Stories of explosive business growth are compelling to mining industry investors who want to get an early lead on opportunities. Agnico-Eagle Mines (AEM) offers a fascinating story of a company that progressed steadily for many years and then, recently, switched tactics and is now seeing some exciting growth in new directions. This is great story of a company whose staff has worked together for a long time and yet is still finding some exciting new opportunities.

Sean Boyd, Vice-Chairman and CEO of Agnico-Eagle.

We had an opportunity recently to speak to Sean Boyd, Vice-Chairman and CEO of Agnico-Eagle. The story of how he came to work with the company is just as interesting as the company's expansion into new opportunities.

"I've been with Agnico-Eagle Mines for 25 years. I'm a chartered accountant and I worked with Ernst & Young, who was doing the audit of Agnico in 1982. I worked on the audit for about 3 years and I think they finally got tired of seeing me around here as the auditor so they hired me." A decade after joining the company, Mr. Boyd was appointed to the CEO position.

Boyd not only brought an in-depth awareness of the company when he joined them, but he also joined a team that has worked together ever since. "I've been here with most of the senior management team for over 20 years. The team has been in place and worked together for quite a long time." In total, according to the Agnico-Eagle website, there are 17 officers whose education consists of chartered accountants and professional engineers. Eberhard Scherkus is President and COO and has been with the company for over 20 years; David Garofalo is CFO and has been with the company for 12 years.

For many years, Agnico-Eagle enjoyed consistent, predictable success within one particular niche but recently they have branched out to pursue other exciting opportunities. "Growth is our most exciting story right now," says Mr. Boyd. "We were a more regionally-focused single asset company for many, many years. We were focused in the province of Quebec with a great asset – the LaRonde mine – which produces a lot of gold and several other metals. With that mine we developed a lot of unique skills producing multiple metals as well as building and running a deep underground mine." On its own, a great mine with a well-developed skill-set is enviable, but the Agnico-Eagle team decided to go further. "We decided to look for opportunities that were earlier stage and that fit with our skill-set, and opportunities that we thought could provide us with diversification as well as the ability to drive per-share growth in production and reserves."

So, with this new mindset – a mindset that switches from sustaining success to pursuing growth – they have added an impressive list of new projects to their roster. They're currently operating 6 projects: LaRonde, their flagship mine in Quebec, as well as Goldex and Lapa mines in Quebec, Meadowbank in Nunavut, Kittila in Finland, and Pinos Altos in Mexico. They primarily produce gold, but that's not all they do. "We produce about 6 million ounces of silver a year and we produce a significant amount of zinc and copper."

"The biggest one in terms of annual output, which is also the most recent one, is [Nunavut's] Meadowbank. That's the one we're focused on right now because we're still in the early stages of commissioning. We started the plant up in February and reached commercial production in March. We've had a relatively uneventful start-up there… It was logistically challenging for us [to start] but we built our own road and our own airstrip so we're not reliant on an ice road, and we've incorporated a lot of logistical support from our base in Quebec. This open pit mine has 3.6 million ounces of gold reserves, an estimated 2010 production of 300,000 ounces, and a lifespan for the next 9-10 years. "We're studying an increase in through-put. We think we can grow there by 15% to 20%.".

Their project in Finland, Kittila, is an open pit and underground operation extracting the largest gold deposit in Europe. "We believe the asset can grow by 50%. The deposit has grown significantly since we bought it back in 2005." The mine has a 40 million ounce resource with an estimated lifespan through 2025 and is close to infrastructure in the Finland mining region.

Their Pinos Altos mine in Mexico is a gold and silver mine in the Chihuahua State. There is a gold resource of 3.4 million ounces and an estimated mine life through 2028. "This is a prolific mining region so we haven't had any [infrastructure] challenges."

"The last three acquisitions we've done in the past 3 years have had a lot of exploration potential: They are large land packages with wide open deposits, but what we really like is that we're using the same exploration team that has worked with us for 20 years."

This new strategy has turned out to be quite successful for Agnico-Eagle. As Mr. Boyd explains, "Through the growth, we doubled our production in 2009 from the previous year and we're going to double again in 2010 from last year. And, because these are brand new mines, which have made up the bulk of this growth, we think we can grow them further through optimization and internal expansion. It's very much a growth story in an industry that is having a tough time growing."

Thanks to their ability to optimize and streamline, they have countered assumptions and driven down production costs below the industry average in spite of the fact that they are running 6 operations spread through 3 countries, some in relatively remote areas. It helps that 3 of their 6 mines are located in Quebec, right along the TransCanada highway; and, as Mr. Boyd points out, "we own all of our assets 100% so we can move people and equipment around and keep costs down."

Growth is not without its challenges. "We need to focus now on optimization. We've just come off 3 years where we have basically built 5 mines out of nothing and now it's time for them to grow at a more measured pace."

We are still looking to grow, but the base of the growth is internal expansion, and we feel we can grow our output by 50% over the next 3-4 years but we're also looking for smaller acquisitions – like early stage opportunities – that we can get into early, drill for 2-3 years, then decide what we can build… Nice and steady, measured, and focused."

References

http://www.agnico-eagle.com/

Tel: (416) 947-1212

Tel: 1-888-822-6714

Agnico-Eagle Mines Limited

145 King Street East, Suite 400

Toronto, Ontario, Canada

M5C 2Y7