Avion Gold Corporation (TSX:AVR)(OTCQX:AVGCF) ("Avion" or the "Company") today
announces its financial results for the first quarter ended March 31, 2012. All
amounts are in United States dollars unless otherwise indicated.
Avion plans to host a conference call at 10:30 AM (ET) on May 16, 2012. To
participate in the call please dial:
International: +1 416 340 8018
Toll Free North America: 866 223 7781
Toronto Area: 416 340 8018
A play-back recording will be available shortly after the completion of the call
on Avion's website at www.aviongoldcorp.com.
Complete unaudited financial statements and the related Management's Discussion
and Analysis are available under the Company's profile on www.sedar.com.
First Quarter Highlights:
-- The Company had a net loss of $6.2 million or $0.01 per share, for the
quarter as compared to net income of $12.6 million or $0.03 per share
for the comparable quarter last year. The loss in earnings is primarily
related to: The change in fair value of the call options of $6.4
million, higher operating costs as Avion transitions to underground
mining; depletion and depreciation charges of $5.1 million and foreign
exchange losses of $3.0 million.
-- The Company achieved revenue of $33.0 million for the quarter compared
to revenues of $31.8 million for the comparable quarter last year,
representing a 4% increase.
-- Avion produced 26,256 ounce of gold during the quarter after final
refinery adjustments at a cash cost of per ounce produced of $898.
Please see "Non-GAAP Measures" below. Mining and processing costs were
$19.0 million compared to $13.0 million for the comparable quarter last
year.
-- Production mining at the Tabakoto underground deposit commenced in
February, 2012. During the first quarter of 2012 approximately 86,000
tonnes of ore was mined from stopes and development headings at an
average estimated grade of 5.40 g/t Au.
-- During the quarter the Company sold 19,460 ounces of gold at an average
realized price of $1,694 per ounce. The build-up of gold inventories at
March 31 included gold readily available for shipment and refining of
6,188 ounces. These ounces were sold in April and will benefit the
operating profit in the 2nd quarter of 2012.
-- The Company generated operating cash flow before working capital
adjustments of $4.2 million compared to $15.4 million for the same
quarter last year. Net working capital adjustments of $17.3 million
contributed to decreased operating cash flows during this quarter versus
the same quarter last year.
-- The Company completed the quarter having $41.2 million in cash and cash
equivalents including working capital of $19.2 million.
-- The Company sold call options raising $25 million in February 2012.
Capital Expansion Programs
Expansion plans continued at Tabakoto during the quarter, consisting of the
following activities:
-- Construction of the haul road from the Dioulafoundou deposit to the
Djambaye II deposit was essentially completed.
-- The underground portal at the Segala deposit encountered a 2m wide fault
zone which halted advance. A shotcrete machine has been purchased and
has been set up and to spray concrete onto the tunnel walls to reinforce
the workings. It is anticipated that is will take until the end of May
before normal advance resumes.
-- Construction work to double the Tabakoto plant capacity from 2,000 to
4,000 tonnes per day was progressing well until a military coup occurred
on March 21, 2012. The plant expansion was on budget and schedule and
approximately 80% completed on a cost spend basis. The Company reported
in early May that it had suspended the mill expansion program due to the
effects of the military coup.
Financial Discussion: three months ended March 31, 2012
Avion produced 26,256 ounces of gold during Q1-2012, which is a 30% increase
compared to the 20,272 ounces produced in Q1-2011. The Tabakoto plant processed
225,729 tonnes of ore at an average grade of 4.02 g/t Au and the average mill
recovery for Q1-2012 was 90.2%. This compares to Q1-2011 production of 180,800
tonnes of ore at an average grade of 3.64 g/t Au and an average mill recovery of
96.2%.
The Company reported a net loss of $6,189,551 ($0.01 per share, basic and
diluted) for the three months ended March 31, 2012 compared to net income of
$12,564,705 ($0.03 per share, basic and diluted) for the three months ended
March 31, 2011.
During Q1-2012, the Company sold 19,460 ounces of gold and generated $32,965,385
in gold sales revenue. In Q1-2011, 22,583 ounces of gold was sold generating
$31,489,868 in gold sales revenue. Mining and processing costs were $19,048,663
(Q1-2011: $13,017,240), and the Company recorded depletion and depreciation of
$5,055,950 (Q1-2011: $1,560,056). The Company is amortizing deferred property,
plant and equipment related to the Mali projects on a unit of production basis
from the current mine plan. The Company was subject to a 6% royalty on metal
sales during Q1-2012. Royalties expense totaled $1,977,310 (Q1-2011: $1,473,593)
for the ounces of gold sold during Q1-2012. Gold inventories on hand included
6,188 of ounces readily available for shipment and refining at March 31st. These
ounces were sold in the first few weeks of April and the sale of these ounces
will be reflected in the 2nd quarter results.
The Company realized a cash cost per ounce produced of $898 per ounce for
Q1-2012 compared to $462 for Q1-2011. Please see "Non-IFRS Measures" below.
Corporate and administrative expenses totaled $2,309,666 for the quarter ended
March 31, 2012 compared to $1,067,176 for Q1-2011. The Company incurred higher
professional costs during the quarter primarily higher audit costs and costs
associated with financing efforts. Consulting and management costs were also
higher in Q1-2012 compared to Q1-2011.
Non-cash share-based compensation expense for Q1-2012 was $1,255,264 (Q1-2011:
$3,479,773) related to the estimated fair value of stock options that were
granted and vested during Q1-2012. A total of 1,700,000 stock options were
granted during Q1-2012 compared to 4,455,000 during Q1-2011. Share-based
compensation was estimated using the Black-Scholes option pricing model as at
the date of grant.
Other gains and losses included a foreign exchange loss of $2,984,000 during
Q1-2012 compared to a gain of $1,477,495 during Q1-2011. The Company carried
large liabilities denominated in FCFA during Q1-2012 as a result of the loan
with Banque Atlantique as well as large accounts payables balances. The FCFA
strengthen during the quarter, resulting in a foreign exchange loss.
The Company recorded an unrealized loss on the change in fair value of
derivative liabilities of $6,430,979 during Q1-2012 (Q1-2011: $nil). This was in
relation to the gold call options sold during the quarter.
Andrew Bradfield, P.Eng., the Chief Operating Officer of the Company, and a
qualified person under National Instrument 43-101, has reviewed and approved the
scientific and technical information in this press release.
About Avion Gold Corporation
Avion is a Canadian-based gold mining company focused in West Africa that holds
80% of the Tabakoto and Segala gold projects in Mali. Gold production commenced
at these projects in 2009 with approximately 51,290 ounces produced. 2010
production was 87,630 ounces of gold. 2011 production was 91,200 ounces of gold.
The current mineral reserve estimate (as of January 1, 2012) of 6.91 million
tonnes grading 3.73 g/t Au totaling 827,100 ounces of gold (proven and
probable), for the Tabakoto project property, demonstrates several sources of
excellent grade open pit and good grade underground mineral resources thus
providing significant flexibility for Avion's future mining plans. The Company
has developed an underground mine at the Tabakoto deposit, and is developing
another underground mine at the Segala deposit. The Tabakoto project property
also contains several producing open pit mines. Production sustainability will
continue to be supported by exploration programs over an approximately 600 km2
exploration package that both surrounds and is near to the Company's existing
mine infrastructure, and contains mineral resources on the Kofi property.
Additionally, mineral resources have grown considerably at Avion's 1,600 km2
Hounde exploration property in Burkina Faso. Avion has a highly skilled
management team, with a focus on growth and consolidation within West Africa.
Cautionary Notes
This press release contains "forward-looking information" within the meaning of
applicable Canadian securities legislation. Forward-looking information
includes, without limitation, statements regarding the impact of the financial
results on the Company, development potential and timetable of the Mali
projects; the future price of gold; the estimation of mineral resources; the
realization of mineral resource estimates; the timing and amount of estimated
future production, development and exploration; costs of future activities;
capital and operating expenditures; success of exploration activities; mining or
processing issues; currency exchange rates; government regulation of mining
operations; and environmental risks. Generally, forward-looking information can
be identified by the use of forward-looking terminology such as "plans",
"expects" or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or state that certain
actions, events or results "may", "could", "would", "might" or "will be taken",
"occur" or "be achieved". Forward-looking information is subject to known and
unknown risks, uncertainties and other factors that may cause the actual
results, level of activity, performance or achievements of the Company to be
materially different from those expressed or implied by such forward-looking
information, including but not limited to: general business, economic,
competitive, geopolitical and social uncertainties; the actual results of
current exploration activities; foreign operations risks; other risks inherent
in the mining industry and other risks described in the annual information form
of the Company, which is available under the profile of the Company on SEDAR at
www.sedar.com. Although the Company has attempted to identify important factors
that could cause actual results to differ materially from those contained in
forward-looking information, there may be other factors that cause results not
to be as anticipated, estimated or intended. There can be no assurance that such
information will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking information. The
Company does not undertake to update any forward-looking information, except in
accordance with applicable securities laws.
Cautionary Non-GAAP Statements
Avion believes that investors use certain indicators to assess gold mining
companies. The indicators are intended to provide additional information and
should not be considered in isolation or as a substitute for measures of
performance prepared with GAAP. "Cash flow from operating activities before
changes in non-cash working capital" is a non-GAAP performance measure which
could provide an indication of the Company's ability to generate cash flows from
operations, and is calculated by adding back the change in non-cash working
capital to "Cash provided by (used for) operating activities" as presented on
the Company's consolidated statements of cash flows. "Cash flow per share" is
calculated by dividing "Cash provided by (used for) operating activities" and
adding back the change in non-cash working capital by the fully diluted number
of shares outstanding for the period. "Cash cost per ounce produced" is a
non-GAAP performance measure which could provide an indication of the mining and
processing efficiency and effectiveness at the mine. It is determined by
dividing the relevant mining and processing costs excluding royalties by the
ounces produced in the period. There may be some variation in the method of
computation of "cash cost per ounce produced" as determined by the Company
compared with other mining companies. In this context, "ounces produced"
includes in-process and dore inventory along with ounces of gold sold in the
period. "Cash costs per ounce produced" may vary from one period to another due
to operating efficiencies, waste to ore ratios, grade of ore processed and gold
recovery rates in the period.
The following table provides a reconciliation of mining and processing costs per
the financial statements and cash operating for the purposes of calculating cash
costs per ounce produced and total cash costs produced.
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Three months Three months
ended ended
March 31, 2012 March 31, 2011
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Mining and processing expenses 19,048,663 13,017,240
By-product silver sales credit (94,882) (298,022)
Inventory movements and adjustments 4,617,965 (3,364,038)
Cash operating costs 23,571,746 9,355,180
Divided by ounces of gold produced 26,256 20,270
Cash cost per ounce produced 898 462
Royalties 1,977,310 1,473,593
Total cash cost per ounce produced 973 534
Operating cashflow $4,241,905 15,397,626
Operating cashflow per ounce produced 162 760
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