Argonaut Gold Ltd. (TSX: AR) today announced its financial results
for the 2nd quarter, ended on June 30, 2010. (All dollar amounts
expressed are in US dollars.) In addition, positive results from
the capital expansion program support our outlook for production
for the remainder of the year.
Second Quarter Highlights
-- 2010 Q2 compared to 2009 Q2
-- Total Tonnes mined up +85%
-- Ore tonnes processed up + 141%
-- Gold Production up +57%
-- $600 Cash cost per oz. produced
-- Revenue $12.5 million
-- Operating income $3.5 million
-- Net income $1.2 million
-- Cash flow from Operations $2.7 million
-- Amended loan agreement on $6.9 million of long-term debt to reduce the
interest rate from 12% to LIBOR plus 3%
-- Four 100 ton trucks and a 992 front loader belonging to the mining
contractor were delivered to the site and placed in production
July Highlights
-- 1.5 million total tonnes moved in July 2010
-- Over 4,500 ounces of production in July 2010
-- 13,000 meters of the Phase II drill program complete by the end of July
CAPEX Program Updates
West Side Improvements
-- Pad 7 is scheduled for 3rd quarter completion
-- New West Side Carbon Plant for gold recovery was completed and
commissioned in early July with a nominal flow of 740 cubic meters/hr,
approximately a 100% improvement to the existing carbon plant
-- New crushing circuit providing 250,000 tonnes per month (TPM) capacity
vs. 68,000 tonnes previously
East Side Additions
-- 5 million tonnes of heap leach pad capacity scheduled for 3rd quarter
completion
-- New East Side carbon plant with columns already in place is scheduled
for 3rd quarter completion and will be commissioned in the 4th quarter
after completion of processing ponds
El Castillo processing capacities will increase to 1 million ore
tonnes per month
CEO Commentary:
Pleased with progress made in the second quarter, Argonaut
Gold's President and CEO Pete Dougherty noted, "El Castillo's
growth is directly attributable to the extensive capital expansion
plans budgeted and implemented in 2010. Many of the capital
expansion initiatives scheduled have been completed ahead of
time.
July ramp up in production included 1.5 million total tonnes
moved, already achieving the September goal, due to the early
delivery of four new 100 ton trucks and a corresponding loader. El
Castillo production growth continued with July production of more
than 4,500 ounces of gold. In addition, with more than 20,000
ounces added on the pad during the 2nd quarter, production looks to
improve for the third consecutive quarter. This provides us with
strong support to achieve our projection of 47,000 ounces in
2010".
This press release should be read in conjunction with the
Company's unaudited consolidated interim financial statements for
the quarter-ended June 30, 2010 and associated Management's
Discussion and Analysis ("MD&A") which are available from the
Company's website www.argonautgoldinc.com, in the "Investors"
section under "Financial Filings", and on SEDAR www.sedar.com.
Summary of Production Results:
Year over year, total tonnes mined increased by 85% for the
quarter. The larger, more efficient truck fleet continued to
produce higher total tonnes mined. The 40 ton fleet is currently
being replaced by the mining contractor with a 100 ton mining fleet
and higher capacity loaders. Four trucks and a corresponding loader
have already arrived on site and were added into operation. 20,112
ounces were placed on the pad during the 2nd quarter of 2010
representing a 22% increase over 1st quarter 2010. In June, the
Company loaded 7,988 of the 20,112 ounces loaded on the pad for the
quarter.
A newly installed crushing circuit replaced equipment on the
west side in order to meet the 250,000 tonnes per month crushing
capacity for the west circuit at El Castillo. The downtime during
the replacement resulted in lower crushing totals for the second
quarter and impacted average grade.
Gold production of 10,066 ounces in the second quarter of 2010
was a 57% increase compared to the second quarter of 2009. Key
operational metrics and production statistics for the second
quarter of 2010 compared to 2009 are presented below in Table
1.
Table 1 - Summary of Q2 2010 Production Results
El Castillo Operating Q2 2010 Q2 2009 6 Months 6 Months
Statistics 6/30/2010 6/30/2009(i) 6/30/2010 6/30/2009(i)
------------ ----------- --------- -----------
Total Tonnes mined 3,450,572 1,862,200 6,343,906 3,372,100
Tonnes Ore 1,867,191 775,100 3,183,738 1,426,600
Tonnes Ore-direct to
leach pad 1,562,907 573,200 2,562,028 1,026,100
Tonnes Crushed 270,879 201,900 585,284 400,400
Gold Grade (grams/tonne) 0.34 0.47 0.36 0.52
Gold Ounces to Leach Pad
(ounces) 20,112 11,712 36,542 23,712
Gold Produced (ounces) 10,066 6,421 20,308 12,389
(i)Note: Information obtained from Castle Gold Corporation press release
dated August 26, 2009 and are prior to the acquisition of Castle Gold by
the Company.
Financial Results - Second Quarter 2010
During the second quarter of 2010, revenue was $12.5 million
compared to $5.9 million in Q2 of 2009 as reported by Castle Gold
Corporation ("Castle Gold") for the El Castillo Mine in its
Management's Discussion and Analysis for the Quarter ended June 30,
2009 posted on August 26th to Sedar.com. The increase in revenue is
due to 3,961 more gold ounces sold and higher gold prices. During
the second quarter of 2010, cost of sales was $7.4 million. Cost of
sales included 2,634 gold ounces, of the 10,387 gold ounces sold,
that were fair valued at acquisition of Castle Gold at market price
of gold less cost to process units. Cash cost per ounce of gold
produced was approximately $600. During the quarter, operating
income was $3.5 million and net income was $1.2 million.
During the six months ended June 30, 2010, revenue was $21.9
million compared to $11.1 million reported by Castle Gold. The
increase in revenue is due to 6,661 more gold ounces sold and
higher gold prices. During the first half of 2010, cost of sales
was $16.7 million. Cost of sales included 11,032 gold ounces, of
the 18,785 gold ounces sold, that were fair valued at acquisition
of Castle Gold at market price of gold less cost to process units.
During the first half of 2010, cash cost per ounce of gold produced
was approximately $594. During the first half of 2010, operating
income was $3.5 million and net loss was $1.9 million.
Looking Forward - 3rd Quarter Milestones:
-- Remaining nine 100 ton trucks scheduled for September delivery
-- East side processing facility scheduled for Q4 completion
-- Current production rate on target to achieve 47,000 ounces in 2010
Cash Requirements:
The cash balance as at June 30, 2010 was $27.6 million. Cash
flow from operating activities was $2.7 million in the second
quarter and $3.1 million in the first half of 2010. The 2010
capital expansion program is anticipated to be $15 - $20 million.
As at June 30, 2010, $12.7 million was recorded as capital
expenditures. The capital expansion program will be funded by cash
on hand and operating cash flow.
Q2 2010 Financial Results Conference Call and Webcast:
Argonaut Gold will host a conference call on Monday, August
16th, 2010 at 9:30 am EDT to discuss the second quarter 2010
results and provide an update of the Company's operating,
exploration, and development activities.
Participants may join the conference call by dialing
1(877)240-9772 or 1(416)340-8530 for calls outside of Canada and
the United States. The conference call may also be accessed via
webcast by visiting the Company's website,
www.argonautgoldinc.com.
A recorded playback of the conference call can be accessed after
the event until August 23, 2010 by dialing 1(800)408-3053 or
1(416)695-5800 for calls outside Canada and the United States. The
pass code for the conference call playback is 6778610 followed by
the # key.
About Argonaut Gold
Argonaut Gold is a Canadian gold company engaged in exploration,
mine development and production activities. Its primary assets
being the production-stage El Castillo Project and the
exploration-stage La Fortuna Project, both located in the State of
Durango, Mexico. Argonaut Gold is a new venture created by former
executive management team members of Meridian Gold Inc. Creating
the Next Quality Mid-Tier Gold Producer in the Americas.
Non-GAAP Measures
"Cash cost" is a non-GAAP measure calculated in accordance with
the Gold Institute Production Cost Standard and includes site costs
for all mining (excluding deferred stripping costs), processing
administration, royalties and production taxes but exclusive of
depletion, depreciation, reclamation, financing costs, capital
costs and exploration costs. Cash cost is presented as we believe
that it represents an industry standard of comparison.
"Cash cost per ounce" is a non-GAAP measure derived from the
cash cost of ounces produced divided by total ounces produced.
Cash cost per ounce is not a term defined under Canadian
generally accepted accounting principles, and does not have a
standard, agreed upon meaning. As such cash cost per ounce may not
be directly comparable to cash cost per ounce reported by similar
issuers.
Cautionary Language Regarding Forward-Looking Information
This news release contains certain forward-looking statements.
Forward-looking statements include but are not limited to those
with respect to the price of gold, the estimation of mineral
resources and reserves, the realization of mineral reserve
estimates, the timing and amount of estimated future production,
costs of production, capital expenditures, costs and timing of
development of new deposits, success of exploration activities,
permitting time lines, currency fluctuations, requirements for
additional capital, completion of capital projects, availability of
financing on acceptable terms, government regulation of mining
operations, environmental risks, unanticipated reclamation expenses
and title disputes or claims and limitations on insurance coverage.
In certain cases, forward- looking statements can be identified by
the use of words such as "goal", "targets", "objective", "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 statements involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Argonaut Gold to be
materially different from any future results, performance or
achievement expressed or implied by the forward-looking statements.
Such risks and uncertainties include, among others, the actual
results of current exploration activities, conclusions of economic
evaluations, changes in project parameters, possible variations in
grade and ore densities or recovery rates, failure of plant,
equipment or processes to operate as anticipated, accidents, labour
disputes or other risks of the mining industry, delays in obtaining
government approvals or financing or in completion of development
or construction activities, risks relating to the integration of
acquisitions, to international operations, to the price of gold.
Although Argonaut Gold has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results
not to be as anticipated, estimated or intended.
It is important to note, that: (i) unless otherwise indicated,
forward-looking statements indicate the Company's expectations as
at the date of this news release; (ii) actual results may differ
materially from the Company's expectations if known and unknown
risks or uncertainties affect its business, or if estimates or
assumptions prove inaccurate; (iii) the Company cannot guarantee
that any forward-looking statement will materialize and,
accordingly, readers are cautioned not to place undue reliance on
these forward-looking statements; and (iv) the Company disclaims
any intention and assumes no obligation to update or revise any
forward-looking statement even if new information becomes
available, as a result of future events or for any other reason. In
making the forward-looking statements in this news release,
Argonaut Gold has made several material assumptions, including but
not limited to, the assumption that: (i) consistent supply of
sufficient inputs including power will be available to develop and
operate the project as planned; (ii) metal prices and exchange
rates experienced match those anticipated; (iii) mineral reserve
and resource estimates are accurate; (iv) the technology used to
develop and operate its project will and will continue to work
effectively; (vi) that labour and materials will be sufficiently
plentiful as to not impede the projects or add significantly to the
estimated cash costs of operations; and (vii) that the process and
plan expansion projects continue to be implemented
successfully.
Contacts: Argonaut Gold Ltd. Nichole Cowles Investor Relations
Manager (775) 284-4422 x 101 nichole.cowles@argonautgoldinc.com
www.argonautgoldinc.com
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