FILED PURSUANT TO GENERAL
INSTRUCTION II.L. OF
FORM F-10;
FILE NO. 333-100902
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 8, 2002)
[LOGO]
AGNICO-EAGLE MINES LIMITED
6,900,000 COMMON SHARES
This prospectus supplement relates to: (i) up to 6,900,000 common shares
("Common Shares") of Agnico-Eagle Mines Limited (the "Company") issuable from
time to time on exercise of 6,900,000 share purchase warrants (the "Warrants")
expected to be issued by the Company on or about November 14, 2002; and
(ii) such indeterminate number of additional Common Shares that may be issuable
by reason of the anti-dilution provisions contained in the indenture governing
the Warrants.
On November 6, 2002, the Company filed a short form prospectus with the
securities commission or similar regulatory authority in each of the provinces
of Canada and a registration statement on Form F-10 with the United States
Securities and Exchange Commission (the "SEC") relating to the offering (the
"Unit Offering") by the Company to the public in Canada and the United States of
units ("Units"), each Unit consisting of one Common Share and one-half of a
Warrant. The Unit Offering is expected to be completed on or about November 14,
2002.
INVESTING IN THE COMMON SHARES INVOLVES RISKS THAT ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 6 OF THE ACCOMPANYING PROSPECTUS.
The outstanding common shares of the Company are listed on The Toronto Stock
Exchange (the "TSX") under the symbol "AGE" and the New York Stock Exchange (the
"NYSE") under the symbol "AEM". The TSX has conditionally approved the listing
of the Common Shares issuable on exercise of the Warrants. Listing is subject to
the Company fulfilling all of the requirements of the TSX on or before
January 28, 2003. The NYSE has conditionally approved the listing of the Common
Shares issuable on exercise of the Warrants, subject to official notice of
issuance.
NO UNDERWRITER HAS BEEN INVOLVED IN THE PREPARATION OF, OR HAS PERFORMED ANY
REVIEW OF, THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
WE ARE PERMITTED TO PREPARE THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN ACCORDANCE WITH CANADIAN DISCLOSURE REQUIREMENTS, WHICH ARE
DIFFERENT FROM THOSE OF THE UNITED STATES. ALTHOUGH WE CURRENTLY PREPARE OUR
FINANCIAL STATEMENTS IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, SOME FINANCIAL STATEMENTS INCORPORATED BY REFERENCE
HEREIN HAVE, AS INDICATED, BEEN PREPARED IN ACCORDANCE WITH CANADIAN GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES AND ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR
INDEPENDENCE STANDARDS. AS A RESULT, THESE FINANCIAL STATEMENTS MAY NOT BE
COMPARABLE TO FINANCIAL STATEMENTS OF UNITED STATES COMPANIES.
OWNING THE COMMON SHARES MAY SUBJECT YOU TO TAX CONSEQUENCES BOTH IN THE UNITED
STATES AND CANADA. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
MAY NOT DESCRIBE THESE TAX CONSEQUENCES FULLY. YOU SHOULD READ CAREFULLY THE
DISCUSSION OF TAX CONSIDERATIONS CONTAINED IN THIS PROSPECTUS SUPPLEMENT.
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES FEDERAL
SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED IN
ONTARIO, SOME OF OUR OFFICERS AND DIRECTORS AND SOME OF THE EXPERTS NAMED IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE CANADIAN
RESIDENTS, AND SUBSTANTIALLY ALL OF OUR ASSERTS AND THE ASSETS OF THOSE
OFFICERS, DIRECTORS AND EXPERTS ARE LOCATED OUTSIDE OF THE UNITED STATES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus supplement is November 12, 2002.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
--------
PLAN OF DISTRIBUTION.................... S-3
USE OF PROCEEDS......................... S-3
CANADIAN FEDERAL INCOME TAX
CONSIDERATIONS........................ S-4
PAGE
--------
UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS........................ S-7
LEGAL MATTERS........................... S-9
DOCUMENTS INCORPORATED BY REFERENCE..... S-9
PROSPECTUS
PAGE
--------
PROSPECTUS SUMMARY...................... 3
RECENT DEVELOPMENTS..................... 4
FORWARD-LOOKING STATEMENTS.............. 5
RISK FACTORS............................ 6
THE COMPANY............................. 11
USE OF PROCEEDS......................... 13
CAPITALIZATION.......................... 13
DESCRIPTION OF EXISTING INDEBTEDNESS.... 14
EARNINGS COVERAGE....................... 17
DESCRIPTION OF SHARE CAPITAL............ 17
DIVIDEND POLICY......................... 19
DESCRIPTION OF DEBT SECURITIES.......... 19
PAGE
--------
DESCRIPTION OF WARRANTS................. 24
PLAN OF DISTRIBUTION.................... 24
LEGAL MATTERS........................... 25
AUDITORS, TRANSFER AGENT AND
REGISTRAR............................. 25
DOCUMENTS INCORPORATED BY REFERENCE..... 25
AVAILABLE INFORMATION................... 27
ENFORCEABILITY OF CERTAIN CIVIL
LIABILITIES........................... 27
DOCUMENTS FILED AS PART OF THE
REGISTRATION STATEMENT................ 27
This document is in two parts. The first part is this prospectus supplement,
which describes the terms of the offering and also adds to and updates
information contained in the accompanying short form base shelf prospectus dated
November 8, 2002 (the "Prospectus") and the documents incorporated by reference
therein. The second part is the accompanying Prospectus which gives more general
information, some of which may not apply to the offering.
Only the information contained or incorporated by reference in the
accompanying Prospectus, including this prospectus supplement, should be relied
upon. The Company has not authorized any other person to provide different
information. If anyone provides different or inconsistent information, it should
not be relied upon. The Common Shares may not be offered or sold in any
jurisdiction where the offer or sale is not permitted. Unless otherwise
indicated, the statistical, operating and financial information contained in
this prospectus supplement is presented as at December 31, 2001. It should be
assumed that the information appearing in this prospectus supplement, the
Prospectus and the documents incorporated by reference in the Prospectus is
accurate only as of their respective dates. The Company's business, financial
condition, results of operations and prospects may have changed since those
dates.
IN THIS PROSPECTUS SUPPLEMENT, UNLESS STATED OTHERWISE, "AGNICO-EAGLE", THE
"COMPANY", "WE", "US", AND "OUR" REFER TO AGNICO-EAGLE MINES LIMITED AND ITS
CONSOLIDATED SUBSIDIARY.
Unless otherwise indicated, all references to "$", "US$" or "dollar" in this
prospectus refer to US dollars and "C$" refers to Canadian dollars. For
information purposes, the noon buying rate in The City of New York for cable
transfers in Canadian dollars as certified for customs purposes by the Federal
Reserve Bank of New York (the "Noon Buying Rate") on November 8, 2002 was
US$1.00 = C$1.5644.
S-2
PLAN OF DISTRIBUTION
This prospectus supplement relates to: (i) up to 6,900,000 Common Shares
issuable from time to time on exercise of 6,900,000 Warrants expected to be
issued by the Company on or about November 14, 2002; and (ii) such indeterminate
number of additional Common Shares that may be issuable by reason of the
anti-dilution provisions contained in the indenture governing the Warrants. Each
whole Warrant will entitle the purchaser to purchase one Common Share for a
price of US$19.00 (or its equivalent in Canadian dollars) at any time on or
prior to 5:00 p.m. (Toronto time) on the date which is five years from the date
of the closing of the Unit Offering.
On November 6, 2002, the Company filed a short form prospectus with the
securities commission or similar regulatory authority in each of the provinces
of Canada (the "Canadian Securities Authorities") and a registration statement
on Form F-10 (File No. 333-100850) with the SEC relating to the offering by the
Company to the public in Canada and the United States of Units, each Unit
consisting of one Common Share and one-half of a Warrant. In connection with the
Unit Offering, the Company entered into an agreement dated October 31, 2002 with
a syndicate of underwriters (collectively, the "Underwriters"), pursuant to
which the Company has agreed to sell and the Underwriters have agreed to
purchase from the Company 13,800,000 Units (including 1,800,000 Units pursuant
to the exercise of the over-allotment option granted to the Underwriters in
connection with the Unit Offering), at a price of C$21.79 per Unit (US$13.90 per
Unit). The Unit Offering is expected to be completed on or about November 14,
2002. The exercise price of the Warrants was determined by negotiation between
the Company and the Underwriters.
On November 8, 2002, the Company filed the accompanying Prospectus with the
Canadian Securities Authorities and a registration statement on Form F-10 (File
No. 333-100902) (the "Shelf Registration Statement") with the SEC relating to
the offering by the Company from time to time during the 25 months that the
Prospectus, including amendments thereto, remains valid of up to US$500,000,000
of debt securities, Common Shares or warrants to purchase debt securities or
Common Shares. The Shelf Registration Statement was declared effective by the
SEC on November 8, 2002. It is a condition of closing of the Unit Offering that
the Shelf Registration Statement be declared effective by the SEC and that the
Company have filed with the SEC this prospectus supplement registering the
offering of the Common Shares issuable from time to time on the exercise of the
Warrants.
This prospectus supplement registers the offering of the securities to which
it relates under the United States Securities Act of 1933, as amended, in
accordance with the multijurisdictional disclosure system adopted by the SEC and
the securities commission on similar regulatory authority in each of the
provinces of Canada. This prospectus supplement does not qualify in any of the
provinces of Canada the distribution of the securities to which it relates.
The Common Shares to which this prospectus supplement relates will be sold
directly by the Company to holders of Warrants on the exercise of such Warrants.
No underwriters, dealers or agents will be involved in these sales. No
underwriter has been involved in the preparation of, or has performed any review
of, this prospectus supplement or the accompanying Prospectus.
USE OF PROCEEDS
From time to time, when Warrants are exercised, the Company will receive
proceeds equal to the aggregate exercise price of such Warrants. Assuming that
all of the Warrants are exercised prior to the Expiry Time and that no
adjustment based on the anti-dilution provisions contained in the Warrant
indenture has taken place, the net proceeds to the Company will be approximately
US$131,100,000 (C$205,092,840 based on the Noon Buying Rate on November 8,
2002). The net proceeds from the exercise of Warrants will be used for general
corporate purposes.
S-3
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal tax considerations under the
INCOME TAX ACT (Canada) (the "Canadian Tax Act") generally applicable to a
purchaser of Common Shares acquired on exercise of Warrants.
This summary is based upon the current provisions of the Canadian Tax Act
and its regulations, all specific proposals to amend the Canadian Tax Act and
the regulations publicly announced by or on behalf of the Minister of Finance
(Canada) before the date of this prospectus (the "Tax Proposals"), and on the
published administrative practices of the Canada Customs and Revenue Agency
("CCRA"). This summary does not address all of the tax considerations that may
be relevant to any particular holder and, except for the Tax Proposals, does not
take into account or anticipate any changes in law, whether by legislative,
governmental or judicial decision or action, or any changes in the
administrative practices of the CCRA. This summary does not take into account
tax legislation of any province, territory or foreign jurisdiction. Provisions
of provincial or territorial income tax legislation vary among provinces and
territories in Canada and may differ from federal income tax legislation.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE LEGAL OR
TAX ADVICE TO ANY PARTICULAR PURCHASER OF COMMON SHARES. ACCORDINGLY,
PROSPECTIVE PURCHASERS OF UNITS SHOULD CONSULT THEIR OWN TAX ADVISORS ABOUT THE
SPECIFIC TAX CONSEQUENCES TO SUCH HOLDERS OF PURCHASING, HOLDING OR DISPOSING OF
COMMON SHARES AND WARRANTS.
Purchasers of Units pursuant to the Unit Offering and the Company must
allocate the purchase price of each Unit on a reasonable basis between the
Common Shares and the one-half of a Warrant to determine the cost of each for
the purposes of the Canadian Tax Act. For its purposes, the Company intends to
allocate C$20.00 to each Common Share and C$1.79 to each one-half of a Warrant
(US$12.76 and US$1.14, respectively, based on the Noon Buying Rate on
October 30, 2002). Although the Company believes this allocation to be
reasonable, it will not be binding on the CCRA.
All amounts relevant in computing a holder's liability under the Canadian
Tax Act must be computed in Canadian dollars.
RESIDENTS OF CANADA
The following is a summary of the principal considerations under the
Canadian Tax Act generally applicable to a purchaser of Common Shares on the
exercise of Warrants who:
- is a resident of Canada for purposes of the Canadian Tax Act and any
applicable tax treaty or convention;
- holds Common Shares and Warrants as capital property; and
- deals at arm's length and is not affiliated with the Company or a
subsequent purchaser of such Common Shares and Warrants.
For purposes of this discussion, such a person is referred to as a "Canadian
Holder". Canadian Holders whose Common Shares do not otherwise qualify as
capital property may in certain circumstances make an irrevocable election under
subsection 39(4) of the Canadian Tax Act to have their Common Shares and every
"Canadian security" (as defined in the Canadian Tax Act) owned by such Canadian
Holder in the taxation year of the election and in all subsequent taxation years
deemed to be capital property.
The Canadian Tax Act contains provisions relating to securities held by
certain financial institutions, commonly referred to as the mark-to-market
rules. This summary does not take into account these mark-to-market rules.
Canadian Holders that are financial institutions for purposes of these rules
should consult their own tax advisors.
EXERCISE OF WARRANTS
No gain or loss will be realized by a Canadian Holder on the exercise of a
Warrant (except if cash is received in lieu of the issuance of fractional Common
Shares).
S-4
The cost to the Canadian Holder of each Common Share acquired on the
exercise of a Warrant will be the aggregate of the Canadian Holder's adjusted
cost base of the Warrant immediately before the exercise thereof and the amount
paid to acquire the Common Share on the exercise of the Warrant. The cost to the
Canadian Holder of each Common Share acquired on the exercise of a Warrant must
then be averaged with the adjusted cost base of all other Common Shares then
held by the Canadian Holder as capital property for purposes of subsequently
computing the adjusted cost base of each Common Share of the Canadian Holder.
DISPOSITION OF WARRANTS
A Canadian Holder who disposes of or is deemed to dispose of a Warrant,
including on redemption or expiry of a Warrant (but otherwise than by exercise
of the Warrant), generally will realize a capital gain (or a capital loss) equal
to the amount by which the proceeds of disposition, net of any reasonable costs
of disposition, exceed (or are less than) the adjusted cost base of the Warrant
to the Canadian Holder. A Canadian Holder whose unexercised Warrant expires
generally will realize a capital loss equal to the adjusted cost base to the
Canadian Holder of the Warrant at the time of expiry.
DIVIDENDS ON COMMON SHARES
Dividends received or deemed to be received by a Canadian Holder on Common
Shares will be included in computing the Canadian Holder's income for purposes
of the Canadian Tax Act. The gross-up and dividend tax credit rules normally
applicable to taxable dividends paid by taxable Canadian corporations will apply
to dividends received by an individual. Such dividends received by a corporation
will normally be deductible in computing its taxable income.
A corporation which is a private corporation or a subject corporation for
purposes of the Canadian Tax Act may be liable to pay a refundable tax of
33 1/3% on dividends received or deemed to be received to the extent that such
dividends are deductible in computing the corporation's income. Canadian Holders
to whom these rules may be relevant should consult their own tax advisors.
DISPOSITION OF COMMON SHARES
Upon a disposition or a deemed disposition (other than to the Company) of a
Common Share, a Canadian Holder generally will realize a capital gain (or a
capital loss) equal to the amount by which the proceeds of disposition of the
Common Share, net of any reasonable costs of disposition, exceed (or are less
than) the adjusted cost base of the Common Share to the Canadian Holder. The
cost to a Canadian Holder of a Common Share acquired on exercise of Warrants
will be averaged with the adjusted cost base of any other of the Company's
common shares owned as capital property by the Canadian Holder for purposes of
determining the adjusted cost base of each such share to the Canadian Holder.
TREATMENT OF CAPITAL GAINS AND CAPITAL LOSSES
A Canadian Holder will be required to include one-half of the amount of any
capital gain (a "taxable capital gain") in income, and will be required to
deduct one-half of the amount of any capital loss (an "allowable capital loss")
against taxable capital gains realized by the Canadian Holder in the year of
disposition. Allowable capital losses not deducted in the taxation year in which
they are realized may be carried back and deducted in any of the three preceding
taxation years or carried forward and deducted in any subsequent taxation year
against taxable capital gains realized in such years, to the extent and under
the circumstances specified in the Canadian Tax Act. A capital gain realized by
a Canadian Holder who is an individual may give rise to alternative
minimum tax.
The amount of any capital loss realized on the disposition or deemed
disposition of a Common Share by a Canadian Holder that is a corporation may be
reduced by the amount of dividends received or deemed to have been received by
it on the Common Share to the extent and in the circumstances prescribed by the
Canadian Tax Act. Similar rules may apply where a Canadian Holder that is a
corporation is a member of a partnership or a beneficiary of a trust that owns
Common Shares and where a trust is a member of a partnership or a partnership or
trust is a beneficiary of a trust. Canadian Holders to whom these rules may be
relevant should consult their own tax advisors.
S-5
If a Canadian Holder is a Canadian-controlled private corporation for
purposes of the Canadian Tax Act, the Canadian Holder may be liable to pay an
additional refundable tax of 6 2/3% on certain investment income, including
taxable capital gains.
NON-RESIDENTS OF CANADA
The following is a summary of the principal considerations under the
Canadian Tax Act generally applicable to a purchaser of Common Shares acquired
on the exercise of Warrants who:
- is not a resident of Canada for purposes of the Canadian Tax Act and any
applicable tax treaty or convention;
- holds Common Shares and Warrants as capital property;
- deals at arm's length and is not affiliated with the Company;
- does not use or hold Common Shares or Warrants in carrying on a business
in Canada; and
- is not a non-resident insurer for purposes of the Canadian Tax Act.
For purposes of this discussion such a person is referred to as a
"Non-Canadian Holder".
EXERCISE OF WARRANTS
No gain or loss will be realized by a Non-Canadian Holder on the exercise of
a Warrant (except if cash is received in lieu of the issuance of fractional
Common Shares).
DIVIDENDS ON COMMON SHARES
Dividends paid or credited or deemed to be paid or credited to a
Non-Canadian Holder on Common Shares will be subject to withholding tax under
the Canadian Tax Act at a rate of 25%, subject to reduction under the provisions
of an applicable income tax treaty or convention. Under the Canada-United States
Income Tax Convention (1980), the applicable rate of dividend withholding tax is
generally reduced to 15%.
DISPOSITION OF COMMON SHARES OR WARRANTS
A Non-Canadian Holder of Common Shares or Warrants which are not taxable
Canadian property will not be subject to tax under the Canadian Tax Act on the
disposition of such Common Shares or Warrants. Generally, Common Shares and
Warrants will not be taxable Canadian property to a Non-Canadian Holder at a
particular time if:
- the Common Shares are listed on a prescribed stock exchange, including the
TSX and the NYSE, at that time; and
- during the 60-month period immediately preceding the disposition of the
Common Shares or Warrants, as the case may be, the Non-Canadian Holder,
persons with whom the Non-Canadian Holder did not deal at arm's length, or
the Non-Canadian Holder together with such persons, did not own or have an
interest in or an option in respect of 25% or more of the Company's issued
shares of any class or series. For the purpose of the foregoing
determination, the CCRA will treat Warrants held by the Non-Canadian
Holder and non-arm's length persons as having been exercised.
If Common Shares or Warrants are taxable Canadian property to a Non-Canadian
Holder, a capital gain realized on a disposition thereof by the Non-Canadian
Holder will be subject to tax under the Canadian Tax Act in the manner described
above under the heading "-- Residents of Canada -- Treatment of Capital Gains
and Capital Losses", unless the capital gain is exempt from tax under the
Canadian Tax Act pursuant to the provisions of an applicable income tax treaty
or convention. Non-Canadian Holders whose Common Shares or Warrants are taxable
Canadian property should consult their own tax advisors.
S-6
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
considerations to a U.S. Holder (as defined below) regarding the acquisition,
ownership and disposition of Common Shares received in connection with the
exercise of the Warrants. This summary applies only to U.S. Holders who acquire
Common Shares, hold such Common Shares as capital assets (that is, for
investment purposes) and are eligible for benefits under the income tax
convention between the U.S. and Canada signed on September 26, 1980, as amended,
currently in force, which is referred to in this prospectus supplement as the
"Treaty". This summary is based upon current U.S. federal income tax law and the
Treaty, as in effect on the date of this prospectus supplement. Changes in the
laws may alter the tax treatment of Common Shares, possibly with retroactive
effect.
This summary is general in nature and does not address the effects of any
state, local, foreign or other tax laws. In addition, it does not address all
tax considerations that may be relevant to a U.S. Holder in light of a the
U.S. Holder's particular circumstances, nor does it apply to a U.S. Holder
having a special status, such as:
- a person that owns, or is treated as owning, 10% or more of the Company's
voting shares;
- a dealer in securities or currencies;
- a trader in securities that elects to use a mark-to-market method of
accounting for securities holdings;
- a bank, mutual fund, life insurance company or other financial
institution;
- a tax-exempt organization;
- a person that holds Common Shares or Warrants as part of a straddle,
hedge, constructive sale or other integrated transaction for tax purposes;
- an S corporation or small business investment company;
- a person whose functional currency for tax purposes is not the US dollar;
or
- a person liable for alternative minimum tax.
U.S. HOLDERS SHOULD CONSULT THEIR OWN ADVISORS REGARDING THE TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON SHARES AND
WARRANTS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
For purposes of this discussion, a "U.S. Holder" means a beneficial owner of
a Common Share or Warrant that is, for U.S. federal income tax purposes:
- an individual citizen or resident of the United States;
- a corporation, or other entity treated as a corporation for U.S. federal
income tax purposes, created or organized in or under the laws of the U.S.
or any political subdivision thereof;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust (a) the administration over which a U.S. court can exercise
primary supervision and (b) all of the substantial decisions of which one
or more U.S. persons have the authority to control.
If a partnership holds Common Shares, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships holding Common Shares or Warrants should
consult their tax advisors.
EXERCISE OF WARRANTS
No gain or loss will be recognized for U.S. federal income tax purposes by
U.S. Holders of the Warrants upon the exercise thereof in exchange for Common
Shares (except if cash is received in lieu of the issuance of fractional Common
Shares). A U.S. Holder's tax basis in the Common Shares received on exercise of
Warrants will equal the sum of its tax basis in the Warrants (which in the case
of an initial U.S. Holder, will equal the portion of the purchase price of the
Unit allocated to the Warrant plus the exercise price paid on the exercise
thereof. The holding period of the Common Shares received on the exercise of the
Warrants generally will not include the holding period of the Warrants.
S-7
DISTRIBUTIONS
Any dividends on Common Shares are expected to be declared and paid in US
dollars. Subject to the discussion found under "-- Passive Foreign Investment
Company" below, the gross amount of any distribution (other than in liquidation)
generally will be treated as a foreign source dividend taxable as ordinary
income to the extent paid out of the Company's current or accumulated earnings
and profits, as determined for U.S. federal income tax purposes, and generally
will be "passive income" for U.S. foreign tax credit purposes. A distribution on
the Common Shares made by the Company in excess of the Company's current or
accumulated earnings and profits will be treated as a tax-free return of capital
to the extent of a U.S. Holder's adjusted tax basis in such Common Shares and,
to the extent in excess of adjusted basis, as capital gain. See "-- Sale or
Other Disposition of Shares". Because the Company is not a U.S. corporation, no
dividends-received deduction will be allowed with respect to dividends paid by
the Company.
As described above under "Canadian Federal Income Tax
Considerations -- Non-Residents of Canada -- Dividends on Common Shares", under
the Treaty, Canada currently imposes withholding tax on distributions at a rate
of 15%. U.S. Holders generally will have the option of claiming the amount of
any Canadian income taxes withheld either as a deduction from gross income or as
a dollar-for-dollar credit against their U.S. federal income tax liability,
subject to numerous complex limitations and restrictions which must be
determined and applied on an individual basis by each shareholder. Accordingly,
U.S. Holders should consult their own tax advisors concerning these rules in
light of their particular circumstances.
SALE OR OTHER DISPOSITION OF COMMON SHARES
Subject to the discussion found under "Passive Foreign Investment Company"
below, in general, if a U.S. Holder sells or otherwise disposes of Common Shares
in a taxable disposition:
- such U.S. Holder will recognize gain or loss equal to the difference (if
any) between:
- the US dollar value of the amount realized on such sale or other
taxable disposition; and
- such U.S. Holder's adjusted tax basis in such Common Shares;
- any gain or loss will be capital gain or loss and will be long-term
capital gain or loss if such U.S. Holder's holding period for the Common
Shares is more than one year at the time of such sale or other taxable
disposition;
- any gain or loss will generally be treated as U.S. source income for
U.S. foreign tax credit purposes;
- additional preferential tax treatment may be available if such
U.S. Holder disposes of Common Shares held for more than five years; and
- such U.S. Holder's ability to deduct capital losses (if any) is subject to
limitations.
If a U.S. Holder is a cash basis taxpayer who receives foreign currency,
such as Canadian dollars, in connection with a sale or other taxable disposition
of Common Shares, the amount realized will be based on the US dollar value of
the foreign currency received with respect to such Common Shares, as determined
on the settlement date of such sale or other taxable disposition.
If a U.S. Holder is an accrual basis taxpayer, such U.S. Holder may elect
the same treatment required of cash basis taxpayers with respect to a sale or
other taxable disposition of Common Shares, provided the election is applied
consistently from year to year. The election may not be changed without the
consent of the IRS. If a U.S. Holder is an accrual basis taxpayer and does not
elect to be treated as a cash basis taxpayer (pursuant to the U.S. Treasury
Regulations applicable to foreign currency transactions) for this purpose, such
U.S. Holder might have a foreign currency gain or loss for U.S. federal income
tax purposes because of differences between the US dollar value of the foreign
currency received prevailing on the date of the sale or other taxable
disposition of Common Shares and the date of payment. Any such currency gain or
loss generally will be treated as U.S. source ordinary income or loss and would
be in addition to gain or loss, if any, that such U.S. Holder recognizes on the
sale or other taxable disposition of Common Shares.
S-8
PASSIVE FOREIGN INVESTMENT COMPANY
U.S. Holders (who are not tax-exempt) would be subject to a special, adverse
tax regime (that would differ in certain respects from that described above) if
the Company is or were to become a passive foreign investment company for
U.S. federal income tax purposes. Although the determination of whether a
corporation is a passive foreign investment company is made annually, and thus
may be subject to change, the Company does not believe that it is, nor does it
expect to become, a passive foreign investment company. Notwithstanding the
foregoing, the Company urges U.S. Holders to consult their U.S. tax advisors
regarding the adverse U.S. federal income tax consequences of owning the stock
(or an option to acquire stock) of a passive foreign investment company and of
making certain elections designed to lessen those adverse consequences.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Dividends on Common Shares and payments of the proceeds from a sale or other
disposition of Common Shares, paid within the U.S. or through certain
U.S.-related financial intermediaries, are subject to information reporting and
may be subject to backup withholding unless a holder:
- is a corporation or other exempt recipient; or
- provides a taxpayer identification number and certify that no loss of
exemption from backup withholding has occurred.
Amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against a holder's U.S. federal income tax liability,
provided the required information is furnished to the IRS.
LEGAL MATTERS
Certain legal matters relating to the offering of Common Shares on exercise
of Warrants will be passed upon on behalf of the Company by Davies Ward
Phillips & Vineberg LLP, Toronto, Ontario and by Troutman Sanders LLP, McLean,
Virginia. At the date hereof, partners and associates of Davies Ward Phillips &
Vineberg LLP and Troutman Sanders LLP own beneficially, directly or indirectly,
less than 1% of the securities of the Company or any associate or affiliate of
the Company.
DOCUMENTS INCORPORATED BY REFERENCE
This prospectus supplement is deemed, as of the date hereof, to be
incorporated by reference into the accompanying Prospectus only for the purposes
of the offering of the Common Shares issuable on exercise of Warrants.
The following documents filed with the securities commissions or similar
authorities in each of the provinces of Canada are specifically incorporated by
reference in and form an integral part of the accompanying Prospectus, as
supplemented by this prospectus supplement:
(a) the Company's Annual Information Form dated April 24, 2002 consisting of
the Company's Annual Report on Form 20-F under the United States
Securities Exchange Act of 1934 for the fiscal year ended December 31,
2001;
(b) the audited consolidated financial statements of the Company, including
the notes thereto, as at December 31, 2001 and 2000 and for each of the
years in the three-year period ended December 31, 2001 together with the
auditors' report thereon;
(c) management's discussion and analysis of financial condition and results
of operations of the Company for the year ended December 31, 2001;
(d) the Management Information Circular dated April 24, 2002, prepared in
connection with the Company's annual meeting of shareholders on June 21,
2002 (excluding the sections entitled "Composition of Compensation
Committee", "Report on Executive Compensation", "Performance Graph" and
"Statement of Corporate Governance Practices");
S-9
(e) the information set forth under the caption "Summarized Quarterly Data"
on pages 40 and 41 of the Company's annual report for the year ended
December 31, 2001;
(f) management's discussion and analysis of results of operations and
liquidity and capital resources of the Company for the nine months ended
September 30, 2002 and unaudited consolidated financial statements of the
Company as at and for the nine months ended September 30, 2002;
(g) the material change report dated February 22, 2002 filed by the Company
in respect of the redemption of the convertible notes due 2004; and
(h) the material change report dated May 22, 2002 filed by the Company in
respect of the forgiveness of certain intercompany debt owed to the
Company by Sudbury Contact Mines Limited.
All documents of the type referred to above, and any material change reports
(excluding confidential material change reports), filed by the Company with any
securities commission or similar regulatory authority in Canada, subsequent to
the date of this prospectus supplement and prior to the termination of the
distribution under this prospectus supplement shall be deemed to be incorporated
by reference into the Prospectus.
Upon a new annual information form and the related annual audited
consolidated financial statements being filed by the Company with, and where
required, accepted by, the Canadian Securities Authorities during the currency
of this prospectus supplement, the previous annual information form, the
previous annual audited consolidated financial statements and all interim
unaudited financial statements (including the management's discussion of
financial condition and results of operations in the quarterly reports for such
periods), material change reports and management information circulars filed
prior to the commencement of the Company's financial year in which the new
annual information form is filed shall be deemed no longer to be incorporated by
reference in the accompanying Prospectus for purposes of future offers and sales
of Common Shares hereunder.
ANY STATEMENT CONTAINED IN THE PROSPECTUS, THIS PROSPECTUS SUPPLEMENT OR IN
A DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE IN THE
PROSPECTUS FOR THE PURPOSES OF THIS OFFERING SHALL BE DEEMED TO BE MODIFIED OR
SUPERSEDED FOR THE PURPOSES OF THE PROSPECTUS TO THE EXTENT THAT A STATEMENT
CONTAINED HEREIN, OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT WHICH ALSO IS
INCORPORATED OR IS DEEMED TO BE INCORPORATED BY REFERENCE IN THE PROSPECTUS,
MODIFIES OR SUPERSEDES SUCH STATEMENT. THE MODIFYING OR SUPERSEDING STATEMENT
NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR INCLUDE
ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT WHICH IT MODIFIES OR SUPERSEDES.
THE MAKING OF A MODIFYING OR SUPERSEDING STATEMENT WILL NOT BE DEEMED AN
ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR SUPERSEDED STATEMENT, WHEN MADE,
CONSTITUTED A MISREPRESENTATION, AN UNTRUE STATEMENT OF A MATERIAL FACT OR AN
OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR THAT IS
NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES IN
WHICH IT WAS MADE. ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED,
EXCEPT AS SO MODIFIED OR SUPERSEDED TO CONSTITUTE A PART OF THE PROSPECTUS FOR
THE PURPOSES OF THIS OFFERING.
S-10
BASE SHELF PROSPECTUS
NEW ISSUE [LOGO] November 8, 2002
AGNICO-EAGLE MINES LIMITED
DEBT SECURITIES
COMMON SHARES
WARRANTS
US$500,000,000
Agnico-Eagle Mines Limited (the "Company") may from time to time offer and issue
debt securities, common shares or warrants to purchase debt securities or common
shares (collectively, the "Securities"), up to a total price of US$500,000,000
(or its equivalent in Canadian dollars or any other currency used to denominate
the Securities) during the 25-month period that this short form base shelf
prospectus, including any amendments hereto, remains valid. Securities may be
offered separately or together, in amounts, at prices and on terms to be
determined based on market conditions at time of sale and set forth in an
accompanying shelf prospectus supplement (a "Prospectus Supplement").
The specific variable terms of any offering of Securities will be set out in the
applicable Prospectus Supplement including, where applicable: (i) in the case of
common shares, the number of shares offered, the offering price and any other
specific terms; (ii) in the case of debt securities, the designation of the debt
securities, any limit on the aggregate principal amount of the debt securities,
whether payment on the debt securities will be senior or subordinated to the
Company's other liabilities and obligations, whether the debt securities will be
secured by any of the Company's assets or guaranteed by any other person,
whether the debt securities will bear interest, the interest rate or method of
determining the interest rate, whether any conversion or exchange rights will be
attached to the debt securities, whether the Company may redeem the debt
securities at its option and any other specific terms; and (iii) in the case of
warrants, the designation, number and terms of debt securities or common shares
purchasable on the exercise of the warrants, any procedures that will result in
adjustment of these numbers, the exercise price, dates and periods of exercise,
the currency in which the warrants are issued and any other specific terms. A
Prospectus Supplement may include specific variable terms pertaining to the
Securities that are not within the alternatives and parameters described in this
prospectus.
All shelf information permitted under applicable laws to be omitted from this
prospectus will be contained in one or more Prospectus Supplements that will be
delivered to purchasers together with this prospectus. Each Prospectus
Supplement will be incorporated by reference into this prospectus for the
purposes of securities legislation as of the date of the Prospectus Supplement
and only for the purposes of the distribution of the Securities to which the
Prospectus Supplement pertains.
The Company may sell the Securities to or through underwriters or dealers
purchasing as principals pursuant to applicable statutory exemptions, and may
also sell the Securities to one or more purchasers directly or through agents.
The Prospectus Supplement relating to a particular offering of Securities will
identify each underwriter, dealer or agent engaged in connection with the
offering and sale of the Securities, and will set forth the terms of the
offering of such Securities, the method of distribution of such Securities
including, to the extent applicable, the proceeds to the Company and any fees,
discounts or any other compensation payable to underwriters, dealers or agents
and any other material terms of the plan of distribution.
The outstanding common shares of the Company are listed on The Toronto Stock
Exchange (the "TSX") under the symbol "AGE" and the New York Stock Exchange (the
"NYSE") under the symbol "AEM".
WE ARE PERMITTED TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN
DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES.
ALTHOUGH WE CURRENTLY PREPARE OUR FINANCIAL STATEMENTS IN ACCORDANCE WITH UNITED
STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, SOME FINANCIAL STATEMENTS
INCORPORATED BY REFERENCE HEREIN HAVE, AS INDICATED, BEEN PREPARED IN ACCORDANCE
WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND ARE SUBJECT TO
CANADIAN AUDITING AND AUDITOR INDEPENDENCE STANDARDS. AS A RESULT, THESE
FINANCIAL STATEMENTS MAY NOT BE COMPARABLE TO FINANCIAL STATEMENTS OF UNITED
STATES COMPANIES.
OWNING SECURITIES MAY SUBJECT YOU TO TAX CONSEQUENCES BOTH IN THE UNITED STATES
AND CANADA. THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT MAY NOT DESCRIBE THESE
TAX CONSEQUENCES FULLY. YOU SHOULD READ CAREFULLY THE DISCUSSION OF TAX
CONSIDERATIONS CONTAINED IN THE APPLICABLE PROSPECTUS SUPPLEMENT.
YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES FEDERAL
SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED IN
ONTARIO, SOME OF OUR OFFICERS AND DIRECTORS AND SOME OF THE EXPERTS NAMED IN
THIS PROSPECTUS ARE CANADIAN RESIDENTS, AND SUBSTANTIALLY ALL OF OUR ASSETS AND
THE ASSETS OF THOSE OFFICERS, DIRECTORS AND EXPERTS ARE LOCATED OUTSIDE OF THE
UNITED STATES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
PAGE
--------
PROSPECTUS SUMMARY...................... 3
RECENT DEVELOPMENTS..................... 4
FORWARD-LOOKING STATEMENTS.............. 5
RISK FACTORS............................ 6
THE COMPANY............................. 11
USE OF PROCEEDS......................... 13
CAPITALIZATION.......................... 13
DESCRIPTION OF EXISTING INDEBTEDNESS.... 14
EARNINGS COVERAGE....................... 17
DESCRIPTION OF SHARE CAPITAL............ 17
DIVIDEND POLICY......................... 19
DESCRIPTION OF DEBT SECURITIES.......... 19
PAGE
--------
DESCRIPTION OF WARRANTS................. 24
PLAN OF DISTRIBUTION.................... 24
LEGAL MATTERS........................... 25
AUDITORS, TRANSFER AGENT AND
REGISTRAR............................. 25
DOCUMENTS INCORPORATED BY REFERENCE..... 25
AVAILABLE INFORMATION................... 27
ENFORCEABILITY OF CERTAIN CIVIL
LIABILITIES........................... 27
DOCUMENTS FILED AS PART OF THE
REGISTRATION STATEMENT................ 27
Only the information contained or incorporated by reference in this
prospectus should be relied upon. The Company has not authorized any other
person to provide different information. If anyone provides different or
inconsistent information, it should not be relied upon. The Securities offered
hereunder may not be offered or sold in any jurisdiction where the offer or sale
is not permitted. Unless otherwise indicated, the statistical, operating and
financial information contained in this prospectus is presented as at
December 31, 2001. It should be assumed that the information appearing in this
prospectus and the documents incorporated by reference is accurate only as of
their respective dates. The Company's business, financial condition, results of
operations and prospects may have changed since those dates.
IN THIS PROSPECTUS, UNLESS STATED OTHERWISE, "AGNICO-EAGLE", THE "COMPANY",
"WE", "US", AND "OUR" REFER TO AGNICO-EAGLE MINES LIMITED AND ITS CONSOLIDATED
SUBSIDIARY.
The Company publishes its consolidated financial statements in United States
dollars ("US dollars"). Unless otherwise indicated, all references to "$", "US$"
or "dollar" in this prospectus refer to US dollars and "C$" refers to Canadian
dollars. For information purposes, the noon buying rate in The City of New York
for cable transfers in Canadian dollars as certified for customs purposes by the
Federal Reserve Bank of New York (the "Noon Buying Rate") on October 30, 2002
was US$1.00 = C$1.5677 and on November 7, 2002 was US$1.00 = C$1.5528.
To reflect the Company's substantial U.S. shareholder base and to maintain
comparability with other companies in the gold sector, the Company changed its
primary basis of reporting to United States generally accepted accounting
principles ("US GAAP") effective January 1, 2002. For statutory reporting
purposes in Canada, the Company continues to prepare and file consolidated
financial statements and related management discussion and analysis under
Canadian generally accepted accounting principles ("Canadian GAAP"). UNLESS
OTHERWISE STATED HEREIN ALL NUMBERS USED HEREIN WERE PREPARED IN ACCORDANCE WITH
CANADIAN GAAP.
The 2001 Ore Reserve Report dated February 25, 2001 relating to the
Company's LaRonde Division prepared by Marc Legault, the LaRonde Division's
Chief Geologist, contains information concerning drilling methods, sampling
methods and approach, sample preparation, analysis and security, quality control
procedures, data verification and laboratories used for analysis, which
procedures, techniques and laboratories were used by the Company in connection
with the scientific and technical information provided in this prospectus. Marc
Legault is a qualified person as defined under the Canadian Securities
Administrators' National Instrument 43-101 and has supervised the preparation of
and verified the information that forms the basis for the scientific and
technical data contained in this prospectus.
2
PROSPECTUS SUMMARY
THE FOLLOWING INFORMATION IS A SUMMARY ONLY AND IS TO BE READ IN CONJUNCTION
WITH, AND IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN. CAPITALIZED TERMS USED BUT NOT DEFINED IN THIS SUMMARY HAVE
THE RESPECTIVE MEANINGS ASCRIBED THERETO ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, THE STATISTICAL, OPERATING AND FINANCIAL INFORMATION
CONTAINED IN THIS PROSPECTUS IS PRESENTED AS AT DECEMBER 31, 2001.
THE COMPANY
The Company is an established Canadian gold producer with mining operations
located in northwestern Quebec and exploration and development activities in
Canada and the southwestern United States (principally Nevada). The Company's
operating history includes almost three decades of continuous gold production,
primarily from underground operations. Since its formation in 1972, the Company
has produced approximately three million ounces of gold. In 2001, the Company
produced 234,860 ounces of gold at an average cash cost of $155 per ounce, net
of revenues received from the sale of zinc, silver and copper by-products. The
Company believes that it is one of the low cash cost producers in the North
American gold mining industry. The Company has traditionally sold all of its
gold production at the spot price due to its general policy not to sell forward
its future gold production. However, the Company has purchased put options that
will allow it to set a floor price of $260 per ounce on approximately 45% of its
gold production over the period from 2004 to 2007 inclusive.
The Company's principal operating divisions are the LaRonde Division and the
Exploration Division. The LaRonde Division consists of the LaRonde Mine,
including the El Coco Property, which is 100% owned and operated by the Company.
The El Coco Property was acquired from Barrick Gold Corporation in 1999 and is
subject to a 50% net profits interest on future production from current mineral
reserves on this property, which are expected to be depleted by the end of 2003.
The LaRonde Mine, with its single operating production shaft (the "Penna
Shaft"), currently accounts for all of the Company's gold production. Since the
commissioning of the mill in 1988, the LaRonde Division has produced over
1.9 million ounces of gold. The Penna Shaft at the LaRonde Mine extends to a
depth of 7,380 feet, which the Company believes makes it the deepest single-lift
shaft in the Western Hemisphere. Production was expanded at the LaRonde Mine to
5,000 tons of ore treated per day in October 2000 and to 7,000 tons of ore
treated per day in October 2002. As of December 31, 2001, the LaRonde Division
had established proven and probable mineral reserves of approximately
3.3 million ounces of contained gold with a total mineral reserve and mineral
resource base of 8.5 million ounces of gold.
The Company's current strategy is to pursue opportunities for growth in gold
production and gold reserves through the acquisition of advanced exploration
properties, development properties, producing properties or other mining
businesses and through continued exploration, development and expansion of the
LaRonde Mine. The Company continuously evaluates opportunities to make
acquisitions, although it currently has no contract, arrangement or
understanding with respect to any material acquisition.
The Company, through its Exploration Division and its 67.5% owned
subsidiary, Sudbury Contact Mines Limited ("Sudbury Contact"), focuses its
exploration activities primarily on the identification of new gold reserves and
development opportunities in proven producing regions in Canada and the
southwestern United States. In addition, Sudbury Contact engages in exploration
for deposits of diamonds in northern Ontario.
3
RECENT DEVELOPMENTS
RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND OUTLOOK
As disclosed in the Company's management's discussion and analysis of
financial conditions and the results of operations for the nine months ended
September 30, 2002, gold production and revenue for the nine month period were
lower than anticipated due to the impact of delays in development in Zone 20
North at depth caused by delays in ventilation installation. As a result of
these delays, mining activity was concentrated in the zinc-silver rich zones in
the upper part of Zone 20 North. This re-sequencing of production is expected to
push into future years gold production initially scheduled for 2002. Production
was also affected by an electrical failure of the semi-autogenous (SAG) mill
drive which resulted in 11 days of lost production in July 2002. The mill drive
has since been replaced. Cash costs per ounce of gold for the nine months ended
September 30, 2002 were also higher than anticipated due to lower than projected
gold production, a higher El Coco royalty resulting from increased gold price
and a weaker than budget zinc price, partially offset by a weaker than
anticipated Canadian dollar. In 2003, further cost improvements are anticipated
as ore grades increase and production improves at the LaRonde Mine when mining
is expected to begin on the higher grade zones and the first full year of
production at 7,000 tons of ore treated per day is realized. Gold production for
the full year 2002 is now expected to be approximately 285,000 ounces at a cash
cost of approximately $130 per ounce and a total cash cost, including royalties
payable in respect of production from the El Coco Property, of approximately
$165 per ounce. The Company's ability to meet these production and cost targets
is subject to the uncertainties associated with mining and processing
operations, as well as the effects of gold prices, by-product credits (for zinc,
silver and copper), treatment and refining charges and the US dollar/Canadian
dollar exchange rate.
Capital expenditures for 2002 are estimated to be approximately
$55 million. These estimated capital expenditures for the year are approximately
$9 million in excess of the budget for the year. The increase was attributable
to a decline in labour productivity resulting from high underground temperatures
caused by the delays in ventilation installation.
LARONDE MINE EXPANSION
The expansion of the LaRonde Mine from 5,000 to 7,000 tons of ore per day
was completed in October 2002 and the construction of a crushing plant and a
load out plant at lower levels is scheduled to be completed by July 2003.
Underground, the first production stope on Level 194 was blasted during
June 2002. Extraction was delayed while an ore pass between Level 194 and 215
was completed which was slowed due to the delay in installing ventilation to
that depth.
The expansion of the mill is now substantially complete. The mill was shut
down for five days in early October 2002 to complete commissioning. Further work
remains to be done during the fourth quarter to upgrade the refinery heating and
ventilation systems. The mill is expected to average 7,000 tons of ore treated
per day during the fourth quarter.
DEEP DEVELOPMENT PROJECT
The Company has set up a team to study a deep development project at LaRonde
to access the Company's mineral resource base of 5.2 million ounces, located
outside of the Penna Shaft infrastructure. The initial phase is to study the
technical issues associated with deep mining, including ventilation and cooling
at depth, hoisting constraints and capacity at depth and excavation stability. A
detailed feasibility study has been initiated and the results of this study are
expected to be available in the first half of 2003.
PROPOSED ACCOUNTING CHANGE
Effective January 1, 2003, the Company will adopt Statement of Financial
Accounting Standards No. 143 relating to asset retirement obligations. The
Company is currently evaluating the impact of adopting this standard. Although
the change may negatively affect earnings in the first quarter of 2003, on an
annual basis its impact is expected to be immaterial.
4
UNIT OFFERING
On November 6, 2002, the Company filed a short form prospectus with the
securities commission in each of the provinces of Canada and filed a
registration statement on Form F-10 (File No. 333-100850) with the United States
Securities and Exchange Commission (the "SEC") relating to an offering (the
"Unit Offering") by the Company of units ("Units"), each Unit consisting of one
common share and one-half of a share purchase warrant (a "Warrant"), to the
public in Canada and the United States. In connection with the Unit Offering,
the Company entered into an agreement dated October 31, 2002 (the "Underwriting
Agreement") with a syndicate of underwriters (collectively, the "Underwriters"),
pursuant to which the Company has agreed to sell and the Underwriters have
agreed to purchase from the Company 12,000,000 Units at a price of C$21.79 per
Unit ($13.90 per Unit). The Unit Offering is expected to be completed on
November 14, 2002. Under the Underwriting Agreement, the Underwriters have an
option to purchase up to an additional 1,800,000 Units from the Company, solely
to cover over-allotments in the Unit Offering, if any, prior to or on
December 6, 2002.
Each whole Warrant will entitle the holder to purchase one common share for
a price of US$19.00 at any time on or prior to five years from the date of
closing of the Unit Offering, after which the Warrants will expire and be of no
value. Holders of Warrants may elect to pay the exercise price in the Canadian
dollar equivalent of the US dollar exercise price. See "Description of Share
Capital -- Warrants".
The estimated net proceeds to the Company of the Unit Offering will be
approximately C$249.6 million ($159.2 million based on the Noon Buying Rate on
October 30, 2002) (determined after deducting the underwriting commission and
the estimated expenses of the Unit Offering payable by the Company and assuming
no exercise of the Underwriters' over-allotment option). The net proceeds of the
Unit Offering will be used to fund future potential acquisitions, capital
expenditures, temporary repayment of existing indebtedness and for other general
corporate purposes.
It is a condition of the closing of the Unit Offering that the registration
statement of which this shelf prospectus forms part be declared effective by the
SEC and that the Company have filed with the SEC a prospectus supplement
registering the offering of the Common Shares issuable from time to time on the
exercise of the Warrants.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and in certain documents
incorporated by reference in this prospectus constitute "forward-looking
statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995. When used in such documents, the words
"anticipate", "believe", "estimate", and "expect" and similar expressions, as
they relate to the Company or the Company's management, are intended to identify
forward-looking statements. Such statements reflect the Company's current views
with respect to future events and are subject to certain risks, uncertainties
and assumptions. Many factors could cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performances, or achievements that may be expressed or implied by such
forward-looking statements, including, among others, those which are discussed
under the heading "Risk Factors" in this prospectus. Should one or more of these
risks or uncertainties materialize, or should assumptions underlying the
forward-looking statements prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated or expected. The
Company does not intend, and does not assume any obligation, to update these
forward-looking statements.
5
RISK FACTORS
AN INVESTMENT IN THE SECURITIES INVOLVES CERTAIN RISKS. BEFORE MAKING AN
INVESTMENT DECISION, PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER ALL OF THE
INFORMATION IN THIS PROSPECTUS, IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN AND IN THE APPLICABLE PROSPECTUS SUPPLEMENT AND, IN PARTICULAR, SHOULD
EVALUATE THE FOLLOWING RISK FACTORS. HOWEVER, THE RISKS DESCRIBED BELOW ARE NOT
THE ONLY ONES FACING THE COMPANY. ADDITIONAL RISKS NOT CURRENTLY KNOWN TO THE
COMPANY OR THAT THE COMPANY CURRENTLY DEEMS IMMATERIAL MAY ALSO IMPAIR THE
COMPANY'S BUSINESS OPERATIONS.
RECENT LOSSES
Although the Company reported net earnings for the nine months ended
September 30, 2002, it incurred net losses in the three months ended
September 30, 2002 and in each of the last five years. The Company's
profitability depends on the price of gold, gold production, cash operating
costs, the prices and production levels of by-product zinc, silver and copper
and other factors discussed in this section of the prospectus. Substantially all
of these factors are beyond the Company's control and there can be no assurance
that the Company will sustain profitability in the near future.
METAL PRICE VOLATILITY
The Company's earnings are directly related to the price of gold as revenues
are derived primarily from gold mining. The Company's general policy is not to
sell forward its future gold production. Gold prices fluctuate widely and are
affected by numerous factors beyond the Company's control, including central
bank sales, producer hedging activities, expectations of inflation, the relative
exchange rate of the US dollar with other major currencies, global and regional
demand and political and economic conditions and production costs in major gold
producing regions. The aggregate effect of these factors is impossible to
predict with accuracy. Gold prices are also affected by worldwide production
levels. In addition, the price of gold has on occasion been subject to very
rapid short-term changes because of speculative activities. Fluctuations in gold
prices may materially adversely affect the Company's financial performance or
results of operations. If the market price of gold falls below the Company's
production costs and remains at such a level for any sustained period, the
Company will experience losses and may curtail or suspend some or all of its
exploration, development and mining activities. The prices received for the
Company's by-products (zinc, silver and copper) affect the Company's ability to
meet its targets for cost per ounce of gold produced. By-product prices
fluctuate widely and are affected by numerous factors beyond the Company's
control.
The volatility of gold prices is illustrated in the following table which
sets forth, for the periods indicated, the high and low afternoon fixing prices
for gold on the London Bullion Market (the "London P.M. Fix") and the average
gold prices received by the Company.
2002
(TO NOVEMBER 5) 2001 2000 1999 1998 1997
---------------- -------- -------- -------- -------- --------
High price ($ per ounce)............................... 330 293 313 326 313 367
Low price ($ per ounce)................................ 277 256 264 253 273 283
Average price received ($ per ounce)................... 308 273 278 274 296 336
On November 5, 2002, the London P.M. Fix was $319 per ounce of gold.
Based on 2002 production estimates, the approximate sensitivities of the
Company's after-tax earnings and cash flows to a 10% change in metal prices from
2001 market average prices are as follows:
EARNINGS PER SHARE CASH FLOW PER SHARE
------------------ -------------------
Gold........................................................ $0.07 $0.12
Zinc........................................................ $0.02 $0.03
Silver...................................................... $0.01 $0.02
Sensitivities of the Company's after-tax earnings and cash flows to changes
in metal prices will increase with increased production.
6
DEPENDENCE ON THE LARONDE DIVISION
The Company's mining and milling operations at the LaRonde Division account
for all of the Company's gold production and will continue to account for all of
its gold production in the future unless additional properties are acquired or
brought into production. Any adverse condition affecting mining or milling
conditions at the LaRonde Division could be expected to have a material adverse
effect on the Company's financial performance and results of operations until
such time as the condition is remedied. In addition, the Company's principal
development program is the expansion of the LaRonde Division. This program
involves the exploration and extraction of ore from new zones and may present
new or different challenges for the Company. There can be no assurance that the
Company's current exploration and development programs at the LaRonde Division
will result in any new economically viable mining operations or yield new
mineral reserves to replace and expand current mineral reserves.
COST OF EXPLORATION AND DEVELOPMENT PROGRAMS
The Company's profitability is significantly affected by the costs and
results of its exploration and development programs. As mines have limited lives
based on proven and probable mineral reserves, the Company actively seeks to
replace and expand its reserves, primarily through exploration and development
and, from time to time, through strategic acquisitions. Exploration for minerals
is highly speculative in nature, involves many risks and frequently is
unsuccessful. Among the many uncertainties inherent in any gold exploration and
development program are the location of economic ore bodies, the development of
appropriate metallurgical processes, the receipt of necessary governmental
permits and the construction of mining and processing facilities. In addition,
substantial expenditures are required to pursue such exploration and development
activities. Assuming discovery of an economic ore body, depending on the type of
mining operation involved, several years may elapse from the initial phases of
drilling until commercial operations are commenced and during such time the
economic feasibility of production may change. Accordingly, there can be no
assurance that the Company's current exploration and development programs will
result in any new economically viable mining operations or yield new reserves to
replace and expand current reserves.
TOTAL CASH COSTS OF GOLD PRODUCTION AT THE LARONDE MINE
The Company's total cash operating costs to produce an ounce of gold are
dependent on a number of factors, including primarily the prices and production
levels of by-product zinc, silver and copper, the revenue from which is offset
against the cost of gold production, the US dollar/Canadian dollar exchange rate
and the net profit royalty on metal production from the adjacent El Coco
Property, which is affected by all of these factors and the gold price. As these
factors are beyond the Company's control, there can be no assurance that the
Company will continue to maintain its status as a low cash cost gold producer.
RESTRICTIONS IN THE BANK CREDIT FACILITY
The Company's $125 million revolving bank credit facility limits, among
other things, the Company's ability to incur additional indebtedness, pay
dividends or make payments in respect of the Common Shares, make investments or
loans, transfer the Company's assets and make expenditures relating to the
LaRonde Mine or the El Coco Property, except as set forth in a mine development
plan delivered pursuant to the credit facility and the ability of its
subsidiaries to make expenditures in excess of $5 million in any fiscal year in
excess of those set forth in the mine development plan. Further, the bank credit
facility requires the Company to maintain specified financial ratios and satisfy
financial condition tests. Events beyond the Company's control, including
changes in general economic and business conditions, may affect the Company's
ability to satisfy these covenants, which could result in a default under the
bank credit facility. If an event of default under the bank credit facility
occurs, the lenders could elect to declare all principal amounts outstanding
thereunder, together with accrued interest, to be immediately due and payable
and to enforce their security interest over substantially all property relating
to the LaRonde Mine and the El Coco Property. An event of default under the bank
credit facility may also give rise to an event of default under existing and
future debt agreements and, in such event, the Company may not have sufficient
funds to repay amounts owing under such agreements.
7
COMPETITION AND SCARCITY OF MINERAL LANDS
Many companies and individuals are engaged in the mining business, including
large, established mining companies with substantial capabilities and long
earnings records. There is a limited supply of desirable mineral lands available
for claim staking, lease or other acquisition in the areas where the Company
contemplates conducting exploration activities. The Company may be at a
competitive disadvantage in acquiring mining properties, as it must compete with
these individuals and companies, many of which have greater financial resources
and larger technical staffs than the Company. Accordingly, there can be no
assurance that the Company will be able to compete successfully for new mining
properties.
RISKS OF ACQUISITIONS
The Company has recently begun to focus on evaluating opportunities to
acquire shares or assets of other mining businesses. Such acquisitions may be
significant in size, may change the scale of the Company's business, and may
expose the Company to new geographic, political, operating, financial or
geological risks. The Company's success in its acquisition activities depends on
its ability to identify suitable acquisition candidates, acquire them on
acceptable terms and integrate their operations successfully with those of the
Company. Any acquisitions would be accompanied by risks, such as the difficulty
of assimilating the operations and personnel of any acquired businesses; the
potential disruption of the Company's ongoing business; the inability of
management to maximize the financial and strategic position of the Company
through the successful integration of acquired assets and businesses; the
maintenance of uniform standards, controls, procedures and policies; the
impairment of relationships with employees, customers and contractors as a
result of any integration of new management personnel; and the potential unknown
liabilities associated with acquired assets and businesses. In addition, the
Company may need additional capital to finance an acquisition. Debt financing
related to any acquisition may expose the Company to increased risk of leverage,
while equity financing may cause existing shareholders to suffer dilution. The
Company is not currently permitted under the terms of its bank credit facility
to raise additional debt financing without the consent of a majority of the
lenders. There can be no assurance that the Company would be successful in
overcoming these risks or any other problems encountered in connection with such
acquisitions.
UNCERTAINTY OF MINERAL RESERVE AND MINERAL RESOURCE ESTIMATES
The figures for proven and probable mineral reserves and mineral resource
presented herein are estimates, and no assurance can be given that the
anticipated tonnages and grades will be achieved or that the indicated level of
recovery of gold will be realized. The ore grade actually recovered by the
Company may differ from the estimated grades of the mineral reserves and mineral
resource. Such figures have been determined based on assumed gold prices and
operating costs. The Company has estimated proven and probable mineral reserves
based on a $300 per ounce gold price. While gold prices have generally been
above $300 per ounce to date in 2002, for the previous four years the market
price of gold has been, on average, below $300 per ounce. Prolonged declines in
the market price of gold may render mineral reserves containing relatively lower
grades of gold mineralization uneconomic to exploit and could reduce materially
the Company's reserves. Should such reductions occur, the Company could be
required to take a material write-down of its investment in mining properties or
delay or discontinue production or the development of new projects, resulting in
increased net losses and reduced cash flow. If a gold price of $275 per ounce
were assumed, the mineral reserve and mineral resource position would decline by
less than 2%. Market price fluctuations of gold, as well as increased production
costs or reduced recovery rates, may render mineral reserves containing
relatively lower grades of mineralization uneconomical to recover and may
ultimately result in a restatement of mineral resources. Short-term factors
relating to the mineral reserve, such as the need for orderly development of ore
bodies or the processing of new or different grades may impair the profitability
of a mine in any particular accounting period.
Mineral resource estimates for properties that have not commenced production
are based, in most instances, on very limited and widely spaced drill hole
information, which is not necessarily indicative of conditions between and
around the drill holes. Accordingly, such mineral resource estimates may require
revision as more drilling information becomes available or as actual production
experience is gained.
8
MINING RISKS AND INSURANCE
The business of gold mining is generally subject to certain types of risks
and hazards, including environmental hazards, industrial accidents, unusual or
unexpected rock formations, changes in the regulatory environment, cave-ins and
flooding and gold bullion losses. Such occurrences could result in damage to, or
destruction of, mineral properties or production facilities, personal injury or
death, environmental damage, delays in mining, monetary losses and possible
legal liability. The Company carries insurance to protect itself against certain
risks of mining and processing in amounts that it considers to be adequate but
which may not provide adequate coverage in certain unforeseen circumstances. The
Company may also become subject to liability for pollution, cave-ins or other
hazards against which it cannot insure or against which it may elect not to
insure because of high premium costs or other reasons or the Company may become
subject to liabilities which exceed policy limits. In such case, the Company may
be required to incur significant costs that could have a material adverse effect
on its financial performance and results of operations.
LAWS AND REGULATIONS
The Company's mining operations and exploration activities are subject to
extensive Canadian federal and provincial, United States federal and state and
local laws and regulations governing prospecting, development, production,
exports, taxes, labour standards, occupational health and safety, water
disposal, toxic substances, environmental protection, mine safety and other
matters. Compliance with such laws and regulations increases the costs of
planning, designing, drilling, developing, constructing, operating and closing
mines and other facilities. Amendments to current laws and regulations governing
operations and activities of mining companies or more stringent implementation
or interpretation thereof could have a material adverse impact on the Company,
cause a reduction in levels of production and delay or prevent the development
of new mining properties.
In July 2002, the Company paid a C$5,046 fine in respect of a notice of
infraction issued by the Quebec Ministry of the Environment under the LOI SUR LA
QUALITE DE L'ENVIRONNEMENT with respect to a toxic effluent at the LaRonde
Division. The Company has taken measures to prevent the discharge of toxic
effluent, including the installation of on-site water treatment systems, the
last of which is expected to be completed in 2003. In the meantime, the Company
is storing the effluent on site for future treatment. Although the costs of
treatment have not yet been finally determined, the Company believes that such
costs will not have a material effect on the Company's results of operations.
Under mine closure plans originally submitted to the Minister of Natural
Resources in Quebec in 1996, the estimated current reclamation costs for the
LaRonde Division and Joutel are approximately $15 million and $0.5 million,
respectively. These reclamation plans are subject to approval by the Minister of
Natural Resources and there can be no assurance that the Minister of Natural
Resources will not impose additional reclamation obligations with attendant
higher costs. In addition, the Minister of Natural Resources may require that
the Company provide financial assurances to support such plans. At December 31,
2001, the Company had a total reclamation provision of $2.1 million, with
$0.9 million allocated for the LaRonde Division and $1.0 million allocated for
Joutel. Based on the current estimated reclamation costs for the LaRonde
Division, the Company records its annual reclamation provision for the LaRonde
Division at approximately $5 per ounce of gold produced.
CURRENCY FLUCTUATIONS
The Company's operating results and cash flow are significantly affected by
changes in the US dollar/Canadian dollar exchange rate. Exchange rate movements
can have a significant impact as all of the Company's revenues are earned in
US dollars but most of its operating and capital costs are in Canadian dollars.
The US dollar/Canadian dollar exchange rate has varied significantly over the
last several years. During the period from January 1, 1997 to September 30,
2002, the Noon Buying Rate fluctuated from a high of C$1.6128 to a low of
C$1.3357. Historical fluctuations in the US dollar/Canadian dollar exchange rate
are not necessarily indicative of future exchange rate fluctuations. Based on
the Company's anticipated 2002 after-tax operating results, a 10% change in the
average annual US dollar/Canadian dollar exchange rate would affect net income
and operating cash flow by approximately $0.06 per share and $0.10 per share,
respectively. To hedge its foreign
9
exchange risk and minimize the impact of exchange rate movements on operating
results and cash flow, the Company has periodically used foreign currency
options and forward foreign exchange contracts to purchase Canadian dollars.
However, there can be no assurance that the Company's foreign exchange hedging
strategies will be successful or that foreign exchange fluctuations will not
materially adversely affect the Company's financial performance and results of
operations.
INTEREST RATE FLUCTUATIONS
Fluctuations in interest rates can affect the Company's results of
operations and cash flows. The Company's convertible debentures due 2012 are at
a fixed rate of interest; however both its bank debt and cash balances are
subject to variable interest rates.
SECURITY PRICE VOLATILITY
The trading price of the Company's common shares has been and may continue
to be subject to large fluctuations and, therefore, the trading price of
Securities convertible into or exchangeable for common shares may also fluctuate
significantly, which may result in losses to investors. The trading price of the
common shares and Securities convertible into or exchangeable for common shares
may increase or decrease in response to a number of events and factors,
including:
- current events affecting the economic situation in Canada and the United
States;
- trends in the mining industry and the markets in which the Company
operates;
- changes in the market price of the commodities the Company sells;
- changes in financial estimates and recommendations by securities analysts;
- acquisitions and financings;
- quarterly variations in operating results;
- the operating and share price performance of other companies that
investors may deem comparable; and
- purchases or sales of blocks of the common shares or Securities
convertible into or exchangeable for common shares.
Part of this volatility, however, is attributable to the current state of
the stock market, in which wide price swings are common. This volatility may
adversely affect the prices of the common shares and the Securities convertible
into or exchangeable for common shares regardless of the Company's operating
performance.
EARNINGS COVERAGE DEFICIENCY
After giving effect to the issuance of all long-term debt of the Company and
repayment or redemption thereof since December 31, 2001 and to adjustments to
amounts under Canadian GAAP to include distributions on the Company's
convertible debentures due 2012 in pro forma interest expense, the Company's
earnings before interest and income taxes for the 12-month period ended
December 31, 2001 were insufficient to cover the Company's pro forma interest
requirements for such period by $3.7 million ($0.6 million under U.S. GAAP).
See "Earnings Coverage".
10
THE COMPANY
HISTORY AND DEVELOPMENT OF THE COMPANY
The Company is an established Canadian gold producer with mining operations
located in northwestern Quebec and exploration and development activities in
Canada and the southwestern United States (principally Nevada). The Company's
operating history includes almost three decades of continuous gold production,
primarily from underground operations. Since its formation in 1972, the Company
has produced approximately three million ounces of gold. In 2001, the Company
produced 234,860 ounces of gold at an average cash cost of $155 per ounce, net
of revenues received from the sale of zinc, silver and copper by-products. The
Company believes that it is one of the low cash cost producers in the North
American gold mining industry. The Company has traditionally sold all of its
gold production at the spot price due to its general policy not to sell forward
its future gold production. However, the Company has purchased put options that
will allow it to set a floor price of $260 per ounce on approximately 45% of its
gold production over the period from 2004 to 2007 inclusive.
The Company's principal operating divisions are the LaRonde Division and the
Exploration Division. The LaRonde Division consists of the LaRonde Mine,
including the El Coco Property, which is 100% owned and operated by the Company.
The El Coco Property was acquired from Barrick Gold Corporation in 1999 and is
subject to a 50% net profits interest on production from current mineral
reserves on this property, which are expected to be depleted by the end of 2003.
The LaRonde Mine, with its single operating production shaft (the "Penna
Shaft"), currently accounts for all of the Company's gold production. Since the
commissioning of the mill in 1988, the LaRonde Division has produced over
1.9 million ounces of gold. The Penna Shaft at the LaRonde Mine extends to a
depth of 7,380 feet, which the Company believes makes it the deepest single-lift
shaft in the Western Hemisphere. Production was expanded at the LaRonde Mine to
5,000 tons of ore treated per day in October 2000 and to 7,000 tons of ore
treated per day in October 2002.
An extensive surface and underground exploratory drilling program to
delineate additional reserves at the LaRonde Mine has been underway since 1990.
The program successfully outlined several ore zones and a large mineral resource
to the east of the site of what was, at the time, the main production shaft. As
of December 31, 2001, the LaRonde Division had established proven and probable
mineral reserves of approximately 3.3 million ounces of contained gold with a
total mineral reserve and mineral resource base of 8.5 million ounces of gold.
The Company's current strategy is to pursue opportunities for growth in gold
production and gold reserves through the acquisition of advanced exploration
properties, development properties, producing properties or other mining
businesses and through continued exploration, development and expansion of the
LaRonde Mine. Aggregate expenditures on the development and expansion of the
LaRonde Mine incurred in the last four fiscal years were $215 million, of which
$36.3 million was spent in 2001. Expenditures for the nine months ending
September 30, 2002 on this property were $45.1 million and planned expenditures
for the remaining three months of the year are estimated to be $9.8 million.
These expenditures will be financed out of funds from the Company's
$125 million revolving bank credit facility and operating cash flows. Depending
on the success of the exploration programs at this and other properties, the
Company may be required to make additional capital expenditures for exploration,
development and preproduction. In addition, the Company continuously evaluates
opportunities to make acquisitions, although it currently has no contract,
arrangement or understanding with respect to any material acquisition.
The Company, through its Exploration Division and its subsidiary company,
Sudbury Contact, focuses its exploration activities primarily on the
identification of new gold reserves and development opportunities in proven
producing regions in Canada and the southwestern United States. In addition,
Sudbury Contact engages in exploration for deposits of diamonds in northern
Ontario. The Company currently manages exploration on 71 properties in central
and eastern Canada.
The Company's only significant subsidiary is Sudbury Contact, a public
company listed on the TSX. The Company has an approximate 67.4% interest in
Sudbury Contact. Sudbury Contact is a corporation incorporated under the laws of
the Province of Ontario.
11
The Company's executive and registered office is located at Suite 500, 145
King Street East, Toronto, Ontario, Canada M5C 2Y7; telephone number
(416) 947-1212; website: http://www.agnico-eagle.com. The information contained
on the website is not part of this prospectus.
KEY OPERATING STRENGTHS
The Company believes that it has a number of key operating strengths that
provide distinct competitive advantages.
FOCUSED BUSINESS STRATEGY. The Company and its predecessors have over three
decades of experience and expertise in metals mining, including nearly three
decades of continuous gold production. The Company's operations are located in
areas that are supportive of the mining industry in Canada and the southwestern
United States. These operations are concentrated in areas among North America's
principal gold-producing regions.
LOW-COST, EFFICIENT PRODUCER. The Company believes that it is one of the
low cash cost producers in the North American gold mining industry. The Company
has been able to improve this position through its dedication to cost-efficient
mining operations, the strength of its by-product revenue and the economies of
scale afforded by its large single shaft mine. In addition, the Company believes
its highly motivated work force contributes significantly to its low-cost
position and continued operational improvements.
SOUND OPERATING BASE. The Company's existing operations at the LaRonde
Division provide a sound economic base for additional reserve and production
development at the property. Since 1990, an extensive surface and underground
exploration program has identified several ore zones at depths ranging from 300
feet to approximately 10,000 feet below surface, at which point mineralization
remains open at depth and to the west. Production from these ore zones began in
1999 and the Penna Shaft was completed in March 2000. The Company successfully
expanded production at the LaRonde Mine to 5,000 tons of ore treated per day in
October 2000 and to 7,000 tons of ore treated per day in October 2002. See
"Recent Developments".
STRONG MANAGEMENT TEAM. The Company's senior management team has an average
of 20 years of operating and exploration experience in the mining industry.
Management's significant experience has been instrumental in the Company's
historical growth and provides a solid base on which to expand the Company's
operations. The geological knowledge that management has gained through its
years of experience in mining and developing the LaRonde Division is expected to
benefit the Company's current expansion program in the region.
GROWTH STRATEGY
OPTIMIZE AND FURTHER EXPAND OPERATIONS. The Company's strategy is to
increase annual gold production and gold reserves through the continued
exploration, development and expansion of the LaRonde Mine. The expansion of
production at the LaRonde Mine from 5,000 to 7,000 tons of ore treated per day
was completed in October 2002. Under the 7,000 tons-per-day mine plan, the
Company's objective is to increase gold production at the LaRonde Division to
approximately 400,000 ounces per year by 2004 and to continue to lower its costs
to produce an ounce of gold. Capital expenditures at the LaRonde Division in
2001 were $36.3 million and are expected to be approximately $55 million in 2002
and $17 million in 2003 to complete development of the ore zones accessible from
the Penna Shaft required to sustain production at the rate of 7,000 tons of ore
treated per day and to construct a crushing plant and a load out plant at lower
levels, scheduled to be completed by July 2003.
GROWTH THROUGH ACQUISITIONS. The Company has traditionally sought to
achieve growth by acquiring advanced exploration properties, development
properties and producing properties and by investing in early-stage exploration
companies. More recently, the Company has begun to focus on achieving growth
through the acquisition of shares or assets of other mining businesses. The
Company is currently examining several such acquisition opportunities.
EXPAND GOLD RESERVES. The Company is conducting an aggressive drilling
program at the LaRonde Division to further increase its mineral reserve base and
transfer mineral resources to the mineral reserve
12
category. In the three years ended December 31, 2001, the Company has
transferred over 17 million tons of mineral resources to proven and probable
mineral reserves, net of production replacements. In that same period, the
Company's exploration activities have added 2.0 million ounces to proven and
probable gold reserves net of production replacement of 0.4 million ounces of
gold mined. As a result, the LaRonde Division's current global proven and
probable mineral reserve and mineral resource base is estimated to contain
8.5 million ounces of gold, 3.2 billion pounds of zinc, 106 million ounces of
silver and 612 million pounds of copper of which 3.3 million ounces of gold,
2.9 billion pounds of zinc, 83 million ounces of silver and 260 million pounds
of copper are proven and probable mineral reserve. The new underground workings
at the Penna Shaft will provide a base from which the Company can conduct its
aggressive drilling program of 550,000 feet over the period from 2002 to 2005,
inclusive.
EXPAND GEOGRAPHIC BASE. The Company's assets are primarily located in the
provinces of Quebec and Ontario. The Company's strategy is to seek to expand the
geographic base of its properties through acquisition of additional properties
or mining businesses within and outside Canada. The Company continuously
considers such acquisition opportunities.
LEVERAGE MINING EXPERTISE. The Company believes it can benefit not only
from the existing infrastructure at its mines, but also from geological
knowledge that it has gained in mining and developing its properties. The
Company's strategy is to capitalize on its operating and mine development
expertise to exploit fully the potential of its properties. The Company's goal
is to apply the proven operating principles of the LaRonde Division to each of
its existing and future properties.
USE OF PROCEEDS
Unless otherwise specified in a Prospectus Supplement, the net proceeds from
the sale of the Securities will be used for general corporate purposes,
including to fund potential future acquisitions and capital expenditures. Each
Prospectus Supplement will contain specific information concerning the use of
proceeds from that sale of Securities.
All expenses relating to an offering of Securities and any compensation paid
to underwriters, dealers or agents, as the case may be, will be paid out of the
Company's general funds.
CAPITALIZATION
Since December 31, 2001, the following changes have occurred in the
consolidated capitalization of the Company: the Company has agreed to issue
12,000,000 Units, each Unit consisting of one common share and one-half of a
Warrant, pursuant to the Unit Offering, which is expected to close on
November 14, 2002; the issuance by the Company of $143.75 million aggregate
principal amount of 4.50% convertible debentures due 2012 (the "Convertible
Debentures") for net proceeds of approximately $138.5 million on February 15,
2002, resulting in an increase in shareholders' equity of $138.5 million under
Canadian GAAP (an increase in long-term debt of $143.75 million under US GAAP);
the repurchase for cancellation or redemption by the Company of $126.5 aggregate
stated amount at maturity of convertible notes due January 27, 2004
("Convertible Notes") at an aggregate repurchase or redemption price of
$120.9 million, resulting in a decrease of $120.9 million in long-term debt
under both Canadian GAAP and US GAAP. As at the date of this prospectus, there
have been no other material changes in the share and loan capital structure of
the Company since December 31, 2001.
13
DESCRIPTION OF EXISTING INDEBTEDNESS
BANK CREDIT FACILITY
The Company entered into a credit agreement dated November 13, 2001, as
amended on January 31, 2002 (the "Credit Agreement"), with a group of financial
institutions providing for a revolving bank credit facility of up to
$125 million. The following summary describes certain provisions of the
Company's bank credit facility, although it does not purport to be complete and
is subject to and is qualified in its entirety by reference to the bank credit
facility. Terms not defined in this summary have the meanings given to them in
the Credit Agreement.
The bank credit facility provides the Company with a revolving credit
facility of up to $125 million, subject to the reductions described below. The
facility consists of two tranches, Tranche 1 which provides for loans of up to
$100 million and Tranche 2 which provides for loans of up to $25 million.
Tranche 2 will become available after certain completion tests in connection
with the LaRonde Mine expansion are satisfied. These completion tests are
expected to be satisfied by December 31, 2003. The facility matures on
December 31, 2008, unless terminated before that date: (i) voluntarily by the
Company; (ii) by law; or (iii) by the Majority Lenders following an event of
default.
The bank credit facility is available on a revolving basis until
December 30, 2004, after which no further advances will be made by the lenders.
Commencing on the last business day of December 2004 and until the last business
day of December 2008, the maximum amount available under the facility will be
reduced on each of the following reduction dates by an amount equal to the
product of the percentage reduction specified below times the amount drawn on
the facility as at December 30, 2004. Commencing on the last business day of
December 2004 until maturity, the Company is required to repay on each of the
following reduction dates an amount equal to the product of the percentage
reduction specified below times the amount drawn on the facility as at
December 30, 2004.
REDUCTION DATE PERCENTAGE REDUCTION
-------------- ------------------------
Last business day of December 2004.......................... 25.00%
Last business day of June 2005.............................. 16.25%
Last business day of December 2005.......................... 16.25%
Last business day of June 2006.............................. 10.00%
Last business day of December 2006.......................... 10.00%
Last business day of June 2007.............................. 6.25%
Last business day of December 2007.......................... 6.25%
Last business day of June 2008.............................. 5.00%
Last business day of December 2008.......................... The then outstanding
balance of the principal
amount of the loans
Base Rate Advances and Prime Rate Advances under the revolving bank credit
facility bear interest at a rate per annum equal to the Base Rate or the Prime
Rate, as the case may be, plus the following margin, as applicable: (i) prior to
Project Completion, which is to occur by October 31, 2003, 1.25% per annum, and
(ii) after Project Completion, (A) 1.25% per annum if the Historic Debt Service
Coverage Ratio for the immediately preceding four fiscal quarters of the Company
was less than or equal to 1.5 to 1, (B) 1.125% per annum if such ratio for such
period was greater than 1.5 to 1 and less than or equal to 2.0 to 1 and
(C) 1.0% per annum if such ratio for such period was greater than 2.0 to 1.
LIBOR Advances made under the revolving bank credit facility bear interest at a
rate per annum equal to the LIBOR plus the margin applicable to Base Rate
Advances plus an additional 1.0% per annum. The lenders under the bank credit
facility are each paid a commitment fee at a rate of 0.75% (unless the Company
incurs certain indebtedness of $40 million or more in which case such rate
increases to 1.0%) per annum on their undrawn portion of the facility until
December 30, 2004. In connection with advances under the bank credit facility,
the Company is required, among other things, to satisfy minimum projected debt
service coverage ratios over the life of the facility.
14
In accordance with the Credit Agreement, the Company has entered into hedge
agreements to ensure that projected revenues from sales of metals are sufficient
to reasonably ensure that the Company will be in compliance with financial and
other covenants of the Credit Agreement.
To secure the payment and performance of the Company's indebtedness,
liabilities and obligations under the bank credit facility documents, including
any hedge agreements, the Company has granted a security interest in and has
hypothecated substantially all property relating to the LaRonde Mine and the El
Coco Property to the administrative agent on behalf of itself, the lenders under
the Credit Agreement and the counterparties to any hedge agreements. The Company
has also assigned and granted a security interest in certain material contracts,
including hedge agreements, to the administrative agent on behalf of the same
parties. Further, the Company has designated the administrative agent on behalf
of the same parties as the named insured and loss payee under certain insurance
policies and granted a security interest in such policies.
The Credit Agreement contains covenants that restrict, among other things:
- the Company's ability and the ability of the Company's subsidiaries to
incur additional indebtedness other than, among other things, subject to
certain conditions, indebtedness incurred to refinance the Convertible
Debentures on or prior to their maturity;
- the Company's ability to pay or declare dividends or make other restricted
distributions or payments in respect of any shares of the Company's
capital stock or make payments in cash of principal on the Convertible
Debentures prior to their maturity, subject to certain exceptions;
- the Company's ability to make asset sales or other dispositions;
- the Company's ability to pledge existing or future assets, subject to
permitted exceptions;
- the Company's ability to enter into transactions with affiliates;
- the Company's ability to make any loans to or investments in any other
person or to acquire assets from any other person for cash consideration;
- the Company's ability to amalgamate or otherwise transfer its assets; and
- the Company's ability to make expenditures relating to the LaRonde Mine
and the El Coco Property except as set forth in the Development Plan
delivered pursuant to the credit facility and the ability of the Company's
subsidiaries to make expenditures in excess of $5 million in any fiscal
year in excess of those set forth in the mine development plan.
The Credit Agreement also requires the Company to maintain certain financial
ratios as well as tangible net worth and provides for various events of default,
including, among other things:
- a failure to pay principal when due and payable or interest or other
amounts payable within three business days of such amounts becoming due
and payable;
- a breach by the Company of any term, covenant or other agreement that is
not cured within 15 business days after written notice of the breach has
been given to the Company;
- a default in any payment of principal or interest or in the observance or
performance of any other agreement or condition of the Company's other
indebtedness or the Company's material subsidiaries in excess of
$10 million, or the occurrence or existence of any other event or
condition resulting in an acceleration of such indebtedness;
- a failure by the Company to observe or perform any covenant or agreement
in the Convertible Debentures or the related trust indenture resulting in
the acceleration of the maturity of such notes;
- a change in control of the Company; and
- various events relating to the bankruptcy or insolvency or winding-up,
liquidation or dissolution of the Company, or any of the Company's
material subsidiaries.
The Company is entitled to permanently prepay borrowings under the bank
credit facility without penalty at any time on 45 days' notice.
15
CONVERTIBLE DEBENTURES
On February 15, 2002, the Company issued $143.75 million aggregate principal
amount of Convertible Debentures for net proceeds of approximately
$138.5 million. The Convertible Debentures were issued pursuant to an indenture
(the "Indenture") dated as of February 15, 2002 between the Company and
Computershare Trust Company of Canada, as trustee. The following summary
describes certain provisions of the Convertible Debentures and the Indenture,
although the following summary does not purport to be complete and is subject to
and is qualified in its entirety by reference to the Convertible Debentures and
the Indenture. Terms not defined in this summary have the meanings given to them
in the Indenture.
The Convertible Debentures are subordinated unsecured general obligations
and rank junior in right of payment to all present and future senior
indebtedness of the Company.
The Convertible Debentures are convertible into common shares at a
conversion rate of 71.429 common shares per $1,000 principal amount of
Convertible Debentures, subject to adjustment. If all of the holders of
Convertible Debentures were to exercise their respective conversion rights, the
Company would be required to issue approximately 10.2 million additional common
shares.
The Convertible Debentures bear interest at a rate of 4.50% per annum on the
principal amount, payable semi-annually on February 15 and August 15 of each
year. The Convertible Debentures mature on February 15, 2012. The Convertible
Debentures are redeemable by the Company, in whole or in part, at any time on or
after February 15, 2006.
For as long as the common shares are listed on a National Securities
Exchange in the United States, the Company may, at its option and subject to
receiving all applicable regulatory approvals, unless an event of default has
occurred and is continuing, elect to satisfy all or a portion of its obligations
to pay the outstanding principal amount of the Convertible Debentures and
accrued but unpaid interest on redemption or maturity for any reason, by issuing
and delivering to the holder, for each $1,000 principal amount of Convertible
Debentures, that number of fully-paid and non-assessable and freely-tradable
common shares obtained by dividing such principal amount by 95% of the Current
Market Price of the common shares on the date of redemption or maturity, as
applicable.
Subject to receiving all applicable regulatory approvals, the Company shall
have the right to elect, unless an event of default has occurred and is
continuing, from time to time, to issue and deliver common shares to the trustee
under the Indenture to raise funds in order to satisfy its obligation to pay
interest on the Convertible Debentures.
If the Company experiences a change of control prior to maturity of the
Convertible Debentures, the Company is required, within 15 business days after
the occurrence of the change of control, to make an offer to all holders to
purchase all outstanding Convertible Debentures properly tendered pursuant to
the offer and, on the date that is 35 business days after notice of the
occurrence of the change of control, to accept for purchase all Convertible
Debentures properly tendered pursuant to the offer for a cash price in United
States dollars equal to 101% of the principal amount of the Convertible
Debentures plus accrued and unpaid interest thereon to but excluding the date of
notice of the occurrence of the change of control.
The Indenture contains covenants that restrict the Company's ability to
merge, amalgamate or consolidate with or into any other person or sell, convey
or otherwise dispose of all or substantially all of the Company's assets to any
other person.
The Indenture provides for various events of default, including, among other
things:
- a default in payment of current interest for 30 days;
- a default in payment of principal, redemption price or change in control
purchase price;
- a failure to deliver common shares (or cash in lieu of fractional shares)
on conversion of a Convertible Debenture and continuance of such default
for 10 days;
- a breach of any agreement in the Convertible Debentures or the Indenture
that is not cured within 60 days after receipt of notice of the breach;
16
- a default resulting in an acceleration of the Company's other indebtedness
or indebtedness of the Company's subsidiaries in excess of $15 million;
- failure to make an offer to purchase all outstanding Convertible
Debentures as described above following a change in control of the
Company; and
- various events relating to the bankruptcy or insolvency of the Company or
any of the Company's subsidiaries.
EARNINGS COVERAGE
In accordance with the requirements of the Canadian Securities Authorities,
the following consolidated earnings coverage ratios have been calculated for the
12-month periods ended September 30, 2002 and December 31, 2001 and give effect
to the issuance of all long-term debt of the Company and repayment or redemption
thereof since those dates. The earnings coverage ratios set forth below do not
purport to be indicative of earnings coverage ratios for any future periods. The
earnings coverage ratios and interest requirements do not give effect to the
issuance of any debt securities that may be issued pursuant to this prospectus
and any Prospectus Supplement, since the aggregate principal amounts and the
terms of such securities are not currently known. The information presented
herein for the 12-month period ended September 30, 2002 is based on unaudited
financial information.
The Canadian GAAP earnings coverage ratios have been calculated based on
amounts determined under Canadian GAAP, except that distributions on the
Convertible Debentures, which are charged to retained earnings under
Canadian GAAP, have been included in the Company's pro forma interest
requirements.
CANADIAN GAAP US GAAP
---------------------------------------- ----------------------------------------
12 MONTHS ENDED 12 MONTHS ENDED 12 MONTHS ENDED 12 MONTHS ENDED
SEPTEMBER 30, 2002 DECEMBER 31, 2001 SEPTEMBER 30, 2002 DECEMBER 31, 2001
------------------- ------------------ ------------------- ------------------
Pro forma interest
requirements(1)................ 9.1 10.6 9.7 11.0
Earnings before interest expense
and taxes(1)................... 14.0 6.9 12.8 10.4
Earnings coverage................ 1.54 times(2) 0.65 times(2) 1.32 times 0.94 times
---------------
Notes:
(1) In millions of US dollars.
(2) Under Canadian GAAP, without the adjustments described above, the Company's
earnings coverage ratios for the 12-month periods ended September 30, 2002
and December 31, 2001 were 5.38 and 1.68, respectively.
On this basis, the Company's adjusted Canadian GAAP earnings before interest
and income tax for the 12-month period ended December 31, 2001 were insufficient
to cover the Company's pro forma interest requirements for such period by
$3.7 million ($0.6 million under US GAAP).
If the Company offers any debt securities having a term to maturity in
excess of one year under this prospectus and a Prospectus Supplement, the
Prospectus Supplement will include earnings coverage ratios giving effect to the
issuance of such securities.
DESCRIPTION OF SHARE CAPITAL
COMMON SHARES
The authorized capital of the Company consists of an unlimited number of
common shares, of which 69,746,169 were issued and outstanding as of
November 5, 2002. Upon the completion of the Unit Offering, an additional
12,000,000 common shares (13,800,000 common shares if the over-allotment granted
to the underwriters of the Unit Offering is exercised in full) will be issued
and outstanding. All outstanding common shares of the Company are fully paid and
non-assessable. The holders of the common shares are entitled to one vote per
share at meetings of shareholders and to receive dividends if, as and when
declared by the directors of the Company. In the event of voluntary or
involuntary liquidation, dissolution or winding-up of the Company,
17
after payment of all outstanding debts, the remaining assets of the Company
available for distribution would be distributed rateably to the holders of the
common shares. Holders of the common shares of the Company have no pre-emptive,
redemption, exchange or conversion rights.
WARRANTS
Upon the completion of the Unit Offering, 6,000,000 Warrants will be issued
and outstanding (6,900,000 Warrants if the over-allotment option granted to the
Underwriters of the Unit Offering is exercised in full). Each whole Warrant will
entitle the holder to purchase one common share for a price of US$19.00 at any
time on or prior to five years from the date of closing of the Unit Offering
after which time the Warrants will expire and be of no value. The exercise price
for the Warrants is payable in US dollars. However, holders of Warrants may
elect to pay the exercise price in Canadian dollars based on then current
exchange rates. No fractional common shares will be issuable on the exercise of
the Warrants. To the extent that the holder of a Warrant would otherwise be
entitled to purchase a fraction of a common share, the holder will receive a
cash payment in lieu thereof based on the then current market price of the
common shares.
The warrant indenture (the "Warrant Indenture") between the Company and
Computershare Trust Company of Canada, as trustee, will provide that the
exercise price and/or the number and kind of securities or property issuable on
the exercise of Warrants are subject to adjustment in certain events.
Holders of Warrants will not have any voting rights or any other rights
which a holder of common shares would have (including, without limitation, the
right to receive notice of or to attend meetings of shareholders or any right to
receive dividends or other distributions). Holders of Warrants will have no
pre-emptive rights to acquire securities of the Company. If all of the Warrants
were exercised, the Company would be required to issue 6,000,000 common shares
(subject to adjustment in certain circumstances), assuming no exercise of the
over-allotment option granted to the Underwriters of the Unit Offering.
The foregoing summary describes certain provisions of the Warrants and the
Warrant Indenture, although the foregoing summary does not purport to be
complete and is subject to and is qualified in its entirety by reference to the
Warrants and the Warrant Indenture.
CONVERTIBLE DEBENTURES
On February 15, 2002, the Company issued $143.75 million principal amount of
Convertible Debentures for net proceeds of approximately $138.5 million. See
"Description of Existing Indebtedness" Based on the initial conversion rate, if
all of the holders of the Convertible Debentures were to exercise their
respective conversion rights, the Company would be required to issue
approximately 10.2 million common shares.
SHAREHOLDER RIGHTS PLAN
On April 22, 1999, the Board of Directors of the Company adopted a
shareholder rights plan (the "Plan") to replace the original shareholder rights
plan dated May 10, 1989, to take effect at the close of business on May 10, 1999
(the "Record Date"), subject to shareholder approval, confirmation and
ratification, which was received on June 25, 1999. The rights issued under the
Plan will expire (the "Expiration Time") at the close of the Company's annual
meeting in 2009, unless earlier redeemed or exchanged by the Company and subject
to shareholder re-ratification of the Plan by the shareholders at the Company's
annual meeting to be held in 2005.
Pursuant to the Plan, the Board declared a distribution of one right (a
"Right") for each outstanding common share of the Company to shareholders of
record at the close of business on the Record Date and authorized the issuance
of one Right for each common share (including the common shares offered hereby)
issued after the Record Date and prior to the Separation Time (described below)
and the Expiration Time. The Rights will separate from the common shares at the
time (the "Separation Time") which is the close of business on the eighth
trading day (or such later day as determined by the Board of Directors) after
the earlier of the first public announcement of the acquisition of, or intention
to acquire, beneficial ownership of 20% of the common shares of the Company by
any person other than in accordance with the terms of the Plan, or when a
Permitted Bid (described below) or competing Permitted Bid ceases to qualify as
such.
18
In order to constitute a "Permitted Bid", an offer must be made in
compliance with the Plan and must be made to all shareholders (other than the
offeror), must be open for at least 75 days and be accepted by shareholders
holding more than 50% of the outstanding voting shares and, if so accepted, must
be extended for a further 10 business day period.
DIVIDEND POLICY
The Company continued its policy of annual dividends with the declaration of
a $0.02 per share dividend in 2001, unchanged from 2000 and 1999 levels. This
represents 22 years of uninterrupted cash dividend payments by the Company.
Although the Company expects to continue paying an annual cash dividend, future
dividends will be at the discretion of the Company's Board of Directors and will
be subject to such factors as the Company's earnings, financial condition and
capital requirements. The Company's bank credit facility contains covenants
which restrict the Company's ability to pay or declare dividends.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Company may issue debt securities in one or more series under an
indenture that it will enter into with one or more trustees that will be
described in the Prospectus Supplement for the debt securities. The following
summary describes certain provisions of the indenture, although it does not
purport to be complete and is subject to and is qualified in its entirety by
reference to the indenture. A copy of the form of indenture has been filed with
the SEC as an exhibit to the registration statement of which this prospectus
forms a part and will be filed with the Canadian Securities Authorities. The
terms of debt securities the Company offers may differ from the general
information provided below. Prospective investors should rely only on
information in the Prospectus Supplement if it is different from the following
information.
The Company may issue debt securities and incur additional indebtedness
other than through the offering of debt securities pursuant to this prospectus.
References to the "Company" in this description of debt securities mean
Agnico-Eagle Mines Limited but not any of its subsidiaries.
The indenture does not limit the amount of debt securities the Company can
issue under the indenture and does not limit the amount of other indebtedness
the Company may incur. The Company may issue debt securities from time to time
in separate series.
The Prospectus Supplement for any series of debt securities the Company
offers will describe the specific terms of the debt securities and may include
any of the following:
- the designation of the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the percentage of the principal amount at which the debt securities will
be issued;
- whether payment on the debt securities will be senior or subordinated to
its other liabilities and obligations;
- whether the payment of the debt securities will be secured by any of the
Company's assets or by any other person;
- the dates on which the Company may issue the debt securities and the date
or dates on which the Company will pay the principal and any premium on
the debt securities and the portion (if less than the principal amount) of
debt securities to be payable on a declaration of acceleration of
maturity;
- whether the debt securities will bear interest, the interest rate or the
method of determining the interest rate, the date from which interest will
accrue, the dates on which the Company will pay interest and the record
dates for interest payments;
19
- the place or places the Company will pay interest and the place or places
where debt securities can be presented for registration of transfer or
exchange;
- whether and under what circumstances the Company will be required to pay
any additional amounts for withholding or deduction for Canadian taxes
with respect to the debt securities, and whether the Company will have the
option to redeem the debt securities rather than pay the additional
amounts;
- whether the Company may redeem the debt securities at its option;
- whether the Company will be obligated to redeem or repurchase the debt
securities pursuant to any sinking fund or other provisions, or at the
option of a holder;
- the denominations in which the Company will issue the debt securities;
- the currency in which the Company will make payments on the debt
securities and whether payments will be payable with reference to any
index or formula;
- whether the Company will issue the debt securities as global securities
and, if so, the identity of the depositary for the global securities;
- whether the Company will issue the debt securities as bearer securities or
only in registered form;
- any changes or additions to events of default or covenants;
- any changes or additions to the provisions for defeasance described under
"Defeasance" below;
- whether the holders of any series of debt securities have special rights
if specified events occur;
- any restrictions on the transfer or exchange of the debt securities;
- the terms for any conversion or exchange of the debt securities for any
other securities;
- provisions as to modification, amendment or variation of any rights or
terms attaching to the debt securities; and
- any other terms of the debt securities.
Unless stated otherwise in the applicable Prospectus Supplement, no holder
will have the right to require the Company to repurchase the debt securities and
there will be no increase in the interest rate if the Company becomes involved
in a highly leveraged transaction or there is a change of control of the
Company.
The Company may issue debt securities bearing no interest or interest at a
rate below the prevailing market rate at the time of issuance, and offer and
sell these securities at a discount below their stated principal amount. The
Company may also sell any of the debt securities for a foreign currency or
currency unit, and payments on the debt securities may be payable in a foreign
currency or currency unit. In any of these cases, the Company will describe in
the applicable Prospectus Supplement, any Canadian and United States federal
income tax consequences and other special considerations.
The Company may issue debt securities with terms different from those of
debt securities previously issued and, without the consent of the holders
thereof, the Company may reopen a previous issue of a series of debt securities
and issue additional debt securities of such series (unless the reopening was
restricted when such series was created).
Unless stated otherwise in the applicable Prospectus Supplement, the Company
will issue debt securities only in fully registered form without coupons, in
denominations of $1,000 and multiples of $1,000. In addition, all or a portion
of the debt securities of any series may be issued in permanent registered
global form which will be exchangeable for definitive debt securities only under
certain conditions. The applicable Prospectus Supplement may indicate the
denominations to be issued, the procedures for payment of interest and principal
and other matters. No service charge will be made for any registration of
transfer or exchange of the debt securities, but the Company may, in certain
instances, require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with these transactions.
20
PAYMENT AND TRANSFER
Unless stated otherwise in the Prospectus Supplement, the Company will make
payments of principal of (and premium, if any, on) debt securities of a
particular series in the designated currency against surrender of the debt
securities at the office of the paying agent the Company designates from time to
time. Unless stated otherwise in the applicable Prospectus Supplement, the
Company will make payment of any instalment of interest on debt securities to
the persons in whose names the debt securities are registered on the close of
business on the day or days specified by the Company. Unless otherwise indicated
in the applicable Prospectus Supplement, payments of interest will be made, at
the Company's option:
- at the corporate trust office of the paying agent that the Company
designates from time to time;
- by electronic funds transfer to an account that the holder designates from
time to time; or
- by a cheque in the designated currency mailed to each holder at the
relevant holder's registered address.
Holders may transfer or exchange fully registered debt securities at the
corporate trust office of the trustee or at any other office or agency the
Company maintains for these purposes, without the payment of any service charge
except for any tax or governmental charge.
GLOBAL SECURITIES
The Company may issue debt securities of a series in the form of one or more
global securities which will be deposited with a depositary, or its nominee,
identified in the applicable Prospectus Supplement. The global securities may be
in temporary or permanent form. The applicable Prospectus Supplement will
describe the terms of any depositary arrangement and the rights and limitations
of owners of beneficial interests in any global security. The applicable
Prospectus Supplement also will describe the exchange, registration and transfer
rights relating to any global security.
MERGER, AMALGAMATION OR CONSOLIDATION
The indenture generally permits the Company to amalgamate or consolidate
with or merge into any other person, and to transfer or dispose of substantially
all of its assets, so long as the resulting person is a Canadian or U.S. entity
and assumes the Company's obligations on the debt securities and under the
indenture and the Company or such successor person will not be in default under
the indenture immediately after the transaction.
If the resulting person assumes the Company's obligations, subject to
certain exceptions, the Company will be relieved of those obligations.
EVENTS OF DEFAULT
When the Company uses the term "event of default" in the indenture, it
means, in respect of a series of debt securities:
- the Company fails to pay principal or any premium on any debt security of
that series when it is due;
- the Company fails to pay interest on any debt security of that series for
30 days;
- the Company fails to comply with any of its other agreements relating to
the debt securities or the indenture for 60 days after written notice by
the trustee or by holders of at least 25% in aggregate principal amount of
the outstanding debt securities of that series;
- certain events involving its bankruptcy, insolvency or reorganization; and
- any other event of default provided for that series of debt securities.
The Prospectus Supplement for a series of debt securities may include
additional events of default or changes to the events of default described
above. The trustee will give notice within a reasonable time (not exceeding
30 days) to the holders of debt securities of any default unless it determines
in good faith the withholding of such notice is in the best interests of the
holders, collectively, and so advises the Company in writing.
21
A default under one series of debt securities will not necessarily be a
default under another series.
If an event of default for any series of debt securities occurs and
continues, the trustee or the holders of at least 25% in aggregate principal
amount of the debt securities of that series may require the Company to repay
immediately:
- the entire principal of the debt securities of the series; or
- if the debt securities are discounted securities, that portion of the
principal as is described in the applicable Prospectus Supplement.
If an event of default relates to events involving the Company's or a
subsidiary's bankruptcy, insolvency or reorganization, the principal of all debt
securities will become immediately due and payable without any action by the
trustee or any holder. In either case, subject to certain conditions, the
holders of a majority of the aggregate principal amount of the debt securities
of the affected series can rescind the accelerated payment requirement.
Other than its duties in case of a default, the trustee is not obligated to
exercise any of its rights or powers under the indenture at the request, order
or direction of any holders, unless the holders offer the trustee reasonable
indemnity. If they provide this reasonable indemnity, the holders of a majority
in principal amount of any series of debt securities may, subject to certain
limitations, direct the time, method and place of conducting any proceeding or
any remedy available to the trustee, or exercising any power conferred on the
trustee, for any series of debt securities.
The Company will be required to furnish to the trustee a statement annually
as to its compliance with all conditions and covenants under the indenture and,
if the Company is not in compliance, it must specify any defaults.
DEFEASANCE
When the Company uses the term "defeasance", it means discharge from some or
all of its obligations under the indenture. If the Company deposits with the
trustee sufficient cash or government securities to pay the principal, interest,
any premium and any other sums due to the stated maturity date or a redemption
date of the debt securities of a series, then at its option:
- the Company will be discharged from its obligations with respect to the
debt securities of that series; or
- the Company will no longer be under any obligation to comply with certain
restrictive covenants under the indenture, and certain events of default
will no longer apply to the Company.
If this happens, the holders of the debt securities of the affected series
will not be entitled to the benefits of the indenture except for registration of
transfer and exchange of debt securities and the replacement of lost, stolen or
mutilated debt securities. These holders may look only to the deposited fund for
payment on their debt securities.
Unless stated otherwise in the Prospectus Supplement, in order to exercise
its defeasance option, the Company will be required to deliver to the trustee an
opinion of counsel to the effect that the deposit and related defeasance would
not cause the holders of the debt securities to recognize income, gain or loss
for Canadian federal or Canadian provincial income tax purposes (and any other
jurisdiction specified for this purpose in the Prospectus Supplement). The
Company also will be required to deliver a certificate of an officer of the
company and an opinion of counsel, each stating that all of the conditions
precedent provided for relating to defeasance have been satisfied. In addition,
other conditions must be met before the Company may exercise its defeasance
option.
22
MODIFICATION AND WAIVER
The Company may modify the indenture with the consent of the holders of a
majority in aggregate principal amount of the outstanding debt securities of
each series affected by the modification. However, without the consent of each
holder affected, no modification may:
- reduce the percentage of the unpaid principal amount of any series whose
holders must consent to any amendment or waiver under the indenture or
which may otherwise require notice, information or action or effect any
action, or modify the provisions in the indenture relating to amendment or
waiver;
- reduce the amount of, or change the currency of payment of or to delay the
time of any payments (whether of principal, premium, interest or
otherwise) to be made to the holders of debt securities of any series;
- change the definition of or the manner of calculating amounts (including
any change in the applicable rate or rates of interest) to which any
holder of debt securities of any series is entitled under the indenture;
- make any change that adversely affects the redemption, conversion or
exchange rights of holders of debt securities of any series;
- make any change that would result in the issuer being required to make any
deduction or withholding from payments to be made to holders of debt
securities of any series; or
- impair the right of holders to institute a suit to enforce their rights to
payment.
The holders of a majority in principal amount of outstanding debt securities
of any series may on behalf of the holders of all outstanding debt securities of
that series waive, only insofar as that series is concerned, any prospective or
existing defaults under the indenture and the Company's compliance with certain
restrictive provisions of the indenture. However, these holders may not waive a
default in any payment on any debt security or compliance with a provision that
cannot be modified without the consent of each holder affected.
The Company may modify the indenture without the consent of the holders to:
- cure any ambiguity, defect or inconsistency, provided, however, that the
amendment to cure any ambiguity, defect or inconsistency does not
adversely affect the rights of any holder of debt securities;
- provide for the assumption by a successor of the Company's obligations
under the indenture;
- give effect to certain directions of the holders;
- change or eliminate any provisions where the change takes effect when
there are no debt securities outstanding under the indenture;
- provide for uncertificated debt securities in addition to certificated
debt securities, as long as those uncertificated debt securities are in
registered form for United States federal income tax purposes;
- make any change to maintain the qualification of the indenture under the
United States Trust Indenture Act of 1939, as amended, or to comply with
applicable laws;
- add to the Company's covenants or the Company's obligations under the
indenture for the protection of holders of debt securities;
- surrender any right, power or option conferred by the indenture on the
Company; or
- in any other manner that would not adversely affect the rights of holders
of outstanding securities.
THE TRUSTEE
The trustee under the indenture or its affiliates may provide banking and
other services to the Company in the ordinary course of their business.
The indenture contains certain limitations on the rights of the trustee, as
long as it or any of its affiliates remains the Company's creditor, to obtain
payment of claims in certain cases or to realize on certain property
23
received on any claim as security or otherwise. The trustee and its affiliates
will be permitted to engage in other transactions with the Company. If the
trustee or any affiliate acquires any conflicting interest and a default occurs
with respect to the debt securities, the trustee must eliminate the conflict or
resign.
DESCRIPTION OF WARRANTS
The Company may issue warrants to purchase debt securities or common shares.
The Company may issue warrants independently or together with other securities,
and warrants sold with other securities may be attached to or separate from the
other securities. Unless the Prospectus Supplement otherwise indicates, warrants
will be issued under one or more indentures that the Company will enter into
with a warrant trustee or trustees that will be named in the Prospectus
Supplement.
The following sets forth certain general terms and provisions of the
warrants offered under this prospectus. The specific terms of the warrants, and
the extent to which the general terms described in this section apply to these
warrants, will be set out in the applicable Prospectus Supplement.
The Prospectus Supplement relating to any warrants the Company offers will
describe the warrants and include specific terms relating to the offering. The
Prospectus Supplement will include some or all of the following:
- the designation and aggregate number of warrants offered;
- the currency or currencies in which the warrants will be offered;
- the designation, number and terms of the common shares or debt securities
purchasable on exercise of the warrants, and procedures that will result
in the adjustment of those numbers;
- the exercise price of the warrants;
- the dates or periods during which the warrants are exercisable;
- the designation and terms of any securities with which the warrants are
issued;
- if the warrants are issued as a unit with another security, the date on
and after which the warrants and the other security will be separately
transferable;
- any minimum or maximum amount of warrants that may be exercised at any one
time;
- any terms, procedures and limitations relating to the transferability,
exchange or exercise of the warrants;
- whether the warrants will be subject to redemption or call and, if so, the
terms of such redemption or call provisions;
- material Canadian and United States tax consequences of owning the
warrants; and
- any other material terms of the warrants.
Warrant certificates will be exchangeable for new warrant certificates of
different denominations at the office indicated in the Prospectus Supplement.
Prior to the exercise of their warrants, holders of warrants will not have any
of the rights of holders of the securities subject to the warrants.
The Company may amend the warrant indenture(s) and the warrants, without the
consent of the holders of the warrants, to cure any ambiguity, to cure, correct
or supplement any defective or inconsistent provision, or in any other manner
that will not prejudice the rights of the holders of outstanding warrants, as a
group.
PLAN OF DISTRIBUTION
The Company may sell the Securities, separately or together, to or through
one or more underwriters or dealers, purchasing as principals for public
offering and sale by them, and also may sell Securities to one or more other
purchasers directly or through agents. Each Prospectus Supplement will set out
the terms of the offering, including the name or names of any underwriters or
agents, the purchase price or prices of the Securities and the proceeds to the
Company from the sale of the Securities.
24
The Securities may be sold, from time to time in one or more transactions at
a fixed price or prices which may be changed or at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The prices at which the Securities may be offered may vary as
between purchasers and during the period of distribution. If, in connection with
the offering of Securities at a fixed price or prices, the underwriters have
made a bona fide effort to sell all of the Securities at the initial offering
price fixed in the applicable Prospectus Supplement, the public offering price
may be decreased and thereafter further changed, from time to time, to an amount
not greater than the initial public offering price fixed in such Prospectus
Supplement, in which case the compensation realized by the underwriters will be
decreased by the amount that the aggregate price paid by purchasers for the
Securities is less than the gross proceeds paid by the underwriters to the
Company.
Underwriters, dealers and agents who participate in the distribution of the
Securities may be entitled under agreement to be entered into with the Company
to indemnification by the Company against certain liabilities, including
liabilities under Canadian and US securities legislation, or to contribution
with respect to payments with such underwriters, dealers or agents may be
required to make in respect thereof. Such underwriters, dealers and agents may
engage in transactions with, or perform services for, the Company in the
ordinary course of business.
In connection with any offering of Securities, the underwriters may offer,
allot or effect transactions which stabilize or maintain the market price of the
securities offered at a level above that which might otherwise prevail in the
open market. Such transactions, if commenced, may be discontinued at any time.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby will
be passed on for the Company by Davies Ward Phillips & Vineberg LLP, Toronto,
Ontario and by Troutman Sanders LLP, McLean, Virginia. At the date hereof,
partners and associates of each of Davies Ward Phillips & Vineberg LLP and
Troutman Sanders LLP own beneficially, directly or indirectly, less than one
percent of the common shares of the Company.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of the Company are Ernst & Young LLP, Chartered Accountants,
Ernst & Young Tower, 222 Bay Street, P.O. Box 251, Toronto, Ontario M5K 1J7. The
audited consolidated financial statements of the Company as at December 31, 2001
and 2000 and for each of the three-year period ended December 31, 2001 have been
audited by Ernst Young and are incorporated by reference herein in reliance on
the authority of said firm as experts in auditing and accounting.
The registrar and transfer agent for the Company's common shares and
Warrants is Computershare Trust Company of Canada through its offices at 100
University Avenue, Toronto, Ontario M5J 2Y1.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the securities commissions or similar
authorities in each of the provinces of Canada are specifically incorporated by
reference in and form an integral part of this prospectus:
(a) the Company's Annual Information Form dated April 24, 2002 consisting of
the Company's Annual Report on Form 20-F under the United States
Securities Exchange Act of 1934, as amended (the "Exchange Act") for the
fiscal year ended December 31, 2001;
(b) the audited consolidated financial statements of the Company, including
the notes thereto, as at December 31, 2001 and 2000 and for each of the
years in the three-year period ended December 31, 2001 together with the
auditors' report thereon;
(c) management's discussion and analysis of financial condition and results
of operations of the Company for the year ended December 31, 2001;
(d) the Management Information Circular dated April 24, 2002, prepared in
connection with the Company's annual meeting of shareholders on June 21,
2002 (excluding the sections entitled
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"Composition of Compensation Committee", "Report on Executive
Compensation", "Performance Graph" and "Statement of Corporate Governance
Practices");
(e) the information set forth under the caption "Summarized Quarterly Data"
on pages 40 and 41 of the Company's annual report for the year ended
December 31, 2001;
(f) management's discussion and analysis of results of operations and
liquidity and capital resources of the Company for the nine months ended
September 30, 2002 and unaudited consolidated financial statements of the
Company as at and for the nine months ended September 30, 2002;
(g) the material change report dated February 22, 2002 filed by the Company
in respect of the redemption of the convertible notes due 2004; and
(h) the material change report dated May 22, 2002 filed by the Company in
respect of the forgiveness of certain intercompany debt owed to the
Company by Sudbury Contact.
All documents of the type referred to above, and any material change reports
(excluding confidential material change reports), filed by the Company with any
securities commission or similar regulatory authority in Canada, subsequent to
the date of this prospectus and prior to the termination of the distribution
under this prospectus shall be deemed to be incorporated by reference in this
prospectus.
Upon a new annual information form and the related annual audited
consolidated financial statements being filed by the Company with, and where
required, accepted by, the Canadian Securities Authorities during the currency
of this prospectus, the previous annual information form, the previous annual
audited consolidated financial statements and all interim unaudited financial
statements (including the management's discussion of financial condition and
results of operations in the quarterly reports for such periods), material
change reports and management information circulars filed prior to the
commencement of the Company's financial year in which the new annual information
form is filed shall be deemed no longer to be incorporated by reference in this
prospectus for purposes of future offers and sales of Securities hereunder.
ANY STATEMENT CONTAINED HEREIN OR IN A DOCUMENT INCORPORATED OR DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED
FOR THE PURPOSES OF THIS PROSPECTUS TO THE EXTENT THAT A STATEMENT CONTAINED
HEREIN, OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT WHICH ALSO IS INCORPORATED
OR IS DEEMED TO BE INCORPORATED BY REFERENCE HEREIN, MODIFIES OR SUPERSEDES SUCH
STATEMENT. THE MODIFYING OR SUPERSEDING STATEMENT NEED NOT STATE THAT IT HAS
MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR INCLUDE ANY OTHER INFORMATION SET
FORTH IN THE DOCUMENT WHICH IT MODIFIES OR SUPERSEDES. THE MAKING OF A MODIFYING
OR SUPERSEDING STATEMENT WILL NOT BE DEEMED AN ADMISSION FOR ANY PURPOSES THAT
THE MODIFIED OR SUPERSEDED STATEMENT, WHEN MADE, CONSTITUTED A
MISREPRESENTATION, AN UNTRUE STATEMENT OF A MATERIAL FACT OR AN OMISSION TO
STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR THAT IS NECESSARY TO MAKE
A STATEMENT NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES IN WHICH IT WAS MADE.
ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED, EXCEPT AS SO
MODIFIED OR SUPERSEDED TO CONSTITUTE A PART OF THIS PROSPECTUS.
INFORMATION HAS BEEN INCORPORATED BY REFERENCE IN THIS SHORT FORM PROSPECTUS
FROM DOCUMENTS FILED WITH SECURITIES COMMISSIONS OR SIMILAR AUTHORITIES IN
CANADA. Copies of the documents incorporated herein by reference may be obtained
on request without charge from the Corporate Secretary, Agnico-Eagle Mines
Limited, Suite 500, 145 King Street East, Toronto, Ontario M5C 2Y7, (Telephone
(416) 947-1212). For the purpose of the Province of Quebec, this simplified
prospectus contains information to be completed by consulting the permanent
information record. A copy of the permanent information record may be obtained
from the Corporate Secretary of Agnico-Eagle Mines Limited at the
above-mentioned address and telephone number.
A Prospectus Supplement containing the specific terms of an offering of
Securities will be delivered to purchasers of such Securities together with this
Prospectus and shall be deemed to be incorporated by reference into this
Prospectus as of the date of such Prospectus Supplement solely for the purposes
of the offering of the Securities covered by that Prospectus Supplement.
26
AVAILABLE INFORMATION
The Company has filed with the SEC a registration statement on Form F-10,
together with all amendments and supplements thereto, under the United States
Securities Act of 1933, as amended, with respect to the securities offered
hereby. This prospectus, which forms a part of the registration statement, does
not contain all of the information set forth in the registration statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the SEC. For further information with respect to the Company and
the securities offered in this prospectus, reference is made to the registration
statement and to the schedules and exhibits filed therewith. Statements
contained in this prospectus as to the contents of certain documents are not
necessarily complete and, in each instance, reference is made to the copy of the
document filed and exhibits to the registration statement. Each such statement
is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports and other information with the SEC.
Under a multijurisdictional disclosure system adopted by the United States, such
reports and other information may be prepared in accordance with the disclosure
requirements of Canada, which requirements are different from those of the
United States. The Company is exempt from the rules under Section 14 of the
Exchange Act prescribing the furnishing and content of proxy statements, and the
Company's officers, directors and principal shareholders are exempt from the
reporting and short-swing profit recovery provisions contained in Section 16 of
the Exchange Act. Under the Exchange Act, the Company is not required to publish
financial statements as frequently or as promptly as U.S. companies. Any
information filed with the SEC can be read and copied at prescribed rates at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330.
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES
The Company is an Ontario corporation with its principal place of business
in Canada. All of its directors and officers and certain experts named in this
prospectus are residents of Canada and all or a substantial portion of its
assets and the assets of such persons are located outside the United States.
Consequently, it may be difficult for United States investors to effect service
of process within the United States on the Company or its directors or officers,
or to realize in the United States on judgments of courts of the United States
predicated on civil liabilities under the United States Securities Act of 1933,
as amended. Investors should not assume that Canadian courts would enforce
judgments of United States courts obtained in actions against the Company or
such persons predicated on the civil liability provisions of the United States
federal securities laws or the securities or "blue sky" laws of any state within
the United States or would enforce, in original actions, liabilities against the
Company or such persons predicated on the United States federal securities or
any such state securities or blue sky laws.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been filed with the SEC as part of the
registration statement of which this prospectus forms a part: the documents
referred to under "Documents Incorporated by Reference"; consent of Ernst &
Young LLP; consent of Marc Legault; the powers of attorney; form of indenture
relating to the debt securities; and earnings coverage ratios. If debt
securities are offered under a Prospectus Supplement, a trustee's Statement of
Eligibility on Form T-1 will be filed with the SEC.
27