Increases Royalty Revenue Guidance and Expands Kemess East
Exploration Program
TORONTO, Aug. 8, 2016 /PRNewswire/ - AuRico Metals Inc.
(TSX: AMI),("AuRico" or the "Company") today reported
its financial results for the quarter ended June 30, 2016. The Company also announced
increased guidance on royalty revenue and an expanded exploration
program at Kemess East. For complete details of the Financial
Statements and associated Management's Discussion and Analysis for
the quarter ended June 30, 2016,
please see the Company's filings on SEDAR (www.sedar.com) or the
Company's website (www.auricometals.ca). All amounts are in US
dollars unless otherwise indicated.
Recent Highlights
- On August 2, 2016, the Company
announced a C$10.0 million bought
deal equity financing whereby the Company will issue 10,000,000
common shares at C$1.00 per
share. The Company has granted the underwriters an
over-allotment option to purchase up to an additional 1,500,000
common shares under the same terms;
- On August 8, 2016, the Company
announced that Alamos Gold Inc. ("Alamos") has exercised its
participation right with respect to the bought deal announced
above. As a result, the Company will issue up to an
additional 1,273,000 common shares through a private placement at
C$1.00 per share;
- During Q2 2016, recognized royalty revenue of $2.0 million, comprised of $0.9 million from the Fosterville royalty, $0.8 million from the Young-Davidson royalty, and $0.3 million from the Hemlo, Eagle
River and Stawell royalties;
- On July 29, 2016, Newmarket Gold
Inc. ("Newmarket") announced that it has increased guidance at
Fosterville to 130,000 to 140,000
ounces for 2016, up from previous guidance of 110,000 to 120,000
ounces;
- On July 27, 2016, Barrick Gold
Corporation ("Barrick") announced that it has increased guidance at
Hemlo to 215,000 to 230,000 ounces
for 2016, up from previous guidance of 200,000 to 220,000
ounces;
- The Company has increased its royalty revenue guidance to
between $7.7 million to $8.1 million
from its original guidance of $6.6 million
to $7.1 million;
- The Company has expanded its Kemess East exploration program to
$4.4 million this year with a focus
on further expanding and infilling the previously announced
resource. The increased program has been funded by CEE
("Canadian Exploration Expenses") flow-through financings for
$2.7 million completed subsequent to
June 30th;
- On May 12, 2016, the Company
announced that the Company's application for an Environmental
Assessment ("EA") Certificate for the Kemess Underground Project
entered the 180-day review period; and
- On May 6, 2016, the Company
announced that it had filed the National Instrument 43-101
technical report for the Kemess Underground Project and the Kemess
East Resource Estimate.
Commenting on the results, Chris
Richter, President and CEO stated, "We are pleased to report
a fourth consecutive quarter of higher royalty revenue and to be
increasing our annual royalty revenue guidance. At Kemess we
are advancing through the EA review process and are keen to
accelerate permitting efforts over the remainder of the year.
We are particularly excited about our expanded exploration program
at Kemess East and look forward to the results from three drills
currently in operation."
Operations Update
Royalties
The Company estimates quarterly revenue from its royalty assets
based on a combination of guidance and recent production of the
underlying operations. Revenues are adjusted in the
subsequent quarter to reflect actual royalty payments received,
should they differ from the estimated revenue.
During the three and six months ended June 30, 2016, the Company recognized revenues
from the following royalties:
(in
millions)
|
Q2
2016
|
Year-to-date
2016
|
Revised
Guidance
|
Fosterville 2% NSR
royalty
|
$0.9
|
$1.6
|
$3.4 –
$3.5
|
Young-Davidson 1.5% NSR
royalty
|
$0.8
|
$1.5
|
$3.3 -
$3.4
|
Other
royalties
|
$0.3
|
$0.5
|
$1.0 -
$1.2
|
Total
|
$2.0
|
$3.6
|
$7.7 -
$8.1
|
|
|
|
|
The Company recognized revenue of $0.9
million from the Fosterville 2% NSR royalty in the three months
ended June 30, 2016. In Q2
2016, Fosterville announced
another record quarter, producing 37,245 ounces at a mill grade of
7.50 grams per tonne gold. This is a 12% increase over
production of 33,138 ounces in Q1 2016 which was, at that time, a
record. Record production during the first half of 2016 has
led Newmarket to increase its
production guidance at Fosterville
to 130,000 to 140,000 ounces, up from previously announced guidance
of 110,000 to 120,000 ounces. In addition, Newmarket reported encouraging drill
intercepts at its Harrier South gold system during the quarter,
including 22.13 gold grams per tonne over 3.4 metres in hole UDH
1559 (please refer to the press releases dated June 27, 2016, July 12,
2016 and July 29, 2016
available on Newmarket's website
at www.newmarketgoldinc.com).
During Q2 2016, the Company recognized revenue of $0.8 million from the Young-Davidson 1.5% NSR royalty. Underground
mining rates at Young-Davidson in Q1 2016 averaged 5,776 tonnes per
day ("TPD"), increasing to an average of 6,300 TPD in April.
Alamos notes that the operation remains on target to achieve 7,000
TPD by the end of 2016, which will have a favorable impact on
production in the second half of 2016 (please refer to the press
release dated May 12, 2016 available
on Alamos' website at www.alamosgold.com).
The Company's 1% NSR royalty on the Stawell mine in Victoria, Australia, commenced on January 1, 2016 in accordance with the NSR
agreement. The Company recognized revenue of $0.1 million from this royalty in Q2 2016, based
on 8,504 ounces of production during the quarter.
Newmarket continued drilling the
Aurora B gold discovery during the quarter, completing an eight
hole drill program which successfully demonstrated the continuation
of mineralization both up and down plunge. Drilling on Aurora
B will continue in the third quarter with two rigs operational
(please refer to the press release dated July 12, 2016 available on Newmarket's website at
www.newmarketgoldinc.com).
During Q2 2016, the Company recognized revenue of $0.1 million from its 0.25% royalty on the
Williams mine at Hemlo. During the quarter, Barrick announced
total production of 52,000 ounces at Hemlo, a 24% increase from the 42,000 ounces
produced in the second quarter of 2015. On July 27, 2016, Barrick announced that it has
increased guidance at Hemlo to
215,000 to 230,000 ounces for 2016, up from previous guidance of
200,000 to 220,000 ounces. Not all production at Hemlo is attributable to the Company's
Williams-Hemlo royalty, therefore,
total attributable production will be less than the Q2 2016
production reported by Barrick (please refer to the 2016 Q2 Mine
Statistics, and the press release dated July
27, 2016, both available on Barrick's website at
www.barrick.com).
The Company recognized revenue of $0.1
million from its 0.5% NSR royalty on the Eagle River
underground mine during the three months ended June 30, 2016. In Q2 2016, the Eagle River
underground mine reported production of 10,210 ounces. During
the quarter, Wesdome Gold Mines Ltd. ("Wesdome") also released
encouraging initial results from its 7 Zone exploration program,
including the results of 15 underground drill holes. The 7
Zone has now been traced 200 metres up-plunge from existing
reserves to the 840 metre level and continues to remain open
towards surface (please refer to the press releases dated
May 11, 2016 and May 31, 2016 available on Wesdome's website at
www.wesdome.com).
Kemess Underground
The British Columbia Environmental Assessment Office ("EAO")
initiated the 180 day EA review period on May 11, 2016. As of July 11, initial questions and comments from
working group members, the general public and our First Nations
partners had been received. By August
5, the Company had provided responses to 88% of these
comments.
On August 2, the Company sent a
letter to the EAO requesting an eight week extension to the
application review period on account of the Company receiving many
of the comments referenced above later than anticipated, and to
accommodate a request from our First Nations partners for
additional time for community engagement, which the Company
supports. The Company's request for an extension was granted
on August 4th.
Towards the end of the review period, the EAO will conclude
their assessment and submit their report to both the provincial and
federal ministers for their respective decisions. These
decisions are expected in Q1 2017.
Kemess East
The Company has increased its planned drilling at Kemess East
from $1.7 million to $4.4 million, having raised additional
exploration funds through flow-through financings completed on
July 22, 2016 and August 3, 2016. The ongoing drill campaign
is focused on infilling and expanding the high grade core of Kemess
East which was identified in 2015. The Company currently has
3 drills turning and the first set of assay results are expected in
the near future.
Near-Term Corporate Objectives
The Company's objectives over the next several months
include:
- Evaluate potential royalty acquisition opportunities;
- Progress EA review for Kemess Underground;
- Commence permitting and detailed engineering for Kemess
Underground;
- Release the results of an expanded summer drill campaign at
Kemess East (Q3 and Q4 2016); and
- Continue efforts to reduce care and maintenance costs at the
Kemess site to targeted levels by the end of 2016.
Outlook
The Company provided its initial annual outlook within its
MD&A for the year ended December 31,
2015, and re-confirmed this guidance in its Q1
MD&A. The Company is updating its guidance and now
expects the following for the full year (assuming a 0.75 CAD to USD exchange rate):
(in
millions)
|
Original
|
Revised
|
Royalty revenues
(pre-tax)
|
$6.6 to
$7.1
|
$7.7 to
$8.1
|
Royalty revenues
(after-tax)
|
$5.6 to
$6.1
|
$6.6 to
$7.0
|
General and administrative
expense, excluding stock-based
compensation
|
$2.5
|
$2.5
|
Care and maintenance
expense
|
$4.5
|
$4.5
|
Kemess Underground project
capital expenditures
|
$1.5 to
$2.5
|
$3.0 to
$3.8
|
Kemess East exploration
expenditures
|
$1.7
|
$4.4
|
The Company has reported stronger revenues to date, as a result
of both an improvement in gold prices, and increased production
from the Fosterville mine in the
first half of 2016. In its most recent forecast, the Company
has revised its assumed gold price to $1,300 per ounce for the second half of the year,
and has increased its production assumptions at Fosterville to be in line with revised
Newmarket guidance of 130,000 to
140,000 gold ounces.
Conditional on the closing of the announced bought deal
financing, the Company will increase its guidance for expenditures
on Kemess Underground from a range of $1.5
million to $2.5 million to a range of $3.0 million to $3.8 million. The
additional spend relates to accelerating permitting efforts for
Kemess Underground during the remainder of 2016.
The Company has increased its guidance on exploration spending
at Kemess East to $4.4 million.
These expenditures have been funded through flow-through financings
completed subsequent to June 30,
2016.
Preliminary Short Form Prospectus
In connection with the recently announced bought deal equity
financing the Company expects to file its preliminary short form
prospectus by the end of day on August 8,
2016.
About AuRico Metals
AuRico Metals is a mining royalty and development company whose
producing gold royalty assets include a 1.5% NSR royalty on the
Young-Davidson Gold Mine, a 0.25% NSR royalty on the Williams Mine
at Hemlo, and a 0.5% NSR royalty
on the Eagle River Mine – all located in Ontario, Canada. AuRico Metals also has a 2%
NSR royalty on the Fosterville Mine and a 1% NSR royalty on the
Stawell Mine, located in Victoria,
Australia. Aside from its diversified royalty portfolio,
AuRico owns (100%) the advanced Kemess Gold-Copper Project in
British Columbia,
Canada. AuRico Metals' head office is located in Toronto, Ontario, Canada.
Cautionary Statement
This press release contains forward-looking statements and
forward-looking information as defined under Canadian and U.S.
securities laws. All statements, other than statements of
historical fact, are, or may be deemed to be, forward-looking
statements. The words "expect", "believe", "anticipate", "will",
"intend", "estimate", "forecast", "budget" and similar expressions
identify forward-looking statements. Forward-looking statements
include statements related to the Company's outlook and key
deliverables for Kemess over the next year. These statements
are based on a number of factors and assumptions that, while
considered reasonable by management at the time of making such
statements, are inherently subject to significant business,
economic and competitive uncertainties and contingencies.
Known and unknown factors could cause actual results to differ
materially from those projected in the forward-looking
statements. Such forward-looking statements and the factors
and assumptions underlying them in this document include, but are
not limited to:
- Royalty revenue guidance may be impacted by the performance of
the Young-Davidson, Fosterville, Stawell, Hemlo and Eagle
River mines. Management has based its revenue
assumptions on the latest guidance provided by the operators of
these assets, but there is uncertainty as to whether operators will
achieve stated production guidance. Royalty revenue is also
based on an assumed gold price of $1,300 per ounce. The Company's gold price
assumption may be inaccurate; every $50 change in gold price assumption impacts
after-tax revenue by $0.2 million
(for the last 6 months of 2016).
- General and administrative expense guidance may be impacted by
changes in foreign exchange rates, employee relations, litigation,
and business opportunities that may be pursued by the Company.
- Care and maintenance expense guidance may be impacted by
changes in foreign exchange rates, employee relations, electricity
rates in British Columbia, weather
in the region surrounding the Kemess site, equipment reliability,
quality of service received by vendors and consultants, and the
price of consumables.
- Kemess underground capital expenditures are at the Company's
discretion and will be impacted by changes in foreign exchange
rates, the number of comments or questions raised by First Nations
partners, working group members, and the general public during the
EA review period, additional studies required in order to address
concerns raised and the results of those studies, the results of
the Company's updated feasibility study, optimization efforts by
management, and credit market conditions and conditions in
financial markets generally.
- The estimates, models and assumptions contained in the
Feasibility Study, which may be impacted by changes in commodity
prices and the exchange rate between the Canadian dollar and US
dollar from assumed levels, estimated future production and cost of
sales forecasts meeting expectations, estimated labour and
materials costs being consistent with the Company's expectations,
the accuracy of current mineral reserve and mineral resource
estimates as contemplated by the Feasibility Study, the viability
of Kemess Underground including, but not limited to, permitting,
development and expansion being consistent with the Company's
current expectations, access to capital markets, including but not
limited to identifying financing options and securing partial
project financing for the Kemess Underground project, being
consistent with the Company's current expectations.
- The estimates, models and assumptions contained in the Kemess
East Mineral Resource estimate, which may be impacted by changes in
commodity prices and the exchange rate between the Canadian dollar
and US dollar from assumed levels, the accuracy of current mineral
resource estimates, as contemplated by the Mineral Resource
estimate, and metallurgical recoveries being consistent with the
Company's current expectations.
The Company has made forward-looking statements relating to
corporate objectives and key deliverables over the next 12 months,
including permitting and the EA, the Company's ability to fund
forecasted cash shortfalls, the Company's ability to create value
for shareholders, sufficiency of working capital for future
commitments and other statements that express management's
expectations or estimates of future performance.
Actual results and developments are likely to differ, and may
differ materially, from those expressed or implied by the
forward-looking statements contained herein. Such statements are
based on a number of assumptions which may prove to be incorrect,
including assumptions about: business and economic conditions;
commodity prices and the price of key inputs such as labour, fuel
and electricity; credit market conditions and conditions in
financial markets generally; development schedules and the
associated costs; ability to procure equipment and supplies and on
a timely basis; the timing and ability to obtain permits and other
approvals for projects and operations including provincial and
federal approval of the environmental assessment application; the
ability to attract and retain skilled employees and contractors for
the operations; the accuracy of reserve and resource estimates; the
impact of changes in currency exchange rates on costs and results;
interest rates; taxation; and ongoing relations with employees and
business partners. The Company disclaims any intention or
obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Readers are cautioned that forward-looking statements are not
guarantees of future performance. All of the forward-looking
statements made in this press release are qualified by these
cautionary statements. The Company disclaims any intention or
obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Other information
The technical information disclosed in this press release
relating to the Kemess Underground project, Kemess East Mineral
Resource and the Company's Young-Davidson and Fosterville NSR royalties has
been approved by Mr. John
Fitzgerald, an officer of the Company, who is a qualified
person within the meaning of National Instrument 43-101.
SOURCE AuRico Metals