Mr. Pierre Lacombe reports
SCORPIO MINING REPORTS FOURTH QUARTER AND YEAR-END FINANCIAL RESULTS FOR 2013 AND UPDATED RESERVES AND RESOURCES AT NUESTRA SEAPLUS OR MINUSORA
Scorpio Mining Corp. today released its
financial and operating results for the fourth quarter and year
ended Dec. 31, 2013. This press release should be read in
conjunction with the company's audited financial statements,
management's discussion and analysis, and annual information
form for the year ended Dec. 31, 2013, as available on the
company's website and on SEDAR.
HIGHLIGHTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER, 2013
Three months ended
Dec. 31, Sept. 30, Dec. 31, Year ended
2013 2013 2012 2013 2012
Mine operating earnings (loss) ($000) $ (868) $ 803 $ 3,884 $ 186 $ 15,202
Net (loss) earnings ($000) (1,873) (5,381) 1,429 (9,187) 7,090
(Loss) earnings per share (basic) (0.01) (0.03) 0.01 (0.05) 0.04
Adjusted EBITDA ($000) (1) 570 2,012 5,319 4,261 15,543
Adjusted EBITDA per share (basic) (1) 0.00 0.01 0.03 0.02 0.08
Cash flows from operating activities
before changes in working capital ($000) (1) 636 2,050 5,347 4,419 15,615
Underground ore production (tonnes) 145,872 123,807 130,006 522,227 517,788
Plant throughput (tonnes) 134,437 136,610 129,115 534,043 521,557
Surface stockpile (tonnes) 41,826 19,580 36,679 41,826 36,679
Head grades
Silver grade (g/t) 75 67 91 70 90
Zinc grade (%) 1.51 2.09 1.60 1.65 1.85
Copper grade(%) 0.23 0.16 0.27 0.23 0.28
Lead grade (%) 0.71 0.95 0.72 0.82 0.87
Recovered metals in concentrates
Silver ounces 262,380 240,499 296,243 969,025 1,184,964
Zinc pounds (000) 3,406 4,738 3,321 14,536 16,463
Copper pounds (000) 333 201 347 1,312 1,608
Lead pounds (000) 1,444 2,036 1,330 6,762 6,550
Silver equivalent ounces (2) 492,832 523,780 521,295 1,959,113 2,282,512
Total cash cost per payable
silver ounce (U.S. $) (1) 14.25 11.16 10.56 13.76 11.93
Payable metals in concentrates
Silver ounces 206,207 207,316 247,877 815,043 999,462
Zinc pounds (000) 3,133 3,698 2,879 12,208 14,105
Copper pounds (000) 323 194 338 1,224 1,543
Lead pounds (000) 1,277 1,919 1,168 6,167 5,965
Silver equivalent ounces (2) 418,686 446,245 448,931 1,682,606 1,977,108
Revenue from payable metals ($000) 9,675 10,823 12,546 39,146 54,966
Revenue distribution
Silver 46% 46% 61% 48% 58%
Zinc 29% 30% 21% 27% 22%
Copper 11% 6% 9% 10% 10%
Lead 14% 18% 9% 15% 10%
(1) This is a non-IFRS (international financial reporting standards) performance measure; see non-IFRS
performance measures section in the management's discussion and analysis.
(2) Silver equivalent ounces were calculated using the following metal prices: silver $24 (U.S.) per ounce, zinc
90 U.S. cents per pound, copper $3.50 (U.S.) per pound and lead 90 U.S. cents per pound.
Reconciliation of reserves and resources -- Nuestra Senora
The company completed an internal reconciliation of its mineral reserves
and resources as at Dec. 31, 2013, against the amounts declared as
at Dec. 31, 2012, in the report titled "Technical Report and
Preliminary Economic Assessment, Nuestra Senora, San Rafael and El
Cajon Deposits," prepared by Mine Development Associates. The reconciliation was prepared by the company's technical
services team under the supervision of the company's vice-president, exploration,
James Stonehouse, who is a qualified person in accordance with National Instrument
43-101.
The table presents the remaining reserves and resources in the
Nuestra Senora mine, accounting for mining operations and definition
drilling work through 2013.
RECONCILIATION OF NUESTRA SENORA RESERVES AND RESOURCES AT EOY 2013
Reserves -- proven and probable
Tonnes Ag Zn Pb Cu Ag oz Zn lb Pb lb Cu lb
(000) (g/t) (%) (%) (%) (000) (000) (000) (000)
Balance, Dec. 31, 2012 (1) (2) 533 98.2 1.74 0.88 0.25 1,683 20,411 10,378 2,997
2013 depletion 167 91.6 1.88 0.97 0.13 494 7,590 3,932 526
Balance, Dec. 31, 2013 366 101.2 1.46 0.73 0.28 1,189 12,821 6,446 2,471
Resources -- measured and indicated
Tonnes Ag Zn Pb Cu Ag oz Zn lb Pb lb Cu lb
(000) (g/t) (%) (%) (%) (000) (000) (000) (000)
Balance, Dec. 31, 2012 (1) (2) 2,420 94.92 1.74 0.90 0.27 7,385 92,967 48,142 14,186
2013 depletion 175 92.68 2.26 0.99 0.22 520 8,710 3,805 834
Balance, Dec. 31, 2013 2,245 95.09 1.56 0.82 0.25 6,865 84,257 44,337 13,352
Resources -- inferred
Tonnes Ag Zn Pb Cu Ag oz Zn lb Pb lb Cu lb
(000) (g/t) (%) (%) (%) (000) (000) (000) (000)
Balance, Dec. 31, 2012 (1) 2,025 88.98 1.44 0.71 0.26 5,793 64,287 31,697 11,607
2013 depletion 50 120.74 2.18 1.10 0.41 193 2,389 2,939 20
Balance, Dec. 31, 2013 1,975 88.18 1.30 0.61 0.24 5,600 61,898 28,758 11,587
(1) Based on MDA technical report.
(2) Reserves included in measured and indicated resources.
During 2013, only 31 per cent of the reserves were thus depleted, representing
31 per cent of the overall plant feed tonnage processed, with the balance
provided from non-reserve material within Nuestra Senora and from La
Verde. The remaining reserves of 366 kilotonnes represent 65 per cent of the
budgeted plant feed in 2014, with the possibility of adding more
tonnage as plant feed from the resource envelope as mining and
development progress during the year.
2013 highlights
Financial
- Revenue from payable metals of $39.1-million in 2013 decreased from
$55.0-million in 2012 due to lower metal prices for silver, zinc and
copper and lower head grades for all metals.
- Cash cost per payable silver ounce, net of byproduct credits (1), increased to $13.76 in 2013 compared with $11.93 in 2012 due to a
decrease in payable silver ounces and a decrease in byproduct credits as
a result of lower metal production and metal prices for all metals,
except lead, partially offset by increased throughput due to high
processing plant availability and utilization.
- Net loss in 2013 was $9.2-million or five cents per share (basic)
compared with net earnings of $7.1-million, or four cents per share (basic) in
2012. The 2013 net loss includes an impairment charge of $5.5-million
or three cents per share (basic) related to the company's investment in the
common shares of Scorpio Gold and an
impairment charge of $800,000, net of tax, in respect of the
company's deferred development and exploration costs at its Nuestra
Senora mine.
- Adjusted EBITDA (1) of $4.3-million in 2013 decreased from $15.5-million in 2012 as a result
of lower revenues described above.
-
Cash flow from operating activities before movements in working capital
of $4.4-million in 2013 decreased from $15.6-million in 2012.
-
Working capital was $35.8-million at the end of 2013, down from $44.7-million at the end of 2012.
Operations:
- On a year-to-year basis, 2013 experienced the highest annual plant
throughput at 534,043 tonnes. Lead production increased in 2013
compared with 2012 whereas all other metals experienced relative
declines. Silver recovery increased from 79 per cent to 81 per cent, and lead from 66 per cent
to 70 per cent, despite pressure on plant efficiency coming from the decrease
in head grades from 90 grams per tonne to 70 grams per tonne and 0.87 per cent to 0.82 per cent, for silver
and lead, respectively.
- Recovered silver equivalent ounces (2) at 1,959,113 ounces in 2013 decreased by 14 per cent from 2,282,512 ounces in
2012, mainly due to the lower head grades.
- Focus on decreasing costs and increasing efficiencies led to drafting of
changes to work schedules for plant and mine personnel, resulting in
the reduction of overlaps and overtime. A review of the required
manpower base led to the identification of operations and exploration
personnel redundancies. As such, during 2013, a 14-per-cent reduction in the
company's work force was implemented across these departments.
- Contract mining commenced at the company's wholly owned silver-copper La
Verde mine during third-quarter 2013 and production from La Verde totalled 34,265
silver equivalent ounces (2) during 2013.
-
Concentrate sales contracts have been renegotiated for copper and
extended for zinc, with the copper and lead concentrates placed until
June 30, 2014, and zinc concentrate until Dec. 31, 2014.
(1) This is a non-IFRS performance measure; see non-IFRS performance measures section in the management's discussion and analysis.
(2) Silver equivalent ounces were calculated using the following metal prices: silver $24 (U.S.) per ounce, zinc
90 U.S. cents per pound, copper $3.50 (U.S.) per pound and lead 90 U.S. cents per pound.
Project development
- Released the latest reserve estimate for the Nuestra Senora mine and the
preliminary economic assessment for the advanced Cosala
district mineral resources;
-
Received approval from SEMARNAT for the company's environmental impact statement pertaining to underground mining at the El Cajon and San Rafael projects;
-
Received approval from SEMARNAT for the application for the change of
use of soil pertaining to the development of underground mining
operations at the El Cajon project, located in the Cosala Norte
district;
- Received archeological clearance for the haulage road realignment
linking the Cosala Norte development area and the existing Nuestra
Senora processing plant;
- JDS Energy and Mining Inc. was engaged to perform a
prefeasibility study for underground mining of the El Cajon
project. While progressing through the preparation of the PFS, the
company identified discrepancies between registered data and mapped
information relative to the boundaries of the concessions encompassing
the El Cajon resource outline. The company is proceeding with
development work while awaiting confirmation of the boundaries from the
Direccion General de Mineria. The completion of the PFS is
expected in third-quarter 2014, following incorporation of geotechnical data
analysis and resolution of the concession boundaries by the DGM, and
will then result in the publication of National Instrument 43-101-compliant mineral
reserves.
Exploration:
- The company completed 7,150 metres of underground drilling at the
Nuestra Senora mine.
- Efforts have been directed at following up geophysical and ASTER studies
performed during first-quarter 2013. Over 4,000 geochemical samples have been
taken in grids covering areas identified by radiometric and
aeromagnetic surveys. Mapping of these areas has been performed as
well.
- A mapping and sampling program on surface at Nuestra Senora has led to
defining material that can be recovered from within the Nuestra Senora
mine. This program has now expanded to cover more distant targets in
the Nuestra Senora area. Efforts are under way to acquire the necessary
permissions to drill targets developed from the mapping and sampling
efforts adjacent to Nuestra Senora.
- Additional mapping at La Verde has defined previously unrecognized
mineralized material controls. Resampling of drill cores is aiding in
targeting new potential areas. The mine workings have been completely
remapped, and all the drill cores relogged, in light of the new ore
controls. Plans are being formulated for a more detailed evaluation of
the mine area toward definition of resources.
- Geochemistry and mapping based on geophysical data have outlined a six-kilometre-long structural zone, related to La Verde, which contains
several targets around small prospects conforming to the same La Verde
model. Steps are being taken to allow for the detailed exploration of
these zones. Archeological studies have been performed and cleared the
area for future work.
-
Programs have been designed to upgrade the resources at the San Rafael
Main zone and El Cajon in 2014.
Outlook for 2014
The company is focused on maintaining ore production at current levels
to meet the nominal plant capacity of 1,600 tonnes per day throughout 2014, first
through providing the plant with a mixture of material mined from the
Nuestra Senora and La Verde mines, and second through El Cajon, which
becomes the primary source once it is fully ramped up. At this point,
remnant mining at Nuestra Senora would not justify maintaining a
production team and related equipment within this mine. These assets
would then be redeployed within El Cajon to minimize equipment
purchases.
A program based on a continued thorough review of previously mined
sections of the Nuestra Senora orebody, including the Candelaria zone;
the continuing placement of backfill, which enabled mining of secondary
stopes; and other initiatives provided higher plant feed grades in third-quarter
and fourth-quarter 2013. These same sources are expected to be available through fourth-quarter
2014. Mining of the reserves and resources at Nuestra Senora will
continue, with additional plant feed as defined by short-term
definition drilling, while ensuring that safe, sustainable methods are
used.
The CUS for the El Cajon deposit was approved by SEMARNAT in fourth-quarter 2013.
This has allowed the company to commence development of El Cajon in
early 2014. This underground development work at El Cajon is expected
to be completed in third-quarter 2014. An additional quarter will be needed to
ramp the mining activities to a regular production regime at an
expected potential of up to 1,500 tonnes per day using design assumptions based
solely on surface drilling data. A level of sustainable output will be
better determined once underground operations are under way and multiple
accesses to the orebody are achieved. JDS is currently working on a PFS
to be provided in third-quarter 2014. Geotechnical drilling and tree-clearing
activities have been completed at El Cajon, with cut-and-fill
activities at the location of the mine adit and surface infrastructures
nearing completion. A short list of mine contractors for driving the
ramp has been completed, with the selection of the retained bidder
expected in March, 2014.
The company ended 2013 with approximately $16.4-million in its treasury,
over $35-million in working capital and no debt. Despite reduced cash
flows brought on by the difficult metal pricing environment, with a reduction
in the operating and exploration expenditures, coupled with improved
head grades, the company believes that its treasury and future cash
flows will be adequate to finance the development of El Cajon, define
resources at the La Verde mine, derisk the San Rafael project and
sustain minimal regional exploration during 2014.
Annual general and special meeting of shareholders
Scorpio Mining also announces that its 2014 annual general and special
meeting of shareholders will be held at 4 p.m. Eastern Time on
Tuesday, May 13, 2014, at the New Brunswick room, main mezzanine floor
of the Fairmont Royal York Hotel, 100 Front St. West, Toronto,
Ont., M5J 1T1.
Scorpio shareholders of record at the close of business on April 3, 2014,
are entitled to attend the annual general and special meeting and vote
their shares.
Scorpio Mining's president and chief executive officer, Pierre Lacombe, Eng, is a
qualified person as defined under National Instrument 43-101 and has
reviewed and approved the content of this release.
We seek Safe Harbor.
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