Sas reports positive 2013 first quarter results, beating cash cost guidance and generating net cash flow

All dollar amounts are stated in Canadian dollars, unless otherwise indicated

(1) See "non-GAAP measures" for an explanation of non-GAAP

TORONTO, May 9, 2013 /CNW/ - St Andrew Goldfields Ltd. (T-SAS) (OTCQX-STADF), ("SAS" or the "Company") earned net income attributable to shareholders for Q1 2013 of $1.0 million, or nil on a per share basis, compared to net income of $2.7 million, or $0.01 per share, for Q1 2012. For the Q1 of 2013, adjusted net earnings ⁽¹⁾ were $1.1 million, or nil on a per share basis, compared to adjusted net earnings of $2.0 million, or $0.01 per share, for Q1 2012.

Net income for the quarter was negatively impacted by an increase in non-cash depreciation and depletion expense of $3.9 million over Q1 2012, and $1.2 million mark-to-market loss in foreign currency derivatives. Compared to Q1 2012, adjusted net earnings ⁽¹⁾ for the quarter were also negatively impacted by the increase in depreciation and depletion expenses.

Cash provided by operating activities for Q1 2013 was $14.1 million, compared to $8.3 million in Q1 2012. Net cash flow ⁽¹⁾ for the quarter was $4.1 million as compared to net cash out flows of $1.0 million in Q1 2012.

"We are happy to report strong first quarter results and another consecutive quarter of net cash flow generation," said Jacques Perron, President & CEO of SAS. "Our operating mines are performing well and our production guidance for 2013 remains unchanged. The Company expects to produce between 95,000 and 105,000 ounces from the three operations with mine cash costs of between US$800-US$850 per ounce, before royalties. In recent weeks, we have witnessed a significant decline in the gold price to as low as US$1,378 per ounce. In light of the recent gold price volatility, we have reviewed our capital expenditure programs and deferred some expenditures in order to ensure we can meet our near-term objectives while maintaining a strong financial position."

Q1 2013 Conference Call Information
A conference call and webcast is scheduled for 10:00am EDT, Friday, May 10, 2013 to discuss the Q1 2013 results. Participants are invited to join via webcast from the Company's website under the section titled "Events", at www.sasgoldmines.com. A recorded playback of the call will also be available via the website and will be posted within 24 hours of the call.

Q1 2013 Highlights

Summarized Operating and Financial Data

Financial Performance
Gold sales revenues for Q1 2013 increased by $3.9 million over Q1 2012 as a result of increased production from the Holt Mine, despite a US$63 per ounce decrease in the average realized price per ounce of gold sold ⁽¹⁾. The increase in production for Q1 2013 resulted in a decrease in total cash cost per ounce of gold sold ⁽¹⁾ of US$57 per ounce when compared to Q1 2012. The increase in gold sales during the quarter coupled with the decrease in unit cost has led to an 18% increase in cash margin from mine operations ⁽¹⁾.

When compared to the previous quarter, commercial gold production sold decreased by 12% or approximately 3,000 ounces which together with a US$78 per ounce decrease in the average realized price per ounce of gold sold ⁽¹⁾, which led to a decrease in gold sales revenue of $6.1 million. The decline in revenue together with a US$49 per ounce increase in mine cash cost over the previous quarter, (as a result of the additional heating requirements during the winter season), led to a decrease in cash margin from mine operations ⁽¹⁾ of $5.1 million.

Depreciation and depletion expenses for the quarter increased by $3.9 million and $1.2 million when compared to Q1 2012, and Q4 2012, respectively. The increase resulted from the depletion of mineral reserves and resources at the operations, and the loss of approximately 26,000 contained ounces in mineral reserves at Hislop as a result of the updated mineral reserves and resource model and pit optimization completed at year end 2012.

For Q1 2013, the Company incurred $1.2 million in mark-to-market loss on foreign currency derivatives for the quarter due to the strengthening of the US dollar relative to Canadian dollar, which negatively impacted earnings.

Holt Mine, Operations and Financial Review (see "Operating and Financial Statistics Holt")
During Q1 2013, the Holt Mine ("Holt") produced 14,806 ounces of gold, a decrease of 2% over Q4 2012. As a result of the slight decrease in production, gold sales also decreased slightly over Q4 2012.

Total cash cost per ounce of gold sold ⁽¹⁾ increased by US$44 per ounce or 6% over the previous quarter mainly due to an 8% increase in mine cash costs, which is attributable to the increase in heating costs for the mine due to the winter season.

The decrease in gold sales and a slight increase in operating costs lead to a $2.7 million decrease in cash margin from mine operations ⁽¹⁾ over Q4 2012. Holt contributed 72% of the total cash margin from mine operations ⁽¹⁾ earned during the quarter.

Holt is expected to contribute approximately 55% of the Company's total gold production for 2013.

Holloway Mine, Operations and Financial Review (see "Operating and Financial Statistics Holloway")
The Holloway Mine ("Holloway") produced 5,140 ounces of gold for Q1 2013, which is consistent with the production level achieved in Q4 2012. For the quarter, ore grade improved slightly while the mill recovery rate of approximately 92% exceeded the Company's forecast recovery due to improved mineralogical conditions in the areas mined during the quarter. Development crews continue to provide access for additional areas within the Smoke Deep Zone ("Smoke Deep") in order to sustain the production profile for the mine.

Gold sales revenues for the quarter were in line with the previous quarter, despite a decrease in the average realized price per ounce of gold sold ⁽¹⁾.

Total cash cost per ounce of gold sold ⁽¹⁾ during the quarter increased by US$131 per ounce when compared to the previous quarter, mainly due to a 7% decrease in throughput and the additional heating costs in the winter season. These factors, in conjunction with a lower average realized price per ounce of gold sold ⁽¹⁾, led to a $0.9 million decrease in cash margin from mine operations ⁽¹⁾ over the previous quarter.

Holloway is expected to contribute approximately 25% of the Company's total gold production for 2013.

Hislop Mine, Operations and Financial Review (see "Operating and Financial Statistics Hislop")
The Hislop Mine ("Hislop") produced 4,515 ounces of gold during Q1 2013. The head grade averaged 2.14 g/t Au, with lower than expected mill recoveries of 82%, which was affected by the challenging winter conditions.

Commercial gold production sold decreased by 31% or approximately 2,000 ounces for Q1 2013 compared to Q4 2012, due to the decrease in throughput.

Total cash cost per ounce of gold sold ⁽¹⁾ was 4% higher than the previous quarter as a result of the decrease in throughput, and lower head grade and mill recoveries.

Hislop is expected to contribute approximately 20% of the Company's total gold production for 2012.

Taylor Project Update ("Taylor")
A stepped approach was implemented in order to improve the quality of information prior to allocating total capital expenditures for the development activities at the West Porphyry Zone ("WPZ"). During 2012, SAS conducted ramp dewatering and rehabilitation, and accessed the area at the top of the WPZ, near surface, in order to, extract a 15,000 tonne bulk sample, test the proposed mining method, and gather more information from an area that had limited information.

During Q1 2013, activities at Taylor included: the completion of the tower sampling program and subsequent assaying of the generated representative samples; a campaign of diamond drilling in the bulk sample area (approximately 700 metres of drilling); an extensive geological structural analysis by a leading expert in the field; a comprehensive geochemical analysis performed by a reputable outside third party; as well as the continuation of lateral development within the ramp system.

Based on the results of the sampling program and the additional structural and geochemical analysis, the Company has concluded that it needs additional geological information to further improve the accuracy of the geological model. In addition, in light of the revised capital expenditure program for 2013, SAS has revised the program at Taylor to include additional diamond drilling on the area identified for the second bulk sample, to confirm its knowledge of the ore grade distribution within the main lens of the WPZ. SAS has advanced ramp development and commenced underground diamond drilling on this part of the WPZ and will utilize this additional information in order to optimize the future development and mining plan for Taylor. The rescheduling of the main ramp infrastructure does not have a material impact on net cash flow for 2014 and 2015.

Exploration Projects
Exploration activities during Q1 2013 remained focused on drilling at Holloway and Hislop. Drilling to test the easterly strike and up-dip and down-dip component at Smoke Deep returned encouraging results, and identified a new zone, the Sediment Zone. Additional drilling on these two zones is planned for Q2 2013 with one surface drill, and one underground drill set up on the 550m Level drift, to follow up on results released on March 4, 2013 (see press release available under the Company's profile on www.sedar.com or on the Company website at www.sasgoldmines.com).

Drilling on the Hislop Property, namely the Hislop North Project, also returned encouraging results and is situated directly along strike from the 147 and Grey Fox South mineralized trends. As well, drilling beneath the West Pit at Hislop, returned significant grades and width, with hole HP12-002 returning 94.56 g/t Au over 9.6 metres (uncut), including 120.60 g/t Au over 7.5 metres (uncut) (see press release dated March 4, 2013, available under the Company's profile on www.sedar.com or on the Company website at www.sasgoldmines.com).

For the remainder of 2013, the exploration programs will continue to concentrate on targets situated near the existing mining operations. The priorities will include the Hislop North and Hislop Pit targets located near Hislop, as well as the Smoke Deep and Sediment targets at Holloway. There are currently three surface drills active with two drills focused on the Hislop Property and one drill at Holloway.

Capital Resources
Working capital at the end of the quarter was $15.2 million compared to working capital of $18.2 million in the previous quarter. SAS generated cash flow from operations in Q1 2013 of $14.1 million, a decrease of $7.7 million over Q4 2012, primarily as a result of the reduction in gold sold for the quarter. This resulted in a decrease in cash margin from mine operations⁽¹⁾ of $5.1 million, coupled with a decrease in net change in working capital of $2.5 million. At the end of Q1 2013, the Company had cash and cash equivalents of $32.1 million. The Company also has access to additional cash resources by way of an undrawn US$10.0 million revolving credit facility.

The price of gold has declined significantly to a level that will impact the Company's cash flow and operating results. There is no certainty that the price of gold will increase in the near term or return to levels attained in FY 2012 and in Q1 2013. With this in mind, the Company has revised its capital expenditure programs as well as exploration and evaluation assets with the objective to maintain a strong financial position.

Under SAS' revised expenditure program, exploration programs for FY 2013 have been prioritized and expenditures were reduced by $1.5 million, a reduction of 19% from the amount initially forecasted. The core programs are to focus on near mine exploration with the objectives to increase the mineral resource base at Holloway and Hislop. Mine sustaining and development capital, in conjunction with the Taylor advanced stage exploration program, have also been revised to reschedule mid and long-term development programs and/or curtail non-essential equipment procurement and infrastructure upgrades. As a result, the Company's forecast for the remainder of 2013 has been reduced by $20.8 million, a reduction of 40% from the initial amount planned.

The Company believes that it is able to sustain operations at an average gold price of US$1,300 per ounce without any significant reduction or curtailment of its current operating plans. The Company continues to monitor this risk and will revise its operating plans accordingly in order to ensure its near-term and long-term cash flow objectives are met.

Qualified Person
Production and ongoing development programs at the Holt, Holloway and Hislop mines, and processing at the Holt Mill, as well as activities at the Taylor Project are being conducted under the supervision of Duncan Middlemiss, P.Eng, the Company's COO and Vice-President of Operations. The exploration programs on the Company's various mineral properties are under the supervision of Doug Cater, P.Geo, the Company's Vice-President, Exploration. Both Messrs. Middlemiss and Cater are qualified persons as defined by National Instrument 43-101, and have reviewed and approved this news release.

Non-GAAP Measures
The Company has included the following non‐GAAP performance measures: adjusted net earnings; operating cash flow per share; net cash flow; average realized price per ounce of gold sold; total cash cost per ounce of gold sold; cash margin from mine operations; cash margin per ounce of gold sold; and mine‐site cost per tonne milled throughout this press release, which do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS") and are not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the method of calculation. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors use this information to evaluate the Company's performance. Refer to pages the non-GAAP section of this news release for a discussion and the reconciliation of these non-GAAP measurements to the Company's Unaudited Condensed Interim Financial Report for Q1 2013.

The Unaudited Balance Sheets, Statements of Operations and Statements of Cash Flows for the Company for the three months ended March 31, 2013, can be found at the end of this release.

To review the complete Unaudited Condensed Financial Report for Q1 2013, and the Interim Management's Discussion and Analysis for Q1 2013, please see SAS's SEDAR filings under the Company's profile at www.sedar.com or the Company's website at www.sasgoldmines.com.

The following abbreviations are used to describe the periods under review throughout this release

About SAS
SAS (operating as "SAS Goldmines"), is a gold mining and exploration company with an extensive land package in the Timmins mining district, north-eastern Ontario, which lies within the Abitibi greenstone belt, the most important host of historical gold production in Canada.

SAS owns and operates the Holt, Holloway and Hislop mines, which contribute approximately 100,000 ounces of annual gold production. The Company is also advancing the Taylor Project and is conducting exploration across 120km of land straddling the Porcupine-Destor Fault Zone.

FORWARD-LOOKING INFORMATION

This news release contains forward-looking information and forward-looking statements (collectively, "forward-looking information") under applicable securities laws, concerning the Company's business, operations, financial performance, condition and prospects, as well as management's objectives, strategies, beliefs and intentions. Forward-looking information is frequently identified by such words as "may", "will", "plan", "expect", "estimate", "anticipate", "believe", "intend" and similar words referring to future events and results, including in respect of the targeted gold production levels at the Company's three operating mines for 2013; the revised advanced exploration program at Taylor, and the timing thereof; and the level of capital expenditures required at the three operations, development and exploration projects; the extent and objectives of the Company's exploration programs for the balance of 2013; the impact of significant declines in the gold price; and the sufficiency of the Company's cash flow and existing cash resources to finance its capital programs and the further development of its advanced stage exploration projects.

This forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied by the forward-looking information. Factors that may cause actual results to vary materially include, but are not limited to, unanticipated operational or technical difficulties which could increase the time necessary to complete the development initiatives, escalate operating and/or capital costs and reduce anticipated production levels; uncertainties relating to the interpretation of the geology, continuity, grade and size estimates of the mineral reserves and resources; the Company's dependence on key employees and changes in the availability of qualified personnel; fluctuations in gold prices and exchange rates; operational hazards and risks, including the inability to insure against all risks; changes in laws and regulations; and changes in general economic conditions. Such forward looking information is based on a number of assumptions, including in respect of the ability to achieve operating cost estimates, the level and volatility of the price of gold, the accuracy of reserve and resource estimates and the assumptions on which such estimates are based and general business and economic conditions. Should one or more risks and uncertainties materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking information. Accordingly, readers are cautioned not to place undue reliance on this forward-looking information. SAS does not assume the obligation to revise or update this forward-looking information after the date of this release or to revise such information to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws. A further description of the risks and uncertainties facing the Company may also be found in the Company's Annual Information Form available on SEDAR at www.sedar.com.

NON-GAAP MEASURES

Adjusted net earnings
Adjusted net earnings are calculated by removing the gains and losses, resulting from the mark-to-market revaluation of the Company's gold-linked liabilities and foreign currency price protection derivative contracts, one-time gains or losses on the disposition of non-core assets, periodic adjustments to the Company's asset retirement obligations, and expenses, asset impairment gains or losses and significant tax adjustments not related to current period's earnings, as detailed in the table below.  Adjusted net earnings does not constitute a measure recognized by IFRS and does not have a standardized meaning defined by IFRS and may not be comparable to information in other gold producers' reports and filings. The Company discloses this measure, which is based on its Financial Reports, to assist in the understanding of the Company's operating results and financial position.

Total cash cost per ounce of gold sold
Total cash cost per ounce of gold sold is a non-GAAP performance measure and may not be comparable to information in other gold producers' reports and filings. The Company has included this non-GAAP performance measure throughout this document as the Company believes that this generally accepted industry performance measure provides a useful indication of the Company's operational performance. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The following table provides a reconciliation of total cash costs per ounce of gold sold to production expenses per the Financial Report for Q1 2013:

Mine-site cost per tonne milled
Mine-site cost per tonne milled is a non-GAAP performance measure and may not be comparable to information in other gold producers' reports and filings. As illustrated in the table below, this measure is calculated by adjusting Production Costs, as shown in the statements of operations for inventory level changes and then dividing by tonnes processed through the mill. Since total cash cost per ounce of gold sold data can be affected by fluctuations in foreign currency exchange rates, Management believes that mine-site cost per tonne milled provides additional information regarding the performance of mining operations and allows Management to monitor operating costs on a more consistent basis as the per tonne milled measure eliminates the cost variability associated with varying production levels. Management also uses this measure to determine the economic viability of mining blocks. As each mining block is evaluated based on the net realizable value of each tonne mined, the estimated revenue on a per tonne basis must be in excess of the mine-site cost per tonne milled in order to be economically viable. Management is aware that this per tonne milled measure is impacted by fluctuations in throughput and thus uses this evaluation tool in conjunction with production costs prepared in accordance with IFRS. This measure supplements production cost information prepared in accordance with IFRS and allows investors to distinguish between changes in production costs resulting from changes in production versus changes in operating performance.

Cash margin from mine operations
Cash margin from mine operations is a non-GAAP measure which may not be comparable to information in other gold producers' reports and filings. It is calculated as the difference between gold sales and production costs (comprised of mine-site operating costs and production royalties) per the Company's Financial Reports. The Company believes it illustrates the performance of the Company's operating mines and enables investors to better understand the Company's performance in comparison to other gold producers who present results on a similar basis.

Average realized price per ounce of gold sold
Average realized price per ounce of gold sold is a non-GAAP measure and is calculated by dividing gold sales as reported in the Company's Financial Reports by the gold ounces sold. It may not be comparable to information in other gold producers' reports and filings.

Cash margin per ounce of gold sold
Cash margin per ounce of gold sold is a non-GAAP measure, and is calculated by subtracting the total cash cost per ounce of gold sold from the average realized price per ounce of gold sold.

Net cash flow
Net cash flow is a non-GAAP measure and is calculated by taking cash flow from operating activities less cash used in investing activities as reported in the Company's Financial Reports. It may not be comparable to information in other gold producers' reports and filings.

Operating cash flow per share
Operating cash flow per share is a non-GAAP measure and is calculated by dividing cash flow from operating activities in the Company's Financial Reports by the weighted average number of shares outstanding for each period.  It may not be comparable to information in other gold producers' reports and filings.

Operating and Financial Statistics - Holt Mine

Operating and Financial Statistics - Holloway Mine

Operating and Financial Statistics - Hislop Mine

Statements of Operations (unaudited)
St Andrew Goldfields Ltd.
Expressed in thousands of Canadian dollars except per share information