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1. BASIS OF PRESENTATION
The accompanying interim unaudited consolidated financial statements of Agnico Eagle Mines Limited ("Agnico Eagle" or the "Company") have been prepared in accordance with United States generally accepted accounting principles ("US GAAP") in US dollars. They do not include all of the disclosures required by US GAAP for annual financial statements. Accordingly, these interim unaudited consolidated financial statements should be read in conjunction with the fiscal 2013 audited annual consolidated financial statements, including the accounting policies and notes thereto, included in the Annual Report and Annual Information Form/Form 40-F for the year ended December 31, 2013. In the opinion of management, the interim unaudited consolidated financial statements reflect all adjustments, which consist only of normal and recurring adjustments necessary to present fairly the financial position as at June 30, 2014 and the results of operations and cash flows for the three and six months ended June 30, 2014 and June 30, 2013.
Operating results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2014.
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2. USE OF ESTIMATES
The preparation of the interim unaudited consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim unaudited consolidated financial statements and accompanying notes. Management believes that the estimates used in the preparation of the interim unaudited consolidated financial statements are reasonable and prudent; however, actual results may differ from these estimates.
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3. ACCOUNTING POLICIES
These interim unaudited consolidated financial statements follow the same accounting policies and methods of their application as the December 31, 2013 audited annual consolidated financial statements.
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4. FAIR VALUE MEASUREMENT
ASC 820 — Fair Value Measurement and Disclosure defines fair value, establishes a framework for measuring fair value under US GAAP and requires expanded disclosures about fair value measurements including the following three fair value hierarchy levels:
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).
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 following table sets out the Company's financial assets and liabilities measured at fair value as at June 30, 2014 using the fair value hierarchy:
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Level 1 | Level 2 | Level 3 | Total | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Financial assets: |
||||||||||||||
Trade receivables(i) |
$ | — | $ | 57,800 | $ | — | $ | 57,800 | ||||||
Available-for-sale securities(ii) |
66,211 | 5,327 | — | 71,538 | ||||||||||
Fair value of derivative financial instruments(iii) |
— | 14,710 | — | 14,710 | ||||||||||
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$ | 66,211 | $ | 77,837 | $ | — | $ | 144,048 | ||||||
Financial liabilities: |
||||||||||||||
Fair value of derivative financial instruments(iii) |
$ | 33,385 | $ | 1,333 | $ | — | $ | 34,718 | ||||||
The following table sets out the Company's financial assets and liabilities measured at fair value as at December 31, 2013 using the fair value hierarchy:
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Level 1 | Level 2 | Level 3 | Total | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Financial assets: |
||||||||||||||
Trade receivables(i) |
$ | — | $ | 67,300 | $ | — | $ | 67,300 | ||||||
Available-for-sale securities(ii) |
74,581 | — | — | 74,581 | ||||||||||
Fair value of derivative financial instruments(iii) |
— | 5,590 | — | 5,590 | ||||||||||
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$ | 74,581 | $ | 72,890 | $ | — | $ | 147,471 | ||||||
Financial liabilities: |
||||||||||||||
Fair value of derivative financial instruments(iii) |
$ | — | $ | 467 | $ | — | $ | 467 | ||||||
Notes:
Derivative financial instruments classified within Level 1 of the fair value hierarchy relate to common shares held in depositary relating to convertible debentures acquired from Osisko (see note 10 for details). These financial liabilities constitute contracts to issue publicly-traded shares for which quoted market prices approximate the fair value of the derivative financial instruments.
In the event that a decline in the fair value of an investment in available-for-sale securities occurs and the decline in value is considered to be other-than-temporary, an impairment charge is recorded in the interim unaudited consolidated statements of income (loss) and comprehensive income (loss) 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 investee data, the length of time and the extent to which the fair value has been less than cost, the financial condition of the investee 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 in available-for-sale securities for which the cost basis exceeds its fair value.
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5. PROPERTY, PLANT AND MINE DEVELOPMENT
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As at June 30, 2014 | As at December 31, 2013 | ||||||||||||||||||
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Cost | Accumulated Amortization |
Net Book Value |
Cost | Accumulated Amortization |
Net Book Value |
||||||||||||||
Mining properties |
$ | 1,375,973 | $ | 121,256 | $ | 1,254,717 | $ | 1,361,867 | $ | 89,700 | $ | 1,272,167 | ||||||||
Plant and equipment |
2,557,739 | 780,592 | 1,777,147 | 2,286,887 | 662,394 | 1,624,493 | ||||||||||||||
Mine development costs |
1,082,728 | 261,699 | 821,029 | 1,038,564 | 239,898 | 798,666 | ||||||||||||||
Construction in Progress: |
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Meliadine project |
214,203 | — | 214,203 | 192,413 | — | 192,413 | ||||||||||||||
La India mine(i) |
— | — | — | 161,378 | — | 161,378 | ||||||||||||||
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$ | 5,230,643 | $ | 1,163,547 | $ | 4,067,096 | $ | 5,041,109 | $ | 991,992 | $ | 4,049,117 | ||||||||
Note:
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6. SHAREHOLDERS' EQUITY
In 2009, the Company implemented the restricted share unit ("RSU") plan for certain employees. Effective January 1, 2012, the RSU plan was amended to include directors and senior executives of the Company.
A deferred compensation balance is recorded for the total grant date value on the date of each RSU plan grant. The deferred compensation balance is recorded as a reduction of shareholders' equity and is amortized as compensation expense over the applicable vesting period.
During the first quarter of 2014, the Company funded the RSU plan by transferring $7.5 million (first quarter of 2013 — $19.0 million) to an employee benefit trust (the "Trust") that then purchased common shares of the Company in the open market. For accounting purposes, the Trust is treated as a variable interest entity and consolidated in the accounts of the Company. The common shares purchased and held by the Trust are excluded from the basic net income (loss) per share calculations but are included in the basic net income (loss) per share calculations once they have vested. All of the non-vested common shares held by the Trust are included in the diluted net income (loss) per share calculations, unless the impact is anti-dilutive.
The following table sets out the maximum number of common shares that would be outstanding if all instruments outstanding at June 30, 2014 were exercised:
Common shares outstanding at June 30, 2014 |
208,524,366 | ||||
Employee stock options |
12,150,710 | ||||
RSU plan |
293,551 | ||||
Common shares held in depositary relating to convertible debentures acquired from Osisko (note 10) |
871,680 | ||||
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221,840,307 | ||||
The following table sets out the weighted average number of common shares used in the calculation of basic and diluted net income (loss) per share:
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2014 | 2013 | 2014 | 2013 | ||||||||||
Net income (loss) for the period |
$ | 37,676 | $ | (24,380 | ) | $ | 146,528 | $ | (521 | ) | ||||
Weighted average number of common shares outstanding — basic (in thousands) |
185,718 | 172,572 | 179,845 | 172,426 | ||||||||||
Add: Dilutive impact of shares related to RSU plan |
346 | — | 329 | — | ||||||||||
Add: Dilutive impact of common shares held in depositary relating to convertible debentures acquired from Osisko (note 10) |
143 | — | 72 | — | ||||||||||
Weighted average number of common shares outstanding — diluted (in thousands) |
186,207 | 172,572 | 180,246 | 172,426 | ||||||||||
Net income (loss) per share — basic |
$ | 0.20 | $ | (0.14 | ) | $ | 0.81 | $ | (0.00 | ) | ||||
Net income (loss) per share — diluted |
$ | 0.20 | $ | (0.14 | ) | $ | 0.81 | $ | (0.00 | ) | ||||
Diluted net income per share has been calculated using the treasury stock method. In applying the treasury stock method, outstanding employee stock 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 net income per share as the impact would be anti-dilutive.
For the three and six months ended June 30, 2014, all employee stock options were excluded from the calculation of diluted net income per share as their effect would have been anti-dilutive.
For the three and six months ended June 30, 2013, the impact of any additional shares issued under the employee stock option plan, as a result of the conversion of warrants, or related to the RSU Plan would be anti-dilutive as a result of the net loss positions. Consequently, diluted net loss per share was calculated in the same manner as basic net loss per share. The warrants expired unexercised on December 3, 2013.
Accumulated other comprehensive income (loss)
The following table sets out the changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2014:
|
Cumulative Translation Adjustment |
Available-for-sale Securities and Other Investments |
Derivative Financial Instruments |
Pension Benefits |
Total | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Accumulated other comprehensive (loss) income, December 31, 2013 |
$ | (16,206 | ) | $ | 3,965 | $ | (148 | ) | $ | (2,752 | ) | $ | (15,141 | ) | |||
Unrealized other comprehensive gain |
— | 26,282 | 1,334 | — | 27,616 | ||||||||||||
Income tax recovery impact |
— | — | (352 | ) | — | (352 | ) | ||||||||||
Reclassifications from accumulated other comprehensive (loss) income to the interim unaudited consolidated statements of income (loss) and comprehensive income (loss) |
— | (2,870 | ) | 475 | 330 | (2,065 | ) | ||||||||||
Income tax recovery impact |
— | — | (125 | ) | (87 | ) | (212 | ) | |||||||||
Other comprehensive income for the period |
— | 23,412 | 1,332 | 243 | 24,987 | ||||||||||||
Accumulated other comprehensive (loss) income, June 30, 2014 |
$ | (16,206 | ) | $ | 27,377 | $ | 1,184 | $ | (2,509 | ) | $ | 9,846 | |||||
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7. STOCK-BASED COMPENSATION
The following summary sets out activity with respect to Agnico Eagle's outstanding stock options:
|
Six Months Ended June 30, 2014 |
Six Months Ended June 30, 2013 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Number of Stock Options |
Weighted Average Exercise Price |
Number of Stock Options |
Weighted Average Exercise Price |
||||||||||
Outstanding, beginning of period |
11,283,535 | C$ | 56.02 | 10,587,126 | C$ | 56.60 | ||||||||
Granted |
3,180,000 | 28.04 | 2,803,000 | 52.13 | ||||||||||
Exercised |
(377,425 | ) | 29.90 | (213,500 | ) | 37.06 | ||||||||
Forfeited |
(211,250 | ) | 52.24 | (181,750 | ) | 60.68 | ||||||||
Expired |
(1,724,150 | ) | 62.64 | (1,340,885 | ) | 54.86 | ||||||||
Outstanding, end of period |
12,150,710 | C$ | 48.63 | 11,653,991 | C$ | 56.02 | ||||||||
Options exercisable, end of period |
7,739,210 | C$ | 55.42 | 7,469,045 | C$ | 59.36 | ||||||||
Agnico Eagle estimated the fair value of stock options under the Black-Scholes option pricing model using the following weighted average assumptions:
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Six Months Ended June 30, |
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---|---|---|---|---|---|---|---|---|
|
2014 | 2013 | ||||||
Risk-free interest rate |
1.56% | 1.51% | ||||||
Expected life of stock options (in years) |
2.6 | 2.7 | ||||||
Expected volatility of Agnico Eagle's share price |
42.5% | 35.0% | ||||||
Expected dividend yield |
3.83% | 1.79% |
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8. AVAILABLE-FOR-SALE SECURITIES
The Company's investments in available-for-sale securities consist primarily of investments in common shares of entities in the mining industry. The cost basis of available-for-sale securities is determined using the average cost method and they are carried at fair value. Detail on the Company's available-for-sale securities holdings is set out below:
|
As at June 30, 2014 |
As at December 31, 2013 |
||||||
---|---|---|---|---|---|---|---|---|
Available-for-sale securities in an unrealized gain position: |
||||||||
Cost (net of impairments) |
$ | 43,077 | $ | 30,583 | ||||
Unrealized gains in accumulated other comprehensive income (loss) |
27,786 | 11,530 | ||||||
Estimated fair value |
70,863 | 42,113 | ||||||
Available-for-sale securities in an unrealized loss position: |
||||||||
Cost (net of impairments) |
1,006 | 39,933 | ||||||
Unrealized losses in accumulated other comprehensive income (loss) |
(331 | ) | (7,465 | ) | ||||
Estimated fair value |
675 | 32,468 | ||||||
Total estimated fair value of available-for-sale securities |
$ | 71,538 | $ | 74,581 | ||||
During the three months ended June 30, 2014, the Company received proceeds of $39.5 million and recognized a gain before income taxes of $5.0 million on the sale of certain available-for-sale securities. During the six months ended June 30, 2014, the Company received proceeds of $40.1 million and recognized a gain before income taxes of $5.3 million on the sale of certain available-for-sale securities. During the three and six months ended June 30, 2013, the Company did not dispose of any available-for-sale securities.
During the three and six months ended June 30, 2014, certain available-for-sale securities fell into an unrealized loss position. In each case, the Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. During the three months ended June 30, 2014, the Company recorded an impairment loss of $2.4 million (three months ended June 30, 2013 — $17.3 million) on certain available-for-sale securities that were determined to be other-than-temporarily impaired. During the six months ended June 30, 2014, the Company recorded an impairment loss of $2.4 million (six months ended June 30, 2013 — $28.3 million) on certain available-for-sale securities that were determined to be other-than-temporarily impaired.
At June 30, 2014, the fair value of available-for-sale securities in an unrealized loss position was $0.7 million (December 31, 2013 — $32.5 million) with total unrealized losses in accumulated other comprehensive income (loss) of $0.3 million (December 31, 2013 — $7.5 million). Based on an evaluation of the severity and duration of the impairment of these available-for-sale securities (less than three months) and on the Company's intent to hold the investments for a period of time sufficient for a recovery of fair value, the Company does not consider these available-for-sale securities to be other-than-temporarily impaired as at June 30, 2014.
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9. LONG-TERM DEBT
Credit Facility
On June 22, 2010, the Company amended and restated one of its two unsecured revolving bank credit facilities (the "Credit Facility") and terminated its other unsecured revolving bank credit facility, increasing the amount available from an aggregate $900.0 million to $1,200.0 million.
On July 20, 2012, the Company further amended the Credit Facility, extending the maturity date from June 22, 2016 to June 22, 2017 and amending pricing terms.
At June 30, 2014, the Credit Facility was drawn down by $520.0 million (December 31, 2013 — $200.0 million). Amounts drawn down, together with outstanding letters of credit under the Credit Facility, resulted in Credit Facility availability of $678.9 million at June 30, 2014.
2012 Notes
On July 24, 2012, the Company closed a $200.0 million private placement of guaranteed senior unsecured notes (the "2012 Notes") which, on issuance, had a weighted average maturity of 11.0 years and weighted average yield of 4.95%.
The following table sets out details of the individual series of the 2012 Notes:
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Principal | Interest Rate | Maturity Date | ||||||||
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Series A |
$ | 100,000 | 4.87% | 7/23/2022 | |||||||
Series B |
100,000 | 5.02% | 7/23/2024 | ||||||||
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$ | 200,000 | |||||||||
2010 Notes
On April 7, 2010, the Company closed a $600.0 million private placement of guaranteed senior unsecured notes (the "2010 Notes") which, on issuance, had a weighted average maturity of 9.84 years and weighted average yield of 6.59%.
The following table sets out details of the individual series of the 2010 Notes:
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Principal | Interest Rate | Maturity Date | ||||||||
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Series A |
$ | 115,000 | 6.13% | 4/7/2017 | |||||||
Series B |
360,000 | 6.67% | 4/7/2020 | ||||||||
Series C |
125,000 | 6.77% | 4/7/2022 | ||||||||
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$ | 600,000 | |||||||||
Covenants
Payment and performance of Agnico Eagle's obligations under the Credit Facility, 2012 Notes and 2010 Notes is guaranteed by each of its significant subsidiaries and certain of its other subsidiaries (the "Guarantors").
The Credit Facility contains covenants that limit, among other things, the ability of the Company to incur additional indebtedness, make distributions in certain circumstances and sell material assets.
The 2012 Notes and 2010 Notes contain covenants that restrict, among other things, the ability of the Company to amalgamate or otherwise transfer its assets, sell material assets, carry on a business other than one related to mining and the ability of the Guarantors to incur indebtedness.
The Credit Facility, 2012 Notes and 2010 Notes also require the Company to maintain a total net debt to EBITDA ratio below a specified maximum value as well as a minimum tangible net worth.
The Company was in compliance with all covenants contained in the Credit Facility, 2012 Notes and 2010 Notes as at June 30, 2014.
Interest on long-term debt
Total long-term debt interest costs incurred during the three and six months ended June 30, 2014 were $13.4 million (three months ended June 30, 2013 — $12.4 million) and $26.6 million (six months ended June 30, 2013 — $24.7 million), respectively.
Total interest costs capitalized to property, plant and mine development during the three and six months ended June 30, 2014 were $0.2 million (three months ended June 30, 2013 — $1.2 million) and $0.4 million (six months ended June 30, 2013 — $2.3 million), respectively.
During the three months ended June 30, 2014, cash interest paid on the Credit Facility was $0.8 million (three months ended June 30, 2013 — $0.2 million), cash standby fees paid on the Credit Facility were $1.4 million (three months ended June 30, 2013 — $1.2 million) and cash interest paid on the 2010 Notes and 2012 Notes was $19.8 million (three months ended June 30, 2013 — $19.8 million).
During the six months ended June 30, 2014, cash interest paid on the Credit Facility was $1.9 million (six months ended June 30, 2013 — $0.2 million), cash standby fees paid on the Credit Facility were $2.8 million (six months ended June 30, 2013 — $2.4 million) and cash interest paid on the 2010 Notes and 2012 Notes was $24.7 million (six months ended June 30, 2013 — $24.7 million).
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10. FINANCIAL INSTRUMENTS
Currency Risk Management
The Company utilizes foreign exchange hedges to reduce the variability in expected future cash flows arising from changes in foreign currency exchange rates. The hedged items represent a portion of the Canadian dollar denominated cash outflows arising from Canadian dollar denominated expenditures.
As at June 30, 2014, the Company had outstanding foreign exchange zero cost collars with a cash flow hedging relationship that qualified for hedge accounting under ASC 815 — Derivatives and Hedging. 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. At June 30, 2014, the zero cost collars hedged $120.0 million of 2014 expenditures and the Company recognized mark-to-market adjustments in accumulated other comprehensive income (loss).
Amounts deferred in accumulated other comprehensive income (loss) are reclassified to the production costs line item on the interim unaudited consolidated statements of income (loss) and comprehensive income (loss), as applicable, when the hedged transaction has occurred. Mark-to-market gains (losses) related to foreign exchange derivative financial instruments are recorded at fair value based on broker-dealer quotations that utilize period end forward pricing of the currency hedged to calculate fair value.
The Company's other foreign currency derivative strategies in 2014 and 2013 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 for Canadian dollars. All of these derivative transactions expired prior to period end such that no derivatives were outstanding as at June 30, 2014 or June 30, 2013. The call option premiums were recognized in the (loss) gain on derivative financial instruments line item of the interim unaudited consolidated statements of income (loss) and comprehensive income (loss).
Commodity Price Risk Management
To mitigate the risks associated with fluctuating diesel fuel prices, the Company uses derivative financial instrument contracts to hedge the price on a portion of diesel fuel costs associated with the Meadowbank mine's diesel fuel exposure as it relates to operating costs. Financial contracts that expired in 2013 and totaled 10.5 million gallons of heating oil were entered into at an average price of $2.99 per gallon, which was approximately 55.0% of the Meadowbank mine's expected 2013 diesel fuel operating costs. These contracts qualified for hedge accounting and the related market-to-market adjustments prior to settlement were recognized in accumulated other comprehensive income (loss). No heating oil derivative financial instrument contracts expired during the three or six months ended June 30, 2014.
Amounts deferred in accumulated other comprehensive income (loss) are reclassified to the production costs line item on the interim unaudited consolidated statements of income (loss) and comprehensive income (loss), as applicable, when the derivative financial instrument has settled. Mark-to-market gains (losses) related to heating oil derivative financial instruments are based on broker-dealer quotations that utilize period end forward pricing to calculate fair value.
As at June 30, 2014 and December 31, 2013, there were no metal derivative positions. The Company may from time to time utilize short-term (including intra-quarter) financial instruments as part of its strategy to minimize risks and optimize returns on its by-product metal sales.
Common Shares Held in Depositary Relating to Convertible Debentures Acquired from Osisko
As part of the Company's joint acquisition of Osisko on June 16, 2014 (see note 14 for details), 871,680 Agnico Eagle common shares were contributed to a depositary to satisfy the convertible debentures acquired from Osisko if converted in the future.
These Agnico Eagle common shares are not considered outstanding as they are non-voting and as accrued dividends may revert back to the Company. These common shares are excluded from the calculation of basic net income per share and are included in the calculation of diluted net income per share (see note 6 for net income per share calculations).
Agnico Eagle has recorded a derivative financial instrument liability relating to the potential delivery of its common shares relating to the convertible debentures acquired from Osisko on the fair value of derivative financial instruments line item of the interim unaudited consolidated balance sheets. Related fair value gains and losses are reported on the (loss) gain on derivative financial instrument line item of the interim unaudited consolidated statements of income (loss) and comprehensive income (loss).
The following table sets out a summary of the amounts recognized in the (loss) gain on derivative financial instruments line item of the interim unaudited consolidated statements of income (loss) and comprehensive income (loss):
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Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
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2014 | 2013 | 2014 | 2013 | ||||||||||
Premiums realized on written foreign exchange call options |
$ | 1,178 | $ | 789 | $ | 2,010 | $ | 1,473 | ||||||
Mark-to-market (loss) gain on derivative equity contracts(i) |
(500 | ) | 498 | (948 | ) | 1,331 | ||||||||
Realized loss on warrants |
— | — | (185 | ) | — | |||||||||
Mark-to-market gain (loss) on warrants(i) |
2,197 | (3,223 | ) | 5,326 | (1,758 | ) | ||||||||
Mark-to-market loss on common shares held in depositary relating to convertible debentures acquired from Osisko(i) |
(4,219 | ) | — | (4,219 | ) | — | ||||||||
(Loss) gain on derivative financial instruments |
$ | (1,344 | ) | $ | (1,936 | ) | $ | 1,984 | $ | 1,046 | ||||
Note:
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11. 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 June 30, 2014, the total amount of these guarantees was $180.0 million.
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12. 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 that represent more than 10% of the combined revenue, profit or loss or total assets of all operating segments. Each of the Company's significant operating mines and projects are considered to be separate segments. Certain operating segments that do not meet the quantitative thresholds are still disclosed when the Company believes that the information is useful. Segment results for the three and six months ended June 30, 2013 have been retrospectively revised to reflect organizational changes in 2013 that created three business units consisting of the Northern Business unit, the Southern Business unit, and the Exploration business unit. However, under this revised organizational structure the Chief Executive Officer also reviews segment income (defined as revenues from mining operations less production costs, exploration and corporate development and impairment losses) on a mine-by-mine basis. The following are the Company's reportable segments organized according to their relationship with the Company's three business units and reflect how the Company manages its business and how it classifies its operations for planning and measuring performance:
Northern Business: |
LaRonde mine, Lapa mine, Goldex mine, Meadowbank mine, Canadian Malartic mine, Meliadine project and Kittila mine | ||
Southern Business: |
Pinos Altos mine, Creston Mascota deposit at Pinos Altos and La India mine | ||
Exploration: |
United States Exploration office, Europe Exploration office, Canada Exploration offices and Latin America Exploration office |
The accounting policies of the reportable segments are the same as those described in the December 31, 2013 audited annual consolidated financial statements. Excluding the related party transactions described in note 16, there are no transactions between the reportable segments affecting revenue. Production costs for the reportable segments are net of intercompany transactions.
Corporate and other (including the Urastar property) assets and specific income and expense items are set out separately below.
The Goldex mine's M and E Zones achieved commercial production on October 1, 2013. The La India mine achieved commercial production on February 1, 2014. The Company's 50.0% interest in the Canadian Malartic mine is accounted for as an equity method investment and was jointly acquired on June 16, 2014.
Three Months Ended June 30, 2014 |
Revenues from Mining Operations |
Production Costs |
Exploration and Corporate Development |
Segment Income (Loss) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Northern Business: |
||||||||||||||
LaRonde mine |
$ | 73,160 | $ | (45,340 | ) | $ | — | $ | 27,820 | |||||
Lapa mine |
23,406 | (14,643 | ) | — | 8,763 | |||||||||
Goldex mine |
28,702 | (15,028 | ) | — | 13,674 | |||||||||
Meadowbank mine |
152,536 | (71,892 | ) | — | 80,644 | |||||||||
Canadian Malartic mine (note 16) |
21,274 | (20,727 | ) | — | 547 | |||||||||
Kittila mine |
41,109 | (27,107 | ) | — | 14,002 | |||||||||
Total Northern Business |
$ | 340,187 | $ | (194,737 | ) | $ | — | $ | 145,450 | |||||
Southern Business: |
||||||||||||||
Pinos Altos mine |
$ | 63,357 | $ | (30,033 | ) | $ | — | $ | 33,324 | |||||
Creston Mascota deposit at Pinos Altos |
14,237 | (6,901 | ) | — | 7,336 | |||||||||
La India mine |
20,013 | (7,335 | ) | — | 12,678 | |||||||||
Total Southern Business |
$ | 97,607 | $ | (44,269 | ) | $ | — | $ | 53,338 | |||||
Exploration |
$ | — | $ | — | $ | (11,552 | ) | $ | (11,552 | ) | ||||
Segments totals |
$ | 437,794 | $ | (239,006 | ) | $ | (11,552 | ) | $ | 187,236 | ||||
Total segments income |
$ | 187,236 | ||||||||||||
Corporate and other: |
||||||||||||||
Amortization of property, plant and mine development |
(77,570 | ) | ||||||||||||
General and administrative |
(24,791 | ) | ||||||||||||
Impairment loss on available-for-sale securities |
(2,419 | ) | ||||||||||||
Interest expense |
(15,731 | ) | ||||||||||||
Interest and sundry expense |
(3,370 | ) | ||||||||||||
Loss on derivative financial instruments |
(1,344 | ) | ||||||||||||
Gain on sale of available-for-sale securities |
5,016 | |||||||||||||
Foreign currency translation loss |
(8,666 | ) | ||||||||||||
Income before income and mining taxes and other items |
58,361 | |||||||||||||
Income and mining taxes expense |
(18,360 | ) | ||||||||||||
Loss on equity investment |
(2,325 | ) | ||||||||||||
Net income for the period |
$ | (37,676 | ) | |||||||||||
Three Months Ended June 30, 2013 |
Revenues from Mining Operations |
Production Costs |
Exploration and Corporate Development |
Segment Income (Loss) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Northern Business: |
||||||||||||||
LaRonde mine |
$ | 74,996 | $ | (60,624 | ) | $ | — | $ | 14,372 | |||||
Lapa mine |
34,737 | (18,094 | ) | — | 16,643 | |||||||||
Meadowbank mine |
122,518 | (90,136 | ) | — | 32,382 | |||||||||
Kittila mine |
18,047 | (18,159 | ) | — | (112 | ) | ||||||||
Total Northern Business |
$ | 250,298 | $ | (187,013 | ) | $ | — | $ | 63,285 | |||||
Southern Business: |
||||||||||||||
Pinos Altos mine |
$ | 76,219 | $ | (34,511 | ) | $ | — | $ | 41,708 | |||||
Creston Mascota deposit at Pinos Altos |
9,907 | (4,427 | ) | — | 5,480 | |||||||||
Total Southern Business |
$ | 86,126 | $ | (38,938 | ) | $ | — | $ | 47,188 | |||||
Exploration |
$ | — | $ | — | $ | (11,326 | ) | $ | (11,326 | ) | ||||
Segments totals |
$ | 336,424 | $ | (225,951 | ) | $ | (11,326 | ) | $ | 99,147 | ||||
Total segments income |
$ | 99,147 | ||||||||||||
Corporate and other: |
||||||||||||||
Amortization of property, plant and mine development |
(70,128 | ) | ||||||||||||
General and administrative |
(28,385 | ) | ||||||||||||
Impairment loss on available-for-sale securities |
(17,313 | ) | ||||||||||||
Provincial capital tax |
1,504 | |||||||||||||
Interest expense |
(13,735 | ) | ||||||||||||
Interest and sundry expense |
(3,734 | ) | ||||||||||||
Loss on derivative financial instruments |
(1,936 | ) | ||||||||||||
Foreign currency translation gain |
11,120 | |||||||||||||
Loss before income and mining taxes |
(23,460 | ) | ||||||||||||
Income and mining taxes expense |
(920 | ) | ||||||||||||
Net loss for the period |
$ | (24,380 | ) | |||||||||||
Six Months Ended June 30, 2014 |
Revenues from Mining Operations |
Production Costs |
Exploration and Corporate Development |
Segment Income (Loss) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Northern Business: |
||||||||||||||
LaRonde mine |
$ | 165,864 | $ | (94,927 | ) | $ | — | $ | 70,937 | |||||
Lapa mine |
54,096 | (30,096 | ) | — | 24,000 | |||||||||
Goldex mine |
54,072 | (29,819 | ) | — | 24,253 | |||||||||
Meadowbank mine |
343,576 | (142,961 | ) | — | 200,615 | |||||||||
Canadian Malartic mine (note 16) |
21,274 | (20,727 | ) | — | 547 | |||||||||
Kittila mine |
89,571 | (56,532 | ) | — | 33,039 | |||||||||
Total Northern Business |
$ | 728,453 | $ | (375,062 | ) | $ | — | $ | 353,391 | |||||
Southern Business: |
||||||||||||||
Pinos Altos mine |
$ | 133,840 | $ | (61,919 | ) | $ | — | $ | 71,921 | |||||
Creston Mascota deposit at Pinos Altos |
27,776 | (12,929 | ) | — | 14,847 | |||||||||
La India mine |
39,492 | (13,187 | ) | — | 26,305 | |||||||||
Total Southern Business |
$ | 201,108 | $ | (88,035 | ) | — | $ | 113,073 | ||||||
Exploration |
$ | — | $ | — | $ | (20,970 | ) | $ | (20,970 | ) | ||||
Segments totals |
$ | 929,561 | $ | (463,097 | ) | $ | (20,970 | ) | $ | 445,494 | ||||
Total segments income |
$ | 445,494 | ||||||||||||
Corporate and other: |
||||||||||||||
Amortization of property, plant and mine development |
(151,107 | ) | ||||||||||||
General and administrative |
(52,030 | ) | ||||||||||||
Impairment loss on available-for-sale securities |
(2,419 | ) | ||||||||||||
Interest expense |
(31,666 | ) | ||||||||||||
Interest and sundry expense |
(2,953 | ) | ||||||||||||
Gain on derivative financial instruments |
1,984 | |||||||||||||
Gain on sale of available-for-sale securities |
5,289 | |||||||||||||
Foreign currency translation loss |
(326 | ) | ||||||||||||
Income before income and mining taxes and other items |
212,266 | |||||||||||||
Income and mining taxes expense |
(63,413 | ) | ||||||||||||
Loss on equity investment |
(2,325 | ) | ||||||||||||
Net income for the period |
$ | 146,528 | ||||||||||||
Six Months Ended June 30, 2013 |
Revenues from Mining Operations |
Production Costs |
Exploration and Corporate Development |
Segment Income (Loss) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Northern Business: |
||||||||||||||
LaRonde mine |
$ | 166,194 | $ | (118,527 | ) | $ | — | $ | 47,667 | |||||
Lapa mine |
73,135 | (34,704 | ) | — | 38,431 | |||||||||
Meadowbank mine |
252,610 | (183,725 | ) | — | 68,885 | |||||||||
Kittila mine |
90,185 | (45,341 | ) | — | 44,844 | |||||||||
Total Northern Business |
$ | 582,124 | $ | (382,297 | ) | $ | — | $ | 199,827 | |||||
Southern Business: |
||||||||||||||
Pinos Altos mine |
$ | 163,909 | $ | (66,163 | ) | $ | — | $ | 97,746 | |||||
Creston Mascota deposit at Pinos Altos |
10,813 | (7,544 | ) | — | 3,269 | |||||||||
Total Southern Business |
$ | 174,722 | $ | (73,707 | ) | $ | — | $ | 101,015 | |||||
Exploration |
$ | — | $ | — | $ | (19,897 | ) | $ | (19,897 | ) | ||||
Segments totals |
$ | 756,846 | $ | (456,004 | ) | $ | (19,897 | ) | $ | 280,945 | ||||
Total segments income |
$ | 280,945 | ||||||||||||
Corporate and other: |
||||||||||||||
Amortization of property, plant and mine development |
(140,199 | ) | ||||||||||||
General and administrative |
(65,705 | ) | ||||||||||||
Impairment loss on available-for-sale securities |
(28,308 | ) | ||||||||||||
Provincial capital tax |
1,504 | |||||||||||||
Interest expense |
(27,651 | ) | ||||||||||||
Interest and sundry expense |
(3,946 | ) | ||||||||||||
Gain on derivative financial instruments |
1,046 | |||||||||||||
Foreign currency translation gain |
7,462 | |||||||||||||
Income before income and mining taxes |
25,148 | |||||||||||||
Income and mining taxes expense |
(25,669 | ) | ||||||||||||
Net loss for the period |
$ | (521 | ) | |||||||||||
|
Total Assets as at | |||||||
---|---|---|---|---|---|---|---|---|
|
June 30, 2014 |
December 31, 2013 |
||||||
Northern Business: |
||||||||
LaRonde mine |
$ | 873,458 | $ | 878,719 | ||||
Lapa mine |
77,778 | 78,293 | ||||||
Goldex mine |
130,399 | 120,601 | ||||||
Meadowbank mine |
640,662 | 711,387 | ||||||
Meliadine project |
899,431 | 877,923 | ||||||
Kittila mine |
908,394 | 870,332 | ||||||
Total Northern Business |
$ | 3,530,122 | $ | 3,537,255 | ||||
Southern Business: |
||||||||
Pinos Altos mine |
$ | 579,023 | $ | 537,560 | ||||
Creston Mascota deposit at Pinos Altos |
86,790 | 86,185 | ||||||
La India mine |
539,216 | 512,450 | ||||||
Total Southern Business |
$ | 1,205,029 | $ | 1,136,195 | ||||
Exploration |
$ | 24,335 | $ | 19,838 | ||||
Corporate and other |
$ | 310,208 | $ | 266,071 | ||||
Equity investment |
$ | 1,638,784 | $ | — | ||||
Total |
$ | 6,708,478 | $ | 4,959,359 | ||||
|
13. RECLAMATION PROVISION
Agnico Eagle's reclamation provision includes both asset retirement obligations and environmental remediation liabilities. Reclamation provision estimates are based on current legislation, third party estimates, management's estimates and feasibility study calculations.
Due to the suspension of mining operations at the Goldex mine's GEZ on October 19, 2011, Agnico Eagle recognized an environmental remediation liability. During the six months ended June 30, 2014, the Company incurred $2.0 million in remediation costs that were applied against the environmental remediation liability recognized in 2011. As at June 30, 2014, the remaining Goldex mine environmental remediation liability was $12.6 million, $0.9 million of which was classified as a current liability.
|
14. ACQUISITIONS
Osisko Mining Corporation
On June 16, 2014, Agnico Eagle and Yamana Gold Inc. ("Yamana") completed the joint acquisition of 100.0% of the issued and outstanding common shares of Osisko Mining Corporation ("Osisko") by way of their previously announced court-approved plan of arrangement ("the Arrangement").
Under the Arrangement, Agnico Eagle and Yamana each own 50.0% of Osisko and jointly operate the Canadian Malartic mine in Quebec through the newly formed Canadian Malartic General Partnership. Agnico Eagle and Yamana will also jointly explore the Kirkland Lake assets, the Hammond Reef project and the Pandora and Wood-Pandora properties.
Each outstanding common share of Osisko was exchanged under the Arrangement for: (i) C$2.09 in cash (Agnico Eagle's 50.0% share was C$1.045); (ii) 0.07264 of an Agnico Eagle common share; (iii) 0.26471 of a Yamana common share; and (iv) 0.1 of one common share of Osisko Gold Royalties Ltd., a newly formed company that has commenced trading on the Toronto Stock Exchange.
Pursuant to the Arrangement, the following assets of Osisko were transferred to Osisko Gold Royalties Ltd.: (i) a 5.0% net smelter royalty on the Canadian Malartic mine; (ii) C$157.0 million in cash; (iii) a 2.0% net smelter royalty on the Kirkland Lake assets, the Hammond Reef project, and certain other properties; (iv) all assets and liabilities of Osisko in its Guerrero camp; and (v) certain other investments and assets.
Agnico Eagle has accounted for its joint acquisition of Osisko as an equity method investment. Direct transaction costs totaling $16.7 million were included in the cost of the equity investment in Osisko.
Agnico Eagle's share of Osisko's June 16, 2014 purchase price was comprised of the following:
Cash paid for acquisition |
$ | 462,728 | |||
Agnico Eagle common shares issued for acquisition |
1,135,071 | ||||
Fair value of derivative financial instruments(i) |
29,166 | ||||
Total Agnico Eagle purchase price |
$ | 1,626,965 | |||
Note:
A fair value approach was applied by management in developing preliminary estimates of the fair value of identifiable assets and liabilities contributed to the newly formed Osisko joint venture. Preliminary estimates of fair value represent all information available as of the acquisition date. However, estimates of fair value may be adjusted during the measurement period as new information about the facts and circumstances that existed as of the acquisition date is obtained.
The following table sets out summarized financial information relating to Agnico Eagle's equity method investment for June 16, 2014 through June 30, 2014 based on management's preliminary estimates of fair value:
Current assets |
$ | 153,370 | |||
Non-current assets |
$ | 1,939,249 | |||
Current liabilities |
$ | 69,243 | |||
Non-current liabilities |
$ | 398,736 | |||
Revenues from mining operations |
$ | 21,885 | |||
Operating margin(i) |
$ | 2,886 | |||
Net loss |
$ | (2,325 | ) |
Note:
Urastar Gold Corporation
On May 16, 2013, the Company completed the acquisition of all of the issued and outstanding common shares of Urastar Gold Corporation ("Urastar") pursuant to a court-approved plan of arrangement under the Business Corporations Act (British Columbia) for cash consideration of $10.1 million. The Urastar acquisition was accounted for as a business combination and goodwill of $9.8 million was recognized on the Company's consolidated balance sheets.
The transaction costs associated with the acquisition totaling $0.7 million were expensed through the general and administrative line item of the consolidated statements of income (loss) and comprehensive income (loss) during the year ended December 31, 2013.
The following table sets out the allocation of the purchase price to assets acquired and liabilities assumed, based on management's estimates of fair value:
Total purchase price: |
|||||
Cash paid for acquisition |
$ | 10,127 | |||
Fair value of assets acquired and liabilities assumed: |
|||||
Mining properties |
$ | 1,994 | |||
Goodwill |
9,802 | ||||
Cash and cash equivalents |
76 | ||||
Trade receivables |
731 | ||||
Other current assets |
12 | ||||
Plant and equipment |
2 | ||||
Accounts payable and accrued liabilities |
(791 | ) | |||
Other liabilities |
(1,573 | ) | |||
Deferred tax liability |
(126 | ) | |||
Net assets acquired |
$ | 10,127 | |||
The Company believes that goodwill for the Urastar acquisition arose principally because of the following factors: (1) the going concern value implicit in the Company's ability to sustain and/or grow its business by increasing mineral reserves and mineral 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 the Company assuming the acquisition of Urastar described above had occurred as of January 1, 2013 are detailed below. On a pro forma basis, there would have been no effect on the Company's consolidated revenues.
|
Year Ended December 31, 2013 |
||||
---|---|---|---|---|---|
|
Unaudited |
||||
Pro forma net loss for the year |
$ | (409,020 | ) | ||
Pro forma net loss per share — basic |
$ | (2.37 | ) |
|
15. GENERAL AND ADMINISTRATIVE
As a result of a kitchen fire at the Meadowbank mine in March 2011, the Company recognized a loss on disposal of the kitchen of $6.9 million, incurred related costs of $7.4 million, and recognized an insurance receivable for $11.2 million. The difference of $3.1 million was recognized in the general and administrative line item of the interim unaudited consolidated statements of income and comprehensive income in the first quarter of 2011.
During the subsequent period ended December 31, 2013, the Company received $9.8 million of insurance proceeds and had a remaining insurance receivable of $0.7 million recorded in the other current assets line item of the consolidated balance sheets as at December 31, 2013. During the first quarter of 2014, the Company received $0.7 million of insurance proceeds and had a remaining insurance receivable of nil as at June 30, 2014.
|
16. RELATED PARTY TRANSACTIONS
Agnico Eagle purchases 50.0% of the net metal content in the dore produced by its jointly owned equity method investee, the Canadian Malartic General Partnership, by way of a net metal content purchase agreement (the "Agreement"). Net metal content purchases under the Agreement are determined by multiplying the number of troy ounces of gold and silver purchased by the London p.m. fix rate for gold and the London fix rate for silver as quoted by the London Bullion Market Association on the date of shipment. Agnico Eagle then sells the gold and silver externally at prevailing spot market metal prices. Between June 16, 2014 and June 30, 2014, Agnico Eagle purchased $20.8 million of gold and $0.3 million of silver from the Canadian Malartic General Partnership. Gold and silver purchased by Agnico Eagle from the Canadian Malartic General Partnership is initially recorded in the concentrates and dore bars line item of the interim unaudited consolidated balance sheets and is reclassified upon external sale as an expense in the production line item of the interim unaudited consolidated statements of income (loss) and comprehensive income (loss). As at June 30, 2014, Agnico Eagle gold and silver purchases totaling $21.1 million remained payable to the Canadian Malartic General Partnership.
|
17. SUBSEQUENT EVENTS
On July 30, 2014, Agnico Eagle announced that the Board approved the payment of a quarterly cash dividend of $0.08 per common share, payable on September 16, 2014 to holders of record of the common shares of the Company on September 2, 2014.
On July 10, 2014, Agnico Eagle announced that it had exercised 19,800,000 warrants of Pershimco Resources Inc. ("Pershimco") at an exercise price of C$0.40 per Pershimco common share for total consideration of C$7.92 million. Upon exercising the warrants that were acquired under a private placement on January 28, 2014, Agnico Eagle held 39,600,000 common shares of Pershimco.
|
18. ONGOING LITIGATION
Securities Class Action Lawsuits
On November 7, 2011 and November 22, 2011, the Company and certain current and former senior officers, some of whom also are or were directors of the Company, were named as defendants in two putative class action lawsuits, styled Jerome Stone v. Agnico-Eagle Mines Ltd., et al., and Chris Hastings v. Agnico-Eagle Mines Limited, et al., respectively, which were filed in the United States District Court for the Southern District of New York. On February 6, 2012, the Court ordered that the two complaints be consolidated under the caption In re Agnico-Eagle Mines Ltd. Securities Litigation, and lead counsel was appointed. On April 6, 2012, a Consolidated Complaint was issued against the Company and certain of its current and former senior officers and directors. The Consolidated Complaint alleges that the Company had violated federal securities law in connection with its disclosure related to the Goldex mine. The Consolidated Complaint seeks, among other things, damages on behalf of persons who purchased or acquired securities of the Company during the period July 28, 2010 to October 19, 2011. The Consolidated Complaint has not been certified as a class action, and the Company intends to vigorously defend it. On January 14, 2013, Judge Oetken granted the Company's motion to dismiss the Consolidated Complaint and all claims therein and denied the plaintiffs' request for leave to amend the Consolidated Complaint. On February 12, 2013, the plaintiffs filed a Notice of Appeal to the United States Court for Appeals for the Second Circuit. The appeal was heard on September 23, 2013, and on October 3, 2013 the Court of Appeals for the Second Circuit affirmed the decision below dismissing the Consolidated Complaint. The time for the plaintiffs to file a petition for a writ of certiorari, requesting a review by the United States Supreme Court, has expired and the judgment dismissing the plaintiffs' Consolidated Complaint is now final and no longer appealable.
On March 8, 2012 and April 10, 2012, a Notice of Action and Statement of Claim (collectively, the "Ontario Claim") were issued by William Leslie, AFA Livforsakringsaktiebolag and certain other entities against the Company and certain of its current and former officers, some of whom also are or were directors of the Company. On September 27, 2012, the plaintiffs issued a Fresh as Amended Statement of Claim. The Fresh as Amended Statement of Claim alleges that the Company's public disclosure concerning water flow issues at its Goldex mine was misleading. The Ontario Claim was issued by the plaintiffs on behalf of all persons and entities who acquired securities of the Company during the period March 26, 2010 to October 19, 2011, excluding persons resident or domiciled in the Province of Quebec at the time they purchased or acquired such securities. The plaintiffs seek, among other things, damages of C$250.0 million and to certify the Ontario Claim as a class action. On April 17, 2013 an Order was granted on consent certifying a class action proceeding and granting leave for the claims under Section 138 of the Securities Act (Ontario) to proceed. The Company intends to vigorously defend the action on the merits.
On April 12, 2012, two senior officers of the Company, who also are or were directors of the Company, were served with a Motion for Leave to Institute a Class Action and for the Appointment of a Representative Plaintiff (the "Quebec Motion"). The action is on behalf of all persons and entities with fewer than 50 employees resident in Quebec who acquired securities of the Company between March 26, 2010 and October 19, 2011. The proposed class action is for damages of C$100.0 million arising as a result of allegedly misleading disclosure by the Company concerning its operations at the Goldex mine. On October 15, 2012, the plaintiffs served an amended Quebec Motion seeking leave to commence an action under the Securities Act (Quebec) in addition to seeking authorization to institute a class action. On October 1, 2013, the Quebec court certified the class action on terms identical to those set out in the consent Order granted in Ontario on April 17, 2013. No date has been set for the hearing to argue the class action on the merits. The Company intends to vigorously defend the action on the merits.
Canadian Malartic Corporation Litigation
On June 6, 2014, Clifton Star Resources Inc. ("Clifton") instituted proceedings against Canadian Malartic Corporation (formerly known as Osisko Mining Corporation or "Osisko") seeking an order that, among other things, Osisko pay Clifton C$22.5 million in damages. In the proceedings, Clifton alleges that Osisko was obliged to lend C$22.5 million (the "Loan") to Clifton on or around December 1, 2012 and that Osisko's failure to advance the Loan resulted in damages to Clifton in the same amount. In addition, Clifton claims that the agreements with Osisko entitled Clifton to repay the Loan with common shares of Clifton at a conversion rate beneficial to Clifton and has asked the court to acknowledge Clifton's right and undertaking to satisfy any obligation to repay funds that are advanced under the Loan by Osisko by issuing to Osisko 6,961,538 Clifton common shares. Clifton further alleges that the Loan was intended to be used to make payments under option agreements that entitled Clifton to purchase the shares of companies that own part of a gold project referred to as the "Duparquet Project" (the "Underlying Option Agreements"). Clifton has indicated its intention to claim an additional C$222.0 million in damages from Osisko if Clifton loses its rights under the Underlying Option Agreements. Canadian Malartic General Partnership intends to vigorously defend the action on the merits.
On May 28, 2014, Abitibi Royalties Inc. ("Abitibi") instituted proceedings seeking a provisional, interlocutory and permanent injunction ordering Osisko not to transfer its interest in the CHL property to Canadian Malartic General Partnership. Abitibi further asserted that as a result of an internal reorganization contemplated in connection with the plan of arrangement pursuant to which Osisko was indirectly acquired by Yamana Gold Inc. and the Company, a right of first refusal had been triggered allowing it to acquire Osisko's interest in the CHL property. On May 30, 2014, the plan of arrangement was amended to clarify that Osisko's interest in the CHL property would not be transferred to Canadian Malartic General Partnership. Nevertheless, Abitibi continues to assert that its right of first refusal has been triggered, and that it is entitled to acquire Osisko's interest in the CHL property at a price to be determined by the court. On June 13, 2014, the Superior Court of Quebec dismissed Abitibi's proceedings based on an arbitration provision contained in the relevant agreement. Abitibi is appealing this judgment. Canadian Malartic Corporation intends to vigorously defend Abitibi's claim on the merits.
|
19. COMPARATIVE FIGURES
Certain figures in the comparative interim unaudited consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the 2014 interim unaudited consolidated financial statements.
|
The following table sets out the Company's financial assets and liabilities measured at fair value as at June 30, 2014 using the fair value hierarchy:
|
Level 1 | Level 2 | Level 3 | Total | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Financial assets: |
||||||||||||||
Trade receivables(i) |
$ | — | $ | 57,800 | $ | — | $ | 57,800 | ||||||
Available-for-sale securities(ii) |
66,211 | 5,327 | — | 71,538 | ||||||||||
Fair value of derivative financial instruments(iii) |
— | 14,710 | — | 14,710 | ||||||||||
|
$ | 66,211 | $ | 77,837 | $ | — | $ | 144,048 | ||||||
Financial liabilities: |
||||||||||||||
Fair value of derivative financial instruments(iii) |
$ | 33,385 | $ | 1,333 | $ | — | $ | 34,718 | ||||||
The following table sets out the Company's financial assets and liabilities measured at fair value as at December 31, 2013 using the fair value hierarchy:
|
Level 1 | Level 2 | Level 3 | Total | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Financial assets: |
||||||||||||||
Trade receivables(i) |
$ | — | $ | 67,300 | $ | — | $ | 67,300 | ||||||
Available-for-sale securities(ii) |
74,581 | — | — | 74,581 | ||||||||||
Fair value of derivative financial instruments(iii) |
— | 5,590 | — | 5,590 | ||||||||||
|
$ | 74,581 | $ | 72,890 | $ | — | $ | 147,471 | ||||||
Financial liabilities: |
||||||||||||||
Fair value of derivative financial instruments(iii) |
$ | — | $ | 467 | $ | — | $ | 467 | ||||||
Notes:
Derivative financial instruments classified within Level 1 of the fair value hierarchy relate to common shares held in depositary relating to convertible debentures acquired from Osisko (see note 10 for details). These financial liabilities constitute contracts to issue publicly-traded shares for which quoted market prices approximate the fair value of the derivative financial instruments.
|
|
As at June 30, 2014 | As at December 31, 2013 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Cost | Accumulated Amortization |
Net Book Value |
Cost | Accumulated Amortization |
Net Book Value |
||||||||||||||
Mining properties |
$ | 1,375,973 | $ | 121,256 | $ | 1,254,717 | $ | 1,361,867 | $ | 89,700 | $ | 1,272,167 | ||||||||
Plant and equipment |
2,557,739 | 780,592 | 1,777,147 | 2,286,887 | 662,394 | 1,624,493 | ||||||||||||||
Mine development costs |
1,082,728 | 261,699 | 821,029 | 1,038,564 | 239,898 | 798,666 | ||||||||||||||
Construction in Progress: |
||||||||||||||||||||
Meliadine project |
214,203 | — | 214,203 | 192,413 | — | 192,413 | ||||||||||||||
La India mine(i) |
— | — | — | 161,378 | — | 161,378 | ||||||||||||||
|
$ | 5,230,643 | $ | 1,163,547 | $ | 4,067,096 | $ | 5,041,109 | $ | 991,992 | $ | 4,049,117 | ||||||||
Note:
|
Common shares outstanding at June 30, 2014 |
208,524,366 | ||||
Employee stock options |
12,150,710 | ||||
RSU plan |
293,551 | ||||
Common shares held in depositary relating to convertible debentures acquired from Osisko (note 10) |
871,680 | ||||
|
221,840,307 | ||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2014 | 2013 | 2014 | 2013 | ||||||||||
Net income (loss) for the period |
$ | 37,676 | $ | (24,380 | ) | $ | 146,528 | $ | (521 | ) | ||||
Weighted average number of common shares outstanding — basic (in thousands) |
185,718 | 172,572 | 179,845 | 172,426 | ||||||||||
Add: Dilutive impact of shares related to RSU plan |
346 | — | 329 | — | ||||||||||
Add: Dilutive impact of common shares held in depositary relating to convertible debentures acquired from Osisko (note 10) |
143 | — | 72 | — | ||||||||||
Weighted average number of common shares outstanding — diluted (in thousands) |
186,207 | 172,572 | 180,246 | 172,426 | ||||||||||
Net income (loss) per share — basic |
$ | 0.20 | $ | (0.14 | ) | $ | 0.81 | $ | (0.00 | ) | ||||
Net income (loss) per share — diluted |
$ | 0.20 | $ | (0.14 | ) | $ | 0.81 | $ | (0.00 | ) | ||||
|
Cumulative Translation Adjustment |
Available-for-sale Securities and Other Investments |
Derivative Financial Instruments |
Pension Benefits |
Total | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Accumulated other comprehensive (loss) income, December 31, 2013 |
$ | (16,206 | ) | $ | 3,965 | $ | (148 | ) | $ | (2,752 | ) | $ | (15,141 | ) | |||
Unrealized other comprehensive gain |
— | 26,282 | 1,334 | — | 27,616 | ||||||||||||
Income tax recovery impact |
— | — | (352 | ) | — | (352 | ) | ||||||||||
Reclassifications from accumulated other comprehensive (loss) income to the interim unaudited consolidated statements of income (loss) and comprehensive income (loss) |
— | (2,870 | ) | 475 | 330 | (2,065 | ) | ||||||||||
Income tax recovery impact |
— | — | (125 | ) | (87 | ) | (212 | ) | |||||||||
Other comprehensive income for the period |
— | 23,412 | 1,332 | 243 | 24,987 | ||||||||||||
Accumulated other comprehensive (loss) income, June 30, 2014 |
$ | (16,206 | ) | $ | 27,377 | $ | 1,184 | $ | (2,509 | ) | $ | 9,846 | |||||
|
|
Six Months Ended June 30, 2014 |
Six Months Ended June 30, 2013 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Number of Stock Options |
Weighted Average Exercise Price |
Number of Stock Options |
Weighted Average Exercise Price |
||||||||||
Outstanding, beginning of period |
11,283,535 | C$ | 56.02 | 10,587,126 | C$ | 56.60 | ||||||||
Granted |
3,180,000 | 28.04 | 2,803,000 | 52.13 | ||||||||||
Exercised |
(377,425 | ) | 29.90 | (213,500 | ) | 37.06 | ||||||||
Forfeited |
(211,250 | ) | 52.24 | (181,750 | ) | 60.68 | ||||||||
Expired |
(1,724,150 | ) | 62.64 | (1,340,885 | ) | 54.86 | ||||||||
Outstanding, end of period |
12,150,710 | C$ | 48.63 | 11,653,991 | C$ | 56.02 | ||||||||
Options exercisable, end of period |
7,739,210 | C$ | 55.42 | 7,469,045 | C$ | 59.36 | ||||||||
|
Six Months Ended June 30, |
|||||||
---|---|---|---|---|---|---|---|---|
|
2014 | 2013 | ||||||
Risk-free interest rate |
1.56% | 1.51% | ||||||
Expected life of stock options (in years) |
2.6 | 2.7 | ||||||
Expected volatility of Agnico Eagle's share price |
42.5% | 35.0% | ||||||
Expected dividend yield |
3.83% | 1.79% |
|
|
As at June 30, 2014 |
As at December 31, 2013 |
||||||
---|---|---|---|---|---|---|---|---|
Available-for-sale securities in an unrealized gain position: |
||||||||
Cost (net of impairments) |
$ | 43,077 | $ | 30,583 | ||||
Unrealized gains in accumulated other comprehensive income (loss) |
27,786 | 11,530 | ||||||
Estimated fair value |
70,863 | 42,113 | ||||||
Available-for-sale securities in an unrealized loss position: |
||||||||
Cost (net of impairments) |
1,006 | 39,933 | ||||||
Unrealized losses in accumulated other comprehensive income (loss) |
(331 | ) | (7,465 | ) | ||||
Estimated fair value |
675 | 32,468 | ||||||
Total estimated fair value of available-for-sale securities |
$ | 71,538 | $ | 74,581 | ||||
|
|
Principal | Interest Rate | Maturity Date | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Series A |
$ | 100,000 | 4.87% | 7/23/2022 | |||||||
Series B |
100,000 | 5.02% | 7/23/2024 | ||||||||
|
$ | 200,000 | |||||||||
|
Principal | Interest Rate | Maturity Date | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Series A |
$ | 115,000 | 6.13% | 4/7/2017 | |||||||
Series B |
360,000 | 6.67% | 4/7/2020 | ||||||||
Series C |
125,000 | 6.77% | 4/7/2022 | ||||||||
|
$ | 600,000 | |||||||||
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2014 | 2013 | 2014 | 2013 | ||||||||||
Premiums realized on written foreign exchange call options |
$ | 1,178 | $ | 789 | $ | 2,010 | $ | 1,473 | ||||||
Mark-to-market (loss) gain on derivative equity contracts(i) |
(500 | ) | 498 | (948 | ) | 1,331 | ||||||||
Realized loss on warrants |
— | — | (185 | ) | — | |||||||||
Mark-to-market gain (loss) on warrants(i) |
2,197 | (3,223 | ) | 5,326 | (1,758 | ) | ||||||||
Mark-to-market loss on common shares held in depositary relating to convertible debentures acquired from Osisko(i) |
(4,219 | ) | — | (4,219 | ) | — | ||||||||
(Loss) gain on derivative financial instruments |
$ | (1,344 | ) | $ | (1,936 | ) | $ | 1,984 | $ | 1,046 | ||||
Note:
|
Three Months Ended June 30, 2014 |
Revenues from Mining Operations |
Production Costs |
Exploration and Corporate Development |
Segment Income (Loss) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Northern Business: |
||||||||||||||
LaRonde mine |
$ | 73,160 | $ | (45,340 | ) | $ | — | $ | 27,820 | |||||
Lapa mine |
23,406 | (14,643 | ) | — | 8,763 | |||||||||
Goldex mine |
28,702 | (15,028 | ) | — | 13,674 | |||||||||
Meadowbank mine |
152,536 | (71,892 | ) | — | 80,644 | |||||||||
Canadian Malartic mine (note 16) |
21,274 | (20,727 | ) | — | 547 | |||||||||
Kittila mine |
41,109 | (27,107 | ) | — | 14,002 | |||||||||
Total Northern Business |
$ | 340,187 | $ | (194,737 | ) | $ | — | $ | 145,450 | |||||
Southern Business: |
||||||||||||||
Pinos Altos mine |
$ | 63,357 | $ | (30,033 | ) | $ | — | $ | 33,324 | |||||
Creston Mascota deposit at Pinos Altos |
14,237 | (6,901 | ) | — | 7,336 | |||||||||
La India mine |
20,013 | (7,335 | ) | — | 12,678 | |||||||||
Total Southern Business |
$ | 97,607 | $ | (44,269 | ) | $ | — | $ | 53,338 | |||||
Exploration |
$ | — | $ | — | $ | (11,552 | ) | $ | (11,552 | ) | ||||
Segments totals |
$ | 437,794 | $ | (239,006 | ) | $ | (11,552 | ) | $ | 187,236 | ||||
Total segments income |
$ | 187,236 | ||||||||||||
Corporate and other: |
||||||||||||||
Amortization of property, plant and mine development |
(77,570 | ) | ||||||||||||
General and administrative |
(24,791 | ) | ||||||||||||
Impairment loss on available-for-sale securities |
(2,419 | ) | ||||||||||||
Interest expense |
(15,731 | ) | ||||||||||||
Interest and sundry expense |
(3,370 | ) | ||||||||||||
Loss on derivative financial instruments |
(1,344 | ) | ||||||||||||
Gain on sale of available-for-sale securities |
5,016 | |||||||||||||
Foreign currency translation loss |
(8,666 | ) | ||||||||||||
Income before income and mining taxes and other items |
58,361 | |||||||||||||
Income and mining taxes expense |
(18,360 | ) | ||||||||||||
Loss on equity investment |
(2,325 | ) | ||||||||||||
Net income for the period |
$ | (37,676 | ) | |||||||||||
Three Months Ended June 30, 2013 |
Revenues from Mining Operations |
Production Costs |
Exploration and Corporate Development |
Segment Income (Loss) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Northern Business: |
||||||||||||||
LaRonde mine |
$ | 74,996 | $ | (60,624 | ) | $ | — | $ | 14,372 | |||||
Lapa mine |
34,737 | (18,094 | ) | — | 16,643 | |||||||||
Meadowbank mine |
122,518 | (90,136 | ) | — | 32,382 | |||||||||
Kittila mine |
18,047 | (18,159 | ) | — | (112 | ) | ||||||||
Total Northern Business |
$ | 250,298 | $ | (187,013 | ) | $ | — | $ | 63,285 | |||||
Southern Business: |
||||||||||||||
Pinos Altos mine |
$ | 76,219 | $ | (34,511 | ) | $ | — | $ | 41,708 | |||||
Creston Mascota deposit at Pinos Altos |
9,907 | (4,427 | ) | — | 5,480 | |||||||||
Total Southern Business |
$ | 86,126 | $ | (38,938 | ) | $ | — | $ | 47,188 | |||||
Exploration |
$ | — | $ | — | $ | (11,326 | ) | $ | (11,326 | ) | ||||
Segments totals |
$ | 336,424 | $ | (225,951 | ) | $ | (11,326 | ) | $ | 99,147 | ||||
Total segments income |
$ | 99,147 | ||||||||||||
Corporate and other: |
||||||||||||||
Amortization of property, plant and mine development |
(70,128 | ) | ||||||||||||
General and administrative |
(28,385 | ) | ||||||||||||
Impairment loss on available-for-sale securities |
(17,313 | ) | ||||||||||||
Provincial capital tax |
1,504 | |||||||||||||
Interest expense |
(13,735 | ) | ||||||||||||
Interest and sundry expense |
(3,734 | ) | ||||||||||||
Loss on derivative financial instruments |
(1,936 | ) | ||||||||||||
Foreign currency translation gain |
11,120 | |||||||||||||
Loss before income and mining taxes |
(23,460 | ) | ||||||||||||
Income and mining taxes expense |
(920 | ) | ||||||||||||
Net loss for the period |
$ | (24,380 | ) | |||||||||||
Six Months Ended June 30, 2014 |
Revenues from Mining Operations |
Production Costs |
Exploration and Corporate Development |
Segment Income (Loss) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Northern Business: |
||||||||||||||
LaRonde mine |
$ | 165,864 | $ | (94,927 | ) | $ | — | $ | 70,937 | |||||
Lapa mine |
54,096 | (30,096 | ) | — | 24,000 | |||||||||
Goldex mine |
54,072 | (29,819 | ) | — | 24,253 | |||||||||
Meadowbank mine |
343,576 | (142,961 | ) | — | 200,615 | |||||||||
Canadian Malartic mine (note 16) |
21,274 | (20,727 | ) | — | 547 | |||||||||
Kittila mine |
89,571 | (56,532 | ) | — | 33,039 | |||||||||
Total Northern Business |
$ | 728,453 | $ | (375,062 | ) | $ | — | $ | 353,391 | |||||
Southern Business: |
||||||||||||||
Pinos Altos mine |
$ | 133,840 | $ | (61,919 | ) | $ | — | $ | 71,921 | |||||
Creston Mascota deposit at Pinos Altos |
27,776 | (12,929 | ) | — | 14,847 | |||||||||
La India mine |
39,492 | (13,187 | ) | — | 26,305 | |||||||||
Total Southern Business |
$ | 201,108 | $ | (88,035 | ) | — | $ | 113,073 | ||||||
Exploration |
$ | — | $ | — | $ | (20,970 | ) | $ | (20,970 | ) | ||||
Segments totals |
$ | 929,561 | $ | (463,097 | ) | $ | (20,970 | ) | $ | 445,494 | ||||
Total segments income |
$ | 445,494 | ||||||||||||
Corporate and other: |
||||||||||||||
Amortization of property, plant and mine development |
(151,107 | ) | ||||||||||||
General and administrative |
(52,030 | ) | ||||||||||||
Impairment loss on available-for-sale securities |
(2,419 | ) | ||||||||||||
Interest expense |
(31,666 | ) | ||||||||||||
Interest and sundry expense |
(2,953 | ) | ||||||||||||
Gain on derivative financial instruments |
1,984 | |||||||||||||
Gain on sale of available-for-sale securities |
5,289 | |||||||||||||
Foreign currency translation loss |
(326 | ) | ||||||||||||
Income before income and mining taxes and other items |
212,266 | |||||||||||||
Income and mining taxes expense |
(63,413 | ) | ||||||||||||
Loss on equity investment |
(2,325 | ) | ||||||||||||
Net income for the period |
$ | 146,528 | ||||||||||||
Six Months Ended June 30, 2013 |
Revenues from Mining Operations |
Production Costs |
Exploration and Corporate Development |
Segment Income (Loss) |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Northern Business: |
||||||||||||||
LaRonde mine |
$ | 166,194 | $ | (118,527 | ) | $ | — | $ | 47,667 | |||||
Lapa mine |
73,135 | (34,704 | ) | — | 38,431 | |||||||||
Meadowbank mine |
252,610 | (183,725 | ) | — | 68,885 | |||||||||
Kittila mine |
90,185 | (45,341 | ) | — | 44,844 | |||||||||
Total Northern Business |
$ | 582,124 | $ | (382,297 | ) | $ | — | $ | 199,827 | |||||
Southern Business: |
||||||||||||||
Pinos Altos mine |
$ | 163,909 | $ | (66,163 | ) | $ | — | $ | 97,746 | |||||
Creston Mascota deposit at Pinos Altos |
10,813 | (7,544 | ) | — | 3,269 | |||||||||
Total Southern Business |
$ | 174,722 | $ | (73,707 | ) | $ | — | $ | 101,015 | |||||
Exploration |
$ | — | $ | — | $ | (19,897 | ) | $ | (19,897 | ) | ||||
Segments totals |
$ | 756,846 | $ | (456,004 | ) | $ | (19,897 | ) | $ | 280,945 | ||||
Total segments income |
$ | 280,945 | ||||||||||||
Corporate and other: |
||||||||||||||
Amortization of property, plant and mine development |
(140,199 | ) | ||||||||||||
General and administrative |
(65,705 | ) | ||||||||||||
Impairment loss on available-for-sale securities |
(28,308 | ) | ||||||||||||
Provincial capital tax |
1,504 | |||||||||||||
Interest expense |
(27,651 | ) | ||||||||||||
Interest and sundry expense |
(3,946 | ) | ||||||||||||
Gain on derivative financial instruments |
1,046 | |||||||||||||
Foreign currency translation gain |
7,462 | |||||||||||||
Income before income and mining taxes |
25,148 | |||||||||||||
Income and mining taxes expense |
(25,669 | ) | ||||||||||||
Net loss for the period |
$ | (521 | ) | |||||||||||
|
Total Assets as at | |||||||
---|---|---|---|---|---|---|---|---|
|
June 30, 2014 |
December 31, 2013 |
||||||
Northern Business: |
||||||||
LaRonde mine |
$ | 873,458 | $ | 878,719 | ||||
Lapa mine |
77,778 | 78,293 | ||||||
Goldex mine |
130,399 | 120,601 | ||||||
Meadowbank mine |
640,662 | 711,387 | ||||||
Meliadine project |
899,431 | 877,923 | ||||||
Kittila mine |
908,394 | 870,332 | ||||||
Total Northern Business |
$ | 3,530,122 | $ | 3,537,255 | ||||
Southern Business: |
||||||||
Pinos Altos mine |
$ | 579,023 | $ | 537,560 | ||||
Creston Mascota deposit at Pinos Altos |
86,790 | 86,185 | ||||||
La India mine |
539,216 | 512,450 | ||||||
Total Southern Business |
$ | 1,205,029 | $ | 1,136,195 | ||||
Exploration |
$ | 24,335 | $ | 19,838 | ||||
Corporate and other |
$ | 310,208 | $ | 266,071 | ||||
Equity investment |
$ | 1,638,784 | $ | — | ||||
Total |
$ | 6,708,478 | $ | 4,959,359 | ||||
|
Cash paid for acquisition |
$ | 462,728 | |||
Agnico Eagle common shares issued for acquisition |
1,135,071 | ||||
Fair value of derivative financial instruments(i) |
29,166 | ||||
Total Agnico Eagle purchase price |
$ | 1,626,965 | |||
Note:
Current assets |
$ | 153,370 | |||
Non-current assets |
$ | 1,939,249 | |||
Current liabilities |
$ | 69,243 | |||
Non-current liabilities |
$ | 398,736 | |||
Revenues from mining operations |
$ | 21,885 | |||
Operating margin(i) |
$ | 2,886 | |||
Net loss |
$ | (2,325 | ) |
Note:
Total purchase price: |
|||||
Cash paid for acquisition |
$ | 10,127 | |||
Fair value of assets acquired and liabilities assumed: |
|||||
Mining properties |
$ | 1,994 | |||
Goodwill |
9,802 | ||||
Cash and cash equivalents |
76 | ||||
Trade receivables |
731 | ||||
Other current assets |
12 | ||||
Plant and equipment |
2 | ||||
Accounts payable and accrued liabilities |
(791 | ) | |||
Other liabilities |
(1,573 | ) | |||
Deferred tax liability |
(126 | ) | |||
Net assets acquired |
$ | 10,127 | |||
|
Year Ended December 31, 2013 |
||||
---|---|---|---|---|---|
|
Unaudited |
||||
Pro forma net loss for the year |
$ | (409,020 | ) | ||
Pro forma net loss per share — basic |
$ | (2.37 | ) |
|
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