2013-02-21 22:32:40 -
MONTREAL, QUEBEC -- (Marketwire) -- 02/21/13 -- Osisko Mining Corporation (the "Company" or "Osisko") (TSX:OSK)(FRANKFURT:EWX) is pleased to report that it has generated net earnings of $9.6 million ($0.02 per share) during the fourth quarter of 2012 versus net earnings of $37.8 million in the fourth quarter of 2011 ($0.10 per share).
For the year of 2012, its first full year of operations, the Company generated net earnings of $78.4 million ($0.20 per share) compared to net earnings of $18.0 million ($0.05 per share) in the previous year. The Canadian Malartic Mine, the Company's flagship asset, reached commercial production on May 19, 2011.
Earnings from mine operations for the fourth quarter amounted to $68.1 million compared to $39.5 million in the corresponding period of 2011. For the year, Canadian Malartic generated earnings from mine operations of $239.7 million compared to $79.5 million in 2011.
Sean Roosen, President and Chief Executive Officer, commenting on the results: "Despite the various challenges that we faced, we generated cash from mine operations(1) of $305.6 million, which clearly demonstrates the strength of Canadian Malartic. The past year had its challenges as we continued ramping up Canadian Malartic to its nameplate capacity. In the fourth quarter we were affected by delays in executing a major blast over old underground mine workings which reduced our operating flexibility and impacted our mining plan. We anticipate Canadian Malartic will generate improved and strong cash flow once the ramp up phase is completed later this year."
-- Gold production of 101,544 ounces at an average cash cost1 of $903 per
ounce for the quarter, 388,478 ounces at an average cash cost of $909
per ounce for the year;
-- Operating cash flow(2) of $77.7 million, 66.7% higher than in 2011 for
the quarter and $273.7 million for the year;
-- Free cash flow(3) of $15.0 million for the quarter;
-- Write down of portfolio investments for $16.3 million for the quarter
and $19.4 million for the year;
-- Completion of the Queenston Mining Inc. acquisition;
-- Receipt of modifications to the Canadian Malartic operating parameters.
1) Reconciliation of non-IFRS measures is provided under Note Regarding
Certain Non-IFRS Measures of Performance of this press release.
2) Before change in non-cash working capital items.
3) Free cash flow is equivalent to the increase in cash and cash equivalents
on the consolidated statement of cash flows for the three months ended
December 31, 2012.
Fourth quarter production was affected by changes to the mining plan caused by a delay of approximately 60 days in executing a 940,000-tonne blast over previously mined underground stopes, blasting constraints and access to the north pit wall. The delay restricted access to a number of areas and the mine was forced to lay-off contractors and reduced the utilization of the mining fleet. Lower grade material was processed from the available stockpile. Production was also affected by several mill shutdowns to modify crushing and conveying systems and the installation of the second pebble crusher.
The mine operating statement for the production period is as follows:
Q4 2012 Q3 2012 Q2 2012 Q1 2012 Q4 2011
Gold sales (ounces) 111,104 95,424 95,675 92,400 75,100
Silver sales (ounces) 74,100 49,751 48,880 52,800 42,100
($000) ($000) ($000) ($000) ($000)
Revenues 191,080 158,503 157,134 158,658 128,100
Production Costs (101,239) (81,841) (98,837) (71,910) (74,841)
Royalties (2,546) (1,998) (2,021) (2,359) (1,933)
Depreciation (19,198) (14,605) (15,289) (13,877) (11,800)
Total (122,983) (98,444)(116,147) (88,146) (88,574)
Earnings from mine operations 68,097 60,059 40,987 70,512 39,526
Following the commencement of commercial production, steady improvements have been made despite some setbacks in the fourth quarter and the May 9th fire at the mill which affected production during a 10-day period. Improved productivity at the mine was noted throughout 2012 as the pit floor was further developed, mobile equipment efficiencies improved, and throughput at the mill increased. As the ramp up continues towards the 55,000 tonnes per day nameplate mill capacity, cash cost per ounce is expected to decrease.
Key operating results
(in thousands of Canadian dollars, unless otherwise noted)
The production statistics are as follows:
Mill operating statistics continue to show progress in all categories.
Ore Reserves - Canadian Malartic
The table below shows the reserve and resource statement for the Canadian Malartic mine as at January 1, 2013:
Reserve and resource estimates with a lower cut-off grade of 0.31 to 0.34 g/t Au
Compared to the reserves reported in January 2012, there is a reduction of tonnes in part due to the 2012 production, but there is an increase in grade from 0.99 g/t to 1.01 g/t Au.
The fourth quarter had several non-cash items which adversely affected the earnings including:
The tax rate is unusually high during the quarter due to the non-deductible losses/adjustments described above.
Adjusted net earnings(7) including the above mentioned non-cash items would be:
The year-to-date results improved following the full year of operations at Canadian Malartic, which caused depreciation to be higher than the previous year. Finance costs were higher compared to 2011, as in 2011 such costs were capitalized up to commercial production reached on May 19, 2011.
The Company invested $228.8 million in property, plant and equipment during 2012. These investments were mainly focused on the development of the pit and modification to the mill at Canadian Malartic and on the completion of definition drilling work at the Hammond Reef Project.
On December 28, 2012, Osisko completed the acquisition of Queenston Mining Inc. As part of the transaction, the Company acquired the Upper Beaver Project and a package of lands covering 230 km2 in the rich Kirkland Lake Gold Camp, which has produced over 40 million ounces in past years.
In addition to the $42.3 million spent to acquire the 9.2% interest in Queenston held by Agnico-Eagle Mines, Osisko issued 46,638,799 common shares in exchange for Queenston shares. The acquisition was booked at a fair value of $417.5 million.
A NI 43-101 technical report was issued by SRK Consulting on November 5, 2012 for the Upper Beaver deposit indicating a measured and indicated resources of 1.5 million ounces and 0.7 million ounces of inferred resources.
Queenston had initiated work to gain access to the deposit via an exploration shaft to provide a better base to conduct exploration drilling. Osisko intends to continue the program complemented by deep holes from surface. Osisko will also pursue an intensive exploration program on previously identified deposits, which could provide mill feed to a regional mill and on new targets. Using an approach that was successful at Canadian Malartic, the Company intends to undertake a major compilation and analysis of the regional exploration and geological data.
The Company completed definition drilling work on the advanced stage Hammond Reef project. Osisko has completed over 629,000 metres at Hammond Reef, is finishing an EIA that will be filed in accordance with the accepted terms of reference and will table a feasibility study in the first half of 2013. The project is located approximately 20 kilometres from grid power, and is located 23 kilometres north of the town of Atikokan. Osisko signed a Resource Sharing Agreement with eight first nations groups in December 2010, as well as a Memorandum of Understanding with the Metis Nation of Ontario in April 2012.
Osisko issued a resource estimate prepared by SGS on January 28, 2013, which is summarized as follows:
Hammond Reef Global Resource Estimates
G Mining Services Inc of Montreal, in collaboration with SGS, also estimated resources within a Whittle-optimized pit shell using a base case gold price of US$1,400 per ounce and pit limits that are unconstrained by lakeshores. The optimization yielded two distinct pits separated by approximately 200 metres with an average strip ratio of 1.01. The total in-pit M&I resource for the Hammond Reef gold deposit is 5.31 million ounces of gold at an average undiluted grade of 0.72 g/t Au, based on a derived lower cut-off grade of 0.31 g/t Au (west pit) and 0.33 g/t Au (east pit).
Hammond Reef Undiluted Resource Estimates within US$1,400 Whittle pit shell
The Company continues to pursue value creation through the discovery of new ore deposits. Osisko has several agreements and has staked properties in various gold camps within the Americas.
The Company has been active in the Guerrero District of Mexico where it has accumulated a large land package in an area with operating gold mines and advanced exploration projects.
Building on its flagship Canadian Malartic Mine, the Company hopes to discover and build new gold mines to ensure continued growth. These new projects will be developed only if they meet rate-of-return criteria and the Company has the financial capabilities to conduct such expansion.
Improved Financial Flexibility
During the second quarter, the Company amended its $150 million credit facility with CPPIB Credit Investments Inc. ("CPPIB"), a wholly-owned subsidiary of the CPP Investment Board, with CPPIB making available to the Company an additional $100 million delayed draw term loan. The key terms of the amendment are as follows:
As part of the agreement, Osisko has agreed to reduce the strike price of share purchase warrants to $10 per warrant for Tranche A (previously $10.75) and Tranche B (previously $19.25). Of the total 12.5 million of warrants, 5.5 million Tranche B warrants can be accelerated at Osisko's discretion if the share price trades at a 50% premium to the exercise price for a period of 15 days. Tranche A warrants expire on September 24, 2014 and Tranche B warrants are set to expire on December 31, 2015.
During the fourth quarter, the Company received from an equipment supplier a non-interest bearing advance of $14.7 million to fund the acquisition of major components as part of the rebuild program. The advance will be repaid over the next two years.
Outlook for 2013
Following the modifications and commissioning of the pre-crushing circuit and the second pebble crushing unit, it is anticipated that mill throughput should be stabilized in 2013. Gold production is estimated between 485,000 - 510,000 ounces for the year. As a result of gaining access to higher grade material in the second half of the year, it is anticipated that gold output will be higher in the second semester. Cash costs are estimated between $780 - $825 per ounce. This anticipates a 9 - 14% cost reduction from 2012.
Capital expenditures for 2013 are estimated at $220 million as follows:
The Company expects to release the Hammond Reef Feasibility Study in the first semester of the year.
Following the acquisition of Queenston Mining on December 28, 2012, the Company has assumed the leadership of the Upper Beaver advanced exploration program. It is also focused on integrating the Queenston Exploration group into Osisko. For 2013, focus will be on the initial development of the 1,300 meter exploration shaft, including engineering, design and fabrication of the head frame and hoisting facilities, initial collar excavation and preparation for shaft sinking.
The Company intends to invest $50 million in exploration on its projects in the Americas, including $42 million that will be capitalized.
Mr. Charles E. Page was appointed to the Board of Directors on February 21, 2013. Mr. Page was previously a Director and Chief Executive Officer of Queenston Mining Inc. He has over 30 years of exploration experience and in-depth knowledge of the Kirkland Lake Gold Camp.
Mr. Denis Cimon was promoted to Vice President of Technical Services effective January 1, 2013. He will be responsible for the oversight of the technical studies undertaken by Osisko, and he will be focused on optimizing the Canadian Malartic processing plant. He will also coordinate all research projects within the organization.
Mr. Eric Tremblay was promoted to General Manager of Canadian Malartic Mine replacing Mr. Cimon. He will be responsible for all operating activities at Canadian Malartic, ensuring the operations are carried out in a safe manner, in compliance with our operating permits and respecting our commitments to our host community.
Q4 Conference Call Information
Osisko will host a conference call on Friday, February 22, 2013 at 8:00am EST, where senior management will discuss the financial results and provide an update of the Company's activities. Those interested in participating in the conference call should dial in at (416) 981-9000 (Toronto local and international), or 1-800-732-8470 (North American toll free). An operator will direct participants to the call.
The conference call replay will be available from 10:00 a.m. EST on February 22 until 11:59 p.m. EST on March 8 with the following dial in number: (416) 626-4100 or Toll-free 1-800-558-5253, access code 21647923.
Note Regarding Certain Non-IFRS Measures of Performance
This press release contains certain non-IFRS measures, including "cash cost per ounce", "cash margin per ounce", "cash generated from mine operations" and "adjusted net earnings". The Company believes that these measures, together with measures determined in accordance with IFRS, provides investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Cash cost per ounce
"Cash cost per ounce" is defined as the cost of production of one ounce of gold excluding non-cash costs for a certain period. "Cash cost per ounce" is obtained from "Production costs" and "Royalties" less non-cash "Share-based compensation" and "By-product credits (silver sales)", adjusted for "Production inventory variation" for the period, divided by the "Number of ounces of gold produced" for the period.
Cash margin per ounce (US$ per ounce)
"Cash margin per ounce" is defined as the "Average selling price of gold per ounce sold" in US$ less "Cash cost per ounce" in US$ for the period.
Adjusted net earnings (loss) and adjusted net earnings (loss) per share
"Adjusted net earnings (loss)" is defined as "Net earnings (loss)" less certain non-cash items: "Write-off of property, plant and equipment", "Share-based compensation", "Unrealized gain (loss) on investments", "Impairment on available-for-sale assets", "Gain on premium of flow-through shares" and "Deferred income and mining tax expense (recovery)".
"Adjusted net earnings (loss) per share" is obtained from the "Adjusted net earnings (loss)" divided by the "Weighted average number of common shares outstanding" for the period.
Cash generated from mine operations
"Cash generated from mine operations" is defined as "Revenues" for a certain period less "Production costs" (excluding non-cash "Share-based compensation") and "Royalties". "Cash generated from mine operations" less "Depreciation" and "Share-based compensation" results in "Earnings from mine operations".
About Osisko Mining Corporation
Osisko Mining Corporation operates the Canadian Malartic Gold Mine in Malartic, Quebec and is carrying out aggressive exploration and project development elsewhere in Canada and Latin America.
Mr. Luc Lessard, Eng., Senior Vice-President and Chief Operating Officer of Osisko, is the Qualified Person who has reviewed this news release and is responsible for the technical information reported herein, including verification of the data disclosed.
Cautionary Notes Concerning Estimates of Mineral Resources
This news release uses the terms measured, indicated and inferred resources as a relative measure of the level of confidence in the resource estimate. Readers are cautioned that mineral resources are not economic mineral reserves and that the economic viability of resources that are not mineral reserves has not been demonstrated. In addition, inferred resources are considered too geologically speculative to have any economic considerations applied to them. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies or economic studies except for Preliminary Assessment as defined under NI 43-101. Readers are cautioned not to assume that that further work will lead to mineral reserves that can be mined economically.
For further information in relation to the Hammond Reef project, please refer to the "Technical Report on the Hammond Reef Gold Property Atikokan area, Ontario" dated December 20, 2011. For further information in relation to the Canadian Malartic project, please refer to the "Feasibility Study - Canadian Malartic Project (Malartic, Quebec)", dated December 2008. Both of these reports are available under the Osisko profile at www.sedar.com.
For further information in relation to the Upper Beaver project, please refer to the "Technical Report on the Upper-Beaver Gold-Copper Project, Ontario, Canada" dated November 9, 2012, which is available under the Queenston profile at www.sedar.com.
Certain statements contained in this press release may be deemed "forward-looking statements". All statements in this release, other than statements of historical fact, that address events or developments that Osisko expects to occur, are forward looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential", "scheduled" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur including, without limitation, timely completion of the ramp-up phase towards throughput design capacity of 55,000 tonnes per day, improvement of mine productivity, access to higher grade material, reduction of cost, positive outcome of any exploration work conducted around the Canadian Malartic infrastructure, at the Hammond Reef and Upper Beaver projects or at other Osisko's properties, and further development of its Hammond Reef project including timely completion of the project feasibility study.
Although Osisko believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, including, without limitation, that all technical, economical and financial conditions will be met in order to achieve such events qualified by the foregoing cautionary note regarding forward looking statements, such statements are not guarantees of future performance and actual results may differ materially from those in forward looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include gold prices, access to skilled consultants, mining development and construction personnel, results of exploration and development activities, Osisko's limited experience with production and mining operations, uninsured risks, regulatory framework and changes, defects in title, availability of personnel, materials and equipment, timeliness of government approvals, actual performance of facilities, equipment and processes relative to specifications and expectations, unanticipated environmental impacts on operations market prices, continued availability of capital and financing and general economic, market or business conditions. These factors are discussed in greater detail in Osisko's most recent Annual Information Form and in the most recent Management Discussion and Analysis filed on SEDAR, which also provide additional general assumptions in connection with these statements. Osisko cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Osisko believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
Vice-President Corporate Development
Director of Investor Relations
Toll Free: 1-888-674-7563
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