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Anaconda Mining Reports Second Quarter 2018 Results; Generates $2.9 Million of Cash Flow from Operating Activities

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Anaconda Mining Reports Second Quarter 2018 Results; Generates $2.9 Million of Cash Flow from Operating Activities

Canada NewsWire

TORONTO, Aug. 2, 2018 /CNW/ - Anaconda Mining Inc. ("Anaconda" or the "Company") – (TSX:ANX) (OTCQX:ANXGF) is pleased to report its financial and operating results for the three and six months ended June 30, 2018 ("Q2 2018"). The condensed interim consolidated financial statements and management discussion & analysis documents can be found at www.sedar.com and the Company's website, www.anacondamining.com. All dollar amounts are in Canadian dollars unless otherwise noted.

In 2017, the Company changed its fiscal year-end to December 31, from its previous fiscal year end of May 31. For comparative purposes, the results for the three and six months ended June 30, 2018, have been compared to the three and six months ended May 31, 2017. 

Second Quarter 2018 Highlights

  • Anaconda sold 4,330 ounces of gold in Q2 2018, generating metal revenue of $7.4 million at an average realized gold price* of $1,695 per ounce; the Company also generated $0.1 million from the sale of aggregates.
  • Strong revenue and lower costs enabled the Point Rousse Project to generate EBITDA* of $3.3 million for the second quarter of 2018, and $6.6 million for the first half of 2018.
  • Operating cash costs per ounce sold* at the Point Rousse Project in the three and six months ended June 30, 2018 were $872 (US$675) and $885 (US$693), respectively.
  • The Company has revised its 2018 annual guidance for operating cash costs per ounce sold from $1,100 to below $1,000, as a result of the strong operational performance from the first half of 2018, as well as the forecasted operating cost profile as the Company fully transitions to higher-grade production from Stog'er Tight.
  • On a consolidated basis, EBITDA* for the three and six months ended June 30, 2018 was $2.3 million and $4.6 million, respectively, compared with $3.0 million and $3.6 million in the comparative periods.
  • All-in sustaining cash costs per ounce sold*, including corporate administration and sustaining capital expenditures, were $1,360 (US$1,053) and $1,368 (US$1,071) for the three and six months ended June 30, 2018.
  • In the first half of 2018, the Company invested $2.7 million in its exploration and development projects, including $2.0 million on the Goldboro Gold Project in Nova Scotia.
  • Net loss for the three months ended June 30, 2018 was $549,543, or $0.01 per share, which included transaction costs related to the takeover bid for Maritime Resources Corp. ("Maritime") of $740,018, or $0.01 per share. Excluding transaction costs, Q2 2018 net income was $190,475, or $0.00 per share.
  • As at June 30, 2018, the Company had a cash balance of $7.9 million, net working capital* of $9.9 million, and additional available liquidity of $1,000,000 from an undrawn revolving line of credit facility.
  • Anaconda successfully completed a non-brokered private placement for $4.5 million in June 2018, which will enable continued drilling at the Goldboro Gold Project, the Argyle Deposit, and other prospective targets at the Point Rousse Project.

*Refer to Non-IFRS Measures section below. A full reconciliation of Non-IFRS Measures can be found in the Company's Management Discussion and Analysis for the three and six months ended June 30, 2018.

"Anaconda has had an excellent first half of 2018, with the Point Rousse operations continuing to exceed expectations, achieving strong operational results, including record throughput in the mill, while generating significant cash flow and driving down operating cash costs to below $900 per ounce or US$675. With cash generated from operations of $2.9 million in Q2 2018, after all corporate costs, and the recent $4.5 million flow-through financing, we have built a significant treasury of $7.9 million. We are well positioned to continue to create shareholder value from the continued investment in the organic growth opportunities at our Point Rousse and Goldboro Projects."

~Dustin Angelo, President and CEO, Anaconda Mining Inc.

Consolidated Results Summary

Financial Results

Three months

ended

June 30, 2018

Three months
ended

May 31, 2017

Six months

ended

June 30, 2018

Six months

ended

May 31, 2017

(restated)

Revenue ($)

7,451,617

7,831,048

15,048,217

13,904,846

Cost of operations, including depletion and depreciation ($)

5,586,145

6,182,586

11,097,498

12,940,113

Mine operating income ($)

1,865,472

1,648,462

3,950,719

964,733

Net loss ($)

(549,543)

(1,890,260)

(400,325)

(2,830,292)

Net loss per share ($/share) – basic and diluted

(0.01)

(0.03)

(0.00)

(0.05)

Cash generated from operating activities ($)

2,944,700

3,172,938

3,936,505

3,496,083

Capital investment in property, mill and equipment ($)

817,139

225,612

1,381,112

786,949

Capital investment in exploration and evaluation assets ($)

1,121,070

763,988

2,656,434

1,292,695

Average realized gold price per ounce ($)*

1,695

1,658

1,686

1,613

Operating cash costs per ounce sold ($)* 

872

866

885

1,019

All-in sustaining cash costs per ounce sold ($)* 

1,360

1,234

1,368

1,428

*Refer to Non-IFRS Measures section below.










Operational Results

Three months
ended

June 30, 2018

Three months
ended

May 31, 2017

Six months

ended

June 30, 2018

Six months

ended

May 31, 2017

Ore mined (t)

32,833

92,167

176,673

194,698

Waste mined (t)

356,642

386,387

606,774

711,463

Strip ratio

10.9

4.2

3.4

3.7

Ore milled (t)

121,299

107,956

230,518

215,718

Grade (g/t Au)

1.38

1.49

1.41

1.35

Recovery (%)

85.9

85.8

85.6

85.5

Gold ounces produced

4,632

4,442

8,925

8,209

Gold ounces sold

4,330

4,658

8,856

8,255

 

Second Quarter 2018 Review

Operational Overview

The Pine Cove Mill processing facility achieved record quarterly throughput of 121,299 tonnes in the second quarter of 2018.  Mill throughput was 1,350 tonnes per day ("tpd") in Q2 2018, a 12% increase over the comparative three months ended May 31, 2017, and an improvement from the 1,300 tpd in Q1 2018.

Average grade during the second quarter of 2018 was 1.38 g/t, a decrease over both Q1 2018 and the three-month comparative period ending May 31, 2017. The lower grade profile was in line with plan, with throughput being comprised mainly of ore stockpile from the Pine Cove Pit. The Company expects an increased grade profile in the second half of 2018, as ore feed is predominantly sourced from Stog'er Tight. The mill achieved an average recovery rate of 85.9%, an improvement over Q1 2018, resulting in gold production in Q2 2018 of 4,632 ounces.

Mining activity in Q2 2018 focused on the completion of development at Stog'er Tight, removing a further 133,576 tonnes of waste, which will be capitalized as development. Commercial ore production began in May, with 28,974 tonnes of ore mined from Stog'er Tight in May and June.  Given the focus on development in the West Pit, the strip ratio of 10.9 waste tonnes to ore tonnes was high compared to previous periods; however, the strip ratio is expected to decrease over the life of the pit.

Mine activity in the Pine Cove Pit finished in the middle of March, and the Company has commenced planning for two pushbacks to the pit, which are expected to contribute ore in 2019. The Company is now converting the Pine Cove Pit into a fully-permitted in-pit tailings storage facility, which has approximately 15 years of capacity based on a throughput rate of 1,350 tonnes per day. Anaconda expects to begin tailings deposition in the third quarter of 2018.

Financial Results

Anaconda sold 4,330 ounces of gold during the second quarter of 2018, generating metal revenue of $7,351,525, and year-to-date has sold 8,856 ounces of gold to generate metal revenue of $14,948,125. As at June 30, 2018, the Company also had over 750 ounces of gold doré and bullion inventory, which were sold in early July. In addition, the Company generated a further $100,092 in revenue from the sale of aggregates during Q2 2018.

Operating expenses for the three months ended June 30, 2018 were $3,865,256, compared to $4,151,450 in the three months ended May 31, 2017. The decrease in operating costs was the result of lower mining costs as the operation moved 19% less material during the quarter, which was partially offset by higher processing costs, which were driven by a 12% increase in throughput in Q2 2018. The operating cash costs per ounce sold in the first three and six months of fiscal 2018 were $872 (US$675) and $885 (US$693), a reduction of 13% compared to operating cash costs of $1,019 per ounce sold (US$746) in the six months ended May 31, 2017, which has led the Company to revise its operating cash cost guidance from C$1,100 to below C$1,000, mainly due to better than expected grades in the bottom of the Pine Cove Pit.

Depletion and depreciation expense for the three and six months ended June 30, 2018 was $1,701,812 and $3,138,818, respectively, a decrease from $2,031,136 and $3,978,135 during the comparative periods. The lower depletion and depreciation was the result of lower depletion of stripping costs for the Pine Cove Pit, where mining was completed in Q1 2018. Capitalized development costs for Stog'er Tight for 2018 of $993,502 are now being depreciated from May 1, 2018, the beginning of production.

Mine operating income for the three months ended June 30, 2018 was $1,865,472, compared to $1,648,462 in the comparative period of 2017, as higher revenues due to higher gold sales in the prior year were offset by lower operating and depletion and depreciation expenses.

Corporate administration expenditures were $1,148,342 and $2,242,696 for the first three and six months of fiscal 2018, up from $657,283 and $1,285,009 for the comparative periods. The lower comparative balances reflect the previously lower corporate cost profile prior to the significant Goldboro Gold Project acquisition, which occurred in May 2017. The higher expenditures in the current periods reflect the expanded senior management team to execute the Company's growth plans, greater market presence and investor relations activity, and the timing of certain corporate costs as a result of the change in year-end to December 31.

Share-based compensation was $190,407 during Q2 2018 and $340,880 for the first half of 2018, compared to $22,737 and $45,367 in the comparative periods, reflecting the stock options granted during Q1 2018, as well as the impact of the share consolidation on the fair value of the options as determined by the Black-Scholes option pricing model.

The drawdown of the deferred premium on flow-through shares resulted in recoveries of $96,663 and $253,535 in the three and six months ended June 30, 2018, as the remaining exploration commitments from the October 31, 2017 flow-through financing were incurred.

Net loss for the three months ended June 30, 2018, was $549,543, or $0.01 per share, compared to $1,890,260, or $0.03 per share, in the comparative period. Net loss for the period was impacted by the recognition of $740,018 in transaction costs related to the takeover bid of Maritime; however, still improved over the prior comparative period due to higher mine operating income, which was partially offset by higher corporate administration expenditures and share-based compensation.

Financial Position and Cash Flow Analysis

As at June 30, 2018, the Company continued to maintain a robust working capital position of $9,914,191, which included cash and cash equivalents of $7,853,330. In addition, the Company maintains a $1,000,000 revolving credit facility as well as a $500,000 revolving equipment lease line of credit with the Royal Bank of Canada. As at June 30, 2018, the Company had not drawn against the revolving credit facility.

During the three months ended June 30, 2018, Anaconda generated cash flow from operations of $2,944,700, after accounting for corporate administration costs. Revenue less operating expenses from the Point Rousse Project were $3,586,361 in the second quarter, corporate administration costs were $1,148,342, and there was a net increase in operating cash flows of $1,348,388 from changes in working capital. Trade and other receivables decreased by $552,288 due to the collection of HST refunds.

During the second quarter of 2018, the Company continued to invest in its key growth projects in Newfoundland and Nova Scotia. The Company spent $1,121,070 in Q2 2018 on exploration and evaluation assets (adjusted for amounts included in trade payables and accruals at June 30, 2018), primarily on the continued advancement of the Goldboro Project. The Company also invested $817,139 during Q2 2018 and $1,381,112 during the first half of 2018 into the property, mill and equipment at the Point Rousse Project, with capital investment focused largely on development activity at Stog'er Tight, where a total of $993,502 was capitalized in the first half of 2018.

In June 2018, the Company successfully completed a flow-through financing of $4,465,290. Other financing activities during the second quarter of 2018 were primarily limited to the repayment of capital lease obligations and government loans. The Company also received cash proceeds of $116,000 from the exercise of stock options in Q2 2018.

Restatement of Prior Period Financial Information

As part of the preparation of the audited consolidated financial statements for the year ended May 31, 2017, the Company undertook a comprehensive review of the capitalization and units-of-production depletion calculations for its production stripping asset and property, mill infrastructure and equipment and deferred taxes and discovered that certain errors had been made. As a result, the Company amended the treatment of these balance sheet items resulting in a restatement of prior periods. 

The amounts of each adjustment and a reconciliation between the previously published consolidated statement of comprehensive loss for the six months ended June 30, 2017, have been presented in Note 4 of the condensed interim consolidated financial statements.

ABOUT ANACONDA

Anaconda is a TSX-listed gold mining, development, and exploration company, focused in the prospective Atlantic Canadian jurisdictions of Newfoundland and Nova Scotia. The Company operates the Point Rousse Project located in the Baie Verte Mining District in Newfoundland, comprised of the Stog'er Tight Mine, the Pine Cove open pit mine, the Argyle Mineral Resource, the fully-permitted Pine Cove Mill and tailings facility, deep water port, and approximately 5,800 hectares of prospective gold-bearing property. Anaconda is also developing the Goldboro Project in Nova Scotia, a high-grade Mineral Resource, with the potential to leverage existing infrastructure at the Company's Point Rousse Project.

The Company also has a pipeline of organic growth opportunities, including the Great Northern Project on the Northern Peninsula of Newfoundland and the Tilt Cove Property on the Baie Verte Peninsula, also in Newfoundland.

FORWARD-LOOKING STATEMENTS

This news release contains "forward-looking information" within the meaning of applicable Canadian and United States securities legislation. 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 based on the opinions and estimates of management at the date the information is made, and is based on a number of assumptions and is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Anaconda to be materially different from those expressed or implied by such forward-looking information, including risks associated with the exploration, development and mining such as economic factors as they effect exploration, future commodity prices, changes in foreign exchange and interest rates, actual results of current production, development and exploration activities, government regulation, political or economic developments, environmental risks, permitting timelines, capital expenditures, operating or technical difficulties in connection with development activities, employee relations, the speculative nature of gold exploration and development, including the risks of diminishing quantities of grades of resources, contests over title to properties, and changes in project parameters as plans continue to be refined as well as those risk factors discussed in the annual information form for the fiscal year ended December 31, 2017, available on www.sedar.com. Although Anaconda 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 information. Accordingly, readers should not place undue reliance on forward-looking information. Anaconda does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

NON-IFRS MEASURES

Anaconda has included certain non-IFRS performance measures as detailed below. In the gold mining industry, these are common performance measures but may not be comparable to similar measures presented by other issuers. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate cash flow. Accordingly, it 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.

Operating Cash Costs per Ounce of Gold – Anaconda calculates operating cash costs per ounce by dividing operating expenses per the consolidated statement of operations, net of silver sales and aggregate sales by-product revenue, by the gold ounces sold during the applicable period. Operating expenses include mine site operating costs such as mining, processing and administration as well as royalties, however excludes depletion and depreciation and rehabilitation costs.

All-In Sustaining Costs per Ounce of Gold – Anaconda has adopted an all-in sustaining cost performance measure that reflects all of the expenditures that are required to produce an ounce of gold from current operations. While there is no standardized meaning of the measure across the industry, the Company's definition conforms to the all-in sustaining cost definition as set out by the World Gold Council in its guidance dated June 27, 2013. The World Gold Council is a non-regulatory, non-profit organization established in 1987 whose members include global senior mining companies. The Company believes that this measure will be useful to external users in assessing operating performance and the ability to generate free cash flow from current operations.

The Company defines all-in sustaining costs as the sum of operating cash costs (per above), sustaining capital (capital required to maintain current operations at existing levels), corporate administration costs, sustaining exploration, and rehabilitation accretion and amortization related to current operations. All-in sustaining costs excludes capital expenditures for significant improvements at existing operations deemed to be expansionary in nature, exploration and evaluation related to growth projects, financing costs, debt repayments, and taxes. Canadian and US dollars are noted for realized gold price, operating cash costs per ounce of gold and all-in sustaining costs per ounce of gold. Both currencies are considered relevant and the Company uses the average foreign exchange rate for the period.

Average Realized Gold Price per Ounce Sold – In the gold mining industry, average realized gold price per ounce sold is a common performance measure that does not have any standardized meaning. The most directly comparable measure prepared in accordance with IFRS is gold revenue. The measure is intended to assist readers in evaluating the revenue received in a period from each ounce of gold sold.

Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") - EBITDA is earnings before finance expense, deferred income tax expense and depletion and depreciation.

Point Rousse Project EBITDA is EBITDA before corporate administration and other expenses (income).

Working Capital – Working capital is a common measure of near-term liquidity and is calculated by deducting current liabilities from current assets.

SOURCE Anaconda Mining Inc.

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