June 2, 2011
Cash Costs of $462 Per Ounce Produced in First Quarter 2011
Avion Gold Corporation 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:
A play-back recording will be available shortly after the completion of the call on Avion’s website at www.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.
In addition to the release above, Avion filed another release making some corrections regarding miscalculations in revenues:
Avion Gold Re-Files March 31, 2011 Interim Financial Statements to Reflect Increase In First Quarter Earnings to $12.56 Million