Avion Gold Announces First Quarter Earnings of $8.3
Million and Cashflow of $15.4 Million
Avion
Gold Corporation (TSX:AVR)(OTCQX:AVGCF) ("Avion" or the "Company") today announces its
financial results for the first quarter ended March 31, 2011. All amounts are
in United States dollars unless otherwise indicated.
Avion
plans to host a conference call at 10:30 AM (EST) on June 2, 2011. To participate in the
call please dial:
International:
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+1
416 340 9432
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Toll Free North America:
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877
440 9795
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Toronto
Area:
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416
340 9432
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A play-back recording
will be available shortly after the completion of the call on Avion's website atwww.aviongoldcorp.com.
Complete audited
financial statements and related Management's Discussion and Analysis will be
available under the Company's profile on www.sedar.com before
the market opens on June 2, 2011.
First Quarter Highlights:
·
The Company had earnings of $8.3 million,
or $0.02 per share for the quarter as compared to $0.7 million in earnings, or
$0.00 per share for the comparable quarter last year.
·
The Company produced 20,270 ounces of gold
at a cash cost per ounce of $462 and total cash costs produced of $534. The
Company continues to generate significant cash flow from its operations with
$15.4 million generated this quarter as compared to $1.9 million for the
comparable quarter last year. The Company generated cash flow of approximately
$762 per ounce of gold produced. Please see Non-GAAP measures
below.
·
Before share based compensation, the
Company had earnings of $11.8 million, or $0.03 per share for the quarter as
compared to $3.0 million in earnings, or $0.01 per share for the comparable
quarter last year.
·
The Company achieved revenues of $27.5
million this quarter compared to revenues of $19.5 million for the comparable
quarter last year representing a 29% increase.
·
During the quarter, the Company's gold
sales at an average realized price of $1,394 per ounce, which was $8 higher
than the London PM fix average for the quarter ended March 31, 2011.
·
During the quarter the Company expended
$38.6 million on its extensive capital programs including underground
development, mill plant expansion activities and exploration. These capital
programs continue to proceed on time and on schedule.
·
The Company completed the quarter with a
strong balance sheet having $24.4 million in working capital, which included $
19.1 million in cash and cash equivalents, as at March 31, 2011.
·
In May 2011 the Company completed a $35
million credit facility through Atlantic Financial Group which is available for
a three year term with an annual interest rate of 7% and no hedging
requirements, as is normally requested by lenders.
Commenting on the first quarter 2011
results, Avion's Chief Financial Officer, Mr. Gregory
Duras stated: "The Company generated strong
earnings this quarter, resulting in significant operating cash flow, allowing
the Company to maintain a strong financial position to sustain its extensive
capital programs, including underground development, plant expansion and an
aggressive exploration program. Our capital program will position us well for
continued growth".
Capital
Expansion Programs
Expansion plans continued at Tabakoto, consisting of the following activities:
·
1,332 metres of
underground development was completed at the Tabakoto
deposit, plus a ventilation raise. Over 13,000 tonnes
of development ore was mined from various zones within the deposit. Development
remains on plan to enable production in the 1st quarter of
2012.
·
Over 1.87 million tonnes
of oxide waste material was mined at the Dioulafoundou
deposit, and over 46,000 tonnes of ore was mined
during Q1-2011. By the end of the quarter, the waste pre-stripping program was completed,
allowing access to ore in the future at a reduced strip ratio.
·
Purchase orders and down payments were
submitted to vendors for the remaining long lead time equipment required for
the planned plant expansion to 4,000 tonnes per day
in 2012. The project
remained on schedule and within budget.
Financial
Discussion: three months ended March 31, 2011
The Company reported net income of
$8,271,205 ($0.02 per share, basic and diluted) for the three months ended
March 31, 2011 compared to $663,279 ($0.00 per share, basic and diluted) for
the three months ended March 31, 2010.
During Q1-2011, the Company sold 22,583
ounces of gold and generated $27,494,390 in gold sales revenue. In Q1-2010,
17,298 ounces of gold was sold generating $19,466,619 in gold sales revenue.
Mining and processing costs were $13,017,240 (Q1-2010: $11,409,242), which
includes $385,304 (Q1-2010: $191,150) in amortized deferred stripping costs,
and the Company recorded amortization and depletion of $1,560,056 (Q1-2010:
$1,407,716). 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
Q1-2011. Royalties expense totaled $1,473,593 (Q1-2010: $1,358,440) for the
ounces of gold sold during Q1-2011. The Company previously bought out an
aggregate 3% royalty in late 2009 and 2010 for a combined $3,000,000 in cash,
shares and warrants valued at $1,107,116. These amounts have been deferred and
will be amortized over the life of the mine.
The Company realized a cash cost per ounce
produced of $462 per ounce for Q1-2011 compared to $886 for Q1-2010. Please see
"Non-GAAP Measures" below.
Corporate and administrative expenses for
the quarter ended March 31, 2011 totaled $1,067,176 compared to $711,958 for
Q1-2010. This moderate increase in corporate and administrative expenses
reflects the increased level of activities of the Company, increased executive
travel requirements, and higher expenses associated with a TSX listing. The
Company continues to share office space and other resources with companies that
have common directors and officers.
Non-cash share based compensation expense
for Q1-2011 was $3,479,773 (Q1-2010: $2,382,567) related to the estimated fair
value of stock options that were granted and vested during Q1-2011. A total of
4,455,000 stock options were granted during Q1-2011 compared to 3,905,000
during Q1-2010. Share based compensation was estimated using the Black-Scholes option pricing model as at the date of grant.
During Q1-2011, the Company incurred a
non-cash accretion expense of $61,750 related to the Company's asset retirement
obligations acquired through the acquisition of the Mali projects (Q1-2010:
$55,500).
The Company recognized a nominal
unrealized loss of $10,916 during Q1-2011 (Q1-2010: an unrealized loss of
$711,958) related to their held-for-trading investments based on the fair
market value of these investments as at March 31, 2011.
The Company also incurred a foreign
exchange translation gain of $1,477,095 during Q1-2011 compared to a loss of
$309,349 during Q1-2010. The Mali franc, which is pegged to the Euro,
strengthened compared to the US dollar during the quarter and a large
proportion of the Company's net monetary assets are carried in Mali franc.
Andrew Bradfield, P.Eng.,
the Chief Operating Officer of the Company and a qualified person under
National Instrument 43-101 has reviewed the scientific and technical information
in this press release.
About
Avion Gold Corporation
Avion
is a Canadian-based gold mining company focused in West Africa that holds 80%
of the Tabakoto and Ségala
gold projects in Mali. Gold production commenced at these projects in 2009 with
just over 51,000 ounces produced. 2010 production was 87,630 ounces of gold.
Production sustainability will continue to be supported and enhanced by an
aggressive 2011 drill program over an approximately 600 km2 exploration package that both surrounds and is
near to the Company's existing mine infrastructure. The current mineral
resources estimate for the Tabakoto project
demonstrates several sources of excellent grade open pit and good grade
underground mineral resources thus providing significant flexibility for Avion's future mining plans. Additionally, the 1,670 km2 Houndé
exploration property in Burkina Faso continues to return promising results.
These properties will be subject to a preliminary US$ 10 million dollar,
approximate 60,000 metre, drill-focused, exploration
program in 2011. Avion continues to progress towards
its medium term goal of 200,000 ounces of gold per year and a longer term goal
of organic growth through development of its exploration properties. The
Company is developing an underground mine at the Tabakoto
deposit, and is preparing to mine underground at the Ségala
deposit. Avion has a highly skilled management team,
with a focus on growth and consolidation within West Africa.
Cautionary Notes
The ability of Avion
to increase production to 200,000 ounces of gold per year has not been the
subject of a feasibility study and there is no certainty that the proposed
expansion will be economically viable.
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;
conclusions of economic evaluation (including scoping studies); 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 atwww.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 ended
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Three months ended
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March 31, 2011
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March 31, 2010
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Mining and processing expenses
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13,017,240
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11,409,422
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By-product silver sales credit
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(298,022
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)
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(41,237
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)
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Inventory movements and adjustments
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(3,364,038
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)
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2,512,881
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Cash operating costs
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9,355,180
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13,881,066
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Divided by ounces of gold produced
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20,270
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15,716
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Cash cost per ounce produced
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462
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883
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Royalties
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1,473,593
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1,358,440
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Total cash cost per ounce produced
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534
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970
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Operating
cashflow
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15,397,626
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2,454,619
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Operating cashflow
per ounce produced
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760
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156
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