WINNIPEG, MANITOBA--(Marketwired - Aug 12, 2013) -
(All amounts in Canadian dollars unless otherwise stated)
During the quarter, the Company produced 22,526 ounces of gold with an average milled grade of 5.05 grams per tonne with cash operating costs of $783 per ounce of gold sold. The Company generated income from operations of $3.4 million, a cash contribution from operations before changes in non-cash working capital of $5.0 million, and recognized a quarterly total and comprehensive loss of $3.6 million.
The Company initiated a number of cost-cutting initiatives during the quarter in response to recent adverse market conditions. Compared with the same quarter last year, the Company reduced its total cash operating costs by $2.7 million, capital expenditures by $3.9 million, and general and administrative expenses by $2.6 million while maintaining production levels.
"I am very pleased with the progress we have made this quarter in improving grade and stabilizing production levels while reducing costs across all aspects of the company. I anticipate continued improvement in the Company's financial performance through the remainder of the year as the full effect of our cost-cutting initiatives takes hold," said Ian Berzins, San Gold's President, CEO and Chief Operating Officer.
Through the first two quarters of the year the Company has completed $10.4 million of flow- through eligible exploration pursuing a number of prospective drilling targets near existing infrastructure. The Company will continue to pursue these targets through the remainder of 2013 with its remaining $6 million in flow-through exploration commitments and anticipates a substantial reduction in surface exploration in 2014 once these commitments are complete.
2013 Second Quarter Highlights:
- Produced 22,526 ounces of gold, a 23% increase compared to 18,241 ounces in the second quarter of 2012.
- Achieved average mill throughput of 1,784 tons per day for the quarter, a 39% increase compared to average mill throughput of 1,281 tons per day in the second quarter of 2012.
- Mined ore at a record quarterly rate of approximately 1,905 tons per day for a total of 173,350 tons, an increase of 11% compared to the rate of 1,709 tons per day in the same period of 2012.
- Achieved total cash costs of $783 per ounce of gold sold compared to $970 per ounce in the second quarter of 2012 and realized a cash operating margin of $611 per ounce of gold sold with a realized price of $1,394 per ounce through the quarter.
- Achieved a total cost per ton of ore of $105, a 36% decrease compared to a total cost per ton of ore of $164 in the second quarter of 2012.
- Generated cash flow from operating activities before changes in non-cash working capital of $5.0 million, compared to $5.7 million in the second quarter of 2012, despite a reduction in the realized price of gold.
- Generated quarterly operating income from operations of $3.4 million, compared to income from operations of $2.4 million in the second quarter of 2012.
- Recognized quarterly revenue of $30.4 million on gold sales of 21,796 ounces at a realized price of $1,394 per ounce compared to revenue of $31.6 million in the second quarter of 2012.
- Recognized quarterly total and comprehensive loss of $3.6 million, compared to total and comprehensive loss of $7.8 million in the second quarter of 2012.
- Had a cash and short term investments balance of $21.3 million as at June 30, 2013.
- Accessed the down dip extension of the 007 zone at depth on 26 level and began silling on the structure.
- Began a program to segregate lower grade ore in a separate surface stockpile to be milled as an incremental feed source at a later date.
- Completed approximately 74,000 metres of exploration and definition diamond drilling.
- Purchased mineral claims from Wildcat Exploration Ltd. in the subsequent period.
Review of 2013 Second Quarter Results
The Company produced 22,526 ounces of gold during the quarter compared with 18,241 ounces in the second quarter of 2012. The increase in the number of ounces of gold produced was a result of a 39% increase in tons milled which was offset somewhat by an 11% decrease in grade. The Company milled 162,344 tons in the second quarter of 2013 compared with 116,546 tons milled in the second quarter of 2012. Head grade was 5.05 grams of gold per tonne of ore in the second quarter of 2013, a 22% increase compared with a head grade of 4.15 grams of gold per tonne of ore in the first quarter of this year.
The Company reports quarterly income from operations of $3.4 million and a total and comprehensive loss of $3.6 million, compared to income from operations of $2.4 million and a total and comprehensive loss of $7.8 million in the second quarter of 2012. The increase in income from operations is due to a reduction in total cash operating costs which was partially offset by a reduction in the realized price of gold.
The Company earned quarterly revenue of $30.4 million, a 4% decrease over revenue of $31.6 million in the second quarter of 2012. The decrease in gold sales revenue in the second quarter of 2013 is a result of a 13% decrease in the average realized gold price compared to the second quarter of 2012 which was partially offset by an 11% increase in the number of ounces sold. The Company realized $1,394 per ounce of gold sold in the second quarter of 2013, compared with the $1,607 the Company realized per ounce in the second quarter of 2012 and the Company sold 21,796 ounces of gold in the second quarter of 2013, compared with sales of 19,648 ounces in the second quarter of 2012.
The Company generated $5.0 million of cash flow from operating activities before changes in non-cash working capital in the second quarter of 2013, compared with $5.7 million generated in the second quarter of 2012. After changes in non-cash working capital, operating activities used $5.1 million in the second quarter of 2013, compared to $11.0 million generated in the second quarter of 2012.
Capital spending in the second quarter of 2013 was focused on mine development, increasing mining capability, improving key infrastructure, and sustaining capital. The Company invested $12.9 million in mine development activities and recognized related depletion of $7.8 million compared with an investment of $14.8 million and related depletion of $7.8 million in the second quarter of 2012. The Company also capitalized $4.1 million of property, plant, and equipment and recognized related amortization of $2.1 million during the second quarter of 2013 compared to an investment of $6.1 million and related amortization of $1.7 million in the second quarter of 2012. The Company is continuing its critical review of all subsequent capital development and property, plant and equipment spending for the year and may elect to defer or cancel previously planned projects.
The Company continues to carry out a comprehensive review of its operating, capital, corporate overhead, and exploration costs as well as evaluating investments that do not directly contribute to the Company's core operations. The focus continues to be on optimizing margins per ounce and to find the most direct path to achieving free cash flows.
For the balance of 2013, the Company will continue to concentrate mining operations on the 007 complex, with less dependence on Hinge and with a supplemental feed provided by the Rice Lake mine. Mining operations will continue in the Rice Lake mine alongside ongoing capital development projects to provide operational access beneath the current mining areas within the 007 and Hinge mines and extend the 16 and 26 levels in order to accelerate access to the down dip extensions of these deposits. The Company expects the changes to result in improved grade for the balance of the year, a further decrease in capital development spending and property, plant and equipment spending requirements while maintaining production guidance of 75,000 to 90,000 ounces at full year cash costs of between $800 and $900.
Exploration activities for the remainder of the year will continue to focus on definition and extension drilling within the Company's mineral lease for both production planning and exploration purposes at the San Antonio Mining Unit, the Shoreline Basalt Unit, the Normandy Creek Shear Zone, and within the intermediate volcanic rock unit north of the Shoreline Basalt Unit. The objectives of the Company's exploration program is to develop a larger mine complex that can be exploited through existing infrastructure.
Underground drill bays constructed during the first quarter of 2013 continue to provide better access for definition drilling of the 007 structures at depth. The Company has improved confidence about the resource potential at depth as recent drill results below 26 Level confirm continuity of the geological structures hosting the 007 and Hinge deposits.
2013 Q2 Financial Results Conference Call
The Company's senior management plans to host a conference call on August 13, 2013 at 11:00 am Eastern Time to discuss the 2013 second quarter financial results and to provide an update of the Company's operating, exploration, and development activities.
Participants may join the conference call by dialing 1 (866) 225-0198 or 1 (416) 340-8061 for participants outside of Canada and the United States. The conference call will also be available by webcast on the Company's website at www.sangold.ca.
A recorded playback of the conference call can be accessed after the event until August 29, 2013 by dialing 1 (800) 408-3053 or 1 (905) 694-9451 for calls outside Canada and the United States. The pass code for the conference call playback is 8568217. The archived audio webcast will also be available on the Company's website at www.sangold.ca.
About San Gold
San Gold is an established Canadian gold producer, explorer, and developer that owns and operates the Rice Lake Mining Complex near Bissett, Manitoba. The Company employs more than 420 people and is committed to the highest standards of safety and environmental stewardship. San Gold is on the Toronto Stock Exchange under the symbol "SGR" and on the OTCQX under the symbol "SGRCF".
This press release should be read in conjunction with the Company's consolidated financial statements for the quarter ended December 31, 2012 and associated Management's Discussion and Analysis ("MD&A"), which are available from the Company's website (www.sangold.ca), in the "News & Reports" section under "Financial Statements", and on SEDAR (www.sedar.com).
For further information on San Gold, please visit www.sangold.ca.
Cautionary Non-IFRS Statements
The Company believes that investors use certain indicators to assess gold mining companies. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with International Financial Reporting Standards ("IFRS"). "Total cash operating costs" as used in this analysis is a non-IFRS term typically used by gold mining companies to assess the level of gross margin available to the Company per ounce of gold by subtracting these costs from the unit price realized during the period. This non-IFRS term is also used to assess the ability of a mining company to generate cash flow from operations. There may be some variation in the method of computation of "total cash operating costs" as determined by the Company compared with other mining companies. In this context, "total cash operating costs" reflects the per ounce cash costs allocated from in-process and dore inventory associated with ounces of gold sold in the period and net royalties. "Total cash operating costs" may vary from one period to another due to operating efficiencies, quantity of ore processed, grade of ore processed, and gold recovery rates.
Cautionary Note Regarding Forward-Looking Statements
No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. This news release includes certain "forward-looking statements". All statements, other than statements of historical fact included in this release, including, without limitation, statements regarding forecast gold production, gold grades, recoveries, cash operating costs, potential mineralization, mineral resources, mineral reserves, exploration results, and future plans and objectives of the Company, are forward-looking statements that involve various risks and uncertainties. These forward-looking statements include, but are not limited to, statements with respect to mining and processing of mined ore, achieving projected recovery rates, anticipated production rates and mine life, operating efficiencies, costs and expenditures, changes in mineral resources and conversion of mineral resources to proven and probable mineral reserves, and other information that is based on forecasts of future operational or financial results, estimates of amounts not yet determinable and assumptions of management.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "estimates" or "intends", or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be "forward-looking statements." Forward-looking statements are subject to a variety of risks and uncertainties that could cause actual events or results to differ from those reflected in the forward-looking statements.
There can be no assurance that forward-looking statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations include, among others, the actual results of current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined as well as future prices of precious metals, as well as those factors discussed in the section entitled "Other MD&A Requirements and Additional Disclosure and Risk Factors" in the Company's most recent quarterly Management's Analysis and Discussion ("MD&A"). Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
Exploration results that include geophysics, sampling, and drill results on wide spacings may not be indicative of the occurrence of a mineral deposit. Such results do not provide assurance that further work will establish sufficient grade, continuity, metallurgical characteristics, and economic potential to be classed as a category of mineral resource. A mineral resource that is classified as "inferred" or "indicated" has a great amount of uncertainty as to its existence and economic and legal feasibility. It cannot be assumed that any or part of an "indicated mineral resource" or "inferred mineral resource" will ever be upgraded to a higher category of resource. Investors are cautioned not to assume that all or any part of mineral deposits in these categories will ever be converted into proven and probable reserves.
Cautionary Note to United States and Other Investors Concerning Estimates of Measured, Indicated and Inferred Mineral Resources:
This press release uses the terms "Measured", "Indicated", and "Inferred" resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. "Inferred Mineral Resources" have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of a Mineral Resource is economically or legally mineable.
Table 1: 2013 Second Quarter Income Statement
|SAN GOLD CORPORATION|
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS|
|Three month period ended||Six month period ended|
|June 30||June 30||June 30||June 30|
|Operations (Note 16)||26,997,444||29,192,070||51,356,518||57,556,960|
|INCOME FROM OPERATIONS||3,376,987||2,386,780||3,337,941||9,523,750|
|General and administrative (Note 17)||1,479,785||4,113,439||6,914,386||7,938,811|
|LOSS BEFORE OTHER INCOME AND EXPENSES||3,811,009||5,972,038||13,936,491||7,261,730|
|OTHER INCOME AND EXPENSES|
|Finance income - net (Note 18)||42,572||(105,392||)||(364,365||)||193,321|
|Finance costs (Note 18)||(1,663,203||)||(101,030||)||(2,286,361||)||(215,861||)|
|Equity loss of associate (Note 8)||-||(3,130,001||)||-||(4,130,001||)|
|LOSS BEFORE INCOME TAX||5,431,640||9,308,461||16,587,217||11,414,271|
|Income tax recovery on flow-through shares||1,871,574||1,494,022||3,359,194||2,909,634|
|NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD||$||3,560,066||$||7,814,439||$||13,228,023||$||8,504,637|
|LOSS PER COMMON SHARE: (Note 22)|
Table 2: Financial Highlights
|Total and comprehensive income (loss) (000)||$||(3,560||)||$||(7,814||)|
|Items not affecting cash (000)||$||8,604||$||13,476|
|Cash provided (used) by operating activities before changes in non-cash working capital (000)||$||5,044||$||5,662|
|Net change in non-cash working capital (000)||$||22||$||5,382|
|Cash provided by operating activities (000)||$||5,067||$||11,044|
|Earnings (loss) per share|
|Weighted average number of common shares outstanding|
Table 3: Production Summary and Statistics
|Ore milled (tons)||162,344||116,546||45,798||39||%|
|Head grade (g/tonne Au)||5.05||5.70||(0.65||)||-11||%|
|Contained gold (ounces)||23,964||19,385||4,579||24||%|
|Ounces of gold produced||22,526||18,241||4,285||23||%|
|Ore mined (tons)||173,350||155,495||17,855||11.5||%|
|Ore milled per day (tons)||1,784||1,281||503||39||%|
|Ore mined per day (tons)||1,905||1,709||196||11||%|
|Mill recovery (%)||94||%||94||%||0||%||0||%|
Table 4: Quarterly Production Summary and Statistics
|Ore milled (tons)||162,344||156,013||168,088||191,105||116,546||153,537||141,890||121,844|
|Head grade (g/tonne Au)||5.05||4.15||4.22||5.21||5.70||5.35||5.36||5.83|
|Contained gold (ounces)||23,964||18,884||20,539||29,029||19,385||23,995||22,190||20,732|
|Ounces of gold produced||22,526||17,354||19,019||27,084||18,241||22,162||20,359||19,119|
|Ore mined (tons)||173,350||143,859||171,351||143,949||155,495||144,549||136,166||124,952|
|Ore milled per day (tons)||1,784||1,733||1,827||2,077||1,281||1,687||1,542||1,324|
|Ore mined per day (tons)||1,905||1,598||1,863||1,565||1,709||1,588||1,480||1,358|
|Mill recovery (%)||94||%||92||%||93||%||93||%||94||%||92||%||92||%||92||%|
NOTE: Final refinery settlements, or the effects of rounding, may have resulted in increases or decreases to reported gold production.