Toronto, Ontario – August 14, 2017 – Roxgold Inc. (“Roxgold” or the “Company”) (TSX: ROXG) (OTC: ROGFF) today reported its financial results for the three-month period ended June 30, 2017.
For complete details of the unaudited Condensed Interim Consolidated Financial Statements and associated Management’s Discussion and Analysis please refer to the Company’s filings on SEDAR (www.sedar.com) or the Company’s website (www.roxgold.com). All amounts are in U.S. dollars unless otherwise indicated.
For the three-month period ended June 30, 2017, and thereafter, the Company:
“We are very pleased with the continued strong performance at Yaramoko this quarter where we are on track to deliver at the upper-end of our annual production guidance and costs were as expected. Grades were in line with plan, and we anticipate grades to be similar in Q3 ahead of increasing in the fourth quarter,” commented John Dorward, President and CEO of Roxgold. “During the second quarter, we have made good progress on advancing the construction work at site to facilitate the Bagassi South expansion project and are pleased to have commenced the drilling program on the newly identified regional targets along the Bagassi Corridor,” added Mr. Dorward.
The Company considers that pre-commercial production operations at the Yaramoko gold mine commenced in June 2016 as the construction of the processing plant and associated infrastructure was completed, the contractual performance tests associated with the engineering, procurement, and construction (“EPC”) lump sum contract with the DRA/Group Five Joint Venture was passed and a first gold shipment was exported and refined. Ramp-up of pre-commercial production continued during the third quarter ended September 30, 2016 leading to the declaration of commercial production on October 1, 2016. Accordingly, there are no comparable gold sales and operational results from mine operations from the previous year. The Company is providing the six-month period ended December 31, 2016 results as comparative figures.
June 30, 2017
June 30, 2016
Dec 31, 20163
|Ore mined (tonnes)||66,044||135,281||–||104,831|
|Ore processed (tonnes)||65,159||129,114||–||122,135|
|Head grade (g/t)||12.8||15.4||–||16.1|
|Gold ounces produced||27,970||63,564||–||62,678|
|Gold ounces sold1||28,788||63,767||–||68,861|
|Financial Data (in thousands of dollars)|
|Revenues – Gold sales1||36,166||79,143||–||87,566|
|Mining operating expenses||13,677||27,831||–||26,239|
|Statistics (in dollars)|
|Average realized selling price (per ounce)||1,254||1,240||–||1,272|
|Cash operating cost (per ounce produced) 2||498||445||–||379|
|Cash operating cost (per tonne processed) 2||214||219||–||195|
|Total cash cost (per ounce sold) 2||549||497||–||439|
|Sustaining capital cost (per ounce sold) 2||280||251||–||228|
|All-in sustaining cost (per ounce sold) 2||873||789||–||702|
During the three-month period ended June 30, 2017, the Yaramoko gold mine continued to operate in line with expectations. The Company has now reached twelve months of full production and operations have performed according to plan and expected production. During the period, the Yaramoko gold mine maintained its LTI ratio at 0.00 while achieving over 3,000,000 hours worked LTI free.
During the second quarter of 2017, the Yaramoko gold mine produced 27,970 ounces and sold 28,788 ounces of gold1 for total production during the six-month period ended June 30, 2017 of 63,564 ounces of gold. The production is in line with expectations of relatively stronger first and fourth quarters due to higher ore head grades in the mine schedule.
For the three-month period ended June 30, 2017, the Company mined 66,044 tonnes of ore at 11.7 g/t Au with 2,085 metres of development completed. Combined with the first quarter performance, a total of 135,281 tonnes of ore was mined as of June 30, 2017, which is ahead of expectations. With seven stoping faces in operation as of June 30, 2017, together with significant waste and ore development achieved, it is believed that the mine remains well established to deliver against expectations.
During the second quarter of 2017, the plant processed 65,159 tonnes of ore at an average head grade of 12.8 g/t Au. The lower head grade when compared to the previous quarter is due to the mining sequence. The third quarter is expected to be similar to the second quarter with mined grades expected to increase towards the end of the year. Plant availability was 97.2% and overall recovery was 99.0% during the quarter.
During the first quarter of 2017, the Yaramoko gold mine was connected to the Burkina Faso High Voltage (“HV”) national power grid. Connection took place as scheduled on February 1, 2017, and the mine has subsequently benefited from grid availabilities of 99%. Operations are now focusing on optimizing the power factor contribution of the grid to deliver additional cost savings.
As of June 30, 2017, underground development had reached the 5083 RL (“Reduced Level”), some 230 meters below surface. Since the Company started operations in June 2016, it has taken advantage of higher than planned development productivity rates from the underground mining contractor to bring forward additional mine development. A total of 3,823 meters of underground waste development has been completed in that 12-month period, 1,972 metres during the second half of 2016 and 1,851 metres for the first half of 2017. As a result, the Company is significantly ahead of the mine plan contemplated in the Technical Report which included 2,814 meters for the corresponding 12-month period. This additional development has provided early access to additional areas of the mine to increase flexibility and resiliency for the mine plan. This additional investment has resulted in development accessing approximately 180,000 ounces of gold in situ to support future stoping operations.
Based on the Company’s accounting policy (refer to note 2 of the Company’s annual consolidated financial statements as of December 31, 2016 available on www.sedar.com ), commercial production was declared on October 1, 2016. Accordingly, there are no comparable gold sales and operational results from mine operations for the first half of 2016.
During the six-month period ended June 30, 2017, a total of 63,767 ounces of gold were sold resulting in revenues and deferred revenues from gold sales totalling $79 million at an average realized gold price of $1,240 per ounce sold compared to an average market gold price of $1,238 per ounce. Ounces sold during the period include 1,175 ounces of gold sold, but not shipped, as of June 30, 2017 due to the timing of gold shipment. As a result, deferred revenues totalling $1,463,000 have been recognized on the Company’s balance sheet as at June 30, 2017. The decrease in ounces sold during the second quarter is attributable to a lower head grade.
Mine operating expenses represent mining, processing, and mine site-related general and administrative expenses. Cash operating cost per tonne processed2 totalled $214 for the quarter and $219 for the first half of 2017. The variation between the cash operating cost per tonne processed2 for the six-month period ended June 30, 2017 and the cost achieved during the second half of 2016 is mainly due to higher mining costs per tonne. Factors contributing to higher mining costs per tonne mined are a lower ratio of ore vs waste tonnes mined during the period combined with higher rate of marginal ore within the ore drifts. In addition, the cash operating cost per tonne2 for the period was affected by standard preventive maintenance costs which were not incurred in 2016 as the mill had been in operation for less than a year. Mining costs per tonne are expected to decrease in the second half as mining of stoping tonnes is expected to increase to approximately 60% of total ore mined in the fourth quarter of 2017. Tonnes provided by development in ore are expected to reduce as stoping activities continue to ramp up.
The cash operating cost per ounce produced2 totalled $498 per ounce for the second quarter of 2017 contributing to a cash operating cost per ounce of $445 for the six-month period ended June 30, 2017 and well within the 2017 guidance set at between $445-$490 per ounce produced. The higher cash operating cost for the quarter, as compared to the previous period, is the result of lower head grade partially offset by lower cash operating cost per tonne processed. The cash operating cost per ounce sold is in line with the cash operating cost per ounce produced.
During the second quarter of 2017, Roxgold invested $8,073,000 in underground mine development, representing a sustaining capital cost per ounce sold2 of $280. This reflects the Company’s decision to invest in additional metres of development to provide for potentially greater operational flexibility and robustness. As a result, access to two additional stoping panels are already ready for mining while access to ore drives is also significantly ahead of schedule. According to the mine plan, 269,811 and 267,196 ore tonnes are scheduled to be mined in 2018 and 2019, respectively. Investment in underground development was expected to be more intense in the first half of 2017, as compared to the second half of 2017, as a result of the mining sequence. Mining development costs for 2017 are expected to be within guidance.
Based on the foregoing, the Company generated cash flow from mining operations2 totalling $18,638,000 for the second quarter of 2017, at an all-in sustaining cost2 of $873 per ounce sold. The total all-in sustaining costs for the period related to underground development was similar to the previous quarter, however shared over a lower volume of gold sold as a result of the lower head grade during the period. Accordingly, the all-in sustaining cost2 for the six-month period ended June 30, 2017 was $789 per ounce sold. The Company anticipates that the all-in sustaining cost2 per ounce sold for the year will remain within guidance.
For comparison purposes, the Technical report forecasted an all-in sustaining cost of $751 per ounce sold in 2017, the second year of operations, and a Life of Mine all-in sustaining cost average of $590 per ounce sold as development expenditure in the early years of the mine plan tapered off. Considering the extra development that has been achieved since the commencement of operations, the Company is pleased with progress against original expectations.
On July 19, 2017, the Company announced an updated MRE and provided complete drilling results from the Company’s Infill and Extensional drilling program, during the first half of 2017, at the Bagassi South deposit which is located less than two kilometers from its flagship underground gold mine at the 55 Zone.
The 2017 Bagassi South drilling program returned a significant number of high grade intercepts which have been incorporated into an updated MRE. Below are the highlights of the estimate:
The updated Bagassi South MRE is a significant improvement over the previous inferred resource estimate of 563,000 tonnes at 12.1 g/t Au for 220,000 at a cut-off grade of 5.0 g/t Au (see press release dated April 27, 2017 available on SEDAR at www.sedar.com or on the Company’s website at www.roxgold.com).
The reported Mineral Resources have been estimated using a geostatistical block modelling approach informed by capped composited gold assay data collected in core boreholes. Resource domains were constructed as implicit wireframes using interval selections of assay and lithological data.
The MRE was undertaken by Roxgold’s mine site personnel under the supervision of Yan Bourassa, P.Geo (APGO #1336), VP Geology for Roxgold Inc., a Qualified Person within the meaning of National Instrument 43-101. The MRE was reviewed by Sébastien Bernier, PGeo (APGO #1847) from SRK Consulting (Canada) Inc. (“SRK”) of Toronto. SRK is satisfied that work carried out by Roxgold has been conducted in a manner consistent with generally recognized industry best practices and, therefore, the exploration drilling data are sufficiently reliable for the purpose of supporting a mineral resource evaluation.
For more information on the Company’s updated Bagassi South MRE, please refer to the Company’s press release dated July 19 2017, available on SEDAR at www.sedar.com or on the Company’s website at www.roxgold.com.
The Company declared commercial production on October 1, 2016 and consequently there is no comparable mine operating profit for the first quarter of 2016. During the second quarter of 2017, revenues totalled $34,703,000 while mining operating expenses and royalties totalled $13,667,000 and $1,387,000, respectively, for a total cash cost2 per ounce sold of $545. Including the doré sold, but not shipped, as of June 30, 2017, the total cash cost2 for the period is $549 per ounce sold. The increase compared to the first quarter of 2017 is primarily due to lower grade ore, which was anticipated within the mining sequence for the year. For more information on the cash operating costs2 see the financial performance of the Mine Operating Activities section of this MD&A.
Depreciation for the quarter remained stable when compared to the previous quarter as lower production was offset by a higher asset base. The higher asset base was the result of the completion of the HV power line and additional underground development. The depreciation expenses for the corresponding period of 2016 were capitalized within other development costs.
General and administrative expenses totalled $934,000 compared to $917,000 for corresponding period in the prior year. Non-recurring professional fees and filing fees totaling approximately $250,000, associated with the process to become a listed issuer on the Toronto Stock Exchange, affected the expenditures incurred during Q1 2017. General and administrative expenses for the remainder of the year are expected to be in line with 2016 corporate expenditures.
Sustainability and other in-country costs totalling $330,000 comprise expenditures incurred to maintain Roxgold’s licence to operate in Burkina Faso, as well as investments made in sustainability and community projects related to current operations. During the corresponding period of 2016, sustainability and other in-country costs were capitalized within other development costs.
Exploration and evaluation expenses increased from $1,764,000 during the second quarter of 2016 to $3,514,000 for the same period in 2017. The variation reflects expenditures associated with the Bagassi South infill and extensional drilling program completed during the period as the Company progressed in its objective to provide a Feasibility Study on Bagassi South in the coming months.
Drilling costs incurred during the period totaled $1,300,000 and $3,570,000 for the first half of 2017. The drilling campaign totaled 29,160 meters over 134 holes while the 2016 drilling costs reflected the program totalling 2,360 meters of diamond drilling completed to further define the high grade QV1 mineralization to provide for the maiden resource estimated published during the second quarter of 2016. Further economic evaluation expenses of $880,000 were incurred during the three-month period ended June 30, 2017. Remaining E&E costs are attributable to the start of construction work at site to facilitate the Bagassi South expansion project.
Share-based payments are not an item affecting the Company’s cash on hand. Lower stock option costs reflect the decrease in stock options granted combined with a modification of the vesting conditions. Stock options granted in January 2017 are now vesting one-third on each of the first, second and third anniversary of the grant. Historically, one-third of the options granted vested immediately and the remaining two-thirds vested over the next twelve and twenty-four month periods, respectively.
The increase in restricted share unit (“RSU”) expenses, when compare to the same period of the prior year, is mainly associated with the fact that the Company is no longer in the development stage. While in the development stage, a portion of RSU expenditures was capitalized within other development costs, which is no longer applicable as the Company is in commercial production.
Performance share units (“PSUs”) were granted to senior management during the first quarter of 2017. As the PSUs plan had not been approved by the Company’s shareholders during the first quarter of 2017, the PSUs were considered as cash settled instruments and recognized as a liability on the Company’s balance sheet with an equivalent expense based on the stock price and PSUs vested as at the reporting date. Since the approval of the PSUs at the Annual General Meeting held on June 28, 2017, the PSUs are no longer considered to be a liability, now being recognized within the Company’s share capital with related expenses reflecting the vesting of the PSUs based on the valuation at the time of the grant as opposed to the valuation of the grant at the reporting date.
Net financial expenses totaled $551,000 for the second quarter of 2017 compared to $5,733,000 for the same period in 2016. The variation year over year is mainly attributable to the change in the fair value of the Company’s gold forward sales contracts and the variation in its unrealized foreign exchange loss incurred in relation to the Company and its subsidiaries’ cash on hand held in currencies other than their functional currencies during the period.
Interests expenses incurred in relation to the Company’s Amended Facility along with banking charges contributed to the rest of the variation year over year. During the second quarter of 2016, interest expenses and banking charges were capitalized within other development costs, as the Company was not in production.
The deferred income tax expense is not an item affecting the Company’s cash on hand, and is due to the recognition of a deferred income tax liability related to the Company’s profit and timing differences, for tax purposes in Burkina Faso.
The Company’s net income for the three and six-month periods ended June 30, 2017 totalled $5,717,000 and $9,549,000 respectively, compared to a net loss of $8,996,000 and $22,311,000 for the three and six-month periods ended June 30, 2016. The variation is a result of the Company’s operations as the Company was in the development stage until it declared commercial production on October 1, 2016.
Based on the net income for the three and six-month periods ended June 30, 2017, the Company’s income per share was $0.02 and $0.03 versus a loss of $0.03 and $0.07 per share for the three and six-month periods ended June 30, 2016.
At June 30, 2017, the non-controlling interest (“NCI”) of the Government of Burkina Faso, which represents 10% in Roxgold SANU S.A. totalled $3,804,000 (December 31, 2016: $1,440,000). The income attributable to the NCI for the six-month period ended June 30, 2017, totalling $2,364,000, is based on the net income for Roxgold SANU SA, as determined using IFRS. This excludes all items within Other expenses and Financial income (expenses) on the Company’s consolidated statement of income (loss), with the exception of sustainability and other in-country costs, interest expense, and financing fees, and any related foreign exchange loss.
The Company will also host a conference call, Tuesday August 15, 2017 at 11:00 am EST to discuss the 2017 second quarter financial results.
Participants in Canada and the U.S. can call in by dialing toll free 1-888-231-8191 and participants outside of North America can call in by dialing +1-647-427-7450.
A live and archived webcast of the conference call will also be available in the events section of the Company’s website (www.roxgold.com) as well as through the conference call provider:
A recorded playback of the 2017 second quarter earnings call will be available two hours after the call for 90 days by dialing toll free 855-859-2056 and entering the call back passcode 57369038.
Paul Criddle, FAUSIMM, Chief Operating Officer for Roxgold Inc., a Qualified Person within the meaning of National Instrument 43-101, has verified and approved the technical disclosure contained in this press release.
Yan Bourassa, P.Geo, VP Geology for Roxgold Inc., a Qualified Person within the meaning of National Instrument 43-101, has verified and approved the technical disclosure contained in this MD&A.
For further information regarding the Project, please refer to the technical report dated June 4, 2014 and entitled “Technical Report for the Yaramoko Gold Project, Burkina Faso” (the “Technical Report”), available on SEDAR at www.sedar.com.
Roxgold is a gold mining company with its key asset, the high grade Yaramoko Gold Mine, located in the Houndé greenstone region of Burkina Faso, West Africa. Roxgold trades on the TSX under the symbol ROXG and as part of the Nasdaq International Designation program with the symbol OTC: ROGFF.
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Manager, Investor Relations & Communications
This press release contains “forward-looking information” within the meaning of applicable Canadian securities laws (“forward-looking statements”). Such forward-looking statements include, without limitation: statements with respect to Mineral Reserves and Mineral Resource estimates, future production and life of mine estimates, future capital and operating costs and expansion and development plans, These statements are based on information currently available to the Company and the Company provides no assurance that actual results will meet management’s expectations. In certain cases, forward-looking information may be identified by such terms as “anticipates”, “believes”, “could”, “estimates”, “expects”, “may”, “shall”, “will”, or “would”. Forward-looking information contained in this news release is based on certain factors and assumptions regarding, among other things, the estimation of Mineral Resources and Mineral Reserves, the realization of resource estimates and reserve estimates, gold metal prices, the timing and amount of future exploration and development expenditures, the estimation of initial and sustaining capital requirements, the estimation of labour and operating costs, the availability of necessary financing and materials to continue to explore and develop the Yaramoko Gold Project in the short and long-term, the progress of exploration and development activities, the receipt of necessary regulatory approvals, and assumptions with respect to currency fluctuations, environmental risks, title disputes or claims, and other similar matters. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include: changes in market conditions, unsuccessful exploration results, possibility of project cost overruns or unanticipated costs and expenses, changes in the costs and timing of the development of new deposits, inaccurate reserve and resource estimates, changes in the price of gold, unanticipated changes in key management personnel and general economic conditions. Mining exploration and development is an inherently risky business. Accordingly, actual events may differ materially from those projected in the forward-looking statements. This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the Company’s forward-looking statements. The Company does not undertake to update any forward-looking statement that may be made from time to time by the Company or on its behalf, except in accordance with applicable securities laws.