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Gold
Not Just For Bugs
David Garofalo,
SVP, Finance and CFO
Agnico-Eagle Mines Limited
1
Forward Looking Statements
The information in this document has been prepared as at April 19, 2010. Certain statements contained in this document constitute
“forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward
looking information under the provisions of Canadian provincial securities laws. When used in this document, the words “anticipate”,
“expect”, “estimate”, “forecast”, “will”, “planned”, and similar expressions are intended to identify forward-looking statements or
information.
Such statements include without limitation: statements regarding timing and amounts of capital expenditures and other assumptions;
estimates of future reserves, resources, mineral production and sales; estimates of mine life; estimates of future internal rates of
return, mining costs, cash costs, minesite costs and other expenses; estimates of future capital expenditures and other cash needs,
and expectations as to the funding thereof; statements and information as to the projected development of certain ore deposits,
including estimates of exploration, development and production and other capital costs, and estimates of the timing of such
exploration, development and production or decisions with respect to such exploration, development and production; estimates of
reserves and resources, and statements and information regarding anticipated future exploration; the anticipated timing of events with
respect to the Company's minesites and statements and information regarding the sufficiency of the Company's cash resources. Such
statements and information reflect the Company's views as at the date of this document and are subject to certain risks, uncertainties
and assumptions, and undue reliance should not be placed on such statements and information. Many factors, known and unknown
could cause the actual results to be materially different from those expressed or implied by such forward looking statements and
information. Such risks include, but are not limited to: the volatility of prices of gold and other metals; uncertainty of mineral reserves,
mineral resources, mineral grades and mineral recovery estimates; uncertainty of future production, capital expenditures, and other
costs; currency fluctuations; financing of additional capital requirements; cost of exploration and development programs; mining risks;
community protests; risks associated with foreign operations; governmental and environmental regulation; the volatility of the
Company's stock price; and risks associated with the Company's byproduct metal derivative strategies. For a more detailed
discussion of such risks and other factors that may affect the Company’s ability to achieve the expectations set forth in the forward-
looking statements contained in this document, see the Company's Annual Report on Form 20-F for the year ended December 31,
2008, as well as the Company's other filings with the Canadian Securities Administrators and the U.S. Securities and Exchange
Commission. The Company does not intend, and does not assume any obligation, to update these forward-looking statements and
information. Marc Legault, a Qualified Person and the Company’s Vice-President, Project Development, reviewed the technical
information disclosed herein. For a detailed breakdown of the Company’s reserve and resource position see the February 17, 2010
press release on the Company’s website. That press release also lists the Qualified Persons for each project.
2
Note To Investors
Note to Investors Regarding the Use of Non-GAAP Financial Measures
This document presents estimates of future "total cash cost per ounce" and "minesite cost per tonne" that are not recognized
measures under United States generally accepted accounting principles ("US GAAP"). This data may not be comparable to data
presented by other gold producers. These future estimates are based upon the total cash costs per ounce and minesite costs per
tonne that the Company expects to incur to mine gold at the applicable projects and do not include production costs attributable to
accretion expense and other asset retirement costs, which will vary over time as each project is developed and mined. It is therefore
not practicable to reconcile these forward-looking non-GAAP financial measures to the most comparable GAAP measure. A
reconciliation of the Company's total cash cost per ounce and minesite cost per tonne to the most comparable financial measures
calculated and presented in accordance with US GAAP for the Company's historical results of operations is set forth in the notes to the
financial statements included in the Company's Annual Information Form and Annual Report on Form 20-F, for the year ended
December 31, 2008, as well as the Company's other filings with the Canadian Securities Administrators and the SEC.
3
Gold is Money
■ First known gold artifacts date back to ~4,000 BC
■ Gold’s appeal, characteristics and scarcity have contributed
to its synonymity with “value”
■ Gold overtook silver as Europe’s currency
standard at the end of the 17th century
■ By 1908, only China and Hong Kong remained on a silver
standard
■ Gold backed treasury notes began to lose value
around WWI, as governments were forced to
issue non-backed paper money to fund the war
■ Breton Woods system established after WWII –
Gold pegged at US$35/oz
■ System collapsed in 1971 as nearly all nations switched to
full fiat money
■ Gold remains the only non-printable, accepted
currency and store of value
4
What Makes Gold So Special?
■ Gold’s appeal through the centuries is
multifold:
■ Dense, soft, shiny and the most malleable and
ductile pure metal known
■ A gold leaf can be beaten thin enough to become
translucent; 1 gram can be beaten into a sheet of 1m2
■ 70% denser than lead
■ Resistant to oxidation, corrosion and an excellent
conductor of electricity
■ Well suited for use in coins, jewelry, and as a protective
coating on other metals
■ Least reactive metal
■ Multiple industrial applications – (jewelry, medicine,
dentistry, electronics, food, etc.)
■ Very rare – Gold’s abundance in the Earth’s crust is
0.0000003%
■ In medieval times, gold was often seen as
beneficial for the health, in the belief that
something that rare and beautiful could not
be anything but healthy.
5
Gold – Sound Investment Over Time
Gold has proven to be a consistent store of value
"Regardless of the dollar price involved, one ounce of gold would purchase a
good-quality man's suit at the conclusion of the Revolutionary War, the Civil
War, the presidency of Franklin Roosevelt, and today.“
Peter A. Burshre – Financial Commentator
$2,500
$2,000
$1,500
$1,000
$500
$0
1791 1803 1815 1827 1839 1851 1863 1875 1887 1899 1911 1923 1935 1947 1959 1971 1983 1995 2007
US Market Price Au Inflation Adjusted Gold Price (2009 Dollars)
6
Preservation Of Wealth
Gold’s scarcity is in stark contrast to the exponential growth of public debt…
“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth.
Gold stands in the way of this insidious process. It stands as a protector of
property rights.”
Alan Greenspan – Former Chairman of the Federal Reserve
Public Debt as a Percentage of GDP (Advanced Economies)
120%
100%
80%
60%
40%
20%
0%
1970 1980 1990 2000 2010E
Source: NBF Economics, NBF Equity Research
7
Hedge Against Inflation And Volatility
… As well as the exponential growth in money supply
“The gold standard makes the money’s purchasing power independent of the
changing, ambitions and doctrines of political parties and pressure groups.
This is not a defect of the gold standard; it is its main excellence.”
Ludwig von Mises – Famous Austrian Economist
USD Billions
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
M1 Money Supply Index M2 Money Supply Index (inclusive of M1)
8
Gold – One Of The Scarcest Metals
■ Every year, global gold production is a mere 2,500 tonnes
■ By comparison, Iron (Fe) is produced at 1.2B tonnes annually
■ As of 2009, worldwide above ground gold amounted to 163,000t – the volume
equivalent of ~240 TEU’s*, or less than one feeder vessel (300-500 TEU’s).
■ It would take the cargoes of about 40 feeder vessels to fill up a large container ship
Element Composition Of The Earth’s Crust 2009 Meadowbank Sealift ~ 240 TEU’s
Potassium Magnesium
Gold’s occurrence
All others
2.6% 2.1% in the Earth’s crust
1.5%
Sodium 0.0000003%
Calcium 2.8%
3.6%
Iron
5.0%
Aluminum
8.1% Oxygen
46.6%
Silicon
27.7%
Source: Association for Mineral Exploration BC * TEU – the volume of an intermodal container ~39m3
9
Gold Price Drivers
Supply, Demand and (Dis)-Investment
Sources Of Gold Supply - 2009
Official
Primary drivers of gold price: Holdings
Changes
Scrap
1%
■ Investment / Disinvestment Recovery,
37%
■ Scrap supply
■ Jewellery demand
■ Producer hedging / dehedging
Total Gold
Production,
62%
■ Central Bank sales or purchases
■ Mine supply Sources Of Gold Demand - 2009
Investment Dehedging
Demand 6%
33%
Other
Fabrication Jewellery
Demand Demand
20% 41%
10
Investment Demand
■ Investment demand has likely been the most significant driver of the gold
price over the past decade
■ Introduction of the gold ETF has created a medium for channeling investment demand for gold
2,000 $1,200
Comex Net Speculative Position LHS Global ETFs (6 funds) LHS Gold Price RHS
$1,150
$1,100
$1,050
1,500
$1,000
$950
Gold Price (US$/oz)
1,570t
$900
Tonnes
1,000 $850
$800
$750
$700
500
$650
646t
$600
$550
0 $500
Dec-05 Apr-06 Aug-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Oct-09 Feb-10
Source: RBC CM
11
Scrap Supply
■ Jewellery gold is the largest potential source of supply from above ground stocks
■ Scrap sales volumes generally increase during periods of high prices and
economic hardships – but not enough to adversely impact gold prices
■ Since 2000, gold price rose approximately by 300%, while scrap supply roughly doubled
■ In developed countries, high retail gold premiums force scrap sales to be driven primarily by special
circumstances (death, divorce, destitution, damage)
■ In developing countries, price swings and economic crises are the main sources of scrap sales
2008 distribution of above ground gold (tonnes) Global scrap supply
1,600
1,400
1,200
1,000
800
600
400
2009E
2010E
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: GFMS Source: GFMS, NBF
12
Jewellery Demand
■ Over the past decade 76% (UBS) of total gold supply has been accounted for by
jewellery demand
■ Large appreciation of the USD-denominated gold price from 2001 to 2008 led to a significant
decline in annual demand for gold jewellery…
■ … however, rising demand from India, China and other developing countries continue to make
jewellery demand an important factor affecting the price of gold
Top 10 jewellery consuming countries, 1999-2008 Global gold jewellery demand 1996-2008
3,500
3,000
2,500
2,000
1,500
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: GFMS
13
Producer Hedging/Dehedging
■ Miners’ hedging of gold production has had a material adverse effect on prices
through the 1990’s
■ Industry wide dehedging that began at the turn of the century has provided
support for the gold price over the past decade
■ Total dehedging in 2009 was approximately 242 tonnes, leaving the remaining balance of world
hedge books at approximately 250 tonnes, or 8M oz of gold
600 t 9.0%
8.0%
400 t
7.0%
200 t 6.0%
5.0%
0t
4.0%
-200 t 3.0%
2.0%
-400 t
1.0%
-600 t .0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Net Producer Hedging 5-yr Treasury Yields
14
Central Bank Sales / Purchases
■ Central Bank sales prior to and during CBGA agreements created significant
resistance to upward gold price movement over the past two decades and
peaked at close to 700 tonnes in 2005
■ Since 2005 selling subsided materially, with net sales of only 24t in 2009
■ Non-CBGA countries, holding large foreign exchange reserves emerged as net buyers of gold
Central Bank Sales (1990 – 2010E) Top-10 Foreign Exchange Holders
700 (US$ billion,end-May 2009)
600 Country Foreign Exchange Reserves
China 2,089
500
Japan 993
400 Russia 386
Tonnes
Taiwan 313
300
India 242
200 South Korea 212
100 Brazil 194
Hong Kong 193
0
Singapore 170
2009E
2010E
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Algeria 141
Source: GFMS, NBF Source: IMF; respective central bank websites
15
Central Bank Sales / Purchases (continued)
■ In 2009, gold sales by the IMF and CBGA participants have been largely
absorbed by purchases from Central Banks of China, India, Russia, Sri Lanka,
and others
■ Total Central Bank holdings are ~34,000 tonnes of gold at the end of 2009,
representing approximately 12% of overall foreign exchange reserves
■ Developing countries with large foreign exchange reserves and relatively low gold holdings
represent material potential purchasing power and support to the gold price
Official Sector Gold Holdings Gold vs. Other Reserves (at end-April)
IMF, 11%
BIS, <1% 100%
80%
CBGA
Signatories,
% of total reserves
Rest of World,
40% 60%
21%
40%
20%
0%
USA CBGA China Other World
United States,
27% Gold Other Reserves
Source: IMF Source: GFMS
16
Mine Supply
■ Despite a 6% increase in 2009, overall mine production output has steadily
declined since 2001 and is expected to continue to do so post-2010
■ Production decline is particularly pronounced in traditional gold producing
countries (S.Afr., USA, Canada, Australia), while China, Russia and Indonesia
experienced the largest production increases in 2009
■ New, high-political risk Gold Mine Production 2008 down 62t
or 2.5% yoy
jurisdictions are increasingly 3,000
becoming the locations of
2,500
new projects
■ Lack of physical and
2,000
government infrastructure, 1,500
Tonnes
corruption, permitting risk 1,000
and political instability are
some of the new risks facing 500
producers 0
1980 1984 1988 1992 1996 2000 2004 2008
Source: GFMS S. Africa, USA, Australia, Canada Rest of World
17
Market Cost Structure
■ Industry cash costs have risen dramatically over the past decade, reflecting:
■ Difficulties of operating gold mines in new, challenging jurisdictions
■ Sensitivities to increasing costs of input commodities (i.e. oil, steel, explosives, etc.)
■ Scarcity of quality large scale deposits
■ Consistently rising industry operating cost environment provides a degree of
support for the price of gold
2010E Cash Costs – Select North American Producers Industry Cash Costs
$600 $500
$500 $450
wt. avg - $442/oz
2010E Cash Costs (US$/oz)
Total Cash Costs (US$/oz)
$400 $400
$300 $350
$200 $300
$250
$100
$200
$0
Alamos
Yamana
Agnico-Ea
Eldorado
Goldcorp
Allied Neva
Barrick
Newmont
New Gold
Centerra
Kinross
IAMGOLD
$150
2010E
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: AEM guidance, RBC CM Source: GFMS, RBCCM
18
Operations At A Glance
100% of reserves at six operating mines.
■ Located in mining-friendly regions of low political risk
■ 100% owned, with low total acquisition costs
■ Each region has long-term mining camp potential
Fraser Institute’s Fraser Institute’s Fraser Institute’s
ranking
1 ranking
1 ranking
14
LaRonde Goldex Kittila
QUEBEC, CANADA QUEBEC, CANADA KITTILA, FINLAND
Fraser Institute’s Fraser Institute’s Fraser Institute’s
ranking
1 ranking
28 ranking
44
Lapa Pinos Altos Meadowbank
QUEBEC, CANADA CHIHUAHUA, MEXICO NUNAVUT, CANADA
19
Fraser Institute’s 2008/2009 ranking of 71 mining jurisdictions
Corporate Strategy
Strategy Remains Focused On Per Share Metrics
■ Increase gold production
■ Targeting 2010 gold production of 1.0 million
to 1.1 million oz
■ Internal expansions expected to contribute to
steady production growth through 2014
■ Grow gold reserves
■ Record gold reserves of 18.4 million ounces
■ Four of the six deposits may ultimately
exceed 5 million oz
■ Acquire small, think big
■ Focus on early stage projects where value
can be created for AEM’s shareholders
■ Anticipate closing Comaplex deal in June 2010
■ Be a low-cost leader
■ Steady state mines have achieved
very good cost performance
■ Maintain a solid financial profile
■ Credit facilities of $900M with a large
syndicate of banks 20
AEM Transformation Successfully Completed
$2.1B Spent on Five New Mines Over Three Years
■ 2007 ■ 2010
■ Regionally focused one-mine ■ Multi-mine international gold
producer producer with 6 operating mines
■ Annual production of 231,000 oz ■ Production expected to grow
Au four-fold to over 1 million oz Au
■ Gold reserves of 12.5 million oz ■ Gold reserves have grown
~50% to 18.4 million oz
■ $40M Exploration budget ■ Exploration budget increased
90% to $75M in 2010
■ Share price of $38.92 (Jan 3/07) ■ Share price of $56.21 (Jan 4/10)
■ Focus on construction of new ■ Focus on internal expansions
mines
21
Industry Leading1 Gold Production Growth Estimates
Studies on three potential internal expansions underway. Meliadine study to begin in 2011.
Payable Gold Production
Total Cash Cost
(ounces)
(US$/oz)
1,800,000
1,600,000
$400
1,400,000
1,200,000
$350
1,000,000
800,000 $300
600,000
400,000 $250
200,000
0 $200
2009A 2010E 2011E 2012E 2013E 2014E
LaRonde Goldex Lapa Kittila Pinos Altos Meadowbank Creston Mascota Total Cash Cost (US$/oz)
1 For an intermediate or senior gold producer
22
Leading Growth Profile Among Senior Producers
Gold production (oz) / 1000 shares
Source: AEM guidance, BMO Capital Markets estimates – Feb/10
23
Transformation To Multi-Mine Gold Producer Complete
Industry Leader In Cash Generation Going Forward
Cash Flow Per Share 2010E Revenue By Metal
2009E 2010E 2011E 2012E 2013E 2014E
$7.0
$6.0 Gold
87%
$5.0
$4.0
$3.0
Silver
$2.0 6%
$1.0
Base
$0.0
Metals
Newmont Agnico-Eagle Barrick Goldcorp Kinross IAMGold Yamana Eldorado 7%
Free Cash Flow Per Share
2009E 2010E 2011E 2012E 2013E 2014E 2010E Revenue By Mine
$4.0
Pinos
$3.0
Kittila Altos
$2.0 12% 17%
$1.0
$0.0 Lapa
-$1.0 9%
-$2.0 Meadow
-$3.0 Goldex bank
-$4.0 12% 26%
-$5.0
Agnico-Eagle Goldcorp IAMGold Barrick Eldorado Yamana Newmont Kinross
LaRonde
24%
Source: BMO Capital Markets estimates – Feb/10; Gold assumptions (US$/oz): 2010 - $1150, 2011 – $1150, 2012 – $950, 2013 & 2014 - $850 24
A solid financial position, low-cost structure, well-funded
growth projects in regions of low political risk, and a
focused, consistent strategy put Agnico-Eagle in a strong
position to continue creating exceptional per share value.
Sean Boyd
Vice Chairman and Chief Executive Officer
Ebe Scherkus
President and Chief Operating Officer
David Garofalo
Senior Vice President, Finance and Chief Financial Officer
Trading Symbol: AEM on TSX & NYSE
Executive and Registered Office:
145 King Street East, Suite 400
Toronto, Ontario, Canada, M5C 2Y7
Tel: 416-947-1212
Toll-Free: 888-822-6714
Fax: 416-367-4681
www.agnico-eagle.com
Investor Relations:
416-947-1212
info@agnico-eagle.com
Member of the World Gold Council www.gold.org 25
