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Agnico Eagle Reports Third Quarter 2018 Results; Production Guidance Increased for 2018 and 2019; Nunavut Development Projects Continue to Advance as Planned; Drilling Extends Amaruq Mineralization at Depth

Stock Symbol: AEM (NYSE and TSX)

(All amounts expressed in U.S. dollars unless otherwise noted)

TORONTO, Oct. 24, 2018 /PRNewswire/ - Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM) ("Agnico Eagle" or the "Company") today reported quarterly net income of $17.1 million, or $0.07 per share, for the third quarter of 2018.  This result includes non-cash foreign currency translation gains on deferred tax liabilities and non-recurring tax gains of $11.8 million ($0.05 per share) and non-cash foreign currency translation gains, mark-to-market adjustments and derivative gains on financial instruments of $4.1 million ($0.01 per share).  Excluding these items would result in adjusted net income1 of $1.2 million or $0.01 per share for the third quarter of 2018.  In the third quarter of 2017, the Company reported net income of $72.5 million or $0.31 per share.

Included in the third quarter of 2018 net income, and not adjusted above, is non-cash stock option expense of $3.8 million ($0.02 per share).

In the first nine months of 2018, the Company reported net income of $67.0 million, or $0.29 per share.  This compares with the first nine months of 2017, when net income was $203.3 million, or $0.89 per share.

In the third quarter of 2018, cash provided by operating activities was $137.6 million ($155.0 million before changes in non-cash components of working capital), as compared with the third quarter of 2017 when cash provided by operating activities was $194.1 million ($207.9 million before changes in non-cash components of working capital).

In the first nine months of 2018, cash provided by operating activities was $465.4 million ($495.1 million before changes in non-cash components of working capital), as compared with the first nine months of 2017 when cash provided by operating activities was $600.6 million ($629.9 million before changes in non-cash components of working capital).

The decrease in net income and cash provided by operating activities during the current quarter compared to the prior year period was mainly due to lower gold sales volumes, lower realized gold prices, lower by-product revenue and expected higher costs at several operations, principally at LaRonde, Kittila and the Company's Mexican operations.  Lower gold sales were primarily as a result of the expected lower gold production in the period primarily due to reduced throughput levels at Meadowbank as the mine transitions through the last full year of mining at site.

The decrease in net income and cash provided by operating activities in the first nine months of 2018 compared to the prior year period was mainly due to lower gold sales volumes, lower by-product revenue and expected higher costs at several operations, principally at Meadowbank, Kittila and the Company's Mexican operations, partially offset by higher realized gold prices.  Lower gold sales were primarily as a result of the expected lower gold production in the period primarily due to reduced throughput levels at Meadowbank as described above.

"On the back of another strong operational quarter, we have once again increased our 2018 production guidance.  We now expect to produce approximately 1.60 million ounces, up from our previous forecast of 1.58 million ounces that was announced last quarter. Total cash costs and AISC are expected to be at or slightly below the mid-point of our guidance range", said Sean Boyd, Agnico Eagle's Chief Executive Officer.  "Our Nunavut development projects are progressing well.  Drilling continues to generate positive exploration results from the Amaruq underground deposits and we see potential for a slightly earlier startup at Meliadine.  As a result, we now expect our 2019 gold production to exceed 1.70 million ounces, which was the mid-point of the previous 2019 guidance", added Mr. Boyd.

_______________
1 Adjusted net income is a non-GAAP measure.  For a discussion regarding the Company's use of non-GAAP measures, please see "Note Regarding Certain Measures of Performance".


Third quarter 2018 highlights include:

  • Strong quarterly production with stable cost performance continues - Payable gold production2 in the third quarter of 2018 was 421,718 ounces at production costs per ounce of $657, total cash costs per ounce3 of $637 and all-in sustaining costs per ounce4 ("AISC") of $848

  • Production guidance increased for 2018 and 2019 - Based on strong operational performance, 2018 production guidance is now forecast to be approximately 1.60 million ounces of gold, compared to previous guidance of 1.58 million ounces of gold. Total cash costs per ounce and AISC are expected to be at or slightly below the mid-point of the 2018 guidance range ($625 to $675 per ounce and $890 to $940 per ounce, respectively). Given the positive development progress in Nunavut, 2019 production guidance is now forecast to exceed the mid-point of the current guidance range (1.63 to 1.77 million ounces).  The Company will update its 2019 production guidance in February 2019

  • Meliadine project on budget and slightly ahead of schedule - At the end of September, construction at Meliadine was 89% completed and underground development was proceeding as planned with the first production stope in the drilling phase. Commissioning of the process plant is expected to begin in the first quarter of 2019, followed by the expected commencement of commercial production in the second quarter of 2019

  • Amaruq project continues to advance on schedule and on budget for 2018 - Expansion of the haulage road and exterior construction activities are scheduled to be completed in the fourth quarter of 2018. The first ore is expected to be mined early in the second quarter of 2019. Initial production from the Whale Tail deposit is expected to begin in the third quarter of 2019

  • Drilling at Amaruq continues to expand known mineralized zones at depth, further highlighting the potential for underground mining - Recent drilling intersected 19.6 grams per tonne ("g/t") gold over 5.6 metres at 656 metres depth, expanding the V Zone westward at depth. A recent confirmation hole in the Whale Tail North deposit returned 19.5 g/t gold over 7.0 metres at 477 metres depth, which could expand the mineral resources outline. High-grade intercepts, such as 14.2 g/t gold over 5.1 metres at 698 metres depth, expands the deep potential of the Whale Tail deposit to the west. Underground ramp development is continuing at Amaruq, and the Company is evaluating potential underground mining scenarios

  • A quarterly dividend of $0.11 per share was declared


__________________________
2 Payable production of a mineral means the quantity of a mineral produced during a period contained in products that have been or will be sold by the Company whether such products are shipped during the period or held as inventory at the end of the period.

3 Total cash costs per ounce is a non-GAAP measure and, unless otherwise specified, is reported on a by-product basis.  For a reconciliation to production costs and for total cash costs on a co-product basis, see "Reconciliation of Non-GAAP Financial Performance Measures" below.  See also "Note Regarding Certain Measures of Performance".

4 All-in-sustaining costs per ounce is a non-GAAP measure and, unless otherwise specified, is reported on a by-product basis.  For a reconciliation to production costs and for all-in sustaining costs on a co-product basis, see "Reconciliation of Non-GAAP Financial Performance Measures" below.  See also "Note Regarding Certain Measures of Performance".

 

Third Quarter Financial and Production Highlights

In the third quarter of 2018, strong operational performance continued at the Company's mines, which led to payable gold production of 421,718 ounces, compared to 454,362 ounces in the third quarter of 2017.  In the first nine months of 2018, payable gold production was 1,215,957 ounces, compared to 1,300,321 ounces in the prior-year period.

The lower level of production in the third quarter of 2018 and the first nine months of 2018, when compared with the prior-year periods, was primarily due to reduced throughput levels at Meadowbank as the mine transitions through the last full year of mining at site.  A detailed description of the production of each mine is set out below.

Production costs per ounce in the third quarter of 2018 were $657, compared to $578 in the prior-year period.  Total cash costs per ounce in the third quarter of 2018 were $637, compared to $546 per ounce in the prior-year period.

Production costs per ounce in the first nine months of 2018 were $720, compared to $596 in the prior-year period.  Total cash costs per ounce in the first nine months of 2018 were $647, compared with $547 in the prior-year period.

Production costs per ounce and total cash costs per ounce in the third quarter of 2018 and the first nine months of 2018, when compared to the prior-year periods, were negatively affected by lower gold production levels at Meadowbank and higher costs at several mines, partially offset by the weakening of local currencies against the U.S. dollar.  In addition, total cash costs per ounce were negatively affected by lower by-product revenues.

AISC in the third quarter of 2018 were $848 per ounce, compared to $789 in the prior-year period.  The higher AISC when compared to the prior-year period is primarily due to the expected lower gold production and higher total cash costs per ounce compared to the third quarter of 2017.

AISC in the first nine months of 2018 were $885 per ounce, compared to $772 in the prior-year period.  The higher AISC when compared to the prior-year period is primarily due to the same reasons as described above.  A detailed description of the cost performance of each mine is set out below.

Cash Position Remains Strong

Cash and cash equivalents and short term investments decreased to $533.4 million at September 30, 2018, from the June 30, 2018 balance of $721.2 million as a result of the capital spending primarily at the Company's Nunavut projects.

The outstanding balance on the Company's credit facility remained nil at September 30, 2018.  This results in available credit lines of approximately $1.2 billion, not including the uncommitted $300 million accordion feature.

Approximately 54% of the Company's remaining 2018 Canadian dollar exposure is hedged at an average floor price of 1.28 C$/US$, of which approximately one third are designated for capital expenditures at Meliadine.  Approximately 49% of the Company's remaining 2018 Mexican peso exposure is hedged at an average floor price of 19.00 MXN/US$.  Approximately 14% of the Company's remaining 2018 Euro exposure is hedged at an average floor price of 1.20 US$/EUR.  The Company's full year 2018 cost guidance was based on assumed exchange rates of 1.25 C$/US$, 18.00 MXN/US$ and 1.20 US$/EUR.  Agnico Eagle anticipates adding to its operating currency hedges, subject to market conditions.

Diesel relating to the Nunavut operations that is expected to be consumed through to July 2019 was purchased during the 2018 sealift season.  As a result, any outstanding diesel hedges were settled in the third quarter of 2018.  Agnico Eagle anticipates opportunistically entering into hedging arrangements with respect to its diesel exposure for future consumption periods, subject to market conditions.

Capital Expenditures

Given the ongoing positive drill results from the deeper portions of the Whale Tail and V-Zone deposits (see the Amaruq section of this news release), and the potential to develop an underground mining scenario at Amaruq, in the third quarter of 2018 the Company began capitalizing underground ramp expenditures at Amaruq, which totalled $8.7 million in the period.  Capital costs for the ramp for the remainder of the year are estimated to be $7.9 million.  Capitalizing these costs is expected to reduce expensed exploration expenditures by $16.6 million for the full year 2018.

Total capital expenditures (including sustaining capital) in 2018 remain forecast to be approximately $1.08 billion.  The additional capital costs for the Amaruq underground ramp are expected to be offset by savings at other projects.  The following table sets out capital expenditures (including sustaining capital) in the third quarter and first nine months of 2018.






Capital Expenditures





(In thousands of US dollars)








Three Months Ended


Nine Months Ended



September 30, 2018


September 30, 2018

Sustaining Capital






LaRonde mine


$

13,424


$

47,036


LaRonde Zone 5



1,602



2,141


Canadian Malartic mine



13,572



42,862


Meadowbank mine



2,761



14,876


Kittila mine



14,479



37,947


Goldex mine



4,754



15,169


Pinos Altos mine



4,552



22,877


Creston Mascota mine



921



2,647


La India mine



2,498



5,422


Total Sustaining Capital


$

58,563


$

190,977






Development Capital






LaRonde mine


$

5,208


$

7,143


LaRonde Zone 5



4,626



19,627


Canadian Malartic mine



7,619



18,900


Amaruq satellite deposit



77,354



120,797


Amaruq underground ramp



8,700



8,700


Kittila mine



34,067



77,378


Goldex mine



7,221



23,762


Pinos Altos mine



1,707



1,991


Creston Mascota mine



4,971



14,921


La India mine



898



1,641


Meliadine project



126,398



296,852


Other



376



1,976

Total Development Capital


$

279,145


$

593,688

Total Capital Expenditures


$

337,708


$

784,665

 

Revised Guidance for 2018 and 2019 – Production Increased

Based on strong operational performance in the first nine months of the year, 2018 production guidance is now forecast to be approximately 1.60 million ounces of gold, compared to previous guidance of 1.58 million ounces of gold.  Key drivers for the increase in 2018 production guidance includes the extension of production at Lapa to December 2018, higher grades at Meadowbank in the third quarter of 2018 and higher throughput and grades at Canadian Malartic in the first nine months of 2018.

Total cash costs per ounce and AISC are expected to be at or slightly below the mid-point of the 2018 guidance range ($625 to $675 per ounce and $890 to $940 per ounce, respectively).  Given the positive development progress in Nunavut, 2019 production guidance is now forecast to exceed the mid-point of the current guidance range (1.63 to 1.77 million ounces).  The Company will update its 2019 production guidance in February 2019.

2018 Tax Guidance

The Company anticipates the overall effective tax rate for 2018 to be at the previous guidance of approximately 45% for the full year 2018.

As previously outlined in the Company's news release dated February 14, 2018, the Company expects its effective tax rates by jurisdiction for the full year 2018 to be:

Canada - 40% to 50%
Mexico - 35% to 40%
Finland - 20%

Dividend Record and Payment Dates for the Fourth Quarter of 2018

Agnico Eagle's Board of Directors has declared a quarterly cash dividend of $0.11 per common share, payable on December 14, 2018, to shareholders of record as of November 30, 2018.  Agnico Eagle has declared a cash dividend every year since 1983.

Dividend Reinvestment Plan

Please see the following link for information on the Company's dividend reinvestment plan: Dividend Reinvestment Plan

Third Quarter 2018 Results Conference Call and Webcast Tomorrow

The Company's senior management will host a conference call on Thursday, October 25, 2018 at 11:00 AM (E.D.T.) to discuss the Company's financial and operating results.

Via Webcast:

A live audio webcast of the conference call will be available on the Company's website www.agnicoeagle.com.

Via Telephone:

For those preferring to listen by telephone, please dial 1-647-427-7450 or toll-free 1-888-231-8191.  To ensure your participation, please call approximately ten minutes prior to the scheduled start of the call.

Replay Archive:

Please dial 1-416-849-0833 or toll-free 1-855-859-2056, access code 8096137.  The conference call replay will expire on November 25, 2018.  The webcast, along with presentation slides will be archived for 180 days on the Company's website.

NORTHERN BUSINESS REVIEW

ABITIBI REGION, QUEBEC

Agnico Eagle is currently Quebec's largest gold producer with a 100% interest in the LaRonde, Goldex, Lapa and LaRonde Zone 5 mines and a 50% interest in the Canadian Malartic mine.  These mines are located within 50 kilometres of each other, which provides operating synergies and allows for the sharing of technical expertise.

LaRonde Mine – Implementing Technologies to Support Future Automated Mining Activities

The 100% owned LaRonde mine in northwestern Quebec achieved commercial production in 1988.

LaRonde Mine - Operating Statistics







Three Months Ended


Three Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes)


555


582

Tonnes of ore milled per day


6,033


6,326

Gold grade (g/t)


5.18


5.87

Gold production (ounces)


88,353


105,345

Production costs per tonne (C$)


$

110


$

93

Minesite costs per tonne (C$)


$

120


$

101

Production costs per ounce of gold produced ($ per ounce):


$

527


$

377

Total cash costs per ounce of gold produced ($ per ounce):


$

514


$

328

 

Production costs per tonne in the third quarter of 2018 increased when compared to the prior-year period due to slightly higher labour costs (due to an increase in the Company's employees versus contractors), higher underground costs, lower tonnage and the timing of unsold concentrate inventory.  Production costs per ounce in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above and lower production.

Minesite costs per tonne5 in the third quarter of 2018 increased when compared to the prior-year period due to slightly higher labour costs, higher underground costs and lower tonnage.  Total cash costs per ounce in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above, lower production and lower by-product metal revenues.

Gold production in the third quarter of 2018 decreased when compared to the prior-year period due to lower tonnage and lower grades resulting from the mining sequence.

LaRonde Mine - Operating Statistics







Nine Months Ended


Nine Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes)


1,593


1,661

Tonnes of ore milled per day


5,835


6,084

Gold grade (g/t)


5.37


5.02

Gold production (ounces)


262,664


256,347

Production costs per tonne (C$)


$

140


$

105

Minesite costs per tonne (C$)


$

120


$

107

Production costs per ounce of gold produced ($ per ounce):


$

664


$

510

Total cash costs per ounce of gold produced ($ per ounce):


$

446


$

413

 

________________________
5 Minesite costs per tonne is a non-GAAP measure.  For a reconciliation of this measure to production costs as reported in the financial statements, see "Reconciliation of Non-GAAP Financial Performance Measures" below.  See also "Note Regarding Certain Measures of Performance" below.

 

Production costs per tonne in the first nine months of 2018 increased when compared to the prior-year period due to slightly higher labour costs, higher underground costs, lower tonnage and the timing of unsold concentrate inventory.  Production costs per ounce in the first nine months of 2018 increased when compared to the prior-year period due to the reasons described above, partially offset by higher production.

Minesite costs per tonne in the first nine months of 2018 increased when compared to the prior-year period due to slightly higher labour costs, higher underground costs and lower tonnage.  Total cash costs per ounce in the first nine months of 2018 increased when compared to the prior-year period due to the reasons described above, partially offset by higher production and by-product metal revenues.

Gold production in the first nine months of 2018 increased when compared to the prior-year period due to higher grades resulting from the mining sequence in the western pyramid in the lower part of the mine.

Drilling is ongoing at LaRonde 3 with a focus on mineral resource conversion to mineral reserves.  The Company continues to evaluate a phased approach to development between level 311 (a depth of 3.1 kilometres) and level 350 (a depth of 3.5 kilometres). The Company is also studying the best design approaches to LaRonde 3 and the current western pyramid with consideration of potential seismic risk in the deeper portion of the mine.

Following the successful deployment of the LTE network at LaRonde Zone 5, the Company is installing a similar network at the LaRonde mine.  Full coverage below level 269 is expected to be in place by the end of 2018, and the technology will be evaluated for use at LaRonde 3.

The Company is also evaluating the potential to develop Zone 11-3, which is at depth in the past producing Bousquet 2 mine.  This zone currently hosts an indicated mineral resource of approximately 126,000 ounces of gold (824,800 tonnes grading 4.76 g/t gold), and could provide additional production flexibility for the LaRonde complex.

LaRonde Zone 5 – New Production Fleet Commissioned; Operations Continue to Ramp Up

In 2003, the Company acquired the LaRonde Zone 5 project ("LZ5").  The property lies adjacent to and west of the LaRonde complex and previous operators exploited the deposit by open pit.  In February 2017, LZ5 was approved by Agnico Eagle's Board of Directors for development.  Commercial production was achieved on June 1, 2018.

In the third quarter of 2018, mining continued at LZ5 with ore processed in July and ore stockpiled at surface in August and September as the mill processed ore from Lapa.

LaRonde Zone 5 Mine - Operating Statistics





Three Months Ended



September 30, 2018*

Tonnes of ore milled (thousands of tonnes)


54

Tonnes of ore milled per day


1,742

Gold grade (g/t)


2.49

Gold production (ounces)


3,823

Production costs per tonne (C$)


$

148

Minesite costs per tonne (C$)


$

85

Production costs per ounce of gold produced ($ per ounce):


$

1,607

Total cash costs per ounce of gold produced ($ per ounce):


$

897

* Milling operations occurred for 31 days in the period




                               

Production costs per tonne in the third quarter of 2018 were $148.  Production costs per ounce in the third quarter of 2018 were $1,607.  Minesite costs per tonne in the third quarter of 2018 were C$85.  Total cash costs per ounce in the third quarter of 2018 were $897.  Gold production in the third quarter of 2018 was 3,823 ounces of gold.

LaRonde Zone 5 Mine - Operating Statistics





Nine Months Ended



September 30, 2018**

Tonnes of ore milled (thousands of tonnes)


110

Tonnes of ore milled per day


1,803

Gold grade (g/t)


2.63

Gold production (ounces)


8,424

Production costs per tonne (C$)


$

79

Minesite costs per tonne (C$)


$

85

Production costs per ounce of gold produced ($ per ounce):


$

791

Total cash costs per ounce of gold produced ($ per ounce):


$

842

** Milling operations occurred for 61 days in the period




                               

Production costs per tonne in the nine months of 2018 were $79.  Production costs per ounce in the nine months of 2018 were $791.  Minesite costs per tonne in the nine months of 2018 were C$85.  Total cash costs per ounce in the nine months of 2018 were $842.  Gold production in the nine months of 2018 was 8,424 ounces of gold.

Mining will continue at LZ5 over the balance of 2018, but in order to maximize production (tonnage and ounces), ore from LZ5 will be batch processed with ore from Lapa until the end of 2018.  Currently stockpiled ore from LZ5 is expected to be processed in October and November.

Productivity at LZ5 is slightly better than forecast.  Dilution and mining recovery are slightly better than anticipated while mill recovery is higher than forecast.

The LZ5 full production fleet was commissioned in the third quarter of 2018 (two trucks and one scoop tram).  Pilot testing of automated mining is expected to start in the fourth quarter of 2018 for both trucks and the scoop tram.

Under the current LZ5 mine plan, a total of approximately 350,000 ounces of gold are expected to be mined through 2026.  The Company is evaluating the potential to extend operations at depth and along strike onto the Ellison property, which adjoins LZ5 to the west.  Ellison hosts an indicated mineral resource of 68,000 ounces (651,000 tonnes grading 3.25 g/t gold) as of December 31, 2017.

Canadian Malartic Mine – Strong Operational Performance Driven By Higher Grades

In June 2014, Agnico Eagle and Yamana Gold Inc. ("Yamana") acquired Osisko Mining Corporation and created the Canadian Malartic General Partnership (the "Partnership").  The Partnership owns and operates the Canadian Malartic mine in northwestern Quebec through a joint management committee.  Each of Agnico Eagle and Yamana has an indirect 50% ownership interest in the Partnership.  All volume numbers in this section reflect the Company's 50% interest in the Canadian Malartic mine, except as noted.

Canadian Malartic Mine - Operating Statistics







Three Months Ended


Three Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes) (100%)


5,114


5,056

Tonnes of ore milled per day (100%)


55,587


54,957

Gold grade (g/t)


1.22


1.14

Gold production (ounces)


88,602


82,097

Production costs per tonne (C$)


$

26


$

22

Minesite costs per tonne (C$)


$

26


$

24

Production costs per ounce of gold produced ($ per ounce):


$

573


$

548

Total cash costs per ounce of gold produced ($ per ounce):


$

572


$

577

 

Production costs per tonne in the third quarter of 2018 increased when compared to the prior-year period due to higher costs for contractors, fuel and tires, partially offset by higher throughput levels.  Production costs per ounce in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above, partially offset by higher production.

Minesite costs per tonne in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above.  Total cash costs per ounce in the third quarter of 2018 decreased when compared to the prior-year period due higher production, partially offset by higher contractor and fuel costs.

Gold production in the third quarter of 2018 increased when compared to the prior-year period due to higher throughput levels and higher grades, partially offset by slightly lower gold recoveries.

Canadian Malartic Mine - Operating Statistics







Nine Months Ended


Nine Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes) (100%)


15,400


15,128

Tonnes of ore milled per day (100%)


56,410


55,414

Gold grade (g/t)


1.21


1.09

Gold production (ounces)


263,868


235,988

Production costs per tonne (C$)


$

25


$

22

Minesite costs per tonne (C$)


$

25


$

23

Production costs per ounce of gold produced ($ per ounce):


$

563


$

552

Total cash costs per ounce of gold produced ($ per ounce):


$

558


$

558

 

Production costs per tonne in the first nine months of 2018 increased when compared to the prior-year period due to higher costs for contractors, fuel and tires, partially offset by higher throughput levels.  Production costs per ounce in the first nine months of 2018 increased when compared to the prior-year period due the reasons described above, partially offset by higher production.

Minesite costs per tonne in the first nine months of 2018 increased when compared to the prior-year period due to the reasons described above.  Total cash costs per ounce in the first nine months of 2018 were the same when compared to the prior-year period as the increase in costs described above were offset by higher production.

Gold production in the first nine months of 2018 increased when compared to the prior-year period due to higher throughput levels and higher grades, partially offset by slightly lower gold recoveries.

Work on the Barnat extension project is proceeding on budget and on schedule.  Work is primarily focused on the highway 117 road deviation, overburden stripping and tailings expansion.  Production activities at Barnat are scheduled to begin in late 2019.

As part of ongoing stakeholder engagement, Canadian Malartic is in discussions with four First Nations groups concerning a potential memorandum of understanding, which is expected to also include a financial component.  As with the Good Neighbour Guide and other community relations efforts at Canadian Malartic, the Company is working collaboratively with stakeholders to establish cooperative relationships that support the long-term potential of the mine.

Lapa – Operations Expected to Extend to December of 2018

The 100% owned Lapa mine in northwestern Quebec achieved commercial production in May 2009.

Lapa Mine - Operating Statistics







Three Months Ended


Three Months Ended



September 30, 2018*


September 30, 2017

Tonnes of ore milled (thousands of tonnes)


116


134

Tonnes of ore milled per day


1,902


1,457

Gold grade (g/t)


3.51


4.41

Gold production (ounces)


10,464


17,169

Production costs per tonne (C$)


$

67


$

113

Minesite costs per tonne (C$)


$

123


$

113

Production costs per ounce of gold produced ($ per ounce):


$

578


$

703

Total cash costs per ounce of gold produced ($ per ounce):


$

1,061


$

706

* Milling operations occurred for 61 days in the period







 

In the third quarter of 2018, the Lapa mill processed ore for 61 days as the mine approaches the end of operations, therefore, the operating statistics in the above table are not meaningfully comparable to the prior-year period.

Lapa Mine - Operating Statistics







Nine Months Ended


Nine Months Ended



September 30, 2018**


September 30, 2017

Tonnes of ore milled (thousands of tonnes)


242


398

Tonnes of ore milled per day


1,806


1,458

Gold grade (g/t)


4.23


4.24

Gold production (ounces)


26,719


48,410

Production costs per tonne (C$)


$

92


$

121

Minesite costs per tonne (C$)


$

130


$

120

Production costs per ounce of gold produced ($ per ounce):


$

649


$

758

Total cash costs per ounce of gold produced ($ per ounce):


$

916


$

755

** Milling operations occurred for 134 days in the period







 

In the first nine months of 2018, the Lapa mill processed ore for 134 days as the mine approaches the end of operations, therefore, the operating statistics in the above table are not meaningfully comparable to the prior-year period.

Mining operations at Lapa are forecast to continue to December with ore stockpiled in October and November expected to be processed in December.  As a result, gold production from Lapa for the full year 2018 is now forecast to exceed 30,000 ounces (previous guidance was 25,000 ounces).

Goldex – Extent of South Zone Greater than Expected; Potential for Increased Mining Throughput

The 100% owned Goldex mine in northwestern Quebec began production from the M and E satellite zones in September 2013.  Commercial production from the Deep 1 Zone commenced on July 1, 2017.

Goldex Mine - Operating Statistics







Three Months Ended


Three Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes)


616


657

Tonnes of ore milled per day


6,696


7,141

Gold grade (g/t)


1.69


1.47

Gold production (ounces)


31,255


28,906

Production costs per tonne (C$)


$

41


$

34

Minesite costs per tonne (C$)


$

41


$

34

Production costs per ounce of gold produced ($ per ounce):


$

617


$

611

Total cash costs per ounce of gold produced ($ per ounce):


$

611


$

598

 

Production costs per tonne in the third quarter of 2018 increased when compared to the prior-year period due to higher maintenance costs and lower tonnage due to mining transitioning out of the M&E zones and the continuing ramp up of the Deep 1 sector.  Production costs per ounce in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above, partially offset by higher production.

Minesite costs per tonne in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above.  Total cash costs per ounce in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above.

Gold production in the third quarter of 2018 increased when compared to the prior-year period due to higher grades.  Throughput levels were lower in the third quarter of 2018 as a result of a 14-day scheduled shutdown at Goldex to update the hoist drive controls, which affected underground operations.  Concurrently, there was a seven-day scheduled shutdown to carry out mill maintenance.  Stockpiled ore was milled during one week of the underground shutdown.

Goldex Mine - Operating Statistics





All metrics exclude pre-production tonnes and ounces


Nine Months Ended


Nine Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes)


1,914


1,803

Tonnes of ore milled per day


7,011


6,604

Gold grade (g/t)


1.56


1.54

Gold production (ounces)


89,659


83,873

Production costs per tonne (C$)


$

40


$

36

Minesite costs per tonne (C$)


$

40


$

36

Production costs per ounce of gold produced ($ per ounce):


$

656


$

587

Total cash costs per ounce of gold produced ($ per ounce):


$

654


$

576

 

Production costs per tonne in the first nine months of 2018 increased when compared to the prior-year period due to higher costs relating to contractors, maintenance and consumables, partially offset by higher throughput levels (after deducting development ore tonnage from pre-commercial production at the Deep 1 Zone in the first nine months of 2017).  Production costs per ounce in the first nine months of 2018 increased when compared to the prior-year period due to the reasons described above, partially offset by higher production (after deducting pre-commercial ounces in the first nine months of 2017).

Minesite costs per tonne in the first nine months of 2018 increased when compared to the prior-year period due to the reasons described above.  Total cash costs per ounce in the first nine months of 2018 increased when compared to the prior-year period due to the reasons described above.

Gold production in the first nine months of 2018 increased when compared to the prior-year period (after deducting pre-commercial ounces in the first nine months of 2017) due to higher throughput levels.  As stope development in the higher grade Deep 1 area matures through 2018, utilization of the Rail-Veyor system is expected to increase and lead to a reduction in unit costs.

Drilling and development is ongoing in the South Zone, which is accessible from the Deep 1 Zone infrastructure.  The South Zone consists of quartz veins that have higher grades than those in the primary mineralized zones at Goldex.  The Company is evaluating the potential for the South Zone to provide incremental ore feed to the Goldex mill.  Additional development continued at level 106 as a result of better than expected grades, which allows for the potential to increase mining throughput from the South Zone.  A test stope in the South Zone is expected to be mined in the fourth quarter of 2018.

Akasaba West

The Company acquired the Akasaba West gold-copper deposit in January 2014.  Located less than 30 kilometres from Goldex, the Akasaba West deposit could create flexibility and synergies for the Company's operations in the Abitibi region by using extra milling capacity at both Goldex and LaRonde, while reducing overall unit costs.

The Company continues to review the timeline for the integration of the Akasaba West project into the Goldex production profile.  Over a five-year mine life, total production is expected to be approximately 115,000 ounces of gold and 21,000 tonnes of copper at total cash costs per ounce of $550 to $600.

Kirkland Lake Project Update – 2018 Drilling Program Focused on Upper Beaver and Upper Canada

The Kirkland Lake project in northeastern Ontario covers approximately 27,312 hectares, and mineral reserves and mineral resources have been outlined on several properties.  The properties have been owned 100% by Agnico Eagle since March 28, 2018, when the Company completed the acquisition of Yamana's indirect 50% interest in the Canadian exploration assets of Canadian Malartic Corporation that it did not previously own.  Deposits in the Kirkland Lake project include: Upper Beaver, Upper Canada, Anoki and McBean, and Amalgamated Kirkland.

An initial $5.6 million exploration program is underway at Kirkland Lake and drilling commenced in July.  There are currently two rigs working on extending the Upper Beaver deposit at depth, and one rig testing for satellite targets around the Upper Canada deposit.  In the third quarter of 2018, 11,754 metres of drilling (22 holes) was completed.

In addition, the Company is completing a technical review of historical exploration data for the Upper Beaver and Upper Canada deposits, and updating the geological models.  Baseline studies continue at Upper Beaver as well as detailed engineering work and consulting.  The Company is evaluating potential synergies between the Upper Beaver and Upper Canada projects and its other Abitibi operations. 

NUNAVUT REGION

Agnico Eagle has identified Nunavut as a politically attractive and stable jurisdiction with enormous geological potential.  With the Company's Meadowbank mine, two significant development assets (Meliadine and the Amaruq satellite deposit at Meadowbank) and other exploration projects, Nunavut has the potential to be a strategic operating platform with the ability to generate strong production and cash flows over several decades.

Meadowbank – Strong Third Quarter Performance Driven By Better than Expected Grade and Throughput

The 100% owned Meadowbank mine in Nunavut, northern Canada, achieved commercial production in March 2010.  The mine produced its two millionth ounce of gold in 2015.

Meadowbank Mine - Operating Statistics







Three Months Ended


Three Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes)


888


939

Tonnes of ore milled per day


9,652


10,207

Gold grade (g/t)


2.56


3.16

Gold production (ounces)


68,259


86,821

Production costs per tonne (C$)


$

73


$

82

Minesite costs per tonne (C$)


$

73


$

82

Production costs per ounce of gold produced ($ per ounce):


$

716


$

697

Total cash costs per ounce of gold produced ($ per ounce):


$

694


$

661

 

Production costs per tonne in the third quarter of 2018 decreased when compared to the prior-year period primarily due to lower open pit mining costs as a result of the reduced rate of open pit mining activity as the mine transitions through the last full year of mining at site, partially offset by higher re-handling costs.  Production costs per ounce in the third quarter of 2018 increased when compared to the prior-year period as expected due to lower gold production.

Minesite costs per tonne in the third quarter of 2018 decreased when compared to the prior-year period primarily due to lower open pit mining costs as a result of the reduced rate of open pit mining activity as the mine transitions through the last full year of mining at site, partially offset by higher re-handling costs and lower throughput levels.  Total cash costs per ounce in the third quarter of 2018 increased when compared to the prior-year period as expected due to lower gold production.

Gold production in the third quarter of 2018 decreased when compared to the prior-year period as expected due to anticipated lower grades and processing ore that was harder than previously anticipated from the Vault pit, which resulted in lower throughput levels.

However, gold production in the third quarter of 2018 was better than the second quarter of 2018 as a result of higher grades and increased tonnage.  During the quarter, mining activities were carried out at both the Vault and Portage deposits and in addition, ore was sourced from the marginal stockpile.  For all three sources of ore, grades were slightly better than expected.  Tonnage was better than expected due to the operation of the secondary crusher and a higher ratio of Portage ore (softer) to Vault ore processed.

Meadowbank Mine - Operating Statistics







Nine Months Ended


Nine Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes)


2,562


2,861

Tonnes of ore milled per day


9,385


10,480

Gold grade (g/t)


2.50


3.18

Gold production (ounces)


189,333


267,480

Production costs per tonne (C$)


$

84


$

77

Minesite costs per tonne (C$)


$

82


$

76

Production costs per ounce of gold produced ($ per ounce):


$

881


$

631

Total cash costs per ounce of gold produced ($ per ounce):


$

839


$

602

 

Production costs per tonne in the first nine months of 2018 increased when compared to the prior-year period primarily due to increased re-handling costs and lower throughput levels, partially offset by lower open pit mining costs.  Production costs per ounce in the first nine months of 2018 increased when compared to the prior-year period as expected due to the reasons described above and lower gold production.

Minesite costs per tonne in the first nine months of 2018 increased when compared to the prior-year period primarily due to increased re-handling costs and lower throughput levels,  partially offset by lower open pit mining costs.  Total cash costs per ounce in the first nine months of 2018 increased when compared to the prior-year period as expected due to the reasons described above and lower gold production.

Gold production in the first nine months of 2018 decreased when compared to the prior-year period as expected due to anticipated lower grades and processing ore that was harder than previously anticipated from the Vault pit, which resulted in lower throughput levels.

Amaruq Project – Project Continues to Advance on Schedule and on Budget; Exploration Continues to Extend Whale Tail and V Zone Mineralization at Depth

Agnico Eagle has a 100% interest in the Amaruq project, approximately 50 kilometres northwest of the Meadowbank mine.  Amaruq is situated on a 99,878-hectare property, almost adjacent to the 68,735-hectare Meadowbank property.  Development of the Amaruq project was approved in February 2017 by the Company's Board of Directors as a satellite deposit to supply ore to the existing Meadowbank mill.

On July 11, 2018, the Minister of Crown-Indigenous Relations and Northern Affairs Canada (formerly Indigenous and Northern Affairs Canada) approved Agnico Eagle's Type A Water Licence for the Whale Tail pit, which had been issued by the Nunavut Water Board on May 30, 2018.  This approval authorized the Company to commence development activities on the Whale Tail pit.

In late July 2018, the Company began construction activities related to the Whale Tail dike and progressive overburden and waste stripping for Phase 1 of the Whale Tail Pit. Other work carried out in the third quarter of 2018 included processing plant modifications, expansion of the haulage road, construction of a permanent camp facility and a new mobile maintenance shop.  Expansion of the haulage road is scheduled to be completed in November 2018 and exterior construction activities are expected to be finished in December 2018.

During the third quarter of 2018, 392 metres of ramp development was carried out.  Year-to-date ramp development is now 870 metres, with a target of 1,210 metres of development for the full year.  The first ventilation raise is also underway.

Given the ongoing positive drill results from the deeper portions of the Whale Tail and V-Zone deposits, and the potential to develop an underground mining scenario at Amaruq, in the third quarter of 2018 the Company began capitalizing underground ramp expenditures at Amaruq, which totalled $8.7 million in the period.  Capital costs for the ramp for the remainder of the year are estimated to be $7.9 million.

The first open pit ore is expected to be mined early in the second quarter of 2019.  Initial production from the Whale Tail deposit is expected to begin in the third quarter of 2019.  The Company is evaluating potential underground mining scenarios at Amaruq and an update will be provided with the Company's year-end results in February 2019.

The Whale Tail Expansion permitting process for open pit mining activities at the V Zone and underground commenced on October 15, 2018, with a submission of a Project Description to the Nunavut Planning Commission for screening.  The Company subsequently received a positive notice indicating that the proposal conforms to the Land Use Plan.  The Environmental Assessment addendum related to Whale Tail Expansion will be submitted to the Nunavut Impact Review Board in accordance with the permitting process.

The Amaruq project remains on budget with capital expenditures in 2018 forecast to be approximately $175 million (not including the underground ramp expenditures discussed above).

Exploration Drilling Continues to Expand Known Mineralized Zones at Amaruq

Exploration continues at depth in both the Whale Tail deposit and V Zone, as well as conversion drilling of underground mineral resources close to the planned Whale Tail pit bottom.  In the third quarter of 2018, the Company drilled 29,702 metres in 90 drill holes at the Amaruq project, part of the 67,000-metre exploration drill program in 2018.  The exploration program at the Amaruq project was last reported in the Company's news release dated July 16, 2018.

Selected recent intercepts from the Amaruq project are set out in the table below.  The drill hole collars are located on the Amaruq project local geology map; the pierce points are shown on the Amaruq project composite longitudinal section.  All intercepts reported for the Amaruq project show uncapped and capped grades over estimated true widths, based on a preliminary geological interpretation that is being updated as new information becomes available with further drilling.

Recent exploration and conversion drill results from the Whale Tail (WT) deposit and V Zone, Amaruq project

Drill hole

Zone

From
(metres)

To (metres)

Depth of
midpoint
below
surface
(metres)

Estimated
true width
(metres)

Gold grade
(g/t)
(uncapped)

Gold grade
(g/t)
(capped)*

AMQ18-1829

WT

311.2

319.5

257

7.8

8.8

8.8

AMQ18-1830B

WT

749.0

753.0

684

3.6

9.8

9.8

  and

WT

770.3

774.2

702

3.7

8.8

8.8

AMQ18-1830C

WT

759.7

765.1

698

5.1

16.0

14.2

AMQ18-1831

WT

717.5

727.8

555

5.9

4.2

4.2

AMQ18-1831A

WT

683.8

689.8

545

4.6

6.2

6.2

  and

WT

729.5

734.5

580

4.7

6.8

6.8

AMQ18-1834

WT

775.8

786.0

653

5.9

9.1

9.1

AMQ18-1836

WT

498.8

510.0

394

5.6

5.2

5.2

AMQ18-1840

WT

458.1

470.6

327

4.3

10.7

10.7

  and

WT

488.0

501.0

349

11.3

4.0

4.0

AMQ18-1841A

WT North

621.5

630.7

477

7.0

30.8

19.5

AMQ18-1845

V Zone

549.7

553.2

436

3.0

19.0

18.6

  and

V Zone

570.5

574.3

451

2.9

18.4

8.0

AMQ18-1845A

V Zone

584.2

596.5

491

9.4

10.3

7.2

AMQ18-1847A

WT

397.0

408.9

315

5.0

8.2

8.2

  and

WT

428.0

442.2

340

6.0

7.2

7.2

AMQ18-1848

WT

194.2

232.9

186

12.0

11.3

10.4

  including


194.9

210.1

176

5.2

17.1

14.8

  including


221.2

232.9

197

5.9

10.9

10.9

AMQ18-1849

WT

18.4

34.1

26

11.1

3.8

3.8

  and

WT

240.2

246.0

237

2.9

7.4

7.4

  and

WT

253.0

273.3

257

10.2

9.8

9.8

  including


258.5

265.5

257

3.5

15.1

15.1

  and

WT

330.6

339.0

327

8.1

5.2

5.2

AMQ18-1853

WT

68.5

77.1

72

7.0

4.5

4.5

  and

WT

104.5

114.9

108

7.4

3.8

3.8

AMQ18-1856

V Zone

795.8

802.8

643

6.1

5.1

5.1

  and

V Zone

812.0

818.2

656

5.6

19.6

19.6


*Holes at the Whale Tail deposit use a capping factor of 80 g/t gold. Holes at V Zone use a capping factor of 60 g/t gold.

 

[Amaruq Project Local Geology Map]

[Amaruq Project Composite Longitudinal Section]

Whale Tail Deposit Conversion and Deep Exploration

The Whale Tail deposit has been defined over at least 2.3 kilometres of strike length and extends from surface to 915 metres depth.

The conversion drilling program in the third quarter targeted areas beneath the central and western side of the Whale Tail pit, aiming to convert mineral resources to mineral reserves.  The results continue to demonstrate the extension of high-grade mineralization below the proposed pit outline.  The intensive drill program is providing additional information that will be used to further refine the geological and structural models, confirming that there are multiple high-grade intervals.

One area of particular interest is the western part of the Whale Tail ore shoot.  This area has been investigated by two new holes, one drilled from the south and the other from the north, that have led to an update of the structural interpretation.  Hole AMQ18-1849 had four mineralized intercepts, including a significant result of 9.8 g/t gold over 10.2 metres at 257 metres depth, where it ran down-dip along the main folded zone, followed by an interval of 5.2 g/t gold over 8.1 metres at 327 metres depth.  The two intervals are interpreted as parts of the same mineralized lens folded into an S-shape (looking west).  This is expected to lead to a mineral resource with a more continuous outline and, locally, a steeper geometry, approximately 75 to 150 metres beneath the proposed Whale Tail pit.  The results of hole AMQ18-1829, with an intercept of 8.8 g/t gold over 7.8 metres at 257 metres depth in the same area, correspond with the interpretation of the folding of the zone.

Approximately 110 metres east of AMQ18-1849, hole AMQ18-1848 encountered significant gold grades, returning 10.4 g/t gold over 12.0 metres at 186 metres depth, some of which is outside the proposed pit limit.  These results support the interpretation of a thicker folded shape within Whale Tail's main zone in this area.

A series of conversion holes located approximately 50 to 125 metres below the indicated mineral resources centred beneath the proposed Whale Tail pit also demonstrated good continuity of mineralization.  Hole AMQ18-1836 intersected stronger mineralization than anticipated in the iron formation: 5.2 g/t gold over 5.6 metres at 394 metres depth.  Approximately 80 metres to the east, hole AMQ18-1840 had two intercepts: 10.7 g/t gold over 4.3 metres at 327 metres depth and 4.0 g/t gold over 11.3 metres at 349 metres depth.   Another 110 metres farther east, hole AMQ18-1847A also had two intercepts: 8.2 g/t gold over 5.0 metres at 315 metres depth and 7.2 g/t gold over 6.0 metres at 340 metres depth.

The level of confidence in the Whale Tail geological model continues to improve.  Recent drill results could potentially increase the mineral reserve and mineral resources estimate.

Deep exploration drilling continued on the Whale Tail deposit during the third quarter of 2018 using directional drilling.  The main objective was to confirm and extend mineralization beneath the western side of the planned pit at depths ranging from 550 to 700 metres.  Results include hole AMQ18-1830C that highlights the mineral potential toward the west at depth, intersecting 14.2 g/t gold over 5.1 metres at 698 metres depth, approximately 130 metres west of the current inferred mineral resources.  Hole AMQ18-1831 returned 4.2 g/t gold over 5.9 metres at 555 metres depth, while hole AMQ18-1831A returned 6.8 g/t gold over 4.7 metres at 580 metres depth.  These intercepts are approximately 80 and 10 metres, respectively, west of the current inferred mineral resources at this level.  Near the eastern limit of the inferred mineral resources, hole AMQ18-1834 returned 9.1 g/t gold over 5.9 metres at 653 metres depth, confirming significant grade and thickness in this area.

In the Whale Tail North deposit,drill hole AMQ18-1841A returned 19.5 g/t gold over 7.0 metres at 477 metres depth, which could expand the mineral resources outline and improve the grade and thickness locally, along the Whale Tail North structure.  This intercept is approximatively 100 metres north of and slightly above the most strongly mineralized area of Whale Tail's main zone at depth (described in the paragraph above).

The Whale Tail deposit remains open to the west at depth, and to the east along a shallow plunge corresponding to the main ore shoot.  The drill program for the remainder of 2018 will continue to test the Whale Tail deposit and the parallel structure to its north at depth, to expand the mineral resources and continue to convert inferred mineral resources to indicated mineral resources.

V Zone - Drilling Outlines a Potential New Ore Shoot at Depth

The V Zone consists of a series of parallel stacked mineralized structures striking northeast from near surface to as deep as 656 metres below surface; the dip of the structures is approximately 30 degrees near surface and steepens to 60 to 70 degrees at depth, where there are at least two parallel structures.

A mineralized corridor 100 to 150 metres wide plunging shallowly to the northeast has recently been interpreted as another V Zone ore shoot at depth.  It extends from approximately 350 metres to more than 650 metres depth.  The V Zone ore shoot follows the south limb of a fold in the contact between volcanic and sedimentary rock units, which is a favourable location for mineralization.  The ore shoot was first described in the Company's news release dated July 16, 2018.

In the third quarter of 2018, deep exploration drilling continued to return positive results, particularly along the interpreted V Zone ore shoot.

Two new holes are located within the current inferred mineral resources area, providing important information on the geometry and continuity of the mineralization, particularly within the ultramafic host rock.  They also improve drill spacing in an area where previous drilling has demonstrated the presence of high-grade mineralization associated with a series of stacked parallel quartz veins that tend to steepen at depth.  Hole AMQ18-1845 intersected two intervals: 18.6 g/t gold over 3.0 metres at 436 metres depth and 8.0 g/t gold over 2.9 metres at 451 metres depth.  In addition, hole AMQ18-1845A intersected a single long interval of mineralized quartz vein returning 7.2 g/t gold over 9.4 metres at 491 metres depth.

Hole AMQ18-1856, located between previous drill intercepts, returned two distinct intervals both hosted in sedimentary rock: 5.1 g/t gold over 6.1 metres at 643 metres depth and 19.6 g/t gold over 5.6 metres at 656 metres depth.  This is the deepest intercept released in the V Zone.  Results of drilling to date in this area have the potential to extend the mineral resources in the lowest V Zone structure as much as 100 metres to the west and downward.

The V Zone ore shoot remains open at depth and laterally down-plunge along the favourable folded contact between volcanic and sedimentary rocks.  Additional drilling could result in extension of the high-grade ore shoot to the east and west, as well as better definition of the geometry of these structures by the end of 2018.

Meliadine Project – Boat Sealift Completed, Construction Activities are Slightly Ahead of Schedule and on Budget; Potential to Accelerate Commencement of Production

Located near Rankin Inlet, Nunavut, Canada, the Meliadine project was acquired in July 2010, and is Agnico Eagle's largest gold deposit in terms of mineral resources.  The Company owns 100% of the 111,358-hectare property.  In February 2017, the Company's Board of Directors approved the construction of the Meliadine project.

Underground development and surface construction at Meliadine continued through the third quarter of 2018 and the project remains on budget and slightly ahead of schedule for the commencement of commercial production in the second quarter of 2019. The estimated capital budget for 2018 is unchanged at $398 million.

During the third quarter of 2018, the 2018 boat sealift was largely completed, as was the Rankin Inlet bypass road.  Hauling of materials to site can now proceed on a 24-hour basis.


Third Quarter 2018 Activities

Recent development/construction highlights include:

  • At end of the third quarter of 2018, construction was 89% complete
  • The filter press and reagents area were completed in the quarter and mechanical testing will be carried out in late October
  • The crusher and oxygen plant buildings are enclosed and mechanical installation is underway. Construction of the ore bin silo and thickener are in progress. Crusher installation is expected to be completed by the end of January
  • Erection of the paste plant structure is complete and all heavy mechanical equipment is in place
  • The paste dump station concrete is complete with civil earthwork for the paste line 85% complete
  • Commissioning of the power plant is planned for October
  • Mechanical completion of the process plant is still expected in December 2018, with commissioning expected to begin in the first quarter of 2019
  • The new hauling fleet added in August and additional bolters, jumbos and emulsion loaders added in September helped to maximize underground productivity. In the third quarter of 2018, approximately 1,860 metres of underground development was completed (6,121 metres completed year-to-date). The main development focus was on the lower levels and Ramp 3
  • All fresh air raises have been completed ahead of schedule
  • In the third quarter of 2018, approximately 3,372 metres of underground delineation drilling was completed (15,590 metres completed year-to-date), which is in line with budget. All of the stopes that will be mined in 2018 have been delineated, and stope delineation for 2019 is progressing as expected
  • Results from the delineation drilling have generally been in line with the block model
  • Production drilling for the first stope began on September 19, 2018, ahead of schedule by approximately two weeks. Four stopes are expected to be completed by year-end 2018
  • In the second quarter of 2019, the process plant is expected to start up using a 150,000 to 200,000-tonne stockpile of development ore grading approximately 8.5 g/t gold
  • Exploration drilling is ongoing to expand and convert mineral resources into mineral reserves in numerous areas of the mine. Additional details will be provided with the Company's year-end results in February 2019


FINLAND AND SWEDEN

Agnico Eagle's Kittila mine in Finland is the largest primary gold producer in Europe and hosts the Company's largest mineral reserves.  Exploration activities continue to expand the mineral reserves and mineral resources and the Company has approved an expansion to add an underground shaft and increase expected mill throughput by 25 percent to 2.0 million tonnes per annum ("mtpa").  In Sweden, the Company has a 55 percent interest in the Barsele exploration project.

Kittila – Record Quarterly Mill Throughput in the Third Quarter of 2018

The 100% owned Kittila mine in northern Finland achieved commercial production in 2009.

Kittila Mine - Operating Statistics





Three Months Ended


Three Months Ended


September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes)

474


429

Tonnes of ore milled per day

5,152


4,659

Gold grade (g/t)

3.87


4.15

Gold production (ounces)

49,459


50,415

Production costs per tonne (EUR)

71


76

Minesite costs per tonne (EUR)

72


77

Production costs per ounce of gold produced ($ per ounce):

$

791


$

750

Total cash costs per ounce of gold produced ($ per ounce):

$

813


$

753

 

Production costs per tonne in the third quarter of 2018 decreased when compared to the prior-year period primarily due to higher throughput levels.  Production costs per ounce in the third quarter of 2018 increased when compared to the prior-year period due to lower gold production.

Minesite costs per tonne in the third quarter of 2018 decreased when compared to the prior-year period due to the reason described above.  Total cash costs per ounce in the third quarter of 2018 increased when compared to the prior-year period due to the reason described above.

Despite record quarterly mill throughput, gold production in the third quarter of 2018 decreased when compared to the prior-year period due to lower grades and recoveries.  The lower grade resulted from a delay in accessing higher grade stopes due to a re-prioritization of underground development.  Mining development is back on schedule; however, grades are expected to remain slightly below guidance for the remainder of 2018 primarily due to the mining sequence.  The lower grades are expected to be partially offset by higher throughput levels.

Recoveries were slightly below guidance in the third quarter of 2018 due to higher than expected thiocyanate concentrations in the reclaim water pond, higher amounts of active carbon in the ore and lower grade.  Thiocyanate levels have declined during the summer months and a new water treatment strategy is being developed to address this issue.

Kittila Mine - Operating Statistics







Nine Months Ended


Nine Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore milled (thousands of tonnes)


1,365


1,291

Tonnes of ore milled per day


5,000


4,728

Gold grade (g/t)


3.76


4.09

Gold production (ounces)


139,626


149,192

Production costs per tonne (EUR)


74


76

Minesite costs per tonne (EUR)


75


76

Production costs per ounce of gold produced ($ per ounce):


$

864


$

738

Total cash costs per ounce of gold produced ($ per ounce):


$

876


$

739

 

Production costs per tonne in the first nine months of 2018 decreased when compared to the prior-year period due to higher throughput levels.  Production costs per ounce in the first nine months of 2018 increased when compared to the prior-year period due to lower gold production and the strengthening of the Euro relative to the U.S. dollar between periods.

Minesite costs per tonne in the first nine months of 2018 were essentially the same when compared to the prior-year period.  Total cash costs per ounce in the first nine months of 2018 increased when compared to the prior-year period due to lower gold production and the strengthening of the Euro relative to the U.S. dollar between periods.

Gold production in the first nine months of 2018 decreased when compared to the prior-year period due to lower grades and recoveries, as described above.

An eight to ten-day scheduled autoclave shutdown is scheduled for late October.

In February 2018, the Company's Board of Directors approved an expansion to increase throughput rates at Kittila to 2.0 mtpa from the current rate of 1.6 mtpa.  This expansion includes the construction of a 1,044-metre deep shaft, a processing plant expansion as well as other infrastructure and service upgrades over a period from 2018 to 2021.

The expansion project is expected to increase the efficiency of the mine and decrease or maintain current operating costs while providing access to the deeper mining horizons.  In addition, the shaft is expected to provide access to the mineral resources located below 1,150 metres depth, where recent exploration programs have shown promising results.

The Kittila shaft/mill expansion is progressing on schedule and on budget.  Major contracts are in place, mobilization is complete and permitting is underway.  Shaft raise boring for the first 325 metres was completed in August, and slashing is expected to start at the end of October.

Phase 1 of the mill expansion remains on schedule and on budget.  Engineering was finalized in the third quarter of 2018, and civil and structural work has begun.  The first mill tie-ins are expected to be completed during a scheduled mill shutdown in the spring of 2019.  Structural work continues on the Rimpi paste plant, and the underground paste line will be started in the fourth quarter of 2018.  The Rimpi paste plant is expected to be completed in the first quarter of 2019.

Capital expenditures for the expansion project in 2018 remain on budget at €21 million.

Drilling Continues to Infill and Expand the Roura Main Zone and Sisar Top and Central Areas

In the third quarter of 2018, exploration drilling at Kittila continued with 17 holes (5,896 metres) drilled in the Sisar Top, Sisar Central, Roura and Rimpi Deep zones.  Sisar is subparallel to and slightly east of the main Kittila mineralization.

Selected recent drill results are set out in the table below and drill-hole collar coordinates are set out in the Appendix of this news release.  Pierce points are shown on the Kittila Composite Longitudinal Section.  All intercepts reported for the Kittila mine show uncapped grades over estimated true widths, based on a current geological interpretation that is being updated as new information becomes available with further drilling.

Recent exploration drill results from the Sisar and Roura zones at the Kittila mine

Drill hole

Zone

From
(metres)

To (metres)

Depth of
midpoint
below
surface
(metres)

Estimated
true width
(metres)

Gold grade (g/t)
(uncapped)

ROD13-002C

Main - Roura

453.6

462.0

1,053

3.1

4.3

and

Main - Roura

504.0

513.0

1,091

3.6

4.5

ROD13-002D

Main - Roura

486.0

499.0

1,070

6.9

5.5

ROD13-002E

Main - Roura

514.0

528.0

1,106

5.2

6.9

ROD18-700

Sisar Top

549.0

555.0

1,094

3.8

4.3

ROU18-603

Main - Roura

120.0

125.0

1,009

3.7

5.4

ROU18-604

Main - Roura

149.0

154.0

1,042

3.1

5.5

and

Main - Roura

173.0

190.0

1,061

10.5

3.7

ROU18-606

Sisar Top

145.0

151.0

886

5.7

4.5

ROU18-611

Sisar Central

296.1

302.0

1,124

4.0

4.4

ROU18-616

Main - Roura

118.0

123.0

1,009

3.5

5.1

and

Sisar Top

196.0

206.0

1,047

7.2

4.6

 

[Kittla Composite Longitudinal Section]

Drilling continues into the Roura area from the exploration ramp.  Recent intercepts have confirmed the Main Zone and the Sisar Top Zone mineral reserves and mineral resources in the northern part of the Roura area, between 885 and 1,125 metres depth.  Drilling targeted the Roura-Rimpi gap area in the Main and Sisar zones.

In the Main Zone, hole ROU18-603 returned 5.4 g/t gold over 3.7 metres at 1,009 metres depth and hole ROU18-604 returned 5.5 g/t gold over 3.1 metres at 1,042 metres depth; the same hole intersected another lens approximately 20 metres to the east grading 3.7 g/t gold over 10.5 metres at 1,061 metres depth.  These three intercepts confirm the Main Zone in the area.  Approximately 50 metres to the south, hole ROU18-616 intersected the Main Zone grading 5.1 g/t gold over 3.5 metres at 1,009 metres depth.

Three exploration holes drilled from the same platform on the exploration ramp intersected the Sisar Zone over a 240-metre range of depths.  Hole ROU18-606 returned 4.5 g/t gold over 5.7 metres at 886 metres depth, while hole ROU18-611 returned 4.4 g/t gold over 4.0 metres at 1,124 metres depth.  Approximately 100 metres to the south, hole ROU18-616 returned 4.6 g/t gold over 7.2 metres at 1,047 metres depth.  These three intercepts confirm the Sisar Zone mineral reserves and mineral resources in this area.

Drilling of the Roura area continues from the exploration ramp with two high-capacity drill rigs. The goal of this drilling is to convert mineral resources into mineral reserves in the Main and Sisar zones between 1,100 to 1,400 metres depth.

Approximately 250 metres to the south of the drill holes described above, hole ROD18-700 intersected 4.3 g/t gold over 3.8 metres at 1,094 metres depth at the Sisar Top Zone.

Another 250 metres southward, three holes have confirmed the Main Zone in this area.  Hole ROD13-002C intersected two lenses of the Roura Main Zone: 4.3 g/t gold over 3.1 metres at 1,053 metres depth and 4.5 g/t gold over 3.6 metres at 1,091 metres depth.  Hole ROD13-002D intersected 5.5 g/t gold over 6.9 metres at 1,070 metres depth, while hole ROD17-002E intersected 6.9 g/t gold over 5.2 metres at 1,106 metres depth.

The 2018 exploration program is budgeted at $9.2 million including 36,000 metres of drilling, focused on extending the Roura and Rimpi zones.

SOUTHERN BUSINESS REVIEW

Agnico Eagle's Southern Business operations are focused in Mexico.  These operations have been a solid source of precious metals production (gold and silver) with stable operating costs and strong free cash flow since 2009.

Pinos Altos – Sinter Underground Development Underway; Access to Mineralization Expected in Q4 2018

The 100% owned Pinos Altos mine in northern Mexico achieved commercial production in November 2009.

Pinos Altos Mine - Operating Statistics







Three Months Ended


Three Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore processed (thousands of tonnes)


508


587

Tonnes of ore processed per day


5,522


6,380

Gold grade (g/t)


2.96


2.65

Gold production (ounces)


46,405


46,897

Production costs per tonne


$

66


$

44

Minesite costs per tonne


$

66


$

51

Production costs per ounce of gold produced ($ per ounce):


$

727


$

545

Total cash costs per ounce of gold produced ($ per ounce):


$

533


$

376

 

Production costs per tonne in the third quarter of 2018 increased when compared to the prior-year period due to lower throughput levels, higher costs associated with underground mining and the timing of unsold inventory.  Production costs per ounce in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above.

Minesite costs per tonne in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above.  Total cash costs per ounce in the third quarter of 2018 increased when compared to the prior-year period due to the reasons described above and lower by-product revenues.

Gold production in the third quarter of 2018 was essentially unchanged when compared to the prior-year period.

Pinos Altos Mine - Operating Statistics







Nine Months Ended


Nine Months Ended



September 30, 2018


September 30, 2017

Tonnes of ore processed (thousands of tonnes)


1,630


1,760

Tonnes of ore processed per day


5,971


6,447

Gold grade (g/t)


2.66


2.67

Gold production (ounces)


131,887


140,453

Production costs per tonne


$

63


$

44

Minesite costs per tonne


$

62


$

48

Production costs per ounce of gold produced ($ per ounce):


$

782


$

555

Total cash costs per ounce of gold produced ($ per ounce):


$

560


$

369

 

Production costs per tonne in the first nine months of 2018 increased when compared to the prior-year period due to lower throughput levels, higher costs associated with underground mining and the timing of unsold inventory.  Production costs per ounce in the first nine months of 2018 increased when compared to the prior-year period due to the reasons described above and lower gold production.

Minesite costs per tonne in the first nine months of 2018 increased when compared to the prior-year period due to the reasons described above.  Total cash costs per ounce in the first nine months of 2018 increased when compared to the prior-year period due to the reasons described above, lower gold production and lower by-product revenue.

Gold production in the first nine months of 2018 decreased when compared to the prior-year period due to lower throughput levels.

In 2018, Pinos Altos is transitioning into a predominantly underground mining operation, with associated higher costs.  The development of satellite deposits provides an opportunity to lower unit costs by filling available capacity at the processing and heap leaching facility.  Optimization opportunities are being studied to reduce unit costs.

The Sinter and Cubiro satellite deposits at Pinos Altos continued to advance in the third quarter of 2018.  The Sinter deposit, located approximately 2.0 kilometres northwest of the Pinos Altos mine, will be mined from underground and a small open pit.  At Sinter, underground development has begun; 400 metres of lateral development and ancillary drifts have been completed.  Initial production from Sinter is expected to commence in the fourth quarter of 2018.

At the Cubiro deposit, located approximately 9.2 kilometres northwest of the Pinos Altos mine, which could potentially supply high-grade ore to the Pinos Altos processing facilities, access road construction was completed in the third quarter of 2018.  Ramp development preparation began in September and 460 metres of underground development is planned to start in the fourth quarter of 2018.  Underground exploration and delineation drilling is expected to commence in 2019.

At Pinos Altos, the Company is currently installing an ore sorting pilot plant with the goal of improving feed grades to the processing facilities.  Testing is expected to begin in late October and continue for approximately six months.  Over this period, samples will be processed from all the ore bodies to determine the merits of implementing the technology in Mexico; similar ore sorting pilot testing is being considered in the Company's other operating regions.

Exploration in the Third Quarter of 2018 Focused on Reyna de Plata Deposit

The Reyna de Plata deposit is an opportunity for another satellite source of ore on the Pinos Altos property, approximately 1,200 metres north of the Oberon de Weber pit.  The Company is studying different mining options to advance the deposit into the Pinos Altos production schedule.  The current exploration program is part of the activities to increase the mineral resources at Reyna de Plata.

Exploration permits were received for the Reyna de Plata deposit in the fourth quarter of 2017, and a drill program commenced in mid-January 2018.  In the third quarter of 2018, exploration included 5,892 metres (48 holes) of step-out drilling to extend the mineral resources beyond the current pit model.  Total drilling in the first nine months of 2018 was 15,144 metres.  Drilling results for Reyna de Plata were last reported in the Company's news release dated July 25, 2018.

Selected recent drill results from the Reyna de Plata deposit are set out in the table below and drill hole coordinates are set out in a table in the Appendix of this news release.  The collars are also located on the Pinos Altos Local Geology Map.  All intercepts reported for the Reyna de Plata Zone show uncapped and capped gold and silver grades over estimated true widths, based on a preliminary geological interpretation that will be updated as new information becomes available with further drilling.

Recent exploration drill results from the Reyna de Plata Deposit at the Pinos Altos mine

Drill Hole

From
(metres)

To (metres)

Depth of
midpoint
below
surface
(metres)

Estimated
true width
(metres)

Gold grade
(g/t)
(uncapped)

Gold
grade (g/t)
(capped)

Silver grade
(g/t)
(uncapped)

Silver
grade (g/t)
(capped)

RP18-101

49.0

61.0

65

10.9

1.1

1.1

25

25

RP18-114

88.1

103.8

73

12.9

1.2

1.2

17

17

RP18-118

203.0

217.6

193

7.3

3.6

3.3

56

56

RP18-126

66.0

79.2

42

12.6

1.6

1.6

25

25

  and

103.5

113.6

83

9.7

3.2

3.0

34

34

RP18-137

30.0

38.4

44

7.6

2.0

2.0

31

31

RP18-139

86.8

106.8

106

17.4

2.3

1.8

30

30

RP18-141

151.2

157.2

118

3.9

1.2

1.2

26

26

  and

185.1

214.0

151

23.7

0.9

0.9

37

37

  and

230.5

237.0

184

5.0

2.5

2.2

23

23

RP18-145

0.0

24.0

20

19.7

1.0

1.0

10

10

RP18-159

27.5

43.5

40

13.9

2.9

2.9

75

75

  including

33.0

36.6

40

3.1

6.4

6.4

105

105


Cut-off value 0.30 g/t gold, maximum 3.0 metres internal dilution

Holes at the Reyna de Plata zone use a capping factor of 10 g/t gold and 200 g/t silver

 

[Pinos Altos Local Geology Map]

The Reyna de Plata deposit lies along the Reyna de Plata Fault, as does the Sinter Zone, approximately 1,740 metres to the northwest.  The Reyna de Plata deposit consists of low-sulphidation epithermal vein-style mineralization over a 2.5-kilometre strike length in an east-west direction, from surface to locally as deep as 250 metres.  The gold and silver mineralization is accompanied by green-clear-white quartz and calcite in veins, stockwork and breccia.

Recent deeper drilling has yielded significant intercepts below the current mineral resources, such as hole null