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Here’s the entire text of the Q&A from Agnico-Eagle Mines’ (ticker: AEM) Q3 2005 conference call. The prepared remarks are here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections.

QUESTIONS AND ANSWERS

Operator

Thank you.

Ladies and gentlemen, we will now conduct the question-and-answer session. If you have a question, please press the "star" key followed by the "one" on your touchtone phone. You'll hear a tone acknowledging your request. The 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 key. One moment, please, for your first question.

Your first question comes from David Stein from Sprott Securities. Please go ahead with your question.

David Stein - Sprott Securities - Analyst

Hi, good morning guys. First question, I guess, is -- it was a good presentation, first of all, on all the assets. So, my first question is kind of philosophical. You guys had a pretty good operating quarter, and that's -- that hedge marked-to-market thing to cure earnings down quite a lot. On what amounts to not a whole lot of your byproducts being hedged over the longer term, so I am wondering what's you -- given the accounting rule changes, what is your philosophy on that going forward? Do you think it's worth it to hedge, given the tremendous volatility that this is putting in their earnings?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

Yes, you should never read -- let accounting drive for your business and how you run your business, but this sort of came out of left field because we put these hedges as a hedge of our byproduct, a very modest amount. And then, the rules changed. And what's interesting is we have currency hedges that are well in the money. And we are not allowed to book those.

But unfortunately, we're required to adjust to sort of marked-to-market on a quarterly basis on a very, very small fraction. So we are much less inclined now to create earnings volatility by putting on these types of hedges. In order to get a byproduct metal hedges considered an effective hedge, we have to hedge every element of the concentrate, which would mean hedging the gold, which we won't do.

So I think it's an issue for people selling these products because they don't do what they're supposed to do now, which is have consistent earnings and provide a bit of a backstop. They create volatility, which we don't like. So we would be less inclined going forward to do this.

David Stein - Sprott Securities - Analyst

Okay. Good. Now a question on your gold guidance for Q4. You basically maintained your 250 for the year, does that imply a pretty good Q4 in terms of gold production of about 70,000 ounces. Do you see an increase in gold production for the remainder of the year?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

Well, Ebe answer that.

Ebe Scherkus - Agnico-Eagle Mines Limited - EVP and COO

Good morning, David. We are basically maintaining the guidance and all we have to do is repeat September. September was a good month for us in the quarter. We are getting into a high grade cycle on our two mining horizons, level 215 and level 194. So that's why we are maintaining our guidance.

David Stein - Sprott Securities - Analyst

Okay. Great. In terms of the drilling that's going on at Suurikuusikko, you said that it's ongoing. It's going to take whatever take six months or whatever to sort of finalize the acquisition. Can you report drilling in that time frame, and I guess if so do you know when you're going to have some exploration results from the project?

Ebe Scherkus - Agnico-Eagle Mines Limited - EVP and COO

Yes. We can report drilling. Essentially it is a tidy up issue right now. Part of the process, November 4, so in a couple of weeks we will move to have the company de-listed and essentially work running the company's existing management there. We've kept the program going during that time because we were confident of the results. The company has done a good job getting the financing to keep that program going during the bid process, which went on a little bit longer than we had hoped. So that momentum is still there, and in our timeline we show that we will be able to update that drilling in January. It's our expectation, and maybe sooner. We have to see how it goes.

David Stein - Sprott Securities - Analyst

Okay. Great. That's all my questions for now. Thanks.

Ebe Scherkus - Agnico-Eagle Mines Limited - EVP and COO

Thank you.

Operator

Your next question comes from Chantal Gosselin from Haywood Securities. Please go ahead with your question.

Chantal Gosselin - Haywood Securities - Analyst

Good afternoon. Just a quick question regarding LaRonde 2. Just looking at the slide here, I'm trying to figure out what's the length of the winze that you are planning -- where you're going?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

The winze will be going down to a depth of about 9700 feet, Chantal. So it will be wins BB+ collared tentatively on level 206. So we are looking at about 2700, 2800 foot wins.

Chantal Gosselin - Haywood Securities - Analyst

And that would access all the reserves that you have on LaRonde 2?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

Yes. You can also see on that slide there is a ramp that goes down from the winze to the lower levels of LaRonde 2.

Chantal Gosselin - Haywood Securities - Analyst

Okay. And would it be reasonable to assume that the excavation of the winze would not impact your LaRonde 1 operation, which means that you would go on with that 8,000 tons...

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

That is correct, Chantal. And I think part of the positive nature of this type of approach is that we will not be generating a significant amount of waste. And whatever waste we do have we will be dumping into existing scopes. And also as the mine matures there will be less development generated underground.

Chantal Gosselin - Haywood Securities - Analyst

Okay. So the winze would come in, play, I guess at the end of LaRonde 1 mine life which is about 2012, okay?

Ebe Scherkus - Agnico-Eagle Mines Limited - EVP and COO

We haven't finalized that, but current thinking is that if this project goes ahead there could be some overlap in the latter years of LaRonde 1. That's another plus of this approach.

Chantal Gosselin - Haywood Securities - Analyst

Okay. So the winze itself would run about 5,000 to 6,000 tons a day?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

That is correct.

Chantal Gosselin - Haywood Securities - Analyst

That's it. Thank you. The next question comes from Steve Butler, Canaccord Capital. Please go ahead with your question.

Steve Butler - Canaccord Capital - Analyst

Good morning, guys.

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

Good morning.

Steve Butler - Canaccord Capital - Analyst

In terms of the Lapa reserve grade, Sea, if you could just remind us what the cut and uncut reserve grade is for Lapa? And as well I wanted to ask a question, related status to what the earliest point next year in 2006 would be that we would get results of -- for sampling efforts underground at Lapa that may allow you to restate the year that could create a fire?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

Just in terms of the reserve grade, its a quarter ounce; its 0.25. And the undercut grade is about 0.32, 0.33. We've got some different thoughts on Lapa over the last month or so on getting a sample that's more representative than what was contemplated in the earlier plan. Maybe I'll let Ebe get his recent thoughts on Lapa.

Ebe Scherkus - Agnico-Eagle Mines Limited - EVP and COO

Part of the new approach on Lapa was based on Goldex. Our experience at Goldex with the three razes versus extracting a bulk sample from one location. So we have modified that approach rather than extracting one test scope as we had originally envisioned. We will be driving on two levels along the strike of the ore body and crosscutting across the ore body on several horizons. So we expect to have that completed by the end of the year of 2006. And that will be incorporated into our reserve estimate -- a revised reserved estimate and the feasibility study.

Steve Butler - Canaccord Capital - Analyst

Okay. And Ebe, could you maybe just clarify -- I just wondered, see if you can reconcile for us the fact that 70% of tons were from the lowest levels, but you'd of course good zinc despite that in the quarter. I think you alluded to some discussion about better zinc grades in the foot walls that leads to lower gold grades.

Ebe Scherkus - Agnico-Eagle Mines Limited - EVP and COO

That is correct, Steve. On the eastern part of our level 215 mining horizon or pyramid, we have a significant zinc mineralization in the hanging wall. And as we even move further east on level 215 most of those scopes actually turn into almost 100% zinc scopes with gold credits. So during the past quarter about 30% of our scopes from level 215 were from the eastern part of that pyramid. And with the zinc prices being what they are, we're getting grades of anywhere between 4% to 6% zinc in the hanging wall.

Steve Butler - Canaccord Capital - Analyst

And the related gold that comes from that...

Ebe Scherkus - Agnico-Eagle Mines Limited - EVP and COO

Sorry.

Steve Butler - Canaccord Capital - Analyst

What would be the related gold grades that comes with that 46% zinc?

Ebe Scherkus - Agnico-Eagle Mines Limited - EVP and COO

That would typically average about 0.02 to 0.03 ounces of gold per ton. Yet on the fourth wall we have grades in the neighborhood of 0.14 to 0.16 ounces of gold per ton.

Steve Butler - Canaccord Capital - Analyst

Okay. Thanks very much. Operator Your next question comes from Don McLean from Paradigm Capital. Please go ahead with your question.

Don McLean - Paradigm Capital - Analyst

Good morning, guys. I would just add further to Steve's question. Could you give a sense of what kind of dilution you are experiencing? You also mentioned about higher costs from ground support in the deeper levels.

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

That ground support was ongoing, just below level 194 in the Sill Pillar (ph) horizon. That's just a fact of life. So that's nothing different from what we had expected in the earlier part of the year. In terms of overall mind dilution on the lower levels, that includes level 194 Horizon and level 215, we average the same as the last quarter, about 20% of level 215 that would work out to about 8% to 12% and above level 194, we would be looking at anywhere between 20% to 30% depending on the scope.

Don McLean - Paradigm Capital - Analyst

Great. Okay. And maybe if -- is there any way you can give us a little bit more color on your thoughts on Surrey. I know you are -- you've decide to go for a full bankable feasibility study. But I guess having spent quite a bit of money now I have to issue chairs. I guess we are all kind of anxious to get some sense of your vision for the property. You talked about the exploration upside but I think a lot of us are quite curious to get some gauge of two things, what operating costs might be even within a broad band and maybe your capital cost estimate.

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

I'll answer that Don. I think what has probably changed at Surrey, there are two main things. One is the process. We are now proceeding with pressure oxidation. We believe we can have equivalent or even slightly lower operating costs. We also believe that we can have improvements in the recovery and we also believe that it's environmentally, more friendly than previous by oxidation process. Also if you look at the growth in resources that has predominantly been from underground. So we have now changed our focus to it resource conversion into reserve. We've only drilled 2.6 miles of the property so there could be other open pit potential which we are presently not aware of, but we have a whole resource inventory underground. And so, our plans going forward will definitely incorporate an underground component to be able to access some of this resource to be able to further convert it and then also to bring it on stream to complement the open pit. Also what as Sean mentioned, we are looking at higher throughput because we have a larger reserve resource base. Previous studies were in the neighborhood of 700,000 tons to 750,000 tons per year. We believe with a large deposit the economies of scale can come into play that's why we're looking at scenario of million tons per year. With respect to operating costs, we are working on that right now. With respect to the capital cost, we are obtaining bids from various engineering groups, suppliers, contractors. So I'm not really ready to venture any members at this point.

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

What we're doing Don is we are fine-tuning our numbers but the nature the depositor has changed in the last few months with the growth in the resource, and as Steve said it's growing underground. But the general concept is to get a starter open pit going, probably accessed the underground, we'll ramp, sort of we can do what in equal traditionally does and go and be very aggressive within an underground program. We think that's important now to be adult to determine where an ultimate -- where eventually a shaft will go. So it's too premature to say the shaft. We don't really know where the best part of this deposit is. But we're working in finalizing an internal sort of prefeasibility study through the balance of this year and maybe we can be a little bit clearer in February and give you a little bit more information prior to ultimately completing the full feasibility.

Don McLean - Paradigm Capital - Analyst

Yes. So we would all encourage you to give us some sense of that sooner rather than later. Is the nature of the deposit such that you can, or you said you do have a sweet spot that you can start with, with significantly lower than average operating costs?

Unidentified Speaker

Well, obviously the open pit would fall into that bracket, Don. We but find it further, so and we have done studies on it and it would definitely past that is what Sean referred to as the starter pits, the starter operation for the first five or six years of the mine life.

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

When we look at the overall strategy, Don and we look at building an underground mine at Goldex, Building potentially underground mine lap up possibly when we look at the international projects, given everything we have on the table it would be nice to be able t start open pits on both of them, lower the amount of capital, get up mine going and do much more exploration from an underground access point. So those of the things we're trying to sort of put together right now.

Don McLean - Paradigm Capital - Analyst

Okay. Thank you. Operator Your next question comes from Thomas Robert Peterson as Shareholder. Please go ahead with your question.

Thomas Robert Peterson - Analyst - Analyst

Yes. I'm wondering about the loans and a loan agreement. Are any of those non recourse and the sense that they require at a short against a falling metal prices?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

No. There are no heads requirements, if that's what you're referring to. The only subtle see to it is that they are secured against the Goldex projects, but there are no heads requirements, is that's your question?

Thomas Robert Peterson - Analyst - Analyst

Thank you. Operator Your next question comes from Barry Cooper from CIBC World markets. Please go ahead with you question.

Barry Cooper - CIBC World markets - Analyst

You've answered most of them with respect to surgery. -- sorry --. One of the issues taking place in LaRonde was the issue with respect to skin of relatively high grade mineralization that is being left as you were trying to master the amount of pollution there and minimize it. What is the status? Have you kind of come to period now where you are comfortable that you can get that with some of the extra dilution?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

Well that a job on a daily bails, I think what complicate some of the stoops of the mining blocks is the at sericite (ph) ships and it's very subtle task of how close of how close you places your holes to the Hanging Wall, we've had some recent results where we have had still trying to come up with zero dilution we've card that put like with a knife and yet we have had other folks where we thought we were being maybe too conservative and went a bit closer to the Hanging Wall.

Then we event I think we were back to historical levels of dilution so I think would so I think to answer your question there will always be some c fine tuning but I think the lions share of the work has been done. We are looking more at things like materials handling how quickly can we get the order out before the Hanging Wall has change to collapse. So these are some things with respect to productivity fragmentation and that we can t that we are working on, and we are also looking a bit in ground support but I think on a whole we have now found our recipe and it is only tweaking that we are working on.

Barry Cooper - CIBC World markets - Analyst

Is that Scopes specific or is that...

Unidentified Speaker

Potentially minors scope specific not mine specific.

Barry Cooper - CIBC World markets - Analyst

No. I didn't mean mine, but, miner. In another words, the guy that's in the scope sometimes are able to do this consistently and other team -- given the experience level that probably the industry is facing with respect to getting good talent into the areas.

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

Well, I think, it's definitely not miner specific, because where we have one of the, probably, what we consider one of the best work forces is in the business. A lot of our long-haul drillers, etcetera, have been with us for almost 15 years and so, are very familiar. They have mined everything, from shaft number 1, shaft number 2 and million of tones at Pinos shaft. So also with respect to developing the scopes in great control the people, the miners that we have on site under supervision, are very aware of the issues surrounding that was definitely not miner or employ related, it would be geology, where we have complexities in the hanging wall and that is mostly in the area of our 49 scopes, where we had our fall of ground, two years ago. That particular area appears to have a chimney with a very weak hanging wall, so it is scope specific.

Barry Cooper - CIBC World markets - Analyst

Okay. Thanks a lot.

Operator

Your next question is a follow-up question from Don McLean from Paradigm Capital. Please go ahead with your question.

Don McLean - Paradigm Capital - Analyst

I just wanted to touch on the Pinos Altos, a bit. Sean, you mentioned that you are quite excited and the geologists are exited that you have delayed by a couple of months your decision. So I guess one question is what you need to see with this additional underground drilling to make a positive decision? And then, I would certainly find it helpful, if maybe Mark or Ebe to go through in little bit more detail, what you've added beyond, what's Pinos work gap indicated to you, what you have added since?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

Just before we turn it over Mark and Ebe. This process is not just drilling at this point. It also involves, during a scoping study on what we feel can be build here. So, that's why it's taking some time. We also need to know the depth extent of Santo Nino. And as we said, we had difficulty -- technical difficulty getting holes down at that depth, and that is one of the important aspects of this project. So, that was also already built into that contract.

So, we didn't have to do anything that wasn't contemplated when we entered into an agreement that was something that was agreed upon that if we didn't get the drilling performance -- because, we weren't sure, we signed this contract, whether we can get the drills, as quickly as, we could in place like Mexico. So drills are hard to come back. So, it was all driven around our ability to get the data and then take a two month period to access all data. So it's just part of the data collection process. I will turn over to Mark and Ebe.

Ebe Scherkus - Agnico-Eagle Mines Limited - EVP and COO

We had three objectives, when we started the Pinos Altos. One was to confirm the Pinos resource estimates. Secondly, we have the idea that there was upward close to surface potential, open pitiable potential. And then we wanted to have a feeling for the blue-sky potential. So, I think, we were able to prove the first two. And as Sean mentioned, we had the technical difficulties with some of the drill rigs to get some of the deeper drill rigs down, so that is why we had the extension. So, but Mark was looking after the project and shed more color on that.

Mark LaGaux - Agnico-Eagle Mines Limited

That's exactly. If we had a programmed outlined -- the open pit drilling is the easiest drilling that you can do, it turned out to be like that. And we had very good success at depth, even though we drilled whole lot of a -- drilled the meters that we thought we needed to drill. It was in a few cases - in few cases near critical, because they occurred just in of late August and in mid September. We lost a couple of key holes that we felt that would have given us much more comfort to the depth potential. Although, there meters were all drilled and that's essentially it's the fact we couldn't -- we did not have enough time to restart the whole and give us the peace of mind that we needed that we exercised and mutually agreed to in the program. That's essentially - If we have a target for that and these drill holes now, we will be able to proceed and put more emphasis, which will cost us a little bit more money. But, it's a small investment we can be able to give us a comfort level to the deep potential and to be able to better structure things of that we have a scope instead we can actually see whether the asset were and that's what it comes down to.

Don McLean - Paradigm Capital - Analyst

Could you quantify a little bit for us, when you say, you have added surface open to that material that are you talking ,sort of, one year or two years type of production? Or is it something more than that? And I guess, for the deep, what if you don't see the deposit extent to the dept you are drilling? Maybe, what dept are you drilling and what happens if you don't find that it extents down there? Do you call it all off?

Mark LaGaux - Agnico-Eagle Mines Limited

I will answer the last part of your question. I don't think we will call it all off. I told on, I think we're very satisfied with the results that we currently have. But, I think in any scoping study what we would like to do is get a feel for the -- there will be an underground operation. With the terrain on site, we'd like to have a feel for how we approach an underground operation, and we feel that based on the potential, we'll be successful at depth.

With respect to an open pitable operation, now that is being worked on right now, we're conducting metallurgical tests. We have an idea on various recoveries. I think, one of the issues, you know, when we looked at our original model, one of the problems that we do have, and this is a good problem. As we initially looked at potential of heap leach operation from the open pit, but the grades that we encountered on the basis of the results that we have released, they are significantly higher than what we had envisioned. So we're now looking at a processing plant, which was not expected or not anticipated originally, when we got into this. So that's why we don't really want to mention any tonnages or life of mine or how much is open pitable, because, we're still drilling the open pitable material, like the most recent results that had been from (inaudible) we have been pleasantly surprised. So, before we can finalize anything we would like to see what the drilling tells us.

Don McLean - Paradigm Capital - Analyst

So, materially positive obviously.

Mark LaGaux - Agnico-Eagle Mines Limited

Obviously.

Don McLean - Paradigm Capital - Analyst

Okay. Thank you. Operator Your next question comes from Michael Van from CIBC World Markets. Please go ahead with your question.

Michael Van - CIBC World Markets - Analyst

Yes, hi. Just a question on LaRonde, again. I just wanted to know about the mine plan - is the mine plan changing now that link prices have gone up, meaning that are some stopes that have a higher zinc displacing previous scopes or are they just getting bigger?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

No. they are not displacing. We are not -- we haven't made a conscious decision to mine more zinc stopes from the upper part of the mine. What we are doing is that the lower part of the mine Level 215, where some of the material was below our cut off grade previously based on metal prices. And therefore it was not considered in our mine plan, so we were only mining the copper rich, gold copper rich part of the deposit. But now with improving zinc and silver prices, all we are doing is increasing the thicknesses of some of these stopes, especially on Level 215, rather than a stope being 30 to 50 feet wide we will take the additional mineralization and it may be 40 to 60 feet thick. So that is the only difference.

Michael Van - CIBC World Markets - Analyst

Okay. So you basically spend a little bit more time on each stope?

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

That's correct.

Michael Van - CIBC World Markets - Analyst

Okay. Thanks.

Operator

Your next question comes from Mark Smith from Dundee Securities. Please go ahead with your question.

Mark Smith - Dundee Securities - Analyst

Yes. Hi guys. Just a really quick question, I just wonder if you have a feeling with the winze option, how much capital we might be looking at for LaRonde II, just in generality?

David Garofalo - Agnico-Eagle Mines Limited - VP of Finance & CFO

We hope to get bids right now, Mark and that's why we are not going to come up with a number now.

Mark Smith - Dundee Securities - Analyst

Okay. But it's going to be presumably significantly less than the 325, the new shaft option, right?

David Garofalo - Agnico-Eagle Mines Limited - VP of Finance & CFO

Yes.

Mark Smith - Dundee Securities - Analyst

Okay. All right. Thank you.

Operator

Ladies and gentlemen, if there are any additional questions at this time, please press the "star" key followed by the "one." As a remainder, if you are using a speakerphone, please lift the handset before pressing the keys. Mr. Boyd, there are no further questions at this time. Please continue.

Sean Boyd - Agnico-Eagle Mines Limited - President & CEO

Thank you, operator: And just want to thank everybody for their time and attention to our third quarter conference call. And we will keep you updated as we move forward on our growth plans. Thank you very much.

Operator

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

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