Great summary articleTimmins Gold swings to Q1 profit, nearly doubles revenue as production, prices soar
Wed 8:56 am by Deborah Sterescu
Mexico-focused Timmins Gold Corp. (TSE:TMM) reported Wednesday that it swung to a profit in the first quarter, as metal revenues nearly doubled on a 59% increase in gold production and higher prices.
For the three months ending June 30, the company, which is in commercial production from its San Francisco Mine in Sonora, Mexico, posted net income of $5.75 million, or 4 cents per share, compared to a loss of $1.01 million, or break-even per share, a year ago.
Cash flow from operations, a measure of a company's ability to fund future operations, increased to $6.03 million during the quarter, versus $4.98 million in the year-earlier period.
"The company is focused on continued operational improvements on a quarter over quarter basis," said CEO, Bruce Bragagnolo.
"The aggressive exploration program to increase the mine life at San Francisco has proven successful to date, and we anticipate publishing an updated NI 43-101 Resource and Reserve statement in the coming weeks, which will include approximately 90,000 metres of drilling since June, 2010."
Metal revenues climbed around 94% year-over-year to $27.02 million. Timmins produced 16,676 ounces of gold during the quarter, and sold 17,965 ounces, compared to gold produced and sold of 11,319 ounces a year earlier.
The company expects production to increase further, as it recently completed an expansion plan at its San Francisco Mine, from 12,000 tonnes per day, to 18,000 tonnes per day, with expected benefits to be realized later this year.
In addition to higher production, revenues soared as a result of a 23% increase in the average realized gold price, to $1,507 per ounce. Cash costs were also reduced, at $550 per gold equivalent ounce, down from $691 per ounce in the first quarter of 2010.
"The company is focused on organic resource and reserve growth at San Francisco and La Chicharra, and is currently drilling at a rate in excess of 20,000 metres per month," Bragagnolo added.
Earlier this month, the company announced it extended gold mineralization during its ongoing drill program at the La Chicharra open pit mine in Sonora. The mineral trend intersected is located 500 metres south of the company's San Francisco mine, and 1,200 metres southeast of the La Chicharra pit, along what Timmins said appears to be a parallel mineral system to the San Francisco deposit.
Drill results indicated that the mineralization at La Chicharra extends down-dip to a depth of 200 metres, and for 300 metres parallel to the previously known gold mineralization.
A few weeks earlier, it also reported that in July, it intercepted more mineralized zones from its ongoing drill program at San Francisco. The Mexico-focused miner said the program could lead to a significant increase in the mineral resource at its main mine, as drill results have confirmed that the mineralized zones continue both beneath the currently planned pit bottom, and outside the perimeter of the planned pit limit.
The drilling campaign also could potentially lead to the discovery of additional satellite deposits within the existing land package, Timmins said in a statement in August. The 100,000 meter exploration program, which started in July, is expected to be finished by the end of the year.
The company is in a solid cash position to fund its aggressive drilling activities. In June, Timmins replaced and restructured its $15 million gold-linked debt facility with a Canadian dollar C$18 million credit agreement, which does not contain any payments that are indexed to movements in gold prices, the company said, allowing it to "freely realize" current gold prices.
Timmins ended the quarter with total cash of $7.97 million, and total assets of $131.53 million, having also closed a private placement of 25.2 million special warrants in July at a price of C$2.51 each.
"The company is well positioned to continue realizing current gold prices and record margins, while generating strong operating cash flow on a quarter over quarter basis," Bragagnolo concluded.
The San Francisco mine is a past-producing open pit heap leach operation that has forecast production at a rate in excess of 100,000 ounces of gold per year at a life of mine cash cost of approximately US$489 per ounce