Grouting of a weaker, fractured, volcanic rock unit in the eastern end of the hangingwall of the deposit at Agnico-Eagle’s Goldex mine is underway. The purpose of the grouting program is to reduce the water inflow to the underground mine. This water flow has caused ground settlement issues at the mine site as previously saturated soils are draining into the mine and lowering the water table. To date, movement has been observed in the mill building and in the headframe. However, water flow rates have been controlled as remediation continues. The mine and processing facility continue to operate normally while remediation efforts are expanded.

While the company’s underground instrumentation shows that the volcanic rock mass above the Goldex orebody is stable, it has received an opinion from a rock mechanics consultant that suggests that water inflow has negatively impacted the integrity of the rock mass. As a result, the company is undertaking further assessment of the stability of the rock mass and is increasing its efforts to decrease water inflow and the potential negative effects of the water on the rock mass. The expanded grouting and monitoring program includes:

• Drilling from surface to investigate the area around the eastern end of the deposit for water flow and possible rock subsidence
• Drilling from underground into the volcanic rock unit to determine whether additional fracturing and movement in the rock mass has occurred
• Grouting with six larger drills. Targeting the rock between 80 m and 100 m below surface over an area at the eastern end of the deposit to stop or reduce the water inflow
• Installing additional instrumentation to monitor for any soil and rock movements
• Installing additional excess pumping capacity to ensure that increased water flows can be dealt with, should the need arise.

The program will be reassessed on a three month basis to determine whether additional remediation work or changes in the mining plan are warranted. The initial budget for remediation of this subsidence issue was C$20 million through 2011. As a result of the expanded program, the company anticipates that 2011 expenditure will total approximately C$25 million. It is currently anticipated that the additional capital for monitoring and remediation will be approximately C$20 million in 2012.

The mill processed an average of 8,222 t/d in the third quarter of 2011 as compared with 8,448 t/d in the second quarter. The mine and mill continue to run at capacity. Gold production in the third quarter of 2011 was 40,224 oz. This compares with the second quarter of 2011 when the payable gold production was 41,998 oz. The decrease was largely due to the slightly lower throughput combined with slightly lower grades.