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Agnico-Eagle Mines LTD. (NYSE:AEM)

Q2 2007 Earnings Conference Call

August 2, 2007 11:00 am ET

Executives

Sean Boyd - Vice Chairman of the Board, Chief Executive Officer

Jean Robitaille - Vice-President Metallurgy & Marketing

Eberhard Scherkus - President, Chief Operating Officer, Director

David Garofalo - Chief Financial Officer, Senior Vice President - Finance

Analysts

John Bridges – J.P. Morgan

Victor Flores - HSBC

[D. Fran] - E Capital

Steven Butler – [Canico] Islands

Greg Barnes - TD Newcrest

Chantal Gosselin - Genuity Capital Markets

Robert Cohen - Goodman and Co

Lynn Moore of the Montreal Gazette

Steven Kibsey - CDP Capital

TRANSCRIPT SPONSOR
Wall Street Breakfast

Operator

Good morning ladies and gentlemen and thank you for standing by. Welcome to the Agnicole-Eagle Mines second quarter 2007 conference call. (Operator Instructions) I would like to remind everyone that this conference call is being recorded today, Thursday August 2nd, 2007 at 11 am ET. I would now like to turn the conference over to Mr. Sean Boyd, Vice Chairman and Chief Executive Officer. Mr. Boyd, please go ahead.

Sean Boyd

Thanks operator and good morning everyone and thanks for joining our Q2 ’07 conference call. We’re going to take you through certainly the operations, talk a bit about the projects, just outline some of the news flow over the next several months as we continue to be very active not only on the mine-building side but also on the exploration side.

Just to reiterate at the top, expect no change sort of in our philosophy or our approach to growing our business. Expect us to continue to focus on building value by constructing the projects and growing our reserve base through an aggressive and large exploration program.

The goal continues to be to provide our shareholders with quality production and reserve growth, do that in pearl mining regions, have that fully funded and still providing the investor with very good exploration upside. And we’ll take you through some of the focus and some of the targets of that as well.

For those on the Internet, you can follow all the advancing slides as we move forward. We’re just looking through the forward-looking statements.

Just on the growth strategy, again, we’ve been very consistent, no change there. The focus is to grow our gold output. We’ve got industry-leading production growth. We anticipate being able to grow our production five times by 2010 to the 1.2 million ounce mark. That production growth will be supported by increasing reserves. The reserve position is over 15 million ounces. We have the ability to grow this position, which is already the largest reserve position in the mid-tier. We continue to target the 18 to 20 million-ounce range within the next 18 months. We’ve got an excellent track record of growing these reserves and certainly have been doing that on a reserve per share basis over many years.

What we really have as we continue to work on these properties and get drill results, is we still firmly believe we have to the potential to have three or four or five 3 million ounce plus deposits. We’re spending $40 million plus on exploration. That budget is largely focused on four main projects, all of those deposits are wide open and those are projects that we a re building in to mines.

The exploration budget will likely increase. It will likely be in the high 40’s and may approach $50 million. On the acquisition side again, disciplined approach will continue. We’re focused on smaller opportunities and as we’ve said recently. We’re not in the game to do three to four to five billion dollar acquisitions. We feel we can add more value by being disciplined and focusing on those smaller opportunities.

On the cost side we continue to perform very well. On a per ounce basis, given our by-product credits, we’re producing gold at extremely negative cash costs and one of the nice positions to be in this market is certainly with a solid financial position. That’s been enhanced this quarter through the acquisition of Cumberland. We continue to generate good cash flow as well. And even though we spent a lot on our projects, we closed the quarter with almost $500 million in cash.

As far as corporate highlights, one of the highlights, which are not on here, is the completed acquisition of Cumberland, so we now have 100% of the metal bank project. Earnings roughly similar to year-ago quarter in ’06. Cash flow very strong at almost $80 million for the first half of the year. $136 million. Which puts us in position to repeat our cash flow last year, which was well over $200 million.

Cash cost continue to be low. There are four projects under construction. We’re looking at approving Pino Saltos next week as we take that to the board. And on the safety front, Miron continues an excellent track record with 30 consecutive months without lost time or injury and that’s tremendous performance.

We’d also like to note that in the first time in the 52-year history of the Quebec Mine Rescue championships, the team at Miron has won for the third year in a row. So that’s a tremendous accomplishment and we’d like to congratulate all the employees at Miron and particularly the mine rescue team.

On the operating results, another strong quarter at LaRonde, development ahead of schedule. Dilution within target range. The mill performing well, it treated almost 7,500 tons a day. We had fairly consistent metal production coming out of La Ronde. We did see an increase in cost per ton to Canadian $71. But about $4 or $5 of that was related to the Booscay stockpile, which had a cost, associated with the inventory of about $100 per ton.

We’re forecasting full year cost per ton of about $65. That means second half ’07 would be about $63 per ton as we get the benefit of accelerated development, but we spent some time on it in the first six months of ’07.

Metal output for ’07; flat gold, about 240,000 ounces. No change there. Silver up about 4%. We’re looking for slight declines in zinc, down about 7%. Copper down about 10% as we optimize the ore body at higher prices. We’re taking some marginal grade ore which wasn’t contemplated to be taken when we did our budget last year, but it allows us to maximize the ore body.

As far as financial results, revenue is about flat. Earnings up slightly. Earnings per share down a little bit from the period the year before, but we issued almost 13 million shares on the Cumberland transaction. If we normalize the earnings, there was a foreign exchange loss of about $8 million, so that’s $.06 per share. So that would put us into the mid 30’s. Then cash flow very strong, $80 million as we said, and for the full year, or for the first half of ’07, $135 million.

So, very strong position, which allows us to go forward with an extremely strong balance sheet with almost $500 million in cash, no long-term debt. Our common shares outstanding about 134-135 million after taking out the last bit of Cumberland. Fully diluted, that number still remains at 146 million-share level. We have available bank credit of $300 million so very liquid balance sheet and we do anticipate the warrants to mature in November of this year which would bring in another $130 million, further strengthening the financial position, allowing us to build out all of our projects.

On the reserve side, strong position. We continue to drill those deposits, continue to drill the resource that’s attached to those deposits, in addition to the reserve of over 15 million ounces we have about 6 million ounces of resource. As we indicated in our last exploration update, we continue to drill outside of the reserve resource line and continue to hit ore-grade mineralization of a mineable width. So that’s why we’re comfortable with our target of 18-20 million ounces in the reserve category over the next 18 months.

Moving to the projects; in terms of the focus on the projects and the strategy there, it also remains the same. We do have a regional focus that is a priority. The focus remains on large ore bodies. Large ore bodies in pearly-mining regions that we can own 100% and that allows us to take a long term very patient approach to creating value and that’s been successful for us up to this point and we see no reason in changing that approach or that strategy.

In terms of the production growth, we can see the growth out through 2010, getting us to about the 1.2 million ounce mark. We’ll be fine-tuning this production growth chart as we certainly complete, have completed the Pinos feasibility. So those numbers we can update as we make that feasibility public. We expect to do that next week.

We’re also updating the metal bank feasibility. Currently being worked on in terms of detailed engineering. The new team is also working on it so that will have an impact. What we’re proposing to do is revise all of our life-of-mine plans during the budgeting process this November. So that will allow us to fine-tune the production profile and also fine-tune the CapEx, which is on the next schedule.

So we’ll be updating that CapEx next week as we come out with Pinos Saltos. We’ll also be updating as we have more detailed engineering work done on the Meadow Bank project. We will also be updating that for foreign exchange movements where we’ve had some impact as we’ve seen some movements against the U.S. dollar which impacts the U.S dollar cap backs which is what this chart is based on. So we’ll be updating that as we move forward.

Project specifically LaRonde, work is currently focused on the underground infrastructure construction, and also doing detailed engineering, the shaft sinking on the internal shaft will begin next quarter. First production is still anticipated in 2011, so no changes there. We’re also drifting out on level 215, the exploration drift. That will put us in a position shortly to start to drill the exploration target that was identified earlier in the previous year on the Bousquet property. So work is still ongoing on that.

On Goldex, it’s going very well, underground development on schedule, shaft-sinking performance on budget, the processing plant we expect to complete in the first quarter of ‘08. We still expect startup of this project in the second quarter of ‘08, and on this project we have not seen any major cost overruns. And we also continue to drill this; this in addition to the 1.7 million ounce reserve has about 700,000 ounces in the resource category, and we have opened up a drill station, which is allowing us to drill for potential extensions of the Goldex deposit.

On LAPA, we continue to get very good shaft sinking performance. We expect to complete the shaft this quarter. We also expect to start lateral development on this, on the underground program in the fourth quarter of this year. What we have seen on the start date, we’ve seen the start date of the project slip into 2009, originally we scheduled for December 2008. And that’s principally due to the deliver schedule for some of the processing equipment.

We’re now looking at the second quarter of 2009; however, as we look at the budget and the ramp-up, we’re not expecting this to have any significant impact on the 2009 gold output, as we plan on processing the roughly the same amount of ore in 2009, as we planned in the original feasibility. It will have a minor impact on 2008, I think we were expecting about 8,000 ounces of production from LAPA in 2008.

Moving on to Kittila, Kittila is a focus certainly of mine building but also from exploration, the construction of the decline is on schedule. We’re down about 1,000 meters at the end of June, we’ve ordered the mining fleet, mechanical installation, the plant is underway. The project remains on schedule for startup towards the end of the third quarter of 2008. What we’re seeing in Finland in terms of local currency, we’re seeing roughly a general cost escalation on the project of about EUR 7 or EUR 8 million, which is about 7%, so we’re seeing no real significant items on this project. As we said, we continue to drill, the drilling is focused not only along targets, along strike, but also deep drilling is ongoing, and that’s designed to follow-up on earlier, very good results that were released in May of this year.

And just by way of note on all the exploration we will have a full and comprehensive exploration update. We plan on having that in roughly the third week of September, which will provide an update on not only Kittila, but on all the projects.

On Pinos Altos, as we said, we’ll be providing more details on that next week, but just on the exploration side, we continue to drill in a number of areas. This is the largest part of our exploration budget of $26 million, which includes the ramp. The ramp is down now 280 meters; anticipate being in a position to begin underground drilling, of certainly the Santo Nino area, from the ramp, by the end of this year. In the meantime we continue with surface drilling, we continue to focus between Cerro Colorado and Santo Nino. We continue to focus west of Cerro Colorado, and we also continue to focus on the Crested [Mescota] area, which is a structure up to the Northwest, which continues to show very good promise.

What we’re also doing, we’ve completed the feasibility, but there is also work ongoing on a new reserve calculation, which is not part of this feasibility work, which we’ll be looking at next week, so work will continue at this project to take into account revised reserve figure. So we hope to provide you with some details on that as me move Pinos Altos forward.

At the Meadowbank project, one of the most significant developments in the quarter was the hiring of the senior team that will be responsible for building and operating this project. We’ve added Dan Kivari as the general manager and Martin Bergeron as the mine manager. Both of these gentlemen have an average of 30 years experience in building and operation large mining operations, with particular expertise in large open pits. So they are both well suited for this project, and I think that this demonstrates a point that we’ve been making for the last little while that in an industry where it has been difficult in some instances to attract top-notch talent, we found that we have not had as much difficulty as we expected. And certainly Meadowbank is no different than the strength of the team that we added in Mexico or in Finland, so we’ve got a very good team in all of our locations now to move these projects forward.

What this team will be doing will be working on detailed engineering and updating the feasibility work going forward. We expect to provide a project update on this project after that work is completed in the next three to four months. What we’re trying to do as well, as drilling has suggested, that we may have to change the general layout of the original mine plan based on some drilling success, so that is something we’re looking at as we update and modify the feasibility. We’re looking in terms the startup, no change there, roughly mid 2010, but on the cost side we’re anticipating about a 7-10% increase in Canadian dollar construction cap backs on this project, based on doing some more engineering, and we’ll be working through those number with the new teams and come up with a revised feasibility on that in the next three to four months.

In terms of the timeline we touched on this a bit. Pinos Altos decision will be next week, a comprehensive exploration update will be provided in September, our earnings for the third quarter will be on October 25 after the market close. And what we propose to do is advance, we normally come out with a 2008 forecast in December, which also in the past has included the dividend announcement or rate, which we’ve done for 25 years, we’ve proposed to move that forward about a month, which will allow us to incorporate the new life of mine plans, as well as the updated ‘08 production forecast, and that will be the basis for considering the dividend going forward. So we’d like to get that done this year in November, as opposed to earlier years when we did that in early December. So it’s a busy program moving forward, but we’re certainly looking forward to putting out what we think should be a fairly steady flow of good news.

On the investment highlights side, just to summarize, still generating very solid earnings in cash flows, which puts us in a position to have these projects fully funded. The production profile still sees us reaching above the 1.2 million ounce mark in 2010, we’re still targeting 18-20 million ounces of reserves in the next 18 months. What will be doing, we will continue to focus on the exploration upside that exists on all these projects, and part of that exploration upside would be the ability to demonstrate the potential these projects will really be driven by our access,. And at a couple of these projects, we have been drilling strictly from surface, we will begin over the next little while to gain underground access with drills, particularly in Finland, the ramps down about 1,000 meters, so shortly we’ll be in a position to start drilling from the ramp, that will allow us to get a better angle at the deeper targets on the main zone at Kittila. And also in Mexico, the ramp will allow us better access to drill deeper targets at Santa Nino. That will put us in a better position to outline the ultimate potential, certainly at those two deposits.

That’s the conclusion of the formal part of the presentation. Operator, at this point we’d like to take questions.

Question-and-Answer Session

Operator

Certainly. Ladies and gentlemen, we will now conduct a question and answer session. If you have a question, please press the star key followed by the 1 on your touchtone phone. You will hear a tone acknowledging your request. Your questions will be pulled in the order they are received. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. One moment please for your first question.

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

John Bridges – J.P. Morgan

Hi Sean, everybody. I was just wondering with this mining of the lower grade zinc core at La Ronde? Your comment that that extends the life, how should we look at the mix of contributions from the different ore sources that are going forward.

Ebe Scherkus

Good morning, John. Ebe Scherkus. Actually the mix will be roughly the same. I think the issue that we have at LaRonde is in the actual metal prices in comparison to the budget. We used very conservative metal prices when we started the budget, and if we use present day prices, then a lot of the material, especially on the fringes on east and west and also into the hanging wall, becomes economic. And so, the actual blend will be the same, but the impact, if we do take that additional material it will extend the life of Mine La Ronde One by an additional two years.

John Bridges – J.P. Morgan

Ok, and that's the entirety of it, or just what's in front of you at the moment?

Ebe Scherkus

Just what's in front of us at the moment.

John Bridges – J.P. Morgan

So, when would you require, I suppose that gives you more leeway with the deep extension.

Ebe Scherkus

Exactly.

John Bridges – J.P. Morgan

And, so when would that switchover come?

Ebe Scherkus

That switchover, obviously we like to maintain our gold production profile, and so the planned switchover was around 2011. That's still our target, but it will mean that La Ronde One will not be depleted.

John Bridges – J.P. Morgan

Ok, so you're basically building some flexibility.

Ebe Scherkus

Yes.

John Bridges – J.P. Morgan

Ok, that's helpful. I see with your, there are some rather optimistic currency estimates in some of the cash cost estimates. Will those be changed with the new forecasting you're going to give us later in the year?

Ebe Scherkus

Yea, that will be part of the update in November.

John Bridges – J.P. Morgan

Ok, well done the results, and thanks very much.

Ebe Scherkus

Thank you.

Operator

Your next question comes from Victor Flores, of HSBC. Please go ahead.

Victor Flores - HSBC

Yes, thanks. Good morning. I was hoping that you could give us a bit more color on what you see as the long term potential for Kittila. I realize that you can't answer all of these questions until you get down there and do some more drilling, but it appears that the center of gravity of this project is moving more towards the underground, and I was just hoping you could give us some color on that.

Ebe Scherkus

That is because we're focusing on the main mine zone, main zone currently, Victor, and I think for long term planning purposes with respect to looking at the shaft locations, but I think what the deep drilling has done is basically extend the mineralization vertically by about another 400 meters, but if you look at the history of the whole belt of the original [Ciricusico] deposit, the main zones started out very similarly to our zones at [Rurara, the Paha], the other zones to the north, so they all have that same sort of history, so as we started drilling deeper and followed them up the deposits grew so I would say there's nothing, there's no real relationship with respect to the center of gravity, it's just a matter of getting the work done, and we're focusing on building ounces, and the , that is our first priority. Secondly, if you look at the deep drilling, that's some of the best grade material that we have encountered, and of course we'd like to focus all of the drills around that particular intersection, because that's where we believe we can get instant growth and reserves and resources.

Thank you, do you have any sense as to whether there are specific areas that have higher-grade shoots that you'd like to focus on, or is it still too early to ask that kind of question?

Well, I think the area we'd like to focus on right now are the actual main zone. When we look at the intersection that we obtained there, it was over 15 meters thick, but the actual mineralization was in excess of 30 meters thick. So that is one very prime target area that we have to follow up on.

Great, thanks, and then, just turning down, there's a lot of information coming, including the analysts tour, but can you give us the sense that this point is to , what the break down, the reserve is between the open pit and the underground?

Your next question comes from [D. Fran], with E Capital, Please go ahead.

[D. Fran] - E Capital

Good morning. My first question relates to Kitila, could you give us an update on the amended permits, since you had to amend for autoclave?

We just received notification from the Lapland environmental authority, and they have ruled that it will only be an amendment, an amendment will be required, and not a full EIS, so that is very good news indeed, and we expect to have the permit by the end of the year for the Autoclaves.

You would still be on track to still be in production…

Ebe Scherkus

Absolutely.

[D. Fran] - E Capital

Yea, ok. Secondly, regarding Goldex, you did put some stockpile in your press release here, 181,000 tons at 1.9 grams, is that ore mostly coming from the reserve, or from the ore?

Ebe Scherkus

Well most of the development, if you look at the Goldex deposits, of the zone, is within the ore body, but a lot of it is in the bottom part, in the drop points, the bottom of the ore body in the cones, and part of it is also with respect to the drill drifts, so you would expect to see slightly lower grade, because it is at the bottom, so there is some inter lapping there, Over lapping.

[D. Fran] - E Capital

That's why the grade is lower than the reserves?

Ebe Scherkus

That's one reason, but then also that is based on channel sampling, and if you'll look when we made the feasibility, or completed the feasibility sample, channel sampling gave us one of the lower grades in comparison to actually mill recovered grades and diamond drilling.

[D. Fran] - E Capital

Ok, so you still expect the 2.3 grams...

Ebe Scherkus

I would say in the neighborhood of that, but slightly lower because we do know we are taking material that is marginal to put in the infrastructure.

The open pit reserve would be about one third, of that would be roughly, I would say, 800-900,000 would be open pittable, and the remaining would be underground.

[D. Fran] - E Capital

And lastly, just once you finish the shaft end, can you give us an estimate of how long it's going to take to be in commercial production?

Ebe Scherkus

Well, we're saying that we will be ready by the middle of the year, the shaft will be completed in the fourth quarter of this year, and as you're aware we're developing a lot of infrastructure from Shaft number one, so the main thing that we have to complete the next year or so is the crusher, the load up facility, but work has already started on the crusher excavation from shaft number one, so we expect to have all of the infrastructure ready by, ready to go by the middle of next year. Production drilling will be starting in the first quarter of next year, and then we're gong to start blasting and building up to swell so production to ramp up to, during the second half of the year, and we expect to be at 4 tonnage by the end of next year.

[D. Fran] - E Capital

Thank you very much.

Operator

Your next question comes from Steven Butler, of Canico Islands. Please go ahead.

Ok.

Steven Butler – [Canico] Islands

Good afternoon Guys, and congratulations on hiring Mr. Dan Keveri. I wonder when he's headed back to Finland?

Ebe Scherkus

I don't know, that's not part of this work description.

Steven Butler – [Canico] Islands

I know, I was just kidding. Guys, just a quick question, for you on Ebe, as much for you as anybody, on LAPA, cause Sean mentioned the delay maybe missed what your comments were Sean or Ebe, on LAPA, in terms of expecting now nominal ounces of production in 2008?

Ebe Scherkus

Well, the amount of ounces that we had forecasted at LAPA was around 8,000 ounces, and now it's just start-up in December. We've done a lot of additional metallurgical work, so we've done some modifications to the process, and so as a result of that, we ordered the equipment and the market being what it currently is, especially delivery times of the site mill were longer than what we had anticipated, so that has been incorporated. However what we have been able to do is rather than have a slower ramp-up, we will have a quicker ramp-up in the second half of the year, so the ounce production for 2009 will be as planned.

Steven Butler - [Canico] Islands

Ok, thanks. And Sean, you m mentioned the impact of [blueskate] ore, in the quarter, in my calculation, to a fairly nominal impact of not much more than a ton on your consolidated costs, is that correct?

Sean Boyd

I'd say, Steve, there's about $3 million in costs previously quarried. They were added to period costs in the quarter and that added an impact of almost $4 a ton.

Steven Butler – [Canico] Islands

Oh, I see, so they were not necessarily in the $100 per ton quote. They're additional to the $100 per ton quote.

Sean Boyd

No, no, the $3 million is you asked, is about 100 and Canadian. And that got added to our period costs in the quarter, so we’re over and above our regular operating cost. Cause it didn’t displace any La Ronde ore.

Steven Butler – [Canico] Islands

Oh, I see.

Sean Boyd

Our (inaudible) was over budget in the quarter and was over budget by the amount of [blue scale] that we processed.

Steven Butler – [Canico] Islands

Ok, ok. Thanks very much.

Operator

(Operator Instructions) Your next questions comes from Gregg Barnes of TD Newcrest. Please go ahead.

Greg Barnes - TD Newcrest

Yeah, thanks. Sean, I guess from your opening statements we can conclude that you have no intention of getting involved in the end of M&A in the gold sect that’s going on right now?

Sean Boyd

Well, I think if you take a look at the approach we’ve taken over the last three years, that’s certainly the way we hope to continue. We’ve been asked specifically about the Meridian transaction and normally we wouldn’t comment on it, but we will in this case because we’ve consistently said in the last year that that’s something we would not do. And it’s no knock against them cause we actually, as we’ve said, respect the job that they’ve done over many, many years of doing the right thing and creating a lot of value for their shareholders. But when we look at it, it’s our estimations that we can add as many ounces as Meridian has currently in reserves through our own drilling of our resource in the next 18 months. So it makes more sense to do that rather than have to spend $3 billion plus to buy something like Meridian.

Greg Barnes - TD Newcrest

Great thank you. Just a follow-up question, too. On your CapEx breakdown for the year, you’ve revised a bit from what you put out at the end of Q1. I guess that’s just the distribution of the CapEx. And Goldex has gone up from $91 million to $107. Is that a timing issue or is that something else going on there?

Sean Boyd

I think it’s a function of timing and a little bit of foreign exchange as well. We’re using more current foreign currency rates and there hasn’t been any serious escalation in currency costs in local terms but obviously when translated into US dollars there is an impact.

Greg Barnes - TD Newcrest

And that’s the same on the other numbers that have moved around a bit?

Sean Boyd

More or less. Yes.

Greg Barnes - TD Newcrest

OK, thank you.

Operator

Your next question is a follow-up question from Chantal Gosselin of Genuity Capital. Please go ahead.

Chantal Gosselin - Genuity Capital Markets

Hi, I just forgot to ask about the tax rate. In the quarter, your tax rate was much below what you guided before. 41%. Can you tell us or give us some guidance what we should use going forward?

Sean Boyd

Yeah, the big change in the quarter was because of the acquisition of Cumberland. The expenditures we’re incurring at Meadow Bank actually help us to shelter income (inaudible) and that reduces our overall effective tax rate going forward so we’re guiding for the full year 30%-35% and similar levels next year.

Chantal Gosselin - Genuity Capital Markets

And that would be for two years and then we would go back to something more like 40%?

Sean Boyd

Yeah, once the expenditures at Meadow Bank start to abate in late, late ’09 to 2010, then I would expect the tax rate to creep back up.

Chantal Gosselin - Genuity Capital Markets

Ok, thank you.

Operator

Your next question comes from Robert Cohen of Goodman and Co. Please go ahead.

Robert Cohen - Goodman and Co.

Yes, hi guys. Hi Sean, how are you? Quick question just on your TCRC, given the fact that the TCRC market, the costs have dropped quite significantly over the last few quarters. Just wondering if we’re still on some old contracts right now and what we, what things look like going forward. Do you we expect to renew any contracts?

Jean Robitaille - Vice-President Metallurgy & Marketing

All of our contracts, we’re on long-term contract currently and we are on the benchmark for all of the predictions, completely committed for the year and coming here.

Robert Cohen - Goodman and Co.

Do you have a sense of what you’re paying on your basic TCRC charges?

Jean Robitaille

Presently it’s in line with what is the news, so for the zinc it is in the 100 something. I have to check back. I can come back to you.

Robert Cohen - Goodman and Co.

Ok, thank you.

Operator

Your next question comes from Lynn Moore of the Montreal Gazette. Please go ahead.

Lynn Moore - The Montreal Gazette

Hello, I just wanted to ask you about the labor situation. You referred to it obliquely earlier. Is it still a very tight labor market for skilled and experienced people?

Ebe Scherkus

Good morning Lynn. It’s Ebe Scherkus here. The market is definitely tightening. However, we have been fortunate because we offer the job security and the (inaudible). What has been surprising is the recruitment on our Meadow Bank project, we recently put out an ad in the Western Canada Nunevut and Eastern Canada and what was surprising is that we received over 500 applications for the Meadow Bank project

Also within Nunavut and Baker Lake and surrounding areas we’ve received an addition over 200 people, so we have to look through over 700 people that are interested to compete for about 300 jobs. We don’t have the same problems but there is a definite tightening.

Lynn Moore - The Montreal Gazette

OK, are these skilled jobs?

Ebe Scherkus

I would say about 60% of them would be able to be truck drivers, operators, and the remainder would be journeymen, electricians, mechanics, and of course technical people.

Lynn Moore - The Montreal Gazette

OK, just one last question. You mentioned the experience of the two fellows you hired for the project. They have 30 years, is that together, or each?

Ebe Scherkus

60 years together.

Lynn Moore - The Montreal Gazette

Ah, very good. Thanks.

Operator

The next question comes from (inaudible) with CDP Capital

Steven Kibsey - CDP Capital

Ah, good morning, it’s actually Steven Kibsey. I was just wondering, at Meadowbank, what was the exchange rate that was used in the feasibility study to get the cost at $230-250 U.S dollars an ounce?

David Garofalo

Steve, off the top of my head, it’s Dave, I think it’s around 120.

Steven Kibsey - CDP Capital

OK, thank you very much.

Operator

Mr. Boyd, there are no further questions at this time. Please continue.

Sean Boyd

Thank you operator, and thanks once again for participating in second quarter conference call. For some of you, we’ll see you at Pinos Altos in a couple weeks. Thanks again.

Operator

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

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