VANCOUVER, BRITISH COLUMBIA — (MARKET WIRE) — 05/12/10 —
First Quarter 2010 Financial and Operating Highlights:
— Gold production totalled 19,299 ounces for the three months ended March 31, 2010, with on-site cash costs(1) of $493 per ounce of gold produced; — Gold sales totalled 18,034 ounces for the quarter for net sales of $19,791,000; — Mine operating profit of $8,733,000; — Net loss for the quarter of $1,270,000 or $0.01 per share; — Adjusted net earnings for the quarter, after adjusting for unrealized foreign exchange losses and other non-recurring revenue and expense items, of $3,023,000 or $0.02 per share; — Completed a joint treasury and secondary bought equity financing (“2010 Offering”) on February 4, 2010 for gross proceeds of C$100,800,000 of which C$75,600,000 was attributable to the Company; and — Ended the quarter with $102.2 million in cash and cash equivalents, excluding restricted cash.
First Quarter 2010 Development and Corporate Achievements Highlights:
— Continued to advance the engineering and mine development at the
Gonzalo Rios; and — Closed the acquisition of the Sao Francisco and Sao Vicente gold mines in Brazil subsequent to quarter end on April 30, 2010 and reduced the cash and promissory note consideration by a combined $10.7 million, as a result of the net free cash flow generated by the two mines from the date of the acquisition agreement.
“Gold production from the San Andres Mine in the first quarter 2010 of 19,299 ounces showed a 32% increase in gold production over the same period of 2009, and a 5% increase over fourth quarter 2009 production,” commented
Patrick Downey, President and Chief Executive Officer of
(1) See cautionary note regarding non-GAAP measures.
The following financial information does not constitute management’s discussion and analysis (“MD&A”) as contemplated by relevant securities rules and should be read in conjunction with the Company’s interim unaudited financial statements for the quarter ended March 31, 2010 and audited financial statements for the year ended December 31, 2009 and MD&A’s for each of the two periods, which are available on SEDAR at www.sedar.com under the Company’s profile or on the Company’s website.
The following table presents a summary of financial information for the three months ended March 31, 2010 and 2009:
Three months Three months (Unaudited, in thousands of dollars, ended ended except per share amounts) March 31, 2010 March 31, 2009 ————————————————————————— Sales $ 19,791 $ 35 Cost of goods sold 11,058 23 ————————————————————————— Mine operating profit 8,733 12 Expenses Stock-based compensation 1,921 866 Cost of operations in care and maintenance – 624 Exploration expenses 5,092 2,288 General and administrative expenses 3,051 1,152 Transaction costs 1,297 – Interest expense (income), net 117 (72) Foreign exchange gain (3,481) (1,541) Impairment charge – 8,167 ————————————————————————— (Profit) loss before income taxes (736) 11,472 Income tax expense (recovery), net 2,006 (2,775) ————————————————————————— Net Loss for the Period $ 1,270 $ 8,697 ————————————————————————— ————————————————————————— Adjustments: Unrealized foreign exchange losses 1,075 – Stock-based compensation 1,921 866 Non-recurring transaction costs 1,297 – Impairment charge, net of related future income tax recovery – 5,390 ————————————————————————— Adjusted Earnings (Loss)(1) for the Period $ 3,023 $ (2,441) ————————————————————————— ————————————————————————— Basic and diluted earnings (loss) per share $ (0.01) $ (0.07) ————————————————————————— ————————————————————————— Adjusted earnings (loss)(1) per share $ 0.02 $ (0.02) ————————————————————————— ————————————————————————— (1) See cautionary note regarding non-GAAP measures.
Sales revenues for the quarter ended March 31, 2010 were comprised of gold sales of 18,034 ounces from the San Andres Mine at an average realized gold price of $1,112 per gold ounce, which compares to an average price for the same period of $1,109 per ounce (London PM Fix). As a result, total sales for the quarter ended March 31, 2010 were $19,791,000, inclusive of local sales taxes paid of $256,000.
The cash cost of gold sold at the San Andres Mine totalled $9,470,000 or $525 per ounce in the first quarter 2010, which included a net smelter return royalty of $101,000 or $6 per ounce. Together with the non-cash depletion, amortization and accretion charges for the first quarter of $1,588,000 or $88 per ounce, total cost of goods sold related to the San Andres Mine is $11,058,000 or $613 per ounce.
Other expenses for the three months ended March 31, 2010 include exploration expenses of $5,092,000, stock-based compensation of $1,921,000, general and administrative expenses of $3,051,000, and transaction costs related to the Brazilian mine acquisitions of $1,297,000. Of the $1,297,000 transaction costs expensed during the quarter, $1,000,000 were capitalized as deferred transaction costs as of December 31, 2009 and were expensed effective January 1, 2010 in connection with the Company’s adoption of new accounting standards related to business combinations. For the three months ended March 31, 2009, other expenses included exploration expense of $2,288,000, stock-based compensation of $866,000, general and administrative expenses of $1,152,000, costs of operations in care and maintenance (
For the quarter ended March 31, 2010, the Company recorded interest expense of $221,000 (2009 – Nil) on the promissory notes issued in connection with the San Andres Mine, and interest income of $104,000 (2009 – $72,000). For the quarter ended March 31, 2010, the Company also recorded a net foreign exchange gain of $3,481,000 (2009 – $1,541,000) reflecting the effects on the Company’s assets and liabilities held in foreign currencies, and the fluctuation of those currencies against the United States dollar during the period. Before income taxes, the Company reported a profit of $736,000 for the quarter ended March 31, 2010, as compared to a loss of $11,472,000 for the same quarter in 2009.
For the three months ended March 31, 2010, the Company recorded a current income tax expense of $2,386,000 relating to income taxes payable on earnings at the San Andres Mine. In the same quarter, the Company recorded a future income tax recovery of $380,000, which primarily reflects the reversal of a portion of the future income tax liabilities set up on the acquisitions of the San Andres Mine and the
For the three months ended March 31, 2010, the Company recorded a net loss of $1,270,000 or $0.01 per share, compared to a loss of $8,697,000 or $0.07 per share recorded for the three months ended March 31, 2009.
Adjusted earnings(1) for the quarter ended March 31, 2010, after adjusting for unrealized foreign exchange gains and losses, impairment losses and other non-recurring revenue and expense items, was $3,023,000 or $0.02 per share. This compares to an adjusted loss(1) for the quarter ended March 31, 2009 of $2,441,000 or $0.02 per share.
(1) See cautionary note regarding non-GAAP measures.
Liquidity and Capital Resources
Cash and cash equivalents generated from operating activities during the three months ended March 31, 2010 were $3,615,000. Cash and cash equivalents used in investing activities during the three months ended March 31, 2010 were $7,064,000 and included $6,250,000 of property, plant and equipment acquired for cash, and $681,000 of resource properties acquired related to the copper-gold-iron ore
Cash and cash equivalents generated from financing activities during the three months ended March 31, 2010 were $68,692,000, of which $66,470,000 were the net proceeds from the 2010 Offering. Cash generated from financing activities also includes $2,222,000 from the exercise of options and warrants during the quarter. As a result, the increase in cash and cash equivalents for the three months ended March 31, 2010 was $65,243,000.
As at March 31, 2010, the Company had working capital of $153,249,000, which included cash and cash equivalents of $102,221,000 and restricted cash of $56,866,000. Subsequent to quarter-end, the Company paid cash of $50,858,000 to the vendors of the Sao Francisco and Sao Vicente gold mines from the restricted cash amount. The balance of the restricted cash of $6,008,000 was returned to the Company. As at May 12, 2010, the Company’s strong cash position in excess of $100,000,000 is expected to fund operational and development growth objectives in 2010 and beyond.
Operational and Project Review
Sao Francisco and Sao Vicente Mines Acquisition Completed
On April 30, 2010,
The Company’s focus at these two mines during 2010 will be operational improvements, with the objectives of increasing productivity, improving overall gold recovery and lowering cash operating costs. Key operational initiatives at the Sao Francisco Mine will include: updating the mine plan to improve grade control and mine contractor productivity; upgrading the current crushing plant to increase feed to the gravity circuit; improving the leaching characteristics of run-of-mine ore not previously crushed; reconfiguring the gravity circuit to improve recovery and increase overall gold security; and, completing an exploration program to increase the current reserve and resource base and to test identified targets on the property.
Mine improvement initiatives identified for the Sao Vicente Mine include: implementing upgrades to the crushing and process plant to increase equipment availability (thereby increasing plant throughput and reducing operating costs); installing critical standby equipment to increase plant availability; upgrading elements of the gravity circuit to increase recovery; modifying the heap leach stacking system to reduce compaction thereby improving heap recoveries; and, conducting a definition and expansion drilling program to increase the resource base and drilling nearby targets identified for increased production.
San Andres Mine Operations Review
The table below sets out selected operating information for the San Andres Mine for the three months ended March 31, 2010:
Operating Information Q1 2010 ————————————————————————— Ore mined (tonnes) 1,217,655 Waste mined (tonnes) 32,368 Total mined (tonnes) 1,250,023 Waste-to-ore ratio 0.03 Ore plant feed (tonnes) 1,244,024 Grade (g/tonne) 0.77 Production (ounces) 19,299 Sales (ounces) 18,034 Average cash cost of gold produced ($/ounce) $ 493 Average cash cost of gold sold ($/ounce)(1) $ 525 ————————————————————————— (1) See cautionary note regarding non-GAAP measures.
Total waste and ore mined during the period was 1,250,023 tonnes, an increase of 11.8% over the 1,117,600 tonnes mined in the fourth quarter of 2009. Ore tonnes mined in the first quarter of 2010 were 1,217,655 or 24.7% higher than the 976,100 mined in the previous quarter. The San Andres Mine had a very low waste-to-ore ratio of 0.03 to 1 in the first quarter of 2010, as compared to 0.14 to 1 in the previous quarter. Based on the mine plan, the Company expects a 2010 waste-to-ore ratio of approximately 0.15 to 1.
Total plant feed during the quarter ended March 31, 2010 was 1,244,024 tonnes of ore, an increase of 29.7% over the previous quarter. The improvement over the fourth quarter of 2009 reflects better plant availability and improved maintenance practices.
As a result of the above, gold production for the first quarter of 2010 was 19,299 ounces, a 5.1% increase over the 18,357 ounces of gold produced in the fourth quarter of 2009. The Company expects further production increases at the San Andres Mine will be supported by the new crusher-conveyor system, for which commissioning was completed in April 2010, as well as by a new stacking system, which is expected to be in operation in the third quarter of this year.
The increased production helped lower cash costs(1) by approximately 10% to $493 per ounce of gold produced in the first quarter of 2010, as compared the $550 per ounce reported for the fourth quarter of 2009, despite increases to mining and plant and processing costs which were due to inefficiencies encountered during the crusher changeover.
An exploration drilling program has been planned for the San Andres Mine property during 2010, with the goal of increasing the existing reserve and resource base.
(1) See cautionary note regarding non-GAAP measures.
Aranzazu Project Executing 50,000-Metre Drilling Program
Based on significant results obtained from the 16,000-metre drilling program conducted in 2009,
In addition, an updated resource estimate and a first reserve estimate for the
Arapiraca Project Advancing to Feasibility Study Level
Based on the positive results of the Preliminary Economic Assessment Study released in 2009,
Updated resource estimates for the Serrote and Caboclo deposits at the
Exploration Work Continues at
The Inaja iron ore Project located in Para State, Brazil, continues to move ahead. Exploration work on the property is being carried out by
Reaffirm 2010 Guidance
2010 Gold Production Guidance ————————————————————————— San Andres Mine 90,000 oz Sao Francisco Mine 60,000 – 65,000 oz Sao Vicente Mine 35,000 – 40,000 oz ————————————————————————— Total 185,000 – 195,000 oz —————————————————————————
Based on cash costs(1) for the quarter ended March 31, 2010, of $493 per ounce of gold produced, the Company expects to meet or improve upon the previously released guidance for the San Andres Mine of cash costs(1) in the range of $480-520 per ounce. As reported by the vendors, first quarter production from the Sao Francisco and Sao Vicente mines were 19,399 ounces of gold at cash costs(1) of $933 per ounce and 13,837 ounces at $743 per ounce, respectively. Implementation by the Company of certain of the operational initiatives described in this news release (“Operational and Project Review”) and in Section 3 of the Company’s MD&A for the three months ended March 31, 2010, “Corporate Developments and Significant Transactions and Factors Affecting Results of Operations”, commenced immediately upon acquiring the mines on April 30th. The Company expects that certain of these initiatives will have an almost immediate effect on operating efficiencies and costs and certain others, including capital programs of for approximately $25 million as described below, will take longer to implement. Accordingly, the Company will provide cost guidance later in the third quarter once it has fully assessed the impact of ongoing operational upgrades. Cash costs(1) at the Sao Francisco and Sao Vicente mines, as well as at the San Andres Mine, are expected to decrease in 2011 and beyond, as additional operational improvements at the three mines are expected to result in higher throughputs and increased recoveries.
These estimates do not include any production from the
Capital expenditure guidance for 2010 remains at approximately $65 million. Of this amount, $18 million is being spent at the San Andres Mine for the new stacking system, completion of the Phase 4 leach pad expansion, and the remaining expenditures related to the crusher-conveyor system which was started in 2009 and fully commissioned in April 2010. The balance of 2010 capital expenditures includes: $25 million for completion of the underground development and mill upgrades associated with the restart of the
(1) See cautionary note regarding non-GAAP measures.
The call is being webcast and can be accessed at
This news release includes certain non-GAAP performance measures, in particular, the total cash costs of gold per ounce, and adjusted earnings or loss and adjusted earnings or loss per share. These non- GAAP measure do not have any standardized meaning within Canadian GAAP and therefore may not be comparable to similar measures presented by other companies. The Company believes that this information is useful to management and certain investors in evaluating the Company’s performance. The data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP. Cash costs are presented as they represent an industry standard method of comparing certain costs on a per unit basis. Total cash costs include on-site mining, processing and, administration costs, off-site refining and royalty charges, reduced by by-product credits, but exclude amortization, reclamation, and exploration costs, as well as capital expenditures. Total cash costs are divided by ounces to arrive at per ounce cash costs. Adjusted earnings or loss and adjusted earnings or loss per share are calculated by taking the Company’s net earnings or loss, excluding (a) non-recurring revenue and expense items; (b) stock-based compensation; (c) unrealized foreign exchange gains and losses; (d) unrealized gains and losses on derivative financial instruments; and (e) impairment losses.
(1) Refer to cautionary note regarding non-GAAP measures in this news release.
This news release contains forward-looking statements that are not historical facts. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include those risks set out in
No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.