First Quarter 2013 Operating Results
Gold production of 55,000 ounces in the first quarter of 2013 increased 36% compared to 40,500 ounces in the first quarter of 2012. Higher gold production in the first quarter of 2013 relative to the first quarter of 2012 was primarily attributable to higher crusher throughput. In addition, production in the first quarter of 2013 benefitted from a full quarter of production from the Escondida high-grade zone compared to a commissioning period in the first quarter of 2012.
Crusher throughput in the first quarter of 2013 averaged 17,900 tpd, 29% higher than 13,900 tpd in the same period last year and above the annual average budgeted rate of 17,500 tpd. This was the second consecutive quarter in which crusher throughput exceeded 17,500 tpd. During the first quarter of 2013, mill throughput met budgeted levels of 500 tpd.
The grade of the crushed ore stacked on the leach pad in the first quarter of 2013 of 1.25 g/t Au was higher than the full year budgeted grade of 0.98 g/t Au, and higher than the grade in the first quarter of 2012 of 1.17 g/t Au.
The grade of the Escondida high-grade zone mined and milled in the first quarter of 2013 was 6.59 g/t Au, below the Company's full year budgeted average grade of 11 g/t Au. The bench mined during the quarter contained an area with highly silicified ore and weak fracturing, which had substantially lower grades than were modelled. Despite the shortfall in grade in the first quarter of 2013, the average grade of ore milled from the Escondida zone since the start of mining has averaged 11.27 g/t Au, which is consistent with the reserve grade. The Company expects to have completed mining the Escondida high-grade reserves at the end of 2013, at which point the Escondida Deep zone is expected to provide additional high-grade mill feed.
The reconciliation of mined blocks to the block model for the Global Mulatos Pit, including Escondida, for the quarter ended March 31, 2013 was +28%, -29% and -10% for tonnes, grade and ounces, respectively. During the first quarter of 2013, the Company encountered significantly more tonnes of ore, which had been modelled as waste in the block model, as the actual recoveries were better than reported in the model. The negative grade reconciliation was due to the lower grades encountered in the Escondida zone.
Since the start of mining activities in 2005, the project-to-date reconciliation is +3%, +5%, and +9% for tonnes, grade and ounces, respectively. Positive variances indicate that the Company is mining more gold than was indicated in the reserve model.
The recovery ratio in the first quarter of 2013 was 76%, in line with the Company's budgeted average recovery ratio for the year of 75%.
Cash operating costs (exclusive of the 5% royalty) of $358 per ounce of gold sold in the first quarter of 2013 were significantly below the Company's guidance of $415 to 435 per ounce. Cash operating costs were in line with costs in the first quarter of 2012, as higher input costs, including labour, cyanide and diesel, were offset by an improved recovery ratio. Including the 5% royalty, total cash costs were $449 per ounce of gold sold in the first quarter of 2013.
Key operational metrics and production statistics for the first quarter of 2013 compared to the same period of 2012 are presented in Table 3 at the end of this press release.
Share Buyback Program
The Board of Directors of Alamos has authorized the share buyback program because it believes that, at certain times, the purchase of shares may represent an appropriate use of Alamos' available cash resources when, in the opinion of management, the value of the Company's shares exceeds the trading price of such shares. Such purchases would provide additional liquidity to shareholders and may benefit the remaining shareholders by increasing the value of their equity interest in Alamos. Subject to acceptance by the TSX, the NCIB period will commence on April 29, 2013 and will conclude on the earlier of the date on which purchases under the bid have been completed and April 28, 2014. The NCIB permits the Company to purchase up to 10% of the public float in its shares, or 11,373,316 Shares. As at April 23, 2013 there were 127,487,786 shares issued and outstanding and the public float was 113,733,160 shares. Any purchases made under the NCIB will be effected through the facilities of the TSX, Alpha and/or alternate trading systems in Canada and will be made at the market price of the shares at the time of the purchase. Subject to any block purchases made in accordance with the rules of the TSX, Alamos may purchase up to 94,061 shares during any trading day, being 25% of its average daily trading volume of 376,244 shares for the six months ended March 31, 2013. The actual number of shares purchased, if any, and the timing of such purchases will be determined by Alamos considering market conditions, stock prices, its cash position, and other factors. There cannot be any assurances as to how many shares, if any, will ultimately be acquired by Alamos under the NCIB, and Alamos intends that any shares acquired pursuant to the NCIB will be cancelled. The Company has appointed Dundee Securities Ltd. as the broker firm responsible for making purchases of shares on behalf of the Company.
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