(All amounts are in Canadian dollars, unless stated otherwise)
San Gold Corporation (TSX: SGR)(OTCQX: SGRCF) ("San Gold" or the
"Company") reports financial and operating results for the second
quarter of 2011.
Second Quarter 2011 Highlights:
-- Recognized record revenue of $28.4 million on gold sales of 19,276
ounces.
-- Generated operating income from operations of $7.6 million, or $0.03 per
share.
-- Achieved record gold production of 20,111 ounces.
-- Record-low total cash costs of $820 per ounce of gold sold.
-- Realized a record cash operating margin of $655 per ounce of gold sold.
-- Achieved record average mill throughput of 1,260 tons per day.
-- Reported a total and comprehensive loss of $4.0 million, or $0.01 per
share.
-- Cash and cash equivalents balance of $37.7 million as at June 30, 2011.
-- Appointed Mr. Jeremy Link as Vice-President, Corporate Development.
Promoted Eric Setchell to Mine General Manager.
-- Appointed two experienced directors to the Board of Directors, Mr.
Michael Anderson and Mr. Stephen Harapiak.
-- Achieved a new safety milestone of 500,000 man hours without a lost time
accident.
"I am very pleased with this quarter's financial and operating
results," stated George Pirie, President and Chief Executive
Officer of San Gold. "The Company generally reported record
financial results with higher revenue, cash flow from operations,
and income from operations relative to prior periods. Today's
results also confirmed our belief that the operational improvements
implemented over the past two years would result in increased
productivity leading to higher production and lower costs, as
evidenced by record gold production and record-low total cash
costs. I am also pleased to report that we remain on track to
deliver on our full-year guidance of 80,000 ounces at an average
total cash cost of $825 per ounce of gold."
This press release should be read in conjunction with the
Company's consolidated financial statements for the quarter ended
June 30, 2011 and associated Managements' Discussion and Analysis
("MD&A"), which are available from the Company's website
(www.sangold.ca), in the "News & Reports" section under
"Financial Statements", and on SEDAR (www.sedar.com).
Review of Financial Results
Record gold sale revenues in the second quarter of 2011 of $28.4
million on the sale of 19,276 ounces were 126% higher than revenues
of $12.6 million recognized in the second quarter of 2010. The
increase in gold sales revenue in the second quarter of 2011 is a
result of a 61% increase in the number of ounces sold and a 40%
increase in the average realized gold price compared to the second
quarter of 2010.
The Company generated record cash flows from operating
activities before changes in non-cash working capital of $3.0
million ($0.01 per share), compared to a use of $2.4 million ($0.01
per share) in the second quarter of 2010. After changes in non-cash
working capital, operating activities used $10.5 million ($0.03 per
share) in the second quarter of 2011, a substantial change from
$5.5 million ($0.02 per share) generated in the second quarter of
2010.
Income from operations in second quarter of 2011 was $7.6
million ($0.02 per share), a substantial improvement relative to a
loss from operations of $2.0 million ($0.01 per share) in the same
period of 2010. Income from operations in the second quarter also
represents an increase of 137% from income from operations of $3.2
million in the first quarter of 2011. Relative to prior periods,
the increase in income from operations in the second quarter of
2011 is attributable to higher cash operating margins of $655 per
ounce, resulting from lower total cash operating costs and higher
realized gold prices.
After exploration, general and administrative, and other net
expenses, total and comprehensive loss in the second quarter of
2011 improved by 50% to $4.0 million ($0.01 per share), compared to
a $7.9 million ($0.03 per share) in the same period of 2010.
Capital spending in the second quarter of 2011 was focused on
increasing mill capacity, improving key infrastructure, and
sustaining capital. Investments in operating capital and
development activities were $4.1 million in the second quarter of
2011.
Key financial metrics for the second quarter of 2011 compared to
the second quarter of 2010are presented at the end of this press
release in Table 1.
Review of Operational Results
The Company's Rice Lake, Hinge, and 007 mines (the "Rice Lake
Project") produced a record of 20,111 ounces during the second
quarter of 2011, an increase of 119% relative to gold production of
9,188 ounces in the second quarter of 2010 and 37% higher than gold
production of 14,688 ounces in the first quarter of 2011. Gold
production in the first half of 2011 increased 61% to 34,799 ounces
compared to gold production of 21,650 ounces in the first half of
2010.
In the second quarter of 2011, total cash operating costs were
$820 per ounce of gold sold, slightly below full year guidance of
$825, and a 24% reduction from $1,084 in the second quarter of
2010. These lower total cash operating costs, combined with a
realized gold price of $1,475 per ounce, resulted in a cash
operating margin of $655 per ounce in the second quarter of
2011.
Year-to-date gold production of 34,799 ounces is in-line with
the Company's full year 2011 production guidance of 80,000 ounces.
Year-to-date total cash cost per ounce of gold sold of $832also is
in-line with full-year guidance of $825.
Key operational metrics and production statistics for the second
quarter of 2011 compared to the trailing three quarters are
presented at the end of this press release in Table 2.
Outlook
In the first half of 2011, the Company achieved record operating
performance with quarterly gold production of 14,688 and 20,111
ounces in the first and second quarters of 2011, respectively, for
year-to-date production of 34,799 ounces. Record quarterly
production was accompanied by record-low total cash costs per ounce
of gold sold of $862 and $820 in the first and second quarters of
2011, respectively. On a year-to-date basis, total cash costs per
ounce of gold sold of $832. The increase in crushing and milling
capacity, the implementation of more cost-effective mining methods,
and the general debottlenecking of operations contributed to the
substantial increase in gold production and the reduction in total
cash operating costs per ounce.
Production is forecast to continue to incrementally increase
throughout the second half of the year and result in full year gold
production of 80,000 ounces at an average total cash cost of $825
per ounce sold. Higher gold production is expected be driven by an
increase in daily throughput from the second quarter average rate
of 1,260 tons per day to a year-end exit rate of approximately
1,600 tons per day. Concurrent with the production increases, total
cash operating costs are expected to continue to decline throughout
the remainder of the year and are forecast to exit the year at a
total cash operating cost approaching $650 per ounce.
At current gold prices and production volumes, cash flow from
operations, and cash-on-hand is expected to be sufficient to fund
the Company's mill expansion plans, additional operations projects
to increase activity levels, and an aggressive 300,000-metre
exploration drilling program.
Exploration activities in the second half of 2011 will continue
to focus on definition and extension drilling at the Company's
recently identified Shoreline Basalt Unit for both production
planning and exploration purposes. The Shoreline Basalt Unit is a
system of stacked lenses, including the L10, 007, Cohiba, and
Emperor zones. This unit has a strike length of more than two
kilometres, a plunge that has been traced to over 1,400 metres from
surface, and remains open along strike and to depth. The objective
of the Company's exploration programs is to develop a larger mining
complex that can be exploited through existing infrastructure. The
Company plans to report an updated Mineral Resource and Reserve
Statement in 2012.
With rising production and declining total cash operating costs,
combined with a strong gold-price environment, the Company has
positioned itself to finance its existing mining and exploration
plans, as well as grow through potential acquisitions and new
discoveries.
Reminder of Second Quarter 2011 Financial Results Conference
Call and Webcast
The Company's senior management plans to host a conference call
today, Monday, August 15, 2011 at 11:00 am Eastern Standard Time to
discuss the 2011 second quarter financial results, and to provide
an update of the Company's operating, exploration, and development
activities.
Participants may join the conference call by dialing 1 (888)
231-8191 or 1 (647) 427-7450 for outside Canada and the United
States. The conference call will also be available by webcast at
the following link:
www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3595460.
A recorded playback of the conference call can be accessed after
the event until August22, 2011 by dialing 1 (800) 642-1687 or 1
(416) 849-0833 for calls outside Canada and the United States. The
pass code for the conference call playback is 81672417. The
archived audio webcast will also be available on the Company's
website at www.sangold.ca.
About San Gold
San Gold is an established Canadian-based gold producer,
explorer, and developer that owns and operates the Hinge, 007, and
Rice Lake mines near Bissett, Manitoba. The Company employs more
than 400 people and is committed to the highest standards of safety
and environmental stewardship. The Company has over $40 million in
cash and equivalents and is unhedged to the price of gold. As of
August 1, 2011, San Gold has 310,966,175 common shares outstanding
(327,360,186 shares fully diluted), which are traded on the Toronto
Stock Exchange under the symbol "SGR" and on the OTCQX under the
symbol "SGRCF".
For further information on San Gold, please visit
www.sangold.ca.
Cautionary Non-IFRS Statements
The Company believes that investors use certain 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
International Financial Reporting Standards ("IFRS"). "Total cash
operating costs" as used in this analysis is a non-IFRS term
typically used by gold mining companies to assess the level of
gross margin available to the Company per ounce of gold by
subtracting these costs from the unit price realized during the
period. This non-IFRS term is 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 "total cash
operating costs" as determined by the Company compared with other
mining companies. In this context, "total cash operating costs"
reflects the per ounce cash costs allocated from in-process and
dore inventory associated with ounces of gold sold in the period
and net royalties. "Total cash operating costs" may vary from one
period to another due to operating efficiencies, quantity of ore
processed, grade of ore processed, and gold recovery rates.
Cautionary Note
No stock exchange, securities commission or other regulatory
authority has approved or disapproved the information contained
herein. 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, cash operating costs, potential mineralization, mineral
resources, mineral reserves, exploration results, and future plans
and objectives of the Company, 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 mineral
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.
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 the Company's expectations include, among others,
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 precious metals,
as well as those factors discussed in the section entitled "Other
MD&A Requirements and Additional Disclosure and Risk Factors"
in the Company's most recent quarterly Management's Analysis and
Discussion ("MD&A"). Although the Company 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.
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.
Table 1: Financial Highlights
----------------------------------------------------------------------------
Q2 Q2 YTD YTD
2011 2010 2011 2010
----------------------------------------------------------------------------
Total and Comprehensive
Loss (000) ($3,973) ($7,919) ($9,308) ($10,641)
Items not affecting cash
(000) $6,940 $5,564 $12,784 $4,156
----------------------------------------------------------------------------
Cash provided (used) by
operating activities
before changes in non-
cash working capital
(000) $2,967 ($2,355) $3,476 ($6,485)
Net change in non-cash
working capital (000) ($13,514) $7,806 ($9,578) $4,831
----------------------------------------------------------------------------
Cash provided by
operating activities
(000) ($10,547) $5,451 ($6,102) ($1,654)
Total and Comprehensive
Loss (000) ($3,973) ($7,919) ($9,308) ($10,641)
Loss per share
- basic and diluted $0.01 $0.03 $0.03 $0.04
Weighted average number
of common shares
outstanding
- basic and diluted 309,871,490 277,374,958 306,105,249 272,983,117
----------------------------------------------------------------------------
Table 2: Operating Highlights
----------------------------------------------------------------------------
Q2 Q2 Change Change
2011 2010 (#) (%)
----------------------------------------------------------------------------
Ore milled (tons) 114,624 58,098 56,526 97%
Head grade (g/tonne Au) 6.35 5.90 0.45 8%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Contained gold (ounces) 21,244 9,996 11,248 113%
Ounces of gold produced 20,111 9,188 10,923 119%
Ore mined (tons) 123,261 63,323 59,938 95%
Ore milled per day
(tons) 1,260 638 621 97%
Ore mined per day (tons) 1,355 696 659 95%
Mill recovery (%) 95% 93% 2 2%
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The TSX or the OTCQX have not reviewed and do not accept
responsibility for the adequacy or accuracy of this release.
Contacts: San Gold Corporation Tim Friesen Director,
Communications +1 (204) 772-9149 ext. 202 San Gold Corporation
Jeremy Link Vice-President, Corporate Development +1 (416) 214-0024
ext. 201 www.sangold.ca
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