News Release2014-02-13 17:45 ET - News Release Mr. St Andrew reports SAS REPORTS 2013 FOURTH QUARTER AND YEAR-END RESULTS, BEATING CASH COST GUIDANCE AND PROVIDES 2014 GUIDANCE St. Andrew Goldfields Ltd. incurred a net loss attributable to shareholders for fourth quarter 2013 of $4.4-million or one cent per share, compared with net income of $12.6-million, or three cents per share in fourth quarter 2012. Net earnings in Q4 2013 were significantly impacted by a 26% or US$451 per ounce decline in gold price when compared to the same period last year. Operating cash flow in the quarter was $6.9 million or $0.02 per share, compared to operating cash flow for Q4 2012 of $21.6 million, or $0.06 per share. In addition, there was an increase in non-cash depreciation and depletion charge of $2.7 million in Q4 2013 compared to Q4 2012, which also negatively impacted net earnings. For FY 2013, SAS incurred a net loss attributable to shareholders of $5.0 million or $0.01 per share as compared to net income of $26.0 million or $0.07 per share for FY 2012. SAS generated $36.5 million in cash flow from operations, or $0.10 on a per share basis in FY 2013, compared to $54.2 million or $0.15 per share in FY 2012. The Holt, Holloway and Hislop mines produced a total of 99,548 ounces of gold in FY 2013, at a mine cash cost of US$782 per ounce (excluding a royalty cost of US$120 per ounce). For 2014, targeted annual production is between 75,000 - 85,000 ounces of gold (excluding ounces from the second bulk sample at Taylor), with a similar mine cash cost estimate of between US$800-US$850 per ounce, before royalties. The reduced production in the near-term is due to the decrease in mineral reserves at the Holloway Mine and Hislop open pits. Through exploration and technical work planned during 2014, the Company anticipates its gold production profile will return to the 100,000 ounce level in 2015. Despite the step down in production in 2014, SAS anticipates that cash flow generation and its cash position will remain positive, which the Company views as a more significant focus in light of the current lower gold prices. "2013 was a challenging year in the gold business, with gold price declining 16% from 2012, said Duncan Middlemiss, President & CEO of SAS. "This sharp decline which started in April of 2013 caused the Company to re-evaluate its capital programs and modify them significantly. We cut our proposed expenditures in half and delayed the advancement of the Taylor Project, which may likely be our next producing asset. With the depletion of reserves at Holloway and the Hislop open pits, both high cost operations, the Company's production guidance for this year is reduced. However, we expect to maintain positive cash flow from our mine operations as our flagship asset, the Holt Mine continues to expand." Conference Call Information A conference call will be held Friday, February 14, 2014 at 10:00 a.m. (EST) to discuss the fourth quarter and annual 2013 results. Participants may access the webcast via the SAS website at www.sasgoldmines.com. A recorded playback of the call will also be available via the website and will be posted within 24 hours of the call. Holt Mine, Operations and Financial Review (see Operating and Financial Statistics - Holt Mine) The Holt Mine ("Holt") produced 13,579 ounces of gold in Q4 2013 from processing 81,791 tonnes of ore derived from Zone 4 and Zone 6, with an average head grade of 5.42 g/t Au, which was above reserve grade for the mine. Mill recoveries were at their expected levels of approximately 95%. Gold sales revenue for the quarter decreased by 19% over Q3 2013 and 29% over Q4 2012 due to the decrease in gold price and a 22% decrease in throughput (9% over Q4 2012) due to the hoist motor and hoist drive upgrades completed during the quarter. Total cash cost per ounce of gold sold (1) increased by US$42 per ounce in Q4 2013 when compared to Q4 2012 due to the use of cemented backfill during the quarter and the decrease in throughput as mentioned above. Cemented backfill operations, which added an additional $10 per tonne milled to the mine-site operating cost in Q4 2013, are now fully integrated. This additional increase in mine-site cost per tonne milled (1) is expected throughout 2014. For FY 2013, total cash cost per ounce of gold sold (1) decreased by US$58 per ounce when compared to FY 2012 as the mining rate at the mine increased year over year. Cash margin from mine operations (1) in Q4 2013 decreased by $3.8 million over Q3 2013 and $7.6 million over Q4 2012 due to the decrease in gold production and decline in gold price. Holt contributed 89% of the total cash margin from mine operations (1) earned during Q4 2013 compared to 80% for Q3 2013 and 68% for Q4 2012. For FY 2013, this performance metric decreased by $2.9 million over FY 2012 due to the decline in gold price, partially offset by the increase in throughput and a lower royalty cost. Holt contributed 76% of the total cash margin from mine operations (1) earned during FY 2013 compared to 60% for FY 2012. Holloway Mine, Operations and Financial Review (see Operating and Financial Statistics - Holloway Mine) The Holloway Mine ("Holloway") produced 5,654 ounces of gold from processing 47,960 tonnes of ore with an average head grade of 4.13 g/t Au primarily from the Smoke Deep Zone ("Smoke Deep"). Recoveries of approximately 89% and the production level for the quarter were both in line with expectations. Gold sales revenue during Q4 2013 decreased by 21% when compared Q4 2012 due to the decrease in gold price, offset partially by an 8% increase in gold production which resulted from a 6% improvement in head grade. Total cash cost per ounce of gold sold (1) increased by US$97 per ounce in Q4 2013 when compared to Q4 2012 mainly due to the increase in operating mine development. For FY 2013, total cash cost per ounce of gold sold (1) increased by US$89 per ounce when compared to FY 2012, due to the increase in labour and energy costs, offset by a US$66 per ounce decrease in royalty cost. Cash margin from mine operations (1) in Q4 2013 decreased by $2.7 million over Q4 2012 and $7.1 million in FY 2013 over the previous year, mainly as a result of the decrease in the gold price and increase in costs. Holloway contributed 12% of the total cash margin from mine operations (1) earned during FY 2013 as compared to 19% for FY 2012. Hislop Mine, Operations and Financial Review (see Operating and Financial Statistics - Hislop Mine) The Hislop Mine ("Hislop") produced 5,068 ounces of gold during Q4 2013 from processing 98,293 tonnes of ore at a head grade of 1.96 g/t Au. When compared to Q3 2013, production increased by 28% as a result of the increase in throughput. Gold sales revenue in Q4 2013 decreased by 34% or $3.5 million when compared to Q4 2012 due to the 15% decrease in gold production sold and the decline in gold price. Total cash cost per ounce of gold sold (1) increased by US$102 per ounce in Q4 2013 when compared to Q4 2012 and increased by US$62 per ounce for FY 2013 when compared to FY 2012 as a result of increased stripping costs as mining transitioned from the East Pit to the West Pit during the quarter. Cash margin from mine operations (1) in Q4 2013 decreased by $0.8 million when compared to Q3 2013 and decreased by $3.4 million when compared to Q4 2012 as a result of the lower gold price and increased costs. For FY 2013, cash margin from mine operations (1) decreased by $8.6 million when compared to FY 2012 due to the 14% decrease in throughput and lower gold price. Hislop contributed 12% of the total cash margin from mine operations (1) earned during FY 2013 compared to 21% for FY 2012. Advanced Exploration Program - Taylor Project ("Taylor") In Q4 2013, the Company conducted geological modelling and technical work to update the resource model, as well as maintain the surface and ramp infrastructure. Given the exploration potential available, a 1,500 m (7 hole) underground drill program commenced in late December to potentially expand the 1004 lens mineralization further to the east and at depth. In December 2013, the Company updated the mineral resources and mineral reserves estimate at Taylor incorporating drill results from the summer program. Exploration Programs Exploration activities during FY 2013 were focussed on the near mine targets, specifically exploring for strike and depth extensions of the known mineralized zones and also exploring for potential repetitions and satellite zones situated near the operations. In 2013, SAS drilled a total of 49,900 m of surface core and an additional 8,700 m of underground drilling. The majority of surface drilling activities were focused on the evaluation of Smoke Deep at Holloway, and the 147 and Grey Fox zones and Hislop Pit Complex on the Hislop Property. The majority of the underground drilling took place on the 550m Level at Holloway to evaluate the potential of Smoke Deep and the 220m Level at Taylor targeting the eastern extension of the 1004 lens of the West Porphry Zone ("WPZ"). More generative exploration targets were evaluated during the 2013 field season with SAS exploration personnel conducting geochemical sampling, trenching and mapping exercises. A number of field season generated targets warrant drill follow-up in 2014. Outlook for 2014 SAS produced 99,548 ounces of gold in FY 2013 meeting the mid-range of its production guidance. SAS is forecasting 2014 annual production of between 75,000 - 85,000 ounces of gold from its three operations with similar mine cash cost estimates to 2013. In 2014, SAS plans to continue its ramp development to depth of the WPZ at Taylor and to extract the second bulk sample. Pending positive results from the second bulk sample program, SAS estimates it will be able to bring Taylor into production in the first half of 2015. Exploration in 2014 remains focused on the near-mine targets and key targets remain Zone 4 up-dip at Holt, the Ghost Zone, and several targets on the Hislop Property. SAS is sufficiently funded to achieve its near-term objectives. Capital Resources During FY 2013 SAS generated $9.2 million in net cash flow (1), despite significant declines in the gold price. Working capital at the end of 2013 was $13.9 million compared to a working capital of $18.2 million as at December 31, 2012, which includes the classification of US$9.0 million owing on the term credit facility as a current liability at December 31, 2013. The Company's financial position remains positive at the end of FY 2013 with cash and cash equivalents of $33.7 million. The Company has access to additional cash resources by way of a US$10.0 million revolving credit facility, and in conjunction with the expected cash flow from operations, the Company is well positioned to finance its planned capital programs for 2014, which include the advancement of Taylor, and to fulfil its debt obligation. The majority of the capital expenditures to be incurred at the producing mines are sustaining capital (see "non-GAAP Measures - All-in sustaining costs"). Expenditures at Taylor do not reflect expected revenues from the processing of ore extracted from the second bulk sample program. The $2.0 million expenditure planned at the Aquarius Project includes completing an update of the 2003 Feasibility Study for the project. Mineral Resources and Mineral Reserves Update Compared to the December 31, 2012, mineral resources estimate, the December 31, 2013, mineral resources have increased by approximately 552,000 ounces of gold in the measured and indicated categories and 60,000 ounces of gold in the inferred category. These increases are mainly due to the addition of indicated and inferred resources beneath the East and West pits at Hislop, and inferred resources at Zone 4 at Holt and the Deep Thunder Zone east of Holloway. Compared to the December 31, 2012, mineral reserves estimate, the December 31, 2013 mineral reserves estimate decreased from approximately 735,000 ounces to approximately 668,000 ounces. The decrease is a result of mining activities in FY 2013, which depleted various zones at Holloway and Hislop, and as a result of a mine re-design at Taylor following a geological re-interpretation. The decrease was partially offset by an increase in mineral reserves at Holt (Zone 4, Tousignant Zone, U-100 Zone) and Hislop (Thor Zone). Qualified Person Production at the Holt, Holloway and Hislop mines, processing at the Holt Mill, and mine development and production activities at the operations were being conducted under the supervision of Duncan Middlemiss, P.Eng. Mr. Middlemiss was the Company's Chief Operating Officer and Vice-President of Operations, until his appointment as SAS' President & CEO on October 1, 2013. Subsequent to Mr. Middlemiss' appointment, Marc-Andre Pelletier, P. Eng, was appointed General Manager of Operations in Q4 2013, and is the qualified person responsible for activities at the operations. Exploration activities on the Company's various mineral properties, including the drilling program at Taylor, and the update of mineral resources is under the supervision of Mr. Doug Cater P. Geo, the Company's Vice-President, Exploration. Mineral reserves were updated under the supervision of Mr. Pierre Rocque, P. Eng., the Company's Vice-President, Engineering. Messrs. Middlemiss, Pelletier, Cater and Rocque are qualified persons as defined by NI 43-101, and have reviewed and approved this news release. The following abbreviations are used to describe the periods under review throughout this release. Abbreviation Period Abbreviation Period Q1 2013 January 1, 2013 - March 31, 2013 Q1 2012 January 1, 2012 - March 31, 2012 Q2 2013 April 1, 2013 - June 30, 2013 Q2 2012 April 1, 2012 - June 30, 2012 Q3 2013 July 1, 2013 - September 30, 2013 Q3 2012 July 1, 2012 - September 30, 2012 Q4 2013 October 1, 2013 - December 31, 2013 Q4 2012 October 1, 2012 - December 31, 2012 FY 2013 January 1, 2013 - December 31, 2013 FY 2012 January 1, 2012 - December 31, 2012 Expressed in thousands of Canadian dollars except per share information Three months ended December 31, Twelve months ended December 31, 2013 2012 2013 2012 Gold sales $ 31,707 $ 44,332 $ 142,983 $ 156,391 Operating costs and expenses: Mine site operating 21,216 19,242 79,499 73,769 Production royalty 2,720 3,590 12,208 12,753 Site maintenance 9 232 182 684 Exploration 929 2,149 7,971 7,040 Corporate administration 1,703 2,340 7,148 7,491 Depreciation and depletion 9,862 7,127 37,220 23,481 Write-down of mining equipment and investment - - 994 - 36,439 34,680 145,222 125,218 Operating income (loss) (4,732) 9,652 (2,239) 31,173 Finance costs 461 507 1,960 2,687 Mark-to-market (gain) loss on gold-linked liabilities (594) (151) (1,596) 1,667 Mark-to-market (gain) loss on foreign currency derivatives 91 333 1,065 (2,061) Foreign exchange (gain) loss 864 (4) 1,455 323 Impairment loss on available-for-sale investments 67 825 567 825 Gain (loss) on divestiture of non-core assets - 272 - (247) Finance income and other (79) (77) (308) (260) Income (loss) before taxes (5,542) 7,947 (5,382) 28,239 Net deferred tax expense (recovery) (1,177) (4,685) (364) 2,247 Net income (loss) attributable to shareholders $ (4,365) $ 12,632 $ (5,018) $ 25,992 Other comprehensive income (loss) Unrealized loss on available-for-sale investments (nil tax (75) (193) (151) (596) Reclassification adjustment for impairment loss on available-for-sale investments (nil tax effect) 67 825 567 825 Comprehensive income (loss) for the period $ (4,423) $ 13,006 $ (5,176) $ 26,654 Basic and diluted income (loss) per share $ (0.01) $ 0.03 $ (0.01) $ 0.07