Mr. Wade Dawe reports
A LETTER FROM BRIGUS GOLD'S CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Brigus Gold Corp. is providing the following letter from Wade Dawe, its chairman and chief executive officer.
Dear fellow shareholders:
Given the recent volatility of the precious metals markets, I would like
to share my perspective on what's occurred in the sector, while
reviewing our progress at Brigus and outlining our strategy and outlook
for the quarters ahead.
The second quarter saw a precipitous drop in precious metal prices,
including gold's one day dip of about 9 per cent in April. Lower gold prices led to
reduced financial results for gold mining companies compared with the
previous quarter, and a significant reduction in the valuation and
equity prices for virtually all gold mining companies, including
Brigus.
Since hitting a 46-month low of $1,179 on June 27, spot gold prices have now rebounded to the $1,400 level and equity
prices are also beginning to recover. Investor sentiment for the
sector, having reached extreme negative levels, is in the process of
reverting to a more reasonable range.
Regardless of the short-term volatility over the past few months, we at
Brigus remain steadfast in our belief that gold will continue to play a
very important role as a store of value for investors. We believe high-quality gold mining companies will prove to be a worthwhile investment
for years to come.
During a time when the world's major paper currencies are being
systematically debased as a result of unprecedented central bank
policies, gold will continue to be accumulated as a hard asset of
choice by many of the world's smartest investors, and gold mining
companies with a prudent strategy will be major beneficiaries.
At Brigus, our underlying fundamentals are strengthening, and we are
intently focused on positioning the company to deliver strong operating
results and positive shareholder returns in the current gold price
environment.
Our corporate strategy is based on five key elements, as follows:
Increasing gold production:
- Brigus has delivered substantial increases in gold production over the
past six quarters.
- Brigus had record six-month production of 49,620 ounces of gold year to date,
despite the one-time suspension of milling activities in the second quarter.
- In July, we increased our production guidance for 2013 from
90,000 to 100,000 ounces to 95,000 to 105,000 ounces, and we are confident in our
ability to deliver excellent results for the remainder of the year.
- Both our open pit and underground mines are operating safely and
strongly.
Reducing our cost structure and lowering production costs per ounce:
- At our Black Fox mine, all-in sustaining cash costs continue to decline.
In July, we provided guidance that all-in sustaining costs will be
approximately $1,100 for the remainder of the year, thus providing
attractive margins in this reduced gold price environment.
- In response to lower gold prices, we reduced capital spending by $7-million and implemented various cost-saving measures, including
personnel reductions and price concessions from key suppliers. We are
doing more with less. These cost-saving measures will not negatively
impact gold production levels moving forward, in fact, we have
increased our production guidance as stated.
- Now that we have reached critical mass with underground mine and
infrastructure development, capital spending and sustaining capital is
forecasted to be between $20-million and $25-million for 2014, a 35-per-cent to 48-per-cent decrease from our spending levels for 2013. This reduction
will have a major impact on all-in sustaining cash costs moving
forward, resulting in increased cash flows from our mining operations.
- Last month Brigus adopted the guidelines recently provided by the World
Gold Council when reporting various mining costs. These guidelines will
provide valuable information for investors when comparing costs of one
company relative with another. When we reported our second quarter financial
results, we reported all-in sustaining cash costs for the first time
and we will continue to do so.
- Our cost structure at Brigus compares favorably with many of our peers in
Canada and globally, and our costs on a per-ounce basis continue to
decline.
- It's important to note that our Black Fox mine was in a ramp-up and
development phase during 2012 and the first half of 2013. We have made
the required investment to reach a production threshold of 100,000
ounces annually, and our capital requirements and cash outlays are now
declining.
Balance sheet management, including debt reduction:
- Since Brigus was formed in June of 2010, the company raised both debt
and equity from the capital markets to finance the development and
expansion of our mine.
- Now that the construction and major development phase of our Black Fox
mine is complete, a key priority is to utilize a portion of the
resulting cash flows to reduce long-term debt levels.
- In the first half of 2013, Brigus's long-term debt decreased by $7.3-million and the company is forecasting to make an additional $9.9-million of principal payments during the second half of the year, a
trend that will continue in 2014.
Focused exploration to increase Brigus's inventory of gold ounces:
- Over the past three years Brigus delivered excellent exploration results
at the Black Fox mine and the newly discovered Grey Fox gold deposit.
- Consistent high-grade drilling results were delivered from both
orebodies over the past year. A recently published gold resource of
507,400 indicated ounces plus 228,600 inferred ounces was reported for
Grey Fox on July 7, 2013, and the orebody remains open both laterally and at depth for
expansion.
- In December, we will publish a new reserve report for the Black Fox
mine.
- In 2014, we will publish a revised resource update for the growing Grey
Fox gold deposit.
- There is considerable potential to expand the Black Fox orebody and the
Grey Fox property, and several attractive drill targets remain in the
pipeline.
- Our success with the drill bit reinforces our belief that we will be
successfully mining these properties for many years to come.
- We look forward to releasing a scoping study on Grey Fox in September
with considerably lower initial capital requirements than originally
anticipated.
A stable jurisdiction to achieve organic growth:
- All mining jurisdictions are not created equal, a factor that is often
overlooked in the mining industry.
- Canada is among the best mining jurisdictions in the world, and we see
Timmins as a top-tier mining and exploration district. Our region of
operations is politically safe, with a stable fiscal and tax regime. We
have access to top-notch technology and specialist services.
We are optimistic about the future of Brigus Gold. I encourage you to
review our company in detail, and compare the fundamentals and strategy
of Brigus with that of our peer group. Our cost profile is attractive,
our growth prospects are compelling and our exploration strategy is
working. Brigus's valuation is modest compared with many within our
industry.
The team at Brigus is working hard to prudently manage your company, and
we look forward to executing our strategy and delivering increased
shareholder value moving forward.
As always, we welcome feedback from our shareholders and we would be
pleased to respond to any inquiries.
Sincerely,
Wade K. Dawe
Chairman and CEO
We seek Safe Harbor.
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