"Now that we have eliminated the hedge book, our realized gold price should rise as we sell 100 percent of our production at spot gold prices. The higher realized gold price should result in higher cash margins and cash flows to further strengthen our balance sheet in 2013 and beyond. The free cash flow generated from Sabodala is expected to fund our growth initiatives through both exploration and consolidation," said Richard Young, President and CEO.
Operating Highlights (details on Page 5)
-- Gold production for the three months ended March 31, 2013 increased 63 percent to 68,301 ounces of gold compared to the same prior year period due to the processing of higher grade ore combined with higher mill throughput as a result of the completion of the mill expansion.-- Gold sold for the three months ended March 31, 2013 increased 98 percent to 69,667 ounces compared to the same prior year period. Ounces sold during the first quarter were slightly higher than production for the period due to a draw-down of gold in circuit inventory. At March 31, 2013, gold in circuit and gold bullion inventory amounted to 11,883 ounces.-- Total cash costs for the three months ended March 31, 2013 decreased 18 percent to $535 per ounce sold compared to the same prior year period. While gross mine site costs increased 35 percent due to higher mining and processing rates, the decrease in total cash costs per ounce was mainly due to higher gold ounces sold and higher capitalization of production phase stripping costs. Total cash costs have been adjusted for the adoption of IFRIC 20 for capitalization of a portion of production phase stripping costs.-- Total tonnes mined for the three months ended March 31, 2013 were 19 percent higher compared to the same prior year period due to the increase in hauling and drilling capacity of the mining fleet during 2012 and first quarter 2013.-- Ore tonnes mined were 17 percent higher compared to the prior year period while grades mined were 36 percent higher resulting in an increase in ounces mined of about 60 percent.-- Mining rates are expected to decrease by about 2 percent in the second quarter through the balance of the year despite the commissioning of 3 haul trucks and 1 shovel as the Company lowers its mining rate to maximize free cash flow in 2013 but maintain production guidance.-- Unit mining costs for the quarter were 3 percent higher than the prior year period, mainly due to higher costs for blasting consumables enabling better fragmentation for processing.-- Ore tonnes milled for the three months ended March 31, 2013 were 21 percent higher than the same prior year period due to an increase in mill capacity as a result of the completion of the mill expansion in the second quarter of 2012.-- Transfer chute design upgrades and the addition of more durable liners in the high wear points through the plant commenced with a comprehensive planned shutdown in January 2013, with further work to continue during planned shutdowns in both the second and third quarters 2013. These changes are anticipated to help reduce the frequency and duration of unplanned downtime allowing the design targets to be achieved. Crusher operating time is the key to meeting design target throughput rates.-- Unit processing costs for the three month period ended March 31, 2013 were 31 percent higher than the same prior year period mainly due to higher power generation cost due to a higher power demand associated with the increased milling capacity, higher maintenance costs associated with the planned January shutdown to improve crusher operating time, and higher consumption of grinding media required for the processing of a lower ratio of soft to hard ore blend.-- Unit general and administration costs for the three months ended March 31, 2013 were higher compared to the same prior year period mainly due to a buildup in manpower.2013 Revised Guidance ------------------------------------- Revised Guidance Original GuidanceOperating results Production (oz) 190,000 - 210,000 190,000 - 210,000 Total cash costs (incl. royalties)(1, 2) ($/oz sold) 650 - 700 650 - 700Exploration and evaluation expense (Regional exploration) ($ millions) 3.0 10.0 - 15.0Administration expenses ($ millions) 13.0 15.0 - 20.0Capital expenditures ($ millions) Mine site 20.0 20.0 - 25.0 Capitalized reserve development (Mine License) 5.0 5.0 - 10.0 Gora development costs Mobile equipment 5.0 30.0 - 35.0 Site development 5.0 15.0 - 20.0 ------------------------------------- Total Gora development costs 10.0 45.0 - 50.0 Capitalized deferred stripping(2) 35.0 35.0 - 40.0 -------------------------------------Total capital expenditures 70.0 105.0 - 125.0----------------------------------------------------------------------------(1) Total cash costs per ounce is a non-IFRS financial measure with standardmeaning under IFRS. For definition of this metric, please see page 11 inManagement's Discussion and Analysis.(2) Includes the impact of adopting IFRIC 20 - Stripping Costs in theProduction Phase of a Surface Mine. Refer to Adoption of New AccountingStandards in the Management's Discussion and Analysis.-- First quarter results benefited from continuation of mining a high grade zone in phase two, as a result, the Company remains on track to produce between 190,000 - 210,000 ounces of gold in 2013. Total cash costs guidance for 2013 remains unchanged at $650 to $700 per ounce despite the increase in the royalty rate from 3% to 5% of sales effective January 1, 2013.-- In light of market conditions, we have lowered discretionary expenditures in a number of key areas including operations, exploration and administration, as well as, sustaining and development capital.-- Reserve development expenditures on the Mine License have been reduced while exploration drilling on the Regional Land Package is being minimized. The Agreement in Principle signed with the Government of Senegal in early April provides for the extension of five key regional exploration licenses which allows the Company to defer regional exploration activity. Exploration expense for 2013 is now expected to total $3 million, a decrease from our original guidance range of $10 to $15 million, while capitalized reserve development costs are now expected at the lower end of our original guidance range of $5 to $10 million.-- General and administrative expenses have been reduced to $13 million from the original guidance range of $15 to $20 million, but still provide for the necessary support of operations and development.-- Sustaining and development capital expenditures have been reduced by extending the timeline for the development of the Company's first satellite deposit at Gora, where permits are expected in 2013 and production in the first half of 2014. Mine site capital expenditures are expected at the lower end of our original guidance range of $20 to $25 million. Development expenditures at Gora in 2013 will be minimized to $5 to $10 million from a previous expected range of $45 to $50 million, of which $23 million was to be financed via the new mobile equipment loan. Capitalized deferred stripping at the Sabodala pit is now expected at the bottom end of the original range of $35 to $40 million.-- With these changes, at a gold price of $1,400 per ounce, we expect to generate free cash flow in 2013 which will further improve our financial strength during this period.