AEM

Business Context and Reporting Period

Company: Agnico-Eagle Mines Limited
Filing Type: Form 6-K (Report of Foreign Issuer)
Reporting Period: Fourth Quarter ended December 31, 2003 (Year ended December 31, 2003)
Date of Filing: February 25, 2004
Primary Operations: Gold mining operations primarily at the LaRonde Mine in northwestern Quebec, Canada, with development projects at Lapa, Goldex, and Bousquet.

Key Financial Metrics

Liquidity and Debt:

• Cash and Equivalents: $110.4 million (Dec 31, 2003) vs. $152.9 million (Dec 31, 2002).
• Working Capital: Over $140 million.
• Debt: Long-term debt of $143.8 million; $125 million revolving bank facility remains completely undrawn.

Material Changes vs. Prior Period

• Earnings Improvement: Q4 2003 net income tripled to $2.4 million from $0.8 million in Q4 2002, driven by higher realized gold prices ($395/oz vs. $318/oz) and a tax recovery of $2.5 million.
• Production Decline: Gold production decreased 6.6% in Q4 2003 (70,299 oz) compared to Q4 2002 (75,235 oz), despite higher ore processing rates (627,000 tons vs. 538,000 tons).
• Cost Increases: Cash operating costs per ounce rose to $180 in Q4 2003 from $128 in Q4 2002. Total cash costs (including El Coco royalty) increased to $220 from $198.
• Reserve Expansion: Proven and probable gold reserves surged 96% to a record 7.9 million ounces, primarily due to resource-to-reserve conversions at LaRonde, Lapa, and Goldex.
• Full Year Loss: Despite Q4 profitability, the full year 2003 resulted in a net loss of $19.5 million, largely due to a $1.7 million cumulative catch-up adjustment related to FAS 143 (asset retirement obligations) and higher exploration/capital expenditures.

Guidance, Outlook, and Risks

2004 Outlook:

• Production: Gold production expected to increase 27% to 300,000 ounces; silver production expected to rise 19% to 4.7 million ounces.
• Costs: Total cash operating costs at LaRonde projected to decline to a range of $155–$165 per ounce. This reduction is attributed to the elimination of the El Coco royalty ($54/oz in 2003) and increased byproduct credits.
• Capital Expenditures: Projected total exploration and capital expenditures for 2004 are $38.9 million ($36.9 million capitalized, $2.0 million expensed).

• Forward-Looking Statements: Actual results may differ materially due to risks disclosed in the Annual Information Form (Form 20-F).
• Commodity Prices: Operating costs are sensitive to fluctuations in silver, zinc, and copper prices, as well as the C$/US$ exchange rate.
• Exploration Uncertainty: While drill results at LaRonde II indicate higher grades, further conversion of resources to reserves is required.

Investor Verification Checklist

• Reserve Quality: Verify the 96% increase in reserves (7.9 million oz) and the specific contribution of the LaRonde, Lapa, and Goldex conversions.
• Cost Structure: Confirm the elimination of the El Coco royalty in 2004 and its impact on the projected $155–$165/oz cost range.
• Cash Flow Sustainability: Review the full-year 2003 operating cash flow of $4.0 million against the $52 million invested in expansion and acquisitions to assess liquidity runway.
• Byproduct Sensitivity: Assess the reliance on silver, zinc, and copper credits to offset gold production costs, given the sensitivity analysis provided.
• Exploration Results: Monitor the feasibility study completion for LaRonde II (late 2004) and the bulk sample processing at Goldex (Q1 2005).