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Brio Gold Reports Fourth Quarter and Full Year 2017 Financial Results

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Brio Gold Reports Fourth Quarter and Full Year 2017 Financial Results

Brio Gold Reports Fourth Quarter and Full Year 2017 Financial Results

TORONTO, ON--(Marketwired - March 13, 2018) - BRIO GOLD INC. (TSX:BRIO) ("BRIO GOLD" or the "Company") announces its fourth quarter and full year 2017 financial and operating results. All dollar figures are in U.S. dollars unless otherwise indicated.

   
Q4 and Full Year 2017 Summary Financial Results  
    For the three months
ended December 31
    For the twelve months
ended December 31,
 
In thousands of U.S. Dollars   2017     2016     2017     2016  
Revenues from mining operations   $ 51,413     $ 59,510     $ 217,891     $ 232,356  
Mine operating (loss)/earnings   $ 8,587     $ (122,379 )   $ 28,250     $ (90,074 )
Net loss   $ (8,870 )   $ (22,115 )   $ (21,000 )   $ (16,859 )
Adjusted loss (1)   $ (4,552 )   $ (28,897 )   $ (9,514 )   $ (17,925 )
Adjusted EBITDA(1)   $ 3,719     $ 8,622     $ 30,556     $ 67,379  
Cash flow from operating activity   $ 10,406     $ 31,225     $ 11,732     $ 70,086  
Cash flow from operating activities before changes in working capital   $ 10,956     $ 20,024     $ 41,572     $ 70,470  
                                 
(1) A non-GAAP financial measure. For a reconciliation of non-GAAP measures, please see the end of this press release.
 

Revenues from mining operations were $217.9 million on the sale of 176,069 ounces for the year ended December 31, 2017, compared to $232.4 million on the sale of 192,524 ounces for the comparable period in 2016.

Net loss in 2017 was $21.0 million or $0.18 per share, compared to a net loss of $16.9 million or $0.37 per share for 2016.

The Adjusted Loss in 2017 was $9.5 million, compared to a loss of $17.9 million for the same period of 2016 as the decrease in revenues from mining operations was offset by lower depletion, depreciation and amortization expense. See the end of this press release for a reconciliation of net loss to Adjusted Loss.

Cash flow from operating activities after changes in working capital for 2017 was an inflow of $11.7 million, compared to an inflow of $70.1 million in 2016 due to reduced cash flow from operating activities and a $29.8 million increase in working capital, largely due to a build up of ore stockpile at the RDM Mine and a reduction in trade accounts payable. Cash flow from operating activities before changes in working capital for 2017 was an inflow of $41.6 million, lower compared to an inflow of $70.5 million in 2016 due to higher per unit costs, and higher general and administrative expenses due to one-time costs associated with the transition of Brio Gold becoming a stand alone public company.

 
Full Year 2017 Summary Operational Results
    For the three months ended December 31,   For the twelve months ended December 31,
Consolidated Operating Statistics   2017   2016   Change   2017   2016   Change
Gold production (oz.) (1)   40,350   50,477   (20)%   178,025   189,662   (6)%
Gold sales (oz.)   40,455   50,093   (19)%   176,069   192,524   (9)%
Average realized gold price per ounce sold(2)   $1,286   $1,199   7%   $1,250   $1,219   3%
Cost of sales including depletion, depreciation and amortization per gold ounce sold   $1,059   $1,421   (9)%   $1,076   $1,099   (2)%
Cash cost per gold ounce produced(2)   $806   $832   (3)%   $846   $746   13%
All-in sustaining costs per ounce of gold produced(2)   $1,150   $1,106   4%   $1,126   $985   14%
Notes:    
     
(1)   Operating statistics only include RDM from the date that it was acquired on April 29, 2016.
(2)   A non-GAAP financial measure. Please see the end of the press release for a reconciliation.
     

Production during the year of 2017 from the Company's three producing mines was lower than the comparative year of 2016 by 6% due to lower production at the Fazenda Brasileiro Mine and the Pilar Mine, partially offset by higher production at the RDM Mine.

At the Fazenda Brasileiro Mine, the annual production in 2017 was 60,978 ounces of gold, 14% lower than the same period last year primarily due to lower feed grades from mine sequencing. The grade in the fourth quarter improved significantly over the previous quarter and the Company expects grade to continue to show improvements in 2018. For 2018, the Company expects production at the Fazenda Brasileiro Mine to be 65,000 to 75,000 ounces of gold.

At the Pilar Mine, lower overall grade was a result of increased production from the lower grade Maria Lazara deposit. During the fourth quarter, the company started restructuring the operation, which included halting development at Maria Lazara. The Company is now mining out the developed reserves at Maria Lazara and will be focusing production going forward on the higher grade HG1 and HG2 zones at the main Pilar mine as well as the development of the Tres Buracos open pit. The Maria Lazara mine currently has one year of developed reserves that will be mined out in 2018 and the satellite operation will then be put on care and maintenance. Pilar is expected to produce 65,000 to 75,000 ounces of gold in 2018.

The RDM Mine was put on care and maintenance for close to 5 months in 2017 due to a lack of water. The new water dam/reservoir is operating well, as the region's rainy season allowed adequate water reserves to build up. The operation has been running continuously since December 1st and the company expects that to continue into the foreseeable future. Consistent production at low cost is expected going forward, with Brio Gold forecasting a full year of production at RDM in 2018 with guidance set at 75,000 to 85,000 ounces of gold.

Overall cash costs and all-in sustaining costs per gold ounce for the year were higher than the comparative period of 2016 due to lower overall gold feed grades causing increased costs per ounce as the fixed component of production costs was allocated over fewer ounces. In addition, operating costs increased due to the strengthening of the Brazilian real against the U.S. dollar. Cost of sales including depletion, depreciation and amortization per gold ounce were lower than the comparative period of 2016 due to lower depletion, depreciation, and amortization.

Break down by Mine  
    For the three months ended December 31,     For the twelve months ended December 31,  
    2017   2016   Change     2017   2016   Change  
Gold production (oz.)(1)                                    
  Pilar Mine     14,115     22,170   (36 )%     73,931     87,061   (15 )%
  Fazenda Brasileiro Mine     16,100     18,279   (12 )%     60,978     70,887   (14 )%
  RDM Mine     10,135     10,028   1 %     43,116     31,714   36 %
Total gold production     40,350     50,477   (20 )%     178,025     189,662   (6 )%
Gold sales (oz.)(1)                                    
  Pilar Mine     15,041     21,837   (31 )%     73,753     86,126   (14 )%
  Fazenda Brasileiro Mine     16,345     19,110   (14 )%     59,631     73,517   (19 )%
  RDM Mine     9,069     9,146   (1 )%     42,685     32,881   30 %
Total gold sales     40,455     50,093   (19 )%     176,069     192,524   (9 )%
Cost of sales including depletion, depreciation and amortization per gold oz sold (1)                                    
  Pilar Mine   $ 1,393   $ 1,687   (17 )%   $ 1,220   $ 1,195   2 %
  Fazenda Brasileiro Mine     978     1,074   (9 )%     974     949   3 %
  RDM Mine     628     1,494   (58 )%     971     1,183   (18 )%
Cost of sales including depletion, depreciation and amortization per gold oz sold   $ 1,059   $ 1,421   (9 )%   $ 1,076   $ 1,099   (2 )%
Cash cost per gold ounce produced(1,2)                                    
  Pilar Mine   $ 983   $ 872   13 %   $ 852   $ 742   15 %
  Fazenda Brasileiro Mine     821     753   9 %     862     689   25 %
  RDM Mine     536     888   (40 )%     814     881   (8 )%
Total cash cost per gold ounce produced   $ 806   $ 832   (3 )%   $ 846   $ 746   13 %
All-in sustaining costs per ounce of gold produced(1,2)                                    
  Pilar Mine   $ 1,186   $ 1,150   3 %   $ 1,064   $ 951   12 %
  Fazenda Brasileiro Mine     973     1,018   (4 )%     1,033     918   13 %
  RDM Mine     879     1,006   (13 )%     989     1,001   (1 )%
Total mine all-in sustaining costs per ounce of gold produced   $ 1,024   $ 1,074   (5 )%   $ 1,035   $ 947   9 %
Consolidated all-in sustaining costs per ounce of gold produced   $ 1,150   $ 1,106   4 %   $ 1,126   $ 985   14 %
Notes:    
     
(1)   Operating statistics only include RDM from the date that it was acquired on April 29, 2016.
(2)   A non-GAAP financial measure. See "Management's Discussion and Analysis - Non-GAAP Financial Measures" or the end of this press release for a reconciliation of cost of sales including depletion, depreciation and amortization to cash costs consolidated and on a per mine basis, and reconciliation of cost of sales including depletion, depreciation and amortization to all-in sustaining costs consolidated and on a per mine basis.
     

About Brio Gold

Brio Gold is an established Canadian mining company with significant gold producing, development and exploration stage properties in Brazil. Brio Gold's portfolio includes three operating gold mines and a fully-permitted, fully-constructed mine that was on care and maintenance and currently is in development to be re-started at the end of 2018. Brio Gold is expected to produce 205,000 to 235,000 ounces of gold in 2018 and at full run-rate is expected to produce approximately 400,000 ounces of gold annually in 2019.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This news release contains or incorporates by reference "forward-looking statements" and "forward-looking information" under applicable Canadian securities legislation. Forward-looking information includes, but is not limited to information with respect to the Company's strategy, plans or future financial or operating performance, the outcome of the legal matters involving the damages assessments and any related enforcement proceedings. Forward-looking statements are characterized by words such as "plan," "expect", "budget", "target", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the Company's expectations in connection with the production and exploration, development and expansion plans at the Company's projects discussed herein being met, the impact of proposed optimizations at the Company's projects, the impact of the proposed new mining law in Brazil, and the impact of general business and economic conditions, global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future conditions, fluctuating metal prices (such as gold and silver), currency exchange rates (such as the Brazilian real versus the United States dollar), the impact of inflation, possible variations in ore grade or recovery rates, changes in the Company's hedging program, changes in accounting policies, changes in mineral resources and mineral reserves, risks related to asset disposition, risks related to metal purchase agreements, risks related to acquisitions, changes in project parameters as plans continue to be refined, changes in project development, construction, production and commissioning time frames, unanticipated costs and expenses, higher prices for fuel, steel, power, labour and other consumables contributing to higher costs and general risks of the mining industry, failure of plant, equipment or processes to operate as anticipated, unexpected changes in mine life, unanticipated results of future studies, seasonality and unanticipated weather changes, costs and timing of the development of new deposits, success of exploration activities, permitting timelines, government regulation and the risk of government expropriation or nationalization of mining operations, risks related to relying on local advisors and consultants in foreign jurisdictions, environmental risks, unanticipated reclamation expenses, risks relating to joint venture operations, title disputes or claims, limitations on insurance coverage and timing and possible outcome of pending and outstanding litigation and labour disputes, risks related to enforcing legal rights in foreign jurisdictions, as well as those risk factors discussed or referred to herein. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates, assumptions or opinions should change, except as required by applicable law. The reader is cautioned not to place undue reliance on forward-looking statements. The forward-looking information contained herein is presented for the purpose of assisting investors in understanding the Company's expected financial and operational performance and results as at and for the periods ended on the dates presented in the Company's plans and objectives and may not be appropriate for other purposes.

Non-GAAP Financial Measures

The Company has included certain non-GAAP financial measures including cash costs per ounce of gold produced, all-in sustaining costs per ounce of gold produced, adjusted earnings (loss), and adjusted EBITDA to supplement its consolidated financial statements, which are presented in accordance with IFRS.

The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-GAAP financial 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.

Cash Costs

The Company uses the non-GAAP financial measure "cash costs" on a per ounce of gold produced basis because it believes this measure provides investors and analysts with useful information about the Company's underlying cash costs of operations and is a relevant metric used to understand the Company's operating profitability, and ability to generate cash flow. Cash costs figures are calculated based on the standard developed by The Gold Institute, which was a worldwide association of suppliers of gold and gold products and included leading North American gold producers. The Gold Institute ceased operations in 2002, but the standard remains the generally accepted standard of reporting cash costs of production in North America. Adoption of the standard is voluntary and the cost measures presented herein may not be comparable to other similarly titled measures of other companies.

Cash costs include mine site operating costs such as mining, processing, administration, production taxes and royalties, which are not based on sales or taxable income calculations, but are exclusive of amortization, reclamation, capital, development, and exploration costs. Cash costs per ounce of gold produced are calculated on a weighted average basis.

The term "cash costs" has no standard meaning and therefore, the Company's definitions are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and is not necessarily indicative of operating costs, operating profit or cash flows presented under IFRS.

All-in Sustaining Costs

The Company uses the non-GAAP financial measure "all-in sustaining costs", also referred to as "AISC", on a per ounce of gold produced basis because it believes this measure provides investors with useful information about the Company's underlying cash costs of operations, after deducting certain non-discretionary items such as sustaining capital expenditures, exploration expenses and certain general and administrative costs and is a relevant metric used to understand the Company's ability to generate cash flow. All-in sustaining costs are based on cash costs, including cost components of mine sustaining capital expenditures and exploration and evaluation expense. All-in sustaining costs for a mine do not include capital expenditures attributable to projects or mine expansions, exploration and evaluation costs attributable to growth projects, corporate general and administrative expenses, stock-based compensation, income tax payments, financing costs and dividend payments. Consequently, this measure is not representative of all of the Company's cash expenditures. In addition, the calculation of all-in sustaining costs does not include depletion, depreciation and amortization expense as it does not reflect the impact of expenditures incurred in prior periods. The term "all-in sustaining costs" has no standard meaning and therefore, the Company's definitions are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and is not necessarily indicative of operating costs, operating profit or cash flows presented under IFRS.

Reconciliation of cost of sales including depletion, depreciation and amortization to cash costs and all-in sustaining costs, consolidated and per mine

(Based on Consolidated Financial Statements unless otherwise noted)

       
    For the three months ended December 31, 2017  
                         
(In thousands of U.S. dollars, except per share and per ounce amounts)   Consolidated     Pilar Mine     Fazenda
Brasileiro
Mine
    RDM Mine  
Cost of sales including depletion, depreciation and amortization   42,826     20,957     15,981     5,697  
Depletion, depreciation and amortization   (8,133 )   (4,769 )   (1,776 )   (1,397 )
Adjustments:                        
Inventory movement and adjustments(1)   (2,171 )   (2,313 )   (987 )   1,132  
Cash costs(2)   32,522     13,875     13,218     5,432  
General and administrative expenses attributable to all-in sustaining costs   6,393     106     73     251  
Stock based compensation   (1,381 )   -     -     -  
Sustaining capital expenditures   8,869     2,759     2,374     3,226  
All-in sustaining costs(2)   46,403     16,740     15,665     8,909  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,059     1,393     978     628  
Cash cost per gold ounce produced(2)   806     983     821     536  
All-in sustaining costs per ounce produced(2)   1,150     1,186     973     879  
                         
Gold ounces produced during the period (oz.)   40,350     14,115     16,100     10,135  
Gold ounces sold during the period (oz.)   40,455     15,041     16,345     9,069  
                         
                         
       
       
    For the three months ended December 31, 2016  
       
(In thousands of U.S. dollars, except per share and per ounce amounts)   Consolidated     Pilar Mine     Fazenda
Brasileiro
Mine
    RDM Mine  
Cost of sales including depletion, depreciation and amortization     71,169       36,843       20,530       13,660  
Depletion, depreciation and amortization     (26,275 )     (17,919 )     (5,870 )     (2,477 )
Adjustments:                                
Inventory movement and adjustments(1)     (2,897 )     408       (896 )     (2,278 )
Cash costs(2)     41,997       19,332       13,764       8,905  
General and administrative expenses attributable to all-in sustaining costs     3,232       90       115       144  
Stock based compensation     (1,742 )     -       -       -  
Sustaining capital expenditures     12,341       6,074       4,729       1,039  
All-in sustaining costs(2)     55,828       25,496       18,608       10,088  
                                 
Cost of sales including depletion, depreciation and amortization per gold ounce sold   $ 1,421     $ 1,687     $ 1,074     $ 1,494  
Cash cost per gold ounce produced(2)   $ 832     $ 872     $ 753     $ 888  
All-in sustaining costs per ounce produced(2)   $ 1,106     $ 1,150     $ 1,018     $ 1,006  
                                 
Gold ounces produced during the period (oz.)     50,477       22,170       18,279       10,028  
Gold ounces sold during the period (oz.)     50,092       21,837       19,110       9,146  
                                 
                                 
       
       
    For the twelve months ended December 31, 2017  
                         
(In thousands of U.S. dollars, except per share and per ounce amounts)   Consolidated     Pilar Mine     Fazenda
Brasileiro
Mine
    RDM Mine  
Cost of sales including depletion, depreciation and amortization   189,641     89,955     58,069     41,428  
Depletion, depreciation and amortization   (37,840 )   (24,979 )   (6,728 )   (5,942 )
Adjustments:                        
Inventory movement and adjustments(1)   (1,192 )   (1,987 )   1,222     (390 )
Cash costs(2)   150,609     62,989     52,563     35,096  
General and administrative expenses attributable to all-in sustaining costs   23,434     927     742     709  
Stock based compensation   (7,012 )   -     -     -  
Sustaining capital expenditures   33,425     14,747     9,685     6,837  
All-in sustaining costs(2)   200,456     78,663     62,990     42,642  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,076     1,220     974     971  
Cash cost per gold ounce produced(2)   846     852     862     814  
All-in sustaining costs per ounce produced(2)   1,126     1,064     1,033     989  
                         
Gold ounces produced during the period (oz.)   178,025     73,931     60,978     43,116  
Gold ounces sold during the period (oz.)   176,069     73,753     59,631     42,685  
                         
                         
       
       
    For the twelve months ended December 31, 2016  
       
(In thousands of U.S. dollars, except per share and per ounce amounts)   Consolidated     Pilar Mine     Fazenda
Brasileiro
Mine
    RDM Mine  
Cost of sales including depletion, depreciation and amortization   211,554     102,910     69,754     38,890  
Depletion, depreciation and amortization   (66,818 )   (43,573 )   (18,702 )   (4,543 )
Adjustments:                        
Inventory movement and adjustments(1)   (3,248 )   5,262     (2,211 )   (6,406 )
Cash costs(2)   141,488     64,599     48,841     27,941  
General and administrative expenses attributable to all-in sustaining costs   13,262     264     253     65  
Stock based compensation   (6,968 )   -     -     -  
Sustaining capital expenditures   39,035     17,932     15,980     3,740  
All-in sustaining costs(2)   186,817     82,795     65,074     31,746  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,099     689     694     1,045  
Cash cost per gold ounce produced(2)   746     742     689     881  
All-in sustaining costs per ounce produced(2)   985     951     918     1,001  
                         
Gold ounces produced during the period (oz.)   189,662     87,061     70,887     31,714  
Gold ounces sold during the period (oz.)   192,524     86,126     73,517     32,881  
                         
                         
Notes:    
     
(1)   Inventory movement and adjustment represent the difference between the costs of production (which are based on ounces produced) and the cost of sales (which is based on ounces sold). The timing difference between the units sold and the costs of those units requires an adjustment to reflect the nature of the underlying metric.
(2)   A non-GAAP financial measure.

Quarterly trailing cost of sales including depletion, depreciation and amortization to cash costs consolidated and per mine

(Based on Consolidated Interim Financial Statements unless otherwise noted)

                         
Brio Gold Consolidated                        
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q4-17     Q3-17     Q2-17     Q1-17  
Cost of sales including depletion, depreciation and amortization   42,826     48,972     46,871     50,972  
Depletion, depreciation and amortization   (8,133 )   (9,287 )   (9,766 )   (10,654 )
Adjustments:                        
Inventory movement and adjustments(1)   (2,171 )   (2,093 )   883     2,237  
Cash costs(2)   32,522     37,592     37,988     42,555  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,059     1,133     1,098     1,027  
Cash cost per gold ounce produced(2)   806     876     859     842  
                         
Gold ounces produced during the period (oz.)   40,350     42,913     44,223     50,540  
Gold ounces sold during the period (oz.)   40,455     43,228     42,691     49,615  
                         
                         
                         
                         
Brio Gold Consolidated                        
(In thousands of U.S. dollars, except per share and per ounce amounts)
  Q4-16     Q3-16     Q2-16     Q1-16  
Cost of sales including depletion, depreciation and amortization   71,169     53,009     54,265     33,111  
Depletion, depreciation and amortization   (26,275 )   (13,936 )   (15,752 )   (10,855 )
Adjustments:                        
Inventory movement and adjustments(1)   (2,897 )   (1,614 )   (226 )   1,483  
Cash costs(2)   41,997     37,459     38,287     23,739  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,421     1,085     1,037     803  
Cash cost per gold ounce produced(2)   832     813     726     588  
                         
Gold ounces produced during the period (oz.)   50,477     46,075     52,737     40,372  
Gold ounces sold during the period (oz.)   50,092     48,837     52,351     41,243  
                         
                         
                         
                         
Pilar Mine                        
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q4-17     Q3-17     Q2-17     Q1-17  
Cost of sales including depletion, depreciation and amortization   20,957     22,915     23,276     22,804  
Depletion, depreciation and amortization   (4,769 )   (6,435 )   (6,854 )   (6,921 )
Adjustments:                        
Inventory movement and adjustments(1)   (2,313 )   (387 )   436     258  
Cash costs(2)   13,875     16,093     16,858     16,141  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,393     1,242     1,176     1,114  
Cash cost per gold ounce produced(2)   983     845     831     788  
                         
Gold ounces produced during the period (oz.)   14,115     19,045     20,287     20,484  
Gold ounces sold during the period (oz.)   15,041     18,444     19,793     20,465  
Pilar Mine                        
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q4-16     Q3-16     Q2-16     Q1-16  
Cost of sales including depletion, depreciation and amortization   36,843     23,787     22,554     19,726  
Depletion, depreciation and amortization   (17,919 )   (9,295 )   (8,782 )   (7,577 )
Adjustments:                        
Inventory movement and adjustments(1)   408     1,515     1,713     1,856  
Cash costs(2)   19,332     16,007     15,485     14,005  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,687     1,152     1,023     914  
Cash cost per gold ounce produced(2)   872     791     679     641  
                         
Gold ounces produced during the period (oz.)   22,170     20,237     22,806     21,848  
Gold ounces sold during the period (oz.)   21,837     20,656     22,047     21,586  
                         
                         
                           
                           
Fazenda Brasileiro Mine                          
(In thousands of U.S. dollars, except per share and per ounce amounts)     Q4-17     Q3-17     Q2-17     Q1-17  
Cost of sales including depletion, depreciation and amortization     15,981     17,596     12,990     11,502  
Depletion, depreciation and amortization     (1,776 )   (1,756 )   (1,555 )   (1,641 )
Adjustments:                          
Inventory movement and adjustments(1)     (987 )   (832 )   1,135     1,932  
Cash costs(2)     13,218     15,008     12,570     11,793  
                           
Cost of sales including depletion, depreciation and amortization per gold ounce sold     978     1,056     1,017     831  
Cash cost per gold ounce produced(2)     821     943     892     793  
                           
Gold ounces produced during the period (oz.)     16,100     15,915     14,092     14,872  
Gold ounces sold during the period (oz.)     16,345     16,658     12,776     13,849  
                           
                           
                         
                         
Fazenda Brasileiro Mine                        
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q4-16     Q3-16     Q2-16     Q1-16  
Cost of sales including depletion, depreciation and amortization   20,530     17,072     17,784     14,368  
Depletion, depreciation and amortization   (5,870 )   (3,792 )   (5,484 )   (3,556 )
Adjustments:                        
Inventory movement and adjustments(1)   (896 )   (355 )   (50 )   (883 )
Cash costs(2)   13,764     12,925     12,250     9,929  
                         
Cost of sales including depletion, depreciation and amortization per gold ounce sold   1,074     998     1,008     731  
Cash cost per gold ounce produced(2)   753     751     726     536  
                         
Gold ounces produced during the period (oz.)   18,279     17,211     16,873     18,524  
Gold ounces sold during the period (oz.)   19,110     17,100     17,650     19,657  
                         
                         
                                           
                                           
RDM Mine                                          
(In thousands of U.S. dollars, except per share and per ounce amounts)   Q4-17     Q3-17     Q2-17     Q1-17     Q4-16     Q3-16     Q2-16  
Cost of sales including depletion, depreciation and amortization   5,697     8,461     10,605     16,666     13,660     12,150     13,080  
Depletion, depreciation and amortization   (1,397 )   (1,096 )   (1,357 )   (2,093 )   (2,477 )   (849 )   (1,217 )
Adjustments:                                          
Inventory movement and adjustments(1)   1,132     (883 )   (694 )   64     (2,278 )   (2,794 )   (1,325 )
Cash costs(2)   5,432     6,482     8,554     14,637     8,905     8,507     10,538  
                                           
Cost of sales including depletion, depreciation and amortization per gold ounce sold   628     1,041     1,048     1,089     1,494     1,096     1,034  
Cash cost per gold ounce produced(2)   536     815     869     964     888     986     807  
                                           
Gold ounces produced during the period (oz.)   10,135     7,953     9,844     15,184     10,028     8,628     13,058  
Gold ounces sold during the period (oz.)   9,069     8,126     10,122     15,301     9,146     11,081     12,654  
Notes:    
     
(1)   Inventory movement and adjustment represent the difference between the costs of production (which are based on ounces produced) and the cost of sales (which is based on ounces sold). The timing difference between the units sold and the costs of those units requires an adjustment to reflect the nature of the underlying metric.  
(2)   A non-GAAP financial measure. 
(3)   RDM was acquired during Q2 2016, therefore Q1 2016 is not applicable.
     

Adjusted EBITDA

The Company uses the non-GAAP financial measure "Adjusted EBITDA" because it believes it provides investors with useful information to evaluate its performance and understand its ability to service and/or incur indebtedness.

The Company defines Adjusted EBITDA as net loss, before income tax recovery (expense), depletion, depreciation and amortization, impairment and reversals of mining properties, interest expense, share-based compensation, and non-recurring provisions and other adjustments.

The term "Adjusted EBITDA" has no standard meaning and therefore, the Company's definitions are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and is not necessarily indicative of operating costs, operating profit or cash flows presented under IFRS.

Reconciliation of Net Loss to Adjusted EBITDA

(Based on Consolidated Financial Statements unless otherwise noted)

    For the three months ended December 31,     For the twelve months ended December 31,  
(In thousands of U.S. dollars)   2017     2016     2017     2016  
Net loss     (8,870 )     (28,511 )     (21,000 )     (16,859 )
Adjustments:                                
Income tax expense/(recovery)     (944 )     (8,221 )     (3,618 )     (23,279 )
Depletion, depreciation and amortization     8,133       26,324       37,840       66,818  
Foreign exchange (gain)/loss     (2,864 )     2,051       (306 )     9,239  
Impairment of mineral properties     -       14,659       -       14,659  
Bank, financing fees, interest expense and other     1,160       601       4,807       2,797  
Loss/(gain) on sale of assets     1,001       (680 )     (3,375 )     6  
Provision on indirect tax credits     4,353       1,520       4,908       6,972  
Stock based compensation     1,380       1,742       7,012       6,968  
Legal provisions     1,258       157       2,848       1,078  
Unrealized (gain)/loss on hedge contracts     (888 )     (1,020 )     1,440       (1,020 )
Adjusted EBITDA   $ 3,719     $ 8,622     $ 30,556     $ 67,379  
                                 

Adjusted Earnings or Loss

The Company uses the non-GAAP financial measure "Adjusted earnings or loss" because it believes this measure provides useful information to investors to evaluate the Company's performance by excluding certain cash and non-cash charges. The presentation of Adjusted earnings or loss is not meant to be a substitute for net earnings or loss or net earnings or loss per share presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. Adjusted earnings or loss is calculated as net earnings excluding (a) stock based compensation, (b) unrealized foreign exchange (gains) losses related to revaluation of deferred income tax asset and liability on non-monetary items, (c) unrealized foreign exchange (gains) losses related to other items, (d) impairment losses and reversals, (e) deferred income tax expense (recovery) on the translation of foreign currency inter corporate debt, (f) periodic tax adjustments to historical deferred income tax balances relating to changes in enacted tax rates and (g) non-cash provisions and any other non-recurring adjustments. Non-recurring adjustments from unusual events or circumstances are reviewed from time to time based on materiality and the nature of the event or circumstance. Earnings adjustments for the comparative period reflect continuing operations.

The terms "Adjusted earnings or loss" has no standardized meaning prescribed by IFRS and therefore the Company's definitions are unlikely to be comparable to similar measures presented by other companies.

For more information, see the Consolidated Financial Statements and the related notes.

Reconciliation of Net Loss to Adjusted Earnings or Loss

(Based on Consolidated Financial Statements unless otherwise noted)

    For the three months ended December 31,     For the twelve months ended December 31,  
(In thousands of U.S. dollars)   2017     2016     2017     2016  
Net loss   $ (8,870 )   $ (28,511 )   $ (21,000 )   $ (16,859 )
Adjustments:                                
Net impairment of mineral properties     -       14,659       -       14,659  
Foreign exchange (gain)/loss     (2,864 )     2,051       (306 )     9,239  
Unrealized (gain)/loss on hedge contracts     (888 )     (1,020 )     1,440       (1,020 )
Provisions on indirect tax credits     4,353       1,520       4,908       6,972  
Loss/(gain) on sale of assets     1,001       (680 )     (3,375 )     6  
Reorganization costs     846       2,902       846       6,608  
Business transaction costs     -       -       848       3,706  
Stock based compensation     1,380       1,742       7,012       6,968  
Tax effect on unrealized foreign exchange on non-monetary assets     3,422       (3,185 )     (1,427 )     (31,346 )
Tax impact of adjustments     (1,427 )     (15,905 )     (1,308 )     (20,836 )
Other     (1,505 )     (2,470 )     2,848       3,978  
Adjusted loss   $ (4,552 )   $ (28,897 )   $ (9,514 )   $ (17,925 )
                                 

Realized Price

The Company uses the non-GAAP financial measure "realized price" on a per ounce of gold sold basis because it believes this measure provides investors and analysts with a more accurate measure with which to compare to market gold prices and to assess the Company's gold sales performance. Management believes that this measure provides a more accurate reflection of past performance and is a better indicator of expected performance in future periods. Realized price excludes the impact of the mining royalty on revenue from mining operations. The term "realized price" has no standard meaning and therefore, the Company's definitions are unlikely to be comparable to similar measures presented by other companies and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and is not necessarily indicative of revenue from mining operations, operating profit or cash flows presented under IFRS.

Reconciliation of Revenue from Mining Operations to Realized Price per Gold Ounce Sold

(Based on Consolidated Financial Statements unless otherwise noted)

    For the three months ended December 31,   For the twelve months ended December 31,
(In thousands of U.S. dollars, except price per ounce in dollars and ounces sold)   2017   2016   2017   2016
Revenue from mining operations   $ 51,413   $ 59,510   $ 217,891   $ 232,356
Brazilian mining royalty (CFEM)     621     575     2,273     2,305
Revenue from mining operations excluding CFEM     52,034     60,085     220,164     234,661
Gold ounces sold during the period (oz.)     40,455     50,093     176,069     192,524
                         
Realized price per gold ounce sold ($/oz.)   $ 1,286   $ 1,199   $ 1,250   $ 1,219
                         

BRIO GOLD INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31,

(In thousands of United States Dollars)   2017     2016  
Revenues from mining operations   $ 217,891     $ 232,356  
Cost of sales excluding depletion, depreciation and amortization 17)     (151,801 )     (144,736 )
Gross margin excluding depletion, depreciation and amortization     66,090       87,620  
Depletion, depreciation and amortization     (37,840 )     (66,818 )
Impairment of operating mineral properties     -       (110,876 )
Mine operating income/(loss)     28,250       (90,074 )
                 
Expenses                
General and administrative     (23,434 )     (13,262 )
Impairment reversal of non-operating mineral properties     -       96,217  
Other operating expenses     (17,709 )     (18,500 )
Operating loss     (12,893 )     (25,619 )
Foreign exchange gain/(loss)     306       (9,239 )
Unrealized (loss)/gain on hedge contracts     (1,440 )     1,020  
Finance expense     (10,591 )     (6,300 )
Loss before income taxes     (24,618 )     (40,138 )
Income tax recovery     3,618       23,279  
Net loss     (21,000 )     (16,859 )
                 
Other comprehensive income (loss)                
Items that may be reclassified subsequently to profit or loss:                
  Change in fair value of hedging instruments, net of tax     3,993       308  
Total comprehensive loss     (17,007 )     (16,551 )
                 
Net loss per share (basic and diluted)     (0.18 )     (0.37 )
Weighted average number of shares outstanding (basic and diluted)     114,540,672       45,878,479  

The accompanying notes are an integral part of the consolidated financial statements.

BRIO GOLD INC.

CONSOLIDATED BALANCE SHEETS

AS AT DECEMBER 31,

(In thousands of United States Dollars)   2017     2016  
Assets                
Current assets:                
Cash   $ 19,281     $ 7,014  
Trade and other receivables     4,398       154  
Inventories     40,560       29,620  
Derivative assets     5,969       1,328  
Other current assets     13,584       12,777  
      83,792       50,893  
Non-current assets:                
Property, plant and equipment     514,103       481,746  
Non-current derivative assets     778       -  
Deferred tax assets     7,447       6,167  
Other non-current assets     5,835       2,893  
Total assets   $ 611,955     $ 541,699  
                 
Liabilities                
Current liabilities:                
Trade and other payables   $ 50,925     $ 56,066  
Income taxes payable     3,433       2,998  
Short-term debt     13,663       -  
Other financial liabilities     3,631       1,414  
Other provisions and liabilities     2,465       5,243  
      74,117       65,721  
Non-current liabilities:                
Long-term debt     72,600       -  
Decommissioning, restoration and similar liabilities     36,884       36,871  
Deferred tax liabilities     5,588       11,413  
Derivative liabilities     1,315       -  
Other non-current provisions and liabilities     9,997       4,902  
Total liabilities     200,501       118,907  
                 
Equity                
Share capital     440,975       427,858  
Reserves     67,220       70,675  
Deficit     (96,741 )     (75,741 )
Total equity     411,454       422,792  
Total equity and liabilities   $ 611,955     $ 541,699  

The accompanying notes are an integral part of the consolidated financial statements.

BRIO GOLD INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,

(In thousands of United States Dollars)   2017     2016  
Operating activities                
Loss before income tax expense   $ (24,618 )   $ (40,138 )
Adjustments to reconcile loss before income taxes to net operating cash flows:                
  Depletion, depreciation and amortization     37,840       66,818  
  Foreign exchange (gain)/loss     (306 )     9,239  
  Unrealized loss/(gain) on hedge contracts     1,440       (1,020 )
  Finance expense     10,591       6,300  
  Net impairment of mineral properties     -       14,659  
  Other non-cash operating expenses     18,121       19,667  
  Decommissioning, restoration and similar liabilities paid     (1,408 )     (2,128 )
  Income taxes paid     (88 )     (2,927 )
Cash flows from operating activities before net change in working capital     41,572       70,470  
Net change in working capital     (29,840 )     (384 )
Cash flows from operating activities     11,732       70,086  
Investing activities                
Acquisition of Mineração Riacho dos Machados Ltda     -       (51,362 )
Property, plant and equipment expenditures     (80,449 )     (67,981 )
Cash flows used in investing activities     (80,449 )     (119,343 )
Financing activities                
Proceeds from debt     90,163       -  
Repayment of debt     (1,500 )     -  
Related party financing     -       51,361  
Cost of debt     (3,361 )     -  
Interest and other finance expenses paid     (3,213 )     -  
Cash flows from financing activities     82,089       51,361  
Effect of foreign exchange on cash     (1,105 )     944  
Increase in cash     12,267       3,048  
Cash, beginning of year     7,014       3,966  
Cash, end of year   $ 19,281     $ 7,014  

The accompanying notes are an integral part of the consolidated financial statements.

FOR FURTHER INFORMATION PLEASE CONTACT:
Letitia Wong
Vice President, Corporate Development
Telephone: +1 (416) 860-6310
Email: info@briogoldinc.com

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