WINNIPEG, MANITOBA--(Marketwire - Nov 13, 2012) -
(All amounts in Canadian dollars unless otherwise stated)
2012 Q3 Financial and Operating Highlights
- Generated cash flow from operating activities before changes in non-cash working capital of $15.8 million, compared to $9.9 million in the third quarter of 2011.
- Year-to-date, the Company has generated $31.4 million from operating activities before changes in non-cash working capital compared with $13.5 million through the first three quarters of 2011.
- Recognized record quarterly revenue of $41.0 million on gold sales of 24,469 ounces at a realized price of $1,675 per ounce, a 25% increase from revenue of $32.9 million in the third quarter of 2011.
- Generated quarterly operating income from operations of $6.0 million, compared to income from operations of $12.1 million in the third quarter of 2011.
- Recognized quarterly total and comprehensive loss of $0.8 million, compared to total and comprehensive income of $1.0 million in the third quarter of 2011.
- Produced a record 27,084 ounces of gold, a 42% increase compared to 19,119 ounces in the third quarter of 2011.
- Mined ore at a quarterly rate of approximately 1,565 tons per day for a total of 143,949 tons, an increase of 15% compared to the rate of 1,358 tons per day in the same period of 2011.
- Achieved record average mill throughput of 2,077 tons per day for the quarter, a 57% increase compared to average mill throughput of 1,324 tons per day in the third quarter of 2011.
- Achieved total cash costs of $785 per ounce of gold sold compared to $769 per ounce in the third quarter of 2011 and realized a cash operating margin of $890 per ounce of gold sold with a realized price of $1,675 per ounce through the quarter.
- Had a cash and short term investments balance of $19.3 million as at Sept. 30, 2012.
- Completed approximately 54,000 metres of exploration and definition diamond drilling.
- Completed its previously announced transaction with Opawica Explorations Inc. for the purchase of 3 mineral properties in Northern Ontario.
- Appointed Mr. Robert (Bob) Brennan as an independent Director of the Company and appointed Mr. Michael Michaud as Vice President, Exploration.
"In the first three quarters of this year, we have generated more than $30 million in cash from operations, before non-cash items. These cash flows continue to fund our aggressive exploration and development program," said George Pirie, President and Chief Executive Officer of San Gold.
Review of Production Results
The Company produced a record 27,084 ounces of gold during the third quarter of 2012 compared with 19,119 ounces in the third quarter of 2011.
The company milled a record 191,105 tons during the quarter, averaging more than 2,000 tons per day. During this period, the company mined 143,949 tons, resulting in approximately 7,900 tons remaining in surface stockpiles as at September 30. The Company plans to mill the remainder of this stockpile during the fourth quarter.
Calculated production costs were $785 per ounce sold during the third quarter, compared with cash costs of $769 in Q3 2011. The total cost per ton of ore in the third quarter of 2012 decreased 15% to approximately $101 compared to $119 in the same period of 2011. Mining cost per ton of ore was $86 in the third quarter of 2012 compared to $101 for the three-month period ended September 30, 2011. Processing costs per ton of ore was $14 in the third quarter of 2012 compared to $17 in the same period of 2011.
The cost per ton of ore for mining and processing are expected to continue to decrease in subsequent quarters. Decreases in mining and processing cost per ton of ore will be realized from the mining of newer, near surface deposits in the Hinge, L10 and 007 zones as well as through increased average throughput rates.
Review of Financial Results
The Company reports quarterly operating income from operations of $6.0 million and a total and comprehensive loss of $0.8 million, compared to income from operations of $12.1 million and a total and comprehensive income of $1.0 million in the third quarter of 2011.
The Company earned revenue during the third quarter of 2012 of $41.0 million, a 25% increase over revenue of $32.9 million in the third quarter of 2011. This increase was a result of greater gold sales despite a lower realized price of gold. The Company sold 24,469 ounces of gold in the third quarter of 2012, a 30% increase compared sales of 18,867 ounces in the third quarter of 2011. The Company realized $1,675 per ounce of gold sold in the third quarter of 2012, a 4% reduction compared to the $1,743 the Company realized per ounce in the third quarter of 2011. San Gold recognized an expense of $0.9 million associated with its share of SGX''s loss for the quarter. The market value of the Company''s 36.7 million shares of SGX is $12.3 million as at September 30, 2012.
The Company generated cash flow from operating activities before changes in non-cash working capital of $15.8 million in the third quarter of 2012, a considerable change compared to $9.8 million in the third quarter of 2011. After changes in non-cash working capital, operating activities generated $14.8 million in the third quarter of 2012, a substantial improvement compared to $10.4 million in the third quarter of 2011.
Capital spending in the third quarter of 2012 was focused on mine development, improving key infrastructure, and sustaining capital. The Company capitalized $18.3 million of mine development and $2.1 million of property, plant, and equipment during the third quarter of 2012 compared to $12.4 million and $6.4 million in the third quarter of 2011, respectively.
Tables 1 to 4 at the end of this release provide a detailed summary of the Company''s key financial and operating metrics.
The Company is well positioned going into the fourth quarter of 2012, with 7,900 tons of ore stockpiled, representing approximately 1,700 ounces of gold. The Company plans to mill the remainder of this stockpile during the fourth quarter.
Record gold production has been accompanied by a steady quarter-over-quarter reduction in total cash operating costs per ounce of gold sold from $840 per ounce in the first quarter to $785 per ounce in the third quarter. Higher mining, crushing, and milling rates combined with operational efficiencies and the removal of operational bottlenecks, has contributed to a significant reduction in the Company''s cash costs per ounce.
In the fourth quarter and through 2013, the Company will be focusing production on its higher margin ounces near surface while developing the Shoreline Basalt deposits and increasing the capacity of the Rice Lake shaft at depth. Effective September 15, 2012, the Company has elected to stop all ore production from the Rice Lake mine in order to concentrate exclusively on capital development on 16 and 26 levels. The goal is to accelerate access to the down dip extensions of the existing ore zones in L10 and 007 by drifting into the Shoreline Basalt on 16 and 26 levels. Additionally, the Company is planning to install a loading pocket on 16 level off shaft A, which in combination with shaft and hoisting rehab project will upgrade our skipping capacity to 3,000 tons per day from this level. These improvements will result in an increase in the number of stopes and an improvement in the material handling capabilities in the mine complex. This strategy will continue for the balance of 2012 and through 2013. To date, this strategy has resulted in a 50% improvement in development productivities and has lowered overall cash costs.
The Company anticipates this strategy will result in significantly improved total cash operating costs and is currently maintaining its expectation of achieving the lower end of its 2012 production guidance.
Capital investments made since 2010 in the Company''s crushing and milling capacity, mechanized mining methods, and the removal of constraints from operations will continue to result in increased gold production and reduced cash costs per ounce of gold sold. Capital investments for the remainder of 2012 will be targeted toward continued infrastructure development on 16 and 26 levels toward the Hinge and 007 zones, additional investments in its mechanized mining fleet, and the construction of an expanded tailings management area. The additional investments planned for the remainder of 2012 and 2013 are anticipated to further increase production capacity in both the mining and milling aspects of the Rice Lake Mining Complex.
In the third quarter of 2012, the Company continued its significant 2012 exploration program within the Rice Lake greenstone belt. Approximately 54,000 metres of exploration were completed by the Company in the third quarter of 2012. The Company is very encouraged by the results of the exploration drilling completed to date as it continues to demonstrate the potential for the expansion of existing mineralized zones and the discovery of new zones in the Rice Lake area. Exploration activities for the remainder of 2012 will continue to focus on definition and extension at the known zones and exploration drilling at other advanced targets on the mine lease and in the surrounding Rice Lake area. The Company is planning to present an updated mineral and resource estimate in the first quarter of 2013.
With rising production volumes and declining cash costs, combined with a strong gold-price environment and a strong balance sheet, the Company is well funded to finance its existing capital and exploration plans, as well as growth through new discoveries and potential acquisitions or joint venture opportunities.
2012 Third Quarter Conference Call
The Company''s senior management plans to host a conference call on Wednesday, November 14, 2012 at 11:00 am Eastern Standard Time to discuss the 2012 third quarter 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) 226-1793 for participants within Canada and the United States or 1 (416) 340-8527 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 December 5, 2012 by dialing 1 (800) 408-3053 for callers within Canada and the United States or 1 (905) 694-9451 for callers outside Canada and the United States. The pass code for the conference call playback is 1034500. 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 Hinge, 007, and Rice Lake mines near Bissett, Manitoba, approximately 235 kilometres northeast of Winnipeg, Manitoba, Canada. The Rice Lake Project has a permitted, modern gold mill currently processing ore at a capacity of 2,500 tons per day, modern surface infrastructure including a licensed tailings management facility, and is connected to the Manitoba power grid system. The Company employs more than 400 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 September 30, 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: 2012 Third Quarter Income Statement
|SAN GOLD CORPORATION|
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)|
|Three month period ended||Nine month period ended|
|September 30||September 30||September 30||September 30|
|Operations (Note 15)||34,936,139||20,740,879||90,977,631||58,208,199|
|INCOME FROM OPERATIONS||6,045,858||12,149,733||17,085,076||22,932,258|
|General and administrative (Note 16)||3,670,401||5,089,684||13,124,680||12,355,766|
|INCOME (LOSS) BEFORE OTHER INCOME AND EXPENSES||(1,433,723||)||939,230||(8,695,453||)||(8,126,539||)|
|OTHER INCOME AND EXPENSES|
|Finance income - net (Note 17)||202,202||185,665||395,523||665,210|
|Finance costs (Note 17)||(93,891||)||(114,248||)||(309,752||)||(353,108||)|
|Equity loss of associate (Note 8)||(899,999||)||-||(5,030,000||)||(483,350||)|
|INCOME (LOSS) BEFORE INCOME TAX||(2,225,411||)||1,010,647||(13,639,682||)||(8,297,787||)|
|Income tax recovery on flow-through shares||1,430,367||-||4,340,001||-|
|NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD||$||(795,044||)||$||1,010,647||$||(9,299,681||)||$||(8,297,787||)|
|EARNINGS (LOSS) PER COMMON SHARE: (Note 21)|
Notes on the Income Statement provided here reference notes to the Company''s interim financial statements, available on SEDAR and on the Company''s website at www.sangold.ca.
Table 2: Financial Highlights (000''s $CDN)
|Total and comprehensive income (loss) (000)||$||(795||)||$||1,011|
|Items not affecting cash (000)||$||16,568||$||8,839|
|Cash provided (used) by operating activities before changes in non-cash working capital (000)||$||15,772||$||9,850|
|Net change in non-cash working capital (000)||$||(957||)||$||504|
|Cash provided by operating activities (000)||$||14,815||$||10,354|
|Earnings (loss) per share|
|Weighted average number of common shares outstanding|
Table 3: Production Summary and Statistics
|Ore milled (tons)||191,105||121,844||69,261||57||%|
|Head grade (g/tonne Au)||5.21||5.83||-0.62||-10.6||%|
|Contained gold (ounces)||29,029||20,732||8,297||40||%|
|Ounces of gold produced||27,084||19,119||7,965||42||%|
|Ore mined (tons)||143,949||124,952||18,997||15||%|
|Ore milled per day (tons)||2,077||1,324||753||57||%|
|Ore mined per day (tons)||1,565||1,358||206||15||%|
|Mill recovery (%)||93||%||92||%||1||%||1.2||%|
Table 4: Quarterly Production Summary and Statistics
|Ore milled (tons)||191,105||116,546||153,537||141,890||121,844||114,624||82,792||83,174|
|Head grade (g/tonne Au)||5.21||5.70||5.35||5.36||5.83||6.35||6.47||4.29|
|Contained gold (ounces)||29,029||19,385||23,995||22,190||20,732||21,244||15,636||10,414|
|Ounces of gold produced||27,084||18,241||22,162||20,359||19,119||20,111||14,688||9,280|
|Ore mined (tons)||143,949||155,495||144,549||136,166||124,952||123,261||102,200||84,743|
|Ore milled per day (tons)||2,077||1,281||1,687||1,542||1,324||1,260||920||904|
|Ore mined per day (tons)||1,565||1,709||1,588||1,480||1,358||1,355||1,136||921|
|Mill recovery (%)||93||%||94||%||92||%||92||%||92||%||95||%||94||%||89||%|
NOTE: Final refinery settlements, or the effects of rounding, may have resulted in increases or decreases to reported gold production.