Deep1andSouthZonesatacostof$0.83million,248holes(41,254metres)wereforconversiondrilling,principallyintheDeep1andMZones,atacostof$2.33million,24holes(1,596metres)weredelineationdrillingintheMandEZonesatacostof$0.07millionand17holes(1,922metres)weredrilledfortheengineeringandminingdepartmentsatacostof$0.15million.
In2017,theCompanyexpectstospend$1.26millionon18,150metresofexplorationdrilling,$2.54millionon33,350metresofconversiondrilling,$0.77millionon10,000metresofdelineationdrillingand$0.3millionon3,000metresofexpenseddrilling.
CanadianMalarticMine
TheCanadianMalarticmineislocatedapproximately25kilometreswestoftheCityofVal-d'Orand80kilometreseastofCityofRouyn-Noranda.TheminelieswithinthetownofMalartic.ItstraddlesthetownshipsofFournière,MalarticandSurimau.AtDecember31,2016,theCanadianMalarticminewasestimatedtohaveprovenandprobablemineralreservescontainingapproximately3.55millionouncesofgoldcomprisedof101.8milliontonnesoforegrading1.08gramspertonne(representingtheCompany's50%interest).
TheCompanyacquiredits50%interestintheCanadianMalarticmineonJune16,2014throughitsjointacquisitionofOsiskowithYamana.See"GeneralDevelopmentoftheBusiness–Three-YearHistory–2014"forfurtherdetailsoftheCompany'sacquisitionofits50%interestintheCanadianMalarticmine.
TheCanadianMalarticmineoperatesunderminingleasesobtainedfromtheMinistryofEnergyandNaturalResources(Quebec)andundercertificatesofapprovalgrantedbytheMinistryofSustainableDevelopment,EnvironmentandtheFightAgainstClimateChange(Quebec).TheCanadianMalarticpropertyiscomprisedoftheEastAmphiproperty,theCHLMalarticprospect,theCanadianMalarticmineandtheFourniere,MidwayandPiche-Harveyproperties.TheCanadianMalarticpropertyconsistsofacontiguousblockcomprisingoneminingconcession,fiveminingleasesand199miningclaims.
ExpirationdatesfortheminingleasesontheCanadianMalarticpropertyvarybetweenMarch23,2019andFebruary17,2034,andareautomaticallyrenewableforthreefurtherten-yeartermsuponpaymentofasmallfee.
TheCanadianMalarticminecanbeaccessedeitherfromVald'OrintheeastorfromRouyn-NorandainthewestviaQuebecprovincialhighwayNo.117.Apavedroadrunningnorth-southfromthetownofMalartictowardsMourierLakecutsthroughthecentralareaoftheCanadianMalarticproperty.TheCanadianMalarticpropertyisfurtheraccessiblebyaseriesofloggingroadsandtrails.TheCanadianMalarticmineisalsoservicedbyarail-linewhichcutsthroughthemiddleofthetownofMalartic.ThenearestairportislocatedinVal-d'Or.
Abufferzone135metreswidehasbeendevelopedalongthenorthernlimitoftheopenpittomitigatetheimpactsofminingactivitiesonthecitizensofMalartic.Insidethisbufferzone,alandscapedridgewasbuiltprimarilyusingrockandtopsoilproducedduringpre-strippingwork.Theheightofthislandscapedridgeis15metreswheretheconcentrationofresidentsishigherandfivetosixmetresnearlesspopulatedareas.
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LocationMapoftheCanadianMalarticMine(asatDecember31,2016)
TheCanadianMalarticmineincludesopenpitoperations,anadministration/warehousebuilding,amineoffice/truckshopbuilding,aprocessplantandthecrushingplant.
FollowingthejointacquisitionoftheCanadianMalarticminebytheCompanyandYamana,mostoftheminingclaimsaresubjecttoa5%netsmelterreturnroyaltypayabletoNewOsisko.TheminingclaimscomprisingtheCHLMalarticprospectaresubjectto3%netsmelterreturnroyaltiespayabletoeachofNewOsiskoandAbitibiRoyaltiesInc.Inaddition,oftheminingclaimsconstitutingtheCanadianMalarticproperty,101arealsosubjecttoothernetsmelterreturnroyaltiesthatvarybetween1%and2%,payableundervaryingcircumstances.In2016thePartnership,whichistheoperatoroftheCanadianMalarticmine,paidC$61.1millionintheaggregatewithrespecttothesenetsmelterreturnroyalties,andexpectstopayapproximatelyC$60.6millionin2017.
GoldwasfirstdiscoveredintheMalarticareain1923.GoldproductionontheCanadianMalarticpropertybeganin1935andcontinueduninterrupteduntil1965.Followingvariousownershipchangesovertheensuingyears,OsiskoacquiredownershipoftheCanadianMalarticpropertyin2004.BasedonafeasibilitystudycompletedinDecember2008,Osiskocompletedconstructionofa55,000tonneperdaymillcomplex,tailingsimpoundmentarea,fivemillioncubicmetrepolishingpondandroadnetworkbyFebruary2011,andthemillwascommissionedinMarch2011.
AsofDecember31,2010,theCanadianMalarticminehadreceivedallformalgovernmentpermitsrequiredforitsconstructionandrelatedactivities,withtheexceptionoftheauthorizationforthemillandmineoperations.TheofficialcertificateofauthorizationforthemillandoperationswasgrantedonMarch31,2011,atwhichpointtheCanadianMalarticminewasfullypermitted.TheCanadianMalarticmineachievedcommercialproductiononMay19,2011.
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Mining and Milling Facilities
SurfacePlanoftheCanadianMalarticMine(asatDecember31,2016)
TheCanadianMalarticmineisalargeopenpitoperationcomprisedoftheCanadianMalarticpit.ThePartnershipcontinuestoworkwiththeQuebecMinistryofTransportandthetownofMalarticonthedeviationofQuebecprovincialhighwayNo.117togainaccesstothehighergradeBarnatandJeffreydeposits.ThefinallayoutandanenvironmentalimpactassessmentwerecompletedattheendofJanuary2015.TheenvironmentalimpactassessmentisunderreviewbytheMinistryofSustainableDevelopment,EnvironmentandtheFightAgainstClimateChange(Quebec).TheQuebecBureaud'audiencespubliquessurl'environment("BAPE")issueditsreportontheCanadianMalarticpitextensiononOctober5,2016.TheBAPEreportconcludedthattheprojectisacceptableandprovidesseveralrecommendationsintendedtoenhancesocialacceptability.
Mining Methods
MiningattheCanadianMalarticmineisdonebyopenpitmethodusingexcavatorsandtrucks.Inordertomaximizeproductivityandlimitthenumberofunitsoperatinginthepit,largescaleequipmentwasselectedforthemineoperation.Theprimaryloadingtoolsarehydraulicexcavators,withwheelloadersusedasasecondaryloadingtool.Themineproductionschedulewasdevelopedtofeedthemillatanominalrateof55,000tonnesperday.Thecontinuityandconsistencyofthemineralization,coupledwithtightdefinitiondrilling,andconfirmedbysevenyearsofminingoperations,demonstratetheamenabilityofthemineralreservesandmineralresourcestotheselectedminingmethod.
ThethroughputattheCanadianMalarticminein2016averaged53,665tonnesperdaycomparedwith52,300tonnesperdayin2015.Theincreasedthroughputin2016waslargelyduetomilloptimization,additionalcrushedorefromtheportablecrusherandmillstability.
Surface Facilities
SurfacefacilitiesattheCanadianMalarticmineincludetheadministration/warehousebuilding,themineoffice/truckshopbuilding,theprocessplantandthecrushingplant.Theprocessingplanthasadailycapacityof55,000tonnesofore.
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Oreisprocessedthroughconventionalcyanidation.Oreblastedfromthepitisfirstcrushedbyagyratorycrusherfollowedbysecondarycrushingpriortogrinding.GroundorefeedssuccessivelyintoleachandCIPcircuits.AZadraelutioncircuitisusedtoextractthegoldfromtheloadedcarbon.Pregnantsolutionisprocessedviaelectrowinningandtheresultingprecipitateissmeltedintogold/silverdorebars.MilltailsarethickenedanddetoxifiedusingaCaroacidprocess,reducingcyanidelevelsbelow20partspermillion.Detoxifiedslurryissubsequentlypumpedtoaconventionaltailingsfacility.
Production and Mineral Recoveries
SincetheJune16,2014acquisitionofOsisko,AgnicoEagleandYamanahaveeachhelda50%interestintheCanadianMalarticmine.During2016,AgnicoEagle'sshareoftheCanadianMalarticmine'spayableproductionwas292,514ouncesofgoldand339,974ouncesofsilverfrom9,620,697tonnesoforegrading1.038gramsofgoldpertonneand1.35gramsofsilverpertonne.TheproductioncostsperounceofgoldproducedatCanadianMalarticin2016were$628.ThetotalcashcostsperounceofgoldproducedatCanadianMalarticin2016were$606onaby-productbasisandwere$626onaco-productbasis.TheCanadianMalarticprocessingfacilityaveraged53,665tonnesperdayandoperatedapproximately95.0%ofavailabletime.Goldandsilverrecoveryaveraged89.3%and79.6%,respectively.TheproductioncostspertonneatCanadianMalarticwereC$25andtheminesitecostspertonnewereC$25in2016.
ThefollowingtablesetsoutthemetalrecoveriesattheCanadianMalarticmineona100%basisin2016.
Head Grade
Overall Metal
RecoveryPayable
Production
Gold 1.038g/t 89.3% 585,027oz
Silver 1.352g/t 79.6% 679,948oz
TheCompany's50%shareofannualproductionattheCanadianMalarticminein2017isexpectedtoconsistofapproximately300,000ouncesofgoldand324,000ouncesofsilverfrom9.4milliontonnesoforegrading1.11gramsofgoldpertonneand1.34gramsofsilverpertonne.Thetotalcashcostsperouncein2017areexpectedtobeapproximately$578perounceonaby-productbasis,withestimatedgoldrecoveryof89.3%andsilverrecoveryof80.0%.MinesitecostspertonneofapproximatelyC$24areexpectedin2017.
Environmental, Permitting and Social Matters
In2015,anactionplanwasdevelopedandimplementedbythePartnershiptomitigatenoise,vibrations,atmosphericemissionsandancillaryissues.Mitigationmeasureswereputinplacetoimprovetheprocessandavoidanyenvironmentalnon-compliance.Asaresult,in2016,thePartnershipimproveditsenvironmentalperformancecomparedtopreviousyears.Withrespecttoactivitiesin2016,thePartnershipreceivedonenon-complianceblastnoticeandtennon-compliancenoisenotices(whichincludednoticesreceivedininstanceswherenoiselevelswereotherwisewithinthemunicipalnoiselimits).Themine'steamofon-siteenvironmentalexpertscontinuetomonitorregulatorycomplianceintermsofapprovals,permitsandobservanceofdirectivesandrequirementsandcontinuetoimplementimprovementmeasures.
OnAugust2,2016,thePartnershipwasservedwithaclassactionlawsuitwithrespecttoallegationsinvolvingtheCanadianMalarticmine.See"LegalProceedingsandRegulatoryActions"forfurtherdetailsontheclassactionlawsuit.
Beginninginthespringof2015,thePartnershiphasbeenworkingcollaborativelywiththecommunityofMalarticanditscitizenstodevelopa"GoodNeighbourGuide"thataddressestheallegationscontainedinthelawsuit.ImplementationoftherecommendationsintheGoodNeighbourGuidebeganonSeptember1,2016.
Theoriginaldesignofthewasterockpilewasdevelopedtoaccommodateapproximately326milliontonnesofmechanicallyplacedwasterockrequiringatotalstoragevolumeofapproximately161millioncubicmetres.
InDecember2015,thePartnershipcompletedtheconstructionofanewpolishingpondeastofdykeA,whichhasbeenoperationalsinceMay2016.Theexistingpolishingpond,withacapacityofapproximately48milliontonnes,hasbeenconvertedintotheeighthcellofthetailingsmanagementfacility,adding2.5yearsofoperationtothetailingsmanagementfacilitycapacityforatotalof148milliontonnesand7.5yearsofoperation.Thetotalcapacityofthecurrenttailingsmanagementfacilityisestimatedat198milliontonnes.Theexpansionoftheopenpit,withtheproductionfromthe
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CanadianMalarticpitextension(Barnatdeposit),willincreasethetotalamountoftailingsto342milliontonnes,requiringanadditional144milliontonnesintailingsstoragecapacity.ThePartnershipplanstostoretailingsinanextendedtailingsfacilityandintheCanadianMalarticpitattheendofitsoperations.Accordingtothemineplan,attheendofminelife,50to100milliontonnesoftailingswillbedepositedinthepit.Therestofthetailings,comprisingaminimumof59andamaximumof109milliontonnes,willbedepositedintheextendedtailingsfacility.
RegulatoryapprovalfortheproposedtailingsdepositionintheCanadianMalarticpitandtheexpansionofthecurrentlyauthorizedtailingsareaarepartoftheapprovalprocessfortheCanadianMalarticpitextension(Barnatdeposit)subjecttotheenvironmentalimpactassessmentprocessoftheQuebecEnvironment Quality Act .TheenvironmentalimpactassessmenthasbeencompletedandisunderreviewbytheMinistryofSustainableDevelopment,EnvironmentandtheFightAgainstClimateChange(Quebec).GolderAssociatesLtd.isdesigningthetailingsextensioncomponentandispreparingahydrogeologicalstudytodemonstratethattheCanadianMalarticpitwouldprovideahydraulictrapandcontainthetailingswithminimumenvironmentalrisk.DelayintheexpectedtimingofthepermitsrequiredfortheCanadianMalarticpitextensioncouldhaveanegativeimpactontheminingsequenceatCanadianMalartic.
Thepublichearings(BAPEprocess)tookplaceinJuneandJuly2016fortheCanadianMalarticpitextensionandtheBAPEissuedtheirreportinOctober2016,witharecommendationtotheMinisterthattheprojectbeacceptedwithcertainconditions.AdecisionbytheMinisterisexpectedinthefirsthalfof2017.
AnannualhydrologicalsitebalanceismaintainedtoprovideayearlyestimateofwatervolumesthatmustbemanagedinthedifferentstructuresofthewatermanagementsystemoftheCanadianMalarticmineduringanaverageclimaticyear(intermsofprecipitation).Resultsofthishydrologicalbalanceindicatethatexcesswaterfromthesoutheastpondwilleventuallyneedtobereleasedintotheenvironment.Awatertreatmentplantwascommissionedin2015toensurethatthewatertobereleasedtotheenvironmentmeetswaterqualityrequirements.Thiswatertreatmentplantreducestherisksassociatedwithsurfacewatermanagementandaddsflexibilitytothesystem.In2016,modificationsonwatermanagementweremadeinordertoimprovewaterqualitysegregationandreducethevolumesofwaterpotentiallyrequiringtreatment.
Reclamationandclosurecostshavebeenestimatedforrehabilitatingthetailingsfacilityandwastedump,vegetatingthesurroundingarea,dismantlingtheplantandassociatedinfrastructure,andperformingenvironmentalinspectionandmonitoringforaperiodoftenyears.ThereclamationandclosurecostisestimatedtobeC$65.5million.Financialassurancehasbeenprovidedbasedontheclosureplan.
Capital Expenditures
TheCompany'sportionofcapitalexpendituresattheCanadianMalarticmineduring2016wereapproximately$60.4million,whichincludedsustainingcapitalexpendituresanddeferredexpense,butexcludedcapitalizeddrilling.Budgeted2017capitalexpendituresattheCanadianMalarticmineare$67.6million,excludingcapitalizeddrilling.
Development
DevelopmentactivitiesattheCanadianMalarticminein2016primarilyconsistedofminorstrippingactivities.Developmentactivitiesin2017areexpectedtoincludeadditionalstrippingactivities.Permittingactivitiesareongoing.
Geology, Mineralization, Exploration and Drilling
Geology
TheCanadianMalarticpropertystraddlesthesouthernmarginoftheeasternportionoftheAbitibiSubprovince,anArcheangreenstonebeltsituatedinthesoutheasternpartoftheSuperiorProvinceoftheCanadianShield.TheAbitibiSubprovinceislimitedtothenorthbygneissesandplutonsoftheOpaticaSubprovince,andtothesouthbymetasedimentsandintrusiverocksofthePontiacSubprovince.ThecontactbetweenthePontiacSubprovinceandtherocksoftheAbitibigreenstonebeltischaracterizedbyamajorfaultcorridor,theeast-westtrendingLarderLake–CadillacFaultZone("LLCFZ").ThisstructurerunsfromLarderLake,OntariothroughRouyn-Noranda,Cadillac,Malartic,Val-d'OrandLouvicourt,Québec,atwhichpointitistruncatedbytheGrenvilleFront.
TheregionalstratigraphyofthesoutheasternAbitibiareaisdividedintogroupsofalternatingvolcanicandsedimentaryrocks,generallyorientedatN280–N330andseparatedbyfaultzones.Themainlithostratigraphicdivisionsinthisregionare,fromsouthtonorth,thePontiacGroupofthePontiacSubprovinceandthePiché,Cadillac,BlakeRiver,KewagamaandMalarticgroupsoftheAbitibiSubprovince.ThevariouslithologicalgroupswithintheAbitibiSubprovincearemetamorphosedtogreenschistfacies.MetamorphicgradeincreasestowardthesouthernlimitoftheAbitibibelt,where
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rocksofthePichéGroupandthenorthernpartofthePontiacGrouphavebeenmetamorphosedtouppergreenschistfacies.
ThemajorityoftheCanadianMalarticpropertyisunderlainbymetasedimentaryunitsofthePontiacGroup,lyingimmediatelysouthoftheLLCFZ.Thenorth-centralportionofthepropertycoversanapproximately9.5kilometresectionoftheLLCFZcorridorandisunderlainbymafic-ultramaficmetavolcanicrocksofthePichéGroupcutbyintermediateporphyriticandmaficintrusions.TheCadillacGroupcoversthenorthernpartoftheproperty(northoftheLLCFZ).Itconsistsofgreywackecontaininglensesofconglomerate.
Mineralization
SurfacedrillingbyLacMineralsLtd.inthe1980sdefinedseveralnear-surfacemineralizedzonesnowincludedintheCanadianMalarticdeposit(theF,P,A,WolfeandGilbertzones),allexpressionsofalarger,continuousmineralizedsystemlocatedatdeptharoundthehistoricalundergroundworkingsoftheCanadianMalarticandSladenmines.Inadditiontothese,theWesternPorphyryZoneoccursonekilometrenortheastofthemainCanadianMalarticdepositandtheGouldiemineralizedzoneoccursapproximately1.2kilometressoutheastofthemainCanadianMalarticdeposit,althoughtherelationshipbetweenthesezonesandthemaindepositispresentlyunknown.
MineralizationintheCanadianMalarticdepositoccursasacontinuousshellof1%to5%disseminatedpyriteassociatedwithfinenativegoldandtracesofchalcopyrite,sphaleriteandtellurides.ThegoldresourceismostlyhostedbyalteredclasticsedimentsofthePontiacGroup(70%)overlyinganepizonaldioriticporphyryintrusion.Aportionofthedepositalsooccursintheupperportionsoftheporphyrybody(30%).
TheSouthBarnatdepositislocatedtothenorthandsouthoftheoldSouthBarnatandEastMalarticmineworkings,largelyalongthesouthernedgeoftheLLCFZ.Thedisseminated/stockworkgoldmineralizationatSouthBarnatishostedbothinpotassic-altered,silicifiedgreywackesofthePontiacGroup(southofthefaultcontact)andinpotassic-alteredporphyrydykesandschistose,carbonatizedandbiotiticultramaficrocks(northofthefaultcontact).
SeveralmineralizedzoneshavebeendocumentedwithintheLLCFZ(SouthBarnat,Buckshot,EastMalartic,Jeffrey,Odyssey,EastAmphi,Fourax),mostofwhicharegenerallyspatiallyassociatedwithstockworksanddisseminationswithinmaficorintermediateporphyriticintrusions.
Exploration and Drilling
GoldwasfirstdiscoveredintheMalarticareain1923bytheGouldieBrothersatwhatisnowdesignatedtheGouldieZone.Duringtheperiodfrom1935to1983,theCanadianMalartic,Barnat/SladenandEastMalarticminesproducedapproximately5.5millionouncesofgoldand1.9millionouncesofsilver,mostlyfromundergroundoperations.
ThecombinedamountofgoldinprovenandprobablemineralreservesattheCanadianMalarticmineattheendof2016was3.55millionounces(101.8milliontonnesoforegrading1.08gramspertonneofgold),whichrepresentsadecreaseofapproximately314,000ouncesofgoldascomparedtotheendof2015,afterproducing292,514ouncesofgold(335,665ouncesinsitugoldmined).Thereductioninmineralreserveswasprincipallyassociatedwithoreminedduring2016.MeasuredandindicatedmineralresourcesattheCanadianMalarticmineincreasedby0.35milliontonnesoforein2016to13.1milliontonnesgrading1.53gramsofgoldpertonne,duetoareductioninthecut-offgraderelatedtogoldpriceandexchangeratemovements.InferredmineralresourcesattheCanadianMalarticmineincreasedby10.5milliontonnesin2016to14.9milliontonnesgrading1.93gramsofgoldpertonne,duetotheinitialinferredmineralresourcesattheOdysseyzone.AllnumbersshownforCanadianMalarticreflectAgnicoEagle'sindirect50%ownershipinthemine.
DiamonddrillingisusedforexplorationontheCanadianMalarticproperty.In2016,155holes(119,393metres)weredrilledfordefinition(conversion)drillingand39holes(24,496metres)wereforexploration.ExplorationexpendituresattheCanadianMalarticmineduring2016wereapproximatelyC$10.9million(50%basis),whichincludesthepurchaseoftheMidwaypropertylocated6kilometresfromtheCanadianMalarticmine.Themainfocusofthe2016explorationprogramconcentratedondrilldefinitionoftheOdysseydepositlocated1.5kilometreseastofthecurrentlimitoftheCanadianMalarticpit.
In2017,thePartnershipexpectstospendapproximatelyC$4.7milliononexplorationdrillingatCanadianMalartic.Explorationprogramsareplannedtoidentifyandextendalreadyknownmineralizedzonesbelowthepit.
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KittilaMine
TheKittilamine,whichcommencedcommercialproductioninMay2009,islocatedinnorthernFinlandapproximately900kilometresnorthofHelsinkiand50kilometresnortheastofthetownofKittila.AtDecember31,2016,theKittilaminewasestimatedtocontainprovenandprobablemineralreservesof4.48millionouncesofgoldcomprisedof30.1milliontonnesoforegrading4.64gramsofgoldpertonne.TheKittilamineisaccessiblebypavedroadfromthevillageofKiistala,whichislocatedonthesouthernportionofthemainclaimblock.ThegolddepositislocatednearthesmallvillageofRouravaara,approximatelytenkilometresnorthofthevillageofKiistala.
ThetotallandholdingssurroundingandincludingtheKittilaminecomprisetwomininglicencesand172tenements.ThetenementsformacontinuousblockaroundtheKittilaandKuotkomininglicences.TheblockhasbeendividedintotheSuurikuusikkoarea(whichincludestheRouravaaraarea),theSuurikuusikkoWestarea,theSuurikuusikkoEastarea,andtheKittilaandKuotkomininglicences.TheKuotkomininglicenceislocatedapproximately15kilometresnorthoftheKittilamine.TheKuotkomininglicenceiscurrentlyintheenvironmentalreviewprocess.
Theboundaryofthemininglicenceisdeterminedbyground-surveyedpoints,whereastheboundariesofthetenementsarenotrequiredtobesurveyed.AllofthetenementsattheKittilamineareregisteredinthenameofAgnicoEagleFinlandOy,anindirect,wholly-ownedsubsidiaryoftheCompany.Theexpirydatesofthetenementsvary,withtheearliestexpirydatebeingApril2017.Tenementsareinitiallyvalidforfouryears,providedexplorationworkintheareaisreportedannuallyandasmallannualfeeispaidtomaintaintitle.Extensionsoftitlescanbegrantedfor11additionalyearsuponpaymentofaslightlyhigherfeeandactiveexplorationinthearea.AgnicoEagleFinlandOyalsoholdsthemininglicenceinrespectoftheKittilamine.Themineissubjecttoa2.0%netsmelterreturnroyaltypayabletotheRepublicofFinland.
ThemineislocatedwithintheArcticCircle,buttheclimateismoderatedbytheGulfStreamoffthecoastofNorway,suchthatnorthernFinland'sclimateiscomparabletothatofeasternCanada.Wintertemperaturesrangefromminustentominus30degreesCelsius,whereassummertemperaturesrangefromtendegreesCelsiustothemid-20s.Explorationandminingworkcanbecarriedoutyear-round.Becauseofitsnorthernlatitude,winterdaysareextremelyshortwithabriefperiodof24-hourdarknessaroundthewintersolstice.Conversely,summerdaysareverylongwithabriefperiodof24-hourdaylightaroundthesummersolstice.
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LocationMapoftheKittilaMine(asatDecember31,2016)
TheCompanyacquiredits100%,indirectinterestintheKittilaminethroughtheacquisitionoftheSwedishcompanyRiddarhyttanResourcesABinNovember2005.InJune2006,onthebasisofanindependentlyreviewedfeasibilitystudy,theCompanyapprovedconstructionoftheKittilamine.MiningatKittilastartedinitiallyasopenpitmining.OpenpitminingendedinNovember2012andallminingiscurrentlycarriedoutfromtheundergroundviarampaccess.Theinitialundergroundstopewasminedinearly2010.Oreisprocessedina3,750-tonneperdaysurfaceprocessingplantthatwascommissionedinlate2008,andexpandedfrom3,000to3,750tonnesperdayin2014.LimitedgoldconcentrateproductionstartedinSeptember2008andgolddorebarproductioncommencedinJanuary2009.
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Mining and Milling Facilities
SurfacePlanoftheKittilaMine(asatDecember31,2016)
TheorebodiesatKittilawereinitiallyminedfromtwoopenpits,followedbyundergroundoperationstominethedepositsfurtherbeneaththesurface.Smalleradditionalopenpitsmaybeusedtomineanyremainingmineralreservesclosetothesurfaceinthefuture.OpenpitminingstartedinMay2008andtheextractedorewasstockpiled.AsofDecember31,2016,atotalof9.86milliontonnesoforehavebeenprocessed,includingorefromtheopenpitsandunderground,
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0.44milliontonnesoforearecurrentlystockpiledand39.9milliontonnesofwasterockhavebeenexcavated,includingbothopenpitandundergroundexcavation.Workcontinuedthroughout2016todeveloptheexplorationandRimpiramps,aswellasotherworktoaccesstheundergroundmineralreserves,includingdevelopmentofaramptowardstheSisarZone.Totalunderground(lateralandvertical)developmentattheendof2016wasapproximately85kilometres.Undergroundminingcommencedinthefourthquarterof2010and,attheendof2016,atotalof6.5milliontonnesoforehasbeenminedfromtheundergroundportionofthemine.
Mining Methods
AttheKittilamine,theSuurikuusikkoandtheRouravaaraorebodiesarecurrentlyminedbyundergroundminingmethodsandaccesstotheundergroundmineisviaramp.Approximately5,000tonnesoforeperdayarefedtotheconcentrator,exceedingthenominalcapacityof3,750tonnesperday.Theundergroundminingmethodisopenstopingwithdelayedbackfill.Stopesarebetween25and40metreshighandyieldbetween8,000and40,000tonnesoforeperstope.Toensuresufficientoreproductionisavailableinthefuturetosupplythemill,over15,000metresoftunnelswillbedevelopedeachyear.Afterextraction,stopesarefilledwithpastebackfillorcementedbackfilltoenablethesafeextractionoforeinadjacentstopes.Oreistruckedtothesurfacecrusherviatherampaccesssystem.
Surface Facilities
Constructionoftheprocessingplantandassociatedequipmentwascompletedin2008.FacilitiesattheKittilamineincludeofficebuildings,amaintenancefacilityforminingequipment,awarehouse,asecondmaintenanceshop,anoxygenplant,aprocessingplant,apastebackfillplant,atankfarm,acrusher,conveyorhousings,anorebinandasulfateremovalplantattheNP3tailingsarea.Inaddition,therearesometemporarystructuresforcontractorofficesandworkareas.
TheoreattheKittilamineistreatedbygrinding,flotation,pressureoxidationandCILcircuits.Aftergrinding,oreprocessingconsistsoftwostages.Inthefirststage,oreisenrichedbyflotationand,inthesecondstage,thegoldisextractedbypressureoxidationandCILprocesses.Attheendofthesecondstage,goldisrecoveredfromthecarboninaZadraelutioncircuitandrecoveredfromthesolutionusingelectrowinningandfinallypouredintodorebarsusinganelectricinductionfurnace.
Production and Mineral Recoveries
In2016,theKittilaminehadpayableproductionof202,508ouncesofgoldfrom1.67milliontonnesoforegrading4.41gramsofgoldpertonne.TheproductioncostsperounceofgoldproducedatKittilain2016were$701.ThetotalcashcostsperounceofgoldproducedatKittilain2016were$699onaby-productbasisandwere$701onaco-productbasisandtheprocessingfacilityaveraged5,251tonnesoforeperdayandoperated86.7%ofavailabletime.During2016,flotationrecoveriesaveraged93.0%.Recoveriesinthesecondstageoftheprocessin2016averaged92.1%andglobalrecoverieswere85.7%.TheproductioncostspertonneatKittilawere€77andtheminesitecostspertonnewere€77in2016.
ThefollowingtablesetsoutthemetalrecoveriesattheKittilaminein2016.
Head Grade
Overall Metal
RecoveryPayable
Production
Gold 4.41g/t 85.7% 202,508oz
In2017,theKittilamineisexpectedtoproduceapproximately190,000ouncesofgoldfrom1.6milliontonnesoforegrading4.30gramsofgoldpertonneatestimatedtotalcashcostsperounceofapproximately$728onaby-productbasis,withestimatedgoldrecoveryof86.0%.Minesitecostspertonneofapproximately€78areexpectedin2017.
Environmental, Permitting and Social Matters
AgnicoEagleFinlandOycurrentlyholdsamininglicence,anenvironmentalpermitandoperationalpermitsinrespectoftheKittilamine.
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Theconstructionofthefirstphaseofthetailingsdamwascompletedinthefallof2008.Workonthesecondphasewascompletedin2010andincludedtheexpansionofthetailingsarea.Workonthethirdphasebeganin2013andincludesworktoheightenthedam.Workonthethirdphaseisexpectedtocontinueforseveralyears.
OnSeptember14,2015,duringroutineinspectionsofthedam,waterseepagewasdiscoveredfromaholdingpond(NP3).Adetailedactionplanforapermanentsolutionwasdevelopedbyateamofinternalandexternalexpertsandthisplanandhasbeenimplemented.Theactionplanconsistedoffillingtheentireareawherethewaterseepagehadoccurredwithtailings.Inthebeginningof2016,allseepagebeneaththedamhadstoppedandtheCompanyexpectsnofurtherriskofseepageoccurringthroughtheliner.
Waterfromdewateringthemineandwaterusedinthemineandmilliscollectedandtreatedbysedimentation.EmissionsandenvironmentalimpactaremonitoredinaccordancewiththecomprehensivemonitoringprogramthathasbeenapprovedbytheFinnishenvironmentalauthorities.Workonenhancingthescrubbingofmillgaseshasresultedinadesigntorecoverheatlossanduseittoheatbuildings,andthisworkiscontinuing.Financialassuranceisprovidedtotheenvironmentalauthoritiesonanannualbasisintheamountprescribedbytheenvironmentalpermit.
TheenvironmentalpermitrenewalwasreceivedinJuly2013.ThisrenewalcontainsadditionaleffluentcriteriaandtheCompanyhasappealedthetimingofcompliancewithsuchcriteriatoallowforstudiesanddesigntotakeplacefornewwatertreatmentasrequired.AdecisionbytheAdministrativeCourtreviewingtheappealwasreceivedinthefirstquarterof2015,grantingtheCompany'sappealinpart.TheCompanyhasalsorespondedtoanotherappeallodgedbyathirdparty.ThefinaldecisionfromtheSupremeAdministrativeCourtwasreceivedinMay2016,andtocomplywiththerequirementsofthenewpermit,awatertreatmentplantforsulfatewasbuiltandcommissionedinthefourthquarterof2016.
Capital Expenditures
CapitalexpendituresattheKittilamineduring2016totaledapproximately$75.9million,whichincludedmillmodification,minesiteexploration,RimpiandSisarareadevelopment,undergrounddevelopmentandsustainingcapitalcosts,butexcludescapitalizeddrilling.
TheCompanyexpectscapitalexpendituresduring2017attheKittilaminetobeapproximately$76.8million,excludingcapitalizeddrilling.
Development
In2016,undergrounddevelopmentcontinuedinboththeSuurikuusikkoandRouravaaraminingareas.Atotalof14,415metresoframpandsublevelaccessdevelopmentwerecompletedduringtheyear.Atotalof187,790tonnesoforefromdevelopmentand1,465,184tonnesofstopeorewereminedin2016.TheCompanyexpectstocompleteapproximately17,084metresoflateraldevelopment(excludingtheRimpiarea)and1,258metresofverticaldevelopmentduring2017.
Geology, Mineralization, Exploration and Drilling
Geology
TheKittilamineissituatedwithintheKittilaGreenstonebelt,partoftheLaplandGreenstonebeltintheProterozoic-ageSvecofenniangeologicprovince.TheappearanceandgeologyoftheareaissimilartothatoftheAbitibiregionoftheCanadianShield.InnorthernFinland,thebedrockistypicallycoveredbyathinbutuniformblanketofunconsolidatedglacialtill.Bedrockexposuresarescarceandirregularlydistributed.
ThemineareaisunderlainbymaficvolcanicandsedimentaryrocksmetamorphosedtogreenschistassemblagesandassignedtotheKittilagroup.Themajorrockunitstrendnorthtonorth-northeastandarenear-vertical.Thevolcanicsarefurthersub-dividedintoiron-richtholeiiticbasaltslocatedtothewestandmagnesium-richtholeiiticbasalt,coarsevolcaniclasticunits,graphiticschistandminorchemicalsedimentaryrockslocatedtotheeast.Thecontactbetweenthesetworockunitsconsistsofatransitionalzone(the"PorkonenFormation")varyingbetween50and200metresinthickness.Thiszoneisstronglysheared,brecciatedandcharacterizedbyintensehydrothermalalterationandgoldmineralization,featuresconsistentwithmajorbrittle-ductiledeformationzones.Thezoneispartofamajornorth-northeast-orientedshearzone(the"SuurikuusikkoTrend").
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Mineralization
ThePorkonenFormationhoststheKittilagolddeposit,whichcontainsmultiplemineralizedzonesstretchingoverastrikelengthofmorethan25kilometres.MostoftheworkattheKittilaminehasbeenfocusedonthe4.5-kilometrestretchthathoststheknowngoldinmineralreservesandmineralresources.Fromnorthtosouth,thezonesareRimminvuoma("Rimpi-S"),thedeepextensionofRimminvuoma("RimpiDeep"),NorthRouravaara("Roura-N"),CentralRouravaara("Roura-C"),depthextensionofRouravaaraandSuurikuusikko("Suuri/RouraDeep"),Suurikuusikko("Suuri"),EtelaandKetola.TheSuuriandSuuri/RouraDeepzonesincludeseveralparallelsub-zonesthathavepreviouslybeenreferredtoasMainEast,MainCentralandMainWest.TheSuurizonehostsapproximately15%ofthecurrentprobablegoldreserveestimateonacontained-goldbasis,whileSuuriDeephasapproximately21%,Roura-Capproximately4%,RouraDeepapproximately27%,RimpiDeepapproximately28%andRimpi-Sapproximately5%.
Goldmineralizationinthesezonesisassociatedwithintensehydrothermalalteration(carbonate-albite-sulphide),andisalmostexclusivelyrefractory,lockedinsidefine-grainedsulphideminerals:arsenopyrite(approximately73%)orpyrite(approximately23%).Therestisfreegold,whichismanifestedasextremelysmallgrainsofgoldinpyrite.
Exploration and Drilling
In2016,provenandprobablegoldreservesincreasedbyapproximately125,915ouncesto4.48millionouncesofgold(30.06milliontonnesoforegrading4.64gramspertonne),afterproducing202,508ouncesofgold(236,317ouncesinsitugoldmined).ThisincreasewasprimarilyduetosuccessfulconversionofmineralresourcestomineralreservesintheSisarZone.MeasuredandindicatedmineralresourcesatDecember31,2016increasedby4.8milliontonnesfrom2015to20.7milliontonnesoforegrading2.92gramsofgoldpertonneduetosuccessfulexplorationandconversiondrillingintheRouraandRimpideepzones.Inferredmineralresourcesdecreasedby0.77milliontonnesfrom2015to11.06milliontonnesoforegrading4.05gramsofgoldpertonne.
DiamonddrillingisusedforexplorationontheKittilaproperty.In2016,alloftheworkonthemininglicenceareafocusedontheRoura,RimpiandSisarareas.From1987throughtheendof2016,atotalof4,520drillholes,totaling895,000metres,havebeencompletedontheproperty.Atotalof486drillholeswerecompletedin2016foralengthof59,900metres.Ofthesedrillholes,399holes(26,585metres)werefordelineationdrilling,26holes(6,922metres)wereforconversiondrillingand55holes(24,930metres)wererelatedtomineexploration.Totalexpendituresfordiamonddrillingin2016were€8.3million,including€0.73millionforconversiondrillingand€5.52millionforexploration.
In2016,atotalof19explorationdrillholes,totaling4,634metres,weredrilledontheKuotkomininglicencearea.TotalexpendituresfortheexplorationdrillingcarriedoutintheKuotkoareain2016were$€0.67million.Attheendof2016,theKuotkodepositcontainedinferredmineralresourcesof0.4milliontonnesoforegrading2.88gramsofgoldpertonne.
OutsideoftheKittilaandKuotkomininglicenceareas,systematicdiamonddrillingandtarget-focusedgroundgeophysicscontinuedalongtheSuurikuusikkoTrend,andanumberofnewtargetsweretestedbydiamonddrillingin2016.Atotalof19diamonddrillholes,totaling4,479metres,weredrilledonexplorationtargetsoutsideofthemininglicenceareain2016,atacostof$2.2million.
The2017explorationbudgetfortheKittilamineisapproximately€8.38million(for40,000metresofminesiteexplorationdrillingand8,000metresofresourceconversiondrilling).ThisdrillingisplannedtofurtherexploretheKittilamineralreserveandmineralresourcepotentialandtoevaluatethepotentialtodeveloptheSisarZoneasanewmininghorizonatKittila.Inaddition,€0.62millionofexplorationexpenditures,including6,000metresofdiamonddrilling,isplannedin2017forfurtherexplorationontheKuotkoarea.Outsideofthemininglicenceareas,$3.7millionofexplorationexpenditures,including7,000metresofdiamonddrilling,isplannedin2017forexplorationalongtheSuurikuusikko,KapsaandHanhimaaTrends.
MeadowbankMine
TheMeadowbankmine,whichachievedcommercialproductioninMarch2010,islocatedintheThirdPortageLakeareaintheKivalliqDistrictofNunavutinnorthernCanada,approximately70kilometresnorthofBakerLake.AtDecember31,2016,theMeadowbankminewasestimatedtocontainprovenandprobablemineralreservesof0.71millionouncesofgoldcomprisedof8.2milliontonnesoforegradinganaverageof2.69gramsofgoldpertonne.TheCompanyacquiredits100%interestintheMeadowbankminein2007astheresultoftheacquisitionofCumberlandResourcesLtd.
In2016,theCompanycompletedaninternaltechnicalstudyontheAmaruqsatellitedepositatMeadowbank,whichislocated50kilometresnortheastoftheMeadowbankmine.Basedonthisstudy,theCompanyhasapprovedtheprojectfor
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developmentpendingthereceiptoftherequiredpermits,whicharecurrentlyexpectedtobereceivedbythesecondquarterof2018.
LocationMapoftheMeadowbankMine,IncludingAmaruq(asatDecember31,2016)
TheMeadowbankmineisheldundertenCrownminingleases,fourexplorationconcessionsand40Crownmineralclaims.TheCrownminingleases,whichcoverthePortage,GooseandGooseSouthdeposits,areadministeredunderfederallegislation.TheCrownminingleases,whichhaverenewableten-yearterms,havenoannualworkcommitmentsbutaresubjecttoannualrentfeesthatvaryaccordingtotheirrenewaldate.TheproductionleasewiththeKivalliqInuitAssociation("KIA")isasurfaceleaseandrequiresthepaymentofC$158,865annually.Productionfromsubsurfaceleaseareasissubjecttoaroyaltyofupto14%oftheadjustednetprofits,asdefinedintheNorthwest Territories and Nunavut MiningRegulations .InordertoconductexplorationontheInuit-ownedlandsatMeadowbank,theCompanymustreceiveapprovalforanannualworkproposalfromtheKIA,thebodythatholdsthesurfacerightsintheKivalliqDistrictandadministerslanduseintheregionthroughvariousboards.TheNunavutWaterBoard(the"NWB"),onesuchboard,providedtherecommendationtotheDepartmentofAboriginalAffairsandNorthernDevelopmentCanadatogranttheMeadowbankmine'sconstructionandoperatinglicencesinJuly2008.TheCompanyhasobtainedalloftheapprovalsandlicencesrequiredtobuildandoperatetheMeadowbankmine.
MeadowbankholdstwomineralexplorationagreementsgrantedbyNunavutTunngavikInc.("NTI"),thecorporationresponsibleforadministeringsubsurfacemineralrightsonInuitownedlandsinNunavut.In2017,explorationconcessionscoveringtheVaultandAmaruqdepositswillrequireannualrentalfeesofC$113,442andC$81,678,
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respectively.Duringtheexplorationphase,theconcessionscanbeheldforupto20yearsandtheconcessionscanbeconvertedintoproductionleaseswithannualfeesofC$1perhectare,withnoannualworkcommitments.
In2012,theCompanysignedaproductionleasewithNTIcoveringtheextractionandprocessingofgoldfromtheVaultdeposit.ThisleaseauthorizestheCompanytomineandprocessgoldfromtheVaultdepositandsetsinplaceroyaltypaymentsthatareequivalenttothosebeingpaidbytheCompanyatthePortageandGoosepits.Productionfromtheconcessionsissubjecttoa12%netprofitsinterestroyaltyfromwhichannualdeductionsarelimitedto85%ofthegrossrevenue.ThisproductionleaseisintheprocessofbeingamendedtoincludeapartofthePhaserLakeandBBPhaserpits.
The40Crownmineralclaimsaresubjecttolandfeesandworkcommitments.Landfeesarepayableonlywhenworkisfiled.Themostrecentfilingwasin2012,whenapproximately$7,254inlandfeeswerepaidand$4,426,941inassessmentworkwassubmitted.
InDecember2016,theAmaruqprojectreceivedanamendedtypeBwaterlicenseauthorizingthedevelopmentandconstructionofaportal/rampandassociatedinfrastructure.AcommercialleasewiththeKIAauthorizestheconstructionandoperationoftheexplorationcampandexplorationactivitiesinadefinedarea.AnexplorationpermitwiththeKIAauthorizestheexplorationactivitiesthatarelocatedoutsidethecommercialleasearea.
TheMeadowbankareaisconsideredtohaveanaridarcticclimatewithtemperaturesrangingfromfivetominus40degreesCelsiusinthewinter(fromOctobertoMay)andfromminusfiveto25degreesCelsiusthroughoutthesummer(fromJunetoSeptember).Surfacegeologicalworkcanbecarriedoutfrommid-Maytomid-October,whilemining,millingandexplorationdrillingcantakeplacethroughouttheyear,thoughoutdoorworkcanbehamperedinDecemberandJanuarybythecoldanddarkness.
TheMeadowbankmineisaccessiblefromBakerLake,located70kilometrestothesouth,overa110-kilometreall-weatherroadcompletedinMarch2008.BakerLakeprovides2.5monthsofsummershippingaccessviaHudsonBayandyear-roundairportfacilities.TheMeadowbankminealsohasa1,752-metrelonggravelairstrip,permittingaccessbyair.Fuel,equipment,bulkmaterialsandsuppliesareshippedbybargeandshipfromMontreal,Quebec(orHudsonBayportfacilities)intoBakerLakeduringthesummerportaccessperiodthatstartsattheendofJulyeachyear.Fuelandsuppliesaretransportedyear-roundtothesitefromBakerLakebyconventionaltractortrailerunits.Scheduledandcharteredflightsprovidetransportationforpersonnelandaircargo.
TheCompanyiscurrentlybuildinga64-kilometreroadfromtheMeadowbanksitetotheAmaruqdeposit.Thisroadisexpectedtobecompletedasanexplorationroadbythefourthquarterof2017,withexpansiontoaproductionroadonceallofthenecessarypermitsarereceived.TheCompanyexpectsthattheorefromtheAmaruqdepositwillbehauledtotheMeadowbankmillusingoff-roadtypetrucks,andthemillisexpectedtooperateat9,000tonnesperday.Themillwillrequireminormodifications,specificallytheadditionofacontinuousgravityandregrindcircuit,inordertoprocesstheorefromtheAmaruqdeposit.
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Mining and Milling Facilities
SurfacePlanoftheMeadowbankMine(asatDecember31,2016)
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SurfacePlanoftheVaultDeposit(asatDecember31,2016)
AllrequiredaggregatesusedintheminingprocessareproducedfromwastematerialtakenfromthePortageandVaultpits.In2008,adewateringdykewasconstructedinordertoaccessthenorthhalfofthePortagepitinpreparationforproductionin2010.ConstructionoftheBay-Goosedyke,amajordewateringdykerequiredtoaccessthesouthernportionofthePortageandtheGoosepits,commencedin2009andwascompletedin2011.Threetailingsimpoundmentdykes:SaddleDam1,SaddleDam2andStormwaterDyke,werebuiltin2009and2010.ThefinalelevationofStormwaterdykewascompletedin2014.Constructionofthemaintailingsimpoundmentdyke,CentralDyke,beganin2012.AdditionalphasesofconstructionontheCentralDykeareexpectedtocontinuethroughouttheminelife.Constructionoftheeight-kilometrelongaccessroadtotheVaultpitbeganin2012andwascompletedin2013.
Mining Methods
MiningattheMeadowbankmineisdonebyopenpitmethodusingexcavatorsandtrucks.Theoreisextractedconventionallyusingdrillingandblasting,thenhauledbytruckstoaprimarygyratorycrusheradjacenttothemill.Themarginal-gradematerial(materialgradingunderthecut-offgradeatagoldpriceof$1,100perounce,butwhichhasthepotentialtoincreasethemineralreservesattheendoftheminelifeifthethencurrentmetalpricesmakesitsprocessingeconomical)isstockpiledseparately.Also,stockpilesoflow-gradematerialcurrentlylowerthanthemillfeedgradehavebeencreated.Themajorityofthislow-gradematerialwasprocessedin2014.Theremainderwillbeprocessedattheendoftheminelife.Wasterockishauledtooneofthreewastestoragesareasontheproperty,usedfordykeconstructionmaterialorbackfilledintotheminedoutarea.
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MiningfirstcommencedinthePortagepitin2010andintheGoosepitinMarch2012,andcommercialproductionattheVaultpitwasachievedinApril2014.TheareasurroundingtheVaultpithastwosmallerareasthatarebeingdevelopedasfuturepits:thePhaserandBBPhaserpits.Thesepitsareexpectedtobeginoperationinthethirdquarterof2017.MiningoperationsattheGoosepitceasedin2015.MiningoperationsattheVaultpitareexpectedtoceasein2018andatthePortagepit(includingthePortageextension)areexpectedtoceasein2019.
MiningattheAmaruqsatellitedepositatMeadowbankwillbedonebyopenpitmethodusingexcavatorsandtrucksandorewillbehauledbytrucktothemillatMeadowbankforprocessing.Commercialproductionisexpectedtobeachievedinthethirdquarterof2019atAmaruqfortheWhaleTailpit.
Surface Facilities
Sitefacilitiesincludeamillbuilding,amechanicalshop,apowerhousebuilding,anassaylabandaheavyvehiclemaintenanceshop.Astructurecomprisedoftwoseparatecrushersflankthemainprocesscomplex.Powerissuppliedbya26.4-megawattdieselelectricpowergenerationplantwithheatrecoveryandanonsitefuelstorage(5.6millionlitres)anddistributionsystem.Themill-service-powercomplexisconnectedtotheaccommodationscomplexbyenclosedcorridors.
TheaccommodationscomplexattheMeadowbankmineconsistsofapermanentcampandatemporarycamptoaccommodateadditionalworkers.Thecampissupportedbyasewagetreatment,solidwastedisposalandapotablewaterplant.
FacilitiesconstructedatBakerLakeincludeabargelandingsitelocatedthreekilometreseastofthecommunityandastoragecompound.Afuelstorageanddistributioncomplexwithcapacityfor60-millionlitresofdieselfueland2-millionlitresofjetfuelislocatednexttothebargelandingfacility.
In2013,newfacilitieswerebuiltneartheVaultdeposit,whichislocatedapproximatelyeightkilometresfromtheminecomplex.Thesefacilitiesincludeaheatedshelterforemployees,astoragearea,afuelfarm,anelectricalpowergenerationplantandawatertreatmentplant.
In2015,theexplorationgroupwasrelocatedtotheAmaruqsatellitedeposittoaseparatecampwitha125-personcapacity.Thecampissupportedbysewagetreatment,solidwastedisposalandapotablewaterplant.Inaddition,threetemporarybuildingsactasawarehouse,amaintenanceshopandacoreshack.
TheprocessdesignatMeadowbankisbasedonaconventionalgoldplantflowsheetconsistingoftwo-stagecrushing,grinding,gravityconcentration,cyanideleachingandgoldrecoveryinaCIPcircuit.Themillwasdesignedtooperateyear-round,withanannualdesigncapacityof3.1milliontonnes(8,500tonnesperday).Theadditionofasecondarycrusherinearlysummer2011increasedtheoverallprocessedtonnescapacityinthemillto3.6milliontonnesperyear(9,840tonnesperday).SincetheinstallationofthepermanentsecondarycrusherinJune2011,theplanthasconsistentlyexceeded8,500tonnesperday.Basedonprojectionsfrommetallurgicaltestswork,theoverallgoldrecoveryisprojectedtobeapproximately91.2%forthelife-of-mine,withapproximately18%goldrecoveredfromthegravitycircuit.
Therun-of-mineoreistransportedtothecrusherusingoff-roadtrucks.Theoreisdumpedintothegyratorycrusherorintostockpilesdesignatedbyore-type.Thefeedfromtheprimarycrusherisconveyedtotheconecrusherinclosedcircuitwithavibratingscreen.Thecrushedoreisdeliveredtothecoarseorestockpileandorefromthestockpileisconveyedtothemill.ThegrindingcircuitiscomprisedofaprimarySAGmilloperatedinopencircuitandasecondaryballmilloperatedinclosedcircuitwithcyclones.Aportionofthecycloneunderflowstreamissenttotheconcentrator,whichseparatestheheavymineralsfromtheore.Thegrindingcircuitincorporatesagravityprocesstorecoverfreegoldandthefreegoldconcentrateisleachedinanintensivecyanideleach-directelectrowinningrecoveryprocess.
Thecycloneoverflowissenttothegrindingthickener.Theclarifiedoverflowisrecycledtothegrindingcircuitandthickenedunderflowispumpedtoapre-aerationandleachcircuit.Thecyanidecircuitconsistsofseventanks,providingapproximately42hoursofretentiontime.TheleachedslurryflowstoatrainofsixCIPtanks.Goldinthesolutionflowingfromtheleachingcircuitisadsorbedintotheactivatedcarbon.GoldisrecoveredfromthecarboninaZadraelutioncircuitandisrecoveredfromthesolutionusinganelectrowinningrecoveryprocess.Thegoldsludgeisthenpouredintodorebarsusinganelectricinductionfurnace.
TheCIPtailingsaretreatedforthedestructionofcyanideusingthestandardsulphur-dioxide-airprocess.Thedetoxifiedtailingsarethenpumpedtothepermanenttailingsfacility.Thetailingsstorageisdesignedforzerodischarge,withallprocesswaterbeingreclaimedforre-useinthemilltominimizewaterrequirements.
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Production and Mineral Recoveries
During2016,theMeadowbankminehadpayableproductionof312,214ouncesofgoldfrom3.92milliontonnesoforegrading2.70gramsofgoldpertonne.TheproductioncostsperounceofgoldproducedatMeadowbankin2016were$701.ThetotalcashcostsperounceofgoldproducedatMeadowbankin2016were$715onaby-productbasisandwere$727onaco-productbasis.TheMeadowbankprocessingfacilityaveraged10,697tonnesperdayandoperatedapproximately94.9%ofavailabletime.Goldrecoveryaveraged91.93%.TheproductioncostspertonneatMeadowbankwereC$73andtheminesitecostspertonnewereC$74in2016.
ThefollowingtablesetsoutthemetalrecoveriesattheMeadowbankminein2016.Millprocessingexceededextractionfromtheminein2016as0.23milliontonnescamefromthemarginalstockpile.
Head Grade
Overall Metal
RecoveryPayable
Production
Gold 2.70g/t 91.93% 312,214oz
Goldproductionduring2017atMeadowbankisexpectedtobeapproximately320,000ouncesfrom3.9milliontonnesoforegrading2.85gramsofgoldpertonneatestimatedtotalcashcostsperounceofapproximately$683onaby-productbasis,withestimatedgoldrecoveryof90.0%.MinesitecostspertonneofapproximatelyC$73areexpectedin2017.
Environmental Matters (including Inuit Impact and Benefit Agreement), Permitting and Social Matters
ThedevelopmentoftheMeadowbankminewassubjecttoanextensiveenvironmentalreviewprocessundertheNunavutLandClaimsAgreement(the"NLCA")administeredbytheNunavutImpactReviewBoard(the"NIRB").OnDecember30,2006,apredecessortotheCompanyreceivedtheProjectCertificatefromtheNIRB,whichincludedthetermsandconditionstoensuretheenvironmentalintegrityofthedevelopmentprocess.InJuly2008,theCompanyreceivedawaterlicencefromtheNWBforconstructionandoperationoftheminesubjecttoadditionaltermsandconditions.BothauthorizationswereapprovedbythethenMinisterofAboriginalAffairsandNorthernDevelopmentCanada.Thiswaterlicencewasrenewedin2015foraperiodoftenyears.
InFebruary2007,apredecessortotheCompanyandtheNunavutgovernmentsignedaDevelopmentPartnershipAgreement(the"DPA")withrespecttotheMeadowbankmine.TheDPAprovidesaframeworkforstakeholders,includingthefederalandmunicipalgovernmentsandtheKIA,tomaximizethelong-termsocio-economicbenefitsoftheMeadowbankminetoNunavut.
AnInuitImpactandBenefitAgreementfortheMeadowbankmine(the"MeadowbankIIBA")wassignedwiththeKIAinMarch2006.ThisagreementwasrenegotiatedandanamendedMeadowbankIIBAwassignedonOctober18,2011.TheMeadowbankIIBAensuresthatlocalemployment,trainingandbusinessopportunitiesarisingfromallphasesoftheprojectareaccessibletotheKivalliqInuit.TheMeadowbankIIBAalsooutlinesthespecialconsiderationsandcompensationthatmustbeprovidedtotheInuitregardingtraditional,socialandculturalmatters.
InJuly2008,theCompanysignedaproductionleasefortheconstructionandtheoperationofthemine,themillandallrelatedactivities.ThisproductionleasewasamendedonMay2,2013toexpandthesurfaceareagrantedunderthelease.InApril2008,theCompanyandtheKIAsignedawatercompensationagreementfortheMeadowbankmineaddressingInuitrightsundertheLandClaimsAgreementrespectingcompensationforwateruseandwaterimpactsassociatedwiththemine.
PermittingfortheoperationoftheAmaruqsatellitedepositatMeadowbankisongoingwiththeNIRBandtheNWB.Publichearingsareexpectedtobeheldinthethirdquarterof2017andtheprojectcertificateandwaterlicenceareexpectedtobeapprovedbythethirdquarterof2017.
AseriesoffourdykeshavebeenbuilttoisolatetheminingactivitiesatthePortageandGoosedepositsfromneighbouringlakes.Anadditionaldykewasbuiltin2013toisolatetheminingactivitiesattheVaultdeposit.WasterockfromthePortage,GooseandVaultpitsisprimarilystoredinthePortageandVaultrockstoragefacilities,andaportionofthewasteisplacedinthePortagePit.Thecontrolstrategyforwasterockstorageincludesfreezecontrolofthewasterockthroughpermafrostencapsulationandcappingwithaninsulatingconvectivelayerofneutralizingrock(ultramaficandnon-acidgeneratingvolcanicrocks).TheVaultrockstoragefacilitydoesnotrequireaninsulatingconvectivelayerduetothenon-acid
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generatingnatureoftherockinthatarea.WasterockdepositedinthePortagepitwillbecoveredwithwaterduringtheclosurephaseofthepit,whichwillpreventanyacidgeneration.Becausethesiteisunderlainbygreaterthan400metresofpermafrost,thewasterockbelowthecappinglayerisexpectedtofreeze,resultinginlow(ifany)ratesofacidrockdrainagegenerationinthelongterm.
TailingsarestoredinthedewateredportionoftheSecondPortageLake.Thetailingsaredepositedontailingsbeacheswithinatwo-celltailingsstoragefacilityisolatedbythecentraldykeandaseriesoffivesaddledams.Areclamationpondislocatedwithinthetailingsstoragefacility.Depositionoftailingsbeganinthesouthcellinthefourthquarterof2014.Tailingsdepositionwascompletedinthenorthcellin2015andreclamationcappinghascommenced.Thecontrolstrategytominimizewaterinfiltrationintothetailingsstoragefacilityandthemigrationofconstituentsoutofthefacilityincludesfreezecontrolofthetailingsthroughpermafrostencapsulationandthroughcomprehensive,engineereddykeliners.Aminimumtwo-metrethickdrycoverofacidneutralizingultramaficrockbackfillwillbeplacedoverthetailingsasaninsulatingconvectivelayertoconfinethepermafrostactivelayerwithinrelativelyinerttailingsmaterials.
Thewatermanagementobjectivefortheprojectistominimizethepotentialimpactonthequalityofsurfacewaterandgroundwaterresourcesatthesite.Diversionditcheswereconstructedin2012todivertcleanrunoffwaterawayfromareasaffectedbythemineorminingactivities.Followingafieldinvestigationin2014,acontactwaterinterceptiontrenchwasconstructedtocollectseepagewaterdowngradientfromthemillpriortoenteringintothenearbylake.Allcontactwateroriginatingfromtheminesiteormillisintercepted,collectedandconveyedtothetailingsstoragefacilityforreuseinprocess.ThereisnodischargeofcontactwaterfromtheminesiteorthePortagepitareatooffsitereceivingwaterbodies.AllcontactwatergeneratedattheVaultpitarea,includingtheVaultWasteRockStorageFacility,isconveyedtotheVaultAttenuationPondanddischargedtonearbyWallyLake.Thereistreatmentforremovalofsolids(ifneeded)priortoreleasetoWallyLake.
InJanuary2012,theCompanyidentifiednaturallyoccurringasbestosfibresindustsamplestakenfromthesecondarycrusherbuildingattheMeadowbankmineandsubsequentlyfoundsmallconcentrationsoffibresintheorecomingfromcertainareasoftheopenpitmines.TheCompanyhasinstitutedadditionalmonitoringandanasbestosmanagementprogramatthesite.
Aninterimclosureandreclamationplanwassubmittedin2014asarequirementofpartoftheNWBTypeAwaterlicenceandfinancialassurancewasprovidedandupdatedinJuly2015aspartofthewaterlicencerenewalprocess.In2013,theCompanyappliedtotheNWBforanincreaseinfreshwaterconsumptionandreceivedtheamendmenttotheTypeAlicenceonJuly23,2014.
In2015,anamendmenttotheprojectcertificatewasrequestedfortheminingofthePhaserpit,asatellitepitintheVaultpitareaandtheapprovalwasreceivedinthethirdquarterof2016.
In2015,EnvironmentCanadachargedtheCompanywithtwoinfractionsundertheFisheries Act inrelationtoaseepageincidentattheMeadowbankminethatwasidentifiedduringaJuly2013on-siteinspection.Monitoringdataindicatedthatthe2013seepageeventdidnotaffectthewaterqualityofthedownstreamSecondPortageLake.Discussionsareunderwaytoattempttoresolvethematterbut,ifunsuccessful,atrialwouldnotlikelyoccuruntil2018.
Capital Expenditures/Development
In2016,theCompanyincurredapproximately$38.8millionincapitalexpendituresattheMeadowbankmineexcludingcapitalizeddrilling.Inaddition,approximately$40millionwasspentonexplorationstudies,roadconstructionandpermittingattheAmaruqsatellitedepositatMeadowbank.
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In2016,theCompanycompletedaninternaltechnicalstudyontheAmaruqsatellitedepositatMeadowbank.ThefollowingtablesetsoutasummaryofkeyestimatesandparametersoftheAmaruqsatellitedepositatMeadowbank.
Indicated mineral resources (Open Pit) 16.9milliontonnesoforegrading3.88g/tgold(2.1millionoz)
Inferred mineral resources (Open Pit) 4.9milliontonnesoforegrading4.81g/tgold(763,000oz)
Inferred mineral resources (Underground) 6.8milliontonnesoforegrading6.22g/tgold(1.4millionoz)
Estimated production over mine life 1,980,000oz
Estimated average metallurgical recovery Approximately93%
Estimated average annual gold production Approximately135,000ouncesbasedon4to5monthsofproduction(year1)
Approximately255,000ounces(year2)
Approximately300,000ounces(year3)
Approximately430,000ounces(years4–6)
Estimated average annual mill throughput Approximately1,279,000tonnesbasedon4to5monthsofproduction(year1)
Approximately2,987,000tonnes(year2)
Approximately3,265,000tonnes(year3)
Approximately3,285,000tonnes(years4–6)
Estimated mine life Approximately6years
Estimated initial capital costs to the first ounceproduced
Approximately$330million
Estimated sustaining capital costs Approximately$25millionperyear
Estimated reclamation costs Approximately$16million
Economic Analysis:
$1,200perouncegold
US$/C$exchangerateof$1.25
Statutoryincometaxrate:Approximately26%
In2017,atotalof$93.4millionhasbeenbudgetedtobespentattheMeadowbankmine,excludingcapitalizeddrilling,whichincludes$73.1millionattheAmaruqdeposit.
Geology, Mineralization, Exploration and Drilling
Geology
TheMeadowbankminecomprisesanumberofArchean-agegolddepositshostedwithinpolydeformedvolcanicandsedimentaryrocksoftheWoodburnLakeGroup,partoftheWesternChurchillsupergroupinnorthernCanada.
Threemineablegolddeposits,Goose,PortageandVault,havebeendiscoveredalongthe25-kilometrelongMeadowbankgoldtrend,andthePDF
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deposit(afourthdeposit)hasbeenoutlinedonthenortheastgoldtrend.Theseknowngoldresourcesarewithin225metresofthesurface,makingthedepositsattractiveforopenpitmining.Inaddition,theAmaruqpropertywillbedevelopedasasatelliteoperationtotheMeadowbankmine.
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Mineralization
ThepredominantgoldmineralizationfoundinthePortageandGoosedepositsisassociatedwithironsulphides,mainlypyriteandpyrrhotite,whichoccurasareplacementofmagnetiteintheoxidefaciesironformationhostrock.Toalesserextent,pyriteandchalcopyritemaybefoundand,onrareoccasions,arsenopyritemaybeassociatedwiththeothersulphides.Goldismainlyobservedinnativeform(electrum),occurringinisolatedspecksorasplatingaroundsulphidegrains.Theorezonesaretypicallysixtosevenmetreswide,followingthecontactsbetweentheironformationunitsandthesurroundinghostrock.Zonesextenduptoseveralhundredmetresalongstrikeandatdepth.Thesulphidesprimarilyoccurasreplacementoftheprimarymagnetitelayers,aswellasnarrowstringersorbandsofdisseminatedsulphidesthatalmostalwayscrosscutthemainfoliationand/orbeddingwhichwouldimplyanepigeneticmodeofemplacement.Thepercentageofsulphidesisquitevariableandmayrangefromtracetosemi-massiveamountsoverseveralcentimetrestoseveralmetresinlength.Thehighergoldgradesandtheoccasionaloccurrenceofvisiblegoldarealmostalwaysassociatedwithgreaterthan20%sulphidecontent.
Themainmineralizedbandedironformationunitisboundedbyanultramaficunittothewestwhichlocallyoccursinterlayeredwiththebandedironformationandtotheeastbyanintermediatetofelsicmetavolcaniclasticunit.
IntheVaultdeposit,pyriteistheprincipalore-bearingsulphide.Thedisseminatedsulphidesoccuralongshearedhorizonsthathavebeensericitizedandsilicified.Thesezonesareseveralmetreswideandmaycontinueforhundredsofmetresalongstrikeanddowndip.
TheGooseandPortagedepositsarehostedwithinhighlydeformed,magnetite-richironformationrocks,whileintermediatevolcanicrockassemblageshostthemajorityofthemineralizationatthemorenortherlyVaultdeposit.Anadditionaldeposit,PDF,showsthesamecharacteristicsasVault,thoughitisnotcurrentlyanticipatedtobeamineabledeposit.
Definedovera1.85-kilometrestrikelengthandacrosslateralextentsrangingfrom100to230metres,thegeometryofthePortagedepositconsistsofgeneralnorth-northweststrikingorezonesthatarehighlyfolded.Themineralizationinthelowerlimbofthefoldistypicallysixtoeightmetresintruethickness,reachingupto20metresinthehingearea.
TheGoosedepositislocatedjustsouthofthePortagedepositandisalsoassociatedwithironformationbutexhibitsdifferentgeometry,withanorth-southtrendandasteepwesterlydip.Mineralizedzonestypicallyoccurasasingleunitnearsurface,splayingintoseverallimbsatdepth.Thedepositiscurrentlydefinedovera750-metrestrikelengthanddownto500metresatdepth(mainlyinthesouthernend),withtruethicknessesofthreeto12metres(reachingupto20metreslocally).TheGooseundergroundresource(100to500metresatdepth)extends700metrestothesouthoftheGoosepit.TheorezonesshowthesamecharacteristicsastheGoosepit,whichistwotofivemainzonessub-parallelandundulating.Theaveragethicknessrarelyexceedsthreetofivemetres.
TheVaultdepositislocatedsevenkilometresnortheastofthePortageandGoosedeposits.Itisplanarandshallow-dippingwithadefinedstrikeof1,100metres.Thedeposithasbeendisturbedbytwosetsofnormalfaultsstrikingeast-westandnorth-southanddippingmoderatelytothesoutheastandsteeplytotheeast,respectively.Themainlenshasanaveragetruethicknessofeightto12metres,reachingashighas18metreslocally.Thehangingwalllensesaretypicallythreetofivemetres,anduptosevenmetres,intruethickness.
TheAmaruqdepositislocated50kilometresnorthwestoftheMeadowbankcomplex.Itisafoldeddepositwithadefinedstrikeof1.6kilometres.ThreecontrastingstylesofmineralizationcoexistontheAmaruqproperty.Inallthreestyles,goldisfoundassociatedwithpyrrhotiteand/orarsenopyriteas25-to50-microninclusionsorgrainsalongfractures,orsimplyasfreegrainsinaquartz-richgangue.
Thefirstmineralizationstylecorrespondstooccurrencesofpyrrhotite-quartz-amphibole-carbonateaslayers,lensesand/ordisseminations,mostlyrestrictedtothesilicate-sulphideironformationsofWhaleTail'snorthdomain.Thesecondmineralizationstylecomprisessilicafloodingwithsignificantpyrrhotite,arsenopyrite,andlocalpyritestockworkanddisseminations,withinagangueofamphibole-carbonate.Thethirdmineralizationstyleisbetweendecimetersandseveralmetersthick,quartz-sulphide-nativegoldveinscuttingthroughthewholeMammoth-WhaleTail-IVRrocksequence.Theseveinsarebestdevelopedinthemaficandultramaficvolcanics,wheretheyarehostedinbiotite-alteredandmoderately-to-stronglyschistosezones.Theoverallsulphidecontentoftheseveinsisgenerallylow(1-5%maximum)andmostcommonlycomprisesarsenopyrite,galena,sphalerite,and/orchalcopyrite.Theseveinsseemmoreabundantandbestdevelopedinthehingezoneoftheregionalfoldandseemtoberestrictedtoshallowsoutheast-dipping,high-straincorridorstherein.
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Exploration and Drilling
ExplorationeffortsontheMeadowbankpropertyhavebeenextensivesince1985,includinggeophysics,prospecting,tillsamplinganddrilling,mainlybydiamonddrillbutalsoreversecirculation.From1985untilAgnicoEagleacquiredthepropertyin2007,126,796metresweredrilledin916diamondandreversecirculationdrillholesontheproperty.In2005,Cumberland(thepreviousowner)estimatedmineralresourcesinthePortage,GooseandVaultdepositscombinedasfollows:measuredandindicatedmineralresourcesof23.3milliontonnesoforegrading4.40gramspertonneofgold(containing3.3millionouncesofgold)andinferredmineralresourcesof3.5milliontonnesoforegrading4.20gramspertonneofgold(containing0.5millionouncesofgold).
In2016,theamountofgoldinprovenandprobablemineralreservesdecreasedbyapproximately215,000ouncesto0.71millionouncesofgold(8.2milliontonnesoforegrading2.69gramspertonne)afterproducing312,214ouncesofgold(304,000ouncesofinsitugoldmined).Thenetdecreasewasprimarilyduetotheminedepletion,partiallyoffsetbytheconversionofmineralresourcestomineralreservesintheextensionsofPortagePitE3andVaultSouthPit.MeasuredandindicatedmineralresourcesattheMeadowbankminedecreasedby3.3milliontonnesto3.7milliontonnesgrading2.07gramsofgoldpertonne.Inferredmineralresourcesdecreasedby2.3milliontonnesto1.1milliontonnesgrading3.13gramsofgoldpertonne.
In2016,diamonddrillingatMeadowbankwasconductedinboththeVaultandthePortagepits.AtVault,20holesweredrilledforatotallengthof975metresinordertocomplete25×25metredrillspacinginthePhaserandBBPhaserpits.Thisdrillingconfirmedthepreviousmineralresourceestimate.AtPortage,14holesweredrilledinPitE3foratotallengthof981metrestoconvertindicatedmineralresourcestoprobablemineralreservesintheE4pushbackofthepitand11holesweredrilledinPitAforatotalof501metrestoconfirmhighgradeintersectionsinpreviousdrillholes.Thetotalcostofdrillingin2016amountedto$0.43million.In2017,1,500metresofinfilldrillingisplannedintheVault,PhaserandBBPhaserpits.
Alsoin2016,diamonddrillingwasconductedattheAmaruqsatellitedepositatMeadowbank.520holesweredrilledforatotallengthof127,751metres.WithintheIVRarea,267holeswerecompleted(65,797metres)onextensionandconversionofVzonesandexplorationtargets.DrillingalongtheMammothtrendsincluded125holes(25,235metres).DrillingatWhaleTailincluded128holes(36,720metres)forconversion,extensionandexplorationdrilling.Inaddition,11engineeringdrillholeswerecompleted(2,222metres).In2017,75,000metresofdiamonddrillingareplannedforexploration,conversionandengineeringpurposes.
MeliadineProject
TheMeliadineprojectisanadvancedexploration/developmentpropertylocatednearthewesternshoreofHudsonBayintheKivalliqregionofNunavut,approximately25kilometresnorthofthehamletofRankinInletand290kilometressoutheastoftheMeadowbankmine.TheclosestmajorcityisWinnipeg,Manitoba,approximately1,500kilometrestothesouth.InFebruary2017,theCompany'sBoardofDirectorsapprovedtheconstructionofamineattheMeliadineproject.CommercialproductionatMeliadineisexpectedinthethirdquarterof2019.
TheCompanyacquiredits100%interestintheMeliadineprojectthroughitsacquisitionofComaplexinJuly2010.
ThemineralreservesandmineralresourcesoftheMeliadineprojectareestimatedatDecember31,2016tocontainprovenandprobablemineralreservesof3.4millionouncesofgoldcomprisedof14.5milliontonnesoforegrading7.32gramsofgoldpertonne.Inaddition,theprojecthas20.8milliontonnesofindicatedmineralresourcesgrading4.95gramsofgoldpertonneand14.7milliontonnesofinferredmineralresourcesgrading7.51gramsofgoldpertonne.
TheMeliadinepropertyisalargelandpackagethatisnearly80kilometreslong.Itconsistsofmineralrights,aportionofwhichareheldundertheNorthwest Territories and Nunavut Mining Regulations andadministeredbyAboriginalAffairsandNorthernDevelopmentCanadaandreferredtoasCrownLand.TheCrownLandismadeupofminingclaimsandmineralleases.TherearealsosubsurfaceNTIconcessionsadministeredbyadivisionoftheNunavutterritorialgovernment.In2016,approximatelyC$125,000waspaidtoIndigenousandNorthernAffairsCanadaforthemininglease.NTIrequiresannualrentalfeesofapproximatelyC$75,000andexplorationexpendituresofapproximatelyC$250,000.
TheKivalliqregionhasanaridarcticclimate.Surfacegeologicalworkcanbecarriedoutfrommid-Maytomid-October,whileexplorationdrillingcantakeplacethroughouttheyear,thoughisreducedinDecemberandJanuaryduetocoldanddarkness.
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Equipment,fuelanddrygoodsaretransportedontheannualsealiftbybargetoRankinInletviaHudsonBay.Ocean-goingbargesfromChurchill,ManitobaoreasternCanadianportscanaccessthecommunityfromlateJunetoearlyOctober.Churchill,whichisapproximately470kilometressouthofRankinInlet,hasadeep-waterportfacilityandayear-roundraillinktolocationstothesouth.
InOctober2013,theCompanycompletedconstructionofa23.8-kilometre-longall-weathergravelroadlinkingRankinInletwiththeprojectsite.ThisroadwasconstructedtosupportongoingexplorationactivitiesattheMeliadinepropertyandsignificantlyreducesthetransportationandlogisticalcostsforexplorationanddevelopmentwork.
LocationMapoftheMeliadineProject(asatDecember31,2016)
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Facilities
SurfacePlanoftheMeliadineProject(asatDecember31,2016)
Theplannedsurfaceinfrastructureisindicatedonthesurfaceplanmapaboveandconsistsofmodularstructuresforthedormitory,kitchen,assaylaboratoriesandelectricalrooms/mechanicalmodules.Theadministrationoffice,maintenanceshopandwarehousearecombinedinapre-engineeredbuilding.Theprocessplant,aswellasthepowerplant,areacombinationofstandardstructurebuildingswithprefabricatedmodules.Thesitemapalsoindicatestheplannedmineportals,ventilationraises,openpits,wastedumps,orepads,watermanagementstructures,attenuationpondandtailingsdrystacks.
Mining Methods
TheCompanyanticipatesthatminingatMeliadinewillbecarriedoutthroughtwelveopenpitsandundergroundminingoperations.Itisestimatedthatapproximately5.5milliontonnesoforewillbeextractedfromsurfaceminingand17.4milliontonnesoforewillbeextractedbyundergroundminingovera14-yearminelife.Itisexpectedthatanadditional2.8milliontonnesoflowergradematerialfromundergrounddevelopmentandopenpitmining(marginalore)willbestockpiledforprocessingattheendoftheminelife.Undergroundaccessisexpectedtobebydecline,withlong-holeminingexpected.Eachstopewillbebackfilled,withcementedpastefillusedinprimarystopesanddryrockfillforthesecondarystopes.Aconventionaltruck/shoveloperationisanticipatedfortheopenpits.
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Surface Facilities
FacilitiesattheMeliadineprojectincludetheexplorationcamplocatedontheshoreofMeliadineLake,approximately2.3kilometreseastoftheTiriganiaqdeposit.Theself-containedcampconsistsoffivewingsofmodulartrailersthatcanaccommodateupto250personnelandincludesakitchenfacility,completewithdieselgenerators.
Powerfortheexplorationcampiscurrentlyprovidedbydieselgenerators.PotablewaterfortheexplorationandoperationcampsispumpedfromMeliadineLake.WaterfortheundergroundoperationsandsurfacedrillprogramsispumpedfromPumpLake.
Theexplorationcamphasanincineratoronsitetoburnallflammablematerials,suchascampandfoodwastes.Incineratorashes,plasticsandmetalobjects,alongwithallhazardoussolidandliquidwastesarecollectedattheMeliadineprojectsiteandthentransportedtoawastemanagementcompanyinsouthernCanada.
SewagehasbeentreatedthroughaBiodisktreatmentsystemsincethesummerof2010.Routinewatersamplingisconductedandreportedonamonthlybasistotheauthorities.TheCompanyisexaminingsalinewatertreatmentstrategies.
AnundergroundportalallowingaccesstoanexplorationrampwasbuiltattheTiriganiaqdepositin2007and2008inordertoextractabulksampleforstudypurposes.Awasterockandorestoragepadwasbuiltduringexcavationoftherampandasamplingtowerwasinstalledforprocessingthebulksample.Thereisatwo-kilometre-longroadbetweentheMeliadineprojectexplorationcampandtheportalsite.Anotherundergroundbulksampleof4,600tonnesoforewastakenfromtheTiriganiaqdepositviathisportalin2011.
Pre-constructionactivitiesbeganinthesummerof2016,pilinginstallationandcampconstructionbeganinAugust2016anddykeconstructionandinstallationofasemi-mobilebatchplantcommencedinNovember2016.
Production and Mineral Recoveries
Morethan39metallurgicaltestprogramshavebeenconductedattheMeliadineproject.Basedontheresultsofthesetestprograms,aconventionalgoldcircuithasbeenrecommended,comprisingcrushing,grinding,gravityseparationandcyanideleaching,withacarbon-in-leachcircuit(CIL),followedbycyanidedestructionandfiltrationofthetailingsfordrystacking.
GlobalgoldrecoveryattheMeliadineprojectisestimatedtobe96%overthecurrent14-yearlifeofmine.Themineplanenvisionsprocessinganaveragerateof3,365tonnesoforeperdayforthefirstthreefullyearsofproduction,and5,600tonnesoforeperdayfortheremainderofthelifeofmine,withanestimatedplantavailabilityof92%.
Environmental Matters (including Inuit Impact and Benefit Agreement), Permitting and Social Matters
LandandenvironmentalmanagementintheregionoftheMeliadineprojectisgovernedbytheprovisionsoftheNLCA.TheMeliadineprojectislocatedonInuit-ownedland,whereInuitownboththesub-surfacemineralrights(managedbyNTI)andthesurfacelandrights(managedbytheKIAonbehalfofInuitbeneficiariesundertheprovisionsoftheNLCA).Consequently,toexploreanddeveloptheproject,theCompanymustobtainlanduseleasesfromtheKIA.TheCompanyhasbeengrantedacommercialleasebytheKIAforexplorationandundergrounddevelopmentactivity,aprospectingandlanduseleaseforexplorationanddevelopmentactivities,anexplorationlanduseleaseforexplorationanddrillingontheInuit-ownedlandsofMeliadineEastandaparceldrillingpermitfordrillingactivityonInuit-ownedlands.Anumberofright-of-wayleasescoveringroadaccesstotheMeliadineprojectpropertyandeskerquarryingontheInuit-ownedlandswerealsograntedbytheKIA.
PursuanttotheNLCAandtheNunavut Waters and Nunavut Surface Rights Tribunal Act requirements,theCompanyobtainedseveralwateruselicencesfromtheNWB,coveringongoingwateruseforitsMeliadineprojectexplorationcamp,theundergroundbulksamplingprogramandforongoingexplorationdrillingactivities.
In2011,theCompanyinitiatedtheenvironmentalassessmentprocessfortheMeliadineprojectwiththeobjectiveofobtainingaprojectcertificatefromtheGovernmentofCanadafortheconstruction,operationandultimatedecommissioningofthefullproject.Theprojectcertificateisrequiredbeforeobtainingthepermitsrequiredtoconstruct,operateanddecommissionagoldmineatMeliadine.InMay2011,theKIAreferredtheMeliadineprojecttotheNIRBforscreeningundertheNLCA.OnMay4,2011,theNIRBreceivedtheMeliadineprojectproposalfromtheCompany.OnJune8,2011,theNIRBreceivedapositiveconformitydeterminationfromtheNunavutPlanningCommissionfortheMeliadineprojectinrelationtotheKeewatinRegionalLandUsePlan.
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TheCompanyreceivedaprojectcertificate,whichsetsoutthetermsandconditionsfortheconstructionoftheMeliadinemine,fromtheNIRBonFebruary26,2015.AnapplicationforaTypeAwaterlicencefromtheNWBwassubmittedin2015andthelicencewasreceivedinApril2016.AcommercialproductionlanduseleasefromtheKIAisexpectedin2017.
AnInuitImpactandBenefitAgreementfortheMeliadineproject(the"MeliadineIIBA")wassignedwiththeKIAinJuly2015.TheMeliadineIIBAaddressesprotectionofInuitvalues,cultureandlanguage,protectionoftheland,waterandwildlife,providesfinancialcompensationtoInuitovertheminelifeandcontainsprovisionfortraining,employmentandcontracting.InorderfortheCompanytomaintainasociallicensetodevelopandoperatetheMeliadineproject,thecommitmentsincludedintheMeliadineIIBAareimplementedandcloselymonitoredbytheCompany.Moreover,theimplementationoftheMeliadineIIBAismanagedbyworkinggroupswithrepresentativesfromtheCompanyandtheKIA,andreviewedbyanImplementationCommitteerepresentedbyeachparty'sseniorrepresentatives.Thesegroupsmeetregularlythroughouttheyeartomonitorimplementationprocessesandissues.
Capital Expenditures
TotalcapitalexpendituresattheMeliadineprojectin2016were$130.9million,includingcapitalizedsurfaceandundergrounddrilling,rampdevelopment,permitting,campoperation,technicalstudiesandsurfaceearthworks.
Capitalexpendituresof$355.8millionhavebeenbudgetedfortheMeliadineprojectin2017,focusedondetailedengineeringandprocurement,constructionofsurfaceinfrastructure,rampdevelopment,undergrounddrillingandcampoperations.
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In2016,internalstudieswerecarriedouttooptimizethepreviousMeliadinemineplanthathadbeenoutlinedinaNI43-101technicalreportdatedFebruary11,2015.Theseinternalstudiesassessedvariousopportunitiestoimprovetheprojecteconomics.ThefollowingtablesetsoutasummaryofthekeyestimatesandparametersoftheMeliadineproject.
Proven and probable mineral reserves 14.5milliontonnesoforegrading7.32g/tgold(3.4millionoz)
Measured and indicated mineral resources 20.8milliontonnesgrading4.95g/tgold(3.3millionoz)
Inferred mineral resource 14.7milliontonnesgrading7.51g/tgold(3.6millionoz)
Estimated production over life of mine 5,315,000oz
Estimated average metallurgical recovery Approximately96%
Estimated average annual gold production Approximately125,000ouncesbasedon4monthsofproduction(year1)*
Approximately375,000ounces(year2)
Approximately360,000ounces(year3)
Approximately405,000ounces(years4–14)
Estimated average annual mill throughput Approximately377,000tonnesbasedon4monthsofproduction(year1)
Approximately1,182,000tonnes(year2)
Approximately1,307,000tonnes(year3)
Approximately2,049,000tonnes(years4–14)
Estimated mine life Approximately14years
Estimated initial capital costs to the first ounceproduced
Approximately$900million
Estimated sustaining capital costs Approximately$48millionperyear
Estimated reclamation costs Approximately$49million
Economic Assumptions:
$1,200perouncegold
US$/C$exchangerateof$1.25
Statutoryincometaxrate:Approximately26%
TheMeliadineprojectissubjecttoanetprofitsroyaltypayableinaccordancewiththeNorthwest Territories andNunavut Mining Regulations .Theroyaltiesarecalculatedusingagraduatedratetoamaximumof13%
* Includesapproximately60,000pre-productionounces
Development
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In2016,3,795metresofhorizontaldevelopmentand198metresofverticaldevelopmentwerecompletedattheMeliadineproject.For2017,theCompanyexpectsapproximately5,590metresofhorizontaldevelopment(including
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approximately1,060metresoftotalrampdevelopment)andapproximately760metresofverticaldevelopmenttobecompleted.
Geology, Mineralization, Exploration and Drilling
Geology and Mineralization
ArcheanvolcanicandsedimentaryrocksoftheMeliadinegreenstonebeltunderlietheproperty,whichismainlycoveredbyglacialoverburdenwithdeep-seatedpermafrostandispartoftheWesternChurchillsupergroupinnorthernCanada.Therocklayershavebeenfolded,shearedandmetamorphosed,andhavebeentruncatedbythePykeFault,aregionalstructurethatextendstheentire80-kilometrelengthoftheproperty.
ThePykeFaultappearstocontrolgoldmineralizationontheMeliadineproperty.AtthesouthernedgeofthefaultisaseriesofoxideironformationsthathostthesevenMeliadineprojectdepositscurrentlyknown.Thedepositsconsistofmultiplelodesofmesothermalquartz-veinstockworks,laminatedveinsandsulphidizedironformationmineralizationwithstrikelengthsofuptothreekilometres.TheUpperOxideironformationhoststheTiriganiaqandWolfNorthzones.ThetwoLowerLeanironformationscontaintheFZone,Pump,WolfMainandWesmegdeposits.TheNormegzonewasdiscoveredin2011ontheeasternendoftheWesmegzone,nearTiriganiaq.TheWolf(NorthandMain),FZone,PumpandWesmeg/NormegdepositsareallwithinfivekilometresofTiriganiaq.TheDiscoverydepositis17kilometreseastsoutheastofTiriganiaqandishostedbytheUpperOxideironformation.Eachofthesedepositshasmineralizationwithin120metresofsurface,makingthempotentiallymineablebyopenpitmethods.Theyalsohavedeeperorethatcouldpotentiallybeminedwithundergroundmethods,whicharecurrentlybeingconsideredinvariousstudies.
Twobulksampleshavebeenextractedfromtheexplorationramp.Theresultsconfirmedtheresourceestimationmodelthathasbeendevelopedforthetwoprincipalzones(Zones1000and1100)atTiriganiaq,andindicatedapproximately6%moregoldthanhadbeenpredictedbytheblockmodelfortheseareas.The2011bulksampleprogramalsoconfirmedthepreviousassessmentoftheCompany'sblockmodelintermsofgradecontinuity,consistencyanddistribution,andtheevaluationofrelatedminingpropertiesthroughgeologicalmapping,undergroundchip,channelandmucksampling,andgeotechnicalobservations.
Exploration and Drilling
ThefirstmineralresourcesestimateatMeliadinewasmadebyStrathconaMineralServicesin2005forthen-ownerComaplex,andcomprisedindicatedmineralresourcesof2.5milliontonnesgrading10.8gramsofgoldpertonne(containing853,000ouncesofgold)andinferredmineralresourcesof1.1milliontonnesgrading13.2gramspertonneofgold(containing486,000ouncesofgold),withallresourcesintheTiriganiaqdeposit.Followingthis,therewereannualestimatesgraduallyincludingnewdeposits,suchasDiscovery,FZone,PumpandWolf.ThefinalmineralresourcesestimatemadebeforetheCompanyacquiredthepropertywasmadebySnowdenMiningIndustryConsultantsforComaplexinJanuary2010anditcomprisedmeasuredandindicatedmineralresourcesof12.9milliontonnesgrading7.9gramsofgoldpertonne(containing3.3millionouncesofgold)andinferredmineralresourcesof8.4milliontonnesgrading6.4gramsofgoldpertonne(containing1.7millionouncesofgold).
ProvenandprobablegoldreservesatMeliadinein2016remained3.42millionouncesofgold(14.5milliontonnesoforegrading7.32gramspertonne).IndicatedmineralresourcesatMeliadinein2016remained20.8milliontonnesoforegrading4.95gramsofgoldpertonne.Inferredmineralresourcesin2016remained14.7milliontonnesoforegrading7.51gramsofgoldpertonne.
In2016,theCompanyspent$0.5millionon1,200metresofexplorationdrillingatMeliadine.The2017planincludesspending$3.9milliononconversiondrilling(25,900metres)and$0.8milliononexplorationdrilling(5,000metres)atMeliadine.
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Southern Business
PinosAltosMine
ThePinosAltosmineachievedcommercialproductioninNovember2009.ItislocatedintheSierraMadregoldbelt,285kilometreswestoftheCityofChihuahuaintheStateofChihuahuainnorthernMexico.AtDecember31,2016,thePinosAltosminewasestimatedtocontainprovenandprobablemineralreservesof1.4millionouncesofgoldand38.1millionouncesofsilvercomprisedof17.4milliontonnesoforegrading2.55gramsofgoldpertonneand68.2gramsofsilverpertonne.TheCrestonMascotadepositatPinosAltosachievedcommercialproductioninthefirstquarterof2011.AtDecember31,2016,theCrestonMascotadepositwasestimatedtocontainadditionalprovenandprobablemineralreservesof0.1millionouncesofgoldand0.9millionouncesofsilvercomprisedof2.5milliontonnesoforegrading1.28gramsofgoldpertonneand11.4gramsofsilverpertonne.ThePinosAltospropertyismadeupoftwoblocks:theAgnicoEagleMexicoConcessions(25concessions)andthePinosAltosConcessions(19concessions).
LocationMapofthePinosAltosMine(asatDecember31,2016)
Approximately47%ofthecurrentPinosAltosmineralreserves,including3%fortheCrestonMascotadeposit,aresubjecttoanetsmelterreturnroyaltyof3.5%payabletoPinosAltosExplotaciónyExploraciónS.A.deC.V.("PAEyE")andtheremaining53%ofthecurrentmineralreservesandmineralresourcesatPinosAltosaresubjecttoa2.5%netsmelterreturnroyaltypayabletotheServicioGeológicoMexicano,aMexicanFederalGovernmentagency.After2029,thisportionofthepropertywillalsobesubjecttoa3.5%netsmelterreturnroyaltypayabletoPAEyE.
TheassetsacquiredbytheCompanyfromPAEyEandtheAsociacióndePequeñosPropietariosForestalesdePinosAltosSdeR.L.in2008includedtherighttouseupto400hectaresoflandformininginstallationsforaperiodof20yearsafterformalminingoperationshavebeeninitiated.TheCompanyalsoobtainedsoleownershipoftheAgnicoEagleMexicoConcessionspreviouslyownedbyCompaniaMineraLaParreñaS.A.deC.V.During2008,theCompanyandPAEyEenteredintoanagreementunderwhichtheCompanyacquiredfurthersurfacerightsforopenpitminingoperationsandadditionalfacilities.Infrastructurepayments,surfacerightspaymentsandadvanceroyaltypaymentstotaling$35.5millionweremadetoPAEyEandtheAsociacióndePequeñosPropietariosForestalesdePinosAltosSdeR.L.in2008asaresultofthisagreement.
AGNICO EAGLE 59 ANNUAL INFORMATION FORM
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Beginningin2006,theCompanyhasnegotiatedwithvariouslandownersfromtheregionfortheacquisitionof7,670hectaresoflandcontainedwithintheAgnicoEagleMexicoandPinosAltosConcessions.Theagreements,otherthantheagreementwithrespecttotheBravoZone,expireineither2028or2036.TheagreementwithrespecttotheBravoZoneexpiresin2017.Theagreements,includingtheagreementwithrespecttotheBravoZone,alsoprovideforfurtherrenewalattheCompany'soption.TheacquisitionofthesesurfacerightsforthegeologicallyprospectivelandswithinthedistrictsurroundingthePinosAltospropertywillfacilitatefutureexplorationandminingdevelopmentintheseareas.ThePinosAltosmineisdirectlyaccessiblebyapavedinterstatehighwaythatlinksthecitiesofChihuahuaandHermosillo.
InAugust2007,theCompanyapprovedconstructionofamineatPinosAltos.ThemineachievedcommercialproductioninNovember2009.In2009,theCompanydecidedtobuildastand-aloneheapleachoperationattheCrestonMascotadepositatPinosAltos.ThefirstgoldpourfromtheCrestonMascotadepositoccurredonDecember28,2010andcommercialproductionfromtheCrestonMascotadepositwasachievedinthefirstquarterof2011.
TheCompanycontinuestoevaluateopportunitiestodevelopothermineralresourcesthathavebeenidentifiedinthePinosAltosareaassatelliteoperations.
Mining and Milling Facilities
SurfacePlanofthePinosAltosMine(asatDecember31,2016)
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SurfacePlanoftheCrestonMascotaDepositatPinosAltos(asatDecember31,2016)
Millingoperationsduring2016atPinosAltosprocessedanaverageof5,415tonnesoforeperdayascomparedtothedesignedrateof4,000tonnesperday.TheundergroundmineatPinosAltosproducedanaverageof3,074tonnesoforeperdayascomparedtoitsdesignedrateof3,000tonnesperday.TheopenpitminesatPinosAltosandtheCrestonMascotadepositproduced15.3milliontonnesofore,overburdenandwastein2016.
Mining Methods
ThesurfaceoperationsatthePinosAltosmineusetraditionalopenpitminingtechniqueswithbenchheightsofsevenmetresanddoublebenchesonthefootwallandsinglebenchingonthehangingwall.Miningisaccomplishedwithfrontendloaders,trucks,trackdrillsandvarioussupportequipment.Basedupongeotechnicalevaluations,thefinalpitslopesvarybetween45degreesand50degrees.PerformanceattheopenpitminingoperationatPinosAltosduring2016continuestoindicatethattheequipment,miningmethodsandpersonnelselectedfortheprojectaresatisfactoryforfutureproductionphases.5.2milliontonnesofore,overburdenandwastewereminedduring2016.
Theundergroundmine,whichcommencedoperationsinthesecondquarterof2010,usesthelongholesublevelstopingmethodtoextractore.Thestopeheightis30metresandthenominalstopewidthis15metres.Oreistransportedtothesurfacebyshafthoistingaswellasbytrucksviaarampsystem.Thepastebackfillsystemandventilationsystemwerecommissionedinthefourthquarterof2010.During2016,approximately1.2milliontonnesoforewereproducedfromthe
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undergroundportionofthemine,averaging3,164tonnesperday.Theplannedcapacityoftheundergroundmineisincreasingfromtheoriginalplannedcapacityof3,000tonnesoforeperdaytowards4,500tonnesoforeperdaywiththecommissioningofashaftin2016andthedevelopmentofadditionalundergroundmineralreserves.Theshafthoistingcapacityisexpectedtoreducetheneedforadditionalundergroundtrucksrequiredastheminedepthincreasesandisexpectedtocontinuetomaintainmillfeedratesat4,500tonnesoforeperdayinfutureyearsastheopenpitminesatPinosAltosbecomedepleted.Approximately57kilometresoftotallateraldevelopmenthavebeencompletedasofDecember31,2016.
Surface Facilities
TheprincipalmineralprocessingfacilitiesatthePinosAltosmineweredesignedtoprocess4,000tonnesoforeperdayinaconventionalprocessplantcircuitwhichincludessinglestagecrushing,grindinginaSAGandballmillinclosedloop,gravityseparationfollowedbyagitatedleaching,counter-currentdecantationandmetalsrecoveryintheMerrill-Croweprocess.Tailingsaredetoxifiedandfilteredandthenusedforpastebackfillintheundergroundmineordepositedasdrytailingsinanengineeredtailingsimpoundmentarea.ThePinosAltosmillprocessedanaverageof5,415tonnesoforeperdayduring2016.LowgradeoreatPinosAltosisprocessedinaheapleachsystemdesignedtoaccommodateapproximatelyfivemilliontonnesofmineralizedmaterialoverthelifeofthemine.Theproductionfromheapleachoperationsisexpectedtoberelativelyminor,contributingapproximately1%oftotalmetalproductionplannedfortheremaininglifeofthemine(notincludingproductionfromtheCrestonMascotaheapleachoperation).Inaddition,during2016,theCompanyapprovedtheconstructionofasilverflotationplant,whichisexpectedtoincreasesilverrecovery.
OthersurfacefacilitiesatthePinosAltosmineinclude:aheadframeandhoistroom,aheapleachpad,pond,linerandpumpingsystem;administrativesupportoffices;campfacilities;alaboratory;aprocessplantshop;amaintenanceshop;apowergeneratingstation;surfacepowertransmissionlinesandsubstations;anengineeredtailingsmanagementsystem;andawarehouse.
AseparateheapleachoperationandancillarysupportfacilitieswerebuiltattheCrestonMascotadeposit,whichisdesignedtoprocessapproximately4,000tonnesoforeperdayinathreestagecrushing,agglomerationandheapleachcircuitwithcarbonadsorption.Thisprojectwascommissionedinthelatterpartof2010,withcommercialproductionachievedinthefirstquarterof2011.During2016,atotalof2.0milliontonnesoforewasminedfromtheCrestonMascotadeposit,averaging5,520tonnesperday.Inthefourthquarterof2016,workonthePhaseIVleachpadexpansionwascompletedwithstackingofmaterialexpectedtobegininthefirstquarterof2017.BasedonperformanceofthemineandprocessfacilitiesattheCrestonMascotadeposittodate,theequipment,miningmethodsandpersonnelaresatisfactoryforcompletionoftheplannedproductionphases.
Overtheremaininglifeofthemine,recoveriesofgoldandsilverinthemillingcircuitatPinosAltos(otherthanfromtheCrestonMascotadeposit)areexpectedtoaverageapproximately93%and43%,respectively.TheCompanyanticipatespreciousmetalsrecoveryfromlowgradeoreprocessedinthePinosAltosheapleachfacilitywillaverage68%forgoldand12%forsilver.HeapleachrecoveriesfororefromtheCrestonMascotadepositareexpectedtoaverage63%forgoldand8%forsilver.
Production and Mineral Recoveries
During2016,thePinosAltosmine,includingtheCrestonMascotadeposit,hadtotalpayableproductionof240,068ouncesofgoldandapproximately2.7millionouncesofsilverfromthePinosAltosmillandtheheapleachpadsatthePinosAltosmineandtheCrestonMascotadeposit.
Ofthetotalin2016,thePinosAltosmillhadpayableproductionof183,576ouncesofgoldand2.4millionouncesofsilverfrom2.0milliontonnesoforegrading3.0gramsofgoldpertonneand80.0gramsofsilverpertonne.TheproductioncostsperounceofgoldproducedatPinosAltosin2016were$594.ThetotalcashcostsperounceofgoldproducedatPinosAltosin2016were$356onaby-productbasisandwere$585onaco-productbasisandtheprocessingfacilityaveraged5,415tonnesoforeperdayandoperated92.6%ofavailabletime.Inthemill,goldrecoveryaveraged94.9%andsilverrecoveryaveraged50%.TheproductioncostspertonneatPinosAltoswere$51andtheminesitecostspertonnewere$49in2016.
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ThefollowingtablesetsoutthemetalrecoveriesatthePinosAltosmillin2016.
Head Grade
Overall Metal
RecoveryPayable
Production
Gold 3.0g/t 94.9% 183,576oz
Silver 80.0g/t 50% 2.4millionoz
Ofthe2016total,thePinosAltosheapleachoperationshadpayableproductionof9,196ouncesofgoldand89,425ouncesofsilverfrom278,000tonnesoforegrading0.9gramsofgoldpertonneand28.0gramsofsilverpertonne.
ThecumulativerecoveryforgoldandsilverontheheapleachpadatPinosAltosareapproximately75%and16%,respectively.Heapleachrecoveryisfollowingtheexpectedcumulativerecoverycurveanditisanticipatedthattheultimaterecoveryof68%forgoldand12%forsilverwillbeachievedwhenleachingiscompleted.
Ofthe2016total,theheapleachoperationsattheCrestonMascotadeposithadpayableproductionof47,296ouncesofgoldand201,243ouncesofsilverfrom2.1milliontonnesoforegrading1.10gramsofgoldpertonneand12.0gramsofsilverpertonne.TheproductioncostsperounceofgoldproducedattheCrestonMascotadepositin2016were$578.ThetotalcashcostsperounceofgoldproducedattheCrestonMascotadepositin2016were$516onaby-productbasisandwere$588onaco-productbasis.TheproductioncostspertonneattheCrestonMascotadepositwere$13andtheminesitecostspertonnewere$13in2016.
ThecumulativemetalsrecoveryforgoldandsilverontheheapleachpadattheCrestonMascotadepositareapproximately60%and14%,respectively.Heapleachrecoveryisfollowingtheexpectedcumulativerecoverycurveanditisanticipatedthattheultimaterecoveryof62%forgoldand11%forsilverwillbeachievedwhenleachingiscompleted.
Productionduring2017atthePinosAltosmine(excludingCrestonMascota)isexpectedtobeapproximately170,000ouncesofgoldand2.6millionouncesofsilverfrom2.2milliontonnesoforegrading2.52gramsofgoldpertonneand71.0gramsofsilverpertonne,atestimatedtotalcashcostsperounceofgoldofapproximately$474onaby-productbasis,withestimatedgoldrecoveryof95.0%andsilverrecoveryof52.9%.Minesitecostspertonneofapproximately$55formilledoreareexpectedin2017.TheheapleachattheCrestonMascotadepositisexpectedtoproduceapproximately40,000ouncesofgoldand0.1millionouncesofsilverfrom2.0milliontonnesoforegrading1.01gramsofgoldpertonneand11.5gramsofsilverpertonne,atestimatedtotalcashcostsperounceofgoldofapproximately$812onaby-productbasis,withestimatedgoldrecoveryof61.8%andsilverrecoveryof13.8%.Minesitecostspertonneofapproximately$17forCrestonMascotaheapleachoreareexpectedin2017.
Environmental, Permitting and Social Matters
ThePinosAltosminehasreceivedthenecessarypermitauthorizationsforconstructionandoperationofamine,includingaChangeofLandUsepermitandanEnvironmentalImpactStudyapprovalfromtheapplicableMexicanenvironmentalagency.PinosAltosusesthedrystacktailingstechnologytominimizethegeotechnicalandenvironmentalriskthatcanbeassociatedwiththerainfallintensitiesandtopographicreliefintheSierraMadreregionofMexico.Since2015,tailingshavebeendepositedinatailingsfacilitythatwasconstructedintheminedoutOberonduWeberpit.
Followinganauditprocessbyanindependentthirdparty,theoperationsatboththePinosAltosmineandtheCrestonMascotadepositreceivedthe"IndustriaLimpia"certificationfromtheMexicanenvironmentalauthorities.Thiscertificationisbasedoncompliancewithenvironmentalrequirements.ThePinosAltosminehasalsoreceivedcertificationundertheInternationalCyanideManagementCode(the"CyanideCode").
TheCompanyhasengagedthelocalcommunitiesintheareawithhiring,localcontracts,educationsupport,infrastructureprojectsandmedicalsupportprogramstoensurethatthemineprovideslong-termbenefitstotheresidentslivingandworkingintheregion.Approximately70%oftheoperatingworkforceatPinosAltosarelocallyhiredand100%ofthepermanentworkforceattheCompanyoperationsinMexicoareMexicannationals.
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Capital Expenditures
CombinedcapitalexpendituresatthePinosAltosmineandCrestonMascotadepositduring2016wereapproximately$68.9million,excludingcapitalizeddrilling.Combinedcapitalexpendituresincludedsustainingcapitalforshaftconstructionandcommissioning,undergroundequipmentmajorcomponents,silverflotationplant,CrestonMascotaphase4leachpadandpondandOberondeWebertailingsdam.
In2017,theCompanyexpectscapitalexpendituresatPinosAltos,includingtheCrestonMascotadeposit,tobeapproximately$59.7million,excludingcapitalizeddrilling.Capitalexpendituresin2017willprimarilybeusedforundergroundminedevelopment,equipmentpurchases,constructionofthesilverflotationplant,pastebackfillplantexpansionandgeneralsustainingactivities.
Development
AsofDecember31,2016,fortheminelifetodate,morethan132milliontonnesofore,overburdenandwastehadbeenremovedfromtheopenpitmineatPinosAltosandapproximately57kilometresoflateraldevelopmenthadbeencompletedintheundergroundmine.AttheCrestonMascotadeposit,approximately54milliontonnesofore,overburden,andwastehadbeenremovedfromtheopenpitmineasofDecember31,2016.
Theshaftsinkingprojectthatwasinitiatedin2012,withanoriginalbudgetof$106million,wascompletedinmid-2016withafinalcostof$96million.Thisnewshaftwillfacilitateimprovedmatchingofminingandmillcapacityfor4,500tonnesoforeand1,500tonnesofwasteperdayastheopenpitminingoperationwindsdown.
Geology, Mineralization, Exploration and Drilling
Geology
ThePinosAltosmineisinthenorthernpartoftheSierraMadregeologicprovince,onthenortheastmarginoftheOcampoCaldera,whichhostsmanyepithermalgoldandsilveroccurrences,includingthenearbyOcampoandMorismines.
ThepropertyisunderlainbyTertiary-age(lessthan45millionyearsold)volcanicandintrusiverocksthathavebeendisturbedbyfaulting.Thevolcanicrocksbelongtothelowervolcaniccomplexandthediscordantoverlyinguppervolcanicsupergroup.ThelowervolcaniccomplexisrepresentedonthepropertybytheNavosaigameconglomerates(includingthinly-beddedsandstoneandsiltstone)andtheElMadronovolcanics(felsictuffsandlavasintercalatedwithrhyolitictuffs,sandyvolcanoclasticsandsediments).TheuppervolcanicgroupismadeupoftheVictoriaignimbrites(explosivefelsicvolcanics),theFrijolarandesites(massivetoflow-banded,porphyriticflows)andtheBuenavistaignimbrites(dacitictorhyoliticpyroclastics).
Intermediateandfelsicdykesaswellasrhyoliticdomesintrudealloftheseunits.TheSantoNinoandesiteisadykethatintrudesalongtheSantoNinofaultzone.
Structureonthepropertyisdominatedbyaten-kilometrebythree-kilometrehorst,afault-upliftedblockstructureorientedwest-northwest,thatisboundedonthesouthbythesouth-dippingSantoNinofaultandonthenorthbythenorth-dippingReynadePlatafault.Quartz-goldveindepositsareemplacedalongthesefaultsandalongtransferfaultsthatsplayoutwardsfromtheSantoNinofault.
Mineralization
GoldandsilvermineralizationatthePinosAltosmineconsistsoflowsulphidationtypeepithermal-typehydrothermalveins,brecciasandbodies.TheSantoNinostructureoutcropsoveradistanceofroughlysixkilometres.Itstrikesat60degreesazimuthonitseasternportionandturnstostrikeroughly90degreesazimuthonitswesternfringe.Thestructuredipsat70degreestowardsthesouth.ThefourmineralizedsectorshostedbytheSantoNinostructureconsistofdiscontinuousquartzrichlensesnamedfromeasttowest:ElApache,OberondeWeber,SantoNinoandCerroColorado.
TheElApachelensisthemostweaklymineralized.Theareahostsaweaklydevelopedwhitequartzdominatedbreccia.Goldvaluesarelowanderraticoveritsroughly750metrestrikelength.Pastdrillingsuggeststhatthiszoneisoflimitedextentatdepth.
TheOberondeWeberlenshasbeenfollowedonsurfaceandbydiamonddrillingoveranextentofroughly500metres.ShallowholesdrilledbytheCompanyshowgoodcontinuitybothintermsofgradeandthicknessoverroughly550metres.FromthepreviousdrillingdonebyPenoles,continuityatdepthappearstobeerraticwithaweaklydefinedwesternrake.
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TheSantoNinolensisthemostverticallyextensiveoftheselenses.Ithasbeentracedtoadepthofapproximately750metresbelowthesurface.Theveinisfollowedcontinuouslyonsurfaceoveradistanceof550metresanddiscontinuouslyupto650metres.Beyonditswesternandeasternextents,theSantoNinoandesiteismassiveandonlyweaklyaltered.Goldgradesfoundaresystematicallyassociatedwithgreenquartzbrecciatedandesite.
TheCerroColoradolensisstructurallymorecomplexthanthethreedescribedabove.Nearthesurface,itismarkedbyacomplexsuperpositionofbrittlefaultswithmineralizedzoneswhicharedifficulttocorrelatefromholetohole.ItsrelationtotheSantoNinofaultzoneisnotclearlydefined.TwodeeperholesdrilledbytheCompanysuggestbettergradecontinuityispossibleatdepth.
TheSanEligiozoneislocatedapproximately250metresnorthofSantoNino.ThehostrockisbrecciatedVictoriaIgnimbrite,occasionallywithastockworkstyleofmineralization.Thereisnoandesiteinthissector.Unliketheotherlenses,theSanEligiolensdipstowardsthenorth.Thelateralextentofthezoneseemstobecontinuousfor950metres.Itsaveragewidthisfivemetresandneverexceeds15metres.Surfacemappingandprospectinghassuggestedthatthereisgoodpotentialforadditionalmineralizationonstrikeandatdepthsbelow150metres.Visiblegoldhasbeenseeninthedrillcore.
TheCrestonMascotadepositissevenkilometresnorthwestoftheSantoNinodeposit,andissimilar,butdipsshallowlytothewest.TheCrestonMascotadepositisapproximately1,000metreslongandfourto40metreswide,andextendsfromsurfacetomorethan200metresdepth.
Severalotherpromisingzonesareassociatedwiththehorstfeatureinthenorthwestpartoftheproperty.TheCubirodepositisanear-surfacedepositlocatedtwokilometreswestoftheCrestonMascotadeposit.Cubirostrikesnorthwest,hasasteepdipandhasbeenfollowedalongstrikeforapproximately850metres.Drillinghasintersectedsignificantgoldandsilvermineralizationupto30metresinwidth.TheCubirodepositissplitbyafaultthatresultedin200metresofdisplacementtothewest,asdefinedbydrillingtodate.Thezoneisstillopentothesoutheastandpossiblyatdepth.
TheSinterzoneis1,500metresnorth-northeastoftheSantoNinozoneandispartoftheReynadePlatagoldstructure.Thesteeplydippingmineralizationrangesfromfourto35metresinwidthandalmost900metreslong,withover350metresofverticaldepth.Sinterisbeingevaluatedforitsopenpitandundergroundminingpotential.
OtheridentifiedmineralresourcesinthePinosAltosregionincludetheBravoandCarolazonesadjacenttotheCrestonMascotadepositandtheReynadelaPlataprospectfurthertotheeast.ExplorationeffortswillbeallocatedtothesezonesasdevelopmentcontinuesatPinosAltosandtheCrestonMascotadeposit.
Exploration and Drilling
In2016,provenandprobablemineralreservesatPinosAltos(excludingCrestonMascota)decreasedbyapproximately35,000ouncesofgoldandincreasedby600,000ouncesofsilverto1.4millionouncesofgoldand38.1millionouncesofsilver(17.4milliontonnesoforegrading2.55gramsofgoldpertonneand68.15gramsofsilverpertonne)afterproducing183,576ouncesofgold(187thousandouncesofinsitugoldmined)and2.4millionouncesofsilver.ThenetdecreasewasaresultofminedepletionaswellasachangetotheSantoNiñopitdesign.IndicatedmineralresourcesatPinosAltosincreasedby2.8milliontonnesin2016to14milliontonnesgrading1.62gramsofgoldpertonneand40.22gramsofsilverpertonneduetonewinterpretationsattheCerroColoradoandSantoNiñodeposits.Inferredmineralresourcesdecreasedby3.4milliontonnesin2016to9.2milliontonnesgrading1.28gramsofgoldpertonneand28.30gramsofsilverpertonne.
In2016,provenandprobablemineralreservesattheCrestonMascotaandBravodepositsdecreasedbyapproximately74,000ouncesofgoldand719,000ouncesofsilverto102,000ouncesofgoldand909,000ouncesofsilver(2.5milliontonnesoforegrading1.28gramsofgoldpertonneand11.35gramsofsilverpertonne)afterproducing47,296ouncesofgold(76,000ouncesofinsitugoldmined)and201,243ouncesofsilver.Thenetdecreasewasaresultofminedepletion.IndicatedmineralresourcesattheCrestonMascotadepositincreasedby28,000tonnesin2016to4.3milliontonnesgrading1.01gramsofgoldpertonneand16.98gramsofsilverpertonneduetoconversionofinferredmineralresourcestoindicatedmineralresourcesattheBravodeposit.TheinferredmineralresourcesattheCrestonMascotadepositdecreasedby2.9milliontonnesin2016to1.3milliontonnesgrading0.72gramsofgoldpertonneand11.54gramsofsilverpertonne.Drillingandevaluationwillcontinuein2017.
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In2016,minesiteexplorationactivitieswereprimarilyfocusedonconversion,infillandexplorationofthemineralresourcesattheCrestonMascota,BravoandMadroñodeposits.Atotalof31,263metresofminesiteexplorationdrilling,including8,690metresofinfilldrillingatCrestonMascota,22,573ofexplorationandstepoutdrillingattheMadroñoandBravodepositsand4,960metresofdefinition(conversion)drilling,werecompleted.
In2017,theCompanyexpectstospendapproximately$6.6milliononexplorationatthePinosAltosmineandtheCrestonMascotadeposit,including$0.5millionon2,000metresofconversiondrillingand$6.1millionon34,000metresofexplorationdrilling.
LaIndiaMine
ConstructionbeganatLaIndiainSeptember2012andcommercialproductionwasachievedonFebruary1,2014.AtDecember31,2016,theLaIndiaminewasestimatedtocontainprovenandprobablemineralreservesof1.0millionouncesofgoldand3.7millionouncesofsilvercomprisedof44.0milliontonnesoforegrading0.72gramsofgoldpertonneand2.6gramsofsilverpertonne.
TheLaIndiapropertyconsistsof52wholly-ownedand13optionedminingconcessionsintheMulatosGoldBeltinSonora,Mexico.TheLaIndiapropertyincludestheTarachidepositandseveralotherprospectivetargetsintheMulatosGoldBelt.AttheTarachideposit,indicatedmineralresourcesare47.2milliontonnesgrading0.39gramsofgoldpertonneandinferredmineralresourcesare81.7milliontonnesgrading0.36gramsofgoldpertonne.ApreliminarymetallurgicaltestingprogramonTarachicompositesampleshasbeencompletedandnegotiationsforlandaccessareongoing.
LocationMapoftheLaIndiaMine(asatDecember31,2016)
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TheMulatosGoldBeltispartoftheSierraMadregoldandsilverbeltthatalsohoststheoperatingMulatosgoldmineimmediatelysoutheastoftheLaIndiapropertyandthePinosAltosmineandtheCrestonMascotadeposit70kilometrestothesoutheast.
TheLaIndiamineislocatedinthemunicipalityofSahuaripa,southeasternSonoraState,betweenthesmallruraltownsofTarachiandMatarachi.TheclosestmajorcitywithaninternationalairportisHermosillo,thecapitalofSonora,located210kilometreswest-northwestoftheLaIndiamine.RoadtravelfromHermosillotothesitetakesapproximatelysevenhours.Alternatively,theminecanbeaccessedbysmallaircraft.ThepowersupplyattheLaIndiamineisprovidedbydieselgenerators.
TheCompanyacquiredtheLaIndiapropertyinNovember2011aspartofitsacquisitionofGrayd,whichhadexploredthepropertysince2004andhadpreparedapreliminaryeconomicassessmentoftheprojectinDecember2010basedonaJune2010NI43-101-compliantmineralresourceestimate.
InfilldrillingatLaIndiafromNovember2011toMay2012allowedtheCompanytoconfirmandexpandthemineralresourcesreportedintheDecember2010preliminaryeconomicassessment.InSeptember2012,followingthecompletionofafeasibilitystudy,theCompanyapprovedtheconstructionofamineatLaIndia.ThemineachievedcommercialproductioninFebruary2014.TheCompanycontinuestoevaluateopportunitiestodevelopothermineralresourcesthathavebeenidentifiedintheLaIndiaarea.
AttheTarachideposit,thesurfacerightsintheprojectareaareownedbytheTarachiEjido(agrariancommunity)andprivateparties.Allmeasured,indicatedandinferredmineralresourcesliewithinprivatelyownedorejidopossessedland.Surfaceaccessleaseagreementshavebeenexecutedwiththepropertyownersorpossessorsforapproximately50%oftheidentifiedtargetareas.Theexistingagreementspermitexplorationanddrillingactivities;ifminingactivityiscontemplatedfollowingexplorationinthearea,thentheCompanywillberequiredtonegotiatefurthertoacquirethesurfacerightsnecessaryforprojectdevelopment.
Mining and Milling Facilities
Mining Methods
OperationsattheLaIndiamineusetraditionalopenpitminingtechniqueswithbenchheightsofsixmetresandutilizefrontendloaders,trucks,trackdrillsandvarioussupportequipment.Basedupongeotechnicalevaluations,thefinalpitslopesvarybetween46degreesand50degrees.
Surface Facilities
Thefollowingsurfaceplandetailstheminelayoutshowingpitsandwasterockdumplocations,roads,theleachpadandotherinfrastructure.
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SurfacePlanoftheLaIndiaMine(asatDecember31,2016)
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SurfacefacilitiesattheLaIndiamineincludeathree-stageorecrushingfacility,a35milliontonnecapacitylinedheapleachpadwithprocesspondsandpumpingsystem,acarbonadsorptionplant,alaboratory,aprocessplantshop,aminingequipmentmaintenanceshop,ageneratedpowerstation,surfacepowertransmissionlinesandsubstations,awarehouse,administrativesupportofficesandcampfacilities.Thepowerforthefacilitiesissuppliedbydieselgeneratorsandwaterissuppliedbyasystemofwellsandcatchmentfacilities.Septicdischargesaremanagedintheirrespectiveleachfields.
Production and Mineral Recoveries
During2016,theLaIndiaminehadpayableproductionof115,162ouncesofgoldfromapproximately5.8milliontonnesoforestackedontheheapleachpadgrading0.81gramsofgoldpertonne.TheproductioncostsperounceofgoldproducedatLaIndiain2016were$432.ThetotalcashcostsperounceofgoldproducedatLaIndiain2016were$395onaby-productbasisandwere$468onaco-productbasis.TheproductioncostspertonneatLaIndiawere$9andtheminesitecostspertonnewere$9in2016.Stackingratesaveraged15,949tonnesoforeperday.
ThecumulativerecoveryforgoldontheheapleachpadatLaIndiaisapproximately61%.Heapleachrecoveryisfollowingtheexpectedcumulativerecoverycurveanditisanticipatedthattheultimategoldrecoveryof68%willbeachievedwhenleachingiscompleted.Thisprojectedultimaterecoveryislowerthantherecoveryoriginallyestimatedinthefeasibilityreportbecauseoftheadditionofsignificantvolumesoftransitionalmaterial.Thisoregradematerialwasnotincludedinthestudybut,followingthecompletionofmetallurgicaltestworkwhichproveditseconomicbenefitdespitealowerrecoveryrate,hassincebeenaddedtothemineralreserves.
ThefollowingtablesetsoutthemetalrecoveriesatLaIndiain2016.
Head Grade
Cumulative Metal
RecoveryPayable
Production
Gold(includingpriortocommercialproduction) 0.81g/t 61% 115,162oz
Goldproductionduring2017attheLaIndiamineisexpectedtobeapproximately100,000ouncesfrom5.3milliontonnesoforegrading0.89gramsofgoldpertonne,atestimatedtotalcashcostsperounceofapproximately$583onaby-productbasis,withestimatedcumulativegoldrecoveryof66%.Minesitecostspertonneofapproximately$11areexpectedin2017.
Environmental, Permitting and Social Matters
TheLaIndiamineisnotlocatedinanareawithaspecialfederalenvironmentalprotectiondesignation.AsofDecember31,2016,allpermitsnecessaryfortheoperationoftheLaIndiaminehadbeenreceived.
TheCompanyhasengagedthelocalcommunitiesintheareawithlocalhiring,contractswithlocalbusinesses,educationsupportandmedicalsupportprogramstoensurethattheLaIndiamineprovideslongtermbenefitstotheresidentslivingandworkingintheregion.Approximately50%oftheoperatingworkforceatLaIndiaislocallyhiredand100%ofthepermanentworkforceareMexicannationals.
Capital Expenditures
CapitalexpendituresattheLaIndiamineduring2016wereapproximately$10.5million,excludingcapitalizeddrilling,whichwasspentonheapleachexpansionandgeneralsustainingactivities.TheCompanyexpectscapitalexpenditurestobeapproximately$7millionin2017,excludingcapitalizeddrilling.Thecapitalexpendituresin2017aretobeusedforheapleachexpansionandgeneralsustainingactivities.
Development
AsofDecember31,2016,fortheminelifetodate,morethan33milliontonnesofore,overburdenandwastehadbeenremovedfromtheopenpitmineatLaIndia.
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Agreements & Licences
TheminingconcessionsfortheLaIndiamineandTarachidepositarecontrolledbyanindirect,wholly-ownedsubsidiaryoftheCompanybymeansofdirectownershipandbyfiveseparateagreementswherebytheCompanycanearna100%interestincertainconcessionsbymakingcashandsharepayments.Paymenthasbeenmadeinfullfortheclaimsthathostallofthemeasured,indicatedandinferredmineralresources.Certainconcessionsaresubjecttounderlyingnetsmelterreturnroyaltiesofbetween1%and3%,certainofwhichmaybepurchasedbytheCompanyandcouldresultinnetsmelterreturnroyaltiesremainingofupto2%.
FortheTarachideposit,paymentstotaling$0.75millionhavebeenmadebytheCompanytoearna100%interestintherelevantconcessions.Certainconcessionsaresubjecttoanunderlyingnetsmelterreturnroyaltyofbetween1%and3%,whichmaybepartiallypurchasedbytheCompany,andcouldresultinnetsmelterreturnroyaltiesremainingofupto2%.Inaddition,in2016theCompanyacquiredtheLaChipriona,LosPinosandSantaClaraclaims.
ThedefinedmineralreserveandmineralresourceandalllandsrequiredforinfrastructurefortheLaIndiaminearewholly-containedwithinthreeprivately-heldpropertieswhichtheCompanyhasacquiredinordertopermitexploration,constructionandminedevelopmentactivities.
Geology, Mineralization, Exploration and Drilling
Geology and Mineralization
TheLaIndiaminelieswithintheSierraMadreOccidental("SMO")province,anextensiveEocenetoMiocenevolcanicfieldextendingfromtheUnitedStates-MexicobordertocentralMexico.TheLaIndiaminelieswithinthewesternlimitsoftheSMOinanareadominatedbyoutcropsofandesiteanddacitictuffs,overlainbyrhyolitesandrhyolitictuffsthatwereaffectedbylarge-scalenorth-northwest-strikingnormalfaultsandintrudedbygranodioriteanddioritestocks.IncisedfluvialcanyonscuttheuppermoststrataandexposetheLowerSeriesvolcanicstrata.
Themineareaispredominantlyunderlainbyavolcanicsequencecomprisedofandesiticandfelsicextrusivevolcanicstratawithinterbeddedepiclasticstrataofsimilarcomposition.Themineraloccurrencespresentintheminearea,andthedeposittypebeingsought,arevolcanic-hostedhigh-sulphidationepithermalhydrothermalgold,silverandporphyry-relatedgolddeposits.Suchdepositsmaybepresentasveinsand/ordisseminateddepositsand/orbreccias.TheLaIndiaminedepositareaisoneofseveralhigh-sulphidationepithermalmineralizationcentresrecognizedintheregion.
Epithermalhigh-sulphidationmineralizationattheLaIndiaminedevelopedasaclusterofgoldzones(MainandNorth)alignednorth-southwithinaspatiallyrelatedzoneofhydrothermalalterationinexcessof20squarekilometresinarea.GoldmineralizationisconfinedtotheLateEocenerockswithinzonesofintermediateandadvancedargilliticalterationoriginallycontainingsulphides,andsubsequentlyoxidizedbysupergeneprocesses.TheNorthandMainzonesarewithintwokilometresofeachother.
Surfaceoutcropmappinganddrill-holedatasofarindicatethatthegoldsystemattheTarachidepositislikelybestclassifiedasagoldporphyrydeposit.
Exploration and Drilling
In2016,provenandprobablemineralreservesatLaIndiaincreasedbyapproximately153,000ouncesofgoldto1.02millionouncesofgold(44milliontonnesoforegrading0.72gramsofgoldpertonne)afterproducing115,162ouncesofgold(153,000ouncesofinsitugoldmined).ThenetincreasewasaresultoftheadditionofnewoxidereservesandtherecognitionofanewstyleoflowgrademineralizationintheMainpitthatisamenabletoheapleaching,whichmorethanoffsettheminedepletion.MeasuredandindicatedmineralresourcesattheLaIndiamineincreasedby3.9milliontonnesin2016to74.2milliontonnesgrading0.36gramsofgoldpertonne,largelyduetorelogging,reinterpretationandnewestimationdomains.Inferredmineralresourcesincreasedby1.8milliontonnesin2016to92.6milliontonnesgrading0.38gramsofgoldpertonneduetonewestimationdomains.
In2016,theCompanycompleted35,760metresofdrillingthrough326diamonddrillholesattheLaIndiamine.Thisincluded12,025metresofminesiteexplorationdrillingatacostof$2.3millionattheElRealito,ElCochiandIndiaEstezonesand23,735metresofinfilldrillingattheMainandNorthzonesatacostof$3.7million.Inaddition,5,710metresofdefinition(conversion)drillingwascompletedattheNorthandMainzones.
TheCompanyexpectstospendapproximately$0.8millionon5,000metresofconversiondrillingand$6.9millionon31,000metresofexplorationdrillingattheLaIndiaminein2017.
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Regional Exploration Activities
During2016,theCompanycontinuedtoactivelyexploreinQuebec,Nunavut,Nevada,Finland,SwedenandMexico.TheCanadianregionalexplorationactivitieswerefocusedontheAmaruqandMeliadinepropertiesinNunavut.IntheUnitedStates,explorationactivitiesduring2016wereconcentratedontheWestPequopandSummitprojectslocatedinnortheastNevada.InMexico,regionalexplorationwasfocusedontheElBarqueno,LaIndiaandPinosAltosproperties.InFinland,regionalexplorationwasfocusedtothenorthoftheKittilaminealongtheKiistalafault,includingtheKuotkodeposit.InSweden,theCompanyexploredtheBarseleandSolvikprojects.CanadianMalarticCorporationfocusedexplorationontheAmalgamatedKirklandandUpperBeaverprojectsnearKirklandLake,OntarioandthePandorapropertyadjacenttotheLapamineinQuebec,andthePartnershipfocusedexplorationontheOdysseyprojectnexttotheCanadianMalarticmine.AttheLaRonde,Goldex,Lapa,CanadianMalartic,Meadowbank,Kittila,PinosAltos(includingtheCrestonMascotadeposit)andLaIndiamines,theCompany(orthePartnership,inthecaseoftheCanadianMalarticmine)continuedexplorationprogramsaroundthemines.Mostoftheexplorationbudgetwasspentondrillingprogramsnearmineinfrastructurealongpreviouslyrecognizedgoldtrends.
Attheendof2016,theCompany'slandholdingsinCanadaconsistedof79projectscomprisedof4,057mineraltitlescoveringanaggregateof574,079hectares(ofthistotalinCanada,11projectscomprisedof1,867mineraltitlescoveringanaggregateof72,497hectaresareheldasa50%interestwithYamana,includingtheCanadianMalarticmine).LandholdingsintheUnitedStatesconsistedoffourpropertiescomprisedof2,695mineraltitlescoveringanaggregateof37,723hectares.LandholdingsinFinlandconsistedoffourgroupsofpropertiescomprisedof218mineraltitlescoveringanaggregateof31,889hectares.LandholdingsinSwedenconsistedoftwoprojectscomprisedof32mineraltitlescoveringanaggregateof37,921hectares.LandholdingsinMexicoconsistedof18projectscomprisedof163miningconcessiontitlescoveringanaggregateof210,865hectares.
ThetotalamountofexpendituresincurredonregionalexplorationactivitiesattheCompany'sexplorationpropertiesplusheadofficeoverheadandcorporatedevelopmentactivitiesin2016was$147.0million.Thisincludeddrilling1,022holesforanaggregateofapproximately335kilometreson100%-ownedproperties.ItalsoincludedtheCompany's50%portionofthecostofdrilling192holesforanaggregateofapproximately144kilometresonCanadianMalarticCorporationexplorationproperties.
ThebudgetforexpendituresonregionalexplorationactivitiesattheCompany'sexplorationpropertiesplusheadofficeoverhead,projectevaluationandcorporatedevelopmentactivitiesin2017isapproximately$143.4million,includingapproximately437kilometresofdrillingon100%-ownedproperties,and50%ofthecostofdrilling137kilometresonCanadianMalarticCorporationexplorationpropertiesandattheCanadianMalarticmine.Forfurtherdetailsofthecomponentsofthe2017explorationbudget,seetheCompany'snewsreleasedatedFebruary15,2017.
Mineral Reserves and Mineral Resources
InformationonMineralReservesandMineralResourcesoftheCompany
ThescientificandtechnicalinformationsetoutinthisAIFhasbeenapprovedbythefollowing"qualifiedpersons"asdefinedbyNI43-101:mineralreservesandmineralresources(otherthanfortheCanadianMalarticmine)–DanielDoucet,Eng.,SeniorCorporateDirector,ReserveDevelopment;mineralreservesandmineralresources(fortheCanadianMalarticmine)–DonaldGervais,P.Geo.,DirectorofTechnicalServicesatCanadianMalarticCorporationandSylvieLampron,P.Eng.,PrincipalEngineeratCanadianMalarticCorporation;exploration–GuyGosselinEng.,Vice-President,Exploration;environmental–LouiseGrondinP.Eng.,SeniorVice-President,Environment,SustainableDevelopmentandPeople;miningoperations,SouthernBusiness–CarolPlummer,Eng.,VicePresident,ProjectDevelopment,SouthernBusiness;metallurgy–PaulCousin,P.Eng.,Vice-President,Metallurgy;miningoperations,Kittilamine–FrancisBrunet,P.Eng.,CorporateDirectorMining;miningoperations,Nunavut–DominiqueGirard,Eng.,Vice-President,NunavutOperations;andminingoperations,Quebecmines–ChristianProvencher,P.Eng.,Vice-President,Canada.TheCompany'smineralreservesestimatewasderivedfrominternallygenerateddataorgeologyreports.
Historically,mineralreservesandmineralresourcesforallpropertiesweretypicallyestimatedusinghistoricthree-yearaveragemetalspricesandforeignexchangeratesinaccordancewithSECguidelines.Theseguidelinesrequiretheuseofpricesthatreflectcurrenteconomicconditionsatthetimeofmineralreservedetermination,whichtheStaffoftheSEChasinterpretedtomeanhistoricthree-yearaverageprices.Giventhecurrentcommoditypriceenvironment,theCompanydecidedtousepriceassumptionsthatarebelowthethree-yearaveragesforits2014,2015and2016mineralreserveandmineralresourceestimates.
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Theassumptionsusedforthe2016mineralreservesandmineralresourcesestimateatallminesandadvancedprojectsreportedbytheCompany(otherthantheMeliadineproject,theCanadianMalarticmineandtheUpperBeaverproject)were$1,150perouncegold,$16.50perouncesilver,$0.95perpoundzinc,$2.15perpoundcopperandexchangeratesofC$1.20per$1.00,16.00Mexicanpesosper$1.00and$1.15per€1.00;provided,however,thatduetotheshorterremainingminelifefortheLapaandMeadowbankminesinCanada,andtheCrestonMascotadepositandSantoNinopitatthePinosAltosmineinMexico,theexchangeratesusedforthemineralreserveandmineralresourceestimatesatthesepropertieswereC$1.30per$1.00and16.00Mexicanpesosper$1.00(otherassumptionsunchanged).AttheMeliadineproject,theassumptionsremainedthesameasatDecember2015,whichwere$1,100perouncegoldandanexchangerateofC$1.16per$1.00.Theassumptionsusedforthe2016mineralreservesandmineralresourcesestimateattheCanadianMalarticmineandtheUpperBeaverprojectwere$1,200perouncegoldand$2.75perpoundcopper;acut-offgradeattheCanadianMalarticminebetween0.33g/tand0.37g/tgold(dependingonthedeposit);aC$125/tonnenetsmelterreturnfortheUpperBeaverproject;andanexchangerateofC$1.25per$1.00.
Theassumptionsusedforthe2015mineralreservesandmineralresourcesestimateatallminesandadvancedprojectsreportedbytheCompany(otherthantheCanadianMalarticmine)were$1,100perouncegold,$16.00perouncesilver,$0.90perpoundzinc,$2.50perpoundcopper,andexchangeratesofC$1.16per$1.00,$1.20per€1.00and14.00Mexicanpesosper$1.00forallminesandprojects(otherthantheLapaandMeadowbankminesandtheCrestonMascotadepositandSantoNiñoopenpitatPinosAltos).Duetoshorterminelife,theassumptionsusedforthemineralreserveestimatesattheshort-lifemines(theLapaandMeadowbankminesandtheCrestonMascotadepositandSantoNiñoopenpit)asofDecember31,2015,includethesamemetalpriceassumptions,andexchangeratesofC$1.30per$1.00and16.00Mexicanpesosper$1.00,respectively.Theassumptionsusedforthe2015mineralreservesandmineralresourcesestimateattheCanadianMalarticminewere$1,150perouncegold,acut-offgradebetween0.34gramspertonneand0.40gramspertonneofgold(dependingonthedeposit)andanexchangerateofC$1.24per$1.00.
Theassumptionsusedforthe2014mineralreservesandmineralresourcesestimateatallminesandadvancedprojectsreportedbytheCompany(otherthantheCanadianMalarticmine)were$1,150perouncegold,$18perouncesilver,$1.00perpoundzinc,$3.00perpoundcopperandexchangeratesofC$1.08per$1.00,13.00Mexicanpesosper$1.00and$1.30per€1.00.Theassumptionsusedforthe2014mineralreservesandmineralresourcesestimateattheCanadianMalarticminewere$1,300perouncegold,acut-offgradebetween0.28gramspertonneand0.35gramspertonneofgold(dependingonthedeposit)andanexchangerateofC$1.10per$1.00.Otherassumptionsusedforestimating2015and2014mineralreserveandmineralresourceinformationmaybefoundintheCompany'sannualfilingsinrespectoftheyearsendedDecember31,2015andDecember31,2014,respectively.
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SetoutbelowarethemineralreserveestimatesasofDecember31,2016,asestimatedinaccordancewithNI43-101(tonnagesandcontainedgoldquantitiesareroundedtothenearestthousand):
MINERAL RESERVES
OPERATIONS
PROVEN PROBABLE PROVEN & PROBABLE
GOLD OWNERSHIP 000tonnes g/t 000ozAu
000tonnes g/t 000ozAu 000tonnes g/t 000ozAu
LaRonde(underground) 100% 5,833 4.91 921 11,758 5.64 2,132 17,591 5.40 3,053 LaRondeZone5(underground) 100% 2,836 2.12 194 3,429 2.08 230 6,265 2.10 423 CanadianMalartic(openpit) 50% 25,560 0.95 785 76,274 1.13 2,764 101,834 1.08 3,548 Goldex(underground) 100% 294 1.47 14 16,507 1.64 872 16,801 1.64 886 AkasabaWest(openpit) 100% — — — 4,942 0.89 142 4,942 0.89 142 Lapa(underground) 100% 259 4.58 38 — — — 259 4.58 38 Meadowbank(openpit) 100% 1,704 1.75 96 6,515 2.94 615 8,219 2.69 711 Meliadine(openpit) 34 7.31 8 4,001 5.00 644 4,035 5.02 652 Meliadine(underground) — — — 10,494 8.20 2,766 10,494 8.20 2,766 Meliadine Total 100% 34 7.31 8 14,495 7.32 3,410 14,529 7.32 3,417 UpperBeaver(underground) 50% — — — 3,996 5.43 698 3,996 5.43 698 Kittila(underground) 100% 1,148 4.19 155 28,907 4.65 4,325 30,055 4.64 4,479 PinosAltos(openpit) 180 0.85 5 2,525 2.07 168 2,705 1.99 173 PinosAltos(underground) 3,331 2.79 299 11,364 2.61 953 14,696 2.65 1,251 Pinos Altos Total 100% 3,512 2.69 304 13,889 2.51 1,120 17,401 2.55 1,424 CrestonMascota(openpit) 100% 65 0.94 2 2,426 1.29 100 2,491 1.28 102 LaIndia(openpit) 100% 213 0.61 4 43,756 0.72 1,016 43,969 0.72 1,020 Total 41,458 1.89 2,520 226,895 2.39 17,423 268,353 2.31 19,943 SILVER OWNERSHIP 000tonnes g/t 000oz
Ag 000tonnes g/t 000ozAg 000tonnes g/t 000ozAg
LaRonde(underground) 100% 5,833 18.31 3,434 11,758 19.56 7,393 17,591 19.14 10,827 PinosAltos(openpit) 180 67.77 393 2,525 59.81 4,856 2,705 60.34 5,249 PinosAltos(underground) 3,331 75.26 8,061 11,364 67.92 24,817 14,696 69.59 32,878 Pinos Altos Total 100% 3,512 74.88 8,454 13,889 66.45 29,673 17,401 68.15 38,127 CrestonMascota(openpit) 100% 65 8.07 17 2,426 11.44 892 2,491 11.35 909 LaIndia(openpit) 100% 213 14.67 100 43,756 2.57 3,615 43,969 2.63 3,716 Total — — 12,006 — — 41,573 — — 53,579 COPPER OWNERSHIP 000tonnes % tonnes
Cu 000tonnes % tonnesCu 000tonnes % tonnesCu
LaRonde(underground) 100% 5,833 0.24 13,736 11,758 0.24 28,589 17,591 0.24 42,325 AkasabaWest(openpit) 100% — — — 4,942 0.50 24,851 4,942 0.50 24,851 UpperBeaver(underground) 50% — — — 3,996 0.25 9,990 Total — — 13,736 — — 63,430 — — 77,166 ZINC OWNERSHIP 000tonnes % tonnes
Zn 000tonnes % tonnesZn 000tonnes % tonnesZn
LaRonde(underground) 100% 5,833 0.41 23,706 11,758 1.10 128,864 17,591 0.87 152,569 Total — — 23,706 — — 128,864 — — 152,569
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MINERAL RESOURCES
OPERATIONS
MEASURED INDICATED MEASURED ANDINDICATED
INFERRED
GOLD OWNERSHIP 000tonnes g/t 000ozAu
000tonnes g/t 000ozAu
000tonnes g/t 000ozAu
000tonnes g/t 000ozAu
LaRonde(underground) 100% — — — 5,688 3.27 598 5,688 3.27 598 7,701 6.68 1,655LaRondeZone5(underground) 100% — — — 8,897 2.49 712 8,897 2.49 712 2,873 5.28 488Ellison(underground) 100% — — — 653 3.25 68 653 3.25 68 2,346 3.41 257CanadianMalartic(openpit) 50% 2,001 1.34 86 11,121 1.56 559 13,122 1.53 644 4,599 1.46 216Odyssey(underground) 50% — — — — — — — — — 10,343 2.15 714Goldex(underground) 100% 12,360 1.86 739 17,949 1.80 1,038 30,309 1.82 1,777 21,882 1.60 1,129AkasabaWest(openpit) 100% — — — 2,484 0.66 53 2,484 0.66 53 — — —Lapa(underground) 100% 85 5.29 14 693 4.09 91 778 4.22 105 652 7.55 158Zulapa(openpit) 100% — — — — — — — — — 391 3.14 39Swanson(openpit) 100% — — — 504 1.93 31 504 1.93 31 — — —Meadowbank(openpit) 100% 587 1.00 19 3,099 2.28 227 3,686 2.07 246 1,142 3.13 115 Amaruq(openpit) — — — 16,925 3.88 2,109 16,925 3.88 2,109 4,931 4.81 763 Amaruq(underground) — — — — — — — — — 6,814 6.22 1,362Amaruq Total 100% — — — 16,925 3.88 2,109 16,925 3.88 2,109 11,745 5.63 2,125 Meliadine(openpit) — — — 7,867 4.24 1,072 7,867 4.24 1,072 1,054 5.35 181 Meliadine(underground) — — — 12,911 5.38 2,234 12,911 5.38 2,234 13,656 7.68 3,371Meliadine Total 100% — — — 20,778 4.95 3,306 20,778 4.95 3,306 14,710 7.51 3,552HammondReef(openpit) 50% 82,831 0.70 1,862 21,377 0.57 389 104,208 0.67 2,251 251 0.74 6UpperBeaver(underground) 50% — — — 1,818 3.45 202 1,818 3.45 202 4,344 5.07 708AK(underground) 50% — — — 634 6.51 133 634 6.51 133 1,187 5.32 203Anoki/McBean(underground) 50% — — — 934 5.33 160 934 5.33 160 1,263 4.70 191 Kittila(openpit) — — — 229 3.41 25 229 3.41 25 373 3.89 47 Kittila(underground) 1,607 2.45 127 18,885 2.95 1,794 20,492 2.91 1,920 10,686 4.06 1,395Kittila Total 100% 1,607 2.45 127 19,114 2.96 1,819 20,721 2.92 1,946 11,059 4.05 1,442Kuotko,Finland(openpit) 100% — — — — — — — — — 396 2.88 37Kylmäkangas,Finland(underground)
100% — — — — — — — — — 1,896 4.11 250
Barsele,Sweden(openpit) 4,057 1.02 133
Barsele,Sweden(underground)
7,887 2.08 528
Barsele Total 55% 11,944 1.72 661 PinosAltos(openpit) — — — 236 1.07 8 236 1.07 8 5,984 0.61 117 PinosAltos(underground) — — — 13,751 1.63 721 13,751 1.63 721 3,241 2.52 262Pinos Altos Total 100% — — — 13,988 1.62 730 13,988 1.62 730 9,225 1.28 380CrestonMascota(openpit) 100% — — — 4,292 1.01 139 4,292 1.01 139 1,332 0.72 31LaIndia(openpit) 100% 11,127 0.24 85 63,081 0.39 783 74,208 0.36 869 92,631 0.38 1,132ElBarqueno(openpit) 100% — — — 8,469 1.11 301 8,469 1.11 301 7,210 1.56 362Total 110,598 0.82 2,933 222,497 1.88 13,446 333,095 1.53 16,378 221,119 2.23 15,850 SILVER OWNERSHIP 000tonnes g/t 000oz
Ag 000tonnes g/t 000oz
Ag 000tonnes g/t 000oz
Ag 000tonnes g/t 000oz
Ag
LaRonde(underground) 100% — — — 5,688 20.51 3,751 5,688 20.51 3,751 7,701 14.48 3,584Kylmäkangas,Finland(underground)
100% — — — — — — — — — 1,896 31.11 1,896
PinosAltos(openpit) — — — 236 20.40 155 236 20.40 155 5,984 20.94 4,029 PinosAltos(underground) — — — 13,751 40.57 17,935 13,751 40.57 17,935 3,241 41.87 4,363Pinos Altos Total 100% — — — 13,988 40.22 18,090 13,988 40.22 18,090 9,225 28.30 8,392CrestonMascota(openpit) 100% — — — 4,292 16.98 2,343 4,292 16.98 2,343 1,332 11.54 494LaIndia(openpit) 100% 11,127 2.37 847 63,081 0.70 1,421 74,208 0.95 2,267 92,631 0.39 1,153ElBarqueno(openpit) 100% — — — 8,469 4.35 1,183 8,469 4.35 1,183 7,210 4.50 1,043Total — — 847 — — 26,787 — — 27,634 — — 16,561 COPPER OWNERSHIP 000tonnes % tonnes
Cu 000tonnes % tonnes
Cu 000tonnes % tonnes
Cu 000tonnes % tonnes
Cu
LaRonde(underground) 100% — — — 5,688 0.21 11,676 5,688 0.21 11,676 7,701 0.25 19,589AkasabaWest(openpit) 100% — — — 2,484 0.40 9,941 2,484 0.40 9,941 — — —UpperBeaver(underground) 50% — — — 1,818 0.14 2,567 1,818 0.14 2,567 4,344 0.20 8,642Total — — — — — 24,184 — — 24,184 — — 28,231 ZINC OWNERSHIP 000tonnes % tonnes
Zn 000tonnes % tonnes
Zn 000tonnes % tonnes
Zn 000tonnes % tonnes
Zn
LaRonde(underground) 100% — — — 5,688 0.93 52,850 5,688 0.93 52,850 7,701 0.60 46,358Total — — — — — 52,850 — — 52,850 — — 46,358
InthetablesaboveandbelowsettingoutmineralreserveinformationabouttheCompany'smineralprojects,andelsewhereinthisAIF,thetotalcontainedgoldouncesstateddonotincludeequivalentgoldouncesforby-productmetalscontainedinthemineralreserve.Mineralreservesarenotasubsetofmineralresources.Tonnageamountsandcontainedmetalamountspresentedinthesetableshavebeenroundedtothenearestthousand,soaggregateamountsmaydifferfromcolumntotals.TheCanadianMalarticmineandUpperBeaverprojectmineralreserveandmineralresourceestimatesrepresentAgnicoEagle's50%interestintheproperties.ForallmineralreservesandmineralresourcesotherthaninferredmineralresourcesandmineralreservesandmineralresourcesheldbyCanadianMalarticCorporationandthePartnership,thereportedmetalgradesintheestimatesreflectdilutionafterminingrecovery.ForthemineralreservesandmineralresourcesattheCanadianMalarticmineandthe
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UpperBeaverproject,thereportedmetalgradesinthe
74 AGNICO EAGLE ANNUAL INFORMATION FORM
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estimatesofthemeasuredandindicatedmineralresourcesdonotreflectdilutionafterminingrecovery.ThemineralreserveandmineralresourcefigurespresentedinthisAIFareestimates,andnoassurancecanbegiventhattheanticipatedtonnagesandgradeswillbeachievedorthattheindicatedlevelofrecoverywillberealized.
TheintegrityandvalidityofthescientificandtechnicalinformationinthisAIFhasbeenverifiedbyQualifiedPersonsasdefinedbyNI43-101.Thisincludesthesamplingmethods,qualitycontrolmeasures,securitymeasurestakentoensurethevalidityandintegrityofsamplestaken,assayingandanalyticalproceduresandqualitycontrolmeasuresanddataverificationprocedures.ThemethodsusedbytheCompanyfollowtheCanadianInstituteofMining,MetallurgyandPetroleum("CIM")BestPracticeGuidelinesforExplorationandforEstimationofMineralResourcesandMineralReservesandindustrypractices.SamplepreparationandanalysesareconductedbyexternallaboratoriesthatareindependentoftheCompany.
TheCompanycarriesoutmineralprocessingandmetallurgicaltestingateachofitsminesandexplorationprojectswithmineralreservesandindicatedmineralresources.ThetestingisdoneinaccordancewithinternalCompanyprotocolsandgoodmineralprocessingpractices.Therearenoknownprocessingfactorsordeleteriouselementsthatareexpectedtohaveasignificanteffectontheeconomicextraction,orpotentialeconomicextraction,ofgoldattheCompany'sminesoradvancedexplorationprojects.
AGNICO EAGLE 75 ANNUAL INFORMATION FORM
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MineralReservesandMineralResources
NorthernBusiness
LaRonde Mine Mineral Reserves and Mineral Resources
As at December 31, 2016 2015 2014
LaRonde Extension Orebody (below Level 245)
Provenmineralreserves–tonnes 5,354,000 2,845,000 3,600,000
Averagegrade–goldgramspertonne 5.16 4.43 4.03
Probablemineralreserves–tonnes 11,686,000 14,706,000 16,000,000
Averagegrade–goldgramspertonne 5.66 5.61 5.61
LaRonde Orebody (above Level 245)
Provenmineralreserves–tonnes 479,000 610,000 900,000
Averagegrade–goldgramspertonne 2.14 2.50 2.65
Probablemineralreserves–tonnes 71,000 59,000 100,000
Averagegrade–goldgramspertonne 1.97 1.77 1.84
Total proven and probable mineral reserves – tonnes 17,591,000 18,220,000 20,532,000
Average grade – gold grams per tonne 5.40 5.31 5.20
Total contained gold ounces 3,053,000 3,109,000 3,432,000
Notes:
(1) The2016provenandprobablemineralreserveestimatessetoutinthetableabovearebasedonanetsmelterreturncut-offvalueoftheorethatvariesbetweenC$106pertonneandC$118pertonnedependingonthedeposit.TheCompany'shistoricalmetallurgicalrecoveryratesattheLaRondeminefromJanuary1,2011toDecember31,2016averaged92.7%forgold,86.2%forsilver,77.8%forzincand81.7%forcopper.SinceMay2013,whenthepreciousmetalscircuitwasupgradedtocarbon-in-pulptechnology,themetallurgicalrecoveryratestoDecember31,2016haveaveraged94.8%forgold,85.8%forsilver,71.5%forzinc,84.7%forcopperand0%forlead(leadhasnotbeenrecoveredsinceMay2013).ThehistoricalmetallurgicalrecoveryrateforleadfromJanuary1,2011toMay31,2013was18.7%.TheCompanyestimatesthata$100(9%)changeinthegoldpricewouldresultinanapproximate1%changeinmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,theLaRondeminecontainedindicatedmineralresourcesof5,688,000tonnesgrading3.27gramsofgoldpertonneandinferredmineralresourcesof7,701,000tonnesgrading6.68gramsofgoldpertonne.Goldcut-offgradesusedformineralresourceestimateswerefixedat75%oftheapplicablemineralreservecut-offgrade.
(3) Thefollowingtablesetsoutthereconciliationofmineralreserves(roundedtothenearestthousandtonnes)attheLaRondeminebycategoryatDecember31,2016withthoseatDecember31,2015.Revisionindicatesadditionalmineralreservesconvertedfrommineralresourcesorothercategoriesofmineralreservesandmineralreservesaddedfromexplorationactivitiesduring2016.
Proven Probable Total
December31,2015 3,455 14,765 18,220
Processedin2016 2,240 – 2,240
Revision 4,618 (3,007) 1,611
December 31, 2016 5,833 11,758 17,591
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(4) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtotheLaRondeminemaybefoundintheTechnicalReportonthe2005LaRondeMineralResource&MineralReserveEstimatefiledwithCanadiansecuritiesregulatoryauthoritiesonSEDARonMarch23,2005andauthoredbyGuyGosselin,Eng.
76 AGNICO EAGLE ANNUAL INFORMATION FORM
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Lapa Mine Mineral Reserves and Mineral Resources
As at December 31, 2016 2015 2014
Gold
Provenmineralreserves–tonnes 259,000 444,000 832,000
Averagegrade–goldgramspertonne 4.58 5.49 5.87
Probablemineralreserves–tonnes – – 74,000
Averagegrade–goldgramspertonne – – 5.50
Total proven and probable mineral reserves – tonnes 259,000 444,000 907,000
Average grade – gold grams per tonne 4.58 5.49 5.84
Total contained gold ounces 38,000 78,000 170,000
Notes:
(1) The2016provenandprobablemineralreserveestimatessetoutinthetableabovewereestimatedusinganassumedmetallurgicalgoldrecoveryof84.8%andacut-offgradeof3.3gramsofgoldpertonne,and.TheoperatingcostpertonneestimatefortheLapaminein2016wasC$134.13.TheCompanyestimatesthata$100(9%)increaseordecreaseinthegoldpricewouldresultinanapproximate235%increaseor76%decrease,respectively,inmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,theLapaminecontainedmeasuredmineralresourcesof85,000tonnesgrading5.29gramsofgoldpertonne,indicatedmineralresourcesof693,000tonnesgrading4.09gramsofgoldpertonneandinferredmineralresourcesof652,000tonnesgrading7.55gramsofgoldpertonne.Themineralresourceswereestimatedusinganassumedmetallurgicalgoldrecoveryof73.9%andacut-offgradeof2.8gramsofgoldpertonne.Goldcut-offgradesusedformineralresourceestimateswerefixedat75%oftheapplicablemineralreservecut-offgrade.
(3) Thefollowingtablesetsoutthereconciliationofmineralreserves(roundedtothenearestthousandtonnes)attheLapaminebycategoryatDecember31,2016withthoseatDecember31,2015.Revisionindicatesadditionalmineralreservesconvertedfrommineralresourcesorothercategoriesofmineralreservesandmineralreservesaddedfromexplorationactivitiesduring2016.
Proven Probable Total
December31,2015 444 – 444
Processedin2016 593 – 593
Revision 408 – 408
December 31, 2016 259 – 259
(4) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtotheLapaminemaybefoundintheTechnicalReportontheLapaGoldProject,CadillacTownship,Quebec,CanadafiledwithCanadiansecuritiesregulatoryauthoritiesonSEDARonJune8,2006.
AGNICO EAGLE 77 ANNUAL INFORMATION FORM
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Goldex Mine Mineral Reserves and Mineral Resources
As at December 31, 2016 2015 2014
Gold
Provenmineralreserves–tonnes 294,000 300,000 203,000
Averagegrade–goldgramspertonne 1.47 1.54 1.70
Probablemineralreserves–tonnes 16,507,000 12,644,000 6,893,000
Averagegrade–goldgramspertonne 1.64 1.61 1.49
Total proven and probable mineral reserves – tonnes 16,801,000 12,944,000 7,096,000
Average grade – gold grams per tonne 1.64 1.61 1.49
Total contained gold ounces 886,000 668,000 340,000
Notes:
(1) The2016provenandprobablemineralreserveestimatessetoutinthetableabovewereestimatedusinganassumedmetallurgicalgoldrecoveryof88%.AsofDecember31,2016,theoperatingcostspertonnewereestimatedtobeC$38.18fortheEZoneandC$36.68fortheMZone.Thecut-offgradeusedformineralreserveswas1.0gramsofgoldpertonne.TheCompanyestimatesthata$100(9%)changeinthegoldpricewouldresultinanapproximate1%changeinmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,theGoldexminecontainedmeasuredmineralresourcesof12,360,000tonnesgrading1.86gramsofgoldpertonne,indicatedmineralresourcesof17,949,000tonnesgrading1.80gramsofgoldpertonneandinferredmineralresourcesof21,882,000tonnesgrading1.60gramsofgoldpertonne.Goldcut-offgradesusedformineralresourceestimateswerefixedat75%oftheapplicablemineralreservecut-offgrade.
(3) Thefollowingtablesetsoutthereconciliationofmineralreserves(roundedtothenearestthousandtonnes)attheGoldexminebycategoryatDecember31,2016withthoseatDecember31,2015.Revisionindicatesadditionalmineralreservesconvertedfrommineralresourcesorothercategoriesofmineralreservesandmineralreservesaddedfromexplorationactivitiesduring2016.
Proven Probable Total
December31,2015 300 12,644 12,944
Processedin2016 2,545 – 2,545
Revision 2,539 3,863 6,402
December 31, 2016 294 16,507 16,801
(4) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtotheGoldexminemaybefoundintheTechnicalReportonProductionoftheMandEZonesatGoldexMinedatedOctober14,2012filedwiththeCanadiansecuritiesregulatoryauthoritiesonSEDARonNovember1,2012,authoredbyRichardGenest,P.Geo.,Eng.,Jean-FrançoisLagueux,Eng.,FrançoisRobichaud,Eng.andSylvainBoily,Eng.
78 AGNICO EAGLE ANNUAL INFORMATION FORM
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Canadian Malartic Mineral Reserves and Mineral Resources (Agnico Eagle's 50% Interest)
As at December 31, 2016 2015 2014
Gold
Provenmineralreserves–tonnes 25,560,000 27,446,000 24,969,000
Averagegrade–goldgramspertonne 0.95 0.97 0.92
Probablemineralreserves–tonnes 76,274,000 83,320,000 101,978,000
Averagegrade–goldgramspertonne 1.13 1.12 1.10
Total proven and probable mineral reserves – tonnes 101,834,000 110,766,000 126,947,000
Average grade – gold grams per tonne 1.08 1.08 1.06
Total contained gold ounces 3,548,000 3,863,000 4,329,000
Notes:
(1) TheCanadianMalarticpropertyisownedbythePartnership,inwhichtheCompanyholdsanindirect50%interest,withtheremaining50%interestheldindirectlybyYamana.The2016provenandprobablemineralreservessetoutinthetableabovewereestimatedusinganassumedmetallurgicalgoldrecoveryofbetween89%and96.5%andacut-offgradefrom0.33to0.37gramsofgoldpertonne,dependingonthedeposit.TheoperatingcostpertonneestimatefortheCanadianMalarticmineasofDecember31,2016wasC$9.67pertonneforCanadianMalarticandtheBarnatdepositandC$10.29pertonnefortheJeffreydeposit.TheCompanyestimatesthata$120(10%)increaseinthegoldpricewouldresultinanapproximate3%increaseinmineralreserves,whilea$120(10%)decreaseinthegoldpricewouldresultinanapproximate4%decreaseinmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,theCanadianMalarticmine(AgnicoEagle's50%interest)containedmeasuredmineralresourcesof2,001,000tonnesgrading1.34gramsofgoldpertonne,indicatedmineralresourcesof11,121,000tonnesgrading1.56gramsofgoldpertonneandinferredmineralresourcesof14,941,000tonnesgrading1.93gramsofgoldpertonne(includingtheOdysseyZoneinferredmineralresources).Goldcut-offgradesusedformineralresourceestimateswerefixedat100%oftheapplicablemineralreservecut-offgradeinpitand1.0gramsofgoldpertonneformineralresourcesbelowpit.
(3) Thefollowingtablesetsoutthereconciliationofmineralreserves(innearestthousandtonnes)attheCanadianMalarticminebycategoryatDecember31,2016withthoseatDecember31,2015,statingAgnicoEagle's50%interest.Revisionindicatesadditionalmineralreservesconvertedfrommineralresourcesduring2016.
Proven Probable Total
December31,2015 27,446 83,320 110,766
Processedin2016 9,821 – 9,821
Revision 7,935 (7,046) 889
December 31, 2016 25,560 76,274 101,834
(4) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtotheCanadianMalarticminemaybefoundintheTechnicalReportontheMineralResourceandMineralReserveEstimatesfortheCanadianMalarticPropertydatedJune16,2014,filedwithCanadiansecuritiesregulatoryauthoritiesonSEDARonAugust13,2014,authoredbyDonaldGervais,P.Geo.,ChristianRoy,Eng.,AlainThibault,Eng.,CarlPednault,Eng.andDanielDoucet,Eng.
AGNICO EAGLE 79 ANNUAL INFORMATION FORM
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Kittila Mine Mineral Reserves and Mineral Resources
As at December 31, 2016 2015 2014
Gold
Provenmineralreserves–tonnes 1,148,000 1,059,000 921,000
Averagegrade–goldgramspertonne 4.19 4.28 4.41
Probablemineralreserves–tonnes 28,907,000 27,136,000 27,614,000
Averagegrade–goldgramspertonne 4.65 4.82 4.95
Total proven and probable mineral reserves – tonnes 30,055,000 28,195,000 28,535,000
Average grade – gold grams per tonne 4.64 4.80 4.93
Total contained gold ounces 4,479,000 4,353,000 4,524,000
Notes:
(1) The2016provenandprobablemineralreservessetoutinthetableabovewereestimatedusingametallurgicalgoldrecoveryof86.1%.Goldcut-offgradesusedwerebetween2.7gramspertonneand2.9gramspertonne,diluted),dependingonthedeposit,forundergroundmineralreserves.Theopenpitoperatingcostwasestimatedtobe€49.55pertonneatDecember31,2016,whiletheundergroundoperatingcostwasestimatedbetween€71.96to€79.64pertonneatDecember31,2016.TheCompanyestimatesthata$100(9%)increaseordecreaseinthegoldpricewouldresultinanapproximate11%increaseor6%decrease,respectively,inmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,theKittilaminecontainedmeasuredmineralresourcesof1,607,000tonnesgrading2.45gramsofgoldpertonne,indicatedmineralresourcesof19,114,000tonnesgrading2.96gramsofgoldpertonneandinferredmineralresourcesof11,059,000tonnesgrading4.05gramsofgoldpertonne.Goldcut-offgradesusedformineralresourceestimateswerefixedat75%oftheapplicablemineralreservecut-offgrade.
(3) Thefollowingtablesetsoutthereconciliationofmineralreserves(innearestthousandtonnes)attheKittilaminebycategoryatDecember31,2016withthoseatDecember31,2015.Revisionindicatesadditionalmineralreservesconvertedfrommineralresourcesorothercategoriesofmineralreservesandmineralreservesaddedfromexplorationactivitiesduring2016.
Proven Probable Total
December31,2015 1,059 27,136 28,195
Processedin2016 1,667 – 1,667
Revision 1,756 1,771 3,527
December 31, 2016 1,148 28,907 30,055
(4) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtotheKittilaminemaybefoundintheTechnicalReportontheDecember31,2009,MineralResourceandMineralReserveEstimateandtheSuuriExtensionProject,KittilaMine,Finland,filedwiththeCanadiansecuritiesregulatoryauthoritiesonSEDARonMarch4,2010,authoredbyDanielDoucet,Eng.,DominiqueGirard,Eng.,LouiseGrondin,P.Eng.,andPierreMatte,Eng.
80 AGNICO EAGLE ANNUAL INFORMATION FORM
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Meadowbank Mine Mineral Reserves and Mineral Resources
As at December 31, 2016 2015 2014
Gold
Provenmineralreserves–tonnes 1,704,000 1,203,000 1,090,000
Averagegrade–goldgramspertonne 1.75 1.51 1.50
Probablemineralreserves–tonnes 6,515,000 9,586,000 10,705,000
Averagegrade–goldgramspertonne 2.94 2.87 3.24
Total proven and probable mineral reserves – tonnes 8,219,000 10,789,000 11,795,000
Average grade – gold grams per tonne 2.69 2.72 3.08
Total contained gold ounces 711,000 943,000 1,168,000
Notes:
(1) The2016provenandprobablemineralreserveestimatessetoutinthetableabovewereestimatedusingacut-offgradethatusedametallurgicalgoldrecoveryof90.5%or95.5%,dependingonthedeposit.Thecut-offgradeusedformineralreservesvariedfrom1.2gramsofgoldpertonneto1.3gramsofgoldpertonne,dependingonthedeposit,andis1.26to1.15gramsofgoldpertonneasamarginalcut-offgrade,dependingonthedeposit.TheoperatingcostsusedforthemineralreserveestimateasofDecember31,2016variedbetweenC$54.67pertonneandC$55.58pertonne,dependingonthedeposit,includinganadditionalhaulagecostofC$0.91pertonneforVaultdepositmineralreserves.TheCompanyestimatesthata$100(9%)increaseordecreaseinthegoldpricewouldresultinanapproximate1%increaseor2%decrease,respectively,inmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,theMeadowbankmine(notincludingtheAmaruqdeposit)containedmeasuredmineralresourcesof587,000tonnesgrading1.00gramsofgoldpertonne,indicatedmineralresourcesof3,099,000tonnesgrading2.28gramsofgoldpertonneandinferredmineralresourcesof1,142,000tonnesgrading3.13gramsofgoldpertonne.Goldcut-offgradesusedformineralresourceestimateswerefixedat75%oftheapplicablemineralreservecut-offgrade.
(3) Thefollowingtablesetsoutthereconciliationofmineralreserves(roundedtothenearestthousandtonnes)attheMeadowbankminebycategoryatDecember31,2016withthoseatDecember31,2015.Revisionindicatesadditionalmineralreservesconvertedfrommineralresourcesorothercategoriesofmineralreserves,anupdatetomineralreservesbasedonchangedmineplans,andmineralreservesaddedfromexplorationactivitiesduring2016.
Proven Probable Total
December31,2015 1,203 9,586 10,789
Processedin2016 3,915 – 3,915
Revision 4,416 (3,071) 1,345
December 31, 2016 1,704 6,515 8,219
(4) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtotheMeadowbankminemaybefoundintheTechnicalReportontheMineralResourcesandMineralReservesatMeadowbankGoldMine,Nunavut,CanadaasatDecember31,2011filedwithCanadiansecuritiesregulatoryauthoritiesonSEDARonMarch23,2012,authoredbyMarcRuel,P.Geo.,AlexProulx,Eng.,PathiesNawejMuteb,Eng.andLarryConnell,P.Eng.
AGNICO EAGLE 81 ANNUAL INFORMATION FORM
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Meliadine Project Mineral Reserves and Mineral Resources
As at December 31, 2016 2015 2014
Gold
Provenmineralreserves–tonnes 34,000 34,000 34,000
Averagegrade–goldgramspertonne 7.31 7.31 7.31
Probablemineralreserves–tonnes 14,495,000 14,495,000 13,910,000
Averagegrade–goldgramspertonne 7.32 7.32 7.44
Total proven and probable mineral reserves – tonnes 14,529,000 14,529,000 13,944,000
Average grade – gold grams per tonne 7.32 7.32 7.44
Total contained gold ounces 3,417,000 3,417,000 3,335,000
Notes:
(1) The2016provenandprobablemineralreservessetoutinthetableabovewereestimatedusingmetallurgicalgoldrecoverycurvesfortheTiriganiaqandWesmegdeposits.Thecurvesgiveamaximumrecoveryof96.5%forTiriganiaqandWesmeg.FortheTiriganiaqandWesmegdeposits,thecut-offgradeusedfortheopenpitmineralreserveswas2.50gramsofgoldpertonne,undiluted(1.76gramsofgoldpertonne,diluted),andthecut-offgradeusedtodeterminetheundergroundmineralreserveswas6.07gramsofgoldpertonne,undiluted(4.67gramsofgoldpertonne,diluted).TheestimatedoperatingcostusedforthemineralreserveestimateasofDecember31,2016wasC$81.97pertonneforopenpitandC$176.44pertonneforunderground.TheCompanyestimatesthata$100(9%)increaseordecreaseinthegoldpricewouldresultinanapproximate5%increaseor7%decrease,respectively,inmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,theMeliadineprojectcontainedindicatedmineralresourcesof20,778,000tonnesgrading4.95gramsofgoldpertonneandinferredmineralresourcesof14,710,000tonnesgrading7.51gramsofgoldpertonne.The2016mineralresourcesattheTiriganiaq-Normeg-Wesmeg,FZone,Pump,DiscoveryandWolfdepositswereestimatedusingafixedmetallurgicalgoldrecoveryof91.1%,91.0%,86.9%,93.5%and94.3%,respectively,foropenpitmineralresources,and93.4%,91.7%,90.0%,95.5%and95.7%,respectively,forundergroundmineralresources.Goldcut-offgradesusedformineralresourceestimateswerefixedat75%oftheapplicablemineralreservecut-offgradeforundergroundresourceestimatesandat100%oftheapplicablereservemarginalcut-offgradeforopenpitmineralresourceestimates.
(3) ThebreakdownofopenpitandundergroundmineralreservesattheMeliadineproject(withtonnageandcontainedouncesroundedtothenearestthousand)atDecember31,2016is:
Category Mining Method Tonnes
Gold Grade
(g/t)
Contained Gold (oz)
Provenmineralreserves Openpitstockpile 34,000 7.31 8,000
Probablemineralreserves Openpit 4,001,000 5.00 644,000
Probablemineralreserves Underground 10,494,000 8.20 2,766,000
Total probable mineral reserves 14,495,000 7.32 3,410,000
Total proven and probable mineral reserves 14,529,000 7.32 3,417,000
(4) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtotheMeliadineprojectmaybefoundintheUpdatedTechnicalReportontheMeliadineGoldProject,Nunavut,CanadadatedFebruary11,2015,filedwithCanadiansecuritiesregulatoryauthoritiesonMarch12,2015,authoredbyJulieLarouche,P.Geo.,DenisCaron,Eng.,LarryConnell,P.Eng.,DanyLaflamme,Eng.,FrançoisRobichaud,Eng.,FrançoisPetrucci,P.Eng.andAlexandreProulx,Eng.
82 AGNICO EAGLE ANNUAL INFORMATION FORM
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SouthernBusiness
Pinos Altos Mine Mineral Reserves and Mineral Resources
As at December 31, 2016 2015 2014
Gold and Silver Provenmineralreserves–tonnes 3,512,000 2,769,000 2,441,000
Averagegoldgrade–gramspertonne 2.69 3.08 3.27
Averagesilvergrade–gramspertonne 74.88 82.51 86.27
Probablemineralreserves–tonnes 13,889,000 12,967,000 15,788,000
Averagegoldgrade–gramspertonne 2.51 2.84 2.97
Averagesilvergrade–gramspertonne 66.45 72.40 78.63
Total proven and probable mineral reserves – tonnes 17,401,000 15,736,000 18,230,000
Average gold grade – grams per tonne 2.55 2.88 3.01
Average silver grade – grams per tonne 68.15 74.18 79.65
Total contained gold ounces 1,424,000 1,459,000 1,763,000
Total contained silver ounces 38,127,000 37,531,000 46,682,000
Notes:
(1) The2016provenandprobablemineralreserveestimatessetoutinthetableaboveatthePinosAltosmine(excludingtheCrestonMascotadeposit)areestimatedbasedonanetsmelterreturncut-offvalueoftheopenpitorebetween$8.22pertonneand$26.03pertonne,dependingontheprocessingmethod,andanetsmelterreturncut-offvalueoftheundergroundoreof$57.21pertonne.Themetallurgicalgoldrecoveryusedinthereserveestimatesvariedbetween74%and96%,dependingonthedepositandtheprocessingmethod.Themetallurgicalsilverrecoveryusedinthereserveestimatesvariedbetween16%and90%,dependingonthedepositandtheprocessingmethod.TheCompanyestimatesthata$100(9%)changeinthegoldpricewouldresultinanapproximate0.2%changeinmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,thePinosAltosminecontainedindicatedmineralresourcesof13,988,000tonnesgrading1.62gramsofgoldpertonneand40.22gramsofsilverpertonneandinferredmineralresourcesof9,225,000tonnesgrading1.28gramsofgoldpertonneand28.30gramsofsilverpertonne.Goldcut-offgradesusedformineralresourceestimateswerefixedat75%oftheapplicablemineralreservecut-offgrade.
(3) ThebreakdownofopenpitandundergroundmineralreservesatthePinosAltosmine(withtonnageandcontainedouncesroundedtothenearestthousand)atDecember31,2016is:
Category Mining Method Tonnes
Gold Grade
(g/t)
Silver Grade
(g/t)
Contained Gold (oz)
Contained Silver
(oz)
Provenmineralreserves Openpitstockpile 180,000 0.85 67.77 5,000 393,000
Provenmineralreserves Underground 3,331,000 2.79 75.26 299,000 8,061,000
Total proven mineral reserves 3,512,000 2.69 74.88 304,000 8,454,000
Probablemineralreserves Openpit 2,525,000 2.07 59.81 168,000 4,856,000
Probablemineralreserves Underground 11,364,000 2.61 67.92 953,000 24,817,000
Total probable mineral reserves 13,889,000 2.51 66.45 1,120,000 29,673,000
Total proven and probable mineral reserves 17,401,000 2.55 68.15 1,424,000 38,127,000
AGNICO EAGLE 83 ANNUAL INFORMATION FORM
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(4) Thefollowingtablesetsoutthereconciliationofmineralreserves(innearestthousandtonnes)atthePinosAltosmine(excludingtheCrestonMascotadeposit)bycategoryatDecember31,2016withthoseatDecember31,2015.Revisionindicatesadditionalmineralreservesconvertedfrommineralresourcesorothercategoriesofmineralreservesandmineralreservesaddedfromexplorationactivitiesduring2016.
Proven Probable Total
December31,2015 2,769 12,967 15,736
Processedin2016 2,260 – 2,260
Revision 3,003 922 3,925
December 31, 2016 3,512 13,889 17,401
(5) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtothePinosAltosminemaybefoundinthePinosAltosGold-SilverMiningProject,ChihuahuaState,Mexico,TechnicalReportontheMineralResourcesandReservesasofDecember31,2008filedwiththeCanadiansecuritiesregulatoryauthoritiesonSEDARonMarch25,2009,authoredbyDyaneDuquette,P.Geo.,LouiseGrondin,P.Eng.,PierreMatte,Eng.andCamilPrince,Eng.
Creston Mascota Deposit at Pinos Altos Mineral Reserves and Mineral Resources
As at December 31, 2016 2015 2014
Gold and Silver Provenmineralreserves–tonnes 65,000 187,000 187,000
Averagegoldgrade–gramspertonne 0.94 0.68 0.76
Averagesilvergrade–gramspertonne 8.07 8.05 8.60
Probablemineralreserves–tonnes 2,426,000 4,026,000 5,657,000
Averagegoldgrade–gramspertonne 1.29 1.33 1.27
Averagesilvergrade–gramspertonne 11.44 12.21 13.63
Total proven and probable mineral reserves – tonnes 2,491,000 4,213,000 5,844,000
Average gold grade – grams per tonne 1.28 1.30 1.25
Average silver grade – grams per tonne 11.35 12.02 13.47
Total contained gold ounces 102,000 176,000 236,000
Total contained silver ounces 909,000 1,628,000 2,530,000
Notes:
(1) The2016provenandprobablemineralreserveestimatessetoutinthetableaboveattheCrestonMascotadepositatPinosAltosareestimatedbasedonanetsmelterreturncut-offvalueoftheopenpitoreof$10.22pertonne.Themetallurgicalgoldrecoveryusedinthereserveestimateswas63%.Themetallurgicalsilverrecoveryusedinthereserveestimateswas15%.TheCompanyestimatesthata$100(9%)increaseordecreaseinthegoldpricewouldresultinanapproximate1%increaseor4%decrease,respectively,inmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,theCrestonMascotadepositatPinosAltoscontainedindicatedmineralresourcesof4,292,000tonnesgrading1.01gramsofgoldpertonneand16.98gramsofsilverpertonneandinferredmineralresourcesof1,332,000tonnesgrading0.72gramsofgoldpertonneand11.54gramsofsilverpertonne.Goldcut-offgradesusedformineralresourceestimateswerefixedat75%oftheapplicablemineralreservecut-offgrade.
(3) Thefollowingtablesetsoutthereconciliationofmineralreserves(roundedtothenearestthousandtonnes)attheCrestonMascotadepositbycategoryatDecember31,2016withthoseatDecember31,2015.Revisionindicatesadditionalmineralreservesconvertedfrommineralresourcesorothercategoriesofmineralreservesandmineralreservesaddedfromexplorationactivitiesduring2016.
Proven Probable Total
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December31,2015 187 4,026 4,213
Processedin2016 2,119 – 2,119
Revision 1,997 (1,600) 397
December 31, 2016 65 2,426 2,491
(4) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtotheCrestonMascotadepositatPinosAltosmaybefoundinthePinosAltosGold-SilverMiningProject,ChihuahuaState,Mexico,TechnicalReportontheMineralResourcesandReservesasofDecember31,2008filedwiththeCanadiansecuritiesregulatoryauthoritiesonSEDARonMarch25,2009,authoredbyDyaneDuquette,P.Geo.,LouiseGrondin,P.Eng.,PierreMatte,Eng.andCamilPrince,Eng.
84 AGNICO EAGLE ANNUAL INFORMATION FORM
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La India Mine Mineral Reserves and Mineral Resources
As at December 31, 2016 2015 2014
Gold
Provenmineralreserves–tonnes 213,000 244,000 99,000
Averagegoldgrade–gramspertonne 0.61 0.68 0.53
Averagesilvergrade–gramspertonne 14.67 12.69 8.62
Probablemineralreserves–tonnes 43,756,000 29,743,000 24,783,000
Averagegoldgrade–gramspertonne 0.72 0.90 0.85
Averagesilvergrade–gramspertonne 2.57 4.16 6.06
Total proven and probable mineral reserves – tonnes 43,969,000 29,987,000 24,882,000
Average gold grade – grams per tonne 0.72 0.90 0.85
Average silver grade – grams per tonne 2.63 4.23 6.07
Total contained gold ounces 1,020,000 867,000 679,000
Total contained silver ounces 3,716,000 4,081,000 4,859,000
Notes:
(1) The2016provenandprobablemineralreserveestimatessetoutinthetableabovefortheLaIndiaminewereestimatedusinganaveragemetallurgicalgoldrecoveryof40%to89%dependingonthezone.Thecut-offgradeusedformineralreservesvarieddependingonthedepositfrom0.20gramsofgoldpertonneto0.40gramsofgoldpertonne.Marginalcut-offgradesvarieddependingondomainfrom0.13gramsofgoldpertonneto0.27gramsofgoldpertonne.TheestimatedoperatingcostusedforthemineralreserveestimateasofDecember31,2016was$6.15pertonne.TheCompanyestimatesthata$100(9%)increaseordecreaseinthegoldpricewouldresultinanapproximate6%increaseor14%decrease,respectively,inmineralreserves.
(2) Inadditiontothemineralreservessetoutabove,atDecember31,2016,theLaIndiamine(includingtheTarachideposit)containedmeasuredmineralresourcesof11,127,000tonnesgrading0.24gramsofgoldpertonneand2.37gramsofsilverpertonne,indicatedmineralresourcesof63,081,000tonnesgrading0.39gramsofgoldpertonneand0.70gramsofsilverpertonneandinferredmineralresourcesof92,631,000tonnesgrading0.38gramsofgoldpertonneand0.39gramsofsilverpertonne.Goldcut-offgradesusedformineralresourceestimateswerefixedat75%oftheapplicablemineralreservecut-offgrade.
(3) Thefollowingtableshowsthereconciliationofmineralreserves(roundedtothenearestthousandtonnes)attheLaIndiaminebycategoryatDecember31,2016withthoseatDecember31,2015.Revisionmeansadditionalmineralreservesconvertedfrommineralresourcesorothercategoriesofmineralreservesandmineralreservesaddedfromexplorationactivitiesandmetallurgicaltestingduring2016.
Proven Probable Total
December31,2015 244 29,743 29,987
Processedin2016 5,837 – 5,837
Revision 5,806 14,013 19,819
December 31, 2016 213 43,756 43,969
(4) Completeinformationontheverificationprocedures,thequalityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisAIFrelatingtotheLaIndiamineprojectmaybefoundintheTechnicalReportontheJune30,2012UpdateoftheMineralResourcesandMineralReserves,LaIndiaGoldProject,MunicipalityofSahuaripa,Sonora,Mexico,datedAugust31,2012,filedwiththeCanadiansecuritiesregulatoryauthoritiesonSEDARonOctober12,2012,authoredbyDanielDoucet,Eng.,TimHaldane,P.Eng.andMichelJulien,P.Eng.
Principal Products and Distribution
TheCompanyearnssubstantiallyallofitsrevenueandcashflowfromtheproductionandsaleofgoldinbothdorebarandconcentrateform.Theremainderofrevenueandcashflowisgeneratedfromtheproductionandsaleofby-productmetals,namelysilver,zincandcopper.ThegoldproducedbytheCompanyissoldinrefinedform,primarilyintheLondonspotmarket.TheCompanyisnotdependentonanyparticularpurchaserof
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itsprincipalproduct.
AGNICO EAGLE 85 ANNUAL INFORMATION FORM
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Employees
AsofDecember31,2016,theCompanyhad8,377employeescomprisedof5,223permanentemployees,2,550contractors,506temporaryemployeesand98students.Ofthepermanentemployees,819wereemployedattheLaRondemine,134attheLapamine,316attheGoldexmine,694attheCanadianMalarticmine(withanadditional24intheCanadianMalarticofficeandanadditional16attheKirklandLakeandHammondReefproperties)409attheKittilamine(withanadditional11attheFinnishexplorationgroup),718attheMeadowbankmine(includingoneattheBakerLakeofficeand29inQuebec),33attheMeliadineproject,1,007atthePinosAltosmine,256attheCrestonMascotadepositatPinosAltos,382attheLaIndiamine,90intheexplorationgroupinMexico,18attheregionalofficeinMexico,38intheexplorationgroupinCanadaandtheUnitedStates,135attheregionaltechnicalofficeinAbitibi,fourattheregionalofficeinTucson,fiveattheregionalofficeinSwedenand114atthecorporateheadofficeinToronto.ThenumberofpermanentemployeesoftheCompanyattheendof2016,2015and2014was5,223,5,093and5,187,respectively.
Competitive Conditions
Thepreciousmetalexplorationandminingbusinessisahighlycompetitivebusiness.TheCompanycompeteswithotherminingandexplorationcompaniesinconnectionwiththeacquisitionofminingclaimsandleases,thesourcingofrawmaterialsandsuppliesusedinconnectionwithminingoperationsandtherecruitmentandretentionofqualifiedemployees.
TheabilityoftheCompanytocontinueitsminingbusinessinthefuturewilldependnotonlyonitsabilitytodevelopitscurrentproperties,butalsoonitsabilitytoselectandacquiresuitableproducingpropertiesorprospectsforpreciousmetaldevelopmentorexploration.See"RiskFactors"foradescriptionofadditionalcompetitiveriskstheCompanyfaces.
Sustainable Development
In2016,theCompanycontinuedtheprocessofincorporatinghealth,safetyandenvironmentalsustainabilityintoallaspectsandstagesofitsbusiness,fromthecorporateobjectivesandexecutiveresponsibilityof'maintaininghighstandardsinsustainability'toexplorationandacquisitionactivities,daytodayoperatingandsiteclosure.Thisintegrationbeganin2012withtheadoptionofanintegratedHealth,Safety,EnvironmentandSocialAcceptabilityPolicy(the"SustainableDevelopmentPolicy")thatreflectstheCompany'scommitmenttoresponsibleminingpractices.TheCompanybelievesthattheSustainableDevelopmentPolicywillleadtotheachievementofmoresustainablepracticesthroughoversightandaccountability.
TheSustainableDevelopmentPolicyoperatesthroughthedevelopmentandimplementationofaformalandintegratedHealth,SafetyandEnvironmentalManagementSystem,termedtheResponsibleMiningManagementSystem(the"RMMS"),acrossalldivisionsoftheCompany.ThePartnershiphascommittedtoimplementingtheRMMSatCanadianMalarticinthefuture.TheaimoftheRMMSistopromoteacultureofaccountabilityandleadershipinmanaginghealth,safety,environmentalandsocialacceptabilitymatters.RMMSimplementationissupportedbysoftwarewidelyusedintheCanadianminingindustrythatisconsistentwiththeISO14001EnvironmentalManagementSystemandtheOHSAS18001HealthandSafetyManagementSystem.
TheRMMSincorporatestheCompany'scommitmentsasasignatorytotheCyanideCode,avoluntaryprogramthataddressesthesafeproduction,transport,storage,handlinganddisposalofcyanide.TheCompanybecameasignatorytotheCyanideCodeinSeptember2011.
TheRMMSalsointegratestherequirementsoftheMiningAssociationofCanada'sindustry-leadingTowardsSustainableMiningInitiative(the"TSMInitiative"),aswellastheGlobalReportingInitiative'ssustainabilityreportingguidelinesfortheminingindustry.InDecember2010,theCompanybecameamemberoftheMiningAssociationofCanadaandendorsedtheTSMInitiative.TheTSMInitiativewasdevelopedtohelpminingcompaniesevaluatethequality,comprehensivenessandrobustnessoftheirmanagementsystemsundersixperformanceelements:crisismanagement;energyandgreenhousegasemissionsmanagement;tailingsmanagement;biodiversityconservationmanagement;healthandsafety;andaboriginalrelationsandcommunityoutreach.
TheCompanyhasadoptedandimplementedtheWorldGoldCouncil'sConflict-FreeGoldStandard.ThisimplementationwasinitiatedonJanuary1,2013.
TheCompany'sSustainableDevelopmentPolicyisavailableontheCompany'swebsiteatwww.agnicoeagle.com. TheCanadianMalarticmine'ssustainabledevelopmentreportisavailableatitswebsite,www.canadianmalartic.com .
86 AGNICO EAGLE ANNUAL INFORMATION FORM
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Employee Health and Safety
TheCompany'soverallhealthandsafetyperformance,asmeasuredbyaccidentfrequency,improvedduring2016.Acombinedlost-timeandrestrictedworkaccidentfrequencyrate(excludingtheCanadianMalarticmine)of1.04wasachieved,a15%reductionfromthe2015rateof1.23andsubstantiallybelowthetargetrateof1.40.ThisisthebestcombinedaccidentfrequencyrateeverrecordedbytheCompany.Extensivehealthandsafetytrainingwasalsoprovidedtoemployeesduring2016.
OneofthemeasuresimplementedbytheCompanytoimprovesafetyperformanceistheworkplacesafetycardsystem.ThissystemwasimplementedacrossalloftheCompany'soperations,inCanadaandabroad,tostrengthentherisk-basedtrainingprogram.DevelopedbytheQuebecMiningAssociation(the"AMQ"),thesafetycardsystemteachesworkersandsupervisorstouserisk-basedthinkingintheirduties.Workersandtheirsupervisorsmustmeeteverydaytodiscusson-the-jobhealthandsafetymatters.ThesafetycardsystemalsoallowstheCompany'sworkersandsupervisorstodocumentdailyinspectionsandrecordobservationsonconditionsintheworkplace,aswellasthenatureofrisks,issuesandotherrelevantinformation.Inaddition,itallowssupervisorstoexchangeandanalyzeallrelevantinformationbetweenshiftsandvarioustechnicalservicestoimproveefficiencyandsafety.
In2016,theAMQacknowledgedtheCompany'sstrongperformanceintheareaofhealthandsafety,recognizing28oftheCompany'ssupervisorsfromtheLaRonde,LapaandGoldexminesforkeepingtheirworkerssafe.ThesupervisorsreceivedAMQsecuritytrophyawardsfor50,000ormorehourssupervisedwithoutalost-timeaccident.Together,thisgroupof28supervisorsachievedmorethan2,000,000hourssupervisedwithoutalost-timeaccidentforamemberoftheircrew.
EachoftheCompany'sminingoperationshasitsownEmergencyResponsePlanandhaspersonneltrainedtorespondtosafety,fireandenvironmentalemergencies.Eachminealsomaintainstheappropriateresponseequipment.In2014,thecorporatecrisismanagementplanwasupdatedtoalignwithindustrybestpracticesandtheTSMInitiativerequirements.Emergencyresponsesimulationswerealsoperformedatalldivisions.TheTSMInitiativealsocontainsaHealthandSafetyprotocol.
TheCanadianMalarticmine'scombinedaccidentfrequencyratein2016was1.4,comparedtoanobjectiveof1.2andthe2015rateof1.28.
Community
TheCompany'sgoal,ateachofitsoperationsworldwide,istohireasmuchofitsworkforceaspossible,includingmanagementteams,directlyfromthelocalregioninwhichtheoperationislocated.In2016,theoverallcompanyaverageforlocalhiringwas76%.TheCompanybelievesthatprovidingemploymentisoneofthemostsignificantcontributionsitcanmaketothecommunitiesinwhichitoperates.
TheCompanycontinueditseffortsincommunitydevelopmentagreementsinNunavut.In2015,theMeadowbankIIBAwasrenewedandtheMeliadineIIBAwassigned.In2016,theCompanycontinueditsdialoguewithFirstNationsintheAbitibiregion.ThePartnershiphasenteredintonegotiationswithFirstNationsaroundtheKirklandLakeprojectandhasalsoinitiatedadialoguewithFirstNationsintheAbitibiregion.
TheCanadianMalarticminecontinueditscontributiontotheeconomicdevelopmentfund(FEMO)whichwasestablishedpriortominedevelopmenttodiversifythelocaleconomythroughouttheminelifesothatthetownofMalarticiswellequippedtofacetheeventualmineclosure.TheCanadianMalarticminehasalsoparticipatedinforumsinitiatedbythetowncouncilonthefutureofthetownofMalartic.Approximately98%ofthehiringin2016attheCanadianMalarticminewasfromthelocalarea.
In2016,theCompanycontinueditssupportoftheKivalliqMineTrainingSocietyandfortheuniqueupwardmobilitytrainingprogramforInuitemployeesdevelopedatMeadowbank.ThisprogramprovidestrainingandcareerpathopportunitiesforInuitwithlimitededucationandworkexperienceintheareaofheavyequipmentoperations,milloperationsandsiteservices.SkillsacquiredthroughtheprogramareeasilytransferabletoothersectorsoftheNunavuteconomy.
Fortheeighthyearinarow,thePinosAltosminewascertifiedasaSociallyResponsibleCompanybytheMexicanCentreforPhilanthropy(CentroMexicanoparalaFilantropía)andtheAllianceforSocialResponsibilityofEnterprises(AlianzaporlaResponsabilidadSocialEmpresarialenMéxico).ThiscertificationrecognizestheexcellenceofthesocialresponsibilitypracticesatthePinosAltosmine.
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TheCompanycontinuestosupportanumberofcommunityhealthandeducationalinitiativesintheregionsurroundingthePinosAltosmine,includingtheestablishmentofalocalsewingcooperativeanddonatingmaterialfortheconstructionofnewclassroomsorfortherepairofexistingclassrooms.
TheCompany'sCodeofBusinessConductandEthicsPolicyisavailableontheCompany'swebsiteatwww.agnicoeagle.com .
Environmental Protection
TheCompany'sexplorationactivitiesandminingandprocessingoperationsaresubjecttothefederal,state,provincial,territorial,regionalandlocalenvironmentallawsandregulationsinthejurisdictionsinwhichtheCompany'sactivitiesandfacilitiesarelocated.Theseincluderequirementsforplanningandimplementingtheclosureandreclamationofminingpropertiesandrelatedfinancialassurance.Eachmineissubjecttoenvironmentalassessmentandpermittingprocessesduringdevelopmentand,inoperation,hasanenvironmentalmanagementsystemconsistentwithISO140001aswellasaninternalauditprogram.TheCompanyworkscloselywithregulatoryauthoritiesineachjurisdictionwhereitoperatestoensureongoingcompliance.
TheCompanyhasreportedgreenhousegasemissionsandclimatechangeriskfactorsannuallytotheCarbonDisclosureProjectsince2007.
In2015,EnvironmentCanadachargedtheCompanywithtwoinfractionsundertheFisheries Act inrelationtoaseepageincidentattheMeadowbankminethatwasidentifiedduringaJuly2013on-siteinspection.Monitoringdataindicatedthatthe2013seepageeventdidnotaffectthewaterqualityofthedownstreamSecondPortageLake.Discussionsareunderwaytoattempttoresolvethematterbut,ifunsuccessful,atrialwouldnotlikelyoccuruntil2018.
Withrespecttoactivitiesin2016,theCanadianMalarticminereceivedonenon-complianceblastnoticeandtennon-compliancenoisenotices(whichincludesnoticesreceivedininstanceswherenoiselevelswereotherwisewithinthemunicipalnoiselimits),adecreasefromthe25infractionsreceivedwithrespecttoactivitiesin2015.Themine'steamofon-siteenvironmentalexpertscontinuetomonitorregulatorycomplianceintermsofapprovals,permitsandobservanceofdirectivesandrequirementsandcontinuetoimplementimprovementmeasures.
TheCompany'stotalliabilityforreclamationandclosurecostobligationsatDecember31,2016was$296million(includingtheCompany'sshareoftheCanadianMalarticreclamationcosts)andtheCompany'sreclamationexpensesfortheyearendedDecember31,2016were$0.6million.Formoreinformationpleaseseenote13totheAnnualFinancialStatements.
TheCompany'sEnvironmentalPolicyisavailableontheCompany'swebsiteatwww.agnicoeagle.com .
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RISK FACTORS TheoperationsoftheCompanyarespeculativeduetothehigh-risknatureofitsbusiness,whichistheacquisition,financing,exploration,developmentandoperationofminingproperties.TheseriskfactorscouldmateriallyaffecttheCompany'sfinancialconditionand/orfutureoperatingresultsandcouldcauseactualeventstodiffermateriallyfromthosedescribedinforward-lookingstatementsrelatingtotheCompany.ThesearenottheonlyrisksanduncertaintiesthattheCompanyfaces.AdditionalrisksanduncertaintiesnotpresentlyknowntotheCompanyorthattheCompanycurrentlyconsidersimmaterialmayalsoimpairitsbusinessoperations.
TheCompany'sfinancialperformanceandresultsmayfluctuatewidelyduetovolatileandunpredictablecommodityprices.
TheCompany'searningsaredirectlyrelatedtocommodityprices,asrevenuesarederivedfromthesaleofgold,silver,zincandcopper.Goldprices,whichhavethegreatestimpactontheCompany'sfinancialperformance,fluctuatewidelyandareaffectedbynumerousfactors,includingcentralbankpurchasesandsales,producerhedgingandde-hedgingactivities,expectationsofinflation,investmentdemand,therelativeexchangerateoftheU.S.dollarwithothermajorcurrencies,interestrates,globalandregionaldemand,politicalandeconomicconditions,productioncostsinmajorgold-producingregions,speculativepositionstakenbyinvestorsortradersingoldandchangesinsupply,includingworldwideproductionlevels,allofwhicharebeyondtheCompany'scontrol.Theaggregateeffectofthesefactorsisimpossibletopredictwithaccuracy.Inaddition,thepriceofgoldhasonoccasionbeensubjecttoveryrapidshort-termchangesbecauseofspeculativeactivitiesorworldevents.FluctuationsingoldpricesmaymateriallyadverselyaffecttheCompany'sfinancialperformanceorresultsofoperations.IfthemarketpriceofgoldfallsbelowtheCompany'sall-insustainingcostsperounceofproductionatoneormoreofitsminesorprojectsatthattimeandremainssoforanysustainedperiod,theCompanymayexperiencelossesand/ormaycurtailorsuspendsomeorallofitsexploration,developmentandminingactivitiesatsuchminesorprojectsoratotherminesorprojects.Inaddition,suchfluctuationsmayrequirechangestothemineplans.TheCompany'scurrentmineplansandmineralreserveandmineralresourceestimatesarebasedonagoldpriceof$1,150perounce,otherthantheCanadianMalarticmine,theMeliadineprojectandtheUpperBeaverproject,wheremineralreservesandmineralresourcesarebasedongoldpricesof$1,200perounce,$1,100perounceand$1,200perounce,respectively(see"OperationsandProduction–MineralReservesandMineralResources–InformationonMineralReservesandMineralResourcesoftheCompany");ifthepriceofgoldfallsbelowsuchlevels,theminesmayberendereduneconomicandproductionmaybesuspended.Inaddition,lowergoldpricesmayrequirethemineplanstobechanged,whichmayresultinreducedproduction,highercoststhananticipated,orboth,andestimatesofmineralreservesandmineralresourcesmaybereduced.Further,thepricesreceivedfromthesaleoftheCompany'sby-productmetalsproducedatitsLaRondemine(silver,zincandcopper)anditsPinosAltos,LaIndiaandCanadianMalarticmines(silver)affecttheCompany'sabilitytomeetitstargetsfortotalcashcostsperounceorall-insustainingcostsperounceofgoldproducedwhensuchmeasuresarecalculatedonaby-productbasis.Theseby-productmetalpricesfluctuatewidelyandarealsoaffectedbynumerousfactorsbeyondtheCompany'scontrol.TheCompany'spolicyandpracticeisnottosellforwarditsfuturegoldproduction;however,undertheCompany'sBoard-approvedpriceriskmanagementpolicy,theCompanymayreviewthispracticeonaprojectbyprojectbasis.See"RiskProfile–CommodityPricesandForeignCurrencies"and"RiskProfile–FinancialInstruments"intheAnnualMD&AformoredetailsontheCompany'suseofderivativeinstruments.TheCompanyoccasionallyusesderivativeinstrumentstomitigatetheeffectsoffluctuatingby-productmetalprices;however,thesemeasuresmaynotbesuccessful.
Thevolatilityofgoldpricesisillustratedinthefollowingtablewhichsetsout,fortheperiodsindicated,thehigh,lowandaverageafternoonfixingpricesforgoldontheLondonBullionMarket(the"LondonP.M.Fix").
2017
(to March 22) 2016 2015 2014 2013 2012
Highprice($perounce) 1,257 1,366 1,296 1,385 1,694 1,792
Lowprice($perounce) 1,151 1,077 1,049 1,142 1,192 1,540
Averageprice($perounce) 1,216 1,251 1,160 1,266 1,411 1,669
OnMarch22,2017,theLondonP.M.Fixwas$1,249perounceofgold.
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Theassumptionsthatunderlietheestimatesoffutureoperatingresultsandthestrategiesusedtomitigatetheeffectsofrisksofmetalpricesaresetoutin"OperationsandProduction–MineralReservesandMineralResources–InformationonMineralReservesandMineralResourcesoftheCompany"inthisAIFandundertheheading"RiskProfile"intheAnnualMD&A.
Basedon2017productionestimates,theapproximatesensitivitiesoftheCompany'safter-taxincometoa10%changeincertainmetalpricesfrom2016marketaveragepricesareasfollows:
Income
per share
Gold $0.13
Silver $0.01
Zinc $0.01
Copper $0.01
SensitivitiesoftheCompany'safter-taxincometochangesinmetalpriceswillincreasewithincreasedproduction.
TheCompanyislargelydependentuponitsminingandmillingoperationsatitsMeadowbankmineinNunavutanditsLaRondemineandCanadianMalarticminesinQuebec,andanyadverseconditionaffectingthoseoperationsmayhaveamaterialadverseeffectontheCompany.
TheCompany'soperationsattheMeadowbankmineinNunavutandattheLaRondemineandCanadianMalarticminesinQuebecaccountedforapproximately19%,18%and18%,respectively,oftheCompany'sgoldproductionin2016andareexpectedtoaccountforapproximately21%,20%and19%,respectively,oftheCompany'sgoldproductionin2017.Also,in2016theMeadowbank,LaRondeandCanadianMalarticminesaccountedforapproximately15%,19%and17%,respectively,oftheCompany'soperatingmargin.AnyadverseconditionaffectingminingormillingconditionsattheseminescouldbeexpectedtohaveamaterialadverseeffectontheCompany'sfinancialperformanceandresultsofoperations(see"–IftheCompanyexperiencesminingaccidentsorotheradverseconditions,theCompany'sminingoperationsmayyieldlessgoldthanindicatedbyitsestimatedgoldproduction"below).GoldproductionattheMeadowbankmineisalsosubjecttorisksrelatingtooperatinginaremotelocation(see"–TheCompanymayexperiencedifficultiesoperatingitsMeadowbankmineanddevelopingtheMeliadineprojectandtheAmaruqsatellitedepositatMeadowbankasaresultoftheirremotelocation"below).
UnlesstheCompanyacquiresordevelopsothersignificantgold-producingassets,theCompanywillcontinuetobedependentonitsoperationsattheMeadowbank,LaRondeandCanadianMalarticminesforasubstantialportionofitsgoldproductionandcashflowprovidedbyoperatingactivities.TherecanbenoassurancethattheCompany'scurrentexplorationanddevelopmentprogramswillresultinanyneweconomicallyviableminingoperationsoryieldnewmineralreservestoreplaceandexpandcurrentproductionandmineralreserves.
TheCompanymayexperiencedifficultiesoperatingitsMeadowbankmineanddevelopingtheMeliadineprojectandtheAmaruqsatellitedepositatMeadowbankasaresultoftheirremotelocation.
TheMeadowbankmine,whichistheCompany'slargestmineintermsofproduction,islocatedintheKivalliqDistrictofNunavutinnorthernCanada,approximately70kilometresnorthofBakerLake.Inaddition,theAmaruqdeposit,located50kilometresnorthwestoftheMeadowbankmine,hasreceivedBoardapproval(pendingreceiptoftherequiredpermits)tobedevelopedasasatelliteoperationtotheMeadowbankmine(productionatAmaruqiscurrentlyforecasttobegininthethirdquarterof2019).TheclosestmajorcitytotheMeadowbankmineisWinnipeg,Manitoba,approximately1,500kilometrestothesouth.TheCompanybuilta110-kilometreall-weatherroadfromBakerLake,whichprovidessummershippingaccessviaHudsonBaytotheMeadowbankmineandtheCompanyisbuildinganall-weatherroadbetweenMeadowbankandtheAmaruqproperty.However,theCompany'soperationsareconstrainedbytheremotenessofthemine,particularlyastheportofBakerLakeisonlyaccessibleapproximatelytenweeksperyear.MostofthematerialsthattheCompanyrequiresfortheoperationoftheMeadowbankmineandthedevelopmentoftheAmaruqdepositmustbetransportedthroughtheportofBakerLakeduringthisshippingseason,whichmaybefurthertruncatedduetoweatherconditions.IftheCompanyisunabletoacquireandtransportnecessarysuppliesduringthistime,oriforetransportationfromAmaruqtoMeadowbankisnegativelyaffected,itmayresultinaslowdownorstoppageofoperationsat
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theMeadowbankmineorthedevelopmentoftheAmaruqdeposit.Furthermore,ifmajorequipmentfails,itemsnecessarytoreplaceorrepairsuchequipmentmayhavetobeshippedthroughBakerLakeduringthiswindow.FailuretohaveavailablethenecessarymaterialsrequiredforoperationsortorepairorreplacemalfunctioningequipmentattheMeadowbankmine(includingattheAmaruqdeposit)mayrequiretheslowdownorstoppageofoperations.Forexample,aMarch2011fireatthekitchenfacilitiesoftheMeadowbankminerequiredoperationstobereducedatthemine,whichresultedingoldproductionattheminebeingbelowexpectedlevelsin2011.
TheCompany'sMeliadinemineproject,290kilometressoutheastoftheMeadowbankmine,hasreceivedBoardapprovalforconstruction(productionatMeliadineiscurrentlyforecasttobegininthethirdquarterof2019),isalsolocatedintheKivalliqDistrictofNunavut,approximately25kilometresnorthwestofthehamletofRankinInletonthewestcoastofHudsonBay.MostofthematerialsthattheCompanyrequirestodevelopandoperatetheMeliadinemineprojectmustbetransportedthroughtheportofRankinInletduringitsapproximately14-weekshippingseason.IftheCompanycannotidentifyandprocuresuitableequipmentandmaterialswithinatimeframethatpermitstransportingthemtotheprojectwithinthisshippingseason,itcouldresultindelaysand/orcostincreasesintheexplorationprogram,construction,developmentandexplorationoftheproperty.
TheremotenessoftheMeadowbankmine,theAmaruqdepositandMeliadinemineprojectalsonecessitatestheuseoffly-in/fly-outcampsfortheaccommodationofsiteemployeesandcontractors,whichmayhaveanimpactontheCompany'sabilitytoattractandretainqualifiedmining,explorationandconstructionpersonnel.IftheCompanyisunabletoattractandretainsufficientpersonnelorcontractorsonatimelybasis,theCompany'soperationsattheMeadowbankmine(includingthedevelopmentoftheAmaruqdeposit)andconstructionofamineattheMeliadinemineprojectmaybeadverselyaffected.
IftheCompanyexperiencesminingaccidentsorotheradverseconditions,theCompany'sminingoperationsmayyieldlessgoldthanindicatedbyitsestimatedgoldproduction.
TheCompany'sgoldproductionmayfallbelowestimatedlevelsasaresultofminingaccidentssuchascave-ins,rockfalls,rockbursts,pitwallfailures,firesorfloodingorasaresultofotheroperationalproblemssuchasafailureofaproductionhoist,autoclave,filterpressorsemi-autogenousgrindingmill.Inaddition,productionmaybereducedif,amongotherthings,duringthecourseofminingorprocessing,unfavourableweatherconditions,groundconditions,highgeomechanicalstressareasorseismicactivityareencountered,oregradesarelowerthanexpected,thephysicalormetallurgicalcharacteristicsoftheorearelessamenablethanexpectedtominingortreatment,dilutionincreases,electricalpowerisinterruptedorheapleachprocessingresultsincontainmentdischarge.
WhiletheCompanyhasmetorexceededgoldproductionforecastssince2012,itfailedtodosoinfiveoftheprevioustenyearsprimarilydueto:mininglowergradegoldzonesin2007;delaysinthecommissioningoftheGoldexproductionhoistandtheKittilaautoclavein2008;autoclaveissuesatKittila,filteringissuesatPinosAltosanddilutionissuesatLapain2009;lowerthroughputattheMeadowbankmillduetoabottleneckinthecrushingcircuitandcontinuedautoclaveissuesattheKittilamineinthefirsthalfoftheyearin2010;andsuspensionofminingoperationsattheGoldexmineduetogeotechnicalconcernswiththerockabovethemininghorizon,afireintheMeadowbankminekitchencomplexthatnegativelyimpactedproductionandlowerthanexpectedgradesattheMeadowbankandLaRondeminesin2011.
Despitemeetingorexceedingproductionforecastssince2012,goldproductionwasnegativelyaffectedby:thetemporarysuspensionofheapleachoperationsattheCrestonMascotadepositatPinosAltosasaresultofissueswiththephaseoneleachpadlinerin2012;anextendedmaintenanceshutdownatKittiladuringthesecondquarter,duringwhichthemineonlyoperatedfor14days,anda16-dayunplannedshutdownrelatedtotheLaRondehoistdrivein2013;tendaysofdowntimeresultingfromaproductionhoistdrivefailureatLaRondein2014;andlowerthanexpectedgradesatKittilaandadecisionduringtheyeartoextendtheVaultpitatMeadowbankresultinginlowerthanexpectedproductionin2015.
Occurrencesofthisnatureandotheraccidents,adverseconditionsoroperationalproblemsinfutureyearsmayresultintheCompany'sfailuretoachievecurrentorfutureproductionestimates.
FluctuationsinforeigncurrencyexchangeratesinrelationtotheU.S.dollarmayadverselyaffecttheCompany'sresultsofoperations.
TheCompany'soperatingresultsandcashflowaresignificantlyaffectedbychangesintheU.S.dollar/Canadiandollarexchangerate.AlloftheCompany'srevenuesareearnedinU.S.dollarsbutthemajorityofitsoperatingcostsattheLaRonde,Lapa,Goldex,CanadianMalarticandMeadowbankmines,aswellastheCompany'sdevelopmentcostsattheMeliadinemineproject,andtheAmaruqdepositareincurredinCanadiandollars.TheU.S.dollar/Canadiandollarexchangeratehasfluctuatedsignificantlyoverthelastseveralyears.FromJanuary1,2012toJanuary1,2017,theNoon
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BuyingRatefluctuatedfromahighofC$1.0299per$1.00toalowofC$0.6854per$1.00.HistoricalfluctuationsintheU.S.dollar/Canadiandollarexchangeratearenotnecessarilyindicativeoffutureexchangeratefluctuations.BasedontheCompany'santicipated2017after-taxoperatingresults,a10%changeintheU.S.dollar/Canadiandollarexchangeratefromthe2016marketaverageexchangeratewouldaffectnetincomebyapproximately$0.11pershare.Toattempttomitigateitsforeignexchangeriskandminimizetheimpactofexchangeratemovementsonoperatingresultsandcashflow,theCompanyhasperiodicallyusedforeigncurrencyoptionsandforwardforeignexchangecontractstopurchaseCanadiandollars;however,therecanbenoassurancethatthesestrategieswillbeeffective.See"RiskProfile–CommodityPricesandForeignCurrencies"intheAnnualMD&Aforadescriptionoftheassumptionsunderlyingthesensitivitycalculations.Inaddition,themajorityoftheCompany'soperatingcostsattheKittilamineareincurredinEurosandasignificantportionofoperatingcostsatthePinosAltosandLaIndiaminesareincurredinMexicanpesos.EachofthesecurrencieshasalsofluctuatedsignificantlyagainsttheU.S.dollaroverthepastseveralyears.TherecanbenoassurancethattheCompany'sforeignexchangederivativesstrategieswillbesuccessfulorthatforeignexchangefluctuationswillnotmateriallyadverselyaffecttheCompany'sfinancialperformanceandresultsofoperations.
TheCompany'smineconstructionprojectsandexpansionprojectsaresubjecttorisksassociatedwithminedevelopment,whichmayresultindelaysintheoptimizationofminingoperations,delaysinexistingoperationsandunanticipatedcosts.
TheCompany'sproductionforecastsarebasedonfullproductionbeingachievedatallofitsmines,andtheCompany'sabilitytoachieveandmaintainfullproductionratesattheseminesissubjecttoanumberofrisksanduncertainties.Productionfromtheseminesin2017maybelowerthananticipatediftheanticipatedfullproductionratecannotbeachieved.
TheCompanybelievesthattheLaRondemineextension,whichcommencedoperationinlate2011,isthedeepestoperationintheWesternHemispherewithacurrentlyexpectedmaximumdepthof3,110metresbelowthesurfaceand,in2017,87%oftheLaRondemine'sproductionisanticipatedtobefromtheLaRondemineextension.TheLaRondemineextensioncontinuestomovetowardsoperatingatanticipatedsteadystatelevels.TheCompany'soperationsattheLaRondemineextensionrelyoninfrastructureinstalledinconnectionwiththeextensionforhaulingoreandmaterialstothesurface,includingawinzeandaseriesoframpslinkingminingdepositstothePennaShaftthatserviceshistoricoperationsattheLaRondemine.ThedepthoftheoperationsposessignificantchallengestotheCompany,suchasgeomechanicalandseismicrisksandventilationandairconditioningrequirements,whichmayresultindifficultiesanddelaysinachievinggoldproductionobjectives.OperationsatthelowerleveloftheLaRondeminearesubjecttohighlevelsofgeomechanicalstressandtherearefewresourcesavailabletoassisttheCompanyinmodellingthegeomechanicalconditionsatthesedepths,whichmayresultintheCompanynotbeingabletoextracttheoreattheselevelsascurrentlycontemplated.In2012,challengesassociatedwithexcessheatandcongestionatthelowerpartsoftheminedelayedtherampupofproductionand,in2013,throughputattheLaRondeminewasreducedasaresultof16daysofunplannedshutdowntothehoistdrive.In2014,tendaysofdowntimeresultingfromaproductionhoistdrivefailureresultedinannualproductionatLaRondebeingapproximately10,000ouncesbelowtheCompany'sexpectations.Inaddition,theCompanyisevaluatingthepotentialtominebelowthecurrentlyplanned3.1kilometredepthatLaRonde,ortheLaRonde3deposit.
ThefurtherdevelopmentoftheKittilaandPinosAltosmines,aswellasthedevelopmentofthenewminingzonesattheGoldexmine,requirestheconstructionandoperationofnewundergroundmininginfrastructureand,atKittila,millingoperationswererequiredtobeexpanded.Theconstructionandoperationofundergroundminingfacilitiesandtheexpansionofmillingfacilitiesaresubjecttoanumberofrisks,includingunforeseengeologicalformations,implementationofnewminingormillingprocesses,delaysinobtainingrequiredconstruction,environmentaloroperatingpermitsandengineeringandmineormilldesignadjustments.
TheAmaruqsatellitedepositatMeadowbankandtheMeliadineproject,bothofwhichareexpectedtocommenceminingoperationsinthethirdquarterof2019,arebothlocatedintheKivalliqDistrictofNunavut.TheCompanymayexperiencedifficultiesdevelopingtheMeliadineprojectandtheAmaruqsatellitedepositatMeadowbankasaresultoftheirremotelocation(see"–TheCompanymayexperiencedifficultiesoperatingitsMeadowbankmineanddevelopingtheMeliadineprojectandtheAmaruqsatellitedepositatMeadowbankasaresultoftheirremotelocation."above).Inaddition,theextremelyharshweatherconditionsthatareexperiencedintheKivalliqDistrictofNunavutmayresultinconstructiondelaysthatcouldresultindelaystothecommencementofminingoperationsateitherorbothoftheAmaruqsatellitedepositatMeadowbankandtheMeliadineprojectorincreasedcostsindevelopingtheprojects.
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TheCompany'stotalcashcostsperounceandall-insustainingcostsperounceofgoldproduceddepend,inpart,onexternalfactorsthataresubjecttofluctuationand,ifsuchcostsincrease,someoralloftheCompany'sactivitiesmaybecomeunprofitable.
TheCompany'stotalcashcostsperounceandall-insustainingcostsperounceofgoldaredependentonanumberoffactors,includingtheexchangeratebetweentheU.S.dollarandtheCanadiandollar,EuroandMexicanpeso,smeltingandrefiningcharges,productionroyalties,thepriceofgoldandby-productmetals(whencalculatedonaby-productbasis)andthecostofinputsusedinminingoperations.AttheLaRondemine,theCompany'stotalcashcostsperounceandall-insustainingcostsperounceofproduction(whencalculatedonaby-productbasis)areaffectedbythepricesandproductionlevelsofby-productzinc,silverandcopper,therevenuefromwhichisoffsetagainstthecostofgoldproduction.AttheCanadianMalartic,PinosAltosandLaIndiamines,theCompany'stotalcashcostsperounceandall-insustainingcostsperounceofproduction(whencalculatedonaby-productbasis)areaffectedbythepricesandproductionlevelsofby-productsilver,therevenuefromwhichisoffsetagainstthecostofgoldproduction.Totalcashcostsperounceandall-insustainingcostsperouncefromtheCompany'soperationsatitsminesinCanada,MexicoandtheKittilamineinFinlandareaffectedbychangesintheexchangeratesbetweentheU.S.dollarandtheCanadiandollar,MexicanpesoandtheEuro,respectively.Totalcashcostsperounceandall-insustainingcostsperounceatalloftheCompany'sminesarealsoaffectedbythecostsofinputsusedinminingoperations,includinglabour(includingcontractors),steel,chemicalreagentsandenergy.AllofthesefactorsarebeyondtheCompany'scontrol.IftheCompany'stotalcashcostsperounceorall-insustainingcostsperounceofgoldriseabovethemarketpriceofgoldandremainsoforanysustainedperiod,theCompanymayexperiencelossesandmaycurtailorsuspendsomeorallofitsexploration,developmentand/orminingactivities.
Totalcashcostsperounceandall-insustainingcostsperouncearenotrecognizedmeasuresunderUSGAAPorIFRS,andthisdatamaynotbecomparabletodatapresentedbyothergoldproducers.SeetheAnnualMD&Aforreconciliationoftotalcashcostsperounceandall-insustainingcostsperouncetotheirclosestIFRSmeasureand"IntroductoryNotes–NotetoInvestorsConcerningCertainMeasuresofPerformance"inthisAIFforadiscussionofnon-GAAPmeasures.
Mineralreserveandmineralresourceestimatesareonlyestimatesandsuchestimatesmaynotaccuratelyreflectfuturemineralrecovery.
ThefiguresformineralreservesandmineralresourcespublishedbytheCompanyareestimatesandnoassurancecanbegiventhattheanticipatedtonnagesandgradeswillbeachievedorthattheindicatedlevelofrecoveryofgoldwillberealized.MineralreserveandmineralresourceestimatesarebasedongoldrecoveriesinsmallscalelaboratorytestsandmaynotbeindicativeofthemineralizationintheentireorebodyandtheCompanymaynotbeabletoachievesimilarresultsinlargerscaletestsunderon-siteconditionsorduringproduction.TheoregradeactuallyrecoveredbytheCompanymaydifferfromtheestimatedgradesofthemineralreservesandmineralresources.Theestimatesofmineralreservesandmineralresourceshavebeendeterminedbasedonassumedmetalprices,foreignexchangeratesandoperatingcosts.Forexample,theCompanyhasestimatedprovenandprobablemineralreservesbasedon,amongotherthings,a$1,150perouncegoldprice($1,200forCanadianMalarticandtheUpperBeaverprojectand$1,100forMeliadine).Theyearlyaveragegoldpricehasbeenabove$1,150perouncesince2010;however,priortothattime,yearlyaveragegoldpriceswerebelow$1,150perounce.Prolongeddeclinesinthemarketpriceofgold(orapplicableby-productmetalprices)mayrendermineralreservescontainingrelativelylowergradesofmineralizationuneconomicaltorecoverandcouldmateriallyreducetheCompany'smineralreserves.Shouldsuchreductionsoccur,theCompanymayberequiredtotakeamaterialwrite-downofitsinvestmentinminingproperties,reducethecarryingvalueofoneormoreofitsassetsordelayordiscontinueproductionorthedevelopmentofnewprojects,resultinginincreasednetlossesandreducedcashflow.TheCompanyusedanassumed$1,250long-termgoldpricetotestforimpairmentofitsminesandconcludednoimpairmentsexistedasatDecember31,2016.Marketpricefluctuationsofgold(orapplicableby-productmetalprices),aswellasincreasedproductioncostsorreducedrecoveryrates,mayrendermineralreservescontainingrelativelylowergradesofmineralizationuneconomicaltorecoverandmayultimatelyresultinarestatementofmineralresources.Short-termfactorsrelatingtothemineralreserve,suchastheneedfororderlydevelopmentoforebodiesortheprocessingofnewordifferentgrades,mayimpairtheprofitabilityofamineinanyparticularaccountingperiod.
Mineralresourceestimatesforpropertiesthathavenotcommencedproductionoratdepositsthathavenotyetbeenexploitedarebased,inmostinstances,onverylimitedandwidelyspaceddrillholeinformation,whichisnotnecessarilyindicativeofconditionsbetweenandaroundthedrillholes.Accordingly,suchmineralresourceestimatesmayrequirerevisionasmoredrillinginformationbecomesavailableorasproductionexperienceisgained.
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TheCompanymayexperienceproblemsinexecutingacquisitionsormanagingandintegratinganycompletedacquisitionswithitsexistingoperations.
TheCompanyregularlyevaluatesopportunitiestoacquiresecuritiesorassetsofotherminingbusinesses.Suchacquisitionsmaybesignificantinsize,maychangethescaleoftheCompany'sbusinessandmayexposetheCompanytonewgeographic,political,operating,financialorgeologicalrisks.TheCompany'ssuccessinitsacquisitionactivitiesdependsonitsabilitytoidentifysuitableacquisitioncandidates,acquirethemonacceptabletermsandintegratetheiroperationssuccessfullywiththoseoftheCompany.Anyacquisitionwouldbeaccompaniedbyrisks,suchas:duediligencefailures;thedifficultyofassimilatingtheoperationsandpersonnelofanyacquiredbusinesses;thepotentialdisruptionoftheCompany'songoingbusiness;theinabilityofmanagementtomaximizethefinancialandstrategicpositionoftheCompanythroughthesuccessfulintegrationofacquiredassetsandbusinesses;themaintenanceofuniformstandards,controls,proceduresandpolicies;theimpairmentofrelationshipswithemployees,suppliersandcontractorsasaresultofanyintegrationofnewmanagementpersonnel;andthepotentialunknownliabilities(includingpotentialenvironmentalliabilitiesoranypriorbriberyorcorruptionactivities)associatedwithacquiredassetsandbusinesses.PotentialacquisitiontargetsmayoperateinjurisdictionsinwhichtheCompanydoesnotoperateandthatmayhaveadifferentriskprofilethanthejurisdictionsinwhichtheCompanycurrentlyoperates(see"–TheCompanymayexperienceoperationaldifficultiesatitsforeignoperations").Inaddition,theCompanymayneedadditionalcapitaltofinanceanacquisition.DebtfinancingrelatedtoanyacquisitionmayexposetheCompanytotherisksrelatedtoincreasedleverage,whileequityfinancingmaycauseexistingshareholderstosufferdilution.TheCompanyispermittedunderthetermsofitsunsecuredrevolvingbankcreditfacilityanditsguaranteedseniorunsecurednotesreferredtounder"MaterialContracts"belowtoincuradditionalunsecuredindebtedness,providedthatitmaintainscertainfinancialratiosandmeetsfinancialconditioncovenantsand,inthecaseofthebankcreditfacility,thatnoeventofdefaultunderthebankcreditfacilityhasoccurredandiscontinuing,orwouldoccurasaresultoftheincurrenceorassumptionofsuchindebtedness.TherecanbenoassurancethattheCompanywouldbesuccessfulinovercomingtheseoranyotherproblemsencounteredinconnectionwithsuchacquisitions.
TheCompanymayexperienceoperationaldifficultiesatitsforeignoperations.
TheCompany'soperationsincludeamineinFinlandandtwominesinnorthernMexico.Collectively,theseminesaccountedforapproximately34%oftheCompany'sgoldproductionin2016andareexpectedtoaccountforapproximately32%oftheCompany'sgoldproductionin2017.Theseoperationsaresubjecttovariouslevelsofpolitical,economicandotherrisksanduncertaintiesthataredifferentfromthoseencounteredattheCompany'sCanadianproperties.Theserisksanduncertaintiesvaryfromcountrytocountryandmayinclude:extremefluctuationsincurrencyexchangerates;highratesofinflation;labourunrest;risksofwarorcivilunrest;expropriationandnationalization;renegotiationornullificationofexistingconcessions,licences,permitsandcontracts;illegalmining;corruption;restrictionsonforeignexchangeandrepatriation;hostagetaking;securityissues(includingtheftsofgoldfromamine);changingpoliticalconditions;andcurrencycontrols.Inaddition,theCompanymustcomplywithmultipleandpotentiallyconflictingregulationsinCanada,theUnitedStates,FinlandandMexico,includingexportrequirements,taxes,tariffs,importdutiesandothertradebarriers,aswellashealth,safetyandenvironmentalrequirements.
Changes,ifany,inminingorinvestmentpoliciesorshiftsinpoliticalattitudeinFinlandorMexicomayadverselyaffecttheCompany'soperationsorprofitability.Operationsmaybeaffectedinvaryingdegreesbygovernmentregulationswithrespecttomattersincludingrestrictionsonproduction,pricecontrols,exportcontrols,currencycontrolsorrestrictions,currencyremittance,incomeandothertaxes,expropriationofproperty,foreigninvestment,maintenanceofclaims,environmentallegislation,landuse,landclaimsoflocalpeople,wateruseandminesafety.Failuretocomplystrictlywithapplicablelaws,regulationsandlocalpracticesrelatingtomineralrightsapplicationsandtenurecouldresultinloss,reductionorexpropriationofentitlementsortheimpositionofadditionallocalorforeignpartiesasjointventurepartnerswithcarriedorotherinterests.
Inaddition,FinlandandMexicohavesignificantlydifferentlawsandregulationsthanCanadaandthereareculturalandlanguagedifferencesbetweenthesecountriesandCanada.Also,theCompanyfaceschallengesinherentinefficientlymanagingemployeesoverlargegeographicaldistances,includingthechallengesofstaffingandmanagingoperationsinseveralinternationallocationsandimplementingappropriatesystems,policies,benefitsandcomplianceprograms.Thesechallengesmaydivertmanagement'sattentiontothedetrimentoftheCompany'sotheroperations.TherecanbenoassurancethatdifficultiesassociatedwiththeCompany'sforeignoperationscanbesuccessfullymanaged.
Inthefuture,theCompanymaychoosetooperateinforeignjurisdictionsotherthanFinlandandMexico.Forexample,theCompanycurrentlyhasexplorationpropertiesineachoftheUnitedStatesandSweden,aswellasstrategicinvestmentsincompaniesholdingpropertiesinBrazil,theDominicanRepublicandPanama.Suchoperationswouldinherentlybe
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subjecttovariouslevelsofpolitical,economicandotherrisksanduncertaintiesthataredifferentfromthoseencounteredattheCompany'sCanadian,FinnishandMexicanproperties.
TheCompanyissubjecttotherisksnormallyassociatedwiththeconductofjointoperations.
TheCompanyholdsanindirect50%interestintheCanadianMalarticminethroughthePartnership,withtheremaininginterestinthispropertybeingheldindirectlybyYamana.TheCompany'sinterestintheCanadianMalarticmineissubjecttotherisksnormallyassociatedwiththeconductofpartnershipsandotherjointoperations.TheexistenceoroccurrenceofoneormoreofthefollowingcircumstancesandeventscouldhaveamaterialadverseeffectonCompany'sprofitabilityortheviabilityofitsinterestsheldthroughjointoperations,whichcouldhaveamaterialadverseeffectontheCompany'sfinancialperformanceandresultsofoperations:(i)lackofcontroloverthejointoperationsanddisagreementwithpartnersonhowtoexplore,developoroperateminesefficiently;(ii)inabilitytoexertinfluenceovercertainstrategicdecisionsmadeinrespectofjointlyheldproperties;(iii)inabilityofpartnerstomeettheirobligationstothejointoperationorthirdparties;(iv)litigationbetweenjointventurepartnersregardingjointoperationmatters;and(v)liabilitythatmightaccruetopartnersasaresultofthefailureofthejointventureorgeneralpartnershiptosatisfytheirobligations.In2015,theCompanyenteredintoajointventurewithOrexMineralsInc.withrespecttotheBarseleprojectinSweden.TheCompanymayenterintoadditionaljointventuresorpartnershipsinthefuture.
TotheextentthattheCompanyisnottheoperatorofitsjointventureproperties,theCompanywillbedependentontheoperatorsforthetimingofactivitiesrelatedtothesepropertiesandtheCompanywillbelargelyunabletodirectorcontroltheactivitiesoftheoperators.TheCompanyalsowillbesubjecttothedecisionsmadebytheoperatorsregardingactivitiesattheproperties,andwillhavetorelyontheoperatorsforaccurateinformationabouttheproperties.AlthoughtheCompanyexpectsthattheoperatorsofthepropertiesinwhichitownsajointventureinterestwilloperatethesepropertiesinaccordancewithindustrystandardsandinaccordancewithanyapplicableoperatingagreements,therecanbenoassurancethatalldecisionsoftheoperatorswillachievetheexpectedgoals.
TheCompanyestimatestherecoverableamountoflong-livedassetsandgoodwillusingassumptionsandifthecarryingvalueofanassetorgoodwillisthendeterminedtobegreaterthanitsactualrecoverableamount,animpairmentisrecognizedreducingtheCompany'searnings.
TheCompanyconductsannualimpairmentassessmentsofgoodwillandattheendofeachreportingperiodtheCompanyassesseswhetherthereisanyindicationthatlong-livedassets(suchasminingpropertiesandplantandequipment)maybeimpaired.Ifanindicatorofimpairmentexists,therecoverableamountoftheassetiscalculatedinordertodetermineifanyimpairmentlossisrequired.Testingforimpairmentinvolvesacomparisonoftherecoverableamountofthecashgeneratingunittoitscarryingvalue.Animpairmentchargeisrecognizedforanyexcessofthecarryingamountoftheassetgrouporreportingunitoveritsrecoverableamount.AsatDecember31,2016,theCompanytestedforimpairmentofitsminesandprojectsandconcludednoimpairmentsexisted.
Theassessmentforimpairmentissubjectiveandrequiresmanagementtomakeestimatesandassumptionsforanumberoffactorsincludingestimatesofproductionlevels,mineralreservesandmineralresources,operatingcostsandcapitalexpendituresreflectedintheCompany'slife-of-mineplans,aswellaseconomicfactorsbeyondmanagement'scontrol,suchasgoldprices,discountratesandobservablenetassetvaluemultiples.Shouldmanagement'sestimatesandassumptionsregardingthesefactorsbeincorrect,theCompanymayberequiredtorealizeimpairmentcharges,whichwillreducetheCompany'searnings.Thetimingandamountofsuchimpairmentchargesisdifficulttopredict.
TheCompany'stransitiontoreportingitsfinancialresultsunderIFRSmayalsohaveaneffectonthefrequencyandamountofimpairmentcharges.UnderUSGAAP,atwo-stepapproachisusedforlong-livedassetimpairmenttestingwherebylong-livedassetsarefirsttestedforrecoverabilitybasedontheirexpectedundiscountedcashflows.Ifalong-livedasset'sexpectedundiscountedcashflowexceedstherecordedcarryingamount,noimpairmentchargeisrequired.Iftheexpectedundiscountedcashflowislowerthantherecordedcarryingamount,thelong-livedassetsarewrittendowntotheirestimatedfairvalue.IFRSprescribesaone-stepapproachforassetimpairmenttestingandmeasurementwherebyanasset'srecoverableamountiscompareddirectlyagainstitsrecordedcarryingamount.UnderIFRS,anasset'srecoverableamountisdeterminedasthehigheroftheestimatedfairvaluelesscoststosellorvalueinuse(whichismeasuredusingdiscountedcashflows).Ifanasset'srecoverableamountislessthantherecordedcarryingamount,animpairmentchargeisrequired.ThedifferenceintheapproachtoassetimpairmenttestingandmeasurementmayresultinmorefrequentimpairmentchargesunderIFRS,whereassetcarryingvaluespreviouslysupportedunderUSGAAPonanundiscountedcashflowbasiscannotbesupportedonadiscountedcashflowbasis.Inaddition,underIFRS,theremaybeinstanceswheretheremaybeanimpairmentreversalofthevalueofanasset(whereanimpairmentchargehadpreviouslybeenrecorded)whichmayleadtovolatilityintheCompany'searnings.
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IftheCompanyfailstocomplywithrestrictivecovenantsinitsdebtinstruments,theCompany'sabilitytoborrowunderitsunsecuredrevolvingbankcreditfacilitycouldbelimitedandtheCompanymaythendefaultunderotherdebtagreements,whichcouldharmtheCompany'sbusiness.
TheCompany'sunsecuredrevolvingbankcreditfacilitylimits,amongotherthings,theCompany'sabilitytopermitthecreationofcertainliens,makeinvestmentsotherthaninvestmentsinbusinessesrelatedtominingorabusinessancillaryorcomplementarytomining,disposeoftheCompany'smaterialassetsor,incertaincircumstances,paydividends.Inaddition,theCompany'sguaranteedseniorunsecurednoteslimit,amongotherthings,theCompany'sabilitytopermitthecreationofcertainliens,carryonbusinessunrelatedtominingordisposeoftheCompany'smaterialassets.ThebankcreditfacilityandtheguaranteedseniorunsecurednotesalsorequiretheCompanytomaintainspecifiedfinancialratiosandmeetfinancialconditioncovenants.EventsbeyondtheCompany'scontrol,includingchangesingeneraleconomicandbusinessconditions,mayaffecttheCompany'sabilitytosatisfythesecovenants,whichcouldresultinadefaultunderthebankcreditfacilityortheguaranteedseniorunsecurednotesand,byextension,theBNSLetterofCreditFacility(asdefinedbelow).AtMarch22,2017,therewas$0.8milliondrawnunderthebankcreditfacility(includingunderlettersofcredit)andapproximatelyC$333milliondrawnundertheCompany'sotherletterofcreditfacilities.Ifaneventofdefaultundertheunsecuredrevolvingbankcreditfacilityortheguaranteedseniorunsecurednotesoccurs,theCompanywouldbeunabletodrawdownfurtheronthebankcreditfacilityandthelenderscouldelecttodeclareallprincipalamountsoutstandingthereunderatsuchtime,togetherwithaccruedinterest,tobeimmediatelydueanditcouldcauseaneventofdefaultundertheCompany'sguaranteedseniorunsecurednotesandotherletterofcreditfacilities.Aneventofdefaultundertheunsecuredrevolvingbankcreditfacility,theguaranteedseniorunsecurednotesortheuncommittedletterofcreditfacilitiesmayalsogiverisetoaneventofdefaultunderotherexistingandfuturedebtagreementsand,insuchevent,theCompanymaynothavesufficientfundstorepayamountsowingundersuchagreements.
Theexplorationofmineralpropertiesishighlyspeculative,involvessubstantialexpendituresandisfrequentlyunsuccessful.
TheCompany'sfinancialperformanceissignificantlyaffectedbythecostsandresultsofitsexplorationanddevelopmentprograms.Asmineshavelimitedlivesbasedonprovenandprobablemineralreserves,theCompanyactivelyseekstoreplaceandexpanditsmineralreserves,primarilythroughexplorationanddevelopmentaswellasthroughstrategicacquisitions.Explorationformineralsishighlyspeculativeinnature,involvesmanyrisksandisfrequentlyunsuccessful.Amongthemanyuncertaintiesinherentinanygoldexplorationanddevelopmentprogramarethelocationofeconomicorebodies,thedevelopmentofappropriatemetallurgicalprocesses,thereceiptofnecessarygovernmentalpermits,theacceptanceorsupportoflocalstakeholdersandtheconstructionofminingandprocessingfacilities.Substantialexpendituresarerequiredtopursuesuchexplorationanddevelopmentactivities.Assumingdiscoveryofaneconomicorebody,dependingonthetypeofminingoperationinvolved,severalyearsmayelapsefromtheinitialphasesofdrillinguntilcommercialoperationsarecommencedandduringsuchtimetheeconomicfeasibilityofproductionmaychange.Accordingly,therecanbenoassurancethattheCompany'scurrentorfutureexplorationanddevelopmentprogramswillresultinanyneweconomicallyviableminingoperationsoryieldnewmineralreservestoreplaceandexpandcurrentmineralreserves.
Theminingindustryishighlycompetitive,andtheCompanymaynotbesuccessfulincompetingfornewminingproperties.
Thereisalimitedsupplyofdesirablemineralpropertiesavailableforclaimstaking,leasing,explorationoracquisitionintheareaswheretheCompanycontemplatesconductingactivities.Manycompaniesandindividualsareengagedintheminingbusiness,includinglarge,establishedminingcompanieswithsubstantialcapabilitiesandlongearningsrecords.TheCompanymaybeatacompetitivedisadvantageinacquiringminingproperties,asitmustcompetewiththesecompaniesandindividuals,someofwhichhavegreaterfinancialresourcesandlargertechnicalstaffthantheCompany.Accordingly,therecanbenoassurancethattheCompanywillbeabletocompetesuccessfullyfornewminingproperties.
ThesuccessoftheCompanyisdependentongoodrelationswithitsemployeesandonitsabilitytoattractandretainemployeesandkeypersonnel.
SuccessattheCompany'smines,developmentprojectsandexplorationprojectsisdependentontheeffortsoftheCompany'semployeesandcontractors.TheCompanycompeteswithminingandothercompaniesonaglobalbasistoattractandretainemployeesatalllevelswithappropriatetechnicalskillsandoperatingexperiencenecessarytooperateitsmines.RelationshipsbetweentheCompanyanditsemployeesmaybeaffectedbychangesintheschemeoflabourrelationsthatmaybeintroducedbyrelevantgovernmentauthoritiesinthejurisdictionsthattheCompanyoperates.
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ChangesinapplicablelegislationorintherelationshipbetweentheCompanyanditsemployeesorcontractorsmayhaveamaterialadverseeffectontheCompany'sbusiness,resultsofoperationsandfinancialcondition.
TheCompanyisalsodependentonanumberofkeymanagementpersonnel.ThelossoftheservicesofoneormoreofsuchkeymanagementpersonnelcouldhaveamaterialadverseeffectontheCompany.TheCompany'sabilitytomanageitsoperating,development,explorationandfinancingactivitieswilldependinlargepartontheeffortsoftheseindividuals.
TheCompanyfacessignificantcompetitiontoattractandretainqualifiedpersonnelandtherecanbenoassurancethattheCompanywillbeabletoattractandretainsuchpersonnel.
TheCompany'spropertiesandminingoperationsmaybesubjecttorightsorclaimsofindigenousgroupsandtheassertionofsuchrightsorclaimsmayimpacttheCompany'sabilitytodeveloporoperateitsminingproperties.
TheCompanyoperatesin,andinthefuturemayoperateinorexploreadditional,areascurrentlyortraditionallyinhabitedorusedbyindigenouspeoplesandsubjecttoindigenousrightsorclaims.Accordingly,theCompanyissubjecttotheriskthatoneormoregroupsmayopposethecontinuedoperation,furtherdevelopmentornewdevelopmentoftheCompany'scurrentorfutureproperties.Suchoppositionmaybedirectedthroughlegaloradministrativeproceedings,orthoughprotestsorothercampaignsagainsttheCompany'sactivities.AnysuchactionsmayhaveanadverseimpactontheCompany'soperations.AlthoughtheCompanyattemptstodevelopandmaintaingoodworkingrelationshipswithallstakeholders,therecanbenoassurancethattheserelationshipscanbesuccessfullymanaged.
TheCompanymayhavedifficultyfinancingitsadditionalcapitalrequirementsforitsplannedmineconstruction,explorationanddevelopment.
Thecapitalrequiredforoperations(includingpotentialexpansions)andthedevelopmentoftheAmaruqdepositandtheconstructionattheMeliadinemineprojectandtheexplorationanddevelopmentoftheCompany'sproperties,includingcontinuingexplorationanddevelopmentprojectsinQuebec,Nunavut,Finland,Sweden,MexicoandNevada,willrequiresubstantialexpenditures.TheCompanyexpectsthatcapitalexpenditureswillbeapproximately$859millionin2017.AsatMarch22,2017,theCompanyhadapproximately$1.2billionavailabletobedrawndownunderitsbankcreditfacility.BasedoncurrentfundingavailabletotheCompanyandexpectedcashfromoperations,theCompanybelievesithassufficientfundsavailabletofunditsprojected2017capitalexpendituresforallofitscurrentproperties.However,ifcashfromoperationsislowerthanexpectedorcapitalcostsattheCompany'sminesorprojectsexceedcurrentestimates,iftheCompanyincursmajorunanticipatedexpensesrelatedtoexploration,developmentormaintenanceofitspropertiesorforotherpurposes,orifadvancesfromthebankcreditfacilityareunavailable,theCompanymayberequiredtoseek,ormaydeemitadvantageoustoseek,additionalfinancingtomaintainitscapitalexpendituresatplannedlevels.Inaddition,theCompanywillhaveadditionalcapitalrequirementstotheextentthatitdecidestoexpanditspresentoperationsandexplorationactivities,constructadditionalminingandprocessingoperationsatanyofitspropertiesortakeadvantageofopportunitiesforacquisitions,jointventuresorotherbusinessopportunitiesthatmayarise.
Additionalfinancingmaynotbeavailablewhenneededor,ifavailable,thetermsofsuchfinancingmaynotbefavourabletotheCompanyand,ifraisedbyofferingequitysecurities,orsecuritiesconvertibleintoequitysecurities,anyadditionalfinancingmayinvolvesubstantialdilutiontoexistingshareholders.FailuretoobtainanyfinancingnecessaryfortheCompany'scapitalexpenditureplansmayresultinadelayorindefinitepostponementofexploration,developmentorproductiononanyoralloftheCompany'sproperties,whichmayhaveamaterialadverseeffectontheCompany'sbusiness,financialconditionandresultsofoperations.
Ifthecreditandcapitalmarketsdeteriorate,orifanysuddenorrapiddestabilizationofglobaleconomicconditionsoccurs,itcouldhaveamaterialadverseeffectontheCompany'sliquidity,abilitytoraisecapitalandcostsofcapital.IftheCompanyexperiencesdifficultyaccessingthecreditand/orcapitalmarkets,theCompanymayseekalternativefinancingoptions,including,butnotlimitedto,streamingtransactions,royaltytransactionsorthesaleofnon-coreassets.FailuretoraisecapitalwhenneededoronreasonabletermsmayhaveamaterialadverseeffectontheCompany'sbusiness,financialconditionandresultsofoperations.
Additionally,anysuddenorrapiddestabilizationofglobaleconomicconditionscouldcausedecreasesinassetvaluesthataredeemedtobeotherthantemporary,whichmayresultinimpairmentandotherlossesfortheCompany.
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TheCompany'soperationsaresubjecttonumerouslawsandextensivegovernmentregulationswhichmayrequiresignificantexpendituresorcauseareductioninlevelsofproduction,delaysinproductionorthepreventionofthedevelopmentofnewminingpropertiesorotherwisecausetheCompanytoincurcoststhatadverselyaffecttheCompany'sresultsofoperations.
TheCompany'sminingandmineralprocessingoperations,explorationactivitiesandpropertiesaresubjecttothelawsandregulationsoffederal,provincial,territorial,stateandlocalgovernmentsinthejurisdictionsinwhichtheCompanyoperates.Theselawsandregulationsareextensiveandgovernprospecting,exploration,development,production,exports,taxes,labourstandards,occupationalhealthandsafety,wastedisposalandtailingsmanagement,toxicsubstances,environmentalprotection,minesafety,reportingofpaymentstogovernmentsandothermatters.Compliancewithsuchlawsandregulationsincreasesthecostsofplanning,designing,drilling,developing,constructing,operating,managing,closing,reclaimingandrehabilitatingminesandotherfacilities.Newlawsorregulations,amendmentstocurrentlawsandregulationsgoverningoperationsandactivitiesonminingpropertiesormorestringentimplementationorinterpretationthereofcouldhaveamaterialadverseeffectontheCompany,increasecosts,causeareductioninlevelsofproductionanddelayorpreventthedevelopmentofnewminingproperties.Regulatoryenforcement,intheformofinfractionorcompliancenotices,hasoccurredatsomeoftheCompany'sminesand,whilethecurrentrisksrelatedtosuchenforcementarenotexpectedtobematerial,theriskofmaterialfinesorcorrectiveactioncannotberuledoutinthefuture.
TheCompanyissubjecttoanti-corruptionandanti-briberylaws.
TheCompany'soperationsaregovernedby,andinvolveinteractionswith,variouslevelsofgovernmentinnumerouscountries.TheCompanyisrequiredtocomplywithanti-corruptionandanti-briberylaws,includingtheCorruption of Foreign Public Officials Act (Canada)andtheU.S.ForeignCorruptPracticesAct,aswellassimilarlawsinthecountriesinwhichtheCorporationconductsitsbusiness.Therehasbeenageneralincreaseinthefrequencyofenforcementandtheseverityofpenaltiesundersuchlaws,resultingingreaterscrutinyandpunishmenttocompaniesconvictedofviolatinganti-corruptionandanti-briberylaws.TheCompanymaybefoundliableforviolationsbynotonlyitsemployees,butalsobyitsthirdpartyagents.AlthoughtheCompanyhasadoptedarisk-basedapproachtomitigatesuchrisks,includingtheimplementationofpoliciesandprogramstoensurecompliancewithsuchlaws,suchmeasuresarenotalwayseffectiveinensuringthattheCompany,itsemployeesorthirdpartyagentswillcomplystrictlywithsuchlaws.IftheCompanyfindsitselfsubjecttoanenforcementactionorisfoundtobeinviolationofsuchlaws,thismayresultinsignificantpenalties,finesand/orsanctionsimposedontheCompanywhichcouldresultinamaterialadverseeffectontheCompany'sreputation,financialperformanceandresultsofoperations.IftheCompanychoosestooperateinadditionalforeignjurisdictionsinthefutureitmaybecomesubjecttoadditionalanti-corruptionandanti-briberylawsinsuchjurisdictions.See"TheCompanymayexperienceoperationaldifficultiesatitsforeignoperations".
IncreasedregulationofgreenhousegasemissionsandclimatechangeissuesmayadverselyaffecttheCompany'soperations.
TheCompanyoperatesinjurisdictionswhereregulatoryrequirementshavetakeneffect,orareproposed,tomonitor,reportand/orreducegreenhousegasemissions.IncreasedregulationofgreenhousegasemissionsandclimatechangeissuesmayadverselyaffecttheCompany'soperations.In2015,Canadaestablishedagreenhousegasesreductiontargetof30%from2005levelsby2030.InDecember2015,CanadasignedtheParisAgreementtolimittheglobalaveragetemperaturerisebelow2oCandpursueeffortstolimittheincreaseto1.5oC.Bythefallof2016,theprovincesandthefederalgovernmenthavecommittedtoagreeonapan-Canadianframeworkoncleangrowthandclimatechange.Canada'sfederalandprovincialregulationsalsoimposemandatorygreenhousegasemissionsreportingrequirementsandtheCompany'sQuebecminesaresubjecttocapandtraderegulation.Similarly,FinlandwasasignatorytotheParisAgreementandparticipatesintheEuropeanUnion'scapandtradesystem.MexicoisalsoapartytotheParisAgreementandhasenactedclimatechangelegislationwithagreenhousegasemissionreductiontargetof25%(unconditional)to40%(conditional)from2013businessasusuallevelsby2030.
TheCompanymonitorsandreportsannuallyitsdirectandindirectgreenhousegasemissionstotheinternationalCarbonDisclosureProject.InQuebec,theCompanyprimarilyuseshydroelectricpowerandisnotalargeproducerofgreenhousegases.Asaresult,Quebec'sregulatoryrequirementsarenotexpectedtohaveamaterialadverseeffectontheCompany.In2016,theCompany'stotalgreenhousegasesemissions(directandindirect)wereapproximately400,000tonnesequivalentCO2.In2016,theMeadowbankmineproducedapproximately186,000tonnesofgreenhousegases(directandindirect)mostlyfromtheproductionofelectricityfromdieselpowergeneration,whichisapproximately46%oftheCompany'stotalgreenhousegasemissions(withoutaccountingfortheCanadianMalarticmine).ItisexpectedthatminingoperationsattheMeliadineprojectandAmaruqdepositatMeadowbankwillalsoprimarilyusedieselpowergeneration.
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ThePinosAltosminepurchaseselectricitythatislargelyfossil-fuelgeneratedand,asaresult,itistheCompany'ssecondhighestgreenhousegasproducer(approximately103,000tonnesofgreenhousegasesin2016),whichisapproximately26%oftheCompany'stotaldirectandindirectgreenhousegasemissions(withoutaccountingfortheCanadianMalarticmine).WhiletheevolvingregulatoryrequirementsinrespectofgreenhousegasesandtheadditionalcostsrequiredtocomplyarenotexpectedtohaveamaterialadverseeffectontheCompany'soperations,suchrequirementsmaynotbeadoptedascurrentlyproposed,maybeamendedormayhaveunexpectedeffectsontheCompanyand,asaresult,mayhaveamaterialadverseeffectontheCompany'sfinancialperformanceanditsresultsofoperations.
DuetothenatureoftheCompany'sminingoperations,theCompanymayfaceliability,delaysandincreasedproductioncostsfromenvironmentalandindustrialaccidentsandpollution,andtheCompany'sinsurancecoveragemayproveinadequatetosatisfyfutureclaimsagainsttheCompany.
Thebusinessofgoldminingisgenerallysubjecttorisksandhazards,includingenvironmentalhazards(includinghazardoussubstances,suchascyanide),industrialaccidents,unusualorunexpectedrockformations,changesintheregulatoryenvironment,cave-ins,rockbursts,rockfalls,pitwallfailuresandfloodingandgoldbullionlosses(fromtheftorotherwise).Suchoccurrencescouldresultin,amongotherthings,damageto,ordestructionof,mineralpropertiesorproductionfacilities,personalinjuryordeath,environmentaldamage,delaysinmining,monetarylossesandpossiblelegalliability.Aswell,risksmayarisewithrespecttothemanagementoftailings,wasterock,mineclosureandmanagementofclosedminesites(whethertheCompanyoperatedtheminesiteoracquireditafteroperationswereconductedbyothers).TheCompanycarriesinsurancetoprotectitselfagainstcertainrisksofminingandprocessinginamountsthatitconsiderstobeadequatebutwhichmaynotprovideadequatecoverageincertainunforeseencircumstances.TheCompanymayalsobecomesubjecttoliabilityfor,amongotherthings,pollution,cave-insorotherhazardsagainstwhichitcannotinsureoragainstwhichithaselectednottoinsurebecauseofhighpremiumcostsorotherreasons,ortheCompanymaybecomesubjecttoliabilitieswhichexceedpolicylimits.Inthesecircumstances,theCompanymayincursignificantcoststhatcouldhaveamaterialadverseeffectonitsfinancialperformanceandresultsofoperations.Financialassurancesmayalsoberequiredwithrespecttoclosureandrehabilitationcosts.
TheCompanyissubjecttotheriskoflitigation,thecausesandcostsofwhichcannotbeknown.
TheCompanyissubjecttolitigationarisinginthenormalcourseofbusinessandmaybeinvolvedindisputeswithotherpartiesinthefuturewhichmayresultinlitigation.Thecausesofpotentialfuturelitigationcannotbeknownandmayarisefrom,amongotherthings,businessactivities,environmentallaws,volatilityinstockpriceorfailureorallegedfailuretocomplywithdisclosureobligations.Theresultsoflitigationcannotbepredictedwithcertainty.IftheCompanyisunabletoresolvelitigationfavourably,eitherbyjudicialdeterminationorsettlement,itmayhaveamaterialadverseeffectontheCompany'sfinancialperformanceandresultsofoperations.Forinstance,see"LegalProceedingsandRegulatoryActions–CanadianMalartic"foradiscussionofongoinglitigationinvolvingtheCanadianMalarticmine.
IntheeventofadisputeinvolvingtheforeignoperationsoftheCompany,theCompanymaybesubjecttotheexclusivejurisdictionofforeigncourtsormaynotbesuccessfulinsubjectingforeignpersonstothejurisdictionofcourtsinCanada.TheCompany'sabilitytoenforceitsrightscouldhaveanadverseeffectonitsfuturecashflows,earnings,resultsofoperationsandfinancialcondition.
TitletotheCompany'spropertiesmaybeuncertainandsubjecttorisks.
Theacquisitionoftitletomineralpropertiesisaverydetailedandtime-consumingprocess.Titleto,andtheareaof,mineralconcessionsmaybedisputed.AlthoughtheCompanybelievesithastakenreasonablemeasurestoensurepropertitletoitsproperties,thereisnoguaranteethattitletoanyofitspropertieswillnotbechallengedorimpaired.ThirdpartiesmayhavevalidclaimsonunderlyingportionsoftheCompany'sinterests,includingpriorunregisteredliens,agreements,transfersorclaims,includinglandclaimsbyindigenousgroups,andtitlemaybeaffectedby,amongotherthings,undetecteddefects.Inaddition,althoughtheCompanybelievesthatithassufficientsurfacerightsforitsoperations,theCompanymaybeunabletooperateitspropertiesaspermittedortoenforceitsrightsinrespectofitsproperties.
TheuseofderivativeinstrumentsfortheCompany'sby-productmetalproductionmaypreventgainsfrombeingrealizedfromsubsequentby-productmetalpriceincreases.
WhiletheCompany'sgeneralpolicyisnottosellforwarditsfuturegoldproduction,theCompanyhasused,andmayinthefutureuse,variousby-productmetalderivativestrategies,suchassellingfuturecontractsorpurchasingputoptions.TheCompanycontinuallyevaluatesthepotentialshortandlongtermbenefitsofengaginginsuchderivativestrategiesbaseduponcurrentmarketconditions.Noassurancecanbegiven,however,thattheuseofby-productmetalderivative
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strategieswillbenefittheCompanyinthefuture.ThereisapossibilitythattheCompanycouldlockinforwarddeliveriesatpriceslowerthanthemarketpriceatthetimeofdelivery.Inaddition,theCompanycouldfailtoproduceenoughby-productmetalstooffsetitsforwarddeliveryobligations,requiringtheCompanytopurchasethemetalinthespotmarketathigherpricestofulfillitsdeliveryobligationsor,forcashsettledcontracts,makecashpaymentstocounterpartiesinexcessofby-productrevenue.IftheCompanyislockedintoalowerthanmarketpriceforwardcontractorhastobuyadditionalquantitiesathigherprices,itsnetincomecouldbeadverselyaffected.Noneofthecurrentcontractsestablishingtheby-productmetalderivativespositionsqualifyforhedgeaccountingtreatmentunderIFRSandthereforeanyyear-endmark-to-marketadjustmentsarerecognizedinthe"(Gain)lossonderivativefinancialinstruments"lineitemoftheconsolidatedstatementsofincomeandcomprehensiveincome.See"RiskProfile–FinancialInstruments"intheAnnualMD&Aforadditionalinformation.
ThetradingpricefortheCompany'ssecuritiesisvolatile.
ThetradingpriceoftheCompany'scommonshareshasbeenandmaycontinuetobesubjecttolargefluctuationswhichmayresultinlossestoinvestors.ThetradingpriceoftheCompany'scommonsharesmayincreaseordecreaseinresponsetoanumberofeventsandfactors,including:
• changesinthemarketpriceofgoldorotherby-productmetalstheCompanysells;
• eventsaffectingeconomiccircumstancesinCanada,theUnitedStatesandelsewhere;
• trendsintheminingindustryandthemarketsinwhichtheCompanyoperates;
• changesinfinancialestimatesandrecommendationsbysecuritiesanalysts;
• acquisitions,divestituresandfinancings;
• quarterlyvariationsinoperatingresults;
• compliancewithnewandexistingregulations,includingwithrespecttowaterandtailingsmanagementandgreenhousegasemissions;
• theoperatingandsharepriceperformanceofothercompaniesthatinvestorsmaydeemcomparable;and
• purchasesorsalesoflargeblocksoftheCompany'scommonsharesorsecuritiesconvertibleintoorexchangeablefortheCompany'scommonshares.
WidepriceswingsarecurrentlycommoninthemarketsonwhichtheCompany'ssecuritiestrade.ThisvolatilitymayadverselyaffectthepricesoftheCompany'scommonsharesregardlessoftheCompany'soperatingperformance.
TheCompanyisdependentoninformationtechnologysystems.
TheCompany'soperationsdepend,inpart,uponinformationtechnologysystems.TheCompany`sinformationtechnologysystemsaresubjecttodisruption,damageorfailurefromanumberofsources,including,butnotlimitedto,computerviruses,securitybreaches,naturaldisasters,powerlossanddefectsindesign.AlthoughtodatetheCompanyhasnotexperiencedanymateriallossesrelatingtoinformationtechnologysystemdisruptions,damageorfailure,therecanbenoassurancethatitwillnotincursuchlossesinthefuture.Anyoftheseandothereventscouldresultininformationtechnologysystemsfailures,operationaldelays,productiondowntimes,destructionorcorruptionofdata,securitybreachesorothermanipulationorimproperuseoftheCompany'ssystemsandnetworks,anyofwhichcouldhaveadverseeffectsontheCompany`sreputation,resultsofoperationsandfinancialperformance.
TheCompanymaynotbeabletocomplywiththerequirementsofSection404oftheSarbanes-OxleyAct.
Section404oftheSarbanes-OxleyActof2002("SOX")requiresanannualassessmentbymanagementoftheeffectivenessoftheCompany'sinternalcontroloverfinancialreporting.Section404ofSOXalsorequiresanannualattestationreportbytheCompany'sindependentauditorsaddressingtheeffectivenessoftheCompany'sinternalcontroloverfinancialreporting.TheCompanyhascompleteditsSection404assessmentandreceivedtheauditors'attestationasofDecember31,2016.
IftheCompanyfailstomaintaintheadequacyofitsinternalcontroloverfinancialreporting,assuchstandardsaremodified,supplementedoramendedfromtimetotime,theCompanymaynotbeabletoconcludethatithaseffectiveinternalcontroloverfinancialreportinginaccordancewithSection404ofSOX.TheCompany'sfailuretosatisfytherequirementsofSection404ofSOXonanongoing,timelybasiscouldresultinthelossofinvestorconfidenceinthereliabilityofitsfinancialstatements,whichinturncouldharmtheCompany'sbusinessandnegativelyimpactthetrading
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priceofitscommonsharesormarketvalueofitsothersecurities.Inaddition,anyfailuretoimplementrequiredneworimprovedcontrols,ordifficultiesencounteredintheirimplementation,couldharmtheCompany'soperatingresultsorcauseittofailtomeetitsreportingobligations.FutureacquisitionsofcompaniesmayprovidetheCompanywithchallengesinimplementingtherequiredprocesses,proceduresandcontrolsinitsacquiredoperations.AcquiredcompaniesmaynothavedisclosurecontrolsandproceduresorinternalcontroloverfinancialreportingthatareasthoroughoreffectiveasthoserequiredbysecuritieslawscurrentlyapplicabletotheCompany.
NoevaluationcanprovidecompleteassurancethattheCompany'sinternalcontroloverfinancialreportingwillpreventmisstatementduetoerrororfraudorwilldetectoruncoverallcontrolissuesorinstancesoffraud,ifany.TheeffectivenessoftheCompany'scontrolsandprocedurescouldalsobelimitedbysimpleerrorsorfaultyjudgments.Inaddition,astheCompanycontinuestoexpand,thechallengesinvolvedinmaintainingadequateinternalcontroloverfinancialreportingwillincreaseandwillrequirethattheCompanycontinuetoimproveitsinternalcontroloverfinancialreporting.TheCompanycannotbecertainthatitwillbesuccessfulincontinuingtocomplywithSection404ofSOX.
DIVIDENDS TheCompany'scurrentpolicyistopayquarterlydividendsonitscommonsharesand,onFebruary15,2017,theCompanydeclaredaquarterlydividendof$0.10percommonshare,payableonMarch15,2017.In2016,thedividendpaidwas$0.36percommonshare(quarterlypaymentsof$0.08percommonshareinquartersoneandtwoand$0.10percommonshareinquartersthreeandfour).In2015and2014,thedividendpaidwas$0.32percommonshare(quarterlypaymentsof$0.08percommonshare).AlthoughtheCompanyexpectstocontinuepayingacashdividend,futuredividendswillbeatthediscretionoftheBoardandwillbesubjecttofactorssuchastheCompany'searnings,financialconditionandcapitalrequirements.TheCompany'sbankcreditfacilitycontainsacovenantthatrestrictstheCompany'sabilitytodeclareorpaydividendsifcertaineventsofdefaultunderthebankcreditfacilityhaveoccurredandarecontinuing.
DESCRIPTION OF CAPITAL STRUCTURE TheCompany'sauthorizedcapitalconsistsofanunlimitednumberofsharesofoneclassdesignatedascommonshares.AlloutstandingcommonsharesoftheCompanyarefullypaidandnon-assessable.Theholdersofthecommonsharesareentitledtoonevotepershareatmeetingsofshareholdersandtoreceivedividendsif,asandwhendeclaredbytheBoard.Intheeventofvoluntaryorinvoluntaryliquidation,dissolutionorwinding-upoftheCompany,afterpaymentofalloutstandingdebts,theremainingassetsoftheCompanyavailablefordistributionwouldbedistributedrateablytotheholdersofthecommonshares.HoldersofthecommonsharesoftheCompanyhavenopre-emptive,redemption,exchangeorconversionrights.TheCompanymaynotcreateanyclassorseriesofsharesormakeanymodificationtotheprovisionsattachingtotheCompany'scommonshareswithouttheaffirmativevoteoftwo-thirdsofthevotescastbytheholdersofthecommonshares.
RATINGS TheratingoftheCompany'snotes(the"Notes")issuedundertheNotePurchaseAgreements(asdefinedunder"MaterialContracts–NotePurchaseAgreements")bytheratingagencyDominionBondRatingService("DBRS")asatDecember31,2016isBBB(low)withastableoutlook.
DBRS'slong-termcreditratingsareonaratingscalethatrangesfromAAAtoD,whichrepresentstherangefromhighesttolowestqualityofsecuritiesrated.DBRS'sBBBratingassignedtotheCompany'sNotesisthefourthhighestofthetenratingcategoriesforlong-termdebt.Debtsecuritiesrated"BBB"areofadequatecreditquality,andthecapacityforthepaymentoffinancialobligationsisconsideredacceptable.However,theobligorisfairlysusceptibletoadversechangesinfinancialandeconomicconditions,ortheremaybeotheradverseconditionspresentwhichreducethestrengthoftheobligor.Areferenceto"high"or"low"reflectstherelativestrengthwithintheratingcategory.DBRShasalsoassignedastableoutlooktotherating,whichindicatesthedirectionDBRSconsiderstheratingisheadedshouldpresenttrendscontinue.
TheCompanyunderstandsthattheratingisbasedon,amongotherthings,informationfurnishedtoDBRSbytheCompanyandinformationobtainedbyDBRSfrompubliclyavailablesources.ThecreditratinggiventotheCompany'sNotesbyDBRSisnotarecommendationtobuy,holdorselldebtinstrumentssincesuchratingdoesnotcommentastomarketpriceorsuitabilityforaparticularinvestor.Thereisnoassurancethatanyratingwillremainineffectforanygivenperiodoftimeorthatanyratingwillnotberevisedorwithdrawnentirelybyaratingagencyinthefutureif,initsjudgment,
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circumstancessowarrant.Creditratingsareintendedtoprovideinvestorswith:(i)anindependentmeasureofthecreditqualityofanissueofsecurities;(ii)anindicationofthelikelihoodofrepaymentforanissueofsecurities;and(iii)anindicationofthecapacityandwillingnessoftheissuertomeetitsfinancialobligationsinaccordancewiththetermsofthosesecurities.ThecreditratingaccordedtotheNotesmaynotreflectthepotentialimpactofallrisksonthevalueofdebtinstruments,includingrisksrelatedtomarketorotherfactorsdiscussedinthisAIF.IfDBRSlowersthecreditratingontheNotes,particularlyadowngradebelowinvestmentgrade,itcouldadverselyaffecttheCompany'scostoffinancingandaccesstoliquidityandcapital.Seealso"RiskFactors".TheCompanypaysDBRSanannualfeeinconnectionwiththeratingoftheNotesandanadditionalfeeifandwhenadditionalNotesareissued.NootherpaymentshavebeenmadetoDBRSinrespectofotherservicesduringthelasttwoyears.
MARKET FOR SECURITIES Common Shares
TheCompany'scommonsharesarelistedandtradedontheTSXandontheNewYorkStockExchange(the"NYSE")underthesymbol"AEM".OnMarch22,2017,theclosingpriceofthecommonshareswasC$59.12ontheTSXand$44.37ontheNYSE.
ThefollowingtablesetsforththehighandlowsalepricesandtheaveragedailytradingvolumeforcompositetradingoftheCompany'scommonsharesontheTSXandtheNYSEsinceJanuary1,2016.
TSX NYSE
High (C$)
Low (C$)
Average Daily
Volume
High ($)
Low ($)
Average Daily Volume
2016 January 42.67 37.07 1,766,650 30.29 26.10 2,994,987
February 51.50 40.68 1,914,714 37.24 28.95 3,523,566
March 51.27 44.07 1,604,522 39.49 32.87 2,935,672
April 59.37 45.97 1,249,110 47.33 35.09 2,420,956
May 62.56 56.01 1,413,143 48.47 42.71 2,772,742
June 69.81 58.33 1,387,374 53.79 44.51 2,533,994
July 76.35 67.51 1,076,773 58.53 51.03 1,939,081
August 78.35 65.60 943,430 60.10 50.00 1,596,658
September 74.57 65.38 985,527 57.35 50.00 2,013,586
October 71.34 58.12 1,227,329 54.41 43.93 2,030,711
November 71.16 53.20 1,231,504 53.17 39.48 2,304,881
December 60.00 46.91 1,385,264 44.67 35.05 1,982,900
2017 January 62.98 55.63 1,158,896 48.27 41.38 1,804,811
February 67.41 55.32 1,129,025 51.21 41.80 1,707,688
March(toMarch22) 59.96 52.85 1,211,001 44.76 39.30 1,980,015
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DIRECTORS AND OFFICERS OF THE COMPANY Directors
ThefollowingisabriefbiographyofeachoftheCompany'sdirectors:
Dr.LeanneM.Baker,ofSebastopol,California,isanindependentdirectorofAgnicoEagle.FromNovember2011untilJune2013,Dr.BakerwasthePresidentandChiefExecutiveOfficerofSutterGoldMiningInc.Previously,Dr.BakerwasemployedbySalomonSmithBarneywhereshewasoneofthetop-rankedminingsectorequityanalystsintheUnitedStates.Dr.BakerisagraduateoftheColoradoSchoolofMines(M.S.andPh.D.inmineraleconomics).Dr.BakerhasbeenadirectorofAgnicoEaglesinceJanuary1,2003,andisalsoadirectorofSutterGoldMiningInc.(aminingexplorationcompanytradedontheTSX-VandtheOTCQX),ReunionGoldCorporation(aminingexplorationcompanytradedontheTSX-V)andMcEwenMiningInc.(agoldandsilverproducingcompanytradedontheNYSEArcaandtheTSX).Area of expertise: CorporateFinanceandMineralEconomics.
SeanBoyd,CPA,CA,ofToronto,Ontario,istheVice-ChairmanandChiefExecutiveOfficerandadirectorofAgnicoEagle.Mr.BoydhasbeenwithAgnicoEaglesince1985.PriortohisappointmentasVice-ChairmanandChiefExecutiveOfficerinApril2015,Mr.BoydservedasVice-Chairman,PresidentandChiefExecutiveOfficerfrom2012to2015,Vice-ChairmanandChiefExecutiveOfficerfrom2005to2012andasPresidentandChiefExecutiveOfficerfrom1998to2005,Vice-PresidentandChiefFinancialOfficerfrom1996to1998,TreasurerandChiefFinancialOfficerfrom1990to1996,SecretaryTreasurerduringaportionof1990andComptrollerfrom1985to1990.PriortojoiningAgnicoEaglein1985,hewasastaffaccountantwithClarksonGordon(Ernst&Young).Mr.BoydisaCharteredAccountantandagraduateoftheUniversityofToronto(B.Comm.).Mr.BoydhasbeenadirectorofAgnicoEaglesinceApril14,1998.Area of expertise: ExecutiveManagementandFinance.
MartineA.Celej,ofToronto,Ontario,isanindependentdirectorofAgnicoEagle.Ms.CelejiscurrentlyaVice-President,InvestmentAdvisorwithRBCDominionSecuritiesandhasbeenintheinvestmentindustrysince1989.SheisagraduateofVictoriaCollegeattheUniversityofToronto(B.A.(Honours)).Ms.CelejhasbeenadirectorofAgnicoEaglesinceFebruary14,2011.Area of expertise: InvestmentManagement.
RobertJ.Gemmell,ofToronto,Ontario,isanindependentdirectorofAgnicoEagle.Nowretired,Mr.Gemmellspent25yearsasaninvestmentbankerintheUnitedStatesandinCanada.Mostrecently,hewasPresidentandChiefExecutiveOfficerofCitigroupGlobalMarketsCanadaanditspredecessorcompanies(SalomonBrothersCanadaandSalomonSmithBarneyCanada)from1996to2008.Inaddition,hewasamemberoftheGlobalOperatingCommitteeofCitigroupGlobalMarketsfrom2006to2008.Mr.GemmellisagraduateofCornellUniversity(B.A.),OsgoodeHallLawSchool(LL.B.)andtheSchulichSchoolofBusiness(M.B.A.).Mr.GemmellhasbeenadirectorofAgnicoEaglesinceJanuary1,2011.Area ofexpertise: CorporateFinanceandBusinessStrategy.
MelLeiderman,FCPA,FCA,TEP,ICD.D,ofToronto,Ontario,isanindependentdirectorofAgnicoEagle.Mr.LeidermanistheseniorpartneroftheTorontoaccountingfirmLiptonLLP,CharteredAccountants.HeisagraduateoftheUniversityofWindsor(B.A.)andisacertifieddirectoroftheInstituteofCorporateDirectors(ICD.D).HehasbeenadirectorofAgnicoEaglesinceJanuary1,2003andisalsoadirectorandachairmanoftheAuditCommitteeofMorguardNorthAmericanResidentialREIT.Area of expertise: AuditandAccounting.
DeborahMcCombe,P.Geo.ofToronto,Ontario,isanindependentdirectorofAgnicoEagle.Mrs.McCombeisthePresidentandCEOofRoscoePostleAssociatesInc.,aminingconsultantfirm("RPA").Shehasover30years'ofinternationalexperienceinexplorationprojectmanagement,feasibilitystudies,reserveestimation,duediligencestudiesandvaluationstudies.PriortojoiningRPA,Ms.McCombewasChiefMiningConsultantfortheOntarioSecuritiesCommissionandwasinvolvedinthedevelopmentandimplementationofNI43-101.SheisactivelyinvolvedinindustryassociationsasamemberoftheCommitteeforMineralReservesInternationalReportingStandards–(CIM);PresidentoftheAssociationofProfessionalGeoscientistsofOntario(2010–2011);aDirectoroftheProspectorsandDevelopersAssociationofCanada(1999–2011);aCIMDistinguishedLectureronNI43-101;amemberoftheCIMStandingCommitteeonReserveDefinitions;amemberoftheCSA'sMiningTechnicalAdvisoryandMonitoringCommittee;andaGuestLecturerattheSchulichSchoolofBusiness(M.B.A.inGlobalMineManagement)atYorkUniversity.Ms.McCombeholdsadegreeinGeologyfromWesternUniversity.Ms.McCombehasbeenadirectorofAgnicoEaglesinceFebruary12,2014.Area of expertise: ExecutiveManagementandMining.
JamesD.Nasso,ICD.D,ofToronto,Ontario,isChairmanoftheBoardofDirectorsandanindependentdirectorofAgnicoEagle.Mr.Nassoisnowretired.Mr.NassoisagraduateofSt.FrancisXavierUniversity(B.Comm.)andisacertified
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directoroftheInstituteofCorporateDirectors(ICD.D).Mr.NassohasbeenadirectorofAgnicoEaglesinceJune27,1986.Area of expertise:ManagementandBusinessStrategy.
Dr.SeanRiley,ofAntigonish,NovaScotia,isanindependentdirectorofAgnicoEagle.Nowretired,Dr.RileyservedasPresidentofSt.FrancisXavierUniversityfrom1996to2014.Priorto1996,hiscareerwasinfinanceandmanagement,firstincorporatebankingandlaterinmanufacturing.Dr.RileyisagraduateofSt.FrancisXavierUniversity(B.A.(Honours))andofOxfordUniversity(M.Phil,D.Phil,InternationalRelations).Dr.RileyhasbeenadirectorofAgnicoEaglesinceJanuary1,2011.Area of expertise :ManagementandBusinessStrategy.
J.MerfynRoberts,CA,ofLondon,England,isanindependentdirectorofAgnicoEagle.Nowretired,Mr.Robertswasafundmanagerandinvestmentadvisorformorethan25yearsandhasbeencloselyassociatedwiththeminingindustry.From2007untilhisretirementin2011,hewasaseniorfundmanagerwithCQSManagementLtd.inLondon.Mr.RobertsisagraduateofLiverpoolUniversity(B.Sc.,Geology)andOxfordUniversity(M.Sc.,Geochemistry)andisamemberoftheInstituteofCharteredAccountantsinEnglandandWales.Mr.RobertshasbeenadirectorofAgnicoEaglesinceJune17,2008,andisalsoadirectorandamemberoftheAuditCommitteeofNewportExplorationLimitedandadirectorofRugbyMiningInc.Area of expertise: InvestmentManagement.
JamieSokalsky,CPA,CA,ofToronto,Ontario,isanindependentdirectorofAgnicoEagle.Nowretired,Mr.Sokalskyhasover20years'experienceasaseniorexecutiveintheminingindustry,mostrecentlyasChiefExecutiveOfficerandPresidentofBarrickGoldCorporation("Barrick")fromJune2012toSeptember2014,andasChiefFinancialOfficerofBarrickfrom1999toJune2012andExecutiveVicePresidentofBarrickfromApril2004toJune2012.Priortoenteringtheminingindustry,Mr.Sokalskyservedfor10yearsatGeorgeWestonLimitedandbeganhisprofessionalcareeratErnst&WhinneyCharteredAccountants(KPMG).Mr.SokalskyisgraduateofLakeheadUniversity(B.Comm.(Honours)).Mr.SokalskyhasbeenadirectorofAgnicoEaglesinceJune2,2015,andisalsotheChairmanoftheboardofdirectorsofProbeMetalsInc.andadirectorofPengrowthEnergyCorporationandRoyalGold,Inc.Area of expertise: ExecutiveManagement,FinanceandAccounting.
HowardR.Stockford,P.Eng.,ofToronto,Ontario,isanindependentdirectorofAgnicoEagle.Nowretired,Mr.Stockfordhasover50yearsofexperienceintheminingindustry.Mostrecently,hewasExecutiveVice-PresidentofAurResourcesInc.("Aur")andadirectorofAurfrom1984untilAugust2007,whenitwastakenoverbyTeckComincoLimited.Mr.StockfordhaspreviouslyservedasPresidentoftheCIMandisamemberoftheAssociationofProfessionalEngineersofOntario,theProspectorsandDevelopersAssociationofCanadaandtheSocietyofEconomicGeologists.Mr.StockfordisagraduateoftheRoyalSchoolofMines,ImperialCollege,LondonUniversity,U.K.(B.Sc.,MiningGeology).Mr.StockfordhasbeenadirectorofAgnicoEaglesinceMay6,2005.Area of expertise: ExecutiveManagementandMining.
PerttiVoutilainen,ofEspoo,Finland,isanindependentdirectorofAgnicoEagle.Nowretired,Mr.Voutilainenisaminingindustryveteran.Until2005,hewastheChairmanoftheboardofdirectorsofRiddarhyttanResourcesAB.Previously,Mr.VoutilainenwastheChairmanoftheboardofdirectorsandChiefExecutiveOfficerofKansallisBankingGroupandPresidentafteritsmergerwithUnionBankofFinlanduntilhisretirementin2000.HewasalsoemployedbyOutokumpuCorp.,Finland'slargestminingandmetalscompany,for26years,includingasChiefExecutiveOfficerfor11years.Mr.VoutilainenholdsthehonorarytitleofMiningCounselor(Bergsrad),whichwasawardedtohimbythePresidentoftheRepublicofFinlandin2003.Mr.VoutilainenisagraduateofHelsinkiUniversityofTechnology(M.Sc.),HelsinkiUniversityofBusinessAdministration(M.Sc.)andPennsylvaniaStateUniversity(M.Eng.).HehasbeenadirectorofAgnicoEaglesinceDecember13,2005.Area of expertise: MiningandFinance.
Theby-lawsofAgnicoEagleprovidethatdirectorswillholdofficeforatermexpiringatthenextannualmeetingofshareholdersofAgnicoEagleoruntiltheirsuccessorsareelectedorappointedorthepositionisvacated.TheBoardannuallyappointstheofficersofAgnicoEagle,whoaresubjecttoremovalbyresolutionoftheBoardatanytime,withorwithoutcause(intheabsenceofawrittenagreementtothecontrary).
Committees
ThemembersoftheAuditCommitteeareDr.LeanneM.Baker(Chair),MelLeiderman,Dr.SeanRileyandJamieSokalsky.
ThemembersoftheCompensationCommitteeareRobertJ.Gemmell(Chair),MartineA.Celej,J.MerfynRobertsandHowardR.Stockford.
ThemembersoftheCorporateGovernanceCommitteearePerttiVoutilainen(Chair),JamesD.NassoandJ.MerfynRoberts.
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ThemembersoftheHealth,Safety,EnvironmentalandSustainableDevelopmentCommitteeareDeborahMcCombe(Chair),JamesD.NassoandHowardR.Stockford.
Officers
ThefollowingisabriefbiographyofeachoftheCompany'sofficers(forMr.Boyd,see"DirectorsandOfficersoftheCompany–Directors"):
AmmarAl-Joundi,ofToronto,Ontario,isPresidentofAgnicoEagle,apositionhehasheldsinceApril6,2015.FromSeptember2010toJune2012,Mr.Al-JoundiwasSeniorVice-PresidentandChiefFinancialOfficerofAgnicoEagle.PriortoreturningtoAgnicoEaglein2015,Mr.Al-JoundiservedinvariousrolesatBarrick,includingasChiefFinancialOfficerfromJuly2012toFebruary2015,SeniorExecutiveVicePresidentfromJuly2014toFebruary2015andExecutiveVicePresidentfromJuly2012toJuly2014.PriortojoiningAgnicoEaglein2010,Mr.Al-Joundispent11yearsatBarrickservinginvariousseniorfinancialroles,includingSeniorVicePresidentofCapitalAllocationandBusinessStrategy,SeniorVicePresidentofFinance,andExecutiveDirectorandChiefFinancialOfficerofBarrickSouthAmerica.Priortojoiningtheminingindustry,Mr.Al-JoundiservedasVicePresident,StructuredFinanceatCitibank,Canada.Mr.Al-JoundiisagraduateofWesternUniversity(M.B.A.(Honours))andtheUniversityofToronto(BASc(MechanicalEngineering)).
DonaldG.Allan,CPA,CA, ofToronto,Ontario,isSeniorVice-President,CorporateDevelopmentofAgnicoEagle,apositionhehasheldsinceDecember14,2006.Priortothat,Mr.AllanhadbeenVice-President,CorporateDevelopmentsinceMay6,2002.Priortothat,Mr.Allanspent16yearsasaninvestmentbankercoveringtheminingandnaturalresourcessectorswiththefirmsSalomonSmithBarneyandMerrillLynch.Mr.AllanisagraduateoftheAmosTuckSchool,DartmouthCollege(M.B.A.)andtheUniversityofToronto(B.Comm.).Mr.AllanisalsoqualifiedasaCharteredAccountant.
AlainBlackburn,P.Eng.,ofOakville,Ontario,isSeniorVice-President,ExplorationofAgnicoEagle,apositionhehasheldsinceDecember14,2006.Priortothat,Mr.BlackburnhadbeenVice-President,ExplorationsinceOctober1,2002.Priortothat,Mr.BlackburnservedasAgnicoEagle'sManager,CorporateDevelopmentfromJanuary1999andExplorationManagerfromSeptember1996toJanuary1999.Mr.BlackburnjoinedAgnicoEaglein1988asChiefGeologistattheLaRondemine.Mr.BlackburnisagraduateofUniversitéduQuebecdeChicoutimi(P.Eng.)andUniversitéduQuebecenAbitibi-Temiscamingue(M.Sc.).
LouiseGrondin,Eng.P.Eng.,ofToronto,Ontario,isSeniorVice-President,Environment,SustainableDevelopmentandPeopleofAgnicoEagle,apositionshehasheldsinceFebruary2015.Priortothat,Ms.GrondinwasSeniorVice-President,EnvironmentandSustainableDevelopmentandbeforethatshewasVice-President,EnvironmentandSustainableDevelopment.PriortoheremploymentwithAgnicoEagle,Ms.GrondinworkedforBillitonCanadaLtd.asManagerEnvironment,HumanResourcesandSafety.Ms.GrondinisagraduateoftheUniversityofOttawa(B.Sc.)andMcGillUniversity(M.Sc.).Ms.GrondinisamemberoftheProfessionalEngineersofOntarioandoftheOrdredesIngénieursduQuébec.
R.GregoryLaing, ofOakville,Ontario,isGeneralCounsel,SeniorVice-President,LegalandCorporateSecretaryofAgnicoEagle,apositionhehasheldsinceDecember14,2006,priortowhich,Mr.LainghadbeenGeneralCounsel,Vice-President,LegalandCorporateSecretarysinceSeptember19,2005.Priortothat,hewasVicePresident,LegalofGoldcorpInc.fromOctober2003toJune2005andGeneralCounsel,VicePresident,LegalandCorporateSecretaryofTVXGoldInc.fromOctober1995toJanuary2003.HeworkedasacorporatesecuritieslawyerfortwoprominentTorontolawfirmspriortothat.Mr.LaingisagraduateoftheUniversityofWindsor(LL.B.)andQueen'sUniversity(B.A.).
MarcLegault,P.Eng,ofMississauga,Ontario,isSeniorVice-President,Operations–U.S.AandLatinAmericaofAgnicoEagle,apositionhehasheldsinceFebruary2017.Priortothat,hewasSeniorVice-President,ProjectEvaluationssince2012.Mr.LegaulthasbeenwithAgnicoEaglesince1988,whenhewashiredasanexplorationgeologistinVald'Or,Quebec.Sincethen,hehastakenonsuccessivelyincreasingresponsibilitiesintheCompany'sexploration,minegeologyandprojectevaluationactivities.Mr.LegaultisagraduateofCarletonUniversity(M.Sc.inGeology)andQueen'sUniversity(B.Sc.H.inGeologicalEngineering).Mr.LegaultisamemberoftheProfessionalEngineersofOntarioandoftheOrdredesIngénieursduQuébec.
JeanRobitaille,ofOakville,Ontario,isSeniorVice-President,BusinessStrategyandTechnicalServicesofAgnicoEagle,apositionhehasheldsinceFebruary2014.Priortothat,heheldvariouspositionswithAgnicoEaglesince1988,mostrecentlyasSeniorVice-President,TechnicalServicesandProjectDevelopment,Vice-President,Metallurgy&Marketing,GeneralManager,Metallurgy&MarketingandMillSuperintendentandProjectManagerfortheexpansionoftheLaRondemill.PriortojoiningAgnicoEagle,Mr.RobitailleworkedasametallurgistwithTeckMiningGroup.Mr.Robitailleisa
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directorofOrlaMiningLtd.(aminingexplorationcompany)tradedontheTSX-VandhasservedontheboardofdirectorsoftheCanadaMiningInnovationCouncilsinceMay2014.Mr.RobitailleisamininggraduateoftheCollegedel'AbitibiTémiscaminguewithaspecialtyinmineralprocessing.
DavidSmith,P.Eng.,ofToronto,Ontario,isSeniorVice-President,FinanceandChiefFinancialOfficerofAgnicoEagle,apositionhehasheldsinceOctober24,2012.Priortothat,hewasSeniorVice-President,StrategicPlanningandInvestorRelations,apositionheheldsinceJanuary1,2011,priortothathewasSeniorVice-President,InvestorRelationsandpriortothathewasVice-President,InvestorRelations.HestartedworkininvestorrelationsatAgnicoEagleinFebruary2005.Priortothat,Mr.Smithwasamininganalystformorethanfiveyearsandheldavarietyofminingengineeringpositions,bothinCanadaandabroad.Mr.SmithisaCharteredDirectorandanalternateDirectoroftheWorldGoldCouncil.HeisagraduateofQueen'sUniversity(B.Sc.)andtheUniversityofArizona(M.Sc.).Mr.SmithisaProfessionalEngineer.
YvonSylvestre,ofMississauga,Ontario,isSeniorVice-President,Operations–Canada&Europe,apositionhehasheldsinceFebruary2014.Priortothat,hewasSeniorVice-President,Operations,Vice-President,Construction,MineGeneralManagerattheGoldexdivisionofAgnicoEagleand,previously,MillSuperintendentattheLaRondedivision.Mr.SylvestreisaMetallurgicalEngineeringTechnologygraduatefromCambrianCollegeinSudbury.Followinggraduation,heservedasMetallurgistandMillSuperintendentattheJouteldivisionofAgnicoEagleandalsoheldthepositionofMillSuperintendentattheTroilusdivisionofInmetMiningCorporation.
Shareholdings of Directors and Officers
AsatMarch22,2017,thedirectorsandofficersofAgnicoEagle,asagroup,beneficiallyowned,orcontrolledordirected,directlyorindirectly,anaggregateof478,872commonsharesorapproximately0.2%ofthe225,959,956issuedandoutstandingcommonshares.
Cease Trade Orders, Bankruptcies, Penalties or Sanctions
NodirectororofficeroftheCompanyis,orwithintenyearspriortothedatehereofhasbeen,adirector,chiefexecutiveofficerorchieffinancialofficerofanycompany(includingtheCompany)that:(i)wassubjecttoaceasetradeorder,anordersimilartoaceasetradeorderoranorderthatdeniedtherelevantcompanyaccesstoanyexemptionundersecuritieslegislation,thatwasineffectforaperiodofmorethan30consecutivedays,thatwasissuedwhilethedirectororofficerwasactinginthecapacityasdirector,chiefexecutiveofficerorchieffinancialofficer;or(ii)wassubjecttoaceasetradeorder,anordersimilartoaceasetradeorderoranorderthatdeniedtherelevantcompanyaccesstoanyexemptionundersecuritieslegislation,thatwasineffectforaperiodofmorethan30consecutivedays,thatwasissuedafterthedirectororofficerceasedtobeadirector,chiefexecutiveofficerorchieffinancialofficerandwhichresultedfromaneventthatoccurredwhilethatpersonwasactinginthecapacityasdirector,chiefexecutiveofficerorchieffinancialofficer.
Exceptasdescribedbelow,nodirectororofficeroftheCompany,orashareholderholdingasufficientnumberofsecuritiesoftheCompanytoaffectmateriallythecontroloftheCompany:(i)is,orwithintenyearspriortothedatehereofhasbeen,adirectororofficerofanycompany(includingtheCompany)that,whilethatpersonwasactinginthatcapacity,orwithinayearofthatpersonceasingtoactinthatcapacity,becamebankrupt,madeaproposalunderanylegislationrelatingtobankruptcyorinsolvencyorwassubjecttoorinstitutedanyproceedings,arrangementorcompromisewithcreditorsorhadareceiver,receivermanagerortrusteeappointedtoholditsassets;or(ii)has,withintenyearspriortothedatehereof,becomebankrupt,madeaproposalunderanylegislationrelatingtobankruptcyorinsolvency,orbecomesubjecttoorinstitutedanyproceedings,arrangementorcompromisewithcreditors,orhadareceiver,receivermanagerortrusteeappointedtoholdtheassetsofthedirector,officerorshareholder.
NodirectororofficeroftheCompany,orashareholderholdingasufficientnumberofsecuritiesoftheCompanytoaffectmateriallythecontroloftheCompany,hasbeensubjectto:(i)anypenaltiesorsanctionsimposedbyacourtrelatingtosecuritieslegislationorbyasecuritiesregulatoryauthorityorhasenteredintoasettlementagreementwithasecuritiesregulatoryauthority;or(ii)anyotherpenaltiesorsanctionsimposedbyacourtorregulatorybodythatwouldlikelybeconsideredimportanttoareasonableinvestorinmakinganinvestmentdecision.
Mr.Leiderman,adirectoroftheCompany,wasadirectorofColossusMineralsInc.("Colossus")fromAugust1,2011untilhisresignationonNovember13,2013.OnFebruary7,2014,ColossusfiledaproposaltoitscreditorsundertheBankruptcy and Insolvency Act (Canada).OnFebruary25,2014,theresolutionapprovinganamendedproposalwasapprovedbytherequisitemajorityofColossus'creditors.OnApril30,2014,Colossusannouncedthatithadcompletedtheimplementationofthecourt-approvedproposal.
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Conflicts of Interest
TothebestoftheCompany'sknowledge,andotherthanasdisclosedinthisAIF,therearenoknownexistingorpotentialconflictsofinterestbetweentheCompanyandanydirectororofficeroftheCompany,exceptthatcertainofthedirectorsandofficersoftheCompanyserveasdirectorsandofficersofotherpubliccompaniesandthereforeitispossiblethataconflictmayarisebetweentheirdutiesasadirectororofficeroftheCompanyandtheirdutiesasadirectororofficerofsuchothercompany.
AUDIT COMMITTEE TheAuditCommitteehastwoprimaryobjectives.ThefirstistoadvisetheBoardofDirectorsinitsoversightresponsibilitiesregarding:
• thequalityandintegrityoftheCompany'sfinancialreportsandinformation;
• theCompany'scompliancewithlegalandregulatoryrequirements;
• theeffectivenessoftheCompany'sinternalcontrolsforfinance,accounting,internalaudit,ethicsandlegalandregulatorycompliance;
• theperformanceoftheCompany'sauditing,accountingandfinancialreportingfunctions;
• thefairnessofrelatedpartyagreementsandarrangementsbetweentheCompanyandrelatedparties;and
• theindependentauditors'performance,qualificationsandindependence.
ThesecondprimaryobjectiveoftheAuditCommitteeistopreparethereportsrequiredtobeincludedinmanagementinformationcircularsoftheCompanyinaccordancewithapplicablelawsortherulesofapplicablesecuritiesregulatoryauthorities.
TheBoardhasadoptedanAuditCommitteecharter,whichprovidesthateachmemberoftheAuditCommitteemustbeunrelatedtoandindependentfromtheCompanyasdeterminedbytheBoardinaccordancewiththeapplicablerequirementsofthelawsgoverningtheCompany,thestockexchangesonwhichtheCompany'ssecuritiesarelistedandapplicablesecuritiesregulatoryauthorities.Inaddition,eachmembermustbefinanciallyliterateandatleastonememberoftheAuditCommitteemustbeanauditcommitteefinancialexpert,asthetermisdefinedintherulesoftheSEC.TheAuditCommitteecharterisattachedasScheduleAtothisAIF.
Composition of the Audit Committee
TheAuditCommitteeiscomposedentirelyofdirectorswhoareunrelatedtoandindependentfromtheCompany(currently,Dr.Baker(Chair),Mr.Leiderman,Dr.RileyandMr.Sokalsky),eachofwhomisfinanciallyliterate,asthetermisusedintheCSA'sMultilateralInstrument52-110–Audit Committees .Inaddition,Mr.LeidermanandMr.SokalskyareCharteredAccountants;theBoardhasdeterminedthatbothofthemqualifyasanauditcommitteefinancialexperts,asthetermisdefinedintherulesoftheSEC.
Relevant Education and Experience
TheeducationandexperienceofeachmemberoftheAuditCommitteeissetoutunder"DirectorsandOfficersoftheCompany–Directors"above.
Pre-Approval Policies and Procedures
In2003,theAuditCommitteeestablishedapolicytopre-approveallservicesprovidedbytheCompany'sindependentpublicauditor,Ernst&YoungLLP.TheAuditCommitteedetermineswhichnon-auditservicestheindependentauditorsareprohibitedfromprovidingandauthorizespermittednon-auditservicestobeperformedbytheindependentauditorstotheextentthoseservicesarepermittedbySOXandotherapplicablelegislationandregulations.AllfeespaidtoErnst&YoungLLPin2016werepre-approvedbytheAuditCommittee.
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External Auditor Service Fees
Ernst&YoungLLPhasservedastheCompany'sindependentpublicauditorforeachofthefiscalyearsendedDecember31,2016and2015.FeespaidtoErnst&YoungLLPin2016and2015aresetoutbelow.
Year Ended December 31,
2016 2015 (C$ thousands) Auditfees 2,461 2,305
Audit-relatedfees(1) 118 222
Taxfees(2) 851 308
Allotherfees(3) 144 214
Total (4) 3,574 3,049
Notes:
(1) Audit-relatedfeesconsistoffeespaidforassuranceandrelatedservicesperformedbytheauditorsthatarereasonablyrelatedtotheperformanceoftheauditoftheCompany'sfinancialstatements.Thisincludesconsultationwithrespecttofinancialreporting,accountingstandardsandcompliancewithSection404ofSOX.
(2) Taxfeeswerepaidforprofessionalservicesrelatingtotaxcompliance,taxadviceandtaxplanning.Theseservicesincludedthereviewoftaxreturnsandtaxplanningandadvisoryservicesinconnectionwithinternationalanddomestictaxationissues.
(3) AllotherfeeswerepaidforservicesotherthantheservicesdescribedaboveandincludefeesforprofessionalservicesrenderedbytheauditorsinconnectionwiththetranslationofsecuritiesregulatoryfilingsrequiredtocomplywithsecuritieslawsincertainCanadianjurisdictions.
(4) Nootherfeeswerepaidtoauditorsintheprevioustwoyears.
LEGAL PROCEEDINGS AND REGULATORY ACTIONS Goldex
OnMarch8,2012andApril10,2012,aNoticeofActionandStatementofClaim(collectively,the"OntarioClaim")wereissuedbyWilliamLeslie,AFALivforsakringsaktiebolagandcertainotherentitiesagainsttheCompanyandcertainofitscurrentandformerofficersanddirectors.TheplaintiffsallegedthattheCompany'spublicdisclosureconcerningwaterflowissuesattheGoldexminewasmisleading.TheOntarioClaimwasissuedbytheplaintiffsonbehalfofallpersonsandentitieswhoacquiredsecuritiesoftheCompanyduringtheperiodMarch26,2010toOctober19,2011,excludingpersonsresidentordomiciledintheProvinceofQuebecatthetimetheypurchasedoracquiredsuchsecurities.Theplaintiffssought,amongotherthings,damagesofC$250million.
OnMarch28,2012,theCompanyandcertainofitscurrentandformerofficers,someofwhomalsoareorweredirectorsoftheCompany,werenamedasrespondentsinaMotionforLeavetoInstituteaClassActionandfortheAppointmentofaRepresentativePlaintiff(the"QuebecMotion").Theactionwasonbehalfofallpersonsandentitieswithfewerthan50employeesresidentinQuebecwhoacquiredsecuritiesoftheCompanybetweenMarch26,2010andOctober19,2011.TheproposedclassactionwasfordamagesofC$100millionarisingasaresultofallegedlymisleadingdisclosurebytheCompanyconcerningitsoperationsattheGoldexmine.
Followingmediation,theproceedingsweresettledforC$17.0millionwithoutanyadmissionofliabilitypursuanttoasettlementapprovedbytheOntarioandQuebeccourtsinFebruary2016.TheamountofthesettlementhasbeencoveredbytheinsurerstotheCompany.
CanadianMalartic
Class Action
OnAugust2,2016,thePartnershipwasservedwithaclassactionlawsuitwithrespecttoallegationsinvolvingtheCanadianMalarticmine.ThelawsuitwasfiledbyLouisTrottierwiththeSuperiorCourtofQuebec.Thecomplaintisinrespectof"neighbourhoodannoyances"arisingfromdust,noise,vibrationsandblastsatthemine.TheplaintiffsareseekingdamagesinanunspecifiedamountaswellaspunitivedamagesintheamountofC$20million.Proceedingsfor
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thecertificationoftheclassarescheduledforApril11and12,2017.TheCompanyandthePartnershipwilltakeallnecessarystepstodefendthemselvesagainstthislawsuit.
ForadescriptionofcertaincollaborativeinitiativesbetweenthePartnershipandthecommunityofMalartic,see"OperationsandProduction–NorthernBusiness–CanadianMalarticMine–MiningandMillingFacilities–Environmental,PermittingandSocialMatters"inthisAIF.
Injunction
OnAugust15,2016,thePartnershipreceivednoticeofanapplicationforinjunctionrelatingtotheCanadianMalarticmine,whichhadbeenfiledbyDaveLemirewiththeSuperiorCourtofQuebecundertheEnvironment Quality Act (Quebec).AhearingrelatedtoaninterlocutoryinjunctionwascompletedonMarch17,2017andadecisionoftheSuperiorCourtofQuebecispending.TherequestforinjunctionaimstorestricttheCanadianMalarticmine'sminingoperationstosoundlevelsandminingvolumesbelowthelimitstowhichitissubject.TheCompanyandthePartnershiphavereviewedtheinjunctionrequest,considertherequestwithoutmeritandwilltakeallreasonablestepstodefendagainstthisinjunction.Whileatthistimethepotentialimpactsoftheinjunctioncannotbedefinitivelydetermined,theCompanyexpectsthatiftheinjunctionweretobegranted,therewouldbeanegativeimpactontheoperationsoftheCanadianMalarticmine,whichcouldincludeareductioninproductionandshiftreductionsresultinginthelossofjobs.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS OtherthanasdescribedinthisAIF,sinceJanuary1,2014,nodirector,officeror10%shareholderoftheCompanyoranyassociateoraffiliateofanysuchpersonorshareholder,hasorhadanymaterialinterest,directorindirect,inanytransactionthathasmateriallyaffectedorwillmateriallyaffecttheCompanyoranyofitssubsidiaries.
TRANSFER AGENT AND REGISTRAR TheregistrarandtransferagentfortheCompany'scommonsharesisComputershareTrustCompanyofCanada,Toronto,Ontario.
MATERIAL CONTRACTS TheCompanybelievesthecontractsdescribedbelow(otherthanthe2015NotePurchaseAgreementandtheTDLetterofCreditFacility,bothasdefinedbelow)constitutetheonlymaterialcontractstowhichitisaparty.
Credit Facility
OnAugust4,2011,theCompanyamendedandrestateditscreditfacilitywithagroupoffinancialinstitutionsthatprovidesa$1.2billionunsecuredrevolvingbankcreditfacility(the"CreditFacility").TheCreditFacilitywassubsequentlyamendedonJuly20,2012,September8,2014,September30,2015,June29,2016andOctober26,2016.TheCreditFacilitymaturesandallindebtednessthereunderisdueandpayableonJune22,2021.TheCompany,withtheconsentoflendersrepresentingatleast662/3%oftheaggregatecommitmentsundertheCreditFacility,mayextendthetermoftheCreditFacilityforadditionalone-yearterms.TheCreditFacilityisavailableinmultiplecurrenciesthroughprimerateandbaserateadvances,pricedattheapplicablerateplusamarginthatrangesfrom0.45%to1.75%,dependingontheCompany'screditrating,andthroughLIBORadvances,bankers'acceptancesandlettersofcredit,pricedattheapplicablerateplusamarginthatrangesfrom1.45%to2.75%dependingontheCompany'screditrating.ThelendersundertheCreditFacilityareeachpaidastandbyfeeataratethatrangesfrom0.29%to0.55%oftheundrawnportionofthefacility,dependingontheCompany'screditrating.TheCreditFacilityprovidesforanuncommittedaccordionfeaturewhichpermitstheCompanytorequestanincreaseintheprincipalamountofthefacilitybyupto$300million.NoincreasetotheprincipalamountofthefacilitywilloccurpursuanttotheaccordionfeatureunlessoneormorelendersagreetoincreasetheircommitmentsoranewlenderagreestocommitmentsundertheCreditFacility.PaymentandperformanceoftheCompany'sobligationsundertheCreditFacilityareguaranteedbyeachofitsmaterialsubsidiariesandcertainofitsothersubsidiaries(the"Guarantors"and,togetherwiththeCompany,eachan"Obligor").
TheCreditFacilitycontainscovenantsthatlimit,amongotherthings,theabilityofanObligorto:
• incuradditionalindebtedness;
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• payordeclaredividendsormakeotherrestricteddistributionsorpaymentsinrespectoftheCompany'sequitysecuritiesifaneventofdefaulthasoccurredandiscontinuing;
• makesalesorotherdispositionsofmaterialassets;
• createliensonitsexistingorfutureassets,otherthanpermittedliens;
• enterintotransactionswithaffiliatesotherthantheObligors,exceptonacommerciallyreasonablebasisasifitweredealingwithsuchpersonatarm'slength;
• makeanyinvestmentorloanotherthan:investmentsinorloanstobusinessesrelatedtominingorabusinessancillaryorcomplementarytomining;investmentsincashequivalents;orcertaininter-companyinvestmentsorloans;
• enterintoormaintaincertainderivativeinstruments;and
• amalgamateorotherwisetransferitsassets.
TheCompanyisalsorequiredtomaintainatotalnetdebttoEBITDAratiobelowaspecifiedmaximumvalue.EventsofdefaultundertheCreditFacilityinclude,amongotherthings:
• thefailuretopayprincipalwhendueandpayableorinterest,feesorotheramountspayablewithinfivebusinessdaysofsuchamountsbecomingdueandpayable;
• thebreachbytheCompanyofanyfinancialcovenant;
• thebreachbyanyObligorofanyofitsobligationsorundertakingsundertheCreditFacilityorrelatedagreementsordocumentsthatisnotcuredwithin30daysafterwrittennoticeofthebreachhasbeengiventotheCompany;
• adefaultunderanyotherindebtednessoftheObligorsiftheeffectofsuchdefaultistoaccelerate,ortopermittheaccelerationof,theduedateofsuchindebtednessinanaggregateamountof$75millionormore;
• achangeofcontroloftheCompanywhichisdefinedtooccurupon(a)theacquisition,directlyorindirectly,byanymeanswhatsoever,byanyperson,orgroupofpersonsactingjointlyorinconcert,(collectively,an"offeror")ofbeneficialownershipof,orthepowertoexercisecontrolordirectionover,orsecuritiesconvertibleorexchangeableinto,anysecuritiesoftheCompanycarryinginaggregate(assumingtheexerciseofallsuchconversionorexchangerightsinfavouroftheofferor)morethan50%oftheaggregatevotesrepresentedbythevotingstockthenissuedandoutstandingorotherwiseentitlingtheofferortoelectamajorityoftheboardofdirectorsoftheCompany,or(b)thereplacementbywayofelectionorappointmentatanytimeofone-halformoreofthetotalnumberofthethenincumbentmembersoftheboardofdirectorsoftheCompany,ortheelectionorappointmentofnewdirectorscomprisingone-halformoreofthetotalnumberofmembersoftheboardofdirectorsinofficeimmediatelyfollowingsuchelectionorappointment;unless,inanysuchcase,thenominationofsuchdirectorsforelectionortheirappointmentisapprovedbytheboardofdirectorsoftheCompanyinofficeimmediatelyprecedingsuchnominationorappointmentincircumstanceswheresuchnominationorappointmentismadeotherthanasaresultofadissidentpublicproxysolicitation,whetheractualorthreatened(a"ChangeofControl");and
• variouseventsrelatingtothebankruptcyorinsolvencyorwinding-up,liquidationordissolutionorcessationofbusinessofanyObligor.
AsatMarch22,2017,therewasapproximately$0.8millionintheaggregatedrawnundertheCreditFacility(includingoutstandinglettersofcredit).
Letter of Credit Facilities
BNS Letter of Credit Facility
OnJune26,2012,theCompanyenteredintoaletterofcreditfacilitywithTheBankofNovaScotia,aslender,providingforaC$150millionuncommittedletterofcreditfacility(the"BNSLetterofCreditFacility").ThroughaseriesofamendmentstotheBNSLetterofCreditFacilityfromNovember5,2013toSeptember27,2016,theCompanyandthelenderincreasedthemaximumaggregateamountthatmaybeoutstandingundertheBNSLetterofCreditFacilitytoC$350million.
UnderthetermsoftheBNSLetterofCreditFacility,theCompanymayrequesttobeissuedoneormorelettersofcreditinamaximumaggregateamountoutstandingatanytimenotexceedingC$350million.TheBNSLetterofCreditFacilitymaybeusedbytheCompanytosupport(a)reclamationobligationsoftheCompanyoritssubsidiariesor(b)non-financialorperformanceobligationsoftheCompanyoritssubsidiariesthatarenotdirectlyrelatedtoreclamationobligations.Ifthe
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CompanyfailstopayanyamountofareimbursementobligationundertheBNSLetterofCreditFacility,includinganyinterestthereon,onthedatesuchamountisdue,theoverdueamountwillbearinterestatequalto2%greaterthantheprimerate(ascalculatedundertheBNSLetterofCreditFacility).PaymentandperformanceoftheCompany'sobligationsundertheBNSLetterofCreditFacilityareguaranteedbytheGuarantors.
EventsofdefaultundertheBNSLetterofCreditFacilityinclude,amongotherthings:
• thefailuretopayanyamountdrawnundertheBNSLetterofCreditFacilitywithinthreebusinessdaysofwhennotifiedordemandedbythelender;
• thebreachbyanyObligorofanyobligationorundertakingundertheLetterofCreditFacilityorguaranteeprovidedpursuanttotheBNSLetterofCreditFacilitythathasnotbeenremediedwithin30daysfollowingwrittennoticeofthebreachbeinggivenbythelendertotheCompany;
• adefaultunderanyotherindebtednessoftheObligorsiftheeffectofsuchdefaultistoaccelerate,ortopermittheaccelerationof,theduedateofsuchindebtednessinanaggregateamountof$50millionormore;and
• aChangeofControl.
TheBNSLetterofCreditFacilityprovidesthatuponaneventofdefault,TheBankofNovaScotiamaydeclareimmediatelydueandpayableallamountsdrawnundertheBNSLetterofCreditFacility.
AsatMarch22,2017,therewasapproximatelyC$212millionintheaggregatedrawnundertheBNSLetterofCreditFacility.
TD Letter of Credit Facility
OnSeptember23,2015,theCompanyenteredintoastandbyletterofcreditfacilitywithTheToronto-DominionBank,aslender,providingforaC$150millionuncommittedletterofcreditfacility(asamended,the"TDLetterofCreditFacility").
UnderthetermsoftheTDLetterofCreditFacility,theCompanymayrequesttobeissuedoneormorelettersofcreditinamaximumaggregateamountoutstandingatanytimenotexceedingC$150million.TheTDLetterofCreditFacilitymaybeusedbytheCompanytosupport(a)thereclamationobligationsoftheCompany,itssubsidiariesoranyentityinwhichtheCompanyhasadirectorindirectinterestor(b)theperformanceobligations(otherthanwithrespecttoindebtednessforborrowedmoney)oftheCompany,itssubsidiariesoranyentityinwhichtheCompanyhasadirectorindirectinterestthatarenotdirectlyrelatedtoreclamationobligations.
PaymentandperformanceoftheCompany'sobligationsundertheTDLetterofCreditFacilityaresupportedbyanaccountperformancesecurityguaranteeissuedbyExportDevelopmentCanada("EDC")infavourofthelender.EDCissuedtheguaranteeinconnectionwithadeclarationandindemnitydatedSeptember23,2015betweenEDCandtheObligors(assupplemented,the"EDCIndemnity").PursuanttotheEDCIndemnity,eachoftheObligorshasagreedtoindemnifyEDCagainstallclaimsanddemandsmadeinrespectofanyindemnitybondingproductissuedbyEDCpursuanttotheEDCIndemnity.
AsatMarch22,2017,therewasapproximatelyC$70millionintheaggregatedrawnundertheTDLetterofCreditFacility.
Note Purchase Agreements
OnApril7,2010,theCompanyenteredintoanotepurchaseagreementwithcertaininstitutionalinvestors,providingfortheissuanceofnotesconsistingof$115million6.13%SeriesAseniornotesdue2017,$360million6.67%SeriesBseniornotesdue2020and$125million6.77%SeriesCseniornotesdue2022(the"2010NotePurchaseAgreement").OnJuly24,2012,theCompanyenteredintoanothernotepurchaseagreementwithcertaininstitutionalinvestors,providingfortheissuanceofnotesconsistingof$100million4.87%SeriesAseniornotesdue2022and$100million5.02%SeriesBseniornotesdue2024(the"2012NotePurchaseAgreement").OnSeptember30,2015,theCompanyenteredintothe2015NotePurchaseAgreement,providingfortheissuanceof$50million4.15%seniornotesdue2025(the"2015NotePurchaseAgreement").OnJune30,2016,theCompanyenteredintoanothernotepurchaseagreementwithcertaininstitutionalinvestors,providingfortheissuanceofnotesconsistingof$100million4.54%SeriesAseniornotesdue2023,$200million4.84%SeriesBseniornotesdue2026and$50million4.94%SeriesCseniornotesdue2028(togetherwiththe2010NotePurchaseAgreement,the2012NotePurchaseAgreementandthe2015NotePurchaseAgreement,the"NotePurchaseAgreements").
PaymentandperformanceoftheCompany'sobligationsundertheNotePurchaseAgreements,thenotesissuedpursuanttheretoandtheobligationsoftheGuarantorsundertheguaranteesareguaranteedbytheGuarantors.
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TheNotePurchaseAgreementscontainrestrictivecovenantsthatlimit,amongotherthings,theabilityofanObligorto:
• enterintotransactionswithaffiliatesotherthantheObligors,exceptonacommerciallyreasonablebasisupontermsnolessfavourabletotheObligorthanwouldbeobtainableinacomparablearm'slengthtransaction;
• amalgamateorotherwisetransferitsassets;
• carryonbusinessotherthanthoserelatedtominingorabusinessancillaryorcomplementarytomining;
• engageinanydealingsortransactionswithanypersonorentityidentifiedundercertainanti-terrorismregulations;
• createliensonitsexistingorfutureassets,otherthanpermittedliens;
• incursubsidiaryindebtednesswheretheObligorisasubsidiaryoftheCompany;and
• makesalesorotherdispositionsofmaterialassets.
TheCompanyisalsorequiredtomaintainthesametotalnetdebttoEBITDAratioundertheNotePurchaseAgreementsasundertheCreditFacilityandtomaintainaminimumtangiblenetworth.EventsofdefaultundertheNotePurchaseAgreementsinclude,amongotherthings:
• thefailuretopayprincipalormakewholeamountswhendueandpayableorinterest,feesorotheramountspayablewithinfivebusinessdaysofsuchamountsbecomingdueandpayable;
• thebreachbyanyObligorofanyothertermorcovenantthatisnotcuredwithin30businessdaysaftertheearlierofwrittennoticeofthebreachhavingbeengiventotheCompanyoractualknowledgeofthebreachisobtained;
• thefindingthatanyrepresentationorwarrantymadebyanObligorwasfalseorincorrectinanymaterialrespectonthedateasofwhichitwasmade;
• adefaultunderanyotherindebtednessoftheObligorsiftheeffectofsuchdefaultistoaccelerate,ortopermittheaccelerationof,theduedateofsuchindebtednessinanaggregateamountof$50millionormore;and
• variouseventsrelatingtothebankruptcyorinsolvencyorwinding-up,liquidationordissolutionorcessationofbusinessofanyObligor.
TheNotePurchaseAgreementsprovidethat,uponcertaineventsofdefault,thenotesautomaticallybecomedueandpayablewithoutanyfurtheraction.Inaddition,theNotePurchaseAgreementscontaina"MostFavoredLender"clausewhichactstoincorporateintotheNotePurchaseAgreementsanygraceperiodsuponaneventofdefaultthatareshorterintheCreditFacilitythanintheNotePurchaseAgreements.
INTERESTS OF EXPERTS Ernst&YoungLLP,theauditorsoftheCompany,hasadvisedtheCompanythatitisindependentoftheCompanyinaccordancewiththeRulesofProfessionalConductoftheInstituteofCharteredAccountantsofOntarioandhascompliedwiththeSEC'srulesonauditorindependence.
NoneofAlainThibault,Eng.,AlexandreProulx,Eng.,CamilPrince,Eng.,CarlPednault,Eng.,CarolPlummer,Eng.,ChristianProvencher,P.Eng.,ChristianRoy,Eng.,DanielDoucet,Eng.,DanyLaflamme,Eng.,DenisCaron,Eng.,DominiqueGirard,Eng.,DonaldGervais,P.Geo.,DyaneDuquette,P.Geo.,FrancisBrunet,P.Eng.,FrançoisPetrucci,Eng.,FrançoisRobichaud,Eng.,GuyGosselin,Eng.,JeanFrançoisLagueux,Eng.,JulieLarouche,P.Geo.,LarryConnell,P.Eng.,LouiseGrondin,P.Eng.,MarcRuel,P.Geo.,MichelJulien,P.Eng.,PathiesNawejMuteb,Eng.,PaulCousin,P.Eng.,PierreMatte,Eng.,RichardGenest,P.Geo.,Eng.,SylvainBoily,Eng.,SylvieLampron,P.Eng.orTimHaldane,P.Eng.(each,a"QualifiedPerson"),eachofwhomhaspreparedorcertifiedareportunderNI43-101orapprovedscientificandtechnicalinformationreferencedinafilingmadebytheCompanyunderNationalInstrument51-102–Continuous Disclosure Obligations duringorrelatingtotheCompany'smostrecentlycompletedfinancialyear,hasreceivedadirectorindirectinterestinthepropertyoftheCompanyorofanyassociateoraffiliateoftheCompany.Asatthedatehereof,eachoftheQualifiedPersonsbeneficiallyowns,directlyorindirectly,lessthanonepercentofanyoutstandingsecuritiesoftheCompanyoranyassociateoraffiliateoftheCompany.EachoftheQualifiedPersonsis,orwasatthetimesuchpersonpreparedorcertifiedtherelevantreportunderNI43-101orapprovedtherelevantscientificandtechnicalinformation,anofficeroremployeeoftheCompanyand/oroneormoreofitsassociatesoraffiliates.
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ADDITIONAL INFORMATION AdditionalinformationrelatingtotheCompanycanbefoundonSEDARatwww.sedar.com ,ontheSEC'swebsiteatwww.sec.gov andontheCompany'swebsiteatwww.agnicoeagle.com .Additionalinformation,includingdirectors'andofficers'remunerationandindebtedness,principalholdersoftheCompany'ssecuritiesandsecuritiesauthorizedforissuanceunderequitycompensationplans,iscontainedintheCompany'smanagementinformationcirculardatedMarch13,2017relatingtotheannualandspecialmeetingofshareholdersoftheCompanyscheduledforApril28,2017.AdditionalfinancialinformationisprovidedintheAnnualFinancialStatementsandAnnualMD&A.
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SCHEDULE "A" AUDIT COMMITTEE CHARTER OF THE COMPANY
ThisChartershallgoverntheactivitiesoftheauditcommittee(the"AuditCommittee")oftheboardofdirectors(the"BoardofDirectors")ofAgnicoEagleMinesLimited(the"Corporation").
I. PURPOSE OF THE AUDIT COMMITTEE
TheAuditCommitteeshall:(a)assisttheBoardofDirectorsinitsoversightresponsibilitieswithrespectto:(i)theintegrityoftheCorporation'sandit'ssubsidiaries'financialstatements,(ii)theCorporation'scompliancewithlegalandregulatoryrequirements,(iii)theexternalauditor'squalificationsandindependence,and(iv)theperformanceoftheCorporation'sinternalandexternalauditfunctions;and(b)prepareanyreportoftheAuditCommitteerequiredtobeincludedintheCorporation'sannualreportorproxymaterial.TheheadoftheCorporation'sinternalauditfunctionandtheexternalauditorsshallhavedirectandreadyaccesstothechairoftheAuditCommittee(the"Chair").
TheAuditCommitteeshallhavetheauthoritytodelegatetooneormoreofitsmembers,responsibilityfordevelopingrecommendationsforconsiderationbytheAuditCommitteewithrespecttoanyofthemattersreferredtointhisCharter.
II. COMPOSITION
TheAuditCommitteeshallbecomprisedofaminimumofthreedirectors.NomemberoftheAuditCommitteeshallbeanofficeroremployeeoftheCorporationoranyofitsaffiliatesforthepurposesoftheapplicablecorporatestatute.EachmemberoftheAuditCommitteeshallbeanunrelatedandindependentdirectorasdeterminedbytheBoardofDirectorsinaccordancewiththeapplicablerequirementsofthelawsgoverningtheCorporation,theapplicablestockexchangesonwhichtheCorporation'ssecuritiesarelistedandapplicablesecuritiesregulatoryauthorities.(SeeScheduleAforrequirements.)
EachmemberoftheAuditCommitteeshallbefinanciallyliterate.UnlesstheAuditCommitteeshallotherwisedetermine,amemberoftheAuditCommitteeshallbeconsideredtobefinanciallyliterateifheorshehastheabilitytoreadandunderstandasetoffinancialstatementsthatpresentabreadthandlevelofcomplexityofaccountingissuesthataregenerallycomparabletothebreadthandcomplexityoftheissuesthatcanreasonablybeexpectedtoberaisedbytheCorporation'sfinancialstatements.
AtleastonememberoftheAuditCommitteeshallbeafinancialexpert.(SeeScheduleBfordefinition.)
ThemembersoftheAuditCommitteeshallbeappointedbytheBoardofDirectorsannuallyatthefirstmeetingoftheBoardofDirectorsafterameetingoftheshareholdersatwhichdirectorsareelectedandshallserveuntil:thenextannualmeetingoftheshareholders;theyresign;theirsuccessorsaredulyappointed;orsuchmemberisremovedfromtheAuditCommitteebytheBoardofDirectors.TheBoardofDirectorsshalldesignateonememberoftheAuditCommitteeastheChairor,ifitfailstodoso,themembersoftheAuditCommitteeshallappointtheChairfromamongitsmembers.
NomemberoftheAuditCommitteemayearnfeesfromtheCorporationoranyofitssubsidiariesotherthandirectorsfees(whichfeesmayincludecash,shares,restrictedshareunitsand/orotherin-kindconsiderationordinarilyavailabletodirectors,aswellasalloftheregularbenefitsthatotherdirectorsreceive).Forgreatercertainty,nomemberoftheAuditCommitteeshallacceptanyconsulting,advisoryorothercompensatoryfeefromtheCorporation.
III. MEETINGS
TheAuditCommitteeshallmeetatleastquarterlyormorefrequentlyasrequired.
AsapartofeachmeetingoftheAuditCommitteeatwhichtheAuditCommitteerecommendsthattheBoardofDirectorsapprovetheannualauditedfinancialstatementsoratwhichtheAuditCommitteereviewsthequarterlyfinancialstatements,theAuditCommitteeshallmeetinaseparatesessionwiththeexternalauditorand,ifdesired,withmanagementand/ortheinternalauditor.Inaddition,theAuditCommitteeortheChairshallmeetwithmanagementquarterlytoreviewtheCorporation'sfinancialstatementsasdescribedinSectionIV.5belowandtheAuditCommitteeoradesignatedmemberoftheAuditCommitteeshallmeetwiththeexternalauditorstoreviewtheCorporation'sfinancialstatementsonaquarterlyorotherregularbasisastheAuditCommitteemaydeemappropriate.
TheAuditCommitteeshallseektoactonthebasisofconsensus,butanaffirmativevoteofamajorityofmembersoftheAuditCommitteeparticipatinginanymeetingoftheAuditCommitteeshallbesufficientfortheadoptionofanyresolution.
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IV. RESPONSIBILITIES AND DUTIES
TheAuditCommittee'sprimaryresponsibilitiesareto:
General
1. reviewandassesstheadequacyofthisCharteratleastannuallyand,wherenecessaryordesirable,recommendchangestotheBoardofDirectors;
2. reporttotheBoardofDirectorsregularlyatsuchtimesastheChairmaydeterminetobeappropriatebutnotlessfrequentlythanfourtimesperyear;
3. followtheprocessestablishedforallcommitteesoftheBoardofDirectorsforassessingtheAuditCommittee'sperformance;
Documents/ReportsReview
4. reviewtheCorporation'sfinancialstatementsandrelatedmanagement'sdiscussionandanalysis,AnnualInformationForm("AIF")andrelatedForm40-F,AnnualReportandanyotherannualreportsorotherfinancialinformationtobesubmittedtoanygovernmentalbodyorthepublic,includinganycertification,report,opinionorreviewrenderedbytheexternalauditorsbeforetheyareapprovedbytheBoardofDirectorsandpubliclydisclosed;
5. reviewwiththeCorporation'smanagementandtheexternalauditors,theCorporation'squarterlyfinancialstatementsandrelatedmanagement'sdiscussionandanalysis,beforetheyarereleased;
6. ensurethatadequateproceduresareinplaceforthereviewoftheCorporation'sdisclosureoffinancialinformationextractedorderivedfromtheCorporation'sfinancialstatementsotherthanthedisclosurereferredtointhetwoimmediatelyprecedingparagraphsandperiodicallyassesstheadequacyofsuchprocedures;
7. reviewtheeffectsofregulatoryandaccountinginitiatives,aswellasoff-balancesheetstructures,onthefinancialstatementsoftheCorporation;
8. reviewwiththeCorporation'smanagementanypressreleaseoftheCorporationwhichcontainsfinancialinformation(payingparticularattentiontotheuseofany"proforma"or"adjusted"non-GAAPinformation);
9. reviewandassess,onaquarterlybasis,management'sriskassessmentandriskmanagementstrategiesincludinghedgingandderivativestrategies;
ExternalAuditors
10. recommendexternalauditorsnominationstotheBoardofDirectorstobeputbeforetheshareholdersforappointmentand,asnecessary,theremovalofanyexternalauditorinofficefromtimetotime;
11. approvethefeesandothercompensationtobepaidtotheexternalauditors;
12. pre-approveallsignificantnon-auditengagementstobeprovidedtotheCorporationwiththeexternalauditors;
13. requiretheexternalauditorstosubmittotheAuditCommittee,onaregularbasis(atleastannually),aformalwrittenstatementdelineatingallrelationshipsbetweentheexternalauditorsandtheCorporationanddiscusswiththeexternalauditorsanyrelationshipsthatmightaffecttheexternalauditors'objectivityandindependence;
14. recommendtotheBoardofDirectorsanyactionrequiredtoensuretheindependenceoftheexternalauditors;
15. advisetheexternalauditorsoftheirultimateaccountabilitytotheBoardofDirectorsandtheAuditCommittee;
16. overseetheworkoftheexternalauditorsengagedforthepurposeofpreparinganauditreportorperformingotheraudit,reviewandattestationservicesfortheCorporation;
17. evaluatethequalifications,performanceandindependenceoftheexternalauditorswhicharetoreportdirectlytotheAuditCommittee,including(i)reviewingandevaluatingtheleadpartnerontheexternalauditors'engagementwiththeCorporation,(ii)consideringwhethertheexternalauditors'qualitycontrolsareadequateandtheprovisionofpermittednon-auditservicesiscompatiblewithmaintainingtheexternalauditors'independence,(iii)determinetherotationoftheleadexternalauditpartnerandtheexternalauditfirm,and
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(iv)takeintoaccounttheopinionsofmanagementandtheinternalauditfunctioninassessingtheexternalauditors'qualifications,independenceandperformance;
18. presenttheAuditCommittee'sconclusionswithrespecttoitsevaluationofexternalauditorstotheBoardofDirectorsandtakesuchadditionalactiontosatisfyitselfofthequalifications,performanceandindependenceofexternalauditorsandmakefurtherrecommendationstotheBoardofDirectorsasitconsidersnecessary;
19. obtainandreviewareportfromtheexternalauditorsatleastannuallyregarding:theexternalauditors'internalquality-controlprocedures;materialissuesraisedbythemostrecentinternalquality-controlreview,orpeerreview,ofthefirm,orbyanyinquiryorinvestigationbygovernmentalorprofessionalauthoritieswithintheprecedingfiveyearsrespectingoneormoreexternalauditscarriedoutbythefirm;anystepstakentodealwithanysuchissues;andallrelationshipsbetweentheexternalauditorsandtheCorporation;
20. establishpoliciesfortheCorporation'shiringofemployeesorformeremployeesoftheexternalauditors;
InternalAuditor
21. receiveregularquarterlyreportsfromtheCorporation'sinternalauditoronthescopeandmaterialresultsofitsinternalauditactivities,basedontheInternalAuditCharter;
22. reviewanddiscusstheCorporation'sCodeofBusinessConductandEthicsandfraudpolicyandtheactionstakentomonitorandenforcecompliancewiththeCorporation'sCodeofBusinessConductandEthicsandfraudpolicy;
23. establishproceduresfor:
i) thereceipt,retentionandtreatmentofcomplaintsregardingaccounting,internalcontrolsorauditingmatters;
ii) theconfidential,anonymoussubmissionofconcernsregardingquestionableaccounting,internalcontrolandauditingmatters;and
iii) compliancewithapplicableforeigncorruptpracticeslegislation,guidelinesandpractices.
FraudPreventionandDetection
24. overseeandassessmanagement'scontrolsandprocessestopreventanddetectfraud;
25. receiveperiodicreportsfromtheinternalauditoronfindingsoffraudaswellassignificantfindingsregardingthedesignand/oroperationofinternalcontrolsandmanagementresponses;
FinancialReportingProcess
26. periodicallydiscusstheintegrity,completenessandaccuracyoftheCorporation'sinternalcontrolsandthefinancialstatementswiththeexternalauditorsintheabsenceoftheCorporation'smanagement;
27. inconsultationwiththeexternalauditors,reviewtheintegrityoftheCorporation'sfinancialinternalandexternalreportingprocesses;
28. considertheexternalauditors'assessmentoftheappropriatenessoftheCorporation'sauditingandaccountingprinciplesasappliedinitsfinancialreporting;
29. reviewanddiscusswithmanagementandtheexternalauditorsatleastannuallyandapprove,ifappropriate,anymaterialchangestotheCorporation'sauditingandaccountingprinciplesandpracticessuggestedbytheexternalauditors,internalauditpersonnelormanagement;
30. reviewanddiscusswiththeChiefExecutiveOfficer("CEO")andtheChiefFinancialOfficer("CFO")theproceduresundertakeninconnectionwiththeCEOandCFOcertificationsfortheinterimandannualfilingswithapplicablesecuritiesregulatoryauthorities;
31. reviewdisclosuresmadebytheCEOandCFOduringtheircertificationprocessfortheannualandinterimfilingswithapplicablesecuritiesregulatoryauthoritiesaboutanysignificantdeficienciesinthedesignoroperationof
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internalcontrolswhichcouldadverselyaffecttheCorporation'sabilitytorecord,process,summarizeandreportfinancialdataoranymaterialweaknessesintheinternalcontrols,andanyfraudinvolvingmanagementorotheremployeeswhohaveasignificantroleintheCorporation'sinternalcontrols;
32. establishregularandseparatesystemsofreportingtotheAuditCommitteebymanagementandtheexternalauditorsofanysignificantdecisionmadeinmanagement'spreparationofthefinancialstatements,includingthereportingoftheviewofmanagementandtheexternalauditorsastotheappropriatenessofsuchdecisions;
33. discussduringtheannualaudit,andreviewseparatelywitheachofmanagementandtheexternalauditors,anysignificantmattersarisingfromthecourseofanyaudit,includinganyrestrictionsonthescopeofworkoraccesstorequiredinformation;whetherraisedbymanagement,theheadofinternalauditortheexternalauditors;
34. resolveanydisagreementsbetweenmanagementandtheexternalauditorsregardingfinancialreporting;
35. reviewwiththeexternalauditorsandmanagementtheextenttowhichchangesorimprovementsinfinancialoraccountingpractices,asapprovedbytheAuditCommittee,havebeenimplementedatanappropriatetimesubsequenttotheimplementationofsuchchangesorimprovements;
36. retainanddeterminethecompensationofanyindependentcounsel,accountantsorotheradvisorstoassistinitsoversightresponsibilities(theAuditCommitteeshallnotberequiredtoobtaintheapprovaloftheBoardofDirectorsforsuchpurposes);
37. discussanymanagementorinternalcontrollettersorproposalstobeissuedbytheexternalauditorsoftheCorporation;
DisclosureControlsandProcedures
38. obtainandreviewthestatementofCorporateDisclosureControls,ProceduresandPoliciespreparedbythedisclosurecommitteeoftheBoardofDirectorsand,ifappropriate,approvethedisclosurecontrolsandproceduressetoutinsuchstatementandanychangesmadethereto;
39. receiveconfirmationfromtheCEOandCFOthatreportstobefiledwithCanadiansecuritiesregulatoryauthorities,theheUnitedStatesSecuritiesandExchangeCommissionandanyotherapplicableregulatoryagency:
(a) havebeenpreparedinaccordancewiththeCorporation'sdisclosurecontrolsandprocedures;and
(b) containnomaterialmisrepresentationsoromissionsandfairlypresents,inallmaterialrespects,thefinancialcondition,resultsofoperationsandcashflowasofandfortheperiodcoveredbysuchreports;
40. receiveconfirmationfromtheCEOandCFOthattheyhaveconcludedthatthedisclosurecontrolsandproceduresareeffectiveasoftheendoftheperiodcoveredbythereports;
41. discusswiththeCEOandCFOanyreasonsforwhichanyoftheconfirmationsreferredtointhetwoprecedingparagraphscannotbegivenbytheCEOandCFO;
LegalCompliance
42. confirmthattheCorporation'smanagementhastheproperreviewsysteminplacetoensurethattheCorporation'sfinancialstatements,reports,pressreleasesandotherfinancialinformationsatisfylegalrequirements;
43. reviewlegalcompliancematterswiththeCorporation'slegalcounsel;
44. reviewwiththeCorporation'slegalcounselanylegalmatterthattheAuditCommitteeunderstandscouldhaveasignificantimpactontheCorporation'sfinancialstatements;
45. conductorauthorizeinvestigationsintomatterswithintheAuditCommittee'sscopeofresponsibilities;
46. performanyotheractivitiesinaccordancewiththisCharter,theCorporation'sby-lawsandgoverninglawthattheAuditCommitteeortheBoardofDirectorsdeemsnecessaryorappropriate;
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RelatedPartyTransactions
47. reviewthefinancialreportingofanytransactionbetweentheCorporationandanyofficer,directororother"relatedparty"asdefinedwithintheCorporation'sAccountingPolicy(includinganyshareholderholdinganinterestgreaterthan5%intheCorporation)oranyentityinwhichanysuchpersonhasafinancialinterest;
ReportingandPowers
48. reporttotheBoardofDirectorsfollowingeachmeetingoftheAuditCommitteeandatsuchothertimesastheBoardofDirectorsmayconsiderappropriate;and
49. exercisesuchotherpowersandperformsuchotherdutiesandresponsibilitiesasareincidentaltothepurposes,dutiesandresponsibilitiesspecifiedhereinandasmayfromtimetotimebedelegatedtotheAuditCommitteebytheBoardofDirectors.
V. LIMITATION OF RESPONSIBILITY
WhiletheAuditCommitteehastheresponsibilitiesandpowersprovidedbythisCharter,itisnotthedutyoftheAuditCommitteetoplanorconductauditsortodeterminethattheCorporation'sfinancialstatementsarecompleteandaccurateandareinaccordancewithinternationalfinancialreportingstandards.Thisistheresponsibilityofmanagement(withrespecttowhomtheAuditCommitteeperformsanoversightfunction)andtheexternalauditors.
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SCHEDULE A TO THE AUDIT COMMITTEE CHARTER OF THE CORPORATION
UnrelatedDirector
UndertheTorontoStockExchangerules,"independentdirector"meansadirectorwho:
(a) isnotamemberofmanagementandisfreefromanyinterestandanybusinessorotherrelationshipwhichintheopinionoftheExchangecouldreasonablybeperceivedtomateriallyinterferewiththedirector'sabilitytoactinthebestinterestofthecompany;and
(b) isabeneficialholder,directlyorindirectly,orisanomineeorassociateofabeneficialholder,collectivelyof10%orlessofthevotesattachingtoallissuedandoutstandingsecuritiesoftheapplicant.
TheExchangewillconsiderallrelevantfactorsinassessingtheindependenceofthedirector.Asageneralrule,thefollowingpersonswouldnotbeconsideredanindependentdirector:
i) apersonwhoiscurrently,orhasbeenwithinthepastthreeyears,anofficer,employeeoforserviceprovidertothecompanyoranyofitssubsidiariesoraffiliates;or
ii) apersonwhoisanofficer,employeeorcontrollingshareholderofacompanythathasamaterialbusinessrelationshipwiththeapplicant.
IndependentDirector
NationalInstrument–52-110
Adirectoris"independent"ifheorshehasnodirectorindirectmaterialrelationshipwiththeissuer.ThefollowingsummarizesthemajoraspectsofNationalInstrument52-110–Audit Committees ("NI52-110")relatingtotheindependenceofadirector.
Certain Relationships Automatically Exclude a Director From Serving on the Audit Committee
Ifadirector(oramemberofthedirector'simmediatefamily)hasaspecifiedtypeofrelationshipwiththeissuer(whichincludestheissuer'sparentandsubsidiaryentities),thenthatdirectorwillnotbeconsideredindependent.NI52-110assumesthatthefollowingpersonshaveamaterialrelationshipwiththeissuer(andarethereforeprecludedfromsittingontheauditcommittee):
Employment Relationships
• anindividualwhois,orhasbeenwithinthelastthreeyears,employeeorexecutiveofficeroftheissueroranindividualwhoseimmediatefamilymemberis,orhasbeenwithinthelastthreeyears,anexecutiveofficeroftheissuer;
• anindividualwho,orwhoseimmediatefamilymember,is,orhasbeenwithinthelastthreeyears,anexecutiveofficerofanotherentityifanyoftheissuer'scurrentexecutiveofficersservesorservedatthatsametimeonthecompensationcommitteeofthatentity;
• anindividualwhoreceived,orwhoseimmediatefamilymemberwhoisemployedasanexecutiveofficeroftheissuerwhoreceived,morethanC$75,000indirectcompensationfromtheissuerduringany12monthperiodwithinthelastthreeyears(otherthanremunerationforactingasamemberoftheboardofdirectorsoranyboardcommitteeoftheissuerandfixedamountsreceivedunderaretirementplanforpriorservicewiththeissuerthatisnotcontingentoncontinuedservice);
Relationships with Internal or External Auditors
• anindividualwhoisapartneroremployeeoftheissuer'sinternalorexternalauditororanindividualwhowaswithinthelastthreeyearsapartneroremployeeoftheissuer'sinternalorexternalauditorandpersonallyworkedontheissuer'sauditwithinthattime;
• anindividualwhosespouse,minorchildorstepchild,orchildorstepchildwhosharesahomewiththeindividual,is(i)apartneroftheissuer'sinternalorexternalauditor,(ii)anemployeeoftheissuer'sinternalorexternalauditorandparticipatesinitsaudit,assuranceortaxcompliance(butnottaxplanning)practice,(iii)oranindividualwho
A-6 AGNICO EAGLE ANNUAL INFORMATION FORM
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waswithinthelastthreeyearsapartneroremployeeoftheissuer'sinternalorexternalauditorandpersonallyworkedontheissuer'sauditwithinthattime;
Advisory or Consulting Relationships
• anindividualwhoaccepts,directlyorindirectly,anyconsulting,advisoryorothercompensatoryfeefromtheissueroranysubsidiaryentityoftheissuer,otherthanremunerationforactingasamemberoftheboardoranyboardcommitteeorasapart-timechairorvice-chairoftheboardoranyboardcommittee,includingtheindirectacceptanceofafeebyanindividual'sspouse,minorchildorstepchild,orchildorstepchildwhosharestheindividual'shomeorbyanentityinwhichsuchindividualisapartner,member,officersuchasamanagingdirectororexecutiveofficerandwhichprovidesaccounting,consulting,legal,investmentbankingorfinancialadvisoryservicestotheissueroranysubsidiaryentityoftheissuer;and
Relationships with Affiliated Entities
• anindividualwhoisanaffiliatedentityoftheissueroranyofitssubsidiaryentities,whereaffiliatedentitymeansapersonthathasthedirectorindirectpowertodirectorcausethedirectionofmanagementandthepoliciesoftheissueroranyofitssubsidiaryentities,whetherthroughownershipofvotingsecuritiesorotherwise(otherthananindividualwhoowns,directlyorindirectly,tenpercentoflessofanyclassofvotingsecuritiesoftheissuerandisnotanexecutiveofficeroftheissuer)oranindividualwhoisbothadirectorandanemployeeofanaffiliatedentityoranexecutiveofficer,generalpartnerormanagingmemberofanaffiliatedentity.
The Materiality of Other Relationships is for the Board to Determine
Ifadirectorhasadirectorindirectrelationshipwiththeissuer,thenitwillbematerialif,intheviewoftheissuer'sboardofdirectors,therelationshipcouldreasonablyinterferewiththeexerciseofthedirector'sindependentjudgement.Theserelationshipsmayincludecommercial,charitable,industrial,banking,consulting,legal,accountingorfamilialrelationshipsoranyotherrelationshipthattheboardconsiderstobematerial.
Exceptions to the Independence Requirement
NI52-110providesexemptionsfromtheindependencerequirementsfor:
• auditcommitteememberswhoceasetobeindependentforreasonsoutsidetheircontrol(butonlyforalimitedperiodoftime);
• directorsappointedtotheauditcommitteetofillavacancyresultingfromthedeath,disabilityorresignationofamemberoftheauditcommittee(butonlyforalimitedperiodoftime).Thedirectorappointedtofillthevacancyisalsotemporarilyexemptfromthefinancialliteracyrequirements;
• auditcommitteemembers,underexceptionalandlimitedcircumstancesasdeterminedbytheboardinitsreasonablyjudgment,whoarenotconsultantsoradvisors,notanaffiliatedentityoftheissueroranyofitssubsidiaryentities,notanemployeeorofficeroftheissueroranimmediatefamilymemberofsuchanddonotactaschairoftheauditcommittee(butonlyforamaximumperiodoftwoyears);and
• U.S.listedissuerscomplyingwiththeauditcommitteerequirementsoftheirU.S.exchangeorquotationsystem(providedtheymakethenecessarydisclosureintheirAIF(AnnualInformationForm).
NewYorkStockExchangeRules
UndertheNewYorkStockExchangerules,thefollowingrequirementsmustbemettoqualifyasan"IndependentDirector":
(a) nodirectorqualifiesas"independent"unlesstheboardofdirectorsaffirmativelydeterminesthatthedirectorhasnomaterialrelationshipwiththelistedcompany(eitherdirectlyorasapartner,shareholderorofficerofanorganizationthathasarelationshipwiththecompany).Companiesmustdisclosethesedeterminations.
(b) inaddition,thefollowingpersonsarenotindependent:
• anydirectorwhois(orwhohasanimmediatefamilymemberwhois)anexecutiveofficer,otherthanonaninterimbasis,ofthelistedcompany;
AGNICO EAGLE A-7 ANNUAL INFORMATION FORM
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• anydirectorwhoreceives(orwhohasanimmediatefamilymemberwhoreceives)morethan$120,000peryearindirectcompensationfromthelistedcompany;
• anydirectorwhois(orwhohasanimmediatefamilymemberwhois,inaprofessionalcapacity)apartneroremployeeofthelistedcompany'sinternalorexternalauditor;
• anydirectorwhois(orwhohasanimmediatefamilymemberwhois)employedasanexecutiveofficerofanothercompanywhereanyoftheexecutivesofthelistedcompanyalsoservesorservedonthatothercompany'scompensationcommittee;and
• anydirectorwhoisanemployee(orwhohasanimmediatefamilymemberwhoisanexecutiveofficer)ofanothercompanythathasmadepaymentsto,orreceivedpaymentsfrom,thelistedcompanyforpropertyorserviceswhichexceedsthegreaterof$1millionor2%ofsuchothercompany'sconsolidatedgrossrevenues.
Three Year "Cooling Off" Period. Foreachofthecategoriesabovewhereadirectorisnot(orispresumednottobe)independent,thereisathree-year"coolingoff"period.Accordingly,theexistenceoftheprohibitedrelationshipatanytimeduringtheprecedingthreeyearsispresumedtoimpairindependence.
Sarbanes-OxleyAct
(a) In General .Eachmemberoftheauditcommitteeoftheissuershallbeamemberoftheboardofdirectorsoftheissuer,andshallotherwisebeindependent.
(b) Criteria .Inordertobeconsideredtobeindependentforpurposesofthisparagraph,amemberofanauditcommitteeofanissuermaynot,otherthaninhisorhercapacityasamemberoftheauditcommittee,theboardofdirectorsoranyotherboardcommittee:
• acceptanyconsulting,advisoryorothercompensatoryfeefromtheissuer;or
• beanaffiliatedpersonoftheissueroranysubsidiarythereof.
Exemption Authority. TheCommissionmayexemptfromtherequirementsofsubparagraph(b)aparticularrelationshipwithrespecttoauditcommitteemembers,astheCommissiondeterminesappropriateinlightofthecircumstances.
A-8 AGNICO EAGLE ANNUAL INFORMATION FORM
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SCHEDULE B TO THE AUDIT COMMITTEE CHARTER OF THE CORPORATION
AuditCommitteeFinancialExpert
An"auditcommitteefinancialexpert"mustpossessallofthefollowingattributes:
(a) anunderstandingofgenerallyacceptedaccountingprinciplesandfinancialstatements;
(b) theabilitytoassessthegeneralapplicationofsuchprinciplesinconnectionwiththeaccountingforestimates,accruals,andreserves;
(c) experiencepreparing,auditing,analyzingorevaluatingfinancialstatementsthatpresentabreadthandlevelofcomplexityofaccountingissuesthataregenerallycomparabletothebreathandcomplexityofissuesthatcanreasonablybeexpectedtoberaisedbytheissuer'sfinancialstatements,orexperienceactivelysupervisingoneormorepersonsengagedinsuchactivities;
(d) anunderstandingofinternalcontroloverandproceduresforfinancialreporting;and
(e) anunderstandingofauditcommitteefunctions.
Theauditcommitteefinancialexpertmustalsohaveacquiredthoseattributesthrough:
(a) educationandexperienceasaprincipalfinancialofficer,principalaccountingofficer,controller,publicaccountant,auditororexperienceinoneormorepositionsthatinvolvetheperformanceofsimilarfunctions;
(b) experienceactivelysupervisingaprincipalfinancialofficer,principalaccountingofficer,controller,publicaccountantorauditororpersonperformingsimilarfunctions;
(c) experienceoverseeingorassessingtheperformanceofcompaniesorpublicaccountantsforthepreparation,auditingorevaluationoffinancialstatements;or
(d) otherrelevantexperience.
"Activesupervision"meansthesupervisorparticipatedin,andcontributedto,theprocessofaddressingthesametypesofissuesrelatingtothepreparation,auditing,analysisandevaluationoffinancialstatementsasthepersonactuallyperformingthework.
AGNICO EAGLE B-1 ANNUAL INFORMATION FORM
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QuickLinks
Exhibit99.1
AGNICOEAGLEMINESLIMITEDANNUALINFORMATIONFORMINTRODUCTORYNOTESNotetoInvestorsConcerningEstimatesofMineralReservesandMineralResourcesNotetoInvestorsConcerningCertainMeasuresofPerformanceSELECTEDFINANCIALDATAGLOSSARYOFSELECTEDMININGTERMSCORPORATESTRUCTUREDESCRIPTIONOFTHEBUSINESSGENERALDEVELOPMENTOFTHEBUSINESSOPERATIONSANDPRODUCTIONMINERALRESERVESMINERALRESOURCESRISKFACTORSDIVIDENDSDESCRIPTIONOFCAPITALSTRUCTURERATINGSMARKETFORSECURITIESDIRECTORSANDOFFICERSOFTHECOMPANYAUDITCOMMITTEELEGALPROCEEDINGSANDREGULATORYACTIONSINTERESTOFMANAGEMENTANDOTHERSINMATERIALTRANSACTIONSTRANSFERAGENTANDREGISTRARMATERIALCONTRACTSINTERESTSOFEXPERTSADDITIONALINFORMATIONSCHEDULE"A"AUDITCOMMITTEECHARTEROFTHECOMPANYSCHEDULEATOTHEAUDITCOMMITTEECHARTEROFTHECORPORATIONSCHEDULEBTOTHEAUDITCOMMITTEECHARTEROFTHECORPORATION
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Exhibit 99.2
Annual AuditedConsolidatedFinancial Statements
(PreparedinaccordancewithInternationalFinancialReportingStandards)
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING TotheBoardofDirectors(the"Board")andShareholdersofAgnicoEagleMinesLimited:
WehaveauditedAgnicoEagleMinesLimited'sinternalcontroloverfinancialreportingasofDecember31,2016,basedoncriteriaestablishedinInternal Control – Integrated Framework issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommissionin2013(the"COSOcriteria").AgnicoEagleMinesLimited'smanagementisresponsibleformaintainingeffectiveinternalcontroloverfinancialreporting,andforitsassessmentoftheeffectivenessofinternalcontroloverfinancialreportingincludedintheaccompanyingmanagementcertificationreportoninternalcontroloverfinancialreporting.OurresponsibilityistoexpressanopiniononAgnicoEagleMinesLimited'sinternalcontroloverfinancialreportingbasedonouraudit.
WeconductedourauditinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhethereffectiveinternalcontroloverfinancialreportingwasmaintainedinallmaterialrespects.Ourauditincludedobtaininganunderstandingofinternalcontroloverfinancialreporting,assessingtheriskthatamaterialweaknessexists,testingandevaluatingthedesignandoperatingeffectivenessofinternalcontrolbasedontheassessedrisk,andperformingsuchotherproceduresasweconsiderednecessaryinthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropinion.
Acompany'sinternalcontroloverfinancialreportingisaprocessdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples.Acompany'sinternalcontroloverfinancialreportingincludesthosepoliciesandproceduresthat:(1)pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsofthecompany;(2)providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationoffinancialstatementsinaccordancewithgenerallyacceptedaccountingprinciples,andthatrevenuesandexpendituresofthecompanyarebeingmadeonlyinaccordancewithauthorizationsofmanagementanddirectorsofthecompany;and(3)providereasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,use,ordispositionofthecompany'sassetsthatcouldhaveamaterialeffectonthefinancialstatements.
Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditionsorthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.
Inouropinion,AgnicoEagleMinesLimitedmaintained,inallmaterialrespects,effectiveinternalcontroloverfinancialreportingasofDecember31,2016basedontheCOSOcriteria.
Wehavealsoaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),theconsolidatedbalancesheetsofAgnicoEagleMinesLimitedasofDecember31,2016and2015,andtherelatedconsolidatedstatementsofincomeandcomprehensiveincome,equityandcashflowsforeachofthetwoyearsintheperiodendedDecember31,2016,andourreportdatedMarch27,2017expressedanunqualifiedopinionthereon.
/s/Ernst&YoungLLPToronto,Canada CharteredProfessionalAccountantsMarch27,2017 LicensedPublicAccountants
2 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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MANAGEMENT CERTIFICATION ManagementofAgnicoEagleMinesLimited("AgnicoEagle"orthe"Company")isresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreporting.Internalcontroloverfinancialreportingisaprocessdesignedby,orunderthesupervisionof,theCompany'sChiefExecutiveOfficerandChiefFinancialOfficerandeffectedbytheCompany'sBoard,managementandotherpersonnel,toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples.Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.
TheCompany'smanagement,includingtheCompany'sChiefExecutiveOfficerandChiefFinancialOfficer,assessedtheeffectivenessoftheCompany'sinternalcontroloverfinancialreportingasofDecember31,2016.Inmakingthisassessment,theCompany'smanagementusedthecriteriaoutlinedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommissioninInternalControl–IntegratedFrameworkissuedin2013.Basedonitsassessment,managementconcludedthat,asofDecember31,2016,theCompany'sinternalcontroloverfinancialreportingwaseffective.
TheeffectivenessoftheCompany'sinternalcontroloverfinancialreportingasofDecember31,2016hasbeenauditedbyErnst&YoungLLP,anindependentregisteredpublicaccountingfirm,asstatedintheirreportthatappearsherein.
Toronto,CanadaMarch27,2017
By /s/SEANBOYD
SeanBoydVice-Chairman and Chief Executive Officer
By /s/DAVIDSMITH
DavidSmithSenior Vice-President, Finance and Chief Financial Officer
ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTSAGNICO EAGLE 3
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TotheBoardandShareholdersofAgnicoEagleMinesLimited:
WehaveauditedtheaccompanyingconsolidatedbalancesheetsofAgnicoEagleMinesLimitedasofDecember31,2016and2015,andtherelatedconsolidatedstatementsofincomeandcomprehensiveincome,equityandcashflowsforeachoftheyearsthenended.ThesefinancialstatementsaretheresponsibilityoftheCompany'smanagement.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudits.
WeconductedourauditsinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofmaterialmisstatement.Anauditincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements.Anauditalsoincludesassessingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallfinancialstatementpresentation.Webelievethatourauditsprovideareasonablebasisforouropinion.
Inouropinion,theconsolidatedfinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,theconsolidatedfinancialpositionofAgnicoEagleMinesLimitedatDecember31,2016and2015andtheconsolidatedresultsofitsoperationsanditscashflowsforeachoftheyearsthenendedinconformitywithInternationalFinancialReportingStandardsasissuedbytheInternationalAccountingStandardsBoard.
Wehavealsoaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),AgnicoEagleMinesLimited'sinternalcontroloverfinancialreportingasofDecember31,2016,basedoncriteriaestablishedinInternal Control – Integrated FrameworkissuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommissionin2013,andourreportdatedMarch27,2017expressedanunqualifiedopinionthereon.
/s/Ernst&YoungLLPToronto,Canada CharteredProfessionalAccountantsMarch27,2017 LicensedPublicAccountants
4 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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AGNICO EAGLE MINES LIMITED CONSOLIDATED BALANCE SHEETS (thousands of United States dollars, except share amounts)
As at December 31,
2016
As at December 31,
2015
ASSETS
Currentassets:
Cashandcashequivalents $ 539,974 $ 124,150
Short-terminvestments 8,424 7,444
Restrictedcash 398 685
Tradereceivables(notes6and17) 8,185 7,714
Inventories(note7) 443,714 461,976
Incometaxesrecoverable(note23) – 817
Available-for-salesecurities(notes6and8) 92,310 31,863
Fairvalueofderivativefinancialinstruments(notes6and20) 364 87
Othercurrentassets(note9(a)) 136,810 194,689
Totalcurrentassets 1,230,179 829,425
Non-currentassets:
Restrictedcash 764 741
Goodwill 696,809 696,809
Property,plantandminedevelopment(note10) 5,106,036 5,088,967
Otherassets(note9(b)) 74,163 67,238
Totalassets $ 7,107,951 $ 6,683,180
LIABILITIES AND EQUITY
Currentliabilities:
Accountspayableandaccruedliabilities(note11) $ 228,566 $ 243,786
Reclamationprovision(note12) 9,193 6,245
Interestpayable(note14) 14,242 14,526
Incometaxespayable(note23) 35,070 14,852
Financeleaseobligations(note13(a)) 5,535 9,589
Currentportionoflong-termdebt(note14) 129,896 14,451
Fairvalueofderivativefinancialinstruments(notes6and20) 1,120 8,073
Totalcurrentliabilities 423,622 311,522
Non-currentliabilities:
Long-termdebt(note14) 1,072,790 1,118,187
Reclamationprovision(note12) 265,308 276,299
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Deferredincomeandminingtaxliabilities(note23) 819,562 802,114
Otherliabilities(note15) 34,195 34,038
Totalliabilities 2,615,477 2,542,160
EQUITY
Commonshares(note16): Outstanding—225,465,654commonsharesissued,less500,514sharesheldintrust 4,987,694 4,707,940
Stockoptions(notes16and18) 179,852 216,232
Contributedsurplus 37,254 37,254
Deficit (744,453) (823,734)
Accumulatedothercomprehensiveincome 32,127 3,328
Totalequity 4,492,474 4,141,020
Totalliabilitiesandequity $ 7,107,951 $ 6,683,180
Commitmentsandcontingencies(note25)
OnbehalfoftheBoard:
SeanBoyd,CPA,CA,Director Dr.LeanneM.Baker,Director
See accompanying notes
ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTSAGNICO EAGLE 5
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AGNICO EAGLE MINES LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(thousands of United States dollars, except per share amounts)
Year Ended December 31, 2016 2015 REVENUES
Revenuesfromminingoperations(note17) $ 2,138,232 $ 1,985,432
COSTS, EXPENSES AND OTHER INCOME
Production(i) 1,031,892 995,295
Explorationandcorporatedevelopment 146,978 110,353
Amortizationofproperty,plantandminedevelopment(note10) 613,160 608,609
Generalandadministrative 102,781 96,973
Impairmentlossonavailable-for-salesecurities(note8) – 12,035
Financecosts(note14) 74,641 75,228
(Gain)lossonderivativefinancialinstruments(note20) (9,468) 19,608
Gainonsaleofavailable-for-salesecurities(note8) (3,500) (24,600)
Environmentalremediation(note12) 4,058 2,003
Gainonimpairmentreversal(note22) (120,161) –
Foreigncurrencytranslationloss(gain) 13,157 (4,728)
Otherexpenses 16,233 12,028
Incomebeforeincomeandminingtaxes 268,461 82,628
Incomeandminingtaxesexpense(note23) 109,637 58,045
Netincomefortheyear $ 158,824 $ 24,583
Netincomepershare—basic(note16) $ 0.71 $ 0.11
Netincomepershare—diluted(note16) $ 0.70 $ 0.11
Cashdividendsdeclaredpercommonshare $ 0.36 $ 0.32
COMPREHENSIVE INCOME
Netincomefortheyear $ 158,824 $ 24,583
Othercomprehensiveincome(loss):
Itemsthatmaybesubsequentlyreclassifiedtonetincome:
Available-for-salesecuritiesandotherinvestments:
Unrealizedchangeinfairvalueofavailable-for-salesecurities 36,757 4,822
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Reclassificationtoimpairmentlossonavailable-for-salesecurities(note8) – 12,035
Reclassificationtogainonsaleofavailable-for-salesecurities(note8) (3,500) (24,600)
Incometaximpactofreclassificationitems(note23) 467 1,684
Incometaximpactofothercomprehensiveincome(loss)items(note23) (4,925) (613)
28,799 (6,672)
Itemsthatwillnotbesubsequentlyreclassifiedtonetincome:
Pensionbenefitobligations:
Remeasurementgain(loss)ofpensionbenefitobligations(note15(a)) 612 (205)
Incometaximpact(note23) 76 32
688 (173)
Othercomprehensiveincome(loss)fortheyear 29,487 (6,845)
Comprehensiveincomefortheyear $ 188,311 $ 17,738
Note:
(i) Exclusiveofamortization,whichisshownseparately.
See accompanying notes
6 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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AGNICO EAGLE MINES LIMITED CONSOLIDATED STATEMENTS OF EQUITY (thousands of United States dollars, except share and per share amounts)
Common Shares Outstanding
Shares
Amount
Stock Options
Contributed Surplus
Deficit
Accumulated Other
Comprehensive Income
Total Equity
Balance December 31, 2014 214,236,234 $4,599,788 $ 200,830 $ 37,254 $ (779,382) $ 10,000 $ 4,068,490
Netincome – – – – 24,583 – 24,583
Othercomprehensiveloss – – – – (173) (6,672) (6,845)
Totalcomprehensiveincome(loss) – – – – 24,410 (6,672) 17,738
Transactionswithowners:
Sharesissuedunderemployeestockoptionplan(notes16and18(a)) 747,683 22,326 (4,654) – – – 17,672
Stockoptions(notes16and18(a)) – – 20,056 – – – 20,056
Sharesissuedunderincentivesharepurchaseplan(note18(b)) 512,438 14,033 – – – – 14,033
Sharesissuedunderdividendreinvestmentplan 345,734 9,305 – – – – 9,305
SharesissuedforjointacquisitionofMalarticCHLproperty(note5) 459,197 13,441 – – – – 13,441
SharesissuedforacquisitionofSoltoroLtd.(note5) 770,429 24,351 – – – – 24,351
SharesissuedtosettleCMGPConvertibleDebenturespreviouslyissuedbyOsisko 871,680 24,779 – – – – 24,779
Dividendsdeclared($0.32pershare) – – – – (68,762) – (68,762)
RestrictedShareUnitplanandLongTermIncentivePlan(notes16and18(c)) (292,600) (83) – – – – (83)
Balance December 31, 2015 217,650,795 $4,707,940 $ 216,232 $ 37,254 $ (823,734) $ 3,328 $ 4,141,020
Netincome – – – – 158,824 – 158,824
Othercomprehensiveincome – – – – 688 28,799 29,487
Totalcomprehensiveincome – – – – 159,512 28,799 188,311
Transactionswithowners:
Sharesissuedunderemployeestockoptionplan(notes16and18(a)) 6,492,907 245,128 (53,025) – – – 192,103
Stockoptions(notes16and18(a)) – – 16,645 – – – 16,645
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Sharesissuedunderincentivesharepurchaseplan(note18(b)) 344,778 15,443 – – – – 15,443
Sharesissuedunderdividendreinvestmentplan 224,732 8,893 – – – – 8,893
Sharesissuedunderflow-throughshareprivateplacement(note16) 374,869 13,593 – – – – 13,593
Dividendsdeclared($0.36pershare) – – – – (80,231) – (80,231)
RestrictedShareUnitplan,PerformanceShareUnitplan,andLongTermIncentivePlan(notes16and18(c,d)) (122,941) (3,303) – – – – (3,303)
Balance December 31, 2016 224,965,140 $4,987,694 $ 179,852 $ 37,254 $ (744,453) $ 32,127 $ 4,492,474
See accompanying notes
ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTSAGNICO EAGLE 7
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AGNICO EAGLE MINES LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands of United States dollars)
Year Ended December 31,
2016 2015 OPERATING ACTIVITIES
Netincomefortheyear $ 158,824 $ 24,583
Add(deduct)itemsnotaffectingcash:
Amortizationofproperty,plantandminedevelopment(note10) 613,160 608,609
Deferredincomeandminingtaxes(note23) 7,609 6,550
Gainonsaleofavailable-for-salesecurities(note8) (3,500) (24,600)
Stock-basedcompensation(note18) 33,804 35,822
Impairmentlossonavailable-for-salesecurities(note8) – 12,035
Gainonimpairmentreversal(note22) (120,161) –
Foreigncurrencytranslationloss(gain) 13,157 (4,728)
Other 14,012 3,145
Adjustmentforsettlementofreclamationprovision (2,719) (1,385)
Changesinnon-cashworkingcapitalbalances:
Tradereceivables (471) 52,019
Incometaxes 28,082 (2,333)
Inventories 20,355 (40,547)
Othercurrentassets 53,009 (74,106)
Accountspayableandaccruedliabilities (35,408) 20,464
Interestpayable (1,136) 710
Cashprovidedbyoperatingactivities 778,617 616,238
INVESTING ACTIVITIES
Additionstoproperty,plantandminedevelopment(note10) (516,050) (449,758)
Acquisitions,netofcashandcashequivalentsacquired(note5) (12,434) (12,983)
Netpurchasesofshort-terminvestments (980) (2,823)
Netproceedsfromsaleofavailable-for-salesecuritiesandotherinvestments(note8) 9,461 61,075
Purchasesofavailable-for-salesecuritiesandotherinvestments(note8) (33,774) (19,815)
Decreaseinrestrictedcash 287 49,785
Cashusedininvestingactivities (553,490) (374,519)
FINANCING ACTIVITIES
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Dividendspaid (71,375) (59,512)
Repaymentoffinanceleaseobligations(note13(a)) (10,004) (23,657)
Proceedsfromlong-termdebt 125,000 436,000
Repaymentoflong-termdebt (405,374) (697,086)
Notesissuance(note14) 350,000 50,000
Long-termdebtfinancing(note14) (3,415) (1,689)
Repurchaseofcommonsharesforstock-basedcompensationplans(notes16and18(c,d)) (15,576) (11,899)
Proceedsonexerciseofstockoptions(note18(a)) 192,103 17,672
Commonsharesissued(note16) 29,027 9,411
Cashprovidedby(usedin)financingactivities 190,386 (280,760)
Effect of exchange rate changes on cash and cash equivalents 311 (14,346)
Net increase (decrease) in cash and cash equivalents during the year 415,824 (53,387)
Cash and cash equivalents, beginning of year 124,150 177,537
Cash and cash equivalents, end of year $ 539,974 $ 124,150
SUPPLEMENTAL CASH FLOW INFORMATION
Interestpaid(note14) $ 71,401 $ 69,414
Incomeandminingtaxespaid $ 105,184 $ 81,112
See accompanying notes
8 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(thousands of United States dollars, except share and per share amounts, unless otherwise indicated) December 31, 2016
1. CORPORATE INFORMATION
AgnicoEagleMinesLimited("AgnicoEagle"orthe"Company")isprincipallyengagedintheproductionandsaleofgold,aswellasrelatedactivitiessuchasexplorationandminedevelopment.TheCompany'sminingoperationsarelocatedinCanada,MexicoandFinlandandtheCompanyhasexplorationactivitiesinCanada,Europe,LatinAmericaandtheUnitedStates.AgnicoEagleisapubliccompanyincorporatedunderthelawsoftheProvinceofOntario,Canadawithitsheadandregisteredofficelocatedat145KingStreetEast,Suite400,Toronto,Ontario,M5C2Y7.TheCompanyislistedontheTorontoStockExchangeandtheNewYorkStockExchange.AgnicoEaglesellsitsgoldproductionintotheworldmarket.
TheseconsolidatedfinancialstatementswereauthorizedforissuancebytheBoardofDirectorsoftheCompany(the"Board")onMarch27,2017.
2. BASIS OF PRESENTATION
A) StatementofCompliance
TheaccompanyingconsolidatedfinancialstatementsofAgnicoEaglehavebeenpreparedinaccordancewithInternationalFinancialReportingStandards("IFRS")asissuedbytheInternationalAccountingStandardsBoard("IASB")inUnitedStates("US")dollars.
Theseconsolidatedfinancialstatementswerepreparedonagoingconcernbasisunderthehistoricalcostmethodexceptforcertainfinancialassetsandliabilitieswhicharemeasuredatfairvalue.Significantaccountingpoliciesarepresentedinnote3totheseconsolidatedfinancialstatementsandhavebeenconsistentlyappliedineachoftheperiodspresented.
B) BasisofPresentation
Subsidiaries
TheseconsolidatedfinancialstatementsincludetheaccountsofAgnicoEagleanditsconsolidatedsubsidiaries.Allintercompanybalances,transactions,incomeandexpensesandgainsorlosseshavebeeneliminatedonconsolidation.SubsidiariesareconsolidatedwhereAgnicoEaglehastheabilitytoexercisecontrol.ControlofaninvesteeexistswhenAgnicoEagleisexposedtovariablereturnsfromtheCompany'sinvolvementwiththeinvesteeandhastheabilitytoaffectthosereturnsthroughitspowerovertheinvestee.TheCompanyreassesseswhetherornotitcontrolsaninvesteeiffactsandcircumstancesindicatethattherearechangestooneormoreoftheelementsofcontrol.
Joint Arrangements
Ajointarrangementisdefinedasanarrangementinwhichtwoormorepartieshavejointcontrol.Jointcontrolisthecontractuallyagreedsharingofcontroloveranarrangementbetweentwoormoreparties.Thisexistsonlywhenthedecisionsabouttherelevantactivitiesthatsignificantlyaffectthereturnsofthearrangementrequiretheunanimousconsentofthepartiessharingcontrol.
Ajointoperationisajointarrangementwherebythepartieshavejointcontrolofthearrangementandhaverightstotheassetsandobligationsfortheliabilitiesrelatingtothearrangement.TheseconsolidatedfinancialstatementsincludetheCompany'sinterestsintheassets,liabilities,revenuesandexpensesofthejointoperations,fromthedatethatjointcontrolcommenced.AgnicoEagle's50%interestinCanadianMalarticCorporationandCanadianMalarticGP("thePartnership"),thegeneralpartnershipthatholdstheCanadianMalarticminelocatedinQuebec,hasbeenaccountedforasajointoperation.
ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTSAGNICO EAGLE 9
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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BusinessCombinations
Inabusinesscombination,theacquisitionmethodofaccountingisused,wherebythepurchaseconsiderationisallocatedtothefairvalueofidentifiableassetsacquiredandliabilitiesassumedatthedateofacquisition.Preliminaryfairvaluesallocatedatareportingdatearefinalizedassoonastherelevantinformationisavailable,withinaperiodnottoexceedtwelvemonthsfromtheacquisitiondatewithretroactiverestatementoftheimpactofadjustmentstothosepreliminaryfairvalueseffectiveasattheacquisitiondate.Acquisitionrelatedcostsareexpensedasincurred.
Purchaseconsiderationmayalsoincludeamountspayableiffutureeventsoccurorconditionsaremet.Anysuchcontingentconsiderationismeasuredatfairvalueandincludedinthepurchaseconsiderationattheacquisitiondate.Subsequentchangestotheestimatedfairvalueofcontingentconsiderationarerecordedthroughtheconsolidatedstatementsofincome,unlessthepreliminaryfairvalueofcontingentconsiderationasattheacquisitiondateisfinalizedbeforethetwelvemonthmeasurementperiodinwhichcasetheadjustmentisallocatedtotheidentifiableassetsacquiredandliabilitiesassumedretrospectivelytotheacquisitiondate.
Wherethecostoftheacquisitionexceedsthefairvaluesoftheidentifiablenetassetsacquired,thedifferenceisrecordedasgoodwill.Againisrecordedthroughtheconsolidatedstatementsofincomeifthecostoftheacquisitionislessthanthefairvaluesoftheidentifiablenetassetsacquired.
Non-controllinginterestsrepresentthefairvalueofnetassetsinsubsidiariesthatarenotheldbytheCompanyasatthedateofacquisition.Non-controllinginterestsarepresentedintheequitysectionoftheconsolidatedbalancesheets.
Inabusinesscombinationachievedinstages,theCompanyremeasuresanypreviouslyheldequityinterestatitsacquisitiondatefairvalueandrecognizesanygainorlossintheconsolidatedstatementsofincome.
B) Non-currentAssetsandDisposalGroupsHeldForSaleandDiscontinuedOperations
TheCompanyclassifiesanon-currentassetordisposalgroupasheldforsaleifitishighlyprobablethattheywillbesoldintheircurrentconditionwithinoneyearfromthedateofclassification.AssetsanddisposalgroupsthatmeetthecriteriatobeclassifiedasanassetheldforsalearemeasuredatthelowerofcarryingamountandfairvaluelesscoststodisposeandtheCompanystopsamortizingsuchassetsfromthedatetheyareclassifiedasheldforsale.Assetsanddisposalgroupsthatmeetthecriteriatobeclassifiedasheldforsalearepresentedseparatelyintheconsolidatedbalancesheets.
Ifthecarryingamountoftheassetpriortobeingclassifiedasheldforsaleisgreaterthanthefairvaluelesscoststodispose,theCompanyrecognizesanimpairmentloss.Anysubsequentchangeinthemeasurementamountofitemsclassifiedasheldforsaleisrecognizedasagain,totheextentofanycumulativeimpairmentchargespreviouslyrecognizedtotherelatedassetordisposalgroup,orasafurtherimpairmentloss.
AdiscontinuedoperationisacomponentoftheCompanythatcanbeclearlydistinguishedfromtherestoftheentity,bothoperationallyandforfinancialreportingpurposes,thathasbeendisposedoforisclassifiedasheldforsaleandrepresents:a)aseparatesignificantlineofbusinessorgeographicalareaofoperations;b)apartofasingleco-ordinatedplantodisposeofanareaofoperations;orc)asubsidiaryacquiredexclusivelyforresale.Theresultsofthedisposalgroupsorregionswhicharediscontinuedoperationsarepresentedseparatelyintheconsolidatedstatementsofcomprehensiveincome.
10 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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C) ForeignCurrencyTranslation
ThefunctionalcurrencyoftheCompany,foreachsubsidiaryandforjointarrangements,isthecurrencyoftheprimaryeconomicenvironmentinwhichitoperates.ThefunctionalcurrencyofalloftheCompany'soperationsistheUSdollar.
OncetheCompanydeterminesthefunctionalcurrencyofanentity,itisnotchangedunlessthereisachangeintherelevantunderlyingtransactions,eventsandcircumstances.Anychangeinanentity'sfunctionalcurrencyisaccountedforprospectivelyfromthedateofthechange,andtheconsolidatedbalancesheetsaretranslatedusingtheexchangerateatthatdate.
Attheendofeachreportingperiod,theCompanytranslatesforeigncurrencybalancesasfollows:
• Monetaryitemsaretranslatedattheclosingrateineffectattheconsolidatedbalancesheetdate;
• Non-monetaryitemsthataremeasuredintermsofhistoricalcostaretranslatedusingtheexchangerateatthedateofthetransaction.Itemsmeasuredatfairvaluearetranslatedattheexchangerateineffectatthedatethefairvaluewasmeasured;and
• Revenueandexpenseitemsaretranslatedusingtheaverageexchangerateduringtheperiod.
D) CashandCashEquivalents
TheCompany'scashandcashequivalentsincludecashonhandandshort-terminvestmentsinmoneymarketinstrumentswithremainingmaturitiesofthreemonthsorlessatthedateofpurchase.TheCompanyplacesitscashandcashequivalentsandshort-terminvestmentsinhighqualitysecuritiesissuedbygovernmentagencies,financialinstitutionsandmajorcorporationsandlimitstheamountofcreditexposurebydiversifyingitsholdings.
E) Short-termInvestments
TheCompany'sshort-terminvestmentsincludefinancialinstrumentswithremainingmaturitiesofgreaterthanthreemonthsbutlessthanoneyearatthedateofpurchase.Short-terminvestmentsaredesignatedasheldtomaturityforaccountingpurposesandarecarriedatamortizedcost,whichapproximatesmarketvaluegiventheshort-termnatureoftheseinvestments.
F) Inventories
Inventoriesconsistoforestockpiles,concentrates,dorebarsandsupplies.Inventoriesarecarriedatthelowerofcostandnetrealizablevalue("NRV").Costisdeterminedusingtheweightedaveragebasisandincludesallcostsofpurchase,costsofconversionandothercostsincurredinbringingtheinventoriestotheirpresentlocationandcondition.Costofinventoriesincludesdirectcostsofmaterialsandlabourrelateddirectlytominingandprocessingactivities,includingproductionphasestrippingcosts,amortizationofproperty,plantandminedevelopmentdirectlyinvolvedintherelatedminingandproductionprocess,amortizationofanystrippingcostspreviouslycapitalizedanddirectlyattributableoverheadcosts.Wheninterruptionstoproductionoccur,anadjustmentismadetothecostsincludedininventories,suchthattheyreflectnormalcapacity.Abnormalcostsareexpensedintheperiodtheyareincurred.
Thecurrentportionoforestockpiles,oreinleachpadsandinventoriesisdeterminedbasedontheexpectedamountstobeprocessedwithinthenexttwelvemonths.Orestockpiles,oreonleachpadsandinventoriesnotexpectedtobeprocessedorusedwithinthenexttwelvemonthsareclassifiedaslong-term.
NRVisestimatedbycalculatingthenetsellingpricelesscoststobeincurredinconvertingtherelevantinventoriestosaleableproductanddeliveringittoacustomer.Coststocompletearebasedonmanagement'sbestestimateas
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attheconsolidatedbalancesheetdate.AnNRVimpairmentmaybereversedinasubsequentperiodifthecircumstancesthattriggeredtheimpairmentnolongerexist.
G) FinancialInstruments
TheCompany'sfinancialassetsandliabilities(financialinstruments)includecashandcashequivalents,short-terminvestments,restrictedcash,tradereceivables,available-for-salesecurities,accountspayableandaccruedliabilities,long-termdebt(includingconvertibledebentures)andderivativefinancialinstruments.Allfinancialinstrumentsarerecordedatfairvalueatrecognition.Subsequenttoinitialrecognition,financialinstrumentsclassifiedastradereceivables,accountspayableandaccruedliabilitiesandlong-termdebt(excludingconvertibledebentures)aremeasuredatamortizedcostusingtheeffectiveinterestmethod.Otherfinancialassetsandliabilitiesarerecordedatfairvaluethroughtheconsolidatedstatementsofincome.
Available -for -sale Securities
TheCompany'sinvestmentsinavailable-for-salesecuritiesconsistprimarilyofinvestmentsincommonsharesofentitiesintheminingindustryrecordedusingtradedateaccounting.Investmentsaredesignatedasavailable-for-salebasedonthecriteriathattheCompanydoesnotholdthesefortradingpurposes.Thecostbasisofavailable-for-salesecuritiesisdeterminedusingtheaveragecostmethodandtheyarecarriedatfairvalue.Unrealizedgainsandlossesrecordedtomeasureavailable-for-salesecuritiesatfairvaluearerecognizedinothercomprehensiveincome.
Intheeventthatadeclineinthefairvalueofaninvestmentinavailable-for-salesecuritiesoccursandthedeclineinvalueisconsideredtobesignificantorprolonged,animpairmentchargeisrecordedintheconsolidatedstatementsofincomeandcomprehensiveincome.TheCompanyassesseswhetheradeclineinvalueisconsideredtobesignificantorprolongedbyconsideringavailableevidence,includingchangesingeneralmarketconditions,specificindustryandinvesteedata,thelengthoftimeandtheextenttowhichthefairvaluehasbeenlessthancostandthefinancialconditionoftheinvestee.
Derivative Instruments and Hedge Accounting
TheCompanyusesderivativefinancialinstruments(primarilyoptionandforwardcontracts)tomanageexposuretofluctuationsinby-productmetalprices,interestratesandforeigncurrencyexchangeratesandmayusesuchmeanstomanageexposuretocertaininputcosts.TheCompanydoesnotholdfinancialinstrumentsorderivativefinancialinstrumentsfortradingpurposes.
TheCompanyrecognizesallderivativefinancialinstrumentsintheconsolidatedfinancialstatementsatfairvalueregardlessofthepurposeorintentforholdingtheinstrument.Changesinthefairvalueofderivativefinancialinstrumentsareeitherrecognizedperiodicallyintheconsolidatedstatementsofincomeandcomprehensiveincomeorinequityasacomponentofaccumulatedothercomprehensiveincome,dependingonthenatureofthederivativefinancialinstrumentandwhetheritqualifiesforhedgeaccounting.Financialinstrumentsdesignatedashedgesaretestedforeffectivenessateachreportingperiod.Realizedgainsandlossesonthosecontractsthatareproventobeeffectivearereportedasacomponentoftherelatedtransaction.
H) Goodwill
Goodwillisrecognizedinabusinesscombinationifthecostoftheacquisitionexceedsthefairvaluesoftheidentifiablenetassetsacquired.Goodwillisthenallocatedtothecashgeneratingunit("CGU")orgroupofCGUsthatareexpectedtobenefitfromthesynergiesofthecombination.ACGUisthesmallestidentifiablegroupofassetsthatgeneratescashinflowswhicharelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets.
12 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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TheCompanyperformsgoodwillimpairmenttestsonanannualbasisasatDecember31eachyear.Inaddition,theCompanyassessesforindicatorsofimpairmentateachreportingperiodendand,ifanindicatorofimpairmentisidentified,goodwillistestedforimpairmentatthattime.IfthecarryingvalueoftheCGUorgroupofCGUstowhichgoodwillisassignedexceedsitsrecoverableamount,animpairmentlossisrecognized.Goodwillimpairmentlossesarenotreversed.
TherecoverableamountofaCGUorgroupofCGUsismeasuredasthehigherofvalueinuseandfairvaluelesscostsofdisposal.
I) MiningProperties,PlantandEquipmentandMineDevelopmentCosts
Miningproperties,plantandequipmentandminedevelopmentcostsarerecordedatcost,lessaccumulatedamortizationandaccumulatedimpairmentlosses.
Mining Properties
Thecostofminingpropertiesincludesthefairvalueattributabletoprovenandprobablemineralreservesandmineralresourcesacquiredinabusinesscombinationorassetacquisition,undergroundminedevelopmentcosts,deferredstripping,capitalizedexplorationandevaluationcostsandcapitalizedborrowingcosts.
Significantpaymentsrelatedtotheacquisitionoflandandmineralrightsarecapitalizedasminingpropertiesatcost.Ifamineableorebodyisdiscovered,suchcostsareamortizedtoincomewhencommercialproductioncommences,usingtheunits-of-productionmethod,basedonestimatedprovenandprobablemineralreserves.Ifnomineableorebodyisdiscovered,suchcostsareexpensedintheperiodinwhichitisdeterminedthatthepropertyhasnofutureeconomicvalue.Costcomponentsofaspecificprojectthatareincludedinthecapitalcostoftheassetincludesalariesandwagesdirectlyattributabletotheproject,suppliesandmaterialsusedintheproject,andincrementaloverheadcoststhatcanbedirectlyattributabletotheproject.
Assetsunderconstructionarenotamortizeduntiltheendoftheconstructionperiodoroncecommercialproductionisachieved.Uponachievingtheproductionstage,thecapitalizedconstructioncostsaretransferredtotheappropriatecategoryofplantandequipment.
Plant and Equipment
Expendituresfornewfacilitiesandimprovementsthatcanextendtheusefullivesofexistingfacilitiesarecapitalizedasplantandequipmentatcost.Thecostofanitemofplantandequipmentincludes:itspurchaseprice,includingimportdutiesandnon-refundablepurchasetaxes,afterdeductingtradediscountsandrebates;anycostsdirectlyattributabletobringingtheassettothelocationandconditionnecessaryforittobecapableofoperatinginthemannerintendedbymanagement;andtheestimateofthecostsofdismantlingandremovingtheitemandrestoringthesiteonwhichitislocatedotherthancoststhatariseasaconsequenceofhavingusedtheitemtoproduceinventoriesduringtheperiod.
Anitemofproperty,plantandequipmentisderecognizedupondisposalorwhennofutureeconomicbenefitsareexpectedfromitsuseordisposal.Anygainorlossarisingonderecognitionoftheasset(calculatedasthedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheasset)isincludedintheconsolidatedstatementofincomeandcomprehensiveincomewhentheassetisderecognized.
Amortizationofanassetbeginswhentheassetisinthelocationandconditionnecessaryforittooperateinthemannerintendedbymanagement.Amortizationceasesattheearlierofthedatetheassetisclassifiedasheldforsaleorthedatetheassetisderecognized.Assetsunderconstructionarenotamortizeduntiltheendoftheconstructionperiod.Amortizationischargedaccordingtoeithertheunits-of-productionmethodorona
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straight-linebasis,accordingtothepatterninwhichtheasset'sfutureeconomicbenefitsareexpectedtobeconsumed.Theamortizationmethodappliedtoanassetisreviewedatleastannually.
Usefullivesofproperty,plantandequipmentarebasedonestimatedminelivesasdeterminedbyprovenandprobablemineralreserves.RemainingminelivesatDecember31,2016rangefrom1to18years.
Mine Development Costs
Minedevelopmentcostsincurredafterthecommencementofcommercialproductionarecapitalizedwhentheyareexpectedtohaveafutureeconomicbenefit.Activitiesthataretypicallycapitalizedincludecostsincurredtobuildshafts,drifts,rampsandaccesscorridorswhichenablestheCompanytoextractoreunderground.
TheCompanyrecordsamortizationonundergroundminedevelopmentcostsonaunits-of-productionbasisbasedontheestimatedtonnageofprovenandprobablemineralreservesoftheidentifiedcomponentoftheorebody.Theunits-of-productionmethoddefinesthedenominatorasthetotaltonnageofprovenandprobablemineralreserves.
Deferred Stripping
Inopenpitminingoperations,itisnecessarytoremoveoverburdenandotherwastematerialstoaccessorefromwhichmineralscanbeextractedeconomically.Theprocessofminingoverburdenandwastematerialsisreferredtoasstripping.
Duringthedevelopmentstageofthemine,strippingcostsarecapitalizedaspartofthecostofbuilding,developingandconstructingthemineandareamortizedoncetheminehasenteredtheproductionstage.
Duringtheproductionstageofamine,strippingcostsarerecordedasapartofthecostofinventoriesunlessthesecostsareexpectedtoprovideafutureeconomicbenefitand,insuchcases,arecapitalizedtoproperty,plantandminedevelopment.
Productionstagestrippingcostsprovideafutureeconomicbenefitwhen:
• Itisprobablethatthefutureeconomicbenefit(e.g.,improvedaccesstotheorebody)associatedwiththestrippingactivitywillflowtotheCompany;
• TheCompanycanidentifythecomponentoftheorebodyforwhichaccesshasbeenimproved;and
• Thecostsrelatingtothestrippingactivityassociatedwiththatcomponentcanbemeasuredreliably.
Capitalizedproductionstagestrippingcostsareamortizedovertheexpectedusefullifeoftheidentifiedcomponentoftheorebodythatbecomesmoreaccessibleasaresultofthestrippingactivity.
Borrowing Costs
Borrowingcostsarecapitalizedtoqualifyingassets.QualifyingassetsareassetsthattakeasubstantialperiodoftimetopreparefortheCompany'sintendeduse,whichincludesprojectsthatareintheexplorationandevaluation,developmentorconstructionstages.
Borrowingcostsattributabletotheacquisition,constructionorproductionofqualifyingassetsareaddedtothecostofthoseassetsuntilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduse.Allotherborrowingcostsarerecognizedasfinancecostsintheperiodinwhichtheyareincurred.Wherethefundsusedtofinanceaqualifyingassetformpartofgeneralborrowings,theamountcapitalizediscalculatedusingaweightedaverageofratesapplicabletotherelevantborrowingsduringtheperiod.
14 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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Leases
Thedeterminationofwhetheranarrangementis,orcontains,aleaseisbasedonthesubstanceofthearrangementattheinceptiondate,includingwhetherthefulfillmentofthearrangementisdependentontheuseofaspecificassetorassetsorwhetherthearrangementconveysarighttousetheasset.
LeasingarrangementsthattransfersubstantiallyalltherisksandrewardsofownershipoftheassettotheCompanyareclassifiedasfinanceleases.Financeleasesarerecordedasanassetwithacorrespondingliabilityatanamountequaltothelowerofthefairvalueoftheleasedassetsandthepresentvalueoftheminimumleasepayments.Eachleasepaymentisallocatedbetweentheliabilityandfinancecostsusingtheeffectiveinterestratemethod,wherebyaconstantrateofinterestexpenseisrecognizedonthebalanceoftheliabilityoutstanding.Theinterestelementoftheleaseischargedtotheconsolidatedstatementofincomeasafinancecost.Anassetleasedunderafinanceleaseisamortizedovertheshorteroftheleasetermanditsusefullife.
Allotherleasesarerecognizedasoperatingleases.Operatingleasepaymentsarerecognizedasanoperatingexpenseintheconsolidatedstatementsofincomeonastraight-linebasisovertheleaseterm.
J) DevelopmentStageExpenditures
Developmentstageexpendituresarecostsincurredtoobtainaccesstoprovenandprobablemineralreservesandprovidefacilitiesforextracting,treating,gathering,transportingandstoringtheminerals.Thedevelopmentstageofaminecommenceswhenthetechnicalfeasibilityandcommercialviabilityofextractingthemineralresourcehasbeendetermined.Coststhataredirectlyattributabletominedevelopmentarecapitalizedasproperty,plantandminedevelopmenttotheextentthattheyarenecessarytobringthepropertytocommercialproduction.
Abnormalcostsareexpensedasincurred.Indirectcostsareincludedonlyiftheycanbedirectlyattributedtotheareaofinterest.Generalandadministrativecostsarecapitalizedaspartofthedevelopmentexpenditureswhenthecostsaredirectlyattributedtoaspecificminingdevelopmentproject.
Commercial Production
Amineconstructionprojectisconsideredtohaveenteredtheproductionstagewhenthemineconstructionassetsareavailableforuse.Indeterminingwhethermineconstructionassetsareconsideredavailableforuse,thecriteriaconsideredinclude,butarenotlimitedto,thefollowing:
• Completionofareasonableperiodoftestingmineplantandequipment;
• Abilitytoproducemineralsinsaleableform(withinspecifications);and
• Abilitytosustainongoingproductionofminerals.
Whenamineconstructionprojectmovesintotheproductionstage,amortizationcommences,thecapitalizationofcertainmineconstructioncostsceasesandexpendituresareeithercapitalizedtoinventoriesorexpensedasincurred.Exceptionsincludecostsincurredforadditionsorimprovementstoproperty,plantandminedevelopmentandopen-pitstrippingactivities.
K) ImpairmentofLong-livedAssets
AttheendofeachreportingperiodtheCompanyassesseswhetherthereisanyindicationthatlong-livedassetsmaybeimpaired.Ifanindicatorofimpairmentexists,therecoverableamountoftheassetiscalculatedinordertodetermineifanyimpairmentlossisrequired.Ifitisnotpossibletoestimatetherecoverableamountoftheindividualasset,assetsaregroupedattheCGUlevelforthepurposeofassessingtherecoverableamount.AnimpairmentlossisrecognizedforanyexcessofthecarryingamountoftheCGUoveritsrecoverableamount.Theimpairmentloss
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relatedtoaCGUisfirstallocatedtogoodwillandtheremaininglossisallocatedonapro-ratabasistotheremaininglong-livedassetsoftheCGUbasedontheircarryingamounts.
Anyimpairmentchargethatistakenonalong-livedassetexceptgoodwillisreversediftherearesubsequentchangesintheestimatesorsignificantassumptionsthatwereusedtorecognizetheimpairmentlossthatresultinanincreaseintherecoverableamountoftheCGU.Ifanindicatorofimpairmentreversalhasbeenidentified,arecoveryshouldberecognizedtotheextenttherecoverableamountoftheassetexceedsitscarryingamount.Theamountofthereversalislimitedtothedifferencebetweenthecurrentcarryingamountandtheamountwhichwouldhavebeenthecarryingamounthadtheearlierimpairmentnotbeenrecognizedandamortizationofthatcarryingamounthadcontinued.Impairmentsandsubsequentreversalsarerecordedintheconsolidatedstatementofincomeintheperiodinwhichtheyoccur.
L) Debt
Debtisinitiallyrecordedatfairvalue,netoffinancingcostsincurred.Debtissubsequentlymeasuredatamortizedcost.Anydifferencebetweentheamountsreceivedandtheredemptionvalueofthedebtisrecognizedintheconsolidatedstatementsofincomeovertheperiodtomaturityusingtheeffectiveinterestratemethod.Convertibledebenturesareaccountedforasafinancialliabilitymeasuredatfairvalueintheconsolidatedstatementsofincome.
M) ReclamationProvisions
Assetretirementobligations("AROs")arisefromtheacquisition,developmentandconstructionofminingpropertiesandplantandequipmentduetogovernmentcontrolsandregulationsthatprotecttheenvironmentontheclosureandreclamationofminingproperties.ThemajorpartsofthecarryingamountofAROsrelatetotailingsandheapleachpadclosureandrehabilitation,demolitionofbuildingsandminefacilities,ongoingwatertreatmentandongoingcareandmaintenanceofclosedmines.TheCompanyrecognizesanAROatthetimetheenvironmentaldisturbanceoccursoraconstructiveobligationisdeterminedtoexistbasedontheCompany'sbestestimateofthetimingandamountofexpectedcashflowsexpectedtobeincurred.WhentheAROprovisionisrecognized,thecorrespondingcostiscapitalizedtotherelateditemofproperty,plantandminedevelopment.Reclamationprovisionsthatresultfromdisturbanceinthelandtoextractoreinthecurrentperiodisincludedinthecostofinventories.
Thetimingoftheactualenvironmentalremediationexpendituresisdependentonanumberoffactorssuchasthelifeandnatureoftheasset,theoperatinglicenceconditionsandtheenvironmentinwhichthemineoperates.Reclamationprovisionsaremeasuredattheexpectedvalueoffuturecashflowsdiscountedtotheirpresentvalueusingarisk-freeinterestrate.AROsareadjustedeachperiodtoreflectthepassageoftime(accretion).Accretionexpenseisrecordedinfinancecostseachperiod.UponsettlementofanARO,theCompanyrecordsagainorlossiftheactualcostdiffersfromthecarryingamountoftheARO.Settlementgainsorlossesarerecordedintheconsolidatedstatementsofincome.
Expectedcashflowsareupdatedtoreflectchangesinfactsandcircumstances.Theprincipalfactorsthatcancauseexpectedcashflowstochangearetheconstructionofnewprocessingfacilities,changesinthequantitiesofmaterialinprovenandprobablemineralreservesandacorrespondingchangeinthelife-of-mineplan,changingorecharacteristicsthatimpactrequiredenvironmentalprotectionmeasuresandrelatedcosts,changesinwaterqualitythatimpacttheextentofwatertreatmentrequiredandchangesinlawsandregulationsgoverningtheprotectionoftheenvironment.
Eachreportingperiod,provisionsforAROsareremeasuredtoreflectanychangestosignificantassumptions,includingtheamountandtimingofexpectedcashflowsandrisk-freeinterestrates.Changestothereclamation
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provisionresultingfromchangesinestimateareaddedtoordeductedfromthecostoftherelatedasset,exceptwherethereductionofthereclamationprovisionexceedsthecarryingvalueoftherelatedassetsinwhichcasetheassetisreducedtonilandtheremainingadjustmentisrecognizedintheconsolidatedstatementsofincome.
Environmentalremediationliabilities("ERLs")aredifferentiatedfromAROsinthatERLsdonotarisefromenvironmentalcontaminationinthenormaloperationofalong-livedassetorfromalegalorconstructiveobligationtotreatenvironmentalcontaminationresultingfromtheacquisition,constructionordevelopmentofalong-livedasset.TheCompanyisrequiredtorecognizealiabilityforobligationsassociatedwithERLsarisingfrompastacts.ERLsaremeasuredbydiscountingtheexpectedrelatedcashflowsusingarisk-freeinterestrate.TheCompanypreparesestimatesofthetimingandamountofexpectedcashflowswhenanERLisincurred.Eachreportingperiod,theCompanyassessescostestimatesandotherassumptionsusedinthevaluationofERLstoreflectevents,changesincircumstancesandnewinformationavailable.ChangesinthesecostestimatesandassumptionshaveacorrespondingimpactonthevalueoftheERL.AnychangeinthevalueofERLsresultsinacorrespondingchargeorcredittotheconsolidatedstatementsofincome.UponsettlementofanERL,theCompanyrecordsagainorlossiftheactualcostdiffersfromthecarryingamountoftheERLintheconsolidatedstatementsofincome.
N) Post-employmentBenefits
InCanada,theCompanymaintainsadefinedcontributionplancoveringallofitsemployees(the"BasicPlan").TheBasicPlanisfundedbyCompanycontributionsbasedonapercentageofincomeforservicesrenderedbyemployees.Inaddition,theCompanyhasasupplementalplanfordesignatedexecutivesatthelevelofVice-Presidentorabove(the"SupplementalPlan").UndertheSupplementalPlan,anadditional10.0%ofthedesignatedexecutives'incomeiscontributedbytheCompany.
TheCompanyalsoprovidesanon-registeredsupplementaryexecutiveretirementdefinedbenefitplanforcertaincurrentandformerseniorofficers(the"ExecutivesPlan").TheExecutivesPlanbenefitsaregenerallybasedontheemployee'syearsofserviceandlevelofcompensation.PensionexpenserelatedtotheExecutivesPlanisthenetofthecostofbenefitsprovided(includingthecostofanybenefitsprovidedforpastservice),thenetinterestcostonthenetdefinedliability/asset,andtheeffectsofsettlementsandcurtailmentsrelatedtospecialevents.Pensionfundassetsaremeasuredattheircurrentfairvalues.Thecostsofpensionplanimprovementsarerecognizedimmediatelyinexpensewhentheyoccur.Remeasurementsofthenetdefinedbenefitliabilityarerecognizedimmediatelyinothercomprehensiveincome(loss)andaresubsequentlytransferredtoretainedearnings.
Defined Contribution Plan
TheCompanyrecognizesthecontributionspayabletoadefinedcontributionplaninexchangeforservicesrenderedbyemployeesasanexpense,unlessanotherpolicyrequiresorpermitstheinclusionofthecontributioninthecostofanasset.Afterdeductingcontributionsalreadypaid,aliabilityisrecordedthroughouteachperiodtoreflectunpaidbutearnedcontributions.Ifthecontributionpaidexceedsthecontributionduefortheservicebeforetheendofthereportingperiod,theCompanyrecognizesthatexcessasanassettotheextentthattheprepaymentwillleadtoareductioninfuturepaymentsoracashrefund.
Defined Benefit Plan
Planassetsaremeasuredattheirfairvalueattheconsolidatedbalancesheetdateandaredeductedfromthepresentvalueofplanliabilitiestoarriveatanetdefinedbenefitliability/asset.Thedefinedbenefitobligationreflectstheexpectedfuturepaymentsrequiredtosettletheobligationresultingfromemployeeserviceinthecurrentandpriorperiods.
Currentservicecostrepresentstheactuariallycalculatedpresentvalueofthebenefitsearnedbytheactiveemployeesineachperiodandreflectstheeconomiccostforeachperiodbasedoncurrentmarketconditions.The
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currentservicecostisbasedonthemostrecentactuarialvaluation.Thenetinterestonthenetdefinedbenefitliability/assetisthechangeduringtheperiodinthedefinedbenefitliability/assetthatarisesfromthepassageoftime.
Pastservicecostrepresentsthechangeinthepresentvalueofthedefinedbenefitobligationresultingfromaplanamendmentorcurtailment.Pastservicecostsfromplanamendmentsthatincreaseordecreasevestedorunvestedbenefitsarerecognizedimmediatelyinnetincomeattheearlierofwhentherelatedplanamendmentoccursorwhentheentityrecognizesrelatedrestructuringcostsorterminationbenefits.
Gainsorlossesonplansettlementsaremeasuredasthedifferenceinthepresentvalueofthedefinedbenefitobligationandsettlementprice.Thisresultsinagainorlossbeingrecognizedwhenthebenefitobligationsettles.Actuarialgainsandlossesarerecordedontheconsolidatedbalancesheetsaspartofthebenefitplan'sfundedstatus.Gainsandlossesarerecognizedimmediatelyinothercomprehensiveincomeandaresubsequentlytransferredtoretainedearningsandarenotsubsequentlyrecognizedinnetincome.
O) ContingentLiabilitiesandOtherProvisions
Provisionsarerecognizedwhenapresentobligationexists(legalorconstructive),asaresultofapastevent,forwhichitisprobablethatanoutflowofresourceswillberequiredtosettletheobligation,andareliableestimatecanbemadeoftheamountoftheobligation.Theamountrecognizedasaprovisionisthebestestimateoftheexpenditurerequiredtosettletheobligationattheconsolidatedbalancesheetdate,measuredusingtheexpectedcashflowsdiscountedforthetimevalueofmoney.Theincreaseinprovision(accretion)duetothepassageoftimeisrecognizedasafinancecostintheconsolidatedstatementsofincome.
Contingentliabilitiesarepossibleobligationswhoseexistencewillbeconfirmedonlyontheoccurrenceornon-occurrenceofuncertainfutureeventsoutsidetheentity'scontrol,orpresentobligationsthatarenotrecognizedbecauseitisnotprobablethatanoutflowofeconomicbenefitswouldberequiredtosettletheobligationortheamountcannotbemeasuredreliably.Contingentliabilitiesarenotrecognizedbutaredisclosedanddescribedinthenotestotheconsolidatedfinancialstatements,includinganestimateoftheirpotentialfinancialeffectanduncertaintiesrelatingtotheamountortimingofanyoutflow,unlessthepossibilityofsettlementisremote.InassessinglosscontingenciesrelatedtolegalproceedingsthatarependingagainsttheCompanyorunassertedclaimsthatmayresultinsuchproceedings,theCompany,withassistancefromitslegalcounsel,evaluatestheperceivedmeritsofanylegalproceedingsorunassertedclaimsaswellastheperceivedmeritsoftheamountofreliefsoughtorexpectedtobesought.
P) Stock-basedCompensation
TheCompanyoffersequity-settledawards(theemployeestockoptionplan,incentivesharepurchaseplan,restrictedshareunitplanandperformanceshareunitplan)tocertainemployees,officersanddirectorsoftheCompany.
Employee Stock Option Plan ("ESOP")
TheCompany'sESOPprovidesforthegrantingofoptionstodirectors,officers,employeesandserviceproviderstopurchasecommonshares.Optionshaveexercisepricesequaltothemarketpriceonthedaypriortothedateofgrant.Thefairvalueoftheseoptionsisrecognizedintheconsolidatedstatementsofincomeandcomprehensiveincomeorintheconsolidatedbalancesheetsifcapitalizedaspartofproperty,plantandminedevelopmentovertheapplicablevestingperiodasacompensationcost.Anyconsiderationpaidbyemployeesonexerciseofoptionsorpurchaseofcommonsharesiscreditedtosharecapital.
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FairvalueisdeterminedusingtheBlack-Scholesoptionvaluationmodel,whichrequirestheCompanytoestimatetheexpectedvolatilityoftheCompany'ssharepriceandtheexpectedlifeofthestockoptions.Limitationswithexistingoptionvaluationmodelsandtheinherentdifficultiesassociatedwithestimatingthesevariablescreatedifficultiesindeterminingareliablesinglemeasureofthefairvalueofstockoptiongrants.Thecostisrecordedoverthevestingperiodoftheawardtothesameexpensecategoryoftheawardrecipient'spayrollcostsandthecorrespondingentryisrecordedinequity.Equity-settledawardsarenotremeasuredsubsequenttotheinitialgrantdate.ThedilutiveimpactofstockoptiongrantsisfactoredintotheCompany'sreporteddilutednetincomepershare.Thestockoptionexpenseincorporatesanexpectedforfeiturerate,estimatedbasedonexpectedemployeeturnover.
Incentive Share Purchase Plan ("ISPP")
UndertheISPP,directors(excludingnon-executivedirectors),officersandemployees(the"Participants")oftheCompanymaycontributeupto10.0%oftheirbasicannualsalariesandtheCompanycontributesanamountequalto50.0%ofeachParticipant'scontribution.AllcommonsharessubscribedforundertheISPPareissuedbytheCompany.
TheCompanyrecordsanexpenseequaltoitscashcontributiontotheISPP.Noforfeiturerateisappliedtotheamountsaccrued.Whereanemployeeleavespriortothevestingdate,anyaccrualforcontributionsbytheCompanyduringthevestingperiodrelatedtothatemployeeisreversed.
Restricted Share Unit ("RSU") Plan
TheRSUplanisopentodirectorsandcertainemployees,includingseniorexecutives,oftheCompany.Commonsharesarepurchasedandheldinatrustuntiltheyhavevested.Thecostisrecordedoverthevestingperiodoftheawardtothesameexpensecategoryastheawardrecipient'spayrollcosts.ThecostoftheRSUsisrecordedwithinequityuntilsettled.Equity-settledawardsarenotremeasuredsubsequenttotheinitialgrantdate.
Performance Share Unit ("PSU") Plan
ThePSUplanisopentoseniorexecutivesoftheCompany.Commonsharesarepurchasedandheldinatrustuntiltheyhavevested.PSUsaresubjecttovestingrequirementsbasedonspecificperformancemeasurementsbytheCompany.ThefairvaluefortheportionofthePSUsrelatedtomarketconditionsisbasedontheapplicationofpricingmodelsatthegrantdateandthefairvaluefortheportionrelatedtonon-marketconditionsisbasedonthemarketvalueofthesharesatthegrantdate.CompensationexpenseisbasedonthecurrentbestestimateoftheoutcomeforthespecificperformancemeasurementestablishedbytheCompanyandisrecognizedoverthevestingperiodbasedonthenumberofunitsestimatedtovest.ThecostofthePSUsisrecordedwithinequityuntilsettled.Equity-settledawardsarenotremeasuredsubsequenttotheinitialgrantdate.
Q) RevenueRecognition
Revenuefromminingoperationsconsistsofgoldrevenues,netofsmelting,refining,transportationandothermarketingcharges.Revenuesfromby-productmetalsalesareshownnetofsmelterchargesaspartofrevenuesfromminingoperations.
Revenuefromthesaleofgoldandsilverisrecognizedwhenthefollowingconditionshavebeenmet:
• TheCompanyhastransferredtothebuyerthesignificantrisksandrewardsofownership;
• TheCompanyretainsneithercontinuingmanagerialinvolvementtothedegreeusuallyassociatedwithownershipnoreffectivecontroloverthegoodssold;
• Theamountofrevenuecanbemeasuredreliably;
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• ItisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheCompany;and
• Thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.
Revenuefromgoldandsilverintheformofdorebarsisrecordedwhentherefinedgoldorsilverissoldanddeliveredtothecustomer.Generally,allofthegoldandsilverintheformofdorebarsrecoveredintheCompany'smillingprocessissoldintheperiodinwhichitisproduced.
UnderthetermsoftheCompany'sconcentratesalescontractswiththird-partysmelters,finalpricesforthemetalscontainedintheconcentratearedeterminedbasedontheprevailingspotmarketmetalpricesonaspecifiedfuturedate,whichisestablishedasofthedatethattheconcentrateisdeliveredtothesmelter.TheCompanyrecordsrevenuesunderthesecontractsbasedonforwardpricesatthetimeofdelivery,whichiswhentherisksandrewardsofownershipoftheconcentratepassestothethird-partysmelters.Thetermsofthecontractsresultindifferencesbetweentherecordedestimatedpriceatdeliveryandthefinalsettlementprice.Thesedifferencesareadjustedthroughrevenueateachsubsequentfinancialstatementdate.
R) ExplorationandEvaluationExpenditures
Explorationandevaluationexpendituresarethecostsincurredintheinitialsearchformineraldepositswitheconomicpotentialorintheprocessofobtainingmoreinformationaboutexistingmineraldeposits.Explorationexpenditurestypicallyincludecostsassociatedwithprospecting,sampling,mapping,diamonddrillingandotherworkinvolvedinsearchingforore.Evaluationexpendituresarethecostsincurredtoestablishthetechnicalandcommercialviabilityofdevelopingmineraldepositsidentifiedthroughexplorationactivitiesorbyacquisition.
Explorationandevaluationexpendituresareexpensedasincurredunlessitcanbedemonstratedthattheprojectwillgeneratefutureeconomicbenefit.Whenitisdeterminedthataprojectcangeneratefutureeconomicbenefitthecostsarecapitalizedintheproperty,plantandminedevelopmentlineitemoftheconsolidatedbalancesheets.
Theexplorationandevaluationphaseendswhenthetechnicalfeasibilityandcommercialviabilityofextractingthemineralisdemonstrable.
S) NetIncomePerShare
Basicnetincomepershareiscalculatedbydividingnetincomeforagivenperiodbytheweightedaveragenumberofcommonsharesoutstandingduringthatsameperiod.Dilutednetincomepersharereflectsthepotentialdilutionthatcouldoccurifholderswithrightstoconvertinstrumentstocommonsharesexercisetheserights.Convertibledebtisdilutivewheneveritsimpactonnetincome,includingmark-to-marketgains(losses),interestandtaxexpense,perordinaryshareobtainableonconversionislessthanbasicnetincomepershare.Theweightedaveragenumberofcommonsharesusedtodeterminedilutednetincomepershareincludesanadjustment,usingthetreasurystockmethod,forstockoptionsoutstanding.Underthetreasurystockmethod:
• Theexerciseofoptionsisassumedtooccuratthebeginningoftheperiod(ordateofissuance,iflater);
• Theproceedsfromtheexerciseofoptionsplusthefutureperiodcompensationexpenseonoptionsgrantedareassumedtobeusedtopurchasecommonsharesattheaveragemarketpriceduringtheperiod;and
• Theincrementalnumberofcommonshares(thedifferencebetweenthenumberofsharesassumedissuedandthenumberofsharesassumedpurchased)isincludedinthedenominatorofthedilutednetincomepersharecalculation.
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T) IncomeTaxes
Currentanddeferredtaxexpensesarerecognizedintheconsolidatedstatementsofincomeexcepttotheextentthattheyrelatetoabusinesscombination,ortoitemsrecognizeddirectlyinequityorinothercomprehensiveincome(loss).
Currenttaxexpenseisbasedonsubstantivelyenactedstatutorytaxratesandlawsattheconsolidatedbalancesheetdate.
Deferredtaxisrecognizedinrespectoftemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandthetaxbasisofsuchassetsandliabilitiesmeasuredusingtaxratesandlawsthataresubstantivelyenactedattheconsolidatedbalancesheetdateandeffectiveforthereportingperiodwhenthetemporarydifferencesareexpectedtoreverse.
Deferredtaxesarenotrecognizedinthefollowingcircumstances:
• Whereadeferredtaxliabilityarisesfromtheinitialrecognitionofgoodwill;
• Whereadeferredtaxassetorliabilityarisesontheinitialrecognitionofanassetorliabilityinatransactionwhichisnotabusinesscombinationand,atthetimeofthetransaction,affectsneithernetincomeortaxableprofits;and
• FortemporarydifferencesrelatingtoinvestmentsinsubsidiariesandjointlycontrolledentitiestotheextentthattheCompanycancontrolthetimingofthereversalofthetemporarydifferenceanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.
Deferredtaxassetsarerecognizedforunusedtaxlossesandtaxcreditscarriedforwardanddeductibletemporarydifferencestotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheycanbeutilizedexceptasnotedabove.
Ateachreportingperiod,previouslyunrecognizeddeferredtaxassetsarereassessedtodeterminewhetherithasbecomeprobablethatfuturetaxableprofitswillallowthedeferredtaxassetstoberecovered.
Recently Issued Accounting Pronouncements
IFRS9–FinancialInstruments
InJuly2014,theIASBissuedthefinalversionofIFRS9FinancialInstrumentsthatreplacesIAS39andallpreviousversionsofIFRS9.IFRS9bringstogetherallthreeaspectsoftheaccountingforfinancialinstrumentsproject:classificationandmeasurement,impairmentandhedgeaccounting.IFRS9iseffectiveforannualperiodsbeginningonorafterJanuary1,2018,withearlyapplicationpermitted.Exceptforhedgeaccounting,retrospectiveapplicationisrequired,buttheprovisionofcomparativeinformationisnotcompulsory.Forhedgeaccounting,therequirementsaregenerallyappliedprospectively,withsomelimitedexceptions.TheCompanyplanstoadoptthenewstandardontherequiredeffectivedate.
During2016,theCompanyperformedahigh-levelimpactassessmentofallthreeaspectsofIFRS9.ThispreliminaryassessmentisbasedoncurrentlyavailableinformationandmaybesubjecttochangesarisingfromfurtherdetailedanalysisoradditionalreasonableandsupportableinformationbeingmadeavailabletotheCompanyinthefuture.Overall,thereisnosignificantimpactexpectedonthebalancesheetorstatementofequityfromtheadoptionofIFRS9.
Classification and measurement
TheonlychangeinIFRS9inrespectoftheclassificationoffinancialliabilitiesisthatforthosedesignatedatfairvaluethroughprofitorloss("FVTPL"),fairvaluechangesattributabletotheCompany'sowncreditriskarepresentedinOCI.IFRS9
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introducesanewmodelforclassifyingfinancialassets.Thestandardintroducesprinciple-basedrequirementsfortheclassificationoffinancialassets,usingthefollowingmeasurementcategories:
• Debtinstrumentsatamortizedcost;
• DebtinstrumentsatfairvaluethroughOCI("FVOCI")withcumulativegainsandlossesreclassifiedtoprofitorlossuponderecognition;
• Debtinstruments,derivativesandequityinstrumentsatFVTPL;and
• EquityinstrumentsdesignatedatFVOCIwithnorecyclingofgainsandlossesuponderecognition.
TheCompanyisstillevaluatingitsdifferentfinancialassetstoensureappropriateclassificationunderIFRS9.
Impairment
Thenewimpairmentrequirementsarebasedonaforward-lookingexpectedcreditlossmodel.ThemodelappliestodebtinstrumentsmeasuredatamortizedcostoratFVOCI,aswellasleasereceivables,tradereceivables,contractsassets(asdefinedinIFRS15),andloancommitmentsandfinancialguaranteecontractsthatarenotatfairvaluethroughprofitorloss.TheCompanydoesnotholdsignificantamountsofthesetypesoffinancialassetsandthereforedoesnotexpectthesechangestohaveasignificantimpact.
Hedge accounting
ThechangesinIFRS9relatingtohedgeaccountingwillhavenoimpactastheCompanydoesnotcurrentlyapplyhedgeaccounting.
IFRS15–RevenuefromContractswithCustomers
IFRS15wasissuedinMay2014andestablishesafive-stepmodeltoaccountforrevenuearisingfromcontractswithcustomers.UnderIFRS15,revenueisrecognizedatanamountthatreflectstheconsiderationtowhichanentityexpectstobeentitledinexchangefortransferringgoodsorservicestoacustomer.
ThenewrevenuestandardwillsupersedeallcurrentrevenuerecognitionrequirementsunderIFRS.EitherafullretrospectiveapplicationoramodifiedretrospectiveapplicationisrequiredforannualperiodsbeginningonorafterJanuary1,2018.Earlyadoptionispermitted.
TheCompanyplanstoadoptthenewstandard(includingtheclarificationsissuedbytheIASBinApril2016)ontherequiredeffectivedate.During2016,theCompanycommenceditspreliminaryassessmentofIFRS15andsomeofthekeyissuesithasidentified,anditsinitialviewsandperspectives,aresetoutbelow.ThesearebasedontheworkcompletedtodateandtheCompany'scurrentinterpretationofIFRS15andmaybesubjecttochangesasmoredetailedanalysisiscompletedandasinterpretationsevolvemoregenerally.Furthermore,theCompanyisconsideringandwillcontinuetomonitoranyfurtherdevelopment.Todate,theissuessetoutimmediatelybelowwereidentifiedbytheCompanyasrequiringfurtherconsideration.
Provisionally priced sales
SomeoftheCompany'ssalesofmetalinconcentratecontainprovisionalpricingfeatures.UnderIAS18,revenueisrecognizedunderthesecontractsbasedonforwardpricesatthetimeofdelivery,whichiswhentherisksandrewardsofownershipoftheconcentratepasstothethird-partysmelters.Finalpricesforthemetalscontainedintheconcentratearedeterminedbasedontheprevailingspotmarketmetalpricesonaspecifiedfuturedate,whichisestablishedasofthedatethattheconcentrateisdeliveredtothesmelter.
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AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(thousands of United States dollars, except share and per share amounts, unless otherwise indicated) December 31, 2016
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
TheCompanyiscurrentlyevaluatingtheaccountingtreatmentofthesecontractsunderIFRS15.Theimpactisexpectedtobeimmaterial.In2016,revenuefromconcentratesalescontractswasapproximately0.7%oftotalrevenue.
Other presentation and disclosure requirements
IFRS15containspresentationanddisclosurerequirementswhicharemoredetailedthanthecurrentstandards.Thepresentationrequirementsrepresentasignificantchangefromcurrentpracticeandwillincreasethevolumeofdisclosuresrequiredinthefinancialstatements.ManyofthedisclosurerequirementsinIFRS15arecompletelynew.In2016,theCompanystartedtoconsiderthesystems,internalcontrols,policiesandproceduresnecessarytocollectanddisclosetherequiredinformation.
IFRS16–Leases
InJanuary2016,theIASBissuedIFRS16–Leases whichbringsmostleaseson-balancesheetforlesseesbyeliminatingthedistinctionbetweenoperatingandfinanceleases.Lessoraccountingremainslargelyunchangedandthedistinctionbetweenoperatingandfinanceleasesisretained.UnderIFRS16,alesseerecognizesaright-of-useassetandaleaseliability.Theright-of-useassetistreatedsimilarlytoothernon-financialassetsanddepreciatedaccordingly,andtheliabilityaccruesinterest.Theleaseliabilityisinitiallymeasuredatthepresentvalueoftheleasepaymentspayableovertheleaseterm,discountedattherateimplicitinthelease.Lesseesarepermittedtomakeanaccountingpolicyelection,byclassofunderlyingasset,toapplyamethodlikeIAS17'soperatingleaseaccountingandnotrecognizeleaseassetsandleaseliabilitiesforleaseswithaleasetermof12monthsorlessandonalease-by-leasebasis,toapplyamethodsimilartocurrentoperatingleaseaccountingtoleasesforwhichtheunderlyingassetisoflowvalue.IFRS16supersedesIAS17–Leases andrelatedinterpretationsandiseffectiveforperiodsbeginningonorafterJanuary1,2019,withearlieradoptionpermittedifIFRS15hasalsobeenapplied.Alesseecanchoosetoapplythestandardusingeitherafullretrospectiveoramodifiedretrospectiveapproach.Thestandard'stransitionprovisionspermitcertainpracticalexpedients.In2017,theCompanyplanstoassessthepotentialeffectofIFRS16onitsconsolidatedfinancialstatements.
4. SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS
ThepreparationoftheseconsolidatedfinancialstatementsinconformitywithIFRSrequiresmanagementtomakejudgments,estimatesandassumptionsthataffecttheamountsreportedintheconsolidatedfinancialstatementsandaccompanyingnotes.Managementbelievesthattheestimatesusedinthepreparationoftheconsolidatedfinancialstatementsarereasonable;however,actualresultsmaydiffermateriallyfromtheseestimates.Thekeyareaswheresignificantjudgments,estimatesandassumptionshavebeenmadearesummarizedbelow.
ProvenandProbableMineralReserves
ProvenandprobablemineralreservesareestimatesoftheamountoforethatcanbeeconomicallyandlegallyextractedfromtheCompany'sminingproperties.Theestimatesarebasedoninformationcompiledby"qualifiedpersons"asdefinedundertheCanadianSecuritiesAdministrators'NationalInstrument43-101–StandardsofDisclosureforMineralProjects("NI43-101").Suchananalysisrelatingtothegeologicalandtechnicaldataonthesize,depth,shapeandgradeoftheorebodyandsuitableproductiontechniquesandrecoveryratesrequirescomplexgeologicaljudgmentstointerpretthedata.Theestimationofrecoverableprovenandprobablemineralreservesisbaseduponfactorssuchasestimatesofcommodityprices,futurecapitalrequirementsandproductioncosts,geologicalandmetallurgicalassumptionsandjudgmentsmadeinestimatingthesizeandgradeoftheorebodyandforeignexchangerates.
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Astheeconomicassumptionsusedmaychangeandasadditionalgeologicalinformationisacquiredduringtheoperationofamine,estimatesofprovenandprobablemineralreservesmaychange.SuchchangesmayimpacttheCompany'sconsolidatedbalancesheetsandconsolidatedstatementsofincomeandcomprehensiveincome,including:
• ThecarryingvalueoftheCompany'sproperty,plantandminedevelopmentandgoodwillmaybeaffectedduetochangesinestimatedfuturecashflows;
• Amortizationchargesintheconsolidatedstatementsofincomeandcomprehensiveincomemaychangewheresuchchargesaredeterminedusingtheunits-of-productionmethodorwheretheusefullifeoftherelatedassetschange;
• Capitalizedstrippingcostsrecognizedintheconsolidatedbalancesheetsaseitherpartofminingpropertiesoraspartofinventoriesorchargedtoincomemaychangeduetochangesintheratiooforetowasteextracted;and
• Reclamationprovisionsmaychangewherechangestotheprovenandprobablemineralreserveestimatesaffectexpectationsaboutwhensuchactivitieswilloccurandtheassociatedcostoftheseactivities.
ExplorationandEvaluationExpenditures
TheapplicationoftheCompany'saccountingpolicyforexplorationandevaluationexpendituresrequiresjudgmenttodeterminewhetherfutureeconomicbenefitsarelikelytoariseandwhetheractivitieshavereachedastagewherethetechnicalfeasibilityandcommercialviabilityofextractingthemineralisdemonstrable.
ProductionStageofaMine
Aseachmineisunique,significantjudgmentisrequiredtodeterminethedatethatamineenterstheproductionstage.TheCompanyconsidersthefactorsoutlinedinnote3totheseconsolidatedfinancialstatementstomakethisdetermination.
Contingencies
Contingenciescanbeeitherpossibleassetsorpossibleliabilitiesarisingfrompasteventswhich,bytheirnature,willberesolvedonlywhenoneormoreuncertainfutureeventsoccurorfailtooccur.Theassessmentoftheexistenceandpotentialimpactofcontingenciesinherentlyinvolvestheexerciseofsignificantjudgmentandtheuseofestimatesregardingtheoutcomeoffutureevents.
ReclamationProvisions
EnvironmentalremediationcostswillbeincurredbytheCompanyattheendoftheoperatinglifeoftheCompany'sminingproperties.Managementassessesitsreclamationprovisioneachreportingperiodorwhennewinformationbecomesavailable.Theultimateenvironmentalremediationcostsareuncertainandcostestimatescanvaryinresponsetomanyfactors,includingestimatesoftheextentandcostsofreclamationactivities,technologicalchanges,regulatorychanges,costincreasesascomparedtotheinflationrateandchangesindiscountrates.Theseuncertaintiesmayresultinfutureactualexpendituresdifferingfromtheamountofthecurrentprovision.Asaresult,therecouldbesignificantadjustmentstotheprovisionsestablishedthatwouldaffectfuturefinancialresults.Thereclamationprovisionasatthereportingdaterepresentsmanagement'sbestestimateofthepresentvalueofthefutureenvironmentalremediationcostsrequired.
IncomeandMiningTaxes
Managementisrequiredtomakeestimatesregardingthetaxbasisofassetsandliabilitiesandrelateddeferredincomeandminingtaxassetsandliabilities,amountsrecordedforuncertaintaxpositions,themeasurementofincomeandminingtaxexpense,andestimatesofthetimingofrepatriationofincome.Severaloftheseestimatesrequiremanagementtomake
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assessmentsoffuturetaxableprofitand,ifactualresultsaresignificantlydifferentthantheCompany'sestimates,theabilitytorealizethedeferredincomeandminingtaxassetsrecordedontheconsolidatedbalancesheetscouldbeaffected.
Amortization
Property,plantandminedevelopmentcomprisealargeportionoftheCompany'stotalassetsandassuchtheamortizationoftheseassetshasasignificanteffectontheCompany'sconsolidatedfinancialstatements.Amortizationischargedaccordingtothepatterninwhichanasset'sfutureeconomicbenefitsareexpectedtobeconsumed.Thedeterminationofthispatternoffutureeconomicbenefitsrequiresmanagementtomakeestimatesandassumptionsaboutusefullivesandresidualvaluesattheendoftheasset'susefullife.Actualusefullivesandresidualvaluesmaydiffersignificantlyfromcurrentassumptions.
ImpairmentandImpairmentReversals
TheCompanyevaluateseachassetorCGU(excludinggoodwill,whichisassessedforimpairmentannuallyregardlessofindicatorsandisnoteligibleforimpairmentreversals)ineachreportingperiodtodetermineifanyindicatorsofimpairmentorimpairmentreversalexist.Whencompletinganimpairmenttest,theCompanycalculatestheestimatedrecoverableamountofCGUs,whichrequiresmanagementtomakeestimatesandassumptionswithrespecttoitemssuchasfutureproductionlevels,operatingandcapitalcosts,long-termcommodityprices,foreignexchangerates,discountrates,explorationpotential,andclosureandenvironmentalremediationcosts.Theseestimatesandassumptionsaresubjecttoriskanduncertainty.Therefore,thereisapossibilitythatchangesincircumstanceswillhaveanimpactontheseprojections,whichmayimpacttherecoverableamountofassetsorCGUs.Accordingly,itispossiblethatsomeortheentirecarryingamountoftheassetsorCGUsmaybefurtherimpairedortheimpairmentchargereversedwiththeimpactrecognizedintheconsolidatedstatementsofincomeandcomprehensiveincome.
JointArrangements
JudgmentisrequiredtodeterminewhentheCompanyhasjointcontrolofacontractualarrangement,whichrequiresacontinuousassessmentoftherelevantactivitiesandwhenthedecisionsinrelationtothoseactivitiesrequireunanimousconsent.Judgmentisalsocontinuallyrequiredtoclassifyajointarrangementaseitherajointoperationorajointventurewhenthearrangementhasbeenstructuredthroughaseparatevehicle.ClassifyingthearrangementrequirestheCompanytoassessitsrightsandobligationsarisingfromthearrangement.Specifically,theCompanyconsidersthelegalformoftheseparatevehicle,thetermsofthecontractualarrangementandotherrelevantfactsandcircumstances.Thisassessmentoftenrequiressignificantjudgment,andadifferentconclusiononjointcontrol,orwhetherthearrangementisajointoperationorajointventure,mayhaveamaterialimpactontheaccountingtreatment.
ManagementevaluateditsjointarrangementwithYamanaGoldInc.("Yamana")toeachacquire50.0%ofthesharesofOsisko(nowCanadianMalarticCorporation)undertheprinciplesofIFRS11JointArrangements.TheCompanyconcludedthatthearrangementqualifiedasajointoperationuponconsideringthefollowingsignificantfactors:
• Therequirementthatthejointoperatorspurchasealloutputfromtheinvesteeandinvesteerestrictionsonsellingtheoutputtoanythirdparty;
• Thepartiestothearrangementaresubstantiallytheonlysourceofcashflowcontributingtothecontinuityofthearrangement;and
• Ifthesellingpricedropsbelowcost,thejointoperatorsarerequiredtocoveranyobligationstheentitycannotsatisfy.
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5. ACQUISITIONS
GunnarnMiningAB
OnJune11,2015,AgnicoEagleSwedenAB("AESweden")anindirectwholly-ownedsubsidiaryoftheCompany,acquired55.0%oftheissuedandoutstandingcommonsharesofGunnarnMiningAB("Gunnarn")fromOrexMineralsInc.("Orex"),bywayofasharepurchaseagreement(the"GunnarnSPA").TheoperationandgovernanceofGunnarnandtheBarseleprojectaregovernedbyajointventureagreementamongtheCompany,AESweden,OrexandGunnarn(the"GunnarnJVA").
UndertheGunnarnSPA,theconsiderationfortheacquisitionofthe55.0%ofGunnarn'soutstandingcommonshareswas$10.0million,comprisedof$6.0millionincashpayableatclosingandpaymentsof$2.0millionincashor,atAESweden'ssolediscretion,sharesoftheCompanyoneachofthefirstandsecondanniversaryoftheclosing.UndertheGunnarnJVA,AESwedencommittedtoincuranaggregateof$7.0millionofexplorationexpensesattheBarseleprojectbyJune11,2018,45.0%or$3.1millionofwhichisconsideredaccruedpurchaseconsideration.Accordingly,theCompany'stotalpurchaseconsiderationfortheacquisitionofits55.0%interestinGunnarnwas$13.1million.AESwedenmayearnanadditional15.0%interestinGunnarnundertheGunnarnJVAifitcompletesafeasibilitystudyinrespectoftheBarseleproject.
TheGunnarnJVAalsoprovidesAESwedenwiththerighttonominateamajorityofthemembersoftheboardofdirectorsofGunnarn(basedoncurrentshareholdings)andAESwedenisthesoleoperatoroftheBarseleprojectandpaidcustomarymanagementfees.
Inconnectionwiththetransaction,Orexalsoobtaineda2.0%netsmelterreturnroyaltyonproductionfromtheBarseleproperty,whichtheCompanymayrepurchaseatanytimefor$5.0million.
TheGunnarnacquisitionwasaccountedforbytheCompanyasanassetacquisitionandtransactioncostsassociatedwiththeacquisitiontotaling$0.6millionwerecapitalizedtotheminingpropertiesacquired.
OnSeptember25,2015,OrexassigneditsinterestintheGunnarnJVAgreementtoBarseleMineralsCorp.("BarseleMinerals"),whichwasatthetimeawholly-ownedsubsidiaryofOrex.AllofthesharesofBarseleMineralsweresubsequentlydistributedtoshareholdersofOrexunderaplanofarrangement.
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Thefollowingtablesetsouttheallocationofthepurchasepricetoassetsacquiredandliabilitiesassumed,basedonmanagement'sestimatesoffairvalue:
Total purchase price:
Cashpaidforacquisition $ 5,994
Accruedconsideration 7,150
Totalpurchasepricetoallocate $ 13,144
Fair value of assets acquired and liabilities assumed:
Miningproperties $ 20,021
Cashandcashequivalents 3
Othercurrentassets 35
Accountspayableandaccruedliabilities (80)
Long-termdebt (29)
Otherliabilities (6,806)
Netassetsacquired $ 13,144
SoltoroLtd.
OnJune9,2015,theCompanyacquiredalloftheissuedandoutstandingcommonsharesofSoltoroLtd.("Soltoro"),includingcommonsharesissuableontheexerciseofSoltoro'soutstandingoptionsandwarrants,bywayofaplanofarrangementundertheCanada Business CorporationsAct (the"SoltoroArrangement").Atthetimeofitsacquisition,SoltorowasaTSXVenturelistedexplorationcompanyfocusedonthediscoveryofpreciousmetalsinMexico.
EachoutstandingshareofSoltorowasexchangedundertheSoltoroArrangementfor:(i)C$0.01incash;(ii)0.00793ofanAgnicoEaglecommonshare;and(iii)onecommonshareofPalaminaCorp.,acompanythatwasnewlyformedinconnectionwiththeSoltoroArrangement.
PursuanttotheSoltoroArrangement,SoltorotransferredallminingpropertieslocatedoutsideofthestateofJalisco,MexicotoPalaminaCorp.,andretainedallminingpropertieslocatedwithinthestateofJalisco,Mexico.AgnicoEaglehadnointerestinPalaminaCorp.upontheclosingoftheSoltoroArrangement.
AgnicoEagle'stotalpurchasepriceof$26.7millionwascomprisedof$2.4millionincash,including$1.6millionincashcontributedtoPalaminaCorp.,and770,429AgnicoEaglecommonsharesissuedfromtreasury.TheSoltoroacquisitionwasaccountedforasanassetacquisitionandtransactioncostsassociatedwiththeacquisitiontotaling$1.4millionwerecapitalizedtotheminingpropertiesacquiredseparatelyfromthepurchasepriceallocationsetoutbelow.
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Thefollowingtablesetsouttheallocationofthepurchasepricetoassetsacquiredandliabilitiesassumed,basedonmanagement'sestimatesoffairvalue:
Total purchase price:
Cashpaidforacquisition $ 2,366
AgnicoEaglecommonsharesissuedforacquisition 24,351
Totalpurchasepricetoallocate $ 26,717
Fair value of assets acquired and liabilities assumed:
Miningproperties $ 27,053
Cashandcashequivalents 2,375
Available-for-salesecurities 17
Othercurrentassets 130
Plantandequipment 33
Accountspayableandaccruedliabilities (1,134)
Othercurrentliabilities (1,757)
Netassetsacquired $ 26,717
MalarticCHLProperty
OnMarch19,2015,AgnicoEagle,YamanaandthePartnershipcompletedthepurchaseofa30.0%interestintheMalarticCHLpropertyfromAbitibiRoyaltiesInc.("Abitibi")inexchangefor459,197AgnicoEaglecommonshares,3,549,695Yamanacommonsharesand3.0%netsmelterreturnroyaltiestoeachofAbitibiandOsiskoGoldRoyaltiesLtd.ontheMalarticCHLproperty.TotalAgnicoEaglecommonshareconsiderationissuedwasvaluedat$13.4millionbasedontheclosingpriceofthecommonsharesonMarch18,2015.TheMalarticCHLpropertyislocatedadjacenttotheCompany'sjointlyownedCanadianMalarticmineandtheremaining70.0%interestintheMalarticCHLpropertywasjointlyacquiredthroughtheJune16,2014acquisitionofOsisko(thepredecessortoCanadianMalarticCorporation).Concurrentwiththetransactionclosing,eachofAbitibi,AgnicoEagle,Yamana,thePartnershipandCanadianMalarticCorporationreleasedanddischargedtheotherswithrespecttoallproceedingspreviouslycommencedbyAbitibiwithrespecttotheMalarticCHLproperty.Asaresultofthetransaction,AgnicoEagleandYamanajointlyowna100%interestintheMalarticCHLpropertythroughtheirrespectiveindirectinterestsinthePartnership.
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6. FAIR VALUE MEASUREMENT
Fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Allassetsandliabilitiesforwhichfairvalueismeasuredordisclosedintheconsolidatedfinancialstatementsarecategorizedwithinthefairvaluehierarchy,described,asfollows,basedonthelowest-levelinputthatissignificanttothefairvaluemeasurementasawhole:
Level1–Unadjustedquotedpricesinactivemarketsthatareaccessibleatthemeasurementdateforidentical,unrestrictedassetsorliabilities;
Level2–Quotedpricesinmarketsthatarenotactiveorinputsthatareobservable,eitherdirectlyorindirectly,forsubstantiallythefulltermoftheassetorliability;and
Level3–Pricesorvaluationtechniquesthatrequireinputsthatarebothsignificanttothefairvaluemeasurementandunobservable(supportedbylittleornomarketactivity).
ThefairvaluehierarchygivesthehighestprioritytoLevel1inputsandthelowestprioritytoLevel3inputs.
Foritemsthatarerecognizedatfairvalueonarecurringbasis,theCompanydetermineswhethertransfershaveoccurredbetweenlevelsinthehierarchybyreassessingtheirclassificationattheendofeachreportingperiod.
DuringtheyearendedDecember31,2016,therewerenotransfersbetweenLevel1andLevel2fairvaluemeasurements,andnotransfersintooroutofLevel3fairvaluemeasurements.
TheCompany'sfinancialassetsandliabilitiesincludecashandcashequivalents,short-terminvestments,restrictedcash,tradereceivables,available-for-salesecurities,accountspayableandaccruedliabilities,long-termdebtandderivativefinancialinstruments.
Thefairvaluesofcashandcashequivalents,short-terminvestments,restrictedcashandaccountspayableandaccruedliabilitiesapproximatetheircarryingvaluesduetotheirshort-termnature.
Long-termdebtisrecordedontheconsolidatedbalancesheetsatDecember31,2016atamortizedcost.Thefairvalueoflong-termdebtisdeterminedbyapplyingadiscountrate,reflectingthecreditspreadbasedontheCompany'screditrating,tofuturerelatedcashflowswhichiscategorizedwithinLevel2ofthefairvaluehierarchy.AsatDecember31,2016,theCompany'slong-termdebthadafairvalueof$1,319.7million(December31,2015–$1,226.5million).
ThefollowingtablesetsouttheCompany'sfinancialassetsandliabilitiesmeasuredatfairvalueonarecurringbasisasatDecember31,2016usingthefairvaluehierarchy:
Level 1 Level 2 Level 3 Total Financial assets:
Tradereceivables $ – $ 8,185 $ – $ 8,185
Available-for-salesecurities 86,736 5,574 – 92,310
Fairvalueofderivativefinancialinstruments – 364 – 364
Totalfinancialassets $ 86,736 $ 14,123 $ – $ 100,859
Financial liabilities:
Fairvalueofderivativefinancialinstruments $ – $ 1,120 $ – $ 1,120
Totalfinancialliabilities $ – $ 1,120 $ – $ 1,120
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ThefollowingtablesetsouttheCompany'sfinancialassetsandliabilitiesmeasuredatfairvalueonarecurringbasisasatDecember31,2015usingthefairvaluehierarchy:
Level 1 Level 2 Level 3 Total Financial assets:
Tradereceivables $ – $ 7,714 $ – $ 7,714
Available-for-salesecurities 27,630 4,233 – 31,863
Fairvalueofderivativefinancialinstruments – 87 – 87
Totalfinancialassets $ 27,630 $ 12,034 $ – $ 39,664
Financial liabilities:
Fairvalueofderivativefinancialinstruments $ – $ 8,073 $ – $ 8,073
Totalfinancialliabilities $ – $ 8,073 $ – $ 8,073
Valuation Techniques
TradeReceivables
Tradereceivablesfromprovisionalinvoicesforconcentratesalesarevaluedusingquotedforwardratesderivedfromobservablemarketdatabasedonthemonthofexpectedsettlement(classifiedwithinLevel2ofthefairvaluehierarchy).
Available-for-saleSecurities
Available-for-salesecuritiesrepresentingsharesofpubliclytradedentitiesarerecordedatfairvalueusingquotedmarketprices(classifiedwithinLevel1ofthefairvaluehierarchy).Available-for-salesecuritiesrepresentingsharesofnon-publiclytradedentitiesornon-transferablesharesofpubliclytradedentitiesarerecordedatfairvalueusingexternalbroker-dealerquotationscorroboratedbyoptionpricingmodels(classifiedwithinLevel2ofthefairvaluehierarchy).
DerivativeFinancialInstruments
DerivativefinancialinstrumentsclassifiedwithinLevel2ofthefairvaluehierarchyarerecordedatfairvalueusingexternalbroker-dealerquotationscorroboratedbyoptionpricingmodelsoroptionpricingmodelsthatutilizeavarietyofinputsthatareacombinationofquotedpricesandmarket-corroboratedinputs.Derivativefinancialinstrumentsareclassifiedasfairvaluethroughprofitandloss.
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AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(thousands of United States dollars, except share and per share amounts, unless otherwise indicated) December 31, 2016
7. INVENTORIES
As at December 31,
2016
As at December 31,
2015 Oreinstockpilesandonleachpads $ 90,536 $ 88,633
Concentratesanddorebars 108,193 108,657
Supplies 244,985 264,686
Totalcurrentinventories $ 443,714 $ 461,976
Non-currentoreinstockpilesandonleachpads(i) 62,780 61,167
Totalinventories $ 506,494 $ 523,143
Note:
(i) OrethattheCompanydoesnotexpecttoprocesswithin12monthsisclassifiedaslong-termandisrecordedintheotherassetslineitemontheconsolidatedbalancesheets.
DuringtheyearendedDecember31,2016,achargeof$6.6million(2015–$8.6million)wasrecordedwithinproductioncoststoreducethecarryingvalueofinventoriestotheirnetrealizablevalue.
8. AVAILABLE-FOR-SALE SECURITIES
As at December 31,
2016
As at December 31,
2015 Cost $ 91,200 $ 64,832
Accumulatedimpairmentlosses (36,017) (36,842)
Unrealizedgainsinaccumulatedothercomprehensiveincome 37,634 4,030
Unrealizedlossesinaccumulatedothercomprehensiveincome (507) (157)
Totalestimatedfairvalueofavailable-for-salesecurities $ 92,310 $ 31,863
DuringtheyearendedDecember31,2016,theCompanyreceivednetproceedsof$6.0million(2015–$54.4million)andrecognizedagainbeforeincometaxesof$3.5million(2015–$24.6million)onthesaleofcertainavailable-for-salesecurities.
DuringtheyearendedDecember31,2016,theCompanyrecordedanimpairmentlossofnil(2015–$12.0million)oncertainavailable-for-salesecuritiesthatweredeterminedtohaveanimpairmentthatwassignificantorprolonged.
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9. OTHER ASSETS
(a) OtherCurrentAssets
As at December 31,
2016
As at December 31,
2015
Federal,provincialandothersalestaxesreceivable $ 77,380 $ 89,313
Prepaidexpenses 47,416 71,811
Insurancereceivable – 12,288
Other 12,014 21,277
Totalothercurrentassets $ 136,810 $ 194,689
(b) OtherAssets
As at December 31,
2016
As at December 31,
2015
Non-currentoreinstockpilesandonleachpads $ 62,780 $ 61,167
Otherassets 11,383 6,071
Totalotherassets $ 74,163 $ 67,238
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10. PROPERTY, PLANT AND MINE DEVELOPMENT
Mining
Properties Plant and Equipment
Mine Development
Costs Total
As at December 31, 2014 $ 1,939,940 $ 2,009,247 $ 1,206,678 $ 5,155,865
Additions 103,664 174,477 283,221 561,362
Disposals (88) (6,269) (1,757) (8,114)
Amortization (168,612) (352,090) (99,444) (620,146)
Transfersbetweencategories (209,294) 239,041 (29,747) –
As at December 31, 2015 1,665,610 2,064,406 1,358,951 5,088,967
Additions 53,072 244,018 279,119 576,209
Gainonimpairmentreversal 83,992 36,169 – 120,161
Disposals (1,890) (17,658) – (19,548)
Amortization (207,383) (342,208) (110,162) (659,753)
Transfersbetweencategories 12,135 39,556 (51,691) –
As at December 31, 2016 $ 1,605,536 $ 2,024,283 $ 1,476,217 $ 5,106,036
As at December 31, 2015
Cost $ 3,330,464 $ 4,273,798 $ 1,867,172 $ 9,471,434
Accumulatedamortizationandnetimpairments (1,664,854) (2,209,392) (508,221) (4,382,467)
Netcarryingamount–December31,2015 $ 1,665,610 $ 2,064,406 $ 1,358,951 $ 5,088,967
As at December 31, 2016
Cost $ 2,593,659 $ 4,233,945 $ 2,050,980 $ 8,878,584
Accumulatedamortizationandnetimpairments (988,122) (2,209,663) (574,763) (3,772,548)
Netcarryingamount–December31,2016 $ 1,605,537 $ 2,024,282 $ 1,476,217 $ 5,106,036
AsatDecember31,2016,assetsunderconstruction,andthereforenotyetbeingdepreciated,includedinthenetcarryingamountofproperty,plantandminedevelopmentamountedto$532.3million(December31,2015–$350.7million).
DuringtheyearendedDecember31,2016,theCompanydisposedofproperty,plantandminedevelopmentwithacarryingvalueof$19.5million(2015–$8.1million).Thelossondisposalwasrecordedintheotherexpenseslineitemintheconsolidatedstatementsofincomeandcomprehensiveincome.
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GeographicInformation:
As at December 31,
2016
As at December 31,
2015
Northern Business: Canada $ 3,266,594 $ 3,196,494
Finland 867,257 851,867
Southern Business: Mexico 961,943 1,030,364
UnitedStates 10,242 10,242
Totalproperty,plantandminedevelopment $ 5,106,036 $ 5,088,967
11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As at December 31,
2016
As at December 31,
2015
Tradepayables $ 111,173 $ 121,633
Wagespayable 42,522 40,020
Accruedliabilities 55,893 51,533
Otherliabilities 18,978 30,600
Totalaccountspayableandaccruedliabilities $ 228,566 $ 243,786
In2016and2015,theotherliabilitiesbalanceconsistedprimarilyofvariousemployeepayrolltaxwithholdingsandotherpayrolltaxes.
12. RECLAMATION PROVISION
AgnicoEagle'sreclamationprovisionincludesbothassetretirementobligationsandenvironmentalremediationliabilities.Reclamationprovisionestimatesarebasedoncurrentlegislation,thirdpartyestimates,management'sestimatesandfeasibilitystudycalculations.Assumptionsbasedoncurrenteconomicconditions,whichtheCompanybelievesarereasonable,havebeenusedtoestimatethereclamationprovision.However,actualreclamationcostswillultimatelydependonfutureeconomicconditionsandcostsforthenecessaryreclamationwork.Changesinreclamationprovisionestimatesduringtheperiodreflectchangesincashflowestimatesaswellasassumptionsincludingdiscountandinflationrates.ThediscountratesusedinthecalculationofthereclamationprovisionatDecember31,2016rangedbetween0.74%and2.35%(December31,2015–between0.48%and2.37%).
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ThefollowingtablereconcilesthebeginningandendingcarryingamountsoftheCompany'sassetretirementobligations.Thesettlementoftheobligationisestimatedtooccurthroughto2069.
Year Ended December 31,
2016
Year Ended December 31,
2015
Assetretirementobligations–long-term,beginningofyear $ 269,068 $ 242,615
Assetretirementobligations–current,beginningofyear 4,443 2,863
Currentyearadditionsandchangesinestimate,net (9,112) 64,305
Currentyearaccretion 3,847 4,178
Liabilitiessettled (1,113) (1,496)
Foreignexchangerevaluation (1,474) (38,954)
Reclassificationfromlong-termtocurrent,endofyear (5,953) (4,443)
Assetretirementobligations–long-term,endofyear $ 259,706 $ 269,068
ThefollowingtablereconcilesthebeginningandendingcarryingamountsoftheCompany'senvironmentalremediationliability.Thesettlementoftheobligationisestimatedtooccurthroughto2025.
Year Ended December 31,
2016
Year Ended December 31,
2015
Environmentalremediationliability–long-term,beginningofyear $ 7,231 $ 7,302
Environmentalremediationliability–current,beginningofyear 1,802 3,906
Currentyearadditionsandchangesinestimate,net 243 180
Liabilitiessettled (1,606) (562)
Foreignexchangerevaluation 1,172 (1,793)
Reclassificationfromlong-termtocurrent,endofyear (3,240) (1,802)
Environmentalremediationliability–long-term,endofyear $ 5,602 $ 7,231
13. LEASES
(a) FinanceLeases
TheCompanyhasenteredintosale-leasebackagreementswiththirdpartiesforvariousfixedandmobileequipmentwithinCanada.Thesearrangementsrepresentsale-leasebacktransactionsinaccordancewithIAS17–Leases.Thesale-leasebackagreementshaveanaverageeffectiveannualinterestrateof3.3%andtheaveragelengthofthecontractsisfiveyears.
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Allofthesale-leasebackagreementshaveendofleaseclausesthatqualifyasbargainpurchaseoptionsthattheCompanyexpectstoexecute.AsatDecember31,2016,thetotalnetbookvalueofassetsrecordedundersale-leasebackfinanceleasesamountedto$5.3million(December31,2015–$7.1million).
TheCompanyhasagreementswiththirdpartyprovidersofmobileequipment.ThesearrangementsrepresentfinanceleasesinaccordancewiththeguidanceinIAS17–Leases.Theleasesarefortwotosevenyearsandhaveanaverageeffectiveannualinterestrateof8.2%.
AsaresultofitsJune16,2014jointacquisitionofOsisko,AgnicoEagleassumedindirectattributablesecuredfinanceleaseobligationsofC$38.3million($35.3million)providedinseparatetrancheswithmaturitiesrangingbetween2015and2019anda7.5%interestrate.AsatDecember31,2016,theCompany'sattributablefinanceleaseobligationsamountedto$5.9million(December31,2015–$13.7million).
Thefollowingtablesetsoutfutureminimumleasepaymentsunderfinanceleasestogetherwiththepresentvalueofthenetminimumleasepayments:
As at December 31, 2016
As at December 31, 2015
Minimum Finance Lease
Payments Interest Present
Value
Minimum Finance Lease
Payments Interest Present
Value
Within1year $ 5,955 $ 420 $ 5,535 $ 10,191 $ 602 $ 9,589
Between1–5years 6,630 311 $ 6,319 10,057 510 9,547
Total $ 12,585 $ 731 $ 11,854 $ 20,248 $ 1,112 $ 19,136
AsatDecember31,2016,thetotalnetbookvalueofassetsrecordedunderfinanceleases,includingsale-leasebackfinanceleases,was$21.1million(December31,2015–$38.0million).Theamortizationofassetsrecordedunderfinanceleasesisincludedintheamortizationofproperty,plantandminedevelopmentlineitemoftheconsolidatedstatementsofincomeandcomprehensiveincome.
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(b) OperatingLeases
TheCompanyhasanumberofoperatingleaseagreementsinvolvingofficefacilities.Someoftheleasesforofficefacilitiescontainescalationclausesforincreasesinoperatingcostsandpropertytaxes.Futureminimumleasepaymentsrequiredtomeetobligationsthathaveinitialorremainingnon-cancellableleasetermsinexcessofoneyearareasfollows:
As at December 31,
2016
As at December 31,
2015
Within1year $ 3,691 $ 1,780
Between1–3years 4,780 2,479
Between3–5years 2,127 2,205
Thereafter 9,543 10,272
Total $ 20,141 $ 16,736
DuringtheyearendedDecember31,2016,$2.1million(yearendedDecember31,2015–$1.4million)ofoperatingleasepaymentswererecognizedintheconsolidatedstatementsofincome.
14. LONG -TERM DEBT
As at December 31,
2016
As at December 31,
2015
CreditFacility(i)(ii) $ (6,416) $ 258,083
2016Notes(i) 347,716 –
2015Note(i) 49,429 49,364
2012Notes(i) 198,894 198,722
2010Notes(i) 598,167 597,567
Otherattributabledebtinstruments 14,896 28,902
Totaldebt $ 1,202,686 $ 1,132,638
Less:currentportion 129,896 14,451
Totallong-termdebt $ 1,072,790 $ 1,118,187
(i) Inclusiveofdeferredfinancingcosts.Thetermsofthe2016Notes,2015Note,2012Notesand2010Notesaredefinedbelow.
(ii) AmountsoutstandingundertheCreditFacility(asdefinedbelow)werefullyrepaidasatDecember31,2016.TheDecember31,2016balancerelatestodeferredfinancingcostswhicharebeingamortizedonastraight-linebasisuntilthematuritydateofJune22,2021.CreditFacilityavailabilityisreducedbyoutstandinglettersofcredit,amountingto$0.8millionatDecember31,2016.
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ScheduledDebtPrincipalRepayments
2017 2018 2019 2020 2021 2022 and Thereafter Total
2016Notes $ – $ – $ – $ – $ – $ 350,000 $ 350,000
2015Note – – – – – 50,000 50,000
2012Notes – – – – – 200,000 200,000
2010Notes 115,000 – – 360,000 – 125,000 600,000
Otherattributabledebtinstruments 14,896 – – – – – 14,896
Total $ 129,896 $ – $ – $ 360,000 $ – $ 725,000 $ 1,214,896
CreditFacility
OnSeptember30,2015,theCompanyamendeditsunsecuredrevolvingbankcreditfacility(the"CreditFacility"),extendingthematuritydatefromJune22,2019toJune22,2020andamendingpricingterms.
OnOctober26,2016,theCompanyfurtheramendedtheCreditFacilityto,amongotherthings,extendthematuritydatefromJune22,2020toJune22,2021andamendpricingterms.
AtDecember31,2016,theCreditFacilitywasfullyrepaid(December31,2015–drawndownby$265.0million).OutstandinglettersofcreditundertheCreditFacilityresultedinCreditFacilityavailabilityof$1,199.2millionatDecember31,2016.
2016Notes
OnJune30,2016,theCompanycloseda$350.0millionprivateplacementofguaranteedseniorunsecurednotes(the"2016Notes")which,onissuance,hadaweightedaveragematurityof9.43yearsandweightedaverageyieldof4.77%.Proceedsfromtheofferingofthe2016NoteswereusedtorepayamountsoutstandingundertheCreditFacility.
Thefollowingtablesetsoutdetailsoftheindividualseriesofthe2016Notes:
Principal Interest Rate Maturity Date SeriesA $ 100,000 4.54% 6/30/2023
SeriesB 200,000 4.84% 6/30/2026
SeriesC 50,000 4.94% 6/30/2028
Total $ 350,000
2015Note
OnSeptember30,2015,theCompanyclosedaprivateplacementconsistingofa$50.0millionguaranteedseniorunsecurednote(the"2015Note")withaSeptember30,2025maturitydateandayieldof4.15%.Anamountequaltoorgreaterthanthenetproceedsfromthe2015NotemustbeappliedtowardminingprojectsintheProvinceofQuebec,Canada.
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2012Notes
OnJuly24,2012,theCompanycloseda$200.0millionprivateplacementofguaranteedseniorunsecurednotes(the"2012Notes")which,onissuance,hadaweightedaveragematurityof11.0yearsandweightedaverageyieldof4.95%.
Thefollowingtablesetsoutdetailsoftheindividualseriesofthe2012Notes:
Principal Interest Rate Maturity Date SeriesA $ 100,000 4.87% 7/23/2022
SeriesB 100,000 5.02% 7/23/2024
Total $ 200,000
2010Notes
OnApril7,2010,theCompanycloseda$600.0millionprivateplacementofguaranteedseniorunsecurednotes(the"2010Notes"and,togetherwiththe2016Notes,the2015Noteandthe2012Notes,the"Notes")which,onissuance,hadaweightedaveragematurityof9.84yearsandweightedaverageyieldof6.59%.
Thefollowingtablesetsoutdetailsoftheindividualseriesofthe2010Notes:
Principal Interest Rate Maturity Date SeriesA $ 115,000 6.13% 4/7/2017
SeriesB 360,000 6.67% 4/7/2020
SeriesC 125,000 6.77% 4/7/2022
Total $ 600,000
CMGPConvertibleDebentures
InconnectionwithitsjointacquisitionofOsiskoonJune16,2014,thePartnershipwasassignedandassumedcertainoutstandingdebtobligationsofOsiskorelatingtotheCanadianMalarticmine.AgnicoEagle'sindirectattributableinterestinsuchdebtinstrumentsincludedseniorunsecuredconvertibledebentures(the"CMGPConvertibleDebentures")withprincipaloutstandingofC$37.5million($34.6million),aNovember2017maturitydateanda6.875%interestrate.
OnJune30,2015,thenegotiatedearlysettlementofalloftheCMGPConvertibleDebentureswascompleted.Asaresultofthissettlement,871,680AgnicoEaglecommonshareswithafairvalueof$24.8millionwerereleasedfromadepositarytotheholdersoftheCMGPConvertibleDebenturesalongwithacashpaymentof$10.1milliontosettletheCompany'sshareoftheobligations.IntheyearendedDecember31,2015,amark-to-marketlossof$2.4millionwasrecordedintheotherexpenseslineitemoftheconsolidatedstatementsofincomeandcomprehensiveincomerelatedtotheCMGPConvertibleDebentures.Additionalcashconsiderationof$3.2millionwaspaidtotheholdersoftheCMGPConvertibleDebenturesuponsettlementandwasrecordedintheotherexpenseslineitemoftheconsolidatedstatementsofincomeandcomprehensiveincome.AsatDecember31,2015,theCMGPConvertibleDebentureshadprincipaloutstandingofnil.
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OtherLoans
InconnectionwithitsjointacquisitionofOsiskoonJune16,2014,thePartnershipwasassignedandassumedcertainoutstandingdebtobligationsofOsiskorelatingtotheCanadianMalarticmine.AgnicoEagle'sindirectattributableinterestinsuchdebtobligationsincludedasecuredloanfacility(the"CMGPLoan").AscheduledrepaymentofC$20.0million($15.4million)wasmadeonJune30,2016,resultinginattributableoutstandingprincipalofC$20.0million($14.9million)asatDecember31,2016(December31,2015–$28.9million).
Covenants
PaymentandperformanceofAgnicoEagle'sobligationsundertheCreditFacilityandtheNotesisguaranteedbyeachofitsmaterialsubsidiariesandcertainofitsothersubsidiaries(the"Guarantors").
TheCreditFacilitycontainscovenantsthatlimit,amongotherthings,theabilityoftheCompanytoincuradditionalindebtedness,makedistributionsincertaincircumstancesandsellmaterialassets.
ThenotepurchaseagreementspursuanttowhichtheNoteswereissued(the"NotePurchaseAgreements")containcovenantsthatrestrict,amongotherthings,theabilityoftheCompanytoamalgamateorotherwisetransferitsassets,sellmaterialassets,carryonabusinessotherthanonerelatedtominingandtheabilityoftheGuarantorstoincurindebtedness.
TheCreditFacilityandNotePurchaseAgreementsalsorequiretheCompanytomaintainatotalnetdebttoearningsbeforeinterest,taxes,depreciationandamortization("EBITDA")ratiobelowaspecifiedmaximumvalue.
TheCMGPLoanrequiresthePartnershiptomaintainaminimumEBITDAtointerestexpenseratioandamaximumdebttoEBITDAratio.
TheCompanywasincompliancewithallcovenantscontainedintheCreditFacilityandNotePurchaseAgreementsasatDecember31,2016.ThePartnershipwasincompliancewithallCMGPLoancovenantsasatDecember31,2016.
InterestonLong-termDebt
Totallong-termdebtinterestcostsincurredduringtheyearendedDecember31,2016were$63.1million(2015–$58.8million).
Totalborrowingcostscapitalizedtoproperty,plantandminedevelopmentduringtheyearendedDecember31,2016were$3.1million(2015–$1.7million)atacapitalizationrateof1.70%(2015–1.25%).
DuringtheyearendedDecember31,2016,cashinterestpaidontheCreditFacilitywas$3.6million(2015–$8.7million),cashstandbyfeespaidontheCreditFacilitywere$5.2million(2015–$3.8million)andcashinterestpaidontheNoteswas$59.8million(2015–$49.4million).
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AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(thousands of United States dollars, except share and per share amounts, unless otherwise indicated) December 31, 2016
15. OTHER LIABILITIES
Otherliabilitiesconsistofthefollowing:
As at December 31,
2016
As at December 31,
2015 Long-termportionofcapitalleaseobligations(note13(a)) $ 6,319 $ 9,547
Pensionbenefitobligations(note15(a)) 19,273 17,146
Other 8,603 7,345
Totalotherliabilities $ 34,195 $ 34,038
(a) PensionBenefitObligations
Executives Plan
AgnicoEagleprovidestheExecutivesPlanforcertaincurrentandformerseniorofficers.ItisconsideredadefinedbenefitplanasdefinedinIAS19–EmployeeBenefitswithapensionformulabasedonfinalaverageearningsinexcessoftheamountspayablefromtheregisteredplan.AssetsfortheExecutivesPlanconsistofdepositsonhandwithregulatoryauthoritiesthatarerefundablewhenbenefitpaymentsaremadeorontheultimatewind-upoftheplan.TheestimatedaverageremainingservicelifeoftheplanatDecember31,2016is2.0years.ThefundedstatusoftheExecutivesPlanisbasedonactuarialvaluationsperformedasofDecember31,2016.
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ThefundedstatusoftheExecutivesPlanfor2016and2015isasfollows:
Year Ended December 31, 2016 2015 Reconciliation of the Executives Plan assets:
ExecutivesPlanassets,beginningofyear $ 2,011 $ 2,278
AgnicoEagle'scontributions 327 312
Benefitpayments (88) (202)
AdministrativeExpenses (119) –
InterestonExecutivesPlanassets 86 83
NetreturnonExecutivesPlanassetsexcludinginterest (86) (83)
Effectofexchangeratechanges 61 (377)
ExecutivesPlanassets,endofyear 2,192 2,011
Reconciliation of Executives Plan defined benefit obligation:
Definedbenefitobligation,beginningofyear 10,641 11,895
Servicecost 326 435
Benefitpayments (88) (202)
Interestcost 456 445
Actuariallossesarisingfromchangesineconomicassumptions 400 –
Actuarial(gains)lossesarisingfromExecutivesPlanexperience (185) 48
Effectofexchangeratechanges 317 (1,980)
Definedbenefitobligation,endofyear 11,867 10,641
Net defined benefit liability, end of year $ 9,675 $ 8,630
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ThecomponentsofAgnicoEagle'spensionexpenserecognizedintheconsolidatedstatementsofincomerelatingtotheExecutivesPlanareasfollows:
Year Ended December 31, 2016 2015 Servicecost $ 326 $ 435
AdministrativeExpenses 119 –
Interestcostondefinedbenefitobligation 456 445
InterestonExecutivesPlanassets (86) (83)
Pensionexpense $ 815 $ 797
Theremeasurementsofthenetdefinedbenefitliabilityrecognizedinothercomprehensiveincome(loss)relatingtotheExecutivesPlanareasfollows:
Year Ended December 31, 2016 2015 Actuariallossesrelatingtothedefinedbenefitobligation $ 215 $ 48
NetreturnonExecutivesPlanassetsexcludinginterest 86 83
Totalremeasurementsofthenetdefinedbenefitliability $ 301 $ 131
In2017,theCompanyexpectstomakecontributionsof$0.2millionandbenefitpaymentsof$0.1millionrelatedtotheExecutivesPlan.
ThefollowingtablesetsoutsignificantweightedaverageassumptionsusedinmeasuringtheCompany'sExecutivesPlandefinedbenefitobligation:
As at December 31, 2016 2015 Assumptions:
Discountrate–beginningofyear 4.0% 4.0%
Discountrate–endofyear 3.8% 4.0%
Rateofcompensationincrease 3.0% 3.0%
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ThefollowingisasummaryoftheeffectofchangesinsignificantactuarialassumptionsontheCompany'sExecutivesPlandefinedbenefitobligation:
As at December 31,
2016
Change in assumption:
0.5%increaseindiscountrate $ (766)
0.5%decreaseindiscountrate 845
0.5%increaseintherateofcompensationincrease 19
0.5%decreaseintherateofcompensationincrease (19)
ThesummaryoftheeffectofchangesinsignificantactuarialassumptionswaspreparedusingthesamemethodsandactuarialassumptionsasthoseusedforthecalculationoftheExecutivesPlandefinedbenefitobligationasattheendofthefiscalyear,exceptforthechangeinthesingleactuarialassumptionbeingevaluated.Themodificationofseveralactuarialassumptionsatthesametimecouldleadtodifferentresults.
Other Plans
InadditiontotheExecutivesPlan,theCompanymaintainstheBasicPlanandtheSupplementalPlan.UndertheBasicPlan,AgnicoEaglecontributes5.0%ofcertainemployees'baseemploymentcompensationtoadefinedcontributionplan.In2016,$9.7million(2015–$9.8million)wascontributedtotheBasicPlan,$0.2millionofwhichrelatedtocontributionsforkeymanagementpersonnel(2015–$0.2million).EffectiveJanuary1,2008,theCompanyadoptedtheSupplementalPlanfordesignatedexecutivesatthelevelofVice-Presidentorabove.TheSupplementalPlanisfundedbytheCompanythroughnotionalcontributionsequalto10.0%ofthedesignatedexecutive'searningsfortheyear(includingsalaryandshort-termbonus).In2016,theCompanymade$1.4million(2015–$1.3million)innotionalcontributionstotheSupplementalPlan,$0.9million(2015–$0.9million)ofwhichrelatedtocontributionsforkeymanagementpersonnel.TheCompany'sliabilityrelatedtotheSupplementalPlanis$7.1millionatDecember31,2016(December31,2015–$5.3million).TheSupplementalPlanisaccountedforasacashbalanceplan.
16. EQUITY
CommonShares
TheCompany'sauthorizedsharecapitalincludesanunlimitednumberofcommonshareswithnoparvalue.AsatDecember31,2016,AgnicoEagle'sissuedcommonsharestotaled225,465,654(December31,2015–218,028,368),less500,514commonsharesheldinatrust(December31,2015–377,573commonsharesheldinatrust).
369,972commonsharesareheldinatrustinconnectionwiththeCompany'sRSUplan(December31,2015–373,785commonsharesheldinatrust).124,500commonsharesareheldinatrustinconnectionwiththeCompany'sPSUplan(December31,2015–nil).
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Inthefirstquarterof2015,aLongTermIncentivePlan("LTIP")wasimplementedforcertainemployeesofthePartnershipandCanadianMalarticCorporation,bothofwhicharejointly-owned,comprisedof50.0%deferredcash,25.0%AgnicoEaglecommonsharesand25.0%Yamanacommonsharesandvestingoveraperiodrangingbetween18to36months.AsatDecember31,2016,6,042AgnicoEaglecommonshareswereheldinatrustinconnectionwiththeLTIP(December31,2015–3,788commonsharesheldinatrust).
ThetrustshavebeenevaluatedunderIFRS10–ConsolidatedFinancialStatementsandareconsolidatedintheaccountsoftheCompany,withsharesheldintrustoffsetagainsttheCompany'sissuedsharesinitsconsolidatedfinancialstatements.Thecommonsharespurchasedandheldinatrustareexcludedfromthebasicnetincomepersharecalculationsuntiltheyhavevested.Allofthenon-vestedcommonsharesheldinatrustareincludedinthedilutednetincomepersharecalculations,unlesstheimpactisanti-dilutive.
ThefollowingtablesetsoutthemaximumnumberofcommonsharesthatwouldbeoutstandingifalldilutiveinstrumentsoutstandingatDecember31,2016wereexercised:
CommonsharesoutstandingatDecember31,2016 224,965,140
Employeestockoptions 5,478,837
CommonsharesheldinatrustinconnectionwiththeRSUplan(note18(c)),PSUplan(note18(d))andLTIP 500,514
Total 230,944,491
NetIncomePerShare
Thefollowingtablesetsouttheweightedaveragenumberofcommonsharesusedinthecalculationofbasicanddilutednetincomepershare:
Year Ended December 31, 2016 2015 Netincomefortheyear $ 158,824 $ 24,583
Weightedaveragenumberofcommonsharesoutstanding–basic(inthousands) 222,737 216,168
Add:DilutiveimpactofcommonsharesrelatedtotheRSUplan,PSUplanandLTIP 639 300
Add:Dilutiveimpactofemployeestockoptions 2,378 633
Weightedaveragenumberofcommonsharesoutstanding–diluted(inthousands) 225,754 217,101
Netincomepershare–basic $ 0.71 $ 0.11
Netincomepershare–diluted $ 0.70 $ 0.11
Dilutednetincomepersharehasbeencalculatedusingthetreasurystockmethod.Inapplyingthetreasurystockmethod,outstandingemployeestockoptionswithanexercisepricegreaterthantheaveragequotedmarketpriceofthecommonsharesfortheperiodoutstandingarenotincludedinthecalculationofdilutednetincomepershareastheimpactwouldbeanti-dilutive.
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FortheyearendedDecember31,2016,20,000(yearendedDecember31,2015–6,806,055)employeestockoptionswereexcludedfromthecalculationofdilutednetincomepershareastheirimpactwouldhavebeenanti-dilutive.
Flow-throughshareprivateplacement
OnMarch10,2016,theCompanyraisedapproximatelyC$25.0million($18.7million)throughtheissuanceof374,869flow-throughcommonsharesatapriceofC$66.69percommonshare.Flow-throughsharesaresecuritiesissuedtoinvestorswherebythedeductionsfortaxpurposesrelatedtoresourceexplorationandevaluationexpendituresmaybeclaimedbyinvestorsinsteadoftheissuer,subjecttoarenouncementprocess.Atthetimetheflow-throughshareswereissued,thesaleoftaxdeductionsweredeferredandwerepresentedintheaccountspayableandaccruedliabilitieslineitemintheconsolidatedbalancesheetsbecausetheCompanyhadnotyetfulfilleditsobligationtopassonthetaxdeductionstotheinvestor.AtthetimetheCompanyfulfillsitsobligation,thesaleoftaxdeductionsisrecognizedintheincomestatementasareductionofdeferredtaxexpense.TheclosingpriceoftheCompany'scommonsharesontheMarch10,2016issuancedatewasC$48.49,resultinginanincreasetosharecapitalofapproximatelyC$18.2million($13.6million).TheinitialC$6.8million($5.1million)liabilityisdrawndownaseligibleexpendituresareincurredbecausetheCompanyhasapositiveintentiontorenouncetheseexpenses.DuringtheyearendedDecember31,2016,theliabilitywasfullyextinguishedbasedoneligibleexpendituresincurred.
17. REVENUES FROM MINING OPERATIONS AND TRADE RECEIVABLES
AgnicoEagleisagoldminingcompanywithminingoperationsinCanada,MexicoandFinland.TheCompanyearnsasignificantproportionofitsrevenuesfromtheproductionandsaleofgoldinbothdorebarandconcentrateform.Theremainderofrevenueandcashflowisgeneratedbytheproductionandsaleofby-productmetals.Therevenuefromby-productmetalsisprimarilygeneratedbyproductionattheLaRondemineinCanada(silver,zincandcopper)andthePinosAltosmineinMexico(silver).
ThecashflowandprofitabilityoftheCompany'soperationsaresignificantlyaffectedbythemarketpriceofgoldand,toalesserextent,silver,zincandcopper.ThepricesofthesemetalscanfluctuatesignificantlyandareaffectedbynumerousfactorsbeyondtheCompany'scontrol.
DuringtheyearendedDecember31,2016,fourcustomerseachcontributedmorethan10.0%oftotalrevenuesfromminingoperationsforacombinedtotalofapproximately80.9%ofrevenuesfromminingoperationsintheNorthernandSouthernbusinessunits.However,becausegoldcanbesoldthroughnumerousgoldmarkettradersworldwide,theCompanyisnoteconomicallydependentonalimitednumberofcustomersforthesaleofitsproduct.
TradereceivablesarerecognizedoncethetransferofownershipforthemetalssoldhasoccurredandreflecttheamountsowingtotheCompanyinrespectofitssalesofdorebarsorconcentratestothirdpartiespriortothesatisfactioninfullofthepaymentobligationsofthethirdparties.AsatDecember31,2016,theCompanyhad$8.2million(December31,2015–$7.7million)inreceivablesrelatingtoprovisionallypricedconcentratesales.FortheyearendedDecember31,2016,theCompanyrecognizedmark-to-marketgainsof$0.6million(yearendedDecember31,2015–lossesof$0.5million)onconcentratereceivables.
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Year Ended December 31, 2016 2015 Revenuesfromminingoperations:
Gold $ 2,049,871 $ 1,911,500
Silver 85,096 66,991
Zinc 1,413 505
Copper 1,852 6,436
Totalrevenuesfromminingoperations $ 2,138,232 $ 1,985,432
In2016,preciousmetals(goldandsilver)accountedfor99.9%ofAgnicoEagle'srevenuesfromminingoperations(2015–99.7%).Theremainingrevenuesfromminingoperationsconsistedofnetby-productmetalrevenuesfromnon-preciousmetals.
18. STOCK-BASED COMPENSATION
(a) EmployeeStockOptionPlan
TheCompany'sESOPprovidesforthegrantofstockoptionstodirectors,officers,employeesandserviceproviderstopurchasecommonshares.UndertheESOP,stockoptionsaregrantedatthefairmarketvalueoftheunderlyingsharesonthedaypriortothedateofgrant.Thenumberofcommonsharesthatmaybereservedforissuancetoanyonepersonpursuanttostockoptions(undertheESOPorotherwise),warrants,sharepurchaseplansorotherarrangementsmaynotexceed5.0%oftheCompany'scommonsharesissuedandoutstandingatthedateofgrant.
OnApril24,2001,theCompensationCommitteeoftheBoardadoptedapolicypursuanttowhichstockoptionsgrantedafterthatdatehaveamaximumtermoffiveyears.In2016,theshareholdersapprovedaresolutiontoincreasethenumberofcommonsharesreservedforissuanceundertheESOPto31,300,000commonshares.
Ofthe2,160,075stockoptionsgrantedundertheESOPin2016,540,027stockoptionsvestedwithin30daysofthegrantdate.Theremainingstockoptions,allofwhichexpirein2021,vestinequalinstallmentsoneachanniversarydateofthegrantoverathree-yearperiod.Ofthe3,068,080stockoptionsgrantedundertheESOPin2015,688,995stockoptionsvestedimmediately.Theremainingstockoptions,allofwhichexpirein2020,vestinequalinstallmentsoneachanniversarydateofthegrantoverathree-yearperiod.UpontheexerciseofstockoptionsundertheESOP,theCompanyissuescommonsharesfromtreasurytosettletheobligation.
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ThefollowingtablesetsoutactivitywithrespecttoAgnicoEagle'soutstandingstockoptions:
Year Ended December 31, 2016
Year Ended December 31, 2015
Number of Stock
Options
Weighted Average Exercise
Price
Number of Stock
Options
Weighted Average Exercise
Price
Outstanding,beginningofyear 12,082,212 C$ 43.65 11,913,210 C$ 48.84
Granted 2,160,075 36.65 3,068,080 29.09
Exercised (6,492,907) 38.48 (747,683) 29.68
Forfeited (141,038) 38.42 (92,314) 40.40
Expired (2,129,505) 76.46 (2,059,081) 57.20
Outstanding,endofyear 5,478,837 C$ 34.40 12,082,212 C$ 43.65
Optionsexercisable,endofyear 1,606,558 C$ 40.27 7,519,120 C$ 50.71
TheaveragesharepriceofAgnicoEagle'scommonsharesduringtheyearendedDecember31,2016wasC$58.52(yearendedDecember31,2015–C$36.16).
Theweightedaveragegrantdatefairvalueofstockoptionsgrantedin2016wasC$9.69(2015–$C8.10).
ThefollowingtablesetsoutinformationaboutAgnicoEagle'sstockoptionsoutstandingandexercisableatDecember31,2016:
Stock Options Outstanding
Stock Options Exercisable
Range of Exercise Prices Number
Outstanding
Weighted Average
Remaining Contractual
Life
Weighted Average Exercise
PriceNumber
Exercisable
Weighted Average Exercise
Price
C$28.03–C$38.15 4,747,712 3.15years C$ 31.65 907,308 C$ 31.06
C$40.66–C$66.17 731,125 1.16years $ 52.25 699,250 $ 52.23
C$28.03–C$66.17 5,478,837 2.89years C$ 34.40 1,606,558 C$ 40.27
TheweightedaverageremainingcontractualtermofstockoptionsexercisableatDecember31,2016was2.08years.
TheCompanyhasreservedforissuance5,478,837commonsharesintheeventthatthesestockoptionsareexercised.
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ThenumberofcommonsharesavailableforthegrantofstockoptionsundertheESOPasatDecember31,2016andDecember31,2015was6,289,059and2,678,591,respectively.
SubsequenttotheyearendedDecember31,2016,2,003,140stockoptionsweregrantedundertheESOP,ofwhich500,796stockoptionsvestedwithin30daysofthegrantdate.Theremainingstockoptions,allofwhichexpirein2022,vestinequalinstallmentsoneachanniversarydateofthegrantoverathree-yearperiod.
AgnicoEagleestimatedthefairvalueofstockoptionsundertheBlack-Scholesoptionpricingmodelusingthefollowingweightedaverageassumptions:
Year Ended December 31, 2016 2015 Risk-freeinterestrate 0.89% 1.50%
Expectedlifeofstockoptions(inyears) 2.5 2.7
ExpectedvolatilityofAgnicoEagle'sshareprice 45.0% 45.0%
Expecteddividendyield 1.33% 1.69%
TheCompanyuseshistoricalvolatilitytoestimatetheexpectedvolatilityofAgnicoEagle'sshareprice.Theexpectedtermofstockoptionsgrantedisderivedfromhistoricaldataonemployeeexerciseandpost-vestingemploymentterminationexperience.
ThetotalcompensationexpensefortheESOPrecordedinthegeneralandadministrativelineitemoftheconsolidatedstatementsofincomeandcomprehensiveincomefor2016was$16.6million(2015–$20.1million).OfthetotalcompensationcostfortheESOP,$0.3millionwascapitalizedaspartoftheproperty,plantandminedevelopmentlineitemoftheconsolidatedbalancesheetsin2016(2015–$0.6million).
(b) IncentiveSharePurchasePlan
OnJune26,1997,theCompany'sshareholdersapprovedtheISPPtoencourageParticipantstopurchaseAgnicoEagle'scommonsharesatmarketvalue.In2009,theISPPwasamendedtoremovenon-executivedirectorsaseligibleParticipants.
UndertheISPP,Participantsmaycontributeupto10.0%oftheirbasicannualsalariesandtheCompanycontributesanamountequalto50.0%ofeachParticipant'scontribution.AllcommonsharessubscribedforundertheISPPareissuedbytheCompany.Thetotalcompensationcostrecognizedin2016relatedtotheISPPwas$5.1million(2015–$4.7million).
In2016,344,778commonsharesweresubscribedforundertheISPP(2015–512,438)foravalueof$15.4million(2015–$14.0million).InMay2015,theCompany'sshareholdersapprovedanincreaseinthemaximumnumberofcommonsharesreservedforissuanceundertheISPPto7,100,000from6,100,000.AsatDecember31,2016,AgnicoEaglehasreservedforissuance1,554,970commonshares(2015–1,899,748)undertheISPP.
(c) RestrictedShareUnitPlan
In2009,theCompanyimplementedtheRSUplanforcertainemployees.EffectiveJanuary1,2012,theRSUplanwasamendedtoincludedirectorsandseniorexecutivesoftheCompanyaseligibleparticipants.
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AdeferredcompensationbalanceisrecordedforthetotalgrantdatevalueonthedateofeachRSUplangrant.Thedeferredcompensationbalanceisrecordedasareductionofequityandisamortizedascompensationexpenseoverthevestingperiodofthreeyears.
In2016,354,592(2015–423,822)RSUsweregrantedwithagrantdatefairvalueof$28.62(2015–$27.99).In2016,theCompanyfundedtheRSUplanbytransferring$10.1million(2015–$11.5million)toanemployeebenefittrustthatthenpurchasedcommonsharesoftheCompanyintheopenmarket.ThegrantdatefairvalueoftheRSUsgenerallyapproximatesthecostofpurchasingthesharesintheopenmarket.Oncevested,thecommonsharesinthetrustaredistributedtosettletheobligationalongwithacashpaymentreflectingtheaccumulatedamountthatwouldhavebeenpaidasdividendshadthecommonsharesbeenoutstanding.
CompensationexpenserelatedtotheRSUplanwas$10.4millionin2016(2015–$12.0million).CompensationexpenserelatedtotheRSUplanisincludedaspartofthegeneralandadministrativelineitemoftheconsolidatedstatementsofincomeandcomprehensiveincome.
SubsequenttotheyearendedDecember31,2016,360,500RSUsweregrantedundertheRSUplan.
(d) PerformanceShareUnitPlan
Beginningin2016,theCompanyadoptedaPSUplanforseniorexecutivesoftheCompany.PSUsaresubjecttovestingrequirementsoverathreeyearperiodbasedonspecificperformancemeasurementsestablishedbytheCompany.ThefairvaluefortheportionofthePSUsrelatedtomarketconditionsisbasedontheapplicationofpricingmodelsatthegrantdateandthefairvaluefortheportionrelatedtonon-marketconditionsisbasedonthemarketvalueofthesharesatthegrantdate.CompensationexpenseisbasedonthecurrentbestestimateoftheoutcomeforthespecificperformancemeasurementestablishedbytheCompanyandisrecognizedoverthevestingperiodbasedonthenumberofunitsestimatedtovest.
In2016,183,000(2015–nil)PSUsweregrantedwithagrantdatefairvalueof$32.20.TheCompanyfundedthePSUplanbytransferring$5.3million(2015–nil)toanemployeebenefittrustthatthenpurchasedcommonsharesoftheCompanyintheopenmarket.Oncevested,thecommonsharesinthetrustaredistributedtosettletheobligationalongwithacashpaymentreflectingtheaccumulatedamountthatwouldhavebeenpaidasdividendshadthecommonsharesbeenoutstanding.
CompensationexpenserelatedtothePSUplanwas$2.2millionin2016(2015–nil).CompensationexpenserelatedtothePSUplanisincludedaspartofthegeneralandadministrativelineitemoftheconsolidatedstatementsofincomeandcomprehensiveincome.
SubsequenttotheyearendedDecember31,2016,182,000PSUsweregrantedunderthePSUplan.
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AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(thousands of United States dollars, except share and per share amounts, unless otherwise indicated) December 31, 2016
19. CAPITAL AND FINANCIAL RISK MANAGEMENT
TheCompany'sactivitiesexposeittoavarietyoffinancialrisks:marketrisk(includinginterestraterisk,commoditypriceriskandforeigncurrencyrisk),creditriskandliquidityrisk.TheCompany'soverallriskmanagementpolicyistosupportthedeliveryoftheCompany'sfinancialtargetswhileminimizingthepotentialadverseeffectsontheCompany'sperformance.
RiskmanagementiscarriedoutbyacentralizedtreasurydepartmentunderpoliciesapprovedbytheBoard.TheCompany'sfinancialactivitiesaregovernedbypoliciesandproceduresanditsfinancialrisksareidentified,measuredandmanagedinaccordancewithitspoliciesandrisktolerance.
a) MarketRisk
Marketriskistheriskthatchangesinmarketfactors,suchasinterestrates,commoditypricesandforeignexchangerates,willaffectthevalueofAgnicoEagle'sfinancialinstruments.TheCompanycanchoosetoeitheracceptmarketriskormitigateitthroughtheuseofderivativesandothereconomichedgingstrategies.
i. InterestRateRisk
Interestrateriskistheriskthatthefairvalueoffuturecashflowsofafinancialinstrumentwillfluctuateasaresultofchangesinmarketinterestrates.TheCompany'sexposuretotheriskofchangesinmarketinterestratesrelatesprimarilytotheCompany'slong-termdebtobligationsthathavefloatinginterestrates.
Theimpactofa1.0%changeininterestratesonincomebeforeincomeandminingtaxesandequityasatDecember31,2016isapproximately$2.6million(2015–$4.5million).
ii. CommodityPriceRisk
a. MetalPrices
AgnicoEagle'srevenuesfromminingoperationsandnetincomearesensitivetometalprices.Changesinthemarketpriceofgoldmaybeattributedtonumerousfactorssuchasdemand,globalmineproductionlevels,centralbankpurchasesandsalesandinvestorsentiment.Changesinthemarketpricesofby-productmetals(silver,zincandcopper)maybeattributedtofactorssuchasdemandandglobalmineproductionlevels.
Inordertomitigatetheimpactoffluctuatingby-productmetalprices,theCompanyoccasionallyentersintoderivativefinancialinstrumentcontractsunderitsBoard-approvedRiskManagementPoliciesandProcedures.TheCompanyhasalong-standingpolicyofnoforwardgoldsales.However,thepolicydoesallowtheCompanytouseothereconomichedgingstrategies,whereappropriate,tomitigateby-productmetalpricingrisks.TheCompanyoccasionallybuysputoptions,entersintopricecollarsandentersintoforwardcontractstoprotectminimumby-productmetalpriceswhilemaintainingfullexposuretothepriceofgold.TheRiskManagementCommitteehasapprovedthestrategyofusingshort-termcalloptionsinanattempttoenhancetherealizedby-productmetalprices.TheCompany'spolicydoesnotallowspeculativetrading.
b. Fuel
Tomitigatetherisksassociatedwithfluctuatingdieselfuelprices,theCompanyusesderivativefinancialinstrumentsaseconomichedgesofthepriceriskonaportionofitsdieselfuelcosts(refertonote20totheseconsolidatedfinancialstatementsforfurtherdetailsonderivativefinancialinstruments).
iii. ForeignCurrencyRisk
TheCompanyreceivespaymentforallofitsmetalsalesinUSdollarsandpaysmostofitsoperatingandcapitalcostsinCanadiandollars,EurosorMexicanpesos.Thisgivesrisetosignificantcurrencyriskexposure.TheCompanyentersintocurrencyeconomichedgingtransactionsundertheBoard-approvedForeignExchangeRiskManagementPoliciesandProcedurestohedgepartofitsforeigncurrencyexposure.Thepolicydoesnot
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permitthehedgingoftranslationexposure(thatis,thegainsandlossesthatarisefromtheaccountingtranslationofCanadiandollar,EuroorMexicanpesodenominatedassetsandliabilitiesintoUSdollars),asitdoesnotgiverisetocashexposure.TheCompany'sforeigncurrencyderivativefinancialinstrumentstrategyincludestheuseofpurchasedputs,soldcalls,collarsandforwardsthatarenotheldforspeculativepurposes(refertonote20totheseconsolidatedfinancialstatementsforfurtherdetailsontheCompany'sderivativefinancialinstruments).
ThefollowingtablesetsoutthetranslationimpactonincomebeforeincomeandminingtaxesandequityfortheyearendedDecember31,2016ofa10.0%changeintheexchangerateoftheUSdollarrelativetotheCanadiandollar,EuroandMexicanpeso,withallothervariablesheldconstant.
Impact on Income Before Income and Mining Taxes and Equity
10.0%Strengthening of the US Dollar
10.0% Weakening
of the US Dollar
Canadiandollar $ 7,015 $ (7,015)
Euro $ 2,159 $ (2,159)
Mexicanpeso $ (66) $ 66
b) CreditRisk
Creditriskistheriskthatathirdpartymightfailtofulfillitsobligationsunderthetermsofafinancialinstrument.Creditriskarisesfromcashandcashequivalents,short-terminvestments,restrictedcash,tradereceivablesandderivativefinancialinstruments.TheCompanyholdsitscashandcashequivalents,restrictedcashandshort-terminvestmentsinhighlyratedfinancialinstitutionsresultinginalowlevelofcreditrisk.Fortradereceivablesandderivativefinancialinstruments,historicallevelsofdefaulthavebeennegligible,resultinginalowlevelofcreditrisk.TheCompanymitigatescreditriskbydealingwithrecognizedcredit-worthycounterpartiesandlimitingconcentrationrisk.Forderivativefinancialinstrumentliabilities,theCompanyassumesnocreditriskwhenthefairvalueofaninstrumentisnegative.Themaximumexposuretocreditriskisequaltothecarryingamountoftheinstrumentsasfollows:
As at December 31,
2016
As at December 31,
2015
Cashandcashequivalents $ 539,974 $ 124,150
Short-terminvestments 8,424 7,444
Restrictedcash 1,162 1,426
Tradereceivables 8,185 7,714
Derivativefinancialinstrumentassets 364 87
Total $ 558,109 $ 140,821
52 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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c) LiquidityRisk
LiquidityriskistheriskthattheCompanywillencounterdifficultyinmeetingobligationsassociatedwithfinancialliabilitiesthataresettledbydeliveringcashoranotherfinancialasset.TheCompanymonitorsitsriskofashortageoffundsbymonitoringitsdebtratingandprojectedcashflowstakingintoaccountthematuritydatesofexistingdebtandotherpayables.TheCompanymanagesexposuretoliquidityriskbymaintainingcashbalances,havingaccesstoundrawncreditfacilitiesandaccesstopublicdebtmarkets.Contractualmaturitiesrelatingtofinanceleaseobligationsaredetailedinnote13(a)totheseconsolidatedfinancialstatementsandcontractualmaturitiesrelatingtolong-termdebtaredetailedinnote14totheseconsolidatedfinancialstatements.Otherfinancialliabilities,includingaccountspayableandaccruedliabilitiesandderivativefinancialinstruments,havematuritieswithinoneyearofDecember31,2016.
d) CapitalRiskManagement
TheCompany'sprimarycapitalmanagementobjectiveistomaintainanoptimalcapitalstructuretosupportcurrentandlong-termbusinessactivitiesandtoprovidefinancialflexibilityinordertomaximizevalueforequityholders.
AgnicoEagle'scapitalstructurecomprisesamixoflong-termdebtandtotalequityasfollows:
As at December 31,
2016
As at December 31,
2015
Long-termdebt $ 1,202,686 $ 1,132,638
Totalequity 4,492,474 4,141,020
Total $ 5,695,160 $ 5,273,658
TheCompanymanagesitscapitalstructureandmakesadjustmentstoitbasedonchangesineconomicconditionsandtherequirementsoffinancialcovenants.Toeffectivelymanageitscapitalrequirements,AgnicoEaglehasinplacearigorousplanning,budgetingandforecastingprocesstoensureithastheappropriateliquiditytomeetitsoperatingandgrowthobjectives.TheCompanyhastheabilitytoadjustitscapitalstructurebyvariousmeans.
Seenote14totheseconsolidatedfinancialstatementsfordetailsrelatedtoAgnicoEagle'scompliancewithitslong-termdebtcovenants.
20. DERIVATIVE FINANCIAL INSTRUMENTS
CurrencyRiskManagement
TheCompanyutilizesforeignexchangeeconomichedgestoreducethevariabilityinexpectedfuturecashflowsarisingfromchangesinforeigncurrencyexchangerates.TheCompanyisprimarilyexposedtocurrencyfluctuationsrelativetotheUSdollarasaportionoftheCompany'soperatingcostsandcapitalexpendituresaredenominatedinforeigncurrencies;primarilytheCanadiandollar,theEuroandtheMexicanpeso.Thesepotentialcurrencyfluctuationsincreasethevolatilityof,andcouldhaveasignificantimpacton,theCompany'sproductioncosts.Theeconomichedgesrelatetoaportionoftheforeigncurrencydenominatedcashoutflowsarisingfromforeigncurrencydenominatedexpenditures.TheCompanydoesnotapplyhedgeaccountingtothesearrangements.
AsatDecember31,2016,theCompanyhadoutstandingforeignexchangezerocostcollars.ThepurchaseofUSdollarputoptionswasfinancedthroughsellingUSdollarcalloptionsatahigherlevelsuchthatthenetpremiumpayabletothedifferentcounterpartiesbytheCompanywasnil.AtDecember31,2016,thezerocostcollarsrelatedto$179.4millionof2017
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expendituresandtheCompanyrecognizedmark-to-marketadjustmentsinthe(gain)lossonderivativefinancialinstrumentslineitemoftheconsolidatedstatementsofincomeandcomprehensiveincome.Mark-to-marketgainsandlossesrelatedtoforeignexchangederivativefinancialinstrumentsarerecordedatfairvaluebasedonbroker-dealerquotationscorroboratedbyoptionpricingmodelsthatutilizeperiodendforwardpricingoftheapplicableforeigncurrencytocalculatefairvalue.
TheCompany'sotherforeigncurrencyderivativestrategiesin2016and2015consistedmainlyofwritingUSdollarcalloptionswithshortmaturitiestogeneratepremiumsthatwould,inessence,enhancethespottransactionratereceivedwhenexchangingUSdollarsforCanadiandollarsandMexicanpesos.AllofthesederivativetransactionsexpiredpriortoperiodendsuchthatnoderivativeswereoutstandingasatDecember31,2016orDecember31,2015.Thecalloptionpremiumswererecognizedinthe(gain)lossonderivativefinancialinstrumentslineitemoftheconsolidatedstatementsofincomeandcomprehensiveincome.
CommodityPriceRiskManagement
Tomitigatetherisksassociatedwithfluctuatingdieselfuelprices,theCompanyusesderivativefinancialinstrumentsaseconomichedgesofthepriceriskonaportionofdieselfuelcostsassociatedwiththeMeadowbankmine'sdieselfuelexposureasitrelatestooperatingcosts.TherewerederivativefinancialinstrumentsoutstandingasatDecember31,2016relatingto1.0milliongallonsofheatingoil(December31,2015–7.0milliongallonsofheatingoil).Therelatedmark-to-marketadjustmentspriortosettlementwererecognizedinthe(gain)lossonderivativefinancialinstrumentslineitemoftheconsolidatedstatementsofincomeandcomprehensiveincome.TheCompanydoesnotapplyhedgeaccountingtothesearrangements.
Mark-to-marketgainsandlossesrelatedtoheatingoilderivativefinancialinstrumentsarebasedonbroker-dealerquotationsthatutilizeperiodendforwardpricingtocalculatefairvalue.
AsatDecember31,2016andDecember31,2015,therewerenometalderivativepositions.TheCompanymayfromtimetotimeutilizeshort-termfinancialinstrumentsaspartofitsstrategytominimizerisksandoptimizereturnsonitsby-productmetalsales.
Thefollowingtablesetsoutasummaryoftheamountsrecognizedinthe(gain)lossonderivativefinancialinstrumentslineitemoftheconsolidatedstatementsofincomeandcomprehensiveincome:
Year Ended December 31,
2016
2015
Premiumsrealizedonwrittenforeignexchangecalloptions $ (2,569) $ (2,654)
Realizedloss(gain)onwarrants 543 (9,072)
Unrealized(gain)lossonwarrants(i) (580) 2,213
Realizedlossoncurrencyandcommodityderivatives 357 29,297
Unrealizedgainoncurrencyandcommodityderivatives(i) (7,219) (176)
(Gain)lossonderivativefinancialinstruments $ (9,468) $ 19,608
Note:
(i) Unrealizedgainsandlossesonfinancialinstrumentsthatdidnotqualifyforhedgeaccountingarerecognizedthroughthe(gain)lossonderivativefinancialinstrumentslineitemoftheconsolidatedstatementsofincomeandcomprehensiveincomeandthroughtheotherlineitemoftheconsolidatedstatementsofcashflows.
54 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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21. SEGMENTED INFORMATION
AgnicoEagleoperatesinasingleindustry,namelyexplorationforandproductionofgold.TheCompany'sprimaryoperationsareinCanada,MexicoandFinland.TheCompanyidentifiesitsreportablesegmentsasthoseoperationswhoseoperatingresultsarereviewedbytheChiefOperatingDecisionMaker("CODM"),theChiefExecutiveOfficerforthepurposeofallocatingresourcesandassessingperformanceandthatrepresentmorethan10.0%ofthecombinedrevenuefromminingoperations,incomeorlossortotalassetsofalloperatingsegments.EachoftheCompany'ssignificantoperatingminesandprojectsareconsideredtobeseparateoperatingsegments.CertainoperatingsegmentsthatdonotmeetthequantitativethresholdsarestilldisclosedwheretheCompanybelievesthattheinformationisuseful.TheCODMalsoreviewssegmentincome(definedasrevenuesfromminingoperationslessproductioncosts,explorationandcorporatedevelopmentexpensesandimpairmentlossesandreversals)onamine-by-minebasis.ThefollowingaretheCompany'sreportablesegmentsorganizedaccordingtotheirrelationshipwiththeCompany'sthreebusinessunitsandreflecthowtheCompanymanagesitsbusinessandhowitclassifiesitsoperationsforplanningandmeasuringperformance:
NorthernBusiness: LaRondemine,Lapamine,Goldexmine,MeadowbankmineincludingtheAmaruqdeposit,CanadianMalarticjointoperation,MeliadineprojectandKittilamine
SouthernBusiness: PinosAltosmine,CrestonMascotadepositatPinosAltosandLaIndiamine
Exploration: UnitedStatesExplorationoffice,EuropeExplorationoffice,CanadaExplorationofficesandLatinAmericaExplorationoffice
Revenuesfromminingoperationsandproductioncostsforthereportablesegmentsarereportednetofintercompanytransactions.
Corporateandotherassetsandspecificincomeandexpenseitemsarenotallocatedtoreportablesegments.
ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTSAGNICO EAGLE 55
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Year Ended December 31, 2016
Revenues from Mining
Operations
Production Costs
Exploration and Corporate
Development
Gain on Impairment
Reversal
Segment Income (Loss)
Northern Business:
LaRondemine $ 388,180 $ (179,496) $ – $ – $ 208,684
Lapamine 92,160 (52,974) – – 39,186
Goldexmine 149,730 (63,310) – – 86,420
Meadowbankmine 384,023 (218,963) (63,488) 37,161 138,733
CanadianMalarticjointoperation 371,920 (183,635) (4,044) – 184,241
Meliadineproject – – – 83,000 83,000
Kittilamine 252,346 (141,871) – – 110,475
Total Northern Business 1,638,359 (840,249) (67,532) 120,161 850,739
Southern Business:
PinosAltosmine 294,377 (114,557) – – 179,820
CrestonMascotadepositatPinosAltos 62,967 (27,341) – – 35,626
LaIndiamine 142,529 (49,745) – – 92,784
Total Southern Business 499,873 (191,643) – – 308,230
Exploration – – (79,446) – (79,446)
Segments totals $ 2,138,232 $ (1,031,892) $ (146,978) $ 120,161 $ 1,079,523
Total segments income $ 1,079,523
Corporateandother:
Amortizationofproperty,plantandminedevelopment (613,160)
Generalandadministrative (102,781)
Financecosts (74,641)
Gainonderivativefinancialinstruments 9,468
Gainonsaleofavailable-for-salesecurities 3,500
Environmentalremediation (4,058)
Foreigncurrencytranslationloss (13,157)
Otherexpenses (16,233)
Incomebeforeincomeandminingtaxes $ 268,461
56 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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Year Ended December 31, 2015
Revenues from Mining
Operations
Production Costs
Exploration and Corporate
Development
Segment Income (Loss)
Northern Business:
LaRondemine $ 318,207 $ (172,283) $ – $ 145,924
Lapamine 104,785 (52,571) – 52,214
Goldexmine 133,845 (61,278) – 72,567
Meadowbankmine 446,898 (230,564) (43,676) 172,658
CanadianMalarticjointoperation 333,280 (171,473) (6,093) 155,714
Kittilamine 206,357 (126,095) – 80,262
Total Northern Business 1,543,372 (814,264) (49,769) 679,339
Southern Business:
PinosAltosmine 250,909 (105,175) – 145,734
CrestonMascotadepositatPinosAltos 66,472 (26,278) – 40,194
LaIndiamine 124,679 (49,578) – 75,101
Total Southern Business 442,060 (181,031) – 261,029
Exploration – – (60,584) (60,584)
Segments totals $ 1,985,432 $ (995,295) $ (110,353) $ 879,784
Total segments income $ 879,784
Corporateandother:
Amortizationofproperty,plantandminedevelopment (608,609)
Generalandadministrative (96,973)
Impairmentlossonavailable-for-salesecurities (12,035)
Financecosts (75,228)
Lossonderivativefinancialinstruments (19,608)
Gainonsaleofavailable-for-salesecurities 24,600
Environmentalremediation (2,003)
Foreigncurrencytranslationgain 4,728
Otherexpenses (12,028)
Incomebeforeincomeandminingtaxes $ 82,628
ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTSAGNICO EAGLE 57
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Total Assets as at
December 31, 2016
December 31, 2015
Northern Business:
LaRondemine $ 808,981 $ 834,881
Lapamine 16,473 50,951
Goldexmine 248,766 201,257
Meadowbankmine 500,207 595,682
CanadianMalarticjointoperation 1,956,285 2,012,648
Meliadineproject 781,999 561,271
Kittilamine 961,392 933,362
Total Northern Business 5,274,103 5,190,052
Southern Business:
PinosAltosmine 667,123 585,735
CrestonMascotadepositatPinosAltos 60,308 70,670
LaIndiamine 428,005 501,179
Total Southern Business 1,155,436 1,157,584
Exploration 198,738 199,606
Corporate and other 479,674 135,938
Total assets $ 7,107,951 $ 6,683,180
ThefollowingtablesetsoutthecarryingamountofgoodwillbysegmentfortheyearsendedDecember31,2015andDecember31,2016:
Meliadine Project
La India Mine
Canadian Malartic Joint
Operation
Total
Cost $ 200,064 $ 39,017 $ 657,792 $ 896,873
Accumulatedimpairment (200,064) – – (200,064)
Carrying amount $ – $ 39,017 $ 657,792 $ 696,809
58 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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Thefollowingtablesetsoutcapitalexpendituresbysegment:
Capital Expenditures Year Ended December 31,
2016
2015
Northern Business:
LaRondemine $ 64,288 $ 67,342
Lapamine – 6,491
Goldexmine 78,388 48,818
Meadowbankmine 38,248 65,230
CanadianMalarticjointoperation 60,434 43,368
Meliadineproject 116,136 66,747
Kittilamine 75,904 56,404
Total Northern Business 433,398 354,400
Southern Business:
PinosAltosmine 59,572 61,829
CrestonMascotadepositatPinosAltos 9,287 4,195
LaIndiamine 10,507 23,379
Total Southern Business 79,366 89,403
Corporate and other 3,286 5,955
Total capital expenditures $ 516,050 $ 449,758
Thefollowingtablesetsoutrevenuesfromminingoperationsbygeographicarea(i):
Year Ended December 31,
2016
2015
Canada $ 1,386,013 $ 1,337,017
Mexico 499,873 442,058
Finland 252,346 206,357
Total revenues from mining operations $ 2,138,232 $ 1,985,432
(i) Presentedbasedonthelocationoftheminefromwhichtheproductoriginated.
ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTSAGNICO EAGLE 59
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AGNICO EAGLE MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(thousands of United States dollars, except share and per share amounts, unless otherwise indicated) December 31, 2016
21. SEGMENTED INFORMATION (Continued)
Thefollowingtablesetsoutnon-currentassetsbygeographicarea:
Non-current Assets as at
December 31, 2016
December 31, 2015
Canada $ 3,970,435 $ 3,878,644
Mexico 1,010,063 1,082,524
Finland 887,032 882,345
UnitedStates 10,242 10,242
Total non -current assets $ 5,877,772 $ 5,853,755
22. IMPAIRMENT AND IMPAIRMENT REVERSALS
GoodwillImpairmentTesting
TheCompanyperformsgoodwillimpairmenttestsonanannualbasisasatDecember31eachyear.Inaddition,theCompanyassessesforindicatorsofimpairmentateachreportingperiodendandifanindicatorofimpairmentisidentified,goodwillandlong-livedassetsaretestedforimpairmentatthattime.Ifanindicatorofimpairmentexists,therecoverableamountoftheassetiscalculatedinordertodetermineifanyimpairmentlossisrequired.Animpairmentlossisrecognizedforanyexcessofthecarryingamountoftheassetoveritsrecoverableamount.
TheestimatedrecoverableamountoftheCanadianMalarticjointoperationsegmentasatDecember31,2016andDecember31,2015wasdeterminedonthebasisoffairvaluelesscoststodisposeoftheCanadianMalarticmineaswellastheexplorationpropertiesincludedinthejointoperation.TheestimatedrecoverableamountoftheCanadianMalarticminewascalculatedbydiscountingtheestimatedfuturenetcashflowsovertheestimatedlifeofthemineusinganominaldiscountrateof6.00%(2015–5.25%),commensuratewiththeestimatedlevelofriskassociatedwiththeCanadianMalarticmine.Therecoverableamountcalculationwasbasedonanestimateoffutureproductionlevelsapplyinggoldpricesof$1,250perounce(inrealterms)(2015–$1,150to$1,250perounce),foreignexchangeratesofUS$0.75:C$1.00toUS$0.80:C$1.00(2015–US$0.75:C$1.00toUS$0.80:C$1.00),aninflationrateof2.0%(2015–2.0%),andcapital,operatingandreclamationcostsbasedonapplicablelife-of-mineplans.Explorationpropertieswithinthejointoperationwerevaluedbyreferencetocomparablerecenttransactions.TheCanadianMalarticjointoperationsegmentestimatedrecoverableamountexceededitscarryingamountatDecember31,2016andDecember31,2015.ThediscountedcashflowapproachusessignificantunobservableinputsandisthereforeconsideredLevel3fairvaluemeasurementunderthefairvaluehierarchy.
ImpairmentReversals
TheCompanyassessesforindicatorsofimpairmentreversalonlong-livedassetsotherthangoodwillthathavepreviouslybeenimpairedateachreportingperiodend.Ifanindicatorofimpairmentreversalisidentified,therecoverableamountoftheassetiscalculatedinordertodetermineifanyimpairmentreversalisrequired.Animpairmentlossrecognizedinapriorperiodcanonlybereversediftherearesubsequentchangesintheestimatesorsignificantassumptionsthatwereusedtodeterminetherecoverableamountsincetheimpairmentlosswasrecognized.Againonimpairmentreversalisrecognizedforanyexcessoftherecoverableamountoftheassetoveritscarryingamount.Theamountofthereversalislimitedtothedifferencebetweenthecurrentcarryingamountandtheamountwhichwouldhavebeenthecarryingamounthadtheearlierimpairmentnotbeenrecognizedandamortizationofthatcarryingamounthadcontinued.
60 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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In2016,theCompanycompletedaninternaltechnicalstudyontheAmaruqsatellitedepositattheMeadowbankmine.BoardapprovalforthedevelopmentoftheprojectwasreceivedonFebruary15,2017.ThefavourableprojecteconomicsandtheexpectedpotentialforextensionstotheCompany'scurrentmineplaninrelationtotheAmaruqsatellitedepositattheMeadowbankmineisanimpairmentreversalindicatorfortheMeadowbankmineCGU.TheupdatedmineplanrepresentsanobservableindicationthatthevalueoftheCGUhasincreasedsignificantlyandisafavourablechangetotheextentandmannerinwhichtheassetisexpectedtobeused.Thereissignificantjudgementinvolvedinthedeterminationofwhetherapreviouslyrecognizedimpairmentlossshouldbereversed.
TheestimatedrecoverableamountoftheMeadowbankmineCGUasatDecember31,2016wasdeterminedonthebasisoffairvaluelesscoststodisposeofthemine.TheestimatedrecoverableamountoftheMeadowbankmineCGUwascalculatedbydiscountingtheestimatedfuturenetcashflowsovertheestimatedlifeofthemineusinganominaldiscountrateof7.25%(2015–3.75%),commensuratewiththeestimatedlevelofriskassociatedwiththeMeadowbankmineCGU.Therecoverableamountcalculationwasbasedonanestimateoffutureproductionlevelsapplyinggoldpricesof$1,250perounce(inrealterms),foreignexchangeratesofUS$0.75:C$1.00toUS$0.80:C$1.00,aninflationrateof2.0%,andcapital,operatingandreclamationcostsbasedonapplicablelife-of-mineplans.TheestimatedrecoverableamountoftheMeadowbankmineCGUexceededitscarryingamountatDecember31,2016.TheMeadowbankmineCGU'smaximumimpairmentreversalislimitedtothedifferencebetweenthecurrentcarryingamountandthepreviouscarryingamountlessamortizationthatwouldhavebeenrecognizedhadtheassetsnotbeenpreviouslyimpaired.CertainassetsthatarenotexpectedtobeutilizedinconjunctionwiththeAmaruqsatellitedeposithadrecoverableamountslessthantheircurrentcarryingamountsandthereforenoimpairmentreversalwasapplied.TheCompanydeterminedthattheAmaruqsatellitedepositwillutilizesomeoftheexistinginfrastructureattheMeadowbankmine,primarilythemill,camp,roadandairstrip,togeneratecashflowsattheAmaruqsatellitedepositandtheseassetswerewrittenuptothemaximumofthepreviouscarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognizedfortheassetsinprioryears.Againonimpairmentreversalof$37.2million($27.6million,netoftax)wasrecognizedinthegainonimpairmentreversallineitemintheconsolidatedstatementsofincomeandcomprehensiveincometoincreasethecarryingamountofrelatedplantandequipment.ThediscountedcashflowapproachusessignificantunobservableinputsandisthereforeconsideredLevel3fairvaluemeasurementunderthefairvaluehierarchy.
In2016,theCompanycompletedinternalstudiestooptimizethepreviousMeliadinemineplanthathadbeenoutlinedinanupdatedNI43-101technicalreportdatedFebruary11,2015.Theseinternalstudiesevaluatedvariousopportunitiestoimprovetheprojecteconomicsandtheafter-taxinternalrateofreturn.BoardapprovalfordevelopmentoftheprojectwasreceivedonFebruary15,2017.ThefavourableprojecteconomicsandtheexpectedpotentialforextensionstotheCompany'scurrentmineplanisanimpairmentreversalindicatorfortheMeliadineprojectCGU.TheupdatedmineplanrepresentsanobservableindicationthatthevalueoftheCGUhasincreasedsignificantlyandisafavourablechangetotheextentandmannerinwhichtheassetisexpectedtobeused.Thereissignificantjudgmentinvolvedinthedeterminationofwhetherapreviouslyrecognizedimpairmentlossshouldbereversed.
TheestimatedrecoverableamountoftheMeliadineprojectCGUasatDecember31,2016wasdeterminedonthebasisoffairvaluelesscoststodisposeofthemine.TheestimatedrecoverableamountoftheMeliadineprojectCGUwascalculatedbydiscountingtheestimatedfuturenetcashflowsovertheestimatedlifeofthemineusinganominaldiscountrateof9.00%(2015–7.50%),commensuratewiththeestimatedlevelofriskassociatedwiththeMeliadineprojectCGU.Therecoverableamountcalculationwasbasedonanestimateoffutureproductionlevelsapplyinggoldpricesof$1,250perounce(inrealterms),foreignexchangeratesofUS$0.75:C$1.00toUS$0.80:C$1.00,aninflationrateof2.0%andcapital,operatingandreclamationcostsbasedonapplicablelife-of-mineplans.AstheMeliadineprojectCGU'sestimatedrecoverableamountexceededthepreviouscarryingamountlessamortizationthatwouldhavebeenrecognizedhadtheassetsnotbeenimpaired,againonimpairmentreversalof$83.0million($53.6million,netoftax)wasrecognizedinthegainonimpairmentreversallineitemintheconsolidatedstatementsofincomeandcomprehensiveincometoincreasethecarryingamountoftherelated
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miningproperty.ThediscountedcashflowapproachusessignificantunobservableinputsandisthereforeconsideredLevel3fairvaluemeasurementunderthefairvaluehierarchy.
KeyAssumptions
Discountrateswerebasedoneachassetgroup'sweightedaveragecostofcapital,ofwhichthetwomaincomponentsarethecostofequityandtheafter-taxcostofdebt.Costofequitywascalculatedbasedonthecapitalassetpricingmodel,incorporatingtherisk-freerateofreturnbasedonGovernmentofCanadamarketablebondyieldsasatthevaluationdate,theCompany'sbetacoefficientadjustmenttothemarketequityriskpremiumbasedonthevolatilityoftheCompany'sreturninrelationtothatofacomparablemarketportfolio,plusasizepremiumandCompany-specificriskfactor.CostofdebtwasdeterminedbyapplyinganappropriatemarketindicationoftheCompany'sborrowingcapabilitiesandthecorporateincometaxrateapplicabletoeachassetgroup'sjurisdiction.Goldpriceestimatesweredeterminedusingforecastsoffuturepricespreparedbyindustryanalysts,whichwereavailableasatorclosetothevaluationdate.Foreignexchangeestimatesarebasedonacombinationofcurrencyforwardcurvesandestimatesthatreflecttheoutlooksofmajorglobalfinancialinstitutions.
23. INCOME AND MINING TAXES
Incomeandminingtaxesexpenseismadeupofthefollowingcomponents:
Year Ended December 31,
2016
2015
Currentincomeandminingtaxes $ 102,028 $ 51,495
Deferredincomeandminingtaxes:
Originationandreversaloftemporarydifferences 7,609 6,550
Totalincomeandminingtaxesexpense $ 109,637 $ 58,045
62 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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TheincomeandminingtaxesexpenseisdifferentfromtheamountthatwouldhavebeencalculatedbyapplyingtheCanadianstatutoryincometaxrateasaresultofthefollowing:
Year Ended December 31,
2016
2015
Combinedfederalandcompositeprovincialtaxrates 26.0% 26.0%
Expectedincometaxexpenseatstatutoryincometaxrate $ 69,666 $ 21,442
Increase(decrease)inincomeandminingtaxesresultingfrom:
Miningtaxes 33,949 19,042
Taxlawchanges (1,557) 4,357
Impactofforeigntaxrates (9,370) (8,499)
Permanentdifferences 2,387 1,359
Impactofforeignexchangeondeferredincometaxbalances 14,562 20,344
Totalincomeandminingtaxesexpense $ 109,637 $ 58,045
ThefollowingtablesetsoutthecomponentsofAgnicoEagle'snetdeferredincomeandminingtaxliabilities:
As at December 31,
2016
As at December 31,
2015
Miningproperties $ 1,046,218 $ 1,039,105
Netoperatingandcapitallosscarryforwards (80,227) (86,126)
Miningtaxes (76,344) (75,410)
Reclamationprovisionsandotherliabilities (70,085) (75,455)
Totaldeferredincomeandminingtaxliabilities $ 819,562 $ 802,114
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Year Ended December 31,
2016
2015
Deferredincomeandminingtaxliabilities–beginningofyear $ 802,114 $ 797,192
Incomeandminingtaximpactrecognizedinnetincome 7,888 6,025
Incometaximpactrecognizedinothercomprehensiveincome(loss) 4,458 (1,103)
Reductionofflow-throughshareliability 5,102 –
Deferredincomeandminingtaxliabilities–endofyear $ 819,562 $ 802,114
TheCompanyoperatesindifferentjurisdictionsand,accordingly,itissubjecttoincomeandothertaxesunderthevarioustaxregimesinthecountriesinwhichitoperates.Thetaxrulesandregulationsinmanycountriesarehighlycomplexandsubjecttointerpretation.TheCompanymaybesubjectinthefuturetoareviewofitshistoricincomeandothertaxfilingsand,inconnectionwithsuchreviews,disputescanarisewiththetaxingauthoritiesovertheinterpretationorapplicationofcertaintaxrulesandregulationstotheCompany'sbusinessconductedwithinthecountryinvolved.
Thedeductibletemporarydifferencesandunusedtaxlossesinrespectofwhichadeferredtaxassethasnotbeenrecognizedintheconsolidatedbalancesheetsareasfollows:
As at December 31,
2016
As at December 31,
2015
Netcapitallosscarryforwards $ 34,298 $ 90,647
Otherdeductibletemporarydifferences 202,614 213,879
Unrecognizeddeductibletemporarydifferencesandunusedtaxlosses $ 236,912 $ 304,526
TheCompanyalsohasunusedtaxcreditsof$12.9millionasatDecember31,2016(December31,2015–$9.9million)forwhichadeferredtaxassethasnotbeenrecognized.
Capitallosscarryforwardsandotherdeductibletemporarydifferenceshavenoexpirydatewhiletheunusedtaxcreditsexpirein2020.
TheCompanyhas$410.5million(2015–$412.8million)oftaxabletemporarydifferencesassociatedwithitsinvestmentsinsubsidiariesforwhichdeferredincometaxhasnotbeenrecognized,astheCompanyisabletocontrolthetimingofthereversalofthetaxabletemporarydifferencesanditisprobablethattheywillnotreverseintheforeseeablefuture.
TheCompanyissubjecttotaxesinCanada,MexicoandFinland,eachwithvaryingstatutesoflimitations.Priortaxationyearsgenerallyremainsubjecttoexamination.
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24. EMPLOYEE BENEFITS AND COMPENSATION OF KEY MANAGEMENT PERSONNEL
DuringtheyearendedDecember31,2016,employeebenefitsexpensewas$479.1million(2015–$463.0million).Therewerenorelatedpartytransactionsin2016or2015otherthancompensationofkeymanagementpersonnel.KeymanagementpersonnelincludethemembersoftheBoardandtheseniorleadershipteam.
Year Ended December 31,
2016
2015
Salaries,short-termincentivesandotherbenefits $ 16,620 $ 13,620
Post-employmentbenefits 1,489 1,452
Share-basedpayments 13,591 13,919
Total $ 31,700 $ 28,991
25. COMMITMENTS AND CONTINGENCIES
Aspartofitsongoingbusinessandoperations,theCompanyhasbeenrequiredtoprovideassuranceintheformoflettersofcreditforenvironmentalandsiterestorationcosts,customcredits,governmentgrantsandothergeneralcorporatepurposes.AsatDecember31,2016,thetotalamountoftheseguaranteeswas$251.6million.
CertainoftheCompany'spropertiesaresubjecttoroyaltyarrangements.Thefollowingarethemostsignificantroyaltyarrangements:
• TheCompanyhasaroyaltyagreementwiththeFinnishgovernmentrelatingtotheKittilamine.Starting12monthsaftertheKittilamine'soperationscommenced,theCompanyhasbeenrequiredtopay2.0%onnetsmelterreturns,definedasrevenuelessprocessingcosts.Theroyaltyispaidonanannualbasisinthefollowingyear.
• TheCompanyiscommittedtopay2.0%netsmelterreturnontheBarselepropertyinSweden.Thenetsmelterreturnisdefinedasgrossproceedslessrefiningcosts.Paymentshouldbedonequarterlyonemonthinarrears.TheCompanyhasabuyoutoptiontopurchasetherighttobepaidtheroyalty,foranaggregateconsiderationofUS$5million.
• ThePartnershipiscommittedtopayaroyaltyonproductionfromcertainpropertiesinQuebec,Canada.Thetypeofroyaltyagreementsinclude,butarenotlimitedto,netsmelterreturnroyalties,withpercentagesrangingfrom1.5%to5.0%.
• TheCompanyiscommittedtopayaroyaltyonproductionfromcertainpropertiesinQuebec,Canada.Thetypeofroyaltyagreementsinclude,butarenotlimitedto,netprofitsinterestroyaltiesandnetsmelterreturnroyalties,withpercentagesrangingfrom2.5%to5.0%.
• TheCompanyiscommittedtopayaroyaltyonproductionfromcertainpropertiesinMexico.Thetypeofroyaltyagreementsinclude,butarenotlimitedto,netsmelterreturnroyalties,withpercentagesrangingfrom0.5%to3.5%.
TheCompanyregularlyentersintovariousearn-inandshareholderagreements,oftenwithcommitmentstopaynetsmelterreturnandotherroyalties.
ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTSAGNICO EAGLE 65
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TheCompanyhadthefollowingpurchasecommitmentsasatDecember31,2016,ofwhich$29.4millionrelatedtocapitalexpenditures:
Purchase
Commitments
2017 $ 43,289
2018 8,562
2019 6,520
2020 5,035
2021 3,854
Thereafter 16,971
Total $ 84,231
26. ONGOING LITIGATION
OnAugust2,2016,thePartnershipwasservedwithaclassactionlawsuitwithrespecttoallegationsinvolvingtheCanadianMalarticmine.Thecomplaintisinrespectof"neighbourhoodannoyances"arisingfromdust,noise,vibrationsandblastsatthemine.Theplaintiffsareseekingdamagesinanunspecifiedamountaswellaspunitivedamagesintheamountof$20.0million.ProceedingsforthecertificationoftheclassarescheduledforApril11and12,2017.TheCompanyandthePartnershipwilltakeallnecessarystepstodefendthemselvesfromthislawsuit.
OnAugust15,2016,thePartnershipreceivednoticeofanapplicationforinjunctionrelatingtotheCanadianMalarticmine,whichhasbeenfiledundertheEnvironment Quality Act (Quebec).AhearingrelatedtoaninterlocutaryinjunctionwascompletedonMarch17,2017andadecisionoftheSuperiorCourtofQuebecispending.TherequestforinjunctionaimstorestricttheCanadianMalarticmine'sminingoperationstosoundlevelsandminingvolumesbelowthelimitstowhichitissubject.AgnicoEagleandthePartnershiphavereviewedtheinjunctionrequest,considertherequestwithoutmeritandwilltakeallreasonablestepstodefendagainstthisinjunction.Whileatthistimethepotentialimpactscannotbedefinitivelydetermined,theCompanyexpectsthatiftheinjunctionweretobegrantedtherewouldbeanegativeimpactontheoperationsoftheCanadianMalarticmine,whichcouldincludeareductioninproduction.
27. SUBSEQUENT EVENTS
DividendsDeclared
OnFebruary15,2017,AgnicoEagleannouncedthattheBoardapprovedthepaymentofaquarterlycashdividendof$0.10percommonshare(atotalvalueofapproximately$22.5million),paidonMarch15,2017toholdersofrecordofthecommonsharesoftheCompanyonMarch1,2017.
PurchaseofOtisGoldCorporationCommonShares
OnFebruary28,2017,theCompanycompletedthepurchaseof14,420,000commonsharesofOtisGoldCorporation("Otis")pursuanttoaprivateplacement.TheCompanypaidC$0.35perOtiscommonshare,fortotalconsiderationofapproximatelyC$5.0million.Upontheclosingofthetransaction,AgnicoEagleheldapproximately9.95%oftheissuedandoutstandingcommonsharesofOtisonanon-dilutedbasis.
66 AGNICO EAGLE ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTS
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PurchaseofGoldQuestMiningCorporationCommonShares
OnMarch8,2017,theCompanycompletedthepurchaseof38,100,000commonsharesofGoldQuestMiningCorporation("GoldQuest")pursuanttoaprivateplacement.TheCompanypaidC$0.60perGoldQuestcommonshare,fortotalconsiderationofapproximatelyC$22.9million.Upontheclosingofthetransaction,AgnicoEagleheldapproximately15.0%oftheissuedandoutstandingcommonsharesofGoldQuestonanon-dilutedbasis.
ANNUALAUDITEDCONSOLIDATEDFINANCIALSTATEMENTSAGNICO EAGLE 67
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Exhibit99.2
REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRMONINTERNALCONTROLOVERFINANCIALREPORTINGMANAGEMENTCERTIFICATIONREPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRMAGNICOEAGLEMINESLIMITEDCONSOLIDATEDBALANCESHEETS(thousandsofUnitedStatesdollars,exceptshareamounts)AGNICOEAGLEMINESLIMITEDCONSOLIDATEDSTATEMENTSOFEQUITY(thousandsofUnitedStatesdollars,exceptshareandpershareamounts)AGNICOEAGLEMINESLIMITEDCONSOLIDATEDSTATEMENTSOFCASHFLOWS(thousandsofUnitedStatesdollars)
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Exhibit 99.3
Management'sDiscussion andAnalysis
FortheyearendedDecember31,2016
(PreparedinaccordancewithInternationalFinancialReportingStandards)
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AGNICO EAGLE MINES LIMITED MANAGEMENT'S DISCUSSION AND ANALYSIS
Table of Contents
This
Management'sDiscussionandAnalysis("MD&A")datedMarch27,2017ofAgnicoEagleMinesLimited("AgnicoEagle"orthe"Company")shouldbereadinconjunctionwiththeCompany'sannualconsolidatedfinancialstatementsfortheyearendedDecember31,2016thatwerepreparedinaccordancewithInternationalFinancialReportingStandards("IFRS")asissuedbytheInternationalAccountingStandardsBoard("IASB").TheannualconsolidatedfinancialstatementsandthisMD&AarepresentedinUnitedStatesdollars("USdollars","$"or"US$")andallunitsofmeasurementareexpressedusingthemetric
system,unlessotherwisespecified.CertaininformationinthisMD&AispresentedinCanadiandollars("C$"),MexicanpesosorEuropeanUnioneuros("Euros"or"€").AdditionalinformationrelatingtotheCompany,includingtheCompany'sAnnualInformationFormfortheyearendedDecember31,2016(the"AIF"),isavailableontheCanadianSecuritiesAdministrators'(the"CSA")SEDARwebsiteatwww.sedar.com.
ExecutiveSummary 1
Strategy 1
PortfolioOverview 2
KeyPerformanceDrivers 4
BalanceSheetReview 7
ResultsofOperations 8–RevenuesfromMiningOperations 8–ProductionCosts 9–ExplorationandCorporateDevelopmentExpense 13–AmortizationofProperty,PlantandMineDevelopment 13–GeneralandAdministrativeExpense 14–ImpairmentLossonAvailable-for-saleSecurities 14–FinanceCosts 14–GainonImpairmentReversal 14–ForeignCurrencyTranslationLoss(Gain) 15–IncomeandMiningTaxesExpense 15
LiquidityandCapitalResources 15–OperatingActivities 15–InvestingActivities 15–FinancingActivities 17–ContractualObligations 19–Off-BalanceSheetArrangements 20–2017LiquidityandCapitalResourcesAnalysis 20
QuarterlyResultsReview 21
Outlook 21–GoldProduction 21–FinancialOutlook 23
RiskProfile 25–CommodityPricesandForeignCurrencies 26–CostInputs 27–InterestRates 27–FinancialInstruments 28–OperationalRisk 28–RegulatoryRisk 30
ControlsEvaluation 30
OutstandingSecurities 31
Governance 31
SustainableDevelopmentManagement 32
EmployeeHealthandSafety 32
Community 33
Environment 33
CriticalIFRSAccountingPoliciesandAccountingEstimates 34–DerivativeInstrumentsandHedgeAccounting 34–Goodwill 34–MiningProperties,PlantandEquipmentandMineDevelopmentCosts
34
–DevelopmentStageExpenditures 36–ImpairmentofLong-livedAssets 37–ReclamationProvisions 37–Stock-basedCompensation 38–RevenueRecognition 38–IncomeTaxes 39
RecentlyIssuedAccountingPronouncements 39
MineralReserveData 41
Non-GAAPFinancialPerformanceMeasures 43
SummarizedQuarterlyData 54
ThreeYearFinancialandOperatingSummary 60
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NOTE TO INVESTORS CONCERNING FORWARD -LOOKING INFORMATION CertainstatementsinthisMD&A,referredtohereinas"forward-lookingstatements",constitute"forward-lookinginformation"undertheprovisionsofCanadianprovincialsecuritieslawsandconstitute"forward-lookingstatements"withinthemeaningoftheUnitedStatesPrivateSecuritiesLitigationReformActof1995.Thesestatementsrelateto,amongotherthings,theCompany'splans,objectives,expectations,estimates,beliefs,strategiesandintentionsandcangenerallybeidentifiedbytheuseofwordssuchas"anticipate","believe","budget","could","estimate","expect","forecast","intend","likely","may","plan","project","schedule","should","target","will","would"orothervariationsofthesetermsorsimilarwords.Forward-lookingstatementsinthisMD&Ainclude,butarenotlimitedto,thefollowing:
• theCompany'soutlookfor2017andfutureperiods;
• statementsregardingfutureearnings,andthesensitivityofearningstogoldandothermetalprices;
• anticipatedlevelsortrendsforpricesofgoldandby-productmetalsminedbytheCompanyorforexchangeratesbetweencurrenciesinwhichcapitalisraised,revenueisgeneratedorexpensesareincurredbytheCompany;
• estimatesoffuturemineralproductionandsales;
• estimatesoffuturecosts,includingminingcosts,totalcashcostsperounce,all-insustainingcostsperounce,minesitecostspertonneandothercosts;
• estimatesoffuturecapitalexpenditures,explorationexpendituresandothercashneeds,andexpectationsastothefundingthereof;
• statementsregardingtheprojectedexploration,developmentandexploitationoforedeposits,includingestimatesofexploration,developmentandproductionandothercapitalcostsandestimatesofthetimingofsuchexploration,developmentandproductionordecisionswithrespectthereto;
• estimatesofmineralreservesandmineralresourcesandtheirsensitivitiestogoldpricesandotherfactors,oregradesandmineralrecoveriesandstatementsregardinganticipatedfutureexplorationresults;
• estimatesofcashflow;
• estimatesofminelife;
• anticipatedtimingofeventsattheCompany'sminesites,minedevelopmentprojectsandexplorationprojects;
• estimatesoffuturecostsandotherliabilitiesforenvironmentalremediation;
• statementsregardinganticipatedlegislationandregulations,includingwithrespecttoclimatechange,andestimatesoftheimpactontheCompany;and
• otheranticipatedtrendswithrespecttotheCompany'scapitalresourcesandresultsofoperations.
Forward-lookingstatementsarenecessarilybaseduponanumberoffactorsandassumptionsthat,whileconsideredreasonablebyAgnicoEagleasofthedateofsuchstatements,areinherentlysubjecttosignificantbusiness,economicandcompetitiveuncertaintiesandcontingencies.ThefactorsandassumptionsofAgnicoEagleuponwhichtheforward-lookingstatementsinthisMD&Aarebased,andwhichmayprovetobeincorrect,includetheassumptionssetoutelsewhereinthisMD&Aaswellas:thattherearenosignificantdisruptionsaffectingAgnicoEagle'soperations,whetherduetolabourdisruptions,supplydisruptions,damagetoequipment,naturalorman-madeoccurrences,miningormillingissues,politicalchanges,titleissuesorotherwise;thatpermitting,developmentandexpansionateachofAgnicoEagle'smines,minedevelopmentprojectsandexplorationprojectsproceedonabasisconsistentwithexpectations,andthatAgnicoEagledoesnotchangeitsexplorationordevelopmentplansrelatingtosuchprojects;thattheexchangeratesbetweentheCanadiandollar,Euro,MexicanpesoandtheUSdollarwillbeapproximatelyconsistentwithcurrentlevelsorassetoutinthisMD&A;thatpricesforgold,silver,zincandcopperwillbeconsistentwithAgnicoEagle'sexpectations;thatpricesforkeyminingandconstructionsupplies,includinglabourcosts,remainconsistentwithAgnicoEagle'sexpectations;thatproductionmeetsexpectations;thatAgnicoEagle'scurrentestimatesofmineralreserves,mineralresources,mineralgradesandmineralrecoveriesareaccurate;thattherearenomaterialdelaysinthetimingforcompletionofdevelopmentprojects;andthattherearenomaterialvariationsinthecurrenttaxandregulatoryenvironmentsthataffectAgnicoEagle.
Theforward-lookingstatementsinthisMD&AreflecttheCompany'sviewsasatthedateofthisMD&Aandinvolveknownandunknownrisks,uncertaintiesandotherfactorswhichcouldcausetheactualresults,performanceorachievementsoftheCompanyorindustryresultstobemateriallydifferentfromanyfutureresults,performanceorachievementsexpressedor
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impliedbysuchforward-lookingstatements.Suchfactorsinclude,amongothers,theriskfactorssetoutin"RiskFactors"below.Giventheseuncertainties,readersarecautionednottoplaceunduerelianceontheseforward-lookingstatements,whichspeakonlyasofthedatemade.Exceptasotherwiserequiredbylaw,theCompanyexpresslydisclaimsanyobligationorundertakingtoreleasepubliclyanyupdatesorrevisionstoanysuchstatementstoreflectanychangeintheCompany'sexpectationsoranychangeinevents,conditionsorcircumstancesonwhichanysuchstatementisbased.ThisMD&Acontainsinformationregardingestimatedtotalcashcostsperounce,all-insustainingcostsperounceandminesitecostspertonneinrespectoftheCompanyoratcertainoftheCompany'sminesandminedevelopmentprojects.TheCompanybelievesthatthesegenerallyacceptedindustrymeasuresarerealisticindicatorsofoperatingperformanceandareusefulinallowingyearoveryearcomparisons.Investorsarecautionedthatthisinformationmaynotbesuitableforotherpurposes.
Meaningof"including"and"suchas":WhenusedinthisMD&A,theterms"including"and"suchas"meanincludingandsuchas,withoutlimitation.
NOTE TO INVESTORS CONCERNING ESTIMATES OF MINERAL RESERVES AND MINERALRESOURCES ThemineralreserveandmineralresourceestimatescontainedinthisMD&AhavebeenpreparedinaccordancewiththeCanadiansecuritiesregulatoryauthorities'(the"CSA")NationalInstrument43-101Standards of Disclosure for Mineral Projects ("NI43-101").ThesestandardsaresimilartothoseusedbytheUnitedStatesSecuritiesandExchangeCommission's(the"SEC")IndustryGuideNo.7,asinterpretedbyStaffattheSEC("Guide7").However,thedefinitionsinNI43-101differincertainrespectsfromthoseunderGuide7.Accordingly,mineralreserveinformationcontainedorincorporatedbyreferencehereinmaynotbecomparabletosimilarinformationdisclosedbyU.S.companies.UndertherequirementsoftheSEC,mineralizationmaynotbeclassifiedasa"reserve"unlessthedeterminationhasbeenmadethatthemineralizationcouldbeeconomicallyandlegallyproducedorextractedatthetimethereservedeterminationismade.TheSECdoesnotrecognizemeasuresof"mineralresource".
Themineralreserveandmineralresourcedatapresentedhereinareestimates,andnoassurancecanbegiventhattheanticipatedtonnagesandgradeswillbeachievedorthattheindicatedlevelofrecoverywillberealized.TheCompanydoesnotincludeequivalentgoldouncesforby-productmetalscontainedinmineralreservesinitscalculationofcontainedounces.
Cautionary Note to Investors Concerning Estimates of Measured and Indicated Mineral Resources
Thisdocumentusestheterms"measuredmineralresources"and"indicatedmineralresources".InvestorsareadvisedthatwhilethesetermsarerecognizedandrequiredbyCanadianregulations,theSECdoesnotrecognizethem.Investors are cautioned not to assume that any part or allof mineral deposits in these categories will ever be converted into mineral reserves.
Cautionary Note to Investors Concerning Estimates of Inferred Mineral Resources
Thisdocumentusestheterm"inferredmineralresources".InvestorsareadvisedthatwhilethistermisrecognizedandrequiredbyCanadianregulations,theSECdoesnotrecognizeit."Inferredmineralresources"haveagreatamountofuncertaintyastotheirexistenceandastotheireconomicandlegalfeasibility.Itcannotbeassumedthatanypartorallofaninferredmineralresourcewilleverbeupgradedtoahighercategory.UnderCanadianrules,estimatesofinferredmineralresourcesmaynotformthebasisoffeasibilityorpre-feasibilitystudies,exceptinrarecases.Investors are cautioned not to assume that any part or all of an inferred mineral resource exists, or is economically or legally mineable.
NOTE TO INVESTORS CONCERNING CERTAIN MEASURES OF PERFORMANCE ThisMD&Adisclosescertainmeasures,including"totalcashcostsperounce","all-insustainingcostsperounce","adjustednetincome"and"minesitecostspertonne"thatarenotrecognizedmeasuresunderIFRS.Thesemeasuresmaynotbecomparabletosimilarmeasuresreportedbyothergoldproducers.ForareconciliationofthesemeasurestothemostdirectlycomparablefinancialinformationpresentedintheconsolidatedfinancialstatementspreparedinaccordancewithIFRS,seeNon-GAAP Financial Performance Measures inthisMD&A.
Thetotalcashcostsperounceofgoldproducedisreportedonbothaby-productbasis(deductingby-productmetalrevenuesfromproductioncosts)andco-productbasis(beforedeductingby-productmetalrevenues).Thetotalcashcostsperounceofgoldproducedonaby-productbasisiscalculatedbyadjustingproductioncostsasrecordedintheconsolidatedstatementsofincomeforby-productrevenues,inventoryproductioncosts,smelting,refiningandmarketingchargesandotheradjustments,andthendividingbythenumberofouncesofgoldproduced.Thetotalcashcostsperounceofgold
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producedonaco-productbasisiscalculatedinthesamemannerasthetotalcashcostsperounceofgoldproducedonaby-productbasis,exceptthatnoadjustmentismadeforby-productmetalrevenues.Accordingly,thecalculationoftotalcashcostsperounceofgoldproducedonaco-productbasisdoesnotreflectareductioninproductioncostsorsmelting,refiningandmarketingchargesassociatedwiththeproductionandsaleofby-productmetals.Thetotalcashcostsperounceofgoldproducedisintendedtoprovideinformationaboutthecash-generatingcapabilitiesoftheCompany'sminingoperations.ManagementalsousesthesemeasurestomonitortheperformanceoftheCompany'sminingoperations.Asmarketpricesforgoldarequotedonaperouncebasis,usingthetotalcashcostsperounceofgoldproducedonaby-productbasismeasureallowsmanagementtoassessamine'scash-generatingcapabilitiesatvariousgoldprices.
All-insustainingcostsperounceisusedtoshowthefullcostofgoldproductionfromcurrentoperations.TheCompanycalculatesall-insustainingcostsperounceofgoldproducedonaby-productbasisastheaggregateoftotalcashcostsperounceonaby-productbasis,sustainingcapitalexpenditures(includingcapitalizedexploration),generalandadministrativeexpenses(includingstockoptions)andreclamationexpenses,andthendividingbythenumberofouncesofgoldproduced.Theall-insustainingcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerastheall-insustainingcostsperounceofgoldproducedonaby-productbasis,exceptthatthetotalcashcostsperounceonaco-productbasisisused,meaningnoadjustmentismadeforby-productmetalrevenues.TheCompany'smethodologyforcalculatingall-insustainingcostsperouncemaydifferfromthemethodologyusedbyotherproducersthatdiscloseall-insustainingcostsperounce.TheCompanymaychangethemethodologyitusestocalculateall-insustainingcostsperounceinthefuture,includinginresponsetotheadoptionofformalindustryguidanceregardingthismeasurebytheWorldGoldCouncil.
Managementisawarethattheseperouncemeasuresofperformancecanbeaffectedbyfluctuationsinexchangeratesand,inthecaseoftotalcashcostsperounceofgoldproducedonaby-productbasis,by-productmetalprices.ManagementcompensatesfortheseinherentlimitationsbyusingthesemeasuresinconjunctionwithminesitecostspertonneaswellasotherdatapreparedinaccordancewithIFRS.
Managementalsoperformssensitivityanalysesinordertoquantifytheeffectsoffluctuatingexchangeratesandmetalprices.ThisMD&Aalsocontainsinformationastoestimatedfuturetotalcashcostsperounce,all-insustainingcostsperounceandminesitecostspertonne.Theestimatesarebaseduponthetotalcashcostsperounce,all-insustainingcostsperounceandminesitecostspertonnethattheCompanyexpectstoincurtominegoldatitsminesandprojectsand,consistentwiththereconciliationoftheseactualcostsreferredtoabove,donotincludeproductioncostsattributabletoaccretionexpenseandotherassetretirementcosts,whichwillvaryovertimeaseachprojectisdevelopedandmined.Itisthereforenotpracticabletoreconciletheseforward-lookingnon-GAAPfinancialmeasurestothemostcomparableIFRSmeasure.
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Executive Summary
AgnicoEagleisaseniorCanadiangoldminingcompanythathasproducedpreciousmetalssince1957.TheCompany'sminesarelocatedinCanada,MexicoandFinland,withexplorationanddevelopmentactivitiesinCanada,Europe,LatinAmericaandtheUnitedStates.TheCompanyanditsshareholdershavefullexposuretogoldpricesduetoitslong-standingpolicyofnoforwardgoldsales.AgnicoEaglehasdeclaredacashdividendeveryyearsince1983.
AgnicoEagleearnsasignificantproportionofitsrevenueandcashflowfromtheproductionandsaleofgoldinbothdorebarandconcentrateform.Theremainderofrevenueandcashflowisgeneratedbytheproductionandsaleofby-productmetals,primarilysilver,zincandcopper.In2016,AgnicoEaglerecordedproductioncostsperounceofgoldof$621andtotalcashcostsperounceofgoldproducedof$573onaby-productbasisand$643onaco-productbasisonpayablegoldproductionof1,662,888ounces.Theaveragerealizedpriceofgoldincreasedby8.0%from$1,156perouncein2015to$1,249perouncein2016.
AgnicoEagle'soperatingminesanddevelopmentprojectsarelocatedinwhattheCompanybelievestobepoliticallystablecountriesthataresupportiveoftheminingindustry.ThepoliticalstabilityoftheregionsinwhichAgnicoEagleoperateshelpstoprovideconfidenceinitscurrentandfutureprospectsandprofitability.ThisisimportantforAgnicoEagleasitbelievesthatmanyofitsnewminesandrecentlyacquiredminingprojectshavelong-termminingpotential.
Highlights
• Continuedstrongoperationalperformancewithpayablegoldproductionof1,662,888ouncesandproductioncostsperounceofgoldof$621during2016.
• Totalcashcostsperounceofgoldproducedof$573onaby-productbasisand$643onaco-productbasisin2016.
• All-insustainingcostsperounceofgoldproducedof$824onaby-productbasisand$894onaco-productbasisin2016.
• Provenandprobablegoldreservestotaled19.9millionouncesatDecember31,2016,a5.0%increasecomparedwith19.1millionouncesatDecember31,2015.
• AsatDecember31,2016,AgnicoEaglehadstrongliquiditywith$548.4millionincashandcashequivalentsandshortterminvestmentsalongwithapproximately$1.2billioninundrawncreditlines.
• TheCompany'soperationsarelocatedinmining-friendlyregionsthattheCompanybelieveshavelowpoliticalriskandlong-termminingpotential.
• TheCompanymaintainsasolidfinancialpositionandforecastsbeingfullyfundedforitscurrentlyplanneddevelopmentoftheAmaruqdepositandtheMeliadinemineproject,investmentinexistingminesandkeyexplorationprojects.
• TheCompanyhasstrongseniormanagementcontinuityasitschiefexecutiveofficerhasover30yearsofservicewiththeCompany.
• InFebruary2017,theCompanydeclaredaquarterlycashdividendof$0.10percommonshare.AgnicoEaglehasnowdeclaredacashdividendeveryyearsince1983.
Strategy
AgnicoEagle'sabilitytoconsistentlyexecuteitsbusinessstrategyhasprovidedasolidfoundationforgrowth.
TheCompany'sgoalsareto:
• Deliverhighqualitygrowthwhilemeetingexpectationsandmaintaininghighperformance standardsinhealth,safety,environmentandcommunitydevelopment;
• Buildastrongpipeline ofprojectstodrivefutureproduction;and
• Employthebestpeople andmotivatethemtoreachtheirpotential.
Thesethreepillars–performance, pipeline and people –formthebasisofAgnicoEagle'ssuccessandcompetitiveadvantage.Bydeliveringonthem,theCompanystrivestocontinuetobuilditsproductionbaseandgenerateincreasedvalueforshareholders,whilemakingmeaningfulcontributionstoitsemployeesandcommunities.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 1
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Portfolio Overview
NorthernBusiness
Canada – LaRonde Mine
The100%ownedLaRondemineinnorthwesternQuebec,theCompany'sfirstmine,achievedcommercialproductionin1988.TheLaRondemineextension,theportionoftheminebelowthe245level,achievedcommercialproductioninDecember2011andisexpectedtoextendthelifeoftheminethrough2024.
In2003,theCompanyacquiredtheBousquetgoldproperty,whichadjoinstheLaRondeminingcomplextotheeastandhoststheBousquetZone5,whichtheCompanyhasrenamedLaRondeZone5.LaRondeZone5hasbeenapprovedfordevelopmentsubjecttopermittingapproval,whichisexpectedtobereceivedbymid-2018,withminingexpectedtocommenceshortlythereafter.
In2016,thefirstmineralreservesweredeclaredintheeasternportionofLaRonde3,theportionoftheLaRondeminebelowthecurrentlyplanned3.1kilometredepthatLaRonde,andadditionalinferredmineralresourcesweredeclaredinthewesternportionofLaRonde3.StudiesareongoingtoevaluatethepotentialtominetheLaRonde3portionofthedeposit.
TheLaRondemine'sprovenandprobablemineralreserveswereapproximately3.5millionouncesatDecember31,2016.
Canada – Lapa Mine
Commercialproductionwasachievedatthe100%ownedLapamineinnorthwesternQuebecinMay2009.Basedonthecurrentlifeofmineplan,Lapaisexpectedtooperateuntiltheendofthesecondquarterof2017,withproductioncomingfromtheZoneDeepEastandZone7Deepareas.TheCompanyisevaluatingopportunitiestocontinueproductionintothesecondhalfof2017.
TheLapamine'sprovenandprobablemineralreserveswereapproximately38,000ouncesatDecember31,2016.
Canada – Goldex Mine
The100%ownedGoldexmineinnorthwesternQuebecachievedcommercialproductionfromtheMandEsatellitezonesinOctober2013.
TheCompanyacquiredtheAkasabaWestdepositinJanuary2014.Locatedlessthan30kilometresfromGoldex,theCompanybelievesthattheAkasabaWestdepositcouldcreateflexibilityandsynergiesfortheCompany'soperationsintheAbitibiregionbyutilizingextramillingcapacityatbothGoldexandLaRonde,whilereducingoverallcosts.ThepermittingprocesshascommencedatAkasabaandpermittingactivitiesareexpectedtocontinueuntil2018.TheCompanyexpectstobeginsourcingopenpitorefromAkasabaWestin2019.TheAkasabaWestdeposit'sprovenandprobablemineralreserveswereapproximately0.1millionouncesatDecember31,2016.
InJuly2015,theCompanyannouncedtheapprovaloftheDeep1projectatGoldex,whichisexpectedtobegincommissioninginearly2018.StudiesareongoingtoevaluatethepotentialtoincreasethroughputfromtheDeep1ZoneandthepotentialtomineaportionoftheDeep2Zone,bothofwhichcouldenhanceproductionlevelsorextendthecurrentminelifeatGoldexandreduceoperatingcosts.
TheGoldexmine'sprovenandprobablemineralreserveswereapproximately0.9millionouncesatDecember31,2016.
Canada – Canadian Malartic Mine
AgnicoEagleandYamanaGoldInc.("Yamana")jointlyacquired100.0%ofOsiskoMiningCorporation("Osisko")onJune16,2014pursuanttoacourt-approvedplanofarrangementundertheCanada Business Corporations Act (the"OsiskoArrangement").AsaresultoftheOsiskoArrangement,AgnicoEagleandYamanaeachindirectlyown50.0%ofOsiskoandCanadianMalarticGP,whichnowholdstheCanadianMalarticmineinnorthwesternQuebec.AgnicoEagleandYamanaarejointlyexploring,throughtheirindirectownershipofCanadianMalarticCorporation(thesuccessortoOsisko),theKirklandLakeassets,theHammondReefprojectandthePandoraandWood-Pandoraproperties.
TheOdysseypropertyliesontheeastsideoftheCanadianMalarticproperty,approximately1.5kilometreseastofthecurrentlimitoftheopenpit.In2016,explorationprogramsdefinedthemineralizationattheOdysseyNorthandSouthzones,resultinginanestimatedinitialmineralresourcefortheOdysseyproperty.PermittingactivitiesrelatedtotheBarnatextensionandthere-routingoftheadjacentHighway117areexpectedtocontinueinthefirsthalfof2017,nodateforapprovalhas
2 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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beenset.ProductionactivitiesatBarnatarecurrentlyanticipatedtobegininlate2018,dependingonthetimingofthestartofconstructionoftheHighway117diversion.
AgnicoEagle'sattributableshareofprovenandprobablemineralreservesattheCanadianMalarticminewereapproximately3.5millionouncesatDecember31,2016.
Canada – Meadowbank Mine
In2007,theCompanyacquiredCumberlandResourcesLtd.,whichhelda100%interestintheMeadowbankgoldprojectinNunavut,Canada.CommercialproductionwasachievedbyAgnicoEagleattheMeadowbankmineinMarch2010.
The100%ownedAmaruqprojectislocatedapproximately50kilometresnorthwestoftheMeadowbankmineinNunavut,Canada.Inlate2015,theCompanyreceivedapprovalfortheconstructionofanall-weatherexplorationroadlinkingtheAmaruqprojecttotheMeadowbankmine.In2016,theCompanycompletedaninternaltechnicalstudyontheAmaruqsatellitedepositatMeadowbank.Basedonthisstudy,theCompanyhasapprovedtheprojectfordevelopmentpendingthereceiptoftherequiredpermits,whicharecurrentlyexpectedtobereceivedbythesecondquarterof2018.Productioniscurrentlyforecasttobegininthethirdquarterof2019,subjecttothetimingofthereceiptoftherequiredpermits.
AtMeadowbank,opportunitiesarebeinginvestigatedtopotentiallyextendproductionattheVaultpitthroughyear-end2018.TheVaultpitextensionisexpectedtopartiallybridgetheproductiongapattheMeadowbankminethroughtotheexpectedcommencementofdevelopmentoftheAmaruqproject.
TheMeadowbankmine'sprovenandprobablemineralreserveswereapproximately0.7millionouncesatDecember31,2016.
Canada – Meliadine Mine Project
OnJuly6,2010,AgnicoEagleacquiredits100%interestintheMeliadinemineprojectinNunavut,CanadathroughitsacquisitionofComaplexMineralsCorp.
In2016,internalstudieswerecarriedouttooptimizethepreviousMeliadinemineplanthathadbeenoutlinedinanupdatedNI43-101technicalreportdatedFebruary11,2015.Theseinternalstudiesevaluatedvariousopportunitiestoimprovetheprojecteconomicsandtheafter-taxinternalrateofreturn.Basedontheresultsoftheseinternalstudies,theCompany'sBoardofDirectorsapprovedtheconstructionoftheMeliadinemineproject.Themineisexpectedtobeginoperationsinthethirdquarterof2019,whichisapproximatelyoneyearaheadofthepreviousschedule.Overanestimated14-yearminelife,itisanticipatedthatapproximately5.3millionouncesofgoldwillbeproducedatMeliadine.Thisrepresentsapproximatelyhalfofthecurrentlyknownmineralreserveandmineralresourcebaseforthisproject.
Budgeted2017Meliadinemineprojectcapitalexpendituresof$360.0millionarefocusedonfurtherundergrounddevelopment,conversionandundergrounddelineationdrilling,installationofundergroundventilationandheating,completionofthefuelfarminRankinInlet,completionofthecampcomplex,closinginoftheprocessandpowerplantbuildingsandconstructionofthesecondrampportal.
TheMeliadinemineprojecthadprovenandprobablemineralreservesofapproximately3.4millionouncesatDecember31,2016.
Finland – Kittila Mine
The100%ownedKittilamineinnorthernFinlandwasaddedtotheCompany'sportfoliothroughtheacquisitionofRiddarhyttanResourcesABin2005.ConstructionattheKittilaminewascompletedin2008andcommercialproductionwasachievedinMay2009.
In2017,theCompanywillcontinuetoevaluatetheeconomicsofincreasingthroughputratesatKittila.IncreasingtheminingratecouldpotentiallybesupportedbythedevelopmentoftheRimpiandSisarzones.DrillingisongoingtofurtherevaluatetheSisarzone,wheremineralizationhasnowbeenoutlinedtoadepthof2.0kilometresbelowsurface
ProvenandprobablemineralreservesattheKittilamineamountedtoapproximately4.5millionouncesatDecember31,2016.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 3
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SouthernBusiness
Mexico – Pinos Altos Mine
In2006,theCompanycompletedtheacquisitionofthePinosAltosproperty,thenanadvancedstageexplorationpropertyinnorthernMexico.CommercialproductionwasachievedatthePinosAltosmineinNovember2009.AshaftsinkingprojectwascompletedinJune2016atthePinosAltosmine.Thenewshafthasimprovedthematchingofminingandmillcapacityastheopenpitminingoperationwindsdown.
In2016,drillingatPinosAltossuccessfullyreplacedthemineralreservesthatweremined.In2016,explorationattheCerroColoradoZoneoutlinedadditionalmineralizationontheboundariesofthezone,andfurtherdrillingwillbecarriedoutin2017toevaluatethispotential.
ThePinosAltosmine'sprovenandprobablemineralreserveswereapproximately1.4millionouncesatDecember31,2016.
Mexico – Creston Mascota Deposit at Pinos Altos
The100%ownedCrestonMascotadepositatPinosAltosislocatedapproximatelysevenkilometresnorthwestofthemaindepositatthePinosAltosmineinnorthernMexico.CommercialproductionwasachievedattheCrestonMascotadepositatPinosAltosinMarch2011.TheCompanybelievesthattheMadronoandCubirozonescouldpotentiallyextendthelifeoftheCrestonMascotaheapleachfacility.In2017,additionaldrillingisplannedfortheBravo,MadronoandCubirozonestofurtherdelineateareasthattheCompanybelievesmayhavehighergradeareasthatcouldpotentiallyprovideadditionalfeedtothePinosAltosmill.
Inthefourthquarterof2016,workonthePhase4leachpadwascompletedwithstackingofmaterialexpectedtobegininthefirstquarterof2017.
Provenandprobablemineralreserveswereapproximately0.1millionouncesattheCrestonMascotadepositatPinosAltosatDecember31,2016.
Mexico – La India Mine
AgnicoEaglecompleteditsacquisitionofGraydResourceCorporation("Grayd")onJanuary23,2012.GraydownedtheLaIndiaproject,whichislocatedapproximately70kilometresnorthwestofthePinosAltosmineinnorthernMexico.InSeptember2012,developmentandconstructionoftheLaIndiaminewasapprovedbytheBoardandcommercialproductionwasachievedinFebruary2014.
In2016,additionaldrillingwascarriedoutatLaIndiawithafocusonextendingmineralizationintheMainZoneandtheLaIndiaZoneandconversionofsulfidemineralizationintomineralreservesandmineralresources.Additionally,stepoutdrillingin2016atthenearbyElRealitoprojectalsoyieldedencouragingresults.AdditionalexplorationworkisplannedatElRealitoandtheCerrodeOroareasin2017.GeologicalworkiscontinuingatLosTubostoalsodefinedrilltargetsduring2017.Withtheincreasedmineralreservesandmineralresources,andthepotentialforfutureadditionsatothersatellitezones,studiesareunderwaytolookatpotentialexpansionoptionsattheLaIndiamine.
TheLaIndiamine'sprovenandprobablemineralreserveswereapproximately1.0millionouncesatDecember31,2016.
Mexico – El Barqueno Project
OnNovember28,2014,theCompanyacquiredCaydenResourcesInc.("Cayden")pursuanttoacourt-approvedplanofarrangementundertheBusiness Corporations Act (BritishColumbia).Caydenholdsa100.0%interestintheMorelosSurpropertyaswellasanoptiontoacquirea100%interestintheElBarquenoproperty,bothlocatedinMexico.
AgnicoEaglebelievesthatElBarquenoultimatelyhasthepotentialtobedevelopedintoaseriesofopenpitsutilizingheapleachand/ormillprocessing,similartothePinosAltosmine.ConceptualdesignstudiesandadditionalmetallurgicaltestingareongoingatElBarqueno.Explorationexpendituresin2017areexpectedtototalapproximately$16.8million.
Key Performance Drivers
ThekeydriversoffinancialperformanceforAgnicoEagleinclude:
• Thespotpriceofgold,silver,zincandcopper;
• Productionvolumes;
• Productioncosts;and
• Canadiandollar/USdollar,Mexicanpeso/USdollarandEuro/USdollarexchangerates.
4 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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SpotPriceofGold,Silver,ZincandCopper
GOLD ($ per ounce)
2016 2015 % Change Highprice $1,375 $1,308 5.1%
Lowprice $1,061 $1,046 1.4%
Averageprice $1,248 $1,160 7.6%
Averagepricerealized $1,249 $1,156 8.0%
In2016,theaveragemarketpriceperounceofgoldwas7.6%higherthanin2015.TheCompany'saveragerealizedpriceperounceofgoldin2016was8.0%higherthanin2015.
SILVER ($ per ounce)
2016 2015 % Change Highprice $21.14 $18.23 16.0%
Lowprice $13.75 $13.71 0.3%
Averageprice $17.11 $15.70 9.0%
Averagepricerealized $17.28 $15.63 10.6%
Netby-product(primarilysilver,zincandcopper)revenueistreatedasareductionofproductioncostsincalculatingtotalcashcostsperounceofgoldproducedonaby-productbasisandall-insustainingcostsperounceofgoldproducedona
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 5
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by-productbasis.In2016,theaveragemarketpriceperounceofsilverwas9.0%higherthanin2015.TheCompany'saveragerealizedpriceperounceofsilverin2016was10.6%higherthanin2015.
ZINC ($ per tonne) COPPER ($ per tonne)
AgnicoEagle'saveragerealizedsalespriceyear-over-yearforzincincreasedby9.2%andaveragerealizedsalespricesforcopperyear-over-yeardecreasedby3.9%overthesameperiod.Significantquantitiesofby-productmetalsareproducedbytheLaRondemine(silver,zincandcopper)andthePinosAltosmine(silver).
TheCompanyhasneversoldgoldforward,allowingtheCompanytotakefulladvantageofrisinggoldprices.Managementbelievesthatlowcostproductionisthebestprotectionagainstadecreaseingoldprices.
ProductionVolumesandCosts
ChangesinproductionvolumeshaveadirectimpactontheCompany'sfinancialresults.Totalpayablegoldproductionwas1,662,888ouncesin2016,adecreaseof0.5%comparedwith1,671,340ouncesin2015,primarilyduetodecreasedamountoforeprocessedandlowergoldgradeandmillrecoveryratesattheMeadowbankminein2016comparedto2015anddecreasedgoldgradeattheLapaandLaIndiaminesandtheCrestonMascotadepositatPinosAltos.PartiallyoffsettingtheoveralldecreaseingoldproductionwereincreasedtonnesmilledattheKittilaandCanadianMalarticminesandhighergoldgradeandmillrecoveryratesattheLaRondemine.AgnicoEagle'saveragerealizedgoldpriceincreasedby$93,or8.0%,to$1,249perouncein2016from$1,156perouncein2015.
ProductioncostsarediscussedindetailintheResults of Operations sectionbelow.
ForeignExchangeRates(RatiotoUS$)
TheexchangerateoftheCanadiandollar,MexicanpesoandEurorelativetotheUSdollarisanimportantfinancialdriverfortheCompanyforthefollowingreasons:
• AllrevenuesareearnedinUSdollars;
• AsignificantportionofoperatingcostsattheLaRonde,Lapa,Goldex,MeadowbankandCanadianMalarticminesare,andmineconstructioncostsattheAmaruqdepositandtheMeliadinemineprojectwillbe,incurredinCanadiandollars;
• AsignificantportionofoperatingcostsatthePinosAltosmine,theCrestonMascotadepositatPinosAltosandtheLaIndiamineareincurredinMexicanpesos;and
• AsignificantportionofoperatingcostsattheKittilamineareincurredinEuros.
TheCompanymitigatespartofitsforeigncurrencyexposurebyusingcurrencyhedgingstrategies.
CANADIAN DOLLAR MEXICAN PESO EURO
6 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Onaverage,theCanadiandollar,MexicanpesoandEuroallweakenedrelativetotheUSdollarin2016comparedwith2015,decreasingcostsdenominatedinlocalcurrencieswhentranslatedintoUSdollarsforreportingpurposes.
Balance Sheet Review
TotalassetsatDecember31,2016of$7,108.0millionincreasedcomparedtoDecember31,2015totalassetsof$6,683.2million.Ofthe$424.8millionincreaseintotalassetsbetweenperiods,$415.8millionrelatedtoanincreaseincashandcashequivalentsbetweenperiods.TheDecember31,2014balanceof$6,809.3millionwascomparabletothetotalassetsbalanceasatDecember31,2015.
Cashandcashequivalentswere$540.0millionatDecember31,2016,anincreaseof$415.8millioncomparedwithDecember31,2015primarilyduetocashprovidedbyoperatingactivitiesof$778.6million,theissuanceofthe2016Notes(asdefinedbelow)inanaggregateprincipalamountof$350.0milliononJune30,2016and$192.1millionofproceedsfromtheexerciseofstockoptions,partiallyoffsetby$516.1millionincapitalexpenditures,anet$280.3millionrepaymentoflong-termdebtand$71.4millionindividendspaidduring2016.
Currentinventorybalancesdecreasedby$18.3millionfrom$462.0millionatDecember31,2015to$443.7millionatDecember31,2016primarilyduetoplannedpartsinventorydrawdownsattheMeadowbankmine.Non-currentoreinstockpilesandonleachpadsatDecember31,2016of$62.8millionwerecomparablewithDecember31,2015non-currentoreinstockpilesandonleachpadsof$61.2million.
Available-for-salesecuritiesincreasedfrom$31.9millionatDecember31,2015to$92.3millionatDecember31,2016primarilydueto$29.6millioninnewinvestmentsin2016and$33.2millioninunrealizedfairvaluegains,partiallyoffsetby$2.4millionindispositionsduring2016.
Property,plantandminedevelopmentincreasedby$17.1millionto$5,106.0millionatDecember31,2016comparedwithDecember31,2015primarilyduetoa$516.1millionincreaserelatedtocapitalexpendituresduring2016anda$120.2millionincreaseduetoimpairmentreversalsattheMeadowbankmineandMeliadinemineproject.Thisincreasewaspartiallyoffsetbyamortizationexpenseof$613.2millionduring2016.
Totalliabilitiesincreasedto$2,615.5millionatDecember31,2016from$2,542.2millionatDecember31,2015primarilyduetoa$70.0millionnetincreaseinlong-termdebtanda$21.0millionincreaseinincometaxespayable.Ofthetotal$198.6milliondecreaseintotalliabilitiesbetweentheDecember31,2014balanceof$2,740.8millionandtheDecember31,2015balanceof$2,542.2million,$235.0millionrelatedtoanetrepaymentundertheCompany's$1.2billionunsecuredrevolvingcreditfacility(the"CreditFacility"),whichwaspartiallyoffsetbyincreasesinaccountspayable,accruedliabilitiesandreclamationprovisionsduring2015.
Accountspayableandaccruedliabilitiesdecreasedby$15.2millionbetweenDecember31,2015andDecember31,2016primarilyduetoa$12.3millionsecuritiesclassactionlawsuitsettlementagreementthatwaspaidbytheCompany'sinsurers.
Incometaxespayableincreasedby$21.0millionbetweenDecember31,2015andDecember31,2016asthecurrenttaxexpenseexceededpaymentstotaxauthorities.
Long-termdebtincreasedby$70.0millionbetweenDecember31,2015andDecember31,2016primarilyduetotheissuanceofthe2016Notes,partiallyoffsetby$265.0millioninnetCreditFacilityrepayments.
AgnicoEagle'sreclamationprovisiondecreasedby$8.0millionbetweenDecember31,2015andDecember31,2016primarilyduetothere-measurementoftheCompany'sreclamationprovisionsbyapplyingupdatedexpectedcashflowsandassumptionsasatDecember31,2016.
Deferredincomeandminingtaxliabilitiesincreasedby$17.4millionbetweenDecember31,2015andDecember31,2016primarilyduetothegainonimpairmentreversalof$37.2millionrecordedattheMeadowbankmineand$83.0millionattheMeliadinemineproject,withatotalimpactof$39.0millionondeferredincomeandminingtaxes.
FairValueofDerivativeFinancialInstruments
TheCompanyoccasionallyentersintocontractstolimittheriskassociatedwithdecreasedby-productmetalprices,increasedforeigncurrencycosts(includingcapitalexpenditures)andinputcosts.Thecontractsactaseconomichedgesofunderlyingexposuresandarenotheldforspeculativepurposes.AgnicoEagledoesnotusecomplexderivativecontractstohedgeexposures.ThefairvalueoftheCompany'sderivativefinancialinstrumentsisoutlinedinthefinancialinstrumentsnotetotheCompany'sannualconsolidatedfinancialstatements.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 7
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Results of Operations
AgnicoEaglereportednetincomeof$158.8million,or$0.71pershare,in2016comparedwithnetincomeof$24.6million,or$0.11pershare,in2015.In2014,theCompanyreportednetincomeof$83.0million,or$0.43pershare.AgnicoEaglereportedbasicadjustednetincomeof$109.5million,or$0.49pershare,in2016comparedwithbasicadjustednetincomeof$73.5million,or$0.34pershare,in2015.In2014,theCompanyreportedbasicadjustednetincomeof$124.2million,or$0.64pershare.In2016,operatingmargin(revenuesfromminingoperationslessproductioncosts)increasedto$1,106.3millionfrom$990.1millionin2015.In2014,operatingmarginwas$892.2million.
RevenuesfromMiningOperations
Revenuesfromminingoperationsincreasedby$152.8million,or7.7%,to$2,138.2millionin2016from$1,985.4millionin2015primarilyduetohighersalespricesrealizedongoldandsilver,aswellasincreasedsilverproduction,partiallyoffsetbylowergoldproductionandsales.Revenuesfromminingoperationswere$1,896.8millionin2014.
RevenuesfromtheNorthernBusinessincreasedby$95.0million,or6.2%,to$1,638.4millionin2016from$1,543.4millionin2015,primarilyduetohighersalespricesrealizedongoldandsilver,partiallyoffsetbylowergoldproductionandsales.RevenuesfromtheSouthernBusinessincreasedby$57.8million,or13.1%,to$499.9millionin2016from$442.1millionin2015,primarilyduetothehigherrealizedsalespricesnotedabove.RevenuesfromtheNorthernBusinesswere$1,491.9million,andrevenuesfromtheSouthernBusinesswere$404.9millionin2014.
Salesofpreciousmetals(goldandsilver)accountedfor99.9%ofrevenuesfromminingoperationsin2016,upfrom99.7%in2015and98.6%in2014.Theincreaseinthepercentageofrevenuesfrompreciousmetalscomparedwith2015isprimarilyduetohighersalespricesrealizedongoldandsilver,aswellasincreasedsilverproduction,partiallyoffsetbylowergoldproductionandsales.Revenuesfromminingoperationsareaccountedfornetofrelatedsmelting,refining,transportationandothercharges.
8 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Thetablebelowsetsoutrevenuesfromminingoperations,productionvolumesandsalesvolumesbymetal:
2016 2015 2014
(thousands of United States dollars) Revenuesfromminingoperations:
Gold $ 2,049,871 $ 1,911,500 $ 1,807,927
Silver 85,096 66,991 62,466
Zinc 1,413 505 9,901
Copper 1,852 6,436 16,479
Lead(i) – – (7)
Totalrevenuesfromminingoperations $ 2,138,232 $ 1,985,432 $ 1,896,766
Payableproduction(ii):
Gold(ounces) 1,662,888 1,671,340 1,429,288
Silver(thousandsofounces) 4,759 4,258 3,564
Zinc(tonnes) 4,687 3,501 10,515
Copper(tonnes) 4,416 4,941 4,997
Payablemetalsold:
Gold(ounces) 1,630,865 1,645,081 1,425,338
Silver(thousandsofounces) 4,761 4,184 3,633
Zinc(tonnes) 3,554 3,596 10,535
Copper(tonnes) 4,522 4,947 5,003
Notes:
(i) Leadconcentraterevenuesofnilin2016(2015–nil;2014–$0.1million)arenettedagainstdirectfeesofnil(2015–nil;2014–$0.1million).Othermetalrevenuesderivedfromleadconcentrateareincludedintheirrespectivemetalcategoriesintheabovetable.
(ii) Payableproduction(anon-GAAP,non-financialperformancemeasure)isthequantityofmineralproducedduringaperiodcontainedinproductsthatareorwillbesoldbytheCompany,whethersuchproductsaresoldduringtheperiodorheldasinventoriesattheendoftheperiod.
Revenuesfromgoldincreasedby$138.4millionor7.2%in2016comparedwith2015primarilyduetoan8.0%increaseintheCompany'saveragerealizedgoldpriceperounceto$1,249in2016comparedto$1,156in2015.Thisincreasewaspartiallyoffsetbya0.8%decreaseofgoldsalesto1,630,865ouncesin2016comparedto1,645,081ouncesin2015primarilyduetolowerproductionandsalesattheMeadowbankandLapamines.
Revenuesfromsilverincreasedby$18.1millionor27.0%in2016comparedwith2015primarilyduetoa13.8%increaseinsilversales.AgnicoEagle'saveragerealizedsilverpriceperounceincreasedby10.6%to$17.28in2016from$15.63in2015.Revenuesfromzincincreasedby$0.9millionor179.8%to$1.4millionin2016comparedwith$0.5millionin2015primarilyduetoa9.2%increaseintherealizedzincpricebetweenperiods,aswellaslowerdirectcostsassociatedwithzincsales.Revenuesfromcopperdecreasedby$4.6millionor71.2%in2016comparedwith2015primarilyduetoa3.9%declineintherealizedcopperpriceandan8.6%decreaseintonnessold.
ProductionCosts
Productioncostsincreasedto$1,031.9millionin2016comparedwith$995.3millionin2015primarilyduetohigherproductionexpensesattheCanadianMalartic,KittilaandPinosAltosmines.PartiallyoffsettingtheoverallincreasewastheimpactofaweakerCanadiandollarandMexicanpesorelativetotheUSdollar.Productioncostswere$1,004.6millionin2014.
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Thetablebelowsetsoutproductioncostsbymine:
2016 2015 2014
(thousands of United States dollars) LaRondemine $ 179,496 $ 172,283 $ 188,736
Lapamine 52,974 52,571 61,056
Goldexmine 63,310 61,278 64,836
Meadowbankmine 218,963 230,564 270,824
CanadianMalarticmine(attributable50.0%) 183,635 171,473 113,916
Kittilamine 141,871 126,095 116,893
PinosAltosmine 114,557 105,175 123,342
CrestonMascotadepositatPinosAltos 27,341 26,278 28,007
LaIndiamine 49,745 49,578 36,949
Totalproductioncosts $ 1,031,892 $ 995,295 $ 1,004,559
Thediscussionofproductioncostsbelowrefersto"totalcashcostsperounceofgoldproduced"and"minesitecostspertonne",neitherofwhicharerecognizedmeasuresunderIFRS.ForareconciliationofthesemeasurestoproductioncostsandadiscussionoftheirusebytheCompany,seeNon-GAAP Financial Performance Measures inthisMD&A.
ProductioncostsattheLaRondeminewere$179.5millionin2016,a4.2%increasecomparedwith2015productioncostsof$172.3millionprimarilyduetoincreasedundergroundandmillmaintenancecostsandadecreaseininventory.During2016,theLaRondemineprocessedanaverageof6,121tonnesoforeperdaycomparedwith6,141tonnesoforeperdayduring2015.ProductioncostspertonneincreasedtoC$106in2016comparedwithC$98in2015duetothesamefactorsasnotedabove.MinesitecostspertonneincreasedtoC$106in2016comparedwithC$99in2015duetothesamefactorsasnotedabove,otherthantheinventoryadjustment.
ProductioncostsattheLapaminewere$53.0millionin2016,a0.8%increasecomparedwith2015productioncostsof$52.6million.During2016,theLapamineprocessedanaverageof1,619tonnesoforeperdaycomparedwith1,534tonnesoforeperdayprocessedduring2015.Theincreaseinthroughputbetweenperiodswasduetotheprocessingoflowergradeorefromnewzonespreviouslyexcludedfromthemineplan.ProductioncostspertonnedecreasedtoC$118in2016comparedwithC$119in2015duetohigherthroughputlevelsandanincreaseininventory.MinesitecostspertonneincreasedtoC$121in2016comparedwithC$117in2015primarilyduetothehighercostsassociatedwithdevelopmentworkinnewzones,otherthantheinventoryadjustment.
ProductioncostsattheGoldexminewere$63.3millionin2016,a3.3%increasecomparedwith2015productioncostsof$61.3millionprimarilyduetoincreasedthroughput.During2016,theGoldexmineprocessedanaverageof6,954tonnesoforeperdaycomparedwith6,336tonnesoforeperdayprocessedduring2015.Theincreaseinthroughputbetweenperiodswasprimarilyduetobetterundergroundminingandmillingperformance.ProductioncostspertonnedecreasedtoC$33in2016comparedwithC$34in2015duetohigherthroughputlevelsandanincreaseininventory.MinesitecostspertonneremainedunchangedatC$33between2015and2016.
ProductioncostsattheMeadowbankminewere$219.0millionin2016,a5.0%decreasecomparedwith2015productioncostsof$230.6millionprimarilyduetolowerthroughput,aloweramountofstrippingcostsbeingcapitalizedandanincreaseininventory.During2016,theMeadowbankmineprocessedanaverageof10,697tonnesoforeperdaycomparedwith11,049tonnesoforeperdayprocessedduring2015.ThedecreaseinthroughputbetweenperiodswasprimarilyduetoharderorebeingprocessedfromtheVaultpit.ProductioncostspertonneincreasedtoC$73in2016comparedwithC$71in2015duetothedecreaseintonnageprocessed.MinesitecostspertonneincreasedtoC$74in2016comparedwithC$70in2015duetothefactorsnotedabove,otherthantheinventoryadjustment.
AttributableproductioncostsattheCanadianMalarticminewere$183.6millionin2016,a7.1%increasecomparedwith2015productioncostsof$171.5millionprimarilyduetoincreasedthroughputandhighercontractorcosts.During2016,theCanadianMalarticmineprocessedanaverageof26,833tonnesoforeperdayattributabletotheCompanycomparedwith26,150tonnesoforeperdayprocessedin2015.Theincreaseinthroughputbetweenperiodswasprimarilyduetoimproved
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crusherperformance.ProductioncostspertonneincreasedtoC$25in2016comparedwithC$23in2015duetounplannedmaintenanceontheleachtank,ballmillandcrushercomponentsintheprocessplantandadditionalstrippingcosts.MinesitecostspertonneincreasedtoC$25in2016comparedwithC$23in2015primarilyduetothesamefactorsnotedabove.
ProductioncostsattheKittilaminewere$141.9millionin2016,anincreaseof12.5%comparedwith2015productioncostsof$126.1millionprimarilyduetoincreasedthroughputandhighercontractorandmillmaintenancecosts.During2016,theKittilamineprocessedanaverageof4,554tonnesoforeperday,anincreaseof13.5%comparedwiththe4,011tonnesoforeperdayprocessedduring2015primarilyduetoadditionalminedevelopmentleadingtoimprovedoreaccessandstrongminingproductivity.Productioncostspertonneremainedthesameat€77between2015and2016.Minesitecostspertonneincreasedslightlyto€77in2016comparedwith€76in2015.
ProductioncostsatthePinosAltosminewere$114.6millionin2016,anincreaseof8.9%comparedwith2015productioncostsof$105.2millionprimarilyduetohigherconsumablecosts,variationsintheproportionofheapleachoretomilledore,variationsintheopenpitoretoundergroundore,fluctuationsinthewastetoorestrippingratiointheopenpitminesandadecreaseininventory,partiallyoffsetbyaweakerMexicanpesorelativetotheUSdollarbetweenperiods.During2016,thePinosAltosminemillprocessedanaverageof5,415tonnesoforeperday,adecreaseof0.9%comparedwiththe5,462tonnesoforeperdayprocessedduring2015.In2016,approximately278,100tonnesoforewerestackedonthePinosAltosmineleachpad,adecreaseof27.7%comparedwiththeapproximately384,700tonnesoforestackedin2015,primarilyduetominesequencing.Productioncostspertonneincreasedto$51in2016comparedwith$44in2015duetolowerthroughputandtheincreasedcostfactorsnotedabove.Minesitecostspertonneincreasedto$49in2016comparedwith$45in2015primarilyduetothesamefactorsnotedabove,otherthantheinventoryadjustment.
ProductioncostsattheCrestonMascotadepositatPinosAltoswere$27.3millionin2016,anincreaseof4.0%comparedwith2015productioncostsof$26.3millionprimarilyduetohigherre-handlingcosts,partiallyoffsetbyaweakerMexicanpesorelativetotheUSdollarbetweenperiods.During2016,approximately2,119,200tonnesoforewerestackedontheleachpadattheCrestonMascotadepositatPinosAltos,anincreaseof1.0%comparedwiththeapproximate2,098,800tonnesoforestackedin2015.Productioncostspertonneremainedunchangedat$13between2015and2016.Minesitecostspertonneincreasedslightlyto$13in2016comparedwith$12in2015.
ProductioncostsattheLaIndiaminewere$49.7millionin2016,anincreaseof0.3%comparedwith2015productioncostsof$49.6million.During2016,theLaIndiaminestackedapproximately5,837,400tonnesoforeontheleachpad,anincreaseof8.7%comparedwiththeapproximate5,371,400tonnesoforestackedin2015primarilyduetounexpectedadditionalorefoundinareaspreviouslythoughttohavecontainedwaste.Productioncostspertonneremainedunchangedat$9between2015and2016.Minesitecostspertonneremainedunchangedat$9between2015and2016.
Total Production Costs by Category
TotalcashcostsperounceofgoldproducedispresentedinthisMD&Aonbothaby-productbasis(deductingby-productmetalrevenuesfromproductioncosts)andco-productbasis(beforedeductingby-productmetalrevenues).Totalcashcostsperounceofgoldproducedonaby-productbasisiscalculatedbyadjustingproductioncostsasrecordedintheconsolidatedstatementsofincomeandcomprehensiveincomeforby-productrevenues,inventoryproductioncosts,smelting,refining
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andmarketingchargesandotheradjustments,andthendividingbythenumberofouncesofgoldproduced.Totalcashcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerastotalcashcostsperounceofgoldproducedonaby-productbasisexceptthatnoadjustmentforby-productmetalrevenuesismade.Accordingly,thecalculationoftotalcashcostsperounceofgoldproducedonaco-productbasisdoesnotreflectareductioninproductioncostsorsmelting,refiningandmarketingchargesassociatedwiththeproductionandsaleofby-productmetals.
Totalproductioncostsperounceofgoldproduced,representingtheweightedaverageofalloftheCompany'sproducingmines,increasedto$621in2016comparedwith$596in2015anddecreasedfrom$705in2014.Totalcashcostsperounceofgoldproducedonaby-productbasisincreasedto$573in2016comparedwith$567in2015anddecreasedfrom$637in2014.Totalcashcostsperounceofgoldproducedonaco-productbasisincreasedto$643in2016comparedwith$626in2015anddecreasedfrom$721in2014.SetoutbelowisananalysisofthechangeintotalproductioncostsperounceandtotalcashcostsperounceateachoftheCompany'sminingoperations:
• AttheLaRondemine,totalproductioncostsperounceofgoldproduceddecreasedto$587in2016comparedwith$643in2015primarilyduetoa14.1%increaseingoldproduction.Totalcashcostsperounceofgoldproducedonaby-productbasisdecreasedto$501in2016comparedwith$590in2015primarilyduetotheincreaseingoldproductionnotedaboveandhigherby-productrevenues.Totalcashcostsperounceofgoldproducedonaco-productbasisdecreasedto$668in2016comparedwith$760in2015,reflectingtheincreaseingoldproductionnotedabove.
• AttheLapamine,totalproductioncostsperounceofgoldproducedincreasedto$717in2016comparedwith$578in2015duetolowerproductionandhighercostsassociatedwithdevelopmentworkinthenewzonesthatwerepreviouslyexcludedfromthemineplan.Totalcashcostsperounceofgoldproducedonaby-productbasisincreasedto$732in2016comparedwith$590in2015duetothesamefactorsnotedabove.Totalcashcostsperounceofgoldproducedonaco-productbasisincreasedto$732in2016comparedwith$591in2015duetothesamefactorsasnotedabove.
• AttheGoldexmine,totalproductioncostsperounceofgoldproduceddecreasedto$525in2016comparedwith$531in2015duetoa4.6%increaseingoldproductionandanincreaseininventory.Totalcashcostsperounceofgoldproducedonaby-productbasisdecreasedto$532in2016comparedwith$538in2015duetotheincreaseingoldproductionnotedabove.Totalcashcostsperounceofgoldproducedonaco-productbasisdecreasedto$532in2016comparedwith$538in2015duetothesamefactorsasnotedabove,otherthantheinventoryadjustment.
• AttheMeadowbankmine,totalproductioncostsperounceofgoldproducedincreasedto$701in2016comparedwith$604in2015duetoan18.2%decreaseinproduction,aloweramountofstrippingcostsbeingcapitalizedandadecreaseininventory.Totalcashcostsperounceofgoldproducedonaby-productbasisincreasedto$715in2016comparedwith$613in2015duetothesamefactorsnotedabove,otherthantheinventoryadjustment.Totalcashcostsperounceofgoldproducedonaco-productbasisincreasedto$727in2016comparedwith$623in2015duetothesamefactorsasnotedabove,otherthantheinventoryadjustment.
• AttheCanadianMalarticmine,totalproductioncostsperounceofgoldproducedincreasedto$628in2016comparedwith$600in2015duetounplannedmaintenanceontheleachtank,ballmillandcrushercomponentsintheprocessplantandadditionalstrippingcosts.Totalcashcostsperounceofgoldproducedonaby-productbasisincreasedto$606in2016comparedwith$596during2015asaresultofthesamefactorsnotedabove.Totalcashcostsperounceofgoldproducedonaco-productbasisincreasedto$626in2016comparedwith$613during2015asaresultofthesamefactorsasnotedabove.
• AttheKittilamine,totalproductioncostsperounceofgoldproduceddecreasedto$701in2016comparedwith$711in2015duetoa14.2%increaseingoldproductionandanincreaseininventory.Totalcashcostsperounceofgoldproducedonaby-productbasisdecreasedto$699in2016comparedwith$709in2015duetothesamefactorsasnotedabove,otherthantheinventoryadjustment.Totalcashcostsperounceofgoldproducedonaco-productbasisdecreasedto$700in2016comparedwith$710in2015duetothesamefactorsasnotedabove,otherthantheinventoryadjustment.
• AtthePinosAltosmine,totalproductioncostsperounceofgoldproducedincreasedto$594in2016comparedwith$545in2015duetohigherconsumablecosts,variationsintheproportionofheapleachoretomilledore,variationsinopenpitoretoundergroundore,fluctuationsinthewastetoorestrippingratioandadecreaseininventory.Totalcashcostsperounceofgoldproducedonaby-productbasisdecreasedto$356in2016comparedwith$387in2015.Thisdecreasewasprimarilyduetoincreasedby-productrevenueduetohighersilverpricesandaweakerMexicanpesorelativetotheUSdollarbetweenperiods.Totalcashcostsperounceofgoldproducedonaco-productbasis
12 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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increasedto$585in2016comparedwith$578in2015duetothesamefactorsasnotedabove,otherthanby-productrevenueandtheinventoryadjustment.
• AttheCrestonMascotadepositatPinosAltos,totalproductioncostsperounceofgoldproducedincreasedto$578in2016comparedto$480in2015duetoa13.5%decreaseingoldproductionandadecreaseininventory.Totalcashcostsperounceofgoldproducedonaby-productbasisincreasedto$516in2016comparedwith$430in2015.Thisincreasewasprimarilyduetothedecreaseingoldproductionnotedabove,partiallyoffsetbyaweakerMexicanpesorelativetotheUSdollarbetweenperiods,otherthantheinventoryadjustment.Totalcashcostsperounceofgoldproducedonaco-productbasisincreasedto$588in2016comparedwith$474in2015duetothesamefactorsasnotedabove,otherthantheinventoryadjustment.
• AttheLaIndiamine,totalproductioncostsperounceofgoldproduceddecreasedto$432in2016comparedwith$475in2015duetoa10.3%increaseingoldproductionandanincreaseininventory.Totalcashcostsperounceofgoldproducedonaby-productbasisdecreasedto$395in2016comparedwith$436in2015.ThisdecreasewasprimarilyduetheincreaseingoldproductionnotedaboveandaweakerMexicanpesorelativetotheUSdollarbetweenperiods,otherthantheinventoryadjustment.Totalcashcostsperounceofgoldproducedonaco-productbasisdecreasedto$468in2016comparedwith$475in2015duetothesamefactorsasnotedabove,otherthantheinventoryadjustment.
ExplorationandCorporateDevelopmentExpense
Explorationandcorporatedevelopmentexpenseincreasedby33.2%to$147.0millionin2016from$110.4millionin2015.Explorationandcorporatedevelopmentexpensewas$56.0millionin2014.
AsummaryoftheCompany'ssignificant2016explorationandcorporatedevelopmentactivitiesissetoutbelow:
• InCanada,explorationexpensesincreasedby71.2%to$96.0millionin2016comparedwith2015primarilyduetoincreasedexplorationattheAmaruqprojectlocated50kilometresnorthwestoftheMeadowbankmineinNunavut.
• Explorationexpensesdecreasedby18.3%to$20.8millioninLatinAmericacomparedwith2015primarilyduetodecreasedexplorationattheElBarquenoandMorelosSurprojectsinMexico.
• Explorationexpensesdecreasedby31.1%to$2.5millionintheUnitedStatesandincreasedby49.0%to$5.9millioninEuropein2016comparedwith2015.
• Corporatedevelopmentandprojectevaluationexpensesincreasedby2.7%to$21.7millionin2016comparedwith2015primarilyduetoincreasedprojectevaluationexpensesattheMinasChaparralprojectinMexico.
Thetablebelowsetsoutexplorationexpensebyregionandtotalcorporatedevelopmentexpense:
2016 2015 2014 (thousands of United States dollars) Canada $ 96,026 $ 56,099 $ 27,773
LatinAmerica 20,812 25,483 8,006
UnitedStates 2,525 3,666 2,615
Europe 5,877 3,943 5,044
Corporatedevelopmentexpense 21,738 21,162 12,564
Totalexplorationandcorporatedevelopmentexpense $ 146,978 $ 110,353 $ 56,002
AmortizationofProperty,PlantandMineDevelopment
Amortizationofproperty,plantandminedevelopmentexpenseincreasedto$613.2millionin2016comparedwith$608.6millionin2015and$433.6millionin2014.Theincreaseinamortizationofproperty,plantandminedevelopmentbetween2015and2016wasprimarilyduetotheincreasedamortizationatthePinosAltosmineasaresultoftheshaftgoingintocommercialproductioninJulyof2016andincreasedtonnageattheKittilamine,partiallyoffsetbylowerdepreciationattheGoldexandLaIndiaminesduetoreserveincreasesasatDecember31,2015.Amortizationexpensecommencesonceoperationsareincommercialproduction.
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GeneralandAdministrativeExpense
Generalandadministrativeexpenseswere$102.8millionin2016,whichwerecomparabletogeneralandadministrativeexpensesof$97.0millionin2015.Generalandadministrativeexpenseswere$118.8millionin2014.
ImpairmentLossonAvailable-for-saleSecurities
Impairmentlossonavailable-for-salesecuritieswasnilin2016comparedwith$12.0millionin2015and$15.8millionin2014.Impairmentlossevaluationsofavailable-for-salesecuritiesarebasedonwhetheradeclineinfairvalueisconsideredtobesignificantorprolonged.
FinanceCosts
Financecostsdecreasedto$74.6millionin2016comparedwith$75.2millionin2015and$73.4millionin2014.Thetablebelowsetsoutthecomponentsoffinancecosts:
2016 2015 2014 (thousands of United States dollars) Stand-byfeesoncreditfacilities $ 5,387 $ 4,025 $ 4,605
Amortizationofcreditfacilities,financingandnoteissuancecosts 2,470 2,437 2,757
InterestonCreditFacility 3,102 8,892 7,499
Interestonnotes 60,044 49,937 49,414
Accretionexpenseonreclamationprovisions 3,832 4,164 5,173
Otherinterestandpenalties 2,871 7,476 5,651
Interestcapitalizedtoconstructioninprogress (3,065) (1,703) (1,706)
Totalfinancecosts $ 74,641 $ 75,228 $ 73,393
SeeLiquidity and Capital Resources – Financing Activities inthisMD&AfordetailsontheCreditFacilityandnotesreferencedabove.
GainonImpairmentReversal
AttheendofeachreportingperiodtheCompanyassesseswhetherthereisanyindicationthatanimpairmentlossrecognizedinpriorperiodsforanassetotherthangoodwillmaynolongerexistormayhavedecreased.Ifanindicatorofimpairmentreversalexists,therecoverableamountoftheassetiscalculatedinordertodetermineifanyimpairmentreversalisrequired.Againonimpairmentreversalisrecognizedforanyexcessoftherecoverableamountoftheassetoveritscarryingamount.Thecarryingamountofanassetisnotincreasedabovethelowerofitsrecoverableamountandthecarryingamountthatwouldhavebeendeterminednetofamortizationhadnoimpairmentlossbeenrecognizedinpriorperiods.
AsatDecember31,2016,theCompanyidentifiedindicatorsofpotentialimpairmentreversalfortheCompany'sMeadowbankmineandMeliadinemineproject.Asaresultoftheidentificationoftheseindicators,theCompanyestimatedtherecoverableamountsoftheMeadowbankmineandMeliadinemineprojectcashgeneratingunitsandconcludedtherecoverableamountsexceededthecarryingamounts.TheCompanyrecordedagainonimpairmentreversalof$37.2millionattheMeadowbankmineand$83.0millionattheMeliadinemineproject(refertonote22intheCompany'sannualconsolidatedfinancialstatementsforadditionaldetails).
Adiscountedcashflowapproachwasusedtoestimatefairvaluelesscostsofdisposal,whichrepresentstherecoverableamountofproperty,plantandminedevelopmentassetsthatwasusedtodeterminetheimpairmentreversalamounts.ThetotalgainonimpairmentreversalrecordedduringtheyearendedDecember31,2016was$120.2million.
AttheendofeachreportingperiodtheCompanyalsoassesseswhetherthereisanyindicationthatlong-livedassetsmaybeimpaired.Ifanindicatorofimpairmentexists,therecoverableamountoftheassetiscalculatedinordertodetermineifanyimpairmentlossisrequired.Animpairmentlossisrecognizedforanyexcessofthecarryingamountoftheassetoveritsrecoverableamount.Therecoverableamountsarebasedoneachasset'sfuturecashflowsandrepresentseachasset'sfairvaluelesscostsofdisposal.
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BasedonassessmentscompletedbytheCompany,noimpairmentlosseswererequiredin2016,2015or2014.
Management'sestimatesoffuturenetcashflowsaresubjecttoriskanduncertainties.Therefore,itisreasonablypossiblethatchangescouldoccurwhichmayaffecttherecoverabilityoftheCompany'slong-livedassetsandgoodwill.ThismayhaveamaterialeffectontheCompany'sfutureconsolidatedfinancialstatements.
ForeignCurrencyTranslationLoss(Gain)
TheCompany'soperatingresultsandcashflowaresignificantlyaffectedbychangesintheexchangeratebetweentheUSdollarandeachoftheCanadiandollar,MexicanpesoandEuroasalloftheCompany'srevenuesareearnedinUSdollarswhileasignificantportionofitsoperatingandcapitalcostsareincurredinsuchothercurrencies.DuringtheperiodfromJanuary1,2015throughDecember31,2016,thedailyUSdollar(noon)exchangerateasreportedbytheBankofCanadahasfluctuatedbetweenC$1.17andC$1.46,14.57Mexicanpesosand20.83Mexicanpesosand€0.83and€0.96perUS$1.00.
Aforeigncurrencytranslationlossof$13.2millionwasrecordedin2016comparedwithaforeigncurrencytranslationgainof$4.7millionin2015andaforeigncurrencytranslationlossof$3.8millionin2014.Onaverage,theUSdollarstrengthenedagainsttheCanadiandollar,MexicanpesoandEuroin2016comparedwith2015.TheUSdollaralsostrengthenedagainsttheMexicanpesoandEuroandweakenedagainsttheCanadiandollaronDecember31,2016,comparedtoDecember31,2015.Thenetforeigncurrencytranslationlossin2016wasprimarilyduetothetranslationimpactofmonetaryassetsdenominatedinMexicanpesosandEurosandmonetaryliabilitiesdenominatedinCanadiandollars,offsetpartiallybythetranslationimpactofmonetaryliabilitiesdenominatedinMexicanpesosandEurosandmonetaryassetsdenominatedinCanadiandollars.
IncomeandMiningTaxesExpense
In2016,theCompanyrecordedincomeandminingtaxesexpenseof$109.6milliononincomebeforeincomeandminingtaxesof$268.5millionataneffectivetaxrateof40.8%.In2015,theCompanyrecordedincomeandminingtaxesexpenseof$58.0milliononincomebeforeincomeandminingtaxesof$82.6millionataneffectivetaxrateof70.2%.TheCompany's2016and2015effectivetaxrateswerehigherthantheapplicablestatutorytaxrateof26.0%primarilyduetotheimpactofminingtaxes,foreignexchangeandnon-deductibleexpenses.In2014,theCompanyrecordedincomeandminingtaxesexpenseof$106.2milliononincomebeforeincomeandminingtaxesof$189.1millionataneffectivetaxrateof56.1%.
Liquidity and Capital Resources
AsatDecember31,2016,theCompany'scashandcashequivalents,short-terminvestmentsandcurrentrestrictedcashtotaled$548.8millioncomparedwith$132.3millionatDecember31,2015.TheCompany'spolicyistoinvestexcesscashinhighlyliquidinvestmentsofthehighestcreditqualitytoreducerisksassociatedwiththeseinvestments.Suchinvestmentswithremainingmaturitiesofgreaterthanthreemonthsandlessthanoneyearatthetimeofpurchaseareclassifiedasshort-terminvestments.Decisionsregardingthelengthofmaturitiesarebasedoncashflowrequirements,ratesofreturnandvariousotherfactors.
Workingcapital(currentassetslesscurrentliabilities)increasedto$806.6millionatDecember31,2016comparedwith$517.9millionatDecember31,2015.
OperatingActivities
Cashprovidedbyoperatingactivitiesincreasedby$162.4millionto$778.6millionin2016comparedwith2015.Theincreaseincashprovidedbyoperatingactivitieswasprimarilyduetoincreasesintheaveragerealizedpriceofgold,theimpactoncostsofaweakerCanadiandollarrelativetotheUSdollarandmorefavourableworkingcapitalchangesbetweenperiods.Partiallyoffsettingthesepositiveimpactsoncashprovidedbyoperatingactivitieswasa$36.6millionincreaseinexplorationandcorporatedevelopmentexpensesbetween2015and2016.Cashprovidedbyoperatingactivitieswas$668.3millionin2014,$52.1millionhigherthanin2015primarilyduetohigheraveragerealizedpricesofallmetalsin2014comparedwith2015.
InvestingActivities
Cashusedininvestingactivitiesincreasedto$553.5millionin2016from$374.5millionin2015.Theincreaseincashusedininvestingactivitiesbetweenperiodswasprimarilyduetoa$66.3millionincreaseincapitalexpenditures,a$51.6milliondecreaseinnetproceedsfromthesaleofavailable-for-salesecuritiesandotherinvestmentsanda$14.0millionincreaseinpurchasesofavailable-for-salesecuritiesandotherinvestments.Cashusedininvestingactivitieswas$851.6millionin2014,
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includingcapitalexpendituresof$475.4millionand$403.5millioninnetcashexpendituresassociatedwiththeCompany'sjointacquisitionofOsisko,partiallyoffsetby$44.7millioninnetproceedsfromthesaleofavailable-for-salesecuritiesandwarrants.
In2016,theCompanyinvestedcashof$516.1millioninprojectsandsustainingcapitalexpenditurescomparedwith$449.8millionin2015.Capitalexpendituresin2016included$116.1millionattheMeliadinemineproject,$78.4millionattheGoldexmine,$75.9millionattheKittilamine,$64.3millionattheLaRondemine,$60.4millionattheCanadianMalarticmine(theCompany'sattributableportion),$59.6millionatthePinosAltosmine,$38.3millionattheMeadowbankmine,$10.5millionattheLaIndiamine,$9.3millionattheCrestonMascotadepositatPinosAltosand$3.3millionatotherprojects.The$66.3millionincreaseincapitalexpendituresbetween2015and2016wasprimarilyduetosignificantexpendituresthatwereincurredin2016relatingtothedevelopmentoftheMeliadinemineproject,includingthepurchaseoflongleadtimeequipmentandmaterialtopreparefortheupcomingbargeseason.
OnMarch8,2017,theCompanycompletedthepurchaseof38,100,000commonsharesofGoldQuestMiningCorporation("GoldQuest")pursuanttoaprivateplacement.TheCompanypaidC$0.60perGoldQuestcommonshare,fortotalconsiderationofapproximatelyC$22.9million.Upontheclosingofthetransaction,AgnicoEagleheldapproximately15.0%oftheissuedandoutstandingcommonsharesofGoldQuestonanon-dilutedbasis.
OnFebruary28,2017,theCompanycompletedthepurchaseof14,420,000commonsharesofOtisGoldCorporation("Otis")pursuanttoaprivateplacement.TheCompanypaidC$0.35perOtiscommonshare,fortotalconsiderationofapproximatelyC$5.0million.Upontheclosingofthetransaction,AgnicoEagleheldapproximately9.95%oftheissuedandoutstandingcommonsharesofOtisonanon-dilutedbasis.
OnDecember22,2016,theCompanysubscribedfor22,500,000commonsharesofCartierResourcesInc.("Cartier")inanon-brokeredprivateplacementatapriceofC$0.20perCartiercommonshare,fortotalcashconsiderationofC$4.5million.Uponclosingthetransaction,theCompanyheldapproximately19.97%oftheissuedandoutstandingcommonsharesofCartieronanon-dilutedbasis.OnMarch20,2017,theCompanysubscribedforanadditional3,365,369commonsharesofCartierfortotalproceedsofapproximatelyC$0.6million.Uponclosingthetransaction,theCompanyheldapproximately19.85%oftheissuedandoutstandingcommonsharesofCartieronanon-dilutedbasis.
OnDecember13,2016,theCompanysubscribedfor12,100,000commonsharesofG4GCapitalCorp.,subsequentlyrenamedWhiteGoldCorp("WhiteGold")inanon-brokeredprivateplacementatapriceofC$1.20perWhiteGoldcommonshare,fortotalcashconsiderationofapproximatelyC$14.5million.Uponclosingthetransaction,theCompanyheldapproximately19.93%oftheissuedandoutstandingcommonsharesofWhiteGoldonanon-dilutedbasis.OnMarch21,2017,theCompanysubscribedforanadditional1,110,000sharesofWhiteGoldfortotalproceedsofapproximatelyC$1.5million.Uponclosingthetransaction,theCompanyheldapproximately19.93%oftheissuedandoutstandingcommonsharesofWhiteGoldonanon-dilutedbasis.
OnMarch16,2016,theCompanysubscribedfor11,680,000commonsharesofBeloSunMiningCorp.("BeloSun")inanon-brokeredprivateplacementatapriceofC$0.53perBeloSuncommonshare,fortotalcashconsiderationofapproximatelyC$6.2million.OnJuly27,2016,theCompanysubscribedfor14,922,760commonsharesofBeloSunpursuanttopublicofferingbyBeloSunatapriceofC$0.85perBeloSuncommonshare,fortotalcashconsiderationofapproximatelyC$12.7million.Uponclosingthetransaction,theCompanyheldapproximately19.2%oftheissuedandoutstandingcommonsharesofBeloSunonanon-dilutedbasis.
OnJune11,2015,AgnicoEagleSwedenAB("AESweden"),anindirectwholly-ownedsubsidiaryoftheCompany,acquired55.0%oftheissuedandoutstandingcommonsharesofGunnarnMiningAB("Gunnarn")fromOrexMineralsInc.("Orex"),bywayofasharepurchaseagreement(the"GunnarnSPA").TheoperationandgovernanceofGunnarnandtheBarseleprojectaregovernedbyajointventureagreementamongtheCompany,AESweden,OrexandGunnarn(the"GunnarnJVA").UndertheGunnarnSPA,theconsiderationfortheacquisitionofthe55.0%ofGunnarn'soutstandingcommonshareswas$10.0million,comprisedof$6.0millionincashpayableatclosingandpaymentsof$2.0millionincashor,atAESweden'ssolediscretion,sharesoftheCompany,oneachofthefirstandsecondanniversaryoftheclosing.UndertheGunnarnJVA,AESwedencommittedtoincuranaggregateof$7.0millionofexplorationexpensesattheBarseleprojectbyJune11,2018,45.0%or$3.1millionofwhichisconsideredaccruedpurchaseconsideration.Accordingly,theCompany'stotalpurchaseconsiderationfortheacquisitionofits55.0%interestinGunnarnwas$13.1million.AESwedenmayearnanadditional15.0%interestinGunnarnundertheGunnarnJVAifitcompletesafeasibilitystudyinrespectoftheBarseleproject.TheGunnarnJVAalsoprovidesAESwedenwiththerighttonominateamajorityofthemembersoftheboardofdirectorsofGunnarn(basedoncurrentshareholdings)andAESwedenisthesoleoperatoroftheBarseleprojectandpaidcustomarymanagementfees.Inconnectionwiththetransaction,Orexalsoobtaineda2.0%netsmelterreturnroyaltyonproductionfromtheBarseleproperty,whichtheCompanymayrepurchaseatanytimefor$5.0million.TheGunnarnacquisitionwas
16 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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accountedforbytheCompanyasanassetacquisitionandtransactioncostsassociatedwiththeacquisitiontotaling$0.6millionwerecapitalizedtotheminingpropertiesacquired.OnSeptember25,2015,OrexMineralsInc.assigneditsinterestintheGunnarnJVAgreementtoBarseleMineralsCorp.("BarseleMinerals"),whichwasatthetimeawholly-ownedsubsidiaryofOrex.AllofthesharesofBarseleMineralsweresubsequentlydistributedtoshareholdersofOrexunderaplanofarrangement.
OnJune9,2015,theCompanyacquiredalloftheissuedandoutstandingcommonsharesofSoltoroLtd.("Soltoro"),includingcommonsharesissuableontheexerciseofSoltoro'soutstandingoptionsandwarrants,bywayofaplanofarrangementundertheCanadaBusinessCorporationsAct(the"SoltoroArrangement").EachoutstandingshareofSoltorowasexchangedundertheSoltoroArrangementfor:(i)C$0.01incash;(ii)0.00793ofanAgnicoEaglecommonshare;and(iii)onecommonshareofPalaminaCorp.,acompanythatwasnewlyformedinconnectionwiththeSoltoroArrangement.PursuanttotheSoltoroArrangement,SoltorotransferredallminingpropertieslocatedoutsideofthestateofJalisco,MexicotoPalaminaCorp.andretainedallotherminingproperties.AgnicoEaglehadnointerestinPalaminaCorp.upontheclosingoftheSoltoroArrangement.AgnicoEagle'stotalpurchasepriceof$26.7millionwascomprisedof$2.4millionincash,including$1.6millionincashcontributedtoPalaminaCorp.and770,429AgnicoEaglecommonsharesissuedfromtreasury.TheSoltoroacquisitionwasaccountedforasanassetacquisitionandtransactioncostsassociatedwiththeacquisitiontotaling$1.4millionwerecapitalizedtotheminingpropertiesacquired.
OnMay21,2015,theCompanysubscribedfor62,500,000commonsharesofBeloSuninanon-brokeredprivateplacementatapriceofC$0.24perBeloSuncommonshare,fortotalcashconsiderationofC$15.0million.
OnMarch19,2015,AgnicoEagle,YamanaandCanadianMalarticGPcompletedthepurchaseofa30.0%interestintheMalarticCHLpropertyfromAbitibiRoyaltiesInc.("Abitibi")inexchangefor459,197AgnicoEaglecommonshares,3,549,695Yamanacommonsharesand3.0%netsmelterreturnroyaltiestoeachofAbitibiandOsiskoGoldRoyaltiesLtd.ontheMalarticCHLproperty.TotalAgnicoEaglecommonshareconsiderationissuedwasvaluedat$13.4millionbasedontheclosingpriceofthecommonsharesonMarch18,2015.TheMalarticCHLpropertyislocatedadjacenttotheCompany'sjointlyownedCanadianMalarticmineandtheremaining70.0%interestintheMalarticCHLpropertywasjointlyacquiredthroughtheJune16,2014acquisitionofOsisko(thepredecessortoCanadianMalarticCorporation).Concurrentwiththetransactionclosing,eachofAbitibi,AgnicoEagle,Yamana,CanadianMalarticGPandCanadianMalarticCorporationreleasedanddischargedtheotherswithrespecttoallproceedingspreviouslycommencedbyAbitibiwithrespecttotheMalarticCHLproperty.Asaresultofthetransaction,AgnicoEagleandYamanajointlyowna100.0%interestintheMalarticCHLpropertythroughtheirrespectiveindirectinterestsinCanadianMalarticGP.
In2016,theCompanyreceivednetproceedsof$9.5millionfromthesaleofavailable-for-salesecuritiesandotherinvestmentscomparedwith$61.1millionin2015and$44.7millionin2014.In2016,theCompanypurchased$33.8millionofavailable-for-salesecuritiesandotherinvestmentscomparedwith$19.8millionin2015and$27.2millionin2014.TheCompany'sinvestmentsinavailable-for-salesecuritiesconsistprimarilyofinvestmentsincommonsharesofentitiesintheminingindustry.
FinancingActivities
Cashprovidedbyfinancingactivitiesof$190.4millionin2016increasedcomparedwithcashusedinfinancingactivitiesof$280.8millionin2015primarilyduetotheissuanceofthe2016NotesonJune30,2016andthereceiptof$192.1millionofproceedsfromtheexerciseofstockoptions,partiallyoffsetbya$19.3millionincreaseinnetrepaymentsofdebtbetweenperiods.Cashprovidedbyfinancingactivitieswas$229.2millionin2014,whichincludednetproceedsfromlong-termdebtof$286.0million,partiallyoffsetbydividendspaidof$54.1million.
In2016,theCompanypaiddividendsof$71.4millioncomparedwith$59.5millionin2015and$54.1millionin2014.AgnicoEaglehasdeclaredacashdividendeveryyearsince1983.AlthoughtheCompanyexpectstocontinuepayingdividends,futuredividendswillbeatthediscretionoftheBoardandwillbesubjecttofactorssuchasincome,financialconditionandcapitalrequirements.
OnOctober26,2016,theCompanyamendedits$1.2billionCreditFacilityto,amongotherthings,extendthematuritydatefromJune22,2020toJune22,2021andamendingpricingterms.AsatDecember31,2016,theCompany'soutstandingbalanceundertheCreditFacilitywasnil.CreditFacilityavailabilityisreducedbyoutstandinglettersofcredit,amountingto$0.8millionatDecember31,2016.AsatDecember31,2016,$1,199.2millionwasavailableforfuturedrawdownundertheCreditFacility.
OnJune30,2016,theCompanycloseda$350.0millionprivateplacementofguaranteedseniorunsecurednotes(the"2016Notes"),which,onissuance,hadaweightedaveragematurityof9.43yearsandaweightedaverageyieldof4.77%.Proceedsfromtheofferingofthe2016NoteswereusedtorepayamountsoutstandingundertheCreditFacility.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 17
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OnJune29,2016,theCompanyenteredintoastandbyletterofcreditfacilitywithafinancialinstitutionprovidingforaC$100.0millionuncommittedletterofcreditfacility(the"ThirdLCFacility").TheThirdLCFacilitymaybeusedtosupportthereclamationobligationsornon-financialorperformanceobligationsoftheCompanyoritssubsidiaries.TheobligationsoftheCompanyundertheThirdLCFacilityareguaranteedbycertainofitssubsidiaries.AsatDecember31,2016,totallettersofcreditoutstandingundertheThirdLCFacilityamountedto$38.2million.
OnMarch10,2016,theCompanyraisedapproximatelyC$25.0million($18.7million)throughtheissuanceof374,869commonsharesatapriceofC$66.69percommonshare.Flow-throughsharesaresecuritiesissuedtoinvestorswherebythedeductionsfortaxpurposesrelatedtoresourceexplorationandevaluationexpendituresmaybeclaimedbyinvestorsinsteadoftheissuer,subjecttoarenouncementprocess.Atthetimetheflow-throughsharesareissued,thesaleoftaxdeductionsisdeferredandpresentedintheaccountspayableandaccruedliabilitieslineiteminthebalancesheetbecausetheCompanyhadnotyetfulfilleditsobligationtopassonthetaxdeductionstotheinvestor.AtthetimetheCompanyfulfillsitsobligation,thesaleoftaxdeductionsisrecognizedintheincomestatementasareductionofdeferredtaxexpense.TheclosingpriceoftheCompany'scommonsharesontheMarch10,2016issuancedatewasC$48.49,resultinginanincreasetosharecapitalofapproximatelyC$18.2million($13.6million).TheinitialC$6.8million($5.1million)liabilityisdrawndownaseligibleexpendituresareincurredbecausetheCompanyhasapositiveintentiontorenouncetheseexpenses.DuringtheyearendedDecember31,2016,theliabilitywasfullyextinguishedbasedoneligibleexpendituresincurred.
OnSeptember30,2015,theCompanyclosedaprivateplacementconsistingofa$50.0millionguaranteedseniorunsecurednote(the"2015Note")withaSeptember30,2025maturitydateandayieldof4.15%.Underthenotepurchaseagreementinrespectofthe2015Note,theCompanyagreedthatanamountequaltoorgreaterthanthenetproceedsfromthe2015NotewouldbespentonminingprojectsintheProvinceofQuebec,Canada.
OnSeptember23,2015,theCompanyenteredintoastandbyletterofcreditfacilitywithafinancialinstitutionprovidingforaC$150.0millionuncommittedletterofcreditfacility(asamended,the"SecondLCFacility").TheSecondLCFacilitymaybeusedbytheCompanytosupportthereclamationobligationsoftheCompany,itssubsidiariesoranyentityinwhichtheCompanyhasadirectorindirectinterestortheperformanceobligations(otherthanwithrespecttoindebtednessforborrowedmoney)oftheCompany,itssubsidiariesoranyentityinwhichtheCompanyhasadirectorindirectinterestthatarenotdirectlyrelatedtoreclamationobligations.PaymentandperformanceoftheCompany'sobligationsundertheSecondLCFacilityaresupportedbyanaccountperformancesecurityguaranteeissuedbyExportDevelopmentCanadainfavourofthelender.AsatDecember31,2016,$52.2millionhadbeendrawnundertheSecondLCFacility.
OnJuly31,2015,theCompanyamendeditscreditagreementwithafinancialinstitutionrelatingtoitsuncommittedletterofcreditfacility(asamended,the"FirstLCFacility").EffectiveNovember5,2013,theamountavailableundertheFirstLCFacilityincreasedfromC$175.0milliontoC$200.0million.EffectiveSeptember28,2015,theamountavailableundertheFirstLCFacilitywasincreasedtoC$250.0million.EffectiveSeptember27,2016,theamountavailableundertheFirstLCFacilitywasincreasedtoC$350.0million.TheobligationsoftheCompanyundertheFirstLCFacilityareguaranteedbycertainofitssubsidiaries.TheFirstLCFacilitymaybeusedtosupportthereclamationobligationsornon-financialorperformanceobligationsoftheCompanyoritssubsidiaries.AsatDecember31,2016,$158.7millionhadbeendrawnundertheFirstLCFacility.
OnJuly24,2012,theCompanyclosedaprivateplacementof$200.0millionofguaranteedseniorunsecurednotes(the"2012Notes").The2012Notesmaturein2022and2024andatissuancehadaweightedaveragematurityof11.0yearsandweightedaverageyieldof4.95%.Proceedsfromtheofferingofthe2012NoteswereusedtorepayamountsoutstandingundertheCreditFacility.
OnApril7,2010,theCompanyclosedaprivateplacementof$600.0millionofguaranteedseniorunsecurednotesduein2017,2020and2022(the"2010Notes")withaweightedaveragematurityof9.84yearsandweightedaverageyieldof6.59%.Proceedsfromtheofferingofthe2010NoteswereusedtorepayamountsundertheCompany'sthenoutstandingcreditfacilities.
InconnectionwithitsjointacquisitionofOsiskoonJune16,2014,CanadianMalarticGPwasassignedandassumedcertainoutstandingdebtandfinanceleaseobligationsofOsiskorelatingtotheCanadianMalarticmine.AgnicoEagle'sindirectattributableinterestinsuchdebtandfinanceleaseobligationsincludedasecuredloanfacility(the"CMGPloan")witharemainingscheduledC$20.0millionrepaymentonJune30,2017anda6.875%perannuminterestrate.AsatDecember31,2016,theattributableoutstandingprincipalisC$20.0million($14.9million).AgnicoEagle'sindirectattributableinterestinthefinanceleaseobligationsofCMGPincludesecuredfinanceleaseobligationsprovidedinseparatetrancheswithremainingmaturitiesupto2019anda7.5%interestrate.AsatDecember31,2016,theCompany'sattributablefinanceleaseobligationswere$5.9million.
18 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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TheCompanywasincompliancewithallcovenantscontainedintheCreditFacility,2016Notes,2015Note,2012Notes,2010Notes,FirstLCFacility,SecondLCFacilityandtheThirdLCFacilityasatDecember31,2016.CanadianMalarticGPwasincompliancewithallcovenantsundertheCMGPLoanasatDecember31,2016.
TheCompanyissuedcommonsharesundertheCompany'sincentivesharepurchaseplananddividendreinvestmentplanforgrossproceedsof$29.0millionin2016comparedwith$9.4millionin2015and$10.4millionin2014.
ContractualObligations
AgnicoEagle'scontractualobligationsasatDecember31,2016aresetoutbelow:
Total 2017 2018-2019 2020-2021 Thereafter (millions of United States dollars) Reclamationprovisions(i) $ 397.3 $ 9.2 $ 15.0 $ 8.9 $ 364.2
Purchasecommitments(ii) 84.2 43.3 15.1 8.8 17.0
Pensionobligations(iii) 6.6 0.1 0.9 1.6 4.0
Financeandoperatingleases 31.9 9.2 11.1 2.1 9.5
Long-termdebt(iv) 1,214.9 129.9 — 360.0 725.0
Total(v) $ 1,734.9 $ 191.7 $ 42.1 $ 381.4 $ 1,119.7
Notes:
(i) Miningoperationsaresubjecttoenvironmentalregulationsthatrequirecompaniestoreclaimandremediatelanddisturbedbyminingoperations.TheCompanyhassubmittedclosureplanstotheappropriategovernmentalagencieswhichestimatethenature,extentandcostsofreclamationforeachofitsminingproperties.Expectedreclamationcashflowsarepresentedaboveonanundiscountedbasis.ReclamationprovisionsrecordedintheCompany'sconsolidatedfinancialstatementsaremeasuredattheexpectedvalueoffuturecashflowsdiscountedtotheirpresentvalueusingarisk-freeinterestrate.
(ii) Purchasecommitmentsincludecontractualcommitmentsfortheacquisitionofproperty,plantandminedevelopment.AgnicoEagle'sattributableinterestinthepurchasecommitmentsassociatedwithitsjointoperationstotaled$2.7millionasatDecember31,2016.
(iii) AgnicoEagleprovidesanon-registeredsupplementaryexecutiveretirementdefinedbenefitplanforcertaincurrentandformerseniorofficers(the"ExecutivesPlan").TheExecutivesPlanbenefitsaregenerallybasedontheemployee'syearsofserviceandlevelofcompensation.Thedataincludedinthistablehavebeenactuariallydetermined.
(iv) WithrespecttotheCompany'slong-termdebtobligations,theCompanyhasassumedthatrepaymentwilloccuroneachinstrument'srespectivematuritydate.
(v) TheCompany'sfutureoperatingcashflowsareexpectedtobesufficienttosatisfyitscontractualobligations.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 19
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Off-BalanceSheetArrangements
TheCompany'soff-balancesheetarrangementsasatDecember31,2016includeoperatingleaseswithvariouscounterpartiesof$20.1million(seeNote13(b)totheconsolidatedfinancialstatements)andoutstandinglettersofcreditforenvironmentalandsiterestorationcosts,customcredits,governmentgrantsandothergeneralcorporatepurposesof$251.6millionundertheCreditFacility,FirstLCFacility,SecondLCFacilityandThirdLCFacility(seeNote25totheconsolidatedfinancialstatements).IftheCompanyweretoterminatetheseoff-balancesheetarrangements,theCompany'sliquidityposition(asoutlinedinthetablebelow)issufficienttosatisfyanyrelatedpenaltiesorobligations.
2017LiquidityandCapitalResourcesAnalysis
TheCompanybelievesthatithassufficientcapitalresourcestosatisfyits2017mandatoryexpenditurecommitments(includingthecontractualobligationssetoutabove)anddiscretionaryexpenditurecommitments.Thefollowingtablesetsoutexpectedcapitalrequirementsandresourcesfor2017:
Amount
(millions of United States
dollars)
2017MandatoryCommitments:
Contractualobligations(seetableabove) $ 191.7
Accountspayableandaccruedliabilities(asatDecember31,2016) 228.6
Interestpayable(asatDecember31,2016) 14.2
Incometaxespayable(asatDecember31,2016) 35.1
Total2017mandatoryexpenditurecommitments $ 469.6
2017 Discretionary Commitments:
Expected2017capitalexpenditures $ 859.4
Expected2017explorationandcorporatedevelopmentexpenses 103.2
Total2017discretionaryexpenditurecommitments 962.6
Total 2017 mandatory and discretionary expenditure commitments $ 1,432.2
2017 Capital Resources:
Cash,cashequivalentsandshort-terminvestments(asatDecember31,2016) $ 548.4
Expected2017cashprovidedbyoperatingactivities 650.9
Workingcapital,excludingcash,cashequivalentsandshort-terminvestments(asatDecember31,2016) 258.2
AvailableundertheCreditFacility(asatDecember31,2016) 1,199.2
Total 2017 Capital Resources $ 2,656.7
WhiletheCompanybelievesitscapitalresourceswillbesufficienttosatisfyall2017commitments(mandatoryanddiscretionary),theCompanymaychoosetodecreasecertainofitsdiscretionaryexpenditurecommitments,whichincludecertaincapitalexpenditures,shouldunexpectedfinancialcircumstancesariseinthefuture.TheCompanybelievesthatitwillcontinuetohavesufficientcapitalresourcesavailabletosatisfyitsplanneddevelopmentandgrowthactivities.
20 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Quarterly Results Review
FortheCompany'sdetailed2016and2015quarterlyfinancialandoperatingresultsseeSummarized Quarterly Data inthisMD&A.
Revenuesfromminingoperationsincreasedby3.4%to$499.2millioninthefourthquarterof2016comparedwith$482.9millioninthefourthquarterof2015primarilyduetohighersalespricesrealizedongoldandsilver,partiallyoffsetbya5.1%decreaseingoldsalesbetweenperiods.Productioncostsincreasedby11.0%to$255.1millioninthefourthquarterof2016comparedwith$229.8millioninthefourthquarterof2015duetoincreasedproductionandtonnageprocessed,partiallyoffsetbytheimpactofaweakerMexicanpesorelativetotheUSdollarbetweenperiods.Explorationandcorporatedevelopmentexpensesincreasedby37.9%to$35.8millioninthefourthquarterof2016comparedwith$26.0millioninthefourthquarterof2015primarilyduetoincreasedexplorationexpensesincurredattheAmaruqprojectattheMeadowbankMineinNunavut.Amortizationofproperty,plantandminedevelopmentdecreasedby3.6%to$151.4millioninthefourthquarterof2016comparedwith$157.1millioninthefourthquarterof2015primarilyduetoloweramortizationattheLaIndiaandGoldexminesduetoanincreaseindepreciablereservesasatDecember31,2015,partiallyoffsetbyhigheramortizationatthePinosAltosmineduetotheshaftgoingintocommercialproductioninthethirdquarterof2016.Netincomeof$62.7millionwasrecordedinthefourthquarterof2016afterincomeandminingtaxesexpenseof$52.8millioncomparedwithanetlossof$15.5millioninthefourthquarterof2015afterincomeandminingtaxesexpenseof$34.6million.
Cashprovidedbyoperatingactivitiesdecreasedby14.3%to$120.6millioninthefourthquarterof2016comparedwith$140.7millioninthefourthquarterof2015.Thedecreaseincashprovidedbyoperatingactivitieswasprimarilyduetoa$34.2milliondecreaseinworkingcapitalbalances,partiallyoffsetbya$16.3millionincreaseinrevenueduetoa9.3%increaseintheaveragerealizedpriceofgoldbetweenperiods.
Outlook
Thefollowingsectioncontains"forward-lookingstatements"and"forward-lookinginformation"withinthemeaningofapplicablesecuritieslaws.PleaseseeNote to Investors Concerning Forward-Looking Information inthisMD&Aforadiscussionofassumptionsandrisksrelatingtosuchstatementsandinformation.
GoldProduction
LaRonde Mine
In2017,payablegoldproductionattheLaRondemineisexpectedtobeapproximately315,000ounces.Overthe2017to2019period,averageannualpayablegoldproductionattheLaRondemineisexpectedtobeapproximately347,000ounces.Infilldrillingcompletedin2016successfullyupgradedportionsoftheLaRonde3mineralresourcebase,whichwillcontinuetobeexploredgoingforward.Aswell,throughoutthethree-yearguidanceperioditisexpectedthattherewillbeanincreaseingradeclosertothatoftheaveragemineralreserves.Totalcashcostsperounceofgoldproducedonaby-productbasisattheLaRondemineareexpectedtobeapproximately$510in2017comparedwith$501in2016.
Lapa Mine
In2017,payablegoldproductionattheLapamineisexpectedtobeapproximately15,000ounces.Underthecurrentlifeofmineplan,Lapaisexpectedtooperateuntiltheendofthesecondquarterof2017,withproductioncomingfromZoneDeepEastandZone7Deep.TheCompanyisevaluatingopportunitiestocontinueproductionintothesecondhalfof2017.Totalcashcostsperounceofgoldproducedonaby-productbasisattheLapamineareexpectedtobeapproximately$1,002in2017comparedwith$732in2016,reflectingexpectationsofdecreasedproductionandlowergoldgrade.
Goldex Mine
In2017,payablegoldproductionattheGoldexmineisexpectedtobeapproximately105,000ounces.Overthe2017to2019period,averageannualpayablegoldproductionattheGoldexmineisexpectedtobeapproximately113,000ounces.Throughoutthethreeyearguidanceperiod,miningwilltransitionfromtheMandEsatellitezonestotheDeep1zone.CommissioningoftheDeep1projectremainsonbudgetandscheduleforcommencementofmininginearly2018.Totalcashcostsperounceofgoldproducedonaby-productbasisattheGoldexmineareexpectedtobeapproximately$667in2017comparedwith$532in2016,reflectingexpectationsofdecreasedproductionduetolowergoldgrade.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 21
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Meadowbank Mine
In2017,payablegoldproductionattheMeadowbankmineisexpectedtobeapproximately320,000ounces.Overthe2017to2018period,averageannualpayablegoldproductionattheMeadowbankmineisexpectedtobeapproximately242,500ounces.Productionguidancehasincreasedslightlyoverpreviousguidanceduetoaslightincreaseinmineralreservesatyear-end2016andtheminingofhighergradeoreinthePortagepit.AttheVaultpit,opportunitiesarebeinginvestigatedtopotentiallyextendproductionthroughyear-end2018.TheAmaruqsatellitedepositatMeadowbankisexpectedtogointoproductioninthethirdquarterof2019andprovideapproximately135,000ouncesinitsfirstpartialyearofcommercialproduction.Totalcashcostsperounceofgoldproducedonaby-productbasisattheMeadowbankmineareexpectedtobeapproximately$683in2017comparedwith$715in2016,reflectingexpectationsofincreasedproduction.
Canadian Malartic Mine
In2017,attributablepayablegoldproductionattheCanadianMalarticmineisexpectedtobeapproximately300,000ounces.Overthe2017to2019period,averageannualattributablepayablegoldproductionattheCanadianMalarticmineisexpectedtobeapproximately315,000ounces.TheupdatedlifeofmineplanforMalarticprovidesearlieraccesstohighergradezonesthatarelocateddeeperintheCanadianMalarticpit.Totalcashcostsperounceofgoldproducedonaby-productbasisattheCanadianMalarticmineareexpectedtobeapproximately$578in2017comparedwith$606in2016,reflectingexpectationsofincreasedproductionandhighergoldgrade.
Kittila Mine
In2017,payablegoldproductionattheKittilamineisexpectedtobeapproximately190,000ounces.Overthe2017to2019period,averageannualpayablegoldproductionattheKittilamineisexpectedtobeapproximately200,000ounces.TheCompanyiscarryingoutstudiestoevaluatetheeconomicsofincreasingthroughputratesfromthecurrent1.6milliontonnesperannumto2.0milliontonnes,whichcouldbefurthersupportedbycontinueddevelopmentoftheRimpiandSisarzones.Totalcashcostsperounceofgoldproducedonaby-productbasisattheKittilamineareexpectedtobeapproximately$728in2017comparedwith$699in2016,reflectingexpectationsofdecreasedproduction.
Pinos Altos Mine
In2017,payablegoldproductionatthePinosAltosmineisexpectedtobeapproximately170,000ounces.Overthe2017to2019period,averageannualpayablegoldproductionatthePinosAltosmineisexpectedtobeapproximately173,000ounces.CommissioningofthePinosAltosshaftwascompletedin2016shouldallowforincreasedthroughputatthemill.ExplorationoftheCerroColoradoZoneoutlinedadditionalmineralizationontheboundariesofthezone,andfurtherdrillingwillbecarriedoutin2017toevaluatethispotential.Totalcashcostsperounceofgoldproducedonaby-productbasisatthePinosAltosmineareexpectedtobeapproximately$474in2017comparedwith$356in2016,reflectingexpectationsofdecreasedproductionduetochangesintheminingsequenceandtheweakeningoftheMexicanpesorelativetotheUSdollarduring2016.
Creston Mascota deposit at Pinos Altos
In2017,payablegoldproductionattheCrestonMascotadepositatPinosAltosisexpectedtobeapproximately40,000ounces.Overthe2017to2019period,averageannualpayablegoldproductionattheCrestonMascotadepositatPinosAltosisexpectedtobeapproximately25,000ounces.RecentexplorationatBravo,CubiroandMadronohasyieldedpositiveresultsandfurtherdrillingisplannedfor2017.Totalcashcostsperounceofgoldproducedonaby-productbasisattheCrestonMascotadepositatPinosAltosareexpectedtobeapproximately$812in2017comparedwith$516in2016,reflectingexpectationsofdecreasedproductionastheminelifewindsdownandtheweakeningoftheMexicanpesorelativetotheUSdollarduring2016.
La India Mine
In2017,payablegoldproductionattheLaIndiamineisexpectedtobeapproximately100,000ounces.Overthe2017to2019period,averageannualpayablegoldproductionattheLaIndiamineisexpectedtobeapproximately107,000ounces.Stepoutdrillingin2016atthenearbyElRealitoprojectyieldedencouragingresults,andadditionalworkisplannedfor2017.Totalcashcostsperounceofgoldproducedonaby-productbasisattheLaIndiamineareexpectedtobeapproximately$583in2017comparedwith$395in2016,reflectingdecreasedproduction,lowertonnesprocessedandtheweakeningoftheMexicanpesorelativetotheUSdollarduring2016.
22 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Production Summary
WiththeachievementofcommercialproductionattheKittila,LapaandPinosAltosminesin2009,theMeadowbankminein2010,theCrestonMascotadepositatPinosAltosandLaRondemineextensionin2011,theGoldexmineMandEZonesin2013andtheLaIndiaminein2014,alongwiththejointacquisitionoftheCanadianMalarticmineonJune16,2014,AgnicoEaglehastransformedfromaonemineoperationtoaneightmineseniorgoldminingcompanyoverthelasteightyears.In2016,theCompanyachievedannualpayablegoldproductionof1,662,888ounces.AstheCompanyplansitsnextgrowthphasefromthisexpandedproductionplatform,itexpectstocontinuetodeliveronitsvisionandstrategy.Annualpayablegoldproductionisexpectedtodecreasetoapproximately1,555,000ouncesin2017,representinga6.9%decreasecomparedwith2016.TheCompanyexpectsthatthemaincontributorstoachievingthetargetedlevelsofpayablegoldproduction,mineralreservesandmineralresourcesin2017willinclude:
• IncreasedproductionfromtheMeadowbank,LaRondeandCanadianMalarticminesduetotheminingofhighergradeore;
• Continuedmillandmineplanoptimization;and
• ContinuedconversionofAgnicoEagle'scurrentmineralresourcestomineralreserves.
FinancialOutlook
Revenue from Mining Operations and Production Costs
In2017,theCompanyexpectstocontinuetogeneratesolidcashflowwithpayablegoldproductionofapproximately1,555,000ouncescomparedwith1,662,888ouncesin2016.ThisexpecteddecreaseinpayablegoldproductionisprimarilyduetotheplannedwinddownoftheLapaminein2017,changesintheminingsequenceofPinosAltosresultinginlowergoldproductionin2017andlowerproductionattheGoldexmineasaresultoflowerthroughput.
Thetablebelowsetsoutactualpayableproductionin2016andexpectedpayableproductionin2017:
2017
Forecast2016 Actual
Gold(ounces) 1,555,000 1,662,888
Silver(thousandsofounces) 4,435 4,759
Zinc(tonnes) 7,267 4,687
Copper(tonnes) 4,480 4,416
In2017,theCompanyexpectstotalcashcostsperounceofgoldproducedonaby-productbasisattheLaRondeminetobeapproximately$510comparedwith$501in2016.Incalculatingexpectationsoftotalcashcostsperounceofgoldproducedonaby-productbasisfortheLaRondemine,netsilver,zincandcopperby-productrevenueoffsetsproductioncosts.Therefore,productionandpriceassumptionsforby-productmetalsplayanimportantroleintheLaRondemine'sexpectedtotalcashcostsperounceofgoldproducedonaby-productbasisduetoitssignificantby-productproduction.ThePinosAltosminealsogeneratessignificantsilverby-productrevenue.Anincreaseinby-productmetalpricesaboveforecastedlevelswouldresultinimprovedtotalcashcostsperounceofgoldproducedonaby-productbasisatthesemines.Totalcashcostsperounceofgoldproducedonaco-productbasisareexpectedtobeapproximately$699in2017attheLaRondeminecomparedwith$668in2016.
AsproductioncostsattheLaRonde,Lapa,Goldex,MeadowbankandCanadianMalarticminesaredenominatedprimarilyinCanadiandollars,productioncostsattheKittilaminearedenominatedprimarilyinEurosandproductioncostsatthePinosAltosmine,theCrestonMascotadepositatPinosAltosandtheLaIndiaminearedenominatedprimarilyinMexicanpesos,theCanadiandollar/USdollar,Euro/USdollarandMexicanpeso/USdollarexchangeratesalsoaffecttheCompany'sexpectationsforthetotalcashcostsperounceofgoldproducedbothonaby-productandco-productbasis.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 23
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Thetablebelowsetsoutthemetalpriceandexchangerateassumptionsusedinderivingtheexpected2017totalcashcostsperounceofgoldproducedonaby-productbasis(forecastedproductionforeachmetalisshowninthetableabove)aswellastheactualmarketaverageclosingpricesforeachvariablefortheperiodofJanuary1,2017throughFebruary28,2017:
2017
Assumptions
Actual Market Average
(January 1, 2017 – February 28, 2017)
Silver(perounce) $16.00 $17.33
Zinc(pertonne) $2,425 $2,779
Copper(pertonne) $5,500 $5,837
Diesel(C$perlitre) $0.80 $0.72
C$/US$exchangerate(C$) $1.28 $1.32
Euro/US$exchangerate(Euros) €0.91 €0.94
Mexicanpeso/US$exchangerate(Mexicanpesos) 18.00 20.92
SeeRisk Profile – Commodity Prices and Foreign Currencies inthisMD&Afortheexpectedimpactonforecast2017totalcashcostsperounceofgoldproducedonaby-productbasisofcertainchangesincommoditypriceandexchangerateassumptions.
Exploration and Corporate Development Expenditures
In2017,AgnicoEagleexpectstoincurexplorationandcorporatedevelopmentexpensesofapproximately$103.2million.ExplorationexpensesareexpectedtobefocusedontheAmaruqprojectinNunavut,theLaRonde3deepdeposit,theBarseleprojectinSweden,theSisarzoneattheKittilamineinFinland,satellitetargetsatthePinosAltosandLaIndiaminesinMexicoandtheElBarquenoprojectinJaliscoState,Mexico.AttheAmaruqproject,thefirstphaseofaplanned75,000metredrillprogram(costingapproximately$21.9million)commencedinearlyFebruary2017.AgnicoEagle'sexpectedexplorationprogramattheElBarquenoprojectin2017ofapproximately$16.8millionwillfocusonmineralresourcedevelopment,conversionandregionalexploration.AtBarsele,$8.8millionwillbespentwithafocustoexpandthemineralresourcesalongstrikeandatdepthandtotestthegapbetweentheCentralandAvanzones.AtKittila,approximately$7.9millionwillbespentonfurtherdeepdrilling,includingattheSisarzone.
ExplorationprogramsaredesignedtoinfillandexpandknowndepositsandtestotherfavourabletargetareasthatcouldultimatelysupplementtheCompany'sexistingproductionprofile.Explorationissuccessdrivenandthusplannedexplorationcouldchangemateriallybasedontheresultsofthevariousexplorationprograms.Whenitisdeterminedthataprojectcangeneratefutureeconomicbenefit,thecostsofdrillinganddevelopmenttofurtherdelineatetheorebodyonsuchapropertyarecapitalized.In2017,theCompanyexpectstocapitalizeapproximately$21.7millionondrillinganddevelopmentrelatedtofurtherdelineatingorebodiesandconvertingmineralresourcesintomineralreserves.
Other Expenses
Generalandadministrativeexpensesareexpectedtobebetween$95.0millionand$115.0millionin2017comparedwith$102.8millionin2016.Amortizationofproperty,plantandminedevelopmentisexpectedtobebetween$590.0millionand$620.0millionin2017comparedwith$613.2millionin2016.TheCompany'seffectivetaxrateisexpectedtobebetween40.0%and45.0%in2017.
Capital Expenditures
Capitalexpenditures,includingsustainingcapital,constructionanddevelopmentcostsandcapitalizedexplorationcosts,areexpectedtototalapproximately$859.4millionin2017.TheCompanyexpectstofundits2017capitalexpendituresthrough
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operatingcashflowfromthesaleofitsgoldproductionandtheassociatedby-productmetals.Significantcomponentsoftheexpected2017capitalexpendituresprogramincludethefollowing:
• $284.4millioninsustainingcapitalexpendituresrelatingtotheLaRondemine($67.7million),CanadianMalarticmine($65.9million–portionattributabletotheCompany),Kittilamine($52.7million),PinosAltosmine($48.4million),Meadowbankmine($20.3million),Goldexmine($17.0million),LaIndiamine($6.9million)andtheCrestonMascotadepositatPinosAltos($5.5million);
• $553.3millionincapitalizeddevelopmentexpendituresrelatingtotheMeliadinemineproject($355.8million),Amaruq($73.1million),Goldexmine($55.8million),LaRondeZone5($35.0million),Kittilamine($24.1million),PinosAltosmine($5.8million)andtheCanadianMalarticmine($1.7million–portionattributabletotheCompany);and
• $21.7millionincapitalizeddrillingexpenditures.
Duringthe2017year,asignificantportionofCompany'scapitalcommitmentswillrelatetotheconstructionoftheMeliadinemineproject.TheMeliadinemineproject'sforecast$355.8millionindevelopmentexpendituresrepresentapproximately60.7%ofthe$553.3milliontotal.TheMeliadinemineprojectwillalsohaveanestimated$3.9millionincapitalizeddrillingexpenditures.Thekeyelementsofthe$359.7millionprograminclude:
• 5,600metresofundergrounddevelopment(includingthestartofasecondrampportal);
• Approximately12,500metresofconversiondrillingand14,000metresofundergrounddelineationdrilling;
• Completionofthecampcomplexinthesecondquarterof2017;
• Installationofundergroundventilationandheatinginfrastructurebythefourthquarterof2017;
• CompletionofthefuelfarminRankinInletandattheminesiteinthefourthquarterof2017;
• Closinginoftheprocessandpowerplantbuildingsbytheendof2017;and
• Constructionofsecondrampportalinthesecondtofourthquartersof2017.
TheCompanycontinuestoexamineotherpossiblecorporatedevelopmentopportunitieswhichmayresultintheacquisitionofcompaniesorassetsusingtheCompany'ssecurities,cashoracombinationthereof.Ifcashisusedtofundacquisitions,AgnicoEaglemayberequiredtoissuedebtorsecuritiestosatisfycashpaymentrequirements.
All-in Sustaining Costs per Ounce of Gold Produced
All-insustainingcostsperounceofgoldproducediscalculatedonbothaby-productbasis(deductingby-productmetalrevenuesfromproductioncosts)andco-productbasis(beforedeductingby-productmetalrevenues).All-insustainingcostsperounceofgoldproducedonaby-productbasisiscalculatedastheaggregateoftotalcashcostsperounceofgoldproducedonaby-productbasisandsustainingcapitalexpenditures(includingcapitalizedexploration),generalandadministrativeexpenses(includingstockoptions)andnon-cashreclamationprovisionexpenseperounceofgoldproduced.All-insustainingcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerasall-insustainingcostsperounceofgoldproducedonaby-productbasisexceptthatnoadjustmentforby-productmetalrevenuesismadetototalcashcostsperounceofgoldproduced.Thecalculationofall-insustainingcostsperounceofgoldproducedonaco-productbasisdoesnotreflectareductioninproductioncostsorsmelting,refiningandmarketingchargesassociatedwiththeproductionandsaleofby-productmetals.
AgnicoEagle'sall-insustainingcostsperounceofgoldproducedonaby-productbasisareexpectedtobeapproximately$850to$900in2017comparedwith$824in2016.
Risk Profile
TheCompanymitigatesthelikelihoodandpotentialseverityofthevariousrisksitencountersinitsday-to-dayoperationsthroughtheapplicationofhighstandardsintheplanning,constructionandoperationofitsminingfacilities.Emphasisisplacedonhiringandretainingcompetentpersonnelanddevelopingtheirskillsthroughtraining,includingsafetyandlosscontroltraining.TheCompany'soperatingandtechnicalpersonnelhaveasolidtrackrecordofdevelopingandoperatingpreciousmetalminesandseveraloftheCompany'smineshavereceivedsafetyanddevelopmentawards.Nevertheless,theCompanyanditsemployeescontinueeffortstoimproveworkplacesafetywithanemphasisonsafetyproceduretrainingforbothminingandsupervisoryemployees.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 25
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TheCompanyalsoattemptstomitigatesomeofitsnormalbusinessriskthroughthepurchaseofinsurancecoverage.AnInsurableRiskManagementPolicy,approvedbytheBoard,governsthepurchaseofinsurancecoverageandrestrictscoveragetoinsurancecompaniesofthehighestcreditquality.ForamorecompletelistoftheriskfactorsaffectingtheCompany,pleasesee"RiskFactors"intheAIF.
CommodityPricesandForeignCurrencies
AgnicoEagle'snetincomeissensitivetometalpricesandtheCanadiandollar/USdollar,Mexicanpeso/USdollarandEuro/USdollarexchangerates.Forthepurposeofthesensitivityanalysessetoutinthetablebelow,theCompanyappliedthefollowingmetalpriceandexchangerateassumptionsfor2017:
• Silver–$16.00perounce;
• Zinc–$2,425pertonne;
• Copper–$5,500pertonne;
• Diesel–C$0.80perlitre;
• Canadiandollar/USdollar–C$1.28per$1.00;
• Euro/USdollar–€0.91per$1.00;and
• Mexicanpeso/USdollar–18.00Mexicanpesosper$1.00.
Changesinthemarketpriceofgoldmaybeattributedtonumerousfactorssuchasdemand,globalmineproductionlevels,centralbankpurchasesandsalesandinvestorsentiment.Changesinthemarketpricesofothermetalsmaybeattributedtofactorssuchasdemandandglobalmineproductionlevels.Changesinthemarketpriceofdieselmaybeattributedtofactorssuchassupplyanddemand.Changesinexchangeratesmaybeattributedtofactorssuchassupplyanddemandforcurrenciesandeconomicconditionsineachcountryorcurrencyarea.In2016,therangesofmetalprices,dieselpricesandexchangerateswereasfollows:
• Silver:$13.75–$21.14perounce,averaging$17.11perounce;
• Zinc:$1,451–$2,907pertonne,averaging$2,094pertonne;
• Copper:$4,310–$5,945pertonne,averaging$4,867pertonne;
• Diesel:C$0.56–C$0.77perlitre,averagingC$0.67perlitre;
• Canadiandollar/USdollar:C$1.25–C$1.47per$1.00,averagingC$1.32per$1.00;
• Euro/USdollar:€0.86–€0.97per$1.00,averaging€0.90per$1.00;and
• Mexicanpeso/USdollar:17.05–21.39Mexicanpesosper$1.00,averaging18.69Mexicanpesosper$1.00.
Thefollowingtablesetsouttheimpactonforecasted2017totalcashcostsperounceofgoldproducedonaby-productbasisofspecificallyidentifiedchangesinassumedmetalprices,thedieselpriceandexchangerates.Specificallyidentifiedchangesineachvariablewereconsideredinisolationwhileholdingallotherassumptionsconstant.Basedonhistoricalmarketdataandthe2016pricerangesshownabove,thesespecificallyidentifiedchangesinassumedmetalpricesandexchangeratesarereasonablylikelyin2017.
26 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Changes in Variable
Impact on Forecasted2017
Total Cash Costs perOunce
of Gold Produced (By-Product Basis)
Silver–$1perounce $3
Zinc–10% $1
Copper–10% $2
Diesel–10% $3
Canadiandollar/USdollar–1% $4
Euro/USdollar–1% $1
Mexicanpeso/USdollar–10% $5
Inordertomitigatetheimpactoffluctuatingby-productmetalprices,theCompanyoccasionallyentersintoderivativefinancialinstrumentcontractsunderitsBoard-approvedRiskManagementPoliciesandProcedures.TheCompanyhasalong-standingpolicyofnoforwardgoldsales.However,thepolicydoesallowtheCompanytouseotherhedgingstrategieswhereappropriatetomitigateforeignexchangeandby-productmetalpricingrisks.TheCompanyoccasionallybuysputoptions,entersintopricecollarsandentersintoforwardcontractstoprotectminimumby-productmetalpriceswhilemaintainingfullexposuretothepriceofgold.TheRiskManagementCommitteehasapprovedthestrategyofusingshort-termcalloptionsinanattempttoenhancerealizedby-productmetalprices.TheCompany'spolicydoesnotallowspeculativetrading.
TheCompanyreceivespaymentforallofitsmetalsalesinUSdollarsandpaysmostofitsoperatingandcapitalcostsinCanadiandollars,EurosorMexicanpesos.Thisgivesrisetosignificantcurrencyriskexposure.TheCompanyentersintocurrencyhedgingtransactionsunderitsBoard-approvedForeignExchangeRiskManagementPoliciesandProcedurestohedgepartofitsforeigncurrencyexposure.Thepolicydoesnotpermitthehedgingoftranslationexposure(thatis,thegainsandlossesthatarisefromtheaccountingtranslationofCanadiandollar,EuroorMexicanpesodenominatedassetsandliabilitiesintoUSdollars),asitdoesnotgiverisetocashexposure.TheCompany'sforeigncurrencyderivativefinancialinstrumentstrategyincludestheuseofpurchasedputs,soldcalls,collarsandforwardsthatarenotheldforspeculativepurposes.
CostInputs
TheCompanyconsidersandmayenterintoriskmanagementstrategiestomitigatepriceriskoncertainconsumablesincluding,butnotlimitedto,dieselfuel.Thesestrategieshavelargelybeenconfinedtolongertermpurchasingcontractsbutmayincludefinancialandderivativeinstruments.
InterestRates
TheCompany'scurrentexposuretomarketriskforchangesininterestratesrelatesprimarilytodrawdownsonitsCreditFacilityanditsinvestmentportfolio.DrawdownsontheCreditFacilityareusedprimarilytofundaportionofthecapitalexpendituresrelatedtotheCompany'sdevelopmentprojectsandworkingcapitalrequirements.AsatDecember31,2016,therewerenoamountsoutstandingontheCompany'sCreditFacility.Inaddition,theCompanyinvestsitscashininvestmentswithshortmaturitiesorwithfrequentinterestresettermsandacreditratingofR1-Highorbetter.Asaresult,theCompany'sinterestincomefluctuateswithshort-termmarketconditions.AsatDecember31,2016,short-terminvestmentswere$8.4million.
AmountsdrawnundertheCreditFacilityaresubjecttofloatinginterestratesbasedonbenchmarkratesavailableintheUnitedStatesandCanadaoronLIBOR.Inthepast,theCompanyhasenteredintoderivativeinstrumentstohedgeagainstunfavorablechangesininterestrates.TheCompanywillcontinuetomonitoritsinterestrateexposureandmayenterintosuchagreementstomanageitsexposuretofluctuatinginterestrates.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 27
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FinancialInstruments
TheCompanyoccasionallyentersintocontractstolimittheriskassociatedwithfluctuationsinby-productmetalprices,interestratesandforeigncurrencyexchangeratesandmayusesuchmeanstomanageexposuretocertaininputcosts.Thecontractsactaseconomichedgesofunderlyingexposuresandarenotheldforspeculativepurposes.AgnicoEagledoesnotusecomplexderivativecontractstohedgeexposures.
Usingfinancialinstrumentscreatesvariousfinancialrisks.CreditriskistheriskthatthecounterpartiestofinancialcontractswillfailtoperformonanobligationtotheCompany.Creditriskispartiallymitigatedbydealingwithhighqualitycounterpartiessuchasmajorbanks.Marketliquidityriskistheriskthatafinancialpositioncannotbeliquidatedquickly.TheCompanyprimarilymitigatesmarketliquidityriskbyspreadingoutthematurityoffinancialcontractsovertime,usuallybasedonprojectedproductionlevelsforthespecificmetalbeinghedged,suchthattherelevantmarketswillbeabletoabsorbthecontracts.Mark-to-marketriskistheriskthatanadversechangeinmarketpricesformetalswillaffectfinancialcondition.Becausederivativecontractsareprimarilyusedaseconomichedges,changesinmark-to-marketvaluemayimpactincome.Foradescriptionoftheaccountingtreatmentofderivativefinancialinstruments,pleaseseeCritical IFRS Accounting Policies and Accounting Estimates – DerivativeInstruments and Hedge Accounting inthisMD&A.
OperationalRisk
Thebusinessofgoldminingisgenerallysubjecttorisksandhazards,includingenvironmentalhazards,industrialaccidents,equipmentfailures,unusualorunexpectedrockformations,changesintheregulatoryenvironment,cave-ins,rockbursts,rockfalls,groundconditions,pitwallfailures,floodingandgoldbullionlosses.Theoccurrenceoftheseorsimilartypesofeventsandcircumstancesmayresultindamageto,ordestructionof,mineralpropertiesorproductionfacilities,personalinjuryordeath,environmentaldamage,delaysinmining,monetarylossesandlegalliability.TheCompanycarriesinsurancetoprotectitselfagainstcertainrisksofminingandprocessinginamountsthatitconsiderstobeadequatebutwhichmaynotprovidecoverageincertainunforeseencircumstances.TheCompanymayalsobecomesubjecttoliabilityforpollution,cave-insorotherhazardsagainstwhichitcannotinsureoragainstwhichithaselectednottoinsurebecauseofpremiumcostsorotherreasons.TheCompanyalsomaybecomesubjecttoliabilitieswhichexceedpolicylimits.Inthesecircumstances,theCompanymayberequiredtoincursignificantcoststhatcouldhaveamaterialadverseeffectonitsfinancialperformanceandresultsofoperations.
TheMeadowbank,LaRondeandCanadianMalarticminesweretheCompany'smostsignificantpayablegoldproductioncontributorsin2016at18.8%,18.4%and17.6%respectively.Theseminesareexpectedtoaccountfor60.2%oftheCompany'spayablegoldproductionin2017.
Thefollowingtablesetsoutexpected2017payablegoldproductionbymine:
Expected Payable Gold Production
(Ounces)
Expected Payable Gold Production
(%)
LaRondemine 315,000 20.3%
Lapamine 15,000 1.0%
Goldexmine 105,000 6.8%
Meadowbankmine 320,000 20.6%
CanadianMalarticmine(attributable50.0%) 300,000 19.3%
Kittilamine 190,000 12.2%
PinosAltosmine 170,000 10.9%
CrestonMascotadepositatPinosAltos 40,000 2.6%
LaIndiamine 100,000 6.3%
Total 1,555,000 100.0%
28 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Miningisacomplexandunpredictablebusinessand,therefore,actualpayablegoldproductionmaydifferfromexpectations.AdverseconditionsaffectingminingormillingmayhaveamaterialadverseimpactontheCompany'sfinancialperformanceandresultsofoperations.TheCompanyanticipatesusingrevenuegeneratedbyitsoperationstofinancethecapitalexpendituresrequiredatitsmineprojects.
TheCompanymaynotachieveexpectedpayablegoldproductionlevelsasaresultofoccurrencessuchascave-ins,rockfalls,rockbursts,pitwallfailures,firesorfloodingorasaresultofotheroperationalproblemssuchasafailureofaproductionhoist,anautoclave,afilterpressoragrindingmill.Payablegoldproductionmayalsobeaffectedbyunfavorableweatherconditions,groundconditionsorseismicactivity,lowerthanexpectedoregrades,higherthanexpecteddilution,electricalpowerinterruptions,thephysicalormetallurgicalcharacteristicsoftheoreandheapleachprocessingresultingincontainmentdischarge.TheCompanyhasfailedtomeetpayablegoldproductionforecastsinthepastduetoadverseconditionssuchasrockfalls,productiondrillingchallenges,lowerthanplannedmillrecoveriesandgrades,higherthanexpecteddilution,minestructuralissuesanddelaysinthecommencementofproductionandrampupatnewmines.In2014,goldproductionwasnegativelyaffectedbytendaysofdowntimeresultingfromaproductionhoistdrivefailureatLaRonde.In2015,goldproductionwasnegativelyaffectedbylowerthanexpectedgradesatKittilaandadecisionduringtheyeartoextendtheVaultpitatMeadowbankresultinginlowerthanexpected2015production.Occurrencesofthisnatureandotheraccidents,adverseconditions,operationalproblemsorregulatorycircumstancesinfutureyearsmayresultintheCompany'sfailuretoachievecurrentorfutureproductionexpectations.
TheCompanybelievesthattheLaRondemineextensionisthedeepestoperationintheWesternHemisphere,withanexpectedmaximumdepthofover3kilometres.TheoperationsoftheLaRondemineextensionrelyoninfrastructureforhaulingoreandmaterialstothesurface,includingawinze(orinternalshaft)andaseriesoframpslinkingminingdepositstothePennaShaftthatserviceshistoricoperationsattheLaRondemine.ThedepthoftheoperationsposessignificantchallengestotheCompany,suchasgeomechanicalandseismicrisksandventilationandairconditioningrequirements,whichmayresultindifficultiesanddelaysinachievinggoldproductionobjectives.OperationsatthelowerleveloftheLaRondeminearesubjecttohighlevelsofgeomechanicalstressandtherearefewresourcesavailabletoassisttheCompanyinmodellingthegeomechanicalconditionsatthesedepths,whichmayresultintheCompanynotbeingabletoextracttheoreattheselevelsascurrentlycontemplated.In2014,tendaysofdowntimeresultingfromaproductionhoistdrivefailureresultedinannualproductionatLaRondebeingapproximately10,000ouncesbelowtheCompany'sexpectations.ThecontinuedsustainingdevelopmentoftheLaRondemineextensionissubjecttoanumberofrisksandchallenges,includingunforeseengeologicalformations,theimplementationofnewminingprocessesandengineeringandminedesignadjustments.TheseoccurrencesmayresultinoperationaldelaysandinadditionalcostsbeingincurredbytheCompanybeyondthosebudgeted.
TheCompany'sstatedmineralreservesandmineralresourcesareestimatesandnoassurancecanbegiventhattheanticipatedtonnagesandgradeswillbeachievedorthattheindicatedlevelofrecoveryofgoldwillberealized.TheoregradeactuallyrecoveredbytheCompanymaydifferfromtheexpectedgradesofthemineralreservesandmineralresources.Theestimatesofmineralreservesandmineralresourceshavebeendeterminedbasedon,amongotherthings,assumedmetalprices,foreignexchangeratesandoperatingcosts.Prolongeddeclinesinthemarketpriceofgold(orapplicableby-productmetalprices)mayrendermineralreservescontainingrelativelylowergradesofmineralizationuneconomicaltorecoverandcouldmateriallyreducetheCompany'smineralreserves.Shouldsuchreductionsoccur,theCompanymayberequiredtorecordamaterialimpairmentlossonitsinvestmentinminingpropertiesordelayordiscontinueproductionorthedevelopmentofnewprojects,resultinginnetlossesandreducedcashflow.Marketpricefluctuationsofgold(orapplicableby-productmetalprices),aswellasincreasedproductioncostsorreducedrecoveryrates,mayrendermineralreservescontainingrelativelylowergradesofmineralizationuneconomicaltorecoverandmayultimatelyresultinarestatementofmineralreservesandmineralresources.Short-termfactorsrelatingtothemineralreserve,suchastheneedfororderlydevelopmentoforebodiesortheprocessingofnewordifferentgrades,mayimpairtheprofitabilityofamineinanyparticularreportingperiod.
Mineralresourceestimatesforpropertiesthathavenotcommencedproductionoratdepositsthathavenotyetbeenexploitedarebased,inmostinstances,onverylimitedandwidelyspaceddrillholeinformation,whichisnotnecessarilyindicativeofconditionsbetweenandaroundthedrillholes.Accordingly,suchmineralresourceestimatesmayrequirerevisionasmoredrillinginformationbecomesavailableorasactualproductionexperienceisgained.
TheCompany'soperationsincludeamineinFinlandandminesinMexico.Theseoperationsareexposedtovariouslevelsofpolitical,economicandotherrisksanduncertaintiesthataredifferentfromthoseencounteredattheCompany'sCanadianproperties.Theserisksanduncertaintiesvaryfromcountrytocountryandmayinclude:extremefluctuationsincurrencyexchangerates;highratesofinflation;labourunrest;risksofwarorcivilunrest;expropriationandnationalization;
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renegotiationornullificationofexistingconcessions,licenses,permitsandcontracts;illegalmining;corruption;restrictionsonforeignexchangeandrepatriation;hostagetaking;securityissues;andchangingpoliticalconditionsandcurrencycontrols.Inaddition,theCompanymustcomplywithmultipleandpotentiallyconflictingregulationsinCanada,theUnitedStates,EuropeandMexico,includingexportrequirements,taxes,tariffs,importdutiesandothertradebarriers,aswellashealth,safetyandenvironmentalrequirements.
TheCompany'sMeadowbankmine,whichistheCompany'slargestmineintermsofproduction,islocatedintheKivalliqDistrictofNunavutinnorthernCanada,approximately70kilometresnorthofBakerLake.Inaddition,theAmaruqproperty,located50kilometresnorthwestoftheMeadowbankmine,hasbeenapprovedasasatelliteoperationtotheMeadowbankmine(pendingreceiptofrequiredpermits).TheCompanybuilta110-kilometreall-weatherroadfromBakerLake,whichprovidessummershippingaccessviaHudsonBaytotheMeadowbankmineandtheCompanyisbuildinganall-weatherroadbetweenMeadowbankandtheAmaruqproperty.However,theCompany'soperationsareconstrainedbytheremotenessofthemine,particularlyastheportofBakerLakeisonlyaccessibleapproximately2.5monthsperyear.MostofthematerialsthattheCompanyrequiresfortheoperationoftheMeadowbankmine,includingtheexplorationandpotentialdevelopmentoftheAmaruqdeposit,mustbetransportedthroughtheportofBakerLakeduringthisshippingseason,whichmaybefurthertruncatedduetoweatherconditions.IftheCompanyisnotabletoacquireandtransportnecessarysuppliesduringthistime,thismayresultinaslowdownorstoppageofoperationsattheMeadowbankmineordevelopmentoftheAmaruqdepositatMeadowbank.Furthermore,ifmajorequipmentfails,anyitemsnecessarytoreplaceorrepairsuchequipmentmayhavetobeshippedthroughBakerLakeduringthiswindow.FailuretohavethenecessarymaterialsrequiredforoperationsortorepairorreplacemalfunctioningequipmentattheMeadowbankminemayrequiretheslowdownorstoppageofoperations.
TheCompany'sMeliadineproject,located290kilometressoutheastoftheMeadowbankmine,isalsolocatedintheKivalliqDistrictofNunavut,approximately25kilometresnorthwestofthehamletofRankinInletonthewestcoastofHudsonBay.MostofthematerialsthattheCompanyrequiresforminedevelopmentmustbetransportedthroughtheportofRankinInletduringitsapproximately14-weekshippingseason.IftheCompanycannotidentifyandprocuresuitableequipmentandmaterialswithinatimeframethatpermitstransportingthemtotheprojectwithinthisshippingseason,itcouldresultindelaysand/orcostincreasesintheconstructionordevelopmentontheproperty.
RegulatoryRisk
TheCompany'sminingandmineralprocessingoperations,explorationactivitiesandpropertiesaresubjecttothelawsandregulationsoffederal,provincial,stateandlocalgovernmentsinthejurisdictionsinwhichtheCompanyoperates.Theselawsandregulationsareextensiveandgovernprospecting,exploration,development,production,exports,taxes,labourstandards,occupationalhealthandsafety,wastedisposal,toxicsubstances,environmentalprotection,minesafetyandothermatters.Compliancewithsuchlawsandregulationsincreasesthecostsofplanning,designing,drilling,developing,constructing,operating,closing,reclaimingandrehabilitatingminesandotherfacilities.Newlawsorregulations,amendmentstocurrentlawsandregulationsgoverningoperationsandactivitiesofminingcompaniesormorestringentimplementationorinterpretationthereofcouldhaveamaterialadverseimpactontheCompany,causeareductioninlevelsofproductionanddelayorpreventthedevelopmentofnewminingproperties.Regulatoryenforcement,intheformofcomplianceorinfractionnotices,hasoccurredatsomeoftheCompany'sminesand,whilethecurrentrisksrelatedtosuchenforcementarenotexpectedtobematerial,theriskoffinesorcorrectiveactioncannotberuledoutinthefuture.
Controls Evaluation
TheCompany'smanagementisresponsibleforestablishingandmaintainingadequateinternalcontroloverfinancialreporting("ICFR")anddisclosurecontrolsandprocedures("DC&P").
ICFRisaframeworkdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithIFRS.ManagementhasusedtheInternal Control – Integrated Framework issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommissionin2013("COSO")inordertoassesstheeffectivenessoftheCompany'sICFR.
DC&PformabroaderframeworkdesignedtoprovidereasonableassurancethatinformationrequiredtobedisclosedbytheCompanyinitsannualandinterimfilingsandotherreportsfiledundersecuritieslegislationisrecorded,processed,summarizedandreportedwithinthetimeframespecifiedinsecuritieslegislationandincludescontrolsandproceduresdesignedtoensurethatinformationrequiredtobedisclosedbytheCompanyinitsannualandinterimfilingsandotherreportssubmittedundersecuritieslegislationisaccumulatedandcommunicatedtotheCompany'smanagementtoallowtimelydecisionsregardingrequireddisclosure.
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Together,theICFRandDC&Pframeworksprovideinternalcontroloverfinancialreportinganddisclosure.TheCompanymaintainsdisclosurecontrolsandproceduresthataredesignedtoprovidereasonableassurancethatinformation,whichisrequiredtobedisclosedintheCompany'sannualandinterimfilingsandotherreportsfiledundersecuritieslegislation,isaccumulatedandcommunicatedinatimelyfashion.Duetotheirinherentlimitations,theCompanyacknowledgesthat,nomatterhowwelldesigned,ICFRandDC&Pcanprovideonlyreasonableassuranceofachievingthedesiredcontrolobjectivesandassuchmaynotpreventordetectallmisstatements.Further,theeffectivenessofICFRissubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewithpoliciesorproceduresmaychange.
TheCompanyhasretrospectivelyreviewedandevaluatedtheeffectivenessofthedesignandoperationofitscontrolsandproceduresrelatedtotheimpairmenttestingofitslong-livedassets(specifically,property,plant&minedevelopmentandgoodwill)andhasconcludedithadnotmaintainedeffectiveinternalcontroloverfinancialreportingasofDecember31,2015.Specifically,acontrolemployedbytheCompanyinitsreviewandevaluationofcertainassumptionsemployedindeterminingtherecoverableamountofcashgeneratingunitssubjecttoimpairmenttestingwasnotdesignedwithsufficientprecisiontopreventordetectapotentialmaterialerrorintheCompany'sfinancialinformation.ThisresultedinareasonablepossibilitythatamaterialmisstatementintheCompany'sconsolidatedfinancialstatementsrelatedtoimpairmenttestingonlong-livedassetswouldnothavebeenpreventedordetectedonatimelybasis.
Therefore,managementhasconcludedthatapreviouslyunreportedmaterialweaknessexistedinthisreviewcontrolasofDecember31,2015.Amaterialweaknessisadeficiency,orcombinationofdeficiencies,inICFR,suchthatthereisareasonablepossibilitythatamaterialmisstatementoftheCompany'sannualorinterimfinancialstatementswillnotbepreventedordetectedonatimelybasis.ThematerialweaknessidentifieddidnotresultinanyidentifiedmisstatementorerrorintheCompany'sconsolidatedfinancialstatementsasatandfortheyearendedDecember31,2015andtherewerenochangesintheCompany'spreviouslyreleasedfinancialstatements.TheCompanyadvisesthatbecauseofthematerialweakness,itsICFRandDC&PwereineffectiveasofDecember31,2015andcontinuedtobeineffectiveuntilthematerialweaknesswasremediatedasdescribedbelow.
InordertoaddressthematerialweaknessidentifiedasofDecember31,2015,thecontrolsrelatedtoimpairmenttestingoflong-livedassetshavebeenre-designedforthe2016year-endimpairmentprocess,andadditionalcontrolshavebeenintroduced,toincreasetheprecisionlevelofthereviewofkeyassumptionstopreventordetecterror.Amaterialweaknessisnotconsideredremediateduntiltheapplicableremedialcontrolsoperateforasufficientperiodoftime.ThecontrolsrelatingtoimpairmenttestingweretestedasofDecember31,2016andmanagementhasconcluded,throughthistesting,thatthesecontrolsareoperatingeffectively.Basedontheseefforts,theidentifiedmaterialweaknessrelatingtointernalcontrolsoverimpairmenttestingoflong-livedassetshasbeenremediated.
Thechangesimplementedhavenotmateriallyaffected,andarenotreasonablylikelytomateriallyaffect,theCompany'sICFRinotherrespects.TheCompany'smanagement,underthesupervisionoftheCompany'sChiefExecutiveOfficerandChiefFinancialOfficer,hasevaluatedtheeffectivenessofitsICFRandDC&PasatDecember31,2016.Basedonthisevaluation,managementconcludedthattheCompany'scorrectedICFRandDC&PwereeffectiveasatDecember31,2016.
Outstanding Securities
ThefollowingtablesetsoutthemaximumnumberofcommonsharesthatwouldbeoutstandingifalldilutiveinstrumentsoutstandingatMarch13,2017wereexercised:
CommonsharesoutstandingatMarch13,2017 224,932,981
Employeestockoptions 7,050,128
CommonsharesheldinatrustinconnectionwiththeRestrictedShareUnitplan,PerformanceShareUnitplanandLongTermIncentivePlan 949,422
Total 232,932,531
Governance
AgnicoEagle'sSustainableDevelopmentPolicy,revisedbytheBoardofDirectorsin2016,formallyoutlinestheguidingprinciplesandcommitmentsthattheCompanystrivestouphold.TheSustainableDevelopmentPolicyisbasedonfour
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fundamentalvaluesofsustainabledevelopmentatAgnicoEagle:respectfortheCompany'semployees;protectionoftheenvironment;safeoperations;andrespectfortheCompany'scommunities.
Sustainable Development Management
In2016,theCompanycontinuedtheprocessofincorporatinghealth,safetyandenvironmentalsustainabilityintoallaspectsandstagesofitsbusiness,fromthecorporateobjectivesandexecutiveresponsibilityof'maintaininghighstandardsinsustainability'toexplorationandacquisitionactivities,daytodayoperatingandsiteclosure.Thisintegrationbeganin2012withtheadoptionofanintegratedHealth,Safety,EnvironmentandSocialAcceptabilityPolicy(the"SustainableDevelopmentPolicy")thatreflectstheCompany'scommitmenttoresponsibleminingpractices.TheCompanybelievesthattheSustainableDevelopmentPolicywillleadtotheachievementofmoresustainablepracticesthroughoversightandaccountability.
TheSustainableDevelopmentPolicyoperatesthroughthedevelopmentandimplementationofaformalandintegratedHealth,SafetyandEnvironmentalManagementSystem,termedtheResponsibleMiningManagementSystem(the"RMMS"),acrossalldivisionsoftheCompany.ThePartnershiphascommittedtoimplementingtheRMMSatCanadianMalarticinthefuture.TheaimoftheRMMSistopromoteacultureofaccountabilityandleadershipinmanaginghealth,safety,environmentalandsocialacceptabilitymatters.RMMSimplementationissupportedbysoftwarewidelyusedintheCanadianminingindustrythatisconsistentwiththeISO14001EnvironmentalManagementSystemandtheOHSAS18001HealthandSafetyManagementSystem.
TheRMMSincorporatestheCompany'scommitmentsasasignatorytotheCyanideCode,avoluntaryprogramthataddressesthesafeproduction,transport,storage,handlinganddisposalofcyanide.TheCompanybecameasignatorytotheCyanideCodeinSeptember2011.
TheRMMSalsointegratestherequirementsoftheMiningAssociationofCanada'sindustry-leadingTowardsSustainableMiningInitiative(the"TSMInitiative"),aswellastheGlobalReportingInitiative'ssustainabilityreportingguidelinesfortheminingindustry.InDecember2010,theCompanybecameamemberoftheMiningAssociationofCanadaandendorsedtheTSMInitiative.TheTSMInitiativewasdevelopedtohelpminingcompaniesevaluatethequality,comprehensivenessandrobustnessoftheirmanagementsystemsundersixperformanceelements:crisismanagement;energyandgreenhousegasemissionsmanagement;tailingsmanagement;biodiversityconservationmanagement;healthandsafety;andaboriginalrelationsandcommunityoutreach.
TheCompanyhasadoptedandimplementedtheWorldGoldCouncil'sConflict-FreeGoldStandard.ThisimplementationwasinitiatedonJanuary1,2013.
Employee Health and Safety
TheCompany'soverallhealthandsafetyperformance,asmeasuredbyaccidentfrequency,improvedduring2016.Acombinedlost-timeandrestrictedworkaccidentfrequencyrate(excludingtheCanadianMalarticmine)of1.04wasachieved,a15%reductionfromthe2015rateof1.23andsubstantiallybelowthetargetrateof1.40.ThisisthebestcombinedaccidentfrequencyrateeverrecordedbytheCompany.Extensivehealthandsafetytrainingwasalsoprovidedtoemployeesduring2016.
OneofthemeasuresimplementedbytheCompanytoimprovesafetyperformanceistheworkplacesafetycardsystem.ThissystemwasimplementedacrossalloftheCompany'soperations,inCanadaandabroad,tostrengthentherisk-basedtrainingprogram.DevelopedbytheQuebecMiningAssociation(the"AMQ"),thesafetycardsystemteachesworkersandsupervisorstouserisk-basedthinkingintheirduties.Workersandtheirsupervisorsmustmeeteverydaytodiscusson-the-jobhealthandsafetymatters.ThesafetycardsystemalsoallowstheCompany'sworkersandsupervisorstodocumentdailyinspectionsandrecordobservationsonconditionsintheworkplace,aswellasthenatureofrisks,issuesandotherrelevantinformation.Inaddition,itallowssupervisorstoexchangeandanalyzeallrelevantinformationbetweenshiftsandvarioustechnicalservicestoimproveefficiencyandsafety.
In2016,theAMQacknowledgedtheCompany'sstrongperformanceintheareaofhealthandsafety,recognizing28oftheCompany'ssupervisorsfromtheLaRonde,LapaandGoldexminesforkeepingtheirworkerssafe.ThesupervisorsreceivedAMQsecuritytrophyawardsfor50,000ormorehourssupervisedwithoutalost-timeaccident.Together,thisgroupof28supervisorsachievedmorethan2,000,000hourssupervisedwithoutalost-timeaccidentforamemberoftheircrew.
EachoftheCompany'sminingoperationshasitsownEmergencyResponsePlanandhaspersonneltrainedtorespondtosafety,fireandenvironmentalemergencies.Eachminealsomaintainstheappropriateresponseequipment.In2014,the
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corporatecrisismanagementplanwasupdatedtoalignwithindustrybestpracticesandtheTSMInitiativerequirements.Emergencyresponsesimulationswerealsoperformedatalldivisions.TheTSMInitiativealsocontainsaHealthandSafetyprotocol.
TheCanadianMalarticmine'scombinedaccidentfrequencyratein2016was1.4,comparedtoanobjectiveof1.2,andcomparedtothe2015rateof1.28.
Community
TheCompany'sgoal,ateachofitsoperationsworldwide,istohireasmuchofitsworkforceaspossible,includingmanagementteams,directlyfromthelocalregioninwhichtheoperationislocated.In2016,theoverallcompanyaverageforlocalhiringwas76%.TheCompanybelievesthatprovidingemploymentisoneofthemostsignificantcontributionsitcanmaketothecommunitiesinwhichitoperates.
TheCompanycontinueditseffortsincommunitydevelopmentagreementsinNunavut.In2015,theMeadowbankIIBAwasrenewedandtheMeliadineIIBAwassigned.In2016,theCompanycontinueditsdialoguewithFirstNationsintheAbitibiregion.ThePartnershiphasenteredintonegotiationswithFirstNationsaroundtheKirklandLakeprojectandhasalsoinitiatedadialoguewithFirstNationsintheAbitibiregion.
TheCanadianMalarticminecontinueditscontributiontotheeconomicdevelopmentfund(FEMO)whichwasestablishedpriortominedevelopmenttodiversifythelocaleconomythroughouttheminelifesothatthetownofMalarticiswellequippedtofacetheeventualmineclosure.TheCanadianMalarticminehasalsoparticipatedinforumsinitiatedbythetowncouncilonthefutureofthetownofMalartic.Approximately98%ofthehiringin2016attheCanadianMalarticminewasfromthelocalarea.
In2016,theCompanycontinueditssupportoftheKivalliqMineTrainingSocietyandfortheuniqueupwardmobilitytrainingprogramforInuitemployeesdevelopedatMeadowbank.ThisprogramprovidestrainingandcareerpathopportunitiesforInuitwithlimitededucationandworkexperienceintheareaofheavyequipmentoperations,milloperationsandsiteservices.SkillsacquiredthroughtheprogramareeasilytransferabletoothersectorsoftheNunavuteconomy.
Fortheeighthyearinarow,thePinosAltosminewascertifiedasaSociallyResponsibleCompanybytheMexicanCentreforPhilanthropy(CentroMexicanoparalaFilantrop?ia)andtheAllianceforSocialResponsibilityofEnterprises(AlianzaporlaResponsabilidadSocialEmpresarialenMexico).ThiscertificationrecognizestheexcellenceofthesocialresponsibilitypracticesatthePinosAltosmine.
TheCompanycontinuestosupportanumberofcommunityhealthandeducationalinitiativesintheregionsurroundingthePinosAltosmine,includingtheestablishmentofalocalsewingcooperativeanddonatingmaterialfortheconstructionofnewclassroomsorfortherepairofexistingclassrooms.
Environment
TheCompany'sexplorationactivitiesandminingandprocessingoperationsaresubjecttothefederal,state,provincial,territorial,regionalandlocalenvironmentallawsandregulationsinthejurisdictionsinwhichtheCompany'sactivitiesandfacilitiesarelocated.Theseincluderequirementsforplanningandimplementingtheclosureandreclamationofminingpropertiesandrelatedfinancialassurance.Eachmineissubjecttoenvironmentalassessmentandpermittingprocessesduringdevelopmentand,inoperation,hasanenvironmentalmanagementsystemconsistentwithISO140001aswellasaninternalauditprogram.TheCompanyworkscloselywithregulatoryauthoritiesineachjurisdictionwhereitoperatestoensureongoingcompliance.
TheCompanyhasreportedgreenhousegasemissionsandclimatechangeriskfactorsannuallytotheCarbonDisclosureProjectsince2007.
In2015,EnvironmentCanadachargedtheCompanywithtwoinfractionsundertheFisheries Act inrelationtoaseepageincidentattheMeadowbankminethatwasidentifiedduringaJuly2013on-siteinspection.Monitoringdataindicatedthatthe2013seepageeventdidnotaffectthewaterqualityofthedownstreamSecondPortageLake.Discussionsareunderwaytoattempttoresolvethematterbut,ifunsuccessful,atrialwouldnotlikelyoccuruntil2018.
In2016,theCanadianMalarticminereceivedonenon-complianceblastnoticeand12non-compliancenoisenotices(whichincludesnoticesreceivedininstanceswherenoiselevelswereotherwisewithinthemunicipalnoiselimits),adecreasefromthe25infractionsreceivedin2015.Themine'steamofon-siteenvironmentalexpertscontinuetomonitorregulatory
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complianceintermsofapprovals,permitsandobservanceofdirectivesandrequirementsandcontinuetoimplementimprovementmeasures.
Critical IFRS Accounting Policies and Accounting Estimates
AgnicoEagle'ssignificantIFRSaccountingpoliciesaredisclosedintheSummaryofSignificantAccountingPoliciesnotetotheconsolidatedfinancialstatements.
ThepreparationoftheconsolidatedfinancialstatementsinaccordancewithIFRSrequiresmanagementtomakeestimatesandjudgmentsthataffectthereportedamountsofassets,liabilities,revenuesandexpenses.Inmakingjudgmentsaboutthecarryingvalueofassetsandliabilities,theCompanyusesestimatesbasedonhistoricalexperienceandassumptionsthatareconsideredreasonableinthecircumstances.AlthoughtheCompanyevaluatesitsaccountingestimatesperiodically,actualresultsmaydifferfromtheseestimates.
TheCompanybelievesthefollowingcriticalaccountingpoliciesrelatetoitsmoresignificantjudgmentsandestimatesusedinthepreparationofitsconsolidatedfinancialstatements.ManagementhasdiscussedthedevelopmentandselectionofthefollowingcriticalaccountingpolicieswiththeAuditCommitteewhichhasreviewedtheCompany'sdisclosureinthisMD&A.
DerivativeInstrumentsandHedgeAccounting
TheCompanyusesderivativefinancialinstruments(primarilyoptionandforwardcontracts)tomanageexposuretofluctuationsinby-productmetalprices,interestratesandforeigncurrencyexchangeratesandmayusesuchmeanstomanageexposuretocertaininputcosts.TheCompanydoesnotholdfinancialinstrumentsorderivativefinancialinstrumentsfortradingpurposes.
TheCompanyrecognizesallderivativefinancialinstrumentsintheconsolidatedfinancialstatementsatfairvalueregardlessofthepurposeorintentforholdingtheinstrument.Changesinthefairvalueofderivativefinancialinstrumentsareeitherrecognizedperiodicallyintheconsolidatedstatementsofincomeandcomprehensiveincomeorinequityasacomponentofaccumulatedothercomprehensiveincome,dependingonthenatureofthederivativefinancialinstrumentandwhetheritqualifiesforhedgeaccounting.Financialinstrumentsdesignatedashedgesaretestedforeffectivenessateachreportingperiod.Realizedgainsandlossesonthosecontractsthatareproventobeeffectivearereportedasacomponentoftherelatedtransaction.
Goodwill
Goodwillisrecognizedinabusinesscombinationifthecostoftheacquisitionexceedsthefairvaluesoftheidentifiablenetassetsacquired.Goodwillisthenallocatedtothecashgeneratingunit("CGU")orgroupofCGUsthatareexpectedtobenefitfromthesynergiesofthecombination.ACGUisthesmallestidentifiablegroupofassetsthatgeneratescashinflowswhicharelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets.
TheCompanyperformsgoodwillimpairmenttestsonanannualbasisasatDecember31eachyear.Inaddition,theCompanyassessesforindicatorsofimpairmentateachreportingperiodendand,ifanindicatorofimpairmentisidentified,goodwillistestedforimpairmentatthattime.IfthecarryingvalueoftheCGUorgroupofCGUstowhichgoodwillisassignedexceedsitsrecoverableamount,animpairmentlossisrecognized.Goodwillimpairmentlossesarenotreversed.
TherecoverableamountofaCGUorgroupofCGUsismeasuredasthehigherofvalueinuseandfairvaluelesscostsofdisposal.
MiningProperties,PlantandEquipmentandMineDevelopmentCosts
Miningproperties,plantandequipmentandminedevelopmentcostsarerecordedatcost,lessaccumulatedamortizationandaccumulatedimpairmentlosses.
Mining Properties
Thecostofminingpropertiesincludesthefairvalueattributabletoprovenandprobablemineralreservesandmineralresourcesacquiredinabusinesscombinationorassetacquisition,undergroundminedevelopmentcosts,deferredstripping,capitalizedexplorationandevaluationcostsandcapitalizedborrowingcosts.
Significantpaymentsrelatedtotheacquisitionoflandandmineralrightsarecapitalizedasminingpropertiesatcost.Ifamineableorebodyisdiscovered,suchcostsareamortizedtoincomewhencommercialproductioncommences,usingthe
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units-of-productionmethod,basedonestimatedprovenandprobablemineralreserves.Ifnomineableorebodyisdiscovered,suchcostsareexpensedintheperiodinwhichitisdeterminedthatthepropertyhasnofutureeconomicvalue.Costcomponentsofaspecificprojectthatareincludedinthecapitalcostoftheassetincludesalariesandwagesdirectlyattributabletotheproject,suppliesandmaterialsusedintheproject,andincrementaloverheadcoststhatcanbedirectlyattributabletotheproject.
Assetsunderconstructionarenotamortizeduntiltheendoftheconstructionperiodoroncecommercialproductionisachieved.Uponachievingtheproductionstage,thecapitalizedconstructioncostsaretransferredtotheappropriatecategoryofplantandequipment.
Plant and Equipment
Expendituresfornewfacilitiesandimprovementsthatcanextendtheusefullivesofexistingfacilitiesarecapitalizedasplantandequipmentatcost.Thecostofanitemofplantandequipmentincludes:itspurchaseprice,includingimportdutiesandnon-refundablepurchasetaxes,afterdeductingtradediscountsandrebates;anycostsdirectlyattributabletobringingtheassettothelocationandconditionnecessaryforittobecapableofoperatinginthemannerintendedbymanagement;andtheestimateofthecostsofdismantlingandremovingtheitemandrestoringthesiteonwhichitislocatedotherthancoststhatariseasaconsequenceofhavingusedtheitemtoproduceinventoriesduringtheperiod.
Anitemofproperty,plantandequipmentisderecognizedupondisposalorwhennofutureeconomicbenefitsareexpectedfromitsuseordisposal.Anygainorlossarisingonderecognitionoftheasset(calculatedasthedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheasset)isincludedinstatementofprofitorlossandothercomprehensiveincomewhentheassetisderecognized.
Amortizationofanassetbeginswhentheassetisinthelocationandconditionnecessaryforittooperateinthemannerintendedbymanagement.Amortizationceasesattheearlierofthedatetheassetisclassifiedasheldforsaleorthedatetheassetisderecognized.Assetsunderconstructionarenotamortizeduntiltheendoftheconstructionperiod.Amortizationischargedaccordingtoeithertheunits-of-productionmethodoronastraight-linebasis,accordingtothepatterninwhichtheasset'sfutureeconomicbenefitsareexpectedtobeconsumed.Theamortizationmethodappliedtoanassetisreviewedatleastannually.
Usefullivesofproperty,plantandequipmentarebasedonestimatedminelivesasdeterminedbyprovenandprobablemineralreserves.RemainingminelivesatDecember31,2016rangefrom1to18years.
Mine Development Costs
Minedevelopmentcostsincurredafterthecommencementofproductionarecapitalizedwhentheyareexpectedtohaveafutureeconomicbenefit.Activitiesthataretypicallycapitalizedincludecostsincurredtobuildshafts,drifts,rampsandaccesscorridorswhichenabletheCompanytoextractoreunderground.
TheCompanyrecordsamortizationonundergroundminedevelopmentcostsonaunits-of-productionbasisbasedontheestimatedtonnageofprovenandprobablemineralreservesoftheidentifiedcomponentoftheorebody.Theunits-of-productionmethoddefinesthedenominatorasthetotaltonnageofprovenandprobablemineralreserves.
Deferred Stripping
Inopenpitminingoperations,itisnecessarytoremoveoverburdenandotherwastematerialstoaccessorefromwhichmineralscanbeextractedeconomically.Theprocessofminingoverburdenandwastematerialsisreferredtoasstripping.
Duringthedevelopmentstageofthemine,strippingcostsarecapitalizedaspartofthecostofbuilding,developingandconstructingthemineandareamortizedoncetheminehasenteredtheproductionstage.
Duringtheproductionstageofamine,strippingcostsarerecordedasapartofthecostofinventoriesunlessthesecostsareexpectedtoprovideafutureeconomicbenefitand,insuchcases,arecapitalizedtoproperty,plantandminedevelopment.
Productionstagestrippingcostsprovideafutureeconomicbenefitwhen:
• Itisprobablethatthefutureeconomicbenefit(e.g.,improvedaccesstotheorebody)associatedwiththestrippingactivitywillflowtotheCompany;
• TheCompanycanidentifythecomponentoftheorebodyforwhichaccesshasbeenimproved;and
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• Thecostsrelatingtothestrippingactivityassociatedwiththatcomponentcanbemeasuredreliably.
Capitalizedproductionstagestrippingcostsareamortizedovertheexpectedusefullifeoftheidentifiedcomponentoftheorebodythatbecomesmoreaccessibleasaresultofthestrippingactivity.
Borrowing Costs
Borrowingcostsarecapitalizedtoqualifyingassets.QualifyingassetsareassetsthattakeasubstantialperiodoftimetopreparefortheCompany'sintendeduse,whichincludesprojectsthatareintheexplorationandevaluation,developmentorconstructionstages.
Borrowingcostsattributabletotheacquisition,constructionorproductionofqualifyingassetsareaddedtothecostofthoseassetsuntilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduse.Allotherborrowingcostsarerecognizedasfinancecostsintheperiodinwhichtheyareincurred.Wherethefundsusedtofinanceaqualifyingassetformpartofgeneralborrowings,theamountcapitalizediscalculatedusingaweightedaverageofratesapplicabletotherelevantborrowingsduringtheperiod.
Leases
Thedeterminationofwhetheranarrangementis,orcontains,aleaseisbasedonthesubstanceofthearrangementattheinceptiondate,includingwhetherthefulfillmentofthearrangementisdependentontheuseofaspecificassetorassetsorwhetherthearrangementconveysarighttousetheasset.
LeasingarrangementsthattransfersubstantiallyalltherisksandrewardsofownershipoftheassettotheCompanyareclassifiedasfinanceleases.Financeleasesarerecordedasanassetwithacorrespondingliabilityatanamountequaltothelowerofthefairvalueoftheleasedassetsandthepresentvalueoftheminimumleasepayments.Eachleasepaymentisallocatedbetweentheliabilityandfinancecostsusingtheeffectiveinterestratemethod,wherebyaconstantrateofinterestexpenseisrecognizedonthebalanceoftheliabilityoutstanding.Theinterestelementoftheleaseischargedtotheconsolidatedstatementofincomeasafinancecost.Anassetleasedunderafinanceleaseisamortizedovertheshorteroftheleasetermanditsusefullife.
Allotherleasesarerecognizedasoperatingleases.Operatingleasepaymentsarerecognizedasanoperatingexpenseintheconsolidatedstatementsofincomeonastraight-linebasisovertheleaseterm.
DevelopmentStageExpenditures
Developmentstageexpendituresarecostsincurredtoobtainaccesstoprovenandprobablemineralreservesandprovidefacilitiesforextracting,treating,gathering,transportingandstoringtheminerals.Thedevelopmentstageofaminecommenceswhenthetechnicalfeasibilityandcommercialviabilityofextractingthemineralresourcehasbeendetermined.Coststhataredirectlyattributabletominedevelopmentarecapitalizedasproperty,plantandminedevelopmenttotheextentthattheyarenecessarytobringthepropertytocommercialproduction.
Abnormalcostsareexpensedasincurred.Indirectcostsareincludedonlyiftheycanbedirectlyattributedtotheareaofinterest.Generalandadministrativecostsarecapitalizedaspartofthedevelopmentexpenditureswhenthecostsaredirectlyattributedtoaspecificminingdevelopmentproject.
Commercial Production
Amineconstructionprojectisconsideredtohaveenteredtheproductionstagewhenthemineconstructionassetsareavailableforuse.Indeterminingwhethermineconstructionassetsareconsideredavailableforuse,thecriteriaconsideredinclude,butarenotlimitedto,thefollowing:
• Completionofareasonableperiodoftestingmineplantandequipment;
• Abilitytoproducemineralsinsaleableform(withinspecifications);and
• Abilitytosustainongoingproductionofminerals.
Whenamineconstructionprojectmovesintotheproductionstage,amortizationcommences,thecapitalizationofcertainmineconstructioncostsceasesandexpendituresareeithercapitalizedtoinventoriesorexpensedasincurred.Exceptionsincludecostsincurredforadditionsorimprovementstoproperty,plantandminedevelopmentandopen-pitstrippingactivities.
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ImpairmentofLong-livedAssets
AttheendofeachreportingperiodtheCompanyassesseswhetherthereisanyindicationthatlong-livedassetsmaybeimpaired.Ifanindicatorofimpairmentexists,therecoverableamountoftheassetiscalculatedinordertodetermineifanyimpairmentlossisrequired.Ifitisnotpossibletoestimatetherecoverableamountoftheindividualasset,assetsaregroupedattheCGUlevelforthepurposeofassessingtherecoverableamount.AnimpairmentlossisrecognizedforanyexcessofthecarryingamountoftheCGUoveritsrecoverableamount.TheimpairmentlossrelatedtoaCGUisfirstallocatedtogoodwillandtheremaininglossisallocatedonapro-ratabasistotheremaininglong-livedassetsoftheCGUbasedontheircarryingamounts.
Anyimpairmentchargethatistakenonalong-livedassetexceptgoodwillisreversediftherearesubsequentchangesintheestimatesorsignificantassumptionsthatwereusedtorecognizetheimpairmentlossthatresultinanincreaseintherecoverableamountoftheCGU.Ifanindicatorofimpairmentreversalhasbeenidentified,arecoveryshouldberecognizedtotheextenttherecoverableamountoftheassetexceedsitscarryingamount.Theamountofthereversalislimitedtothedifferencebetweenthecurrentcarryingamountandtheamountwhichwouldhavebeenthecarryingamounthadtheearlierimpairmentnotbeenrecognizedandamortizationofthatcarryingamounthadcontinued.Impairmentsandsubsequentreversalsarerecordedintheconsolidatedstatementofincomeintheperiodinwhichtheyoccur.
ReclamationProvisions
Assetretirementobligations("AROs")arisefromtheacquisition,developmentandconstructionofminingpropertiesandplantandequipmentduetogovernmentcontrolsandregulationsthatprotecttheenvironmentontheclosureandreclamationofminingproperties.ThemajorpartsofthecarryingamountofAROsrelatetotailingsandheapleachpadclosureandrehabilitation,demolitionofbuildingsandminefacilities,ongoingwatertreatmentandongoingcareandmaintenanceofclosedmines.TheCompanyrecognizesanAROatthetimetheenvironmentaldisturbanceoccursoraconstructiveobligationisdeterminedtoexistbasedontheCompany'sbestestimateofthetimingandamountofexpectedcashflowsexpectedtobeincurred.WhentheAROprovisionisrecognized,thecorrespondingcostiscapitalizedtotherelateditemofproperty,plantandminedevelopment.Reclamationprovisionsthatresultfromdisturbanceinthelandtoextractoreinthecurrentperiodisincludedinthecostofinventories.
Thetimingoftheactualenvironmentalremediationexpendituresisdependentonanumberoffactorssuchasthelifeandnatureoftheasset,theoperatinglicenceconditionsandtheenvironmentinwhichthemineoperates.Reclamationprovisionsaremeasuredattheexpectedvalueoffuturecashflowsdiscountedtotheirpresentvalueusingarisk-freeinterestrate.AROsareadjustedeachperiodtoreflectthepassageoftime(accretion).Accretionexpenseisrecordedinfinancingcostseachperiod.UponsettlementofanARO,theCompanyrecordsagainorlossiftheactualcostdiffersfromthecarryingamountoftheARO.Settlementgainsorlossesarerecordedintheconsolidatedstatementsofincome.
Expectedcashflowsareupdatedtoreflectchangesinfactsandcircumstances.Theprincipalfactorsthatcancauseexpectedcashflowstochangearetheconstructionofnewprocessingfacilities,changesinthequantitiesofmaterialinprovenandprobablemineralreservesandacorrespondingchangeinthelife-of-mineplan,changingorecharacteristicsthatimpactrequiredenvironmentalprotectionmeasuresandrelatedcosts,changesinwaterqualitythatimpacttheextentofwatertreatmentrequiredandchangesinlawsandregulationsgoverningtheprotectionoftheenvironment.
Eachreportingperiod,provisionsforAROsarere-measuredtoreflectanychangestosignificantassumptions,includingtheamountandtimingofexpectedcashflowsandrisk-freeinterestrates.Changestothereclamationprovisionresultingfromchangesinestimateareaddedtoordeductedfromthecostoftherelatedasset,exceptwherethereductionofthereclamationprovisionexceedsthecarryingvalueoftherelatedassetsinwhichcasetheassetisreducedtonilandtheremainingadjustmentisrecognizedintheconsolidatedstatementsofincome.
Environmentalremediationliabilities("ERLs")aredifferentiatedfromAROsinthatERLsdonotarisefromenvironmentalcontaminationinthenormaloperationofalong-livedassetorfromalegalorconstructiveobligationtotreatenvironmentalcontaminationresultingfromtheacquisition,constructionordevelopmentofalong-livedasset.TheCompanyisrequiredtorecognizealiabilityforobligationsassociatedwithERLsarisingfrompastacts.ERLsaremeasuredbydiscountingtheexpectedrelatedcashflowsusingarisk-freeinterestrate.TheCompanypreparesestimatesofthetimingandamountofexpectedcashflowswhenanERLisincurred.Eachreportingperiod,theCompanyassessescostestimatesandotherassumptionsusedinthevaluationofERLstoreflectevents,changesincircumstancesandnewinformationavailable.ChangesinthesecostestimatesandassumptionshaveacorrespondingimpactonthevalueoftheERL.AnychangeinthevalueofERLsresultsinacorrespondingchargeorcredittotheconsolidatedstatementsofincome.Uponsettlementofan
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ERL,theCompanyrecordsagainorlossiftheactualcostdiffersfromthecarryingamountoftheERLintheconsolidatedstatementsofincome.
Stock-basedCompensation
TheCompanyoffersequity-settledawards(theemployeestockoptionplan,incentivesharepurchaseplan,restrictedshareunitplanandperformanceshareunitplan)tocertainemployees,officersanddirectorsoftheCompany.
Employee Stock Option Plan ("ESOP")
TheCompany'sESOPprovidesforthegrantingofoptionstodirectors,officers,employeesandserviceproviderstopurchasecommonshares.Optionshaveexercisepricesequaltothemarketpriceonthedaypriortothedateofgrant.Thefairvalueoftheseoptionsisrecognizedintheconsolidatedstatementsofincomeandcomprehensiveincomeorintheconsolidatedbalancesheetsifcapitalizedaspartofproperty,plantandminedevelopmentovertheapplicablevestingperiodasacompensationcost.Anyconsiderationpaidbyemployeesonexerciseofoptionsorpurchaseofcommonsharesiscreditedtosharecapital.
FairvalueisdeterminedusingtheBlack-Scholesoptionvaluationmodel,whichrequirestheCompanytoestimatetheexpectedvolatilityoftheCompany'ssharepriceandtheexpectedlifeofthestockoptions.Limitationswithexistingoptionvaluationmodelsandtheinherentdifficultiesassociatedwithestimatingthesevariablescreatedifficultiesindeterminingareliablesinglemeasureofthefairvalueofstockoptiongrants.Thecostisrecordedoverthevestingperiodoftheawardtothesameexpensecategoryoftheawardrecipient'spayrollcostsandthecorrespondingentryisrecordedinequity.Equity-settledawardsarenotre-measuredsubsequenttotheinitialgrantdate.ThedilutiveimpactofstockoptiongrantsisfactoredintotheCompany'sreporteddilutednetincomepershare.Thestockoptionexpenseincorporatesanexpectedforfeiturerate,estimatedbasedonexpectedemployeeturnover.
Incentive Share Purchase Plan ("ISPP")
UndertheISPP,directors(excludingnon-executivedirectors),officersandemployees(theparticipants)oftheCompanymaycontributeupto10.0%oftheirbasicannualsalariesandtheCompanycontributesanamountequalto50.0%ofeachparticipant'scontribution.AllcommonsharessubscribedforundertheISPPareissuedbytheCompany.
TheCompanyrecordsanexpenseequaltoitscashcontributiontotheISPP.Noforfeiturerateisappliedtotheamountsaccrued.Whereanemployeeleavespriortothevestingdate,anyaccrualforcontributionsbytheCompanyduringthevestingperiodrelatedtothatemployeeisreversed.
Restricted Share Unit ("RSU") Plan
TheRSUplanisopentodirectorsandcertainemployees,includingseniorexecutives,oftheCompany.Commonsharesarepurchasedandheldinatrustuntiltheyhavevested.Thecostisrecordedoverthevestingperiodoftheawardtothesameexpensecategoryastheawardrecipient'spayrollcosts.ThecostoftheRSUsisrecordedwithinequityuntilsettled.Equity-settledawardsarenotremeasuredsubsequenttotheinitialgrantdate.
Performance Share Unit ("PSU") Plan
ThePSUplanisopentoseniorexecutivesoftheCompany.Commonsharesarepurchasedandheldinatrustuntiltheyhavevested.PSUsaresubjecttovestingrequirementsbasedonspecificperformancemeasurementsbytheCompany.ThefairvaluefortheportionofthePSUsrelatedtomarketconditionsisbasedontheapplicationofpricingmodelsatthegrantdateandthefairvaluefortheportionrelatedtonon-marketconditionsisbasedonthemarketvalueofthesharesatthegrantdate.CompensationexpenseisbasedonthecurrentbestestimateoftheoutcomeforthespecificperformancemeasurementestablishedbytheCompanyandisrecognizedoverthevestingperiodbasedonthenumberofPSUsestimatedtovest.
RevenueRecognition
Revenuefromminingoperationsconsistsofgoldrevenues,netofsmelting,refining,transportationandothermarketingcharges.Revenuesfromby-productmetalsalesareshownnetofsmelterchargesaspartofrevenuesfromminingoperations.
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Revenuefromthesaleofgoldandsilverisrecognizedwhenthefollowingconditionshavebeenmet:
• TheCompanyhastransferredtothebuyerthesignificantrisksandrewardsofownership;
• TheCompanyretainsneithercontinuingmanagerialinvolvementtothedegreeusuallyassociatedwithownershipnoreffectivecontroloverthegoodssold;
• Theamountofrevenuecanbemeasuredreliably;
• ItisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheCompany;and
• Thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.
Revenuefromgoldandsilverintheformofdorebarsisrecordedwhentherefinedgoldorsilverissoldanddeliveredtothecustomer.Generally,allofthegoldandsilverintheformofdorebarsrecoveredintheCompany'smillingprocessissoldintheperiodinwhichitisproduced.
UnderthetermsoftheCompany'sconcentratesalescontractswiththird-partysmelters,finalpricesforthemetalscontainedintheconcentratearedeterminedbasedontheprevailingspotmarketmetalpricesonaspecifiedfuturedate,whichisestablishedasofthedatethattheconcentrateisdeliveredtothesmelter.TheCompanyrecordsrevenuesunderthesecontractsbasedonforwardpricesatthetimeofdelivery,whichiswhentherisksandrewardsofownershipoftheconcentratepassestothethird-partysmelters.Thetermsofthecontractsresultindifferencesbetweentherecordedestimatedpriceatdeliveryandthefinalsettlementprice.Thesedifferencesareadjustedthroughrevenueateachsubsequentfinancialstatementdate.
IncomeTaxes
Currentanddeferredtaxexpensesarerecognizedintheconsolidatedstatementsofincomeexcepttotheextentthattheyrelatetoabusinesscombination,ortoitemsrecognizeddirectlyinequityorinothercomprehensiveincome(loss).
Currenttaxexpenseisbasedonsubstantivelyenactedstatutorytaxratesandlawsattheconsolidatedbalancesheetdate.
Deferredtaxisrecognizedinrespectoftemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandthetaxbasisofsuchassetsandliabilitiesmeasuredusingtaxratesandlawsthataresubstantivelyenactedattheconsolidatedbalancesheetdateandeffectiveforthereportingperiodwhenthetemporarydifferencesareexpectedtoreverse.
Deferredtaxesarenotrecognizedinthefollowingcircumstances:
• Whereadeferredtaxliabilityarisesfromtheinitialrecognitionofgoodwill;
• Whereadeferredtaxassetorliabilityarisesontheinitialrecognitionofanassetorliabilityinatransactionwhichisnotabusinesscombinationand,atthetimeofthetransaction,affectsneithernetincomeortaxableprofits;and
• FortemporarydifferencesrelatingtoinvestmentsinsubsidiariesandjointlycontrolledentitiestotheextentthattheCompanycancontrolthetimingofthereversalofthetemporarydifferenceanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.
Deferredtaxassetsarerecognizedforunusedtaxlossesandtaxcreditscarriedforwardanddeductibletemporarydifferencestotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheycanbeutilizedexceptasnotedabove.
Ateachreportingperiod,previouslyunrecognizeddeferredtaxassetsarereassessedtodeterminewhetherithasbecomeprobablethatfuturetaxableprofitswillallowthedeferredtaxassetstoberecovered.
Recently Issued Accounting Pronouncements
IFRS9–FinancialInstruments
InJuly2014,theIASBissuedthefinalversionofIFRS9FinancialInstrumentsthatreplacesIAS39andallpreviousversionsofIFRS9.IFRS9bringstogetherallthreeaspectsoftheaccountingforfinancialinstrumentsproject:classificationandmeasurement,impairmentandhedgeaccounting.IFRS9iseffectiveforannualperiodsbeginningonorafterJanuary1,2018,withearlyapplicationpermitted.Exceptforhedgeaccounting,retrospectiveapplicationisrequired,buttheprovisionofcomparativeinformationisnotcompulsory.Forhedgeaccounting,therequirementsaregenerallyappliedprospectively,withsomelimitedexceptions.TheCompanyplanstoadoptthenewstandardontherequiredeffectivedate.
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During2016,theCompanyperformedahigh-levelimpactassessmentofallthreeaspectsofIFRS9.ThispreliminaryassessmentisbasedoncurrentlyavailableinformationandmaybesubjecttochangesarisingfromfurtherdetailedanalysisoradditionalreasonableandsupportableinformationbeingmadeavailabletotheCompanyinthefuture.Overall,thereisnosignificantimpactexpectedonthebalancesheetorstatementofequityfromtheadoptionofIFRS9.
Classification and measurement
TheonlychangeinIFRS9inrespectoftheclassificationoffinancialliabilitiesisthatforthosedesignatedatfairvaluethroughprofitorloss("FVTPL"),fairvaluechangesattributabletotheCompany'sowncreditriskarepresentedinOCI.IFRS9introducesanewmodelforclassifyingfinancialassets.Thestandardintroducesprinciple-basedrequirementsfortheclassificationoffinancialassets,usingthefollowingmeasurementcategories:
• Debtinstrumentsatamortizedcost;
• DebtinstrumentsatfairvaluethroughOCI("FVOCI")withcumulativegainsandlossesreclassifiedtoprofitorlossuponderecognition;
• Debtinstruments,derivativesandequityinstrumentsatFVTPL;and
• EquityinstrumentsdesignatedatFVOCIwithnorecyclingofgainsandlossesuponderecognition.
TheCompanyisstillevaluatingitsdifferentfinancialassetstoensureappropriateclassificationunderIFRS9.
Impairment
Thenewimpairmentrequirementsarebasedonaforward-lookingexpectedcreditlossmodel.ThemodelappliestodebtinstrumentsmeasuredatamortizedcostoratFVOCI,aswellasleasereceivables,tradereceivables,contractsassets(asdefinedinIFRS15),andloancommitmentsandfinancialguaranteecontractsthatarenotatfairvaluethroughprofitorloss.TheCompanydoesnotholdsignificantamountsofthesetypesoffinancialassetsandthereforedoesnotexpectthesechangestohaveasignificantimpact.
Hedge accounting
ThechangesinIFRS9relatingtohedgeaccountingwillhavenoimpactastheCompanydoesnotcurrentlyapplyhedgeaccounting.
IFRS15–RevenuefromContractswithCustomers
IFRS15wasissuedinMay2014andestablishesafive-stepmodeltoaccountforrevenuearisingfromcontractswithcustomers.UnderIFRS15,revenueisrecognizedatanamountthatreflectstheconsiderationtowhichanentityexpectstobeentitledinexchangefortransferringgoodsorservicestoacustomer.
ThenewrevenuestandardwillsupersedeallcurrentrevenuerecognitionrequirementsunderIFRS.EitherafullretrospectiveapplicationoramodifiedretrospectiveapplicationisrequiredforannualperiodsbeginningonorafterJanuary1,2018.Earlyadoptionispermitted.
TheCompanyplanstoadoptthenewstandard(includingtheclarificationsissuedbytheIASBinApril2016)ontherequiredeffectivedate.During2016,theCompanycommenceditspreliminaryassessmentofIFRS15andsomeofthekeyissuesithasidentified,anditsinitialviewsandperspectives,aresetoutbelow.ThesearebasedontheworkcompletedtodateandtheCompany'scurrentinterpretationofIFRS15andmaybesubjecttochangesasmoredetailedanalysisiscompletedandasinterpretationsevolvemoregenerally.Furthermore,theCompanyisconsideringandwillcontinuetomonitoranyfurtherdevelopment.Todate,thefollowingissuessetoutimmediatelybelowwereidentifiedbytheCompanyasrequiringconsideration.
Provisionally priced sales
SomeoftheCompany'ssalesofmetalinconcentratecontainprovisionalpricingfeatures.UnderIAS18,revenueisrecognizedunderthesecontractsbasedonforwardpricesatthetimeofdelivery,whichiswhentherisksandrewardsofownershipoftheconcentratepasstothethird-partysmelters.Finalpricesforthemetalscontainedintheconcentratearedeterminedbasedontheprevailingspotmarketmetalpricesonaspecifiedfuturedate,whichisestablishedasofthedatethattheconcentrateisdeliveredtothesmelter.
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TheCompanyiscurrentlyevaluatingtheaccountingtreatmentofthesecontractsunderIFRS15.Theimpactisexpectedtobeimmaterial.In2016,revenuefromconcentratesalescontractswasapproximately0.7%oftotalrevenue.
Other presentation and disclosure requirements
IFRS15containspresentationanddisclosurerequirementswhicharemoredetailedthanthecurrentstandards.Thepresentationrequirementsrepresentasignificantchangefromcurrentpracticeandwillincreasethevolumeofdisclosuresrequiredinthefinancialstatements.ManyofthedisclosurerequirementsinIFRS15arecompletelynew.In2016,theCompanystartedtoconsiderthesystems,internalcontrols,policiesandproceduresnecessarytocollectanddisclosetherequiredinformation.
IFRS16–Leases
InJanuary2016,theIASBissuedIFRS16–Leaseswhichbringsmostleaseson-balancesheetforlesseesbyeliminatingthedistinctionbetweenoperatingandfinanceleases.Lessoraccountingremainslargelyunchangedandthedistinctionbetweenoperatingandfinanceleasesisretained.UnderIFRS16,alesseerecognizesaright-of-useassetandaleaseliability.Theright-of-useassetistreatedsimilarlytoothernon-financialassetsanddepreciatedaccordingly,andtheliabilityaccruesinterest.Theleaseliabilityisinitiallymeasuredatthepresentvalueoftheleasepaymentspayableovertheleaseterm,discountedattherateimplicitinthelease.Lesseesarepermittedtomakeanaccountingpolicyelection,byclassofunderlyingasset,toapplyamethodlikeIAS17'soperatingleaseaccountingandnotrecognizeleaseassetsandleaseliabilitiesforleaseswithaleasetermof12monthsorlessandonalease-by-leasebasis,toapplyamethodsimilartocurrentoperatingleaseaccountingtoleasesforwhichtheunderlyingassetisoflowvalue.IFRS16supersedesIAS17–LeasesandrelatedinterpretationsandiseffectiveforperiodsbeginningonorafterJanuary1,2019,withearlieradoptionpermittedifIFRS15hasalsobeenapplied.Alesseecanchoosetoapplythestandardusingeitherafullretrospectiveoramodifiedretrospectiveapproach.Thestandard'stransitionprovisionspermitcertainreliefs.In2017,theCompanyplanstoassessthepotentialeffectofIFRS16onitsconsolidatedfinancialstatements.TheCompanyplanstoadoptthenewstandardontherequiredeffectivedate.
Mineral Reserve Data
ThescientificandtechnicalinformationsetoutinthisMD&Ahasbeenapprovedbythefollowing"qualifiedpersons"asdefinedundertheCSA'sNationalInstrument43-101StandardsofDisclosureforMineralProperties:mineralreservesandmineralresources(otherthanfortheCanadianMalarticmine)–DanielDoucet,Eng.,SeniorCorporateDirector,ReserveDevelopment;mineralreservesandmineralresources(fortheCanadianMalarticmine)–DonaldGervais,P.Geo.,DirectorofTechnicalServicesatCanadianMalarticCorporationandSylvieLampron,Eng.,PrincipalEngineeratCanadianMalarticCorporation;Quebecoperations–ChristianProvencher,Eng.,Vice-President,Canada;Nunavutoperations–DominiqueGirard,Eng.,Vice-President,NunavutOperations;Kittilaoperations–FrancisBrunet,Eng.,CorporateDirector,Mining;SouthernBusinessoperations–CarolPlummer,Eng.,Vice-President,ProjectDevelopment,SouthernBusiness;environmental–LouiseGrondinP.Eng.,SeniorVice-President,Environment,SustainableDevelopmentandPeople;metallurgy–PaulCousin,Eng.,Vice-President,Metallurgy;andExploration–GuyGosselin,Eng.,Vice-President,Exploration.TheCompany'smineralreservesestimatewasderivedfrominternallygenerateddataorgeologyreports.
TheassumptionsusedforthemineralreserveestimatesatallminesandprojectsreportedinthisMD&A(excepttheCanadianMalarticmine,theMeliadinemineprojectandtheUpperBeaverproject)asatDecember31,2016are$1,150perouncegold,$16.50perouncesilver,$0.95perpoundzincand$2.15perpoundcopper.ForeignexchangeratesassumptionsofC$1.20perUS$1.00,€0.91perUS$1.00and16.00MexicanpesosperUS$1.00wereusedforallminesandprojectsotherthantheLapaandMeadowbankminesinCanada,theCrestonMascotadepositatPinosAltos,andSantoNinopitatthePinosAltosmineinMexico,whichusedforeignexchangeratesassumptionsofC$1.30perUS$1.00and16.00MexicanpesosperUS$1.00(otherassumptionsunchanged)duetotheirshorterremainingminelives.
AttheMeliadinemineproject,theassumptionsremainedthesameasatDecember2015,whichwere$1,100perouncegoldandaforeignexchangerateofC$1.16perUS$1.00.
TheCanadianMalarticGeneralPartnership(the"Partnership"),ownedbyAgnicoEagle(50%)andYamanaGoldInc.("Yamana")(50%),whichownsandoperatestheCanadianMalarticmine,andtheCanadianMalarticCorporation("CMC"),ownedbyAgnicoEagle(50%)andYamana(50%),whichownsandmanagestheUpperBeaverprojectinKirklandLake,haveestimatedtheDecember2016mineralreservesoftheCanadianMalarticmineandtheUpperBeaverprojectusingthefollowingassumptions:$1,200perouncegoldand$2.75perpoundcopper;acut-offgradeattheCanadianMalarticmine
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between0.33g/tand0.37g/tgold(dependingonthedeposit);aC$125/tonnenetsmelterreturn(NSR)fortheUpperBeaverproject;andanforeignexchangerateofC$1.25perUS$1.00.
Proven and Probable Mineral Reserves by Property (i) Tonnes
GoldGrade (Grams
per Tonne)
Contained Gold
(Ounces) (ii)
(thousands)
(thousands)
Proven Mineral Reserves
LaRondemine(notincludingZone5) 5,833 4.91 921
LaRondeZone5 2,836 2.12 194
Lapamine 259 4.58 38
Goldexmine 294 1.47 14
Meadowbankmine 1,704 1.75 96
CanadianMalarticmine(attributable50.0%) 25,560 0.95 785
Meliadinemineproject 34 7.31 8
Kittilamine 1,148 4.19 155
PinosAltosmine 3,512 2.69 304
CrestonMascotadepositatPinosAltos 65 0.94 2
LaIndiamine 213 0.61 4
Total Proven Mineral Reserves 41,458 1.89 2,520
Probable Mineral Reserves
LaRondemine(notincludingZone5) 11,758 5.64 2,132
LaRondeZone5 3,429 2.08 230
Goldexmine 16,507 1.64 872
Akasabaproject 4,942 0.89 142
Meadowbankmine 6,515 2.94 615
CanadianMalarticmine(attributable50.0%) 76,274 1.13 2,764
Meliadinemineproject 14,495 7.32 3,410
UpperBeaverproject 3,996 5.43 698
Kittilamine 28,907 4.65 4,325
PinosAltosmine 13,889 2.51 1,120
CrestonMascotadepositatPinosAltos 2,426 1.29 100
LaIndiamine 43,756 0.72 1,016
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Total Probable Mineral Reserves 226,895 2.39 17,423
Total Proven and Probable Mineral Reserves 268,353 2.31 19,943
Notes:
(i) Completeinformationontheverificationprocedures,qualityassuranceprogram,qualitycontrolprocedures,expectedpaybackperiodofcapital,parametersandmethodsandotherfactorsthatmaymateriallyaffectscientificandtechnicalinformationpresentedinthisMD&Aanddefinitionsofcertaintermsusedhereinmaybefoundin:theAIFundertheheading"InformationonMineralReservesandMineralResourcesoftheCompany";theTechnicalReportonthe2005LaRondeMineralResource&MineralReserveEstimatefiledwithCanadiansecuritiesregulatoryauthoritiesonSEDARonMarch23,2005;theTechnicalReportontheLapaGoldProject,CadillacTownship,Quebec,Canadafiledwith
42 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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CanadiansecuritiesregulatoryauthoritiesonSEDARonJune8,2006;theTechnicalReportontheDecember31,2009,MineralResourceandMineralReserveEstimateandtheSuuriExtensionProject,KittilaMine,FinlandfiledwiththeCanadiansecuritiesregulatoryauthoritiesonSEDARonMarch4,2010;theTechnicalReportontheMineralResourcesandMineralReservesatMeadowbankGoldMine,Nunavut,CanadaasatDecember31,2011filedwithCanadiansecuritiesregulatoryauthoritiesonSEDARonMarch23,2012;thePinosAltosGold-SilverMiningProject,ChihuahuaState,Mexico,TechnicalReportonMineralResourcesandReservesasofDecember31,2008filedwithCanadiansecuritiesregulatoryauthoritiesonMarch25,2009;theUpdatedTechnicalReportontheMeliadineGoldProject,Nunavut,CanadadatedFebruary11,2015filedwithCanadiansecuritiesregulatoryauthoritiesonSEDARonMarch12,2015;theTechnicalReportontheJune30,2012UpdateoftheMineralResourcesandMineralReserves,LaIndiaGoldProject,MunicipalityofSahuaripa,Sonora,MexicodatedAugust31,2012filedwithCanadiansecuritiesregulatoryauthoritiesonSEDARonOctober12,2012;theTechnicalReportonProductionoftheMandEZonesatGoldexMinedatedOctober14,2012filedwiththeCanadiansecuritiesregulatoryauthoritiesonSEDARonNovember1,2012;andtheTechnicalReportontheMineralResourceandMineralReserveEstimatesfortheCanadianMalarticPropertyasatJune16,2014filedwithCanadiansecuritiesregulatoryauthoritiesonSEDARonAugust13,2014.
(ii) Totalcontainedgoldouncesdoesnotincludeequivalentgoldouncesfortheby-productmetalscontainedinthemineralreserves.
Non-GAAP Financial Performance Measures
ThisMD&Apresentscertainfinancialperformancemeasures,includingadjustednetincome,totalcashcostsperounceofgoldproduced(onbothaby-productandco-productbasis),minesitecostspertonneandall-insustainingcostsperounceofgoldproduced(onbothaby-productandco-productbasis),thatarenotrecognizedmeasuresunderIFRS.Thisdatamaynotbecomparabletodatapresentedbyothergoldproducers.Non-GAAPfinancialperformancemeasuresshouldbeconsideredtogetherwithotherdatapreparedinaccordancewithIFRS.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 43
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AdjustedNetIncome
AdjustednetincomeisnotarecognizedmeasureunderIFRSandthisdatamaynotbecomparabletodatapresentedbyothergoldproducers.Thismeasureiscalculatedbyadjustingnetincomeasrecordedintheconsolidatedstatementsofincomeandcomprehensiveincomefornon-recurring,unusualandotheritems.TheCompanybelievesthatthisgenerallyacceptedindustrymeasureallowstheevaluationoftheresultsofcontinuingoperationsandisusefulinmakingcomparisonsbetweenperiods.AdjustednetincomeisintendedtoprovideinvestorswithinformationabouttheCompany'scontinuingincomegeneratingcapabilities.ManagementusesthismeasuretomonitorandplanfortheoperatingperformanceoftheCompanyinconjunctionwithotherdatapreparedinaccordancewithIFRS.
2016 2015 (i) 2014 (i)
(thousands of United States dollars) Net income for the period – basic $ 158,824 $ 24,583 $ 82,970
Less:DilutiveimpactofCMGPConvertibleDebentures(ii) – – (7,345)
Net income for the period – diluted $ 158,824 $ 24,583 $ 75,625
Impairmentlossonavailable-for-salesecurities – 12,035 15,763
Gainonsaleofavailable-for-salesecurities (3,500) (24,600) (5,635)
Foreigncurrencytranslationloss(gain) 13,157 (4,728) 3,781
(Gain)lossonderivativefinancialinstruments (9,468) 19,608 6,156
Mark-to-marketloss(gain)onCMGPConvertibleDebentures(iii) – 2,416 (7,995)
Gainonimpairmentreversal,netoftax (81,210) – –
Incomeandminingtaxesadjustments(iv) 4,755 24,742 23,323
Other(v) 26,963 19,442 5,832
Adjusted net income for the period – basic $ 109,521 $ 73,498 $ 124,195
Adjusted net income for the period – diluted $ 109,521 $ 73,498 $ 116,850
Netincomepershare–basic $ 0.71 $ 0.11 $ 0.43
Netincomepershare–diluted $ 0.70 $ 0.11 $ 0.39
Adjustednetincomepershare–basic $ 0.49 $ 0.34 $ 0.64
Adjustednetincomepershare–diluted $ 0.49 $ 0.34 $ 0.60
Notes:
(i) Beginningin2016,theCompanydecidedtoexcludestockbasedcompensationexpensefromthecalculationofadjustednetincome.AdjustednetincomefortheyearsendedDecember31,2015and2014havebeenrestatedtoreflectthischange.StockoptionexpensefortheyearendedDecember31,2016was$16.3million(2015–$19.5million;2014–$20.1million).
(ii) InconnectionwiththejointacquisitionofOsiskoonJune16,2014,AgnicoEagleindirectlyassumeditsattributableinterestintheseniorunsecuredconvertibledebenturespreviouslyissuedbyOsiskoandassumedbyCanadianMalarticGP(the"CMGPConvertibleDebentures").OnJune30,2015,thenegotiatedearlysettlementofalltheCMGPConvertibleDebentureswascompleted,resultinginprincipaloutstandingofnil.TheimpactoftheCMGPConvertibleDebentureshasbeenincludedinthecalculationofdilutednetincome,dilutedadjustednetincome,dilutednetincomepershareanddilutedadjustednetincomepersharewheredilutiveandhasbeenexcludedfromthecalculationofdilutednetincome,dilutedadjustednetincome,dilutednetincomepershareanddilutedadjustednetincomepersharewhereanti-dilutive.ThedilutiveimpactoftheCMGPConvertibleDebentureswasexcludedfromthecalculationofdilutednetincome,dilutedadjustednetincome,dilutednetincomepershareanddilutedadjustednetincomepersharefortheyearendedDecember31,2015astheirimpactwouldhavebeenanti-dilutivefortheportionoftheyeartheywereoutstanding.
(iii) WheretheimpactoftheCMGPConvertibleDebenturesisdilutive,theadjustmentformark-to-marketloss(gain)onCMGPConvertibleDebenturesisexcludedfromthecalculationofadjustednetincomefortheperiodonadilutedbasisasitisalreadyincorporatedinthecalculationofnetincomefortheperiodonadilutedbasis.
(iv) Incomeandminingtaxadjustmentsreflectforeigncurrencytranslationrecordedtotheincomeandminingtaxesexpense,recognitionofpreviouslyunrecognizedcapitallosses,theresultofincomeandminingtaxaudits,impactoftaxlawchangesandreflectiveadjustmentstopriorperiodoperatingresults.
(v) TheCompanyincludescertainadjustmentsin"Other"totheextentthatmanagementbelievesthattheseitemsarenotreflectiveoftheunderlyingperformanceoftheCompany'scoreoperatingbusiness.Examplesofitemshistoricallyincludedin"Other"includechangesinestimatesofassetretirementobligationsatclosedsites,gainsandlossesonthedisposalofassetsandothernon-recurringitems.FortheyearendedDecember31,2015,the"Other"lineitemalsoincludedadjustmentsforacatch-upofamortizationexpenserelatedtothefinalizationoftheacquisitiondatefairvalueestimatesofdepreciableminingpropertiesincludedinthepurchasepriceallocationoftheCompany'sJune16,2014jointacquisitionofOsisko;andpaymentsmaderelatedtotheJune30,2015negotiatedearlysettlementoftheCMGP
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ConvertibleDebenturesthatwereassumedbyCMGPinconnectionwiththeCompany'sjointacquisitionofOsisko.
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TotalCashCostsperOunceofGoldProducedandMinesiteCostsperTonne
TheCompanybelievesthattotalcashcostsperounceofgoldproducedandminesitecostspertonnearerealisticindicatorsofoperatingperformanceandfacilitateperiodoverperiodcomparisons.However,bothofthesenon-GAAPgenerallyacceptedindustrymeasuresshouldbeconsideredtogetherwithotherdatapreparedinaccordancewithIFRS.Thesemeasures,takenbythemselves,arenotnecessarilyindicativeofoperatingcostsorcashflowmeasurespreparedinaccordancewithIFRS.
Totalcashcostsperounceofgoldproducedisreportedonbothaby-productbasis(deductingby-productmetalrevenuesfromproductioncosts)andco-productbasis(beforedeductingby-productmetalrevenues).Totalcashcostsperounceofgoldproducedonaby-productbasisiscalculatedbyadjustingproductioncostsasrecordedintheconsolidatedstatementsofincomeandcomprehensiveincome(loss)forby-productrevenues,inventoryproductioncosts,smelting,refiningandmarketingchargesandotheradjustments,andthendividingbythenumberofouncesofgoldproduced.Totalcashcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerastotalcashcostsperounceofgoldproducedonaby-productbasisexceptthatnoadjustmentforby-productmetalrevenuesismade.Accordingly,thecalculationoftotalcashcostsperounceofgoldproducedonaco-productbasisdoesnotreflectareductioninproductioncostsorsmelting,refiningandmarketingchargesassociatedwiththeproductionandsaleofby-productmetals.TotalcashcostsperounceofgoldproducedisintendedtoprovideinformationaboutthecashgeneratingcapabilitiesoftheCompany'sminingoperations.ManagementalsousesthesemeasurestomonitortheperformanceoftheCompany'sminingoperations.Asmarketpricesforgoldarequotedonaperouncebasis,usingthetotalcashcostperounceofgoldproducedonaby-productbasismeasureallowsmanagementtoassessamine'scashgeneratingcapabilitiesatvariousgoldprices.Managementisawarethattheseperouncemeasuresofperformancecanbeaffectedbyfluctuationsinexchangeratesand,inthecaseoftotalcashcostsperounceofgoldproducedonaby-productbasis,by-productmetalprices.Managementcompensatesfortheseinherentlimitationsbyusingthesemeasuresinconjunctionwithminesitecostspertonne(discussedbelow)aswellasotherdatapreparedinaccordancewithIFRS.Managementalsoperformssensitivityanalysesinordertoquantifytheeffectsoffluctuatingmetalpricesandexchangerates.
AgnicoEagle'sprimarybusinessisgoldproductionandthefocusofitscurrentoperationsandfuturedevelopmentisonmaximizingreturnsfromgoldproduction,withothermetalproductionbeingincidentaltothegoldproductionprocess.Accordingly,allmetalsotherthangoldareconsideredby-products.
Totalcashcostsperounceofgoldproducedisreportedonaby-productbasisbecause(i)themajorityoftheCompany'srevenuesaregoldrevenues,(ii)theCompanyminesore,whichcontainsgold,silver,zinc,copperandothermetals,(iii)itisnotpossibletospecificallyassignallcoststorevenuesfromthegold,silver,zinc,copperandothermetalstheCompanyproduces,and(iv)itisamethodusedbymanagementandtheBoardtomonitoroperations.
Minesitecostspertonneiscalculatedbyadjustingproductioncostsasshownintheconsolidatedstatementsofincomeandcomprehensiveincome(loss)forinventoryproductioncostsandotheradjustmentsandthendividingbytonnesoforeprocessed.Asthetotalcashcostsperounceofgoldproducedmeasurecanbeimpactedbyfluctuationsinby-productmetalpricesandexchangerates,managementbelievesthattheminesitecostspertonnemeasureprovidesadditionalinformationregardingtheperformanceofminingoperations.Managementalsousesminesitecostspertonnetodeterminetheeconomicviabilityofminingblocks.Aseachminingblockisevaluatedbasedonthenetrealizablevalueofeachtonnemined,inordertobeeconomicallyviabletheestimatedrevenueonapertonnebasismustbeinexcessoftheminesitecostspertonne.ManagementisawarethatthispertonnemeasureofperformancecanbeimpactedbyfluctuationsinproductionlevelsandcompensatesforthisinherentlimitationbyusingthismeasureinconjunctionwithproductioncostspreparedinaccordancewithIFRS.
Thefollowingtablessetoutareconciliationoftotalcashcostsperounceofgoldproduced(onbothaby-productbasisandco-productbasis)andminesitecostspertonnetoproductioncosts,exclusiveofamortization,aspresentedintheconsolidatedstatementsofincomeandcomprehensiveincome(loss)inaccordancewithIFRS.
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TotalProductionCostsbyMine
Year Ended December 31,
2016
Year Ended December 31,
2015
Year Ended December 31,
2014
(thousands of United States dollars) LaRondemine $ 179,496 $ 172,283 $ 188,736
Lapamine 52,974 52,571 61,056
Goldexmine 63,310 61,278 64,836
Meadowbankmine 218,963 230,564 270,824
CanadianMalarticmine(i) 183,635 171,473 113,916
Kittilamine 141,871 126,095 116,893
PinosAltosmine 114,557 105,175 123,342
CrestonMascotadepositatPinosAltos 27,341 26,278 28,007
LaIndiamine(ii) 49,745 49,578 36,949
Productioncostspertheconsolidatedstatementsofincomeandcomprehensiveincome $ 1,031,892 $ 995,295 $ 1,004,559
ReconciliationofProductionCoststoTotalCashCostsperOunceofGoldProduced(iii)byMineandReconciliationofProductionCoststoMinesiteCostsperTonne(iv)byMine
(thousandsofUnitedStatesdollars,exceptasnoted)
LaRonde Mine Per Ounce of Gold Produced (iii)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per ounce) (thousands) ($ per ounce) (thousands) ($ perounce)
Goldproduction(ounces) 305,788 267,921 204,652
Productioncosts $ 179,496 $ 587 $ 172,283 $ 643 $ 188,736 $ 922
Inventoryandotheradjustments(v) 24,914 81 31,417 117 27,070 133
Cashoperatingcosts(co-productbasis) $ 204,410 $ 668 $ 203,700 $ 760 $ 215,806 $ 1,055
By-productmetalrevenues (51,136) (167) (45,678) (170) (79,015) (387)
Cashoperatingcosts(by-productbasis) $ 153,274 $ 501 $ 158,022 $ 590 $ 136,791 $ 668
LaRonde Mine Per Tonne (iv)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per tonne) (thousands) ($ per tonne) (thousands) ($ pertonne)
Tonnesoforemilled(thousandsoftonnes) 2,240 2,241 2,085
Productioncosts $ 179,496 $ 80 $ 172,283 $ 77 $ 188,736 $ 91
Productioncosts(C$) C$ 237,934 C$ 106 C$ 218,649 C$ 98 C$ 208,222 C$ 100
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Inventoryandotheradjustments(C$)(vi) (1,447) – 4,150 1 (1,364) (1)
Minesiteoperatingcosts(C$) C$ 236,487 C$ 106 C$ 222,799 C$ 99 C$ 206,858 C$ 99
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Lapa Mine Per Ounce of Gold Produced (iii)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per ounce) (thousands) ($ per ounce) (thousands) ($ perounce)
Goldproduction(ounces) 73,930 90,967 92,622
Productioncosts $ 52,974 $ 717 $ 52,571 $ 578 $ 61,056 $ 659
Inventoryandotheradjustments(v) 1,173 15 1,161 13 750 8
Cashoperatingcosts(co-productbasis) $ 54,147 $ 732 $ 53,732 $ 591 $ 61,806 $ 667
By-productmetalrevenues (28) – (62) (1) (61) –
Cashoperatingcosts(by-productbasis) $ 54,119 $ 732 $ 53,670 $ 590 $ 61,745 $ 667
Lapa Mine Per Tonne (iv)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per tonne) (thousands) ($ per tonne) (thousands) ($ pertonne)
Tonnesoforemilled(thousandsoftonnes) 593 560 639
Productioncosts $ 52,974 $ 89 $ 52,571 $ 94 $ 61,056 $ 96
Productioncosts(C$) C$ 69,941 C$ 118 C$ 66,396 C$ 119 C$ 67,280 C$ 105
Inventoryandotheradjustments(C$)(vi) 1,580 3 (710) (2) 848 2
Minesiteoperatingcosts(C$) C$ 71,521 C$ 121 C$ 65,686 C$ 117 C$ 68,128 C$ 107
Goldex Mine Per Ounce of Gold Produced (iii)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per ounce) (thousands) ($ per ounce) (thousands) ($ perounce)
Goldproduction(ounces) 120,704 115,426 100,433
Productioncosts $ 63,310 $ 525 $ 61,278 $ 531 $ 64,836 $ 646
Inventoryandotheradjustments(v) 912 7 878 7 (720) (8)
Cashoperatingcosts(co-productbasis) $ 64,222 $ 532 $ 62,156 $ 538 $ 64,116 $ 638
By-productmetalrevenues (26) – (23) – (20) –
Cashoperatingcosts(by-productbasis) $ 64,196 $ 532 $ 62,133 $ 538 $ 64,096 $ 638
Goldex Mine Per Tonne (iv)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
($ per
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(thousands) ($ per tonne) (thousands) ($ per tonne) (thousands) tonne) Tonnesoforemilled(thousandsoftonnes) 2,545 2,313 2,117
Productioncosts $ 63,310 $ 25 $ 61,278 $ 26 $ 64,836 $ 31
Productioncosts(C$) C$ 83,835 C$ 33 C$ 77,589 C$ 34 C$ 71,359 C$ 34
Inventoryandotheradjustments(C$)(vi) 1,231 – (1,181) (1) (631) (1)
Minesiteoperatingcosts(C$) C$ 85,066 C$ 33 C$ 76,408 C$ 33 C$ 70,728 C$ 33
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Meadowbank Mine Per Ounce of Gold Produced (iii)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per ounce) (thousands) ($ per ounce) (thousands) ($ perounce)
Goldproduction(ounces) 312,214 381,804 452,877
Productioncosts $ 218,963 $ 701 $ 230,564 $ 604 $ 270,824 $ 598
Inventoryandotheradjustments(v) 8,105 26 7,282 19 2,688 6
Cashoperatingcosts(co-productbasis) $ 227,068 $ 727 $ 237,846 $ 623 $ 273,512 $ 604
By-productmetalrevenues (3,837) (12) (3,665) (10) (2,420) (5)
Cashoperatingcosts(by-productbasis) $ 223,231 $ 715 $ 234,181 $ 613 $ 271,092 $ 599
Meadowbank Mine Per Tonne (iv)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per tonne) (thousands) ($ per tonne) (thousands) ($ pertonne)
Tonnesoforemilled(thousandsoftonnes) 3,915 4,033 4,129
Productioncosts $ 218,963 $ 56 $ 230,564 $ 57 $ 270,824 $ 66
Productioncosts(C$) C$ 284,748 C$ 73 C$ 285,023 C$ 71 C$ 295,547 C$ 72
Inventoryandotheradjustments(C$)(vi) 5,681 1 (4,073) (1) 5,088 1
Minesiteoperatingcosts(C$) C$ 290,429 C$ 74 C$ 280,950 C$ 70 C$ 300,635 C$ 73
Canadian Malartic Mine Per Ounce of Gold Produced (i)(iii)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per ounce) (thousands) ($ per ounce) (thousands) ($ perounce)
Goldproduction(ounces) 292,514 285,809 143,008
Productioncosts $ 183,635 $ 628 $ 171,473 $ 600 $ 113,916 $ 797
Inventoryandotheradjustments(v) (553) (2) 3,630 13 (10,862) (76)
Cashoperatingcosts(co-productbasis) $ 183,082 $ 626 $ 175,103 $ 613 $ 103,054 $ 721
By-productmetalrevenues (5,821) (20) (4,689) (17) (2,771) (20)
Cashoperatingcosts(by-productbasis) $ 177,261 $ 606 $ 170,414 $ 596 $ 100,283 $ 701
Canadian Malartic Mine Per Tonne (i)(iv)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
($ per
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(thousands) ($ per tonne) (thousands) ($ per tonne) (thousands) tonne) Tonnesoforemilled(thousandsoftonnes) 9,821 9,545 5,263
Productioncosts $ 183,635 $ 19 $ 171,473 $ 18 $ 113,916 $ 22
Productioncosts(C$) C$ 244,333 C$ 25 C$ 222,717 C$ 23 C$ 122,933 C$ 23
Inventoryandotheradjustments(C$)(vi) (3,399) – (3,003) – (9,115) (1)
Minesiteoperatingcosts(C$) C$ 240,934 C$ 25 C$ 219,714 C$ 23 C$ 113,818 C$ 22
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Kittila Mine Per Ounce of Gold Produced (iii)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per ounce) (thousands) ($ per ounce) (thousands) ($ perounce)
Goldproduction(ounces) 202,508 177,374 141,742
Productioncosts $ 141,871 $ 701 $ 126,095 $ 711 $ 116,893 $ 825
Inventoryandotheradjustments(v) (26) (1) (187) (1) 3,051 21
Cashoperatingcosts(co-productbasis) $ 141,845 $ 700 $ 125,908 $ 710 $ 119,944 $ 846
By-productmetalrevenues (200) (1) (155) (1) (124) (1)
Cashoperatingcosts(by-productbasis) $ 141,645 $ 699 $ 125,753 $ 709 $ 119,820 $ 845
Kittila Mine Per Tonne (iv)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per tonne) (thousands) ($ per tonne) (thousands) ($ pertonne)
Tonnesoforemilled(thousandsoftonnes) 1,667 1,464 1,156
Productioncosts $ 141,871 $ 85 $ 126,095 $ 86 $ 116,893 $ 101
Productioncosts(€) € 128,599 € 77 € 112,285 € 77 € 88,744 € 77
Inventoryandotheradjustments(€)(vi) (505) – (956) (1) 1,243 1
Minesiteoperatingcosts(€) € 128,094 € 77 € 111,329 € 76 € 89,987 € 78
Pinos Altos Mine Per Ounce of Gold Produced (iii)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per ounce) (thousands) ($ per ounce) (thousands) ($ perounce)
Goldproduction(ounces) 192,772 192,974 171,019
Productioncosts $ 114,557 $ 594 $ 105,175 $ 545 $ 123,342 $ 721
Inventoryandotheradjustments(v) (1,840) (9) 6,458 33 (581) (3)
Cashoperatingcosts(co-productbasis) $ 112,717 $ 585 $ 111,633 $ 578 $ 122,761 $ 718
By-productmetalrevenues (44,118) (229) (37,030) (191) (31,643) (185)
Cashoperatingcosts(by-productbasis) $ 68,599 $ 356 $ 74,603 $ 387 $ 91,118 $ 533
Pinos Altos Mine Per Tonne (iv)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per tonne) (thousands) ($ per tonne) (thousands) ($ pertonne)
Tonnesoforeprocessed(thousandsoftonnes) 2,260 2,378 2,520
Productioncosts $ 114,557 $ 51 $ 105,175 $ 44 $ 123,342 $ 49
Inventoryandotheradjustments(vi) (3,698) (2) 2,481 1 (2,376) (1)
Minesiteoperatingcosts $ 110,859 $ 49 $ 107,656 $ 45 $ 120,966 $ 48
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MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 49
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Creston Mascota deposit at PinosAltos Per Ounce of Gold Produced (iii)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per ounce) (thousands) ($ per ounce) (thousands) ($ perounce)
Goldproduction(ounces) 47,296 54,703 47,842
Productioncosts $ 27,341 $ 578 $ 26,278 $ 480 $ 28,007 $ 585
Inventoryandotheradjustments(v) 472 10 (328) (6) 1,232 26
Cashoperatingcosts(co-productbasis) $ 27,813 $ 588 $ 25,950 $ 474 $ 29,239 $ 611
By-productmetalrevenues (3,426) (72) (2,412) (44) (1,574) (33)
Cashoperatingcosts(by-productbasis) $ 24,387 $ 516 $ 23,538 $ 430 $ 27,665 $ 578
Creston Mascota deposit at PinosAltos Per Tonne (iv)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per tonne) (thousands) ($ per tonne) (thousands) ($ pertonne)
Tonnesoforeprocessed(thousandsoftonnes) 2,119 2,099 1,794
Productioncosts $ 27,341 $ 13 $ 26,278 $ 13 $ 28,007 $ 16
Inventoryandotheradjustments(vi) (77) – (757) (1) 870 –
Minesiteoperatingcosts $ 27,264 $ 13 $ 25,521 $ 12 $ 28,877 $ 16
La India Mine Per Ounce of Gold Produced (ii)(iii)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per ounce) (thousands) ($ per ounce) (thousands) ($ perounce)
Goldproduction(ounces)(ii) 115,162 104,362 71,601
Productioncosts $ 49,745 $ 432 $ 49,578 $ 475 $ 36,949 $ 516
Inventoryandotheradjustments(v) 4,189 36 (28) – 1,172 16
Cashoperatingcosts(co-productbasis) $ 53,934 $ 468 $ 49,550 $ 475 $ 38,121 $ 532
By-productmetalrevenues (8,453) (73) (4,058) (39) (3,230) (45)
Cashoperatingcosts(by-productbasis) $ 45,481 $ 395 $ 45,492 $ 436 $ 34,891 $ 487
La India Mine Per Tonne (ii)(iv)
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(thousands) ($ per tonne) (thousands) ($ per tonne) (thousands) ($ pertonne)
Tonnesoforeprocessed(thousandsoftonnes) 5,837 5,371 4,442
Productioncosts $ 49,745 $ 9 $ 49,578 $ 9 $ 36,949 $ 8
Inventoryandotheradjustments(vi) 2,909 – (657) – 778 –
Minesiteoperatingcosts $ 52,654 $ 9 $ 48,921 $ 9 $ 37,727 $ 8
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Notes:
(i) OnJune16,2014,AgnicoEagleandYamanajointlyacquired100%ofOsiskobywayoftheOsiskoArrangement.AsaresultoftheOsiskoArrangement,AgnicoEagleandYamanaeachindirectlyown50%ofOsisko(nowCanadianMalarticCorporation)andCanadianMalarticGP,whichnowholdstheCanadianMalarticmine.TheinformationsetoutinthistablereflectstheCompany's50%interestintheCanadianMalarticminesincethedateofacquisition.
50 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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(ii) TheLaIndiamineachievedcommercialproductiononFebruary1,2014.ThecalculationoftotalcashcostsperounceofgoldproducedfortheyearendedDecember31,2014excludes3,492ouncesofpayablegoldproductionastheywereproducedpriortotheachievementofcommercialproduction.
(iii) TotalcashcostsperounceofgoldproducedisnotarecognizedmeasureunderIFRSandthisdatamaynotbecomparabletodatareportedbyothergoldproducers.Totalcashcostsperounceofgoldproducedisreportedonbothaby-productbasis(deductingby-productmetalrevenuesfromproductioncosts)andco-productbasis(beforedeductingby-productmetalrevenues).Totalcashcostsperounceofgoldproducedonaby-productbasisiscalculatedbyadjustingproductioncostsasrecordedintheconsolidatedstatementsofincomeandcomprehensiveincomeforby-productmetalrevenues,inventoryproductioncosts,smelting,refiningandmarketingchargesandotheradjustments,andthendividingbythenumberofouncesofgoldproduced.Totalcashcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerastotalcashcostsperounceofgoldproducedonaby-productbasisexceptthatnoadjustmentforby-productmetalrevenuesismade.Accordingly,thecalculationoftotalcashcostsperounceofgoldproducedonaco-productbasisdoesnotreflectareductioninproductioncostsorsmelting,refiningandmarketingchargesassociatedwiththeproductionandsaleofby-productmetals.TheCompanybelievesthatthesegenerallyacceptedindustrymeasuresprovidearealisticindicationofoperatingperformanceandprovideusefulcomparisonpointsbetweenperiods.TotalcashcostsperounceofgoldproducedisintendedtoprovideinformationaboutthecashgeneratingcapabilitiesoftheCompany'sminingoperations.ManagementalsousesthesemeasurestomonitortheperformanceoftheCompany'sminingoperations.Asmarketpricesforgoldarequotedonaperouncebasis,usingthetotalcashcostsperounceofgoldproducedonaby-productbasismeasureallowsmanagementtoassessamine'scashgeneratingcapabilitiesatvariousgoldprices.Managementisawarethattheseperouncemeasuresofperformancecanbeaffectedbyfluctuationsinexchangeratesand,inthecaseoftotalcashcostsofgoldproducedonaby-productbasis,by-productmetalprices.ManagementcompensatesfortheseinherentlimitationsbyusingthesemeasuresinconjunctionwithminesitecostspertonneaswellasotherdatapreparedinaccordancewithIFRS.Managementalsoperformssensitivityanalysesinordertoquantifytheeffectsoffluctuatingmetalpricesandexchangerates.
(iv) MinesitecostspertonneisnotarecognizedmeasureunderIFRSandthisdatamaynotbecomparabletodatareportedbyothergoldproducers.Thismeasureiscalculatedbyadjustingproductioncostsasshownintheconsolidatedstatementsofincomeandcomprehensiveincomeforinventoryproductioncosts,andthendividingbytonnesoforemilled.Asthetotalcashcostsperounceofgoldproducedmeasurecanbeaffectedbyfluctuationsinby-productmetalpricesandexchangerates,managementbelievesthattheminesitecostspertonnemeasureprovidesadditionalinformationregardingtheperformanceofminingoperations,eliminatingtheimpactofvaryingproductionlevels.Managementalsousesthismeasuretodeterminetheeconomicviabilityofminingblocks.Aseachminingblockisevaluatedbasedonthenetrealizablevalueofeachtonnemined,inordertobeeconomicallyviabletheestimatedrevenueonapertonnebasismustbeinexcessoftheminesitecostspertonne.ManagementisawarethatthispertonnemeasureofperformancecanbeimpactedbyfluctuationsinprocessinglevelsandcompensatesforthisinherentlimitationbyusingthismeasureinconjunctionwithproductioncostspreparedinaccordancewithIFRS.
(v) UndertheCompany'srevenuerecognitionpolicy,revenueisrecognizedwhenlegaltitleandriskistransferred.Astotalcashcostsperounceofgoldproducedarecalculatedonaproductionbasis,aninventoryadjustmentismadetoreflectthesalesmarginontheportionofproductionnotyetrecognizedasrevenue.Otheradjustmentsincludetheadditionofsmelting,refiningandmarketingchargestoproductioncosts.
(vi) Thisinventoryandotheradjustmentreflectsproductioncostsassociatedwiththeportionofproductionstillininventory.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 51
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All-inSustainingCostsperOunceofGoldProduced
All-insustainingcostsperounceofgoldproducedisnotarecognizedmeasureunderIFRSandthisdatamaynotbecomparabletodatareportedbyothergoldproducers.TheCompanybelievesthatthismeasureprovidesinformationaboutoperatingperformance.However,thisnon-GAAPmeasureshouldbeconsideredtogetherwithotherdatapreparedinaccordancewithIFRSasitisnotnecessarilyindicativeofoperatingcostsorcashflowmeasurespreparedinaccordancewithIFRS.
BasedontherecommendationsoftheWorldGoldCouncilmadein2013,theCompanymodifieditscalculationofall-insustainingcostsperounceofgoldproducedbeginningin2014.All-insustainingcostsperounceofgoldproducedispresentedonbothaby-productbasis(deductingby-productmetalrevenuesfromproductioncosts)andco-productbasis(beforedeductingby-productmetalrevenues).All-insustainingcostsperounceofgoldproducedonaby-productbasisiscalculatedastheaggregateoftotalcashcostsperounceofgoldproducedonaby-productbasisandsustainingcapitalexpenditures(includingcapitalizedexploration),generalandadministrativeexpenses(includingstockoptions)andnon-cashreclamationprovisionexpenseperounceofgoldproduced.All-insustainingcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerasall-insustainingcostsperounceofgoldproducedonaby-productbasisexceptthatnoadjustmentforby-productmetalrevenuesismadetototalcashcostsperounceofgoldproduced.Thecalculationofall-insustainingcostsperounceofgoldproducedonaco-productbasisdoesnotreflectareductioninproductioncostsorsmelting,refiningandmarketingchargesassociatedwiththeproductionandsaleofby-productmetals.
Priortomodifyingitscalculationofall-insustainingcostsperounceofgoldproducedfor2014basedontherecommendationsoftheWorldGoldCouncil,theCompanycalculatedall-insustainingcostsperounceofgoldproducedonaby-productbasisastheaggregateoftotalcashcostsperounceofgoldproducedonaby-productbasisandsustainingcapitalexpenditures,generalandadministrativeexpenses(netofstockoptions)andexplorationandcorporatedevelopmentexpenses(excludinggreenfieldexploration)perounceofgoldproduced.All-insustainingcostsperounceofgoldproducedonaco-productbasiswouldhavebeencalculatedinthesamemannerasall-insustainingcostsperounceofgoldproducedonaby-productbasisexceptthatnoadjustmentforby-productmetalrevenues,netofsmelting,refiningandmarketingchargeswouldhavebeenmadetototalcashcostsperounceofgoldproduced.
52 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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ReconciliationofProductionCoststoAll-inSustainingCostsperOunceofGoldProduced
(United States dollars per ounce of gold produced, except wherenoted)
Year Ended December 31,
2016
Year Ended December 31,
2015
Year Ended December 31,
2014
Productioncostspertheconsolidatedstatementsofincomeandcomprehensiveincome(thousandsofUnitedStatesdollars) $1,031,892 $995,295 $1,004,559
Adjustedgoldproduction(ounces)(i) 1,662,888 1,671,340 1,425,796
Productioncostsperounceofadjustedgoldproduction(i) $621 $596 $705
Adjustments:
Inventoryandotheradjustments(ii) 22 30 16
Totalcashcostsperounceofgoldproduced(co-productbasis)(iii) $643 $626 $721
By-productmetalrevenues (70) (59) (84)
Totalcashcostsperounceofgoldproduced(by-productbasis)(iii) $573 $567 $637
Adjustments:
Sustainingcapitalexpenditures(includingcapitalizedexploration) 187 183 230
Generalandadministrativeexpenses(includingstockoptions) 62 58 83
Non-cashreclamationprovisionandother 2 2 4
All-insustainingcostsperounceofgoldproduced(by-productbasis) $824 $810 $954
By-productmetalrevenues 70 59 84
All-insustainingcostsperounceofgoldproduced(co-productbasis) $894 $869 $1,038
Notes:
(i) TheLaIndiamineachievedcommercialproductiononFebruary1,2014.Thecalculationsoftotalcashcostsperounceofgoldproducedandall-insustainingcostsperounceofgoldproducedfortheyearendedDecember31,2014excludes3,492ouncesofpayablegoldproductionastheywereproducedpriortotheachievementofcommercialproduction.
(ii) UndertheCompany'srevenuerecognitionpolicy,revenueisrecognizedwhenlegaltitleandriskistransferred.Astotalcashcostsperounceofgoldproducedarecalculatedonaproductionbasis,thisinventoryadjustmentreflectsthesalesmarginontheportionofproductionnotyetrecognizedasrevenue.
(iii) TotalcashcostsperounceofgoldproducedisnotarecognizedmeasureunderIFRSandthisdatamaynotbecomparabletodatapresentedbyothergoldproducers.Totalcashcostsperounceofgoldproducedispresentedonbothaby-productbasis(deductingby-productmetalrevenuesfromproductioncosts)andco-productbasis(beforedeductingby-productmetalrevenues).Totalcashcostsperounceofgoldproducedonaby-productbasisiscalculatedbyadjustingproductioncostsasrecordedintheconsolidatedstatementsofincomeandcomprehensiveincomeforby-productmetalrevenues,inventoryproductioncosts,smelting,refiningandmarketingchargesandotheradjustments,andthendividingbythenumberofouncesofgoldproduced.Totalcashcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerastotalcashcostsperounceofgoldproducedonaby-productbasisexceptthatnoadjustmentforby-productmetalrevenuesismade.Accordingly,thecalculationoftotalcashcostsperounceofgoldproducedonaco-productbasisdoesnotreflectareductioninproductioncostsorsmelting,refiningandmarketingchargesassociatedwiththeproductionandsaleofby-productmetals.TheCompanybelievesthatthesegenerallyacceptedindustrymeasuresprovidearealisticindicationofoperatingperformanceandprovideusefulcomparisonpointsbetweenperiods.TotalcashcostsperounceofgoldproducedisintendedtoprovideinformationaboutthecashgeneratingcapabilitiesoftheCompany'sminingoperations.ManagementalsousesthesemeasurestomonitortheperformanceoftheCompany'sminingoperations.Asmarketpricesforgoldarequotedonaperouncebasis,usingthetotalcashcostsperounceofgoldproducedonaby-productbasismeasureallowsmanagementtoassessamine'scashgeneratingcapabilitiesatvariousgoldprices.Managementisawarethattheseperouncemeasuresofperformancecanbeaffectedbyfluctuationsinexchangeratesand,inthecaseoftotalcashcostsofgoldproducedonaby-productbasis,by-productmetalprices.ManagementcompensatesfortheseinherentlimitationsbyusingthesemeasuresinconjunctionwithminesitecostspertonneaswellasotherdatapreparedinaccordancewithIFRS.Managementalsoperformssensitivityanalysesinordertoquantifytheeffectsoffluctuatingmetalpricesandexchangerates.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 53
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SUMMARIZED QUARTERLY DATA (thousands of United States dollars, except where noted)
Three Months Ended
March 31,
2016 June 30,
2016 September 30,
2016 December 31,
2016 Total 2016
Operating margin (i) :
Revenuesfromminingoperations $ 490,531 $ 537,628 $ 610,863 $ 499,210 $ 2,138,232
Productioncosts 243,973 255,436 277,371 255,112 1,031,892
Totaloperatingmargin(i) 246,558 282,192 333,492 244,098 1,106,340
Operating margin (i) by mine:
NorthernBusiness
LaRondemine 48,055 54,985 61,587 44,058 208,684
Lapamine 10,806 14,437 10,181 3,762 39,186
Goldexmine 22,184 22,896 27,834 13,506 86,420
Meadowbankmine 33,329 34,733 46,190 50,807 165,060
CanadianMalarticmine(ii) 41,740 50,133 55,981 40,430 188,285
Kittilamine 24,086 22,079 36,714 27,596 110,475
SouthernBusiness
PinosAltosmine 35,820 48,392 60,699 34,909 179,820
CrestonMascotadepositatPinosAltos 8,989 9,719 10,448 6,470 35,626
LaIndiamine 21,549 24,818 23,858 22,560 92,784
Totaloperatingmargin(i) 246,558 282,192 333,492 244,098 1,106,340
Gainonimpairmentreversal – – – (120,161) (120,161)
Amortizationofproperty,plantandminedevelopment 145,631 154,658 161,472 151,399 613,160
Exploration,corporateandother 73,730 89,624 84,079 97,447 344,880
Incomebeforeincomeandminingtaxes 27,197 37,910 87,941 115,413 268,461
Incomeandminingtaxes(recovery) (591) 18,920 38,549 52,759 109,637
Netincomefortheperiod $ 27,788 $ 18,990 $ 49,392 $ 62,654 $ 158,824
Netincomepershare–basic(US$) $ 0.13 $ 0.09 $ 0.22 $ 0.28 $ 0.71
Netincomepershare–diluted(US$) $ 0.13 $ 0.08 $ 0.22 $ 0.28 $ 0.70
Cash flows:
Cashprovidedbyoperatingactivities $ 145,704 $ 229,456 $ 282,856 $ 120,601 $ 778,617
Cashusedininvestingactivities $ (107,595) $ (122,651) $ (142,701) $ (180,543) $ (553,490)
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Cash(usedin)providedbyfinancingactivities $ (1,588) $ 199,494 $ 11,840 $ (19,360) $ 190,386
54 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Realized prices (US$):
Gold(perounce) $ 1,192 $ 1,268 $ 1,332 $ 1,196 $ 1,249
Silver(perounce) $ 15.09 $ 17.21 $ 19.52 $ 16.76 $ 17.28
Zinc(pertonne) $ 1,540 $ 1,852 $ 2,170 $ 2,346 $ 2,047
Copper(pertonne) $ 4,297 $ 4,714 $ 4,819 $ 5,578 $ 4,827
Payable production (iii) :
Gold(ounces)
NorthernBusiness
LaRondemine 75,337 75,159 71,784 83,508 305,788
Lapamine 21,709 21,914 16,242 14,065 73,930
Goldexmine 32,340 31,452 32,742 24,170 120,704
Meadowbankmine 72,311 72,402 72,731 94,770 312,214
CanadianMalarticmine(ii) 73,613 72,502 76,428 69,971 292,514
Kittilamine 48,127 46,209 54,835 53,337 202,508
SouthernBusiness
PinosAltosmine 48,117 49,458 48,512 46,685 192,772
CrestonMascotadepositatPinosAltos 11,551 12,398 12,134 11,213 47,296
LaIndiamine 28,231 27,438 30,779 28,714 115,162
Totalgold(ounces) 411,336 408,932 416,187 426,433 1,662,888
Silver(thousandsofounces)
NorthernBusiness
LaRondemine 247 266 203 272 988
Lapamine 3 1 1 – 5
Goldexmine – 1 – – 1
Meadowbankmine 43 66 59 53 221
CanadianMalarticmine(ii) 77 86 96 81 340
Kittilamine 3 2 3 4 12
SouthernBusiness
PinosAltosmine 587 633 644 641 2,505
CrestonMascotadepositatPinosAltos 48 50 55 48 201
LaIndiamine 117 105 126 138 486
Totalsilver(thousandsofounces) 1,125 1,210 1,187 1,237 4,759
Zinc(tonnes) 614 1,318 1,010 1,745 4,687
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Copper(tonnes) 1,154 1,141 1,177 944 4,416
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Payable metal sold:
Gold(ounces)
NorthernBusiness
LaRondemine 75,257 72,005 78,096 67,803 293,161
Lapamine 19,836 22,911 16,851 14,621 74,219
Goldexmine 31,955 30,605 33,275 24,059 119,894
Meadowbankmine 71,589 70,021 78,710 85,318 305,638
CanadianMalarticmine(ii)(iv) 65,085 72,259 72,950 67,900 278,194
Kittilamine 50,725 44,580 55,710 51,687 202,702
SouthernBusiness
PinosAltosmine 43,224 52,287 60,541 43,410 199,462
CrestonMascotadepositatPinosAltos 11,845 12,117 12,655 11,695 48,312
LaIndiamine 26,165 27,748 26,050 29,320 109,283
Totalgold(ounces) 395,681 404,533 434,838 395,813 1,630,865
Silver(thousandsofounces)
NorthernBusiness
LaRondemine 232 267 225 257 981
Lapamine 1 – – 1 2
Goldexmine – – 1 – 1
Meadowbankmine 43 66 53 58 222
CanadianMalarticmine(ii)(iv) 73 77 87 77 312
Kittilamine 3 2 3 3 11
SouthernBusiness
PinosAltosmine 530 647 812 598 2,587
CrestonMascotadepositatPinosAltos 48 49 38 58 193
LaIndiamine 86 123 91 152 452
Totalsilver(thousandsofounces) 1,016 1,231 1,310 1,204 4,761
Zinc(tonnes) 605 673 1,374 902 3,554
Copper(tonnes) 1,156 1,164 1,201 1,001 4,522
56 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Three Months Ended
March 31,
2015 June 30,
2015 September 30,
2015 December 31,
2015 Total 2015
Operating margin (i) :
Revenuesfromminingoperations $ 483,596 $ 510,109 $ 508,795 $ 482,932 $ 1,985,432
Productioncosts 247,280 263,612 254,584 229,819 995,295
Totaloperatingmargin(i) 236,316 246,497 254,211 253,113 990,137
Operating margin (i) by mine:
NorthernBusiness
LaRondemine 30,015 32,799 32,443 50,667 145,924
Lapamine 14,687 11,351 13,813 12,363 52,214
Goldexmine 19,253 15,525 20,681 17,108 72,567
Meadowbankmine 46,577 49,600 55,493 64,664 216,334
CanadianMalarticmine(ii) 34,718 44,737 44,293 38,059 161,807
Kittilamine 27,415 16,145 21,528 15,174 80,262
SouthernBusiness
PinosAltosmine 34,652 44,538 37,217 29,327 145,734
CrestonMascotadepositatPinosAltos 8,409 12,968 8,898 9,919 40,194
LaIndiamine 20,590 18,834 19,845 15,832 75,101
Totaloperatingmargin(i) 236,316 246,497 254,211 253,113 990,137
Amortizationofproperty,plantandminedevelopment 135,897 157,615 157,968 157,129 608,609
Exploration,corporateandother 43,706 67,973 110,258 76,963 298,900
Income(loss)beforeincomeandminingtaxes 56,713 20,909 (14,015) 19,021 82,628
Incomeandminingtaxes(recovery) 27,970 10,826 (15,309) 34,558 58,045
Netincome(loss)fortheperiod $ 28,743 $ 10,083 $ 1,294 $ (15,537) $ 24,583
Netincome(loss)pershare–basic(US$) $ 0.13 $ 0.05 $ 0.01 $ (0.07) $ 0.11
Netincome(loss)pershare–diluted(US$) $ 0.13 $ 0.05 $ 0.01 $ (0.07) $ 0.11
Cash flows:
Cashprovidedbyoperatingactivities $ 143,455 $ 188,349 $ 143,687 $ 140,747 $ 616,238
Cashusedininvestingactivities $ (53,892) $ (104,476) $ (100,365) $ (115,786) $ (374,519)
Cash(usedin)providedbyfinancingactivities $ (123,182) $ (64,514) $ 7,396 $ (100,460) $ (280,760)
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 57
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Realized prices (US$):
Gold(perounce) $ 1,202 $ 1,196 $ 1,119 $ 1,094 $ 1,156
Silver(perounce) $ 17.02 $ 16.41 $ 14.93 $ 14.56 $ 15.63
Zinc(pertonne) $ 2,072 $ 2,231 $ 1,909 $ 1,602 $ 1,875
Copper(pertonne) $ 5,056 $ 6,274 $ 4,538 $ 4,568 $ 5,023
Payable production (iii) :
Gold(ounces)
NorthernBusiness
LaRondemine 58,893 64,007 71,860 73,161 267,921
Lapamine 25,920 19,450 25,668 19,929 90,967
Goldexmine 29,250 26,462 32,068 27,646 115,426
Meadowbankmine 88,523 91,276 99,425 102,580 381,804
CanadianMalarticmine(ii) 67,893 68,441 76,603 72,872 285,809
Kittilamine 44,654 41,986 46,455 44,279 177,374
SouthernBusiness
PinosAltosmine 50,106 50,647 47,725 44,496 192,974
CrestonMascotadepositatPinosAltos 12,448 15,606 12,716 13,933 54,703
LaIndiamine 26,523 25,803 28,604 23,432 104,362
Totalgold(ounces) 404,210 403,678 441,124 422,328 1,671,340
Silver(thousandsofounces)
NorthernBusiness
LaRondemine 198 201 221 296 916
Meadowbankmine 1 1 1 1 4
CanadianMalarticmine(ii) 96 57 39 29 221
Kittilamine 72 69 76 83 300
SouthernBusiness 2 2 3 4 11
PinosAltosmine 562 576 606 640 2,384
CrestonMascotadepositatPinosAltos 32 37 40 50 159
LaIndiamine 69 72 67 55 263
Totalsilver(thousandsofounces) 1,032 1,015 1,053 1,158 4,258
Zinc(tonnes) 936 827 739 999 3,501
Copper(tonnes) 1,167 1,133 1,306 1,335 4,941
58 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Payable metal sold:
Gold(ounces)
NorthernBusiness
LaRondemine 60,943 59,376 69,143 65,067 254,529
Lapamine 23,497 20,771 23,331 23,278 90,877
Goldexmine 27,907 27,306 33,004 27,875 116,092
Meadowbankmine 84,780 96,870 100,440 103,667 385,757
CanadianMalarticmine(ii)(iv) 59,261 67,522 72,651 71,982 271,416
Kittilamine 48,982 39,385 47,070 43,499 178,936
SouthernBusiness
PinosAltosmine 41,433 54,402 49,327 41,418 186,580
CrestonMascotadepositatPinosAltos 11,399 16,537 12,911 14,997 55,844
LaIndiamine 26,898 23,803 28,983 25,366 105,050
Totalgold(ounces) 385,100 405,972 436,860 417,149 1,645,081
Silver(thousandsofounces)
NorthernBusiness
LaRondemine 205 225 220 308 958
Meadowbankmine 98 59 36 32 225
CanadianMalarticmine(ii)(iv) 54 80 53 98 285
Kittilamine 2 2 3 3 10
SouthernBusiness
PinosAltosmine 446 616 620 607 2,289
CrestonMascotadepositatPinosAltos 20 48 39 49 156
LaIndiamine 63 76 66 56 261
Totalsilver(thousandsofounces) 888 1,106 1,037 1,153 4,184
Zinc(tonnes) 1,264 733 650 949 3,596
Copper(tonnes) 1,160 1,131 1,302 1,354 4,947
Notes:
(i) Operatingmarginiscalculatedasrevenuesfromminingoperationslessproductioncosts.
(ii) OnJune16,2014,AgnicoEagleandYamanajointlyacquired100%ofOsiskobywayoftheOsiskoArrangement.AsaresultoftheOsiskoArrangement,AgnicoEagleandYamanaeachindirectlyown50%ofOsisko(nowCanadianMalarticCorporation)andCanadianMalarticGP,whichnowholdstheCanadianMalarticmine.TheinformationsetoutinthistablereflectstheCompany's50%interestintheCanadianMalarticminesincethedateofacquisition.
(iii) Payableproduction(anon-GAAPnon-financialperformancemeasure)isthequantityofmineralproducedduringaperiodcontainedinproductsthatareorwillbesoldbytheCompany,whethersuchproductsaresoldduringtheperiodorheldasinventoriesattheendoftheperiod.
(iv) TheCanadianMalarticmine'spayablemetalsoldexcludesthe5.0%netsmelterroyaltytransferredtoOsiskoGoldRoyaltiesLtd.,pursuanttotheOsiskoArrangement.
MANAGEMENT'SDISCUSSIONANDANALYSISAGNICO EAGLE 59
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THREE YEAR FINANCIAL AND OPERATING SUMMARY (thousands of United States dollars, except where noted)
2016 2015 2014 Revenuesfromminingoperations $ 2,138,232 $ 1,985,432 $ 1,896,766
Productioncosts 1,031,892 995,295 1,004,559
Operatingmargin(i) 1,106,340 990,137 892,207
Amortizationofproperty,plantandminedevelopment 613,160 608,609 433,628
Gainonimpairmentreversal (120,161) – –
Exploration,corporateandother 344,880 298,900 269,441
Incomebeforeincomeandminingtaxes 268,461 82,628 189,138
Incomeandminingtaxes 109,637 58,045 106,168
Netincomefortheyear $ 158,824 $ 24,583 $ 82,970
Netincomepershare–basic $ 0.71 $ 0.11 $ 0.43
Netincomepershare–diluted $ 0.70 $ 0.11 $ 0.39
Operatingcashflow $ 778,617 $ 616,238 $ 668,324
Investingcashflow $ (553,490) $ (374,519) $ (851,619)
Financingcashflow $ 190,386 $ (280,760) $ 229,236
Dividendsdeclaredpershare $ 0.36 $ 0.32 $ 0.32
CapitalexpendituresperConsolidatedStatementsofCashFlows $ 516,050 $ 449,758 $ 475,412
Averagegoldpriceperouncerealized $ 1,249 $ 1,156 $ 1,261
Averagesilverpriceperouncerealized $ 17.28 $ 15.63 $ 18.27
Averagezincpricepertonnerealized $ 2,047 $ 1,875 $ 2,224
Averagecopperpricepertonnerealized $ 4,827 $ 5,023 $ 6,596
Weightedaveragenumberofcommonsharesoutstanding–basic(thousands) 222,737 216,168 195,223
Workingcapital(includingundrawncreditlines) $ 2,005,785 $ 1,441,991 $ 1,274,627
Totalassets $ 7,107,951 $ 6,683,180 $ 6,840,538
Long-termdebt $ 1,072,790 $ 1,118,187 $ 1,374,643
Shareholders'equity $ 4,492,474 $ 4,141,020 $ 4,068,490
60 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Operating Summary
LaRondemine
Revenuesfromminingoperations $ 388,180 $ 318,207 $ 308,794
Productioncosts 179,496 172,283 188,736
Operatingmargin(i) $ 208,684 $ 145,924 $ 120,058
Amortizationofproperty,plantandminedevelopment 85,292 80,298 64,945
Grossprofit $ 123,392 $ 65,626 $ 55,113
Tonnesoforemilled 2,240,144 2,241,424 2,085,300
Gold–gramspertonne 4.44 3.91 3.24
Goldproduction–ounces 305,788 267,921 204,652
Silverproduction–thousandsofounces 988 916 1,275
Zincproduction–tonnes 4,687 3,501 10,515
Copperproduction–tonnes 4,416 4,941 4,997
Totalcashcostsperounceofgoldproduced($perouncebasis):
Productioncosts $ 587 $ 643 $ 922
Adjustments:
Inventoryandotheradjustments(ii) 81 117 133
Totalcashcostsperounceofgoldproduced–co-productbasis(iii) $ 668 $ 760 $ 1,055
By-productmetalrevenues (167) (170) (387)
Totalcashcostsperounceofgoldproduced–by-productbasis(iii) $ 501 $ 590 $ 668
Minesitecostspertonne(iv) C$ 106 C$ 99 C$ 99
Lapamine
Revenuesfromminingoperations $ 92,160 $ 104,785 $ 115,254
Productioncosts 52,974 52,571 61,056
Operatingmargin(i) $ 39,186 $ 52,214 $ 54,198
Amortizationofproperty,plantandminedevelopment 30,915 30,939 25,991
Grossprofit $ 8,271 $ 21,275 $ 28,207
Tonnesoforemilled 592,683 559,926 638,800
Gold–gramspertonne 4.64 5.83 5.59
Goldproduction–ounces 73,930 90,967 92,622
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Totalcashcostsperounceofgoldproduced($perouncebasis):
Productioncosts $ 717 $ 578 $ 659
Adjustments:
Inventoryandotheradjustments(ii) 15 13 8
Totalcashcostsperounceofgoldproduced–co-productbasis(iii) $ 732 $ 591 $ 667
By-productmetalrevenues – (1) –
Totalcashcostsperounceofgoldproduced–by-productbasis(iii) $ 732 $ 590 $ 667
Minesitecostspertonne(iv) C$ 121 C$ 117 C$ 107
Goldexmine
Revenuesfromminingoperations $ 149,730 $ 133,845 $ 125,574
Productioncosts 63,310 61,278 64,836
Operatingmargin(i) $ 86,420 $ 72,567 $ 60,738
Amortizationofproperty,plantandminedevelopment 41,278 55,728 52,552
Grossprofit $ 45,142 $ 16,839 $ 8,186
Tonnesoforemilled 2,545,300 2,312,567 2,116,777
Gold–gramspertonne 1.60 1.66 1.60
Goldproduction–ounces 120,704 115,426 100,433
Totalcashcostsperounceofgoldproduced($perouncebasis):
Productioncosts $ 525 $ 531 $ 646
Adjustments:
Inventoryandotheradjustments(ii) 7 7 (8)
Totalcashcostsperounceofgoldproduced–co-productbasis(iii) $ 532 $ 538 $ 638
By-productmetalrevenues – – –
Totalcashcostsperounceofgoldproduced–by-productbasis(iii) $ 532 $ 538 $ 638
Minesitecostspertonne(iv) C$ 33 C$ 33 C$ 33
Meadowbankmine
Revenuesfromminingoperations $ 384,023 $ 446,898 $ 575,856
Productioncosts 218,963 230,564 270,824
Operatingmargin(i) $ 165,060 $ 216,334 $ 305,032
Amortizationofproperty,plantandminedevelopment 122,545 144,931 119,545
Grossprofit $ 42,515 $ 71,403 $ 185,487
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62 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Tonnesoforemilled 3,915,102 4,032,852 4,129,100
Gold–gramspertonne 2.70 3.16 3.61
Goldproduction–ounces 312,214 381,804 452,877
Silverproduction–thousandsofounces 221 221 135
Totalcashcostsperounceofgoldproduced($perouncebasis):
Productioncosts $ 701 $ 604 $ 598
Adjustments:
Inventoryandotheradjustments(ii) 26 19 6
Totalcashcostsperounceofgoldproduced–co-productbasis(iii) $ 727 $ 623 $ 604
By-productmetalrevenues (12) (10) (5)
Totalcashcostsperounceofgoldproduced–by-productbasis(iii) $ 715 $ 613 $ 599
Minesitecostspertonne(iv) C$ 74 C$ 70 C$ 73
CanadianMalarticmine(v)
Revenuesfromminingoperations $ 371,920 $ 333,280 $ 189,900
Productioncosts 183,635 171,473 113,916
Operatingmargin(i) $ 188,285 $ 161,807 $ 75,984
Amortizationofproperty,plantandminedevelopment 117,665 103,050 40,973
Grossprofit $ 70,621 $ 58,757 $ 35,011
Tonnesoforemilled 9,820,696 9,544,763 5,263,100
Gold–gramspertonne 1.04 1.05 0.95
Goldproduction–ounces 292,514 285,809 143,008
Silverproduction–thousandsofounces 340 300 151
Totalcashcostsperounceofgoldproduced($perouncebasis):
Productioncosts $ 628 $ 600 $ 797
Adjustments:
Inventoryandotheradjustments(ii) (2) 13 (76)
Totalcashcostsperounceofgoldproduced–co-productbasis(iii) $ 626 $ 613 $ 721
By-productmetalrevenues (20) (17) (20)
Totalcashcostsperounceofgoldproduced–by-productbasis(iii) $ 606 $ 596 $ 701
Minesitecostspertonne(iv) C$ 25 C$ 23 C$ 22
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Kittilamine
Revenuesfromminingoperations $ 252,346 $ 206,357 $ 176,520
Productioncosts 141,871 126,095 116,893
Operatingmargin(i) $ 110,475 $ 80,262 $ 59,627
Amortizationofproperty,plantandminedevelopment 57,361 48,648 33,683
Grossprofit $ 53,114 $ 31,614 $ 25,944
Tonnesoforemilled 1,666,732 1,464,038 1,156,400
Gold–gramspertonne 4.41 4.44 4.57
Goldproduction–ounces 202,508 177,374 141,742
Silverproduction–thousandsofounces 12 11 7
Totalcashcostsperounceofgoldproduced($perouncebasis):
Productioncosts $ 701 $ 711 $ 825
Adjustments:
Inventoryandotheradjustments(ii) (1) (1) 21
Totalcashcostsperounceofgoldproduced–co-productbasis(iii) $ 700 $ 710 $ 846
By-productmetalrevenues (1) (1) (1)
Totalcashcostsperounceofgoldproduced–by-productbasis(iii) $ 699 $ 709 $ 845
Minesitecostspertonne(iv) € 77 € 76 € 78
PinosAltosmine
Revenuesfromminingoperations $ 294,377 $ 250,909 $ 251,783
Productioncosts 114,557 105,175 123,342
Operatingmargin(i) $ 179,820 $ 145,734 $ 128,441
Amortizationofproperty,plantandminedevelopment 64,101 41,894 42,957
Grossprofit $ 115,719 $ 103,840 $ 85,484
Tonnesoforeprocessed 2,260,155 2,378,406 2,520,400
Gold–gramspertonne 3.04 2.68 2.22
Goldproduction–ounces 192,772 192,974 171,019
Silverproduction–thousandsofounces 2,505 2,384 1,731
64 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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Totalcashcostsperounceofgoldproduced($perouncebasis):
Productioncosts $ 594 $ 545 $ 721
Adjustments:
Inventoryandotheradjustments(ii) (9) 33 (3)
Totalcashcostsperounceofgoldproduced–co-productbasis(iii) $ 585 $ 578 $ 718
By-productmetalrevenues (229) (191) (185)
Totalcashcostsperounceofgoldproduced–by-productbasis(iii) $ 356 $ 387 $ 533
Minesitecostspertonne(iv) $ 49 $ 45 $ 48
CrestonMascotadepositatPinosAltos
Revenuesfromminingoperations $ 62,967 $ 66,472 $ 59,573
Productioncosts 27,341 26,278 28,007
Operatingmargin(i) $ 35,626 $ 40,194 $ 31,566
Amortizationofproperty,plantandminedevelopment 18,898 17,868 9,626
Grossprofit $ 16,728 $ 22,326 $ 21,940
Tonnesoforeprocessed 2,119,245 2,098,812 1,793,800
Gold–gramspertonne 1.12 1.34 1.3
Goldproduction–ounces 47,296 54,703 47,842
Silverproduction–thousandsofounces 201 159 88
Totalcashcostsperounceofgoldproduced($perouncebasis):
Productioncosts $ 578 $ 480 $ 585
Adjustments:
Inventoryandotheradjustments(ii) 10 (6) 26
Totalcashcostsperounceofgoldproduced–co-productbasis(iii) $ 588 $ 474 $ 611
By-productmetalrevenues (72) (44) (33)
Totalcashcostsperounceofgoldproduced–by-productbasis(iii) $ 516 $ 430 $ 578
Minesitecostspertonne(iv) $ 13 $ 12 $ 16
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LaIndiamine(vi)
Revenuesfromminingoperations $ 142,529 $ 124,679 $ 93,512
Productioncosts 49,745 49,578 36,949
Operatingmargin(i) $ 92,784 $ 75,101 $ 56,563
Amortizationofproperty,plantandminedevelopment 72,043 81,430 43,356
Grossprofit $ 20,741 $ (6,329) $ 13,207
Tonnesoforeprocessed 5,837,404 5,371,419 4,773,190
Gold–gramspertonne 0.81 0.95 0.98
Goldproduction–ounces 115,162 104,362 75,093
Silverproduction–thousandsofounces 486 263 178
Totalcashcostsperounceofgoldproduced($perouncebasis)(vi):
Productioncosts $ 432 $ 475 $ 516
Adjustments:
Inventoryandotheradjustments(ii) 36 – 16
Totalcashcostsperounceofgoldproduced–co-productbasis(iii) $ 468 $ 475 $ 532
By-productmetalrevenues (73) (39) (45)
Totalcashcostsperounceofgoldproduced–by-productbasis(iii) $ 395 $ 436 $ 487
Minesitecostspertonne(iv) $ 9 $ 9 $ 8
Notes:
(i) Operatingmarginiscalculatedasrevenuesfromminingoperationslessproductioncosts.(ii) UndertheCompany'srevenuerecognitionpolicy,revenueisrecognizedwhenlegaltitlepasses.Astotalcashcostsperounceofgoldproducedarecalculatedona
productionbasis,thisinventoryadjustmentreflectsthesalesmarginontheportionofproductionnotyetrecognizedasrevenue.Otheradjustmentsincludetheadditionofsmelting,refiningandmarketingchargestoproductioncosts.
(iii) TotalcashcostsperounceofgoldproducedisnotarecognizedmeasureunderIFRSandthisdatamaynotbecomparabletodatapresentedbyothergoldproducers.Totalcashcostsperounceofgoldproducedispresentedonbothaby-productbasis(deductingby-productmetalrevenuesfromproductioncosts)andco-productbasis(beforedeductingby-productmetalrevenues).Totalcashcostsperounceofgoldproducedonaby-productbasisiscalculatedbyadjustingproductioncostsasrecordedintheconsolidatedstatementsofincomeandcomprehensiveincomeforby-productmetalrevenues,inventoryproductioncosts,smelting,refiningandmarketingchargesandotheradjustments,andthendividingbythenumberofouncesofgoldproduced.Totalcashcostsperounceofgoldproducedonaco-productbasisiscalculatedinthesamemannerastotalcashcostsperounceofgoldproducedonaby-productbasisexceptthatnoadjustmentforby-productmetalrevenuesismade.Thecalculationoftotalcashcostsperounceofgoldproducedonaco-productbasisdoesnotreflectareductioninproductioncostsorsmelting,refiningandmarketingchargesassociatedwiththeproductionandsaleofby-productmetals.TheCompanybelievesthatthesegenerallyacceptedindustrymeasuresprovidearealisticindicationofoperatingperformanceandprovideusefulcomparisonpointsbetweenperiods.TotalcashcostsperounceofgoldproducedisintendedtoprovideinformationaboutthecashgeneratingcapabilitiesoftheCompany'sminingoperations.ManagementalsousesthesemeasurestomonitortheperformanceoftheCompany'sminingoperations.Asmarketpricesforgoldarequotedonaperouncebasis,usingthetotalcashcostsperounceofgoldproducedonaby-productbasismeasureallowsmanagementtoassessamine'scashgeneratingcapabilitiesatvariousgoldprices.Managementisawarethattheseperouncemeasuresofperformancecanbeaffectedbyfluctuationsinexchangeratesand,inthecaseoftotalcashcostsofgoldproducedonaby-productbasis,by-productmetalprices.Managementcompensatesfortheseinherentlimitationsbyusingthesemeasuresinconjunctionwithminesitecostspertonne(discussedbelow)aswellasotherdatapreparedinaccordancewithIFRS.Managementalsoperformssensitivityanalysesinordertoquantifytheeffectsoffluctuatingmetalpricesandexchangerates.
(iv) MinesitecostspertonneisnotarecognizedmeasureunderIFRSandthisdatamaynotbecomparabletodatapresentedbyothergoldproducers.Thismeasureiscalculatedbyadjustingproductioncostsasshownintheconsolidatedstatementsofincomeandcomprehensiveincomeforinventoryproductioncosts,andthendividingbytonnesoforemilled.Asthetotalcashcostsperounceofgoldproducedmeasurecanbeimpactedbyfluctuationsinby-productmetalpricesandexchangerates,managementbelievesthattheminesitecostspertonnemeasureprovidesadditionalinformationregardingtheperformanceofminingoperations,eliminatingtheimpactofvaryingproductionlevels.Managementalsousesthismeasuretodeterminetheeconomicviabilityofminingblocks.Aseachminingblockisevaluatedbasedonthenetrealizablevalueofeachtonnemined,inordertobeeconomicallyviabletheestimatedrevenueonapertonnebasismustbeinexcessoftheminesitecostspertonne.ManagementisawarethatthispertonnemeasureofperformancecanbeimpactedbyfluctuationsinprocessinglevelsandcompensatesforthisinherentlimitationbyusingthismeasureinconjunctionwithproductioncostspreparedinaccordancewithIFRS.
66 AGNICO EAGLE MANAGEMENT'SDISCUSSIONANDANALYSIS
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(v) OnJune16,2014,AgnicoEagleandYamanajointlyacquired100%ofOsiskobywayoftheOsiskoArrangement.AsaresultoftheOsiskoArrangement,AgnicoEagleandYamanaeachindirectlyown50%ofOsisko(nowCanadianMalarticCorporation)andCanadianMalarticGP,whichnowholdstheCanadianMalarticmine.TheinformationsetoutinthistablereflectstheCompany's50%interestintheCanadianMalarticminesincethedateofacquisition.
(vi) TheLaIndiamineachievedcommercialproductiononFebruary1,2014.ThecalculationoftotalcashcostsperounceofgoldproducedfortheyearendedDecember31,2014excludes3,492ouncesofpayablegoldproductionastheywereproducedpriortotheachievementofcommercialproduction.
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QuickLinks
Exhibit99.3
NOTETOINVESTORSCONCERNINGFORWARD-LOOKINGINFORMATIONNOTETOINVESTORSCONCERNINGESTIMATESOFMINERALRESERVESANDMINERALRESOURCES
CautionaryNotetoInvestorsConcerningEstimatesofMeasuredandIndicatedMineralResourcesCautionaryNotetoInvestorsConcerningEstimatesofInferredMineralResources
NOTETOINVESTORSCONCERNINGCERTAINMEASURESOFPERFORMANCEGOLD($perounce)SILVER($perounce)TotalProductionCostsbyCategorySUMMARIZEDQUARTERLYDATA(thousandsofUnitedStatesdollars,exceptwherenoted)THREEYEARFINANCIALANDOPERATINGSUMMARY(thousandsofUnitedStatesdollars,exceptwherenoted)
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Exhibit 99.4
Rule 13a-14(a) or Rule 15d-14(a) Certification - CEO I, Sean Boyd, certify that: 1. I have reviewed this annual report on Form 40-F of Agnico Eagle Mines Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; 4. The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer andhave:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annualreport that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5. The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s
auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control
over financial reporting.
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Toronto, Canada
March 27, 2017
/s/ Sean BoydSean BoydVice-Chairman and Chief Executive Officer
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Exhibit 99.5
Rule 13a-14(a) or Rule 15d-14(a) Certification - CFO I, David Smith, certify that: 1. I have reviewed this annual report on Form 40-F of Agnico Eagle Mines Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; 4. The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer andhave:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annualreport that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and
5. The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s
auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control
over financial reporting.
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Toronto, Canada
March 27, 2017
/s/ David SmithDavid SmithSenior Vice-President, Finance and Chief Financial Officer
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Exhibit 99.6
Rule 13a-14(b) Certification CEO In connection with the annual report of Agnico Eagle Mines Limited (the “Company”) on Form 40-F for the fiscal year ended December 31, 2016 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Sean Boyd, the Vice-Chairman, President and Chief Executive Officer of the Company,certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Toronto, Canada March 27, 2017
/s/ Sean BoydSean BoydVice-Chairman and Chief Executive Officer
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Exhibit 99.7
Rule 13a-14(b) Certification CFO In connection with the annual report of Agnico Eagle Mines Limited (the “Company”) on Form 40-F for the fiscal year ended December 31, 2016 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, David Smith, the Senior Vice-President, Finance and Chief Financial Officer of theCompany, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Toronto, Canada March 27, 2017
/s/ David SmithDavid SmithSenior Vice-President, Finance and Chief Financial Officer
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Exhibit 99.8
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the reference to our Firm under the caption “Interests of Experts” and to the inclusion in the Annual Report on Form 40-F of Agnico Eagle MinesLimited for the year ended December 31, 2016 filed with the Securities and Exchange Commission on March 27, 2017 (the “Annual Report”), and theincorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8(registration nos. 333-130339 and 333-152004) of our reports dated March 27, 2017, with respect to the consolidated financial statements of Agnico Eagle MinesLimited as of December 31, 2016 and December 31, 2015 and for each of the years in the two-year period ended December 31, 2016 and with respect to theeffectiveness of internal control over financial reporting of Agnico Eagle Mines Limited, which are included in the Annual Report. Toronto, Canada March 27, 2017
/s/ Ernst & Young LLPERNST & YOUNG LLPChartered Professional Accountants Licensed Public Accountants
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Exhibit 99.9
CONSENT OF DANIEL DOUCET I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Daniel DoucetDaniel DoucetSenior Corporate Director, Reserve Development
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Exhibit 99.10
CONSENT OF DONALD GERVAIS I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Donald GervaisDonald GervaisDirector of Technical Services at Canadian Malartic Corporation
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Exhibit 99.11
CONSENT OF SYLVIE LAMPRON I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Sylvie LampronSylvie LampronPrincipal Engineer at Canadian Malartic Corporation
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Exhibit 99.12
CONSENT OF GUY GOSSELIN I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Guy GosselinGuy GosselinVice-President, Exploration
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Exhibit 99.13
CONSENT OF LOUISE GRONDIN I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Louise GrondinLouise GrondinSenior Vice-President, Environment, Sustainable Development and People
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Exhibit 99.14
CONSENT OF CAROL PLUMMER I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Carol PlummerCarol PlummerVice President, Project Development, Southern Business
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Exhibit 99.15
CONSENT OF PAUL COUSIN I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Paul CousinPaul CousinVice-President, Metallurgy
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Exhibit 99.16
CONSENT OF FRANCIS BRUNET I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Francis BrunetFrancis BrunetCorporate Director Mining
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Exhibit 99.17
CONSENT OF DOMINIQUE GIRARD I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Dominique GirardDominique GirardVice-President Technical Services and Nunavut Operations
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Exhibit 99.18
CONSENT OF CHRISTIAN PROVENCHER I consent to the inclusion in the Annual Report on Form 40-F of Agnico Eagle Mines Limited for the year ended December 31, 2016 filed with the Securities andExchange Commission on March , 2017 (the “Annual Report”) of my name and the information that I have approved of as a “qualified person” under theCanadian Securities Administrators National Instrument 43-101 in the Annual Information Form of Agnico Eagle Mines Limited dated March , 2017 (the “AIF”)filed as part of the Annual Report. I also consent to the incorporation by reference in the Registration Statements on Form F-10 (registration no. 333-206498), Form F-3D (registration no. 333-215096) and Form S-8 (registration nos. 333-130339 and 333-152004) of the reference to my name and the above-mentioned information in the AIF. March 27, 2017
/s/ Christian ProvencherChristian ProvencherVice-President, Canada