Anaconda Mining Reports Financial Results for Seven Month Period Ended December 31, 2017

 

TORONTO, March 1, 2018 /CNW/ - Anaconda Mining Inc. ("Anaconda" or the "Company") – (TSX:ANX) is pleased to report its financial and operating results for the seven month period ended December 31, 2017. The Company has changed its fiscal year end to December 31, from its previous fiscal year end of May 31. Consequently, Anaconda is reporting audited financial results for the seven month fiscal year from June 1, 2017 to December 31, 2017.

All dollar amounts are in Canadian Dollars. The Company's audited consolidated financial statements, management discussion and analysis, and annual information form will be available today at www.sedar.com and the Company's website www.anacondamining.com.

Highlights for the Seven Month Period Ended December 31, 2017

• Anaconda produced 10,002 ounces of gold and sold 9,509 ounces during the seven months ended December 31, 2017, on track to exceed original guidance of 15,500 ounces for the twelve-month period ending May 31, 2018, and exceeding pro-rated guidance of 9,042 ounces for the seven month period;
• The Company generated $15.4 million in revenue at an average sale price of $1,615 per ounce, and earned a further $0.8 million from the sale of waste rock as aggregate from its Point Rousse Project;
• The Pine Cove Mill achieved a throughput rate of 1,316 tonnes per day during the seven month period, an 8% improvement over the previous fiscal year;
• Anaconda mined 382,111 tonnes of ore during the seven-month period at a strip ratio of 1.8 waste tonnes to ore tonnes, a 65% reduction from the previous fiscal year strip ratio of 5.1;
• As at December 31, 2017, the Company had cash of $4.0 million, net working capital of $6.5 million and additional available liquidity of $1,000,000 from an undrawn upon revolving line of credit facility;
• Operating cash costs per ounce sold* for the seven-month period ended December 31, 2017, was $1,001 (US$787), in line with guidance of $1,000 - $1,050, and an 11% improvement over the prior fiscal year;
• All-in sustaining cash costs per ounce sold ("AISC")*, including corporate administration and sustaining capital expenditures, was $1,384 (US$1,088) for the seven month period ended December 31, 2017, a 20% improvement over the prior fiscal year;
• At the Point Rousse Project, EBITDA* for the seven months ended December 31, 2017 was $5.6 million, while consolidated EBITDA was $3.7 million;
• Net income for the period ended December 31, 2017 was $904,635, or $0.01 per share, compared to a net loss of $3,602,188, or $0.07 per share, for the full year ended May 31, 2017;
• With the completion of a $3.0 million non-brokered private placement in October 2017, the Company is undertaking extension and infill drill programs at the Goldboro and Point Rousse Projects (see press releases dated November 1 and 29, 2017).

*Refer to Non-IFRS Measures section below.

"The Company has again achieved strong financial results and maintained a robust financial position, generating EBITDA of $5.6 million from the Point Rousse Project over the seven-month fiscal period, and ending the year with $4.0 million of cash and an undrawn $1 million line of credit. We produced just over 10,000 ounces of gold, on track to exceed our original guidance for the full year ended May 31, 2018, and came in at the lower end of our operating cash cost per ounce guidance with $1,001 per ounce, or US$787. Anaconda is well positioned for success in 2018, as it transitions to the higher-grade Stog'er Tight Mine, progresses the high-grade Goldboro Project, and continues to expand and develop the Argyle Deposit at Point Rousse."

~ Dustin Angelo, President and CEO

Consolidated Results Summary

 

Review of the Seven Month Period Ended December 31, 2017 

Operational Performance - Anaconda sold 9,509 ounces of gold during the seven months ended December 31, 2017, and had 600 ounces of gold doré in finished goods at year-end. Production of 10,002 ounces for the seven month period was on track to exceed the Company's guidance of 15,500 ounces for the twelve month period ending May 31, 2018, the result of higher throughput and recovery rates.

The mill processed 275,640 tonnes of ore during the period, representing a throughput rate of 1,316 tonnes per day, an 8% increase over the prior year throughput rate. Mill recovery was 85.8% over the seven month period, up slightly from the previous year, at an average grade of 1.32 g/t, which is consistent with the prior year. Preventative maintenance continues to be a focus to maintain consistent levels of production, with a liner change in ball mill and related maintenance activities taking place in early Q1 2018.

Mine operations at Point Rousse ran for 135 days during the seven months ended December 31, 2017, with activity in the later part of December focused on development activity at Stog'er Tight, as mining areas became constrained in the bottom of the Pine Cove Pit. Ore produced from the Pine Cove Pit during the period was 382,111 tonnes, which compares favourably to the 432,081 tonnes of production for the full year ended May 31, 2017. Total material moved during the period of 1,074,926 tonnes is significantly lower than the prior year, notwithstanding the shorter comparative period, which is reflective of reduced mining rates as the operation approaches the planned base of the Pine Cove Pit. 

The decrease in material moved wholly relates to lower waste material mined, due to the sequencing of the mine plan which resulted in less waste mined in the most recent period. As a result, the strip ratio for the period of 1.8 waste tonnes to ore tonnes is significantly improved from 5.1 strip ration in the previous fiscal year.

Financial Performance - Anaconda generated total revenue of $15,360,584 during the seven months ended December 31, 2017, based on gold sales of 9,509 ounces of gold and an average realized gold price of $1,615 per ounce. For the year ended May 31, 2017, the Company achieved total revenue of $25,696,629, based on gold sales for the period of 15,562 ounces. 

The Company also generated other income of $809,192 from the sale of waste rock to be used in aggregates, compared to $938,089 in the prior year when it delivered more waste rock tonnes. The aggregates contract was completed in October 2017, and the Company is evaluating opportunities for further waste rock sale agreements.

Operating expenses for the seven months ended December 31, 2017, which include mining, processing and mine support costs, were $9,519,731, compared to $17,525,386 for the year ended May 31, 2017. On a per ounce sold basis, operating cash costs were $1,001 per ounce for the period, which is at the lower end of the Company's guidance range for its old fiscal year. This represented an 11% improvement over operating cash costs per ounce of $1,126 during the previous year ended May 31, 2017. The improvement was the result of stronger mine production volumes, with ore mined for the period only 12% lower than the previous full year, at a significantly lower strip ratio of 1.8 waste tonnes to ore tonnes. In addition, mill throughput had increased 8% compared to the prior fiscal year. There was no royalty expense during the period, however the Stog'er Tight deposit will be subject to a 3% net smelter royalty on currently planned production.

Depletion and depreciation was $4,248,742 for the seven months ended December 31, 2017, compared to $7,262,083 for the year ended May 31, 2017. On an annualized basis, the depletion and depreciation was comparatively consistent, with generally higher depletion and depreciation over the past two fiscal periods as a result of the higher gold ounces sold, which drove higher units-of-production depreciation, and higher depletion of stripping costs for the Pine Cove Pit, which is approaching its end of life.

Mine operating income for the seven months ended December 31, 2017 was $1,595,111, compared to $906,208 for the full year ended May 31, 2017. The higher mine operating income, despite only over a seven month period, was predominantly attributable to higher productivity in both the mine and mill operations, which drove down operating cash costs on a per ounce sold basis.

Corporate administration costs were $2,747,770 for the period, compared to $2,637,276 for the year ended May 31, 2017.  Corporate administration includes senior management and corporate compensation, regulatory costs including audit, tax, and listing costs, marketing and investor relations, and general office expenses. The higher comparative expenditures reflect the expanded senior management team after the acquisition of Goldboro, and increased marketing and communication costs.

Share-based compensation was $131,676 during the period, compared to $181,225 in the twelve months ended May 31, 2017, reflecting the lower days vesting of stock options in the most recent period ended December 31, 2017.

The deferred premium on flow-through shares was a recovery of $96,584, reflecting a proportion of the total deferred premium based on qualifying exploration expenditures spent up to December 31, 2017, as a percentage of the total exploration expenditures to be made under the flow-through financing. The remaining deferred flow-through premium liability of $253,535 is expected to be amortized into comprehensive income over the first two quarters of 2018 as the remaining qualifying exploration expenditures are incurred.

During the period ended December 31, 2017, the Company recognized a write-down of exploration and evaluation costs of $65,939 relating to the removal of tenements from an option agreement, to enable the Company to focus on more prospective targets within that agreement.

Finance expenses of $46,883 for the period are significantly lower than the year ended May 31, 2017, which had included finance costs related to gold prepayment arrangements. Current finance expenses relate to interest on government loans, capital leases and other loans.

The Company recognized a current income tax expense of $118,000 during the period ended December 31, 2017, reflecting the Company's estimate of Newfoundland and Labrador mining taxes payable based on results for the period. A deferred income tax recovery of $1,569,000 was also recognized during the seven month period, mainly the result of the impact of the expected development of the Argyle Mineral Resource on management's estimates with respect to the expected use of tax loss pools. A deferred tax expense of $2,475,000 was recognized for the year ended May 31, 2017, due to a $2,520,000 increase in unrecognized portion of the deferred tax asset.

Net income for the period ended December 31, 2017 was $904,635, or $0.01 per share, compared to a net loss for the year ended May 31, 2017 of $3,602,188, or $0.07 per share (per share amounts reflect the impact of the Share Consolidation). The increase in net income is the result of higher mine operating income, and the deferred tax recovery.

Review of the Four Months Ended December 31, 2017 

Operational Performance - Anaconda sold 4,789 ounces of gold during the four months ended December 31, 2017, and had 600 ounces of gold doré in finished goods at year-end. The Pine Cove Mill processed 156,239 tonnes of ore during this period, representing a throughput rate of 1,299 per operating day, an 8% improvement on throughput compared to the three-month period ended May 31, 2017. Mill recovery of 85.0% was in line with the comparative period, while average grade of 1.29 g/t for the four months ended December 31, 2017 was 13% lower than the three months ended May 31, 2017. 

The mining operations at Point Rousse ran for 69 days over the four month period, with activity in the later part of December 2017 focused on development activity at Stog'er Tight. Mine production of 223,254 tonnes of ore was significantly higher than the 92,167 tonnes of ore mined during the three months ended May 31, 2017, notwithstanding the shorter comparative period, as operations were challenged in the spring of 2017 due to snowfall and related weather conditions. The strip ratio for the four months ending December 31, 2017 was 1.5 waste tonnes to ore tonnes, significantly improved from 4.2 in the comparative period ending May 31, 2017, driven by the sequence of the mine plan as the operation moved to the lower levels of the Pine Cove Pit.

The completion of mining in the Pine Cove Pit is expected in the later part of Q1 2018, with Pine Cove ore stockpiles being processed over the first two quarters of 2018 as the mining operation transitions to Stog'er Tight. Initial mining from the Stog'er Tight West Pit is expected to start in the first quarter of 2018. 

Financial Performance - For the four months ended December 31, 2017, the Company generated $7,747,414 in revenue at an average gold sales price of approximately $1,619 per ounce. Despite a 3% increase in gold ounces sold compared to the three months ended May 31, 2017, total revenue was comparatively flat due to the decrease in the average gold price. 

Operating expenses were $4,479,599 for the four months ended December 31, 2017, equivalent to $936 per ounce sold (US$743), which compares favourably to the Company's guidance of $1,000 to $1,050 per ounce for the old fiscal year ended May 31, 2018. Operating cash costs were $699 per ounce sold for the three months ended May 31, 2017, when the Company achieved record quarterly gold sales of 4,658 ounces. The higher operating cash costs in the most recent period are reflective of a 13% lower mill grade compared to the quarter ended May 31, 2017, which resulted in higher gold ounce production despite comparably lower mill throughput.

Mine operating income for the four months ended December 31, 2017 was $1,291,812, compared to $1,539,616 for the three months ended May 31, 2017. The comparatively lower mine operating income in the most recent period, despite being a four-month period, reflects higher operating expenses in absolute terms due to significantly higher mining rates and higher mill throughput rates during the four months ended December 31, 2017. The increased operating expense were partially offset by depletion and depreciation.

Net income for the four months ended December 31, 2017 was $1,228,668, or $0.01 per share, compared to a net loss of $1,890,260, or $0.03 per share, for the three months ended May 31, 2017. The change in net income is due to strong mine operating income in the recent period, higher income from the sale of waste rock, and a deferred tax recovery of $1,243,000, which were partially offset by higher comparative corporate administration costs, which reflect the Company's expanded corporate presence after the acquisition of the Goldboro Project. The net loss for the three months ended May 31, 2017 was also impacted be a deferred tax expense of $2,785,000.

Non-IFRS Measures

Anaconda has included in this press release certain non-IFRS performance measures as detailed below. In the gold mining industry, these are common performance measures but may not be comparable to similar measures presented by other issuers. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Operating Cash Costs per Ounce of Gold – Anaconda calculates operating cash costs per ounce by dividing operating expenses per the consolidated statement of operations, net of silver sales by-product revenue, by the gold ounces sold during the applicable period. Operating expenses include mine site operating costs such as mining, processing and administration as well as royalties, however excludes depletion and depreciation and rehabilitation costs.

All-In Sustaining Costs per Ounce of Gold – Anaconda has adopted an all-in sustaining cost performance measure that reflects all of the expenditures that are required to produce an ounce of gold from current operations. While there is no standardized meaning of the measure across the industry, the Company's definition conforms to the all-in sustaining cost definition as set out by the World Gold Council in its guidance dated June 27, 2013. The World Gold Council is a non-regulatory, non-profit organization established in 1987 whose members include global senior mining companies. The Company believes that this measure will be useful to external users in assessing operating performance and the ability to generate free cash flow from current operations.

The Company defines all-in sustaining costs as the sum of operating cash costs (per above), sustaining capital (capital required to maintain current operations at existing levels), corporate administration costs, sustaining exploration, and rehabilitation accretion and amortization related to current operations. All-in sustaining costs excludes capital expenditures for significant improvements at existing operations deemed to be expansionary in nature, exploration and evaluation related to growth projects, financing costs, debt repayments, and taxes.  Canadian and US dollars are noted for realized gold price, operating cash costs per ounce of gold and all-in sustaining costs per ounce of gold. Both currencies are considered relevant and the Company uses the average foreign exchange rate for the period.

Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") - EBITDA is earnings before finance expense, deferred income tax expense and depletion and depreciation.

Point Rousse Project EBITDA is EBITDA before corporate administration and other expenses (income).

ABOUT ANACONDA

Anaconda Mining is a TSX-listed gold mining, development, and exploration company, focused in the prospective Atlantic Canadian jurisdictions of Newfoundland and Nova Scotia. The Company operates the Point Rousse Project located in the Baie Verte Mining District in Newfoundland, comprised of the Pine Cove open pit mine, the Stog'er Tight and Argyle Mineral Resource, the fully-permitted Pine Cove Mill and tailings facility, and approximately 5,800 hectares of prospective gold-bearing property. Anaconda is also developing the Goldboro Gold Project in Nova Scotia, a high-grade Mineral Resource, with the potential to leverage existing infrastructure at the Company's Point Rousse Project.

The Company also has a pipeline of organic growth opportunities, including the Great Northern Project on the Northern Peninsula of Newfoundland and the Tilt Cove Property on the Baie Verte Peninsula, also in Newfoundland.

FORWARD-LOOKING STATEMENTS

This news release contains "forward-looking information" within the meaning of applicable Canadian and United States securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate", or "believes" or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur", or "be achieved". Forward-looking information is based on the opinions and estimates of management at the date the information is made, and is based on a number of assumptions and is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Anaconda to be materially different from those expressed or implied by such forward-looking information, including risks associated with the exploration, development and mining such as economic factors as they effect exploration, future commodity prices, changes in foreign exchange and interest rates, actual results of current production, development and exploration activities, government regulation, political or economic developments, environmental risks, permitting timelines, capital expenditures, operating or technical difficulties in connection with development activities, employee relations, the speculative nature of gold exploration and development, including the risks of diminishing quantities of grades of resources, contests over title to properties, and changes in project parameters as plans continue to be refined as well as those risk factors discussed in Anaconda's annual information form for the year ended December 31, 2017, available on www.sedar.com.  Although Anaconda has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Anaconda does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

SOURCE Anaconda Mining Inc.

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