Luna Gold Announces Results for the Fourth Quarter and Full Year 2013
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Mar 19, 2014) - Luna Gold Corp. (TSX:LGC)(LMA:LGC)(OTCQX:LGCUF) ("Luna" or the "Company") today announced its operational and financial results for the three-month and twelve-month periods ending December 31, 2013 ("Fourth Quarter" and "Full Year 2013", respectively).
FOURTH QUARTER 2013 HIGHLIGHTS
- Record gold production of 22,177 ounces, an increase of 630 ounces from the fourth quarter of 2012;
- Total cash cost of production of $652 per ounce of gold, a $16 per ounce decrease from the fourth quarter of 2012;
- All-in sustaining cost of production of $832 per ounce of gold, a decrease of $17 per ounce from the fourth quarter of 2012;
- All-in cost of $982 per ounce of gold produced, a decrease of $152 per ounce from the fourth quarter 2012;
- Cash flow from operating activities before changes in non-cash working capital of $ 3.5 million ($0.03 per share), a decrease of $9.4 million ($0.09 per share) from the fourth quarter 2012;
- Cash balance and finished gold inventory at end of February 2014 of $25 million and 5,000 ounces respectively; and
- Net loss of $0.5 million ($0.00 per share), a decrease of $8.8 million ($0.08 per share) in net income from the fourth quarter 2012.
FULL YEAR 2013 HIGHLIGHTS
- Record gold production of 79,229 ounces, an increase of over 4,900 ounces from full year 2012;
- Total cash cost of production $723 per ounce of gold, a $28 per ounce decrease from full year 2012;
- All-in sustaining cost of production $891 per ounce of gold, a decrease of $60 per ounce from full year 2012;
- All-in cost $1,056 per ounce of gold produced, a decrease of $149 per ounce from full year 2012;
- Cash flow from operating activities before changes in non-cash working capital of $23.1 million ($0.22 per share), a decrease of $8.4 million ($0.08 per share) from full year 2012; and
- Net income of $7.8 million ($0.07 per share), a decrease of $11.2 million ($0.11 per share) from full year 2012.
2013 HIGHLIGHTS
| Q4 2013 | 2013 | ||||
| Gold production (ounces) | 22,177 | 79,229 | |||
| Gold sales (ounces) | 13,907 | 60,141 | |||
| Gold delivered to Sandstorm (ounces) | 2,848 | 12,263 | |||
| Finished gold inventory at December 31, 2013 (ounces) | 9,063 | 9,063 | |||
| Realized gold price received, excluding Sandstorm (USD per ounce) | $ | 1,312 | $ | 1,419 | |
| Gold price received on gold delivered to Sandstorm (USD per ounce) | $ | 400 | $ | 400 | |
| Net realized gold price received, including Sandstorm (USD per ounce) | $ | 1,157 | $ | 1,246 | |
| Total cash cost of production (USD per ounce) | $ | 652 | $ | 723 | |
| All-in sustaining cost of production (USD per ounce) | $ | 832 | $ | 891 | |
| All-in cost (USD per ounce) | $ | 982 | $ | 1,056 | |
| Net (loss) income (USD millions) | $ | (0.5 | ) | $ | 7.8 |
| Earnings per share - basic and fully diluted (USD) | $ | 0.00 | $ | 0.07 | |
| Cash flow per share from operating activities before changes in non-cash working capital (USD) | $ | 0.03 | $ | 0.22 | |
| Cash flow from operating activities before changes in non-cash working capital (USD millions) | $ | 3.5 | $ | 23.1 | |
| Cash flow from operating activities after changes in non-cash working capital (USD millions) | $ | 1.4 | $ | 17.3 | |
| Cash flow from financing activities (USD millions) | $ | (0.4 | ) | $ | 16.2 |
| Cash payments on Phase I Expansion (USD millions) | $ | 5.7 | $ | 28.2 | |
| Cash payments on sustaining capital (USD millions) | $ | 2.7 | $ | 11.5 | |
| Cash payments for mineral property development (USD millions) | $ | 1.3 | $ | 1.8 | |
| Cash balance at December 31, 2013 (USD millions) | $ | 6.0 | $ | 6.0 | |
COMPANY DEVELOPMENTS
- 2014 gold production targeted at 85,000 to 95,000 ounces. The gold production target is based on a mine plan designed to feed the existing plant with saprolite ore and is not reliant on the Phase I Expansion upgrades to achieve production targets;
- The Aurizona Phase I Expansion is progressing and remains on budget as at February 28, 2014. The overall engineering, including detailed site engineering, reached 97% complete, procurement awarded reached 97% complete (on planned material and equipment packages) and construction reached 48% complete. Completion and commissioning of Phase 1 Expansion is targeted for the second half of 2014;
- On February 25, 2014, the Company successfully completed a public offering, on a bought deal basis, of 16,950,000 common shares at a price of C$1.18 per share for gross proceeds to the Company of approximately C$20.0 million, to be used for general corporate purposes. As a result of this financing, the Company had approximately $25.0 million in cash and 5,000 ounces of finished gold on hand at February 28, 2014;
- The Company filed a National Instrument 43-101 technical report (dated April 29th, 2013) updating Measured, Indicated and Inferred Mineral Resources and Proven and Probable Mineral Reserves at its Aurizona Gold Mine, increasing Proven and Probable Mineral Reserves to 2.36 million ounces at the Piaba Gold Deposit, representing a 222% increase when compared to the Piaba July 2010 reserve statement;
- The Company completed an independent Mineral Resource update at the Company's Aurizona Gold Mine, resulting in the Company increasing Measured and Indicated Resources to 3.63 million ounces and Inferred Resources to 1.04 million ounces;
- The Company entered into a $30.0 million corporate secured revolving credit facility with Société Générale and Mizuho Corporate Bank; and
- The Company entered into a $10.0 million subordinated debt facility with Sandstorm Gold Ltd. ("Sandstorm") for the purpose of providing additional working capital during the Aurizona Phase I Expansion.
For complete details on the fourth quarter and full year 2013 results, please refer to the Financial Statements, and Management Discussion and Analysis on SEDAR, www.sedar.com or on the Financial Statements page of the Company's website. Fourth Quarter and Full Year 2013 results have been incorporated into the Luna's latest Corporate Presentation. Recent Aurizona Phase I expansion construction photos are available to view at Phase I Photo Gallery.
OUTLOOK AND STRATEGY
In January 2014, the Company announced its full year 2014 guidance as follows:
- Annual gold production targeted at 85,000 to 95,000 ounces;
- Average annual cash cost of production targeted at US$690 to US$740 per ounce of gold;
- Average annual all-in sustaining cost of production targeted at US$800 to US$900 per ounce of gold;
- Capital expenditure on sustaining items and other non-expansionary projects of $9.0 million throughout 2014; and
- Remaining Phase I Expansion costs are estimated at approximately $12.5 million (net of contribution from Sandstorm) in 2014.
During 2013, production guidance was revised lower than the Company's initial expectations, primarily due to the Company's decisions to slow down waste mining activities and the Phase I Expansion mid-way through the year. These decisions were the result of the rapid decline in the gold price and the drought that occurred in the first quarter that resulted in a significant reduction to operating cash flow, which had been expected to be used to advance both of these items. The Company's priority is to manage its cash and balance sheet, while advancing both the Phase I Expansion and waste stripping at a slower pace. As a result, the Company's guidance for gold production was reduced in 2013 from a range of 95,000 to 105,000 ounces to a range of 80,000 to 90,000 ounces and the forecast is lower than previously planned for 2014. The gold production target range for 2014, 85,000 to 95,000 ounces, is based on a mine plan designed to feed the existing plant with saprolite ore and is not reliant on the plant expansion upgrades to achieve production targets. The expected completion and commissioning of the Phase I Expansion has been delayed past the originally anticipated December 2013 target into the second half of 2014.
Water management was a top priority in 2013 due to the negative impact of the drought in 2013. The Company increased its water storage facilities in 2013 to de-risk the future impacts of any drought as well as provide more capacity for water in the event of excess rainfall during the 2014 rain season. As at the end of February 2014, the Company had approximately seven months of stored water. Rainfall in January and February 2014 was above seasonal averages.
The total cost of the Aurizona Phase I Expansion project remains within budget and the Company expects to incur approximately $12.5 million (net of Sandstorm's capital contribution) to complete the expansion in 2014, which will be funded through cash flow generated from operations.
The Aurizona Phase II Expansion prefeasibility study is progressing well and remains on target for completion in the second half of 2014. The study will assess the viability of expanding Aurizona gold production to between 200,000 and 300,000 ounces per annum. The study will also identify the incremental and sustaining capital investment necessary to maintain a minimum life of mine average of 135,000 ounces of gold production per annum.
In addition, the Company is in process of planning a five year brownfield resource and reserve expansion program at Aurizona. The Company plans to commence discovery and condemnation drill programs in the second half of 2014. The objectives of these programs is to sterilize the future footprints for plant expansion, tailings and waste storage areas and expand resources and reserves, specifically targeting new saprolite mineralization. Results of these drill programs will further assist in the determination of the optimal expansion scenarios.
Work continues on the Aurizona reserve update with a targeted release in the second half of 2014. The Company intends to develop the Tatajuba deposit when permits are received and will add the Boa Esperança, Ferradura and Conceição resources into the life of mine plan and reserve. The updated life of mine plan will focus on feeding oxide ore to the plant.
Phase I Expansion Update
The Phase I Expansion was designed to expand, improve efficiencies and debottleneck the existing Aurizona process plant in order to increase gold production through low capital cost improvements with minimal impact to the current plant foot print and operations. The 2014 gold production target is based on a mine plan designed to feed the existing plant with saprolite ore and is not reliant on the Phase I Expansion upgrades to achieve production targets.
The expansion consists of four projects designed to increase the Aurizona process plant nameplate throughput to 10,000 tonnes per day ("tpd") of saprolite ore. In addition, the expansion has been designed to allow flexibility for further upgrades to maintain the 10,000 tpd throughput as the Company develops the harder primary ore body. These four projects consist of (1) intensive cyanidation reactor ("ICR") with dedicated electro-winning cells ("EW"); (2) carbon regeneration kiln, and new elution and acid wash columns; (3) feed and tailings high rate thickeners and three additional Carbon-In-Leach ("CIL") tanks; and (4) triple deck wet screen, additional cyclones, pumps and trash screen.
This overall expansion continues to progress towards completion and commissioning in the second half of 2014 and remains on budget as at February 28, 2014. The overall engineering, including detailed site engineering, reached 97% complete, procurement awarded reached 97% complete (on planned material and equipment packages) and construction reached 48% complete. From an approved budget of $49.8 million, the Company has committed approximately $47 million of which approximately $38 million has been incurred to the end of February 2014. The status of each project is as follows:
- This project is designed to improve gravity gold recovery efficiency. The ICR is an intense cynanidization process delivering gold in pregnant solution directly to the new stainless steel electro-winning circuit and will eliminate the inefficient shaking tables. The electro-winning cells will increase the efficiency of the gold room through higher capacity and improved controls. The ICR building is structurally complete and block walls will be installed around the first three levels of the secure area of the building. The ICR and EW cells have been rough set. Bulk piping and electrical materials have been received on site and are awaiting installation. This project is approximately 67% complete.
- This project is designed to increase the efficiency of the CIL circuit, reduce carbon replacement costs and increase capacity of the elution circuit. The elution and acid wash columns are designed to improve the overall capacity and efficiency of the elution process. The carbon regeneration kiln building is structurally complete. The new kiln, dewatering screen, feed hopper and quench tank have been rough set. Bulk piping and electrical materials have been received on site and are awaiting installation. This project is approximately 60% complete.
- The high rate thickeners provide increased throughput and optimal water/solids slurry control for consistent delivery of ore in solution to the CIL tanks and recovering cyanide in solution prior to cyanide destruction and tailings disposal. The three CIL tanks will provide increased ore retention time and throughput to the CIL process. The two above ground steel high rate thickeners have been received on site. Foundations for the center columns are complete and main ring foundations for the thickener support steel is 60% complete. Four CIL tank foundations have been completed with one foundation for a future fourth tank, and two tank shells have been completed. The third tank shell was also completed but had to be dismantled due to a construction deficiency. The cost of dismantling and reconstructing this tank, including any new materials, are the responsibility of the contractor and covered by the Company's insurance. With the exception of the third tank, all materials and equipment associated with the thickeners and CIL circuit have been received on site. The materials required to reconstruct the third tank are currently being procured. The feed and tailings high rate thickeners are approximately 40% complete and the CIL tanks are approximately 50% complete.
- This project is designed to improve crushing and grinding circuit efficiencies through optimized feed particle sizing and distribution. The triple deck screen engineering is being completed onsite with procurement and delivery of the screen and main conveyors 100% complete. The remaining equipment and materials are being procured as engineering is completed. Hydrocyclone concrete foundations are being completed, while all materials and equipment have been delivered to site with the exception of the medium voltage variable frequency drive for the new cyclone feed pump, which is expected in May 2014. This project is approximately 20% complete.
| Operating Results | |||||||||||||
| Three months ended December 31 | Years ended December 31 | ||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||
| Mined waste - tonnes | 2,115,474 | 2,684,379 | 6,647,960 | 6,875,268 | |||||||||
| Mined ore - tonnes | 568,679 | 506,415 | 1,981,564 | 1,714,257 | |||||||||
| Ratio of waste to ore | 3.7 | 5.3 | 3.4 | 4.0 | |||||||||
| Ore grade mined - g/t | 1.34 | 1.30 | 1.44 | 1.30 | |||||||||
| Cost per tonne mined (USD) | $ | 1.91 | $ | 1.46 | $ | 2.11 | $ | 1.93 | |||||
| Processed ore - tonnes | 562,501 | 531,289 | 1,934,176 | 2,155,204 | |||||||||
| Average grade processed - g/t | 1.38 | 1.33 | 1.43 | 1.21 | |||||||||
| Average recovery rate % | 89 | % | 91 | % | 90 | % | 87 | % | |||||
| Gold produced (ounces) | 22,177 | 21,547 | 79,229 | 74,269 | |||||||||
| Gold sales (ounces) | 13,907 | 20,923 | 60,141 | 61,869 | |||||||||
| Gold delivered to Sandstorm | 2,848 | 4,286 | 12,263 | 12,672 | |||||||||
| Cash costs of production (USD per ounce) | |||||||||||||
| Mining | $ | 212 | $ | 206 | $ | 224 | $ | 221 | |||||
| Processing | 297 | 330 | 332 | 351 | |||||||||
| Administration | 103 | 93 | 127 | 131 | |||||||||
| Refining and transportation | 27 | 22 | 27 | 31 | |||||||||
| Royalties | 13 | 17 | 13 | 17 | |||||||||
| Total cash costs of production (USD per ounce) | $ | 652 | $ | 668 | $ | 723 | $ | 751 | |||||
| Sustaining capital | 122 | 166 | 145 | 151 | |||||||||
| Brownfields exploration expenditure | 58 | 15 | 23 | 49 | |||||||||
| All-in sustaining costs (USD per ounce) | $ | 832 | $ | 849 | $ | 891 | $ | 951 | |||||
| Gross profit (millions of US dollars) | $ | 5.6 | $ | 16.8 | $ | 29.1 | $ | 39.5 | |||||
Mining Production
The Company's mining activities are performed by an owner/operator mine team with assistance of external mine contractors. In Q3 of this year, the Company changed to a new mine contractor that could supply articulated dump trucks more suitable for rainy season conditions.
During the three months ended December 31, 2013, total material mined (ore and waste) decreased from the comparative period of 2012 by 16%, primarily due to the transition of the mine contractor and the related loss in equipment availability while mobilizing the new contractor. As a result, the waste movement was lower than the comparative quarter in 2012.
For the year ended December 31, 2013, total material mined (ore and waste) was comparable to 2012. The loss in mine production related to the transitioning of mine contractors was partially offset by mine production gains resulting from the drought conditions in Q1. The dry conditions in Q1 allowed for better than expected mining conditions and higher productivity during a period which normally has heavy rains and low mine production.
The average ore grade mined in the three months ended December 31, 2013 was comparable to the same period of 2012, while the full year's average ore grade mined was higher than 2012. The drought conditions at the beginning of the year negatively impacted process plant throughput due to constrained water availability for processing. To compensate, the Company targeted higher grade, harder laterite ore areas of the Piaba pit in an effort to catch up on lost gold production from the beginning of the year.
After adjusting for a foreign exchange gain of $0.20 per tonne, mining costs were 45% higher per tonne mined in the three months ended December 31, 2013 compared to the same quarter of 2012. This was generally due to lower volumes of material moved while the new mining contractor was ramping up its full fleet. In addition fleet maintenance costs increased due to the mining of harder lateritic ore as compared to the fourth quarter of 2012. This also impacted the full year results as compared to 2012.
Mill Processing
Gold production during the three months ended December 31, 2013 was 3% higher than the comparable period of 2012. The increase was the result of processing higher grade saprolite ore and a slight increase in tonnage through the mill. For the year ended December 31 2013, gold production was 7% higher than 2012 due to the processing of higher grade ore and an improved gold recovery, which was partially offset by a decrease in the volume of ore processed through the mill.
Ore throughput in Q4 2013 was higher than the comparable quarter of 2012 due to an increase in the processing of softer saprolite ore. Saprolite ore has a lower work index than harder laterite ore resulting in higher throughput, but a lower gold recovery. For the full year, the volume of ore tonnes processed was lower than 2012 due to the processing of laterite ore in the third quarter of 2013, a plant maintenance shutdown that was longer than planned in the second quarter and low plant availability in the first quarter, due to drought conditions which caused a shortage of water available for processing. Accordingly, a plan to mine and process higher grade ore was developed to increase gold production. The higher grade laterite ore resulted in lower volumes processed but a higher average gold recovery. The gold recovery during the three months ended December 31, 2013 was slightly lower than the comparative period in 2012 due to the increased production of saprolite ore. The gold recovery during the year ended December 31, 2013 was higher than the comparative period in 2012 due to the increased processing of laterite ore and improved processing practices.
Cash Costs of Production
The average unit cash cost of production was 2% and 4% lower for the three months and year ended December 31, 2013 compared to the same periods in 2012. The strengthening of the US dollar had a positive impact on the average unit cash costs for fourth quarter and full year of 2013 of approximately $70 per ounce and $76 per ounce, respectively, compared to 2012.
After adjusting for foreign exchange movements, mining costs per ounce of gold produced in the fourth quarter of 2013 were approximately 14% higher than the comparative quarter of 2012. This was due to higher cost per tonne mined, which was partially offset by the processing of higher grade ore. Processing costs were comparable to the same quarter in 2012. The positive cost impact from the processing of higher grade ore and increased saprolite ore throughput was offset by lower gold recoveries. Administration costs were slightly higher than the comparative quarter of 2012 due to higher employee and IT infrastructure costs and higher gold transport costs related to an increase in the number of shipments to the refineries. Royalty costs are a function of gross sales and were lower due to lower sales compared to the same quarter of 2012.
After adjusting for foreign exchange movements, the total average unit cost of production for the 2013 year increased by 7% over 2012. This increase was driven primarily by higher mining costs due to the increased cost per tonne mined, which was partially offset by the processing of higher grade ore. Processing costs were higher due to an increase in acid leaching, maintenance costs related to the processing of harder laterite ore and an inventory write-down related to consumable inventory which was purchased in previous years. Administration costs were slightly higher than 2012 due to higher employee costs, while refining and transport, as well as royalties, were comparable to 2012.
The average all-in sustaining cost ("AISC") of production was lower by 2% and 6% for the three months and year ended December 31, 2013, as compared with the same periods of 2012, respectively. The lower AISC for Q4 2013 was the result of a $89 per ounce gain in foreign exchange offset by higher capitalized mine activities related to the clearing and preparation of a new mining area on the west side of the Piaba pit. The lower AISC for the year ended December 31, 2013 was primarily related to positive foreign exchange adjustments as well as lower capitalized mineral property expenditures at Aurizona.
CONFERENCE CALL DETAILS
The Company will also host a conference call at 11:00 a.m. Eastern Time on Thursday 20th March 2013, where Management will both review the financial results and discuss the 2014 outlook.
Conference Call Dial-In Details
| Toll Free (North America): | +1 866 226 1799 |
| Toronto Local and International: | +1 416 340 2220 |
| Webcast: | www.gowebcasting.com/5230 |
A replay of the call will be available on Luna's website, www.lunagold.com.
About Luna Gold Corp.
Luna is a gold production company engaged in the operation, expansion, and exploration of gold projects in Brazil.
On behalf of the Board of Directors
John Blake - President and CEO
Website: www.lunagold.com
Forward-Looking Statements
This release contains certain "forward-looking statements" and certain "forward-looking information" as defined under applicable Canadian and U.S. securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "continue", "plans" or similar terminology. Forward-looking statements include, but are not limited to, statements with respect to future gold production and/or the results of analysis on gold production. Forward-looking statements are based on forecasts of future results, estimates of amounts not yet determinable and assumptions that while believed by management to be reasonable, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Forward-looking statements are subject to various risks and uncertainties concerning the specific factors identified in Luna Gold Corp.'s periodic filings with Canadian Securities Regulators. These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drill results and other exploration data, the potential for delays in exploration or development activities, the geology, grade and continuity of mineral deposits, the possibility that future exploration, development or mining results will not be consistent with the Company's expectations, accidents, equipment breakdowns, title matters, labor disputes or other unanticipated difficulties with or interruptions in production and operations, fluctuating metal prices, unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future, the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, regulatory restrictions, including environmental regulatory restrictions and liability, competition, loss of key employees, and other related risks and uncertainties. The Company undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.