Friday May 29, 9:03 pm Eastern Time
Company Press Release
Dayton Mining: First Quarter 1998 Results
VANCOUVER, British Columbia--(BUSINESS WIRE)--May 29, 1998-- Dayton Mining Corporation (''Dayton'') (AMEX/TSE: DAY) announces today its results for the three months ended March 31, 1998, with all amounts in Canadian dollars unless otherwise stated.
FINANCE AND OPERATIONS
Don MacDonald, Chief Financial Officer, today reported that the Andacollo Gold Mine produced 18,109 ounces of gold (or 5 percent less than budget) in the three months ended March 31, 1998 compared with 23,540 ounces of gold in the same period in 1997. Gold production was hampered in the first quarter of 1998 by lower than projected grades, which resulted in part from the difficulty of mining around the old workings at the Socorro deposit, the need to mine ore from the lower grade Tres Perlas West deposit and water supply problems. Cash operating costs at the Andacollo Gold Mine were US$284 per ounce of gold for the quarter compared with US$229 (as restated) for the same quarter in 1997.
OPERATIONS REVIEW
The Andacollo operation production results were lower than anticipated and cash costs per ounce of gold during the first three months of 1998 were higher than anticipated. Although the sources for these results are known, an extensive review of the Andacollo operation has been ongoing since February of this year. A number of key personnel changes have occurred since the end of the quarter, as a result of this review and a result of previously planned changes. A new General Manager for the Andacollo Gold Mine was hired in April; a new Mine Manager was appointed in May; a consultant with 34 years experience in mining was hired to review the entire operation; and all geology and grade control responsibilities have been consolidated under one person.
In April, Fred Earnest assumed the role of General Manager of the Andacollo operation. Fred has a strong background in mine planning and engineering. It is expected that this background will significantly enhance and contribute to the Andacollo operation. Harming Rivera was promoted to Mine Manager in May. Harming has a strong mine operations background that is expected to strengthen operations at the Andacollo Mine. David Beling, a mine operations manager with over 34 years of mine operation and heap leach gold experience, has been retained to review and make recommendations to management regarding the operation. Mr. Beling has already spent three weeks at Andacollo and his initial recommendations are currently being implemented or are under review. His involvement is planned to be ongoing. Patricio Valenzuela, formerly Chief Exploration Geologist, has been made responsible for all geological functions at the mine including the construction of the computer models, grade control practices and reconciliation of the estimated ore grade versus the grade actually mined. Mr. Valenzuela will report directly to Mr. Earnest. It is believed that these personnel changes along with other operating changes and efficiencies that have been put into place will significantly enhance the performance of the Andacollo operation.
In addition to improving the operation through personnel and other changes, a major effort has been directed toward improving grade control, particularly at the high grade Socorro pit, where mining commenced in 1997. Mine Reserve Associates, of Denver, (''MRA'') who have been consulting on the property for several years, were mandated to closely review with on-site staff and outside consultants, the company's mining results to date, so as to better forecast mining grade and tonnage going forward. This has proved particularly important as mining at the higher grade Socorro deposit has been difficult because of old mine workings. These old workings have hampered mining operations, led to greater ore dilution occurring and made it more difficult to accurately predict grades with the higher cut-off grades that are being used as a result of the current depressed gold prices.
In addition to MRA's work, Messrs. Earnest, Beling, Valenzuela and Chief Operating Officer Rex Outzen have been reviewing the reserve modeling, assaying, grade control and mining practices throughout the operation in order to improve overall grade control, efficiency and productivity at the Andacollo mine.
FINANCIAL REVIEW
Total material mined in the first quarter of 1998 was up 50 percent at 5,803,000 tonnes at a stripping ratio of 3.1:1, compared with 3,872,000 tonnes at a stripping ratio of 2.1:1 in the same period in 1997. Ore tonnes mined increased 13 percent to 1,402,000 tonnes of ore grading 0.78 grams of gold per tonne (gpt) compared with 1,237,000 tonnes of ore grading 0.93 gpt, in the same period in 1997. Tonnes crushed increased 36 percent to 1,439,000 tonnes grading 0.73 gpt compared with 1,061,000 tonnes grading 0.93 gpt in the same period in 1997.
Since the stripping ratio in 1998 is significantly higher than the life-of-mine stripping ratio, Dayton has commenced in 1998 allocating mining costs based upon the life-of-mine average stripping ratio, in accordance with the Gold Institute guidelines. Since this is a change in accounting policy, 1997 and 1996 operating results have been restated. This change has had no material effect on the balance sheet at December 31, 1997, although it does have an effect on the operating results within 1997 and 1996. Using this method, cash operating costs for 1997 and 1996, as restated, were US$235 per ounce of gold and US$218 per ounce, respectively, compared with the previously reported costs of US$251 and US$205 per ounce, respectively.
Dayton Mining Corporation made a net loss of $3,386,000 or $0.12 per share (after recognizing the effect of the equity accretion on convertible debentures) for the three months ended March 31, 1998, compared with theash operating costs at the Andacollo Gold Mine were US$284 per ounce of gold for the quarter compared with US$229 (as restated) for the same quarter in 1997.
Revenues were $10,194,000 for the first quarter of 1998 compared with $12,499,000 in the same period in 1997. The average price realized for gold sold during the first quarter of 1998 was US$403 per ounce compared with US$390 per ounce for the same period in 1997. During the quarter the Company paid down on schedule approximately $20 million of its bank loan.
As previously announced, at current gold prices and the current loan life, the Andacollo Gold Mine is not in compliance with certain economic tests under its bank credit facility. The Corporation and the banks are negotiating modifications to the credit facility to bring the operations into compliance. Possible modifications include repaying a portion of the credit facility, reducing the interest rate and extending the term of the loan. Approximately $5 million was repaid on the credit facility, on schedule, in April 1998. Under the credit facility, the scheduled future repayments are $10 million in 1998, $21 million in 1999 and $5 million in 2000.
On May 29, 1998, as a result of the announcement by Manchester Securities Corp. that it intends to seek to replace Dayton's board of directors at the Annual General Meeting on June 17, 1998, the banks requested that Dayton cash collateralize the loan, pending a review by the banks of the board of directors of Dayton after the Annual General Meeting and completion of renegotiation of the credit facility. As at this date, Dayton's cash position is approximately $52 million, and the bank debt is $36 million.
Dayton continues to actively pursue opportunities worldwide using both Dayton personnel and outside consultants. The Company holds a 100 percent interest in the Andacollo Gold Mine located in central Chile, and trades on both the American Stock Exchange (AMEX) and Toronto Stock Exchange (TSE) under the trading symbol DAY.
Notice: The Company relies on litigation protection for ''forward looking'' statements.
Consolidated Balance Sheets
in thousands of Canadian dollars
31 Mar 1998 31 Dec 1997
(unaudited) (audited)
Assets
CURRENT ASSETS
Cash and short term investments 64,731 95,237
Investments in marketable securities 839 839
Bullion settlements receivable 2,969 2,950
Other receivables 3,975 3,841
Inventories 11,343 9,521
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Total current assets 83,857 112,388
PLANT, PROPERTY AND EQUIPMENT 108,488 105,729
OTHER ASSETS 3,736 4,826
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Total assets 196,081 222,943
------------------------
Liabilities
CURRENT LIABILITIES
Accounts payable and
accrued liabilities 7,196 9,812
Bank loan current 40,474 61,307
Capital lease obligation - current 3,694 3,596
Convertible debentures -
liability - current 6,725 6,673
------------------------
Total current liabilities 58,089 81,388
------------------------
LONGTERM LIABILITIES
Capital lease obligation 6,786 7,233
Convertible debentures - liability 19,796 19,605
Other accrued liabilities 1,619 1,540
------------------------
Total longterm liabilities 28,201 28,378
------------------------
Total liabilities 86,290 109,766
------------------------
Shareholders' Equity
SHARE CAPITAL 90,714 90,714
CONVERTIBLE DEBENTURES 69,266 67,904
DEFICIT (50,189) (45,441)
------------------------
Total shareholders' equity 109,791 113,177
------------------------
Total liabilities and equity 196,081 222,943
------------------------
Consolidated Statements of Income
for the periods ended March 31
in thousands of Canadian dollars
(unaudited)
Three months ended
March 31
1998 1997
REVENUES
Sales 10,194 12,499
------------------------
COST OF SALES
Operating costs 7,139 7,323
Depreciation, depletion
and amortization 2,277 2,655
------------------------
Total cost of sales 9,416 9,978
------------------------
778 2,521
------------------------
EXPENSES
Amortization of deferred
financing costs 175 484
Exploration 119 180
Foreign exchange and other 649 (1,041)
General and administrative 2,292 1,142
Interest expense 1,813 1,601
Interest income (884) (557)
------------------------
Total expenses 4,164 1,809
------------------------
NET INCOME (LOSS) (3,386) 712
------------------------
Weighted average shares
outstanding - basic (000's) 40,857 40,847
Weighted average shares
outstanding - fully diluted (000's) 55,775 50,568
Earnings (loss) per share
- basic $ (0.12) $ 0.01
Earnings (loss) per share
- fully diluted $ (0.12) $ 0.01
Consolidated Statements of Deficit
for the periods ended March 31
in thousands of Canadian dollars
(unaudited)
Three months ended
March 31
1998 1997
DEFICIT, BEGINNING OF PERIOD 45,441 14,880
Convertible debentures
- equity accretion 1,362 387
Net (income) loss for the period 3,386 (712)
------------------------
DEFICIT, END OF PERIOD 50,189 14,555
------------------------
Gold produced (oz) 18,109 23,540
Average price realized (US$/oz) 403 390
Cash operating costs per ounce (US$/oz) 284 229
Consolidated Statements of Cash Flows
for the periods ended March 31
in thousands of Canadian dollars
(unaudited)
Three months ended
March 31
1998 1997
OPERATING ACTIVITIES
Net income (loss) for the period (3,386) 712
Adjustment to reconcile net income (loss) to
cash provided by operating activities
Depletion, depreciation and
amortization 2,277 2,655
Amortization of deferred
financing costs 175 484
Amortization of deferred
foreign exchange 371 2
Amortization of other assets 11 12
------------------------
Cashflow from operations (552) 3,865
Bullion sales receivable (18) 495
Other receivables (134) (1,137)
Inventories (1,822) (110)
Accounts payable (2,116) 1,251
Bank loans current portion (20,833) 54,426
Capital lease obligation
- current portion 98 26
------------------------
Cashflow provided by (used for)
operating activities (25,377) 58,816
------------------------
INVESTING ACTIVITIES
Property, plant and equipment (3,335) (1,446)
Mining costs deferred (1,700) (524)
Other assets (68) 24
------------------------
Cashflow used for
investing activities (5,103) (1,946)
------------------------
FINANCING ACTIVITIES
Bank loans 250 (59,256)
Capital lease obligation (356) (698)
Accrued liabilities 80 27
Share capital - 242
Convertible debentures - 90,869
------------------------
Cashflow provided by (used for)
financing activities (26) 31,184
------------------------
NET INCREASE (DECREASE) IN CASH (30,506) 88,054
CASH, BEGINNING OF PERIOD 95,237 22,114
------------------------
CASH, END OF PERIOD 64,731 110,168
------------------------
Cashflow from operations
per share - basic $ (0.01) $ 0.09
Cashflow from operations
per share - fully diluted $ (0.01) $ 0.08
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