AEM noted that current gold reserves at Pinos Altos total 2.2 million oz from 20 million mt of ore in probable reserves grading 3.5 g/mt, an increase of 13% in gold grade over the previous reserve estimate. The Pinos Altos deposit also includes approximately 65.7 million oz of silver in the reserve category, an increase of approximately 10 million oz over the previous estimate.

The Pinos Altos feasibility study does not include these reported increases in gold grade and gold reserves, according to the company. The study projects an after-tax rate of return of 18.3%, based on a gold price of $530/oz and a silver price of $9.59/oz. Average annual production is expected to be approximately 150,000 oz of gold, at average total cash costs per ounce of $230 (including royalties and net of byproduct silver credits). In addition, annual silver production is expected to average over 2 million oz/y. The initial production ramp-up is expected to begin in the second quarter of 2009.

The study envisages an estimated 11-year mine life, a conventional milling operation handling 4,000 t/d ore, and a heap leach operation reaching peak production rates of 2,500 mt/d ore. Metallurgical testing indicates that the ore is non-refractory, yielding gold recoveries greater than 95% with conventional cyanidation processing (silver recoveries are expected to average approximately 50%). Overall mine site operating costs are expected to average $39/mt, with construction capital costs of $190 million and average sustaining capital expenditures of approximately $3 million per year. Agnico-Eagle estimates that the project will be entirely funded from existing cash and cash flows.

“Our decision to build Pinos Altos is an important step in expanding and strengthening our gold production base on our way to having six operating gold mines,” said Sean Boyd, vice-chairman and CEO. “With the increase in gold reserves and grades at Pinos Altos, we continue to demonstrate the reserve growth potential of our development projects and the ability to increase gold production and further extend mine life. Additionally, we are excited to be operating in Mexico, and working with the local communities in the development of a new gold mine,” added Boyd.

Agnico-Eagle said it has signed a letter of intent for delivery of the longlead time ball and SAG mills for the Pinos Altos project, and that all necessary land agreements with the four local ejidos are in place. Negotiations for additional surface rights with the underlying royalty holder are ongoing. If these negotiations are not successful, modifications to the proposed mine plan contained in the base case feasibility study will be implemented.

AEM reported that four drill rigs are currently operating on the Pinos Altos property. Diamond drilling from the first underground drilling station is planned to commence in October. This drilling will follow up on recent positive drill results at depth, targeting possible extensions of the Santo Nino and Cerro Colorado zones.

The company plans to complete more than 12,000 m of diamond drilling by the end of 2007. The main focus of the underground exploration program will be resource-to-reserve conversion of the Cerro Colorado/Santo Nino zones and the area between them. The results of the current exploration program suggest that the Creston Colorado and Mascota zones (northwest of the main Santo Nino deposit) may form part of a larger more widespread zone, occurring at a similar geologic interval, but separated by sub-vertical fault zones that displace the same mineralized horizon. These zones are not included in the current reserve and resource estimate at Pinos Altos and were not considered in the feasibility study.

Development on the underground ramp began in March 2007. More than 350 m of ramp has been completed to date and 1,350 m or more of ramp is expected to be completed by year-end 2008.