(All amounts in US dollars, unless otherwise indicated)
2018 Highlights include:
Gold production of 302,550 ounces and sales of 300,053 gold ounces;
Revenue of $376.5 million;
Adjusted EBITDA1 of $89.5 million;
Net income of $15.3 million and earnings from mine operations of $58.3 million;
All-in sustaining costs (AISC)1 of $974 per ounce of gold sold;
AISC margin1 of $83.2 million; and
Cash balance of $53.0 million at December 31, 2018.
Vancouver, March 14, 2019 – Leagold Mining Corporation (TSX:LMC; OTCQX:LMCNF) (“Leagold” or the “Company”) reports Q4 and full year 2018 financial and operating results with consolidated gold production in 2018 of 302,550 ounces (oz) at AISC of $974 per oz sold and resulting in an AISC margin of $83.2 million. These results generated full-year earnings from mine operations of $58.3 million and net income of $15.3 million. Leagold’s 2018 results include the Brazilian operations on a post-acquisition basis from May 24 to year end.
Leagold CEO Neil Woodyer commented: “2018 was a transformational year as we grew into a diversified, multi-mine operator with four mines in two countries. In only two years, we have completed two significant acquisitions and established Leagold as a mid-tier gold producer. We are now producing gold at an annual rate of about 400,000 oz per year. Our internal growth projects have potential to grow production to 700,000 oz per year. These growth projects are the expansion of the Los Filos mine complex and the restart of construction of the Santa Luz project. Both have recently completed feasibility studies. We are advancing with construction planning and optimizing the sequencing of the major expansion projects as part of our financial planning.”
Table 1: 2018 Gold Production by Quarter (oz)
Mine Q1 2018 Q2 2018 Q3 2018 Q4 2018 Total 2018
Los Filos 51,003 43,541 42,617 58,201 195,362
RDMi,ii - 7,889 16,596 4,913 29,398
Fazendai - 7,460 20,167 19,041 46,668
Pilari - 5,627 13,889 11,606 31,122
Total 51,003 64,517 93,269 93,761 302,550
i For Q2 2018, the results for RDM, Fazenda and Pilar are included in Leagold’s results for the 38-day post-acquisition period from May 24, 2018 to June 30, 2018 (inclusive).
ii During Q4 2018, the RDM mine experienced a temporary shutdown from early October until November 20 due to regional drought conditions.
Table 2: Production and Costs for the Year Ended December 31, 2018
Mining physicals Unit Los Filos RDMii Fazendaii Pilarii Total
Gold produced oz 195,362 29,398 46,668 31,122 302,550
Gold sold oz 190,614 29,389 48,066 31,984 300,053
Cash cost details
Gold revenue $000s 241,126 36,028 58,992 39,256 375,402
Mining costs – open pit 33,905 9,808 2,933 - 46,646
Mining costs – underground 47,083 - 17,650 18,705 83,438
Processing costs 78,571 14,324 9,742 8,709 111,346
Site G&A costs 23,089 3,030 3,782 2,998 32,899
Change in inventory (28,183) 113 (23) 382 (27,711)
Other 831 535 805 985 3,156
Total cash costsi $000s 155,296 27,810 34,889 31,779 249,774
Land access payments 14,966 - 2 23 14,991
Royalties 1,809 897 848 582 4,136
Sustaining capitali 10,224 943 4,561 2,072 17,800
Sustaining capitali – stripping 5,477 - - - 5,477
Total AISCi $000s 187,772 29,650 40,300 34,456 292,178
AISC margini $000s 53,354 6,378 18,692 4,800 83,223
Cash costsi $/oz sold 815 946 726 994 832
AISC i $/oz sold 985 1,009 838 1,077 974
iCash costs, sustaining capital, AISC, and AISC margin are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to the section Non-IFRS Measures for a reconciliation to IFRS. AISC includes cash costs, royalties, land access and community payments and sustaining capital.
ii Includes the period May 24-December 31, 2018 for the RDM, Fazenda, and Pilar mines.
Table 3: Production and Costs for the Three Months Ended December 31, 2018
Mining physicals Unit Los Filos RDM Fazenda Pilar Total
Gold produced oz 58,201 4,913 19,041 11,606 93,761
Gold sold oz 54,001 5,574 18,849 11,580 90,004
Cash cost details
Gold revenue $000s 65,906 7,025 23,111 14,128 110,170
Mining costs – open pit 7,492 1,641 1,278 - 10,411
Mining costs – underground 13,146 - 7,454 7,851 28,451
Processing costs 21,908 3,237 4,387 4,063 33,595
Site G&A costs 6,041 1,066 1,714 1,417 10,238
Change in inventory (8,624) 583 (791) (761) (9,593)
Other 223 174 350 396 1,143
Total cash costsi $000s 40,186 6,701 14,392 12,966 74,245
Land access payments 3,668 - - 12 3,680
Royalties 389 171 356 217 1,133
Sustaining capitali 2,223 184 2,717 745 5,869
Sustaining capitali – stripping 1,614 - - - 1,614
Total AISCi $000s 48,080 7,056 17,465 13,940 86,541
AISC margini $000s 17,826 (31) 5,646 188 23,629
Cash costsi $/oz sold 744 1,202 764 1,120 825
AISC1 $/oz sold 890 1,266 927 1,204 962
i Cash costs, sustaining capital, AISC, and AISC margin are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to the section Non-IFRS Measures for a reconciliation to IFRS. AISC includes cash costs, royalties, land access and community payments and sustaining capital.
At the Los Filos mine complex in Mexico, production of 58,201 oz in Q4 2018 was up 37% over the previous quarter and set a new quarterly production record since acquisition. This production result was due to the significant increase in contained gold placed on the heap leach pad during the year and the delayed gold recovery rates that improved at the end of 2018, and have continued at expected levels into 2019. During Q4 2018, mining operations continued to perform well with ore mined from the open pits up 21% to 2.6 million tonnes and ore mined from underground operations up 3% to 177,000 tonnes.
Full-year production at Los Filos totalled 195,362 oz at AISC of $985 per oz sold. During 2018, growth capital expenditures (e.g. non-sustaining) at Los Filos totalled $22.2 million which included $11.3 million for development of the Bermejal Underground, $3.1 million for the installation of additional conveyors and the agglomerator, $1.5 million on the CIL plant studies, and $6.3 million for the Los Filos Underground exploration drilling program that extended mine life.
At the RDM mine in Brazil, Q4 2018 production was impacted by a six-week shutdown due to regional drought conditions. As a result, the RDM mine only produced 4,913 oz of gold during Q4 2018 compared to 16,596 oz in Q3 2018. Water in the reservoir has continued to build up over the rainy season (typically November through March) and RDM is expected to be positioned for stable and continuous operations in 2019.
Also in Q4 2018, the grid power project at RDM continued to progress with 90% of the towers constructed by quarter-end. During Q1 2019, the installation of the remaining towers and power cable has been completed and commissioned, and the switch-over to grid power is scheduled for mid-March 2019. The lower cost grid power has the potential to reduce annual power costs by $6 million, and the increased power availability will also improve mill performance and gold recovery rates.
Production at RDM for the post-acquisition period of May 24, 2018 to December 31, 2018 totalled 29,398 oz of gold at AISC of $1,009 per oz sold.
At the Fazenda mine in Brazil, Q4 2018 production was ahead of expectations with 19,041 oz. Since acquisition, Leagold has focused on optimizing the excess throughput capacity of the plant using open pit material, which has contributed to consistently strong performance at Fazenda. Production for the post-acquisition period of May 24, 2018 to December 31, 2018 totalled 46,668 oz of gold at AISC of $838 per oz sold.
At the Pilar mine in Brazil, Q4 2018 production was 11,606 oz, slightly below Q3 2018 due to processing of lower grade ore. Processing costs increased compared to the prior quarter due to the timing of increased preventive maintenance in the plant. Since acquisition, total ore mined from underground was 645,047 tonnes at an average grade of 1.36 g/t. Total ore processed was 895,835 tonnes of which 253,659 tonnes came from low-grade stockpiles, allowing the plant to operate at its throughput capacity. By doing this, management achieved record monthly throughput in H2 2018 and has maximized production despite grade issues from the underground mines. Production for the post-acquisition period of May 24, 2018 to December 31, 2018 totalled 31,122 oz of gold at AISC of $1,077 per oz sold.
Expansion and Development Projects
Los Filos Expansion
At the Los Filos mine complex in Mexico, Leagold completed the Los Filos Expansion Feasibility Study in March 2019 which was prepared by independent consultants. The study incorporates the potential for developing the Bermejal underground mine, enlarging the Los Filos open pit mine, re-phasing the Bermejal open pit into two distinct sections (Bermejal and Guadalupe), and building a 4,000 tonne per day (tpd) carbon-in-leach (CIL) plant to complement the existing heap leach facilities.
The Expansion Feasibility Study builds on the large scale exploration program that Leagold commenced in April 2017, shortly after Leagold acquired the Los Filos mine complex from Goldcorp. This exploration program delineated several new areas of high-grade mineralization as part of the Bermejal Underground, and in Q4 2017, an exploration ramp was started. In Q4 2018, development of the 1,330-metre ramp to access the ore body at Bermejal underground was completed on schedule.
Since the acquisition of the Los Filos mine complex, Leagold has carried out extensive exploration programs for both open pit and underground deposits, developed the Bermejal access ramp, completed the Bermejal underground mine design, and completed comprehensive metallurgical test work on all of the mineral deposits to support the CIL plant design. This work, with a total investment of approximately $30 million, has contributed to increasing the Proven and Probable Reserves from 1.7 Moz to 4.5 Moz3 at an average cost of less than $10 per oz, and now forms the basis of the Expansion Feasibility Study.
Highlights of the Expansion Feasibility Study include:
Gold production of 3.2 Moz over a 10-year mine life (2019 to 2028) at an average AISC2 of $740/oz
Post expansion (2021 onwards): •Average annual production of 350,000 oz at AISC2 of $694/oz
•Average annual production exceeding 420,000 oz from 2021 to 2024
Proven and Probable mineral reserves of 104.2 Mt at 1.31 g/t containing 4.5 Moz3
Capital cost of $180 million to develop the Bermejal underground and construct a new 4,000 tpd CIL plant with related infrastructure
Current operations to fund capitalized stripping during the initial expansion phase (2019 to 2020) at the Guadalupe and Los Filos open pits
At $1,250/oz gold price: •NPV0% of $884 million
•NPV5% of $679 million
•IRR of 86%
Leagold is advancing with Los Filos expansion construction planning, optimizing the sequencing of the major expansion projects as part of its financial planning, and discussing the social and economic benefits created by the expansion with its employees, contractors, unions and community members.
Santa Luz Project
At the Santa Luz project in Brazil, Leagold completed the Santa Luz Restart Feasibility Study in October 2018. Santa Luz is a previously operating open pit mine and processing plant which was shut down in 2014 by a previous owner to focus on optimizing gold recoveries. Leagold’s independent metallurgical testwork, review of the pilot plant results, and updated Santa Luz Restart Feasibility Study demonstrates that resin-in-leach (RIL) processing will successfully achieve gold recoveries of 84%. The study outlines the potential for Santa Luz to add 100,000 oz per year of gold production within a 10-month construction period at a capital cost of $82 million. Leagold is considering the timing of the Santa Luz restart in the context of its overall corporate business plan and the opportunities presented in the recently completed Los Filos Expansion study.
Leagold Financial Results
Leagold reported revenue of $110.3 million in Q4 2018 and net earnings of $1.3 million, or $0.00 per share. On a full-year basis, revenue totalled $376.5 million and net earnings totalled $15.3 million, or $0.07 per share. Tables 4 and 5 provide details of Q4 and full-year 2018 financial results.
Table 4: Leagold’s Financial Results for the Three Months Ended December 31, 2018
$000s Three months ended
Dec 31, 2018 Three months ended
Dec 31, 2017
Revenue 110,250 65,265
Operating expenses 77,653 47,059
Depreciation and depletion 13,331 7,690
Royalties 1,132 324
Earnings from mine operations 18,134 10,192
Exploration costs 167 36
Share-based payments 28 225
Acquisition and restructuring costs 2,525 -
General and administration costs 4,801 4,359
Brazil regional office costs 1,342 -
Foreign exchange loss 4,152 58
Finance and accretion expense 5,780 3,514
Other expense/(income) 5,035 (336)
(Loss)/earnings before taxes (5,696) 2,336
Current income tax expense 1,355 2,040
Deferred income tax recovery (8,379) (1,474)
Net income 1,328 1,770
Basic and diluted earnings per share 0.00 0.01
Basic and diluted (loss)/earnings before taxes per share (0.02) 0.02
Table 5: Leagold’s Financial Results for the Year Ended December 31, 2018
$000s Year ended
Dec 31, 2018 Year ended
Dec 31, 2017
Revenue 376,511 193,694
Operating expenses 267,178 148,330
Depreciation and depletion 46,862 16,859
Royalties 4,136 994
Earnings from mine operations 58,335 27,511
Exploration costs 674 119
Share-based payments 30 10,181
Acquisition and restructuring costs 8,038 7,636
General and administration costs1 11,304 8,178
Brazil regional office costs 3,375 -
Foreign exchange loss 2,733 260
Finance and accretion expenses 6,314 11,961
Other expenses/(income) 4,902 (553)
Earnings/(loss) before taxes 20,965 (10,271)
Current income tax expense 7,797 2,326
Deferred income tax (recovery) (2,117) (5,072)
Net income/(loss) 15,285 (7,525)
Basic and diluted earnings/(loss) per share 0.07 (0.07)
Basic and diluted earnings/(loss) before taxes per share 0.09 (0.09)
Outlook and Strategy
Leagold expects to produce 380,000 to 420,000 oz in 2019 at AISC of $920 to $970 per oz. Beyond 2019, Leagold’s internal growth projects have the potential to increase production to 700,000 oz per year. Leagold is currently reviewing the results of the Los Filos Expansion Feasibility Study and the Santa Luz Restart Feasibility Study while preparing financing alternatives that prioritize cash flow generation and long-term shareholder value.
Leagold’s long-term growth strategy also includes acquiring operating gold mines and projects nearing construction where the acquired assets complement its existing operations and provide further operational diversification. Leagold’s experienced management team has a history of operational success which provides the foundation for executing on its acquisition strategy.