TORONTO, ON — (
This release does not constitute management’s discussion and analysis (“MD&A”) as contemplated by applicable securities laws and should be read in conjunction with the MD&A and the Company’s audited consolidated financial statements for the three months and year ended December 31, 2014, which are available on SEDAR at www.sedar.com and on the Company’s website. Unless otherwise noted, references herein to “$” are to thousands of United States dollar. References to “C$” are to thousands of Canadian dollar. Tables are expressed in thousands of United States dollar, except where otherwise noted.
- Gold production at San Andres increased by 39% and average cash cost per ounce (“oz”)1 decreased by 34% in 2014 over the comparable period;
- Gross margin of $10,701 for the year ended December 31, 2014, compared to a gross loss of $5,693 for the year ended December 31, 2013;
- Revenues for the year ended December 31, 2014 decreased by 20% compared to the year ended December 31, 2013. The decrease in revenues resulted from a 24% decrease in gold sales offset by a 7% increase in copper concentrate sales;
- Gold oz production for 2014 was 12% lower than in the prior year and Aranzazu’s copper production for the years ended December 31, 2014 and 2013 was 14,593,460 pounds and 13,626,982 pounds, respectively, an increase of 7%;
- Loss for the year ended December 31, 2014 (after impairment charges on Aranzazu of $137,502) of $142,882 or $0.63 per share compared to a loss of $74,193 (including impairment charges of $56,191 and losses on disposal of non-core exploration properties of $8,760) or $0.32 per share for the year ended December 31, 2013;
- Operating cash flow1 of $31,265 for the year ended December 31, 2014 compared to $66,847 for the year ended December 31, 2013;
1 Please see the cautionary note at the end of this press release.
Jim Bannantine, the Company’s President and Chief Executive Officer stated “Despite a difficult time in the market, we have been able to finance Aura’s requirements twice during 2014 with the support of our lenders, pay down our third party debt requirements and exceed the top end of our production guidance at our gold mines in 2014.
At San Andres, we increased recoveries and production through the implementation of our continuous improvement plan which resulted in a significant decrease in cash cost per ounce produced in 2014; these are in line with the National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) for the project published during the year. Sao Francisco’s results were affected by the tightening of the pit and the longer haul distances of both waste and ore. Sao Francisco also implemented an additional push-back in the south area of the mine which is expected to extend the mine life into the later part of 2015 — and final processing into 2016 — but resulted in a higher cash cost per ounce than originally expected in 2014. We continue to review options to accelerate the remaining value expected to be received from Sao Francisco. The assets and rehabilitation liability of Sao Vicente were disposed of to a third party in the fourth quarter of 2014 following the commencement of closure activities at the project.
Although we were able to achieve both record production and decreased treatment charges, refining charges and penalties at Aranzazu during 2014, the lack of available financing to sustain or expand operations in this challenging commodity price environment has resulted in the suspension of operations at the mine. Management continues to pursue all options to maximize the value of the Aranzazu concession and is planning — financial resources permitting — to prepare an updated NI 43-101 that would include the restart of operations, a slower phased ramp-up from current production rates and much lower capital expenditures. At Serrote, we are pursuing a number of options to realize the value of the project including an alternative sequential development and operating plan while we incur minimal monthly development expenditures.”
Production and Cash Costs
Gold production for the fourth quarter of 2014 was 10% lower than the fourth quarter of 2013 and gold production for the year ended December 31, 2014 was 12% lower than the prior year. Gold production and cash costs1 for the three and twelve months ended December 31, 2014 and 2013 were as follows:
| For the three months ended
December 31, 2014
| For the three months ended
December 31, 2013
|Oz produced||Cash Costs1||Oz Produced||Cash Costs1|
|Total / Average||43,429||$||984||48,506||$||1,085|
| For the year ended
December 31, 2014
| For the year ended
December 31, 2013
|Oz produced||Cash Costs1||Oz Produced||Cash Costs1|
|Total / Average||181,165||$||958||206,956||$||1,166|
Gold production at San Andres in the fourth quarter of 2014 increased by 56% over the comparable period primarily due to increased throughput and improved recoveries in both the leaching and carbon stripping processes. Average cash cost per oz of gold produced1 in the fourth quarter of 2014 decreased by 35% over the fourth quarter of 2013 as a result of the increased production as well as the successful cost reduction program.
Gold production at Sao Francisco in the fourth quarter of 2014 was 21% lower than the fourth quarter of 2013 due to the decrease in grade and lower plant feed. Average cash cost per oz of gold produced1 in the fourth quarter of 2014 was 13% higher than in the fourth quarter of 2013.
Mining at Sao Francisco is expected to continue into the fourth quarter of 2015 as exploration drilling in 2013 and a revised geological block model have identified additional mineralized material in several areas of the pit. An extra push-back in the south is also reflected in the higher strip ratio for the fourth quarter of 2014 as compared to the fourth quarter of 2013. Ongoing monthly reconciliation in 2014 has indicated that there may be a positive conversion of waste to ore and low grade zones, resulting in an increase to the processing plant life. Processing is expected to be extended into 2016.
Mining operations at Sao Vicente were completed by the fourth quarter of 2013, and as a result there was no material moved during 2014. Plant processing continued until the third quarter of 2014. Sao Vicente’s 2014 costs have been impacted by closure costs incurred prior to a fourth quarter 2014 disposal of the asset and liabilities of the mine to a third party.
Copper production at Aranzazu for the fourth quarters of 2014 and 2013 was 2,684,907 pounds and 3,642,482 pounds, respectively, a decrease of 26%. On-site average cash cost1 per pound of copper produced, net of gold and silver credits was $2.71 for the fourth quarter of 2014 compared to $3.92 for the fourth quarter of 2013, inclusive of net realizable value inventory write-downs of $0.50 and $0.76, respectively. Copper production at Aranzazu for the years ended December 31, 2014 and 2013 was 14,593,460 pounds and 13,626,982 pounds, respectively, an increase of 7%. On-site average cash cost1 per pound of copper produced, net of gold and silver credits was $2.87 for the full year of 2014 compared to $4.15 for the full year of 2013 inclusive of net realizable value write-downs of $0.35 and $0.74 for the years 2014 and 2013, respectively. The average arsenic level in the copper concentrate was 0.86% and 0.99% during the fourth quarters of 2014 and 2013, respectively.
At Aranzazu, Copper concentrate production, copper recovery and copper grade decreased by 25%, 4% and 32% in the fourth quarter of 2014 as compared to the fourth quarter of 2013.
As a result of the Company having been unable to either internally generate or externally raise the financing required in to maintain or expand the Aranzazu operations, on January 15, 2015, the Company announced that all mining activities at Aranzazu would be temporarily suspended and that all capital projects, including underground development work, would be deferred. Processing of copper concentrate was to continue until the economic stockpiles were depleted. As at the date of this press release, the Aranzazu project is on care-and-maintenance.
The Serrote project early development phase is continuing and the Company is continuing to pursue options to maximize the value of Serrote including, but not limited to, a disposal of a majority interest in the project equity and the Company is also considering a revised development and operating plan that would require lower capital expenditures and an earlier execution schedule.
Revenues and Cost of Goods Sold
Revenues for the year ended December 31, 2014 decreased by 20% compared to the year ended December 31, 2013. The decrease in revenues resulted from a 24% decrease in gold sales offset by a 7% increase in copper concentrate sales.
The decrease in gold sales is attributable to both a 14% decrease in gold sales volumes and a decrease of 10% in the realized average gold price per oz. The decrease in gold sales volumes is mainly due to the wind down of operations at Sao Vicente.
The increase in copper concentrate net sales is primarily attributable to a 12% increase in DMT sold and a decrease of 5% in the average price realized. Total revenues for the year ended December 31, 2014 at Aranzazu related to the shipment of 28,058 DMT of copper concentrate compared to 24,995 DMT of copper concentrate for the year ended December 31, 2013. Total concentrate shipment revenues for the year ended December 31, 2014 and 2013 were $1,566 per DMT and $1,642 per DMT, respectively.
For the year ended December 31, 2014 and 2013, total cost of goods sold from San Andres was $76,449 or $904 per oz compared to $82,084 or $1,255 per oz, respectively. For the year ended December 31, 2014 and 2013, cash operating costs were $790 per oz and $1,124 per oz, respectively, while non-cash depletion and amortization charges were $115 per oz and $131 per oz, respectively. There were no write-downs of production inventory to net realizable value for the year ended December 31, 2014 (2013: write-downs of $880 or $13 per oz).
At the Brazilian Mines, for the year ended December 31, 2014 and 2013, total cost of goods sold was $112,592 or $1,175 per oz compared to $192,592 or $1,141 per oz, respectively. For the year ended December 31, 2014 and 2013, cash operating costs were $1,165 per oz and $1,090 per oz, respectively, while non-cash depletion and amortization charges were $34 per oz and $252 per oz, respectively. The cash operating costs for the year ended December 31, 2014 included write-downs of $1,161 or $12 per oz to bring production inventory to net realizable value (2013: $23,401 or $163 per oz).
Total cost of goods sold from Aranzazu for the year ended December 31, 2014 and 2013 was $65,647 or $2,340 per DMT and $61,894 or $2,476 per DMT, respectively. For the year ended December 31, 2014 and 2013, cash operating costs were $1,940 per DMT and $2,082 per DMT, respectively, while non-cash depletion and amortization charges were $399 per DMT and $394 per DMT, respectively. The cash operating costs for the year ended December 31, 2014 included a write-down of $7,972 or $284 per DMT to bring production inventory to its net realizable value (2013: $10,074 or $403 per DMT), and suspension and termination cost accruals of $4,793 (2013: $Nil).
For the year ended December 31, 2014 and 2013, general and administrative costs were $13,075 and $16,078, respectively. Salaries, wages and benefits and travel expenses decreased as a result of corporate reorganizations. Professional and consulting fees increased due to additional consulting costs incurred on the closure of Sao Vicente as well as costs attributable to the sustainability reporting. Share-based payment expense decreased significantly as a result of a lower value assigned to stock options granted during the period and prior period forfeitures. Other expenses for 2013 include a non-recurring provision for employee travel liabilities and also separate taxation penalties assessed on the late payment of installments relating to prior periods at the Company’s Brazilian operations. Other expenses for 2014 include withholding taxes on management fees charged by the Company’s corporate office to San Andres, insurance premia and software expenses.
Exploration costs for the year ended December 31, 2014 and 2013 were $540 and $1,987 respectively. The decrease in exploration expenses for San Andres reflects the completion of the resource update which was published in the second quarter of 2014.
For the year ended December 31, 2014, the Company recorded an impairment charge of $137,502 on the Aranzazu Mine. For the year ended December 31, 2013, the Company recorded impairment charges of $16,019 and $40,172 related to the long-lived assets of the Sao Francisco Mine and the San Andres Mine, respectively, and a loss on disposal relating to the non-core Brazilian exploration properties of $8,760.
Finance costs for the year ended December 31, 2014 and 2013 were $6,597 and $5,817, respectively. The increase in accretion expenses relates to increases in the provisions for the mine closure cost and restoration and net smelter return royalty payable. The decrease in interest expense on debt reflects the repayment of the Company’s revolving Credit Facility with
Other gains for the year ended December 31, 2014 were $1,954, as compared to other losses for the year ended December 31, 2013 of $13,402. Income tax recovery for the year ended December 31, 2014 was $1,938 compared to $7,677 for the year ended December 31, 2013.
For the year ended December 31, 2014, the Company recorded a loss of $142,882 which compares to a loss of $74,193 for the year ended December 31, 2013.
Outlook and Strategy
Other key factors influencing profitability and operating cash flows are production levels (impacted by grades, ore quantities, labour, plant and equipment availabilities, and process recoveries) and production and processing costs (impacted by production levels, prices and usage of key consumables, labour, inflation, and exchange rates).
|Gold Mines||Cash Cost per oz 1||2015 Production|
|San Andres||$ 750 – $ 800||90,000 – 100,000 oz|
|Sao Francisco||$ 900 – $ 950||70,000 – 80,000 oz|
|Total||$ 800 – $ 900||160,000 – 180,000 oz|
In the first quarter of 2014 and to the date of this press release, the indicators have been that the pro-rata guidance will be achieved at each operating mine.
For 2015, updated capital spending is expected to be $13,300. Of this amount, $11,900 relates to San Andres and principally includes the heap leach expansion, power line and committed community expenditures. The remaining portion will be spent on other group projects.
This news release includes certain non-GAAP performance measures, in particular, the average cash cost per oz of gold, average cash cost per pound of copper and operating cash flow which are non-GAAP performance measures. These non-GAAP measures do not have any standardized meaning within IFRS and therefore may not be comparable to similar measures presented by other companies. The Company believes that these measures provide investors with additional information which is useful in evaluating the Company’s performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Average cash cost per oz of gold or per pound of copper is presented as it represents an industry standard method of comparing certain costs on a per unit basis. Total cash cost of gold produced includes on-site mining, processing, administration costs, off-site refining and royalty charges, reduced by silver by-product credits, but excludes amortization, reclamation, and exploration costs, as well as capital expenditures. Total cash cost of gold produced is divided by oz produced to arrive at cash cost per oz. Similarly, total cash cost of copper produced includes the above costs, and is net of gold and silver by-products, but includes offsite treatment and refining charges. Total cash cost of copper produced is divided by pounds of copper produced to arrive at an average cash cost per pound.
Operating cash flow is the term the Company uses to describe the cash that is generated from operations excluding depletion and amortization, inventory write-downs, stock based compensation and impairment charges.
This news release contains certain “forward-looking information” and “forward-looking statements”, as defined in applicable securities laws (collectively, “forward-looking statements”). All statements other than statements of historical fact are forward-looking statements. Forward-looking statements relate to future events or future performance and reflect the Company’s current estimates, predictions, expectations or beliefs regarding future events and include, without limitation, statements with respect to: the amount of mineral reserves and mineral resources; the amount of future production over any period; the amount of waste tonnes mined; the amount of mining and haulage costs; cash costs; operating costs; strip ratios and mining rates; expected grades and ounces of metals and minerals; expected processing recoveries; expected time frames; prices of metals and minerals; mine life; and gold hedge programs. Often, but not always, forward-looking statements may be identified by the use of words such as “expects”, “anticipates”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives” or variations thereof or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions.
Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Forward-looking statements in this news release and related MD&A are based upon, without limitation, the following estimates and assumptions: the presence of and continuity of metals at the Company’s Mines at modeled grades; the capacities of various machinery and equipment; the availability of personnel, machinery and equipment at estimated prices; exchange rates; metals and minerals sales prices; appropriate discount rates; tax rates and royalty rates applicable to the mining operations; cash costs; anticipated mining losses and dilution; metals recovery rates, reasonable contingency requirements; and receipt of regulatory approvals on acceptable terms.
Known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s ability to predict or control could cause actual results to differ materially from those contained in the forward-looking statements. Specific reference is made to the most recent Annual Information Form on file with certain Canadian provincial securities regulatory authorities for a discussion of some of the factors underlying forward-looking statements, which include, without limitation, gold and copper or certain other commodity price volatility, changes in debt and equity markets, the uncertainties involved in interpreting geological data, increases in costs, environmental compliance and changes in environmental legislation and regulation, interest rate and exchange rate fluctuations, general economic conditions and other risks involved in the mineral exploration and development industry. Readers are cautioned that the foregoing list of factors is not exhaustive of the factors that may affect the forward-looking statements.
All forward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements.
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