All dollar amounts are stated in Canadian dollars, unless otherwise indicated
TORONTO, May 10, 2012 /CNW/ - St Andrew Goldfields Ltd.
(T-SAS), ("SAS" or the "Company") earned net income attributable to shareholders
for the first quarter 2012 of $2.7 million or $0.01 per share as
compared to a net loss of $2.8 million, or $0.01 per share for the same
period last year.
Adjusted net earnings(1) for the quarter was $1.8 million, or nil on a per share basis, as
compared to an adjusted net loss of $2.9 million, or $0.01 per share,
for the same period in 2011.
FIRST QUARTER HIGHLIGHTS
-
Operating cash flow was $8.3 million.
-
Earned net income attributable to shareholders of $2.7 million, and
adjusted net earnings (1) of $1.8 million.
-
Produced 21,018 ounces of gold from three operations (Holt, Holloway and
Hislop).
-
Sold 20,325 ounces of gold at an average realized price (1) of US$1,695 per ounce for revenues of $34.3 million.
-
Mine cash costs of US$858 per ounce and a royalty cost of US$138 per
ounce, for a total cash cost per ounce of gold sold (1) of US$996 per ounce.
-
Earned cash margin from mine operations (1) of $13.9 million.
-
Incurred total capital expenditures of $8.8 million.
-
Completed a positive Pre-Feasibility study on the Taylor Project and
subsequently commenced activities to advance the project.
- Subsequently, completed a US$25.0 million bank facility on May 8, 2012, to retire the Gold Notes in full; and to increase the Companys capital resources and cash flow (see press release dated May 8, 2012).
| (1) |
See "non-GAAP Measures ", for explanation and reconciliation of non-GAAP
measurements contained in this news release |
"We have achieved another strong quarter of production and cash flow
from operations meeting our objectives", said Jacques Perron, President
and CEO of SAS.
"We are pleased with our production results for the
first quarter of 2012, and pleased to be able to report cash costs in
line with guidance.
The mines are performing well and the grades at
Holt and Hislop have been in line or better than reserve grade.
Production is expected to increase at Holt and Holloway in the latter
half of 2012, as the mines reach their steady state levels.
We
re-iterate our production guidance of 90,000 - 100,000 ounces of gold
at a total cash cost of between US$800-850 per ounce, before royalties,
for 2012."
Holt Mine, Operations and Financial Review (see Operating and Financial Statistics on page 12)
For the first quarter of 2012, the Holt Mine ("Holt") produced 11,025 ounces of gold from processing 67,937 tonnes of ore at
a head grade of 5.36 g/t Au.
The average head grade remained above
reserve grade for Zone 4 and recoveries of 94% were in line with
expectations.
Development of Zone 4 on the 925m Level and 1075m Level
has progressed sufficiently enough to enable a steady increase in
production rates in the second and third quarters of 2012, which will
enable Holt to meets its annual gold production target of approximately
50,000 ounces.
Gold sales during the quarter decreased by 14% when compared to the previous quarter primarily due to a 3% decrease in gold production and an 18% increase in unsold bullion and gold inventory in circuit.
Mine-site cost per tonne milled(1) for the quarter increased by 20% over the previous quarter mainly due
to the increased level of development work; repairs to the shaft
workings in February pursuant to the shaft incident as well as a slight
increase in heating costs due to the winter season.
As a result, total
cash cost per ounce of gold sold(1) increased by US$116 per ounce.
Holt contributed cash margin from mine
operations(1) of $9.1 million during the first quarter.
The Company expects unit
operating costs at Holt will decrease as the mining rate increases
towards its steady state levels.
Holloway Mine, Operations and Financial Review (see Operating and Financial Statistics on page 13)
Production at the Holloway Mine ("Holloway") of 5,058 ounces of gold was impacted by lower grade ore mined at the
Smoke Deep Zone ("Smoke Deep"), and resulted in a 17% reduction in production when compared to the
previous quarter.
The grade in the second quarter is expected to remain
close to that achieved in the first quarter, but is expected to improve
in third and fourth quarters of 2012.
The mill recovery rate of 88% was
an improvement over the previous quarter and is in line with
expectations.
Gold sales decreased by 23% when compared to the previous quarter due to the lower production as discussed above.
Mine-site cost per tonne milled(1) in the quarter increased by 13% over the previous quarter mainly due to
additional heating requirements during the winter months and led to an
increase of US$101 per ounce in total cash cost per ounce of gold sold(1).
The decrease in gold sales resulted in a decrease in cash margin from
mine operations(1) of $2.5 million for the quarter
The Company expects the operating costs at Holloway will decrease once the mining rate at Smoke Deep reaches a steady state rate and the ore grade improves.
Hislop Mine, Operations and Financial Review (see Operating and Financial Statistics on page 14)
The Hislop Mine ("Hislop") produced 4,935 ounces of gold in the first quarter of 2012.
The
throughput at Hislop is expected to return to normal levels as the
harsh weather is now over.
The overburden removal is now complete with
only minor trim amounts remaining.
The Company anticipates the capital
expenditures for the second quarter of 2012, will be similar to that
incurred during the first quarter, however, does not anticipate any
significant capital expenditures for the remainder of 2012 as the strip
ratio is expected to remain below the life-of-mine ratio of 4.8.
Gold sales in the quarter decreased by 7% due to a 3% decrease in head
grade when compared to the previous quarter, however, ore grade is
expected to range from 1.88 g/t Au to 2.00 g/t Au for 2012, depending
on the mining area of the pit.
Mine-site cost per tonne milled(1) during the first quarter of 2012 was $61 per tonne, which was in line
with expectations.
Cash margin from mine operations(1) of $2.4 million remained at the same level as the previous quarter.
Holt Mill Performance
The Holt Mill processed 209,748 tonnes of ore from the Holt, Holloway and Hislop mines in the first quarter of 2012 as compared to 216,797 tonnes of ore from the three mining operations in the previous period. This represents an average milling rate of 2,300tpd or 90% of the mill capacity. During the quarter, throughput was negatively impacted by the harsh weather experienced in northeastern Ontario.
Taylor Project Update
SAS recently released results from a Pre-feasibility study focused on the West Porphyry Zone only ("WPZ") and disclosed mineral reserves of approximately 1.0 million tonnes at a grade of 5.45 g/t Au containing approximately 173,000 ounces of gold. (see the Companys National Instrument 43-101 compliant technical report dated March 29, 2012, available under the Companys profile on SEDAR at www.sedar.com and on the Companys website at www.sasgoldmines.com).
A stepped approach will be taken in order to improve the quality of
information prior to allocating capital expenditures on the development
and production activities at the WPZ.
Once underground access is
re-established, SAS will validate its geological model, mining method
and mill recovery rate by initiating a bulk sampling program.
SAS is
currently assessing competitive bids from mining contractors to
rehabilitate the underground workings for mine exploration and
development.
The Company expects the bulk sampling activities to
commence in the last quarter of 2012.
Exploration Projects
The Companys initial 2012 exploration program focused on surface
drilling at the Ghost Zone near Holt and the Hislop North Project
located northwest of the Hislop pit, and recent results were
encouraging.
As well, SAS recently released results from underground
drilling west of Zone 4 at Holt, which will be followed up on with
surface drilling expected to commence this quarter.
Exploration in the second quarter will continue to concentrate on targets near existing mining operations in order to increase mine life. The priorities will include the Ghost Zone, Hislop North, and Zone 4 at Holt.
SAS is also pleased to announce that Mr.
Douglas F.
Cater, P.Geo., will
be joining SAS in June as Vice President of Exploration.
Mr.
Cater, a
seasoned geologist, most recently held the position of Exploration
Manager with Sabina Silver Corp., and prior to that, Dundee Precious
Metals.
He is currently a member of the Discipline Review and
Admissions Review committees at the Association of Professional
Geoscientists of Ontario.
Financial Performance
Commercial gold production sold in the first quarter of 2012 increased by 73% from the same period in 2011 due to the commencement of the mine operations at Holt in the second quarter of 2011, but declined by $6.1 million or 13% when compared to the fourth quarter of 2011 as a result of a 6% decrease in gold production.
For the first quarter, mine cash cost per ounce of gold sold decreased by US$149 per ounce from the first quarter of 2011 as a result of the addition of the Holt operation, but increased by US$86 per ounce when compared to the fourth quarter of 2011 due to lower production and a higher operating cost during the winter season. The decrease in revenue in the first quarter resulted in a decrease in cash margin from mine operations(1) of $4.8 million when compared to the previous quarter.
Mark-to-market loss on the gold-linked derivatives in the current quarter was $0.8 million due to the higher gold price which was offset by a foreign currency transaction and translation gain of $1.5 million as a result of the fluctuation of the US dollar to the Canadian dollar exchange rate.
Capital Resources
At March 31, 2012, the Companys working capital, adjusted for the
non-cash current liabilities in connection with the Gold Notes of $10.1
million, was $7.0 million.
The Company had cash and cash equivalents of
$12.9 million.
Subsequent to quarter end and following the completion
of a US$25.0 million credit facility with the Bank of Nova Scotia, the
Company has access to cash resources of US$13.9 million and in
conjunction with the expected cash flows from operations, the Company
believes it has sufficient capital resources to finance its ongoing
capital programs at the mines and to finance the advancement of Taylor
and other advanced stage exploration projects.
Q1 2012 Conference Call Information
SAS is scheduled to release its 2012 first quarter results on Thursday,
May 10, 2012.
A conference call and webcast is scheduled for 10:00am
EDT, Friday, May 11, 2012.
Participants may join the call by dialling
1-866-212-4491 (toll free within North America) or 1-416-800-1066
(outside North America) with the password "St Andrew Goldfields".
The
Company will post accompanying power point slides for the call on the
website the morning of May 11.
For further information, please see the
Companys website at www.sasgoldmines.com.
A recorded playback of the call will also be available via the website and will be posted within 24 hours of the call.
Qualified Person
Production and ongoing development programs at the Holt, Holloway and
Hislop mines, and processing at the Holt Mill are being conducted under
the supervision of Duncan Middlemiss, P.Eng, the Companys COO and VP
of Operations.
The exploration programs on the Companys various
mineral properties are under the supervision of Craig Todd, P.Geo, the
Companys Exploration Manager.
The calculation of mineral reserves and
the Taylor Pre-feasibility study were completed by the Company under
the supervision of Pierre Rocque, P.Eng, the Companys VP of
Engineering.
Messrs.
Middlemiss, Todd and Rocque are qualified persons
as defined by National Instrument 43-101, and have reviewed and
approved this news release.
Non-GAAP Measures
The Company has included the non-GAAP performance measures, adjusted net
earnings (loss), operating cash flow before repayments of Gold Notes,
average realized price per ounce of gold sold and total cash costs per
ounce of gold sold, cash margin from mine operations and mine-site cost
per tonne milled, throughout this news release, which do not have
standardized meanings prescribed by International Financial Reporting
Standards ("IFRS") and are not necessarily comparable to other similarly titled measures
of other companies due to potential inconsistencies in the method of
calculation.
The Company believes that, in addition to conventional
measures prepared in accordance with IFRS, the Company and certain
investors use this information to evaluate the Companys performance.
Accordingly, it 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 IFRS.
Refer to the "non-GAAP
Measures", section of this news release for a discussion and the
reconciliation of these non-GAAP measurements to the Companys
Unaudited Condensed Interim Financial Report for the three months ended
March 31, 2012.
The Unaudited Balance Sheets, Statements of Operations and Statements of Cash Flows for the Company for the three months ended March 31, 2012, can be found on pages 15-17.
To review the complete Unaudited Condensed Financial Report for the three months ended March 31, 2012, and the Interim Managements Discussion and Analysis for the first quarter 2012, please see SASs SEDAR filings under the Companys profile at www.sedar.com or the Companys website at www.sasgoldmines.com.
About SAS
SAS (operating as "SAS Goldmines"), is a gold mining and exploration company with an extensive land package in the Timmins mining district, north-eastern Ontario, which lies within the Abitibi greenstone belt, the most important host of historical gold production in Canada.
SAS owns and operate the Holt, Holloway and Hislop mines and is forecasting 2012 production of between 90,000 - 100,000 ounces of gold. The Company is also advancing the Taylor Project and is conducting an aggressive exploration program across 120km of land straddling the Porcupine-Destor Fault Zone.
FORWARD-LOOKING INFORMATION
This news release contains forward-looking information and
forward-looking statements (collectively, "forward-looking
information") under applicable securities laws, concerning the
Companys business, operations, financial performance, condition and
prospects, as well as managements objectives, strategies, beliefs and
intentions.
Forward-looking information is frequently identified by
such words as "may", "will", "plan", "expect", "estimate",
"anticipate", "believe", "intend" and similar words referring to future
events and results, including in respect of the targeted gold
production levels at the Companys three operating mines for 2012; the
improvement in throughput and the impact on operating costs at Holt;
the improvement in throughput and the grade mined, and the subsequent
impact on operating costs at Holloway; the maintenance of grade, strip
ratio and the increase in throughput at Hislop; the increase in
throughput at the Holt Mill; the rehabilitation of the underground mine
workings at Taylor and the completion of an initial bulk sample, and
the timing thereof; the continuance of the exploration programs at the
Ghost Zone, Hislop North, Smoke Deep and Zone 4 areas, as well as the
commencement of exploration activities at the Deep Thunder Zone; and
the sufficiency of the Companys cash flow and cash resources to
finance its capital programs and the advancement of Taylor and other
advance stage exploration projects.
This forward-looking information is subject to known and unknown risks,
uncertainties and other factors that may cause actual results to differ
materially from those expressed or implied by the forward-looking
information.
Factors that may cause actual results to vary materially
include, but are not limited to, unanticipated operational or technical
difficulties which could escalate operating and/or capital costs and
reduce anticipated production levels; uncertainties relating to the
interpretation of the geology, continuity, grade and size estimates of
the mineral reserves and resources; fluctuations in gold prices and
exchange rates; operational hazards and risks; compliance with
applicable government regulations, including the ability to obtain
requisite permits and licenses; dependence on key employees and changes
in general economic conditions and changes in conditions in the
financial markets.
Such forward looking information is based on a
number of assumptions, including but not limited to the level and
volatility of the price of gold, the ability to achieve capital and
operating cost estimates, the accuracy or reserve and resource
estimates and the assumptions upon which such estimates are based, the
continued availability of qualified personnel, and the sufficiency of
the Companys cash reserves and operating cash flow to complete planned
development and exploration activities.
Should one or more risks and
uncertainties materialize or should any assumptions prove incorrect,
then actual results could vary materially from those expressed or
implied in the forward-looking information and accordingly, readers are
cautioned not to place undue reliance on this forward-looking
information.
SAS does not assume the obligation to revise or update
this forward‐looking information after the date of this release or to
revise such information to reflect the occurrence of future
unanticipated events, except as may be required under applicable
securities laws.
A description of these risks and uncertainties are can
also be found in the Companys Annual Information Form obtained on
SEDAR at www.sedar.com.
NON-GAAP MEASURES
Adjusted net earnings (loss)
Adjusted net earnings (loss) are calculated by removing the gains and losses, resulting from the mark-to-market revaluation of the Companys gold-linked liabilities and foreign currency price protection derivative contracts, one-time gains or losses on the disposition of non-core assets and expenses and significant tax adjustment not related to current periods earnings, as detailed in the table below. Adjusted net earnings (loss) does not constitute a measure recognized by IFRS and does not have a standardized meaning defined by IFRS and may not be comparable to information in other gold producers reports and filings. The Company discloses this measure, which is based on its Financial Report, to assist in the understanding of the Companys operating results and financial position.
| Amounts in thousands of Canadian dollars, except per share amounts | Three months ended | ||||||||
| March 31, 2012 | March 31, 2011 | December 31, 2011 | |||||||
| Net income (loss) per Financial Reports | $ | 2,734 | $ | (2,753) | $ | 12,921 | |||
| Reversal of income and mining tax asset valuation allowance | - | - | (433) | ||||||
| Mark-to-market loss (gain) on gold-linked liabilities | 822 | (11) | (1,414) | ||||||
| Mark-to-market gain on foreign currency derivatives | (1,755) | (93) | (3,436) | ||||||
| Gain on the divestiture of non-core assets | - | - | (1,049) | ||||||
| Adjusted net earnings (loss) | $ | 1,801 | $ | (2,857) | $ | 6,589 | |||
| Weighted average number of shares outstanding (000s) | |||||||||
| Basic | 368,245 | 367,716 | 368,067 | ||||||
| Diluted | 368,782 | 371,318 | 368,739 | ||||||
| Adjusted net earnings (loss) per share - basic and diluted | Nil | $ | (0.01) | $ | 0.02 | ||||
Operating cash flow before repayment of Gold Notes
SAS uses the financial measure operating cash flow before repayment of
Gold Notes to supplement the information included in its Financial
Reports.
The presentation of operating cash flow before repayment of
Gold Notes does not constitute a measure recognized by IFRS and is not
meant to be a substitute for cash flow from operations or cash flow
from operating activities presented in accordance with IFRS, but rather
should be evaluated in conjunction with such IFRS measures.
Operating
cash flow before repayment of Gold Notes excludes the non-cash value of
gold delivered to the Companys Gold Note holders.
The term operating cash flow before repayment of Gold Notes does not
have a standardized meaning prescribed by IFRS, and therefore the
Companys definitions are unlikely to be comparable to similar measures
presented by other companies.
Management believes that the presentation
of operating cash flow before repayment of Gold Notes provides useful
information to investors because it excludes the repayment of Gold
Notes in working capital items, and is a better indication of the
Companys cash flow from operations and is considered by Management to
be meaningful in evaluating the Companys past financial performance
and its future prospects.
The Company believes that conventional
measures of performance prepared in accordance with IFRS do not fully
illustrate the ability of the Companys operating mines to generate
cash flow.
| Amounts in thousands of Canadian dollars, except per share amounts | Three months ended | ||||||||
| March 31, 2012 | March 31, 2011 | December 31, 2011 | |||||||
| Operating cash flow per Financial Reports | $ | 8,256 | $ | 4,027 | $ | 13,981 | |||
| Repayment of Gold Notes | - | 2,573 | 3,083 | ||||||
| Operating cash flow before repayment of Gold Notes | $ | 8,256 | $ | 6,600 | $ | 17,064 | |||
| Weighted average number of shares outstanding (000s) | 368,245 | 367,716 | 368,067 | ||||||
| Per share amounts(1) | $ | 0.02 | $ | 0.02 | $ | 0.05 | |||
Note:
| (1) | Per share amounts are calculated by dividing the operating cash flow before repayment of Gold Notes by the weighted average number of shares outstanding for each period. |
Total cash cost per ounce of gold sold
Total cash cost per ounce of gold sold is a non-GAAP performance measure
and may not be comparable to information in other gold producers
reports and filings.
The Company has included this non-GAAP performance
measure throughout this document as the Company believes that this
generally accepted industry performance measure provides a useful
indication of the Companys operational performance.
The Company
believes that, in addition to conventional measures prepared in
accordance with IFRS, certain investors use this information to
evaluate the Companys performance and ability to generate cash flow.
Accordingly, it 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 IFRS.
The following table
provides a reconciliation of total cash costs per ounce of gold sold to
production expenses per the Financial Report for the three months ended
March 31, 2012:
| Three months ended | ||||||||||
| Amounts in thousands of Canadian dollars, except where indicated | March 31, 2012 | March 31, 2011 | December 31, 2011 | |||||||
| Mine-site costs per Financial Reports | $ | 17,451 | $ | 11,665 | $ | 18,452 | ||||
| Production royalties per Financial Reports | 2,922 | 829 | 3,285 | |||||||
| Adjustments (1) | (99) | - | 70 | |||||||
| Total cash costs | $ | 20,274 | $ | 12,494 | $ | 21,807 | ||||
| Divided by gold ounces sold (2) | 20,325 | 11,740 | 23,368 | |||||||
| Total cash cost per ounce of gold sold (Canadian dollars) | $ | 996 | $ | 1,064 | $ | 933 | ||||
| Average CAD:USD exchange rate | $ | 1.00 | $ | 0.99 | $ | 1.02 | ||||
| Total cash cost per ounce of gold sold (US$) | $ |
996
|
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