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Agnico-Eagle Mines Limited (AEM)

Q4 2006 Earnings Call

February 22, 2007, 2:00 pm ET

Executives:

Sean Boyd - President, Chief Executive Officer

Ebe Scherkus - Executive Vice President, Chief Operating Officer

David Garofalo - VP Finance, Chief Financial Officer

Analysts:

John Bridges - JP Morgan

Tony Lesiak - UBS

Mark Smith - Dundee Securities

David Stein - Sprott Securities

Steve Butler - Canaccord Adams

Catherine Gignac – Wellington West

David Christie - TD Newcrest

Michael Jalonen - Merrill Lynch

Presentation:

Operator

Welcome to the Agnico-Eagle Mines year end 2006 Conference Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions.

If anyone has any difficulties hearing the conference, please press *0 for operator assistance at any time. I would like to remind everyone that this conference call is being recorded this Thursday, February 22nd 2007 at 2:00 p.m. Eastern Time. I will now turn the conference over to Mr. Sean Boyd, Chief Executive Officer. Please go ahead, Sir.

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Sean Boyd

Thank you operator and good afternoon everyone. Welcome to our 2006 fourth quarter and year end conference call. What we’d like to do today is go through the results, obviously, but give you an update on our project and some of the exploration. We have a series of slides for those of you who are on the internet, so we’ll take you through those.

Before going into the slides we’ve got several Safe Harbor statements which involve forward looking statements, so please review those when you have a minute. We also have some Safe Harbor statements around the offer which is outstanding for Cumberland resources.

Just to start off, I’d like to go through the corporate strategy of the company. It’s been straightforward, it’s been consistent. We’ve moved along in a very disciplined manner. We’ve put ourselves in a position to increase our annual gold output with existing projects, taking it to about 750 ounces by 2009. As you know we’ve got three new goldmines to begin production next year. We’ve also demonstrated our ability to grow our reserve base. We showed this quarter a 19% increase in our reserves to 12.5 million ounces. We are targeting a reserve position within the next 12 months based on drilling at our existing projects of about 14-15 million ounces.

As far as acquisitions, again the strategy has been disciplined. It’s been straightforward. Our preferred growth is to look for acquisitions that, from a size point of view are small relative to our size, and we’ve been successful over the last couple of years in building our pipeline in that fashion. As you know in 2005 we completed the acquisition of Riddarhyttan Resources, which gave us the Kittila mine which is under construction.

Pinos Altos was closed in 2006 which has given us a project that was in the last stages of feasibility. We’ve completed that and that’s out for third party review, and as you know we’ve recently announced an offer for Cumberland Resources. Again, that transaction, or that proposed transaction is very similar to the style that we employed when we made a bid for Riddarhyttan. So it’s something that we’re very comfortable with going forward, and what that transaction does is enhance an already strong growth story in gold production and in reserves.

Our earnings and cash flow in 2006 are at record levels, and we’re just fortunate as a company to have the bulk of our assets in the provinces which are a great place to operate in, in terms of not only finding gold, but having a sound, steady cost structure to operate within. And part of the strategy is to maintain a very conservative balance sheet and in fact our cash flow allowed us to increase the cash position. We’re almost at $460 million in cash. So essentially we’ve got the financial and technical resources to achieve all of our production and reserve growth objectives.

As far as highlights go, there were several highlights in the quarter, one being the increase in reserves by 19% to 12.5 million ounces which is not listed here. Also not listed is the 24 consecutive months, now it’s 24 consecutive months at LaRonde without an underground time loss accidents, so an extremely good performance by our employees and they should be congratulated on that, particularly when you think that we’re operating an extremely large underground mine and we’ve had two years without a time loss accident there.

And another thing which isn’t on here, we announced in December a quadrupling of our dividend, and we’ve paid a dividend for 25 years, and going forward based on our production growth, our revenue growth, and our bottom line growth, we expect to benefit from…then we’re certainly looking to pay an increased dividend going forward.

On the operating side, highlights; very low cash cost, extremely good earnings, a record quarterly cash flow of $84 million, strong cash position, and we’re moving our projects forward in a very, very steady fashion.

Operating results regarding some of the details at LaRonde: For the full year, our recoveries were above budget for all the metals, so very good performance on the recovery level. On dilution, our dilution was about 12% on average for the year. We budgeted about 10%, but in the deeper part of the mine. Our dilution was about 4%, versus a budget of 8%, so very, very good performance in the lower mine.

We’re seeing very, very good mining conditions as we mine at the lower levels of the mine. Our development, as you know by reading the press release ahead of schedule we did about 8%.

So very, very good performance in the lower mine, we’re seeing very good mining conditions as we mine at the lower levels of our mine. Our development is ahead of schedule and as you know by reading the press release, we did about 15% more meters of level development than we had anticipated and that helped move our operating cost per ton up a little bit higher than we’d expected because of that increased development.

On a cost per ton basis, we came in at about $62 a ton for the full year and that’s an extremely good performance over the last year as you’ll see on the next slide. That performance, we’ve only had an increase in the last three years, in fact, on our cost per ton of about 19%, rising from $52 in the first quarter of ’04 to $62 per full year 2006.

And that goes back to the base of our assets being in Quebec. It’s a good cost structure and a very experienced work force. So when you put that workforce on a track of optimization and efficiency, you get very good results. So we’re fortunate to be in that position, and that shows you what a steady performer LaRonde has been for the last few years.

Financial results, they’re in the press release. I’m not going to go over them in any detail.

We show our cash provided by our operating activity number, which is after working capital changes. What we look at from a business point of view is before working capital changes and that was a record level for the full year.

That was $265 million, very strong compared to a number last year of about $75 million. At a mine level, LaRonde mine generated a mine profit of $320 million in 2006. So, a very strong performance coming from LaRonde, which has strengthened our financial position and put us in a great position to build our pipeline of projects.

On the slides we have our balance sheets, $459 million in cash, no long-term debt, and common shares outstanding of $121 million. Fully diluted would be $131 million, that amounts to about 7 million (inaudible), which we anticipate to be exercised this November which would bring in about $ 130 million in additional cash, and there’s about $3 million in options outstanding.

So a very good position to be in from a financial perspective. We have all the money we need to build out our pipeline and growth projects, including the metal bank project assuming a successful offer for Cumberland resources.

From the gold reserve perspective, just a couple of key assumptions: Gold price we’re using $486, silver price we’re using $869, an ounce and Zinc price $0.89 per pound. Those are the key assumptions, those are our three year averages going backwards as mandated by the FDC, with that we saw a 19% increase in the reserves to 12.5 million ounces.

That puts us well above the average for the intermediate gold producer group. As we move forward, we are targeting additional reserve conversion principally at Pinos Altos, Goldex, and Kittila.

And on a reserve per share basis, which is something we pay attention to…we go back to 1998 where we had about 60 million shares outstanding. Today on a basic level, we have 120 million, so roughly double. But our reserves have grown from 1.3 million ounces to 12.5….So about a 10 times increase in our gold reserves for a doubling of our shares outstanding.

We also have significant quantities of other metals in reserves, these are not gold equivalent numbers, but we do have additional silver reserves of over 100 million ounces, 105 million ounces in fact.

Zinc reserves of 1.6 billion pounds, and copper reserves of about 250 million pounds. So we have significant by-product metal reserves that are not included in the gold number. And over the next 12 months we look to converting a portion of that additional resource and that will bring us within the next 12 months guidance.

We expect to be within the range of about 14-15 million ounces of reserves stand alone. And that does not assume anything from Metal Bank and Cumberland resources.

Moving on to the project, just a bit of an overview of where we are. As far as the management side, we’ve done a very good job of building very solidly in both Finland and Mexico. And they have a big resource that they can draw on from Northwestern Quebec where we have a full mine building and regional development team.

One of the things we like about Agnico is that we own 100% of our product that gives us maximum flexibility in terms of the pace and the direction of exploration, which has always been something we like control over.

That has benefited us tremendously at LaRonde. Political risk is something we don’t like, so our projects are all in mining friendly, low political risk regions. All the projects have camp potential, which is something we feel is important to be able to create value going forward.

And to create that value you have to spend money on exploration. We’re looking to spend about $40 million in 2007. Of that about $23 million will be expense and about $17 million will be capitalized. A big part of that capitalized amount is at Pinos Altos where we’re spending about $26 of the $40 million.

And part of that involves ramp infrastructure, which will not only be used for production, but will also provide us with a drill platform so we can use deeper holes on Santo Nino and below the other structures along that main trend.

That’s important to improve more resources and increase our reserves. Also in the budget, we’re spending about $6 million in Finland on the Kittila project.

Production profiles stand alone and we’re looking at production growth through 2011 of getting close to about 1 million ounces. Obviously the acquisition of Cumberland would significantly enhance that production growth taking us to the 1.3 million ounce level in 2010.

As we said earlier, we’ve got three new mines coming up on string next year, Goldex, before the middle of the year, shortly thereafter, Kittila, the third quarter of ’08 and after that for the fourth quarter of ’08 we’re looking for Lapa to go into production.

From a capital expenditure point of view, 2007 is the big year. What we’ve done on the slides is we’ve made some estimate for Pinos Altos and also in dotted lines we’ve added the anticipated amount that would come from the metal bank product, assuming successful acquisition of Cumberland.

So all combined, would be about $412 million in 2007, $289 million in 2008, $240 million in 2009 and about $91 million in 2010. Going back to our cash position of $459 million puts us in a very good position when you factor in the warrants of about $130 million that will come in addition to the cash flow.

And last year our cash flow before working capital was north of $260 million, and we’re anticipating roughly the same metal output as in 2007 as we had in 2006. So we’re in a very good position to fund all of our production growth.

Just dealing with the projects, LaRonde has a very long life goal reserve. Reserve mine life based on just the reserves takes us until about 2020, or 5.2 million ounces. There’s additional potential with a resource base of over a million ounces as well.

We’re anticipating getting first ore from the deeper extension of LaRonde in 2011. Our average production for the balance of the mine life based on the reserves going up to 2020 would be about 320,000 per year.

The projects going very well, it’s off to a good start. Over the next few months, we’re looking to complete the hoist installation for shaft sinking of the winds to begin in the third quarter of this year.

We’re also doing some development along level 215 extending that exploration drift to the west into the Bousquet area so that we can get a better drill set up to drill what appears to be a mass of sulfite structure on the Bousquet property.

So there’s more upside in the LaRonde camp along that trend.

At Goldex the project’s going very well. All the major equipment has been ordered, the hoist, the mills, the scoops, the drills. Lateral development’s on target. We’ve got about 31% of the drifts and ramps complete. 75% of the raises complete. We continue to stockpile ore.

The reserve base, went up about 100,000 ounces at Goldex, to 1.7 million ounces, but more importantly the resources increased by about .5 million ounces. As we just started drilling that project, we haven’t drilled that project outside of the original resource for many, many years.

And we’ve just started that, and it’s not surprising to us that we saw one of the recent results, which was 2.9 grams per ton over 80 meters as we go deeper and a little to the east.

That’s because if we look at the material outside of the mineable shell that we use for our feasibility, in fact a lot of that material outside of that shell is currently economic, because it does have gold contained in there. If we were to take a big envelope at Goldex, you could make the case that you got 90 millions tons grating about 0.4 ounces per ton.

So there is a lot of gold there and so we’re just starting to get back at exploration drilling and we certainly expect that deposit as we get our drill holes to grow in size. A good asset to have right on the western edge of Eldore, 50 kilometers from LaRonde and it’s gotten off to a really good start.

At Lapa, we continue to make very steady progress moving that project ahead about 1.2 million ounce, reserved. The resource stayed about the same at about half a million ounces.

As we said earlier, production started up in the fourth quarter of 2008, about 125,000 ounces. Cash costs at about $210 million. Fast thinking and surface construction in progress, the shafts go down to about 1,100 meters. There is about 270 meters to go and we’re averaging about 2.7-2.8 meters a day which is very good advance.

In fact, just going back to Goldex, the Goldex advances is even better than that. Its about three meters a day now on the shaft there. So were getting very good shaft sinking performance. From the contractor who is doing both jobs at LaRonde and Goldex.

At Finland and Kittila, we are making good progress on exploration as well as good progress on the project. The reserve went up about 250,000 ounces, its 2.6 million ounces. The resources are relatively about the same at about a million ounces. We continue to drill it; there are about six drills in operation there.

What we are seeing in the north end of the trend, we’re starting to step out away from the major reserve resource and there is still a lot more work to do but were seeing some good drill results. Were getting some good geochemical sampling results. We’ve got a small drill up in the north end, so we’re quite active there.

We’ve also recently hired an exploration manager whose job is to focus outside of the main reserve resource area and to conduct an aggressive program with a budget of about $6 million over the entire project. So we certainly anticipate converting more of the resource into 2007 and building up that reserve base.

As we said earlier, were looking for production in the third quarter of 2008. The ramp there, we’re clearing the paths, building surface facilities and the ramps down about 400 meters. So again, we’re making very good progress in Finland.

In Mexico at Pinos Altos, we’ve proven up a subset of the overall resource for purposes of the feasibility. We have 1.8 million ounces of gold in reserve. We have 55 million ounces of silver in reserve plus additional resources both in gold and silver. Large land position on Pinos Altos has brought 11,000 hectares. We’ve also significantly expanded our presence in that region of Mexico. We’ve slated an additional 35,000 hectares or have claims that are now ours of about 35,000 hectares.

So, in a large position, we have about a $26 million budget, largely focused on Pinos Altos which as we said earlier includes the ramp which is important not only for production but also for drilling so that we can continue to drill deeper holes. To where we’ve had some very good hydride results at depth and that’s important as we continue to move that project forward.

What we are doing now is the feasibility to complete. It will go out to third party review. We expect to bring that to our board in the second quarter of 2007. We’ve also just made the applications for the major permits, they’ve been submitted. We’re now looking to optimize the study based on the new reserve, and we’re in the process of completing the 43-101 technical report that will be filed shortly with the regulators.

So, moving that project ahead, we’ve got a very good team there that we strengthened recently and we’re certainly looking for more exploration there given that it is the largest component of our exploration budget and more than half of the $40 million that will be spent in 2007 is being spent at Pinos Altos.

Just wrapping up in terms of the timeline. In the second quarter, we expect to have completed the third party review of the Pinos feasibility study. We will bring that to our board in the second quarter. We anticipate closing the Cumberland acquisition also in the second quarter. We have our earnings release on April 26th for the first quarter. We have our annual meeting on April 27th and we anticipate having a full exploration update in May of 2007.

Just wrapping up in terms of highlights, we continue to generate extremely good earnings and record cash flows and record earnings. In fact, we anticipate production levels in 2007 to be very similar to what we have in 2006. We’re within a year or so of having three new goldmines starting in 2008.

On the acquisition side, assuming the successful acquisition of Cumberland, we would increase our 2010 production by another 39% as we said to about 1.3 million ounces.

On our own stand alone reserve position we anticipate growing that again within the next 12 months based on our existing projects to the14-15 million ounce range. Again, assuming successful acquisition of Cumberland, we would have a median increase of our current reserve base of 12.5 million. That would jump by 23% to 15.4 million and what that would do is it would take our reserve target up to the 18-20 million ounce range over the next 24 months or so.

So that’s the summary of our Q4 and our full year 2006 and our project update.

Operator, we would like to open it up for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now conduct the question and answer session.

If you have a question, please press the star followed by the one on your touchtone phone. You will hear a tone acknowledging your request. Your questions will be pulled in the order that they are received. Please ensure you lift a headset if you are suing a speakerphone before pressing any key. One moment please for your first question.

Your first question comes from John Bridges of JP Morgan. Please go ahead.

John Bridges - JP Morgan

Good afternoon Sean, congratulations.

Sean Boyd

Thank you.

John Bridges - JP Morgan

What are you looking for underneath Bousquet? What’s the model for that?

Ebe Scherkus

Good afternoon John. What we are looking for is basically another massive sulfite zone. The drilling that we did from the level 215 exploration grip…We basically outlined a massive sulfite zone anywhere between 15-25% of banded massive pyrite with a minor amount of chalical pyrite. In other words the geological model is very similar to LaRonde and Bousquet.

Stratographically, this particular zone appears to lie in the known frontier horizon. It’s south of the original Bousquet or LaRonde horizon. We’ve only been able to put in about three diamond drill holes. We’ve traced it over a vertical distance of about 300 meters or so. But right now, we’re at the end of the exploration drive on level 215. So it’s become increasingly difficult to drill. They’re long banana type holes in the neighborhood of about 2,000 meters. So, what we have proposed to do and this has been accepted, is to extend the level 215 exploration grip by about another 400 meters to the west.

John Bridges - JP Morgan

When did you discover this?

Ebe Scherkus

We discovered this at the end of the third quarter last year.

John Bridges - JP Morgan

This sort of thing you were looking for so you didn’t have to do a wrong to a right?

Ebe Scherkus

Sorry?

John Bridges - JP Morgan

You were looking to expand the depth potential and then go bigger at depth, weren’t you?

Ebe Scherkus

No, this was just a routine coverage significantly to the west of LaRonde II. I believe that this was between these two zones and must be in the neighborhood of at least 500 meters if not more.

John Bridges - JP Morgan

So where would this be served from? Something out of the existing viscid shaft or would this…?

Ebe Scherkus

Well I mean this is all just arm weaving here John. We don’t really know the size of this thing and even right now, the grades are not economic but just we’re using history. And normally when we have encountered mass sulfite mineralization of this type, there tends to be some sort of body lurking in the background.

John Bridges - JP Morgan

OK. Good luck.

Ebe Scherkus

Thank you.

Operator

Your next question comes from Tony Lesiak of UBS. Please go ahead.

(Long pause)

Mr. Lesiak your line is open if you would like to ask a question.

Tony Lesiak - UBS

Hi, can you hear me?

Sean Boyd

Yes.

Tony Lesiak - UBS

Okay great. A couple of questions on the expiration side and reserve resource.

Quickly, at Lapa I noticed the grade improvement of about 10%. Was that due to some additional drilling results or any change in geo-statistical assumptions?

Ebe Scherkus

Basically drilling results.

Tony Lesiak - UBS

OK, so you still might see a great pickup there once you get on the ground and get more confidence?

Ebe Scherkus

That will always be the issue at Lapa until we finally start mining.

Tony Lesiak - UBS

Okay, so we can estimate that you might see a bit of a pick-up there. And well, we have. One of our issues is that we really haven't got a whole lot of access underground. The drilling that we did do in the last quarter of last year is from the lowest level, I think that was 78 so they are very steep drill holes. So once we get the shaft down and the shaft completed we will be in a much better position to drill in the second half of this year.

Tony Lesiak - UBS

Follow-up question on the reserve grade drop at LaRonde, can you explain that?

Ebe Scherkus

We combined the LaRonde I and the LaRonde I, that's why there is an overall drop in grade. If you were to calculate from the same way from LaRonde I or the historical way at LaRonde II, the grades would be very similar as in the last year.

Tony Lesiak - UBS

Ok because I just looked at the reserve that came up and you still haven't broken out there of your proven probable. And if you look at the grades they were down substantially.

Sean Boyd

When the LaRonde I was checked it was marked (inaudible) speaking. At LaRonde I we're basically mining the gold-ore body. So when each year you extract 240,000 ounces, all the relative gold grading will drop because that's the part of the mine in zinc. That's right. Whereas the lower part we're accessing maneuvering around two prospectives of much higher grade and that grade didn't change.

Tony Lesiak - UBS

OK. So there were no zones that were dropped out of the reserve at all?

Sean Boyd

Oh no. No, that's just natural mining.

Tony Lesiak - UBS

OK. And just if you could give us a breakdown of the depth in the underground, maybe just in percentages for Kittila?

Ebe Scherkus

In terms of ounces we'd be looking at somewhere in the neighborhood of 850,000 ounces in the open pit and the remainder would be underground.

Tony Lesiak - UBS

OK, great. Thanks very much.

Operator

The next question comes from Mark Smith of Dundee Securities. Please go ahead.

Mark Smith - Dundee Securities

Yeah, hi. Just a really quick question. On taxes…I'm just wondering, could you give me an indication of what you're looking at? Will the tax rate go forward and how much you have left that will be applicable?

David Garofalo

Yeah, our expected tax rate in 2007 will be about 40% and I say about 2/3 of that or sorry about ¾ of that will be differed and will be backed mining duties from cash tax we're going to be paying this year. And we have income pools filled with about $700 million US. So we won't be paying income tax for quite a while but we are assessable on a mining duty.

Mark Smith - Dundee Securities

OK. So basically your forward it's going to be about 75% differed.

David Garofalo

Yeah. At least for the next few years while we use up the income tax pools.

Mark Smith - Dundee Securities

Yeah but then you've got a new pool coming from the new construction, right?

David Garofalo

We do and that will mitigate some of those mining duties, but we will still be paying cash money duties.

Mark Smith - Dundee Securities

OK. Is there any pools that you picked up with the Cumberland acquisition that are applicable inside of the Northwest territories or some that are in the Northwest territories?

David Garofalo

Well generally those resource pools get streamed. There might be some hard assets that tend not to get streamed or that don't get streamed but I think, I suspect that the vast majority are tax pools or cash pools so they will be streamed against the Meadowbank asset.

Mark Smith - Dundee Securities

OK. Alright, thanks very much Ted.

Operator

Your next question comes from David Stein of Sprott Securities. Please go ahead.

David Stein - Sprott Securities

Hi guys, actually my question has been answered already so I'll let you keep going.

Operator

Your next question comes from Steve Butler of Canaccord Adams. Please go ahead.

Steve Butler - Canaccord Adams

Good afternoon guys. You had said your mine set costs were $63 million Canadian. Can you comment as to how much accelerated development does that go into your cost per fund and (inaudible)?

David Garofalo

The breakdown would be roughly $2.5-3 million and $1.5 per ton of the accelerated development that we experience.

Steve Butler - Canaccord Adams

OK. And was it correct in the, I missed part of the comments Sean or my dyslexia just set in more fully, is it $17 million of the capitalized of the $40 million that will be capitalized? $17 million?

Sean Boyd

Roughly, yep.

Steve Butler - Canaccord Adams

Another question, as your gold recovery dropped, I mean a little bit, given the little bit bump in grade I would have expected recoveries to be slightly higher and I think we're targeting ultimately 94% of reserve basins. But can you comment there what happened? I mean it's not a big deal…

Sean Boyd

Uh, we just cut some minor issues in the mill. We had some problems with our on-screen analyzers so we were running manual or by the seat of our pants till we got the unit repaired. It's the original one and it's no longer in production so spare parts were hard to come by. So that was the main reason, but it's up and running again.

Steve Butler - Canaccord Adams

OK. Did you guys comment, I know it’s preemptive, on your completing and releasing Pinos Altos, but what are your thoughts on through-put rates for Pinos Altos?

Sean Boyd

Ah, we are currently based on the scoping study. We've examined 3,000, and the feasibility we have now used the 4,000 as a parameter but now with a significant increase in the overall tonnage we're evaluating other tonnage fro through-puts. But the 4,000 is about the median that we used.

Steve Butler - Canaccord Adams

OK. Thanks very much guys.

Operator

You're next question comes from Catherine Gignac of Wellington West. Please go ahead.

Catherine Gignac – Wellington West

Hi Steve jumped the gun. He asked the same thing I was going to on Pinos Altos.

Umm spending $26 million for the (inaudible), it's intriguing and I'm also intrigued with you being in Mexico? Could you fill us in a little bit more in terms of the justification for that because you've already got a large land package? What you see for the potential there going forward?

Ebe Scherkus

The ground that we picked up is basically, we have a theory of a collapsed caldera and so the ground we picked up, we feel, is an extension of the caldera. So it's a little of arm waving Catherine, but we never know.

Also it's in a favorable background within a stones throw of other deposits so the ground was available and so we picked it up. And in terms of strategy going forward, well naturally we are actively examining other situations in the Mexico, predominantly Northern Mexico, maybe Sean you want to mention some more thoughts?

Sean Boyd

The way we looked at putting the company together is that when we decide to go into a part of the world, we take a long term view. Like we've done in Quebec where we've been mining and been involved there for over 30 years.

So likely over time we would like to build off of our base in Pinos Altos. And the first way to do that is try to get some more exploration grounds, to try to get our exploration teams to go to work. One of the ways that I don't think is well acknowledged from perspective is our ability, our team's ability to find gold. They certainly demonstrated that ability at LaRonde, at Lapa, at Goldex, at Kittila in the early stages. Our focus is part of a strategy not only to build a pipeline of projects, but also to build a very consistent, focused exploration programs together in and around our major assets.

Catherine Gignac – Wellington West

And you have done that very well. Congratulations on a good quarter and a good year.

Operator

Your next question comes from David Christie of TD Newcrest. Please go ahead.

David Christie - TD Newcrest

Good afternoon guys. Just quickly, and more on Pinos Altos. Of the $26 million how much is getting spent on more grassroots exploration drilling? Other than more intel?

David Garofalo

If you're looking, what we did last year we and the board fixed a $23 million budget. That budget will be finished in June and the program was to drill under-budget at 51,000 meter. And the program was 25% and was for outside of the system.

David Christie - TD Newcrest

Yeah, so the 25% of this year is what you're going to spend on outside?

David Garofalo

Yes.

David Christie - TD Newcrest

OK. And what about at Kittila? What are you spending there?

Ebe Scherkus

Ah Kittila? We're spending $6 million there and I would think about half of that would be outside of the mining lease and about half of that would be within the mining lease.

David Christie - TD Newcrest

OK. This is really the first time you've stepped out of either project?

Ebe Scherkus

Yes. David. With, as Sean mentioned, we hired an exploration manager and we currently have three drills on the exploration program at Kittila exploring to the North. So they are following up on some of the geo-chemical anomalies we just found. Also, we're drilling deeper down, by deeper down I mean 100 meters at the base to be able to follow up on some of the values that we encountered. Drills are naturally production oriented within the mine lease to close in some of the gaps for production purposes.

David Christie - TD Newcrest

Perfect. Thanks a lot, guys.

Operator

Your next question comes from Mike Jalonen of Merrill Lynch. Please go ahead.

Michael Jalonen - Merrill Lynch

Well, hi Sean, guys. I was just wondering, the slide that shows your CapEx, you have a breakdown there of Pinos Altos there and Meadowbank potential, but what about the other vein, the projects for ’07, ’08, 09? Is there a breakdown for them? Or a rough breakdown?

Sean Boyd

Yeah, in the December 12th press release, Mike, for ’07, provided a detailed breakdown by project of the 336 base CapEx for this year.

Michael Jalonen - Merrill Lynch

OK. ‘08’s in there too?

Sean Boyd

I can give you all the other numbers later if you’d like.

Michael Jalonen - Merrill Lynch

OK. Thank you.

Sean Boyd

Yeah.

Operator

Ladies and gentlemen, if there are any other additional questions at this time, please press the * followed by the 1. (Operator Instructions). Mr. Boyd, there are no further questions at this time. Please continue.

Sean Boyd

Thank you, Operator and thank you everyone. I know it’s a busy day and a busy couple of weeks as everybody’s reporting and we’ll let you go and thanks for participating.

Operator

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating and please disconnect your lines.

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