ENP Newswire -
Release date- 13022014 -
This result includes, a non-cash after tax impairment loss of
Excluding these items would result in adjusted net income of
Fourth quarter 2013 cash provided by operating activities was
'Despite a challenging time in the gold market, our employees delivered record operating and safety performance for 2013. This allowed us to exceed both our production and cost guidance for the second year in a row. Over the next three years, we expect further production growth and stable costs', said
Fourth quarter and full year 2013 highlights include:
Continued strong operational performance leads to record annual gold production - record full year payable gold production1 of 1,099,335 ounces at total cash costs2 of
Record fourth quarter production helps drive lower costs - payable gold production of 322,443 ounces at a total cash cost of
All-in sustaining costs3 for 2013 of
Record annual gold production at the
Forecasting 16% projected production growth through 2016 - production is expected to sequentially increase to approximately 1,275,000 ounces in 2016
Year-end 2013 gold reserves, net of production stand at 16.9 million ounces with 11% improvement in average grade to 3.51 grams per tonne (g/t) - gold reserves remain strong despite using
Achievement of commercial production at Goldex and commissioning of La India mines - both projects expected to provide further production growth in 2014
Quarterly dividend of
Payable production of a mineral means the quantity of mineral produced during a period contained in products that are 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.
All-in sustaining cost is a non-GAAP measure. For a reconciliation to production costs, see 'Reconciliation of non-GAAP Financial Performance Measures' below. The Company's methodology for calculating all-in sustaining costs may not be similar to methodology used by other gold producers that disclose all-in sustaining cost. The Company may change the methodology it uses to calculate all-in sustaining costs in the future, including in circumstances where the
For the full year 2013, the Company recorded a net loss of
For 2013, cash provided by operating activities was
In the fourth quarter of 2013, strong operational performance continued at the Company's mines, which led to record quarterly and annual production. Once again, Meadowbank was a key contributor with increased throughput, better than expected gold grades, and strong mill recoveries.
Payable gold production in the fourth quarter of 2013 was a record 322,443 ounces compared to 236,535 ounces in the fourth quarter of 2012. A detailed description of the production and cost performance of each mine is set out below.
Total cash costs for the fourth quarter of 2013 were
For a second straight year, Agnico Eagle has reported record annual gold production. The Company's payable gold production for the full year 2013 was 1,099,335 ounces at total cash costs per ounce of
All-in sustaining costs for 2013 were
Review of Asset Values and Gold Reserves at a Lower Gold Price
Gold reserves were calculated using a
Quarterly Dividend Declared
Agnico Eagle's Board of Directors has declared a quarterly cash dividend of
Conversion to International Financial Reporting Standards
Agnico Eagle has decided to convert its basis of accounting to International Financial Reporting Standards ('IFRS') to enhance the comparability of its financial statements to the Company's peers within the mining industry. The Company has commenced the process to convert its basis of accounting from US GAAP to IFRS with a transition date of
Agnico Eagle anticipates reporting under IFRS for interim and annual periods beginning in the third quarter of 2014, with comparative information restated under IFRS. Additional disclosure regarding the IFRS conversion is included in the Note Regarding Conversion to IFRS section of this news release and will be included in the Company's Management's Discussion and Analysis expected to be filed in
Conference Call Tomorrow
The Company's senior management will host a conference call on
A live audio webcast of the meeting will be available on the Company's website www.agnicoeagle.com.
For those preferring to listen by telephone, please dial 416-644-3416 or Toll-free 1-800-814-4860. To ensure your participation, please call approximately five minutes prior to the scheduled start of the call.
Please dial 416-640-1917 or Toll-free 1-877-289-8525, access code 4661689. The conference call replay will expire on
Liquidity - Existing Cash and Credit Facilities Provide Flexibility
Cash and cash equivalents increased to
Capital expenditures in the fourth quarter of 2013 were
With its cash balances, anticipated cash flows and available bank lines, management believes that Agnico Eagle has adequate funds to advance its pipeline of mine expansion and gold exploration projects in
Three Year Plan Outlines Continued Production Growth
The Company is announcing its production and cost guidance for the three-year period of 2014 through 2016. Anticipated production through 2016 is expected to increase by approximately 16% from 2013 levels.
In 2014, payable gold production is expected to be within the range of 1,175,000 ounces to 1,205,000 ounces. Total cash costs per ounce in 2014 are expected to be in the range of
LaRonde, Goldex, La India and Meadowbank are Key Production Drivers Over the Next Two Years
At LaRonde, commissioning of the cooling plant is expected to have a positive impact on operating flexibility and production at the mine. Furthermore, as LaRonde ramps up production in the deeper portion of the mine, the Company expects the gold grade at the mine to increase gradually over the course of the year.
Agnico Eagle also expects to have significant production growth from Goldex (due to a full year of operation) and La India (expected to achieve commercial production in the first quarter of 2014).
In 2014, Meadowbank is expected to have strong production in the first half of the year (about 60% of the yearly forecast) as higher grades are sequenced in the mine plan at the Portage and Goose deposits. Strong operational performance is expected to continue in 2015 as well.
In 2015, further production growth is expected from LaRonde and
For 2015 and 2016, total cash costs per ounce are expected to be at a slightly lower level than expected for 2014.
In an effort to provide more transparency, Agnico Eagle is providing guidance with respect to its all-in sustaining costs. In 2013, the Company calculated all-in sustaining costs as:
Total cash cost per ounce of gold produced + sustaining capital expenditures + general and administrative expenses (net of stock options) + exploration and corporate development expenditures (excluding greenfield exploration).
To reflect the full cost of gold production from current operations, development capital for new projects was not included in the calculation. The all-in sustaining cost is divided by the gold production to obtain the all-in sustaining cost per ounce.
Based on the recommendations of the
Total cash costs + sustaining capital (including capitalized exploration) + general and administrative expenses (including stock option expenses) + reclamation remediation expense.
All-in sustaining costs for 2014 are expected to be approximately
Improvement in the Three Year Gold Production Forecast
Since the prior three-year production guidance of
At LaRonde, the commissioning of the cooling plant late in the fourth quarter of 2013 has helped reduce heat and congestion in the lower part of the mine and has provided additional flexibility in the mining plan. As a result, production from the deeper areas of the mine is expected to ramp up substantially through 2016. In 2014, total cash costs are expected to be slightly lower than last year primarily due to increased gold grades.
At Lapa, 2014 and 2015 are the last two years of full production based on the current life of mine plan. Production in these two years is expected to decline due to lower grades. The Company expects that the Lapa mine will only operate for a portion of 2016. Additional exploration results from the Zulapa Z8 zone could extend the mine life through 2016.
The Goldex mine successfully started operations at the M and E zones in the fourth quarter of 2013. The increase in production over previous guidance levels, largely relates to the earlier than expected start-up of the mine and to an expected increase in throughput from 5,500 tonnes-per-day (tpd) in the fourth quarter of 2014 to 6,000 tpd in 2015.
A portion of the additional tonnage is forecast to come from the proposed development of the MX and E2 satellite zones. Minesite costs per tonne are expected to remain stable or to slightly decline with the higher expected throughput rates. Exploration is continuing on several other satellite zones, including the deeper D zone, which has the potential to extend the mine's life.
At Kittila, steady production growth is expected over the next three years. In 2014, there is a gradual return to reserve grade (4.64 g/t gold) once the remaining higher grade portions of the Suuri pit pillar are extracted. The 750 tpd mill expansion, which is expected to increase the throughput capacity at the mine to 3,750 tonnes per day, is expected to be completed by the middle of 2015. Increased throughput from the mill expansion is expected to offset the expected decline to reserve grade.
Minesite costs per tonne in 2014 are expected to increase slightly over 2013 levels, but these costs are expected to be reduced with completion of the mill expansion. Additional details on the expansion can be found in the Kittila operating review section of this news release.
In the third and fourth quarters of 2013, mining encountered higher than expected grades in the Portage and Goose pits, which resulted in gold production being well above expected levels. Initiatives undertaken in the fourth quarter of 2013 have resulted in a re-interpretation of the Meadowbank block models, which have largely driven an anticipated 16% improvement in the reserve grade to 3.27 g/t gold. The Company expects to continue to encounter higher-grade mineralization in the first half of 2014, which it believes will be a key driver for production for the year. In succeeding years, the increased production levels over previous guidance are being driven by higher expected reserve grades and the ability to maintain throughput levels in excess of 11,000 tpd.
Operations at Creston Mascota resumed in
Pre-commercial production at La India in 2013 was 3,180 ounces of gold. The Company expects that production will continue to increase at La India for the next several months as the active leach pad area expands and solution volumes increase to steady state operating levels. Crushing plant throughput continues to increase, and stacking rates are currently averaging approximately 12,000 tpd. Commercial production is anticipated at La India in the first quarter of 2014. Production guidance for La India has been increased slightly over last year's guidance due to the mine's earlier than planned startup. Operating costs in 2014 are forecast to be higher than in subsequent years due to the production increase.
Continued Capital Discipline Expected in 2014
At current spot input prices, Agnico Eagle expects to fund this year's capital expenditures, which are estimated to total approximately
Development/Expansion Projects - Future Optionality with Low Capital Commitment
The current three year plan sets out estimated annual gold production which increases each year through 2016 to approximately 1,275,000 million ounces. However, these forecasts do not include the expansion and development projects set out below, which have not yet been approved for construction.
Kittila - Production Shaft and Rimpi Zone Development
A study is underway to consider the construction of a production shaft at Kittila. This shaft would provide operating cost savings and sustain long-term production at higher throughput levels from multiple zones, especially at depths below 700 metres. A shaft would also provide access for exploration and infill drilling. In addition, a study is underway to evaluate the feasibility to develop the
Meliadine - Ramp Extension provides Development Flexibility
Activities in 2013 included infill and step-out diamond drilling, road construction, ramp development, permitting, camp operation and work on an updated technical study.
The 2013 exploration program was completed in August with a total of 79,959 metres drilled. Drilling was focused around known deposits (Tiriganiaq, Wesmeg/Normeg, F zone, Pump and Discovery) and on regional exploration targets.
Highlights of the program include new deep intercepts that have revealed potential to expand the Pump, F zone and Discovery deposits. Drilling has also delineated higher-grade shoots within the Wesmeg deposit, similar to those in the Tiriganiaq and Normeg deposits. These results were incorporated into the year-end 2013 reserve and resource statement. Despite using a lower gold price in 2013, the reserve grade at Meliadine increased to 7.38 g/t from 6.98 g/t.
Construction of a permanent portal with upgraded infrastructure for the exploration ramp was completed in the fourth quarter of 2013. A significant portion of the 2014 Meliadine capital budget (approximately
The ramp would allow for cost-effective exploration and conversion drilling of the deeper parts of the Tiriganiaq and Wesmeg/Normeg zones, which should provide a better understanding of the ore zones and help to optimize potential mining plans. Extension of the ramp would also keep the development time line on track for a potential late 2018 start up if the Company determines to build a mine at Meliadine. A portion of the 2014 budget is allocated to exploration and resource conversion drilling.
An updated technical study is progressing with completion expected in late 2014. The timing of estimating or making capital expenditures on the project beyond 2014 will be subject to Board approval and prevailing market conditions.
Additional Satellite Potential Being Evaluated at Goldex
At the Goldex mine, studies are continuing on the evaluation of other satellite zones including the Deep (top of the
Akasaba West - Could Provide Future Mill Feed to Agnico's Abitibi Facilities
Gold Reserves - 16.9M Ounces with 11% Improvement in Grade
With the recent downturn in commodity prices, the Company has used lower commodity price assumptions to calculate 2013 year-end reserves (
At year-end 2013, the Company's proven and probable gold reserves (net of 2013 production) totaled 149 million tonnes grading 3.51 g/t gold, containing 16.9 million ounces of gold, a decrease of 1.8 million ounces from 2012 levels (including 2013 production of approximately 1.1 million ounces). Despite the decline in overall reserves, the average reserve grade increased to 3.51 g/t gold, which is a considerable increase over last year's grade of 3.16 g/t gold.
In prior years, economic parameters used to model reserves for all properties were calculated using historic three-year average metals prices and foreign exchange rates in accordance with the
Given the downturn in commodity prices in 2013, and in order to focus on improving the quality of the reserve base, Agnico Eagle has decided to use more conservative gold and silver prices of
While the reserves at each operating mine had declines greater than those from depletion resulting from 2013 production, the higher grade makes the remaining reserves more robust in the short-term uncertainty of the current gold market.
The Meadowbank mine had the largest decline in reserves due to the 2013 record high 457,000 ounces of in-situ gold mined (431,000 ounces of gold production) and a higher cut-off grade used in the 2013 estimations. The reserve grade at Meadowbank improved 15% to 3.24 g/t gold, largely due to the re-interpretation of the Goose and Portage block models.
The decline includes approximately 246,000 ounces of lower-grade material from the deeper portion of the Vault pit.
There were also significant grade increases at LaRonde (5.00 g/t versus the prior estimate of 4.54 g/t gold) and Meliadine (7.38 g/t versus the prior estimate of 6.98 g/t gold).
It is the Company's goal to maintain its gold reserves at approximately 15 times its annual gold production rate. The current reserves are approximately at this level when compared to the Company's projected annual 2014 production rate.
In addition to proven and probable gold reserves, Agnico Eagle's byproduct reserves include approximately 75 million ounces of silver at the
Measured and Indicated Gold Resources Grow by 11%
In 2013, drilling was carried out to increase the confidence level of the resource base. This work led to a substantial increase and upgrade to the quality of the resources in 2013.
The Company's measured and indicated resources now total approximately 157 million tonnes grading 1.91 g/t, or 9.7 million ounces of gold. This represents an increase of about 11% or 1.6 million ounces and a 7% increase in grade over the
The main increase to indicated resources came at the Meliadine project, where the gold grade increased 28% to 5.05 g/t. There was also a large increase in the measured and indicated resources at the Kittila mine due to the same factors, and the gold grade increased by 5% to 2.79 g/t.
The Company's inferred resources now total approximately 169 million tonnes grading 1.86 g/t, or 10.1 million ounces of gold. This represents a decrease of approximately 2.0 million ounces of gold in inferred resources. The change is due to the transfer of 1.2 million ounces to indicated resources and a 1.9-million-ounce reduction from using higher cut-off grades, partially offset by a 1.1 million ounce addition from exploration drilling.
The successful conversion to indicated resources was mainly at the Meliadine, Goldex and Kittila mines. The negative impact of the higher cut-off grades was felt most strongly at Kittila and Meliadine, a result of this year's program to increase confidence in the resources. The main exploration success was at the Meliadine and Kittila properties, with some success at
2014 Exploration Program and Budget - a Significant Reduction Over Historical Levels
A large component of the 2014 exploration program will be focused on regional areas such as
Northern Business Operating Review
The 100% owned LaRonde mine in northwestern
The LaRonde mill processed an average of 6,726 tpd in the fourth quarter of 2013, compared with an average of 6,379 tpd in the corresponding period of 2012. Minesite costs per tonne were approximately
Milling performance for the full year 2013 was approximately 6,354 tpd versus 6,444 tpd in 2012. The slightly lower throughput in 2013 relates primarily to 16 days of unplanned shutdown related to the hoist drive compared to 2012.
Minesite costs per tonne for the full year 2013 were approximately
On a per ounce basis, net of byproduct credits, LaRonde's total cash costs per ounce were
For the full year 2013, LaRonde's total cash costs per ounce were
In 2013, the LaRonde mine also produced approximately 19,814 tonnes of zinc (49% less than in 2012), 2.1 million ounces of silver (6% less than in 2012), and 4,835 tonnes of copper (17% more than in 2012) as byproducts to the gold production. These totals are consistent with the change in the metals mix as the mine goes deeper and becomes more gold / copper rich as opposed to zinc / silver rich in the upper levels. In 2014, approximately 80% of the production will come from the lower mine area.
The new cooling plant on the 262 level began operating in
In 2014, work will begin on the installation of a coarse ore conveyor system that will extend from the 293 level to the crusher on the 280 level. The new conveyor, which is expected to be operational in late 2015, should help lower costs and reduce congestion in the deeper portions of the mine.
A three week shutdown is planned at LaRonde in
Lapa - Steady Production and Strong Cost Containment in 2013
The 100% owned Lapa mine in northwestern
The Lapa circuit, located at the LaRonde mill, processed an average of 1,821 tpd in the fourth quarter of 2013. This compares with an average of 1,746 tpd in the fourth quarter of 2012. The improved throughput in the 2013 period was largely due to increased ore hoisted during the quarter compared to the 2012 period.
Minesite costs per tonne were
For the full year 2013, Lapa averaged 1,755 tpd, which is almost identical to 2012 levels. Full-year minesite costs in 2013 were
Payable production in the fourth quarter of 2013 was 26,323 ounces of gold at a total cash cost per ounce of
For the full year 2013, payable production was 100,730 ounces of gold at total cash costs of
At Lapa, 2014 and 2015 are the last two years of full production based on the current life of mine plan. In 2016, production is expected to exhibit a decline from the current levels. Additional exploration drilling in the parallel Zulapa Z8 zone could extend the mine life.
Goldex - Commercial Production Achieved in Fourth Quarter 2013
The 100% owned Goldex mine in northwestern
Mining operations resumed on the M and E satellite zones in
Minesite costs per tonne at Goldex were approximately
Payable gold production in the fourth quarter of 2013 was 19,305 ounces at a total cash cost per ounce of
For the full year 2013, the mine produced 20,810 ounces of gold, including 1,505 pre-production ounces.
In 2014, development activities will begin on the MX and E2 satellite zones. In addition, exploration is continuing on several other satellite zones, including the Deep and P zone (top of the D zone), which have the potential to further extend the mine's life. Economies of scale may be available if additional zones are developed as the mill has the ability to operate at over 8,000 tpd.
Meadowbank - Record Production in 2013
The 100% owned Meadowbank mine in
The Meadowbank mill processed a record average of 11,398 tpd in the fourth quarter of 2013, compared to the 11,193 tpd achieved in the fourth quarter of 2012. The continued improvement in mill throughput in the fourth quarter of 2013 is due to significant improvements in equipment availability and maintenance, compared to the 2012 period.
For the full year 2013, the Meadowbank mill processed an average of 11,350 tpd, compared to 10,440 tpd in the full year 2012. The continued improvement in mill throughput in 2013 compared to 2012 is due to the same reasons outlined above.
Minesite costs per tonne were a record low
Payable production in the fourth quarter of 2013 was 123,433 ounces of gold at total cash costs per ounce of gold of
Full year 2013 payable gold production was a record 430,613 ounces at total cash costs per ounce of gold of
Initially in the third quarter of 2013, mining encountered higher than expected grades in the Portage B pit predominantly due to the presence of more free gold than modeled. Additionally, in the Portage E pit, there was approximately a 30% increase in tonnes and grade compared to the block model. This appears to have been due to an underestimation of the geological complexity (folding) of the mineralization in this portion of the ore body. At the Goose pit, the assay capping level and the block model interpretation down played the continuity of higher-grade areas, which also led to stronger grade reconciliation.
In the fourth quarter of 2013, grades remained high due to accelerated stripping in the Goose pit (providing additional access to the high grade ore), and encountering higher grades than expected in the Goose and Portage pits.
In order to reduce the variance between the block model and the grades going through the mill, a number of initiatives were undertaken in the fourth quarter of 2013. At Goose, the main zone was remodeled to separate the 'Super High Grade' ore (greater than 10 g/t gold) from the run-of mine ore and also remove significant zones of internal waste. In addition, reserves were re-estimated using adjusted parameters and a new interpolation method to better match the grade control estimations. As a result, tonnage declined by 18.5%, but the grade and contained ounces increased by 34.3% and 9.4% respectively when compared to the
At the Portage deposit, 4,400 metres of delineation and infill drilling were completed in Portage South. Ore wireframes were then updated and re-interpreted to be more selective. As a result, the block model has now been estimated using modified parameters. With these modifications, there has been a 13.4% increase in tonnes, a 7.4% increase in grade and a 13.3% increase in ounces at the Portage pit compared to the
Overall, the reserve grade at Meadowbank improved 16% to 3.24 g/t gold, largely due to the re-interpretation of the Goose and Portage block models. With the increased reserve grades and an accelerated stripping program at the Goose pit, Meadowbank is expected to have strong first half production in 2014. The Goose pit is expected to be completed in the second half of 2014.
In 2013, Agnico Eagle returned to its IVR property, located approximately 50km northwest of Meadowbank, with a small exploration program. Due to the exploration success with several holes returning intriguing gold mineralization, a follow-up program of 5,000 metres will be drilled in 2014.
Kittila - Mill Expansion on Schedule for Mid-2015 Start-up
The 100% owned Kittila mine in northern
The Kittila mill processed an average of 3,349 tpd in the fourth quarter of 2013. In the fourth quarter of 2012, the Kittila mill processed 3,030 tpd. Since the completion of the extended maintenance period in the second quarter of 2013, as expected, mill availability and efficiency has improved significantly which has allowed for higher throughput levels at the mill.
Minesite costs per tonne at Kittila were approximately
For the full year 2013, the mill processed an average of 2,559 tpd as compared with 2012 when the mill processed an average of 2,979 tpd. The decrease in throughput relates to the extended shutdown in the second quarter of 2013. For the full year 2013, the minesite costs per tonne were
Fourth quarter 2013 payable gold production at Kittila was 41,710 ounces with a total cash cost per ounce of
For the full year 2013, payable gold production from Kittila was 146,421 ounces at total cash costs of
In 2013, the Kittila mill had annual record recovery of 90.17%.
The 750 tonne per day mill expansion at Kittila is progressing on schedule and budget with start-up expected to occur in mid-2015. Civil works are proceeding as planned with all concrete pouring completed and the erection of steel structures underway. Commissioning of the ore handling area is on-going and construction of the building to house the oxygen plant has been completed. In addition, the manufacture of the ball mill is slightly ahead of schedule. The expansion is expected to improve unit costs and to offset a gradual reduction in realized grade towards the average reserve grade over the next several years.
Southern Business Operating Review
The 100% owned
For the full year 2013, the
Payable production in the fourth quarter of 2013 was 46,490 ounces of gold at a cash cost per ounce of
For the full year 2013,
The Company continues to evaluate a number of regional satellite opportunities such as Sinter and
Creston Mascota - Phase 3 Leach Pad Nearing Completion
The Creston Mascota heap leach has been operating as a satellite operation to the
Approximately 325,500 tonnes of ore were stacked on the Creston Mascota leach pad during the fourth quarter of 2013, compared to approximately 78,300 tonnes stacked in the fourth quarter of 2012. Minesite costs per tonne at Creston Mascota were
Payable gold production at Creston Mascota in the fourth quarter of 2013 was 10,666 ounces at a total cash cost per ounce of
For the full year 2013, approximately 1,276,200 tonnes of ore were stacked on the Creston Mascota leach pad, compared to approximately 1,532,400 tonnes stacked in the full year 2012. Minesite costs per tonne at Creston Mascota were
Payable gold production for the full year 2013 totaled 34,027 ounces at a total cash cost per ounce of
Construction on the Phase 3 leach pad at Creston Mascota is expected to be completed by the end of
The La India mine in
Throughput continues to ramp up and stacking rates are currently averaging approximately 12,000 tpd. It is expected that several months of operation will be required to achieve steady state production. Commercial production is expected to be declared in the first quarter of 2014.
While progressing as expected during the commissioning phase, ramp up challenges have included congestion for leaching and stacking ore at the bottom of the leach pad due to the 'inverted pyramid' geometry of the pad, debottlenecking of the crushing and stacking system, and higher than expected ore abrasion.
Further work is also planned at La India to better define the mineral domains of the known sulfide mineralization.
Agnico Eagle expects its 2014 amortization expense to be in the range of
General & Administrative Cost Guidance
Agnico Eagle expects 2014 general and administration expense to be between
Tax Guidance for 2014
Beginning in 2014, mining companies in
While Agnico will be paying cash taxes with respect to the Mexican mining royalty beginning in 2014, the fourth quarter 2013 deferred tax charge is not a recurring tax expense and arises as a result of the enactment of the new mining tax in the fourth quarter of 2013.
For 2014, the jurisdictional tax rates are expected to be:
The Company's overall tax rate is expected to be between 40% to 45%.
Significant Mining Expertise Added to the Board of Directors
Annual General Meeting
Dividend Reinvestment Plan
Please follow the link below for information on the Company's dividend reinvestment program.
Dividend Reinvestment Plan
About Agnico Eagle
Agnico Eagle is a senior Canadian gold mining company that has produced precious metals since 1957. Its seven mines are located in
Note Regarding Conversion to IFRS
The Company has identified several differences between US GAAP and IFRS that may have an impact on the Company's consolidated financial statements. These differences should not be regarded as a complete list of changes that will result from the transition to IFRS, rather they encompass management's high level evaluation of significant differences between US GAAP and IFRS and available IFRS accounting policy choices as they currently exist.
At this stage in the IFRS conversion plan, the Company has not quantified the impact of these differences on our consolidated financial statements or selected IFRS accounting policies. Significant identified differences between US GAAP and IFRS include asset impairment testing and measurement, accounting for production stripping costs, accounting for exploration and evaluation expenditures and accounting for property, plant and equipment. The Company anticipates providing additional information on the expected quantitative impact of IFRS adoption in its consolidated financial statements filed in respect of the second quarter of 2014.
Under US GAAP, a two-step approach is used for long-lived asset impairment testing whereby long-lived assets are first tested for recoverability based on their expected undiscounted cash flows. If a long-lived asset's expected undiscounted cash flow exceeds the recorded carrying amount, no impairment charge is required. If the expected undiscounted cash flow is lower than the recorded carrying amount, the long-lived assets are written down to their estimated fair value. US GAAP does not permit the reversal of impairment losses. IFRS prescribes a one-step approach for asset impairment testing and measurement whereby an asset's recoverable amount is compared directly against its recorded carrying amount.
Under IFRS, an asset's recoverable amount is determined as the higher of the estimated fair value less costs to sell or value in use (which is measured using discounted cash flows). If an asset's recoverable amount is less than the recorded carrying amount, an impairment charge is required. IFRS also requires the reversal of previously recorded impairment losses where circumstances have changed such that the impairments have been reduced.
The difference in the approach to asset impairment testing and measurement may result in more frequent impairment charges under IFRS, where asset carrying values previously supported under US GAAP on an undiscounted cash flow basis cannot be supported on a discounted cash flow basis. However, the impact of any additional asset impairments recorded under IFRS may be partially offset by the requirement to reverse previously recorded impairment losses where circumstances have changed.
Under US GAAP, the cost of removing overburden and waste materials to expose ore and access mineral deposits for extraction during the production phase of a surface mine ('production stripping costs') are accounted for as production costs and are included in the cost of the inventory produced during the period in which the stripping costs are incurred. IFRS requires that production stripping costs relating to improved access to ore be capitalized as part of a non-current stripping activity asset if probable future economic benefits will be realized, the costs can be reliably measured and the component of an ore body for which access has been improved can be identified.
To the extent that ore is extracted and inventory is produced in the current period, IFRS instead prescribes that production stripping costs be accounted for as part of the cost of the inventory produced. The difference in approach to accounting for production stripping costs will result in a decrease in direct production costs and an increase in amortization expense relating to the recognition of non-current stripping activity assets under IFRS.
Under US GAAP, the Company accounts for exploration and evaluation ('E&E') expenditures as current period operating expenses until it is determined that a mining property can be economically developed as a result of established proven and probable reserves. Once proven and probable reserves are established based on the results of a final feasibility study, the costs of drilling and development to further delineate the ore body are capitalized. IFRS provides guidance related to expenditures incurred during the E&E phase.
IFRS requires entities to select and consistently apply an accounting policy that specifies which expenditures are capitalized as E&E assets. However, IFRS provides no specific guidance as to when E&E expenditures are to be capitalized. Agnico Eagle is in the process of defining the E&E phase within the context of IFRS and developing an accounting policy that outlines the point at which specific types of E&E expenditures will be capitalized.
IFRS requires the separate identification and measurement of significant individual components of property, plant and equipment, with individual components depreciated based on their individual useful lives. The Company identified significant individual components of property, plant and equipment under US GAAP in 2013 and will assess whether an adjustment relating to the retrospective application and depreciation of these components is required to its opening
Note Regarding Production Guidance
The gold production guidance is based on the Company's mineral reserves but includes contingencies, assumed metal prices and foreign exchange rates that are different from those used in the reserve estimates. These factors and others mean that the gold production guidance presented in this news release may not reconcile exactly with the production models used to support these mineral reserves.
Note Regarding Certain Measures of Performance
This news release presents financial performance measures, including 'total cash costs per ounce of gold produced,' 'minesite costs per tonne' and 'all-in sustaining costs', that are not recognized measures under US GAAP. This data may not be comparable to data presented by other gold producers. The Company believes that these generally accepted industry measures are realistic indicators of operating performance and useful in allowing year-over-year comparisons. However, each of these non-US GAAP measures should be considered together with other data prepared in accordance with US GAAP.
These measures, taken by themselves, are not necessarily indicative of operating costs or cash flow measures prepared in accordance with US GAAP. Reconciliations of the Company's total cash costs per ounce of gold produced, minesite costs per tonne and all-in sustaining costs financial performance measures to comparable financial measures calculated and presented in accordance with US GAAP are detailed below.
The information in this news release has been prepared as at
Such statements include without limitation: the Company's forward-looking production guidance, including estimated ore grades, project timelines, drilling results, orebody configurations, metal production, life of mine estimates, production estimates, total cash costs per ounce, minesite costs per tonne and all-in sustaining costs estimates, cash flows, the estimated timing of scoping and other studies, the methods by which ore will be extracted or processed, expansion projects, recovery rates, mill throughput, and projected exploration and capital expenditures, including costs and other estimates upon which such projections are based and estimates of depreciation expense, general and administrative expense and tax rates; the Company's ability to fund its current pipeline of projects; the impact of maintenance shutdowns; the Company's goal to build a mine at Meliadine; the Company's ability to bring into commercial production the mine at La India and other statements and information regarding anticipated trends with respect to the Company's operations, exploration and the funding thereof.
Such statements reflect the Company's views as at the date of this news release and are subject to certain risks, uncertainties and assumptions. Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by Agnico Eagle as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies.
The factors and assumptions of Agnico Eagle contained in this news release, which may prove to be incorrect, include, but are not limited to, the assumptions set forth herein and in management's discussion and analysis and the Company's Annual Report on Form 20-F for the year ended
Many factors, known and unknown could cause the actual results to be materially different from those expressed or implied by such forward-looking statements.
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 metal 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; 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, see the Form 20-F, as well as the Company's other filings with the Canadian Securities Administrators and the
Accordingly, readers are advised not to place undue reliance on forward-looking statements. Certain of the foregoing statements, primarily related to projects, are based on preliminary views of the Company with respect to, among other things, grade, tonnage, processing, recoveries, mining methods, capital costs, total cash costs, minesite costs, and location of surface infrastructure. Actual results and final decisions may be materially different from those currently anticipated.
Tel: (416) 947-1212
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