Anaconda Mining posts $4.3 million, or $0.02 per share, in net income for fiscal 2014
TORONTO, Aug. 28, 2014 /CNW/ - Anaconda Mining Inc. ("Anaconda" or "the Company") - (TSX: ANX) is pleased to report its financial and operating results for the fiscal year ended May 31, 2014. Net income for the year was $4,292,356 or $0.02 per fully diluted share. The Company generated earnings before interest, taxes, depreciation and amortization ("EBITDA") of $7,663,494 for fiscal 2014 compared to $7,171,717 in fiscal 2013. The Company sold 14,577 ounces of gold in fiscal 2014 resulting in $20,175,326 in revenue at an average sales price of $1,384 per ounce. Other revenues of $4,265,630 from its sold Chilean iron ore properties were also recognized during the year. Cash cost per ounce sold at the Pine Cove Project for fiscal 2014 was $1,020. As at May 31, 2014, the Company had cash and cash equivalents of $2,754,225 and net working capital of $5,066,477.
President and CEO, Dustin Angelo, stated, "The Company had another strong year financially in the face of a harsh winter season at the Pine Cove Project. We generated $7.7 million in EBITDA on a consolidated basis, a 7% increase year over year from fiscal 2013, and $5.3 million in cash flow from operations including cash payments from Chile. Consequently, our cash position was approximately $2.8 million by year end fiscal 2014. Continued operational improvements at the Pine Cove Project resulted in an average run rate record of 995 tonnes per operating day for the fourth quarter and an annual record of nearly 305,000 dry tonnes processed through the mill. In the first quarter of fiscal 2015, we are still experiencing strong throughput levels and elevated recoveries in the area of about 85% or more as opposed to 83%. Beyond the operations at the current Pine Cove pit, we plan to spend approximately $1.8 million on exploration activities in fiscal 2015 and are optimistic we will be able to discover more resources on our property package. We are in a good financial position to invest in exploration and we have multiple targets that can either extend the life of the project or add higher grade feed at a potentially lower incremental cost."
The Company's core gold mining business has maintained positive operating cash flows and earnings three years in a row and management has set challenging goals for fiscal 2015. The Company has budgeted to produce and sell approximately 16,000 ounces of gold for the year and generate approximately $2 million in net income using a gold price of $1,400 per ounce. Cash cost per ounce sold is expected to be approximately $1,000 per ounce and all-in sustaining cash cost ("AISC") per ounce sold is budgeted to be approximately $1,375 per ounce. This increase in AISC is attributable to increased capital expenditures and exploration activities planned for fiscal 2015.
Highlights for the fiscal year ended May 31, 2014
BALANCE SHEET IMPROVEMENT:
- As at May 31, 2014, the Company had cash and cash equivalents of $2,754,225 and net working capital of $5,066,477.
- For the year ended May 31, 2014, the Company sold 14,577 ounces of gold and generated $20,175,326 in revenue at an average sales price of $1,384 per ounce.
- The mill processed 946 tonnes per operating day for the fiscal year ended May 31, 2014 with the Company achieving an average run-rate record of 995 tonnes per operating day for the fourth quarter.
- The Pine Cove mill overall recovery for the fiscal year ended May 31, 2014 was 83% which has increased subsequently in the first quarter of fiscal 2015 to approximately 85% due to mill improvements.
- Cash cost per ounce sold at the Pine Cove Project for the year ended May 31, 2014 was $1,020 per ounce.
- AISC cash cost per ounce sold, including corporate administration, capital expenditures and exploration costs for the year ended May 31, 2014 was $1,312 per ounce.
- Milestone payments, royalty revenue and sales price payments from Chilean iron ore properties were $4,265,630 for the year ended May 31, 2014. Included in the second quarter is the receipt of a US$1 million commercial production milestone payment and the recognition of an additional US$2 million payment due no later than May 20, 2015. The Company has also received $1,004,253 in royalty and sales price payments, along with interest accretion and exchange gains during the year.
- At the Pine Cove Project, EBITDA (see Reconciliation of Non-GAAP Financial Measures) for the year ended May 31, 2014 was $5,307,174.
- On a consolidated basis, EBITDA for the year ended May 31, 2014 was $7,663,494.
- Net income for the year ended May 31, 2014 was $4,292,356 or $0.02 per basic and fully diluted share.
- Cash flow from operations for the year ended May 31, 2014 was $5,315,742. Excluding cash generated from Chile, cash flow from operations was $3,301,331.
- Purchase of property, mill and equipment for the year ended May 31, 2014 was $1,452,627. Key items included crusher upgrades of $214,000, waste dump development of $150,000, in-pit construction of $173,000, mining software of $135,000 and mill laboratory additions of $54,000.
- Additions to production stripping assets for the year ended May 31, 2014 were $751,102; depreciation of production stripping assets for the year ended May 31, 2014 was $368,214.
- In November 2013, the Company completed two three-year option agreements to acquire a 100%-undivided interest in the Deer Cove and Stog'er Tight gold projects, which are adjacent to the Pine Cove Project and are key components in its regional exploration program.
- Approximately $901,000 was spent at the Pine Cove Project on exploration for the year ended May 31, 2014. The Company's exploration initiatives for the year focused on a compilation of historic information on the Deer Cove and Stog'er Tight properties in preparation for future drilling activities, condemnation diamond-drilling north of the Pine Cove Mine, structural interpretations in and around the Pine Cove pit, an airborne survey across the entire project and drilling the Romeo and Juliet prospect.
During the year ended May 31, 2014, the gold sales volume of 14,577 ounces represented a 2% decrease over the fiscal 2013. Average sales price for the year was $1,384 per ounce versus $1,625 per ounce for fiscal 2013, a 15% decrease. As a result of the lower sales volume and a lower selling price, gross revenue for the year ended May 31, 2014 of $20,175,326 was lower than the previous fiscal year by $3,998,113 or 17%.
The following table summarizes the key operating metrics for fiscal 2014 and 2013:
|Dry tonnes processed||304,696||287,747|
|Tonnes per 24-hour period||946||890|
|Grade (grams per tonne)||1.83||1.99|
|Overall mill recovery||83%||83%|
|Gold sales volume (troy oz.)||14,577||14,879|
|Ore production (tonnes)||296,235||309,059|
|Waste production (tonnes)||1,623,461||1,649,408|
|Total production (tonnes)||1,919,696||1,958,467|
|Waste: Ore ratio||5.5||5.3|
The Pine Cove mill operated for 322 days during the year at 88% availability. Operating performance in the year ended May 31, 2014 is highlighted by increased mill availability of 88% (87% for the year ended May 31, 2013) and increased throughput of 946 tonnes per operating day (890 tonnes per day for the previous fiscal year), with the Company achieving an average run-rate record of 995 tonnes per operating day for the fourth quarter. Head grade was slightly lower at 1.83 g/t (1.99 g/t for the year ended May 31, 2013). The mill processed 304,696 dry tonnes of ore for the year ended May 31, 2014 (287,747 tonnes for the year ended May 31, 2013), an increase of 6%. The Pine Cove mill overall recovery for the fiscal year ended May 31, 2014 was consistent year over year at 83%. Mill recovery has increased subsequently in the first quarter of fiscal 2015 to approximately 85% due to mill improvements.
Operating performance in the third quarter of fiscal 2014 was hampered by the extreme cold and excessive snowfall that began in late November and lasted into early March. The operating difficulties were compounded by the lack of adequate, consistent power supply, which caused the Pine Cove team to conservatively run the ball mill at a lower throughput rate for most of the third quarter to compensate for these external issues. By the end of January, the Company had made adjustments to overcome the power supply problems. Despite the interruption, the Company processed 16,949 tonnes more during the year compared to fiscal 2013.
The following table summarizes the key mill operating statistics for the fiscal year ended May 31, 2014:
For the three months ended
|Dry tonnes processed||83,890||76,114||63,123||81,569|
|Tonnes per 24-hour period||987||956||834||995|
|Grade (grams per tonne)||1.92||1.80||1.79||1.80|
|Overall mill recovery||83%||83%||83%||82%|
|Gold sales volume (troy oz.)||4,096||3,852||2,832||3,797|
In the first, second and fourth quarters of fiscal 2014, the Pine Cove mill processed an average of 80,524 tonnes per quarter, whereas in the third quarter, due to the aforementioned weather and power supply issues, the mill only had throughput of approximately 63,000 tonnes. If the tonnes processed in the third quarter were similar to the first, second and fourth quarters, the Company estimates that it would have processed approximately 17,400 additional tonnes resulting in increased gold sales of approximately 1,000 ounces and $1.3 million in net revenue.
Mining activities operated for a total of 245 days during the year and excavated a total of 1,919,696 tonnes of ore and waste. Ore production totaled 296,235 tonnes, while waste was 1,623,461 tonnes for a strip ratio of 5.5:1. The strip ratio during the year ranged from 4.0:1 to 6.7:1 due to mine sequencing. Because of the harsh winter conditions and the mill slowdown, mine operations were curtailed during the third quarter and into the beginning of the fourth quarter to an average of 4 days per week and with a reduced truck fleet to keep the mining rate synchronized with mill requirements.
The following table summarizes by quarter the key mine operating statistics for the fiscal year ended May 31, 2014:
For the three months ended
|Ore production (tonnes)||74,189||84,533||78,043||59,470|
|Waste production (tonnes)||484,514||427,845||310,067||401,035|
|Total production (tonnes)||558,703||512,378||388,110||460,505|
|Waste: Ore ratio||6.5||5.1||4.0||6.7|
The Company has developed a strategy to leverage the existing infrastructure at Pine Cove. This involves the exploration and development of its mineral and mining leases based on two general mineralization styles within the property: Pine Cove like, quartz-carbonate-pyrite hosted (2+ g/t) mineralization and higher-grade (5+ g/t) quartz vein ± carbonate ± pyrite mineralization. The strategy involves delineating more Pine Cove like ore through the expansion of the current Pine Cove resource, delineation and expansion of the Stog'er Tight deposit and the discovery of similar deposits, while also delineating higher-grade deposits such as Deer Cove and Romeo and Juliet and discovery of similar style deposits to incrementally increase the feed grade for the mill.
Consistent with this strategy, in the year ended May 31, 2014, Anaconda made the following advances in exploration:
- Completed an airbourne magnetic and EM survey;
- Conducted a drill program on the Romeo and Juliet deposit;
- Drilled at the down-dip extension of the Pine Cove deposit;
- Acquired two historical resources in the Deer Cove and Stog'er Tight projects while increasing its tenements from 4,785 to 5,925 hectares; and
- Started a drill program on the Deer Cove deposit.
Airbourne Magnetic and EM Survey
In June of fiscal 2014, the Company engaged Fugro Airborne Services to perform a helicopter-borne Electromagnetic/Magnetic survey over Anaconda's Pine Cove Project on the Baie Verte Peninsula, Newfoundland.
The survey covered approximately 700 line kilometers at a flight line spacing of 75 meters. The purpose of the survey was to acquire a geophysical dataset that can be used as part of the exploration program to better interpret the general distribution and structure of the geology underlying the Company's property. This data also helps establish a geophysical fingerprint for the various deposits on the property. These are used in conjunction with archived ground geophysics, gold-in-soil geochemical data, and structural and alteration mapping, to refine an exploration model for the discovery and delineation of gold deposits.
Romeo and Juliet
The Romeo and Juliet prospect is a gold-bearing quartz vein system located 1.5 kilometers northwest of the Pine Cove mine. The veins were discovered in 1988 and were trenched and tested by 18 shallow diamond-drill holes. The veins contain very fine free gold, making sampling a challenge ("nugget effect") as historic chip and channel samples returned quite variable assay values including 1.15 g/t gold over 6 m from the Romeo zone up to 23 g/t over 1 m from the Juliet zone. In 1993, a 10-tonne "mini" bulk sample was collected from the Juliet zone and 3,035 kilograms were processed returning a head grade of 36.68 g/t gold (this data is historic in nature and has not been verified by the Company). In August 2012, 24 grab samples were collected from the Juliet zone and assay results ranged from a low of 10 parts-per-billion gold up to 130.7 g/t gold. In the late fall of 2012 Anaconda extracted a 1,000-tonne bulk sample from the Juliet zone and stockpiled the broken quartz vein material at the Pine Cove mine where it was crushed. Five representative samples of crushed quartz, averaging 12.6 kg, were processed at Accurassay Laboratories in Thunder Bay by cyanide extraction (bottle roll testing). The weighted average assay of the five samples is 5.71 g/t gold and is representative of the gold grade within the near surface portion of the Juliet zone where the bulk sample was extracted.
The Company completed 2,305 meters of drilling in 21 holes at Romeo and Juliet during fiscal 2014. Holes RJ-13-19 to RJ-14-39 intersected a new gold-bearing zone dubbed the Balcony zone, located between the Romeo and Connecting zones. It appears to dip steeply to the north, trend roughly east-west and is spatially associated with a northeast-trending topographic linear. Mineralization has been traced for approximately 100 meters and is open to the east, west and down dip. Gold is associated with pyritic altered mafic volcanic rocks, which is different from the Romeo and Juliet massive quartz vein hosted-style of gold mineralization.
In January 2014, Anaconda completed 300 meters of diamond-drilling in two holes (RJ-14-38 and RJ-14-39) that targeted the possible down-plunge and eastern extensions to the newly discovered Balcony zone of the Romeo and Juliet prospect. The drilling was the final phase of a drill program at Romeo and Juliet that was initiated during the summer of 2013. Both holes successfully intersected the targets but did not return economically significant gold grades.
Historic drilling immediately north of the Pine Cove deposit since 2007 indicated potential for additional gold mineralization down-dip of the Pine Cove deposit. In 2011 and 2013, drilling was completed north of the mine. Drill hole PC-11-181 intersected 2.50 g/t gold over 40.8 meters and PC-12-189 intersected 32 meters grading 0.848 g/t. In fiscal 2013, the Company completed a twenty-hole, 3,296-meter program exploring the area immediately west and down-dip of the Pine Cove deposit. This program resulted in the discovery of a new zone of mineralization immediately northwest of the ultimate pit design less than 100 m from surface. These results indicate that the current Pine Cove resource extends down-dip.
In the 2014 fiscal year, exploration on the Pine Cove project included drilling two holes (PC-14-224 and PC-14-234) to test the down-dip extension of the current resource and to follow up on significant intercepts in the northwestern, hanging wall of the current Pine Cove resource.
Hole PC-14-224 was collared 95 meters northwest of PC-11-181 and intersected several intervals of Pine Cove style alteration and mineralization. The best interval assayed 3.06 g/t gold over 5.54 meters (including 5.75 g/t gold over 1.97 meters) beginning at a vertical depth of approximately 207 meters. This mineralization occurs at the same vertical depth as that intersected in PC-11-181 (an angled hole drilled to the south, away from PC-14-224); however, PC-14-224 cut the mineralized zone almost 150 meters northwest of PC-11-181. These results confirm that the down-dip mineralization observed in previous drilling continues to the north at least to the zone intercepted by hole PC-14-224.
Hole PC-14-234 was collared in an area midway between gold mineralization intersected in both PC-11-181 and the historic hole, PC-07-179. It was a vertical hole that intersected multiple zones of quartz veining/brecciation, iron carbonate, sericite and disseminated pyrite that are analogous to Pine Cove-style mineralization. Assay results returned multiple zones of gold mineralization including 2.46 g/t gold over 8 m and 3.17 g/t gold over 8.5 m.
The fiscal 2014 exploration program indicated that the northern extension of the Pine Cove resource and the mineralization at shallow levels of the hanging wall of the Pine Cove resource are continuous within the limits of the fiscal 2014 drilling.
Acquisition of Deer Cove and Stog'er Tight projects
Effective November 13, 2013, the Company entered into two three-year option agreements to acquire a 100%-undivided interest in the Deer Cove and Stog'er Tight gold projects. The three mining licenses, totaling 48 claims (approximately 1,235 hectares), and the two mining leases (approximately 47 hectares) are adjacent to Anaconda's property around the Pine Cove mine.
The Deer Cove deposit was discovered by Noranda prospectors in 1986 and it contains visible gold associated with brecciated quartz veining. The mineralization is hosted by mafic volcanic rocks in thrust contact with strongly deformed talc-carbonate altered schists of the Point Rousse Complex. A Noranda/ Galveston Resources Ltd. joint venture (1987-1989) carried out detailed exploration including diamond drilling (119 holes on the Deer Cove grid), construction of a 7.2 kilometer access road and underground exploration via a 507-meter long adit. No significant exploration work was subsequently undertaken and in 1998 the property reverted to the Crown.
In 2000 and 2001, much of the Deer Cove area was staked by South Coast Ventures Inc. All historic data was compiled and digitized and additional drilling (14 holes) and sampling were completed. In 2010, Tenacity Gold Mining Company Inc. contracted P&E Mining Consultants Inc. ("P&E") to undertake a mining and economic analysis of the Deer Cove project. P&E reported that the Deer Cove deposit, the portion lying above 45 meters above sea level, contained an estimated resource of 12,900 tonnes grading 10.45 g/t gold at a cutoff grade of 6.0 g/t (this is a non-NI 43-101 compliant resource and has not been verified by Anaconda). A combination open pit and underground mining method was proposed and Tenacity entered into a toll-processing arrangement with the Nugget Pond mill. Mining did not proceed and the property transferred to 1512513 Alberta Ltd. ("Alberta").
The Stog'er Tight deposit was discovered in 1988 through an International Impala/Noranda joint venture. Trenching and diamond-drilling followed extensive gold-in-soil geochemistry and outlined three auriferous zones, referred to as the Stog'er Tight, Gabbro West and Gabbro East zones. Noranda carried out more than 8,000 meters of diamond drilling in 80 holes on the Stog'er Tight property with much of the effort focused on Stog'er Tight. The deposit was outlined over a 450-meter strike length with channel sample assays up to 23 g/t gold over 7 meters and diamond-drill assays averaging 5.5 g/t gold over 4.5 meters. The Stog'er Tight deposit was estimated to contain a probable geological reserve of 650,000 tonnes grading 6.7 g/t gold (this is a historic non-NI 43-101 compliant estimate and Anaconda has not verified the accuracy of the data).
Ming Minerals Incorporated purchased the property and, in 1996-1997, carried out diamond drilling and trenching. A revised resource estimate calculated that the deposit contained a resource of 229,200 tonnes grading 6.1 g/t gold (this is a historic non-NI 43-101 compliant estimate and Anaconda has not verified the accuracy of the data.). Ming Minerals extracted a 30,735-tonne bulk sample from the Stog'er Tight deposit, however, recoveries were less than anticipated and mining was stopped.
In 2006, the mining lease was cancelled, the property reverted to the Crown and a call for proposals to develop the property was issued with South Coast Ventures Inc. being the successful applicant. Detailed compilation and digitizing of all historic exploration data was undertaken and additional diamond drilling and sampling were completed. In 2007, a toll processing arrangement was completed with the Nugget Pond mill. In 2010, P&E reported that the Stog'er Tight deposit contained an estimated mineral reserve of 65,200 tonnes grading 4.96 g/t gold, an indicated resource of 96,000 tonnes grading 7.04 g/t gold and an inferred resource of 53,000 tonnes grading 5.75 g/t gold. (this is a historic, non-NI 43-101 compliant estimate). Mining was initiated but results were less than favourable and development ceased. The property transferred to Alberta.
Drilling on the Deer Cove project
In the spring of 2014, Anaconda compiled and reviewed historical data from the Deer Cove deposit based on historic assay results from 20 previously drilled holes by the previous property holders. Based on the analysis of historical data, the Company developed a drill program in the spring of 2014 and expects the drill program to be completed in fiscal 2015. The program consists of approximately 2,000 meters of diamond-drilling to focus on both infill drilling and testing down-dip extensions of mineralization.
The information in this MD&A has been reviewed and approved by Paul McNeill, P. Geo., VP Exploration, a "Qualified Person" under National Instrument 43-101.
Reconciliation of Non-GAAP Financial Measures
The Company has included certain non-GAAP financial measures in this document. These measures are not defined under IFRS and should not be considered in isolation. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. The inclusion of these measures is meant to provide additional information and should not be used as a substitute for performance measures prepared in accordance with IFRS. These measures are not necessarily standard and therefore may not be comparable to other issuers.
EBITDA is earnings before finance expense, foreign exchange loss (gain), unrealized gain on forward sales contract derivative, share based payments, income tax recovery and depreciation and depletion.
The following table provides a reconciliation of EBITDA for the years ended May 31, 2014 and 2013:
|For the year ended||
|Foreign exchange loss (gain)||(2,599)||11,539|
|Unrealized gain on forward sales contract derivative||(39,185)||-|
|Income tax recovery||(31,000)||(3,904,000)|
|Depletion and depreciation||2,970,568||2,323,555|
Cash cost per ounce sold is cost of sales before depreciation divided by gold ounces sold. All-in sustaining cash cost per ounce sold is cash cost, corporate administration, purchase of property, mill and equipment and purchase of exploration and evaluation assets divided by gold ounces sold.
The following table provides a reconciliation of cash operating cost per ounce sold and All-in cash cost per ounce sold for the years ended May 31, 2014 and 2013:
|For the year ended||
|Cost of sales||17,838,720||17,005,945|
|Less: Depletion and depreciation||(2,970,568)||(2,323,555)|
|Cash operating cost||14,868,152||14,682,390|
|Purchase of property, mill and equipment||1,452,627||1,665,632|
|Purchase of exploration and evaluation assets||900,686||1,023,074|
|All-in cash cost||19,130,775||19,690,428|
|Gold ounces sold||14,577||14,879|
|Cash operating cost per ounce sold||1,020||987|
|All-in cost per ounce sold||1,312||1,323|
Headquartered in Toronto, Canada, Anaconda is a growth oriented, gold mining and exploration company with a producing asset located on the Baie Verte Peninsula in Newfoundland, Canada called the Pine Cove mine.
FORWARD LOOKING STATEMENTS
This document contains or refers to forward-looking information. Such forward-looking information includes, among other things, statements regarding targets, estimates and/or assumptions in respect of future production, mine development costs, unit costs, capital costs, timing of commencement of operations and future economic, market and other conditions, and is based on current expectations that involve a number of business risks and uncertainties. Factors that could cause actual results to differ materially from any forward-looking statement include, but are not limited to: the final approval of the private placement by the Toronto Stock Exchange; the grade and recovery of ore which is mined varying from estimates; capital and operating costs varying significantly from estimates; inflation; changes in exchange rates; fluctuations in commodity prices; delays in the development of the any project caused by unavailability of equipment, labour or supplies, climatic conditions or otherwise; termination or revision of any debt financing; failure to raise additional funds required to finance the completion of a project; and other factors. Additionally, forward-looking statements look into the future and provide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include words such as "plans," "may," "estimates," "expects," "indicates," "targeting," "potential" and similar expressions. These forward-looking statements, including statements regarding Anaconda's beliefs in the potential mineralization, are based on current expectations and entail various risks and uncertainties. Forward-looking statements are subject to significant risks and uncertainties and other factors that could cause actual results to differ materially from expected results. Readers should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no responsibility to update them or revise them to reflect new events or circumstances, except as required by law.
SOURCE Anaconda Mining Inc.For further information:
Anaconda Mining Inc.
President and CEO
ProConsul Capital Ltd.
Company website: www.anacondamining.com