Alamos Gold earns $8.79-million (U.S.) in Q1
2009-05-06 20:44 ET - News Release
Shares issued 107,260,506
AGI Close 2009-05-05 C$ 7.70
Mr. Jon Morda reports
ALAMOS GOLD INC. REPORTS FIRST QUARTER 2009 FINANCIAL RESULTS
Alamos Gold Inc. has released its financial results for the first quarter ended March 31, 2009. The company's interim consolidated financial statements for the three-month periods ended March 31, 2009, and March 31, 2008, and related management's discussion and analysis, will be available under the company's name on SEDAR.
All amounts are unaudited and in United States dollars, unless otherwise stated.
First quarter 2009 highlights
During the three-month period ended March 31, 2009, the company:
- Recognized quarterly earnings of $8.8 million ($0.09 per share) compared to earnings of $5.7 million ($0.06 per share) in the first quarter of 2008. - Produced a record 46,000 ounces at a cash operating cost of $306 per ounce of gold sold (total cash cost inclusive of royalties of $353 per ounce of gold sold). - Announced updated reserves and resources with the increase in reserves supporting a doubling of mine life (based on current throughput rates). - Significantly increased the Company's cash position through completion of a bought-deal financing for net proceeds of $62.2 million. - Reported a 14% increase in revenues from $31 million in the first quarter of 2008 to $35.5 million in the first quarter of 2009. - Generated cash flows from operating activities of $16.7 million or $0.16 per share compared to $14.8 million or $0.16 per share (basic) in the first quarter of 2008. - Sold 40,058 ounces of gold, representing an increase of 16% over gold sales in the first quarter of 2008 of 34,609 ounces. - Increased cash balances by $75.2 million in the quarter to $119 million at March 31, 2009.
Results of Operations
Gold production of 46,000 ounces in the first quarter of 2009 increased 38% over gold production of 33,253 ounces in the first quarter of 2008. Gold sales in the first quarter of 2009 increased 16% over the comparable period of 2008 to 40,058 ounces. The table below outlines key quarterly production indicators during the first quarters of 2009 and 2008:
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Production summary Q1 Q1 Change Change
2009 2008 (#) (%)
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Ounces produced (1) 46,000 33,253 12,747 38%
Ore mined (tonnes) 1,047,000 1,230,000 (183,000) (15%)
Waste mined (tonnes) 1,532,000 1,653,000 (121,000) (7%)
Total mined (tonnes) 2,579,000 2,883,000 (304,000) (11%)
Waste-to-ore ratio 1.46 1.34 0.12 9%
Ore crushed (tonnes) 1,068,000 1,244,000 (176,000) (14%)
Ore mined per day (tonnes) 11,500 13,500 (2,000) (15%)
Ore crushed per day (tonnes) 11,700 13,670 (1,970) (14%)
Grade (g/t Au) 1.71 2.34 (0.63) (27%)
(1) Reported gold production for Q1 2008 has been adjusted to reflect
final refinery settlement. Reported gold production for Q1 2009 is
subject to final refinery settlement and may be adjusted.
A new quarterly record was set as gold production in the first quarter of 2009 increased 38% over the prior year period to 46,000 ounces. The Company previously announced that the drum agglomeration process was commissioned ahead of schedule in December 2008. At that time, the Company reported that it expected drum agglomeration to improve leach pad percolation and increase gold recoveries. First quarter 2009 production has demonstrated the benefits of drum agglomeration, with the record level of gold production indicating that gold recoveries over the 17-week leach cycle are improving significantly.
Ore mined and crushed were below budget in the first quarter of 2009 due primarily to two factors. The Company completed a rebuild of the grizzly at the primary crusher in January which resulted in shutting down the primary crusher for approximately five days. In addition, in February and March 2009, the Company mined through an area of the open pit which contained harder than usual ore. This necessitated reducing crusher throughput in order to achieve the desired crush size specifications. In early April 2009, the Company finished mining in this area of the pit and expects ore mined and crushed to increase from the first quarter level of between 11,500 - 11,700 tonnes per day to the budgeted level of approximately 13,400 tonnes per day.
The grade of ore crushed and stacked on the leach pad in the first quarter of 2009 was 1.71 g/t Au, slightly higher than the Company's 2009 budgeted grade of 1.60 g/t Au. In the first quarter of 2008, the Company crushed ore with a grade of 2.34 g/t Au, significantly higher than the budgeted grade.
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Costs per tonne summary Q1 Q1 Change
2009 2008 %
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Mining cost per tonne of material $1.46 $1.50 (3%)
(ore and waste)
Waste-to-ore ratio 1.46 1.34 9%
Mining cost per tonne of ore $3.60 $3.51 3%
Crushing/conveying cost per tonne of ore $1.78 $2.24 (21%)
Processing cost per tonne of ore $2.26 $2.22 2%
Mine administration cost per tonne of ore $1.57 $1.47 7%
Total cost per tonne of ore $9.21 $9.44 (2%)
Total cost per tonne of ore in the first quarter of 2008 was $9.21 or 2% lower than the $9.44 incurred in the same period of 2008. The marginally lower cost per tonne of ore in the first quarter of 2009 was due in part to the weakening of the Mexican peso, offset by lower tonnes throughput and a higher waste-to-ore ratio.
Mining cost per tonne of material was $1.46 in the current period, 3% lower than $1.50 in the first quarter of 2008 despite an 11% decrease in the tonnes of total material mined.
Crushing and conveying cost per tonne of ore in the first quarter of 2009 was $1.78. This represented a 21% decrease compared to the prior year period and is primarily attributable to cost savings realized from the conveying and stacking system. Additional costs associated with the new stage of crushing and an enhanced preventative maintenance schedule have been more than offset by costs savings associated with the elimination of truck-hauling and loading ore on the leach pad.
Processing cost per tonne of ore in the first quarter of 2009 was $2.26 compared to $2.22 in the comparable period of 2008. Processing costs include expenditures incurred with respect to the leach pad, gold recovery plant and refining activities. The conveying and stacking system commissioned in the second quarter of 2008 has resulted in a more efficient lime application process which has decreased lime consumption and corresponding lime costs. Cost savings related to lower lime consumption have been offset by the addition of cement costs to the Company's processing cost structure resulting from the commissioning of the drum agglomeration circuit in December 2008.
Mine administration cost per tonne of ore in the three months ended March 31, 2009 was $1.57 compared with $1.47 in the same period of 2008. This increase is primarily attributable to lower tonnes throughput in the first quarter of 2009 compared to the same period of 2008.
Cash operating costs of $306 per ounce of gold sold in the first quarter of 2009 was 16% lower than the $366 reported in the first quarter of 2008. Cash operating costs per ounce have declined as a result of the weakening Mexican peso, a higher estimated recovery factor and overall lower costs per tonne of ore. The Company expects cash costs per ounce to decrease in subsequent quarters after higher cost in-process inventory from 2008 is produced and charged to mining and processing costs.
Financial Highlights
The Company reported strong financial results in the first quarter of 2009, generating $15.1 million in cash from operating activities before changes in non-cash working capital, and $16.7 million ($0.16 per share) after changes in non-cash working capital. The $16.7 million cash provided by operating activities represents a 13% increase over the $14.8 million ($0.16 per share(basic)) generated in the first quarter of 2008. The change in non-cash working capital in the first quarter of 2009 of $1.6 million is primarily the result of a reduction in the Company's gold in-process inventory reflecting the drawdown of ounces from inventory as quarterly gold production significantly exceeded the number of recoverable ounces stacked on the leach pad during the period.
The Company recognized earnings before income taxes of $11.5 million in the first quarter of 2009 compared to $9.2 million in the same period of 2008.
The Company recorded earnings of $8.8 million or $0.09 per share in the first quarter of 2009 compared to $5.7 million or $0.06 per share in the corresponding period of 2008.
Gold Sales
Gold sales revenues of over $35.5 million in the first quarter of 2009 represented a 14% increase over the same period of 2008 as a result of a 16% increase in the number of ounces sold and a 1% decrease in the realized gold price per ounce. Gold sales in the first quarter of 2009 were approximately 6,000 ounces less than gold production due to the timing of refinery settlements which determines when gold is available for sale. The Company had a large inventory of dore at the end of the first quarter that is available for sale in the second quarter of the year.
The Company realized an average gold price of $887 per ounce in the first quarter of 2009, compared to an average London PM Fix spot gold price of $908 during the period. The Company generally enters into forward gold sales contracts twice monthly in order to match sales contracts with the next expected delivery. The Company's objective is to realize a gold sales price consistent with the average London PM Fix spot gold price. Periodically however, the Company may enter into forward gold sales contracts for future deliveries within a six-month future period in order to fix a gold price that management believes is attractive. At the current time, apart from short-term forward gold sales activity, the Company is fully leveraged to changes in the price of gold.
Operating Expenses and Operating Margins
Amortization was $127 per ounce of gold sold in the first quarter of 2009, marginally lower than the $133 per ounce in the comparable period of 2008. A significant portion of the Company's amortization expense is calculated on a units-of-production basis. An updated reserve estimate was prepared as at December 31, 2008 and reported during the first quarter. The new reserve estimate increased the mine life significantly. As a result, the Company expects amortization costs per ounce to decline in subsequent quarters of 2009.
Production from the Mine is subject to a sliding scale production royalty. At current gold prices above $400, the royalty is calculated at a rate of 5% of the value of gold and silver production, less certain deductible refining and transportation costs. The royalty is calculated based on the daily average London PM Fix gold market prices, not actual prices realized by the Company. With the achievement of commercial production on April 1, 2006, the Mine's production to a maximum of two million ounces of gold is subject to royalty. As at March 31, 2009, the royalty was paid or accrued on approximately 371,000 ounces of applicable gold production. Royalty expense for the first quarter of 2009 was $1.9 million compared to $1.7 million in the first quarter of 2008 due to higher production applicable to royalty and an increase in the average market price of gold.
Investment in Mineral Property, Plant and Equipment
Capital spending in the first quarter of 2009 included spending on construction activities focused on the leach pad, mobile equipment purchases and component changes, advancing the high-grade mill development and capitalized exploration spending.
During the first quarter, the Company purchased and began construction of the new inter-lift liner area where leach pad stacking is expected to start late in the second quarter of 2009. The inter-lift liner is expected to continue to contribute to improved leach pad percolation and corresponding recoveries.
Scheduled component changes totaled $0.6 million in the first quarter. The Company also replaced a portion of its light vehicle fleet in the first quarter.
Other key capital spending in the first quarter of 2009 included $0.4 million primarily in consulting costs related to the high-grade mill development plans and $0.25 million related to pit slope stability and other drilling to support the Company's updated reserve and resource estimate.
Liquidity and Capital Resources
During the first quarter of 2009, the Company's cash balance increased $75.2 million as a result of the net proceeds of the February 17, 2009 financing ($62.2 million) and strong cash flows from operations. At March 31, 2009, the Company had $119 million in cash and cash equivalents compared to $43.8 million at December 31, 2008.
The Company's working capital position increased from a working capital surplus of $63 million at December 31, 2008 to $136.1 million at March 31, 2009.
Cash flows from operating activities in the first quarter of 2009 were $16.7 million or $0.16 per share. The Company reinvested $5.2 million in capital and exploration in the first quarter, primarily focused on exploration drilling and inter-lift liner construction. Proceeds from the completed financing and the exercise of stock options combined to add $63.6 million to the Company's cash balances during the quarter.
With cash balances of $119 million, working capital of $136.1 million and no debt, the Company is well positioned to support aggressive exploration spending on its existing properties, further development of the Mulatos Pit, potential construction of a mill to process high grades ores and acquisitions.
Outlook
In the first quarter of 2009, the Company established a production record of 46,000 ounces. While this level of gold production is not expected to be sustainable, the Company is encouraged by continued evidence that recoveries are achieving or exceeding the Company's budgeted rate of 60% for 2009. Annual production for 2009 is expected to be between 145,000 and 160,000 ounces of gold.
The Company reported total cash costs (including the 5% royalty) of $353 per ounce in the first quarter. These costs related primarily to ounces that were in leach pad inventory at the end of 2008 and were produced in 2009. Higher recoveries combined with a weaker Mexican peso during the first quarter resulted in substantially reducing the cash cost per ounce in leach pad inventory. Second quarter 2008 total cash costs are expected to be below the Company's full year 2009 guidance of $350 per ounce. In addition, lower amortization per ounce in the second quarter of 2009 is expected to result from the near doubling of mine life that the Company announced in the first quarter. If the gold price remains at or around its current level, these factors should result in the Company reporting higher operating earnings in the second quarter of 2009.
Mine capital spending in the second quarter will focus on closing the existing crushing circuit to ensure that the crusher discharge product size is 100% passing 3/8th of an inch. Independent metallurgical testing shows that closing the crushing circuit could improve recoveries by between 4-7%.
A technical study supporting the construction of a mill to process high grade ores including the Escondida deposit is expected to be released shortly.
Exploration activities in the second quarter of 2009 will continue to focus on extending and delineating the newly discovered high-grade zones at Escondida, continuing with resource definition and development at Gap, and compilation and modeling at Cerro Pelon in preparation for a resource estimate to be completed during the second half of the year, and pursue drill target definition at the prospective El Carricito regional target.
The Company continues to strengthen its financial position, debt-free with $119 million in cash on hand at the end of the first quarter and strong cash flows from operations. This financial strength will allow the Company to finance its existing capital and exploration plans, as well as provide significant funding for development of additional projects through potential acquisitions.
Conference Call
The Company's senior management will host a conference call on Thursday, May 7, 2009 at 11:00AM EDT (8:00AM PDT) to discuss the financial results and to provide an update of the Company's operating, exploration and development activities.
The conference call may be accessed via webcast or telephone as follows:
Via webcast:
A live audio webcast of the meeting will be available on the Company's homepage at www.alamosgold.com.
Via telephone:
For those preferring to listen to the conference call via telephone, please dial 416-695-6130 or toll-free 1-866-852-2121. To ensure your participation, please call approximately five minutes prior to the scheduled start of the call.
Instant replay archive:
Please dial 416-695-5800 or the toll-free access number 1-800-408-3053, passcode 7276356, followed by the # key.
The conference call will be available for replay from Thursday, May 7, 2009 at 1:00PM EDT to Thursday, May 21, 2009 at 11:59 PM EDT.
The webcast will be archived for 180 days on the Company's website.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited - stated in thousands of United States dollars,
except per share amounts)
For the three-month
periods ended March 31,
2009 2008
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OPERATING REVENUES
Gold sales $35,521 $31,030
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OPERATING EXPENSES
Mining and processing 12,253 12,682
Royalties 1,886 1,654
Amortization 5,095 4,611
Exploration 1,582 564
Corporate and administrative 1,514 1,028
Stock-based compensation 1,300 970
Accretion expense 86 82
Employee future benefits 62 16
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23,778 21,607
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EARNINGS FROM OPERATIONS 11,743 9,423
Interest income 261 48
Interest expense - (188)
Accretion of convertible debenture discount - (19)
Foreign exchange loss (1,243) (174)
Other income 706 64
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Earnings before income taxes for the period 11,467 9,154
Income taxes
- Current expense (2,670) (3,650)
- Future recovery - 200
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Earnings for the period $8,797 $5,704
Other comprehensive income
- Unrealized gain on securities 454 -
- Reclassification of realized losses on
available for sale securities to earnings 99 -
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Comprehensive income for the period $9,350 $5,704
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Earnings per share for the period
- basic and diluted $0.09 $0.06
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We seek Safe Harbor. |
