DBRS Confirms Agnico-Eagle BBB (low) Issuer Rating with Stable Trend

DBRS has today confirmed the Issuer Rating of Agnico-Eagle Mines Limited (Agnico or the Company) at BBB (low) with Stable trend. Agnico’s rating is underpinned by the strength of its LaRonde mine, which is a long-lived, low-cost, internationally competitive gold producer. In addition, the Company has five other gold mining operations, although its Goldex underground mine was forced to suspend operations (perhaps permanently) in Q4 2011 following the detection of serious rock subsidence and water inflow problems.

DBRS believes that the Company has strong credit metrics and solid liquidity, which will assist it in dealing with the issues at Goldex without unduly interfering with Agnico’s other operating and development plans. Higher debt increased gross leverage to 23% at the end of 20l1. Cash flow-to-total debt (73%) and EBITDA interest coverage (17 times) were negatively affected by higher debt and interest charges offset by higher cash flow and EBITDA, but remain strong for the rating.

Agnico has benefited from the high gold prices that followed its intense period of mine construction (2008-2011). With its average unit cash cost of gold production in line with the industry median cash cost, the Company has been able to maintain a strong balance sheet and operating cash flow, along with healthy credit metrics. In addition, the Company continues to be prudent in its acquisition policy, as demonstrated by its acquisitions of Meliadine Holdings Inc. and, more recently, of Grayd Resource Corporation, which were largely funded by equity or were acquisitions of modest size.

The Company’s cash costs per ounce of production are expected to rise, yet with the outlook for gold prices remaining good (and high by historical standards), DBRS expects Agnico’s credit metrics to stay solid, at least in the near to medium term. The Company entered 2012 with a lull in its new mine construction activities, which has allowed it to continue to address higher-than-expected costs at its Meadowbank and Kittila operations, as well as any potential to salvage any value that may remain at Goldex. The Company’s multiple operations in mining-friendly jurisdictions are expected to reduce the potential risks and volatility of its earnings stream, despite its relatively small size.

DBRS expects Agnico will continue to invest to expand existing operations and to make further property or company acquisitions. In such cases, DBRS expects that the Company would maintain financial discipline by taking on moderately sized investments and utilizing equity as the main funding source, as it has done in the past.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Mining Industry, which can be found on our website under Methodologies.