AGI record cash flow record quarterly earningslamos Gold Inc.
TSX:
AGI
Nov 05, 2009 06:00 ET
Alamos Gold Inc. Reports ThirdQuarter 2009 Financial Results: Record Earnings of $0.13 Per Share andRecord-Low Total Cash Costs of $314 Per Ounce
TORONTO, ONTARIO--(Marketwire - Nov.5, 2009) - Alamos Gold Inc. (TSX:AGI) ("Alamos" or the "Company") ispleased to report its financial and operating results for the thirdquarter ended September 30, 2009, as well as provide an update onrecent exploration activities and comment on the Company's outlook forthe remainder of 2009.
All amounts are in United States dollars, unless stated otherwise.
Q3 2009 Highlights
- Produced 42,500 ounces of gold at a record-low cash operatingcost of $272 per ounce of gold sold, with total cash cost (includingthe 5% royalty) of $314 per ounce;
- Sold 43,201 ounces of gold at an average realized gold price of $956 per ounce for total revenues of $41.3 million;
- Record quarterly earnings of $14.1 million or $0.13 per share;
- Record cash flows from operating activities of $22.7 million of $0.21 per share;
- Increased cash and short-term investment balances to a record high of $154 million.
In addition, during the third quarter, Alamos announced thepotential acquisition of two advanced-stage gold exploration propertiesin the Biga mineral district in northwestern Turkey for considerationof $40 million in cash and the issuance of four million shares of theCompany. The potential acquisition is subject to due diligenceactivities, which are currently underway.
Mine operations continued to out-perform subsequent to quarter-end,with October 2009 production of 19,500 ounces setting a new record formonthly gold production.
This release should be read in conjunction with Alamos's interimconsolidated financial statements for the three and nine-month periodsended September 30, 2009 and 2008 and associated Management Discussionand Analysis ("MD&A"), which are available from the Company'swebsite, www.alamosgold.com, in the "Investors" section under "Annual & Quarterly Reports", or via the following links:
https://media3.marketwire.com/docs/Agi1105fs.pdf
https://media3.marketwire.com/docs/Agi1105mdaa.pdf
Financial Results
The Company generated record earnings and cash flows in the thirdquarter of 2009. Earnings of $14.1 million or $0.13 per share,increased significantly over earnings of $8.3 million or $0.09 pershare in the third quarter of 2008. Cash flows from operatingactivities were a record $22.7 million ($0.21 per share). During thequarter, the Company sold 43,201 ounces at an average realized goldprice of $956 per ounce, compared to sales of 41,293 ounces at anaverage realized price of $901 per ounce in the third quarter of 2008.
Key financial metrics for the third quarter of 2009 compared to thethird quarter of 2008, and on a year-to-date basis to September 30,2009 and 2008 are presented at the end of this release in Table 1.
Operating Results
As previously announced, the Company produced 42,500 ounces in thethird quarter of 2009, an increase of 7% over gold production of 39,900ounces in the comparable period of 2008. Record-low cash operating costof $272 per ounce, and total cash cost (including the 5% royalty) of$314 per ounce, resulted from continued recovery improvements andoperational efficiencies. During the third quarter, daily crusherthroughput averaged 12,200 tonnes per day, consistent with both theprior period of 2008 and budgeted levels for the third quarter rainyseason. The grade of ore stacked on the leach pad in the third quarterof 1.68 grams per tonne of gold ("g/t Au") was consistent with budgetedlevels and slightly above the block model grade. Gold production in themonth of October benefited from the installation of the new phase ofthe inter-lift liner that was completed in the second quarter of theyear. The resulting increase in gold recovery time contributed toestablishing a new monthly production record of 19,500 ounces.
Key operational metrics and production statistics for the thirdquarter of 2009 compared to the third quarter of 2008, and on ayear-to-date basis to September 30, 2009 and 2009 are presented at theend of this press release in Tables 2 and 3.
Exploration Update
Third quarter exploration activities were focused on the conversionof inferred to measured and indicated resources at Gap, additionaldrilling at the Puerto del Aire Extension and geological modeling tosupport resource estimation at Cerro Pelon.
At Gap, the Company has drilled a total of 21,750 metres in 105holes to-date in 2009. The results of this drilling have been tosuccessfully confirm the Company's expectations of continuity ofmineralization from the El Victor zone through the Gap zone toEscondida. In addition, drilling at Gap has resulted in theidentification of potential new high grade zones, as well as newresources not previously included in the Company's 2008 inferredresource estimate.
The Company's investment in exploration for the nine months endedSeptember 30, 2009 totalled $7.2 million. Full year explorationspending is expected to achieve the 2009 budget of $10 million. To-datein 2009, the Company has completed over 64,000 metres of drilling in324 holes.
Exploration activities in the fourth quarter of 2009 will focus onextending and delineating the recently discovered Puerto del AireExtension zone and continued resource definition at Gap. Geologicalmodelling conducted at Cerro Pelon in the third quarter of 2009 willsupport a resource estimate that the Company expects to announce in thefourth quarter. In addition, in early November the Company beganresource definition drilling at San Carlos with the objective being toupgrade inferred resource ounces to the measured and indicatedcategories. The Company is also finalizing field work and compilingdata in preparation for a drilling program at El Carricito, aprospective regional target.
Agi Dagi and Kirazli Gold Projects Acquisition Update
On September 23, 2009, the Company announced that it has enteredinto a Memorandum of Understanding ("MOU") providing for Alamos toacquire 100% of the Agi Dagi and Kirazli gold projects from FronteerDevelopment Corp. ("Fronteer") and Teck Resources Limited ("Teck"),through the acquisition of certain Turkish subsidiaries held by Teckand Fronteer.
Agi Dagi and Kirazli are advanced-stage gold exploration projectsthat form part of the Biga Mineral District, a recently establishedgold-copper mineral district, which is located in the Biga Peninsula ofnorthwestern Turkey. The Biga Mineral District features a growingnumber of high-sulfidation epithermal gold and associated porphyrycopper-gold deposits.
Under the terms of the MOU, Alamos is to pay a total of US$40million and issue a total of four million shares to the vendors inconsideration for these two projects. In addition to statutorycompensation that may apply to the projects, a third party has a 2% NetSmelter Return Royalty on production from the Agi Dagi project.
Completion of the transaction is subject to an exclusive 60-day duediligence period, the execution of definitive agreements, and theapproval of Alamos' Board of Directors and the Toronto Stock Exchange("TSX"). Due diligence is ongoing and is expected to be completedwithin the 60-day period.
Outlook
The third quarter of 2009 was characterized by record earnings,cash flows from operations, and record-low costs per ounce. Withcontinuing record results from mine operations, including recordmonthly gold production of 19,500 ounces in October, the Company is nowconfident that it will achieve the top end of its production guidanceof 170,000 ounces.
While mining operations are producing record results, projects areongoing to potentially further increase production rates. The projectto close the existing crushing circuit is expected to be completed inNovember. This will ensure that 100% of the material stacked on theleach pad meets the optimal size for gold recovery. The Company expectsto realize additional recovery increases from this project, starting in2010.
A scoping study was completed in late October evaluating thepotential capital costs and related benefits of increasing crusherthroughput by as much as 33% from the current level of approximately750 tonnes per hour, to 1,000 tonnes per hour. The Company is in theprocess of evaluating the results of this study.
Ongoing expansion activities at current operations include thedevelopment of the Escondida zone of the Mulatos Pit. The miningcontractor is on schedule and gold production from the high grade millis expected late in 2011.
The Company continues to strengthen its financial position:debt-free with $154 million in cash and short-term investments at theend of the third quarter and strong cash flows from operations. Thisfinancial strength will continue to allow the Company to finance itsimmediate capital, development and exploration plans, as well asprovide significant funding for development of additional projectsthrough acquisitions.
About Alamos
Alamos is a Canadian-based gold producer with operations,exploration, and development activities in Mexico. The Company employsover 450 people in Mexico and is committed to the highest standards ofenvironmental management, social responsibility, and health and safetyfor its employees and neighbouring communities. Alamos has over $154million dollars on hand, is debt-free, and unhedged to the price ofgold. Alamos' common shares are traded on the Toronto Stock Exchangeunder the symbol "AGI".
Cautionary Non-GAAP Statements
The Company believes that investors use certain indicators toassess gold mining companies. They are intended to provide additionalinformation and should not be considered in isolation or as asubstitute for measures of performance prepared with GAAP. "Cash flowfrom operating activities before changes in non-cash working capital"is a non-GAAP performance measure which could provide an indication ofthe Company's ability to generate cash flows from operations, and iscalculated by adding back the change in non-cash working capital to"Cash provided by (used for) operating activities" as presented on theCompany's consolidated statements of cash flows. "Mining cost per tonneof ore" is a non-GAAP performance measure which could provide anindication of the mining and processing efficiency and effectiveness atthe Mine. It is determined by dividing the relevant mining andprocessing costs by the tonnes of ore processed in the period. "Costper tonne of ore" is usually affected by operating efficiencies andwaste-to-ore ratios in the period. "Cash operating costs per ounce" and"total cash costs per ounce" as used in this analysis are non-GAAPterms typically used by gold mining companies to assess the level ofgross margin available to the Company by subtracting these costs fromthe unit price realized during the period. These non-GAAP terms arealso used to assess the ability of a mining company to generate cashflow from operations. There may be some variation in the method ofcomputation of "cash operating costs per ounce" as determined by theCompany compared with other mining companies. In this context, "cashoperating costs per ounce" reflects the cash operating costs allocatedfrom in-process and dore inventory associated with ounces of gold soldin the period. "Cash operating costs per ounce" may vary from oneperiod to another due to operating efficiencies, waste-to-ore ratios,grade of ore processed and gold recovery rates in the period. "Totalcash costs per ounce" includes "cash operating costs per ounce" plusapplicable royalties. Cash operating costs per ounce and total cashcosts per ounce are exclusive of exploration costs.
Cautionary Note
No stock exchange, securities commission or other regulatoryauthority has approved or disapproved the information contained herein.This News Release includes certain "forward-looking statements". Allstatements other than statements of historical fact included in thisrelease, including without limitation statements regarding forecastgold production, gold grades, recoveries, waste-to-ore ratios, totalcash costs, potential mineralization and reserves, exploration results,and future plans and objectives of Alamos, are forward-lookingstatements that involve various risks and uncertainties. Theseforward-looking statements include, but are not limited to, statementswith respect to mining and processing of mined ore, achieving projectedrecovery rates, anticipated production rates and mine life, operatingefficiencies, costs and expenditures, changes in mineral resources andconversion of mineral resources to proven and probable reserves, andother information that is based on forecasts of future operational orfinancial results, estimates of amounts not yet determinable andassumptions of management.
Exploration results that include geophysics, sampling, and drillresults on wide spacings may not be indicative of the occurrence of amineral deposit. Such results do not provide assurance that furtherwork will establish sufficient grade, continuity, metallurgicalcharacteristics and economic potential to be classed as a category ofmineral resource. A mineral resource which is classified as "inferred"or "indicated" has a great amount of uncertainty as to its existenceand economic and legal feasibility. It cannot be assumed that any orpart of an "indicated mineral resource" or "inferred mineral resource"will ever be upgraded to a higher category of resource. Investors arecautioned not to assume that all or any part of mineral deposits inthese categories will ever be converted into proven and probablereserves.
Any statements that express or involve discussions with respect topredictions, 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", "isexpected", "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) arenot statements of historical fact and may be "forward-lookingstatements." Forward-looking statements are subject to a variety ofrisks and uncertainties which could cause actual events or results todiffer from those reflected in the forward-looking statements.
There can be no assurance that forward-looking statements willprove to be accurate and actual results and future events could differmaterially from those anticipated in such statements. Important factorsthat could cause actual results to differ materially from Alamos'expectations include, among others, risks related to internationaloperations, the actual results of current exploration activities,conclusions of economic evaluations and changes in project parametersas plans continue to be refined as well as future prices of gold andsilver, as well as those factors discussed in the section entitled"Risk Factors" in Alamos' Annual Information Form. Although Alamos hasattempted to identify important factors that could cause actual resultsto differ materially, there may be other factors that cause results notto be as anticipated, estimated or intended. There can be no assurancethat such statements will prove to be accurate as actual results andfuture events could differ materially from those anticipated in suchstatements. Accordingly, readers should not place undue reliance onforward-looking statements.
Table 1: Financial Highlights
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Q3 Q3 YTD YTD
2009 2008 2009 2008
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Cash provided by operating
activities before changes in
non-cash working capital (000)(1) $21,247 $13,854 $58,526 $37,882
Changes in non-cash working
capital (000) $1,464 $5,457 $2,302 $11,427
Cash provided by operating
activities (000) $22,711 $19,311 $60,828 $49,309
Earnings before income taxes
(000) $19,389 $11,546 $49,777 $30,341
Earnings (000) $14,115 $8,346 $35,881 $20,241
Earnings per share
- basic $0.13 $0.09 $0.34 $0.21
- diluted $0.13 $0.09 $0.33 $0.21
Weighted average number of
common shares outstanding
- basic 108,560,000 95,714,000 105,937,000 95,226,000
- diluted 110,229,000 97,183,000 107,904,000 96,862,000
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(1) A non-GAAP measure calculated as cash provided by operating activities
as presented on the consolidated statements of cash flows and adding
back changes in non-cash working capital.
Table 2: Production Summary(1)
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Production summary Q3 Q3 YTD YTD
2009 2008 2009 2008
Ounces produced (2) 42,500 39,900 130,500 111,653
Ore crushed (tonnes) 1,119,000 1,133,000 3,259,000 3,550,000
Grade (g/t Au) 1.68 1.98 1.77 2.06
Contained ounces stacked 60,439 72,123 185,455 235,113
Ratio of ounces produced to
contained ounces stacked 70% 55% 70% 47%
Ore mined (tonnes) 1,155,000 1,168,000 3,228,000 3,599,000
Waste mined (tonnes) 751,000 1,399,000 3,364,000 4,654,000
Total mined (tonnes) 1,906,000 2,567,000 6,592,000 8,253,000
Waste-to-ore ratio 0.65 1.20 1.04 1.29
Ore crushed per day (tonnes) 12,200 12,300 11,900 13,300
Ore mined per day (tonnes) 12,600 12,700 11,800 13,400
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(1) Certain numbers may not compute due to the effects of rounding and
truncation.
(2) Reported gold production for Q3 and YTD 2008 has been adjusted to
reflect final refinery settlement. Reported gold production for Q3 and
YTD 2009 is subject to final refinery settlement and may be adjusted.
Table 3: Costs per Tonne Summary
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Costs per tonne summary Q3 Q3 YTD YTD
2009 2008 2009 2008
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Mining cost per tonne of material
(ore and waste) $2.15 $1.88 $1.81 $1.67
Waste-to-ore ratio 0.65 1.20 1.04 1.29
Mining cost per tonne of ore $3.54 $4.13 $3.70 $3.84
Crushing/conveying cost per tonne of
ore $1.66 $1.95 $1.70 $2.10
Processing cost per tonne of ore $2.62 $2.24 $2.54 $2.28
Mine administration cost per tonne of
ore $1.88 $1.84 $1.70 $1.67
Total cost per tonne of ore $9.70 $10.16 $9.64 $9.89
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To view Figure 1 (Mulatos Pit Area), please visit the following link:
https://media3.marketwire.com/docs/agi1105.pdf
The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.