Avesoro Resources Inc. - Financial Results for the Quarter Ended 31 March 2019

TSX: ASO
AIM: ASO

TORONTO, May 15, 2019 - Avesoro Resources Inc., ("Avesoro" or the "Company"), the TSX and AIM listed West African gold producer, is pleased to announce the release and publication of its unaudited Financial Statements ("FS") and Management's Discussion and Analysis ("MD&A") for the quarter ended March 31, 2019 (the "Quarter" or "Q1").

Q1 2019 Operational Highlights:

• Gold production of 45,098 ounces from the New Liberty Gold Mine in Liberia ("New Liberty") and Youga Gold Mine in Burkina Faso ("Youga"); and
• Consolidated operating cash costs of US$911 per ounce sold¹, an improvement of 7% QoQ, and all-in sustaining costs ("AISC") of US$1,149 per ounce sold¹, an improvement of 6% QoQ and both within the full year guidance range;

Q1 2019 Financial Highlights:

• Company revenues of US$59.9 million, an increase of 4% quarter on quarter ("QoQ"), driven by gold sales of 45,810 ounces at an average realised gold price of US$1,304 per ounce, a 6% increase QoQ;
• Company EBITDA of US$9.5 million, an increase of 102% QoQ and EBITDA margin of 16%¹;
• Total capital expenditure of US$7.9million;
• Full draw down of US$10 million additional working capital facility (as announced on March 6, 2019), resulting in gross debt of US$138.8million, an increase of 9% QoQ; and
• Closing cash balance of US$9.3 million.

Post Period Highlights:

• Proven and Probable Mineral Reserves increased by 154koz, an increase of 23% at Youga;
• Four year life of mine extension (to 2031), total forecast gold recovery of 734,066 ounces and a post-tax Net Present Value ("NPV") of US$142.6 million² and Life of Mine ("LOM") free cash generation of US$186.8 million; and
• Estimated combined project level post tax and debt NPV of New Liberty and Youga increased to US$428.6 million² and estimated combined project level post-debt and post-tax LOM cash flows of US$556.8 million, at US$1,300/oz gold price.

Notes: 
¹ See "Non-GAAP Financial Measures"; and
² At a 5% discount rate and US$1,300 gold price, after debt repayment and associated finance charges.

Serhan Umurhan, Chief Executive Officer of Avesoro, commented: "Although gold production was slightly behind our targeted levels for the Quarter, we remain on track to achieve annual production and cost guidance for 2019, and I am pleased to report that both consolidated operating cash costs and all in sustaining cash costs were reduced during the Quarter. This was primarily driven by a 28% reduction in unit mining costs at New Liberty to US$1.68 per tonne and by 14% to US$1.85 per tonne at Youga.

We have now worked through the unplanned mining dilution at Youga and expect the mined grade to increase throughout Q2 2019. The focus going forward remains firmly on driving efficiencies and continued operational improvements to deliver on our recently released revised life of mine plans at our assets in Liberia and Burkina Faso."

Table 1: Key Operational and Financial Highlights

Table 2: Asset Level Financial Highlights

Analyst and Investor Call

The company will be hosting a conference call and webcast for investors and analysts on May 15, 2019 at 13:00 BST.

The access details for the conference call are as follows:

Password:  62541614#
Webcast URL: https://event.on24.com/wcc/r/2006355/B7B6AEAA9DF0082697079291263352D4

The FS are appended to this announcement. The FS and the accompanying MD&A are available to review at the Company's website, www.avesoro.com and on www.sedar.com.

Non-GAAP Financial Measures

The Company has included certain non-GAAP financial measures in this press release, including operating cash costs, all-in sustaining costs ("AISC") per ounce of gold sold, EBITDA and net present value ("NPV"). These non-GAAP financial measures do not have any standardised meaning. Accordingly, these financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with International Financial Reporting Standards ("IFRS").

Operating cash costs and AISC are a common financial performance measure in the mining industry but have no standard definition under IFRS. Operating cash costs are reflective of the cost of production.

AISC include operating cash costs, net-smelter royalty, corporate costs, sustaining capital expenditure, sustaining exploration expenditure and capitalised stripping costs. The Company reports cash costs on an ounces of gold sold basis.

The Company calculates EBITDA as net profit or loss for the period excluding finance costs, income tax expense and depreciation. EBITDA does not have a standardised meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.  EBITDA excludes the impact of cash costs of financing activities and taxes and the effects of changes in working capital balances and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS.  Other companies may calculate EBITDA differently.

Other companies may calculate these measures differently and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

About Avesoro Resources Inc.

Avesoro Resources is a West Africa focused gold producer and development company that operates two gold mines across West Africa and is listed on the Toronto Stock Exchange ("TSX") and the AIM market operated by the London Stock Exchange ("AIM"). The Company's assets include the New Liberty Gold Mine in Liberia ("New Liberty") and the Youga Gold Mine in Burkina Faso ("Youga").

New Liberty has an estimated Proven and Probable Mineral Reserve of 17Mt with 1,365,000 ounces of gold grading 2.49g/t and an estimated Measured and Indicated Mineral Resource of 20.47Mt with 1,748,200 ounces of gold grading 2.66g/t and an estimated Inferred Mineral Resource of 3.0Mt with 271,000 ounces of gold grading 2.8g/t. A supporting Technical Report summarising the PFS, prepared in accordance with CIM guidelines, is set out in an NI 43-101 compliant Technical Report dated January 31, 2019 and entitled "NI 43-101 Pre-Feasibility Report, Mineral Resource and Mineral Reserve Update for the New Liberty Gold Mine, Liberia" and is available on SEDAR?at www.sedar.com. 

Youga has an estimated Proven and Probable Mineral Reserve of 14.7Mt with 814,900 ounces of gold grading 1.72g/t and a combined estimated Measured and Indicated Mineral Resource of 22.16Mt with 1,189,100 ounces of gold grading 1.67g/t and an Inferred Mineral Resource of 7.6Mt with 377,000 ounces of gold grading 1.5g/t. A supporting Technical Report summarising the PFS, prepared in accordance with the requirements of National Instrument 43-101 will be filed on SEDAR at www.sedar.com and on the Company's corporate website www.avesoro.com within 45 days of the date of May 8, 2019.

For more information, please visit www.avesoro.com

Qualified Persons

The Company's Qualified Person is Mark J. Pryor, who holds a BSc (Hons) in Geology & Mineralogy from Aberdeen University, United Kingdom and is a Fellow of the Geological Society of London, a Fellow of the Society of Economic Geologists and a registered Professional Natural Scientist (Pr. Sci.Nat) of the South African Council for Natural Scientific Professions. Mark Pryor is an independent technical consultant with over 25 years of global experience in exploration, mining and mine development and is a "Qualified Person" as defined in National Instrument 43 -101 "Standards of Disclosure for Mineral Projects" of the Canadian Securities Administrators and has reviewed and approved this press release. Mr. Pryor has verified the underlying technical data disclosed in this press release.

Forward Looking Statements

Certain information contained in this press release constitutes forward looking information or forward-looking statements within the meaning of applicable securities laws. This information or statements may relate to future events, facts, or circumstances or the Company's future financial or operating performance or other future events or circumstances. All information other than historical fact is forward looking information and involves known and unknown risks, uncertainties and other factors which may cause the actual results or performance to be materially different from any future results, performance, events or circumstances expressed or implied by such forward-looking statements or information. Such statements can be identified by the use of words such as "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "would", "project", "should", "believe", "target", "predict" and "potential". No assurance can be given that this information will prove to be correct and such forward looking information included in this press release should not be unduly relied upon. Forward looking information and statements speak only as of the date of this press release.

Forward looking statements or information in this press release include, a four year life of mine extension at Youga, total forecast gold recovery of 734,066 ounces and a post-tax NPV of US$142.6 million at Youga, and an estimated combined New Liberty and Youga project level post tax and debt NPV of New Liberty and Youga increased to US$428.6 million and estimated combined project level post-debt and post-tax LOM cash flows of US$556.8 million, at US$1,300/oz gold price.

This release also contains references to estimates of Mineral Resources and Mineral Reserves. The estimation of Mineral Resources and Mineral Reserves is inherently uncertain and involves subjective judgments about many relevant factors. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation (including estimated future production, the anticipated tonnages and grades that will be mined and the estimated level of recovery that will be realized), which may prove to be unreliable and depend, to a certain extent, upon the analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate. Mineral Resource or Mineral Reserve estimates may have to be re-estimated based on: (i) fluctuations in the gold price; (ii) results of drilling, (iii) the results of metallurgical testing and other studies, including their subsequent refinement and updating; (iv) proposed mining operations, including dilution; (v) the evaluation of mine plans subsequent to the date of any estimates; (vi) changes in mining or other costs, and (vii) the possible failure to receive required permits, approvals and licenses or changes to existing mining licences.

In making the forward looking information or statements contained in this press release, assumptions have been made regarding, among other things: general business, economic and mining industry conditions; interest rates and foreign exchange rates; the continuing accuracy of Mineral Resource and Reserve estimates; geological and metallurgical conditions (including with respect to the size, grade and recoverability of Mineral Resources and Reserves) and cost estimates on which the Mineral Resource and Reserve estimates are based; the supply and demand for commodities and precious and base metals and the level and volatility of the prices of gold; market competition; the ability of the Company to raise sufficient funds from capital markets and/or debt to meet its future obligations and planned activities and that unforeseen events do not impact the ability of the Company to use existing funds to fund future plans and projects as currently contemplated; the stability and predictability of the political environments and legal and regulatory frameworks including with respect to, among other things, the ability of the Company to obtain, maintain, renew and/or extend required permits, licences, authorizations and/or approvals from the appropriate regulatory authorities; that contractual counterparties perform as agreed; and the ability of the Company to continue to obtain qualified staff and equipment in a timely and cost-efficient manner to meet its demand.

Actual results could differ materially from those anticipated in the forward-looking information or statements contained in this press release as a result of risks and uncertainties (both foreseen and unforeseen) and should not be read as guarantees of future performance or results and will not necessarily be accurate indicators of whether or not such results will be achieved. These risks and uncertainties include the risks normally incidental to exploration and development of mineral projects and the conduct of mining operations (including exploration failure, cost overruns or increases, and operational difficulties resulting from plant or equipment failure, among others); the inability of the Company to obtain required financing when needed and/or on acceptable terms or at all; risks related to operating in West Africa, including potentially more limited infrastructure and/or less developed legal and regulatory regimes; health risks associated with the mining workforce in West Africa; risks related to the Company's title to its mineral properties; the risk of adverse changes in commodity prices; the risk that the Company's exploration for and development of mineral deposits may not be successful; the inability of the Company to obtain, maintain, renew and/or extend required licences, permits, authorizations and/or approvals from the appropriate regulatory authorities and other risks relating to the legal and regulatory frameworks in jurisdictions where the Company operates, including adverse or arbitrary changes in applicable laws or regulations or in their enforcement; competitive conditions in the mineral exploration and mining industry; risks related to obtaining insurance or adequate levels of insurance for the Company's operations; that Mineral Resource and Reserve estimates are only estimates and actual metal produced may be less than estimated in a Mineral Resource or Reserve estimate; the risk that the Company will be unable to delineate additional Mineral Resources; risks related to environmental regulations and cost of compliance, as well as costs associated with possible breaches of such regulations; uncertainties in the interpretation of results from drilling; risks related to the tax residency of the Company; the possibility that future exploration, development or mining results will not be consistent with expectations; the risk of delays in construction resulting from, among others, the failure to obtain materials in a timely manner or on a delayed schedule; inflation pressures which may increase the cost of production or of consumables beyond what is estimated in studies and forecasts; changes in exchange and interest rates; risks related to the activities of artisanal miners, whose activities could delay or hinder exploration or mining operations; the risk that third parties to contracts may not perform as contracted or may breach their agreements; the risk that plant, equipment or labour may not be available at a reasonable cost or at all, or cease to be available, or in the case of labour, may undertake strike or other labour actions; the inability to attract and retain key management and personnel; and the risk of political uncertainty, terrorism, civil strife, or war in the jurisdictions in which the Company operates, or in neighbouring jurisdictions which could impact on the Company's exploration, development and operating activities.

Although the forward-looking statements contained in this press release are based upon what management believes are reasonable assumptions, the Company cannot provide assurance that actual results or performance will be consistent with these forward-looking statements. The forward looking information and statements included in this press release are expressly qualified by this cautionary statement and are made only as of the date of this press release. The Company does not undertake any obligation to publicly update or revise any forward looking information except as required by applicable securities laws.

Condensed Interim Consolidated Financial Statements (Unaudited)

Avesoro Resources Inc.

For the Three Months Ended March 31, 2019 and 2018
(stated in thousands of US dollars)

Interim Consolidated Statements of Income and Comprehensive Income
(stated in thousands of US dollars)
Unaudited

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Interim Consolidated Statements of Financial Position
(stated in thousands of US dollars)
Unaudited

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Interim Consolidated Statements of Cash Flows
(stated in thousands of US dollars)
Unaudited

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Interim Consolidated Statements of Changes in Equity
(stated in thousands of US dollars)
Unaudited

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)
For the three months ended March 31, 2019 and 2018
(in thousands of US dollars unless otherwise stated)

1  Nature of operations and basis of preparation

Avesoro Resources Inc. ("Avesoro" or the "Company"), was incorporated under the Canada Business Corporations Act on February 1, 2011. The focus of Avesoro's business is the exploration, development and operation of gold assets in West Africa, specifically the New Liberty Gold Mine in Liberia and the Youga Gold Mine in Burkina Faso. 

The Company's parent company is Avesoro Jersey Limited ("AJL"), a company incorporated in Jersey and Mr. Murathan Doruk G?nal is the ultimate beneficial owner.

These condensed interim consolidated financial statements ("interim financial statements") have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".  They do not include all disclosures that would otherwise be required in a complete set of financial statements.  They follow accounting policies and methods of their application consistent with the audited consolidated financial statements for the year ended December 31, 2018 with the exception of the adoption of IFRS 16, "Leases" which has no impact other than to reclassify the finance lease assets to right of use assets.  Accordingly, they should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2018. 

These interim financial statements were authorised by the Board of Directors on May 14, 2019.

Going concern

As at March 31, 2019, the Company had cash and cash equivalents of $9.3 million and net current liabilities of $15.5 million including debt repayments of $29.3 million in the next twelve months.  

The Company's cash flow forecasts based on the recently announced Technical Reports prepared in accordance with the requirements of National Instrument 43-101 for New Liberty and Youga Gold Mines show that the Company will generate sufficient free cash to continue in operational existence for the foreseeable future.  The Company continues to adopt the going concern basis of accounting in preparing the consolidated financial statements.

2  Segment information

The Company is engaged in the exploration, development and operation of gold projects in the West African countries of Liberia, Burkina Faso and Cameroon. Information presented to the Chief Executive Officer for the purposes of resource allocation and assessment of segment performance is focused on the geographical location of mining operations.  The reportable segments under IFRS 8 are as follows:

• New Liberty operations;
• Burkina operations which include the Youga Gold Mine and Balogo satellite deposit;
• Exploration; and
• Corporate.

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the three months ended March 31, 2019:

Following is an analysis of the Group's results, assets and liabilities by reportable segment for the three months ended March 31, 2018:

3    Administrative and other expenses

4   Income taxes

5   (Loss)/Earnings per share ("EPS")

6    Trade and other receivables

Other receivables as at March 31, 2019 include VAT receivable from the Burkina Faso Government of $4.5 million (December 31, 2018: $3.1 million) and a financial asset with respect to factored VAT receivable from the Burkina Faso Government of $nil (December 31, 2018: $6.4 million).

7   Inventories

Ore stockpiles as at March 31, 2019 are stated at their net realisable values after cumulative write-down at New Liberty of $1.9 million (December 31, 2018: $1.6 million) and a provision for obsolescence of consumables at Youga of $0.7 million (December 31, 2018: $0.7 million).   

8   Intangible assets - Exploration and evaluation assets

Intangible assets as at March 31, 2019 are in respect of capitalised exploration and evaluation assets at Ouaré, located 44 kilometres east of the Youga processing plant.  It is the subject of an infill drilling campaign to upgrade the confidence level and classification of the existing mineral resources.  Resource modelling and pit design shows that this satellite deposit will add further mine life to Youga.

Exploration and evaluation costs charged to profit and loss arose from the following licence areas:

9   Property, plant and equipment

The carrying amount of right-of-use assets as at March 31, 2019 comprises of drill rigs of $1.1 million (December 31, 2018: $1.2 million) and fuel storage facility of $2.2 million (December 31, 2018: $2.5 million).

10   Borrowings

(a)  Bank loans

On December 17, 2013 the Company entered into an agreement for an $88 million project finance loan facility with Nedbank Limited and FirstRand Bank Limited (collectively the "Lenders"), (the "Senior Facility"), and also entered into a subordinated loan facility agreement for $12 million with RMB Resources (the "Subordinated Facility").  On December 9, 2015 the Company entered into an agreement for an additional $10 million Tranche B Senior Facility (together with the Senior Facility and the Subordinated Facility the "Loan Facilities") provided by the Lenders.  These Loan Facilities, which have been fully drawn, financed the development of the Company's New Liberty Gold Mine.  $38.4 million of the Senior Facility principal has been repaid to date.

(b)  Working Capital Facility with AJL

Gross proceeds of new tranches during the period ended March 31, 2019 was $10.3 million (year ended December 31, 2018: $21.9 million) of which $0.2 million (year ended December 31, 2018: $3.9 million) has been credited to capital contribution. Gross repayments during the period ended March 31, 2019 amounted to $nil (year ended December 31, 2018: $13.7 million) of which $nil (year ended December 31, 2018: $2.9 million) has been charged to capital contribution.

(c)  Related party loans payable to Mapa ?n?aat ve Ticaret A.?. ("Mapa")

Gross proceeds of new loans during the period ended March 31, 2019 was $nil (year ended December 31, 2018: $10.3 million) of which $nil (year ended December 31, 2018: $0.4 million) has been credited to capital contribution.  Principal repayments during the period ended March 31, 2019 amounted to $nil (year ended December 31, 2018: $4.8 million) and interest repayments during the period ended March 31, 2019 amounted to $0.4 million (year ended December 31, 2018: $1.7 million). 

11   Lease liability

Lease liability as at March 31, 2019 relates to drill rigs and the fuel storage facility at New Liberty.  Lease liability is measured at the present value of the leased payments.  Lease payments are apportioned between the finance charges and reduction of lease liability using the incremental borrowing rate implicit in the lease to achieve a constant rate of interest on the remaining balance of the liability.

12  Equity

(a)  Authorised

Unlimited number of common shares without par value.                                                             

(b)  Issued

(c)  Stock options

Information relating to stock options outstanding at March 31, 2019 is as follows:

13   Non-controlling interest

The composition of the non-controlling interests held by the Government of Burkina Faso is as follows:

14   Related party transactions

(a) Borrowings

The Company's related party loans payable to Mapa, Working Capital Facility with AJL and loan payable to AJL are disclosed in Note 10.

(b) Royalty payable to AJL

Pursuant to the share purchase agreement between the Company and AJL on the acquisition of the Youga Gold Mine in December 2017, the Company accrued a royalty payable to AJL of $1.0 million for the period ended March 31, 2019 in respect of a net smelter return on the Youga Gold Mine.

(b) Provision/(purchases) of goods and services

The Company also provided/(purchased) the following services from related parties:

Included in trade and other receivables is a receivable from related parties of $3.9 million as at March 31, 2019 (December 31, 2018: $3.4 million). 

Included in trade and other payables is $4.7 million payable to related parties as at March 31, 2019 (December 31, 2018: $3.3 million).   

15  Subsequent events

On May 8, 2019, the Company announced the results of an upgraded Mineral Resource and Mineral Reserve Estimate and an updated life-of-mine plan, for its Youga Gold Mine.

SOURCE Avesoro Resources Inc.