ENP Newswire -
Release date- 01082014 -
'We produced 33,000 ounces in the second quarter of 2014 at total cash costs of
'We secured the surface rights at
We remain confident we will achieve our full year production guidance of 150,000 to 170,000 ounces. With strong ongoing cash flow generation, over
Second Quarter 2014 Highlights
Realized quarterly earnings of
Generated cash from operating activities before changes in non-cash working capital of
Sold 34,039 ounces of gold at an average realized price of
Reported cash and cash equivalents and short-term investments of
Paid a semi-annual dividend of
Produced 33,000 ounces of gold at total cash costs of
Announced execution of an agreement to acquire the surface rights to the La Yaqui and
Commenced underground development of
Second Quarter 2014 Financial Results
The Company continued to generate strong operating margins in the second quarter of 2014 despite a substantial decrease in the gold price, as low cash costs allowed the Company to generate
Cash from operating activities of
Earnings before income taxes in the second quarter of 2014 were
Capital expenditures in the second quarter of 2014 totalled
In addition, development spending of
Second Quarter 2014 Operating Results
Gold production of 33,000 ounces in the second quarter of 2014 decreased 38% compared to 53,000 ounces in 2013. Lower gold production in the second quarter of 2014 relative to the second quarter of 2013 was attributable to lower grades and recoveries and less high grade mill production.
Total crusher throughput in the second quarter of 2014 averaged 17,400 tpd, slightly below the budgeted annual average throughput as a result of lower high grade mill feed from Escondida Deep.
The Company continued to benefit from higher grades in the second quarter of 2014, with the grade of crushed ore stacked on the leach pad of 0.93 g/t Au being 9% higher than the budgeted annual grade of 0.85 g/t Au. The grade of ore mined and milled from the Escondida Deep deposit was 8.65 g/t Au for the quarter, consistent with the reserve grade. However, the number of tonnes mined and processed from the Escondida Deep deposit in the second quarter was below expectations.
The Escondida Deep deposit was developed in the first half of 2014 and, based on proven and probable mineral reserves as at
To-date, structurally controlled fracturing within the deposit and higher than anticipated mining dilution have contributed to the Company mining and milling approximately 11,000 tonnes at an average grade of 7 g/t Au for a total of 2,500 contained ounces.
The Company expects to mine and process up to an additional 10,000 tonnes from Escondida Deep, at grades similar to those mined to date, in the third quarter of 2014 at which point the current deposit is expected to be depleted. Exploration activities will continue with the objective of delineating additional high grade mineral resources at other underground targets in proximity to Escondida Deep.
Development of the
The Company is investing approximately
Accordingly, high grade ore mined at
The ratio of ounces produced to contained ounces stacked or milled (or recovery ratio) in the second quarter was 67% compared to 75% in the second quarter of 2013, due to lower mill production in 2014, which has a higher recovery ratio than heap leach production.
Cash operating costs of
The Ministry contested the Court's decision on the basis that there was no applicable regulatory requirement to include such an assessment in an EIA report at the relevant time. Notwithstanding this factor, in the second quarter, the Canakkale Administrative Court upheld its earlier injunction decision and officially revoked the Ministry's EIA approval in relation to the Kirazli main project due to the lack of cumulative impact assessment ('
At the time of the original injunction ruling, given the regulatory uncertainty surrounding the issue, as a contingency measure the Company commenced preparation of an amended EIA for the Kirazli project that includes a cumulative impact assessment. The Company expects to be in a position to submit this revised EIA by the end of
Given that the Company is already awaiting forestry and operating permits, and given the recent political developments in
The Company's EIA for
The Company has budgeted spending of
Second Quarter 2014 Exploration Update
Total exploration expenditures in the second quarter of 2014 were
The focus of exploration at
Four deposits were drilled during the quarter including
Drilling in the Escondida-Gap zone was completed early in the second quarter to test whether the high-grade Escondida Deep style mineralization extends northwest into Gap. Due to the promising intercepts encountered during the testing, a systematic program of exploration is now envisioned for this deposit as part of the 2015 program.
The Company capitalized
During the quarter,
The Company is confident that it can achieve its full year production guidance of 150,000 to 170,000 ounces. Gold production in the first half of 2014 totaled 70,000 ounces at cost levels within the Company's guidance range for the year. While production results benefited from 15% higher grades from heap leach ore in the first half of 2014, negative grade and tonne reconciliations at the Escondida Deep deposit resulted in lower than planned high grade mill production.
The Company expects to process the remainder of the Escondida Deep deposit (up to 10,000 tonnes at similar grades processed to date) in the third quarter and has transitioned to underground mining activities at the
The Company will undertake modifications to the milling circuit in the third quarter in order to ensure optimal recoveries from the different ore types within the
In order to maximize gold recovered, high grade
Third quarter gold production has historically been impacted by the onset of the rainy season, which causes dilution of the leach pad and results in production being deferred until the fourth quarter. Accordingly, the Company expects a strong improvement in production in the fourth quarter.
Looking beyond 2014, the Company expects development of the
The Company closed the acquisition of the surface rights to the La Yaqui deposit in
The focus over the next 18-24 months will be on permitting and developing the two deposits with initial production expected in 2016. The two projects are expected to contribute an average of 33,000 ounces per year of low cost gold production over a 5 year mine life, with peak annual production of 50,000 ounces. The near term focus will be on baseline studies and compiling environmental impact assessments for both
This will be followed by a 6-8 month construction period at La Yaqui and 8-10 month construction period at
Gold production from the first of the Company's Turkish projects, Kirazli, is expected within 18 months of receipt of the outstanding forestry and operating permits. The Company remains confident that these permits will be granted.
However, recent legal developments have increased uncertainty of the expected timing for receipt of these permits. While the Company awaits positive resolution of the legal process, as a contingency measure the Company is also amending its EIA for the Kirazli project to include an assessment of the potential cumulative impacts of proposed projects in the region, and expects to be in a position to file it by the end of September, 2014.
With the completion of the Esperanza and Orsa acquisitions in 2013, the Company increased its development pipeline substantially. Development spending at Esperanza in 2014 of approximately
The Company's financial position remains strong, with over
This press release should be read in conjunction with the Company's interim consolidated financial statements for the three and six month periods ended
Alamos is an established Canadian-based gold producer that owns and operates the
Alamos has approximately
This News Release includes certain 'forward-looking statements'. All statements other than statements of historical fact included in this release, including without limitation statements regarding forecast gold production, gold grades, recoveries, waste-to-ore ratios, total cash costs, potential mineralization and reserves, exploration results, and future plans and objectives of Alamos, are forward-looking statements that involve various risks and uncertainties.
These forward-looking statements include, but are not limited to, statements with respect to mining and processing of mined ore, achieving projected recovery rates, anticipated production rates and mine life, operating efficiencies, costs and expenditures, changes in mineral resources and conversion of mineral resources to proven and probable reserves, and other information that is based on forecasts of future operational or financial results, estimates of amounts not yet determinable and assumptions of management.
Exploration results that include geophysics, sampling, and drill results on wide spacings may not be indicative of the occurrence of a mineral deposit. Such results do not provide assurance that further work will establish sufficient grade, continuity, metallurgical characteristics and economic potential to be classed as a category of mineral resource.
A mineral resource that is classified as 'inferred' or 'indicated' has a great amount of uncertainty as to its existence and economic and legal feasibility. It cannot be assumed that any or part of an 'indicated mineral resource' or 'inferred mineral resource' will ever be upgraded to a higher category of resource. Investors are cautioned not to assume that all or any part of mineral deposits in these categories will ever be converted into proven and probable reserves.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as 'expects' or 'does not expect', 'is expected', 'anticipates' or 'does not anticipate', 'plans', 'estimates' or 'intends', or stating that certain actions, events or results 'may', 'could', 'would', 'might' or 'will' be taken, occur or be achieved) are not statements of historical fact and may be 'forward-looking statements'.
Forward-looking statements are subject to a variety of risks and uncertainties that could cause actual events or results to differ from those reflected in the forward-looking statements.
There can be no assurance that forward-looking statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.
Important factors that could cause actual results to differ materially from Alamos' expectations include, among others, risks related to international operations, the actual results of current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined as well as future prices of gold and silver, as well as those factors discussed in the section entitled 'Risk Factors' in Alamos' Annual Information Form.
Although Alamos has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
Cautionary non-GAAP Measures and Additional GAAP Measures
Note that for purposes of this section, GAAP refers to IFRS. The Company believes that investors use certain non-GAAP and additional GAAP measures as indicators to assess gold mining companies. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP. Non-GAAP and additional GAAP measures do not have a standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other companies.
1. Cash flow from operating activities before changes in non-cash working capital
'Cash flow from operating activities before changes in non-cash working capital' is a non-GAAP performance measure that could provide an indication of the Company's ability to generate cash flows from operations, and is calculated by adding back the change in non-cash working capital to 'Cash provided by (used in) operating activities' as presented on the Company's consolidated statements of cash flows.
2. Mining cost per tonne of ore
'Mining cost per tonne of ore' and 'Cost per tonne of ore' are non-GAAP performance measures that could provide an indication of the mining and processing efficiency and effectiveness of the mine. These measures are calculated by dividing the relevant mining and processing costs and total costs by the tonnes of ore processed in the period. 'Cost per tonne of ore' is usually affected by operating efficiencies and waste-to-ore ratios in the period.
3. Cash operating costs per ounce and total cash costs per ounce
'Cash operating costs per ounce' and 'total cash costs per ounce' as used in this analysis are non-GAAP terms typically used by gold mining companies to assess the level of gross margin available to the Company by subtracting these costs from the unit price realized during the period. These non-GAAP terms are also used to assess the ability of a mining company to generate cash flow from operations. There may be some variation in the method of computation of 'cash operating costs per ounce' as determined by the Company compared with other mining companies.
In this context, 'cash operating costs per ounce' reflects the cash operating costs allocated from in-process and dore inventory associated with ounces of gold sold in the period. 'Cash operating costs per ounce' may vary from one period to another due to operating efficiencies, waste-to-ore ratios, grade of ore processed and gold recovery rates in the period. 'Total cash costs per ounce' includes 'cash operating costs per ounce' plus applicable royalties. Cash operating costs per ounce and total cash costs per ounce are exclusive of exploration costs.
4. All-in sustaining cost per ounce
Effective 2013, in conjunction with a non-GAAP initiative being undertaken by the gold mining industry, the Company is adopting an 'all-in sustaining cost per ounce' non-GAAP performance measure. The Company believes the measure more fully defines the total costs associated with producing gold; however, this performance measure has no standardized meaning. Accordingly, there may be some variation in the method of computation of 'all-in sustaining cost per ounce' as determined by the Company compared with other mining companies.
In this context, 'all-in sustaining cost per ounce' reflects total mining and processing costs, corporate and administrative costs, exploration costs, sustaining capital, and other operating costs. Sustaining capital expenditures are expenditures that do not increase annual gold ounce production at a mine site and excludes all expenditures at the Company's development projects as well as certain expenditures at the Company's operating sites that are deemed expansionary in nature.
5. All-in cost
Effective 2013, in conjunction with a non-GAAP initiative being undertaken by the gold mining industry, the Company is adopting an 'all-in cost per ounce' non-GAAP performance measure; however, this performance measure has no standardized meaning.
Accordingly, there may be some variation in the method of computation of 'all-in cost per ounce' as determined by the Company compared with other mining companies. In this context, 'all-in cost per ounce' reflects total all-in sustaining cash costs, plus capital, operating, and exploration costs associated with the Company's development projects.
6. Other additional GAAP measures
Additional GAAP measures that are presented on the face of the Company's consolidated statements of comprehensive income and are not meant to be a substitute for other subtotals or totals presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. The following additional GAAP measures are used and are intended to provide an indication of the Company's mine and operating performance:
Mine operating costs - represents the total of mining and processing, royalties, and amortization expense
Earnings from mine operations - represents the amount of revenues in excess of mining and processing, royalties, and amortization expense
Earnings from operations - represents the amount of earnings before net finance income/expense, foreign exchange gain/loss, other income/loss, and income tax expense
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