Mr. John Dorward reports
ROXGOLD REPORTS 2019 FIRST QUARTER FINANCIAL RESULTS; DELIVERED SOLID QUARTERLY PERFORMANCE AND ON TRACK TO MEET PRODUCTION AND COST GUIDANCE
Roxgold Inc. has released its first quarter financial results for the period ended March 31, 2019.
For complete details of the unaudited condensed consolidated financial statements and associated management's discussion and analysis (MD&A), please refer to the company's filings on SEDAR or the company's website. All amounts are in U.S. dollars unless otherwise indicated.
Highlights for the quarter ended March 31, 2019
- Continued a strong safety record with no lost-time injuries recorded in Q1 2019, with a 12-month rolling lost-time injury frequency rate (LTIFR) of 0.39 per one million hours worked.
Achieved solid production results of 33,652 ounces (Q1 2018 -- 40,452 ounces);
- Sold 32,798 ounces of gold (1) for a total of $42.8-million in gold sales (1) (40,050 ounces and $53.2-million, respectively, in Q1 2018);
- Cash operating cost (2) of $468 per ounce produced and all-in sustaining cost (2) of $775 per ounce sold were in line with guidance;
- Operating costs (2) of $147 per tonne processed were 32 per cent lower than Q1 2018 as a result of increased throughput and improved efficiencies;
- Mined 98,140 tonnes and achieved a record quarterly throughput of 106,816 tonnes, which exceeded increased nameplate capacity of 1,100 tonnes per day by approximately 8 per cent.
Achieved EBITDA (2) (earnings before interest, taxes, depreciation and amortization) of $16.2-million and EBITDA margin (2) of 38 per cent in Q1 2019, compared with $28.8-million and 54 per cent, respectively, in Q1 2018;
- Generated cash flow from mining operations (2) totalling $23.4-million for cash flow from mining operations per share (2) of six cents (eight Canadian cents per share);
- Maintained a strong balance sheet with a net cash position (2) of $13-million;
Generated a strong return on equity (2) of 16 per cent;
Repurchased and cancelled 4,949,000 shares at an average price of 84 Canadian cents per share for a total cost of $3.1-million ($4.2-million (Canadian)).
Announced the completion of the Seguela gold project acquisition from Newcrest Mining in April, 2019, and commenced RC (reverse circulation) drilling on the Antenna deposit on April 24;
- First stoping ore mined at Bagassi South mine at the end of April, 2019.
"Yaramoko delivered another solid performance, producing 33,652 ounces of gold during the quarter, resulting in strong EBITDA margins of 38 per cent and a return on equity of 16 per cent, one of the highest in the industry. Operating costs per tonne have decreased markedly over the past 12 months and, at Bagassi South, development ramp-up advanced well with first stoping ore mined in April, and we expect to see commercial production begin in the near future. With grades and tonnes expected to be higher in the second half of the year, we are well positioned to meet our production guidance of 145,000 to 155,000 ounces and costs for 2019," said John Dorward, president and chief executive officer. "We remain focused on adding accretive value to shareholders through our active drilling program at Yaramoko and our recently completed Seguela gold project acquisition where we have begun an initial 28,000-metre drilling program."
Gold production between 145,000 and 155,000 ounces;
- Cash operating cost (2) between $440 and $470 per ounce;
All-in sustaining cost (2) between $765 and $795 per cent ounce;
Exploration budget of $10-million to $12-million;
- Bagassi South precommercial production development spend of $12-million to $15-million.
In 2019, Yaramoko is expected to produce stronger quarters in Q3 and Q4 due to the Bagassi South mine commencing stoping operations during Q2 2019.
MINE OPERATING ACTIVITIES
Three months ended March 31, 2019 Three months ended March 31, 2018
Ore mined (tonnes) 98,140 88,607
Ore processed (tonnes) 106,816 71,576
Head grade (g/t) 10.0 16.8
Recovery (%) 98.3 99.0
Gold ounces produced 33,652 40,452
Gold ounces sold (1) 32,798 40,050
(in thousands of dollars) (3)
Revenues -- gold sales (1) 42,840 53,226
Mine operating expenses (4) (15,437) (15,388)
Government royalties (4) (1,976) (2,662)
Depreciation and depletion (4) (11,942) (9,632)
Statistics (in dollars)
Average realized selling price (per ounce) 1,307 1,329
Cash operating cost
(per ounce produced) (2) 468 381
Cash operating cost
(per tonne processed) (2) 147 216
Total cash cost (per ounce sold) (2) 527 451
Sustaining capital cost
(per ounce sold) (2) 180 164
Site all-in sustaining cost
(per ounce sold)(2) 711 615
All-in sustaining cost
(per ounce sold) (2) 775 658
Health and safety performance
There were no lost-time injury (LTI) incidents in the first quarter of 2019, with a 12-month rolling LTIFR of 0.39 per one million hours worked.
The company's gold production in Q1 2019 was 33,652 ounces compared with 40,452 ounces in Q1 2018. The decrease in gold production was mainly driven by a lower head grade, partially offset by higher tonnes processed in Q1 2019. The lower average head grade was primarily due to the ramp-up of the Bagassi South underground mine, which is currently delivering development ore.
During the quarter, 98,140 tonnes of ore at 10.4 grams per tonne (g/t) were extracted from the underground mine along with completing 2,264 metres of development compared with 88,607 tonnes of ore at 15.1 g/t and 1,437 metres of development in Q1 2018.
At the 55 zone, 85,460 tonnes of ore were mined at 10.6 g/t gold (Au) and 1,272 metres of development were completed. During the quarter, approximately 80 per cent of ore mined came from stoping activities as a result of extensive development in place at the 55 zone. At Bagassi South, ramp-up activities continued with 992 metres of development completed.
In Q1 2019, decline development at the mine reached the 4879 level, approximately 440 metres below surface. Ore development was completed between the 4930 and 4896 levels. The mine continues to be well positioned to meet future production requirements with developed reserves for stoping in line with the company's 18-month planned stoping objectives.
The plant processed a record 106,816 tonnes at an average head grade of 10.0 g/t in Q1 2019 compared with 71,576 tonnes of ore at 16.8 g/t in Q1 2018. The increase of 49 per cent is due to the completion and successful commissioning of the plant expansion project and represents a unit throughput rate which is 8 per cent above nameplate capacity. Plant availability was 95.4 per cent and overall recovery was 98.3 per cent in Q1 2019 compared with 97.9 per cent and 99.0 per cent, respectively, for the comparative quarter.
Cash operating costs (2) of $147 per tonne processed represented a 32-per-cent reduction compared with Q1 2018, driven by increased throughput and cost control.
During the first quarter of 2019, a total of 32,798 ounces of gold (1) were sold, resulting in revenue from gold sales (1) totalling $42.8-million. During this period, the company's average realized gold price was $1,307 per ounce sold compared with an average realized gold price of $1,329 per ounce in the comparable period in 2018.
With the increase in nameplate capacity to 1,100 tonnes per day, the company has continued to see reductions in cash operating cost (2) per tonne processed reduce by 32 per cent from $216 in Q1 2018 compared with $147 in Q1 2019. The cash operating cost (2) per ounce produced totalled $468 per ounce for the period compared with $381 per ounce in the prior year, mainly driven by the lower head grade.
The total cash cost (2) per ounce sold of $527 in Q1 2019 compared with $451 per ounce sold in Q1 2018. As a result, the company achieved a site all-in sustaining cost (2) of $711 per ounce sold and an all-in sustaining cost (2) of $775 per ounce sold in Q1 2019, compared with $615 per ounce and $658 per ounce sold, respectively.
The company generated a mine operating margin (2) of $780, which was 11 per cent lower than Q1 2018. This is due to a 2-per-cent decrease in the average gold sales price and an increase in cash costs.
The company invested $5.9-million in underground mine development at the 55 zone mine during the first quarter of 2019, compared with $6.6-million for the comparable period in 2018. Additionally, the company invested $6.0-million in precommercial production underground mine development at the Bagassi South mine.
The company generated strong cash flow from mining operations (2) of $23.4-million in Q1 2019 for cash flow from mining operations per share (2) of six cents (eight Canadian cents per share). Comparatively, the company generated cash flow from mining operations (2) of $30.9-million for cash flow from mining operations per share of eight cents (11 Canadian cents per share) in the comparative period.
Events subsequent to March 31, 2019
On Feb. 11, 2019, the company entered into an agreement with Newcrest West Africa Holdings Pty. Ltd. to acquire a portfolio of 11 exploration permits in Ivory Coast, which includes the Seguela gold project, for a total consideration of $20-million, with a $2-million deposit paid in Q1 2019. On April 18, 2019, the company completed the acquisition with Newcrest.
Review of financial results (3)
Mine operating profit
During the quarter ended March 31, 2019, revenues totalled $39.8-million (2018 -- $53.2-million), while mine operating expenses and royalties totalled $13.6-million (2018 -- $15.4-million) and $1.8-million (2018 -- $2.7-million), respectively. The decrease in sales is primarily due to the decrease in production of 17 per cent and a lower average realized gold price. During the quarter, the company achieved total cash cost (2) per ounce sold of $527 and a mine operating margin (2) of $780 per ounce sold.
For more information on the cash operating costs (2), see the financial performance of mine operating activities section of the company's Q1 2019 MD&A.
In Q1 2019, depreciation included in mine operating profit totalled $11.8-million compared with $9.6-million in Q1 2018. The increase in depreciation is a result of the company's continued investment in the underground development combined with higher throughput.
General and administrative expenses
General and administrative expenses totalled $1.5-million for the 2019 quarter compared with $1.4-million for the comparative period.
Sustainability and other in-country costs
Sustainability and in-country costs totalled $600,000 for the 2019 quarter compared with $400,000 for the comparative period. The increase in expenditures correspond to the increased community projects associated with the Bagassi South project.
Exploration and evaluation (E&E) expenses
Exploration and evaluation expenses totalled $3.2-million for the quarter compared with $3.7-million in the comparative period.
Drilling costs totalling $2.2-million, related to converting resources to reserves or to extending the existing resource body, have been capitalized in accordance with the company's accounting policy as future economic benefits are expected.
For more information on the company's exploration program, see the exploration activities section of the company's Q1 2019 MD&A.
Share-based payments totalled $400,000 in the quarter compared with $200,000 in the comparative period. The increase is consistent with the increase in RSUs (restricted share units) and PSUs (performance share units) outstanding and associated vesting schedules.
Financial income (expenses)
Net financial expense totalled $3.5-million in the quarter compared with $1.8-million in the comparative period. The increase is mainly attributed to the foreign exchange movement, with a foreign exchange loss of $600,000 in Q1 2019 compared with a foreign exchange gain of $1.2-million in the comparable period in 2018.
Current and deferred income tax expense
All past cumulative losses were fully utilized in 2018 and have resulted in the recognition of current income tax expense in Q1 2019. The deferred income tax expense is due to the recognition of the deferred income tax liability as the company is making a profit from its operations in Burkina Faso.
Net income and EBITDA
The company's net income and EBITDA (2) in the first quarter of 2019 were $1.9-million and $16.2-million, respectively. The lower earnings were primarily due to lower gold sales, an unfavourable foreign exchange movement and higher depreciation.
Income attributable to non-controlling interest
For the three months ended March 31, 2019, the income attributable to the non-controlling interest (NCI) was $900,000. The government of Burkina Faso holds a 10-per-cent carried interest in Roxgold SANU SA and as such is considered Roxgold's NCI. The NCI attributable income is based on IFRS (international financial reporting standards) accounting principles and does not reflect dividend payable to the minority shareholder of the operating legal entity in Burkina Faso.
Conference call and webcast information
A webcast and conference call to discuss these results will be held on Wednesday, May 15, 2019, at 8:30 a.m. Eastern Time. Listeners may access a live webcast of the conference call from the events section of the company's website or by dialling toll-free 1-888-231-8191 within North America or 1-647-427-7450 from international locations.
An on-line archive of the webcast will be available by accessing the company's website. A telephone replay will be available for two weeks after the call by dialling toll-free 1-855-859-2056 and entering passcode 7799100.
(1) For the period ended March 31, 2019, gold ounces sold and gold sales include precommercial production ounces sold of 2,305 ounces and revenues of $3.0-million. The precommercial production gold sales and mine operating expenses were accounted against property, plant and equipment.
(2) The company provides some non-IFRS measures as supplementary information that management believes may be useful to investors to explain the company's financial results. Please refer to note No. 17, non-IFRS financial performance measures, in the company's MD&A, dated May 14, 2019, available on the company's website and on SEDAR, for reconciliation of these measures.
(3) In accordance with the transition provision in IFRS 16, Leases, the comparatives for the 2018 reporting periods have not been restated.
(4) For the period ended March 31, 2019, mine operating profit includes capitalized precommercial production costs of $1.9-million in mine operating expenses, $100,000 in royalty costs and $100,000 in depreciation related to the 2,305 ounces sold.
Iain Cox, FAusIMM, interim chief operating officer for Roxgold, a qualified person within the meaning of National Instrument 43-101, has verified and approved the technical disclosure contained in this news release.
Paul Weedon, MAIG, vice-president, exploration, for Roxgold, a qualified person within the meaning of NI 43-101, has verified and approved the technical disclosure contained in this news release. This includes the quality assurance and quality control (QA/QC), sampling, analytical, and test data underlying this information. For more information on the company's QA/QC and sampling procedures, please refer to the company's annual information form, dated Dec. 31, 2018, available on the company's website and on SEDAR.
For further information regarding the Yaramoko gold mine, please refer to the technical report dated Dec. 20, 2017, and entitled "Technical Report for the Yaramoko Gold Mine, Burkina Faso," available on the company's website and on SEDAR.
Roxgold is a Canadian-based gold mining company with assets located in West Africa. The company owns and operates the high-grade Yaramoko gold mine, located on the Hounde greenstone belt in Burkina Faso, and is also advancing the development and exploration of the Seguela gold project, located in Ivory Coast.
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