Osisko Mining Corporation Reports First Quarter 2012 Results
10.05.2012 | Marketwire
Mine Operating Profits of $70.5 Million, Net Profit of $29.4 MillionMONTREAL, QUEBEC -- (Marketwire) -- 05/10/12 -- As previously reported in press releases today, a fire was experienced at the Canadian Malartic Mill early this morning. Details of this event such as they are known at this time were reported earlier and will not be recapped in this press release.
Osisko Mining Corporation (the "Company" or "Osisko") (TSX: OSK) (FRANKFURT: EWX) is pleased to report that it has generated a net profit of $29.4 million ($0.08 per share) during the first quarter of 2012 versus a loss of $5.3 million in 2011 ($0.01 per share).
Mine operating profits during the first quarter totaled a record $70.5 million. The Canadian Malartic mine reached commercial production on May 19, 2011 and, accordingly, mining operations did not contribute any revenues or profit during the corresponding period of 2011.
Highlights for the quarter were as follows:
- Gold production of 91,178 ounces, strongest quarter to date;
- Operating cash flow of $78.7 million, strongest quarter to date;
- Investment in mining assets of $67.7 million;
- Average gold recoveries of 91.2%;
- Positive 11% reconciliation of gold ounces with respect to the reserve model;
- Continued increase in average grade of ore processed at 1.05 g/t Au;
- Continued improvement in cash costs of US$858 per ounce;
- Continued increase in cash margin of US$840 per ounce.
Sean Roosen, President and Chief Executive Officer of Osisko, commenting on the results: "We had record gold production of over 91,000 ounces during the quarter, despite addressing challenges as we continue to ramp up this world class mine. Canadian Malartic was the second largest gold producer in Canada in the last quarter, after Goldcorp's high-grade Red Lake Mine. We'd have likely hit our targeted production for the quarter, but we were three weeks early installing the first unit of the new secondary cone crusher, and consequently lost seven full days and five partial days of production due to the concurrent mill shutdown and startup. We continue improving our methods of extracting high grade ore from the areas around the previously mined underground stopes, despite some difficulties. We are still within the normal ramp-up time frame for a mine of this size, and issues aside, it was again a productive quarter as we generated $70.5 million from Canadian Malartic, our best quarter to date. We have recently been processing at rates of 42,000 to 46,000 tonnes per day, and hope to stabilize the circuit in this range pending the arrival of the last components of the second cone crusher. The completion of the secondary crushing facility in July should set the stage to increase throughput to design capacity of 55,000 tonnes per day in September, three months later than we'd originally planned to have this equipment available to us. Further optimizations of throughput will be pursued once this is achieved."
"The Canadian Malartic mine has been performing very well from a geological and metallurgical point of view, with very positive gold reconciliation of +11%, and excellent recoveries of over 91%. Supplier and manufacturer delivery schedules, design capacities and availability have not met our expectations, and we are now completing the work necessary to resolve these issues. We are looking forward to completing the ramp up phase of this project, and we appreciate the ongoing support and efforts of our suppliers and service providers during this difficult period in supply chain management within the mining industry.
Outlook for 2012
Full integration of the first unit of the new secondary cone crusher is progressing at a slower rate than expected following start-up and commissioning trials. Modifications have been necessary and optimization is continuing, which is expected to result in lower than anticipated production in the second quarter. Manufacturer delays in delivery of elements of the second unit of the secondary crusher are also expected to affect second and third quarter production. Management is currently reviewing production guidance in light of delays in ramp up and assessment of this morning's fire.
Steady Progress at Canadian Malartic
Operations at Canadian Malartic continue to improve during the ramp-up period. Mining activities have accelerated with the development of the pit area, which has enhanced flexibility with better mining conditions. During the quarter there were some difficulties accessing the higher grade ore. However, throughput gold grade continues to increase as more access is gained to the areas of higher grade material, and expertise develops in accessing material over open stopes. Throughput gold grade is expected to continue to increase in the rest of the year. Drilling, blasting and loading procedures are continuously evolving to augment productivity while maintaining a safe working environment.
Mining operations were affected by low availability of ancillary loading units. This will continue in the second quarter as key structural components are being replaced on two Letourneau L-1850 loaders. Osisko is working closely with the suppliers of the mining fleet to improve availability. Mining was also affected by the wet spring and wind conditions, which negatively impacted work schedules.
Production reconciles very favorably with the reserve model with an estimated gain of 11% in ounces for the tonnage mined during the quarter.
Milling throughput was affected by a seven day shutdown in March to connect the first FLSmidth XL2000. This shutdown was followed by five days of very low production while the new crusher was brought on line. Integration of the first XL2000 is continuing with the assistance of the manufacturer's representatives, but it has not performed consistently at the manufacturer throughput guidance parameters of tonnes per hour and output size. This inaugural XL2000 has required several adjustments to move towards design specifications. Osisko is awaiting the final report on the crusher performance from FLSmidth, however it is now becoming apparent that the upper design operating levels are not sustainable. Modifications to the feeding system were required and will continue over the second quarter. Frequent stops and starts have resulted in a lack of stability in the circuit, which is affecting current throughput production. The manufacturer has also experienced a delay in the fabrication of some of the components for the second XL2000, which was previously anticipated to be installed and functional at the end of the second quarter. It is now anticipated that all components of the second XL2000 will arrive on site in June and be installed and commissioned in July. A cost overrun of $13 million on the crusher installation is expected due to modifications to material handling systems and subsequent contract labour costs associated with the modifications.
In order to gain further production flexibility and increase the robustness of the grinding mill circuit, the Company has decided to add an additional pebble crusher (identical to the current pebble crusher) in the mill. This $12 million investment is expected to be in service in September.
The production statistics since commencement of commercial production on May 19, 2011 are as follows:
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Q1 Q4 Q3 Q2
2012 2011 2011 2011
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Tonnes Mined (000's)
- Ore 4,037 3,549 3,005 829
- Waste 8,458 10,590 7,899 2,073
- Overburden 1,954 1,823 1,029 415
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Total 14,449 15,962 11,933 3,317
Tonnes Milled (000's) 2,965 2,935 3,086 1,471
Grade (g Au/t) 1.05 0.96 0.85 0.65
Recovery (%) 91.2 88.3 87.0 88.0
Gold production (oz) 91,178 79,718 73,814 27,101
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Mill operating statistics continue to show progress.
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Total Tonnes per
Available Operating Tonnage Tonnes Operating
Hours Hours (%) Produced (t) per Hour Day
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Q2 2011 2,184 1,793 82 2,481,196 1,384 29,894
Q3 2011 2,208 1,890 86 3,086,324 1,633 36,742
Q4 2011 2,208 1,995 90 2,934,803 1,471 33,733
Q1 2012 2,184 1,890 87 2,965,456 1,569 35,728
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Osisko's focus for the balance of 2012 will be:
i. Complete planned mill modifications, including the installation of the second unit of the secondary cone crusher and adding a second pebble crusher;
ii. Stabilize the operating circuit to reach throughput design capacity of 55,000 tonnes per day;
iii.Improve availability of mining equipment, particularly the loading units.
Despite operating challenges, the Canadian Malartic Mine generated an operating profit of $70.5 million, mainly from higher gold production due to a 9.4% increase in grade of the ore treated. The mine was able to improve its cash margins by US$99 per ounce (13.4%) over the previous quarter, mainly as a result of a 6.1% decrease in cash cost per ounce to US$858. The gold market continues to be strong, thereby allowing Canadian Malartic to achieve strong margins.
The mine operating statement for the production period is as follows:
(in thousands of Canadian dollars, unless otherwise noted)
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Q1 2012 Q4 2011 Q3 2011 Q2 2011
------------------------------------------------
Gold sales (ounces) 92,400 75,100 72,100 8,300
Silver sales (ounces) 52,800 42,100 49,800 -
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($000) ($000) ($000) ($000)
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Revenues 158,658 128,100 122,879 12,429
Production Costs (71,910) (74,841) (74,647) (9,398)
Royalties (2,359) (1,933) (1,192) (159)
Depreciation (13,877) (11,800) (8,748) (1,238)
------------------------------------------------
Total (88,146) (88,574) (84,587) (10,795)
------------------------------------------------
Net Mining Profit 70,512 39,526 38,292 1,634
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Key operating results
(in thousands of Canadian dollars, unless otherwise noted)
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2012 2011 2011 2011(i) 2011
Q1 Q4 Q3 Q2 Q1
--------------------------------------------------
Gold Production (oz) 91,178 79,718 73,814 27,101 -
Gold Sales (oz) 92,400 75,100 72,100 8,300 -
Average Sale Price
(US$/oz) 1,698 1,655 1,695 1,535 -
Average Market Price
(US$/oz) 1,691 1,688 1,702 1,526 -
Cash Costs per Ounce
(C$/oz) 860 936 918 1,094 -
Cash Costs per Ounce
(US$/oz) 858 914 939 1,120 -
Cash Margin per Ounce
(US$/oz) 840 741 756 415 -
Revenues 158,658 128,100 122,879 12,429 -
Mine Operating Profit 70,513 39,526 38,292 1,634 -
Net Earnings (loss) 29,359 37,802 9,302 (23,826) (5,281)
Net Earnings (loss) per
Share 0.08 0.10 0.02 (0.06) (0.01)
Operating Cash Flows 78,716 39,660 49,512 14,972 (20,554)
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(i) Commercial production only.
Net earnings amounted to $29.4 million ($0.08), a decrease of $8.4 million from the fourth quarter of 2011, however fourth quarter results included a non-recurring income tax benefit of $10.0 million.
Summary from the Company's financial position and results are as follows:
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($ Million) March 31, 2012 December 31, 2011
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Cash Position(1) 143.8 142.0
Working Capital 34.6 47.4
Total Assets 2,144.0 2,069.2
Total Debt 333.5 331.6
Shareholders' Equity 1,696.5 1,654.1
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(1) Includes Cash and Cash equivalents, Short-term investments and
Restricted cash.
Exploration and Development
The Company continues to conduct exploration work on a regional basis around the Canadian Malartic infrastructure for additional resources and reserves, and at its Hammond Reef advanced development project. At Hammond Reef, the Company is completing its drilling programs and has initiated various studies necessary for the Project Feasibility Study, which is expected to be completed in late 2012.
Osisko continues to aggressively pursue growth in its reserve and resource base, with some 106,000 meters drilled on its various projects during the quarter.
Osisko also entered into various agreements to add to its project base.
- An option agreement with Global Geoscience Ltd. whereby Osisko can acquire an initial 45% interest in five Nevada gold properties by expending $8 million in exploration over a four year period and subscribing for 14.2 million shares at an issue price of $0.06 per share for a total of $912,000. Osisko can acquire an additional interest of 25% in any property (for a total interest of 70%) by completing a bankable feasibility study on such property.
- An option agreement with Tri Origin Exploration Ltd. whereby Osisko can acquire an initial 51% interest in the Red Lake Extension property located in NW Ontario, by expending $5 million in exploration over a four year period, by paying Tri Origin a total of $800,000 in cash during the period and by subscribing for 5 million ordinary shares in Tri Origin at an issue price of $0.07 per share for a total of $350,000. Osisko can acquire an additional interest of 14% in any property (for a total interest of 65%) by completing a bankable feasibility study.
The Company will open a regional exploration office in Denver, Colorado towards the end of Q2 2012 in order to run US exploration. Mr. Sergio Cattalani has been appointed Vice President Exploration, USA to lead the efforts in the USA, and Ms. Anne Charland will assume the leadership of the Canadian exploration activities as Vice President Exploration, Canada. Dr. Charland was previously Project Manager at Hammond Reef.
Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures including "cash cost per ounce" and "cash margin per ounce" to supplement its financial statements, which are presented in accordance with International Financial Reporting Standards ("IFRS"). Refer to the Company's Management Discussion and Analysis for the three months ended March 31, 2012.
Q1 Conference Call Information
Osisko will host a conference call on Friday, May 11th at 8:00am EDT, where senior management will discuss the financial results and provide an update of the Company's activities. Those interested in participating in the conference call should dial in at 416-981-9012 (Toronto local and international), or 1-800-909-4792 (North American toll free). An operator will direct participants to the call.
The conference call replay will be available from 1:00 p.m. EDT on May 11, 2012 until 11:59 p.m. EDT on May 26, 2012 with the following dial in number: 416-626-4100 or Toll-free 1-800-558-5253, access code 21590364.
About Osisko Mining Corporation
Osisko Mining Corporation operates the Canadian Malartic gold mine in Malartic, Quebec and is pursuing exploration on a number of properties, including the Hammond Reef Gold Project in Northern Ontario.
Mr. Luc Lessard, Eng., Senior Vice-President and Chief Operating Officer of Osisko, is the Qualified Person who has reviewed this news release and is responsible for the technical information reported herein, including verification of the data disclosed.
Cautionary Notes Concerning Estimates of Mineral Resources
This news release uses the terms measured, indicated and inferred resources as a relative measure of the level of confidence in the resource estimate. Readers are cautioned that mineral resources are not economic mineral reserves and that the economic viability of resources that are not mineral reserves has not been demonstrated. In addition, inferred resources are considered too geologically speculative to have any economic considerations applied to them. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies or economic studies except for Preliminary Assessment as defined under NI 43-101. Readers are cautioned not to assume that that further work will lead to mineral reserves that can be mined economically.
For further information in relation to the Hammond Reef project, please refer to the "Technical Report on the Hammond Reef Gold Property Atikokan area, Ontario" dated December 20, 2011. For further information in relation to the Canadian Malartic project, please refer to the "Feasibility Study - Canadian Malartic Project (Malartic, Quebec)", dated December 2008. Both of these reports are available under the Osisko profile at www.sedar.com.
Note Regarding Certain Measures of Performance
This press release contains certain non-IFRS measures, including "cash cost per ounce" and "cash margin per ounce". The Company believes that these measures, together with measures determined in accordance with IFRS, provides investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Forward-Looking Statements
Certain statements contained in this press release may be deemed "forward-looking statements". All statements in this release, other than statements of historical fact, that address events or developments that Osisko expects to occur, are forward looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "scheduled" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur including, without limitation, improving extracting methods, increase throughput at the mill to design capacity, full integration of the first unit of the new secondary cone crusher and timely delivery and installation of the second unit, improvement of mining fleet availability, timely delivery and installation of the additional pebble crusher, consequences of the fire on resumption of operations at the Canadian Malartic Mill and further development of its Hammond Reef project. Although Osisko believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, including, without limitation, that all technical, economical and financial conditions will be met in order to improve extracting methods and increase throughput at the mill to design capacity, ensure full integration of the first unit of the new secondary cone crusher and timely delivery and installation of the second unit, improve availability of the mining fleet, allow for timely delivery and installation of the additional pebble crusher, and ensure diligent resumption of operations at the Canadian Malartic Mill as well as warrant further development of the Hammond Reef project, such statements are not guarantees of future performance and actual results may differ materially from those in forward looking statements.
Factors that could cause the actual results to differ materially from those in forward-looking statements include gold prices, access to skilled consultants, mining development and construction personnel, results of exploration and development activities, Osisko's limited experience with production and mining operations, uninsured risks, regulatory framework and changes, defects in title, availability of personnel, materials and equipment, timeliness of government approvals, actual performance of facilities, equipment and processes relative to specifications and expectations, unanticipated environmental impacts on operations market prices, continued availability of capital and financing and general economic, market or business conditions. These factors are discussed in greater detail in Osisko's most recent Annual Information Form and in the most recent Management Discussion and Analysis filed on SEDAR, which also provide additional general assumptions in connection with these statements. Osisko cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Osisko believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
Osisko Mining Corporation
Consolidated Balance Sheets
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
March 31, 2012 December 31, 2011
----------------------------------------
$ $
Assets
Current assets
Cash and cash equivalents 102,461 100,670
Restricted cash 14,485 14,485
Accounts receivable 27,315 39,419
Inventories 63,427 47,552
Prepaid expenses and other assets 5,903 7,174
----------------------------------------
213,591 209,300
Non-current assets
Restricted cash 26,820 26,878
Investment associates 4,564 1,698
Other investments 18,550 16,041
Property, plant and equipment 1,876,169 1,801,325
Deferred income and mining taxes 4,305 14,000
----------------------------------------
2,143,999 2,069,242
----------------------------------------
----------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities 90,103 74,562
Current portion of long-term debt 87,795 86,485
Provisions and other liabilities 1,113 824
----------------------------------------
179,011 161,871
Non-current liabilities
Long-term debt 245,672 245,139
Provisions and other liabilities 7,118 6,038
Deferred income and mining taxes 15,658 2,126
----------------------------------------
447,459 415,174
----------------------------------------
Equity attributable to Osisko Mining
Corporation shareholders
Share capital 1,669,053 1,656,034
Warrants 13,166 13,166
Contributed surplus 54,781 55,909
Equity component of convertible
debentures 8,005 8,005
Accumulated other comprehensive
income (8,175) (9,397)
Deficit (40,290) (69,649)
----------------------------------------
1,696,540 1,654,068
----------------------------------------
2,143,999 2,069,242
----------------------------------------
----------------------------------------
Osisko Mining Corporation
Consolidated Statements of Income (Loss)
For the three months ended March 31, 2012 and 2011
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars, except per
share amounts)
2012 2011
----------------------------------------
$ $
Revenues 158,658 -
Mine operating costs
Production costs (71,910) -
Royalties (2,359) -
Depreciation (13,877) -
----------------------------------------
Earnings from mine operations 70,512 -
General and administrative
expenses (7,406) (5,968)
Exploration and corporate
development expenses (3,290) (1,349)
Other losses - (485)
----------------------------------------
Earnings (loss) from operations 59,816 (7,802)
Interest income 533 909
Finance costs (7,398) -
Foreign exchange gain 1,587 1,048
Share of loss of associates (134) (106)
Other gains (losses) (1,818) 1,100
----------------------------------------
Earnings (loss) before income and
mining taxes 52,586 (4,851)
Income and mining tax expense (23,227) (430)
----------------------------------------
Net earnings (loss) 29,359 (5,281)
----------------------------------------
----------------------------------------
Net earnings (loss)
Basic 0.08 (0.01)
Diluted 0.08 (0.01)
Weighted average number of common
shares outstanding (in thousands)
Basic 385,777 381,902
Diluted 390,420 381,902
Osisko Mining Corporation
Consolidated Statements of Cash Flows
For the three months ended March 31, 2012 and 2011
(Unaudited)
(tabular amounts expressed in thousands of Canadian dollars)
2012 2011
----------------------------------------
$ $
Operating activities
Net earnings (loss) 29,359 (5,281)
Adjustments for:
Interest income (533) (909)
Share-based compensation 2,631 2,678
Depreciation 14,035 120
Finance costs 7,398 -
Write-off of property, plant and
equipment 617 485
Unrealized foreign exchange gain (1,777) (1,514)
Share of loss of associates 134 106
Gain on sale of available-for-
sale financial assets (87) (4,256)
Unrealized net loss on financial
assets at fair value through
profit and loss 547 3,675
Unrealized loss on available-
for-sale financial assets 152 -
Impairment on available-for-sale
financial assets 1,094 -
Provisions and other liabilities 640 135
Income and mining tax expense 23,227 430
Other non-cash gain - (520)
----------------------------------------
77,437 (4,851)
Change in non-cash working capital
items 1,279 (15,703)
----------------------------------------
Net cash flows from operating
activities 78,716 (20,554)
----------------------------------------
Investing activities
Net decrease in short-term
investments - 7,949
Net decrease in restricted cash 58 51
Acquisition of investments (6,446) (899)
Proceeds on disposal of
investments 453 9,611
Property, plant and equipment, net
of government credits (67,702) (133,770)
Interest received 408 973
----------------------------------------
Net cash flows from investing
activities (73,229) (116,085)
----------------------------------------
Financing activities
Debt issuance costs (5) (18)
Finance lease payments (5,358) (546)
Long-term debt repayments (1,250) -
Issuance of common shares, net of
issue expenses 8,392 1,706
Interest paid (5,475) -
----------------------------------------
Net cash flows from financing
activities (3,696) 1,142
----------------------------------------
Increase (decrease) in cash and cash
equivalents 1,791 (135,497)
Cash and cash equivalents -
beginning of period 100,670 358,493
----------------------------------------
Cash and cash equivalents - end of
period 102,461 222,996
----------------------------------------
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Contact Information
John Burzynski
Vice-President Corporate Development
(416) 363-8653
www.osisko.com
Sylvie Prud'homme
Director of Investor Relations
(514) 735-7131
Toll Free: 1-888-674-7563