Claude Resources Announces First Quarter Results
SASKATOON, May 10 /CNW/ -
Overview
Gold prices remained near record lows during the quarter resulting in
continued pressure on producer cash flows and net earnings. On a positive
note, oil prices began to recover which will have a favorable impact on the
Company's oil and gas revenues.
Claude's Seabee mine operations continued to perform well during the
quarter. The mine produced 15,300 ounces of gold during the first three
months of 1999 compared to 13,200 ounces last year. Effective January 1, 1999,
Claude commenced commercial milling of a portion of its mill feedstock
requirements from the Currie Rose property. Currie Rose Resources Inc. is
entitled to a 30% net profits interest from production on the property after
Claude has recovered the Currie Rose share of pre-production, mining and
milling expenditures.
Consistent with the adoption of a revised Madsen mine plan in the last
quarter of 1998, Claude has pursued aggressive exploration and development
activities to bring the rapidly expanding McVeigh ore deposit to the
commercial production stage. The work programs provide increasing confidence
that the McVeigh zone, which parallels the original Austin zone, will
duplicate the Austin zone from which 2.4 million ounces of gold have been
extracted.
Financial
Claude recorded net earnings of $1.2 million ($.04 per share) for the
first quarter of 1999 compared to $0.6 million ($.03 per share) for the same
period last year. Included in the current year's net earnings is a gain on
the ''provision for foreign currency fluctuations'' account of $0.5 million.
This is the result of a strengthening Canadian/US dollar exchange rate.
Cash flow generated from operations for the quarter was $2.2 million
($.07 per share) compared to $2.5 million ($.14 per share) last year. The
comparative per share calculations are distorted given that Claude had 31
million shares outstanding in this quarter versus 18 million shares
outstanding in the same quarter last year.
Total revenue generated in the quarter was $8.3 million, up 18% from the
$7.0 million recorded in the first quarter of 1998. This was attributable to
the increased gold production at the Seabee mine. The average realized gold
price in the quarter was US $295 compared to US $293 in the first quarter of
1998. Oil and gas revenues remained relatively unchanged.
Cash operating costs were $4.5 million (US $194 per ounce) this year
versus $3.3 million (US $173 per ounce) in the first quarter last year. In
excess of $0.3 million (US $14 per ounce) of this increase is the result of
treating exploration expenditures on the Currie Rose property as a period cost
since commercial production commenced January 1, 1999. Prior to commercial
production these costs were capitalized. The remaining increase in operating
costs is attributable to normal adjustments related to broken ore inventory
changes.
Given these factors, average costs for each of the 1998 and 1999 first
quarters are reasonable and consistent. The 1999 full year cash cost forecast
of US $200 per ounce remains achievable.
Oil and gas operations contributed $0.2 million to cash flow during the
quarter compared to $0.3 million last year. Increasing oil prices in the
latter part of the quarter should have a positive impact during the second
quarter.
The Madsen mine is in the pre-production stage whereby exploration and
development expenditures, net of gold revenues, are capitalized and
accordingly are not included in the financial operating results. During the
first quarter, mill feed consisted primarily of development muck processed
through the mill yielding 4,000 ounces of gold. The current mine plan
contemplates commercial production in the second part of the year with total
gold production through a combination of pre-production and commercial
production targeted at 30-35,000 ounces.
Operations
Gold
A total of 59,100 tonnes were milled at Seabee during the quarter at an
average head grade of 8.4 grams per tonne. Mill throughput averaged 657
tonnes per day compared to 519 tonnes per day for the same period last year
when the head grade averaged 10 grams per tonne.
The Seabee Mine continues to operate in a highly productive and efficient
manner. Audited reserves remain approximately 900,000 tonnes with an
additional 1,000,000 plus tonnes in the resource category.
Seabee is on track to meet its targeted production of 57,000 ounces at a
cash cost of US $200 or less.
Oil & Gas
During the first quarter of 1999, the Company's oil and gas holdings
produced 17% less oil and 10% less gas than the comparable period of 1997. The
decrease in production was partially offset by increasing oil and gas prices.
Development Projects
Madsen Gold Mine
During the quarter, Centaur Mining Contractors, a wholly-owned subsidiary
of Claude Resources and project manager for the Madsen mine, was focussed on
the implementation of the revised mine plan dedicated to the exploration and
development necessary to bring the McVeigh zone to commercial production. The
McVeigh zone runs parallel to the original Austin zone and extends east and
west of the headframe.
The decline ramp collared on the West McVeigh is expected to reach the
second level by the end of April and reach the third level by the end of June.
The decline will create access to an expected minimum of five stopes at each
level.
Surface and underground drilling programs on the West McVeigh continue to
delineate mineralization along a strike length in excess of five hundred
metres. Downplunge drilling is verifying that grade improves with depth. This
is consistent with that experienced on the original Austin zone. Surface
drilling of a previously untested area to the east of the shaft (East McVeigh)
has also produced encouraging mineralization which will require follow-up
drilling.
Consideration is also being given to dewatering the shaft from the
current 12th level to below the 16th level. This would provide access to an
existing exploration drift enabling underground drilling of both the Austin
and McVeigh zones above and below that level.
Exploration
Exploration remained focussed on or near the Company's two operating
properties, the Seabee and Madsen. Surface drilling was the principal
exploration vehicle with approximately 6,000 metres being cored at each site.
Drilling on the Currie Rose property that envelopes the Seabee mine
targeted vein systems discovered by conventional prospecting during the
preceding two field seasons. Significantly, this drilling encountered a well
mineralized, albeit of restricted strike length, elliptical quartz structure
at the intersection of two vein sets. Two holes in the heart of this
structure returned true widths and grades of 17.5 metres at 8.3 grams per
tonne and 20.2 metres at 5.0 grams per tonne, respectively. Both intervals
contained higher grade segments, including 5.8 metres at 22.5 grams per tonne
in the former. Follow-up drilling and mineability are current considerations.
Surface drilling of an untested window at Madsen in the East McVeigh zone
encountered visually encouraging sulfide mineralization without attendant gold
values. However, this drilling was successful in coring significant intervals
within the footwall of the Austin, indicating the presence of a potentially
mineable structure.
Underground drilling of the West McVeigh area produced multiple ore grade
intersections. These holes extend the West McVeigh below the 6th level at a
core-length weighted average grade of 6.6 grams per tonne Au. The West
McVeigh remains kpen in all directions and continues to be the subject of
ongoing drilling.
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CONSOLIDATED BALANCE SHEETS
March 31
Assets 1999 1998
(thousands)
-------------------------------------------------------------------------
Current assets:
Brokerage deposit $ 544 $ -
Cash in trust - 8,146
Receivables 4,306 3,247
Inventories 10,394 11,716
Prepaids and other 1,092 747
-------- --------
16,336 23,856
Agreement receivable 1,590 -
Oil and gas properties 2,719 3,134
Mineral properties 56,055 19,075
-------- --------
76,700 46,065
-----------------------------------------------------------------------
Liabilities and Shareholders' Equity
-----------------------------------------------------------------------
Current liabilities:
Bank indebtedness 3,089 338
Payables 5,192 3,743
Current portion of estimated participation
liability - 192
Current portion of other liabilities 1,191 1,010
-------- --------
9,472 5,283
Estimated participation liability - 260
Other liabilities 2,431 1,105
Future site reclamation costs 2,166 756
Shareholders' equity 62,631 38,661
-------- --------
$ 76,700 $ 46,065
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CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31 1999 1998
(thousands)
-----------------------------------------------------------------------
Revenues: $ 6,841 $ 5,498
Gold
Oil and gas:
Gross revenue 1,455 1,511
Crown royalties (261) (190)
Alberta Royalty Tax Credit 163 175
Overriding royalties (623) (689)
-------- --------
Net oil and gas revenue 734 807
-------- --------
7,575 6,305
Expenses:
Gold 4,488 3,262
Oil and gas 497 522
General and administrative 333 302
Interest and other income - (314)
Provision for income taxes 99 53
-------- --------
5,417 3,825
-------- --------
Earnings before the undernoted items 2,158 2,480
Depreciation, depletion and reclamation:
Gold 1,232 1,685
Oil and gas 189 216
Provision for foreign currency
fluctuations (Note 1) (493) -
-------- --------
Net earnings $ 1,230 $ 579
Net earnings per share $ 0.04 $ 0.03
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(Note 1) Provision for Foreign Currency Fluctuations
At March 31, 1999, the Company had outstanding foreign exchange contracts
to sell US $18.0 million at an average exchange rate of 1.3185. The
value of these contracts are marked to market with the resulting
adjustment to the provision for foreign currency fluctuations. Including
the provision for foreign currency fluctuations, these contracts now have
an effective exchange rate of 1.5085.
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CONSOLIDATED STATEMENTS OF CHANGES
IN FINANCIAL POSITION
Three months ended March 31 1999 1998
(thousands)
-----------------------------------------------------------------------
Cash provided from (used in):
Operations:
Net earnings $ 1,230 $ 579
Non cash items:
Depreciation, depletion and reclamation 1,421 1,901
Provision for foreign currency
fluctuations (493) -
-------- --------
Cash from operations 2,158 2,480
Net change in operating working capital:
Receivables 2,532 (988)
Inventories (1,844) (3,200)
Prepaids and others 29 38
Payables 502 1,844
-------- --------
3,377 174
Investing:
Oil and gas properties (51) (207)
Mineral properties (6,005) (2,281)
-------- --------
(6,056) (2,488)
Financing:
Repayment of estimated participation
liability - (48)
Other liabilities (559) (316)
Issue of common shares 645 88
Issue of special warrants (51) 8,146
-------- --------
35 7,870
-------- --------
Increase (decrease) in cash (2,644) 5,556
Cash position, beginning of year 99 2,252
-------- --------
Cash position, end of period $ (2,545) $ 7,808
Cash being comprised of:
Brokerage deposit $ 544 $ -
Cash in trust - 8,146
Bank indebtedness (3,089) (338)
-------- --------
(2,545) 7,808
Cash from operations per share $ 0.07 $ 0.14
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%SEDAR: 00000498E
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For further information: Neil McMillan, President, (306) 668-7505
clauderesources.com |
