San Gold Reports 2012 Q2 Results
WINNIPEG, MANITOBA -- (Marketwire) -- 08/13/12 -- (All amounts in Canadian dollars unless otherwise stated)
San Gold Corporation (TSX: SGR)(OTCQX: SGRCF) is pleased to announce its quarterly financial and operating results for the second quarter of 2012.
2012 Q2 Financial and Operating Highlights
-- Produced 18,241 ounces of gold despite having milling operations
interrupted for 30 days, from June 1 up to and including June 30.
-- Recognized record quarterly revenue of $31.6 million on gold sales of
19,648 ounces, generating $5.7 million cash flow from operating
activities before changes in non-cash working capital.
-- Generated quarterly operating income from operations of $3.1 million and
recognized a loss of $7.8 million for the quarter including recognition
of a $3.5 million loss related to our investment in SGX Resources Inc.
-- Mined ore at a record quarterly rate of approximately 1,709 tons per day
for a total of 155,495 tons, resulting in a surface stockpile of
approximately 55,000 tons representing more than 10,000 ounces of gold.
To underscore this statement, the Company produced 11,366 ounces in
July.
-- Set an average mill throughput record of 2,032 tons per day in May 2012.
-- Realized a cash operating margin of $637 per ounce of gold sold with a
realized price of $1,607 per ounce through the quarter.
-- Released an updated resource and reserve estimate which increased total
inferred resources by 93% to 3.5 million ounces of gold.
-- Had a cash and cash equivalents balance of $25.7 million as at June 30,
2012.
-- Completed approximately 62,000 metres of exploration and definition
diamond drilling.
-- Completed transactions to expand the Company's land base within the Rice
Lake gold belt and in northern Ontario.
-- Established Health, Safety and Environmental committee of the Board.
"The opportunity available to investors right now is outstanding. Our balance sheet is very strong. We provided a cash contribution of more than $5 million despite significant adversity. We are increasing our production capacity and continue to invest wisely in new properties while remaining debt-free during this difficult period for equity markets," said George Pirie, President and Chief Executive Officer of San Gold.
Review of Production Results
The Company produced 18,241 ounces of gold during the second quarter of 2012 compared with 20,111 ounces in the second quarter of 2011.
Milling operations were temporarily suspended in June due to an unexpected failure of the ball mill pinion and related damage to the ball mill motor. Repairs on the mill were completed in approximately 4 weeks with mill operations resuming on July 1, 2012. During this period, mining operations continued at an average rate of more than 1,700 tons per day while repairs were completed to the ball mill. As a result approximately 55,000 ton of ore, representing approximately 10,000 ounces of gold, were stockpiled as at June 30, 2012. Had mill operations not been suspended, the Company could have had total production of approximately 28,000 ounces of gold during the quarter. To underscore this statement, the Company produced 11,366 ounces in July.
Calculated production costs were higher than previous quarters primarily due to the mill shutdown. The total cost per ton of ore in the second quarter of 2012 increased 18% to approximately $164 compared to $138 in the same period of 2011. Mining cost per ton of ore was approximately $132 in the second quarter of 2012 compared to $121 for the three-month period ended June 30, 2011. Processing costs per ton of ore was approximately $31 in the second quarter of 2012 compared to $18 in the same period of 2011.
The cost per ton of ore for mining and processing are expected to decrease significantly in subsequent quarters and will more closely reflect the Company's true cost and production profile. 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
Financial results were generally lower during the second quarter, primarily due to the mill shutdown. Financial results during the remainder of the year are expected to experience a corresponding increase as the stockpile accumulated during the second quarter is processed and sold.
The Company reports quarterly operating income from operations of $3.1 million and a total and comprehensive loss of $7.8 million, compared to income from operations of $7.6 million and a total and comprehensive loss of $4.0 million in the second quarter of 2011.
The Company earned revenue during the second quarter of 2012 of $31.6 million, an 11% increase over revenue of $28.4 million in the second quarter of 2011. This increase was a result of both greater gold sales and a higher realized price of gold. The Company sold 19,648 ounces of gold in the second quarter of 2012, a 2% increase compared sales of 19,276 ounces in the second quarter of 2011. The Company realized $1,607 per ounce of gold sold in the second quarter of 2012, a 9% increase compared to the $1,475 the Company realized per ounce in the second quarter of 2011. San Gold recognized an expense of $3.5 million associated with its share of SGX's loss for the quarter. The carrying value of the Company's investment in SGX is currently therefore recognized at $0.9 million. The market value of the Company's 36.7 million shares of SGX is $11.4 million as at June 30, 2012.
The Company generated cash flow from operating activities before changes in non-cash working capital of $5.7 million in the second quarter of 2012, a considerable change compared to $3.0 million in the second quarter of 2011. After changes in non-cash working capital, operating activities generated $11.0 million in the second quarter of 2012, a substantial improvement compared to a use of $10.5 million in the second quarter of 2011.
Capital spending in the second quarter of 2012 was focused on mine development, increasing mill capacity, improving key infrastructure, and sustaining capital. The Company capitalized $14.8 million of mine development and $6.1 million of property, plant, and equipment during the second quarter of 2012 compared to $14.6 million and $4.1 million in the second 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.
2012 Guidance:
-- Production of between 95,000 and 105,000 ounces of gold.
-- Cash Costs: $700 - $800 per ounce of gold.
-- Exploration: In excess of 250,000 metres of diamond drilling.
Outlook
The Company is well positioned going into the second half of 2012, with 55,000 tons of ore stockpiled, representing approximately 10,000 ounces of gold inventory costed at just under $600 per ounce. The Company plans to mill the majority of this stockpile during the third quarter and remains confident in its annual guidance of between 95,000 and 105,000 ounces of gold produced in 2012 at an average total cash cost operating costs between $700 and $800 per ounce sold.
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 in the second half of 2012 will be targeted toward developing mining infrastructure in the Hinge and 007 mines, additional investments in its mechanized mining fleet, and the construction of an expanded tailings management area. The additional investments planned for 2012 are anticipated to further increase production capacity in both the mining and milling aspects of the Rice Lake Mining Complex.
In the second quarter of 2012, the Company continued its significant 2012 exploration program within the Rice Lake greenstone belt. Approximately 62,000 metres of exploration were completed by the Company in the second 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 in the second half of 2012 will continue to focus on definition and extension drilling in the San Antonio Mining Unit, the Shoreline Basalt Unit, the Normandy Creek Shear zone, the intermediate volcanic rock unit north of the Shoreline Basalt Unit, and on properties optioned in and around the Rice Lake area. The primary objective of the Company's exploration program is to develop a larger mining complex that can be exploited through existing infrastructure with an increasing focus on converting mineral resources to mineral reserves. The Company will also work to expand its overall mineral inventory and remains optimistic about the down-dip potential of the currently known ore bodies in the Rice Lake area.
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 plans, as well as growth through new discoveries and potential acquisitions or joint venture opportunities.
2012 Second Quarter Conference Call
The Company's senior management plans to host a conference call on Tuesday, August 14, 2012 at 11:00 am Eastern Standard Time to discuss the 2012 second 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 September 4, 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 4175558. 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. 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 June 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 Second Quarter Income Statement
SAN GOLD CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE
LOSS
FOR THE SIX MONTH PERIOD ENDED JUNE 30
(Unaudited)
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Three month period ended Six month period ended
June 30 June 30 June 30 June 30
2012 2011 2012 2011
------------ ------------ ------------ ------------
REVENUE $ 31,578,850 $ 28,432,368 $ 67,080,710 $ 48,249,845
OPERATIONS
Operations (Note
15) 28,524,026 20,847,488 56,041,492 37,467,320
INCOME FROM
OPERATIONS 3,054,824 7,584,880 11,039,218 10,782,525
Exploration 4,245,379 7,276,464 8,846,669 12,582,214
General and
administrative
(Note 16) 4,781,483 4,095,518 9,454,279 7,266,081
LOSS BEFORE OTHER
INCOME AND EXPENSES 5,972,038 3,787,102 7,261,730 9,065,770
OTHER INCOME AND
EXPENSES
Finance income -
net (Note 17) (105,392) 418,010 193,321 479,545
Finance costs
(Note 17) (101,030) (120,223) (215,861) (238,859)
Equity loss of
associate (Note
8) (3,130,001) (483,350) (4,130,001) (483,350)
------------ ------------ ------------ ------------
LOSS BEFORE INCOME
TAX 9,308,461 3,972,665 11,414,271 9,308,434
Income tax recovery
on flow-through
shares 1,494,022 - 2,909,634 -
------------ ------------ ------------ ------------
NET LOSS AND
COMPREHENSIVE LOSS
FOR THE PERIOD $ 7,814,439 $ 3,972,665 $ 8,504,637 $ 9,308,434
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
LOSS PER COMMON
SHARE: (Note 21)
Basic $ 0.02 $ 0.01 $ 0.03 $ 0.03
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted $ 0.02 $ 0.01 $ 0.03 $ 0.03
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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 http://www.sangold.ca/.
Table 2: Financial Highlights (000's $CDN)
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Q2 Q2
2012 2011
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Total and comprehensive income (loss) (000) ($7,814) ($3,973)
Items not affecting cash (000) $13,476 $7,004
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Cash provided (used) by operating activities
before changes in non-cash working capital $5,662 $3,031
(000)
Net change in non-cash working capital (000) $5,382 ($13,578)
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Cash provided by operating activities (000) $11,044 ($10,547)
Earnings (loss) per share
- basic ($0.02) ($0.01)
- diluted ($0.02) ($0.01)
Weighted average number of common shares
outstanding
- basic 324,051,028 309,871,490
- diluted 324,051,028 309,871,490
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Table 3: Production Summary and Statistics
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Q2 Q2 Change Change
2012 2011 (#) (%)
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Ore milled (tons) 116,546 114,624 1,922 2%
Head grade (g/tonne Au) 5.70 6.35 -0.65 -10.2%
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Contained gold (ounces) 19,385 21,244 -1,859 -9%
Ounces of gold produced 18,241 20,111 -1,870 -9%
Ore mined (tons) 155,495 123,261 32,234 26%
Ore milled per day (tons) 1,281 1,260 21 2%
Ore mined per day (tons) 1,709 1,355 354 26%
Mill recovery (%) 94% 95% -1% -0.6%
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Table 4: Quarterly Production Summary and Statistics
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Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
2012 2012 2011 2011 2011 2011 2010 2010
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Ore milled
(tons) 116,546 153,537 141,890 121,844 114,624 82,792 83,174 75,263
Head grade
(g/tonne Au) 5.70 5.35 5.36 5.83 6.35 6.47 4.29 6.12
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Contained gold
(ounces) 19,385 23,995 22,190 20,732 21,244 15,636 10,414 13,436
Ounces of gold
produced 18,241 22,162 20,359 19,119 20,111 14,688 9,280 12,568
Ore mined
(tons) 155,495 144,549 136,166 124,952 123,261 102,200 84,743 71,463
Ore milled per
day (tons) 1,281 1,687 1,542 1,324 1,260 920 904 818
Ore mined per
day (tons) 1,709 1,588 1,480 1,358 1,355 1,136 921 777
Mill recovery
(%) 94% 92% 92% 92% 95% 94% 89% 94%
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NOTE: Final refinery settlements, or the effects of rounding, may have
resulted in increases or decreases to reported gold production.
Contacts:
San Gold Corporation
Gestur Kristjansson
Chief Financial Officer
+1 (204) 772-9149
San Gold Corporation
Tim Friesen
Communications Director
+1 (855) 585-4653
www.sangold.ca
