Richmont Mines Reports Growth for Second Quarter of 2010
MONTREAL, QUEBEC -- (Marketwire) -- 08/06/10 -- Richmont Mines Inc. (TSX: RIC)(NYSE Amex: RIC)
-- Q2 2010 revenue growth of 32% compared to Q2 2009
-- Gold sales of 15,607 ounces at US$1,218 (CAN$1,259) per ounce
-- Q2 2010 earnings of $0.01 per share, versus loss of $0.05 per share in
Q2 2009
-- Equity financing and acquisition of outstanding 30% of Louvem completed
-- Development work at the Francoeur Mine begins
-- 3,500 metres of additional exploration drilling announced for Cripple
Creek property
-- $38.2 million in working capital as at June 30, 2010 and no hedging
contracts or long-term debt
Richmont Mines Inc. ('Richmont' or the 'Company'), today announced financial and operational results for its second quarter ended June 30, 2010. Financial results are based on Canadian GAAP and dollars are reported in Canadian currency, unless otherwise noted.
Martin Rivard, President and CEO commented on the quarter: 'We were active on several fronts in the second quarter. We successfully acquired the 30% of Louvem that we did not already own, which enabled us not only to streamline our business, but also added to our exploration property portfolio in Quebec.'
Mr. Rivard added: 'We also raised gross proceeds of $16.5 million in an equity financing during the quarter, which provides Richmont with additional funds to bring the Francoeur Mine into production by mid-2011, and also gives us additional flexibility in our pursuit of accretive, synergistic acquisitions and/or partnerships.'
Lastly, Mr. Rivard commented on exploration activities: 'We announced an additional 3,500 metres of exploration drilling on our Cripple Creek property, west of the Timmins Gold Camp in Ontario. This is a key exploration property for Richmont, and we expect that this second phase of drilling will expand on the positive exploration results obtained earlier in 2010.'
Revenue for the second quarter of 2010 was $20.7 million, a notable 32% year-over-year improvement over the $15.7 million of revenue generated in the second quarter of 2009. This was driven by an 18% increase in the number of gold ounces sold to 15,607, from 13,250 gold ounces in the prior year, in addition to a higher average realized sales price of US$1,218 (CAN$1,259) per gold ounce, versus the comparable US$941 (CAN$1,075) in the prior year. These factors resulted in total precious metal revenues increasing to $19.7 million in the second quarter of 2010 from $14.2 million in the comparable period of 2009. This offset a 28% year-over-year decline in other revenue to $1.1 million, primarily due to a 37% decrease in the number of tonnes custom-milled at the Company's Camflo Mill in the quarter.
Higher production resulted in operating costs, including royalties, increasing to $14.6 million in the second quarter of 2010, from $11.9 million in the same period last year. However, the average cash cost per ounce of gold sold rose from US$787 (CAN$899) in the second quarter of 2009 to US$908 (CAN$939) in the second quarter of 2010, due to the lower recovered grades at both the Beaufor and Island Gold mines.
Exploration and project evaluation costs declined 41% to $1.8 million in the second quarter of 2010, compared with $3.0 million in the second quarter of 2009. The year-over-year decline primarily reflects lower exploration costs at the Beaufor Mine, where an extensive exploration program below the mine's existing infrastructure took place in 2009. Lower exploration costs similarly reflect higher exploration tax credits in the current quarter of $0.67 million, versus $0.02 million the comparable period last year.
Richmont posted earnings of $0.2 million, or $0.01 per share, in the second quarter of 2010, a notable improvement over the net loss of $1.4 million, or ($0.05) per share, for the second quarter of 2009.
Second Quarter News
Francoeur Mine
Work is progressing well at the Francoeur Mine. All 17 levels of the mine have been dewatered, and underground development work began in July 2010. Work in the first six months of 2010 amounted to approximately $4.0 million. Recruitment for the Francoeur Mine is progressing well, with crews needed for the development phase already in place. The property has probable reserves of 615,664 tonnes grading 6.91 g/t Au for 136,749 ounces of gold. The mine is on schedule to begin production in mid-2011, with an annual estimated production rate of 35,000 ounces of gold over an initial mine life of four years. Additional details can be found in the press release entitled 'Francoeur Mine: Dewatering Phase Completed, Development Work Set to Begin', released on July 7, 2010.
Equity Financing Completed
The Company completed an overnight marketed public offering of 3,300,000 Richmont common shares at a price of $5.00 per common share on June 17, 2010. The offering generated aggregate gross proceeds of $16.5 million and included 300,000 common shares issued as part of the underwriters' over-allotment option. The net proceeds of the offering will be used for development work at Richmont's projects, primarily the Francoeur Mine in Quebec, for potential acquisitions and for general corporate purposes. Additional details regarding the financing can be found in the press release entitled 'Richmont Mines Inc. Completes Equity Financing' released on June 17, 2010.
Louvem Acquisition Completed
On June 30, 2010, Richmont announced that it had successfully acquired the 30% of the issued and outstanding shares of Louvem Mines Inc. that it did not previously own. The acquisition was completed via an amalgamation of 9222-0383 Quebec Inc., a wholly-owned subsidiary of Richmont, and Louvem under Part IA of the Companies Act (Quebec). The Amalgamation was approved by the shareholders of Louvem at a general and special meeting of the Louvem shareholders held on June 18, 2010. Richmont issued approximately 1.4 million shares following the completion of the transaction. Additional details regarding this announcement are outlined in the press release entitled 'Richmont and Louvem Announce Completion of Acquisition of Outstanding 30% of Louvem by Richmont', released on June 30, 2010.
Cripple Creek
As a result of favourable exploration drilling results obtained earlier in 2010 at its Cripple Creek property, Richmont announced that an additional 3,500 metres of drilling would be completed on this property in 2010. Begun in mid-June, this 6-hole campaign is targeting the depth and lateral extension of Zone 16, where drill hole CC-10-45 intersected 73.54 g/t over a true width of 5 metres, in order to confirm the extent of the alteration envelope. Results are expected in the fourth quarter of 2010. Additional information regarding this campaign, as well as details of the complete results from the first phase drilling program, can be found in the press release entitled 'Richmont Mines Announces Start of a 3,500 Metre Drilling Campaign on Its Cripple Creek Property' released on June 10, 2010
Wasamac
On May 27, 2010, Richmont launched a 10,000 metre drilling campaign on its Wasamac property, located approximately 5 km east of the Company's Francoeur Mine. The program will include approximately 20 holes, and will mainly target the extension of known zones within the Wasa Shear, in order to increase resource levels and verify mineralization continuity. As discussed in the Company's first quarter 2010 release, drilling results are anticipated by the beginning of the fourth quarter of 2010, after which Richmont will reassess the resources of the Wasamac Gold Project with a lower cut-off grade approach. Please see the press release entitled 'Richmont Mines Announces a 10,000 Metre Surface Drilling Program on Its Wasamac Property', published on April 8, 2010 for additional details.
Six-Month Review
Revenue totalled $40.7 million for the six-month period ended June 30, 2010, up 14% over the $35.6 million in revenue for the same period in 2009. This reflects a 5% increase in the number of ounces of gold sold, and a 9% increase in the average selling price per ounce of gold in Canadian dollars.
Operating costs, including royalties, were $28.3 million for the first six months of 2010, up 11% over operating costs of $25.4 million during the same period last year, primarily due to the greater number of tonnes produced at the Island Gold Mine, and higher mining costs at the Beaufor Mine.
Exploration and project evaluation costs were $2.5 million during the first half of 2010, compared with $4.2 million during the same period in 2009. The year-over-year decline is primarily related to lower exploration costs at the Beaufor Mine, reflecting last year's extensive exploration below this mine's infrastructure, and an increase in exploration tax credits to $1.1 million in the first six months of 2010 versus $0.3 million in the comparable period last year.
Net earnings were $2.0 million, or $0.08 per share, for the first half of 2010, up notably from net earnings of $0.04 million, or nil per share, during the comparable six-month period in 2009.
Financial Position and Capital Structure
At June 30, 2010, cash and cash equivalents were $35.8 million, compared with $21.1 million at December 31, 2009. This increase is primarily attributable to the completion of an equity offering, which generated gross proceeds of $16.5 million, combined with $6.8 million in cash flow generated from operating activities year-to-date, partially offset by capital expenditures of $8.1 million in the first six months of 2010, primarily at the Francoeur Mine and the Island Gold Mine. Richmont Mines has no long-term debt obligations, no hedging contracts and has $38.2 million in working capital with only 30.9 million shares outstanding.
Island Gold Mine
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Three months ended Six months ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
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Tonnes 63,666 46,659 131,401 97,687
Head grade (g/t) 5.62 5.95 5.50 6.42
Gold recovery (%) 95.69 95.77 94.52 95.09
Recovered grade (g/t) 5.38 5.70 5.19 6.10
Ounces sold 11,006 8,549 21,944 19,162
Cash cost per ounce (US$) 850 801 845 763
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During the second quarter of 2010, 63,666 tonnes of ore from the Island Gold Mine were processed at a recovered grade of 5.38 g/t Au, and 11,006 ounces of gold were sold at an average price of US$1,215 (CAN$1,256) per ounce. For the same period last year, 46,659 tonnes of ore were processed at a recovered grade of 5.70 g/t, and 8,549 ounces of gold were sold at an average price of US$936 (CAN$1,069) per ounce. Production cash costs at Island Gold totalled US$850 (CAN$879) during the quarter, compared with US$801 (CAN$915) for the same period last year. Although recovered grades declined year-over-year, primarily as a result of lower than expected grades in several long-hole stopes, cash costs per ounce in Canadian dollars actually fell 4% year-over-year, a reflection of improved efficiency and productivity at both the mine and on-site mill. The Company plans to expand the mill throughput rate to approximately 850 tonnes per day by replacing an existing 6 foot x 8 foot ball mill with a larger 9 foot x 11 foot ball mill before the end of the third quarter of 2010.
For the first six months of 2010, 131,401 tonnes of ore were processed at a recovered grade of 5.19 g/t, and 21,944 ounces of gold were sold at an average price of US$1,166 (CAN$1,205) per ounce. This compared to tonnage of 97,687 at a recovered grade of 6.10 g/t, and gold sales of 19,162 ounces at an average price of US$968 (CAN$1,106) in the comparable six month period of 2009. While the recovered grade declined year-over-year due to lower than expected grades in long-hole stopes, improved mine and mill productivity translated into a 35% year-over-year increase in tonnage, which in turn resulted in cash costs per ounce produced remaining essentially unchanged in Canadian dollars at $873 versus $871 in the prior year.
Mr. Martin Rivard, President and CEO of Richmont Mines, commented: 'Grades fell short of expectations in production stopes at Island Gold during the quarter. We have adjusted our mine plan for the remainder of the year, and expect improved performance from production stopes by the end of 2010. On the positive side, we are seeing some productivity improvements at the Island Gold Mine and mill, and expect that the replacement of a ball mill will translate into ongoing improvements going forward.'
Beaufor Mine
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Three months ended Six months ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
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Tonnes 24,070 22,806 49,332 52,269
Head grade (g/t) 6.17 6.69 6.12 6.53
Gold recovery (%) 96.29 95.87 97.84 97.60
Recovered grade (g/t) 5.95 6.41 5.99 6.37
Ounces sold 4,601 4,701 9,504 10,702
Cash cost of production
per ounce (US$) 1,047 763 933 714
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During the second quarter of 2010, 24,070 tonnes of ore from the Beaufor Mine were processed at a recovered grade of 5.95 g/t, and 4,601 ounces of gold were sold at an average price of US$1,225 (CAN$1,266) per ounce. In the same quarter of 2009, 22,806 tonnes of ore were processed at a recovered grade of 6.41 g/t, and 4,701 ounces of gold were sold at an average price of US$949 (CAN$1,084) per ounce. Cash costs at the Beaufor Mine increased substantially to US$1,047 (CAN$1,082) per ounce sold in the second quarter of 2010, compared with US$763 (CAN$871) in the second quarter of 2009. Cash costs were higher primarily as a result of the greater amount of development necessary to access the ore zones and a 7% year-over-year decline in the recovered grade, largely attributable to disappointing results from room-and-pillar stopes, where good grades are usually obtained. While extensive development will be necessary to access mining zones at this mine for the foreseeable future, the Company anticipates recovered grades to improve as room and pillar stopes with better grades are accessed during the remainder of the year.
During the first half of 2010, 49,332 tonnes of ore were processed at a recovered grade of 5.99 g/t, and 9,504 ounces of gold were sold at an average price of US$1,162 (CAN$1,201) per ounce. In the first six months of 2009, 52,269 tonnes of ore were processed at a recovered grade of 6.37 g/t, and 10,702 ounces of gold were sold at an average price of US$968 (CAN$1,106) per ounce. Higher cash costs at this mine reflect a combination of lower year-over-year tonnage and lower recovered grades. The Company continues to evaluate possible near-surface targets through exploration drilling, in an effort to increase this property's reserve base of 44,637 ounces of gold as at December 31, 2009.
Camflo Mill
During the second quarter of 2010, Richmont custom-milled 26,035 tonnes of ore at the Camflo Mill, down 37% from the 41,504 tonnes during the second quarter of 2009. The Company continues to explore the potential for additional custom milling contracts of nearby gold projects.
Outlook
Mr. Rivard concluded: 'Operationally, our top priorities for the remainder of 2010 include lowering production costs at our two mining operations, continuing development work at the Francoeur Mine, and pursuing our exploration programs on our Cripple Creek and Wasamac properties. Similarly, we are intensely focused on evaluating potential acquisitions and partnership opportunities to expand our growth profile and increase our reserve and resource base.'
Martin Rivard
President and Chief Executive Officer
About Richmont Mines Inc.
The Company has produced over 1,000,000 ounces of gold from its operations in Quebec, Ontario and Newfoundland since beginning production in 1991. With extensive experience in gold exploration, development and mining, the Company is well positioned to cost-effectively build its North American reserve base through a combination of organic growth, strategic acquisitions and partnerships. Richmont routinely posts news and other important information on its website (www.richmont-mines.com).
Forward-Looking Statements
This news release contains forward-looking statements that include risks and uncertainties. When used in this news release, the words 'estimate', 'project', 'anticipate', 'expect', 'intend', 'believe', 'hope', 'may' and similar expressions, as well as 'will', 'shall' and other indications of future tense, are intended to identify forward-looking statements. The forward-looking statements are based on current expectations and apply only as of the date on which they were made. The factors that could cause actual results to differ materially from those indicated in such forward-looking statements include changes in the prevailing price of gold, the Canadian-United States exchange rate, grade of ore mined and unforeseen difficulties in mining operations that could affect revenue and production costs. Other factors such as uncertainties regarding government regulations could also affect the results. Other risks may be set out in Richmont Mines' Annual Information Form, Annual Reports and periodic reports.
Regulation 43-101
This news release has been reviewed by Mr. Daniel Adam, Geo., Ph.D, Exploration Manager, an employee of Richmont Mines Inc., and a qualified person as defined by Regulation 43-101.
Cautionary Note to U.S. Investors Concerning Resource Estimates
The resource estimate in this news release is prepared in accordance with Regulation 43-101 adopted by the Canadian Securities Administrators. The requirements of R 43-101 differ significantly from the requirements of the United States Securities and Exchange Commission (the 'SEC'). In this news release, we use the terms 'measured', 'indicated' and 'inferred' resources. Although these terms are recognized and required in Canada, the SEC does not recognize them. The SEC permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that constitute 'reserves'. Under United States standards, mineralization may not be classified as a reserve unless the determination has been made that the mineralization could be economically and legally extracted at the time the determination is made. United States investors should not assume that all or any portion of a measured or indicated resource will ever be converted into 'reserves'. Further, 'inferred resources' have a great amount of uncertainty as to their existence and whether they can be mined economically or legally, and United States investors should not assume that 'inferred resources' exist or can be legally or economically mined, or that they will ever be upgraded to a higher category.
FINANCIAL STATEMENTS FOLLOW.
EXPLORATION PROPERTIES
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Three months ended Six months ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
$ $ $ $
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Exploration costs - Mines
Beaufor Mine 570 992 866 1,798
Island Gold Mine 1,215 1,227 1,699 1,595
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1,785 2,219 2,565 3,393
Exploration costs - Other
properties
Francoeur / Wasamac
properties 216 768 286 960
Cripple Creek property 305 - 493 12
Other properties 7 - 34 6
Project evaluation 133 46 248 147
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2,446 3,033 3,626 4,518
Exploration tax credits (674) (20) (1,078) (287)
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1,772 3,013 2,548 4,231
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FINANCIAL DATA
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Three months ended Six months ended
June 30, June 30, June 30, June 30,
CAN$ thousands, except
net earnings per share
data 2010 2009 2010 2009
--------------------------------------------------------------------------
Results (in thousands of
$)
Revenue 20,738 15,736 40,700 35,639
Net earnings (loss) 238 (1,390) 2,002 43
Cash flow from (used in)
operations 1,621 (2,345) 6,829 707
Results per share ($)
Net earnings (loss) basic
and diluted 0.01 (0.05) 0.08 -
Basic weighted average
number of common shares
outstanding (thousands) 26,646 26,111 26,380 26,108
Average selling price of
gold per ounce (CAN$) 1,259 1,075 1,204 1,106
Average selling price of
gold per ounce (US$) 1,218 941 1,165 968
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June 30, December 31,
2010 2009
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Financial position (in thousands of $)
Total assets 106,607 85,230
Working capital 38,242 24,936
Long-term debt - -
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SALES AND PRODUCTION DATA
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Three-month period ended June 30,
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Ounces of gold Cash cost
----------------------
Year Sales Production (per ounce sold)
----------------------
US$ CAN$
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Island Gold Mine 2010 11,006 10,379 850 879
2009 8,549 9,925 801 915
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Beaufor Mine 2010 4,601 4,131 1,047 1,082
2009 4,701 4,398 763 871
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Total 2010 15,607 14,510 908 939
2009 13,250 14,323 787 899
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Six-month period ended June 30,
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Ounces of gold Cash cost
----------------------
Year Sales Production (per ounce sold)
----------------------
US$ CAN$
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Island Gold Mine 2010 21,944 19,908 845 873
2009 19,162 19,431 763 871
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Beaufor Mine 2010 9,504 9,766 933 964
2009 10,702 9,249 714 816
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Total 2010 31,448 29,674 872 901
2009 29,864 28,680 745 851
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Average exchange rate used for 2009: US$1 = CAN$1.1420
2010 ESTIMATED EXCHANGE RATE: US$1 = CAN$1.0338
CONSOLIDATED STATEMENTS OF EARNINGS
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(in thousands of Canadian dollars)
(Unaudited) Three months ended Six months ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
$ $ $ $
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REVENUE
Precious metals 19,652 14,237 37,859 33,027
Other 1,086 1,499 2,841 2,612
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20,738 15,736 40,700 35,639
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EXPENSES
Operating costs 14,176 11,528 27,394 24,614
Royalties 474 389 926 807
Custom milling 610 994 1,563 1,711
Administration 1,208 999 2,246 1,918
Exploration and project
evaluation 1,772 3,013 2,548 4,231
Accretion expense -
asset retirement
obligations 71 44 141 113
Depreciation and
depletion 1,669 1,249 3,224 2,604
Loss (gain) on disposal
of assets 9 (578) (480) (580)
------------------------------------------------
19,989 17,638 37,562 35,418
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EARNINGS (LOSS) BEFORE
OTHER ITEMS 749 (1,902) 3,138 221
MINING AND INCOME TAXES 662 (402) 1,264 187
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NET EARNINGS (LOSS) 87 (1,500) 1,874 34
LOSS ATTRIBUTABLE TO
MINORITY INTEREST (151) (110) (128) (9)
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NET EARNINGS (LOSS)
ATTRIBUTABLE TO RICHMONT
MINES SHAREHOLDERS 238 (1,390) 2,002 43
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NET EARNINGS (LOSS) PER
SHARE basic and diluted 0.01 (0.05) 0.08 -
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
(thousands) 26,646 26,111 26,380 26,108
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DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING (thousands) 26,981 26,406 26,694 26,284
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See accompanying notes to consolidated financial statements available on
SEDAR (www.sedar.com).
CONSOLIDATED BALANCE SHEETS
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(in thousands of Canadian dollars)
June 30, December 31,
2010 2009
$ $
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(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents 35,799 21,139
Shares of publicly-traded companies 1,313 741
Accounts receivable 2,101 1,213
Mining and income taxes receivable 1,325 1,500
Exploration tax credits receivable 2,426 1,348
Inventories 6,352 7,360
--------------------------------
49,316 33,301
DEPOSITS RESTRICTED 290 106
PROPERTY, PLANT AND EQUIPMENT 57,001 51,823
--------------------------------
106,607 85,230
--------------------------------
--------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued charges 9,177 7,130
Mining and income taxes payable 1,897 1,235
--------------------------------
11,074 8,365
ASSET RETIREMENT OBLIGATIONS 6,069 5,928
FUTURE MINING AND INCOME TAXES 1,681 976
--------------------------------
18,824 15,269
--------------------------------
SHAREHOLDERS' EQUITY
Capital stock 86,679 64,675
Contributed surplus 6,467 6,132
Deficit (5,943) (2,789)
Accumulated other comprehensive income 580 (44)
Minority interest - 1 986
--------------------------------
87,783 69,961
--------------------------------
106,607 85,230
--------------------------------
--------------------------------
See accompanying notes to consolidated financial statements available on
SEDAR (www.sedar.com).
CONSOLIDATED STATEMENTS OF CASH FLOW
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(in thousands of Canadian dollars)
(Unaudited) Three months ended Six months ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
$ $ $ $
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CASH FLOW FROM (USED IN)
OPERATING ACTIVITIES
Net earnings (loss) 87 (1,500) 1,874 34
Adjustments for:
Depreciation and
depletion 1,669 1,249 3,224 2,604
Stock-based
compensation 153 99 378 200
Accretion expense -
asset retirement
obligations 71 44 141 113
Loss (gain) on
disposal of assets 9 (578) (480) (580)
Gain on disposal of
shares of publicly-
traded companies (59) - (59) -
Future mining and
income taxes 430 (392) 704 (68)
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2,360 (1,078) 5,782 2,303
Net change in non-cash
working capital items (739) (1,267) 1,047 (1,596)
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1,621 (2,345) 6,829 707
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CASH FLOW USED IN
INVESTING ACTIVITIES
Disposal of shares of
publicly-traded
companies 111 - 111 -
Restricted cash and
deposits (184) 21 (184) 33
Property, plant and
equipment - Island Gold
Mine (885) (1,378) (2,370) (2,669)
Property, plant and
equipment - Beaufor
Mine (954) (179) (1,652) (388)
Property, plant and
equipment - Francoeur
Mine (2,676) (413) (3,976) (413)
Other property, plant
and equipment (48) (181) (140) (285)
Disposal of assets - 1 533 9
Redemption of shares
held by minority
interests (81) - (81) -
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(4,717) (2,129) (7,759) (3,713)
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CASH FLOW FROM (USED IN)
FINANCING ACTIVITIES
Issue of common shares 16,581 68 16,615 82
Common share issue costs (1,025) - (1,025) -
Redemption of common
shares - (46) - (106)
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15,556 22 15,590 (24)
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Net increase (decrease) in
cash and cash equivalents 12,460 (4,452) 14,660 (3,030)
Cash and cash equivalents,
beginning of period 23,339 27,443 21,139 26,021
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Cash and cash equivalents,
end of period 35,799 22,991 35,799 22,991
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See accompanying notes to consolidated financial statements available on
SEDAR (www.sedar.com).
Contacts:
Investor Relations:
RICHMONT MINES INC.
Jennifer Aitken
514-397-1410
jaitken@richmont-mines.com
www.richmont-mines.com
Media Contact:
EDELMAN Public Relations
Ian Bolduc
514-844-6665 ext. 224
ian.bolduc@edelman.com