GCM Mining Announces Second Quarter and First Half 2022 Results
12 August 2022 - 7:49AM
GCM Mining Corp. (TSX: GCM; OTCQX: TPRFF) announced today the
release of its unaudited interim condensed consolidated financial
statements (“Financial Statements”) and accompanying management’s
discussion and analysis (MD&A) for the three and six months
ended June 30, 2022. All financial figures contained herein are
expressed in U.S. dollars (“USD”) unless otherwise noted. Non-GAAP
financial performance measures in this press release are identified
with “NG”. For a detailed description of each of the non-GAAP
measures used in this press release and a detailed reconciliation
to the most directly comparable measure under IFRS, please refer to
the Company’s MD&A.
Second Quarter and First Half 2022
Highlights
- GCM announced on July 25, 2022 that
it will merge with Aris Gold Corporation (“Aris”) through a plan of
arrangement to create a leading Americas gold producer (the
“Aris Merger”). Under the terms of the Aris
Merger, all the outstanding Aris shares not held by GCM will be
exchanged at a ratio of 0.5 of a common share of GCM for each
common share of Aris. Based on respective share values as of the
date of execution of the Arrangement Agreement, on closing, GCM
shareholders and Aris shareholders (taking into consideration the
44.3% of Aris currently held by GCM) are expected to own, on a
diluted in-the-money basis, approximately 74% and 26% of the
combined group, respectively. The no premium transaction will
create the top-of-the-class company among junior producers and the
largest gold company in Colombia, with diversification in Guyana
and Canada. The Aris Merger also brings together teams with
unmatched experience in Colombia and extensive project development
and mine building expertise. The Aris Merger is subject to GCM and
Aris shareholder approval, receipt of all required governmental and
regulatory approvals including Toronto Stock Exchange (“TSX”) and
Colombian anti-trust approvals, and other customary conditions. The
shareholder meetings have been set for September 19, 2022 and
closing is expected a short time thereafter.
- Subsequent to the announcement of
the proposed Aris Merger, Fitch Ratings and
S&P Global Ratings have both affirmed B+
ratings for the Company’s Senior Notes due 2026. Fitch Ratings
maintained its outlook at Stable while S&P Global Ratings
revised its outlook to Positive from Stable. The ratings reflect
the view that GCM will have an immediately increased productive
asset base with the addition of the Marmato Project, which is
currently in production and undergoing an expansion, which will
accelerate deleveraging and result in larger scale and cash flow
generation without requiring additional funding or compromising its
liquidity. With both the Toroparu Project and the expansion of the
Marmato Project funded and the combined group generating Free Cash
Flow from its producing assets, the combined group following the
proposed Aris Merger is expected to maintain a low leverage
profile.
- GCM’s gold
production from its Segovia Operations totaled 53,198
ounces in the second quarter of 2022, up 2% over the second quarter
last year. For the first half of 2022, gold production was 103,149
ounces compared with 103,684 ounces in the first half last year. In
July 2022, Segovia produced 17,951 ounces of gold bringing
Segovia’s trailing 12 months’ total gold production as of the end
of July 2022 to 210,975 ounces, up 2% over 2021. With completion of
the expansion of the Company’s processing plant at Segovia to 2,000
tpd in August 2022, GCM is on track to meet its annual production
guidance for 2022 of between 210,000 and 225,000 ounces of
gold.
- The new polymetallic
recovery plant constructed in 2021 at Segovia has been in
steady operation through the first half of 2022 and is expected to
commence sales of stockpiled zinc and lead concentrates under an
offtake contract with an international customer commencing in the
third quarter of 2022.
- Consolidated
revenue amounted to $101.4 million in the second
quarter of 2022, up 5% over the second quarter last year on the
strength of the production increase and a 3% increase in realized
gold prices, bringing revenue for the first half of 2022 to $202.7
million, up from $198.3 million in the first half of 2021 (which
included $5.1 million from Aris prior to the loss of control of
Aris on February 4, 2021).
- At the Segovia Operations,
total cash costs NG averaged $877
per ounce in the second quarter of 2022, reflecting an increase in
the proportion of its quarterly gold production sourced from
higher-cost, high-grade small-scale miners, the implementation of
annual labor rate increases, an increase in local electricity rates
and a temporary shift toward a higher cost electricity source while
a transformer at the lower cost electricity source was repaired,
and an increase in various activity-based costs such as maintenance
programs associated with older underground mine equipment, the
semi-annual replacement of the mill liners in June, the delivery of
mechanized equipment into the Carla mine and additional headcount
required to support these activities. The Company expects that its
total cash costs per ounce will decrease in the third quarter of
2022 with electricity sourcing back to normal, the maintenance
activities noted above having been completed and the impact of the
plant capacity expansion that will reduce fixed costs on a per
ounce basis. This brings Segovia’s total cash cost for the first
half of 2022 to $847 per ounce compared with $796 per ounce in the
first half last year. Including Marmato, consolidated total cash
costs in the first half last year was $816 per ounce.
- All-in sustaining
costs (“AISC”) NG
per ounce sold for the Segovia Operations
increased to $1,228 in the second quarter of 2022, largely
reflecting the increase in total cash costs per ounce. This brings
Segovia’s AISC to $1,207 per ounce in the first half of 2022
compared with $1,110 per ounce in the first half last year.
Segovia’s AISC for the first half of 2022 reflects the increase in
total cash costs per ounce and the $4.0 million of fees, equivalent
to about $37 per ounce sold, included in G&A expenses in the
first half of 2022 related to the Company’s ongoing arbitration
proceedings with the International Centre for Settlement of
Investment Disputes (“ICSID”) in respect of its claim against the
Republic of Colombia (the “FTA Claim”). Including Marmato,
consolidated AISC in the first half last year was $1,133 per
ounce.
- GCM maintained its commitment to
its exploration drilling campaigns in the first
half of 2022, completing a total of approximately 38,000 meters of
drilling through its in-mine/near-mine and mine geology programs at
its producing mines and another approximately 15,000 meters through
its brownfield drilling program at Cristales, Marmajito, Manzanillo
and Vera. GCM’s press release dated June 27, 2022 reported the
continuation of significant high-grade intercepts at its producing
Sandra K and El Silencio mines and success in its brownfield
drilling campaign on the La Guarida-Cristales Vein System including
48.45 g/t Au and 34.2 g/t Ag over 0.47 meters.
- Adjusted EBITDA
NG amounted to $45.9 million for the second
quarter of 2022 compared with $48.0 million in the second quarter
last year. For the first half of 2022, adjusted EBITDA amounted to
$91.1 million compared with $94.3 million in the first half last
year. This brings the trailing 12 months’ total adjusted EBITDA at
the end of June 2022 to $168.4 million compared with $171.6 million
in 2021.
- Net cash provided by
operating activities in the second quarter of 2022
increased to $31.5 million from $12.8 million in the second quarter
last year, benefitting from the receipt of pending VAT refunds from
2021 and lower income tax payments this year. For the first half of
2022, net cash provided by operating activities was $55.7 million
compared with $26.4 million in the first half last year (which was
net of $10.1 million used by Aris prior to the loss of control in
early 2021). This brings the trailing 12 months’ net cash provided
by operating activities at the end of June 2022 to $109.9 million,
up from $80.6 million in 2021.
- Free Cash Flow
NG in the second quarter of 2022 was $20.5 million
compared with negative $2.8 million in the second quarter last
year, benefitting from the improvement in operating cash flow.
Similarly, for the first half of 2022, Free Cash Flow improved to
$31.2 million compared with negative $0.3 million in the first half
last year. This brings the trailing 12 months’ Free Cash Flow at
the end of June 2022 to $57.7 million, up from $26.2 million in
2021.
- The Company’s balance
sheet remained strong with a cash position of $265.5
million at June 30, 2022. GCM used a portion of its cash position
in the second quarter of 2022 to fund the acquisition of the $35.0
million Aris Convertible Debenture due October 12, 2023. The
Company also has $138.0 million of funding available for
construction of its Toroparu Project in Guyana through a precious
metals stream facility with Wheaton Precious Metals (Caymans) Ltd.
(“Wheaton”). Other than scheduled interest payments, the Company
has no maturities of its long-term debt in the next 12 months.
- GCM has been making considerable
progress at the Toroparu Project in Guyana in the
first half of 2022 focused on pre-construction activities,
preparation of the PFS, finalization of the mining license and
selection and engagement of key contractors to be involved in the
construction and eventual operation of the project. The Company
incurred a total of $31.0 million of non-sustaining capital
expenditures NG in the first half of 2022 at the Toroparu Project.
In light of the proposed Aris Merger, it is now expected that the
PFS will not be finalized until after the closing of the
transaction. The updated application for the mining license was
submitted in early 2022 and the Company is continuing to support
the approval process for the mining license which it expects to
finalize by the fourth quarter of 2022.
- The Company returned a total of
$10.1 million to shareholders in the first half of 2022 with
payment of its monthly dividends totaling $7.0
million and the repurchase of approximately 0.8 million shares for
cancellation under its Normal Course Issuer Bid (“NCIB”) at a cost
of $3.1 million.
- Income from
operations in the second quarter of 2022 was $37.8
million, down from $39.6 million in the second quarter last year
largely due to the impact of the increase in Segovia’s total cash
cost NG per ounce sold on cost of sales, offset partially by a
reduction in share-based compensation. For the first half of 2022,
the increased level of legal costs associated with the FTA Claim,
most of which impacted the first quarter of 2022, and the increased
total cash costs per ounce sold in the second quarter of 2022
contributed to a decrease in income from operations to $73.5
million compared with $78.7 million in the first half last
year.
- The Company reported net
income of $39.0 million ($0.40 per share) in the second
quarter of 2022 compared with $29.8 million ($0.41 per share) in
the second quarter last year. The gain on financial instruments
recorded in the second quarter of 2022 more than compensated for
the decrease in income from operations, higher finance costs and
income taxes, and an increase in the loss from equity accounting in
associates, all compared with the second quarter last year. For the
first half of 2022, the Company reported net income of $44.2
million ($0.45 per share) compared with $148.1 million ($2.31 per
share) in the first half last year, reflecting the decrease in
income from operations, higher finance costs and income taxes, and
an increase in the loss from equity accounting in associates
compared with the first half last year. Net earnings in the first
half of 2021 also included the benefit of a $56.9 million gain on
loss of control of Aris and an $8.9 million gain on sale of the
Zancudo Project, offset partially by $9.8 million of transaction
costs incurred by Aris in connection with the loss of control in
early 2021.
- The Company reported
adjusted net income NG for the second quarter and
first half of 2022 of $14.2 million ($0.15 per share) and $29.0
million ($0.30 per share), respectively, compared with $23.6
million ($0.33 per share) and $45.5 million ($0.69 per share),
respectively, in the second quarter and first half last year. The
decrease in adjusted net income in the second quarter and first
half of 2022 compared with the corresponding periods last year
largely reflects the decrease in income from operations as noted
above together with increase in finance costs and an increase in
income tax expense due to the tax rate increase in Colombia
effective in 2022.
- GCM published its second annual
sustainability report in June 2022. The report
reflects a focused effort on measuring and disclosing the Company’s
Environmental, Social and Governance priorities and performance and
highlights GCM’s initiatives and progress in line with
international reporting standards.
Selected Financial
Information
|
Second Quarter |
First Half |
|
|
2022 |
|
2021 |
|
|
2022 |
|
2021 |
|
Operating data |
|
|
|
|
Gold produced (ounces) (1) |
|
53,198 |
|
52,198 |
|
|
103,149 |
|
103,684 |
|
Gold sold (ounces) |
|
53,884 |
|
52,838 |
|
|
107,529 |
|
108,155 |
|
Average realized gold price ($/oz sold) (2) |
$ |
1,859 |
$ |
1,797 |
|
$ |
1,859 |
$ |
1,805 |
|
Total cash costs ($/oz sold) (2) |
|
877 |
|
767 |
|
|
847 |
|
816 |
|
AISC ($/oz sold) (2) |
|
1,228 |
|
1,101 |
|
|
1,207 |
|
1,133 |
|
|
|
|
|
Financial
data ($000’s, except per share amounts) |
|
|
|
Revenue |
$ |
101,371 |
$ |
96,353 |
|
$ |
202,693 |
$ |
198,272 |
|
Adjusted EBITDA (2) |
|
45,863 |
|
47,995 |
|
|
91,081 |
|
94,318 |
|
Net income |
|
38,965 |
|
29,799 |
|
|
44,203 |
|
148,104 |
|
Per share - basic |
|
0.40 |
|
0.41 |
|
|
0.45 |
|
2.31 |
|
Per share - diluted |
|
0.15 |
|
0.28 |
|
|
0.24 |
|
1.47 |
|
Adjusted net income (2) |
|
14,224 |
|
23,556 |
|
|
29,005 |
|
45,504 |
|
Per share – basic (2) |
|
0.15 |
|
0.33 |
|
|
0.30 |
|
0.69 |
|
Per share - diluted (2) |
|
0.13 |
|
0.28 |
|
|
0.27 |
|
0.58 |
|
Net cash provided by operating activities |
|
31,525 |
|
12,786 |
|
|
55,734 |
|
26,403 |
|
Free cash flow (2) |
|
20,483 |
|
(2,834 |
) |
|
31,171 |
|
(337 |
) |
|
June 30,2022 |
December 31,2021 |
|
|
|
|
Balance sheet
($000’s): |
|
|
Cash and cash equivalents |
$ |
265,501 |
$ |
323,565 |
|
Gold Bullion (3) |
|
2,688 |
|
4,479 |
|
Senior Notes due 2026 – principal amount outstanding (4) |
|
300,000 |
|
300,000 |
|
Convertible Debentures due 2024 – principal amount outstanding
(5) |
CA18,000 |
|
CA18,000 |
|
(1) First half 2021 includes production from the
Marmato Project up to February 4, 2021, the date of loss of control
of Aris.(2) Refer to “Non-IFRS Measures” in the Company’s
MD&A.(3) The Company is maintaining a portion of its liquidity
in gold bullion. As at June 30, 2022, the Company had 1,500 ounces
in its gold bullion account (December 31, 2021 – 2,500 ounces).(4)
The Senior Notes were issued in August 2021 and are recorded in the
Financial Statements at amortized cost. At June 30, 2022, the
carrying amount of the Senior Notes outstanding, including accrued
interest of $8.1 million, was $296.9 million (December 31, 2021 -
$294.8 million, including $8.1 million of accrued interest).(5) The
Convertible Debentures are recorded in the Financial Statements at
fair value. At June 30, 2022, the carrying amount of the
Convertible Debentures outstanding was $14.0 million (December 31,
2021 - $19.5 million). Second Quarter and First Half 2022
Results Webcast
As a reminder, GCM Mining will host a conference
call and webcast on Friday, August 12, 2022 at 9:00 a.m. Eastern
Time to discuss the results.
Webcast and call-in details are as follows:
|
Live Event link: |
https://edge.media-server.com/mmc/p/yswncieo |
|
Canada/ International Toll: |
1 (647) 484-8332 PIN: 19483475# |
|
Canada Toll Free: |
1 (866) 455-3403 PIN: 19483475# |
|
United States Toll: |
1 (404) 400-0571 PIN: 19483475# |
|
United States Toll Free: |
1 (866) 374-5140 PIN: 19483475# |
|
Colombia Toll: |
+57 601 485-0348 PIN: 19483475# |
|
Colombia Toll Free: |
+57 800 519-0788 PIN: 19483475# |
|
Conference ID: |
EV00136622 |
|
|
|
Participants should note that for the Q&A
portion of the webcast, questions must be submitted through the
live event webcast portal noted above.
A replay of the webcast will be available at
www.gcm-mining.com from Friday, August 12, 2022 until Friday,
September 9, 2022.
About GCM Mining Corp.
GCM Mining is a mid-tier gold producer with a
proven track record of mine building and operating in Latin
America. In Colombia, the Company is the leading high-grade
underground gold and silver producer with several mines in
operation at its Segovia Operations. Segovia produced 206,389
ounces of gold in 2021. In Guyana, the Company is advancing its
fully funded Toroparu Project, one of the largest undeveloped
gold/copper projects in the Americas, which is expected to commence
production of more than 200,000 ounces of gold annually in 2024.
GCM Mining has equity interests in Aris Gold Corporation (~44%;
TSX: ARIS; Colombia – Marmato, Soto Norte; Canada - Juby), Denarius
Metals Corp. (~32%; TSX-V: DSLV; Spain – Lomero-Poyatos and
Colombia – Guia Antigua, Zancudo) and Western Atlas Resources Inc.
(~26%; TSX-V: WA: Nunavut – Meadowbank).
Additional information on GCM Mining can be
found on its website at www.gcm-mining.com and by reviewing
its profile on SEDAR at www.sedar.com.
Cautionary Statement on Forward-Looking
Information:
This news release contains "forward-looking
information", which may include, but is not limited to, statements
with respect to the proposed Aris Merger, production guidance, the
Toroparu Project construction, mining license and technical
studies, and other anticipated business plans or strategies. Often,
but not always, forward-looking statements can be identified by the
use of words such as "plans", "expects", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates", or
"believes" or variations (including negative 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 statements involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of GCM Mining to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Factors
that could cause actual results to differ materially from those
anticipated in these forward-looking statements are described under
the caption "Risk Factors" in the Company's Annual Information Form
dated as of March 31, 2022 which is available for view on SEDAR at
www.sedar.com. Forward-looking statements contained herein are made
as of the date of this press release and GCM Mining disclaims,
other than as required by law, any obligation to update any
forward-looking statements whether as a result of new information,
results, future events, circumstances, or if management's estimates
or opinions should change, or otherwise. There can be no assurance
that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, the reader is
cautioned not to place undue reliance on forward-looking
statements.
For Further Information,
Contact:Mike DaviesChief Financial Officer(416)
360-4653investorrelations@gcm-mining.com
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