03:23:28 EST Mon 16 Dec 2019
Enter Symbol
or Name
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Newmarket Gold Inc (2)
Symbol NMI
Shares Issued 135,945,603
Close 2016-03-03 C$ 2.23
Recent Sedar Documents

Newmarket loses $2.78-million (U.S.) in fiscal 2015

2016-03-04 06:41 ET - News Release

Mr. Douglas Forster reports

NEWMARKET GOLD REPORTS 2015 ANNUAL FINANCIAL RESULTS AND RECORD OPERATING CASH FLOW; COMMENCES 2016 WITH A STRENGTHENED BALANCE SHEET, ESSENTIALLY DEBT-FREE BY END OF Q1 2016

Newmarket Gold Inc. has released its financial results for the three and 12 months ended Dec. 31, 2015. Full financial statements and management's discussion and analysis documents can be found at SEDAR and the company's website. All figures are in U.S. dollars, unless otherwise stated.

Highlights -- 2016:

  • Commences 2016 with a strengthened balance sheet, will be essentially debt-free by the end of first quarter 2016 upon conversion of outstanding convertible debentures through the issuance of common shares;
  • Cash balance at Dec. 31, 2015, comprising $36.5-million cash and increased working capital of $22.3-million;
  • Received cash proceeds of $5.1-million following the exercise of share purchase warrants.

Full-year highlights -- 2015:

  • Record operating cash flow of $76.5-million, up 3.2 per cent from 2014, despite a 9-per-cent-lower average realized gold price. Operating cash flow per share of 61 cents, based on the weighted average number of shares in 2015;
  • Record gold production of 222,671 ounces exceeded the top end of 2015 production guidance range of 205,000 to 220,000 ounces and represented the third consecutive year of record production;
  • Results were led by the flagship Fosterville gold mine, which achieved record production, grade and recovery;
  • Record low operating cash costs of $704 per ounce sold at low end of 2015 guidance of $700 to $750. Record low all-in sustaining costs (AISC) of $987 per ounce sold at low end of 2015 guidance of $970 to $1,020;
  • Net loss of $2.8-million or two cents per share includes a non-cash impairment charge of $26.5-million relating to the Cosmo gold mine and non-core assets, accounting for a 21-cent-per-share loss, and also includes transaction costs of $17.0-million accounting for a 14-cent-per-share loss. Adjusted net income was 32 cents per share, or $40.7-million when excluding the impairment and transaction costs;
  • Net income for 2015 reflects a significant investment of $12.0-million in growth exploration spending, resulting in key discoveries across the company's operations.

Highlights -- Q4 2015:

  • Consolidated production of 53,179 ounces represents the 10th consecutive quarter of consolidated gold production above 53,000 ounces;
  • Consolidated operating cash cost per ounce sold of $742, down 6.4 per cent from $793 per ounce sold in Q4 2014, with AISCs of $995 per ounce sold, down 9.4 per cent from $1,098 per ounce sold in Q4 2014;
  • Operating cash flow of $10.6-million, or eight cents per share, based on revenues of $58.4-million from 52,290 ounces sold;
  • Net loss of $20.2-million or 15 cents per share, compared with net income of $10.8-million in Q4 2014 or nine cents per share. The net loss includes a non-cash impairment charge of $26.0-million recorded against the carrying value of Cosmo, reflecting a loss of 19 cents per share. Adjusted net income was four cents per share, or $5.8-million, when excluding the impact of the impairment charge. Net income for Q4 2015 also includes significant growth exploration expenditures of $4.8-million.

Douglas Forster, president and chief executive officer, Newmarket Gold, commented: "In 2015 we achieved record consolidated results on several measures including production, operating cash costs per ounce and all-in sustaining costs per ounce. We grew operating cash flow to a record $76.5-million and maintained a strong cash position of $36.5-million after investing $12-million on growth exploration projects which resulted in three mine site gold discoveries, one at each of our operations. The fourth quarter of 2015 marked a 10th consecutive quarter of production over 53,000 ounces, led by record results at our flagship Fosterville mine, which continued to benefit from an increasing grade and recovery profile as a result of the high-grade, visible gold-bearing Eagle fault discovered in the second half of 2015.

"We are extremely pleased to commence 2016 with a strengthened financial position as we will redeem all outstanding convertible debentures by the end the first quarter 2016 through the issuance of common shares and received $5.1-million in proceeds from the exercise of share purchase warrants in February. Newmarket will be well positioned for future growth with a solid cash balance and essentially no debt. Operationally, to date in 2016, we are on track to deliver production between 205,000 and 220,000 ounces, low operating cash costs per ounce between $650 and $725, and all-in sustaining costs per ounce between $950 and $1,025. We remain focused on our key priorities of safe operations, free cash flow generation, organic production growth and reserve replacement. We will announce updated mineral reserves and resources by the end of Q1 2016, which will include a first resource on the Eagle fault and Aurora B discoveries. We will also invest $5-[million] to $10-million this year on growth exploration projects with the aim of adding quality ounces and extending mine life across our operations."

Outlook -- 2016

In 2016, Newmarket remains an established plus-200,000-ounce gold producer well positioned to execute a strategy of both organic growth as well as growth through the consolidation of high-quality gold assets in the world's most desirable mining jurisdictions. Newmarket's strong senior management team, proven operating team and board of directors with tremendous industry experience are all focused on creating substantial shareholder value through continued safe and sustainable operating performance from its three existing operations and through a disciplined approach to growth.

             PRODUCTION AND CASH COST GUIDANCE FOR FISCAL 2016

                         Fosterville        Cosmo      Stawell  Consolidated

Gold production              110,000-      60,000-      approx.      205,000-
(ounces)                     120,000       65,000       35,000       220,000
Operating cash costs                                                        
per ounce                  $500-$575    $720-$795    $900-$975     $650-$725
AISCs per ounce                                                  $950-$1,025
Sustaining capital                                                          
expenditures ($                                                            
million)                 $37.5-$42.5      $10-$12    $2.5-$3.0     $50-$57.5
Growth expenditures ($                                                      
million)                                                              $5-$10
Corporate general and                                                       
administrative                                                             
expenses ($ million)                                                   $5-$6

Update on convertible debentures

On Feb. 16, 2016, the company provided notice to the holders of its outstanding convertible debentures that on March 30, 2016, it will redeem in full all of its then-outstanding debentures by issuing common shares. The company previously issued $34.5-million of 8-per-cent debentures on April 5, 2013. Subsequent to Dec. 31, 2015, and up to the date of this press release, $9.6-million of the convertible debentures was converted into 9.5 million common shares of the company. As of March 3, 2016, $24.9-million of debentures continued to be outstanding.

            FOURTH QUARTER AND YEAR-END 2015 FINANCIAL RESULTS
      (In thousands of U.S. dollars, except per share and per ounce)

                                   Q4 2015    Q4 2014    FY 2015    FY 2014

Revenue                            $58,383    $69,783   $257,988   $282,739
Cost of operations, including
depletion and depreciation         (49,669)   (56,511)  (197,412)  (241,458)
Mine operating income                8,714     13,272     60,576     41,281
Net (loss) income                  (20,238)    10,760     (2,788)    19,952
Net (loss) income per share
($/share) -- basic and diluted       (0.15)      0.09      (0.02)      0.17
Cash generated from operating
activities                          10,594     25,281     76,497     74,157
Capital investment in mine
development, property, plant
and equipment                       10,870     15,286     55,282     66,742
Average realized gold price per
ounce                                1,117      1,202      1,154      1,268
Average quoted gold price per
ounce                                1,108      1,201      1,160      1,266
Operating cash costs per ounce
sold                                   742        793        704        905
All-in sustaining cash costs per
ounce sold                             995      1,098        987      1,236
Ore milled (t)                     586,940    648,581  2,326,295  2,610,223
Grade (g/t Au)                        3.30       3.21       3.38       3.08
Recovery (%)                          84.0       85.4       86.2       84.6
Gold ounces produced                53,179     58,796    222,671    222,312
Gold ounces sold                    52,290     58,070    223,258    222,903

Fourth quarter 2015 review

Newmarket Gold produced 53,179 ounces of gold in Q4 2015, representing the 10th consecutive quarter of production above 53,000 ounces. This resulted in a third consecutive year of record annual production with 222,671 ounces. Quarterly production declined 9.6 per cent compared with Q4 2014 despite a 2.8-per-cent increase in average consolidated mill grade, mainly driven by higher grades at Fosterville, which was more than offset by a 9.5-per-cent decrease in consolidated mined tonnes and a lower recovery rate. Fourth quarter performance reflects lower-than-expected tonnes from Cosmo and Stawell, accompanied by lower grades and lower-than-expected recovery at Cosmo. Fosterville's tonne profile also decreased year over year as mining continues exclusively from the Phoenix and Lower Phoenix areas of the mine. However, Fosterville's lower tonne profile was more than offset by its increased grade profile which achieved 6.33 grams per tonne in Q4 2015, thanks to the higher-grade Lower Phoenix area, which includes the visible gold-bearing Eagle fault discovered in the second half of 2015. Additionally, Fosterville continued to deliver strong quarterly production, comprising 60 per cent of fourth quarter consolidated gold production.

Total revenues for the quarter of $58.4-million were down 16.3 per cent compared with Q4 2014, reflecting the 10-per-cent decrease in gold ounces sold over the same periods as well as the impact of a 7.1-per-cent decline in the average realized gold price per ounce to $1,117, down from $1,202 in Q4 2014.

Total operating expenses decreased 17.3 per cent compared with Q4 2014, largely due to the effect of a 15.8-per-cent decrease in the value of the Australian dollar relative to the U.S. dollar compared with the prior year period. Further reductions in operating costs were driven by lower physical performance at Cosmo and the capitalization of development costs at Stawell. Consolidated operating cash costs per ounce sold decreased 6.4 per cent to $742 from $793 per ounce sold in the prior year. Of note, Fosterville's operating cash cost per ounce decreased 18.1 per cent over the same period to $511, certainly impacted by the lower average Australian-dollar exchange rate, but also reflecting its increasing grade and recovery profile. On a consolidated basis, this was offset by the effect of grade and recovery challenges at Cosmo on its operations operating cash costs per ounce.

Net income in Q4 2015 was impacted by a non-cash impairment charge of $26.0-million recorded against the carrying value of Cosmo, and related plant and equipment, resulting in a net loss of $20.2-million or 15 cents per share, compared with net income of $10.8-million in Q4 2014 or nine cents per share. The impairment charge represented a net loss per share of 19 cents. Adjusted net income was four cents per share, or $5.8-million, when excluding the impairment charge.

Net income in Q4 2015 was also impacted by the company's decision to invest into its growth exploration programs to drive near-term resource growth. The company spent $4.8-million on exploration and evaluation projects, as opposed to just $600,000 in Q4 2014. These programs include the Lower and Upper Phoenix drill programs, and Harrier drill drive at Fosterville, next phase drilling at Aurora B at Stawell, and Cosmo Deeps and Esmeralda drill programs in the Northern Territory.

Operating cash flow for the quarter ended Dec. 31, 2015, was $10.6-million, a 58.1-per-cent decline from Q4 2014, impacted by reduced gold sales and a lower relative gold price environment, which was only partially offset by the decrease in total operating costs. Operating cash flow also reflects the company's decision to invest a further $4.8-million in growth programs during the quarter.

Mine development in Q4 2015 was $8.8-million, including $5.8-million at Fosterville, and $2.8-million at Cosmo for underground development and resource definition drilling. An additional $2.1-million was invested into plant and equipment. Capital expenditures were lower compared with the corresponding quarter of 2014, due to a focus on growth programs and the weaker Australian dollar.

As a result of lower operating cash costs, an increasing grade and recovery profile at Fosterville, and the weakened Australia dollar, all-in sustaining cash costs decreased 9.4 per cent to $995 per ounce sold, compared with $1,098 in Q4 2014.

Annual 2015 review

Revenue for 2015 was $258.0-million based on 223,258 ounces of gold sold, representing an 8.8-per-cent decrease from 2014. The slightly higher gold sales achieved in 2015 compared with the previous year were offset by a 9.0-per-cent drop in the company's average realized gold price to $1,154 per ounce from $1,268.

Record low operating cash costs per ounce of $704 decreased 22 per cent from $905 per ounce in 2014 and were in line with the lower end of the 2015 consolidated operating-cash-cost-per-ounce guidance range. This represents the third consecutive year of decreasing operational cash costs, both on a total and per-ounce basis.

As a result of the lower capital expenditures and the significant reduction in operating cash costs per ounce, Newmarket Gold achieved record low all-in sustaining cash costs of $987 per ounce, a 20-per-cent decrease from $1,236 per ounce in 2014. Importantly, the improved all-in-sustaining-cost-per-ounce profile reflects an appropriate level of capital investment to ensure the sustainability of the operations, while being disciplined in the allocation of capital.

Based on record consolidated production and decreasing operating cash costs, the company generated a record $76.5-million in cash from operating activities in 2015, up 3.2 per cent from 2014, despite a 9.0-per-cent decrease in the realized gold price from the previous year. Operating cash flow also reflects the company's $12.0-million expenditure in growth exploration programs to drive near-term resource growth, in addition to one-time cash transaction costs of $3.6-million associated with the transaction with Crocodile Gold.

The net loss for 2015 was $2.8-million or two cents per share, compared with net income of $20.0-million in 2014 or 17 cents per share. The net loss for 2015 was impacted by a non-cash impairment charge of $26.5-million recorded against the carrying value of Cosmo, related plant and equipment, and non-core properties, reflecting the significant production challenges experienced by Cosmo for most of 2015 and the lower production profile moving forward. This charge reflects a per-share loss of 21 cents per share. The 2015 net loss was also impacted by $17.0-million in transaction costs, which accounted for a loss of 14 cents per share. Net of the aforementioned items, adjusted net income per share for 2015 was 32 cents or $40.7-million.

Foreign exchange

Newmarket Gold has benefited from the significant drop in the Australian-dollar exchange rate, which has markedly increased the gold price in Australian dollar terms (the functional currency of the company's current operations) while having the effect of lowering cash costs in U.S.-dollar terms. The Australian dollar closed at 72.85 cents on Dec. 31, 2015, down 11 per cent from the previous year-end. Since Jan. 1, 2016, the Australian-dollar gold price was traded at an average price of $1,633 (Australian) per ounce to the date of this release.

Cash position and working capital

At Dec. 31, 2015, the company had a cash balance of $36.5-million, compared with a cash and gold bullion balance of $37.1-million as at Dec. 31, 2014. The cash balance at the end of 2015 reflects significant investments by the company, including a $16.7-million payment to terminate the cash flow sharing agreement with AuRico Gold Inc., growth expenditures of $12.0-million to expand the mineral resource base, and cash transaction costs of $3.6-million associated with the Newmarket Gold and Crocodile Gold arrangement. The year-end cash balance is also comparatively impacted by the translation to U.S. dollars at an 11-per-cent-weaker exchange rate.

As at Dec. 31, 2015, Newmarket's working capital was $22.3-million, up significantly from $12.6-million as at Dec. 31, 2014, reflecting the impact of strong mine operation cash flows, which enabled the company to finance the aforementioned investments.

Additionally, the redemption of the outstanding debentures in Q1 2016 through the issuance of common shares in the company (see Newmarket press release dated Feb. 12, 2016) will further improve the working capital position of the company, as the related current portion of the debentures will be extinguished and the company will no longer incur the 8-per-cent coupon payments of approximately $2.8-million annually after March, 2016. Furthermore, the company has benefited from the receipt of $5.1-million in proceeds on the exercise of share purchase warrants.

            FOURTH QUARTER AND FULL YEAR 2015 OPERATING SUMMARY

                         Q4 2015    Q4 2014    Q3 2015    FY 2015    FY 2014

Fosterville gold mine
Ore milled (tonnes)      179,450    190,823    175,687    703,787    814,837
Grade (g/t Au)              6.33       5.26       6.42       6.11       4.62
Recovery (%)                86.3%      88.5%      89.7%      88.5%      86.4%
Gold production
(oz)                      31,519     29,045     32,793    123,095    105,342
Cosmo gold mine
Ore milled (tonnes)      180,261    225,601    161,351    725,002    868,399
Grade (g/t Au)              2.56       3.05       2.65       2.99       3.14
Recovery (%)                86.9%      90.9%      92.2%      90.7%      88.9%
Gold production
(oz)                      12,898     20,112     12,672     63,255     77,740
Stawell gold mines
Ore milled (tonnes)      227,229    232,157    228,216    897,506    926,987
Grade (g/t Au)              1.50       1.67       1.42       1.56       1.67
Recovery (%)                80.0%      77.6%      80.0%      80.8%      78.8%
Gold production
(oz)                       8,762      9,639      8,352     36,321     39,230
Total gold ounces
produced                  53,179     58,796     53,817    222,671    222,312

Qualified person

Mark Edwards, MAusIMM (CP), MAIG, general manager, exploration, Newmarket Gold, is a qualified person as such term is defined in National Instrument 43-101, and has reviewed and approved the technical information and data included in this press release.

We seek Safe Harbor.

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