Alio Gold Inc. (TSX:ALO) (NYSE AMERICAN:ALO)
(“Alio Gold” or the “Company”), today reported its second quarter
2017 results. Production results were previously released on July
6, 2017. The Company will host a conference call at 11:00am
EDT today, refer to the end of the release for further details.
Second Quarter Highlights and Recent
Developments
- Gold production of 22,011 ounces at an all-in sustaining cost1
(“AISC”) of $954 per ounce, in line with guidance.
- Maintained 2017 guidance of 86,000 to 92,000 ounces of gold at
AISC less than $1,000 per ounce with 20,000 to 22,000 ounces of
production expected in Q3 2017.
- Initiated Revitalization Plan for the San Francisco Mine
following updated NI 43-101 technical report filed in May
2017.
- Commenced the Definitive Feasibility Study (“DFS”) for the
high-grade, high-margin Ana Paula project after positive
Pre-Feasibility Study (“PFS”) released.
- Completed CAD$50.4 million bought deal financing.
“The San Francisco Mine continued to deliver
strong production and cash cost performance in the second quarter,”
said Greg McCunn, Chief Executive Officer. “With the revitalization
plan of the mine underway we are well positioned to continue to
generate cash flow which combined with our recently completely
CAD$50.4 million bought deal financing significantly strengthens
the balance sheet. We continue to advance our high grade, high
margin Ana Paula project and have recently submitted for the change
of land use permit and commenced the definitive feasibility
study.”
Summarized Financial and Operating Results
($ thousands, except where indicated) |
Three months ended June 30 |
Six months ended June 30 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
Gold sold (ounces) |
|
21,495 |
|
26,474 |
|
47,544 |
|
51,141 |
|
Silver sold (ounces) |
|
10,332 |
|
14,884 |
|
22,231 |
|
29,555 |
|
Metal revenues |
$ |
27,069 |
$ |
33,075 |
$ |
59,375 |
$ |
61,684 |
|
Production costs, excl. depreciation and depletion
|
$ |
16,071 |
$ |
18,296 |
$ |
35,433 |
$ |
37,289 |
|
Net earnings (loss) from operations |
$ |
7,751 |
$ |
8,704 |
$ |
17,531 |
$ |
506 |
|
Net earnings (loss) |
$ |
3,512 |
$ |
6,395 |
$ |
9,554 |
$ |
(3,938 |
) |
Net earnings (loss) per share, basic |
$ |
0.10 |
$ |
0.20 |
$ |
0.27 |
$ |
(0.12 |
) |
Cash flows from operating activities* |
$ |
2,772 |
$ |
11,485 |
$ |
12,515 |
$ |
14,245 |
|
By-product cash costs2 (per ounce) |
$ |
740 |
$ |
681 |
$ |
737 |
$ |
720 |
|
AISC1 (per ounce) |
$ |
954 |
$ |
761 |
$ |
896 |
$ |
796 |
|
Average realized gold price per gold ounce |
$ |
1,252 |
$ |
1,232 |
$ |
1,241 |
$ |
1,197 |
|
*after changes in non-cash working capital
Financial performance
Metal revenues decreased by 18.1% to $27.1
million compared to $33.1 million during Q2 2016, as a result of
fewer ounces sold, partially offset by an increase in the average
realized gold price.
Production costs, which comprise the full cost
of operations excluding depreciation and depletion, form a
component of cost of sales and were $16.1 million compared to $18.3
million during Q2 2016.
Depletion and depreciation costs decreased 80.0%
to $0.8 million compared to $4.0 million during Q2 2016. This
decrease was due to an improved mine plan, resulting in lower
unit-of-production depreciation rates.
Earnings from operations decreased 10.3% to $7.8
million compared to $8.7 million during Q2 2016. This decrease was
due to lower earnings from mine operations of $10.2 million
compared to $10.8 million during Q2 2016.
Corporate and administrative expenses increased
19.0% to $2.5 million compared to $2.1 million during Q2 2016. This
increase was primarily due to $0.7 million of termination benefits
being incurred related to corporate restructuring.
Cash provided by operating activities was $2.8
million compared to $11.5 million during Q2 2016. The decrease was
due to:
- A decrease in metal revenues due to lower grade processed;
- An increase in contract mining costs due to increased strip
ratio;
- Tax instalments being applied against VAT receivable;
- Slower VAT receivable collection;
- Building of inventory supplies; and,
- Termination benefits related to corporate
restructuring.
Cash and cash equivalents at June 30, 2017, were
$35.9 million. During the quarter, the Company generated $2.8
million from operations, invested $2.8 million on sustaining
capital expenditures, $0.1 million on exploration and evaluation
projects, and $3.2 million on the Ana Paula project. Also, the
Company received $1.3 million of its VAT receivable in cash.
Subsequent to June 30, 2017, the Company received $37.9 million net
proceeds from the bought deal financing, $2.5 million related to
the completion of the sale of the Caballo Blanco asset on July 20,
2016, and $0.1 million of the $4.3 million VAT receivable.
Working capital at June 30, 2017, was $39.6
million, an improvement of $25.7 million from June 30, 2016. This
increase is a result of improved cash provided by operating
activities. Additionally, during the prior fiscal year, the
Company:
- Sold the Caballo Blanco Property increasing cash by $9.2
million;
- Completed a bought deal financing increasing cash by $13.8
million; and,
- Settled the loan facility and debenture decreasing cash by
$10.2 million and $1.5 million, respectively.
San Francisco (the “Mine”,100%-owned)
The Mine produced 22,011 gold ounces and 10,332
silver ounces compared to 25,863 gold ounces and 14,884 silver
ounces during Q2 2016. The decrease was primarily as a result of
lower grade ore processed, as anticipated in the mine plan.
The Mine’s by-product cash cost was $740 per
ounce while AISC was $954 per ounce, inline with guidance for AISC
of less than $1,000 per ounce. During Q2 2016 by-product cash cost
was $681 per ounce and AISC was $761 per ounce. The increase in
cash cost was due to fewer ounces produced combined with an
increase in waste stripping in-line with the new mine plan.
A Revitalization Plan was announced during the
second quarter which includes a significant pre-stripping campaign,
modifying the crusher and upgrading the power infrastructure. The
updated plan increases gold production to between 100,000 – 120,000
ounces of gold per year for over six years and increased reserves
by 71.4% to 928,700 contained gold ounces (57.79 million tonnes at
0.527 grams per tonne gold).
The pre-stripping campaign envisions moving
approximately 22 million tonnes of waste from the San Francisco
Main pit and the La Chicharra pit over the next 20 months.
Pre-stripping of Phase 6 of the San Francisco Main pit is currently
underway.
The power infrastructure upgrade will provide
additional transformer capacity to eliminate the use of diesel
generated power on the Mine site. The detailed engineering for the
power upgrade was initiated in June 2017 and an order for the new
transformer is expected to be placed in Q3 2017. The project
is expected to be completed by mid-2018.
Crushing plant modifications are being planned
to reduce the particle size of ore being sent to the leach pads and
improve gold recovery. The detailed engineering for the crusher
modification commenced in June 2017 with the first phase expected
to be completed in Q3
2018. Ana
Paula (the “Project”, 100%-owned)
During the second quarter the Pre-Feasibility
Study for the Ana Paula project was completed and the Environmental
Impact Assessment (“MIA”) authorization from SEMARNAT (Mexico’s
Secretary of Environment and Natural Resources) was received.
Subsequently, a Definitive Feasibility Study (“DFS”) was initiated
in mid-July 2017 using the same group of consultants that prepared
the PFS and it is expected to take nine to ten months to complete.
The DFS will be based on the updated mineral resource estimate and
mine plan as well as additional metallurgical testing. The DFS will
provide a higher level of confidence in the robustness of the
project economics than the PFS and allow the Company’s Board of
Directors to make an investment decision to proceed with
construction of the project during Q2 2018.
As the Company advances its engineering studies,
it has also commenced discussions on financing alternatives for the
Ana Paula project including project or corporate debt. It is
expected that financing for approximately $90 million of the total
estimated $137.5 million capital cost will be arranged, subject to
conditions precedent for drawing, in conjunction with the
completion of the DFS.
The land on which the Company expects to
construct the Ana Paula project is privately owned land. The
Company has acquired or signed 30-year lease terms for
approximately 75% of the land required for the Project. During Q2
2017, the Company applied for a Change of Land Use Permit (“ETJ”)
for this land and expects to receive the permit within three to
four months of filing the application. The Company expects to
complete the balance of land acquisition and lease agreements
during Q3 2017 and receive complete Change of Land Use Permits by
the end of 2017.
Director Retirement
The Company also announces today that Tony
Hawkshaw will be retiring from the board of directors on September
1, 2017. “Tony joined the board in 2014 at a difficult time
for the Company”, said Bryan Coates, Chairman of the
Board. “We would like to thank him for his tireless work
through a period of successful change in the Company which included
the acquisition of the Company’s Ana Paula project, a change of the
management team and rebranding as Alio Gold. We wish Tony
continued success in his future endeavors and his retirement”.
Please refer to the Company's financial
statements, related notes and accompanying Management Discussion
and Analysis ("MD&A") for a full review of the San Francisco
operation and Ana Paula project. This can be viewed on the
Company’s website at www.aliogold.com, on SEDAR at
www.sedar.com and EDGAR at www.sec.gov.
Second quarter conference call and
webcast details:
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Date: |
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Thursday, August 10,
2017 |
Time: |
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11:00am (EDT) |
Toll Free (US and
Canada): |
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(855) 427-9509 |
Toll Free (Outside
North America): |
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(210) 229-8822 |
Conference ID: |
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52489332 |
Webcast: |
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http://edge.media-server.com/m/p/z6jucap5 |
Replay: |
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To be available at
http://www.aliogold.com |
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About Alio Gold
Alio Gold is a Canadian gold mining company
engaged in exploration, development and production in Mexico.
Its principal assets include the producing San Francisco mine in
Sonora, Mexico and the development stage Ana Paula project in
Guerrero, Mexico. The Company also has a portfolio of other
exploration properties, all of which are located in Mexico.
Footnotes:
1) All-in sustaining cost per gold ounce
The Company has adopted an all-in sustaining
cost per ounce on a by-product basis performance measure which is
calculated based on the guidance note issued by the World Gold
Council. Management uses this information as an additional measure
to evaluate the Company’s performance and ability to generate
cash.
All-in sustaining costs on a by-product basis
include total production cash costs, corporate and administrative
expenses, sustaining capital expenditures and accretion for site
reclamation and closure costs. These reclamation and closure costs
represent the gradual unwinding of the discounted liability to
rehabilitate the area around the Mine at the end of the mine life.
The Company believes this measure to be representative of the total
costs associated with producing gold; however, this performance
measure has no standardized meaning. As such, there are likely to
be differences in the method of computation when compared to
similar measures presented by other issuers.
The following table provides a reconciliation of
the all-in sustaining cost per gold ounce on a by-product basis to
the consolidated financial statements:
|
Three months ended June 30, |
Six months ended June 30, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Production costs |
$ |
16,071 |
|
$ |
18,296 |
|
$ |
35,433 |
|
$ |
37,289 |
|
Corporate and administrative expenses (1) |
|
1,748 |
|
|
2,098 |
|
|
3,073 |
|
|
3,852 |
|
Sustaining capital expenditures |
|
2,799 |
|
|
- |
|
|
4,360 |
|
|
- |
|
Accretion for site reclamation and closure |
|
57 |
|
|
17 |
|
|
114 |
|
|
30 |
|
Less: By-product silver credits |
|
(172 |
) |
|
(261 |
) |
|
(380 |
) |
|
(483 |
) |
All-in sustaining costs |
|
20,503 |
|
|
20,150 |
|
|
42,600 |
|
|
40,688 |
|
Divided by gold sold (ozs) |
|
21,495 |
|
|
26,474 |
|
|
47,544 |
|
|
51,141 |
|
All-in sustaining cost per gold ounce on a by-product
basis |
$ |
954 |
|
$ |
761 |
|
$ |
896 |
|
$ |
796 |
|
(1) Corporate and administrative expenses adjusted for the
three months and six months ended June 30, 2017, to remove
termination benefits of $0.7 million.
2) Cash cost per gold ounce and cash cost per gold ounce on
a by-product basis
Cash cost per gold ounce and cash cost per gold
ounce on a by-product basis are non-GAAP performance measures that
management uses to assess the Company’s performance and its
expected future performance. The Company has included the non-GAAP
performance measures of cash cost per gold ounce and cash cost per
gold ounce on a by-product basis throughout this document. In the
gold mining industry, these are common performance measures but
they do not have any standardized meaning. As such, they are
unlikely to be comparable to similar measures presented by other
issuers.
Management believes that, in addition to
conventional measures prepared in accordance with GAAP, certain
investors use this information to evaluate the Company’s
performance and ability to generate cash flow. Accordingly,
presentation of these measures is to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP.
The cash cost per gold ounce is calculated by
dividing the operating production costs by the total number of gold
ounces sold. The cash cost per gold ounce on a by-product basis is
calculated by deducting the by-product silver credits per gold
ounce sold from the cash cost per gold ounce. The following table
provides a reconciliation of the cash cost per gold ounce and cash
cost per gold ounce on a by-product basis to the consolidated
financial statements:
|
Three months ended June 30, |
Six months ended June 30, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Production costs |
$ |
16,071 |
|
$ |
18,296 |
|
$ |
35,433 |
|
$ |
37,289 |
|
Divided by gold sold (ozs) |
|
21,495 |
|
|
26,474 |
|
|
47,544 |
|
|
51,141 |
|
Cash cost per gold ounce |
|
748 |
|
|
691 |
|
|
745 |
|
|
729 |
|
Less: By-product silver credits per gold ounce (1)
|
|
(8 |
) |
|
(10 |
) |
|
(8 |
) |
|
(9 |
) |
Cash cost per gold ounce on a by-product basis |
$ |
740 |
|
$ |
681 |
|
$ |
737 |
|
$ |
720 |
|
(1) Management determined that silver metal
revenues, when compared to gold metal revenues, are immaterial and
therefore considered a by-product of the production of gold. For
the three and six months ended June 30, 2017, total by-product
silver credits were $0.2 million and $0.4 million, respectively
(three and six months ended June 30, 2016 - $0.3 million and $0.5
million, respectively).
For further details on the calculation of
production costs, refer to the notes to the consolidated financial
statements. Cash cost per gold ounce and cash cost per gold ounce
on a by-product basis are not necessarily indicative of earnings
from operations or cash flow from operations as determined under
GAAP. Other companies may calculate these measures differently.
3) For further information on the mineral reserves and resources
refer to the technical report entitled “NI 43-101 F1 Technical
Report Updated Resources and Reserves and Mine Plan for the San
Francisco Gold Project, Sonora, Mexico”, report date February 29,
2016 which is available on Alio Gold’s SEDAR profile at
www.sedar.com.
Cautionary Note to United States
InvestorsThe Company is subject to the reporting
requirements of the applicable Canadian securities laws, and as a
result it reports its mineral reserves and resources according to
Canadian standards. Canadian reporting requirements for disclosure
of mineral properties are governed by NI 43-101. The definitions of
NI 43-101 are adopted from those given by the Canadian Institute of
Mining, Metallurgy and Petroleum. U.S. reporting requirements are
governed by Industry Guide 7 (“Guide 7”) of the Securities and
Exchange Commission (the “Commission”). These reporting standards
have similar goals in terms of conveying an appropriate level of
confidence in the disclosures being reported, but embody different
approaches and definitions.
The Company reports “resources” in accordance
with NI 43-101. While the terms “Mineral Resource,” “Measured
Mineral Resource,” “Indicated Mineral Resource” and “Inferred
Mineral Resource” are recognized and required by Canadian
regulations, they are not defined terms under standards of the
Commission and generally, U.S. companies are not permitted to
report resources in documents filed with the Commission. As such,
certain information contained in this news release describing
mineralization and resources under Canadian standards is not
comparable to similar information published by United States
companies subject to the reporting and disclosure requirements of
the Commission. It cannot be assumed that all or any part of
Measured or Indicated Resources will ever be converted into Mineral
Reserves, and it cannot be assumed that all or any part of an
Inferred Mineral Resource exists, or is economically or legally
mineable. Under Industry Guide 7, mineralization may not be
classified as a “reserve” unless the determination has been made
that the mineralization could be economically and legally produced
or extracted at the time the reserve determination is made. In
addition, an Inferred Mineral Resource has a great amount of
uncertainty as to its existence and as to its economic and legal
feasibility, and it cannot be assumed that all or any part of an
Inferred Mineral Resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of a feasibility study. In
addition, the definitions of “Proven Mineral Reserves” and
“Probable Mineral Reserves” under CIM standards differ in certain
respects from the standards of the Commission.
For detailed technical information related to
the Company’s exploration, development, and operating assets,
please refer to the Company’s website at www.aliogold.com or the
most recent Annual Information Form available on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov.
Cautionary Note Regarding
Forward-Looking StatementsCertain statements and
information contained in this news release constitute
“forward-looking statements” within the meaning of applicable U.S.
securities laws and “forward-looking information” within the
meaning of applicable Canadian securities laws, which we refer to
collectively as “forward-looking statements”. Forward-looking
statements are statements and information regarding possible
events, conditions or results of operations that are based upon
assumptions about future economic conditions and courses of action.
All statements and information other than statements of historical
fact may be forward-looking statements. In some cases,
forward-looking statements can be identified by the use of words
such as “seek”, “expect”, “anticipate”, “budget”, “plan”,
“estimate”, “continue”, “forecast”, “intend”, “believe”, “predict”,
“potential”, “target”, “may”, “could”, “would”, “might”, “will” and
similar words or phrases (including negative variations) suggesting
future outcomes or statements regarding an outlook.
Forward-looking statements in news release
herein by reference include, but are not limited to statements and
information regarding: the Company's future mining activities,
including mining capacity, recovery, cash costs, production and
mine life; the Company's reserves and resources estimates; the
Company’s exploration and development plans, including anticipated
costs and timing thereof; the Company’s plans for growth through
exploration activities, acquisitions or otherwise; and expectations
regarding future maintenance and capital expenditures, working
capital requirements, the availability of financing and future
effective tax rates. Such forward-looking statements are based on a
number of material factors and assumptions, including, but not
limited to: that contracted parties provide goods or services in a
timely manner, that no unusual geological or technical problems
occur, that plant and equipment function as anticipated and that
there is no material adverse change in the price of gold, costs
associated with production or recovery. Forward-looking statements
involve known and unknown risks, uncertainties and other factors
which may cause actual results, performance or achievements, or
industry results, to differ materially from those anticipated in
such forward-looking statements. The Company believes the
expectations reflected in such forward-looking statements are
reasonable, but no assurance can be given that these expectations
will prove to be correct and you are cautioned not to place undue
reliance on forward-looking statements contained herein.
Some of the risks and other factors which could
cause actual results to differ materially from those expressed in
the forward-looking statements contained in this news release
herein by reference include, but are not limited to: risks and
uncertainties relating to the interpretation of drill results, the
geology, grade and continuity of mineral deposits and conclusions
of economic evaluations; results of initial feasibility,
pre-feasibility and feasibility studies, and the possibility that
future exploration, development or mining results will not be
consistent with the Company’s expectations; risks relating to
possible variations in reserves, resources, grade, planned mining
dilution and ore loss, or recovery rates and changes in project
parameters as plans continue to be refined; mining and development
risks, including risks related to accidents, equipment breakdowns,
labour disputes (including work stoppages and strikes) or other
unanticipated difficulties with or interruptions in exploration and
development; the potential for delays in exploration or development
activities or the completion of feasibility studies; risks related
to the inherent uncertainty of production and cost estimates and
the potential for unexpected costs and expenses; risks related to
commodity price and foreign exchange rate fluctuations; the
uncertainty of profitability based upon the cyclical nature of the
industry in which the Company operates; risks related to failure to
obtain adequate financing on a timely basis and on acceptable terms
or delays in obtaining governmental or local community approvals or
in the completion of development or construction activities; risks
related to environmental regulation and liability; political and
regulatory risks associated with mining and exploration; risks
related to the uncertain global economic environment; and other
factors contained in the section entitled “Risks and Uncertainties”
per above.
Although the Company has attempted to identify
important factors that could cause actual results or events to
differ materially from those described in the forward-looking
statements, you are cautioned that this list is not exhaustive and
there may be other factors that the Company has not identified.
Furthermore, the Company undertakes no obligation to update or
revise any forward-looking statements included in, or incorporated
by reference in, this news release if these beliefs, estimates and
opinions or other circumstances should change, except as otherwise
required by applicable law.
Neither the TSX nor its Regulation Services
Provider (as that term is defined in the policies of the TSX) nor
the New York Stock Exchange MKT accepts responsibility for the
adequacy or accuracy of this news release.
For further information, please contact:
Lynette Gould
Vice President, Investor Relations
604-638-8976
lynette.gould@aliogold.com
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