AGNICO EAGLE MINES LTD, 20-F filed on 3/28/2011
Annual and Transition Report (foreign private issuer)
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
Current
 
 
Cash and cash equivalents
$ 95,560 
$ 160,280 
Short-term investments
6,575 
3,313 
Restricted cash (note 14)
2,510 
 
Trade receivables (note 1)
112,949 
93,571 
Inventories:
 
 
Ore stockpiles
67,764 
41,286 
Concentrates and dore bars
50,332 
31,579 
Supplies
149,647 
100,885 
Available-for-sale securities (note 2(b))
99,109 
111,967 
Other current assets (note 2(a))
89,776 
61,159 
Total current assets
674,222 
604,040 
Other assets (note 2(c))
61,502 
33,641 
Future income and mining tax assets (note 8)
 
27,878 
Goodwill (note 9)
200,064 
 
Property, plant and mine development, net (note 3)
4,564,563 
3,581,798 
TOTAL ASSETS
5,500,351 
4,247,357 
Current
 
 
Accounts payable and accrued liabilities (note 10)
170,967 
155,432 
Dividends payable
108,009 
28,199 
Income taxes payable
14,450 
4,501 
Interest payable
9,743 
1,666 
Fair value of derivative financial instruments (note 15)
142 
662 
Total current liabilities
303,311 
190,460 
Long term debt (note 4)
650,000 
715,000 
Reclamation provision and other liabilities (note 5)
145,536 
96,255 
Future income and mining tax liabilities (note 8)
736,054 
493,881 
SHAREHOLDERS' EQUITY
 
 
Common shares (notes 6(a,b,c and d))
3,078,217 
2,378,759 
Stock options (note 7(a))
78,554 
65,771 
Warrants (note 6(c))
24,858 
24,858 
Contributed surplus
15,166 
15,166 
Retained earnings
440,265 
216,158 
Accumulated other comprehensive income (loss) (note 6(e))
28,390 
51,049 
Total shareholders' equity
3,665,450 
2,751,761 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 5,500,351 
$ 4,247,357 
Contingencies and commitments (notes 5, 8,12 and 13(b))
 
 
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Per Share data
Year Ended
Dec. 31,
2010
2009
2008
REVENUES
 
 
 
Revenues from mining operations (note 1)
$ 1,422,521 
$ 613,762 
$ 368,938 
COSTS, EXPENSES AND OTHER INCOME
 
 
 
Production
677,472 
306,318 
186,862 
Exploration and corporate development
54,958 
36,279 
34,704 
Amortization of property, plant and mine development
192,486 
72,461 
36,133 
General and administrative
94,327 
63,687 
47,187 
Write-down of available-for-sale securities
 
 
74,812 
Gain on derivative financial instruments
(7,612)
(3,592)
(4,481)
Provincial capital tax
(6,075)
5,014 
5,332 
Interest expense (note 4)
49,493 
8,448 
2,952 
Interest and sundry income
(10,254)
(12,580)
(7,240)
Gain on acquisition of Comaplex, net of transaction costs (note 9)
(57,526)
 
 
Gain on sale of available-for-sale securities (note 2(a))
(19,487)
(10,142)
(25,626)
Foreign currency translation loss (gain)
19,536 
39,831 
(77,688)
Income before income and mining taxes
435,203 
108,038 
95,991 
Income and mining taxes (note 8)
103,087 
21,500 
22,824 
Net income for the year
332,116 
86,538 
73,167 
Net income per share - basic (note 6(f)) (in dollars per share)
2.05 
0.55 
0.51 
Net income per share - diluted (note 6(f)) (in dollars per share)
0.55 
0.50 
Comprehensive income:
 
 
 
Net income for the year
332,116 
86,538 
73,167 
Other comprehensive income (loss):
 
 
 
Unrealized gain (loss) on hedging activities
 
16,287 
(8,888)
Unrealized gain (loss) on available-for-sale securities
64,649 
76,037 
(911)
Adjustments for derivative instruments maturing during the year
 
(7,399)
 
Adjustments for realized loss (gain) on available-for-sale securities due to dispositions and write-downs during the year
(19,487)
(10,142)
8,997 
Net amount reclassified to income due to acquisition of business (note 9)
(64,508)
 
 
Change in unrealized gain (loss) on pension liability
(4,093)
(727)
1,822 
Tax effect of other comprehensive income items
780 
(2,399)
2,084 
Other comprehensive income (loss) for the year
(22,659)
71,657 
3,104 
Comprehensive income for the year
$ 309,457 
$ 158,195 
$ 76,271 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)
In Thousands, except Share data
Common Shares
Stock Options Outstanding
Warrants
Contributed Surplus
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Total
Balance at Dec. 31, 2007
1,931,667 
23,573 
 
15,166 
112,240 
(23,712)
 
Balance (in shares) at Dec. 31, 2007
142,403,379 
 
 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
Shares issued under Employee Stock Option Plan (note 7(a))
41,392 
 
 
 
 
 
 
Shares issued under Employee Stock Option Plan (note 7(a)) (in shares)
1,340,484 
 
 
 
 
 
 
Stock options
 
17,479 
 
 
 
 
 
Shares issued under the Incentive Share Purchase Plan (note 7(b))
9,545 
 
 
 
 
 
 
Shares issued under the Incentive Share Purchase Plan (note 7(b)) (in shares)
154,998 
 
 
 
 
 
 
Shares issued under flow-through share private placement (note 6(b))
22,042 
 
 
 
 
 
 
Shares issued under flow-through share private placement (note 6(b)) (in shares)
779,250 
 
 
 
 
 
779,250 
Shares issued under the Company's dividend reinvestment plan
2,210 
 
 
 
 
 
 
Shares issued under the Company's dividend reinvestment plan (in shares)
30,807 
 
 
 
 
 
 
Shares issued under public offering (note 6(d))
34,200 
 
 
 
 
 
 
Shares issued under public offering (note 6(d)) (in shares)
900,000 
 
 
 
 
 
 
Shares issued under private placement of units (note 6(c))
258,691 
 
24,858 
 
 
 
 
Shares issued under private placement of units (note 6(c)) (in shares)
9,200,000 
 
 
 
 
 
 
Net income for the year
 
 
 
 
73,167 
 
73,167 
Dividends declared ($0.64, $0.18 and $0.18 per share for the year 2010, 2009 and 2008) (note 6(a))
 
 
 
 
(27,866)
 
 
Other comprehensive income for the year
 
 
 
 
 
3,104 
3,104 
Balance at Dec. 31, 2008
2,299,747 
41,052 
24,858 
15,166 
157,541 
(20,608)
 
Balance (in shares) at Dec. 31, 2008
154,808,918 
 
 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
Shares issued under Employee Stock Option Plan (note 7(a))
48,313 
 
 
 
 
 
 
Shares issued under Employee Stock Option Plan (note 7(a)) (in shares)
1,238,000 
 
 
 
 
 
 
Stock options
 
24,719 
 
 
 
 
 
Shares issued under the Incentive Share Purchase Plan (note 7(b))
11,290 
 
 
 
 
 
 
Shares issued under the Incentive Share Purchase Plan (note 7(b)) (in shares)
196,649 
 
 
 
 
 
 
Shares issued under flow-through share private placement (note 6(b))
19,153 
 
 
 
 
 
 
Shares issued under flow-through share private placement (note 6(b)) (in shares)
358,900 
 
 
 
 
 
358,900 
Shares issued under the Company's dividend reinvestment plan
912 
 
 
 
 
 
 
Shares issued under the Company's dividend reinvestment plan (in shares)
18,764 
 
 
 
 
 
 
Shares issued for purchase of mining property (note 6(c))
894 
 
 
 
 
 
 
Shares issued for purchase of mining property (note 6(c)) (in shares)
33,825 
 
 
 
 
 
 
Net income for the year
 
 
 
 
86,538 
 
86,538 
Dividends declared ($0.64, $0.18 and $0.18 per share for the year 2010, 2009 and 2008) (note 6(a))
 
 
 
 
(27,921)
 
 
Other comprehensive income for the year
 
 
 
 
 
71,657 
71,657 
Restricted share unit plan (note 6(a))
(1,550)
 
 
 
 
 
 
Restricted share unit plan (note 6(a)) (in shares)
(29,882)
 
 
 
 
 
 
Balance at Dec. 31, 2009
2,378,759 
65,771 
24,858 
15,166 
216,158 
51,049 
2,751,761 
Balance (in shares) at Dec. 31, 2009
156,625,174 
 
 
 
 
 
156,655,056 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
Shares issued under Employee Stock Option Plan (note 7(a))
104,111 
 
 
 
 
 
 
Shares issued under Employee Stock Option Plan (note 7(a)) (in shares)
1,627,766 
 
 
 
 
 
 
Stock options
 
12,783 
 
 
 
 
 
Shares issued under the Incentive Share Purchase Plan (note 7(b))
14,963 
 
 
 
 
 
 
Shares issued under the Incentive Share Purchase Plan (note 7(b)) (in shares)
229,583 
 
 
 
 
 
 
Shares issued under flow-through share private placement (note 6(b))
 
 
 
 
 
 
 
Shares issued under the Company's dividend reinvestment plan
1,404 
 
 
 
 
 
 
Shares issued under the Company's dividend reinvestment plan (in shares)
25,243 
 
 
 
 
 
 
Shares issued for purchase of mining property (note 6(c))
579,800 
 
 
 
 
 
 
Shares issued for purchase of mining property (note 6(c)) (in shares)
10,225,848 
 
 
 
 
 
 
Net income for the year
 
 
 
 
332,116 
 
332,116 
Dividends declared ($0.64, $0.18 and $0.18 per share for the year 2010, 2009 and 2008) (note 6(a))
 
 
 
 
(108,009)
 
 
Other comprehensive income for the year
 
 
 
 
 
(22,659)
(22,659)
Restricted share unit plan (note 6(a))
(820)
 
 
 
 
 
 
Restricted share unit plan (note 6(a)) (in shares)
(13,259)
 
 
 
 
 
 
Balance at Dec. 31, 2010
$ 3,078,217 
$ 78,554 
$ 24,858 
$ 15,166 
$ 440,265 
$ 28,390 
$ 3,665,450 
Balance (in shares) at Dec. 31, 2010
168,720,355 
 
 
 
 
 
168,763,496 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) (USD $)
Year Ended
Dec. 31,
2010
2009
2008
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 
 
 
Dividends declared, per share
$ 0.64 
$ 0.18 
$ 0.18 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands
Year Ended
Dec. 31,
2010
2009
2008
Operating activities
 
 
 
Net income for the year
$ 332,116 
$ 86,538 
$ 73,167 
Add (deduct) items not affecting cash:
 
 
 
Amortization of property, plant and mine development
192,486 
72,461 
36,133 
Future income and mining taxes
66,928 
20,309 
16,681 
Loss (gain) on available-for-sale securities and derivative financial instruments, net
(20,007)
(20,677)
49,186 
Stock-based compensation
41,635 
28,753 
16,061 
Net amount reclassified to income due to acquisition of business (note 9)
(64,508)
 
 
Foreign currency translation loss (gain)
19,536 
39,831 
(77,688)
Other
13,535 
5,321 
4,642 
Changes in non-cash working capital balances
 
 
 
Trade receivables
(19,378)
(47,930)
33,779 
Income taxes (payable)/recoverable
9,949 
(313)
4,814 
Inventories
(91,306)
(90,772)
(45,904)
Other current assets
(28,729)
4,834 
(24,334)
Accounts payable and accrued liabilities
23,136 
28,552 
34,492 
Prepaid royalty
 
(13,321)
 
Interest payable
8,077 
1,520 
146 
Cash provided by operating activities
483,470 
115,106 
121,175 
Investing activities
 
 
 
Additions to property, plant and mine development
(511,641)
(657,175)
(908,853)
Sale of Stornoway Diamond Corporation debentures (note 11)
 
 
10,720 
Decrease (increase) in short-term investments
(3,262)
(3,313)
78,770 
Net proceeds on available-for-sale securities
36,586 
48,258 
43,583 
Purchase of available-for-sale securities
(42,479)
(6,380)
(113,225)
Decrease (increase) in restricted cash
(2,510)
30,999 
(28,544)
Cash used in investing activities
(523,306)
(587,611)
(917,549)
Financing activities
 
 
 
Dividends paid
(26,830)
(27,132)
(23,779)
Repayment of capital lease obligations
(16,019)
(13,177)
(16,178)
Sale-leaseback financing
14,017 
21,389 
 
Proceeds from long-term debt
1,311,000 
625,000 
300,000 
Repayment of long-term debt
(1,376,000)
(110,000)
(100,000)
Credit facility financing costs
(12,772)
(4,784)
(3,094)
Common shares issued
84,659 
68,522 
376,265 
Warrants issued
 
 
24,858 
Cash provided by (used in) financing activities
(21,945)
559,818 
558,072 
Effect of exchange rate changes on cash and cash equivalents
(2,939)
4,585 
(8,110)
Net increase (decrease) in cash and cash equivalents during the year
(64,720)
91,898 
(246,412)
Cash and cash equivalents, beginning of year
160,280 
68,382 
314,794 
Cash and cash equivalents, end of year
95,560 
160,280 
68,382 
Supplemental cash flow information:
 
 
 
Interest paid during the year
41,429 
17,189 
6,345 
Income, mining and capital taxes paid during the year
$ 25,199 
$ 8,792 
$ 3,802 
TRADE RECEIVABLES AND REVENUES FROM MINING OPERATIONS
TRADE RECEIVABLES AND REVENUES FROM MINING OPERATIONS

1.     TRADE RECEIVABLES AND REVENUES FROM MINING OPERATIONS

  • Agnico-Eagle is a gold mining company with mining operations in Canada, Finland and Mexico. The Company earns a significant proportion of its revenues from the production and sale of gold in both doré bar and concentrate form. The remainder of revenue and cash flow is generated by the production and sale of byproduct metals. The revenue from byproduct metals is mainly generated by production at the LaRonde Mine in Canada (silver, zinc, copper and lead) and the Pinos Altos Mine in Mexico (silver).

    Revenues are generated from operations in Canada, Finland and Mexico. The cash flow and profitability of the Company's operations are significantly affected by the market price of gold, and to a lesser extent, silver, zinc, copper and lead. The prices of these metals can fluctuate widely and are affected by numerous factors beyond the Company's control.

    As gold can be sold through numerous gold market traders worldwide, the Company is not economically dependent on a limited number of customers for the sale of its product.

    Trade receivables are recognized once the transfer of ownership for the metals sold has occurred and reflect the amounts owing to the Company in respect of its sales of doré bars or concentrates to third parties prior to the satisfaction in full of the payment obligations of the third parties.

   
  2010   2009  
 

Doré bars awaiting settlement

  $ 24,281   $ 3,488  
 

Concentrates awaiting settlement

    88,668     90,083  
             
 

 

  $ 112,949   $ 93,571  
             

 

   
  2010   2009   2008  
 

Revenues from mining operations (thousands):

                   
 

Gold

  $ 1,216,249   $ 474,875   $ 227,576  
 

Silver

    104,544     59,155     59,398  
 

Zinc

    77,544     57,034     54,364  
 

Copper

    22,219     22,571     27,600  
 

Lead

    1,965     127      
                 
 

 

  $ 1,422,521   $ 613,762   $ 368,938  
                 
  • In 2010, precious metals accounted for 93% of Agnico-Eagle's revenues from mining operations (2009 — 87%; 2008 — 78%). The remaining revenues from mining operations consisted of net byproduct metals revenues. In 2010, these net byproduct metals revenues as a percentage of total revenues from mining operations were 5% from zinc (2009 — 9%; 2008 — 15%) and 2% from copper (2009 — 4%; 2008 — 7%).

OTHER ASSETS
OTHER ASSETS

2.     OTHER ASSETS

  • (a)
    Other current assets
   
  2010   2009  
 

Federal, provincial and other sales taxes receivable

  $ 63,553   $ 37,847  
 

Prepaid expenses

    10,449     4,797  
 

Employee loans receivable

    4,498     3,640  
 

Government refundables for local community improvements

    803     1,764  
 

Prepaid royalty

    5,282     5,377  
 

Other

    5,191     7,734  
             
 

 

  $ 89,776   $ 61,159  
             

  • (b)
    Available-for-sale securities
    • In 2010, the Company realized $36.6 million (2009 — $41.0 million; 2008 — $40.5 million) in proceeds and recorded a gain of $19.5 million (2009 — $10.1 million; 2008 — $25.6 million) in the consolidated statements of income on the sale of available-for-sale securities. Available-for-sale securities consist of equity securities whose cost basis is determined using the average cost method. Available-for-sale securities are carried at fair value as follows:

   
  2010   2009  
 

Cost

  $ 50,958   $ 44,470  
 

Unrealized gains

    48,151     67,508  
 

Unrealized losses

        (11 )
             
 

Estimated fair value of available-for-sale securities

  $ 99,109   $ 111,967  
             
  • (c)
    Other assets
   
  2010   2009  
 

Deferred financing costs, less accumulated amortization of $2,249 (2009 — $2,732)

  $ 16,780   $ 7,516  
 

Long-term ore in stockpile(i)

    27,409     11,684  
 

Prepaid royalty(ii)

    8,777     13,321  
 

Other

    8,536     1,120  
             
 

 

  $ 61,502   $ 33,641  
             

    • (i)
      Due to the structure of the Goldex Mine and Pinos Altos Mine ore bodies, a significant amount of drilling and blasting is incurred in the early years of its mine life resulting in a long-term stockpile.

      (ii)
      The prepaid royalty relates to the Pinos Altos Mine in Mexico.
PROPERTY, PLANT AND MINE DEVELOPMENT
PROPERTY, PLANT AND MINE DEVELOPMENT

3.     PROPERTY, PLANT AND MINE DEVELOPMENT

   
  2010   2009  
   
  Cost   Accumulated
Amortization
  Net
Book Value
  Cost   Accumulated
Amortization
  Net
Book Value
 
 

Mining properties

  $ 1,885,476   $ 44,823   $ 1,840,653   $ 1,221,646   $ 27,865   $ 1,193,781  
 

Plant and equipment

    2,123,191     321,907     1,801,284     1,389,081     197,794     1,191,287  
 

Mine development costs

    853,927     171,869     682,058     435,469     111,674     323,795  
 

Construction in progress:

                                     
   

LaRonde Mine extension

    185,905         185,905     121,102         121,102  
   

Creston Mascota deposit

    54,663         54,663     10,159         10,159  
   

Meadowbank Mine

                741,674         741,674  
                             
 

 

  $ 5,103,162   $ 538,599   $ 4,564,563   $ 3,919,131   $ 337,333   $ 3,581,798  
                             

  • Geographic Information

   
  Net Book Value
2010
  Net Book Value
2009
 
 

Canada

  $ 3,456,809   $ 2,592,704  
 

Europe

    605,283     568,620  
 

Latin America

    500,211     418,214  
 

USA

    2,260     2,260  
             
 

Total

  $ 4,564,563   $ 3,581,798  
             
  • In 2010, Agnico-Eagle capitalized $0.3 million of costs (2009 — $0.4 million) and recognized $0.8 million of amortization expense (2009 — $0.8 million) related to computer software. The unamortized capitalized cost for computer software at the end of 2010 was $4.7 million (2009 — $5.2 million).

    The unamortized capitalized cost for leasehold improvements at the end of 2010 was $3.3 million (2009 — $2.5 million), which is being amortized on a straight-line basis over the life of the lease plus one renewal period.

    The amortization of assets recorded under capital leases is included in the "Amortization of property, plant and mine development" component of the consolidated statements of income.

LONG TERM DEBT
LONG TERM DEBT

4.     LONG TERM DEBT

  • The Company entered into a credit agreement on January 10, 2008 with a group of financial institutions relating to a new $300 million unsecured revolving credit facility (the "First Credit Facility"); the Company's previous $300 million secured revolving credit facility was terminated. The First Credit Facility was scheduled to mature on January 10, 2013. However, the Company, with the consent of lenders representing 662/3% of the aggregate commitments under the facility, had the option to extend the term of this facility for additional one-year terms.

    On September 4, 2008, the Company entered into a further credit agreement with a separate group of financial institutions relating to an additional $300 million unsecured revolving credit facility (the "Second Credit Facility"). The Second Credit Facility was scheduled to mature on September 4, 2010.

    On June 15, 2009, the Company amended and restated the First Credit Facility and the Second Credit Facility. The amount available under the Second Credit Facility was increased by $300 million to $600 million, and the scheduled maturity date was extended to June 2012.

    On June 22, 2010, the Company terminated the First Credit Facility and amended and restated the Second Credit Facility to increase the amount available to $1.2 billion and extend the scheduled maturity date to June 22, 2014 (as so amended and restated, the "Credit Facility").

    Payment and performance of the Company's obligations under the Credit Facility is guaranteed by all material and certain other subsidiaries of the Company (the "Guarantors"). The Credit Facility contains covenants that restrict, among other things, the ability of the Company to incur additional indebtedness, make distributions in certain circumstances, sell material assets and carry on a business other than one related to the mining business. The Company is also required to maintain a total net debt to EBITDA ratio below a specified minimum value as well as a minimum tangible net worth. At December 31, 2010, the Credit Facility was drawn down by $50 million (2009 — $715 million). This drawdown, together with outstanding letters of credit under the Credit Facility, decrease the amounts available under the Credit Facility such that $1.12 billion was available for future drawdowns at December 31, 2010.

    In addition, on June 2, 2009, Agnico-Eagle executed an unsecured C$95 million financial security issuance agreement with Export Development Canada. This agreement matures June 2014 and is used to provide letters of credit for environmental obligations or in relation to licence or permit bonds relating to the Meadowbank Mine. As at December 31, 2010, outstanding letters of credit drawn against this agreement totalled C$75.6 million (2009 — C$60.4 million).

    On April 7, 2010, the Company closed a private placement of an aggregate of $600 million of guaranteed senior unsecured notes due 2017, 2020 and 2022 (the "Notes") with a weighted average maturity of 9.84 years and weighted average yield of 6.59%. Net proceeds from the offering of the Notes were used to repay amounts owed under the Company's then existing credit facilities. Payment and performance of the Company's obligations under the Notes is guaranteed by the Guarantors. The Notes contains covenants that restrict, among other things, the ability of the Company to amalgamate or otherwise transfer its assets, sell material assets and carry on a business other than one related to the mining business and the ability of the Guarantors to incur indebtedness. The Notes also require the Company to maintain the same financial ratios and same minimum tangible net worth as under the Credit Facility. The Notes and the Credit Facility rank equally in seniority.

    The following are the individual series of the issued Notes:

   
  Principal   Interest Rate   Maturity  
 

Series A

  $ 115,000     6.13%     7/4/2017  
 

Series B

    360,000     6.67%     7/4/2020  
 

Series C

    125,000     6.77%     7/4/2022  
                     
 

 

  $ 600,000              
                     
  • For the year ended December 31, 2010, interest expense was $49.5 million (2009 — $8.4 million; 2008 — $3.0 million) and total cash interest payments were $41.4 million (2009 — $17.2 million; 2008 — $6.3 million). In 2010, cash interest on the Credit Facilities was $12.3 million (2009 — $14.0 million; 2008 — $4.6 million), cash standby fees on the Credit Facilities were $6.7 million (2009 — $2.4 million; 2008 — $1.2 million), and cash interest on the Notes was $19.8 million (2009 — N/A, 2008 — N/A). In 2010, $4.6 million (2009 — $15.5 million; 2008 — $4.6 million) of the interest expense was capitalized to construction in progress.

    The Company's weighted average interest rate on all of its long-term debt as at December 31, 2010 was 5.43% (2009 — 3.18%; 2008 — 3.77%).

RECLAMATION PROVISION AND OTHER LIABILITIES
RECLAMATION PROVISION AND OTHER LIABILITIES

5.     RECLAMATION PROVISION AND OTHER LIABILITIES

  • Reclamation provision and other liabilities consist of the following:

   
  2010   2009  
 

Reclamation and closure costs (note 5(a))

  $ 91,641   $ 62,847  
 

Long-term portion of capital lease obligations (note 13(a))

    38,019     21,981  
 

Pension benefits (note 5(c))

    11,307     8,109  
 

Goldex Mine government grant and other (note 5(b))

    4,569     3,318  
             
 

 

  $ 145,536   $ 96,255  
             
  • (a)
    Reclamation and closure costs
    • Reclamation estimates are based on current legislation, third party estimates and feasibility study calculations. All of the accrued reclamation and closure costs are long-term in nature and thus no portion of these costs has been reclassified to current liabilities. The Company does not currently have assets that are restricted for the purposes of settling these obligations.

      The following table reconciles the beginning and ending carrying amounts of the asset retirement obligations:

   
  2010   2009  
 

Asset retirement obligations, beginning of year

  $ 62,847   $ 52,125  
 

Current year additions and changes in estimate

    23,058      
 

Current year accretion

    3,176     2,916  
 

Liabilities settled

    (277 )    
 

Foreign exchange revaluation

    2,837     7,806  
             
 

Asset retirement obligations, end of year

  $ 91,641   $ 62,847  
             

  • (b)
    Goldex Mine government grant
    • The Company has received funds (the "Grant") from the Quebec government in respect of the construction of the Goldex Mine. The Company has agreed to repay a portion of the Grant to the Quebec government, to a maximum amount of 50% of the Grant. The repayment amount is calculated and paid annually for fiscal years 2010, 2011 and 2012 if the agreed criteria are met. For each of these three years, if the yearly average gold price is higher than $620 per ounce, 50% of one third of the Grant must be repaid.

      For fiscal year 2010, the agreed criteria had been met and the Company recorded a current liability of $1.5 million as of December 31, 2010 that will be paid to the Quebec government in the first quarter of 2011.

      The Company believes the gold price will be higher than $620 per ounce during the years 2011 and 2012 and that the criteria for recognition of a loss contingency accrual in accordance with FASB ASC 450 — Contingencies (prior authoritative literature: FASB Statement No. 5, "Accounting for Contingencies") have been met.

    (c)
    Pension benefits
    • Effective July 1, 1997, the Employees Plan was converted to a defined contribution plan. Employees who retired prior to that date remained in the Employees Plan. In addition, Agnico-Eagle provides the Executives Plan for certain senior officers. The funded status of the Executives Plan is based on actuarial valuations as of July 1, 2008 and projected to December 31, 2010. The funded status of the Employees Plan in 2007 was based on an actuarial valuation as of January 1, 2006 and projected to December 31, 2007. During 2008 however, the Employees Plan was closed as a result of annuities having been purchased for all remaining members. Recognition of the settlement has been reflected in the 2008 net periodic pensions cost.

      The components of Agnico-Eagle's net pension plan expense are as follows:

   
  2010   2009   2008  
 

Service cost — benefits earned during the year

  $ 981   $ 509   $ 452  
 

Interest cost on projected benefit obligation

    613     448     550  
 

Amortization of net transition asset, past service liability and net experience gains

    164     148     (11 )
 

Prior service cost

    25     23     24  
 

Recognized net actuarial loss

        (142 )    
 

Gain due to settlement

            760  
 

Return on plan assets

            (156 )
                 
 

Net pension plan expense

  $ 1,783   $ 986   $ 1,619  
                 
    • Assets for the Executives Plan consist of deposits on hand with regulatory authorities which are refundable when benefit payments are made or on the ultimate wind-up of the plan. The accumulated benefit obligation for this plan at December 31, 2010 was $9.6 million (2009 — $6.4 million). At the end of 2010, the remaining unamortized net transition obligation was $0.7 million (2009 — $0.8 million) for the Executives Plan.

      The following table provides the net amounts recognized in the consolidated balance sheets as at December 31:

   
  2010   2009  
   
  Employees Plan   Executives Plan   Employees Plan   Executives Plan  
 

Liability (asset)

  $   $   $   $  
 

Accrued employee benefit liability

        6,634         6,036  
 

Accumulated other comprehensive income (loss):

                         
   

Initial transition obligation

        681         809  
   

Past service liability

        104         122  
   

Net experience (gains) losses

        2,179         (604 )
                     
 

Net liability (asset)

  $   $ 9,598   $   $ 6,363  
                     

    • The following table provides the components of the expected recognition in 2011 of amounts in accumulated other comprehensive income (loss):

   
  Executives Plan  
 

Transition obligation

  $ 170  
 

Past service cost or credit

    26  
 

Net actuarial gain or loss

    244  
         
 

 

  $ 440  
         
    • The funded status of the Employees Plan and the Executives Plan for 2010 and 2009 is as follows:

   
  2010   2009  
   
  Employees   Executives   Employees   Executives  
 

Reconciliation of the market value of plan assets

                         
 

Fair value of plan assets, beginning of year

  $   $ 1,635   $ 110   $ 1,142  
 

Agnico-Eagle's contribution

        1,397         598  
 

Actual return on plan assets

                 
 

Benefit payments

        (699 )       (299 )
 

Other

            (117 )    
 

Divestitures

                 
 

Effect of exchange rate changes

        110     7     194  
                     
 

Fair value of plan assets, end of year

  $   $ 2,443   $   $ 1,635  
                     
 

Reconciliation of projected benefit obligation

                         
 

Projected benefit obligation, beginning of year

  $   $ 7,998   $   $ 5,637  
 

Service costs

        981         509  
 

Interest costs

        613         448  
 

Actuarial losses (gains)

        2,718         734  
 

Benefit payments

        (812 )       (401 )
 

Settlements

                 
 

Effect of exchange rate changes

        543         1,071  
                     
 

Projected benefit obligation, end of year

  $   $ 12,041   $   $ 7,998  
                     
 

Excess (deficiency) of plan assets over projected benefit obligation

  $   $ (9,598 ) $   $ (6,363 )
                     
 

Comprised of:

                         
 

Unamortized transition asset (liability)

  $   $ (681 ) $   $ (809 )
 

Unamortized net experience gain (loss)

        (2,283 )       482  
 

Accrued assets (liabilities)

        (6,634 )       (6,036 )
                     
 

 

  $   $ (9,598 ) $   $ (6,363 )
                     
 

Weighted average discount rate

    n.a.     7.00 %   n.a.     7.00 %
 

Weighted average expected long-term rate of return

    n.a.     n.a.     n.a.     n.a.  
 

Weighted average rate of compensation increase

    n.a.     3.00 %   n.a.     3.00 %
 

Estimated average remaining service life for the plan (in years)

    n.a.     4.0 (i)   n.a.     5.0 (i)

Notes:

    • (i)
      Estimated average remaining service life for the Executives Plan was developed for individual senior officers.

    • The estimated benefits to be paid from each plan in the next ten years are presented below. As the Employees Plan was settled in 2008, no benefits are payable:

   
  Executives  
 

2011

  $ 117  
 

2012

  $ 484  
 

2013

  $ 483  
 

2014

  $ 482  
 

2015

  $ 481  
 

2016 - 2020

  $ 3,744  
    • In addition to the Employees Plan and the Executives Plan, the Company also has a basic pension plan (the "Basic Plan") and a supplemental pension plan. Under the Basic Plan, Agnico-Eagle contributes 5% of each employee's base employment compensation to a defined contribution plan. The expense in 2010 was $8.8 million (2009 — $6.5 million; 2008 — $5.3 million). Effective January 1, 2008 the Company adopted the supplemental plan for designated executives at the level of Vice-President or above. Under this plan, an additional 10% of the designated executives' earnings for the year (including salary and short-term bonus) are contributed by the Company. In 2010, $1.1 million (2009 — $0.9 million; 2008 — $0.7 million) was contributed to the supplemental plan. The supplemental plan is accounted for as a cash balance plan.

SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY

6.     SHAREHOLDERS' EQUITY

  • (a)
    Common shares
    • The Company's authorized capital stock includes an unlimited number of common shares with issued common shares of 168,763,496 (2009 — 156,655,056), less 43,141 common shares held by a trust in connection with the Company's restricted share unit ("RSU") plan (2009 — 29,882). The trust is treated as a variable interest entity and, as a result, its holdings of shares are set off against the Company's issued shares in the consolidation (note 7(c)).

      In 2010, the Company declared dividends on its common shares of $0.64 per share (2009 — $0.18 per share; 2008 — $0.18 per share).

    (b)
    Flow-through common share private placements
    • In 2010, Agnico-Eagle issued nil (2009 — 358,900; 2008 — 779,250) common shares under flow-through share private placements, which increased share capital by nil (2009 — $19.2 million; 2008 — $43.5 million), net of share issue costs. Effective December 31, 2010, the Company renounced to its investors nil (2009 — C$30.6 million; 2008 — C$54.5 million) of such expenses for income tax purposes. The Company does not have an obligation to incur any exploration expenditures related to the expenditures previously renounced.

      The difference between the flow-through share issuance price and the market price of Agnico-Eagle's shares at the time of purchase is recorded as a liability at the time the flow-through shares are issued. This liability terminates when the exploration expenditures are renounced to investors. The difference between the flow-through share issuance price and market price reduces the future tax expense charged to income as this difference represents proceeds received by the Company for the sale of future tax deductions to investors in the flow-through shares.

    (c)
    Private placements and warrants
    • On December 3, 2008, the Company closed a private placement of 9.2 million units. Each unit consisted of one common share and one-half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common share of the Company at a price of $47.25 per share at any time during the five-year term of the warrant. As consideration for the lead purchaser's commitment, the Company issued to the lead purchaser an additional 4 million warrants. The net proceeds of the private placement were approximately $281 million, after deducting share issue costs of $8.8 million. If all outstanding warrants are exercised, the Company would issue an additional 8.6 million common shares. No warrants have been exercised as of December 31, 2010.

      On May 26, 2009, the Company issued 15,825 shares with a market value of $0.9 million in connection with the acquisition of a 100% participating interest in 52 mining claims, located in the Abitibi region of Quebec.

      On July 24, 2009, the Company issued 18,000 shares upon payment of the exercise price of $500 in connection with the exercise of an option granted by a predecessor to the Company relating to the acquisition of certain properties related to the Goldex Mine.

      On July 26, 2010, the Company issued 15,000 shares with a market value of $0.8 million in connection with the purchase of mining property.

    (d)
    Public offering of common shares
    • In December 2008, the Company issued 900,000 shares at a price of $38 per share under a prospectus supplement to its base shelf prospectus to fund the purchase of surface rights and advance royalty payments in connection with the development of the Pinos Altos property. The net proceeds of the issuance were approximately $34.2 million.

      There were no public offerings of common shares in 2009.

      On July 6, 2010, the Company issued 10,210,848 shares with a market value of $579.0 million in connection with the acquisition of Comaplex Minerals Corp. ("Comaplex") (note 9).

    (e)
    Accumulated other comprehensive income (loss)
    • The cumulative translation adjustment in accumulated other comprehensive income (loss) in 2010 and 2009 of $(15.9) million resulted from Agnico-Eagle electing the US dollar as its principal currency of measurement. Prior to this change, the Canadian dollar had been used as the reporting currency. Prior periods' consolidated financial statements were translated into US dollars by the current rate method using the year end or the annual average exchange rate where appropriate. This translation approach was applied from January 1, 1994. This translation gave rise to a deficit in the cumulative translation adjustment account within accumulated other comprehensive income (loss) as at December 31, 2010 and 2009.

      The following table sets out the components of accumulated other comprehensive income (loss), net of related tax effects:

   
  2010   2009  
 

Cumulative translation adjustment from electing US dollar as principal reporting currency

  $ (15,907 ) $ (15,907 )
 

Unrealized gain on available-for-sale securities

    48,151     67,497  
 

Cumulative translation adjustments

    (299 )   (299 )
 

Unrealized loss on pension liability

    (4,420 )   (327 )
 

Tax effect of unrealized loss on pension liability

    865     85  
             
 

 

  $ 28,390   $ 51,049  
             
    • In 2010, a $19.5 million gain (2009 — $10.1 million gain, 2008 — $9.0 million gain) was reclassified from accumulated other comprehensive income (loss) to income to reflect the realization of gains on available-for-sale securities due to the disposition of those securities.

    (f)
    Net income per share
    • The following table provides the weighted average number of common shares used in the calculation of basic and diluted net income per share:

   
  2010   2009   2008  
 

Weighted average number of common shares outstanding — basic

    162,342,686     155,942,151     144,740,658  
 

Add: Dilutive impact of employee stock options

    1,192,530     1,256,103     1,148,070  
 

          Dilutive impact of warrants

    2,263,902     1,392,752      
 

          Dilutive impact of shares related to RSU plan

    43,141     29,882      
                 
 

Weighted average number of common shares outstanding — diluted

    165,842,259     158,620,888     145,888,728  
                 

    • The calculation of diluted income per share has been computed using the treasury stock method. In applying the treasury stock method, options and warrants with an exercise price greater than the average quoted market price of the common shares, for the period outstanding, are not included in the calculation of diluted income per share, as the effect is anti-dilutive.

STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION

7.     STOCK-BASED COMPENSATION

  • (a)
    Employee Stock Option Plan ("ESOP")
    • The Company's ESOP provides for the granting of options to directors, officers, employees and service providers to purchase common shares. Under this plan, options are granted at the fair market value of the underlying shares on the day prior to the date of grant. The number of shares subject to option for any one person may not exceed 5% of the Company's common shares issued and outstanding at the date of grant.

      Up to May 31, 2001, the number of common shares reserved for issuance under the ESOP was 6,000,000 and options granted under the ESOP had a maximum term of ten years. On April 24, 2001, the Compensation Committee of the Board of Directors adopted a policy pursuant to which options granted after that date have a maximum term of five years. In 2001, the shareholders approved a resolution to increase the number of common shares reserved for issuance under the ESOP by 2,000,000 to 8,000,000. In 2004 and 2006, the shareholders approved a further 2,000,000 and 3,000,000 common shares for issuance under the ESOP, respectively. In 2008, the shareholders approved a further 6,000,000 common shares for issuance under the ESOP.

      Of the 2,926,080 options granted under the ESOP in 2010, 731,520 options granted vested immediately and expire in 2015. The remaining options expire in 2015 and vest in equal installments, on each anniversary date of the grant, over a three-year period. Of the 2,276,000 options granted under the ESOP in 2009, 569,000 options granted vested immediately and expire in 2014. The remaining options expire in 2014 and vest in equal installments, on each anniversary date of the grant, over a three-year period. Of the 2,549,400 options granted under the ESOP in 2008, 637,350 options granted vested immediately and expire in 2013. The remaining options expire in 2013 and vest in equal installments, on each anniversary date of the grant, over a three-year period.

      Upon the exercise of options under the ESOP, the Company issues new common shares to settle the obligation.

      The following summary sets out the activity with respect to Agnico-Eagle's outstanding stock options:

   
  2010   2009   2008  
   
  Options   Weighted
average
exercise price
  Options   Weighted
average
exercise price
  Options   Weighted
average
exercise price
 
 

Outstanding, beginning of year

    5,707,940   C$ 53.85     4,752,440   C$ 44.57     3,609,924   C$ 30.34  
 

Granted

    2,926,080     57.55     2,276,000     62.65     2,549,400     54.84  
 

Exercised

    (1,627,766 )   47.02     (1,238,000 )   34.28     (1,340,484 )   25.46  
 

Forfeited

    (243,550 )   58.03     (82,500 )   55.99     (66,400 )   51.32  
                             
 

Outstanding, end of year

    6,762,704   C$ 56.94     5,707,940   C$ 53.85     4,752,440   C$ 44.57  
                             
 

Options exercisable at end of year

    2,972,857           2,445,615           1,860,890        
                                   
    • Cash received for options exercised in 2010 was $74.7 million (2009 — $36.6 million; 2008 — $33.6 million).

      The total intrinsic value of options exercised in 2010 was C$46.5 million (2009 — C$43.8 million; 2008 — C$50.5 million).

      The weighted average grant-date fair value of options granted in 2010 was C$16.31 (2009 — C$24.52; 2008 — C$16.78). The following table summarizes information about Agnico-Eagle's stock options outstanding at December 31, 2010:

   
  Options outstanding   Options exercisable  
 
Range of exercise
prices
  Number
outstanding
  Weighted average
remaining
contractual life
  Weighted average
exercise price
  Number
exercisable
  Weighted average
exercise price
 
 

C$23.02 — C$36.23

    130,538     0.51 years     26.68     124,438     26.35  
 

C$39.18 — C$59.71

    4,546,516     2.96 years     54.90     1,990,456     53.04  
 

C$60.72 — C$83.08

    2,085,650     3.11 years     63.29     857,963     63.18  
                         
 

C$23.02 — C$83.08

    6,762,704     2.96 years     C$56.94     2,972,857     C$54.85  
                         
    • The weighted-average remaining contractual term of options exercisable at December 31, 2010 was 2.4 years.

      The Company has reserved for issuance 6,762,704 common shares in the event that these options are exercised.

      The number of shares available for granting of options as at December 31, 2010, 2009 and 2008 was 2,771,420, 4,155,750 and 6,349,250, respectively.

      On January 4, 2011, 2,557,064 options were granted under the ESOP, of which 639,266 options vested immediately and expire in the year 2016. The remaining options expire in 2016 and vest in equal installments on each anniversary date of the grant, over a three-year period.

      Agnico-Eagle estimated the fair value of options under the Black-Scholes option pricing model using the following weighted average assumptions:

   
  2010   2009   2008  
 

Risk-free interest rate

    1.86%     1.27%     3.65%  
 

Expected life of options (in years)

    2.5     2.5     2.5  
 

Expected volatility of Agnico-Eagle's share price

    43.8%     64.0%     44.8%  
 

Expected dividend yield

    0.42%     0.42%     0.23%  
    • The Company uses historical volatility in estimating the expected volatility of Agnico-Eagle's share price.

      The aggregate intrinsic value of options outstanding at December 31, 2010 was C$133.0 million. The aggregate intrinsic value of options exercisable at December 31, 2010 was C$64.7 million.

      The total compensation expense for the ESOP recognized in the consolidated statements of income for the current year was $37.8 million (2009 — $27.7 million; 2008 — $25.3 million). The total compensation cost related to non-vested options not yet recognized was $32.9 million as of December 31, 2010. Of the total compensation cost for the ESOP, $1.3 million was capitalized as part of construction costs in 2010 (2009 — $8.7 million; 2008 — $9.0 million).

    (b)
    Incentive Share Purchase Plan
    • On June 26, 1997, the shareholders approved an incentive share purchase plan (the "Purchase Plan") to encourage directors, officers and employees ("Participants") to purchase Agnico-Eagle's common shares at market values. In 2009, the Purchase Plan was amended to remove non-executive directors as eligible participants in the plan.

      Under the Purchase Plan, Participants may contribute up to 10% of their basic annual salaries, and the Company contributes an amount equal to 50% of each Participant's contribution. All shares subscribed for under the Purchase Plan are newly issued by the Company. The total compensation cost recognized in 2010 related to the Purchase Plan was $5.0 million (2009 — $3.8 million; 2008 — $3.2 million).

      In 2010, 229,583 common shares were subscribed for under the Purchase Plan (2009 — 196,649; 2008 — 154,998) for a value of $15.0 million (2009 — $11.3 million; 2008 — $9.5 million). In May 2008, shareholders approved an increase in the maximum number of shares reserved for issuance under the Purchase Plan to 5,000,000 from 2,500,000. As at December 31, 2010, Agnico-Eagle has reserved for issuance 2,510,921 common shares (2009 — 2,740,504; 2008 — 2,937,153) under the Purchase Plan.

    (c)
    Restricted Share Unit Plan
    • In 2009, the Company implemented a RSU plan for certain employees. A deferred compensation balance was recorded for the total grant-date value on the date of the grant. The deferred compensation balance was recorded as a reduction of shareholders' equity and is being amortized as compensation expense (or capitalized to construction in progress) over the applicable vesting period of two years.

      The Company funded the plan by transferring $4.0 million (2009 — $3.0 million) to an employee benefit trust (the "Trust") that then purchased shares of the Company in the open market. Compensation costs for RSUs incorporate an expected forfeiture rate. The forfeiture rate is estimated based on the Company's historical employee turnover rates and expectations of future forfeiture rates that incorporate various factors that include historical ESOP forfeiture rates. For 2009 and 2010, the impact of forfeitures was not material. For accounting purposes, the Trust is treated as a variable interest entity and consolidated in the accounts of the Company. On consolidation, the dividends paid on the shares held by the Trust are eliminated. The shares purchased and held by the Trust are treated as not being outstanding for the basic earnings per share ("EPS") calculations. They are amortized back into basic EPS over the vesting period. All of the shares held by the Trust were included in the diluted EPS calculations.

      Compensation cost related to the RSU plan was $3.0 million in 2010 (2009 — $1.5 million), with $0.1 million (2009 — $0.3 million) being capitalized to the "Property, plant and mine development" line item in the consolidated balance sheets. The $2.9 million (2009 — $1.2 million) of compensation expense is included as a component of production, administration and exploration expense, consistent with the classification of other elements of compensation expense for those employees who had RSUs.

INCOME AND MINING TAXES
INCOME AND MINING TAXES

8.     INCOME AND MINING TAXES

  • Income and mining taxes expense (recovery) is made up of the following geographic components:

   
  2010   2009   2008  
 

Current provision

                   
   

Canada

  $ 34,217   $ 1,171   $ 6,143  
   

Mexico

    1,942          
                 
 

 

    36,159     1,171     6,143  
 

Future provision (recovery)

                   
   

Canada

    47,083     27,083     25,580  
   

Mexico

    18,759          
   

Finland

    1,086     (6,754 )   (8,899 )
                 
 

 

    66,928     20,329     16,681  
                 
 

 

  $ 103,087   $ 21,500   $ 22,824  
                 
  • Cash income and mining taxes paid in 2010 were $25.2 million (2009 — $8.8 million; 2008 — $3.8 million).

    The income and mining taxes expense (recovery) is different from the amount that would have been computed by applying the Canadian statutory income tax rate as a result of the following:

   
  2010   2009   2008  
 

Combined federal and composite provincial tax rates

    29.6 %   30.9 %   31.1 %
 

Increase (decrease) in taxes resulting from:

                   
 

Provincial mining duties

    6.8     16.1     6.9  
 

Tax law change (US$ election)

    (5.1 )   (24.4 )    
 

Impact of foreign tax rates

    (0.5 )   (4.9 )    
 

Permanent differences

    (4.2 )   2.2     (13.4 )
 

Valuation allowance

    (0.2 )       5.8  
 

Effect of changes in income tax rates

    (2.7 )       (6.6 )
                 
 

Actual rate as a percentage of pre-tax income

    23.7 %   19.9 %   23.8 %
                 
  • As at December 31, 2010 and 2009, Agnico-Eagle's future income and mining tax assets and liabilities were as follows:

   
  2010   2009  
   
  Assets   Liabilities   Assets   Liabilities  
 

Mining properties

  $   $ 966,485   $   $ 572,964  
 

Net operating and capital loss carry-forwards

        (133,042 )   27,878     (24,692 )
 

Mining duties

        (71,492 )       (44,967 )
 

Reclamation provisions

        (30,752 )       (20,774 )
 

Valuation allowance

        4,855         11,350  
                     
 

Future income and mining tax assets and liabilities

  $   $ 736,054   $ 27,878   $ 493,881  
                     
  • All of Agnico-Eagle's future income tax assets and liabilities were denominated in local currency based on the jurisdiction in which the Company paid taxes and were translated into US dollars using the exchange rate in effect at the consolidated balance sheet dates until the Company executed a Canadian federal tax election to commence using the US dollar as its functional currency for Canadian income tax purposes for December 31, 2008 and subsequent years. This election resulted in a deferred tax benefit of $21.8 million for the period ended December 31, 2010 (2009 — $21.0 million).

    The Company operates in different jurisdictions and, accordingly, it is subject to income and other taxes under the various tax regimes in the countries in which it operates. The tax rules and regulations in many countries are highly complex and subject to interpretation. The Company in the future may be subject to a review of its historic income and other tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain tax rules and regulations to the Company's business conducted within the country involved.

    A reconciliation of the beginning and ending amount of the unrecognized tax benefits is as follows:

   
  2010   2009  
 

Unrecognized tax benefit, beginning of year

  $ 5,608   $ 2,824  
 

Additions (reductions)

    (3,978 )   2,784  
             
 

Unrecognized tax benefit, end of year

  $ 1,630   $ 5,608  
             
  • The full amount of unrecognized tax benefit, if recognized, would reduce the Company's annual effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

    The Company is subject to taxes in the following significant jurisdictions: Canada, Mexico, Sweden and Finland, each with varying statutes of limitations. The 2007 through 2010 tax years generally remain subject to examination.

ACQUISITIONS
ACQUISITIONS

9.     ACQUISITIONS

  • Comaplex Minerals Corp.

    On April 1, 2010, Agnico-Eagle and Comaplex Minerals Corp. ("Comaplex") jointly announced that they reached an agreement in principle whereby Agnico-Eagle would acquire all of the shares of Comaplex (the "Comaplex Shares") that it did not already own. The transaction was completed under a plan of arrangement under the Business Corporations Act (Alberta). Under the terms of the transaction, each shareholder of Comaplex, other than Agnico-Eagle, received 0.1576 of an Agnico-Eagle share per Comaplex share. Additionally, at closing, each Comaplex shareholder, other than Agnico-Eagle and Perfora Investments S.a.r.l. ("Perfora"), received one common share of a newly formed, wholly-owned, subsidiary of Comaplex, Geomark Exploration Ltd. ("Geomark"), in respect of each Comaplex Share and Comaplex transferred to Geomark all of the assets and related liabilities of Comaplex other than those relating to the Meliadine gold exploration properties in Nunavut, Canada. The Geomark assets included all of Comaplex's net working capital, the non-Meliadine mineral properties, all oil and gas properties and investments. Under the plan of arrangement, Comaplex changed its name to Meliadine Holdings Inc.

    Prior to the announcement of the transaction, Perfora and Agnico-Eagle had entered into a support agreement pursuant to which Perfora agreed to, among other things, support the transaction and vote all of the shares it held in Comaplex in favour of the plan of arrangement. Perfora held approximately 17.3% and Agnico-Eagle held approximately 12.3%, on a fully diluted basis, of the outstanding shares of Comaplex prior to the announcement of the acquisition.

    On July 6, 2010, the transactions relating to the plan of arrangement closed and Agnico-Eagle issued a total of 10,210,848 shares to the shareholders of Comaplex, other than Agnico-Eagle, for a total value of $579.0 million. The related transaction costs associated with the acquisition totalling $7.0 million were expensed through the Consolidated Statements of Income during the third quarter of 2010. The Company has accounted for the purchase of Comaplex as a business combination.

    The following table sets forth the allocation of the purchase price to assets and liabilities acquired, based on management's estimates of fair value.

 

Total purchase price:

       
 

Comaplex shares previously purchased

  $ 88,683  
 

Agnico-Eagle shares issued for acquisition

    578,955  
         
 

Total purchase price to allocate

  $ 667,638  
         
 

Fair value of assets acquired:

       
 

Property

  $ 642,610  
 

Goodwill

    200,064  
 

Supplies

    542  
 

Equipment

    2,381  
 

Asset retirement obligation

    (3,400 )
 

Deferred tax liability

    (174,559 )
         
 

Net assets acquired

  $ 667,638  
         
  • The Comaplex shares purchased prior to the April 1, 2010 announcement of the acquisition had a cost base of $24.1 million and a fair value at July 6, 2010 of $88.6 million. Upon the acquisition of Comaplex, the non-cash gain of $64.5 million on those shares within accumulated other comprehensive income was reversed into the Consolidated Statements of Income as a gain during the third quarter of 2010.

    The Company believes that goodwill for the Comaplex acquisition arose principally because of the following factors: 1) The going concern value implicit in our ability to sustain and/or grow our business by increasing reserves and resources through new discoveries; and 2) the requirement to record a deferred tax liability for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in a business combination at amounts that do not reflect fair value.

    Pro forma results of operations for Agnico-Eagle assuming the acquisition of Comaplex described above had occurred as of January 1, 2009 are shown below. On a pro forma basis, there would have been no effect on Agnico-Eagle's consolidated revenues:

   
  2010   2009  
   
  Unaudited
 
 

Pro forma net income

  $ 331,516   $ 85,371  
 

Pro forma income per share — basic

  $ 2.04   $ 0.55  
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

10.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

   
  2010   2009  
 

Trade payables

  $ 91,974   $ 86,392  
 

Wages payable

    21,583     14,036  
 

Accrued liabilities

    33,390     31,924  
 

Current portion of capital lease obligations

    10,592     11,955  
 

Goldex Mine government grant (note 5(b))

    1,485      
 

Other liabilities

    11,943     11,125  
             
 

 

  $ 170,967   $ 155,432  
             
  • In 2009, other liabilities included the liability portion of the flow-through shares issuance of $6.8 million (note 6(b)). The liability portion of the flow-through shares issuance at December 31, 2010 was nil. The remaining 2009 amounts mainly consisted of various employee payroll tax withholdings and other payroll taxes.

    In 2010, the other liabilities balance mainly consisted of various employee payroll tax withholdings and other payroll taxes.

RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS

11.   RELATED PARTY TRANSACTIONS

  • Contact Diamond Corporation ("Contact") was a consolidated entity of the Company for the year ended December 31, 2002. As of August 2003, the Company ceased consolidating Contact, as the Company's investment no longer represented a "controlling financial interest". A loan was originally advanced for the purpose of funding ongoing exploration and operating activities and was repayable on demand with a rate of interest on the loan of 8% per annum. The Company, however, waived the interest on this loan commencing May 13, 2002.

    In 2006, the Company tendered its 13.8 million Contact shares in conjunction with Stornoway Diamond Corporation's ("Stornoway") offer to acquire all of the outstanding shares of Contact. Under the terms of the offer, each share of Contact was exchanged for 0.36 of a Stornoway share, resulting in the receipt by the Company of 4,968,747 Stornoway shares. A $4.4 million gain on the exchange of shares was recognized and a gain of $2.9 million was recognized on the write-up of the loan to Contact during 2006. On February 12, 2007, Agnico-Eagle subscribed to a private placement of subscription receipts by Stornoway for a total cost of $19.8 million. Stornoway acquired the debt in full by way of assignment of the note in consideration for the issuance to the Company of 3,207,861 common shares of Stornoway at a deemed value of C$1.25 per share. In addition, on March 16, 2007, the Company purchased from Stornoway C$5 million in unsecured Series A Convertible Debentures and C$5 million in unsecured Series B Convertible Debentures. Both series of debentures matured two years after their date of issue and interest was payable under the debentures quarterly at 12% per annum. At the option of Stornoway, interest payments could be paid in cash or in shares of Stornoway. During 2008, the interest payments to the Company amounted to C$0.7 million and consisted of 1,940,614 shares of Stornoway (2007 — C$0.9 million and consisted of C$0.6 million in cash and 302,450 shares of Stornoway).

    On July 31, 2008, the Company purchased from treasury 12,222,222 common shares of Stornoway at a price of C$0.90 per common share. Stornoway used the proceeds of the private placement to redeem the C$10 million principal amount of convertible debentures held by the Company and to pay to the Company a C$1 million amendment fee in connection with the amendment of the debentures to permit early redemption. The Company received an additional 527,947 common shares of Stornoway in satisfaction of accrued but unpaid interest on the debentures prior to their redemption. As a result of these transactions, the Company increased its holdings in Stornoway from 27,520,809 common shares (approximately 13.6% of the issued and outstanding common shares) to 40,270,978 common shares (approximately 15.8% of the issued and outstanding common shares).

    Agnico-Eagle's holdings in Stornoway as at December 31, 2009 remained unchanged at 40,270,978 common shares (approximately 15.3% of the issued and outstanding common shares).

    On February 22, 2010 the Company purchased 5.0 million common shares of Stornoway at a price of C$0.50 per common share. At December 31, 2010 the Company's holdings in Stornoway was 45,270,978 common shares (approximately 12.8% of the issued and outstanding common shares).

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES

12.   COMMITMENTS AND CONTINGENCIES

  • As part of its ongoing business and operations, the Company has been required to provide assurance in the form of letters of credit for environmental and site restoration costs, custom credits, government grants and other general corporate purposes. As at December 31, 2010, the total amount of these guarantees was $111.3 million.

    Certain of the Company's properties are subject to royalty arrangements. The following are the most significant royalties.

    The Company has a royalty agreement with the Finnish government relating to the Kittila Mine. Starting 12 months after the mining operations commenced, the Company is required to pay 2% on net smelter returns, defined as revenue less processing costs. The royalty is paid on a yearly basis the following year.

    The Company is committed to pay a royalty on future production from the Meadowbank Mine. The Nunavut Tunngavik-administered mineral claims are subject to production leases including a 12% net profits interest royalty from which annual deductions are limited to 85% of gross revenue. Production from Crown mining leases is subject to a royalty of up to 14% of adjusted net profits, as defined in the Northwest Territories and Nunavut Mining Regulations under the Territorial Lands Act (Canada).

    The Company is committed to pay a royalty on production from certain properties in the Abitibi area. The type of royalty agreements include but are not limited to net profits interest royalty and net smelter return royalty, with percentages ranging from 0.5% to 5%.

    The Company is committed to pay a royalty on production from certain properties in the Pinos Altos area. The type of royalty agreements include but are not limited to net profits interest royalty and net smelter return royalty, with percentages ranging from 2.5% to 3.5%.

    In addition, the Company has the following purchase commitments:

   
  Purchase Commitments  
 

2011

  $ 10,294  
 

2012

    7,798  
 

2013

    5,918  
 

2014

    4,466  
 

2015

    4,466  
 

Subsequent years

    28,862  
         
 

Total

  $ 61,804  
         
LEASES
LEASES

13.   LEASES

  • (a)
    Capital Leases
    • In 2010 and 2009, the Company entered into five sale-leaseback agreements each year with third-parties for various fixed and mobile equipment within Canada. These arrangements represent sale-leaseback transactions in accordance with ASC 840-40 — Sale-Leaseback Transactions. The sale-leaseback agreements have an average effective annual interest rate of 6.18% and the average length of the contracts is 4.5 years.

      All of the sale-leaseback agreements have end of lease clauses that qualify as bargain purchase options that the Company expects to execute. The total gross amount of assets recorded under sale-leaseback capital leases amounts to $33.6 million (2009 — $21.0 million).

      The Company has agreements with third-party providers of mobile equipment that are used in the Meadowbank and Kittila Mines. These arrangements represent capital leases in accordance with the guidance in ASC 840-30 — Capital Leases. The leases for mobile equipment at the Kittila Mine are for 5 years and the leases for mobile equipment at the Meadowbank Mine are for 5 years. The effective annual interest rate on the lease for mobile equipment at the Meadowbank Mine is 5.64%. The effective annual interest rate on the lease for mobile equipment at the Kittila Mine is 4.99%.

      The following is a schedule of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as at December 31, 2010:

 
Year ending December 31:
   
 
 

2011

  $ 13,015  
 

2012

    13,015  
 

2013

    15,931  
 

2014

    8,907  
 

2015

    3,608  
 

Thereafter

     
         
 

Total minimum lease payments

    54,476  
 

Less amount representing interest

    5,865  
         
 

Present value of net minimum lease payments

  $ 48,611  
         
    • The Company's capital lease obligations at December 31 are comprised as follows:

   
  2010   2009  
 

Total future lease payments

  $ 54,476   $ 37,762  
 

Less: interest

    5,865     3,826  
             
 

 

    48,611     33,936  
             
 

Less: current portion

    10,592     11,955  
             
 

Long-term portion of capital leases

  $ 38,019   $ 21,981  
             
    • At the end of 2010, the gross amount of assets recorded under capital leases, including sale-leaseback capital leases was $55.7 million (2009 — $51.7 million; 2008 — $30.7 million). The charge to income resulting from the amortization of assets recorded under capital leases is included in the "Amortization of property, plant and mine development" component of the Consolidated Statements of Income.

    (b)
    Operating Leases
    • The Company has a number of operating lease agreements involving office space. Some of the leases for office facilities contain escalation clauses for increases in operating costs and property taxes. Future minimum lease payments required to meet obligations that have initial or remaining non-cancellable lease terms in excess of one year as at December 31, 2010 are as follows:

      Minimum lease payments:

 

2011

  $ 1,506  
 

2012

    1,292  
 

2013

    748  
 

2014

    663  
 

2015

    663  
 

Thereafter

    4,891  
         
 

Total

  $ 9,763  
         
    • Total rental expense for operating leases was $4.1 million in 2010 (2009 — $3.7 million; 2008 — $3.1 million).

RESTRICTED CASH
RESTRICTED CASH

14.   RESTRICTED CASH

  • As part of the Company's insurance programs fronted by a third party provider and reinsured through the Company's internal insurance program, the third party provider requires that cash of $2.5 million be restricted.

FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS

15.   FINANCIAL INSTRUMENTS

  • From time to time, Agnico-Eagle has entered into financial instruments with several financial institutions in order to hedge underlying cash flow and fair value exposures arising from changes in commodity prices, interest rates, equity prices or foreign currency exchange rates.

    In 2009 and 2010, financial instruments which have subjected Agnico-Eagle to market risk and concentration of credit risk consisted primarily of cash, cash equivalents and short-term investments. Agnico-Eagle places its cash and cash equivalents and short-term investments in high quality securities issued by government agencies, financial institutions and major corporations and limits the amount of credit exposure by diversifying its holdings.

    Agnico-Eagle generates almost all of its revenues in US dollars. The Company's Canadian operations, which include the LaRonde, Goldex, Lapa and Meadowbank Mines, and the Meliadine mine project have Canadian dollar requirements for capital, operating and exploration expenditures.

    In 2008, to mitigate the risks associated with fluctuating foreign exchange rates, the Company entered into three zero cost collars to hedge the functional currency equivalent cash flows associated with the Canadian dollar denominated capital expenditures related to the Meadowbank Mine. In March 2009, the Company entered into another zero cost collar for the same purpose. The purchase of US dollar put options was financed through selling US dollar call options at a higher level such that the net premium payable to the different counterparties by the Company was nil. The hedged items represented monthly unhedged forecast Canadian dollar cash outflows during 2009. At December 31, 2008, the three zero cost collars hedged $180 million of 2009 expenditures and the additional zero cost collar entered in 2009 hedged $45 million of 2009 expenditures. The cash flow hedging relationship met all requirements per ASC 815 to be perfectly effective, and unrealized gains and losses were recognized within other comprehensive income ("OCI").

    Gains and losses deferred in accumulated other comprehensive income ("AOCI") were recognized into income as amortization (or depreciation) of the hedged capital asset occurred. Amounts transferred out of accumulated OCI were recorded in the "Property, plant and mine development" line item in the consolidated balance sheet and amortized into income over the same period as the hedged capital asset.

    In 2009, all of the effective hedges matured and a total of $7.4 million was reclassified from OCI to the balance sheet as a credit to "Property, plant, and mine development" line item. The total amount of unrealized loss on the hedges was nil as at December 31, 2009 (2008 — $8.9 million). Approximately $0.6 million was reclassified into the Consolidated Statement of Income in 2010 as the net gain was amortized in relation to the hedged capital asset.

    The following table sets out the changes in the AOCI balances recorded in the consolidated financial statements pertaining to the foreign exchange hedging activities. The fair values, based on Black-Scholes calculated mark-to-market valuations, of recorded derivative related assets and liabilities and their corresponding entries to AOCI reflect the netting of the fair values of individual derivative financial instruments.

   
  2010   2009  
 

AOCI, beginning of year

  $   $ (8,888 )
 

Gain reclassified from AOCI into project development costs

        (7,399 )
 

Gain (loss) recognized in OCI

        16,287  
             
 

AOCI, end of year

  $   $  
             
  • During the third quarter of 2010, the Company entered into an extendible foreign exchange flat forward transaction. At the end of each month beginning in August 2010 and ending in December 2010, the Company must exchange $5 million for Canadian dollars at a rate of US$1.0 = C$1.1. The Company had a realized gain on these transactions of $1.8 million. On December 31, 2010 and on June 30, 2011, at the option of the counterparty, the monthly exchange can be extended for another 6 months at each date. The counterparty has given notice to the Company that they will not extend their option for the 6 months following December 31, 2010. The counterparty, however, still has the second extension option to extend for the 6 months following June 30, 2011. The Company had an unrealized mark-to-market gain of $0.1 million that was recorded through the "Gain on derivative financial instruments" line item within the Consolidated Statements of Income and Comprehensive Income relating to the extendible foreign exchange flat forward transaction.

    In 2010, the Company entered into a zero cost collar contract whereby the purchase of US dollar put options was financed through selling US dollar call options at higher exercise prices such that the net premium payable to the different counterparties by the Company was nil. The risk hedged in 2010 was the variability in expected future cash flows arising from changes in foreign currency exchange below and above the levels of C$1.05 and C$1.07 per US dollar. The hedged items represented a portion of the unhedged forecast Canadian dollar denominated cash outflows arising from Canadian dollar denominated expenditures in 2010. In 2010, the zero cost collar hedged $20 million of 2010 expenditures. As of December 31, 2010, all positions had expired and the strategy resulted in an overall realized gain of $0.7 million which was recognized in the "Gain on derivative financial instruments" line item of the Consolidated Statements of Income and Comprehensive Income.

    The Company's other foreign currency derivative strategies in 2010 consisted mainly of writing US dollar call options with short maturities to generate premiums that would, in essence, enhance the spot transaction rate received when exchanging US dollars to Canadian dollars. All of these derivative transactions expired prior to the year end such that no derivatives were outstanding on December 31, 2010. The Company's foreign currency derivative strategy generated $4.9 million (2009 — $4.5 million, 2008 — $4.5 million) in call option premiums for the year ended December 31, 2010 that were recognized in the "Gain on derivative financial instruments" line item of the Consolidated Statements of Income and Comprehensive Income.

    As at December 31, 2010, the Company had unmatured written covered call options on available-for-sale securities with a premium of nil (2009 — $1.1 million) and a Black-Scholes calculated mark-to-market gain (loss) of nil (2009 — $0.5 million). Premiums received on the sale of covered call options are recorded as a liability in the "Fair value of derivative financial instruments" component of the consolidated balance sheets until they mature or the position is closed. Gains or losses as a result of mark-to-market valuations are taken into income in the period incurred. The Company sold these call options against the shares and warrants of Goldcorp Inc. ("Goldcorp") to reduce its price exposure to the Goldcorp shares and warrants it acquired in connection with Goldcorp's acquisition of Gold Eagle Mines Ltd. During 2010, the Company continued to write covered call options on the warrants of Goldcorp as they expired, or were repurchased.

    During the third quarter of 2009, the Company sold its 0.8 million shares of Goldcorp shares but continued to write call options on the 0.8 million warrants it continues to hold. The warrants of Goldcorp were disposed of on December 22, 2010. The $0.6 million recorded as a liability as at December 31, 2009, was recognized through the consolidated statements of income in 2010. As the warrants were disposed of in 2010, no further call options were written and no liability existed as at December 31, 2010.

    During the year-ended December 31, 2010, the Company recognized a net gain of $2.5 million (2009 — $10.5 million) related to the written call options of Goldcorp shares and warrants in the "Interest and sundry income" component of the consolidated statements of income.

    Cash provided by operating activities in the consolidated statements of cash flows is adjusted for gains realized on the consolidated statements of income through the loss (gain) on sale of securities component. Premiums received are a component of proceeds on sale of available-for-sale securities and other within the cash used in investing activities section of the consolidated statements of cash flows.

    In the first quarter of 2010, to mitigate the risks associated with fluctuating zinc prices, the Company entered into a zero-cost collar to hedge the price of zinc associated with a portion of the LaRonde Mine's 2010 production. The purchase of zinc put options has been financed through selling zinc call options at a higher level such that the net premium payable to the counterparty by the Company was nil.

    A total of 15,000 metric tonnes of zinc call options were written at a strike price of $2,500 per metric tonne with 1,500 metric tonnes expiring each month beginning March 31, 2010. A total of 15,000 metric tonnes of zinc put options were purchased at a strike price of $2,200 per metric tonne with 1,500 metric tonnes expiring each month beginning March 31, 2010. While setting a minimum price, the zero-cost collar strategy also limits participation to zinc prices above $2,500 per metric tonne. This represented approximately 21% of forecasted zinc production. These contracts did not qualify for hedge accounting under ASC 815 — Derivatives and Hedging. Gains or losses, along with mark-to-market adjustments are recognized in the "Gain on derivative financial instruments" component of the consolidated statements of income. During the year ended December 31, 2010, the Company recognized a realized gain of $3.7 million. There were no zinc hedges outstanding at December 31, 2010.

    In addition, the Company implemented a strategy to enhance the realized copper metal prices realized and mitigate the risks associated with fluctuating copper prices by occasionally writing copper call options. During 2010, four short-term copper call options were written and the realized loss net of premiums received amounted to $0.6 million that was recognized in the "Gain on derivative financial instruments" line item of the Consolidated Statements of Income and Comprehensive Income.

    As at December 31, 2010 and 2009, there were no metal derivative positions. The Company may from time-to-time utilize short-term (intra quarter) financial instruments as part of its strategy to minimize risks and optimize returns on its byproduct metal sales.

    Other required derivative disclosures can be found in note 6(e), "Accumulated other comprehensive income (loss)".

    The following table provides a summary of the amounts recognized in the "Gain on derivative financial instruments" line item of the Consolidated Statements of Income.

   
  2010   2009   2008  
 

Premiums realized on written foreign exchange call options

  $ 4,845   $ 4,494   $ 4,481  
 

Realized gain on foreign exchange extendible flat forward

    1,797          
 

Realized gain on foreign exchange collar

    711          
 

Mark-to-market on foreign exchange extendible flat forward

    142              
 

Realized gain on zinc financial instruments

    3,733     (752 )    
 

Realized loss on copper financial instruments

    (558 )   (150 )    
 

Realized loss on silver financial instruments

    (3,058 )        
                 
 

 

  $ 7,612   $ 3,592   $ 4,481  
                 
  • Agnico-Eagle's exposure to interest rate risk at December 31, 2010 relates to its cash and cash equivalents, short-term investments and restricted cash totaling $104.6 million (2009 — $163.6 million) and the Credit Facility. The Company's short-term investments and cash equivalents have a fixed weighted average interest rate of 0.56% (2009 — 0.59%).

    The fair values of Agnico-Eagle's current financial assets and liabilities approximate their carrying values as at December 31, 2010.

    ASC 820 — Fair Value Measurement and Disclosure (Prior authoritative literature: FASB Statement No. 157, "Fair Value Measurements" defines fair value, establishes a framework for measuring fair value in US GAAP and expands required disclosures about fair value measurements.

    Fair value is the value at which a financial instrument could be closed out or sold in a transaction with a willing and knowledgeable counterparty over a period of time consistent with the Company's investment strategy. Fair value is based on quoted market prices, where available. If market quotes are not available, fair value is based on internally developed models that use market-based or independent information as inputs. These models could produce a fair value that may not be reflective of future fair value.

    The three levels of the fair value hierarchy under ASC 820 are:

    • Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

      Level 2 — Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

      Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

    The following table sets out the Company's financial assets and liabilities measured at fair value within the fair value hierarchy:

   
  Total   Level 1   Level 2   Level 3  
 

Financial assets:

                         
 

Cash equivalents and short-term investments(1)

  $ 7,820   $   $ 7,820   $  
 

Available-for-sale securities(2)(3)

    99,109     90,925     8,185      
 

Trade receivables(4)

    112,949         112,949      
                     
 

 

  $ 219,878   $ 90,925   $ 128,954   $  
                     
 

Financial liabilities:

                         
 

Derivative liabilities(3)

  $ 142   $   $ 142   $  
                     

  • (1)
    Fair value approximates the carrying amounts due to the short-term nature.

    (2)
    Recorded at fair value using quoted market prices.

    (3)
    Recorded at fair value based on broker-dealer quotations.

    (4)
    Trade receivables from provisional invoices for concentrate sales are included within Level 2 as they are valued using quoted forward rates derived from observable market data based on the month of expected settlement.
  • Both the Company's cash equivalents and short-term investments are classified within Level 2 of the fair value hierarchy because they are valued using interest rates observable at commonly quoted intervals. Cash equivalents are market securities with remaining maturities of three months or less at the date of purchase. The short-term investments are market securities with remaining maturities of over three months at the date of purchase.

    The Company's available-for-sale equity securities are recorded at fair value using quoted market prices or broker-dealer quotations. The Company's available-for-sale equity securities that are valued using quoted market prices in active markets are classified as Level 1 of the fair value hierarchy. The Company's available-for-sale securities classified as Level 2 of the fair value hierarchy consist of equity warrants, which are recorded at fair value based broker-dealer quotations.

    In the event that a decline in the fair value of an investment occurs and the decline in value is considered to be other-than-temporary, an impairment charge is recorded in the interim consolidated statement of income and a new cost basis for the investment is established. The Company assesses whether a decline in value is considered to be other-than-temporary by considering available evidence, including changes in general market conditions, specific industry and individual company data, the length of time and the extent to which the fair value has been less than cost, the financial condition and the near-term prospects of the individual investment. New evidence could become available in future periods which would affect this assessment and thus could result in material impairment charges with respect to those investments for which the cost basis exceeds its fair value.

SEGMENTED INFORMATION
SEGMENTED INFORMATION

16.   SEGMENTED INFORMATION

  • Agnico-Eagle operates in a single industry, namely exploration for and production of gold. The Company's primary operations are in Canada, Mexico, and Finland. The Company identifies its reportable segments as those operations whose operating results are reviewed by the Chief Executive Officer and Chief Operating Officer, and that represent more than 10% of the combined revenue, profit or loss or total assets of all reported operating segments. The following are the reporting segments of the Company and reflect how the Company manages its business and how it classifies its operations for planning and measuring performance:

 

Canada:

  LaRonde Mine, Lapa Mine, Goldex Mine, Meadowbank Mine and the Regional Office
 

Europe:

 

Kittila Mine

 

Latin America:

 

Pinos Altos Mine

 

Exploration:

 

USA Exploration office, Europe Exploration office, Canada Exploration offices, Meliadine Mine Project and the Latin America Exploration office

  • The accounting policies of the reporting segments are the same as those described in the summary of significant accounting policies. There are no transactions between the reported segments affecting revenue. Production costs for the reported segments are net of intercompany transactions. The goodwill of $200.1 million on the Consolidated Balance Sheets relates to the Meliadine Mine Project that is a component of the Exploration segment.

    Corporate Head Office assets are included in the Canada category and specific corporate income and expense items are noted separately below.

    The Goldex Mine achieved commercial production on August 1, 2008. On May 1, 2009, both the Lapa Mine and the Kittila Mine achieved commercial production. The Pinos Altos Mine achieved commercial production on November 1, 2009. The Meadowbank Mine achieved commercial production on March 1, 2010.

 
Twelve Months Ended
December 31, 2010
  Revenues
from
Mining
Operations
  Production
Costs
  Amortization   Exploration
& Corporate
Development
  Foreign Currency
Translation Loss
(Gain)
  Segment
Income
(Loss)
 
 

Canada

  $ 1,086,744   $ 499,621   $ 140,024   $   $ 22,815   $ 424,284  
 

Europe

    160,140     87,735     31,231         (2,780 )   43,954  
 

Latin America

    175,637     90,116     21,134         (2,126 )   66,513  
 

Exploration

            97     54,958     1,627     (56,682 )
                             
 

 

  $ 1,422,521   $ 677,472   $ 192,486   $ 54,958   $ 19,536   $ 478,069  
                             
 

Segment income

  $ 478,069  
 

Corporate and Other

                                     
   

Interest and sundry income

    10,254  
   

Gain on acquisition of Comaplex

    57,526  
   

Gain on sale of available-for-sale securities

    19,487  
   

Gain on derivative financial instruments

    7,612  
   

General and administrative

    (94,327 )
   

Provincial capital tax

    6,075  
   

Interest expense

    (49,493 )
                                       
 

Income before income, mining and federal capital taxes

  $ 435,203  
                                       


 

 
Twelve Months Ended
December 31, 2009
  Revenues
from
Mining
Operations
  Production
Costs
  Amortization   Exploration
& Corporate
Development
  Foreign Currency
Translation Loss
(Gain)
  Segment
Income
(Loss)
 
 

Canada

  $ 538,123   $ 252,035   $ 60,028   $   $ 36,499   $ 189,561  
 

Europe

    61,457     42,464     10,909         3,582     4,502  
 

Latin America

    14,182     11,819     1,524         (250 )   1,089  
 

Exploration

                36,279         (36,279 )
                             
 

 

  $ 613,762   $ 306,318   $ 72,461   $ 36,279   $ 39,831   $ 158,873  
                             
 

Segment income

  $ 158,873  
 

Corporate and Other

                                     
   

Interest and sundry income

    12,580  
   

Gain on sale of available-for-sale securities

    10,142  
   

Gain on derivative financial instruments

    3,592  
   

General and administrative

    (63,687 )
   

Provincial capital tax

    (5,014 )
   

Interest expense

    (8,448 )
                                       
 

Income before income, mining and federal capital taxes

  $ 108,038  
                                       


 

 
Twelve Months Ended
December 31, 2008
  Revenues
from
Mining
Operations
  Production
Costs
  Amortization   Exploration
& Corporate
Development
  Foreign Currency
Translation Loss
(Gain)
  Segment
Income
(Loss)
 
 

Canada

  $ 368,938   $ 186,862   $ 36,133   $   $ (70,442 ) $ 216,385  
 

Europe

                    (7,281 )   7,281  
 

Latin America

                    35     (35 )
 

Exploration

                34,704         (34,704 )
                             
 

 

  $ 368,938   $ 186,862   $ 36,133   $ 34,704   $ (77,688 ) $ 188,927  
                             
 

Segment income

  $ 188,927  
 

Corporate and Other

                                     
   

Interest and sundry income

    7,240  
   

Gain on sale of available-for-sale securities

    25,626  
   

General and administrative

    (47,187 )
   

Write-down on available-for-sale securities

    (74,812 )
   

Gain on derivative financial instruments

    4,481  
   

Provincial capital tax

    (5,332 )
   

Interest expense

    (2,952 )
                                       
 

Income before income, mining and federal capital taxes

  $ 95,991  
                                       


 

   
  Capital Expenditures  
   
  2010   2009   2008  
 

Canada

  $ 1,004,129   $ 435,098   $ 548,555  
 

Europe

    67,894     84,955     190,188  
 

Latin America

    103,131     136,706     171,438  
 

Exploration

    97         55  
                 
 

 

  $ 1,175,251   $ 656,759   $ 910,236  
                 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
  These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and entities in which it has a controlling financial interest after the elimination of intercompany accounts and transactions. The Company has a controlling financial interest if it owns a majority of the outstanding voting common stock or has significant control over an entity through contractual arrangements or economic interests of which the Company is the primary beneficiary.
  Cash and cash equivalents include cash on hand and short-term investments in money market instruments with remaining maturities of three months or less at the date of purchase. Short-term investments are designated as held to maturity for accounting purposes and are carried at amortized cost, which approximates market value given the short-term nature of these investments. Agnico-Eagle places its cash and cash equivalents and short-term investments in high quality securities issued by government agencies, financial institutions and major corporations and limits the amount of credit exposure by diversifying its holdings.

 Inventories consist of ore stockpiles, concentrates, doré bars and supplies. Amounts are removed from inventory based on average cost. The current portion of stockpiles, ore on leach pads and inventories are determined based on the expected amounts to be processed within the next 12 months. Stockpiles, ore on leach pads and inventories not expected to be processed within the next 12 months are classified as long-term.

Stockpiles

        Stockpiles consist of coarse ore that has been mined and hoisted from underground or delivered from an open pit that is available for further processing and in-stope ore inventory in the form of drilled and blasted stopes ready to be mucked and hoisted to the surface. The stockpiles are measured by estimating the tonnage, contained ounces (based on assays) and recovery percentages (based on actual recovery rates achieved for processing similar ore). Specific tonnages are verified and compared to original estimates once the stockpile is milled. Ore stockpiles are valued at the lower of net realizable value and mining costs incurred up to the point of stockpiling the ore. The net realizable value of stockpiled ore is assessed by comparing the sum of the carrying value plus future processing and selling costs to the expected revenue to be earned, which is based on the estimated volume and grade of stockpiled ore.

        Mining costs include all costs associated with mining operations and are allocated to each tonne of stockpiled ore. Costs fully absorbed into inventory values include direct and indirect materials and consumables, direct labour, utilities and amortization of mining assets incurred up to the point of stockpiling the ore. Royalty expenses and production taxes are included in production costs, but are not capitalized into inventory. Stockpiles are not intended to be long-term inventory items and are generally processed within twelve months of extraction, with the exception of the Goldex and Pinos Altos Mine ore stockpiles. Due to the structure of the Goldex and Pinos Altos ore bodies, a significant amount of drilling and blasting is incurred in the early years of its mine life, which results in a long-term stockpile. The decision to process stockpiled ore is based on a net smelter return analysis. The Company processes its stockpiled ore if its estimated revenue, on a per tonne basis and net of estimated smelting and refining costs, is greater than the related mining and milling costs. The Company has never elected to not process stockpiled ore and does not anticipate departing from this practice in the future. Stockpiled ore on the surface is exposed to the elements, but the Company does not expect its condition to deteriorate significantly as a result.

        Pre-production stripping costs are capitalized until an "other than de minimis" level of mineral is produced, after which time such costs are either capitalized to inventory or expensed. The Company considers various relevant criteria to assess when an "other than de minimis" level of mineral is produced. The criteria considered include: (1) the number of ounces mined compared to total ounces in mineral reserves; (2) the quantity of ore mined compared to the total quantity of ore expected to be mined over the life of the mine; (3) the current stripping ratio compared to the expected stripping ratio over the life of the mine; and (4) the ore grade compared to the expected ore grade over the life of the mine.

Concentrates and doré bars

        Concentrates and doré bar inventories consist of concentrates and doré bars for which legal title has not yet passed to third-party smelters. Concentrates and doré bar inventories are measured based on assays of the processed concentrates and are valued based on the lower of net realizable value and the fully absorbed mining and milling costs associated with extracting and processing the ore.

Supplies

        Supplies, consisting of mine stores inventory, are valued at the lower of average cost and replacement cost.

Significant payments related to the acquisition of land and mineral rights are capitalized as mining properties at cost. If a mineable ore body is discovered, such costs are amortized to income when production begins, using the unit-of-production method, based on estimated proven and probable reserves. If no mineable ore body is discovered, such costs are expensed in the period in which it is determined that the property has no future economic value.

        Expenditures for new facilities and improvements that can extend the useful lives of existing facilities are capitalized as plant and equipment at cost. Interest costs incurred for the construction of significant projects are capitalized.

        Mine development costs incurred after the commencement of production are capitalized or deferred to the extent that these costs benefit the entire ore body. Costs incurred to access single ore blocks are expensed as incurred; otherwise, such vertical and horizontal developments are classified as mine development costs.

        Agnico-Eagle records depreciation on both plant and equipment and mine development costs used in commercial production on a unit-of-production basis based on the estimated tonnage of proven and probable mineral reserves of the mine. The unit-of-production method defines the denominator as the total proven and probable tonnes of reserves.

        Repairs and maintenance expenditures are charged to income as production costs. Assets under construction are not depreciated until the end of the construction period. Upon achieving commercial production, the capitalized construction costs are transferred to the various categories of plant and equipment.

        Mineral exploration costs are charged to income in the year in which they are incurred. When it is determined that a mining property can be economically developed as a result of established proven and probable reserves, the costs of further exploration and development to further delineate the ore body on such property are capitalized. The establishment of proven and probable reserves is based on results of final feasibility studies, which indicate whether a property is economically feasible. Upon commencement of the commercial production of a development project, these costs are transferred to the appropriate asset category and are amortized to income using the unit-of-production method mentioned above. Mine development costs, net of salvage values, relating to a property that is abandoned or considered uneconomic for the foreseeable future are written off.

        The carrying values of mining properties, plant and equipment and mine development costs are reviewed periodically, when impairment factors exist, for possible impairment, based on the future undiscounted net cash flows of the operating mine or development property. If it is determined that the estimated net recoverable amount is less than the carrying value, then a write down to the estimated fair value amount is made with a charge to income. Estimated future cash flows of an operating mine and development properties include estimates of recoverable ounces of gold based on proven and probable reserves. To the extent that economic value exists beyond the proven and probable reserves of an operating mine or development property, this value is included as part of the estimated future cash flows. Estimated future cash flows also involve estimates regarding metal prices (considering current and historical prices, price trends and related factors), production levels, capital and reclamation costs, and related income and mining taxes, all based on detailed engineering life-of-mine plans. Cash flows are subject to risks and uncertainties and changes in the estimates of the cash flows may affect the recoverability of long-lived assets.

 Business combinations are accounted for using the purchase method whereby assets and liabilities acquired are recorded at their fair values as of the date of acquisition and any excess of the purchase price over such fair values is recorded as goodwill. As of the date of acquisition, goodwill is allocated to reporting units by determining estimates of the fair value of each reporting unit and comparing this amount to the fair values of assets and liabilities in the reporting unit. Goodwill is not amortized.

        The Company performs goodwill impairment tests on an annual basis as well as when events and circumstances indicate that the carrying amounts may no longer be recoverable. In performing the impairment tests, the Company estimates the fair values of its reporting units that include goodwill and compares those fair values to the reporting units' carrying amounts. If a reporting unit's carrying amount exceeds its fair value, the Company compares the implied fair value of the reporting unit's goodwill to the carrying amount, and any excess of the carrying amount of goodwill over the implied fair value is charged to income.

 From time to time, Agnico-Eagle uses derivative financial instruments, primarily option and forward contracts, to manage exposure to fluctuations in byproduct metal prices, interest rates and foreign currency exchange rates. Agnico-Eagle does not hold financial instruments or derivative financial instruments for trading purposes.

        The Company recognizes all derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized periodically in the consolidated statement of income or in shareholders' equity as a component of accumulated other comprehensive income (loss), depending on the nature of the derivative financial instrument and whether it qualifies for hedge accounting. Financial instruments designated as hedges are tested for effectiveness on a quarterly basis. Gains and losses on those contracts that are proven to be effective are reported as a component of the related transaction.

 Revenue is recognized when the following conditions are met:

    • (a)
      persuasive evidence of an arrangement to purchase exists;

      (b)
      the price is determinable;

      (c)
      the product has been delivered; and

      (d)
      collection of the sales price is reasonably assured.

        Revenue from gold and silver in the form of doré bars is recorded when the refined gold or silver is sold and delivered to the customer. Generally, all the gold and silver in the form of doré bars recovered in the Company's milling process is sold in the period in which it is produced.

        Under the terms of the Company's concentrate sales contracts with third-party smelters, final prices for the metals contained in the concentrate are set based on the prevailing spot market metal prices on a specified future date, which is based on the date that the concentrate is delivered to the smelter. The Company records revenues under these contracts based on forward prices at the time of delivery, which is when transfer of legal title to concentrate passes to the third-party smelters. The terms of the contracts result in differences between the recorded estimated price at delivery and the final settlement price. These differences are adjusted through revenue at each subsequent financial statement date.

        Revenues from mining operations consist of gold revenues, net of smelting, refining, transportation and other marketing charges. Revenues from byproduct metals sales are shown, net of smelter charges, as part of revenues from mining operations.

The functional currency for the Company's operations is the US dollar. Monetary assets and liabilities of Agnico-Eagle's operations denominated in a currency other than the US dollar are translated into US dollars using the exchange rate in effect at year end. Non-monetary assets and liabilities are translated at historical exchange rates while revenues and expenses are translated at the average exchange rate during the year, with the exception of amortization, which is translated at historical exchange rates. Exchange gains and losses are included in income except for gains and losses on foreign currency contracts used to hedge specific future commitments in foreign currencies. Gains and losses on these contracts are accounted for as a component of the related hedge transactions.
 On an annual basis, the Company assesses cost estimates and other assumptions used in the valuation of Asset Retirement Obligations ("ARO") at each of its mineral properties to reflect events, changes in circumstances and new information available. Changes in these cost estimates and assumptions have a corresponding impact on the fair value of the ARO. For closed mines, any change in the fair value of AROs results in a corresponding charge or credit within other expense, whereas at operating mines the charge is recorded as an adjustment to the carrying amount of the corresponding asset. AROs arise from the acquisition, development, construction and normal operation of mining property, plant and equipment, due to government controls and regulations that protect the environment on the closure and reclamation of mining properties. The major parts of the carrying amount of AROs relate to tailings and heap leach pad closure/rehabilitation; demolition of buildings/mine facilities; ongoing water treatment; and ongoing care and maintenance of closed mines. The fair values of AROs are measured by discounting the expected cash flows using a discount factor that reflects the credit-adjusted risk-free rate of interest. The Company prepares estimates of the timing and amount of expected cash flows when an ARO is incurred. Expected cash flows are updated to reflect changes in facts and circumstances. The principal factors that can cause expected cash flows to change are: the construction of new processing facilities; changes in the quantities of material in reserves and a corresponding change in the life of mine plan; changing ore characteristics that have an impact on required environmental protection measures and related costs; changes in water quality that have an impact on the extent of water treatment required; and changes in laws and regulations governing the protection of the environment. When expected cash flows increase, the revised cash flows are discounted using a current discount factor; whereas when expected cash flows decrease, the reduced cash flows are discounted using the historical discount factor used in the original estimation of the expected cash flows, and then in both cases any change in the fair value of the ARO is recorded. Agnico-Eagle records the fair value of an ARO when it is incurred. AROs are adjusted to reflect the passage of time (accretion), which is calculated by applying the discount factor implicit in the initial fair value measurement to the beginning-of-period carrying amount of the AROs. For producing mines, accretion expense is recorded in the cost of goods sold each period. Upon settlement of an ARO, Agnico-Eagle records a gain or loss if the actual cost differs from the carrying amount of the ARO. Settlement gains/losses are recorded in other (income) expense. Other environmental remediation costs that are not AROs as defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 410-20 — Asset Retirement Obligations (Prior authoritative literature: FASB Statement No. 143) are expensed as incurred.

 Agnico-Eagle follows the liability method of tax allocation for accounting for income taxes. Under this method of tax allocation, future income and mining tax bases of assets and liabilities are measured using the enacted tax rates and laws expected to be in effect when the differences are expected to reverse.

        The Company's operations involve dealing with uncertainties and judgments in the application of complex tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxation authorities in various jurisdictions and resolution of disputes arising from federal, provincial, state and international tax audits. The Company recognizes the effect of uncertain tax positions and records tax liabilities for anticipated tax audit issues in Canada and other tax jurisdictions where it is more likely than not based on technical merits that the position would not be sustained. The Company recognizes the amount of any tax benefits that have a greater than 50 percent likelihood of being ultimately realized upon settlement.

        Changes in judgment related to the expected ultimate resolution of uncertain tax positions are recognized in the year of such changes. Accrued interest and penalties related to unrecognized tax benefits are recorded in income tax expense when incurred. The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the tax liabilities. If the Company's estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If the estimate of tax liabilities proves to be greater than the ultimate assessment, a tax benefit would result.

Agnico-Eagle has two stock-based compensation plans. The Employee Stock Option Plan and the Employee Share Purchase Plan are described in note 7(a) and note 7(b), respectively, to the consolidated financial statements. The Company issues common shares to settle its obligations under both plans.

        The Employee Stock Option Plan provides for the granting of options to directors, officers, employees and service providers to purchase common shares. Options have exercise prices equal to the market price on the day prior to the date of grant. The fair value of these options is recognized in the consolidated statement of income or in the consolidated balance sheet if capitalized as part of property, plant and mine development over the applicable vesting period as a compensation cost. Any consideration paid by employees on exercise of options or purchase of common shares is credited to share capital.

        Fair value is determined using the Black-Scholes option valuation model which requires the Company to estimate the expected volatility of the Company's share price and the expected life of the stock options. Limitations with existing option valuation models and the inherent difficulties associated with estimating these variables create difficulties in determining a reliable single measure of the fair value of stock option grants. The dilutive impact of stock option grants is factored into the Company's reported diluted net income per share.

 Basic net income per share is calculated on net income for the year using the weighted average number of common shares outstanding during the year. The weighted average number of common shares used to determine diluted net income per share includes an adjustment, using the treasury stock method, for stock options outstanding and warrants outstanding. Under the treasury stock method:

  • the exercise of options or warrants is assumed to be at the beginning of the period (or date of issuance, if later);

    the proceeds from the exercise of options or warrants, plus, in the case of options, the future period compensation expense on options granted on or after January 1, 2003, are assumed to be used to purchase common shares at the average market price during the period; and

    the incremental number of common shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) is included in the denominator of the diluted net income per share computation.

 Effective July 1, 1997, Agnico-Eagle's defined benefit pension plan for active employees (the "Employees Plan") was converted to a defined contribution plan. Employees who retired prior to that date remained in the Employees Plan. During 2008, however, the Employees Plan was closed as a result of annuities having been purchased for all remaining members. In addition, Agnico-Eagle provides a non-registered supplementary executive retirement defined benefit plan for its senior officers (the "Executives Plan"). The Executives Plan benefits are generally based on the employees' years of service and level of compensation. Pension expense related to the Executives Plan is the net of the cost of benefits provided, the interest cost of projected benefits, return on plan assets and amortization of experience gains and losses. Pension fund assets are measured at current fair values. Actuarially determined plan surpluses or deficits, experience gains or losses and the cost of pension plan improvements are amortized on a straight-line basis over the expected average remaining service life of the employee group.

        In Canada, Agnico-Eagle maintains a defined contribution plan covering all of its employees. The plan is funded by Company contributions based on a percentage of income for services rendered by employees. The Company does not offer any other post-retirement benefits to its employees.

 The Company assesses each mine construction project to determine when a mine moves into the production stage. The criteria used to assess the start date are determined based on the nature of each mine construction project, such as the complexity of a plant and its location. The Company considers various relevant criteria to assess when the mine is substantially complete and ready for its intended use and moved into the production stage. The criteria considered include: (1) the completion of a reasonable period of testing of mine plant and equipment; (2) the ability to produce minerals in saleable form (within specifications); and (3) the ability to sustain ongoing production of minerals. When a mine construction project moves into the production stage, the capitalization of certain mine construction costs ceases and costs are either capitalized to inventory or expensed, except for sustaining capital costs related to property, plant and equipment and underground mine development or reserve development.
TRADE RECEIVABLES AND REVENUES FROM MINING OPERATIONS (Tables)
   
  2010   2009  
 

Doré bars awaiting settlement

  $ 24,281   $ 3,488  
 

Concentrates awaiting settlement

    88,668     90,083  
             
 

 

  $ 112,949   $ 93,571  
             


   
  2010   2009   2008  
 

Revenues from mining operations (thousands):

                   
 

Gold

  $ 1,216,249   $ 474,875   $ 227,576  
 

Silver

    104,544     59,155     59,398  
 

Zinc

    77,544     57,034     54,364  
 

Copper

    22,219     22,571     27,600  
 

Lead

    1,965     127      
                 
 

 

  $ 1,422,521   $ 613,762   $ 368,938  
                 
OTHER ASSETS (Tables)
 
  2010   2009  
 

Federal, provincial and other sales taxes receivable

  $ 63,553   $ 37,847  
 

Prepaid expenses

    10,449     4,797  
 

Employee loans receivable

    4,498     3,640  
 

Government refundables for local community improvements

    803     1,764  
 

Prepaid royalty

    5,282     5,377  
 

Other

    5,191     7,734  
             
 

 

  $ 89,776   $ 61,159  
             
    •  

   
  2010   2009  
 

Cost

  $ 50,958   $ 44,470  
 

Unrealized gains

    48,151     67,508  
 

Unrealized losses

        (11 )
             
 

Estimated fair value of available-for-sale securities

  $ 99,109   $ 111,967  
             
  2010   2009  
 

Deferred financing costs, less accumulated amortization of $2,249 (2009 — $2,732)

  $ 16,780   $ 7,516  
 

Long-term ore in stockpile(i)

    27,409     11,684  
 

Prepaid royalty(ii)

    8,777     13,321  
 

Other

    8,536     1,120  
             
 

 

  $ 61,502   $ 33,641  
             

    • (i)
      Due to the structure of the Goldex Mine and Pinos Altos Mine ore bodies, a significant amount of drilling and blasting is incurred in the early years of its mine life resulting in a long-term stockpile.

      (ii)
      The prepaid royalty relates to the Pinos Altos Mine in Mexico.
PROPERTY, PLANT AND MINE DEVELOPMENT (Tables)

   
  2010   2009  
   
  Cost   Accumulated
Amortization
  Net
Book Value
  Cost   Accumulated
Amortization
  Net
Book Value
 
 

Mining properties

  $ 1,885,476   $ 44,823   $ 1,840,653   $ 1,221,646   $ 27,865   $ 1,193,781  
 

Plant and equipment

    2,123,191     321,907     1,801,284     1,389,081     197,794     1,191,287  
 

Mine development costs

    853,927     171,869     682,058     435,469     111,674     323,795  
 

Construction in progress:

                                     
   

LaRonde Mine extension

    185,905         185,905     121,102         121,102  
   

Creston Mascota deposit

    54,663         54,663     10,159         10,159  
   

Meadowbank Mine

                741,674         741,674  
                             
 

 

  $ 5,103,162   $ 538,599   $ 4,564,563   $ 3,919,131   $ 337,333   $ 3,581,798  
                             

  •  

   
  Net Book Value
2010
  Net Book Value
2009
 
 

Canada

  $ 3,456,809   $ 2,592,704  
 

Europe

    605,283     568,620  
 

Latin America

    500,211     418,214  
 

USA

    2,260     2,260  
             
 

Total

  $ 4,564,563   $ 3,581,798  
             
LONG TERM DEBT (Tables)
Individual series of issued Notes
  •  

   
  Principal   Interest Rate   Maturity  
 

Series A

  $ 115,000     6.13%     7/4/2017  
 

Series B

    360,000     6.67%     7/4/2020  
 

Series C

    125,000     6.77%     7/4/2022  
                     
 

 

  $ 600,000              
                     
RECLAMATION PROVISION AND OTHER LIABILITIES (Tables)
  •  

   
  2010   2009  
 

Reclamation and closure costs (note 5(a))

  $ 91,641   $ 62,847  
 

Long-term portion of capital lease obligations (note 13(a))

    38,019     21,981  
 

Pension benefits (note 5(c))

    11,307     8,109  
 

Goldex Mine government grant and other (note 5(b))

    4,569     3,318  
             
 

 

  $ 145,536   $ 96,255  
             
    •  

   
  2010   2009  
 

Asset retirement obligations, beginning of year

  $ 62,847   $ 52,125  
 

Current year additions and changes in estimate

    23,058      
 

Current year accretion

    3,176     2,916  
 

Liabilities settled

    (277 )    
 

Foreign exchange revaluation

    2,837     7,806  
             
 

Asset retirement obligations, end of year

  $ 91,641   $ 62,847  
             
    •  

   
  2010   2009   2008  
 

Service cost — benefits earned during the year

  $ 981   $ 509   $ 452  
 

Interest cost on projected benefit obligation

    613     448     550  
 

Amortization of net transition asset, past service liability and net experience gains

    164     148     (11 )
 

Prior service cost

    25     23     24  
 

Recognized net actuarial loss

        (142 )    
 

Gain due to settlement

            760  
 

Return on plan assets

            (156 )
                 
 

Net pension plan expense

  $ 1,783   $ 986   $ 1,619  
                 
    • The following table provides the net amounts recognized in the consolidated balance sheets as at December 31:

   
  2010   2009  
   
  Employees Plan   Executives Plan   Employees Plan   Executives Plan  
 

Liability (asset)

  $   $   $   $  
 

Accrued employee benefit liability

        6,634         6,036  
 

Accumulated other comprehensive income (loss):

                         
   

Initial transition obligation

        681         809  
   

Past service liability

        104         122  
   

Net experience (gains) losses

        2,179         (604 )
                     
 

Net liability (asset)

  $   $ 9,598   $   $ 6,363  
                     

    •  

   
  Executives Plan  
 

Transition obligation

  $ 170  
 

Past service cost or credit

    26  
 

Net actuarial gain or loss

    244  
         
 

 

  $ 440  
         
    •  

   
  2010   2009  
   
  Employees   Executives   Employees   Executives  
 

Reconciliation of the market value of plan assets

                         
 

Fair value of plan assets, beginning of year

  $   $ 1,635   $ 110   $ 1,142  
 

Agnico-Eagle's contribution

        1,397         598  
 

Actual return on plan assets

                 
 

Benefit payments

        (699 )       (299 )
 

Other

            (117 )    
 

Divestitures

                 
 

Effect of exchange rate changes

        110     7     194  
                     
 

Fair value of plan assets, end of year

  $   $ 2,443   $   $ 1,635  
                     
 

Reconciliation of projected benefit obligation

                         
 

Projected benefit obligation, beginning of year

  $   $ 7,998   $   $ 5,637  
 

Service costs

        981         509  
 

Interest costs

        613         448  
 

Actuarial losses (gains)

        2,718         734  
 

Benefit payments

        (812 )       (401 )
 

Settlements

                 
 

Effect of exchange rate changes

        543         1,071  
                     
 

Projected benefit obligation, end of year

  $   $ 12,041   $   $ 7,998  
                     
 

Excess (deficiency) of plan assets over projected benefit obligation

  $   $ (9,598 ) $   $ (6,363 )
                     
 

Comprised of:

                         
 

Unamortized transition asset (liability)

  $   $ (681 ) $   $ (809 )
 

Unamortized net experience gain (loss)

        (2,283 )       482  
 

Accrued assets (liabilities)

        (6,634 )       (6,036 )
                     
 

 

  $   $ (9,598 ) $   $ (6,363 )
                     
 

Weighted average discount rate

    n.a.     7.00 %   n.a.     7.00 %
 

Weighted average expected long-term rate of return

    n.a.     n.a.     n.a.     n.a.  
 

Weighted average rate of compensation increase

    n.a.     3.00 %   n.a.     3.00 %
 

Estimated average remaining service life for the plan (in years)

    n.a.     4.0 (i)   n.a.     5.0 (i)

Notes:

    • (i)
      Estimated average remaining service life for the Executives Plan was developed for individual senior officers.

    •  

   
  Executives  
 

2011

  $ 117  
 

2012

  $ 484  
 

2013

  $ 483  
 

2014

  $ 482  
 

2015

  $ 481  
 

2016 - 2020

  $ 3,744  
SHAREHOLDERS' EQUITY (Tables)
    •  

   
  2010   2009  
 

Cumulative translation adjustment from electing US dollar as principal reporting currency

  $ (15,907 ) $ (15,907 )
 

Unrealized gain on available-for-sale securities

    48,151     67,497  
 

Cumulative translation adjustments

    (299 )   (299 )
 

Unrealized loss on pension liability

    (4,420 )   (327 )
 

Tax effect of unrealized loss on pension liability

    865     85  
             
 

 

  $ 28,390   $ 51,049  
             
    •  

   
  2010   2009   2008  
 

Weighted average number of common shares outstanding — basic

    162,342,686     155,942,151     144,740,658  
 

Add: Dilutive impact of employee stock options

    1,192,530     1,256,103     1,148,070  
 

          Dilutive impact of warrants

    2,263,902     1,392,752      
 

          Dilutive impact of shares related to RSU plan

    43,141     29,882      
                 
 

Weighted average number of common shares outstanding — diluted

    165,842,259     158,620,888     145,888,728  
                 
STOCK-BASED COMPENSATION (Tables)
    •  

   
  2010   2009   2008  
   
  Options   Weighted
average
exercise price
  Options   Weighted
average
exercise price
  Options   Weighted
average
exercise price
 
 

Outstanding, beginning of year

    5,707,940   C$ 53.85     4,752,440   C$ 44.57     3,609,924   C$ 30.34  
 

Granted

    2,926,080     57.55     2,276,000     62.65     2,549,400     54.84  
 

Exercised

    (1,627,766 )   47.02     (1,238,000 )   34.28     (1,340,484 )   25.46  
 

Forfeited

    (243,550 )   58.03     (82,500 )   55.99     (66,400 )   51.32  
                             
 

Outstanding, end of year

    6,762,704   C$ 56.94     5,707,940   C$ 53.85     4,752,440   C$ 44.57  
                             
 

Options exercisable at end of year

    2,972,857           2,445,615           1,860,890        
                                   
    • The following table summarizes information about Agnico-Eagle's stock options outstanding at December 31, 2010:

   
  Options outstanding   Options exercisable  
 
Range of exercise
prices
  Number
outstanding
  Weighted average
remaining
contractual life
  Weighted average
exercise price
  Number
exercisable
  Weighted average
exercise price
 
 

C$23.02 — C$36.23

    130,538     0.51 years     26.68     124,438     26.35  
 

C$39.18 — C$59.71

    4,546,516     2.96 years     54.90     1,990,456     53.04  
 

C$60.72 — C$83.08

    2,085,650     3.11 years     63.29     857,963     63.18  
                         
 

C$23.02 — C$83.08

    6,762,704     2.96 years     C$56.94     2,972,857     C$54.85  
                         
    •  

   
  2010   2009   2008  
 

Risk-free interest rate

    1.86%     1.27%     3.65%  
 

Expected life of options (in years)

    2.5     2.5     2.5  
 

Expected volatility of Agnico-Eagle's share price

    43.8%     64.0%     44.8%  
 

Expected dividend yield

    0.42%     0.42%     0.23%  
INCOME AND MINING TAXES (Tables)
  •  

   
  2010   2009   2008  
 

Current provision

                   
   

Canada

  $ 34,217   $ 1,171   $ 6,143  
   

Mexico

    1,942          
                 
 

 

    36,159     1,171     6,143  
 

Future provision (recovery)

                   
   

Canada

    47,083     27,083     25,580  
   

Mexico

    18,759          
   

Finland

    1,086     (6,754 )   (8,899 )
                 
 

 

    66,928     20,329     16,681  
                 
 

 

  $ 103,087   $ 21,500   $ 22,824  
                 
  •  

   
  2010   2009   2008  
 

Combined federal and composite provincial tax rates

    29.6 %   30.9 %   31.1 %
 

Increase (decrease) in taxes resulting from:

                   
 

Provincial mining duties

    6.8     16.1     6.9  
 

Tax law change (US$ election)

    (5.1 )   (24.4 )    
 

Impact of foreign tax rates

    (0.5 )   (4.9 )    
 

Permanent differences

    (4.2 )   2.2     (13.4 )
 

Valuation allowance

    (0.2 )       5.8  
 

Effect of changes in income tax rates

    (2.7 )       (6.6 )
                 
 

Actual rate as a percentage of pre-tax income

    23.7 %   19.9 %   23.8 %
                 
  •  

   
  2010   2009  
   
  Assets   Liabilities