(All amounts in US dollars, unless otherwise indicated)
Q3 2018 highlights include:
Gold production of 93,269 ounces;
Sales of 91,733 gold ounces;
Revenue of $111.3 million;
Earnings from mine operations of $19.6 million;
Net income of $14.9 million or $0.05 cents per share;
All-in sustaining costs (AISC)1 of $966 per ounce of gold sold;
AISC margin1 of $22.1 million; and
Cash balance of $47.0 million at September 30, 2018.
1 AISC and AISC margin are non-IFRS financial performance measures with no standard meaning under IFRS.
Vancouver, November 14, 2018 – Leagold Mining Corporation (TSX:LMC; OTCQX:LMCNF) (“Leagold” or the “Company”) reports third quarter financial and operating results for its four wholly owned gold mines: the Los Filos mine in Mexico, and the RDM, Fazenda, and Pilar mines in Brazil. Consolidated gold production during the period totalled 93,269 ounces (oz) at all-in sustaining costs (AISC) of $966 per oz sold, resulting in an AISC margin of $22.1 million.
Leagold CEO Neil Woodyer commented: “During Q3 we made significant progress toward integrating our three new mines by making some important changes to the reporting and organizational structures in Brazil. We completed the updated feasibility study on the Santa Luz project in October, which demonstrates that it is a very attractive growth opportunity. A key next step for Leagold is the completion of our site-wide review of the Los Filos mine in Mexico, so we can then determine our preferred capital allocation priorities. The Los Filos study is on schedule for completion by year end.
“Among our mines, Fazenda and Pilar both performed as expected in the quarter. Los Filos production was below expectations in Q3, mainly due to the significant increase in contained gold placed on the pads that has caused recovery delays. With Los Filos production set to increase in the near term, the restart of RDM now scheduled for November 20, and the expected cost savings from optimizations in Brazil, we are looking forward to increased production and cash flow in 2019.”
Q3 Financial and Operating Results
At the Los Filos mine in Mexico, Q3 production totalled 42,617 oz at AISC of $1,060 per oz sold. Total material mined from the open pit was 7,400K tonnes at an average grade of 0.65 g/t gold. Ore mined from underground was 172K tonnes – a 19% increase over Q2 – at an average grade of 6.26 g/t. Q3 production was similar to Q2, despite a 49% increase in contained gold placed on the heap leach pads in Q3, due to lower than anticipated recoveries of the lower grade, uncrushed and unagglomerated open pit material. The large increase in material placed on the pads may have extended the normal leaching curve by interrupting solution flow and saturation rates. The processing team is now focused on optimizing recoveries for the lower grade material, and production is expected to increase as recovery rates normalize. Production in October improved to 16,026 oz, a 13% increase over the monthly average of 14,206 ounces in Q3.
Also at Los Filos, Leagold launched initiatives in Q3 which are expected to result in annualized savings of up to $4 million, including staff reductions, new supply chain procedures and controls, and elimination of air charter transportation.
In Brazil, Leagold continued to make progress in Q3 with the integration of the three operating mines acquired in May 2018. Programs were launched to transform each mine into stand-alone profit centres, which included increased management responsibility and the transfer of financial and operating accountability to the mines. Workforce reductions at the Belo Horizonte office were implemented in Q3 and are expected to total 50% by year-end. Excess mine site personnel reduction programs were also introduced in Q3, with total reductions of more than 400 positions representing approximately 15% of the total Brazilian workforce. In addition, operating and maintenance programs have been strengthened to improve long-term performance and cost reductions, and new forecasting and purchasing procedures that include new supply chain and inventory controls were launched during the quarter.
At the RDM mine, Q3 production totalled 16,596 oz, slightly below Leagold’s August 2018 guidance for H2 2018 as water conservation measures due to regional drought conditions began to impact production. Total material mined in Q3 was 6,993K tonnes at an average grade of 1.18 g/t gold. AISC in Q3 totalled $1,002 per oz sold, higher than anticipated due to limited power availability from expensive diesel power generators. To improve availability, additional diesel gensets were rented in Q3 and the grid power project was re-started. Once completed, the lower cost grid power is expected to reduce costs by $6 million annually, from approx. $0.23/kwh to approx. $0.06/kwh. The increased availability of power from the grid will also permit the use of a full load of steel balls in the mill, improving grind size and gold recovery and enabling increased mill throughput.
Subsequent to quarter end, RDM was temporarily shut down due to regional drought conditions. With the onset of the rainy season, the water storage facilities have now accumulated the required water to support the restart of operations scheduled for November 20, 2018. Leagold is now implementing a phased restart of RDM using the existing diesel gensets, and will transition to the national grid during the commissioning of the new power line expected in late December. As the water in the reservoir builds up over the rainy season (typically October through April), and as RDM continues to implement water use reduction programs, RDM is expected to be well positioned for stable and continuous operations in 2019.
At the Fazenda mine, Q3 production totalled 20,167 oz, trending ahead of Leagold’s August 2018 guidance of 33,000-36,000 oz for H2. AISC of $727 per oz sold in Q3 was also ahead of H2 guidance of $875-$925 per oz. Total ore mined from the open pit was 40K tonnes at an average grade of 1.24 g/t gold. Ore mined from underground was 343K tonnes at an average grade of 1.87 g/t. Efficiencies are expected to continue to improve at Fazenda following delivery of new underground mining equipment in Q3.
At the Pilar mine, Q3 production totalled 13,889 oz, trending slightly ahead of Leagold’s August 2018 guidance of 25,000-27,000 oz for H2. AISC of $977 per oz sold in Q3 was also ahead of H2 guidance of $1,000-$1,050 per oz. Ore mined from underground was 267K tonnes at an average grade of 1.38 g/t. The plant achieved record throughput in the quarter which resulted in strong production performance.
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