Mr. Gestur Kristjansson reports
SAN GOLD REPORTS 2012 Q2 RESULTS
San Gold Corp. has released its quarterly financial and operating results for the second quarter of 2012.
Second quarter 2012 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 the company's 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
- 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,
- Completed approximately 62,000 metres of exploration and definition
- 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 four 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 per cent to approximately $164 compared with $138 in the same period of 2011. Mining cost per ton of ore was approximately $132 in the second quarter of 2012 compared with $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 with 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-per-cent 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-per-cent increase compared with 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-per-cent increase compared with 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 $900,000. 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 with $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 with 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 with $14.6-million and $4.1-million in the second quarter of 2011, respectively.
Guidance for 2012:
Production of between 95,000 and 105,000 ounces of gold;
- Cash costs: $700 to $800 per ounce of gold;
- Exploration: in excess of 250,000 metres of diamond drilling.
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 operating costs of 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 downdip potential of the currently known orebodies 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 financed for its existing plans, as well as growth through new discoveries and potential acquisitions or joint venture opportunities.
Second quarter 2012 conference call
The company's senior management plans to host a conference call on Aug. 14, 2012, at 11 a.m. Eastern Standard Time to discuss the second quarter 2012 results and to provide an update of the company's operating, exploration and development activities.
Participants may join the conference call by dialling 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.
A recorded playback of the conference call can be accessed after the event until Sept. 4, 2012, by dialling 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 passcode for the conference call playback is 4175558. The archived audio webcast will also be available on the company's website.
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, which are available from the company's website in the news and reports section under financial statements and on SEDAR.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE
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 28,524,026 20,847,488 56,041,492 37,467,320
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
administrative 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
Finance income --
net (105,392) 418,010 193,321 479,545
Finance costs (101,030) (120,223) (215,861) (238,859)
Equity (loss) of
associate (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
shares 1,494,022 -- 2,909,634 --
Net loss and
for the period $ 7,814,439 $ 3,972,665 $ 8,504,637 $ 9,308,434
Loss per common
Basic $ 0.02 $ 0.01 $ 0.03 $ 0.03
Diluted $ 0.02 $ 0.01 $ 0.03 $ 0.03
We seek Safe Harbor.