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-$6Update 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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