Anaconda Mining sells 2,919 ounces and generates $1.3M of EBITDA at the Point Rousse Project for Q1 fiscal 2017

TORONTO, Oct. 18, 2016 /CNW/ - Anaconda Mining Inc. ("Anaconda" or the "Company") – (TSX:ANX) is pleased to report its financial and operating results for the three months ended August 31, 2016 (the "Quarter").  The Company sold 2,919 ounces of gold resulting in $4,919,737 in revenue at an average sales price of $1,685 (USD$1,299) per ounce. Cash cost per ounce sold at the Point Rousse Project for the three months ended August 31, 2016 was $1,244 (USD$959). The Company generated positive earnings before interest, taxes, depreciation and amortization and other non-cash expenses ("EBITDA") of $1,287,567 at the Point Rousse Project. Net loss for the three months ended August 31, 2016 was $379,565. As at August 31, 2015, the Company had cash and cash equivalents of $359,794 and net working capital of $500,744.

President and CEO, Dustin Angelo, stated, "There were several bright spots in a quarter where the Company did not achieve its desired gold production level, thus generating lacklustre financial results. From a long term perspective, Anaconda accomplished a few goals and set new milestones that will assist in positioning it for long term success. The Company succeeded in raising over $2 million in flow through equity financing for a 17,000-metre drill program and securing a $1.5M credit facility with The Royal Bank of Canada to allow for greater financial flexibility. On the operating side, the Pine Cove Mill finalized its mill automation project and reached new heights in mill throughput, averaging 1,220 tonnes per operating day during the month of August. We've experienced higher rates for the month of September, averaging 1,340 tonnes per operating day. We also expended significant resources on expanding our tailings capacity. In the short term, we have hit a few bumps in the road, but we continue to build a strong foundation for the future. With that being said, we are continuing to make adjustments to improve gold production and expect key drivers like grade, strip ratio and mining costs to improve over the remaining three quarters of the fiscal year."

Highlights for the three months ended August 31, 2016

  • As at August 31, 2016, the Company had cash and cash equivalents of $359,794 and net working capital of $500,744.
  • The Company sold 2,919 ounces of gold and generated $4,919,737 in revenue at an average sales price of $1,685 (USD$1,299) per ounce.
  • Cash cost per ounce sold at the Point Rousse Project was $1,244 (USD$959) (see Reconciliation of Non-GAAP Financial Measures); trailing 8 quarter average was $1,100 (USD$830) (See Unit cost analysis).
  • All-in sustaining cash cost ("AISC") per ounce sold (see Reconciliation of Non-GAAP Financial Measures), including sustaining capital expenditures, the addition of production stripping assets and certain exploration and evaluation expenses was $2,408 (USD$1,856); trailing 8 quarter average was $1,616 (USD$1,219) (See Unit cost analysis).
  • The Pine Cove Mill processed 99,441 tonnes of ore at an average rate of 1,130 tonnes per operating day.
  • Mill availability, recovery and head grade were 96%, 86% and 1.17 g/t respectively.
  • Mining operations at the Pine Cove pit produced 108,305 tonnes of ore and 890,120 tonnes of waste.
  • EBITDA (see Reconciliation of Non-GAAP Financial Measures) at the Point Rousse Project and on a consolidated basis were $1,287,567 and $555,018 respectively.
  • Net loss was $379,565.
  • Purchase of property, mill and equipment was $795,402. Key items included tailings facility and polishing pond construction of $696,000.
  • Production stripping assets include additions of $1,283,856.
  • The Company completed a $2,037,265 flow-through equity financing to fund a 17,000-metre diamond drilling campaign at the Point Rousse and Viking Projects which will focus on near-surface resource expansion as well as targeting relatively higher-grade mineral resources at four main areas – Stog'er Tight, Argyle, Goldenville and Viking.
  • Exploration expenditures totaled $759,850 and were spent on activities such as drilling, trenching, mapping and mineral resource estimates for the three months ended August 31, 2016.
  • The Company completed a Line of Credit Agreement with the Royal Bank of Canada ("RBC") for a $1,000,000 revolving credit facility as well as a $500,000 revolving equipment lease line of credit.

Highlights subsequent to the three months ended August 31, 2016

  • On September 8, 2016, the Company announced that it had completed its $1.025 million mill automation project (the "Automation Project") at the Pine Cove Mill, which began in September 2015. During the implementation of the Automation Project, Anaconda applied for and received $1.0M of financing (the "Financing") through two government programs; the Atlantic Canada Opportunities Agency ("ACOA") and the Department of Business, Tourism, Culture and Rural Development ("DBTCRD").


    The Company obtained the Financing to fund specifically the Automation Project. The ACOA loan of $500,000 is non-interest bearing and will be repayable in 60 equal installments commencing October 1, 2016. Per the terms of the ACOA loan agreement, the funds were received as reimbursement of paid qualifying expenditures, which occurred during the implementation of the Automation Project. The DBTCRD funding consists of a $100,000 grant (non-repayable) and a $400,000 loan, having an interest rate of 3%, which will be repayable in 60 monthly payments of $7,187 commencing November 30, 2016. The DBTCRD funding was received on September 6, 2016.

Operations overview

Net loss for the three months ended August 31, 2016 was $379,565 (loss for the three months ended August 31, 2015 was $184,919). The Company generated a gross margin of $363,615 for the three months ended August 31, 2016 ($409,000 for the three months ended August 31, 2015). Earnings over the comparative periods were negatively impacted as a result of lower gold sales of $866,064 and higher milling costs of $70,029. This was largely offset by lower mining costs of $790,333 and depletion and depreciation expense of $129,476. The Company generated positive EBITDA of $555,018 for the three months ended August 31, 2016 ($939,977 for the three months ended August 31, 2015). Cash flow from operations for the three months ended August 31, 2016 was $36,681. Cash of approximately $1.6 million was used in exploration activities and capital expenditures.

During the first quarter of fiscal 2017, the Company's operations were severely impacted by low grade as well as increased mining activities to meet the demand to place waste rock for the construction of the first phase of the second tailings storage facility. The mining department exceeded its operating budget in the first fiscal quarter and expects to complete construction of the tailings facility in the second quarter of fiscal 2017. The Company projects a reduction in mining costs for the remainder of the fiscal year, driven by lower tonnes mined as well as a reduced strip ratio. Grade is expected to increase in the second half of the fiscal year based on the mine plan. To offset the reduced grade currently being mined, the Pine Cove Mill has significantly increased throughput per operating day. The mill averaged 1,220 tonnes per operating day in August, 90 tonnes per operating day more than the quarterly average. Heading into the second quarter, the Company experienced even better results in the mill, achieving 1,340 tonnes per operating day in September.

Unit cost analysis

During the quarter ended August 31, 2016, cash cost per ounce of $1,244 and was largely the result of the Company's low sales volume of 2,919 ounces. Aggregate costs were in line with historical levels for the past eight quarters, if not slightly lower. Sales volume was below 3,000 ounces primarily because of grade, which registered 1.17 g/t for the Quarter. Based on the tonnes processed and mill recovery for the Quarter, if the head grade were approximately 0.1 g/t higher, the Company would have generated an additional 400 ounces of production resulting in sales of approximately 3,300 ounces and a cash cost per ounce of approximately $1,100, similar to the historical average over the past 8 quarters.

AISC per ounce of $2,408 was not only impacted by low sales volume, but also by the high strip ratio of 8.2 : 1 for the Quarter. During the first quarter of fiscal 2017, the Company incurred $1,283,856 in expenditures that were capitalized to the balance sheet under production stripping assets, which captures mining costs incurred for the portion of the strip ratio that is greater than the life of mine strip ratio. For the last three quarters (including the current period), the Company has been challenged by a high strip ratio relative to the life of mine average. The incremental mining costs of approximately $2,750,000 (or $265 per ounce) to remove additional waste is captured in production stripping assets. Nearly half of that expense was incurred in the first quarter of fiscal 2017 at a cost of approximately $440 per ounce. Over a longer term horizon, the average quarterly AISC per ounce for the trailing eight quarters has been $1,616.

For the remainder of fiscal 2017, the Company expects to see an improvement in AISC per ounce. Most of the improvement is expected in the second half of the fiscal year. Ore grade is projected to increase 15% to 20% from current levels and the strip ratio is expected to be 3.0 : 1 from January through May 2017. Also, phase one construction of the second tailings storage facility will be completed in the second quarter ended November 2016, which will help slow the rate of mining in the second half of the fiscal year. Lastly, exploration expenditures are expected to be lower in the third and fourth quarters of fiscal 2017 as the Company's 17,000-metre diamond drilling program will largely be completed by the end of the second quarter. Consequently, the Company expects cash cost per ounce to return to historical levels around $1,100 per ounce and AISC per ounce to average approximately $1,520 for the remaining three quarters of fiscal 2017.

MILLING OPERATIONS

The following table summarizes the key mill operating metrics for the three months ended August 31, 2016 and 2015:

OPERATING STATISTICS:

For the three months ended

August 31
2016

August 31
2015

Mill



Operating days

88

86

Availability

96%

94%

Dry tonnes processed

99,441

96,532

Tonnes per 24-hour period

1,130

1,122

Grade (grams per tonne)

1.17

1.62

Overall mill recovery

86%

87%

Gold sales volume (troy oz.) 

2,919

3,956

 

The Pine Cove mill operated for 88 days during the first quarter of fiscal 2017 at an availability rate of 96%, a 2% increase above the availability in the first quarter of fiscal 2016. The mill achieved an average run rate of 1,130 tonnes per operating day and processed 99,441 dry tonnes of ore during the quarter compared to 1,122 tonnes per operating day and 96,532 dry tonnes of ore in the first quarter of fiscal 2016. The mill was able to increase throughput per operating day each month throughout the first quarter of fiscal 2017. The Pine Cove Mill achieved an average of over 1,220 tonnes per operating day in August 2016. A focus on crushing and grinding metrics, aided by the recently completed mill automation project has been the main reason for the increased throughput. This improvement has continued into the second quarter with September achieving an average run rate of 1,343 tonnes per operating day. Average feed grade during the quarter was 1.17 g/t, down from 1.62 g/t in the first quarter of fiscal 2016. The Company budgeted a decline in grade during the first half of fiscal 2017 and is projecting an improvement to the Pine Cove grade during the second half of the fiscal year. Overall mill recovery was 86%, compared to 87% in first quarter fiscal 2016.

MINING OPERATIONS

The following table summarizes the key mining operating metrics for the three months ended August 31, 2016 and 2015:

OPERATING STATISTICS:

For the three months ended

August 31
2016

August 31
2015

Mine - Pine Cove Pit



Operating days

83

78

Ore production (tonnes)

108,305

104,278

Waste production (tonnes)

890,120

642,828

Total production (tonnes)

998,425

747,106

Waste: Ore ratio

8.2

6.2

 

The mining operation at the Point Rousse Project operated for 83 days in the first quarter in the Pine Cove Pit. Total production was 108,305 tonnes of ore and 890,120 tonnes of waste. Total tonnes mined at the Pine Cove Pit were 34% higher compared to the first quarter of fiscal 2016 due to a higher strip ratio and the need for waste rock to construct the first phase of tailings storage facility II. The high strip ratio also resulted in the capitalization of $1,283,856 in mining costs to production stripping assets. The Company is forecasting a reduction of total tonnes mined to approximately 250,000 per month from September through December at an average strip ratio of approximately 5.6:1, waste to ore. From January through May, total tonnes mined are expected to reduce further to approximately 170,000 tonnes per month at an average strip ratio of 3.3:1, waste to ore.

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.

Adjusted net earnings measure the performance of the Company, excluding certain impacts which the Company believes are not reflective of the Company's underlying performance for the reporting period, such as the impact of foreign exchange gains and losses, impairment charges, and non-hedge derivative gains and losses. Although some of the items are recurring, the Company believes that they are not reflective of the underlying operating performance of its current business and are not necessarily indicative of future operating results.

The following table provides a reconciliation of adjusted net earnings for the three months ended August 31, 2016 and 2015:


 For the three months ended 


 August 31 

 August 31 


2016

2015


$

$

Net loss

(379,565)

(184,919)




Adjusting items:




Foreign exchange (gain) loss

(9)

2,851


Unrealized (gain) loss on forward sales contract derivative

(25,790)

2,808


Write down of Chilean assets

-

-


Reclamation expense

10,531

5,042

Total adjustments

(15,268)

10,701

Adjusted net loss

(394,833)

(174,218)

Cash cost per ounce sold is cost of sales from the period before depreciation divided by the number of ounces of gold sold in the period. AISC per ounce includes total cash costs plus the sum of corporate administrative expenses, sustaining capital expenditures, the addition of production stripping assets and certain exploration and evaluation expenses, all divided by the number of ounces sold in the period. This measure seeks to reflect the full cost to sustain the current level of gold production from the Company's operations. Certain other cash expenditures, including income tax payments and financing costs are not included. Certain prior period amounts included in the calculation of AISC have been changed to conform to the presentation adopted in the current period.

The following table provides a reconciliation of cash cost per ounce sold and all-in sustaining cash cost per ounce sold for the three months ended August 31, 2016 and 2015:


 For the three months ended 


 August 31 

 August 31 


2016

2015

Cost of sales

4,556,122

5,376,801

Less: Depletion and depreciation

(923,952)

(1,053,428)

Cash operating cost

3,632,170

4,323,373

Corporate administration

655,944

497,144

Purchase of property, mill and equipment

699,370

651,267

Purchase of exploration and evaluation assets

757,070

322,190

Additions to production stripping assets

1,283,856

414,397

All-in cash cost

7,028,411

6,208,370




Gold ounces sold

2,919

3,956

Cash cost per ounce sold

1,244

1,093

All-in sustaining cash cost per ounce sold

2,408

1,569




(in USD$)



Cash cost per ounce sold

959

856

All-in sustaining cash cost per ounce sold

1,856

1,229

 

EBITDA is earnings before finance expense, foreign exchange loss (gain), unrealized gain on forward sales contract derivative, share-based compensation, income tax recovery and depreciation and depletion. Point Rousse Project EBITDA is EBITDA before corporate administration, other revenues and expenses and write down of Chilean assets.

The following table provides a reconciliation of EBITDA for the three months ended August 31, 2016 and 2015:


 For the three months ended 


 August 31 

 August 31 


2016

2015


$

$

Net loss

(379,565)

(184,919)




Adjustments:



Finance expense

50,214

-

Foreign exchange (gain) loss

(9)

2,851

Unrealized (gain) loss on forward sales contract derivative

(25,790)

2,808

Share-based compensation

69,977

80,809

Deferred income tax recovery

(34,000)

(15,000)

Depletion and depreciation

923,952

1,053,428

EBITDA

604,779

939,977

Corporate administration

655,944

497,144

Other expenses

26,844

25,307

Point Rousse Project EBITDA

1,287,567

1,462,428

 

ABOUT ANACONDA
Anaconda Mining is a growth-oriented, gold mining and exploration company with a producing project called the Point Rousse Project and an exploration/development project called the Viking Project in Newfoundland.

The Point Rousse Project is approximately 6,300 hectares of property on the Ming's Bight Peninsula located in the Baie Verte Mining District in Newfoundland, Canada. Since 2012, Anaconda has increased its property control by ten-fold on the peninsula and gold production to approximately 16,000 ounces per year. In an effort to expand production, it is currently exploring three primary, prospective gold trends, which have approximately 20 kilometres of cumulative strike length and include five deposits and numerous prospects and showings, all within 8 kilometres of the Pine Cove Mill.

Anaconda also controls the Viking Project, which has approximately 6,225 hectares of property in White Bay, Newfoundland, approximately 100 kilometres by water (180 kilometres via road) from the Pine Cove Mill. The project contains the Thor Deposit and other gold prospects and showings. The Company's plan is to discover and develop more resources within these project areas and substantially increase annual production at the Pine Cove Mill from its current rate of approximately 16,000 ounces.

As the only pure play gold producer in Atlantic Canada, Anaconda Mining is turning the rock we live on into a growing and profitable resource. With a young and motivated workforce, innovative technology and the support of local suppliers, Anaconda is investing in the people of Newfoundland & Labrador and giving back to the communities in which we operate – building a better future for all our stakeholders, from the ground up.

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.: Dustin Angelo, President and CEO, (647) 260-1248, dangelo@anacondamining.com, www.AnacondaMining.com; High Stakes Strategy & Communications: Lynn Hammond, Executive Consultant, (709) 330-1260, LH@LynnHammond.ca

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